AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 14, 1995
REGISTRATION NO. 33-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NOODLE KIDOODLE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW YORK 5945 11-1771705
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
</TABLE>
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105 PRICE PARKWAY
FARMINGDALE, NEW YORK 11735
(516) 293-5300
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-------------------
STANLEY GREENMAN,
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
NOODLE KIDOODLE, INC.
105 PRICE PARKWAY
FARMINGDALE, NEW YORK 11735
(516) 293-5300
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPIES TO:
RICHARD MARLIN, ESQ. MARK S. BERGMAN, ESQ.
KRAMER, LEVIN, NAFTALIS, NESSEN, PAUL, WEISS, RIFKIND, WHARTON
KAMIN & FRANKEL & GARRISON
919 THIRD AVENUE 1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10019
(212) 715-9100 (212) 373-3000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered in this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /__________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /__________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE(2) OFFERING PRICE(2) FEE
<S> <C> <C> <C> <C>
Common Stock, par value
$.10 per share................. 2,415,000 shares $12.25 per share $29,583,750 $10,202
</TABLE>
(1) Includes a maximum of 315,000 shares which may be purchased by the
Underwriters to cover over-allotments, if any.
(2) Estimated pursuant to Rule 457(c) under the Securities Act of 1933, as
amended, solely for the purpose of calculating the registration fee, based
on the average of the high and low prices for the shares reported on the
American Stock Exchange on December 11, 1995.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
NOODLE KIDOODLE, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEMS OF FORM S-1 HEADING IN PROSPECTUS
- -------------------------------------------------- ----------------------------------------
<S> <C> <C>
Item 1 Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus.............................. Outside Front Cover Page
Item 2 Inside Front and Outside Back Cover
Pages of Prospectus..................... Inside Front Cover Page; Outside Back
Cover Page; Available Information
Item 3 Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges...... Prospectus Summary; Risk Factors
Item 4 Use of Proceeds......................... Use of Proceeds
Item 5 Determination of Offering Price......... Outside Front Cover Page; Underwriting
Item 6 Dilution................................ Not Applicable
Item 7 Selling Security Holders................ Principal and Selling Stockholders
Item 8 Plan of Distribution.................... Outside Front Cover Page; Underwriting
Item 9 Description of Securities to Be
Registered.............................. Description of Capital Stock
Item 10 Interests of Named Experts and
Counsel................................. Legal Matters; Experts
Item 11 Information With Respect to
Registrant.............................. Prospectus Summary; Risk Factors; Price
Range of Common Stock; Dividend
Policy; Capitalization; Selected
Consolidated Financial Data;
Management's Discussion and Analysis
of Financial Condition and Results of
Operations; Business; Management;
Financial Statements
Item 12 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................. Not Applicable
</TABLE>
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 14, 1995
2,100,000 SHARES
[LOGO]
COMMON STOCK
-------------------
Of the 2,100,000 shares of Common Stock offered hereby, 2,000,000 shares are
being sold by Noodle Kidoodle, Inc., formerly known as Greenman Bros. Inc. (the
"Company"), and 100,000 shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). The Company will not receive any of the
proceeds from the sale of shares by the Selling Stockholders. See "Principal and
Selling Stockholders" and "Underwriting."
The Common Stock is quoted on the Nasdaq National Market under the symbol
"NKID." Until December 13, 1995, the Common Stock was traded on the American
Stock Exchange under the symbol "GMN." On December 13, 1995, the last reported
sale price of the Common Stock on the American Stock Exchange was $13.25 per
share. See "Price Range of Common Stock."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
Total........................... $ $ $ $
Total Assuming Full Exercise of
Over-
Allotment Option(3)........... $ $ $ $
</TABLE>
(1) See "Underwriting."
(2) Before deducting estimated expenses of $435,000, which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to the
Underwriters to purchase up to 315,000 additional shares, on the same terms,
solely to cover over-allotments. See "Underwriting."
-------------------
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by the Underwriters, and subject
to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in New York City on or about
, 1996.
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PAINEWEBBER INCORPORATED RODMAN & RENSHAW, INC.
-------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[3 pages of Pictures]
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."
-------------------
Noodle Kidoodle(R), Oodles and Oodles of Fun Things to Learn(R) and Kidoodle
Animation(R) are registered trademarks and service marks of the Company.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere and incorporated by reference in this Prospectus. Unless the context
otherwise requires, all references herein to the "Company" include Noodle
Kidoodle, Inc. and its subsidiaries. The Company's fiscal year ends on the
Saturday closest to January 31 of that year. For example, references to fiscal
1995 refer to the fiscal year ended January 28, 1995. Unless otherwise
indicated, the information in this Prospectus assumes no exercise of the
Underwriters' over-allotment option.
THE COMPANY
Noodle Kidoodle, Inc. is a specialty retailer of a broad assortment of
educationally oriented, creative and non-violent children's products, including
toys, books, games, video and audio tapes, computer software, crafts and other
learning products. The Noodle Kidoodle concept offers something new to parents
and children by combining the attractive pricing and larger size of traditional
toy stores with the more creative product selection and superior customer
service of smaller boutiques, while providing an entertaining shopping
environment through interactive play areas and daily in-store events.
The Company's prototype store is approximately 12,000 square feet and offers
customers a warm and inviting shopping environment with brightly lit spaces,
colorful walls, ceilings and carpets, wide aisles for strollers and kid-level
seating and product shelving. Each store typically carries approximately 25,000
stock-keeping units ("SKUs"), conveniently displayed in separate merchandise
departments, such as "Science & Nature" and "Arts & Crafts," which are
identified by eye-catching signs that are visual as well as verbal so that
children can understand them. All of the products carried in Noodle Kidoodle
stores conform to the Company's creative, non-violent and educational
merchandising strategy. The Company generally does not carry mass market
television advertised toys. However, in certain product categories, the Company
does carry brand name products which fit the Noodle Kidoodle philosophy, such as
Crayola, Lego, Playmobil, the full line of Walt Disney video titles and the
Goosebumps line of books.
The Company currently operates 18 Noodle Kidoodle stores in New York, New
Jersey, Connecticut and the Chicago metropolitan area, and plans to open
approximately 20 more stores in fiscal 1997 in new and existing markets. The
Company's near-term plan is to cluster its stores in the Northeastern United
States and several Midwestern markets, in order to leverage the Company's
advertising programs as well as optimize the capabilities of its strategically
located distribution center. The Company believes that there are substantial
opportunities for nationwide expansion over the longer term.
The Company's strategy is to become the leading national retailer of
educationally oriented children's products. Key components of the Company's
business strategy are:
. Interactive Shopping Environment--Each Noodle Kidoodle store is designed
with children in mind. Each store has designated play areas where children
and their parents are encouraged to explore toys and games in keeping with
the Company's "try before you buy" philosophy. Among the key interactive
features of each store are the Computer Center, "Kidoodle Theater" and
Electronic Learning Center.
. Broad Assortment of Imaginative Products--Noodle Kidoodle stores offer a
broad assortment of products designed to stimulate a child's imagination
and contribute to his or her growth and development consistent with the
Company's slogan that "Kids learn best when they're having fun." The
Company believes that within its targeted age group of infant to twelve
years, it offers
3
<PAGE>
in a single location one of the broadest available assortments of
educationally oriented, creative and non-violent children's products. To
keep its merchandise mix fresh and exciting, the Company continually seeks
innovative new products.
. Daily In-Store Events--The Company provides without charge daily in-store
events such as personal appearances by authors and children's television
personalities, arts and crafts workshops and readings from selected books
to provide entertainment to its customers, increase store traffic and
position Noodle Kidoodle as a destination store.
. Superior Customer Service--By providing knowledgeable and friendly
customer service and selecting enthusiastic employees who enjoy working
with children, the Company believes that it has a competitive advantage
over lower-service superstores and mass merchandisers.
. Targeted Marketing--The Company has created the Noodle Kidoodle Club in
order to establish customer loyalty and track repeat customers. The club
provides its members advance notice of sale events and special promotions,
a bi-monthly newsletter and events calendar, birthday cards sent to
children and similar special privileges. The Company is also establishing
a targeted direct mail marketing program and is in the process of
expanding its customer database for this purpose.
. Competitive Pricing--Noodle Kidoodle offers everyday competitive pricing.
Many products are regularly discounted and prices in general are believed
to be competitive with those featured by superstores carrying the same
lines of merchandise.
The Company was founded in 1946 and, doing business under its former name
Greenman Bros. Inc., historically was engaged in the retail toy business as well
as the wholesale distribution of general merchandise, with an emphasis on toys,
stationery and housewares. During the 1980s, the Company operated a number of
retail toy stores, including a chain of 330 stores under the Circus World name
located principally in shopping malls in approximately 30 states. The Company
sold the Circus World stores in fiscal 1991 but continued to operate a number of
retail toy stores under the Playworld name. The Company opened its first Noodle
Kidoodle store in November 1993, and opened three additional Noodle Kidoodle
stores in fiscal 1995. During fiscal 1996, management determined, based in large
part on the success of its early Noodle Kidoodle stores, that the Company should
focus exclusively on its retail business by expanding and developing the Noodle
Kidoodle retail concept. Accordingly, in August 1995, the Company adopted a new
business plan and ceased operating its wholesale division, which generated net
sales of $113.2 million in fiscal 1995.
The Company, which recently changed its name from Greenman Bros. Inc. to
Noodle Kidoodle, Inc., is incorporated in New York, and has submitted to its
stockholders for approval a proposal to reincorporate in Delaware. The Company's
executive offices are located at 105 Price Parkway, Farmingdale, New York 11735.
Its telephone number is (516) 293-5300.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company....................... 2,000,000 shares
Common Stock Offered by the Selling Stockholders.......... 100,000 shares
Common Stock to be Outstanding after the Offering......... 7,369,390 shares (1)
Use of Proceeds........................................... Primarily to finance new store openings,
as well as for general corporate
purposes. See "Use of Proceeds" and
"Business--Expansion Strategy."
Nasdaq National Market Symbol............................. NKID
</TABLE>
- ------------
(1) Excludes as of December 6, 1995 (i) 588,484 shares of Common Stock issuable
upon exercise of outstanding options at exercise prices ranging from $3.50
to $13.13 per share and (ii) 279,250 shares of Common Stock reserved for
issuance pursuant to options issuable under the Company's stock option
plans.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION AND STORE DATA
(IN THOUSANDS, EXCEPT PER SHARE AND STORE DATA)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS
FISCAL YEARS ENDED ENDED
---------------------------------------------------- -----------------------
FEB. 2, FEB. 1, JAN. 30, JAN. 29, JAN. 28, OCT. 29, OCT. 28,
1991 1992 1993 1994 1995 1994 1995
-------- -------- -------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales......................... $ 11,022 $ 12,850 $ 18,250 $ 20,712 $ 23,308 $12,042 $ 13,508
Gross profit...................... 3,885 4,794 5,471 6,143 7,116 3,828 4,724
Selling and administrative
expenses............................ 5,078 5,813 6,645 8,401 10,790 6,937 10,563
Provision for restructured
operations(a)....................... -- -- -- -- 3,900 3,500 500
Operating loss.................... (1,193) (1,019) (1,174) (2,258) (7,574) (6,609) (6,339)
Net income (loss):
Continuing operations........... (2,622) (1,141) (425) (1,180) (4,490) (3,819) (5,870)
Discontinued operations(b)...... (12,305) 5,069 2,226 1,889 1,096 22 (9,059)
Extraordinary item(c)........... 325 (263) -- -- -- -- --
-------- -------- -------- -------- -------- ----------- --------
Net income (loss)............. $(14,602) $ 3,665 $ 1,801 $ 709 $ (3,394) $(3,797) $(14,929)
-------- -------- -------- -------- -------- ----------- --------
-------- -------- -------- -------- -------- ----------- --------
Net income (loss) per share:
Continuing operations........... $ (.44) $ (.21) $ (.08) $ (.22) $ (.86) $ (.73) $ (1.11)
Discontinued operations(b)...... (2.07) .92 .40 .35 .21 -- (1.71)
Extraordinary item(c)........... .06 (.05) -- -- -- -- --
-------- -------- -------- -------- -------- ----------- --------
Net income (loss) per share... $ (2.45) $ .66 $ .32 $ .13 $ (.65) $ (.73) $ (2.82)
-------- -------- -------- -------- -------- ----------- --------
-------- -------- -------- -------- -------- ----------- --------
Weighted average shares
outstanding......................... 5,949 5,540 5,575 5,338 5,220 5,207 5,302
OTHER FINANCIAL DATA:
Net sales:
Noodle Kidoodle................. $ -- $ -- $ -- $ 1,168 $ 6,414 $ 2,544 $ 11,042
Other Retail(d)................. 11,022 12,850 18,250 19,544 16,894 9,498 2,466
-------- -------- -------- -------- -------- ----------- --------
Total net sales............... 11,022 12,850 18,250 20,712 23,308 12,042 13,508
Discontinued operations:(b)
Net sales....................... $198,890 $151,718 $136,488 $122,138 $113,194 $80,729 $ 50,635
Gross profit.................... 52,753 33,475 31,035 26,711 24,604 17,069 9,164
Operating income (loss)......... [8,666] 5,576 3,633 3,171 1,781 37 (1,914)
Provision for discontinued
operations.......................... 5,712 -- -- -- -- -- 7,145
-------- -------- -------- -------- -------- ----------- --------
Net income (loss)............... [12,305] 5,069 2,226 1,889 1,096 22 (9,059)
STORE DATA (AT END OF PERIOD):
Number of stores:
Noodle Kidoodle................. -- -- -- 1 4 3 15
Other Retail(d)................. 6 8 10 10 4 10 4
-------- -------- -------- -------- -------- ----------- --------
Total......................... 6 8 10 11 8 13 19
Gross square footage:
Noodle Kidoodle................. -- -- -- 10,450 39,700 29,700 160,130
Other Retail(d)................. 56,570 68,870 86,400 86,400 31,500 86,400 31,500
-------- -------- -------- -------- -------- ----------- --------
Total......................... 56,570 68,870 86,400 96,850 71,200 116,100 191,630
</TABLE>
6
<PAGE>
OCTOBER 28, 1995
--------------------
ACTUAL AS ADJUSTED
(E)
------- -----------
BALANCE SHEET DATA:
Working capital....................................... $14,772 39,280
Net assets of discontinued operations(b).............. 6,327 6,327
Total assets.......................................... 38,872 63,380
Total debt............................................ -- --
Total liabilities..................................... 12,428 12,428
Stockholders' equity.................................. 26,444 50,952
- ------------
(a) Represents provisions primarily related to the closing of certain Playworld
and other retail stores.
(b) On August 30, 1995, the Company adopted a formal plan to discontinue its
wholesale business. The operations and net assets of the Company's wholesale
business are being accounted for as a discontinued operation. The
thirty-nine week period ended October 28, 1995 includes a $7.1 million
provision for (i) estimated gains or losses on the sale or liquidation of
wholesale assets and (ii) estimated operating losses until such disposal or
liquidation is completed. Fiscal 1991 results from discontinued operations
include results from the Company's Circus World retail stores which were
sold in fiscal 1991.
(c) Represents the gain (loss) on early extinguishment of debt, net of income
taxes (benefit).
(d) Represents primarily the results of the Company's Playworld and Toy Park
retail toy stores. The Company may close the remaining four Playworld and
Toy Park stores, as certain lease issues are resolved.
(e) Adjusted to reflect the sale of 2,000,000 shares of Common Stock offered by
the Company hereby and the receipt of the estimated net proceeds therefrom.
7
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following factors should be considered carefully before making an investment in
the Common Stock offered hereby.
NEW BUSINESS; LIMITED OPERATING HISTORY
Noodle Kidoodle, Inc., doing business under its former name Greenman Bros.
Inc., historically was engaged in the retail toy business as well as the
wholesale distribution of general merchandise with an emphasis on toys,
stationery and housewares. The Company opened its first Noodle Kidoodle store in
November 1993. The Company operated four Noodle Kidoodle stores at the end of
fiscal 1995 and currently operates 18 Noodle Kidoodle stores. Based on the
success of the early stores, management determined in August 1995 that the
Company should focus exclusively on its Noodle Kidoodle retail business and
become a leading national retailer of educationally oriented children's
products. In connection with that decision, the Company ceased operating its
wholesale business, sold certain of its wholesale inventory and commenced
liquidating the balance. Investors, therefore, have only a limited operating
history to review in evaluating the Company's performance and the viability of
the Noodle Kidoodle concept. For example, the Company currently has only three
stores in operation for a sufficient period of time to provide meaningful
year-to-year comparative data. There can be no assurance that the Company's more
recently opened Noodle Kidoodle stores will be as successful as the earlier
stores or that the Noodle Kidoodle concept will be successful. See
"Business--Overview" and "--Expansion Strategy."
HISTORICAL AND PROJECTED LOSSES
The Company has reported operating losses in each of its last five fiscal
years as a result of the discontinuation of its wholesale business and
subsequent restatement of its historical financial statements. In addition, the
Company's results of operations for the thirty-nine week period ended October
28, 1995 are not profitable. Based on the Company's limited experience with its
Noodle Kidoodle stores, management believes that its new stores should generate
operating profits at the store level in their first full year of operation.
Because pre-opening expenses are amortized over the first twelve months of
operations, new stores' contributions to the Company's profits have not been and
are not expected to be material. In addition, the Company's aggressive expansion
plans require it to carry significant central overhead. As a result of these two
factors, the Company expects to continue to report losses at least through the
end of fiscal 1996 and in fiscal 1997. There can be no assurance that the
Company will be able to achieve or sustain profitable operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ABILITY TO REALIZE EXPANSION PLANS
The Company's growth over the next several years depends principally on its
ability to open new stores in its existing and new markets and to operate those
stores profitably. The Company currently operates 18 Noodle Kidoodle stores in
New York, New Jersey, Connecticut and the Chicago metropolitan market. The
Company plans to use a substantial portion of the net proceeds of this offering
to open approximately 20 more Noodle Kidoodle stores in its existing and new
markets during fiscal 1997. The Company's ability to open stores on a timely
basis will depend upon a number of factors, including its ability to identify
suitable store sites and obtain leases for those sites on acceptable terms. In
order to achieve its long-term expansion plan, it is likely that the Company
will be required to obtain additional financing in order to open planned new
stores after fiscal 1997. There can be no assurance that the Company will be
able to complete its expansion plans successfully or that opening new stores in
markets already served by the Company will not adversely affect existing store
profitability or reduce comparable store sales. In addition, there can be no
assurance that additional financing for new stores will be available to the
Company in amounts, at rates or upon terms and conditions acceptable to the
Company. If such additional financing is unavailable, the Company would have to
delay opening certain of the
8
<PAGE>
planned stores until additional financing or sufficient internally generated
funds are available. See "Use of Proceeds," "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Business--Expansion Strategy."
DISCONTINUED OPERATIONS; RESTRUCTURING CHARGES
In August 1995, the Company adopted a new business plan to focus on its
Noodle Kidoodle retail concept and ceased operating its wholesale business. In
fiscal 1995, the discontinued wholesale operations generated net sales and net
income of $113.2 million and $1.1 million, respectively, compared to the
Company's continuing retail operations' net sales and net loss of $23.3 million
and $4.5 million, respectively. In connection with discontinuing its wholesale
operations, the Company recorded a provision of $7.1 million in the fiscal
quarter ended July 29, 1995 for (i) estimated gains or losses on the sale or
liquidation of wholesale assets and (ii) estimated operating losses until such
disposal or liquidation is completed. In addition, as of October 28, 1995, the
Company had net assets of discontinued operations of $6.3 million, consisting
primarily of accounts receivable, inventories, and properties of $10.5 million,
less accounts payable, accrued expenses and capital lease obligations of $4.2
million. There can be no assurance that the charge recorded in the fiscal
quarter ended July 29, 1995 will be sufficient. In addition, there can be no
assurance that the Company will receive proceeds on the sale or liquidation of
net assets of discontinued operations in the amounts anticipated, or by the
anticipated dates. The receipt of significantly lower amounts than expected or
an extended delay in receipt could have a material adverse effect on the
Company's results of operations and financial condition. In addition, the
Company's decision to focus on its Noodle Kidoodle retail concept has resulted
in the closure of most of its Playworld and Toy Park stores. The Company closed
several Playworld stores in fiscal 1995 and may close the remaining four
Playworld and Toy Park stores, as certain lease issues are resolved. The Company
recorded provisions for store closings of $3.9 million and $0.5 million,
respectively, in fiscal 1995 and the thirty-nine week period ended October 28,
1995. While management believes such provisions to be sufficient, there can be
no assurance that the Company will not record additional provisions in the
future. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
MANAGEMENT OF GROWTH
The Company's ability to manage growth will depend on its ability to improve
operational, financial and management information systems on a timely basis and
to recruit, hire and train additional management and store-level employees, as
well as manage an increasing number of employees. The Company expects to apply
up to $1.0 million of net proceeds from this offering to improve its MIS
software capabilities in fiscal 1997. There can be no assurance that the
Company's personnel, systems, procedures and controls will be adequate to
support the Company's operations in the future. Any failure to improve the
Company's operational, financial and management systems or to recruit, train and
manage an increased number of employees could have a material adverse effect on
the Company's business, operating results and financial condition. See
"Business--Expansion Strategy" and "--Management Information Systems."
DEPENDENCE ON SENIOR MANAGEMENT
The success of the Company's business will continue to be dependent upon
Stanley Greenman, Chairman of the Board and Chief Executive Officer of the
Company, Stewart Katz, President and Chief Operating Officer of the Company, and
other members of senior management. The loss of the services of one or more of
these individuals could have a material adverse effect upon the Company's
business. See "Management."
9
<PAGE>
COMPETITION
The retail toy business is highly competitive. Some of the Company's
competitors are much larger in terms of sales volume and have more capital and
greater management resources than the Company. If any of the Company's larger
competitors were to increase their focus on the educational market or if any
regional competitors were to expand their activities in the markets primarily
served by the Company, the Company could be adversely affected. If any of the
Company's major competitors seek to gain or retain market share by reducing
prices, the Company may be required to reduce its prices on key items in order
to remain competitive, which would have the effect of reducing its
profitability. There can be no assurance that in the future the Company will not
face greater competition from other national, regional and local retailers. See
"Business--Competition."
QUARTERLY AND SEASONAL FLUCTUATIONS
The timing of new store openings, related pre-opening expenses and the
amount of revenue contributed by new and existing stores may cause the Company's
quarterly results of operations to fluctuate. In addition, the Company's
business is affected by the pattern of seasonality common to most toy retailers.
Historically, the Company's stores generate a significant portion of their net
sales and the majority of their store level operating profits during the
Company's fourth fiscal quarter, which includes the Christmas selling season,
and have experienced operating losses or nominal profits in the Company's first,
second and third fiscal quarters.
VOLATILITY OF STOCK PRICE
On December 14, 1995, the Common Stock became quoted on the Nasdaq National
Market. Prior thereto, the Common Stock was traded on the American Stock
Exchange. The market price of the Common Stock has been, and could in the future
be, subject to significant fluctuations. Future announcements concerning the
Company or its competitors, including operating results and earnings estimates,
new store openings and other developments, as well as general economic and
market conditions, could cause the market price of the Common Stock to fluctuate
substantially. See "Price Range of Common Stock."
GENERAL ECONOMIC CONDITIONS
The Company's operating results may be adversely affected by unfavorable
local, regional or national economic conditions. The Company's stores currently
are located in the Northeastern United States and a major Midwestern sub-region
of the United States. Accordingly, the Company is susceptible to fluctuations in
its business caused by adverse economic conditions in these regions. In
addition, the Company's future expansion strategy is to cluster its stores in
relatively close geographic proximity to achieve operating and advertising
efficiency. There can be no assurance that regional economic conditions will not
adversely affect stores clustered in such relatively close geographic proximity.
The success of the Company's operations also depends upon a number of
factors relating to consumer spending, including future economic conditions
affecting disposable consumer income such as employment, business conditions,
interest rates and taxation. If existing economic conditions deteriorate,
consumer spending on discretionary items such as children's toys and educational
products may decline, with a negative impact on the Company's business and
results of operations.
POTENTIAL ANTI-TAKEOVER EFFECTS
Certain provisions of the Company's Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), the Company's Bylaws, as amended (the
"Bylaws"), and New York law could discourage potential acquisition proposals and
could delay or prevent a change in control of the Company. Such provisions could
diminish the opportunities for a stockholder to participate in tender
10
<PAGE>
offers, including tender offers at a price above the then current market value
of the Common Stock. Such provisions may also inhibit increases in the market
price of the Common Stock that could result from takeover attempts. In addition,
the Company's Board of Directors has the authority to issue Preferred Stock
without any further vote or action by the stockholders. The issuance of
Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of the Company without further action by the stockholders and
could adversely affect the rights and powers, including voting rights, of the
holders of Common Stock. Such effects could result in a decrease in the market
price of the Common Stock. See "Description of Capital Stock--Anti-Takeover
Provisions."
USE OF PROCEEDS
The net proceeds to the Company from the sale of 2,000,000 shares of Common
Stock offered by the Company hereby are estimated to be approximately $24.5
million after deducting estimated offering expenses and underwriting discounts
and commissions (approximately $28.4 million if the Underwriters' over-allotment
option is exercised in full). The Company will not receive any proceeds from the
sale of 100,000 shares of Common Stock offered by the Selling Stockholders. The
Company intends to use the net proceeds primarily to finance the Company's store
expansion plans as well as for general corporate purposes, including up to $1.0
million to improve its MIS software capabilities in fiscal 1997. The Company
anticipates that it will open a total of approximately 20 additional Noodle
Kidoodle stores in fiscal 1997. Total expenditures for a new store, including
capital expenditures, pre-opening expenses and net working capital, are expected
to range from $800,000 to $950,000 per store. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "Business--Expansion Strategy."
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the offering based upon the current state of its business
operations, its current plans, and current economic and industry conditions.
Until used, the Company intends to invest the net proceeds from the offering in
short-term investment-grade securities.
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the Nasdaq National Market under the symbol
"NKID." Until December 13, 1995, the Common Stock was traded on the American
Stock Exchange under the symbol "GMN." The following table sets forth, for the
periods indicated, the high and low sales prices per share for the Common Stock
as reported on the American Stock Exchange for each of the fiscal quarters
indicated, through December 13, 1995:
HIGH LOW
------ ------
FISCAL 1994
First Quarter............................................ $ 4.88 $ 4.00
Second Quarter........................................... 5.00 4.13
Third Quarter............................................ 5.50 4.25
Fourth Quarter........................................... 6.75 5.00
FISCAL 1995
First Quarter............................................ 7.38 5.88
Second Quarter........................................... 7.25 5.63
Third Quarter............................................ 7.13 6.38
Fourth Quarter........................................... 6.38 4.38
FISCAL 1996
First Quarter............................................ 5.44 4.00
Second Quarter........................................... 11.63 5.06
Third Quarter............................................ 14.63 9.25
Fourth Quarter (through December 13, 1995)............... 13.75 11.13
11
<PAGE>
On December 13, 1995, the last reported sale price of the Common Stock on
the American Stock Exchange was $13.25 per share. As of December 6, 1995, there
were approximately 600 holders of record of Common Stock.
DIVIDEND POLICY
The Company has not paid cash dividends on its Common Stock in many years.
The Company currently anticipates that it will retain all available funds
generated by its operations for the development and growth of its business and
does not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. Any future determination as to dividend policy will be made
at the discretion of the Board of Directors of the Company and will depend on a
number of factors, including the future earnings, capital requirements,
financial condition and business prospects of the Company and such other factors
as the Board of Directors may deem relevant.
CAPITALIZATION
The following table sets forth the cash balance and capitalization of the
Company as of October 28, 1995 and as adjusted to reflect (i) the sale of
2,000,000 shares offered by the Company hereby and the receipt of the estimated
net proceeds therefrom and (ii) the increase in authorized capital approved by
stockholders in December 1995.
<TABLE>
<CAPTION>
OCTOBER 28, 1995
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents.................................... $ 6,548 $ 31,056
------- -----------
------- -----------
Commitments and contingencies................................ $ -- $ --
Stockholders' equity: -- --
Preferred Stock--$1.00 par value, 500,000 shares
authorized, none issued and outstanding.................. -- --
Common Stock--$0.10 par value, 10,000,000 shares
authorized, 6,292,701 shares issued and
outstanding; 15,000,000 shares authorized,
8,292,701 shares issued and outstanding,
as adjusted (1).......................................... 629 829
Capital in excess of par value............................. 26,294 50,602
Retained earnings.......................................... 3,313 3,313
Less treasury stock, at cost--924,261 shares............... (3,792) (3,792)
------- -----------
Total stockholders' equity............................. 26,444 50,952
------- -----------
Total capitalization................................... $26,444 $ 50,952
------- -----------
------- -----------
</TABLE>
- ------------
(1) Excludes as of October 28, 1995 (i) 589,559 shares of Common Stock issuable
upon exercise of outstanding options at exercise prices ranging from $3.50 to
$13.13 per share and (ii) 279,250 shares of Common Stock reserved for issuance
pursuant to options issuable under the Company's stock option plans.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data presented below reflects selected
financial and operating data of the Company as of and for the periods indicated,
after giving retroactive effect to the Company's discontinued wholesale
business. This data should be read in conjunction with the consolidated
financial statements and notes thereto and Management's Discussion and Analysis
of Financial Condition and Results of Operations included elsewhere in this
Prospectus. The consolidated financial data as of and for each of the five
fiscal years ended January 28, 1995 and as of and for the thirty-nine week
period ended October 28, 1995 are derived from the Consolidated Financial
Statements of the Company which have been audited by Janover Rubinroit, LLC,
independent certified public accountants. The consolidated financial data for
the thirty-nine week period ended October 29, 1994 are derived from unaudited
Consolidated Financial Statements of the Company and reflect all adjustments,
consisting only of normal recurring accruals, that the Company considers
necessary for a fair presentation of the consolidated financial position and
consolidated results of operations for this period.
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS
FISCAL YEARS ENDED ENDED
--------------------------------------------------- ----------------------
FEB. 2, FEB. 1, JAN. 30, JAN. 29, JAN. 28, OCT. 29, OCT. 28,
1991 1992 1993 1994 1995 1994 1995
-------- ------- -------- -------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $ 11,022 $12,850 $ 18,250 $ 20,712 $ 23,308 $12,042 $ 13,508
Costs and expenses:
Cost of products sold including buying
and warehousing costs................. 7,137 8,056 12,779 14,569 16,192 8,214 8,784
Selling and administrative.............. 5,078 5,813 6,645 8,401 10,790 6,937 10,563
Provision for restructured
operations(a).............................. -- -- -- -- 3,900 3,500 500
-------- ------- -------- -------- -------- ----------- --------
12,215 13,869 19,424 22,970 30,882 18,651 19,847
-------- ------- -------- -------- -------- ----------- --------
Operating loss.......................... (1,193) (1,019) (1,174) (2,258) (7,574) (6,609) (6,339)
Interest expense (income), net............ 2,699 236 (481) (277) (297) (243) (469)
-------- ------- -------- -------- -------- ----------- --------
Loss from continuing operations before
income taxes (benefit)..................... (3,892) (1,255) (693) (1,981) (7,277) (6,366) (5,870)
Income taxes (benefit).................... (1,270) (114) (268) (801) (2,787) (2,547) --
-------- ------- -------- -------- -------- ----------- --------
Net income (loss):
Continuing operations................... (2,622) (1,141) (425) (1,180) (4,490) (3,819) (5,870)
Discontinued operations(b).............. (12,305) 5,069 2,226 1,889 1,096 22 (9,059)
Extraordinary item(c)................... 325 (263) -- -- -- -- --
-------- ------- -------- -------- -------- ----------- --------
Net income (loss)..................... $(14,602) $ 3,665 $ 1,801 $ 709 $ (3,394) $(3,797) $(14,929)
-------- ------- -------- -------- -------- ----------- --------
-------- ------- -------- -------- -------- ----------- --------
Net income (loss) per share:
Continuing operations................... $ (.44) $ (.21) $ (.08) $ (.22) $ (.86) $ (.73) $ (1.11)
Discontinued operations(b).............. (2.07) .92 .40 .35 .21 -- (1.71)
Extraordinary item(c)................... .06 (.05) -- -- -- -- --
-------- ------- -------- -------- -------- ----------- --------
Net income (loss) per share........... $ (2.45) $ .66 $ .32 $ .13 $ (.65) $ (.73) $ (2.82)
-------- ------- -------- -------- -------- ----------- --------
-------- ------- -------- -------- -------- ----------- --------
Weighted average shares................... 5,949 5,540 5,575 5,338 5,220 5,207 5,302
BALANCE SHEET DATA:
Working capital........................... $ 52,000 $40,490 $ 40,212 $ 39,810 $ 35,667 $35,099 $ 14,772
Net assets of discontinued
operations(b).............................. 26,640 28,214 25,968 31,217 24,621 26,298 6,327
Total assets.............................. 56,474 47,559 50,296 49,629 48,042 49,906 38,872
Total debt................................ 14,877 -- -- -- -- -- --
Total liabilities......................... 2,171 4,468 5,084 5,565 7,172 9,560 12,428
Stockholders' equity...................... 39,426 43,091 45,212 44,064 40,870 40,346 26,444
</TABLE>
- ------------
(a) Represents provisions primarily related to the closing of certain Playworld
and other retail stores.
(b) On August 30, 1995, the Company adopted a formal plan to discontinue its
wholesale business. The operations and net assets of the Company's wholesale
business are being accounted for as a discontinued operation. The
thirty-nine week period ended October 28, 1995 includes a $7.1 million
provision for (i) estimated gains or losses on the sale or liquidation of
wholesale assets and (ii) estimated operating losses until such disposal or
liquidation is completed. Fiscal 1991 results from discontinued operations
include results from the Company's Circus World retail stores which were
sold in fiscal 1991.
(c) Represents the gain (loss) on early extinguishment of debt, net of income
taxes (benefit).
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis set forth certain information for the
periods presented and should be read in conjunction with the Consolidated
Financial Statements of the Company, and the notes thereto, appearing elsewhere
in this Prospectus.
GENERAL
The Company was founded in 1946 and, doing business under its former name
Greenman Bros. Inc., historically was engaged in the retail toy business as well
as the wholesale distribution of general merchandise with an emphasis on toys,
stationery and housewares. During the 1980s, the Company operated a number of
retail toy stores, including a chain of 330 stores under the Circus World name,
which were located principally in shopping malls in approximately 30 states. In
fiscal 1991, the Company sold its Circus World stores and shifted its focus to
its wholesale business, while retaining a number of Playworld retail stores.
Based on results of operations and trends in the industry during fiscal 1990
through 1993, management concluded that the wholesale component of the Company's
business could not grow and began investigating various possibilities outside
the wholesale business for expansion opportunities which could best utilize
remaining excess cash generated from the sale of the Circus World stores.
The Company opened its first Noodle Kidoodle store in November 1993 and
operated four Noodle Kidoodle stores at the end of fiscal 1995. Based in large
part on the success of its early Noodle Kidoodle stores, management determined
that the Company should focus exclusively on its retail business by further
developing and expanding its Noodle Kidoodle retail concept. In August 1995, the
Company adopted a new business plan and ceased operating its wholesale business.
In fiscal 1995, the discontinued wholesale operations generated net sales and
net income of $113.2 million and $1.1 million, respectively, compared to the
Company's continuing retail operations' net sales and net loss of $23.3 million
and $4.5 million, respectively. In addition, the Company's decision to focus on
its Noodle Kidoodle retail concept has resulted in the closure of most of its
Playworld and Toy Park stores. The Company closed several Playworld stores in
fiscal 1995 and may close the remaining four Playworld and Toy Park stores, as
certain lease issues are resolved.
In connection with discontinuing its wholesale operations, the Company
recorded a provision of $7.1 million in the fiscal quarter ended July 29, 1995
for (i) estimated gains or losses on the sale or liquidation of wholesale assets
and (ii) estimated operating losses until such disposal or liquidation is
completed. In addition, as of October 28, 1995, the Company had net assets of
discontinued operations of $6.3 million, consisting primarily of accounts
receivable, inventories, and properties of $10.5 million, less accounts payable,
accrued expenses and capitalized lease obligations of $4.2 million.
The Company has reported operating losses in each of its last five fiscal
years as a result of the discontinuation of its wholesale business and
subsequent restatement of its historical financial statements. In addition, the
Company's results of operations for the thirty-nine week period ended October
28, 1995 are not profitable. Based on the Company's limited experience with its
Noodle Kidoodle stores, management believes that its new stores should generate
operating profits at the store level in their first full year of operation.
Because pre-opening expenses are amortized over the first twelve months of
operations, new stores' contributions to the Company's profits have not been and
are not expected to be material. In addition, the Company's aggressive expansion
plans require it to carry significant central overhead. As a result of these two
factors, the Company expects to continue to report losses at least through the
end of fiscal 1996 and in fiscal 1997.
The Company's growth over the next several years depends principally on its
ability to open new stores in its existing and new markets and to operate those
stores profitably. The Company currently operates 18 Noodle Kidoodle stores in
New York, New Jersey, Connecticut and the Chicago metropolitan market. The
Company plans to use a substantial portion of the net proceeds of this offering
to open approximately 20 more Noodle Kidoodle stores in its existing and new
markets during fiscal 1997. The Company's ability to open stores on a timely
basis will depend upon a number of factors, including its ability to identify
suitable store sites and obtain leases for those sites on acceptable terms. In
order to achieve its long-term expansion plan, it is likely that the Company
will be required to obtain additional financing in order to open planned new
stores after fiscal 1997.
14
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage of net sales for certain items
in the Company's statement of income (loss) for the periods indicated. "Noodle
Kidoodle" reflects results for this retail concept only, while "Other Retail"
reflects results for the Playworld and Toy Park Stores and certain leased toy
departments. Corporate expenses in "Selling and administrative expenses" include
management salaries, professional fees and other costs capable of supporting a
much larger organization. As a result of recent strategic changes,
period-to-period comparisons of financial results are not meaningful and results
of operations for historical periods are not necessarily indicative of future
results.
SUMMARY RESULTS OF CONTINUING OPERATIONS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
--------------------------------------------------- ---------------------------------
JANUARY 30, JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 28,
1993 1994 1995 1994 1995
--------------- --------------- --------------- --------------- ---------------
% OF % OF % OF % OF % OF
$ SALES $ SALES $ SALES $ SALES $ SALES
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales:
Noodle Kidoodle....... -- -- 1,168 5.6 6,414 27.5 2,544 21.1 11,042 81.7
Other Retail.......... 18,250 100.0 19,544 94.4 16,894 72.5 9,498 78.9 2,466 18.3
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total................. 18,250 100.0 20,712 100.0 23,308 100.0 12,042 100.0 13,508 100.0
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Gross profit:
Noodle Kidoodle....... -- -- 468 40.1 2,385 37.2 854 33.6 3,758 34.0
Other Retail.......... 5,471 30.0 5,675 29.0 4,731 28.0 2,974 31.3 966 39.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total................. 5,471 30.0 6,143 29.7 7,116 30.5 3,828 31.8 4,724 35.0
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Selling and
administrative
expenses:
Noodle Kidoodle....... -- -- 684 58.6 3,240 50.5 1,699 66.8 7,632 69.1
Other Retail.......... 5,104 28.0 5,896 30.2 5,269 31.2 3,526 37.1 1,181 47.9
Corporate............. 1,541 8.4 1,821 8.8 2,281 9.8 1,712 14.2 1,750 13.0
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total................. 6,645 36.4 8,401 40.6 10,790 46.3 6,937 57.6 10,563 78.2
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Provision for
restructuring.......... -- -- -- -- 3,900 16.7 3,500 29.1 500 3.7
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Operating income
(loss):
Noodle Kidoodle....... -- -- (216) (18.5) (855) (13.3) (845) (33.2) (3,874) (35.1)
Other Retail.......... 367 2.0 (221) (1.1) (538) (3.2) (552) (5.8) (215) (8.7)
Corporate............. (1,541) (8.4) (1,821) (8.8) (2,281) (9.8) (1,712) (14.2) (1,750) (13.0)
Provision for
restructuring.......... -- -- -- -- (3,900) (16.7) (3,500) (29.1) (500) (3.7)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Total................. (1,174) (6.4) (2,258) (10.9) (7,574) (32.5) (6,609) (54.9) (6,339) (46.9)
Net loss............... (425) (2.3) (1,180) (5.7) (4,490) (19.3) (3,819) (31.7) (5,870) (43.5)
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
</TABLE>
SUMMARY RESULTS OF DISCONTINUED OPERATIONS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
--------------------------------------------------- THIRTY-NINE WEEKS ENDED
----------------------------------------
JANUARY 30, JANUARY 29, JANUARY 28,
1993 1994 1995 OCTOBER 29, 1994 OCTOBER 28, 1995
--------------- --------------- --------------- --------------------- ----------------
% OF % OF % OF % OF % OF
$ SALES $ SALES $ SALES $ SALES $ SALES
------- ----- ------- ----- ------- ----- ---------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales......... 136,488 100.0 122,138 100.0 113,194 100.0 80,729 100.0 50,635 100.0
Gross profit...... 31,035 22.7 26,711 21.9 24,604 21.7 17,069 21.1 9,164 18.1
Operating income
(loss)............ 3,633 2.7 3,171 2.6 1,781 1.6 37 0.0 (1,914) (3.8)
Provision for
discontinued
operations........ -- -- -- -- -- -- -- -- 7,145 14.1
Net income
(loss)............ 2,226 1.6 1,889 1.5 1,096 1.0 22 0.0 (9,059) (17.9)
------- ----- ------- ----- ------- ----- ---------- -------- ------- ------
------- ----- ------- ----- ------- ----- ---------- -------- ------- ------
</TABLE>
15
<PAGE>
THIRTY-NINE WEEKS ENDED OCTOBER 28, 1995 COMPARED WITH THIRTY-NINE WEEKS ENDED
OCTOBER 29, 1994
CONTINUING OPERATIONS
Net sales increased 12.2% to $13.5 million for the thirty-nine week period
ended October 28, 1995 from $12.0 million in the comparable period in the prior
year. Noodle Kidoodle sales increased $8.5 million to $11.0 million for the
thirty-nine week period ended October 28, 1995 from $2.5 million in the
comparable period in the prior year, primarily due to the addition of new Noodle
Kidoodle stores during the period ended October 28, 1995. Other Retail sales
decreased 74.0% to $2.5 million for the thirty-nine week period ended October
28, 1995 from $9.5 million in the comparable period in the prior year, primarily
as a result of the closing of six Playworld stores during January 1995. At
October 28, 1995, the Company operated 15 Noodle Kidoodle stores, two Playworld
stores and two Toy Park stores.
Gross profit (derived from net sales less the cost of merchandise sold,
which includes buying and warehousing costs) increased 23.4% to $4.7 million for
the thirty-nine week period ended October 28, 1995 from $3.8 million in the
comparable period in the prior year. Overall gross margin increased to 35.0% in
the period ended October 28, 1995 from 31.8% in the comparable period in the
prior year. The increase results from an increase in sales at Noodle Kidoodle
stores, which generated higher margins than the Playworld stores. Gross margin
at Noodle Kidoodle increased to 34.0% in the current period from 33.6% in the
comparable period in the prior year, primarily as a result of decreased buying
and warehousing costs, partially offset by increased cost of merchandise. Gross
margin at Other Retail increased to 39.2% in the current period from 31.3% in
the comparable period in the prior year primarily due to a greater sales
contribution by higher margin Toy Park stores.
Selling and administrative expenses, excluding the provision for
restructuring, increased 52.3% to $10.6 million in the thirty-nine week period
ended October 28, 1995 from $6.9 million in the comparable period in the prior
year, primarily as a result of changes in the store base. Selling and
administrative expenses at Noodle Kidoodle increased to $7.6 million in the
current period from $1.7 million in the comparable period in the prior year
primarily as a result of higher direct store expenses, which increased by $3.7
million, higher advertising expenses, which increased by $1.1 million, and
higher home office expenses. This increase was offset by a decrease in selling
and administrative expenses at Other Retail to $1.2 million in the current
period from $3.5 million in the comparable period in the prior year, principally
attributable to a decrease in direct store expenses as a result of the closing
of six Playworld stores. Selling and administrative expenses as a percentage of
net sales increased to 78.2% in the period ended October 28, 1995 from 57.6% in
the comparable period in the prior year, primarily attributable to the fact that
Noodle Kidoodle stores have higher operating costs.
Provision for restructuring related to the closing of Other Retail stores
was $0.5 million in the thirty-nine week period ended October 28, 1995, compared
to $3.5 million in the comparable period in the prior year. This included losses
from store operations from the date of announcement until closing, employee
severance costs, estimated lease liabilities, losses on liquidation of
inventories and disposition of assets and other related restructuring costs.
Operating loss decreased 4.1% to $6.3 million for the thirty-nine week
period ended October 28, 1995 from $6.6 million in the comparable period in the
prior year. Excluding restructuring charges, the operating loss would have been
$5.8 million for the period ended October 28, 1995 compared to $3.1 million in
the comparable period in the prior year.
Net loss from continuing operations increased 53.7% to $5.9 million ($1.11
per share) in the thirty-nine week period ended October 28, 1995 from $3.8
million ($.73 per share) in the comparable period in the prior year. Excluding
restructuring charges, the net loss would have been $5.4 million ($1.01 per
share) for the period ended October 28, 1995 compared to $1.7 million ($.33 per
share) in the comparable period in the prior year. The net loss for the period
ended October 28, 1995 included no
16
<PAGE>
tax benefit while the comparable period of the prior year included a tax benefit
of $2.5 million. At October 28, 1995, the Company had approximately $13.5
million of net operating loss carryforwards.
DISCONTINUED OPERATIONS
Net sales decreased 37.3% to $50.6 million in the thirty-nine week period
ended October 28, 1995 from $80.7 million in the comparable period in the prior
year. This decrease resulted primarily from discontinuance of the wholesale
business, effective August 30, 1995.
Gross profit decreased 46.3% to $9.2 million in the thirty-nine week period
ended October 28, 1995 from $17.1 million in the comparable period in the prior
year. Gross margins decreased to 18.1% for the thirty-nine week period ended
October 28, 1995 from 21.1% for the comparable period in the prior year,
principally due to a higher mix of lower margin merchandise.
Operating loss before provision for discontinued operations was $1.9 million
in the thirty-nine week period ended October 28, 1995 compared to operating
income of $37,000 for the comparable period in the prior year.
Provision for discontinued operations represents a loss of $7.1 million
related to the disposal of the wholesale business, including the estimated
losses through the disposal period and the anticipated sale of two of the
Company's distribution centers, net of income tax expense of $1.6 million.
Net loss from discontinued operations was $9.1 million ($1.71 per share) in
the thirty-nine week period ended October 28, 1995, including the $7.1 million
($1.35 per share) provision for discontinued operations, as compared to net
income of $22,000 for the comparable period in the prior year.
FISCAL 1995 COMPARED TO FISCAL 1994
CONTINUING OPERATIONS
Net sales increased 12.5% to $23.3 million in fiscal 1995 from $20.7 million
in fiscal 1994. Noodle Kidoodle sales increased $5.2 million to $6.4 million in
fiscal 1995 from $1.2 million in fiscal 1994, while Other Retail sales decreased
13.6% to $16.9 million in fiscal 1995 from $19.5 million in fiscal 1994. The
increase in Noodle Kidoodle sales resulted primarily from the addition of three
new stores during fiscal 1995, while the decrease in Other Retail sales resulted
from the closing of six Playworld stores including the remaining leased
department operation. At the end of fiscal 1995, the Company operated four
Noodle Kidoodle stores, two Playworld stores and two Toy Park stores.
Gross profit increased 15.8% to $7.1 million in fiscal 1995 from $6.1
million in fiscal 1994. Overall gross margin increased to 30.5% in fiscal 1995
from 29.7% in fiscal 1994. The increase in gross margin was primarily
attributable to increased sales volume at Noodle Kidoodle stores, which
generated higher margins than the Playworld stores. Gross margin at Noodle
Kidoodle decreased to 37.2% in fiscal 1995 from 40.1% in fiscal 1994 primarily
attributable to a new store which opened during the high volume holiday season
of fiscal 1994 as well as the corresponding absence of shrinkage and markdowns
in such period relative to fiscal 1995. Gross margin at Other Retail decreased
to 28.0% in fiscal 1995 from 29.0% in fiscal 1994 principally due to a higher
mix of lower margin merchandise.
Selling and administrative expenses, excluding the provision for
restructuring, increased 28.4% to $10.8 million in fiscal 1995 from $8.4 million
in fiscal 1994. Selling and administrative expenses at Noodle Kidoodle increased
to $3.2 million in fiscal 1995 from $0.7 million in fiscal 1994 as a result of
higher store payroll, occupancy and advertising costs for the new stores as well
as higher home office payroll costs as a result of the increased number of
stores. Selling and administrative expenses at Other Retail decreased to $5.3
million in fiscal 1995 from $5.9 million in fiscal 1994, primarily as a result
of decreased payroll costs associated with the reduced level of operations.
Corporate selling and administrative expenses increased to $2.3 million in
fiscal 1995 from $1.8 million in fiscal 1994 due to one-time
17
<PAGE>
insurance and property tax settlements which resulted in gains of $0.4 million
during fiscal 1994. As a percentage of net sales, selling and administrative
expenses increased to 46.3% in fiscal 1995 from 40.6% in fiscal 1994. The
increase was primarily attributable to the increase in Noodle Kidoodle expenses
in relation to total expenses, since Noodle Kidoodle operates with a higher cost
structure as compared to Playworld and Toy Park stores. Noodle Kidoodle selling
and administrative expenses as a percentage of net sales decreased to 50.5% in
fiscal 1995 from 58.6% in fiscal 1994, as a result of the leveraging of
advertising expenses over a larger store base as well as certain non-recurring
pre-opening expenses incurred in fiscal 1994 relating to the first Noodle
Kidoodle store. This decrease was partially offset by higher home office
expenses relating to new stores opened in fiscal 1995.
Provision for restructuring was $3.9 million in fiscal 1995 related to the
closings of six Playworld stores. This included losses from store operations
from the date of announcement until closing, employee severance costs, estimated
lease liabilities, losses on liquidation of inventories and disposition of
assets and other related restructuring costs.
Operating loss increased $5.3 million to $7.6 million in fiscal 1995 from
$2.3 million in fiscal 1994. Excluding restructuring charges, the operating loss
would have been $3.7 million in fiscal 1995.
Net loss from continuing operations increased $3.3 million to $4.5 million
($.86 per share) in fiscal 1995 from $1.2 million ($.22 per share) in fiscal
1994. The increase includes a pre-tax provision for restructured operations of
$3.9 million ($.45 per share). Excluding this provision, net loss would have
been $2.2 million ($.41 per share).
DISCONTINUED OPERATIONS
Net sales decreased 7.3% to $113.2 million in fiscal 1995 from $122.1
million in fiscal 1994. The decrease resulted primarily from decreased revenues
in all merchandise categories associated with more direct buying from
manufacturers by the Company's existing customer base.
Gross profit decreased 7.9% to $24.6 million in fiscal 1995 from $26.7
million in fiscal 1994. Gross margin decreased to 21.7% in fiscal 1995 from
21.9% in fiscal 1994 resulting primarily from a lower sales mix of higher margin
merchandise sold.
Operating income decreased 43.8% to $1.8 million in fiscal 1995 compared to
$3.2 million in fiscal 1994 primarily resulting from the decrease in net sales
which was not offset by a corresponding decrease in selling and administrative
expenses.
Net income from discontinued operations decreased 42.0% to $1.1 million
($.21 per share) in fiscal 1995 compared to $1.9 million ($.35 per share) in
fiscal 1994.
FISCAL 1994 COMPARED TO FISCAL 1993
CONTINUING OPERATIONS
Net sales increased 13.5% to $20.7 million in fiscal 1994 from $18.3 million
in fiscal 1993. Noodle Kidoodle sales were $1.2 million in fiscal 1994,
reflecting sales at the first Noodle Kidoodle store which opened in the fourth
quarter of fiscal 1994. Other Retail sales increased 7.1% to $19.5 million in
fiscal 1994 from $18.3 in fiscal 1993, primarily as a result of the opening of
two new Playworld stores that opened during fiscal 1993 partially offset by a
decrease of 2.8% in comparable store sales.
Gross profit increased 12.3% to $6.1 million in fiscal 1994 from $5.5
million in fiscal 1993. Overall gross margin decreased to 29.7% in fiscal 1994
from 30.0% in fiscal 1993 due to lower margins in the Playworld stores partially
offset by increased sales volume at Noodle Kidoodle which generated higher
margins than the Playworld stores. Gross margin at Other Retail decreased to
29.0% in fiscal 1994 from 30.0% in fiscal 1993, primarily due to a higher mix of
lower margin merchandise.
18
<PAGE>
Selling and administrative expenses increased 26.4% to $8.4 million in
fiscal 1994 from $6.6 million in fiscal 1993. Selling and administrative
expenses at Other Retail increased to $5.9 million in fiscal 1994 from $5.1
million in fiscal 1993, principally as a result of new store openings. Corporate
selling and administrative expenses increased to $1.8 million in fiscal 1994
from $1.5 million in fiscal 1993 principally as a result of higher professional
and consulting costs offset by one-time insurance and property tax settlements
in fiscal 1994. As a percentage of net sales, selling and administrative
expenses were 40.6% in fiscal 1994 and 36.4% in fiscal 1993. The increase
resulted primarily from expenses associated with the first Noodle Kidoodle store
which had higher operating costs as compared to Playworld and Toy Park stores as
well as the opening of new Playworld stores, which had higher operating costs as
compared to older stores.
Operating loss increased 92.3% to $2.3 million in fiscal 1994 from $1.2 in
fiscal 1993.
Net loss from continuing operations increased $0.8 million to $1.2 million
($.22 per share) in fiscal 1994 from $0.4 million ($.08 per share) in fiscal
1993.
DISCONTINUED OPERATIONS
Net sales decreased 10.5% to $122.1 million in fiscal 1994 from $136.5
million in fiscal 1993. The decrease was attributable to weak retail sales,
bankruptcies of several major customers and more direct purchases from
manufacturers by customers.
Gross profit decreased 13.9% to $26.7 million in fiscal 1994 from $31.0
million in fiscal 1993. Gross margins decreased to 21.9% in fiscal 1994 from
22.7% in fiscal 1993, primarily reflecting a lower mix of higher margin
merchandise.
Operating income decreased 12.7% to $3.2 million in fiscal 1994 from $3.6
million in fiscal 1993.
Net income decreased 15.1% to $1.9 million ($.35 per share) in fiscal 1994
from $2.2 million ($.40 per share) in fiscal 1993.
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
During the past three fiscal years and the thirty-nine week period ended
October 28, 1995, the Company satisfied the cash requirements for its continuing
retail operations principally through cash flows from discontinued wholesale
operations and internal cash balances. These cash requirements principally
include operating losses, working capital requirements and expenditures for new
store openings.
The table below summarizes the Company's cash flow from operating, investing
and financing activities derived from the Consolidated Statements of Cash Flows
of the Company.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
----------------------------------------- --------------------------
JANUARY 30, JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 28,
1993 1994 1995 1994 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
Operating activities:
Continuing operations............ $(2,611) $ 8 $(1,466) $(4,734) $(6,981)
Discontinued operations.......... 5,859 (3,048) 9,066 5,800 9,370
Investing activities............... (3,919) 187 (2,472) (1,244) (7,204)
Financing activities............... 234 (1,918) 16 34 455
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents..................... (437) (4,771) 5,144 (144) (4,360)
Cash and cash equivalents--beginning
of period............................ 10,972 10,535 5,764 5,764 10,908
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents--end of
period............................... $10,535 $ 5,764 $10,908 $ 5,620 $ 6,548
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
During the thirty-nine weeks ended October 28, 1995, the Company generated
$9.4 million of cash flow from discontinued operations, primarily attributable
to reductions in inventory, and other working capital of $17.6 million offset by
a net loss of $9.1 million, which included a $7.1 million provision for the
discontinuation of wholesale operations. This cash was used primarily to fund
$7.0 million of cash requirements for continuing retail operations, attributable
to increases in working capital needs of $2.3 million due to new store openings
and seasonal inventory build-up as well as a net loss of $5.9 million. The
Company also used this cash to fund investing activities of $7.2 million
primarily for the purchase of fixed assets for new stores. As a result of the
foregoing, cash and cash equivalents decreased during the period by $4.4
million.
During fiscal 1995, the Company received $9.1 million of cash flow from
discontinued operations, primarily attributable to reductions in working capital
of $7.2 million and net income of $1.1 million. This cash was used primarily to
fund $1.5 million of cash requirements for continuing retail operations,
attributable to a net loss of $4.5 million offset by decreased working capital
needs of $1.7 million. The Company also used cash and $1.0 million of proceeds
received from the sale of marketable securities to fund $3.5 million of property
additions, primarily for the purchase of fixed assets for new stores. As a
result of the foregoing, cash and cash equivalents increased during the fiscal
year by $5.1 million.
During fiscal 1994, the Company did not generate or use any cash from
continuing operations since a net loss of $1.2 million was offset by decreased
working capital needs of $0.9 million and depreciation. The Company used $3.0
million of cash flow from discontinued operations primarily attributable to
increases in working capital of $5.8 million, offset by net income of $1.9
million. The Company applied net proceeds of $2.0 million from the sale of
marketable securities to fund property additions of $2.0 million, primarily for
the purchase of fixed assets for new stores. The Company also repurchased
outstanding shares of Common Stock for $1.9 million. As a result of the
foregoing, cash and cash equivalents decreased during the fiscal year by $4.8
million.
20
<PAGE>
During fiscal 1993, the Company received $5.8 million of cash flow from
discontinued operations attributable to net income of $2.2 million, depreciation
and other non-cash charges of $1.9 million and reductions in working capital of
$1.7 million. The Company used cash primarily to fund $2.6 million of cash
requirements for continuing retail operations, principally working capital needs
of $2.4 million. The Company also used this cash to fund investing activities of
$3.9 million, primarily for the purchase of securities totaling $3.0 million. As
a result of the foregoing, cash and cash equivalents during the period decreased
by $0.4 million.
During the past three fiscal years, the Company did not require any cash
borrowings under its $10.0 million revolving credit line, which expired in June
1995. The Company currently has in place a bank line of credit. Borrowings under
the facility, secured by certain assets of its discontinued wholesale business,
provide for maximum borrowings of $12.5 million in short-term loans and
commercial letters of credit and expires on June 30, 1996. Interest is at the
bank's prime rate plus .5%, or at a Eurodollar rate. Based on an asset-based
formula set by the bank, availability at October 28, 1995 was $5.0 million. As a
result of the discontinuation of the wholesale business, this future
availability is expected to decrease. The Company intends in the near future to
arrange for a new bank facility for its continuing retail operations.
As the Company expands its Noodle Kidoodle retail operations, it will
continue to require cash. The Company expects to fund its near-term cash
requirements principally from the net proceeds from this offering, as well as
from the further sale of discontinued wholesale assets. The Company expects to
finance its long-term expansion plan principally with externally generated
funds, which may include borrowings under future bank facilities, and through
the sale of equity, equity-related or debt securities. There can be no assurance
that financing will be available in amounts, or at rates or on terms and
conditions acceptable to the Company. See "Risk Factors--Ability to Realize
Expansion Plans" and -- Discontinued Operations; Restructuring Charges."
The Company estimates that capital expenditures during fiscal 1996 will be
approximately $8.5 million, of which $7.1 million already has been expended
during the thirty-nine week period ended October 28, 1995, and will be used
primarily to open new stores. The Company anticipates that capital expenditures
in fiscal 1997 will be approximately $11.0 million, primarily to finance
approximately 20 new store openings, at an average cost of approximately $0.5
million per store. In addition to capital expenditure requirements, new stores
require a working capital investment of approximately $0.4 million per store,
primarily for inventory, a large portion of which is financed by vendor trade
credit. Typically, pre-opening expenses are amortized over the first twelve
months of operations. The Company also expects to spend up to $1.0 million to
improve its MIS software capabilities in fiscal 1997.
The Company has available net operating loss carryforwards of approximately
$13.5 million for income tax purposes.
QUARTERLY FLUCTUATIONS IN RESULTS AND SEASONALITY
The timing of new store openings and related pre-opening expenses and the
amount of revenue contributed by new and existing stores have caused, and are
expected to cause in the future, the Company's quarterly results of operations
to fluctuate. In addition, the Company's business is affected by the pattern of
seasonality common to most toy retailers. Historically, the Company's stores
generate a significant portion of their net sales and the majority of their
store level operating profits during the Company's fourth fiscal quarter, which
includes the Christmas selling season, and have experienced operating losses or
nominal profits in the Company's first, second and third fiscal quarters.
IMPACT OF INFLATION
The impact of inflation on the Company's results of operations has not been
significant. The Company attempts to pass on increased costs by increasing
product prices over time.
21
<PAGE>
BUSINESS
OVERVIEW
The Company is a specialty retailer of a broad assortment of educationally
oriented, creative and non-violent children's products, including toys, books,
games, video and audio tapes, computer software, crafts and other learning
products. The Noodle Kidoodle concept offers something new to parents and
children by combining the attractive pricing and larger size of traditional toy
stores with the more creative product selection and superior customer service of
smaller boutiques, while providing an entertaining shopping environment through
interactive play areas and daily in-store events.
The Company was founded in 1946 and, doing business under its former name
Greenman Bros. Inc., historically was engaged in the retail toy business as well
as the wholesale distribution of general merchandise, with an emphasis on toys,
stationery and housewares. During the 1980s, the Company operated a number of
retail toy stores, including a chain of 330 stores under the Circus World name
located principally in shopping malls in approximately 30 states. The Company
sold the Circus World stores in fiscal 1991, but continued to operate a number
of retail toy stores under the Playworld name. In November 1993, the Company
opened its first Noodle Kidoodle store, which emphasized educationally oriented
children's products, and opened three additional Noodle Kidoodle stores in
fiscal 1995. During fiscal 1996, management determined, based in large part on
the success of its early Noodle Kidoodle stores, that the Company should focus
exclusively on its retail business by expanding and developing the Noodle
Kidoodle retail concept. Accordingly, in August 1995, the Company adopted a new
business plan and ceased operating its wholesale division, which generated net
sales of $113.2 million in fiscal 1995.
The Company currently operates 18 Noodle Kidoodle stores in New York, New
Jersey, Connecticut and the Chicago metropolitan area. The Company opened 14 of
these stores in fiscal 1996, and plans to open approximately 20 more stores in
fiscal 1997 in new and existing markets. The Company continues to operate four
other retail toy stores, two each under the Playworld and Toy Park names. The
Company closed several Playworld stores in fiscal 1995 and may close the
remaining Playworld and Toy Park stores, as certain lease issues are resolved.
BUSINESS STRATEGY
The Company's strategy is to become the leading national retailer of
educationally oriented children's products by offering a broad assortment of
creative and non-violent products at competitive prices in an interactive and
entertaining shopping environment with superior levels of customer service. The
key components of the Company's business strategy are:
Interactive Shopping Environment. Each Noodle Kidoodle store is designed
with children in mind. The stores' award-winning design uses colorful walls,
ceilings and carpets to create a playful and exciting atmosphere, where adults
and children are likely to spend more time than in other retail environments.
Seating and product shelves are at kid-level, and there are designated play
areas at each store where children and their parents are encouraged to explore
toys and games in keeping with the Company's "try before you buy" philosophy. A
Computer Center containing six computer stations enables children and adults to
test an assortment of approximately 60 different software programs from the
store's vast selection. An Electronic Learning Center enables children to sample
the store's considerable selection of electronic learning toys. A sampling of
the musical selections available in the store is continually broadcast over the
store's sound system, and a selection from the store's video offerings is
regularly displayed on a large screen television in the store's "Kidoodle
Theater." The Company believes that its customer friendly and interactive
environment differentiates it from large and impersonal superstore competitors.
22
<PAGE>
Broad Assortment of Imaginative Products. The Company's Noodle Kidoodle
stores offer a broad assortment of educationally oriented, creative and
non-violent products. These products are designed to stimulate a child's
imagination and contribute to his or her growth and development consistent with
the Company's slogan that "Kids learn best when they're having fun." Each store
typically carries approximately 25,000 SKUs, which are conveniently displayed in
separate merchandise departments. These departments are identified by colorful
and eye-catching signs which are visual as well as verbal so that children can
understand them. The Company believes that within its targeted age group of
infant to twelve years, its Noodle Kidoodle stores offer in a single location
one of the broadest available assortments of educationally oriented, creative
and non-violent children's products. The Company continually seeks innovative
new products consistent with its merchandising philosophy.
Daily In-Store Events. The Company provides without charge daily in-store
events such as personal appearances by authors and children's television
personalities, arts and crafts workshops and readings from selected books to
provide entertainment to its customers, increase store traffic and position
Noodle Kidoodle as a destination store. The Company provides advance notice of
in-store events through its monthly calendar distributed at the stores and in
the Company's newsletter. These events also frequently demonstrate the value of
the products and encourage customers to make purchases.
Superior Customer Service. Providing knowledgeable and friendly customer
service is a key aspect of the Company's business strategy and, the Company
believes, a competitive advantage over lower-service superstores and mass
merchandisers. The Company seeks to select enthusiastic employees who enjoy
working with children. As a result of the Company's training and development of
its personnel, the Company's sales associates are able to highlight the benefits
of the products being offered to customers. The Company believes that this
approach enables it to attract and retain highly motivated, well qualified store
managers and associates who are committed to providing the customer with
superior service. The Company also offers its customers such services as free
gift wrapping, shipping and special orders.
Targeted Marketing. The Company has created the Noodle Kidoodle Club in
order to establish customer loyalty and track repeat customers. The club
provides its members advance notice of sale events and special promotions, a
bi-monthly newsletter and events calendar, birthday cards sent to children and
similar special privileges. The Company is also establishing a targeted direct
mail marketing program and is in the process of expanding its customer database
for this purpose.
Competitive Pricing. Offering everyday competitive pricing is a key element
in the Company's merchandising strategy. Many products are regularly discounted
and prices in general are believed to be competitive with those featured by
superstores carrying the same lines of merchandise. "Noodle Knockouts," special
value items which are often used as end-of-aisle displays, offer the customer
quality products at substantially reduced prices. The Company believes that its
long involvement in the retail and wholesale toy business affords it a
competitive advantage in selecting and purchasing special value merchandise and
implementing its pricing strategy.
EXPANSION STRATEGY
The Company believes that the Noodle Kidoodle concept has nationwide appeal.
The Company currently operates 18 Noodle Kidoodle stores in New York, New
Jersey, Connecticut and the Chicago metropolitan area, and plans to open
approximately 20 more stores in fiscal 1997 in new and existing markets. The
Company's near-term plan is to cluster its stores in the Northeastern United
States and several Midwestern markets, in order to leverage the Company's
advertising programs as well as optimize the capabilities of its strategically
located distribution center. The Company believes that there are substantial
opportunities for nationwide expansion over the longer term.
23
<PAGE>
The Company has identified a number of large metropolitan markets which it
believes will support multiple Noodle Kidoodle stores. In fiscal 1996, the
Company entered two new markets, opening five stores in the Chicago metropolitan
area and two in Connecticut. In fiscal 1997, the Company plans to enter two
additional new markets, opening stores in the Detroit and Boston metropolitan
areas. The Company's site selection process involves conducting market research
and demographic analysis which consider population density, location relative to
major traffic arteries and such factors as age, household income and education.
The Company seeks locations in high traffic urban and suburban areas with a
demographic profile of above average income and education levels. The Company
employs a dual real estate strategy, situating stores in both strip center and
mall locations.
The Company currently leases all of its stores and expects to continue to
lease its stores in the future. Typically it takes three to four months from the
time that a lease is signed until a store is operational. The cost of leasehold
improvements and furniture and fixtures for a typical Noodle Kidoodle store has
ranged from $400,000 to $600,000 per store, depending on the location and size
of the store. Pre-opening expenses are amortized over the first twelve months of
operations. A typical store requires a working capital investment of
approximately $400,000, primarily for inventory, a large portion of which is
financed through vendor trade credit. Based on the Company's limited experience
with Noodle Kidoodle stores, management believes that its new stores should
generate store level operating profits after pre-opening expenses in their first
full year of operation.
MERCHANDISING
The Company's merchandising strategy is to provide the broadest possible
assortment of products which stimulate a child's imagination and contribute to
his or her growth and development consistent with the Company's slogan that
"Kids learn best when they're having fun." Each store typically carries
approximately 25,000 SKUs conveniently displayed in separate merchandise
departments. These departments are identified by colorful and eye-catching signs
which are visual as well as verbal so that children can understand them. All of
products carried in Noodle Kidoodle stores conform to the Company's creative,
non-violent, and educational merchandising strategy. The Company generally does
not carry mass market television advertised toys. However, in certain product
categories, the Company does carry brand name products which fit the Noodle
Kidoodle philosophy, such as Crayola, Lego, Playmobil, the full line of Walt
Disney video titles and the Goosebumps line of books The stores also feature a
designated "Teacher's Center" where teaching aids can be purchased. To keep its
merchandising mix fresh and exciting, the Company continually seeks innovative
new products.
The Company's products generally fall into two main categories:
Creative and Educational Toys Multi-Media Products
- ----------------------------- --------------------
Arts & Crafts Audio
Construction Books
Electronic Learning Software
Games & Puzzles Video
Impulse
Infants & Pre-School
Let's Pretend
Music
Science & Nature
Seasonal
Stationery
Stickers & Stamps
24
<PAGE>
Creative and Educational Toys accounted for approximately 75% of Noodle
Kidoodle's retail sales in fiscal 1995 compared to Multi-Media Products which
accounted for 25%. Creative and Educational Toys in the aggregate generate
higher margins than Multi-Media Products.
STORE OPERATIONS
The Company's prototype store has increased in size from approximately
10,000 to approximately 12,000 square feet to accommodate additional selections
of merchandise. All of the Noodle Kidoodle stores are based on the Company's
award-winning design and offer a warm and inviting shopping environment with
brightly lit spaces, colorful walls, ceilings and carpets, wide aisles for
strollers and kid-level seating and product shelving. Products are conveniently
displayed in separate merchandise departments, such as "Science & Nature" and
"Arts & Crafts," which are identified by colorful eye-catching signs that are
visual as well as verbal so that children can understand them. Noodle Kidoodle
stores contain designated play areas where children and their parents are
encouraged to explore toys and games in keeping with the Company's "try before
you buy" philosophy. Among the key interactive features at each store are the
Computer Center, Kidoodle Theater and the Electronic Learning Center. Noodle
Kidoodle stores generally are open seven days a week and the typical hours of
operation are from 10:00 a.m. to 9:00 p.m.
The following is a typical floor plan of a prototype Noodle Kidoodle store:
[insert diagram]
The Company emphasizes customer convenience and satisfaction. The Company's
sales associates develop product knowledge in order to assist customers with
purchasing decisions. For example, the Company believes that adults who are not
computer literate are less likely to feel intimidated seeking
25
<PAGE>
software products in Noodle Kidoodle stores than at computer retailers. The
Company is initiating a program to train sales associates with respect to
product knowledge, customer service and loss prevention. In addition, certain
vendors provide training for their products, to enable sales associates to
highlight the benefits and value of these products to customers.
A Noodle Kidoodle store is generally staffed with one manager, two assistant
managers and a varying number of full-time and part-time sales associates,
depending on store volume. Store managers are responsible for virtually all
aspects of store operations, including store staffing and shrinkage control.
However, merchandise replenishment is controlled centrally to ensure adequate
inventory levels consistent with the rate of sale at each store. Store managers
are eligible to receive incentive bonuses based on sales and shrinkage targets
set by management. In addition, store management participates in the Company's
stock option plan.
ADVERTISING AND MARKETING
The Company utilizes newspaper and radio advertising throughout its target
markets to promote the Noodle Kidoodle name and increase awareness of the Noodle
Kidoodle concept and philosophy. Such advertising is also used to attract
customers to grand openings, selected celebrity appearances and special sale
events. During peak holiday seasons, Noodle Kidoodle runs glossy, full-color
newspaper inserts to convey the quality and value of its merchandise and to
highlight specific promotional items. The Company spent approximately $0.6
million and $1.3 million on advertising expenses in fiscal 1995 and the
thirty-nine week period ended October 28, 1995, respectively, substantially all
of which were spent on the Noodle Kidoodle retail business.
In order to build customer loyalty and track repeat customers, the Company
has established the Noodle Kidoodle Club. Sales associates promote free club
membership by encouraging customers to complete a short application form. The
club provides its members advance notice of sale events and special promotions,
a bi-monthly newsletter and events calendar, birthday cards sent to children and
similar special privileges. The Noodle Kidoodle Club currently has approximately
18,000 members and the Company believes that it is a very effective marketing
tool for maintaining long-term customer relationships.
To ensure that frequent customers receive special incentives to shop at
Noodle Kidoodle, the Company is developing a targeted direct mail marketing
program. The Company is in the process of expanding its customer database, which
consists of names acquired from a variety of sources, including the Noodle
Kidoodle Club and at the point of sale. Currently, the customer database
contains approximately 82,000 names. The Company also targets teachers by
offering them a 10% discount on all products and holding semi-annual "teachers'
nights" during which teachers can receive additional discounts.
In addition, the Company has devoted a major effort to develop relationships
with civic and charitable organizations that promote the education, development
and welfare of children. The Company contacts schools, museums and ecological
societies in connection with store openings, and attempts are made to work
jointly with these groups. To date, the Company has worked with, among others,
the Save the Children Foundation, the Liberty Science Center in New Jersey and
the Chicago Children's Museum.
PURCHASING AND DISTRIBUTION
The Company has implemented a centralized purchasing and distribution system
designed to minimize the delivery cost of merchandise and to maximize the
in-stock position of its stores. As the number of stores increases, the Company
anticipates that it will be able to take greater advantage of
26
<PAGE>
volume discounts. In the future, the Company expects to pursue other measures
designed to reduce or control the cost of goods sold, such as direct importing
and private label products.
Noodle Kidoodle purchases merchandise from over 500 suppliers. There are
currently two suppliers who represent slightly more than 5% of total purchases.
Most of the Company's products come from manufacturers oriented to supplying
specialty stores. The Company employs five buyers, each of whom is responsible
for purchasing selected categories of the Company's merchandise. These buyers
generally have extensive purchasing experience with major toy and other
specialty retailers.
The Company currently owns and operates one central distribution center,
located in Phillipsburg, New Jersey. This warehouse contains approximately
269,000 square feet, and is equipped with a conveyor and racking system that
allows for an efficient "pick and ticket" operation capable of supporting at
least 100 stores. Approximately two thirds of the Company's products are
distributed through this warehouse and the balance is shipped to the stores
directly by the manufacturers or distributors. Direct shipments include books,
computer software, audio, stickers and stamps, and certain other merchandise.
The Company's management has been in the distribution business for many years
and believes that such experience represents a significant competitive
advantage.
MANAGEMENT INFORMATION SYSTEMS
The Company utilizes an IBM RS 6000 system which handles all major
informational requirements of the Company's business, including sales,
warehousing and distribution, purchasing, inventory control, merchandise
planning and replenishment as well as various financial systems. At the store
level, the Company uses a point-of-sale ("POS") computer system with the
capability to provide sales data and perpetual inventory data on an SKU basis to
the home office and store locations. Information obtained from daily polling of
this system results in merchandise replenishment in response to specific SKU
requirements of each store. Additional capabilities include scanning and price
look-up.
The Company plans to make improvements in this system during fiscal 1997
with up to $1.0 million of the net proceeds from this offering. These
improvements will primarily consist of new software and should enhance
merchandise planning, analysis and replenishment capabilities. In addition, the
improved system is expected to provide customer profiling capabilities to assist
in the Company's targeted marketing efforts and contribute to more efficient
store operations.
COMPETITION
The retail toy business is highly competitive. The Company competes on the
basis of its stores' interactive environment, broad merchandise selection,
superior customer service and competitive pricing. The Company competes with a
variety of mass merchandisers, superstores and specialty retailers selling
portions of its product lines, including books, software, video and audio
products, and arts and crafts. It also competes with toy superstores and other
toy retailers, including Toys R Us and Kay Bee Toy Stores and other store
formats selling children's products, such as discount stores and smaller
specialty toy stores. Retailing of children's educational products is a
relatively new concept. Included among the Company's direct competitors are Zany
Brainy, Learningsmith and Imaginarium.
Some of the Company's competitors are much larger in terms of sales volume
and have more capital and greater management resources than the Company. If any
of the Company's larger competitors were to increase their focus on the
educational market or if any regional competitors were to expand their
activities in the markets primarily served by the Company, the Company could be
adversely affected. If any of the Company's major competitors seek to gain or
retain market share by reducing prices, the Company may be required to reduce
its prices on key items in order to remain competitive, which would have the
effect of reducing its profitability.
27
<PAGE>
EMPLOYEES
As of October 28, 1995, the Company employed approximately 680 people,
approximately 350 of whom were employed full-time. The Company also employs
additional part-time personnel during the pre-Christmas season. Approximately 15
of the Company's employees in the Playworld and Toy Park stores are covered by
contracts with a union. The Company believes that its relations with its
employees are generally good.
TRADEMARKS
The Company has registered several service marks and trademarks with Federal
and state authorities, including Noodle Kidoodle,(R) Oodles & Oodles of Fun
Things to Learn(R) and Kidoodle Animation,(R) and has applied for a service mark
for the Company's slogan "Kids learn best when they're having fun." The Company
believes it has all licenses necessary to conduct its business.
PROPERTIES
The Company currently supports its retail operations with an owned 269,000
square foot distribution center in Phillipsburg, New Jersey. The Company had
previously supported its total retail and wholesale operations with three other
distribution centers located in Farmingdale, New York, West Haven, Connecticut
and Birmingham, Alabama. In conjunction with discontinuing its wholesale
operations, the Company has ceased operating the Farmingdale distribution
center. The Company discontinued the use of the Birmingham center in 1989 and
has been sub-leasing the space to third parties since such discontinuance. The
Company intends to dispose of its owned Farmingdale and Birmingham properties in
fiscal 1997. The Company ceased operating its West Haven center in October 1995
and the lease expires in March 1996. The Company does not believe that disposing
of or discontinuing operations in any of these facilities will have a material
adverse effect on its operations or financial condition.
The Company continues to operate four other retail toy stores, two each
under the Playworld and Toy Park names. The Playworld stores are both located in
Nassau County, New York, and the Toy Park stores are located in Huntington, New
York and in Manhattan, New York. The Playworld stores are each approximately
10,000 square feet and the Toy Park stores are 7,000 and 4,000 square feet for
the Huntington and Manhattan stores, respectively. The Company has closed
several Playworld stores in fiscal 1995 and may close the remaining Playworld
and the Toy Park stores, as certain lease issues are resolved.
The Company's executive offices are located at its Farmingdale, New York
owned facility. This building, which has historically been used as a
distribution center for the Company's wholesale operations, is expected to be
sold or leased during fiscal 1997, at which time the Company may move to new
headquarters. If the Company chooses to change the location of its headquarters,
it does not expect to experience any difficulty in finding a suitable new
location.
The Company leases all of its Noodle Kidoodle stores. Original lease terms
generally are for ten years, and many leases contain renewal options. The
Company's stores are generally located in either strip centers or mall
locations.
28
<PAGE>
The following chart sets forth the location, size and grand opening date of
each of the 18 Noodle Kidoodle stores:
MARKET AREA AND APPROXIMATE
STORE LOCATION GROSS DATE OF
SQUARE FOOTAGE GRAND OPENING
- --------------------------------------- ---------------- -----------------
NEW YORK
Greenvale.............................. 10,450 11/13/93
Oceanside.............................. 8,000 7/16/94
East Northport......................... 10,800 6/24/95
Massapequa............................. 11,250 6/24/95
Plainview.............................. 9,050 6/24/95
Albany................................. 10,000 10/14/95
Staten Island.......................... 10,000 11/13/95
NEW JERSEY
Wayne.................................. 11,250 8/27/94
Paramus................................ 10,000 11/19/94
Livingston............................. 11,300 2/25/95
Freehold............................... 9,400 11/04/95
CONNECTICUT
Manchester............................. 12,000 9/30/95
Norwalk................................ 11,500 11/18/95
CHICAGO METROPOLITAN
Clybourne.............................. 9,500 8/26/95
Wilmette............................... 10,000 8/26/95
Woodridge.............................. 12,500 8/26/95
Arlington Heights...................... 12,850 10/07/95
Vernon Hills........................... 11,250 10/07/95
--------
Total Gross Square Footage......... 191,100
--------
--------
LEGAL PROCEEDINGS
The Company is a defendant in a purported class action filed in August 1995,
in the United States District Court for the Eastern District of New York against
Playmobil, USA, Inc., a toy manufacturer ("Playmobil"), and against the Company
and another retailer as defendant class representatives of those toy retailers
nationwide selling products manufactured by Playmobil. The Complaint alleges
that Playmobil, through its suggested retail pricing policy, conspired with its
retailers unlawfully to restrict competition in the sales of Playmobil products.
The Company believes the allegations against it to be meritless and intends to
vigorously defend the action.
Except as set forth above, the Company is not a party to any legal
proceedings other than various claims and lawsuits arising in the normal course
of its business which, in the opinion of the Company's management, are not
individually or in the aggregate material to its business. The Company maintains
general liability insurance coverage in amounts deemed adequate by management.
29
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES
The executive officers, directors and other key employees of the Company are
as follows:
NAME AGE POSITION
- ----------------------------- --- --------------------------------------
Stanley Greenman(3).......... 46 Chairman of the Board, Chief
Executive Officer and Treasurer
Stewart Katz(2).............. 54 President, Chief Operating Officer,
Assistant Secretary and Director
William A. Johnson, Jr....... 42 Corporate Vice President, Chief
Financial Officer and Secretary
Robin L. Farkas(2)........... 62 Director
Lester Greenman(1)........... 40 Director
Joseph A. Madenberg(3)....... 58 Director
Barry W. Ridings(1).......... 43 Director
Robert Stokvis(3)............ 48 Director
Irwin Tantleff(1)............ 60 Director
Jerry I. Cohen............... 47 Vice President--Merchandise Planning
Henry S.Y. Lee............... 46 Vice President--Marketing
Matthew J. Peoples........... 37 Vice President--Information Systems
Pauline Pettit............... 43 Vice President--Store Development and
Design
Joel M. Seibert.............. 47 Vice President--Real Estate
- ------------
(1) Class 1 director; term expires in 1998.
(2) Class 2 director; term expires in 1996.
(3) Class 3 director; term expires in 1997.
Stanley Greenman has been the Chairman of the Board, Chief Executive Officer
and Treasurer of the Company since 1990 and has served as a director of the
Company since 1976. Mr. Greenman has been an employee of the Company since 1969.
Mr. Greenman is a brother of Lester Greenman and a brother-in-law of Stewart
Katz.
Stewart Katz has been the President, Chief Operating Officer and Assistant
Secretary of the Company since 1977 and has served as a director of the Company
since 1973. Mr. Katz has been an employee of the Company since 1970. Mr. Katz is
a brother-in-law of both Lester Greenman and Stanley Greenman.
William A. Johnson, Jr. has served as Corporate Vice President and Chief
Financial Officer since May 1989. Mr. Johnson worked for the Company as Vice
President/Corporate Controller from May 1988 to May 1989 and as Director of
Internal Audit from July 1987 to May 1988. Mr. Johnson worked as an Audit
Manager for Touche Ross & Co. prior to joining the Company in July 1987.
Robin L. Farkas has served as a director of the Company since 1993. He is
currently a private investor. From 1984 to 1992, Mr. Farkas was Chairman of the
Board and Chief Executive Officer of Alexanders, Inc. (mass merchandise retail
chain). Alexanders, Inc. filed for bankruptcy under Chapter 11 of the United
States Bankruptcy Code on May 15, 1992 and emerged from bankruptcy and
reorganized on October 4, 1993. Mr. Farkas is also a member of the boards of
directors of Insignia Financial Group, Inc. and Refac Technology Corp.
Lester Greenman has served as a director of the Company since 1994. Mr.
Greenman has been a Vice President of Legal and Business Affairs for Sony
Electronic Publishing Company ("SEPC") since 1994. From 1991 to 1994, he was
Director of Legal and Business Affairs for SEPC. He was an Assistant
30
<PAGE>
United States Attorney in the Southern District of New York from 1990 to 1991,
and an associate at the law firm of Gibson, Dunn & Crutcher from 1987 to 1990.
Mr. Greenman is a brother of Stanley Greenman and a brother-in-law of Stewart
Katz.
Joseph A. Madenberg has served as a director of the Company since 1993. He
has been the President of Joseph A. Madenberg, Inc. (retail management
consulting firm) since 1968 and prior thereto, he was a Professor of Business
Administration at Suffolk County Community College until his retirement in
December 1992.
Barry W. Ridings has served as a director of the Company since 1994. He has
been a Managing Director of Alex. Brown & Sons Incorporated (an investment
banking and securities brokerage firm) since 1990 and he was a Managing Director
at Drexel Burnham Lambert from 1986 to 1990. Mr. Ridings is also a member of the
boards of directors of New Valley Corporation, Norex America, Inc., SubMicron
Systems Corporation, Telemundo Group, Inc., Transcor Waste Services, Inc. and
Trinity Six Inc.
Robert Stokvis has served as a director of the Company since 1991. He has
been the President of Stokvis Enterprises, Inc., (distributor of materials
handling equipment) for more than the past five years.
Irwin Tantleff has served as a director of the Company since July 1995. He
has been a Managing Partner of Four T Associates (real estate and financial
management) since 1986 and has been adjunct Professor of Management at New York
University, Stern School of Business, since 1992. From 1986 to 1989 he was
Corporate Senior Vice President and director of First National Supermarkets,
Inc., d/b/a Finast/Edwards. From 1965 to 1986, he was the founder and Chief
Executive Officer of IJT Limited, d/b/a Foodtown Supermarkets.
Jerry I. Cohen has been the Vice President--Merchandise Planning of the
Company since November 1995. He joined the Company in 1978 and in 1980 was
promoted to the position of Controller. In 1988 he was appointed Vice President
of Finance--Wholesale. Prior to joining the Company, he served as Assistant
Controller for Wallach's, Inc., Accounting Manager for Robert Hall Clothes and
Accounting Supervisor of Interstate Department Stores.
Henry S.Y. Lee has been the Vice President--Marketing of the Company since
November 1995. He joined the Company in 1994, after having provided consulting
services to the Company relating to the implementation of the Noodle Kidoodle
concept through a private company, Corporate Marketing Network. Prior to
entering the consulting field, Mr. Lee was employed by the Children's Place
Retail Stores, Inc. from May 1991 to December 1991 and Brookstone, Inc. from
January 1988 to May 1991, and Laura Ashley from 1985 to 1987, holding the Vice
President of Marketing position at each company.
Matthew J. Peoples has been the Vice President--Information Systems of the
Company since 1990. Mr. Peoples joined the Company as Manager of Systems
Development in 1985, and held the position of Director of MIS from 1988 to 1990.
Prior to joining the Company, he held the position of Software Manager for The
Ultimate Corp. and was a Technical Specialist for ADP, Inc.
Pauline Pettit has been the Vice President--Store Development and Design of
the Company since November 1995. Ms. Pettit joined the Company in May 1993 as
Director of Retail Operations. For 17 years prior to joining the Company in May
1993, Ms. Pettit was employed by Record World, Inc. where she held the position
of Director of Retail Operations and Loss Prevention.
Joel M. Seibert has been Vice President--Real Estate of the Company since
November 1995. He joined the Company in July 1994. From 1990 to 1994, Mr.
Seibert was Senior Vice President and General Counsel for Job Lot Incorporated,
and its affiliated companies. From 1987 to 1990, Mr. Seibert
31
<PAGE>
was Director of Real Estate for Dress Barn, Inc. and, from 1985 to 1987, served
as Associate General Counsel and Director of Real Estate for Caldor, Inc.
BOARD OF DIRECTORS COMMITTEES
Executive Committee. The Executive Committee is currently comprised of
Stanley Greenman, Stewart Katz and Joseph Madenberg. The Executive Committee is
authorized to meet between Board meetings when necessary and has the authority
to act, within limits set by the Board of Directors, on behalf of the entire
Board of Directors in connection with substantially all operating matters.
Audit Committee. The Audit Committee is currently comprised of Barry
Ridings, Stewart Katz and Irwin Tantleff. The primary function of the Audit
Committee is to recommend independent accountants, review the overall scope of
any audits made by the independent accountants and communicate to the Board the
Committee's findings as to the adequacy of the Company's internal or external
financial controls.
Compensation and Stock Option Committee. The Compensation and Stock Option
Committee is currently comprised of Robin Farkas, Joseph Madenberg and Robert
Stokvis. The primary function of the Compensation and Stock Option Committee is
to review and approve the compensation of certain officers of the Company, to
review and approve the granting of stock options to officers and other key
members of management, and to administer the Company's stock option plans.
Strategic Planning Committee. The Strategic Planning Committee is currently
comprised of Robin Farkas, Joseph Madenberg, Robert Stokvis, Irwin Tantleff,
Stanley Greenman and Stewart Katz. This Committee has the responsibility for
developing short- and long-term strategies for the Company's business and
reviewing, from time to time, the Company's progress in implementing such
strategies.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a fee of $2,000 for
each Board meeting they attend. Additionally, directors who are not employees of
the Company receive a fee of $1,000 for attendance at committee meetings held on
a date other than the date of a scheduled Board of Directors meeting.
Under the Company's Outside Directors' 1994 Stock Option Plan, directors who
are not employees of the Company are issued options to purchase 5,000 shares of
Common Stock upon initial election to the Board of Directors. On April 26, 1995,
non-employee directors were automatically issued an option to purchase an
additional 1,000 shares of Common Stock, and pursuant to a plan amendment
approved by stockholders in December 1995, on April 26 of each year thereafter,
such directors will automatically be issued an option to purchase an additional
4,000 shares of Common Stock. The options granted under such plan have a term of
five years and become exercisable as to 50% of the shares on the first
anniversary of the date of the grant and as to the remaining 50% of the shares
on the second anniversary of the date of grant.
Bernard Greenman, a founder and former Chairman of the Board, passed away in
April 1994. Pursuant to a consulting agreement, dated January 31, 1990, by and
between the Company and Mr. Greenman, the Company is obligated to pay Mr.
Greenman's estate the $75,000 annual consulting fee payable under the agreement,
through January 31, 1996. In addition, pursuant to the agreement, the Company is
required to provide coverage or reimbursement for all medical and dental
expenses incurred by Phyllis Greenman, Mr. Greenman's widow, during her
lifetime.
Mr. Joseph Madenberg, a director of the Company since 1993, provides
consulting services to the Company under a consulting agreement with the Company
dated January 18, 1994. Pursuant to the agreement, the Company is required to
pay Mr. Madenberg annual consulting fees totalling $7,300.
32
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation for
services, in all capacities for fiscal 1995, fiscal 1994 and fiscal 1993, of
those persons who were, at the end of fiscal 1995, the Chief Executive Officer
and the most highly compensated executive officers of the Company (collectively,
the "Three Named Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL NUMBER OF
COMPENSATION SECURITIES
NAME AND FISCAL ------------------ UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
- -------------------------------------------- ------ -------- ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Stanley Greenman............................ 1995 $263,500 None 30,000 $552
Chairman of the Board, 1994 $275,000 None None $613
Chief Executive Officer 1993 $275,000 None 56,250 $360
and Treasurer
Stewart Katz................................ 1995 $241,000 None 30,000 $738
President, Chief Operating 1994 $250,000 None None $996
Officer and Assistant 1993 $250,000 None 56,250 $736
Secretary
William A. Johnson, Jr. .................... 1995 $160,000(2) None None $639
Corporate Vice President, Chief Financial 1994 $157,000 None 7,500 $685
Officer and Secretary 1993 $157,000 None 500 $643
</TABLE>
- ------------
(1) Represents for each of the Three Named Officers the amount contributed as
matching contributions by the Company under the Company's 401(k) Plan.
(2) Includes a retroactive annual increase of $5,000 from fiscal 1994 paid to
Mr. Johnson in fiscal 1995.
33
<PAGE>
The following table sets forth information concerning stock option grants
made during fiscal 1995 to the Three Named Officers. These grants are also
reflected in the Summary Compensation Table. In accordance with Commission
rules, a repricing of outstanding options is treated as a new grant. Also in
accordance with the Commission rules, the hypothetical gains or "option spreads"
for each option grant are shown based on compound annual rates of stock price
appreciation of 5% and 10% from the grant date to the expiration date. The
assumed rates of growth are prescribed by the Securities and Exchange Commission
(the "Commission") and are for illustrative purposes only; they are not intended
to predict future stock prices, which will depend upon market conditions and the
Company's future performance. The Company has not granted any stock appreciation
rights.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL
------------------------------------------------------- REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES IN EXERCISE FOR OPTION TERM
OPTIONS FISCAL YEAR PRICE EXPIRATION ------------------
NAME GRANTED(#) 1995(1) ($/SHARE)(2) DATE(3) 5% 10%
- ----------------------------------- ---------- ------------ ------------ ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Stanley Greenman................... 30,000 31.8% $ 5.50 12/20/99 $45,600 $100,800
Stewart Katz....................... 30,000 31.8% $ 5.50 12/20/99 $45,600 $100,800
William A. Johnson, Jr. ........... None -- -- -- -- --
</TABLE>
- ------------
(1) During fiscal 1995, (a) the expiration date of options to purchase a total
of 12,500 shares held by 2 employees was extended, (b) the exercise price of
such options was increased and (c) options to purchase 81,750 shares were
granted to 17 employees.
(2) The exercise price of the options granted was equal to the fair market value
of the underlying stock on the date of grant.
(3) Options become exercisable in equal installments on the first four
anniversaries of the date of grant. Vesting may be accelerated upon the
occurrence of certain events. See "Management -- Employment Agreements."
The following table sets forth information concerning the number of
unexercised options and the fiscal 1995 year-end value of unexercised options on
an aggregated basis held by each of the Three Named Officers. The Company has
not granted any stock appreciation rights and no options were exercised in
fiscal 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Stanley Greenman............................. 112,500 30,000 $14,062 $ 0
Stewart Katz................................. 112,500 30,000 $14,062 $ 0
William A. Johnson, Jr. ..................... 21,250 3,750 $ 8,781 $ 0
</TABLE>
- ------------
(1) Options are "in-the-money" if, on January 28, 1995, the market price of the
Common Stock ($4.5625) exceeded the exercise price of such options. The
value of such options is calculated by determining the difference between
the aggregate market price of the Common Stock underlying the options on
January 28, 1995 as reported on the American Stock Exchange and the
aggregate exercise price of such options.
34
<PAGE>
EMPLOYMENT AGREEMENTS
As of February 1, 1995, the Company entered into employment agreements with
Stanley Greenman and Stewart Katz (collectively, the "Employment Agreements") to
replace the employment agreements with each of them, which expired on January
31, 1995 (the "Old Employment Agreements"). During fiscal years 1993, 1994 and
1995, the employment of Mr. Greenman and Mr. Katz was governed by their Old
Employment Agreements, which provided for base salaries for Mr. Greenman and Mr.
Katz of $250,000 and $225,000, respectively, in each case subject to increases
determined by the Compensation and Stock Option Committee and approved by the
Board of Directors. For fiscal 1995, Mr. Greenman and Mr. Katz requested that
their base salaries, as adjusted in prior years, be reduced by 5% in view of the
transition to the new business plan.
Each of the Employment Agreements provides for employment until January 31,
1998, at annual base salaries of $275,000 (in the case of Mr. Greenman) and
$250,000 (in the case of Mr. Katz), in each case subject to increases determined
by the Compensation and Stock Option Committee and approved by the Board of
Directors. In addition, each of the Employment Agreements, and a separate
agreement for the benefit of William A. Johnson, Jr., provides that in the event
of a Change in Control of the Company (as defined in such agreements) which
results in an actual or constructive termination of employment (as defined in
such agreements), each of the Three Named Officers is entitled to receive
severance pay equal to the difference between 299% of his average annual
compensation for the prior five calendar years and the present value of all
other payments received by him which would be considered as contingent on a
change in control. Exercisability of certain stock options held by the Three
Named Officers would also be accelerated by actual or constructive termination
or hostile takeover events and the value of such accelerated options would be
included in the aforementioned calculation.
In addition, the Employment Agreements provide for the payment of a
performance bonus to each of Mr. Greenman and Mr. Katz (each an "Executive"),
for each of the three fiscal years ended February 3, 1996 ("Year 1"), February
1, 1997 ("Year 2"), and January 31, 1998 ("Year 3"), based upon the net pre-tax
profits or losses of the Company during each such year. The level of the
performance bonus for each year can range from zero to 30% of such Executive's
base salary for the applicable year. If the maximum performance bonus is not
payable for all of Years 1, 2 and 3, each Executive will be paid an additional
bonus if a certain aggregate profit level is reached during Years 1, 2 and 3;
provided, however, that the aggregate performance bonus paid to each Executive
cannot exceed 30% of the total of such Executive's salary during Years 1, 2 and
3. In addition, the maximum amount of the aggregate performance bonus paid to
the Executives shall not exceed 10% of the Company's pre-tax profits (as defined
in the Employment Agreements) for Year 3.
The Employment Agreements also provide that each Executive will be granted
stock options pursuant to the Company's 1994 Stock Incentive Plan based upon the
level of pre-tax profits, net of losses achieved by the Company in Year 1 and
Year 2. The option grant for each year can range from no options to a maximum of
30,000 options. In addition, if the maximum option grant is not awarded for both
Year 1 and Year 2, each Executive will be awarded additional options if a
certain aggregate profit level is reached during Year 1 and Year 2; provided,
however, that in no event will any Executive be granted more than an aggregate
of 60,000 options for Year 1 and Year 2.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Robert Stokvis, Robin Farkas and Joseph Madenberg currently serve as members
of the Compensation and Stock Option Committee of the Board of Directors. Mr.
Madenberg replaced Benjamin Zdatny as a member of the Committee during fiscal
1995. None of Messrs. Stokvis, Farkas or Madenberg is or was formerly an officer
or employee of the Company.
35
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of shares of Common Stock as of December 6, 1995 for (i) each person
or group that is known by the Company to be a beneficial owner of more than 5%
of the outstanding shares Common Stock, (ii) each of the Three Named Officers
and directors, (iii) the Company's executive officers and directors as a group
and (iv) each Selling Stockholder.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING NUMBER OF AFTER OFFERING
------------------------- SHARES -------------------------
NAME AND ADDRESS OF NUMBER OF PERCENTAGE BEING NUMBER OF PERCENTAGE
BENEFICIAL OWNER** SHARES OF OWNERSHIP OFFERED SHARES OF OWNERSHIP
- ------------------------------------------ --------- ------------ --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Ryback Management Corporation............. 426,900(1) 8.0% -- 426,900 5.8%
and/or Lindner Fund, Inc.
7711 Carondelet Avenue
Box 16900
St. Louis, MO 63105
Dimensional Fund Advisors Inc............. 387,000(2) 7.2% -- 387,000 5.3%
1299 Ocean Avenue
Suite 650
Santa Monica, California 90401
Phyllis Greenman,......................... 276,034 5.1% 50,000 226,034 3.1%
Successor Trustee of the Bernard Greenman
Marital Deduction Trust Under
Agreement Dated March 22, 1991
16915 River Birch Circle
Delray Beach, Florida 33445
Stanley Greenman.......................... 360,022(3) 6.6% -- 360,022 4.8%
105 Price Parkway
Farmingdale, New York 11735
Stewart Katz.............................. 351,607(4) 6.4% -- 351,607 4.7%
105 Price Parkway
Farmingdale, New York 11735
Lester Greenman(5)........................ 182,500 3.4% 50,000 132,500 1.8%
William A. Johnson, Jr.(5)................ 9,500 * -- 9,500 *
Robert Stokvis(5)......................... 21,750 * -- 21,750 *
Barry W. Ridings(5)....................... 3,500 * -- 3,500 *
Joseph A. Madenberg(5).................... 3,000 * -- 3,000 *
Robin L. Farkas(5)........................ 3,000 * -- 3,000 *
Irwin Tantleff............................ 1,500 * -- 1,500 *
All executive officers and directors as a
group (9 persons)........................ 936,379 16.6% 50,000 886,379 11.6%
</TABLE>
- ------------
<TABLE>
<C> <S>
* Less than 1% of the outstanding Common Stock.
** Address provided for beneficial owners of more than 5% of the Common Stock.
(1) Based upon information contained in a Schedule 13G filed with the Securities and
Exchange Commission on January 25, 1995. Such Schedule states that as of December 31,
1994, Ryback Management Corporation ("Ryback"), a registered investment advisor, had
sole voting and investment power as to 426,900 shares of the Company's Common Stock,
325,300 shares (6.2%) of which are held by Lindner Fund, Inc., a registered investment
company, for which Ryback serves as investment advisor.
(2) Based upon information contained in a Schedule 13G filed with the Securities and
Exchange Commission on January 30, 1995. Such Schedule states that the beneficial owner
has sole voting power as to 245,300 shares and sole investment power as to 387,000
shares. Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 387,000 shares of the Company's
Common Stock, all of which shares are held in portfolios of DFA Investment Dimensions
Group Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group Trust and the DFA
Participating Group Trust, investment vehicles for qualified employee benefit plans,
all of which Dimensional Fund Advisors Inc. serves as investment manager. Dimensional
disclaims beneficial ownership of all such shares.
(3) Includes 18,750 shares owned of record by Stanley Greenman as custodian for a child,
with respect to which shares Mr. Greenman disclaims beneficial ownership, and 120,000
shares issuable upon the exercise of options exercisable within 60 days.
(4) Includes 181,200 shares owned of record and beneficially by Stewart Katz's wife, 37,907
shares owned of record by Mr. Katz's children, with respect to which shares Mr. Katz
disclaims beneficial ownership, and 120,000 shares issuable upon the exercise of
options exercisable within 60 days.
(5) Includes shares issuable upon exercise of options exercisable within 60 days as
follows: Lester Greenman (2,500), William A. Johnson, Jr. (8,500), Robert Stokvis
(4,250), Barry W. Ridings (2,500), Joseph A. Madenberg (3,000) and Robin L. Farkas
(3,000).
</TABLE>
36
<PAGE>
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue an aggregate of 15,000,000 shares of
Common Stock, par value $.10 per share, 5,369,390 of which are issued and
outstanding, net of 924,261 shares of treasury stock, and held by approximately
600 stockholders of record.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by shareholders. The holders of Common Stock are
entitled, among other things, (i) to share ratably in dividends if, when and as
declared by the Board of Directors out of funds legally available therefor and
(ii) in the event of liquidation, dissolution or winding-up of the Company, to
share ratably in the distribution of assets legally available therefor, after
payment of debts and expenses. The holders of Common Stock do not have
cumulative voting rights in the election of directors and have no preemptive
rights to subscribe for additional shares of the Company. All currently
outstanding shares of the Common Stock are, and the shares offered hereby, when
sold in the manner contemplated by this Prospectus, will be, fully paid and
nonassessable.
PREFERRED STOCK
The Company is authorized to issue an aggregate of 500,000 shares of
Preferred Stock, par value $1.00 per share, 440,000 shares of which are
designated Series A Junior Participating Preferred and reserved for issuance in
connection with the Company's stockholders' rights agreement (the "Rights
Agreement"). No shares of Preferred Stock are issued and outstanding.
The Board of Directors is authorized to determine, among other things, with
respect to each series that may be issued, (i) the dividend rate and conditions
and the dividend preferences, if any; (ii) whether dividends would be cumulative
and, if so, the date from which dividends on such series would accumulate; (iii)
whether, and to what extent, the holders of such series would enjoy voting
rights, if any, in addition to those prescribed by law; (iv) whether, and upon
what terms, such series would be convertible into or exchangeable for shares of
any other class of capital stock or other series of Preferred Stock; (v)
whether, and upon what terms, such series would be redeemable; (vi) whether or
not a sinking fund would be provided for the redemption of such series and, if
so, the terms and conditions thereof; and (vii) the preference, if any, to which
such series would be entitled in the event of voluntary or involuntary
liquidation, dissolution or winding up of the Company. With regard to dividends,
redemption and liquidation preference, any particular series of Preferred Stock
may rank junior to, on a parity with or senior to any other series of Preferred
Stock and the Common Stock.
It is not possible to state the actual effect of the authorization of the
Preferred Stock upon the rights of holders of the Common Stock until the Board
of Directors determines the specific rights of the holders of a series of the
Preferred Stock. However, such effects might include: (i) restriction on
dividends on the Common Stock if dividends on Preferred Stock have not been
paid; (ii) dilution of the voting power of the Common Stock to the extent that
the Preferred Stock has voting rights; (iii) dilution of the equity interest of
the Common Stock to the extent that the Preferred Stock is converted into Common
Stock; or (iv) the Common Stock not being entitled to share in the Company's
assets upon liquidation until satisfaction of any liquidation preference granted
the holders of the Preferred Stock. Issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could make it more difficult for a third party to acquire a
majority of the outstanding voting stock. Accordingly, the issuance of Preferred
Stock may be used as an "anti-takeover" device without further action on the
part of the shareholders of the Company. The Company has no present plans to
issue any shares of Preferred Stock.
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain several
provisions intended to limit the possibility of a takeover of the Company. In
addition to providing for a classified Board of
37
<PAGE>
Directors and the issuance of Preferred Stock having terms established by the
Board of Directors without shareholder approval, the Certificate of
Incorporation requires that, unless the actions set forth below are approved by
the Board of Directors and a majority of such approving directors were members
of the Board prior to the time the Major Stockholder (as defined below) involved
in such action became a Major Stockholder, the affirmative vote of not less than
80% of the shares of stock entitled to vote thereon is required to authorize (i)
any merger, reorganization or consolidation of the Company or of any subsidiary
with or into any other corporation, person or other entity (collectively,
"person"), (ii) any sale, lease, hypothecation, exchange or other disposition
(in one transaction or in a series of related transactions) of all or any
substantial part of the assets of the Company or of any subsidiary to or with
any other person, or (iii) any issuance or transfer by the Company or by any
subsidiary of any of its securities to any other person in exchange for assets
or securities (or a combination thereof) having an aggregate fair market value
of 15% or more of the consolidated assets of the Company immediately preceding
the record date for determination of stockholders entitled to notice thereof and
to vote thereon, if in any such case the person which is a party to such action
beneficially owns (as defined therein) 15% or more of the outstanding capital
stock of the Company (a "Major Stockholder").
Pursuant to the Rights Agreement maintained by the Company, each outstanding
share of the Company's Common Stock carries a stock purchase right. Under
certain circumstances, as defined in the Rights Agreement, each right may be
exercised to purchase 1/100 of a share of Series A Junior Participating
Preferred Stock for $25.00, subject to certain anti-dilution adjustments. The
rights are redeemable by the Company or, under certain circumstances, by a third
party to whom the Company assigns its rights, at $0.01 each until such a person
or group acquires 15% of the Company's Common Stock or until the rights expire
on May 15, 1998. The exercise of any rights under the Rights Agreement may
discourage unsolicited takeover bids by third parties.
Section 912 of the New York Business Corporation Law prohibits a company
from entering into a business combination (e.g., a merger, consolidation, sale
of substantially all assets, or issuance of securities with an aggregate market
value of 10% or more of the aggregate market value of all of the Company's
outstanding capital stock) with a beneficial owner of 20% or more of a company's
securities (a "20% shareholder") for a period of five years following the date
such beneficial owner became a 20% shareholder (the "stock acquisition date"),
unless such business combination or the purchase of stock resulting in the 20%
shareholder's beneficial ownership was approved by the Company's board of
directors prior to the stock acquisition date or, among other things, the
business combination is approved by the affirmative vote of the holders of a
majority of the outstanding voting stock, exclusive of the stock owned by the
20% shareholder. The applicability of this provision to the Company may
discourage unsolicited takeover bids by third parties.
TRANSFER AGENT AND REGISTRAR
Chemical Mellon Shareholder Services, Washington Bridge Station, P.O. Box
469, New York, New York 10033, is the transfer agent and registrar for the
securities of the Company.
38
<PAGE>
UNDERWRITING
The Underwriters named below, for whom PaineWebber Incorporated and Rodman &
Renshaw, Inc. are acting as representatives (the "Representatives"), have
severally agreed, subject to the terms and conditions of the Underwriting
Agreement (the "Underwriting Agreement"), to purchase from the Company and the
Selling Stockholders, and the Company and the Selling Stockholders have agreed
to sell to the Underwriters, the number of shares of Common Stock set forth
opposite their names.
NUMBER
UNDERWRITER OF SHARES
- -------------------------------------------------------- -----------
PaineWebber Incorporated................................
Rodman & Renshaw, Inc...................................
Total........................................... 2,100,000
-----------
-----------
The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the shares of Common Stock offered hereby are subject to certain
conditions. The Underwriters are committed to purchase, and the Company and the
Selling Stockholders are obligated to sell, all of the shares of Common Stock
offered by this Prospectus (other than those covered by the over-allotment
option described below), if any are purchased.
The Company has been advised by the Representatives that the Underwriters
propose initially to offer the shares of Common Stock to the public at the
public offering price set forth on the cover page of this Prospectus, and to
certain securities dealers at such price less a concession not in excess of
$ per share. The Underwriters may allow, and such dealers may reallow,
concessions of not more than $ per share on sales to certain other dealers.
After the public offering, the offering price and concessions may be changed by
the Representatives.
The Company has granted to the Underwriters an option, exercisable within
the 30-day period after the date of this Prospectus, to purchase up to an
additional 315,000 shares of Common Stock at the public offering price set forth
on the cover page of this Prospectus, less the underwriting discounts and
commissions. The Underwriters may exercise such option only to cover
over-allotments, if any, in the sale of the shares of Common Stock offered
hereby. To the extent that such option is exercised, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each
Underwriter bears to the 2,100,000 shares of Common Stock offered hereby.
The Company, its executive officers and directors, and the Selling
Stockholders have agreed not to (a) sell, offer to sell or otherwise dispose of
shares of Common Stock or securities convertible into Common Stock or (b) sell,
offer to sell, contract to sell, or grant rights, options, warrants or other
rights
39
<PAGE>
to shares with respect to Common Stock or securities convertible into Common
Stock, prior to the expiration of 150 days from the date of this Prospectus,
without the prior written consent of PaineWebber Incorporated, other than
pursuant to existing employee stock option plans or in connection with other
employee incentive compensation arrangements of the Company and issuances of
Common Stock upon exercise of options outstanding as of the date of this
Prospectus.
In connection with this offering, certain Underwriters and selling group
members (if any) or their respective affiliates may engage in passive market
making transactions in the Common Stock on the Nasdaq National Market in
accordance with Rule 10b-6A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") during the two business day period before
commencement of offers or sales of the Common Stock. The passive market making
transactions must comply with applicable volume and price limits and be
identified as such. In general, a passive market maker may display its bid at a
price not in excess of the highest independent bid for such security; if all
independent bids are lowered below the passive market maker's bid, however, such
bid must then be lowered when certain purchase limits are exceeded.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters and their controlling persons against certain liabilities,
including liabilities under the Securities Act, or to contribute to payments the
Underwriters may be required to make in respect thereof.
EXPERTS
The financial statements and scheduled included or incorporated by reference
in this prospectus and elsewhere in the registration statement have been audited
by Janover Rubinroit, LLC, independent certified public accountants, as set
forth in their report thereon and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Kramer, Levin, Naftalis, Nessen, Kamin & Frankel, 919
Third Avenue, New York, New York 10022. Certain legal matters in connection with
the Common Stock offered hereby will be passed upon for the Underwriters by
Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York,
New York 10019.
40
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington D.C., a Registration Statement on Form S-1 (together
with all amendments and exhibits thereto, the "Registration Statement") under
the Securities Act of 1933, with respect to the shares of Common Stock offered
hereby. This prospectus constitutes a part of the Registration Statement and
does not contain all the information set forth therein. Any statements contained
herein concerning the provisions of any contract or other document are not
necessarily complete and, in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference. For further information regarding
the Company and the securities offered hereby, reference is made to the
Registration Statement and to the exhibits thereto.
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission. These reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024 of the Commission's office at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at 7 World Trade Center, Suite 1300, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates.
The Company distributes to its stockholders, annual reports containing
audited financial statements and an opinion thereon by the Company's independent
public accountants, and quarterly reports containing unaudited summary financial
information for each of the first three fiscal quarters of each fiscal year.
41
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Consolidated Balance Sheets as of January 29, 1994, January 28, 1995 and
October 28, 1995.................................................................... F-3
Consolidated Statements of Income (Loss) for each of the three fiscal years ended
January 28, 1995 and for each of the thirty-nine week periods ended October 29, 1994
(unaudited) and October 28, 1995...................................................... F-4
Consolidated Statements of Stockholders' Equity for each of the three fiscal years
ended January 28, 1995 and for the thirty-nine week period ended October 28, 1995... F-5
Consolidated Statements of Cash Flows for each of the three fiscal years ended January
28, 1995 and for each of the thirty-nine week periods ended October 29, 1994
(unaudited) and October 28, 1995.................................................... F-6
Notes to Consolidated Financial Statements............................................ F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of
Noodle Kidoodle, Inc. (formerly Greenman Bros. Inc.):
We have audited the accompanying consolidated balance sheets of Noodle
Kidoodle, Inc. (formerly Greenman Bros. Inc.) and Subsidiaries as of January 29,
1994, January 28, 1995, and October 28, 1995 and the related consolidated
statements of income (loss), stockholders' equity, and cash flows for each of
the three fiscal years ended January 28, 1995 and for the thirty-nine week
period ended October 28, 1995. Our audits also include the financial statement
schedule listed in the index at Item 16(b) of the Registration Statement. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Noodle
Kidoodle, Inc. and Subsidiaries as of January 29, 1994, January 28, 1995, and
October 28, 1995, and the results of their operations and cash flows for each of
the three fiscal years ended January 28, 1995 and for the thirty-nine week
period ended October 28, 1995 in conformity with generally accepted accounting
principles. Further, in our opinion, the financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
Janover Rubinroit, LLC
New York, New York
December 13, 1995
F-2
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, OCTOBER 28,
1994 1995 1995
----------- ----------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 5,764 $10,908 $ 6,548
Short-term investments................................... 1,000 -- --
Merchandise inventories.................................. 6,319 4,330 12,437
Prepaid expenses and other current assets................ 1,075 1,551 1,888
Recoverable income taxes................................. -- 1,429 --
Net assets of discontinued operations.................... 31,217 24,621 6,327
----------- ----------- -----------
Total current assets................................. 45,375 42,839 27,200
Property, plant and equipment at cost...................... 6,476 7,752 14,843
Less accumulated depreciation............................ (2,726) (2,589) (3,221)
----------- ----------- -----------
3,750 5,163 11,622
Other assets............................................... 504 40 50
----------- ----------- -----------
Total Assets............................................. $49,629 $48,042 $38,872
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable................................... $ 2,387 $ 2,262 $ 7,191
Accrued expenses and taxes............................... 3,041 4,777 5,237
Income taxes............................................. 137 133 --
----------- ----------- -----------
Total current liabilities............................ 5,565 7,172 12,428
Commitments and contingencies.............................. -- -- --
Stockholders' equity:
Preferred Stock-authorized 500,000 shares, par value
$1.00 (none issued).................................... -- -- --
Common Stock-authorized 10,000,000 shares, par value
$0.10; issued 6,119,348, 6,185,301 and 6,292,701
shares, respectively................................... 612 619 629
Capital in excess of par value........................... 25,608 25,801 26,294
Retained earnings........................................ 21,636 18,242 3,313
Less treasury stock, at cost-924,261 shares.............. (3,792) (3,792) (3,792)
----------- ----------- -----------
Total stockholders' equity........................... 44,064 40,870 26,444
----------- ----------- -----------
Total Liabilities and Stockholders' Equity............... $49,629 $48,042 $38,872
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
THIRTY-NINE WEEKS
FISCAL YEARS ENDED ENDED
----------------------------------------- ----------------------
OCTOBER OCTOBER
JANUARY 30, JANUARY 29, JANUARY 28, 29, 28,
1993 1994 1995 1994 1995
----------- ----------- ----------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales........................... $18,250 $20,712 $23,308 $12,042 $ 13,508
Costs and expenses:
Cost of products sold including
buying and warehousing costs........ 12,779 14,569 16,192 8,214 8,784
Selling and administrative
expenses............................ 6,645 8,401 10,790 6,937 10,563
Provision for restructured
operations.......................... -- -- 3,900 3,500 500
----------- ----------- ----------- --------- ---------
19,424 22,970 30,882 18,651 19,847
----------- ----------- ----------- --------- ---------
Operating loss.................... (1,174) (2,258) (7,574) (6,609) (6,339 )
Interest income..................... 624 392 372 299 501
Interest expense.................... (143) (115) (75) (56) (32 )
----------- ----------- ----------- --------- ---------
Loss from continuing operations
before income taxes................. (693) (1,981) (7,277) (6,366) (5,870 )
Income taxes (benefit).............. (268) (801) (2,787) (2,547) --
----------- ----------- ----------- --------- ---------
Net loss from continuing
operations.......................... (425) (1,180) (4,490) (3,819) (5,870 )
----------- ----------- ----------- --------- ---------
Discontinued operations:
Income (loss) net of income tax
expense of $1,407, $1,282, $685,
$15 and $0, respectively............ 2,226 1,889 1,096 22 (1,914 )
Operating loss of $7,305 including
gain from disposal of assets and
income taxes of $1,602.............. -- -- -- -- (7,145 )
----------- ----------- ----------- --------- ---------
Net income (loss) from
discontinued operations......... 2,226 1,889 1,096 22 (9,059 )
----------- ----------- ----------- --------- ---------
Net income (loss)................. $ 1,801 $ 709 $(3,394) $(3,797) $(14,929 )
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
Net income (loss) per share:
Continuing operations............. $ (.08) $ (.22) $ (.86) $ (.73) $ (1.11 )
Discontinued operations........... .40 .35 .21 -- (1.71 )
----------- ----------- ----------- --------- ---------
Net income (loss)................. $ .32 $ .13 $ (.65) $ (.73) $ (2.82 )
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
Weighted average shares
outstanding......................... 5,574,547 5,338,012 5,220,222 5,206,615 5,301,702
----------- ----------- ----------- --------- ---------
----------- ----------- ----------- --------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL TREASURY STOCK
COMMON STOCK IN EXCESS (AT COST)
---------------- OF PAR RETAINED ----------------
SHARES AMOUNT VALUE EARNINGS SHARES AMOUNT
------ ------ --------- -------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance--February 1, 1992.................. 6,051 $605 $ 25,281 $ 19,126 511 $1,920
Exercise of stock options
including related tax benefits......... 66 7 313 -- -- --
Net income for the year.................. -- -- -- 1,801 -- --
------ ------ --------- -------- ------ ------
Balance--January 30, 1993.................. 6,117 612 25,594 20,927 511 1,920
Exercise of stock options
including related tax benefits......... 2 -- 14 -- -- --
Purchase of treasury stock............... -- -- -- -- 413 1,872
Net income for the year.................. -- -- -- 709 -- --
------ ------ --------- -------- ------ ------
Balance--January 29, 1994.................. 6,119 612 25,608 21,636 924 3,792
Exercise of stock options
(net of stock tendered) including
related tax benefits................... 66 7 193 -- -- --
Net loss for the year.................... -- -- -- (3,394) -- --
------ ------ --------- -------- ------ ------
Balance--January 28, 1995.................. 6,185 619 25,801 18,242 924 3,792
Exercise of stock options................ 107 10 493 -- -- --
Net loss for the period.................. -- -- -- (14,929) -- --
------ ------ --------- -------- ------ ------
Balance--October 28, 1995.................. 6,292 $629 $ 26,294 $ 3,313 924 $3,792
------ ------ --------- -------- ------ ------
------ ------ --------- -------- ------ ------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
----------------------------------------- -------------------------------
JANUARY 30, JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 28,
1993 1994 1995 1994 1995
----------- ----------- ----------- -------------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss from continuing
operations....................... $ (425) $(1,180) $(4,490) $ (3,819) $(5,870)
Adjustments to reconcile to net
cash provided (used):
Depreciation................. 219 297 499 437 648
Restructuring charges--non-
cash portion..................... -- -- 834 3,500 500
Decrease (increase) in non-
cash working capital
accounts:
Merchandise inventories.... (1,503) (226) 1,989 (3,317) (8,107)
Prepaid expenses and other
current assets................... (1,518) 636 (1,905) (2,030) 1,092
Trade accounts payable,
accrued expenses and
taxes............................ 616 481 1,607 495 4,756
----------- ----------- ----------- -------------- -----------
Net cash provided by (used in)
continuing operations............ (2,611) 8 (1,466) (4,734) (6,981)
----------- ----------- ----------- -------------- -----------
Net income (loss) from
discontinued operations.......... 2,226 1,889 1,096 22 (9,059)
Adjustments to reconcile to net
cash provided (used):
Depreciation and other non-
cash changes..................... 1,933 899 775 655 867
Decrease (increase) in non-
cash working capital
accounts and other............... 1,700 (5,836) 7,195 5,123 17,562
----------- ----------- ----------- -------------- -----------
Net cash provided by (used in)
discontinued operations.......... 5,859 (3,048) 9,066 5,800 9,370
----------- ----------- ----------- -------------- -----------
Net cash provided by (used in)
operating activities............. 3,248 (3,040) 7,600 1,066 2,389
----------- ----------- ----------- -------------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of
securities....................... -- 2,987 1,000 1,000 --
Purchase of securities......... (2,987) (1,000) -- -- --
Property additions:
Continuing operations........ (646) (935) (2,751) (1,893) (7,118)
Discontinued operations...... (520) (1,071) (1,213) (934) (86)
Other........................ 234 206 492 583 --
----------- ----------- ----------- -------------- -----------
Net cash provided by (used in)
investing activities............. (3,919) 187 (2,472) (1,244) (7,204)
----------- ----------- ----------- -------------- -----------
</TABLE>
F-6
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
----------------------------------------- -------------------------------
JANUARY 30, JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 28,
1993 1994 1995 1994 1995
----------- ----------- ----------- -------------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES:
Reduction in long-term debt and
obligations under capital
leases........................... (56) (60) (64) (45) (48)
Purchase of treasury stock..... -- (1,872) -- -- --
Exercise of employee options... 290 14 80 79 503
----------- ----------- ----------- -------------- -----------
Net cash provided by (used in)
financing activities............. 234 (1,918) 16 34 455
----------- ----------- ----------- -------------- -----------
Net increase (decrease) in cash
and cash equivalents............. (437) (4,771) 5,144 (144) (4,360)
Cash and cash equivalents--
beginning of period.............. 10,972 10,535 5,764 5,764 10,908
----------- ----------- ----------- -------------- -----------
Cash and cash equivalents--end
of period........................ $10,535 $ 5,764 $10,908 $ 5,620 $ 6,548
----------- ----------- ----------- -------------- -----------
----------- ----------- ----------- -------------- -----------
SUPPLEMENTAL CASH FLOW
INFORMATION:
Net cash paid (received) during
the period for:
Interest expense............. $ 143 $ 115 $ 75 $ 56 $ 32
Income taxes, net............ 1,633 1,068 328 308 (1,522)
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
The following summary of the Company's major accounting policies is
presented to assist in the interpretation of the financial statements.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and all subsidiary companies. Intercompany balances and material
transactions are eliminated in consolidation. The Company and its subsidiaries
are on a 52-53 week accounting period ending on the Saturday closest to January
31. Fiscal 1993, 1994 and 1995 each contained 52 weeks.
INTERIM FINANCIAL INFORMATION
The information provided in the consolidated financial statements for the
thirty-nine weeks ended October 29, 1994 is unaudited but includes all
adjustments which, in the opinion of management, are necessary for a fair
presentation of results for the interim period reported. All adjustments were of
a normal and recurring nature.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents; investments with maturities between
three and twelve months are considered to be short-term investments. These
investments are stated at cost which approximates market value. The Company
places its temporary cash investments in high grade instruments with high credit
quality financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution.
INVENTORIES
Inventories of continuing operations are stated at the lower of cost
(first-in, first-out) or market.
EARNINGS PER SHARE
The computation of earnings per share is based on the weighted average
number of outstanding common shares. The inclusion of common stock equivalents
had no significant dilutive effect or were antidilutive and therefore, were not
utilized in the computations of net income (loss) per share.
PROPERTY, PLANT AND EQUIPMENT
Plant and equipment is stated at cost and is depreciated on a straight-line
basis over estimated useful lives. Repairs and maintenance are charged to
expense as incurred; renewals and betterments, which significantly extend the
useful lives of existing plant and equipment, are capitalized.
Leasehold improvements are amortized over the terms of the respective leases
or over their useful lives, whichever is shorter. Useful lives of other plant
and equipment varies among the classifications, but range for buildings and
improvements from 10-40 years and for fixtures and equipment from 4-10 years.
PRE-OPENING EXPENSES
Costs incurred in the opening of new stores are amortized over the first
twelve months of operations.
F-8
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
INCOME TAXES
In fiscal 1994, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109. Deferred taxes provided under SFAS No. 109 result
principally from temporary differences in depreciation, capitalized inventory
costs, restructuring charges, and allowance for doubtful accounts. Upon
implementation of SFAS No. 109, there was no material impact on the Company's
results of operations or financial position. The Company previously accounted
for income taxes based upon SFAS No. 96.
RECLASSIFICATIONS
Certain reclassifications of prior periods' data have been made to conform
to current period classifications.
NOTE 2--DISCONTINUED OPERATIONS:
On August 30, 1995, the Company adopted a formal plan to discontinue its
wholesale business segment. The plan provides for the sale of two of the
Company's distribution centers and the disposition through sale or liquidation
of substantially all of the operating assets of such segment.
The operations and net assets of the wholesale business segment are being
accounted for as a discontinued operation, and accordingly, its operating
results and net assets are reported in this manner in all periods presented in
the accompanying consolidated financial statements.
In connection with discontinuing its wholesale operations, the Company
recorded a provision of $7.1 million in the fiscal quarter ended July 29, 1995
for (i) estimated gains or losses on the sale or liquidation of wholesale assets
and (ii) estimated operating losses until such disposal or liquidation is
completed.
Summary operating results from discontinued operations are as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
----------------------------------------- --------------------------
JANUARY 30, JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 28,
1993 1994 1995 1994 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales............................ $ 136,488 $ 122,138 $ 113,194 $80,729 $50,635
Gross profit......................... 31,035 26,711 24,604 17,069 9,164
Operating income (loss).............. 3,633 3,171 1,781 37 (1,914)
Provision for discontinued
operations........................... -- -- -- -- 7,145
Net income (loss).................... 2,226 1,889 1,096 22 (9,059)
</TABLE>
Net assets of discontinued operations represent total assets less
liabilities of the Company's wholesale business segment. Net assets of this
segment at October 28, 1995 consist principally of accounts receivable,
inventories and properties of $10,487,000 less accounts payable, accrued
expenses, and capitalized lease obligations of $4,160,000.
F-9
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--PROPERTY, PLANT AND EQUIPMENT:
JANUARY 29, JANUARY 28, OCTOBER 28,
1994 1995 1995
----------- ----------- -----------
(IN THOUSANDS)
Land................................ $ 272 $ 272 $ 272
Buildings and improvements.......... 1,356 1,506 1,657
Fixtures and equipment.............. 2,713 2,797 5,618
Leasehold improvements.............. 2,135 3,177 7,296
----------- ----------- -----------
6,476 7,752 14,843
Less accumulated depreciation....... (2,726) (2,589) (3,221)
----------- ----------- -----------
$ 3,750 $ 5,163 $ 11,622
----------- ----------- -----------
----------- ----------- -----------
NOTE 4--CREDIT FACILITY:
The Company has a secured line of credit with a bank which provides maximum
borrowings of $12.5 million in short-term loans and commercial letters of credit
that expires on June 30, 1996. Credit availability under the line is subject to,
among other things, a borrowing base formula of 75% of eligible accounts
receivable and 50% of eligible inventory (maximum inventory of $6.25 million) of
the wholesale segment. Eligible assets at October 28, 1995 would result in
availability of $5.0 million under the provisions of the line of credit.
Interest on borrowings is at the bank's prime rate plus 0.5% or at a Eurodollar
rate. The Company had no borrowings under this facility during the thirty-nine
week period ended October 28, 1995. Management intends to replace this credit
facility upon expiration.
NOTE 5--COMMITMENTS AND CONTINGENCIES:
Minimum annual commitments under non-cancelable leases in effect at October
28, 1995 are as follows:
SUBLEASE
OPERATING RENTAL
LEASES INCOME
--------- --------
(IN THOUSANDS)
1996 (three months)................................ $ 1,409 $ 164
1997............................................... 6,383 517
1998............................................... 6,078 152
1999............................................... 6,061 157
2000............................................... 6,037 161
2001............................................... 6,106 166
Thereafter......................................... 29,631 525
--------- --------
Total minimum obligations.................... $61,705 $1,842
--------- --------
--------- --------
At October 28, 1995, the Company and its subsidiaries were lessees of
stores, vehicles, and warehouse equipment under various leases. In addition to
fixed rents and rentals based on sales, certain of the leases require the
payment of taxes and other costs. Some leases include renewal options.
F-10
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5--COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
Rental expense (income) for operating leases was as follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE WEEKS ENDED
----------------------------------------- --------------------------
JANUARY 30, JANUARY 29, JANUARY 28, OCTOBER 29, OCTOBER 28,
1993 1994 1995 1994 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Minimum rentals...................... $ 1,320 $ 1,647 $ 1,850 $ 1,304 $ 1,940
Taxes and other costs................ 655 635 1,027 712 855
Sublease rentals..................... (851) (837) (953) (777) (813)
----------- ----------- ----------- ----------- -----------
$ 1,124 $ 1,445 $ 1,924 $ 1,239 $ 1,982
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
LITIGATION
Several lawsuits are pending against the Company. In the opinion of
management, the Company has meritorious defenses or is covered by insurance and
the Company's liability, if any, when ultimately determined will not be
significant.
EMPLOYMENT AND CONSULTING AGREEMENTS
The Company has employment and consulting agreements with certain directors,
officers, and employees. Certain agreements provide for minimum salary levels as
well as for incentive bonuses which are payable if specified management goals
are attained.
NOTE 6--CAPITAL STOCK:
PREFERRED STOCK
The Company has 500,000 authorized (non-issued) shares of preferred stock,
par value $1.00, consisting of 440,000 shares of Series A Junior Participating
Preferred reserved for use under the Company's Rights Agreement and the
remainder for other unspecified purposes.
STOCKHOLDERS' RIGHTS AGREEMENT
Each outstanding share of the Company's common stock carries a stock
purchase right. Under certain circumstances, as defined in the Company's Rights
Agreement, each right may be exercised to purchase 1/100 of a share of Series A
Junior Participating Preferred Stock for $25.00, subject to certain
anti-dilution adjustments. The rights are redeemable by the Company or, under
certain circumstances, by a third party to whom the Company assigns its rights
at $.01 each until a person or group acquires fifteen percent of the Company's
common stock or until they expire on May 15, 1998.
TREASURY STOCK
On February 4, 1993, the Company's Board of Directors authorized the
repurchase from time to time of up to 500,000 shares of its common stock. The
Company purchased 413,600 shares of common stock at an average price of $4.52
per share under this authorization. In April 1995, the Board terminated its
stock repurchase program.
F-11
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--STOCK OPTIONS:
STOCK INCENTIVE PLAN
In 1994, the Company's stockholders adopted a Stock Incentive Plan (the
"Plan") for key employees and consultants. The Plan reserves 500,000 shares of
common stock for the issuance of stock options, stock appreciation rights
(SARs), dividend equivalent rights, restricted stock, unrestricted stock and
performance shares and is administered by the Compensation and Stock Option
Committee (the "Committee") of the Board of Directors of the Company.
Under the terms of the Plan, options granted may be either non-qualified or
incentive stock options and the exercise price, determined by the Committee,
shall be at least 75% (100% in the case of an incentive stock option) of the
fair market value of a share on the date of grant. SARs may be granted (subject
to specified restrictions) in connection with all or any part of, or
independently of, any option granted under the Plan. No SARs, dividend
equivalent rights, restricted stock, unrestricted stock or performance shares
have been granted to date under the Plan. Options granted under the Plan are
exercisable in installments; however, no options are exercisable within one year
or later than ten years from the date of grant.
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
In 1994, the Company adopted the 1994 Outside Directors' Stock Option Plan
(the "Stock Option Plan") and reserved 75,000 shares of common stock for the
issuance of stock options related to this plan. The Stock Option Plan for
outside directors provides that upon the initial election to the Board, each
eligible director is granted an option to purchase 5,000 shares of common stock
and 1,000 shares each year thereafter at the fair market value on the date of
grant. The options have a term of five years and become exercisable 50% on the
first anniversary of the date of grant and 50% on the second anniversary of the
date of grant. See Note 13--Subsequent Events.
1984 STOCK OPTION PLAN
The Company's 1984 Stock Option Plan expired in April 1994, and the
remaining options available, but not granted, under the plan were canceled.
The following summary sets forth the activity under the Company's stock
incentive plans:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------------
THIRTY-NINE WEEKS ENDED
JANUARY 29, 1994 JANUARY 28, 1995 OCTOBER 28, 1995
--------------------- ---------------------- -----------------------
SHARES PRICE RANGE SHARES PRICE RANGE SHARES PRICE RANGE
------- ----------- -------- ----------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
period......................... 576,503 $3.50-$6.25 582,878 $3.50-$6.25 501,459 $3.50-$ 6.50
Granted........................ 22,000 $4.13-$5.00 96,750 $5.50-$6.50 213,500 $4.56-$13.13
Exercised...................... (2,100) $4.00-$4.50 (168,544) $4.00-$4.50 (107,400) $4.00-$ 6.50
Terminated..................... (13,525) $3.75-$4.81 (9,625) $4.00-$6.25 (18,000) $4.50-$ 6.50
------- -------- --------
Outstanding at end of period... 582,878 $3.50-$6.25 501,459 $3.50-$6.50 589,559 $3.50-$13.13
------- ----------- -------- ----------- -------- ------------
------- ----------- -------- ----------- -------- ------------
Exercisable at end of period... 540,228 $3.50-$6.25 384,209 $3.50-$6.50 290,341 $3.50-$ 6.50
------- ----------- -------- ----------- -------- ------------
------- ----------- -------- ----------- -------- ------------
Available for grant at end of
period......................... 115,886 -- 484,250 -- 279,250 --
------- -------- --------
------- -------- --------
</TABLE>
F-12
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--TAXES ON INCOME:
Income taxes consist of the following:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE
----------------------------------------- WEEKS ENDED
JANUARY 30, JANUARY 29, JANUARY 28, OCTOBER 28,
1993 1994 1995 1995
----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current:
Federal............................... $951 $180 $(1,429) $ --
State and local....................... 361 184 -- --
----------- ----------- ----------- -----------
1,312 364 (1,429) --
Deferred................................ (173) 117 (673) 1,602
----------- ----------- ----------- -----------
1,139 481 (2,102) 1,602
Discontinued operations................. 1,407 1,282 685 1,602
----------- ----------- ----------- -----------
Continuing operations................... $(268) $(801) $(2,787) $ --
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
A reconciliation of the statutory federal income tax rate attributable to
income (loss) from continuing operations to the effective income tax rate is as
follows:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED THIRTY-NINE
----------------------------------------- WEEKS ENDED
JANUARY 30, JANUARY 29, JANUARY 28, OCTOBER 28,
1993 1994 1995 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Federal at statutory rates..................... 34% 34% (34)% (34)%
State and local taxes, net of federal tax
benefits....................................... 6 6 (4) (4)
Losses with no current tax benefit............. -- -- -- 38
Other.......................................... (1) -- -- --
-- --
--- ---
39% 40% (38)% --%
-- --
-- --
--- ---
--- ---
</TABLE>
The components of deferred tax assets (liabilities) consist of the
following:
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 28, OCTOBER 28,
1994 1995 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net operating loss carryforwards (expires 2011)............ $ -- $ -- $ 5,545
Capitalizable inventory costs.............................. 529 411 160
Allowance for doubtful accounts............................ 297 393 542
Restructured operations and other.......................... 393 1,011 864
----------- ----------- -----------
Gross deferred tax assets.................................. 1,219 1,815 7,111
----------- ----------- -----------
Depreciation............................................... (290) (213) (131)
----------- ----------- -----------
Gross deferred tax liabilities........................... (290) (213) (131)
----------- ----------- -----------
Net deferred tax assets.................................. 929 1,602 6,980
----------- ----------- -----------
Valuation allowance........................................ -- -- 6,980
----------- ----------- -----------
Net tax assets included in net assets from discontinued
operations................................................. $ 929 $ 1,602 $ --
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
F-13
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 8--TAXES ON INCOME:--(CONTINUED)
Deferred income taxes result from temporary differences in the recognition
of revenue and expense for tax and financial statement purposes. Principal items
resulting in deferred income tax liabilities or assets are differences in
depreciation, inventory valuations, restructuring charges and allowance for
doubtful accounts. At January 28, 1995, management had determined, based on the
Company's history of prior operating earnings and its expectations for the
future, that operating income of the Company would, more likely than not, be
sufficient to recognize fully these net deferred tax assets.
As a result of the Company's decision to discontinue the wholesale business
segment, the Company has incurred losses for which no current tax benefits are
available. The provision for income taxes included in discontinued operation for
the thirty-nine weeks ended October 28, 1995 results primarily from a reduction
in net deferred tax assets. For financial reporting purposes, the effective tax
rate represents an increase in the valuation allowance of net deferred tax
assets to an amount realizable based upon taxes paid for prior years without
relying on future income.
The tax provision for the thirty-nine weeks ended October 29, 1994 was based
upon management's estimate of its annualized effective tax rate.
NOTE 9--EMPLOYEE RETIREMENT PLANS:
The Company has a 401-k savings plan designed to provide additional
financial security during retirement by providing eligible employees with an
incentive to make regular savings. The Company matches 10% of the first 4% of
compensation contributed by the employee.
Certain former employees were covered by union sponsored, multi-employer
pension plans. Contributions and costs were determined in accordance with the
provisions of negotiated labor contracts or terms of the plans. The Company does
not administer nor control the plans. One of the plans, to which the Company and
many other employers made contributions, has had financial difficulties and has
informed the Company that it has initiated a mass termination of the Plan.
"ERISA" imposes certain liabilities upon employers who are contributors to
multi-employer pension plans in the event of withdrawal or termination of such a
plan. The Company has provided for an estimated settlement cost based on the
estimates provided by the plan administrators.
NOTE 10--INDUSTRY SEGMENTS:
The Company operates substantially in one industry segment which includes
the retail sales of children's toys and other products.
NOTE 11--PROVISION FOR RESTRUCTURED OPERATIONS:
On August 10, 1994, the Company announced the closing of stores operating
under the name Playworld Toy Stores and one leased department operation.
Provision of $3,900,000 was recorded for restructuring costs representing losses
from store operations from the date of announcement until closing, employee
severance costs, estimated lease liabilities, losses on liquidation of
inventories and disposition of assets and other related restructuring costs.
This charge increased the net loss for fiscal 1995 by $2,340,000, ($.45 per
share). The Company provided an additional $500,000 ($.09 per share) in the
current period primarily to reflect the closing of one store that was not
anticipated previously.
F-14
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--INTERIM FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
FIRST SECOND THIRD
QUARTER QUARTER QUARTER
------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Fiscal year ending February 3, 1996:
Sales................................................ $ 3,281 $ 3,939 $ 6,288
Gross profit......................................... 1,162 1,396 2,166
Net loss:
Continuing operations.............................. (1,226) (1,674) (2,970)
Discontinued operations............................ (840) (8,219) --
------- ------- -------
Net loss......................................... $(2,066) $(9,893) $(2,970)
------- ------- -------
------- ------- -------
Net loss per share:
Continuing operations.............................. $ (.23) $ (.32) $ (.55)
Discontinued operations............................ (.16) (1.55) --
------- ------- -------
Net loss per share............................... $ (.39) $ (1.87) $ (.55)
------- ------- -------
------- ------- -------
Weighted average shares................................ 5,263 5,287 5,356
------- ------- -------
------- ------- -------
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Fiscal year ended January 28, 1995:
Sales................................................ $ 4,008 $ 3,835 $ 4,199 $11,266
Gross profit......................................... 1,201 1,260 1,367 3,288
Net income (loss):
Continuing operations.............................. (566) (2,679) (574) (671)
Discontinued operations............................ (320) (8) 350 1,074
------- ------- ------- -------
Net income (loss)................................ $ (886) $(2,687) $ (224) $ 403
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) per share:
Continuing operations.............................. $ (.11) $ (.51) $ (.11) $ (.13)
Discontinued operations............................ (.06) (.01) .07 .21
------- ------- ------- -------
Net income (loss) per share...................... $ (.17) $ (.52) $ (.04) $ .08
------- ------- ------- -------
------- ------- ------- -------
Weighted average shares................................ 5,200 5,202 5,218 5,261
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
F-15
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 12--INTERIM FINANCIAL DATA (UNAUDITED):--(CONTINUED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Fiscal year ended January 29, 1994:
Sales................................................ $ 3,410 $ 3,144 $ 3,242 $10,916
Gross profit......................................... 1,004 986 924 3,229
Net income (loss):
Continuing operations.............................. (359) (404) (505) 88
Discontinued operations............................ 170 62 829 828
------- ------- ------- -------
Net income (loss)................................ $ (189) $ (342) $ 324 $ 916
------- ------- ------- -------
------- ------- ------- -------
Net income (loss) per share:
Continuing operations.............................. $ (.06) $ (.07) $ (.09) $ .01
Discontinued operations............................ .03 .01 .15 .16
------- ------- ------- -------
Net income (loss) per share...................... $ (.03) $ (.06) $ .06 $ .17
------- ------- ------- -------
------- ------- ------- -------
Weighted average shares................................ 5,562 5,353 5,193 5,194
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
The Company's sales are highly seasonal. Income (loss) per share
calculations for each of the quarters are based on the weighted average number
of shares outstanding for each period and the sum of the quarters may not
necessarily be equal to the full year income (loss) per share amount.
NOTE 13--SUBSEQUENT EVENTS:
PUBLIC OFFERING
On December 12, 1995, the Company's Board of Directors approved a public
offering of Common Stock (the "Offering"). These financial statements are
intended to be part of the Prospectus for the Offering, in which the Company is
offering 2,000,000 shares of its Common Stock. The net proceeds from the
Offering will be used primarily to finance the Company's store expansion plans
as well as for general corporate purposes, including up to $1.0 million to
improve its MIS software capabilities in fiscal 1997.
SPECIAL MEETING OF STOCKHOLDERS
At a special meeting held on December 11, 1995, the Company's stockholders
voted to change the name of the Company from Greenman Bros. Inc. to Noodle
Kidoodle, Inc. The stockholders also voted to increase the number of authorized
shares of common stock to 15,000,000 shares from 10,000,000 shares. In addition,
the stockholders voted to increase the number of stock options automatically
awarded annually to outside directors to 4,000 from 1,000 and the number of
shares authorized for issuance under the Company's 1994 Stock Option Plan for
outside directors to a total of 125,000 shares from 75,000 shares.
F-16
<PAGE>
- --------------------------------------------- ---------------------------------
- --------------------------------------------- ---------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
IN CONNECTION WITH THIS OFFERING OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS AND, IF 2,100,000 SHARES
GIVEN OR MADE, SUCH INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE
SELLING STOCKHOLDERS OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY [LOGO]
CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO COMMON STOCK
BUY ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES
IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------- -------------------
PROSPECTUS
-------------------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary.................... 3
Risk Factors.......................... 8
Use of Proceeds....................... 11
Price Range of Common Stock........... 11
Dividend Policy....................... 12 PAINEWEBBER INCORPORATED
Capitalization........................ 12
Selected Consolidated Financial
Data.................................. 13
Management's Discussion and Analysis of RODMAN & RENSHAW, INC.
Financial Condition and Results of
Operations.......................... 14
Business.............................. 22
Management............................ 30
Principal and Selling Stockholders.... 36
Description of Capital Stock.......... 37
Underwriting.......................... 39
Experts............................... 40 -------------------
Legal Matters......................... 40
Available Information................. 41
Index to Consolidated Financial
Statements.......................... F-1 ,1996
- --------------------------------------------- ---------------------------------
- --------------------------------------------- ---------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses payable by the Registrant in connection with the issuance and
distribution of the securities being registered (other than the underwriting
discounts and commissions) are estimated to be as follows:
SEC Registration Fee............................................ $ 10,202
NASD Filing Fee................................................. 5,000
Legal Fees and Expenses......................................... 200,000
Accounting Fees and Expenses.................................... 100,000
Printing and Engraving Expenses................................. 100,000
Transfer Agent and Registrar Fees and Expenses.................. 10,000
Miscellaneous Expenses.......................................... 9,798
--------
Total Expenses............................................ $435,000
--------
--------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
To the fullest extent that limitations on the liability of directors and
officers are permitted by the New York Business Corporation Law, no director or
officer of the Registrant shall have any liability to the Registrant or its
stockholders for damages. This limitation on liability applies to events
occurring at the time a person serves as a director or officer of the Registrant
whether or not such person is a director or officer at the time of any
proceeding in which liability is asserted.
The Registrant shall indemnify and advance expenses to its currently acting
and its former directors to the fullest extent that indemnification of directors
is permitted by the New York Business Corporation Law. The Registrant shall
indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. The Board of
Directors may, through a by-law, resolution or agreement, make further
provisions for indemnification of directors, officers, employees and agents to
the fullest extent permitted by the New York Business Corporation Law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers or
persons controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
There have been no sales of unregistered securities by the Registrant during
the past three years.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as Exhibits to this Registration
Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Restated Certificate of Incorporation of Registrant, with all amendments
(Incorporated by reference to Exhibits 3.01, 3.02, 3.03, 3.04 to Registrant's
Annual Report on Form 10-K for the fiscal year ended January 29, 1983 and Exhibit
3.01 to Registrant's Annual Report on Form 10-K for the fiscal year ended January
28, 1989)
3.2 By-Laws of Registrant, as amended through July 9, 1991 (Incorporated by reference
to Registrant's Annual Report on Form 10-K for the fiscal year ended January 29,
1994)
4.1 Rights Agreement, dated as of May 6, 1988, between Registrant and Manufacturers
Hanover Trust Company, as Rights Agent (Incorporated by reference to Registrant's
Report on Form 8-K dated May 6, 1988 and the exhibits filed therewith)
4.2 First Amendment to Rights Agreement dated as of November 22, 1991 (Incorporated by
reference to Registrant's Report on Form 8-K, dated November 22, 1991, and the
exhibits filed therewith)
5.1 Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as to the legality of
the Common Stock**
10.1 Stock Incentive Plan and Outside Directors Stock Option Plan, dated April 26, 1994
(Incorporated by reference to Registrant's Form S-8 Registration Statement
(Commission File No. 33-82104), effective July 26, 1994 and the exhibits filed
therewith)
10.2 Employment Agreement by and between Registrant and Stanley Greenman dated as of
February 1, 1995 (Incorporated by reference to Registrant's Annual Report on Form
10-K for the fiscal year ended January 28, 1995)
10.3 Employment Agreement by and between Registrant and Stewart Katz dated as of
February 1, 1995 (Incorporated by reference to Registrant's Annual Report on Form
10-K for the fiscal year ended January 28, 1995)
10.4 Non-Contributory Insured Medical Reimbursement Plan (Incorporated by reference to
Exhibit 10.05 to Registrant's Annual Report on Form 10-K for the fiscal year ended
January 30, 1993)
10.5 Agreement and Plan of Merger dated February 1, 1994 by and between Registrant and
certain wholly-owned subsidiaries of the Registrant (Incorporated by reference to
Exhibit 10.08 to Registrant's Annual Report on Form 10-K for fiscal year ended
January 29, 1994)
10.6 Amendment to Outside Directors Stock Option Plan, dated December 13, 1995*
11.1 Computation of Earnings Per Share**
21.1 Subsidiaries of Registrant (Incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 28, 1995)
23.1 Consent of Janover Rubinroit, LLC*
23.2 Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (contained in the
opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (set forth on the signature page of this Registration
Statement)
</TABLE>
II-2
<PAGE>
(b) The following documents are filed as Schedules to this Registration
Statement:
<TABLE>
<CAPTION>
SCHEDULE
NUMBER DESCRIPTION OF DOCUMENT
- -------- -----------------------------------------------------------------------------------
<C> <S>
VIII Valuation and Qualifying Accounts For the Fiscal Years Ended January 30, 1993,
January 29, 1994 and January 28, 1995 and the Thirty-Nine Weeks Ended October 29,
1994 and October 28, 1995
</TABLE>
- ------------
* Filed herewith.
** To be filed by amendment
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registration in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this Registration Statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Farmingdale, County of Suffolk, State
of New York, on December 14, 1995.
NOODLE KIDOODLE, INC.
By: /s/ STANLEY GREENMAN
..................................
Name: Stanley Greenman
Title: Chairman of the Board,
Chief Executive Officer
and Treasurer
POWERS OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Stanley Greenman and Stewart Katz his
true and lawful attorney-in-fact and agent, each acting alone, with full powers
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this registration
statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully for all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, each acting alone, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- -------------------------------------- ----------------------------- ---------------------
<S> <C> <C>
/s/ STANLEY GREENMAN Chairman of the Board, Chief December 14, 1995
...................................... Executive Officer and
Stanley Greenman Treasurer
(Principal Executive
Officer)
/s/ STEWART KATZ President, Chief Operating December 14, 1995
...................................... Officer and
Stewart Katz Assistant Secretary
/s/ WILLIAM A. JOHNSON, JR. Vice President, Chief December 14, 1995
...................................... Financial
William A. Johnson, Jr. Officer and Secretary
(Principal Financial and
Accounting Officer)
/s/ LESTER GREENMAN Director December 14, 1995
......................................
Lester Greenman
/s/ BARRY W. RIDINGS Director December 14, 1995
......................................
Barry W. Ridings
/s/ IRWIN TANTLEFF Director December 14, 1995
......................................
Irwin Tantleff
/s/ JOSEPH MADENBERG Director December 14, 1995
......................................
Joseph Madenberg
/s/ ROBERT STOKVIS Director December 14, 1995
......................................
Robert Stokvis
/s/ ROBIN FARKAS Director December 14, 1995
......................................
Robin Farkas
</TABLE>
II-4
<PAGE>
NOODLE KIDOODLE, INC. AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED JANUARY 30, 1993, JANUARY 29, 1994 AND JANUARY 28,
1995
AND THE THIRTY-NINE WEEKS ENDED OCTOBER 29, 1994 AND OCTOBER 28, 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ------------------------------------- ---------- ------------------------ ---------- ----------
ADDITIONS
(1) (2)
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
For estimated losses in collection:
Year ended January 30, 1993........ $2,000 $ 42 $ -- $813(a) $1,229
Year ended January 29, 1994........ $1,229 $275 $ -- $630(a) $ 874
Year ended January 28, 1995........ $ 874 $250 $ -- $141(a) $ 983
Thirty-nine weeks ended October 29,
1994................................. $ 874 $296 $ -- $ -- $1,170
Thirty-nine weeks ended October 28,
1995................................. $ 983 $581 $ -- $138(a) $1,426
</TABLE>
- ------------
(a) Write-offs net of recoveries
All amounts are included in discontinued operations.
S-1
<PAGE>
INDEX TO EXHIBIT
----------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- ----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Restated Certificate of Incorporation of Registrant, with all amendments
(Incorporated by reference to Exhibits 3.01, 3.02, 3.03, 3.04 to Registrant's
Annual Report on Form 10-K for the fiscal year ended January 29, 1983 and Exhibit
3.01 to Registrant's Annual Report on Form 10-K for the fiscal year ended January
28, 1989)
3.2 By-Laws of Registrant, as amended through July 9, 1991 (Incorporated by reference
to Registrant's Annual Report on Form 10-K for the fiscal year ended January 29,
1994)
4.1 Rights Agreement, dated as of May 6, 1988, between Registrant and Manufacturers
Hanover Trust Company, as Rights Agent (Incorporated by reference to Registrant's
Report on Form 8-K dated May 6, 1988 and the exhibits filed therewith)
4.2 First Amendment to Rights Agreement dated as of November 22, 1991 (Incorporated by
reference to Registrant's Report on Form 8-K, dated November 22, 1991, and the
exhibits filed therewith)
5.1 Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel as to the legality of
the Common Stock**
10.1 Stock Incentive Plan and Outside Directors Stock Option Plan, dated April 26, 1994
(Incorporated by reference to Registrant's Form S-8 Registration Statement
(Commission File No. 33-82104), effective July 26, 1994 and the exhibits filed
therewith)
10.2 Employment Agreement by and between Registrant and Stanley Greenman dated as of
February 1, 1995 (Incorporated by reference to Registrant's Annual Report on Form
10-K for the fiscal year ended January 28, 1995)
10.3 Employment Agreement by and between Registrant and Stewart Katz dated as of
February 1, 1995 (Incorporated by reference to Registrant's Annual Report on Form
10-K for the fiscal year ended January 28, 1995)
10.4 Non-Contributory Insured Medical Reimbursement Plan (Incorporated by reference to
Exhibit 10.05 to Registrant's Annual Report on Form 10-K for the fiscal year ended
January 30, 1993)
10.5 Agreement and Plan of Merger dated February 1, 1994 by and between Registrant and
certain wholly-owned subsidiaries of the Registrant (Incorporated by reference to
Exhibit 10.08 to Registrant's Annual Report on Form 10-K for fiscal year ended
January 29, 1994)
10.6 Amendment to Outside Directors Stock Option Plan, dated December 13, 1995*
11.1 Computation of Earnings Per Share**
21.1 Subsidiaries of Registrant (Incorporated by reference to Registrant's Annual
Report on Form 10-K for the fiscal year ended January 28, 1995)
23.1 Consent of Janover Rubinroit, LLC*
23.2 Opinion of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel (contained in the
opinion filed as Exhibit 5.1)
24.1 Powers of Attorney (set forth on the signature page of this Registration
Statement)
</TABLE>
- --------------
* Filed herewithin.
** To be filed by amendment
Exhibit 1.1
2,100,000 Shares
NOODLE KIDOODLE, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
[DATE]
PAINEWEBBER INCORPORATED
RODMAN & RENSHAW, INC.
As Representatives of the
several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Ladies and Gentlemen:
Noodle Kidoodle, Inc., a [New York] corporation (the "Company"),
and the persons named in Schedule I (the "Selling Shareholders") propose to
sell an aggregate of 2,100,000 shares (the "Firm Shares") of the Company's
Common Stock, $[.001] par value per share (the "Common Stock"), of which
2,000,000 shares are to be issued and sold by the Company and an aggregate
of 100,000 shares are to be sold by the Selling Shareholders in the
respective amounts set forth opposite their respective names in Schedule I,
in each case to you and to the other underwriters named in Schedule II
(collectively, the "Underwriters"), for whom you are acting as
representatives (the "Representatives"). The Company has also agreed to
grant to you and the other Underwriters an option (the "Option") to
purchase up to an additional 315,000 shares of Common Stock (the "Option
Shares") on the terms and for the purposes set forth in Section 1(b). The
Firm Shares and the Option Shares are hereinafter collectively referred to
as the "Shares."
The initial public offering price per share for the Shares and
the purchase price per share for the Shares to be paid by the several
Underwriters shall be agreed upon by the Company, the Selling Shareholders
and the Representatives, acting on behalf of the several Underwriters, and
<PAGE>
2
such agreement shall be set forth in a separate written instrument
substantially in the form of Exhibit A hereto (the "Price Determination
Agreement"). The Price Determination Agreement may take the form of an
exchange of any standard form of written telecommunication among the Com-
pany, the Selling Shareholders and the Representatives and shall specify
such applicable information as is indicated in Exhibit A hereto. The
offering of the Shares will be governed by this Agreement, as supplemented
by the Price Determination Agreement. From and after the date of the
execution and delivery of the Price Determination Agreement, this Agreement
shall be deemed to incorporate, and, unless the context otherwise
indicates, all references contained herein to "this Agreement" and to the
phrase "herein" shall be deemed to include the Price Determination
Agreement.
Each Selling Shareholder has executed and delivered a Custody
Agreement and a Power of Attorney in the form attached hereto as Exhibit B
(collectively, the "Agreement and Power of Attorney") pursuant to which
each Selling Shareholder has placed his Firm Shares in custody and
appointed the persons designated therein as a committee (the "Committee")
with authority to execute and deliver this Agreement on behalf of such
Selling Shareholder and to take certain other actions with respect thereto
and hereto.
The Company and the Selling Shareholders confirm as follows their
respective agreements with the Representatives and the several other Under-
writers.
1. Agreement to Sell and Purchase.
------------------------------
(a) On the basis of the respective representations,
warranties and agreements of the Company and the Selling Shareholders
herein contained and subject to all the terms and conditions of this Agree-
ment, (i) the Company and each of the Selling Shareholders, severally and
not jointly, agree to sell to the several Underwriters and (ii) each of the
Underwriters, severally and not jointly, agrees to purchase from the
Company and the Selling Shareholders, at the purchase price per share for
the Firm Shares to be agreed upon by the Representatives, the Company and
the Selling Shareholders in accordance with Section 1(c) or 1(d) and set
forth in the Price Determination Agreement, the number of Firm Shares set
forth opposite the name of such Underwriter in Schedule II, plus such
additional number of Firm Shares which such Underwriter may become
obligated to
<PAGE>
3
purchase pursuant to Section 9 hereof. Schedule II may be attached to the
Price Determination Agreement.
(b) Subject to all the terms and conditions of this
Agreement, the Company grants the Option to the several Underwriters to
purchase, severally and not jointly, up to 315,000 Option Shares from the
Company at the same price per share as the Underwriters shall pay for the
Firm Shares. The Option may be exercised only to cover over-allotments in
the sale of the Firm Shares by the Underwriters and may be exercised in
whole or in part at any time (but not more than once) on or before the 45th
day after the date of this Agreement (or, if the Company has elected to
rely on Rule 430A, on or before the 45th day after the date of the Price
Determination Agreement), upon written or telegraphic notice (the "Option
Shares Notice") by the Representatives to the Company no later than
12:00 noon, New York City time, at least two and no more than five business
days before the date specified for closing in the Option Shares Notice (the
"Option Closing Date") setting forth the aggregate number of Option Shares
to be purchased and the time and date for such purchase. On the Option
Closing Date, the Company will issue and sell to the Underwriters the
number of Option Shares set forth in the Option Shares Notice, and each
Underwriter will purchase such percentage of the Option Shares as is equal
to the percentage of Firm Shares that such Underwriter is purchasing, as
adjusted by the Representatives in such manner as they deem advisable to
avoid fractional shares.
(c) The initial public offering price per share for the
Firm Shares and the purchase price per share for the Firm Shares to be paid
by the several Underwriters shall be agreed upon and set forth in the Price
Determination Agreement. In the event such price has not been agreed upon
and the Price Determination Agreement has not been executed by the close of
business on the fourteenth business day following the date on which the
Registration Statement becomes effective, this Agreement shall terminate
forthwith, without liability of any party to any other party except that
Section 7 shall remain in effect.
2. Delivery and Payment. Delivery of the Firm Shares shall be
--------------------
made to the Representatives for the accounts of the Underwriters against
payment of the purchase price by certified or official bank checks payable
in New York Clearing House (next-day) funds to the order of each of the
Company and the Committee at the office of PaineWebber
<PAGE>
4
Incorporated, 1285 Avenue of the Americas, New York, New York 10019. Such
payment shall be made at 10:00 a.m., New York City time, on the third busi-
ness day (or if pricing of the offering occurs after 4:30 p.m. Eastern
Standard Time, the fourth business day) after the date on which the first
bona fide offering of the Shares to the public is made by the Underwriters
or at such time on such other date, not later than ten business days after
such date, as may be agreed upon by the Company and the Representatives
(such date is hereinafter referred to as the "Closing Date").
To the extent the Option is exercised, delivery of the Option
Shares against payment by the Underwriters (in the manner specified above)
will take place at the offices specified above for the Closing Date at the
time and date (which may be the Closing Date) specified in the Option
Shares Notice.
Certificates evidencing the Shares shall be in definitive form
and shall be registered in such names and in such denominations as the
Representatives shall request at least two business days prior to the
Closing Date or the Option Closing Date, as the case may be, by written
notice to the Company. For the purpose of expediting the checking and
packaging of certificates for the Shares, the Company agrees to make such
certificates available for inspection at least 24 hours prior to the
Closing Date or the Option Closing Date, as the case may be.
The cost of original issue tax stamps, if any, in connection with
the issuance and delivery of the Firm Shares and Option Shares by the
Company to the respective Underwriters shall be borne by the Company. The
cost of tax stamps, if any, in connection with the sale of the Firm Shares
by the Selling Shareholders shall be borne by the Selling Shareholders.
The Company and the Selling Shareholders will pay and save each Underwriter
and any subsequent holder of the Shares harmless from any and all liabil-
ities with respect to or resulting from any failure or delay in paying
Federal and state stamp and other transfer taxes, if any, which may be
payable or determined to be payable in connection with the original
issuance or sale to such Underwriter of the Firm Shares and Option Shares.
3. Representations and Warranties of the Company. The Company
---------------------------------------------
represents, warrants and covenants to each Underwriter that:
<PAGE>
5
(a) A registration statement (Registration No. ) on
Form S-1 relating to the Shares, including a preliminary prospectus and
such amendments to such registration statement as may have been required to
the date of this Agreement, has been prepared by the Company under the
provisions of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations (collectively referred to as the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission. The term "preliminary
prospectus" as used herein means a preliminary prospectus as contemplated
by Rule 430 or Rule 430A ("Rule 430A") of the Rules and Regulations
included at any time as part of the registration statement. Copies of such
registration statement and amendments and of each related preliminary
prospectus have been delivered to the Representatives. The term "Registra-
tion Statement" means the registration statement as amended at the time it
becomes or became effective (the "Effective Date"), including financial
statements and all exhibits and any information deemed to be included by
Rule 430A or Rule 434 of the Rules and Regulations. If the Company files a
registration statement to register a portion of the Shares and relies on
Rule 462(b) of the Rules and Regulations for such registration statement to
become effective upon filing with the Commission (the "Rule 462 Regis-
tration Statement"), then any reference to the "Registration Statement"
shall be deemed to include the Rule 462 Registration Statement, as amended
from time to time. The term "Prospectus" means the prospectus as first
filed with the Commission pursuant to Rule 424(b) of the Rules and Regula-
tions or, if no such filing is required, the form of final prospectus
included in the Registration Statement at the Effective Date.
(b) On the Effective Date, the date the Prospectus is first
filed with the Commission pursuant to Rule 424(b) (if required), at all
times subsequent to and including the Closing Date and, if later, the
Option Closing Date and when any post-effective amendment to the Registra-
tion Statement becomes effective or any amendment or supplement to the
Prospectus is filed with the Commission, the Registration Statement and the
Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment or supplement thereto), including the
financial statements included in the Prospectus, did or will comply with
all applicable provisions of the Act and the Rules and Regulations and will
contain all statements required to be stated therein in accordance with the
Act and the Rules and Regulations. On the Effective Date and when
<PAGE>
6
any post-effective amendment to the Registration Statement becomes
effective, no part of the Registration Statement or any such amendment did
or will contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading. At the Effective Date, the date the
Prospectus or any amendment or supplement to the Prospectus is filed with
the Commission and at the Closing Date and, if later, the Option Closing
Date, the Prospectus did not or will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the state-
ments therein, in the light of the circumstances under which they were
made, not misleading. The foregoing representations and warranties in this
Section 3(b) do not apply to any statements or omissions made in reliance
on and in conformity with information relating to any Underwriter furnished
in writing to the Company by the Representatives specifically for inclusion
in the Registration Statement or Prospectus or any amendment or supplement
thereto. For all purposes of this Agreement, the amounts of the selling
concession and reallowance set forth in the Prospectus constitute the only
information relating to any Underwriter furnished in writing to the Company
by the Representatives specifically for inclusion in the preliminary
prospectus, the Registration Statement or the Prospectus. The Company has
not distributed any offering material in connection with the offering or
sale of the Shares other than the Registration Statement, the preliminary
prospectus, the Prospectus or any other materials, if any, permitted by the
Act.
(c) As of the Effective Date, the Company has made and
completed all filings required under the Securities Exchange Act of 1934,
as amended, (the "Exchange Act"), and the rules and regulations thereunder
(the "Exchange Act Rules and Regulations") and such filings conform in all
material respects with the applicable provisions of the Exchange Act and
the Exchange Act Rules and Regulations.
(d) The only subsidiaries (as defined in the Rules and
Regulations) of the Company are the subsidiaries listed on Exhibit 21 to
the Registration Statement (the "Subsidiaries"). The Company and each of
its Subsidiaries is, and at the Closing Date will be, a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Company and each of its Subsidiaries
has, and at the Closing Date will
<PAGE>
7
have, full power and authority to conduct all the activities conducted by
it, to own or lease all the assets owned or leased by it and to conduct its
business as described in the Registration Statement and the Prospectus.
The Company and each of its Subsidiaries is, and at the Closing Date will
be, duly licensed or qualified to do business and in good standing as a
foreign corporation in all jurisdictions in which the nature of the
activities conducted by it or the character of the assets owned or leased
by it makes such licensing or qualification necessary. All of the
outstanding shares of capital stock of the Subsidiaries have been duly
authorized and validly issued, and are fully paid and non-assessable and
are owned by the Company free and clear of all liens, encumbrances and
claims whatsoever. Except for the stock of the Subsidiaries and as dis-
closed in the Registration Statement, the Company does not own, and at the
Closing Date will not own, directly or indirectly, any shares of stock or
any other equity or long-term debt securities of any corporation or have
any equity interest in any firm, partnership, joint venture, association or
other entity. Complete and correct copies of the certificate of incorpora-
tion and of the by-laws of the Company and each of its Subsidiaries and all
amendments thereto have been delivered to the Representatives, and no
changes therein will be made subsequent to the date hereof and prior to the
Closing Date or, if later, the Option Closing Date.
(e) The outstanding shares of Common Stock have been, and
the Shares to be issued and sold by the Company upon such issuance will be,
duly authorized, validly issued, fully paid and nonassessable and will not
be subject to any preemptive or similar right. The description of the
Common Stock in the Registration Statement and the Prospectus is, and at
the Closing Date will be, complete and accurate in all respects. Except as
set forth in the Prospectus, the Company does not have outstanding, and at
the Closing Date will not have outstanding, any options to purchase, or any
rights or warrants to subscribe for, or any securities or obligations
convertible into, or any contracts or commitments to issue or sell, any
shares of Common Stock, any shares of capital stock of any Subsidiary or
any such warrants, convertible securities or obligations.
(f) The financial statements and schedules included in the
Registration Statement or the Prospectus present fairly the consolidated
financial condition of the Company as of the respective dates thereof and
the consolidated results of operations and cash flows of the
<PAGE>
8
Company for the respective periods covered thereby, all in conformity with
generally accepted accounting principles applied on a consistent basis
throughout the entire period involved, except as otherwise disclosed in the
Prospectus. The pro forma financial statements and other pro forma
financial information included in the Registration Statement or the Pros-
pectus (i) present fairly in all material respects the information shown
therein, (ii) have been prepared in accordance with the Commission's rules
and guidelines with respect to pro forma financial statements and
(iii) have been properly computed on the bases described therein. The
assumptions used in the preparation of the pro forma financial statements
and other pro forma financial information included in the Registration
Statement or the Prospectus are reasonable and the adjustments used therein
are appropriate to give effect to the transactions or circumstances
referred to therein. No other financial statements or schedules of the
Company are required by the Act or the Rules and Regulations to be included
in the Registration Statement or the Prospectus. Janover Rubinroit (the
"Accountants") who have reported on such financial statements and
schedules, are independent accountants with respect to the Company as
required by the Act and the Rules and Regulations. The statements included
in the Registration Statement with respect to the Accountants pursuant to
Rule 509 of Regulation S-K of the Rules and Regulations are true and
correct in all material respects.
(g) The Company maintains a system of internal accountings
control sufficient to provide reasonable assurance that (i) transactions
are executed in accordance with management's general or specific authoriza-
tion; (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and
prior to the Closing Date, except as set forth in or contemplated by the
Registration Statement and the Prospectus, (i) there has not been and will
not have been any change in the capitalization of the Company, or in
<PAGE>
9
the business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries,
arising for any reason whatsoever, (ii) neither the Company nor any of its
Subsidiaries has incurred nor will it incur any material liabilities or
obligations, direct or contingent, nor has it entered into nor will it
enter into any material transactions other than pursuant to this Agreement
and the transactions referred to herein and (iii) the Company has not and
will not have paid or declared any dividends or other distributions of any
kind on any class of its capital stock.
(i) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company
Act of 1940, as amended.
(j) Except as set forth in the Registration Statement and
the Prospectus, there are no actions, suits or proceedings pending or
threatened against or affecting the Company or any of its Subsidiaries or
any of their respective officers in their capacity as such, before or by
any Federal or state court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, wherein an
unfavorable ruling, decision or finding might materially and adversely
affect the Company or any of its Subsidiaries or its business, properties,
business prospects, condition (financial or otherwise) or results of
operations.
(k) The Company and each of its Subsidiaries has, and at
the Closing Date will have, (i) all governmental licenses, permits,
consents, orders, approvals and other authorizations necessary to carry on
its business as contemplated in the Prospectus, (ii) complied in all
respects with all laws, regulations and orders applicable to it or its
business and (iii) performed all its obligations required to be performed
by it, and is not, and at the Closing Date will not be, in default, under
any indenture, mortgage, deed of trust, voting trust agreement, loan
agreement, bond, debenture, note agreement, lease, contract or other agree-
ment or instrument (collectively, a "contract or other agreement") to which
it is a party or by which its property is bound or affected. To the best
knowledge of the Company and each of its Subsidiaries, no other party under
any contract or other agreement to which it is a party is in default in any
respect thereunder. Neither the Company nor
<PAGE>
10
any of its Subsidiaries is, nor at the Closing Date will any of them be, in
violation of any provision of its certificate of incorporation or by-laws.
(l) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is
required in connection with the authorization, issuance, transfer, sale or
delivery of the Shares by the Company, in connection with the execution,
delivery and performance of this Agreement by the Company or in connection
with the taking by the Company of any action contemplated hereby, except
such as have been obtained under the Act or the Rules and Regulations and
such as may be required under state securities or Blue Sky laws or the by-
laws and rules of the National Association of Securities Dealers, Inc. (the
"NASD") in connection with the purchase and distribution by the
Underwriters of the Shares to be sold by the Company.
(m) The Company has full corporate power and authority to
enter into this Agreement. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company and is enforceable against the Company in
accordance with the terms hereof. The performance of this Agreement and
the consummation of the transactions contemplated hereby and the
application of the net proceeds from the offering and sale of the Shares to
be sold by the Company in the manner set forth in the Prospectus under "Use
of Proceeds" will not result in the creation or imposition of any lien,
charge or encumbrance upon any of the assets of the Company or any of its
Subsidiaries pursuant to the terms or provisions of, or result in a breach
or violation of any of the terms or provisions of, or constitute a default
under, or give any other party a right to terminate any of its obligations
under, or result in the acceleration of any obligation under, the
certificate of incorporation or by-laws of the Company or any of its
Subsidiaries, any contract or other agreement to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any of its properties is bound or affected, or violate or
conflict with any judgment, ruling, decree, order, statute, rule or
regulation of any court or other governmental agency or body applicable to
the business or properties of the Company or any of its Subsidiaries.
(n) The Company and each of its Subsidiaries has good and
marketable title to all properties and assets
<PAGE>
11
described in the Prospectus as owned by it, free and clear of all liens,
charges, encumbrances or restrictions, except such as are described in the
Prospectus or are not material to the business of the Company or its
Subsidiaries. The Company and each of its Subsidiaries has valid,
subsisting and enforceable leases for the properties described in the
Prospectus as leased by it, with such exceptions as are not material and do
not materially interfere with the use made and proposed to be made of such
properties by the Company and such Subsidiaries.
(o) There is no document or contract of a character
required to be described in the Registration Statement or the Prospectus or
to be filed as an exhibit to the Registration Statement which is not
described or filed as required. All such contracts to which the Company or
any Subsidiary is a party have been duly authorized, executed and delivered
by the Company or such Subsidiary, constitute valid and binding agreements
of the Company or such Subsidiary and are enforceable against the Company
or such Subsidiary in accordance with the terms thereof.
(p) No statement, representation, warranty or covenant made
by the Company in this Agreement or made in any certificate or document
required by this Agreement to be delivered to the Representatives was or
will be, when made, inaccurate, untrue or incorrect.
(q) Neither the Company nor any of its directors, officers
or controlling persons has taken, directly or indirectly, any action
intended, or which might reasonably be expected, to cause or result, under
the Act or otherwise, in, or which has constituted, stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Shares.
(r) No holder of securities of the Company has rights to
the registration of any securities of the Company because of the filing of
the Registration Statement.
(s) Prior to the Closing Date, the Shares will be duly
delisted from the American Stock Exchange and duly authorized for listing
on the [Nasdaq National Market] upon official notice of issuance.
(t) Neither the Company nor any of its Subsidiaries is
involved in any material labor dispute nor,
<PAGE>
12
to the knowledge of the Company, is any such dispute threatened.
(u) The Company and its Subsidiaries own, or are licensed
or otherwise have the full exclusive right to use, all material trademarks
and trade names which are used in or necessary for the conduct of their
respective businesses as described in the Prospectus. No claims have been
asserted by any person to the use of any such trademarks or trade names or
challenging or questioning the validity or effectiveness of any such
trademark or trade name. The use, in connection with the business and
operations of the Company and its Subsidiaries of such trademarks and trade
names does not, to the Company's knowledge, infringe on the rights of any
person.
(v) Neither the Company nor any of its Subsidiaries nor, to
the Company's knowledge, any employee or agent of the Company or any
Subsidiary has made any payment of funds of the Company or any Subsidiary
or received or retained any funds in violation of any law, rule or
regulation or of a character required to be disclosed in the Prospectus.
(w) The Company has complied, and until the completion of
the distribution of the Shares, will comply with all of the provisions of
(including, without limitation, filing all forms required by)
Section 517.075 of the Florida Securities and Investor Protection Act and
regulation 3E-900.001 issued thereunder with respect to the offering and
sale of the Shares.
(x) Except as described in detail on Schedule III, neither
the Company nor any of its Subsidiaries has incurred, or reasonably expects
to incur any liability under Title IV of the Employee Retirement Income
Security Act ("ERISA") arising in connection with the termination,
insolvency or reorganization of, or a complete or partial withdrawal from,
any plan covered or previously covered by Title IV of ERISA including,
without limitation,any "multi-employer plan" as defined in Section 3(37) of
ERISA (a "Multi-Employer Plan"). If a "complete withdrawal" by the Company
and all of its Subsidiaries were to occur as of this date with respect to
each Multi-Employer Plan as to which the Company or its Subsidiaries has an
obligation to make contributions or otherwise has any liability, none of
the Company and any of its Subsidiaries
<PAGE>
13
would incur an aggregate withdrawal liability under Title IV of ERISA in
excess of $____.
4. Representations and Warranties of the Selling Shareholders.
----------------------------------------------------------
Each Selling Shareholder, severally and not jointly, represents, warrants
and covenants to each Underwriter that:
(a) Such Selling Shareholder has full power and authority
to enter into this Agreement and the Agreement and Power of Attorney. All
authorizations and consents necessary for the execution and delivery by
such Selling Shareholder of the Agreement and Power of Attorney, and for
the execution of this Agreement on behalf of such Selling Shareholder, have
been given. Each of the Agreement and Power of Attorney and this Agreement
has been duly authorized, executed and delivered by or on behalf of such
Selling Shareholder and constitutes a valid and binding agreement of such
Selling Shareholder and is enforceable against such Selling Shareholder in
accordance with the terms thereof and hereof.
(b) Such Selling Shareholder now has, and at the time of
delivery thereof hereunder will have, (i) good and marketable title to the
Shares to be sold by such Selling Shareholder hereunder, free and clear of
all liens, encumbrances and claims whatsoever (other than pursuant to the
Agreement and Power of Attorney), and (ii) full legal right and power, and
all authorizations and approvals required by law, to sell, transfer and
deliver such Shares to the Underwriters hereunder and to make the
representations, warranties and agreements made by such Selling Shareholder
herein. Upon the delivery of and payment for such Shares hereunder, such
Selling Shareholder will deliver good and marketable title thereto, free
and clear of all liens, encumbrances and claims whatsoever.
(c) On the Closing Date or the Option Closing Date, as the
case may be, all stock transfer or other taxes (other than income taxes)
which are required to be paid in connection with the sale and transfer of
the Shares to be sold by such Selling Shareholder to the several
Underwriters hereunder will have been fully paid or provided for by such
Selling Shareholder and all laws imposing such taxes will have been fully
complied with.
(d) The performance of this Agreement and the consummation
of the transactions contemplated hereby
<PAGE>
14
will not result in the creation or imposition of any lien, charge or
encumbrance upon any of the assets of such Selling Shareholder pursuant to
the terms or provisions of, or result in a breach or violation of any of
the terms or provisions of, or constitute a default under, or result in the
acceleration of any obligation under, if such Selling Shareholder is a
corporation or partnership, the organizational documents of such Selling
Shareholder, or, as to all such Selling Shareholders, any contract or other
agreement to which such Selling Shareholder is a party or by which such
Selling Shareholder or any of its property is bound or affected, or under
any ruling, decree, judgment, order, statute, rule or regulation of any
court or other governmental agency or body having jurisdiction over such
Selling Shareholder or the property of such Selling Shareholder.
(e) No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is
required for the consummation by such Selling Shareholder of the
transactions on its part contemplated herein and in the Agreement and Power
of Attorney, except such as have been obtained under the Act or the Rules
and Regulations and such as may be required under state securities or Blue
Sky laws or the by-laws and rules of the NASD in connection with the
purchase and distribution by the Underwriters of the Shares to be sold by
such Selling Shareholder.
(f) The sale of the Shares proposed to be sold by such
Selling Shareholder is not prompted by any knowledge of any material fact
or condition not set forth in the Registration Statement or the Prospectus
which has adversely affected, or may adversely affect, the business,
properties, business prospects, condition (financial or otherwise) or
results of operations of the Company.
(g) All information with respect to such Selling
Shareholder contained in the Registration Statement and the Prospectus (as
amended or supplemented, if the Company shall have filed with the
Commission any amendment or supplement thereto) complied and will comply
with all applicable provisions of the Act and the Rules and Regulations,
contains and will contain all statements required to be stated therein in
accordance with the Act and the Rules and Regulations, and does not and
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make
the statements therein not misleading.
<PAGE>
15
(h) To the best knowledge of such Selling Shareholder, the
representations and warranties of the Company contained in Section 3 are
true and correct.
(i) Other than as permitted by the Act and the Rules and
Regulations, such Selling Shareholder has not distributed and will not
distribute any preliminary prospectus, the Prospectus or any other offering
material in connection with the offering and sale of the Shares. Such
Selling Shareholder has not taken, directly or indirectly, any action
intended, or which might reasonably be expected, to cause or result in,
under the Act or otherwise, or which has caused or resulted in, stabili-
zation or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares.
(j) Certificates in negotiable form for the Firm Shares to
be sold hereunder by such Selling Shareholder have been placed in custody,
for the purpose of making delivery of such Firm Shares under this
Agreement, under the Agreement and Power of Attorney which appoints
as custodian (the "Custodian") for each Selling Shareholder.
- --------------
Such Selling Shareholder agrees that the Shares represented by the certif-
icates held in custody for him or it under the Agreement and Power of
Attorney are for the benefit of and coupled with and subject to the
interest hereunder of the Custodian, the Committee, the Underwriters, each
other Selling Shareholder and the Company, that the arrangements made by
such Selling Shareholder for such custody and the appointment of the
Custodian and the Committee by such Selling Shareholder are irrevocable,
and that the obligations of such Selling Shareholder hereunder shall not be
terminated by operation of law, whether by the death, disability,
incapacity or liquidation of any Selling Shareholder or the occurrence of
any other event. If any Selling Shareholder should die, become disabled or
incapacitated or be liquidated or if any other such event should occur
before the delivery of the Shares hereunder, certificates for the Shares
shall be delivered by the Custodian in accordance with the terms and
conditions of this Agreement and actions taken by the Committee and the
Custodian pursuant to the Agreement and Power of Attorney shall be as valid
as if such death, liquidation, incapacity or other event had not occurred,
regardless of whether or not the Custodian or the Committee, or either of
them, shall have received notice thereof.
<PAGE>
16
5. Agreements of the Company and the Selling Shareholders. The
------------------------------------------------------
Company and the Selling Shareholders (as to Sections 5(i), (j), (n), (o),
(p) and (q)) agree, severally and not jointly, with the several Under-
writers as follows:
(a) The Company will not, either prior to the Effective
Date or thereafter during such period as the Prospectus is required by law
to be delivered in connection with sales of the Shares by an Underwriter or
dealer, file any amendment or supplement to the Registration Statement or
the Prospectus, unless a copy thereof shall first have been submitted to
the Representatives within a reasonable period of time prior to the filing
thereof and the Representatives shall not have objected thereto in good
faith.
(b) The Company will use its best efforts to cause the
Registration Statement to become effective, and will notify the
Representatives promptly, and will confirm such advice in writing, (1) when
the Registration Statement has become effective and when any post-effective
amendment thereto becomes effective, (2) of any request by the Commission
for amendments or supplements to the Registration Statement or the
Prospectus or for additional information, (3) of the issuance by the
Commission of any stop order suspending the effectiveness of the Regis-
tration Statement or the initiation of any proceedings for that purpose or
the threat thereof, (4) of the happening of any event during the period
mentioned in the second sentence of Section 5(e) that in the judgment of
the Company makes any statement made in the Registration Statement or the
Prospectus untrue or that requires the making of any changes in the
Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not
misleading and (5) of receipt by the Company or any representative of the
Company of any other communication from the Commission relating to the
Company, the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending
the effectiveness of the Registration Statement, the Company will make
every reasonable effort to obtain the withdrawal of such order at the
earliest possible moment. The Company will use its best efforts to comply
with the provisions of and make all requisite filings with the Commission
pursuant to Rule 430A and to notify the Representatives promptly of all
such filings.
<PAGE>
17
(c) The Company will furnish to the Representatives,
without charge, two signed copies of the Registration Statement and of any
post-effective amendment thereto, including financial statements and
schedules, and all exhibits thereto and will furnish to the
Representatives, without charge, for transmittal to each of the other
Underwriters, a copy of the Registration Statement and any post-effective
amendment thereto, including financial statements and schedules but without
exhibits.
(d) The Company will comply with all the provisions of any
undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time to
time, the Company will deliver to each of the Underwriters, without charge,
as many copies of the Prospectus or any amendment or supplement thereto as
the Representatives may reasonably request. The Company consents to the
use of the Prospectus or any amendment or supplement thereto by the several
Underwriters and by all dealers to whom the Shares may be sold, both in
connection with the offering or sale of the Shares and for any period of
time thereafter during which the Prospectus is required by law to be deliv-
ered in connection therewith. If during such period of time any event
shall occur which in the judgment of the Company or counsel to the
Underwriters should be set forth in the Prospectus in order to make any
statement therein, in the light of the circumstances under which it was
made, not misleading, or if it is necessary to supplement or amend the
Prospectus to comply with law, the Company will forthwith prepare and duly
file with the Commission an appropriate supplement or amendment thereto,
and will deliver to each of the Underwriters, without charge, such number
of copies thereof as the Representatives may reasonably request.
(f) Prior to any public offering of the Shares by the
Underwriters, the Company will cooperate with the Representatives and
counsel to the Underwriters in connection with the registration or
qualification of the Shares for offer and sale under the securities or Blue
Sky laws of such jurisdictions as the Representatives may request;
provided, that in no event shall the Company be obligated to qualify to do
business in any jurisdiction where it is not now so qualified or to take
any action which would subject it to general service of process in any
jurisdiction where it is not now so subject.
<PAGE>
18
(g) During the period of five years commencing on the
Effective Date, the Company will furnish to the Representatives and each
other Underwriter who may so request copies of such financial statements
and other periodic and special reports as the Company may from time to time
distribute generally to the holders of any class of its capital stock, and
will furnish to the Representatives and each other Underwriter who may so
request a copy of each annual or other report it shall be required to file
with the Commission.
(h) The Company will make generally available to holders of
its securities as soon as may be practicable but in no event later than the
last day of the fifteenth full calendar month following the calendar
quarter in which the Effective Date falls, an earnings statement (which
need not be audited but shall be in reasonable detail) for a period of
12 months ended commencing after the Effective Date, and satisfying the
provisions of Section 11(a) of the Act (including Rule 158 of the Rules and
Regulations).
(i) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement is terminated, the Company and
the Selling Shareholders, jointly and severally, will pay, or reimburse if
paid by the Representatives, all costs and expenses incident to the
performance of the obligations of the Company and the Selling Shareholders
under this Agreement, including but not limited to costs and expenses of or
relating to (1) the preparation, printing and filing of the Registration
Statement and exhibits to it, each preliminary prospectus, the Prospectus
and any amendment or supplement to the Registration Statement or the
Prospectus, (2) the preparation and delivery of certificates representing
the Shares, (3) the printing of this Agreement, the Agreement Among Under-
writers, any Dealer Agreements, any Underwriters' Questionnaire and the
Agreement and Power of Attorney, (4) furnishing (including costs of
shipping, mailing and courier) such copies of the Registration Statement,
the Prospectus and any preliminary prospectus, and all amendments and
supplements thereto, as may be requested for use in connection with the
offering and sale of the Shares by the Underwriters or by dealers to whom
Shares may be sold, (5) the listing of the Shares by the [Nasdaq National
Market], (6) any filings required to be made by the Underwriters with the
NASD, and the fees, disbursements and other charges of counsel for the
Underwriters in connection therewith, (7) the registration
<PAGE>
19
or qualification of the Shares for offer and sale under the securities or
Blue Sky laws of such jurisdictions designated pursuant to Section 5(f),
including the fees, disbursements and other charges of counsel to the
Underwriters in connection therewith, and the preparation and printing of
preliminary, supplemental and final Blue Sky memoranda, (8) counsel to the
Company and counsel to the Selling Shareholders, (9) the transfer agent for
the Shares and (10) the Accountants.
(j) If this Agreement shall be terminated by the Company or
the Selling Shareholders pursuant to any of the provisions hereof
(otherwise than pursuant to Section 9) or if for any reason the Company or
any Selling Shareholder shall be unable to perform its obligations
hereunder, the Company and the Selling Shareholders, jointly and severally,
will reimburse the several Underwriters for all out-of-pocket expenses
(including the fees, disbursements and other charges of counsel to the
Underwriters) reasonably incurred by them in connection herewith.
(k) The Company will not at any time, directly or
indirectly, take any action intended, or which might reasonably be
expected, to cause or result in, or which will constitute, stabilization of
the price of the shares of Common Stock to facilitate the sale or resale of
any of the Shares.
(l) The Company will apply the net proceeds from the
offering and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds."
(m) The Company will not, and will cause each of its
executive officers, directors and each beneficial owner of more than 5% of
the outstanding shares of Common Stock to enter into agreements with the
Representatives in the form set forth in Exhibit C to the effect that they
will not, for a period of 150 days after the commencement of the public
offering of the Shares, without the prior written consent of PaineWebber
Incorporated, sell, contract to sell or otherwise dispose of any shares of
Common Stock or rights to acquire such shares (other than pursuant to
employee stock option plans or in connection with other employee incentive
compensation arrangements).
(n) The Selling Shareholders will not, for a period of 150
days after the commencement of the public
<PAGE>
20
offering of the Shares, without the prior written consent of PaineWebber
Incorporated, sell, contract to sell or otherwise dispose of any shares of
Common Stock, other than pursuant to bona fide gifts to persons who agree
in writing with PaineWebber Incorporated to be bound by the provisions of
this Section 5(n).
(o) The Selling Shareholders will not, without the prior
written consent of PaineWebber Incorporated, make any bid for or purchase
any shares of Common Stock during the [120]-day period following the date
hereof.
(p) As soon as any Selling Shareholder is advised thereof,
such Selling Shareholder will advise PaineWebber Incorporated and confirm
such advice in writing, (1) of receipt by such Selling Shareholder, or by
any representative of such Selling Shareholder, of any communication from
the Commission relating to the Registration Statement, the Prospectus or
any preliminary prospectus, or any notice or order of the Commission
relating to the Company or any of the Selling Shareholders in connection
with the transactions contemplated by this Agreement and (2) of the
happening of any event during the period from and after the Effective Date
that in the judgment of such Selling Shareholder makes any statement made
in the Registration Statement or the Prospectus untrue or that requires the
making of any changes in the Registration Statement or the Prospectus in
order to make the statements therein, in light of the circumstances in
which they were made, not misleading.
(q) The Selling Shareholders will deliver to PaineWebber
Incorporated and the Managers prior to or on the Effective Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations
in lieu thereof).
6. Conditions of the Obligations of the Underwriters. In
-------------------------------------------------
addition to the execution and delivery of the Price Determination
Agreement, the obligations of each Underwriter hereunder are subject to the
following conditions:
(a) Notification that the Registration Statement has become
effective shall be received by PaineWebber Incorporated not later than
5:00 p.m., New York
<PAGE>
21
City time, on the date of this Agreement or at such later date and time as
shall be consented to in writing by PaineWebber Incorporated and all
filings required by Rule 424 of the Rules and Regulations and Rule 430A
shall have been made.
(b) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualifi-
cation or registration of the Shares under the securities or Blue Sky laws
of any jurisdiction shall be in effect and no proceeding for such purpose
shall be pending before or threatened or contemplated by the Commission or
the authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or any such
authorities shall have been complied with to the satisfaction of the staff
of the Commission or such authorities and (iv) after the date hereof no
amendment or supplement to the Registration Statement or the Prospectus
shall have been filed unless a copy thereof was first submitted to
PaineWebber Incorporated and PaineWebber Incorporated did not object
thereto in good faith, and PaineWebber Incorporated shall have received
certificates, dated the Closing Date and the Option Closing Date and signed
by the Chief Executive Officer or the Chairman of the Board of Directors of
the Company and the Chief Financial Officer of the Company (who may, as to
proceedings threatened, rely upon the best of their information and
belief), to the effect of clauses (i), (ii) and (iii).
(c) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) there shall not
have been a material adverse change in the general affairs, business,
business prospects, properties, management, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries,
taken as a whole, whether or not arising from transactions in the ordinary
course of business, in each case other than as set forth in or contemplated
by the Registration Statement and the Prospectus and (ii) neither the
Company nor any of its Subsidiaries shall have sustained any material loss
or interference with its business or properties from fire, explosion, flood
or other casualty, whether or not covered by insurance, or from any labor
dispute or any court or legislative or other governmental action, order or
decree, which is not set forth in the Registration State-
<PAGE>
22
ment and the Prospectus, if in the judgment of PaineWebber Incorporated any
such development makes it impracticable or inadvisable to consummate the
sale and delivery of the Shares by the Underwriters at the initial public
offering price.
(d) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there shall have
been no litigation or other proceeding instituted against the Company or
any of its Subsidiaries or any of their respective officers or directors in
their capacities as such, before or by any Federal, state or local court,
commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, in which litigation or proceeding an unfavorable
ruling, decision or finding would materially and adversely affect the
business, properties, business prospects, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries
taken as a whole.
(e) Each of the representations and warranties of the
Company and the Selling Shareholders contained herein shall be true and
correct in all material respects at the Closing Date and, with respect to
the Option Shares, at the Option Closing Date, as if made at the Closing
Date and, with respect to the Option Shares, at the Option Closing Date,
and all covenants and agreements herein contained to be performed on the
part of the Company and the Selling Shareholders and all conditions herein
contained to be fulfilled or complied with by the Company and the Selling
Shareholders at or prior to the Closing Date and, with respect to the
Option Shares, at or prior to the Option Closing Date, shall have been duly
performed, fulfilled or complied with.
(f) PaineWebber Incorporated shall have received opinions,
each dated the Closing Date and, with respect to the Option Shares, the
Option Closing Date, and satisfactory in form and substance to counsel for
the Underwriters, from Kramer, Levin, Naftalis, Nessen, Kamin & Frankel,
counsel to the Company, to the effect set forth in Exhibit D and from
_______________, counsel to the Selling Shareholders, to the effect set
forth in Exhibit E.
(g) PaineWebber Incorporated shall have received an
opinion, dated the Closing Date and the Option Closing Date, from Paul,
Weiss, Rifkind, Wharton & Garrison, counsel to the Underwriters, with
respect to the Registra
<PAGE>
23
tion Statement, the Prospectus and this Agreement, which opinion shall be
satisfactory in all respects to PaineWebber Incorporated.
(h) On the date of the Prospectus, the Accountants shall
have furnished to PaineWebber Incorporated a letter, dated the date of its
delivery, addressed to PaineWebber Incorporated and in form and substance
satisfactory to PaineWebber Incorporated, confirming that they are
independent accountants with respect to the Company as required by the Act
and the Rules and Regulations and with respect to the financial and other
statistical and numerical information contained in the Registration
Statement. At the Closing Date and, as to the Option Shares, the Option
Closing Date, the Accountants shall have furnished to PaineWebber
Incorporated a letter, dated the date of its delivery, which shall confirm,
on the basis of a review in accordance with the procedures set forth in the
letter from the Accountants, that nothing has come to their attention
during the period from the date of the letter referred to in the prior
sentence to a date (specified in the letter) not more than five days prior
to the Closing Date and the Option Closing Date which would require any
change in their letter dated the date of the Prospectus, if it were
required to be dated and delivered at the Closing Date and the Option
Closing Date.
(i) At the Closing Date and, as to the Option Shares, the
Option Closing Date, there shall be furnished to PaineWebber Incorporated
an accurate certificate, dated the date of its delivery, signed by each of
the Chief Executive Officer and the Chief Financial Officer of the Company,
in form and substance satisfactory to PaineWebber Incorporated, to the
effect that:
(i) Each signer of such certificate has carefully
examined the Registration Statement and the Prospectus and (A) as of
the date of such certificate, such documents are true and correct in
all material respects and do not omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein not untrue or misleading and (B) since the
Effective Date, no event has occurred as a result of which it is
necessary to amend or supplement the Prospectus in order to make the
statements therein not untrue or misleading in any material respect.
<PAGE>
24
(ii) Each of the representations and warranties of the
Company contained in this Agreement were, when originally made, and
are, at the time such certificate is delivered, true and correct in
all material respects.
(iii) Each of the covenants required herein to be
performed by the Company on or prior to the date of such certificate
has been duly, timely and fully performed and each condition herein
required to be complied with by the Company on or prior to the
delivery of such certificate has been duly, timely and fully complied
with.
(j) At the Closing Date and, as to the Option Shares, the
Option Closing Date, there shall have been furnished to PaineWebber
Incorporated an accurate certificate, dated the date of its delivery,
signed by the Committee on behalf of each of the Selling Shareholders, in
form and substance satisfactory to PaineWebber Incorporated, to the effect
that the representations and warranties of each of the Selling Shareholders
contained herein are true and correct in all material respects on and as of
the date of such certificate as if made on and as of the date of such
certificate, and each of the covenants and conditions required herein to be
performed or complied with by the Selling Shareholders on or prior to the
date of such certificate has been duly, timely and fully performed or
complied with.
(k) On or prior to the Closing Date, PaineWebber
Incorporated shall have received the executed agreements referred to in
Section 5(m).
(l) The Shares shall be qualified for sale in such states
as PaineWebber Incorporated may reasonably request, each such qualification
shall be in effect and not subject to any stop order or other proceeding on
the Closing Date and the Option Closing Date.
(m) Prior to the Closing Date, the Shares shall have been
duly authorized for listing by the [Nasdaq National Market] upon official
notice of issuance.
(n) The Company and the Selling Shareholders shall have
furnished to PaineWebber Incorporated such certificates, in addition to
those specifically mentioned herein, as PaineWebber Incorporated may have
reasonably
<PAGE>
25
requested as to the accuracy and completeness at the Closing Date and the
Option Closing Date of any statement in the Registration Statement or the
Prospectus as to the accuracy at the Closing Date and the Option Closing
Date of the representations and warranties of the Company and the Selling
Shareholders herein, as to the performance by the Company and the Selling
Shareholders of its and their respective obligations hereunder, or as to
the fulfillment of the conditions concurrent and precedent to the
obligations hereunder of PaineWebber Incorporated.
7. Indemnification.
---------------
(a) Each of the Company and the Selling Shareholders,
jointly and severally, will indemnify and hold harmless each Underwriter,
the directors, officers, employees and agents of each Underwriter and each
person, if any, who controls each Underwriter within the meaning of Sec-
tion 15 of the Act or Section 20 of the Exchange Act from and against any
and all losses, claims, liabilities, expenses and damages (including any
and all investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding between any of the indemnified parties and any indemnifying
parties or between any indemnified party and any third party, or otherwise,
or any claim asserted), to which they, or any of them, may become subject
under the Act, the Exchange Act or other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus or
the omission or alleged omission to state in such document a material fact
required to be stated in it or necessary to make the statements in it not
misleading, provided that the Company and the Selling Shareholders will not
be liable to the extent that such loss, claim, liability, expense or damage
arises from the sale of the Shares in the public offering to any person by
an Underwriter and is based on an untrue statement or omission or alleged
untrue statement or omission made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company
by PaineWebber Incorporated on behalf of any Underwriter expressly for
inclusion in the Registration Statement, any preliminary prospectus or the
Prospectus. This indemnity
<PAGE>
26
agreement will be in addition to any liability that the Company or any
Selling Shareholder might otherwise have.
(b) Each Underwriter will indemnify and hold harmless the
Company, the Selling Shareholders, each person, if any, who controls the
Company or the Selling Shareholders within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, each director of the Company and
each officer of the Company who signs the Registration Statement to the
same extent as the foregoing indemnity from the Company and the Selling
Shareholders to each Underwriter, but only insofar as losses, claims,
liabilities, expenses or damages arise out of or are based on any untrue
statement or omission or alleged untrue statement or omission made in
reliance on and in conformity with information relating to any Underwriter
furnished in writing to the Company by PaineWebber Incorporated on behalf
of such Underwriter expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus. This indemnity will be in
addition to any liability that each Underwriter might otherwise have.
(c) Any party that proposes to assert the right to be
indemnified under this Section 7 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim
is to be made against an indemnifying party or parties under this Sec-
tion 7, notify each such indemnifying party of the commencement of such
action, enclosing a copy of all papers served, but the omission so to
notify such indemnifying party will not relieve it from any liability that
it may have to any indemnified party under the foregoing provisions of this
Section 7 unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If
any such action is brought against any indemnified party and it notifies
the indemnifying party of its commencement, the indemnifying party will be
entitled to participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving notice of
the commencement of the action from the indemnified party, jointly with any
other indemnifying party similarly notified, to assume the defense of the
action, with counsel satisfactory to the indemnified party, and after
notice from the indemnifying party to the indemnified party of its election
to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below
and except for the reasonable costs of inves-
<PAGE>
27
tigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own
counsel in any such action, but the fees, expenses and other charges of
such counsel will be at the expense of such indemnified party unless
(1) the employment of counsel by the indemnified party has been authorized
in writing by the indemnifying party, (2) the indemnified party has reason-
ably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a
conflict or potential conflict exists (based on advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party
(in which case the indemnifying party will not have the right to direct the
defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the defense
of such action within a reasonable time after receiving notice of the com-
mencement of the action, in each of which cases the reasonable fees,
disbursements and other charges of counsel will be at the expense of the
indemnifying party or parties. It is understood that the indemnifying
party or parties shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm admitted to
practice in such jurisdiction at any one time for all such indemnified
party or parties. All such fees, disbursements and other charges will be
reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not be liable for any settlement of any action or
claim effected without its written consent (which consent will not be
unreasonably withheld). No indemnifying party shall, without the prior
written consent of each indemnified party, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action or
proceeding relating to the matters contemplated by this Section 7 (whether
or not any indemnified party is a party thereto), unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising or that may arise out of such claim,
action or proceeding.
(d) In order to provide for just and equitable contribution
in circumstances in which the indemnification provided for in the foregoing
paragraphs of this Section 7 is applicable in accordance with its terms but
for any reason is held to be unavailable from the
<PAGE>
28
Company, the Selling Shareholders or the Underwriters, the Company, the
Selling Shareholders and the Underwriters will contribute to the total
losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in connection
with, and any amount paid in settlement of, any action, suit or proceeding
or any claim asserted, but after deducting any contribution received by the
Company or the Selling Shareholders from persons other than the Under-
writers, such as persons who control the Company or the Selling
Shareholders within the meaning of the Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also
may be liable for contribution) to which the Company or the Selling
Shareholders and any one or more of the Underwriters may be subject in such
proportion as shall be appropriate to reflect the relative benefits
received by the Company and Selling Shareholders on the one hand and the
Underwriters on the other. The relative benefits received by the Company
and the Selling Shareholders on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Company and the Selling Shareholders bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. If, but only if,
the allocation provided by the foregoing sentence is not permitted by
applicable law, the allocation of contribution shall be made in such pro-
portion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the
Company and the Selling Shareholders, on the one hand, and the Under-
writers, on the other, with respect to the statements or omissions which
resulted in such loss, claim, liability, expense or damage, or action in
respect thereof, as well as any other relevant equitable considerations
with respect to such offering. Such relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates to
information supplied by the Company or PaineWebber Incorporated on behalf
of the Underwriters, the intent of the parties and their relative knowl-
edge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Selling Shareholders and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 7(d) were to be determined by pro rata allocation
(even if the Underwriters were treated as one entity for
<PAGE>
29
such purpose) or by any other method of allocation which does not take into
account the equitable considerations referred to herein. The amount paid
or payable by an indemnified party as a result of the loss, claim,
liability, expense or damage, or action in respect thereof, referred to
above in this Section 7(d) shall be deemed to include, for purpose of this
Section 7(d), any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(d), no
Underwriter shall be required to contribute any amount in excess of the
underwriting discounts received by it, and no person found guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) will be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 7(d) are several in proportion to
their respective underwriting obligations and not joint. For purposes of
this Section 7(d), any person who controls a party to this Agreement within
the meaning of the Act will have the same rights to contribution as that
party, and each officer of the Company who signed the Registration
Statement will have the same rights to contribution as the Company, subject
in each case to the provisions hereof. Any party entitled to contribution,
promptly after receipt of notice of commencement of any action against such
party in respect of which a claim for contribution may be made under this
Section 7(d), will notify any such party or parties from whom contribution
may be sought, but the omission so to notify will not relieve the party or
parties from whom contribution may be sought from any other obligation it
or they may have under this Section 7(d). No party will be liable for
contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements contained in
this Section 7 and the representations and warranties of the Company and
the Selling Shareholders contained in this Agreement shall remain operative
and in full force and effect regardless of (i) any investigation made by or
on behalf of the Underwriters, (ii) acceptance of any of the Shares and
payment therefor or (iii) any termination of this Agreement.
8. Termination. The obligations of the several Underwriters
-----------
under this Agreement may be terminated at any time prior to the Closing
Date (or, with respect to the
<PAGE>
30
Option Shares, on or prior to the Option Closing Date), by notice to the
Company from PaineWebber Incorporated, without liability on the part of any
Underwriter to the Company or any Selling Shareholder, if, prior to
delivery and payment for the Shares (or the Option Shares, as the case may
be), in the sole judgment of PaineWebber Incorporated, (i) trading in any
of the equity securities of the Company shall have been suspended by the
Commission, by an exchange that lists the Shares or by the Nasdaq Stock
Market, (ii) trading in securities generally on the New York Stock Exchange
shall have been suspended or limited or minimum or maximum prices shall
have been generally established on such exchange, or additional material
governmental restrictions, not in force on the date of this Agreement,
shall have been imposed upon trading in securities generally by such
exchange or by order of the Commission or any court or other governmental
authority, (iii) a general banking moratorium shall have been declared by
either Federal or New York State authorities or (iv) any material adverse
change in the financial or securities markets in the United States or in
political, financial or economic conditions in the United States or any
outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall
have occurred, the effect of any of which is such as to make it, in the
sole judgment of PaineWebber Incorporated, impracticable or inadvisable to
market the Shares on the terms and in the manner contemplated by the
Prospectus.
9. Substitution of Underwriters. If any one or more of the
----------------------------
Underwriters shall fail or refuse to purchase any of the Firm Shares which
it or they have agreed to purchase hereunder, and the aggregate number of
Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate
number of Firm Shares, the other Underwriters shall be obligated,
severally, to purchase the Firm Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase, in the proportions
which the number of Firm Shares which they have respectively agreed to
purchase pursuant to Section 1 bears to the aggregate number of Firm Shares
which all such non-defaulting Underwriters have so agreed to purchase, or
in such other proportions as PaineWebber Incorporated may specify; provided
that in no event shall the maximum number of Firm Shares which any Under-
writer has become obligated to purchase pursuant to Section 1 be increased
pursuant to this Section 9 by more than one-ninth of the number of Firm
Shares agreed to be
<PAGE>
31
purchased by such Underwriter without the prior written consent of such
Underwriter. If any Underwriter or Underwriters shall fail or refuse to
purchase any Firm Shares and the aggregate number of Firm Shares which such
defaulting Underwriter or Underwriters agreed but failed or refused to
purchase exceeds one-tenth of the aggregate number of the Firm Shares and
arrangements satisfactory to PaineWebber Incorporated, the Company and the
Committee for the purchase of such Firm Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the
part of any non-defaulting Underwriter, or the Company or any Selling
Shareholder for the purchase or sale of any Shares under this Agreement.
In any such case either PaineWebber Incorporated or the Company and the
Committee shall have the right to postpone the Closing Date, but in no
event for longer than seven days, in order that the required changes, if
any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. Any action taken pursuant to
this Section 9 shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
10. Miscellaneous. Notice given pursuant to any of the
-------------
provisions of this Agreement shall be in writing and, unless otherwise
specified, shall be mailed or delivered (a) if to the Company, at the
office of the Company, 105 Price Parkway, Farmingdale New York 11735,
Attention: Stewart Katz, (b) if to any Selling Shareholder,
[_______________________], or (c) if to the Underwriters, to PaineWebber
Incorporated at the offices of PaineWebber Incorporated, 1285 Avenue of the
Americas, New York, New York 10019, Attention: Corporate Finance Depart-
ment. Any such notice shall be effective only upon receipt. Any notice
under Section 8 or 9 may be made by telex or telephone, but if so made
shall be subsequently confirmed in writing.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company and the Selling Shareholders and of the
controlling persons, directors and officers referred to in Section 7, and
their respective successors and assigns, and no other person shall acquire
or have any right under or by virtue of this Agreement. The term
"successors and assigns" as used in this Agreement shall not include a
purchaser, as such purchaser, of Shares from any of the several
Underwriters.
<PAGE>
32
With respect to any obligation of the Company and the Selling
Shareholders hereunder to make any payment, to indemnify for any liability
or to reimburse for any expense, notwithstanding the fact that such
obligation is a joint and several obligation of the Company and the Selling
Shareholders, the Underwriters (or any other person to whom such payment,
indemnification or reimbursement is owed) may pursue the Company with
respect thereto prior to pursuing any Selling Shareholder.
All representations, warranties and agreements of the Company and
the Selling Shareholders contained herein or in certificates or other
instruments delivered pursuant hereto, shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of
any Underwriter or any of their controlling persons and shall survive
delivery of and payment for the Shares hereunder.
Any action required or permitted to be taken by the
Representatives under this Agreement may be taken by them jointly or by
PaineWebber Incorporated.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF
LAWS PRINCIPLES OF SUCH STATE. This Agreement may be signed in two or more
counterparts with the same effect as if the signatures thereto and hereto
were upon the same instrument.
In case any provision in this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
The Company, the Selling Shareholders and the Underwriters each
hereby irrevocably waive any right they may have to a trial by jury in
respect of any claim based upon or arising out of this Agreement or the
transactions contemplated hereby.
This Agreement may not be amended or otherwise modified or any
provision hereof waived except by an instrument in writing signed by
PaineWebber Incorporated and the Company.
<PAGE>
33
Please confirm that the foregoing correctly sets forth the
agreement among the Company, the Selling Shareholders and the several
Underwriters.
Very truly yours,
NOODLE KIDOODLE, INC.
By:
-------------------------
Title:
THE SELLING SHAREHOLDERS NAMED
IN SCHEDULE I ATTACHED HERETO
By: The Committee
By:
-------------------------
<PAGE>
34
Confirmed as of the date first
above mentioned:
PAINEWEBBER INCORPORATED
RODMAN & RENSHAW, INC.
Acting on behalf of
themselves and as the
Representatives of the
other several Underwriters
named in Schedule II hereof.
By: PAINEWEBBER INCORPORATED
By:
------------------------
Title:
By: RODMAN & RENSHAW, INC.
By:
------------------------
Title:
<PAGE>
35
SCHEDULE I
SELLING SHAREHOLDERS
Total
Name of Number of
Selling Firm Shares
Shareholder to be Sold
- ----------- -----------
[100,000]
[Phyllis Greenman]
<PAGE>
SCHEDULE II
UNDERWRITERS
Number of
Names of Firm Shares
Underwriters to be Purchased
------------ ---------------
PaineWebber Incorporated
Rodman & Renshaw
Total . . . . . . . . . . . . . . . . . [2,100,000]
===========
<PAGE>
EXHIBIT A
NOODLE KIDOODLE, INC.
_____________________
PRICE DETERMINATION AGREEMENT
-----------------------------
[Date]
PAINEWEBBER INCORPORATED
RODMAN & RENSHAW, INC.
As Representatives of the several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated ______,
199___ (the "Underwriting Agreement"), among Noodle Kidoodle, Inc., a
[Delaware] corporation (the "Company"), the Selling Shareholders named in
Schedule I thereto or hereto (the "Selling Shareholders"), and the several
Underwriters named in Schedule II thereto or hereto (the "Underwriters"),
for whom PaineWebber Incorporated and Rodman & Renshaw, Inc. are acting as
Representatives (the "Representatives"). The Underwriting Agreement
provides for the purchase by the Underwriters from the Company and the
Selling Shareholders, subject to the terms and conditions set forth
therein, of an aggregate of 2,100,000 shares (the "Firm Shares") of the
Company's common stock, par value [$.001] per share. This Agreement is the
Price Determination Agreement referred to in the Underwriting Agreement.
Pursuant to Section 1 of the Underwriting Agreement, the
undersigned agree with the Representatives as follows:
1. The public offering price per share for the ___ Shares
shall be $_______.
2. The purchase price per share for the Firm Shares to be
paid by the several Underwriters shall be $_______ representing an amount
equal to the public offering price set forth above, less $______ per share.
The Company represents and warrants to each of the Underwriters
that the representations and warranties of
<PAGE>
2
the Company set forth in Section 3 of the Underwriting Agreement are
accurate as though expressly made at and as of the date hereof.
The Selling Shareholders represent and warrant to each of the
Underwriters that the representations and warranties of the Selling
Shareholders set forth in Section 4 of the Underwriting Agreement are
accurate as though expressly made at and as of the date hereof.
As contemplated by the Underwriting Agreement, attached as
Schedule II is a completed list of the several Underwriters, which shall be
a part of this Agreement and the Underwriting Agreement.
This Agreement shall be governed by the law of the State of New
York without regard to the conflict of laws principles of such State.
If the foregoing is in accordance with your understanding of the
agreement among the Underwriters, the Company and the Selling Shareholders,
please sign and return to the Company a counterpart hereof, whereupon this
instrument along with all counterparts and together with the Underwriting
Agreement shall be a binding agreement among the Underwriters, the Company
and the Selling Shareholders in accordance with its terms and the terms of
the Underwriting Agreement.
Very truly yours,
NOODLE KIDOODLE, INC.
By:
-------------------------
Title:
<PAGE>
3
THE SELLING SHAREHOLDERS NAMED IN
SCHEDULE I TO THE UNDERWRITING AGREEMENT
By: The Committee
By:
----------------------
Confirmed as of the date
first above mentioned:
PAINEWEBBER INCORPORATED
RODMAN & RENSHAW, INC.
Acting on behalf of themselves
and as the Representatives
of the other several Underwriters
named in Schedule II hereof.
By: PAINEWEBBER INCORPORATED
By:
------------------------
Title:
BY: RODMAN & RENSHAW, INC.
By:
------------------------
<PAGE>
EXHIBIT B
POWER OF ATTORNEY
NOODLE KIDOODLE, INC.
Common Stock
[Names and Addresses of Committee]
Dear Ladies and Gentlemen:
The undersigned understands that Noodle Kidoodle, Inc., a [New
York] corporation (the "Company"), intends to file a registration statement
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Act"), in connection with the proposed public offering and sale by
the Company, the undersigned (the "Selling Shareholder") and certain other
Selling Shareholders of the Company's Common Stock, par value [$.001] per
share (the "Common Stock").
The Selling Shareholder desires to sell certain shares of Common
Stock and to include such shares among the shares covered by the
Registration Statement. The number of shares of Common Stock which the
undersigned desires to sell (the "Shares") are set forth beneath the
signature of the Selling Shareholder below.
Concurrently with the execution and delivery of this Power of
Attorney, the undersigned is delivering to you, or requesting the Company
to deliver to you, certificates for the Shares, which you are authorized to
deposit with ____________, as custodian (the "Custodian"), pursuant to a
custody agreement in the form attached as Attachment A hereto (the "Custody
Agreement").
1. In connection with the foregoing, the Selling Shareholder
hereby makes, constitutes and appoints you collectively, and each of you,
individually (a "Member") and each of your respective substitutes under
Section 3, the true and lawful attorneys-in-fact of the undersigned (the
Members or any of them or their respective substitutes, being herein
referred to collectively as the "Committee"), with full power and
authority, in the name and on behalf of the Selling Shareholder:
(a) To enter into the Custody Agreement and deposit with
the Custodian pursuant thereto the certificates
<PAGE>
2
for the Shares delivered to the Committee concurrently herewith;
(b) For the purpose of effecting the sale of the Shares, to
execute and deliver (i) an Underwriting Agreement (the "Underwriting
Agreement"), by and among the Company, the other Selling Shareholders and
the Representatives (the "Representatives"), selected by the Company, of
the several Underwriters (the "Underwriters") and (ii) a Price
Determination Agreement (as defined in the Underwriting Agreement), by and
among the Company, the other Selling Shareholders and the Representatives
of the several Underwriters;
(c) To endorse, transfer and deliver certificates for the
Shares to or on the order of the Representatives or to their nominee or
nominees, and to give such orders and instructions to the Custodian as the
Committee may in its sole discretion determine with respect to (i) the
transfer on the books of the Company of the Shares in order to effect such
sale (including the names in which new certificates for such Shares are to
be issued and the denominations thereof); (ii) the delivery to or for the
account of the Representatives of the certificates for the Shares against
receipt by the Custodian of the full purchase price to be paid therefor;
(iii) the remittance to the Selling Shareholder of the Selling Share-
holder's share of the proceeds, after payment of expenses described in the
Underwriting Agreement, from any sale of Shares; and (iv) the return to the
Selling Shareholder of certificates representing the number of Shares (if
any) deposited with the Custodian but not sold by the Selling Shareholder
under the Registration Statement for any reason;
(d) To retain ____________________[(who are also counsel to
the Company)] as legal counsel for the Selling Shareholders in connection
with any and all matters referred to herein;
(e) To take for the Selling Shareholder all steps deemed
necessary or advisable by the Committee in connection with the registration
of the Shares under the Act, including without limitation filing amendments
to the Registration Statement, requesting acceleration of effectiveness of
the Registration Statement, advising the Securities and Exchange Commission
that the reason the Selling Shareholder is offering the Shares for sale is
to diversify the Selling Shareholder's investments and to assist the
Company in enlarging the public market for the Common Stock, informing said
Commission that the Selling Shareholder has no knowledge of any material
adverse information with regard to the current and prospective operations
of the Company which is not stated in the
<PAGE>
3
Registration Statement, and such other steps as the Committee may in its
absolute discretion deem necessary or advisable;
(f) To make, acknowledge, verify and file on behalf of the
Selling Shareholder applications, consents to service of process and such
other undertakings or reports as may be required by law with state
commissioners or officers administering state securities or Blue Sky laws
and to take any other action required to facilitate the qualification of
the Shares under the securities or Blue Sky laws of the jurisdictions in
which the Shares are to be offered;
(g) If necessary, to endorse (in blank or otherwise) on
behalf of the Selling Shareholder the certificate or certificates
representing the Shares, or a stock power or powers attached to such
certificate or certificates; and
(h) To make, execute, acknowledge and deliver all such
other contracts, orders, receipts, notices, requests, instructions,
certificates, letters and other writings and, in general, to do all things
and to take all action which the Committee in its sole discretion may
consider necessary or proper in connection with or to carry out the
aforesaid sale of Shares, as fully as could the Selling Shareholder if
personally present and acting.
2. This Power of Attorney and all authority conferred hereby is
granted and conferred subject to and in consideration of the interests of
the Company, the Representatives, the Underwriters and the other Selling
Shareholders and, for the purpose of completing the transactions contem-
plated by this Power of Attorney, this Power of Attorney and all authority
conferred hereby shall be irrevocable and shall not be terminated by any
act of the Selling Shareholder or by operation of law, whether by the
death, disability, incapacity or liquidation of the Selling Shareholder or
by the occurrence of any other event or events (including without limita-
tion the termination of any trust or estate for which the Selling
Shareholder is acting as a fiduciary or fiduciaries), and if, after the
execution hereof, the Selling Shareholder shall die or become disabled or
incapacitated or is liquidated, or if any other such event or events shall
occur before the completion of the transactions contemplated by this Power
of Attorney, the Committee shall nevertheless be authorized and directed to
complete all such transactions as if such death, disability, incapacity,
liquidation or other event or events had not occurred and regardless of
notice thereof.
3. Each Member shall have full power to make and substitute any
person in the place and stead of such Member,
<PAGE>
4
and the Selling Shareholder hereby ratifies and confirms all that each
Member or substitute or substitutes shall do by virtue of these presents.
All actions hereunder may be taken by any one Member or his substitute. In
the event of the death, disability or incapacity of any Member, the
remaining Member or Members shall appoint a substitute therefor.
4. The Selling Shareholder hereby represents, warrants and
covenants that:
(a) All information furnished to the Company by or on
behalf of the Selling Shareholder for use in connection with the
preparation of the Registration Statement is and will be true and correct
in all material respects and does not and will not omit any material fact
necessary to make such information not misleading;
(b) The Selling Shareholder, having full right, power and
authority to do so, has duly executed and delivered this Power of Attorney;
(c) The Selling Shareholder has carefully reviewed the
Registration Statement and will carefully review each amendment thereto
immediately upon receipt thereof from the Company and will promptly advise
the Company in writing if:
(i) The name and address of the Selling Shareholder is not
properly set forth in each preliminary prospectus (collectively, the
"Preliminary Prospectus") contained in the Registration Statement and
the prospectuses (collectively, the "Prospectus") contained in the
Registration Statement at the time it becomes effective;
(ii) The Selling Shareholder has reason to believe that
(A) any information furnished to the Company by or on behalf of the
Selling Shareholder for use in connection with the Registration
Statement or the Prospectus or any Preliminary Prospectus is not true
and complete; and (B) any Preliminary Prospectus, the Prospectus and
any supplements thereto contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(iii) The Selling Shareholder knows of any material
adverse information with regard to the current or prospective
operations of the Company or any of its subsidiaries which is not
disclosed in any Pre-
<PAGE>
5
liminary Prospectus, the Prospectus or the Registration Statement; or
(iv) Except as indicated in the Prospectus, the Selling
Shareholder knows of any arrangements made or to be made by any
person, or of any transaction already effected, (A) to limit or
restrict the sale of shares of the Common Stock during the period of
the public distribution, (B) to stabilize the market for the Common
Stock or (C) for withholding commissions, or otherwise to hold any
other person responsible for the distribution of the Selling
Shareholder's participation;
(d) In connection with the offering of the Shares, the
Selling Shareholder has not taken and will not take, directly or
indirectly, any action intended to, or which might reasonably be expected
to, cause or result in stabilization or manipulation of the price of the
Shares to facilitate the sale or resale of the Shares;
(e) The Selling Shareholder has not distributed and will
not distribute any prospectus or other offering material in connection with
the offering and sale of the Shares other than a Preliminary Prospectus, a
Prospectus or other material permitted by the Act;
(f) The Selling Shareholder will notify the Company in
writing immediately of any changes in the foregoing information which
should be made as a result of developments occurring after the date hereof
and prior to the Closing Date under the Underwriting Agreement, and the
Committee may consider that there has not been any such development unless
advised to the contrary;
(g) The Selling Shareholder has, and at the time of
delivery of the Shares to the Representatives and the Managers it will
have, full power and authority to enter into this Power of Attorney, to
carry out the terms and provisions hereof and to make all the
representations, warranties and covenants contained herein; and
(h) This Power of Attorney is the valid and binding
agreement of the Selling Shareholder and is enforceable against the Selling
Shareholder in accordance with its terms.
5. The representations, warranties and covenants of the Selling
Shareholder in this Power of Attorney are made for the benefit of, and may
be relied upon by, [the other Selling Shareholders,] the Committee, the
Company and its counsel, and their representatives, agents and counsel, the
Custodian, the Underwriters and the Representatives.
<PAGE>
6
6. The Committee shall be entitled to act and rely upon any
statement, request, notice or instructions respecting this Power of
Attorney given to it by the Selling Shareholder, not only as to the
authorization, validity and effectiveness thereof, but also as to the truth
and acceptability of any information therein contained.
It is understood that the Committee assumes no responsibility or
liability to any person other than to deal with the Shares deposited with
it and the proceeds from the sale of the Shares in accordance with the
provisions hereof. The Committee makes no representations with respect to
and shall have no responsibility for the Registration Statement, the
Prospectus or any Preliminary Prospectus nor, except as herein expressly
provided, for any aspect of the offering of Common Stock, and it shall not
be liable for any error of judgment or for any act done or omitted or for
any mistake of fact or law except for its own negligence or bad faith. The
Selling Shareholder agrees to indemnify the Committee for and to hold the
Committee harmless against any loss, claim, damage or liability incurred on
its part arising out of or in connection with it acting as the Committee
under this Power of Attorney, as well as the cost and expense of
investigating and defending against any such loss, claim, damage or
liability, except to the extent such loss, claim, damage or liability is
due to the negligence or bad faith of the Member seeking indemnification.
The Selling Shareholder agrees that the Committee may consult with counsel
of its own choice (who may be counsel for the Company) and it shall have
full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion
of such counsel.
It is understood that the Committee may, without breaching any
express or implied obligation to the Selling Shareholder hereunder,
release, amend or modify any other Power of Attorney granted by any other
Selling Shareholder.
7. It is understood that the Committee shall serve entirely
without compensation.
8. This Power of Attorney shall be governed by the laws of the
State of New York without regard to the conflict of laws principles of such
State.
This Power of Attorney may be signed in two or more counterparts
with the same effect as if the signature thereto and hereto were upon the
same instrument.
In case any provision in this Power of Attorney shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
<PAGE>
7
This Power of Attorney shall be binding upon the Committee and
the Selling Shareholder and the heirs, legal representatives, distributees,
successors and assigns of the Selling Shareholder.
Dated: __________, 19__
Very truly yours,
_____________________________*/
_____________________________*/
Signature(s) of Selling
Shareholder(s)
_____________________________
(Address)
SHARES TO BE SOLD:
_____ shares of Common Stock
ACKNOWLEDGED AND ACCEPTED:
THE COMMITTEE:
______________________________
______________________________
______________________________
______________________________
- --------------------
*/1 To be signed in exactly the same manner as the shares are registered.
NOTE: SIGNATURES MUST BE NOTARIZED
Selling Shareholders should use the appropriate form for the
state in which they are located.
<PAGE>
Attachment A
CUSTODY AGREEMENT
-----------------
CUSTODY AGREEMENT, dated ________, 19__, among
___________________________, as Custodian (the "Custodian"), and the
person[s] listed on Annex I hereto ([each] a "Selling Shareholder" [and
collectively the "Selling Shareholders"]).
Noodle Kadoodle, Inc., a Delaware corporation (the "Company"),
intends to file a Registration Statement (the "Registration Statement")
with the Securities and Exchange Commission to register for sale to the
public under the Securities Act of 1933, as amended (the "Act"), shares of
the Company's common stock, [$.001] par value per share (the "Common
Stock").
The shares to be covered by the Registration Statement shall
consist of (a) up to ________ shares of Common Stock to be sold by the
Company and (b) up to ________ shares of Common Stock (the "Shares") to be
sold by the Selling Shareholders.
[Each of] the Selling Shareholder[s] has executed and delivered a
Power of Attorney (the "Power of Attorney") naming _____________,
____________ and _______________, and each of them, as his attorney-in-fact
(the "Committee"), for certain purposes, including the execution, delivery
and performance of this Agreement in his name, place and stead, in
connection with the proposed sale by each Selling Shareholder of the number
of Shares set forth opposite such Selling Shareholder's name in Annex I.
1. A custody arrangement is hereby established by the Selling
Shareholders with the Custodian with respect to the Shares, and the
Custodian is hereby instructed to act in accordance with this Agreement and
any amendments or supplements hereto authorized by the Committee.
2. There are herewith delivered to the Custodian, and the
Custodian hereby acknowledges receipt of, certificates representing the
Shares, which certificates have been endorsed in blank or are accompanied
by duly executed stock powers, in each case with all signatures guaranteed
by a commercial bank or trust company or by a member firm of the New York
Stock Exchange, Inc., the American Stock Exchange, Inc. or a member of the
National Association of Securities Dealers, Inc. Such certificates are to
be held by the Custodian for the account of the Selling Shareholders and
are to be disposed of by the Custodian in accordance with this Agreement.
<PAGE>
2
3. The Custodian is authorized and directed by the Selling
Shareholder[s]:
(a) To hold the certificates representing the Shares
delivered by the Selling Shareholder[s] in its custody;
(b) On or immediately prior to the settlement date for any
Shares sold pursuant to the Registration Statement (the "Closing Date"), to
cause such Shares to be transferred on the books of the Company into such
names as the Custodian shall have been instructed by the Representatives
(the "Representatives") of the several Underwriters (the "Underwriters");
to cause to be issued, against surrender of the certificates for the
Shares, a new certificate or certificates for such Shares, free of any
restrictive legend, registered in such name or names; to deliver such new
certificates representing such Shares to the Representatives, as instructed
by the Representatives on the Closing Date for their account or accounts
against full payment therefor; and to give receipt for such payment;
(c) To disburse such payments in the following manner:
(i) to itself, as agent for the Selling Shareholder[s], a reserve amount to
be designated in writing by the Committee from which amount the Custodian
shall pay, as soon as reasonably practicable, (A) the Selling Shareholders'
proportionate share of all expenses of the offering and sale of the Shares
as provided in the Underwriting Agreement by and among the Company, the
Selling Shareholder[s] and the Representatives, (B) its reasonable [charges
and] disbursements for acting hereunder with respect to the sale of the
Shares and (C) any applicable stock transfer taxes; and (ii) to [each]
Selling Shareholder, pursuant to the written instructions of the Committee,
(A) on the Closing Date, a sum equal to the share of the proceeds to which
such Selling Shareholder is entitled, as determined by the Committee, less
the reserve amount designated by any Committee, and (B) promptly after all
proper charges, disbursements, costs and expenses shall have been paid, any
remaining balance of the amount reserved under clause (i) above. Before
making any payment from the amount reserved under clause (i) above, except
payments made pursuant to subclause (B) of clause (ii) above, the Custodian
shall request and receive the written approval of the Committee. To the
extent the expenses referred to in subclause (A) of clause (i) above exceed
the amount reserved, the Selling Shareholders shall remain liable for their
proportionate share of such expenses.
4. Subject in each case to the indemnification obligations set
forth in Section 7, in the event Shares of any Selling Shareholder are not
sold [prior to ____________,
<PAGE>
3
19__], the Custodian shall deliver to such Selling Shareholder as soon as
practicable after [such date] termination of the offering of the Shares,
certificates representing such Shares deposited by such Selling Share-
holder. Certificates returned to any Selling Shareholder shall be returned
with any related stock powers, and any new certificates issued to the
Selling Shareholders with respect to such Shares shall bear any appropriate
legend reflecting the unregistered status thereof under the Act.
5. This Agreement is for the express benefit of the Company and
the Selling Shareholders, the Underwriters and the Representatives. The
obligations and authorizations of the Selling Shareholders hereunder are
irrevocable and shall not be terminated by any act of any Selling Share-
holder or by operation of law, whether by the death, disability, incapacity
or liquidation of any Selling Shareholder or by the occurrence of any other
event or events (including without limitation the termination of any trust
or estate for which any Selling Shareholder is acting as a fiduciary or
fiduciaries), and if after the execution hereof any Selling Shareholder
shall die or become disabled or incapacitated or is liquidated, or if any
other event or events shall occur before the delivery of such Selling
Shareholder's Shares hereunder to the Representatives, such Shares shall be
delivered to the Representatives in accordance with the terms and condi-
tions of this Agreement, as if such event had not occurred, regardless of
whether or not the Custodian shall have received notice of such event.
6. Until payment of the purchase price for the Shares has been
made to the Selling Shareholders or to the Custodian, the Selling
Shareholders shall remain the owner of (and shall retain the right to
receive dividends and distributions on, and to vote) the number of Shares
delivered by each of them to the Custodian hereunder. Until such payment
in full has been made or until the offering of Shares has been terminated,
each Selling Shareholder agrees that it will not give, sell, pledge,
hypothecate, grant any lien on, transfer, deal with or contract with
respect to the Shares and any interests therein.
7. The Custodian shall assume no responsibility to any person
other than to deal with the certificates for the Shares and the proceeds
from the sale of the Shares represented thereby in accordance with the
provisions hereof, and the Selling Shareholders, severally and not jointly,
hereby agree to indemnify the Custodian for and to hold the Custodian
harmless against any and all losses, claims, damages or liabilities
incurred on its part arising out of or in connection with it acting as the
Custodian pursuant hereto, as well as the cost and expenses of
investigating and defending any such losses, claims, damages
<PAGE>
4
or liabilities, except to the extent such losses, claims, damages or
liabilities are due to the negligence or bad faith of the Custodian. The
Selling Shareholders agree that the Custodian may consult with counsel of
its own choice (who may be counsel for the Company), and the Custodian
shall have full and complete authorization and protection for any action
taken or suffered by the Custodian hereunder in good faith and in
accordance with the opinion of such counsel.
8. Each of the Selling Shareholders, jointly and not severally,
hereby represents and warrants that: (a) it has, and at the time of
delivery of its Shares to the Representatives it will have, full power and
authority to enter into this Agreement and the Power of Attorney, to carry
out the terms and provisions hereof and thereof and to make all of the
representations, warranties and agreements contained herein and therein;
and (b) this Agreement and the Power of Attorney are the valid and binding
agreements of such Selling Shareholder and are enforceable against such
Selling Shareholder in accordance with their respective terms.
9. The Custodian's acceptance of this Agreement by the
execution hereof shall constitute an acknowledgement by the Custodian of
the authorization herein conferred and shall evidence the Custodian's
agreement to carry out and perform this Agreement in accordance with its
terms.
10. The Custodian shall be entitled to act and rely upon any
statement, request, notice or instruction with respect to this Agreement
given to it on behalf of each of the Selling Shareholders if the same shall
be made or given to the Custodian by the Committee, not only as to the
authorization, validity and effectiveness thereof, but also as to the truth
and acceptability of any information therein contained.
11. This Agreement may be executed in two or more counterparts
with the same effect as if the signatures thereto and hereto were upon the
same instrument. Execution by the Custodian of one counterpart hereof and
its delivery thereof to the Committee shall constitute the valid execution
of this Agreement by the Custodian.
12. This Agreement shall be binding upon the Custodian, each of
the Selling Shareholders and the respective heirs, legal representatives,
distributees, successors and assigns of the Selling Shareholders.
13. This Agreement shall be governed by the laws of the State of
New York without regard to the conflict of laws principles of such State.
<PAGE>
5
14. Any notice given pursuant to this Agreement shall be deemed
given if in writing and delivered in person, or if given by telephone or
telegraph if subsequently confirmed by letter: (i) if to a Selling
Shareholder, to his address set forth in Annex I; and (ii) if to the
Custodian, to it at ___________________.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
-------------------------
-------------------------,
as Custodian
THE SELLING SHAREHOLDERS
LISTED IN ANNEX I HERETO:
By: The Committee
By:
----------------------
<PAGE>
Annex I
-------
Names and Addresses of
Selling Shareholders Shares to be Sold
---------------------- -----------------
__________________
Total . . . . . . . . . . . . . . .
==================
<PAGE>
Exhibit C
[DATE]
PAINEWEBBER INCORPORATED
RODMAN & RENSHAW, INC.
As Representatives of the
several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Ladies and Gentlemen:
In consideration of the agreement of the several Underwriters,
for which PaineWebber Incorporated and Rodman & Renshaw, Inc. (the
"Representatives") intend to act as representatives, to underwrite a
proposed public offering (the "Offering") of 2,100,000 shares of Common
Stock, par value $.001 per share (the "Common Stock") of Noodle Kidoodle,
Inc., a New York corporation, as contemplated by a registration statement
with respect to such shares filed with the Securities and Exchange
Commission on Form S-1, the undersigned hereby agrees that the undersigned
will not, for a period of 150 days after the commencement of the public
offering of such shares, without the prior written consent of PaineWebber
Incorporated, offer to sell, sell, contract to sell, grant any option to
sell, or otherwise dispose of, or require the Company to file with the
Securities and Exchange Commission a registration statement under the
Securities Act of 1933 to register, any shares of Common Stock or
securities convertible into or exchangeable for Common Stock or warrants or
other rights to acquire shares of Common Stock of which the undersigned is
now, or may in the future become, the beneficial owner (within the meaning
of Rule 13d-3 under the Securities Exchange Act of 1934) (other than
pursuant to employee stock option plans or in connection with other
employee incentive compensation arrangements).
Very truly yours,
By:________________________
Print Name: ________________________
<PAGE>
EXHIBIT D
Form of Opinion of
Counsel to the Company
----------------------
1. The Company and each of its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has full corporate power and
authority to conduct all the activities conducted by it, to own or lease
all the assets owned or leased by it and to conduct its business as
described in the Registration Statement and the Prospectus. The Company is
the sole record owner and, to our knowledge, the sole beneficial owner of
all of the capital stock of each of its Subsidiaries.
2. All of the outstanding shares of Common Stock have been, and
the Shares, when paid for by the Underwriters in accordance with the terms
of the Agreement, will be, duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar right
under (i) the statutes, judicial and administrative decisions, and the
rules and regulations of the governmental agencies of the State of
[Delaware], (ii) the Company's certificate of incorporation or by-laws or
(iii) any instrument, document, contract or other agreement referred to in
the Registration Statement or any instrument, document, contract or
agreement filed as an exhibit to the Registration Statement. Except as
described in the Registration Statement or the Prospectus, to the best of
our knowledge, there is no commitment or arrangement to issue, and there
are no outstanding options, warrants or other rights calling for the
issuance of, any share of capital stock of the Company or any Subsidiary to
any person or any security or other instrument that by its terms is
convertible into, exercisable for or exchangeable for capital stock of the
Company.
3. No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is
required in connection with the authorization, issuance, transfer, sale or
delivery of the Shares by the Company, in connection with the execution,
delivery and performance of the Agreement1/ by the Company or in
-
connection with the taking by the Company of any action contemplated
thereby [or, if so required, all such consents, approvals, authorizations
and orders, [specifying the same] have been obtained and are in full force
and effect], except such as have been obtained under the Act and
- --------------------
1/ All references in this opinion to the Agreement shall include the
- - Price Determination Agreement.
<PAGE>
2
the Rules and Regulations and such as may be required under state
securities or "Blue Sky" laws or by the by-laws and rules of the NASD in
connection with the purchase and distribution by the Underwriters of the
Shares to be sold by the Company.
4. The authorized, issued and outstanding capital stock of the
Company is as set forth in the Registration Statement and the Prospectus
under the caption "Capitalization." The description of the Common Stock
contained in the Prospectus is complete and accurate in all material
respects. The form of certificate used to evidence the Common Stock is in
due and proper form and complies with all applicable statutory
requirements.
5. The Registration Statement and the Prospectus comply in all
material respects as to form with the requirements of the Act and the Rules
and Regulations (except that we express no opinion as to financial state-
ments, schedules and other financial data contained in the Registration
Statement or the Prospectus).
6. To the best of our knowledge, any instrument, document,
lease, license, contract or other agreement (collectively, "Documents")
required to be described or referred to in the Registration Statement or
the Prospectus has been properly described or referred to therein and any
Document required to be filed as an exhibit to the Registration Statement
has been filed as an exhibit thereto or has been incorporated as an exhibit
by reference in the Registration Statement; and no default exists in the
due performance or observance of any material obligation, agreement,
covenant or condition contained in any Document filed or required to be
filed as an exhibit to the Registration Statement.
7. To the best of our knowledge, except as disclosed in the
Registration Statement or the Prospectus, no person or entity has the right
to require the registration under the Act of shares of Common Stock or
other securities of the Company by reason of the filing or effectiveness of
the Registration Statement.
8. To the best of our knowledge, the Company is not in
violation of, or in default with respect to, any law, rule, regulation,
order, judgment or decree, except as may be described in the Prospectus or
such as in the aggregate do not now have and will not in the future have a
material adverse effect upon the operations, business or assets of the
Company and the Subsidiaries, taken as a whole.
9. All descriptions in the Prospectus of statutes, regulations
or legal or governmental proceedings are
<PAGE>
3
accurate and fairly present the information required to be shown.
10. The Company has full corporate power and authority to enter
into the Agreement, and the Agreement has been duly authorized, executed
and delivered by the Company, is a valid and binding agreement of the
Company and, except for the indemnification and contribution provisions
thereof, as to which we express no opinion, is enforceable against the
Company in accordance with the terms thereof.
11. The execution and delivery by the Company of, and the
performance by the Company of its agreements in, the Agreement do not and
will not (i) violate the certificate of incorporation or by-laws of the
Company, (ii) breach or result in a default under, cause the time for
performance of any obligation to be accelerated under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
assets of the Company or any of its Subsidiaries pursuant to the terms of,
(x) any indenture, mortgage, deed of trust, loan agreement, bond, deben-
ture, note agreement, capital lease or other evidence of indebtedness of
which we have knowledge, (y) any voting trust arrangement or any contract
or other agreement to which the Company is a party that restricts the
ability of the Company to issue securities and of which we have knowledge
or (z) any Document filed as an exhibit to the Registration Statement,
(iii) breach or otherwise violate any existing obligation of the Company
under any court or administrative order, judgment or decree of which we
have knowledge or (iv) violate applicable provisions of the [General
Corporation Law of the State of Delaware or] any statute or regulation [of
the State of New York] or of the United States.
12. Delivery of certificates for the Shares will transfer valid
and marketable title thereto to each Underwriter that has purchased such
Shares in good faith and without notice of any adverse claim with respect
thereto.
13. The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940,
as amended.
14. The Shares have been duly authorized for [inclusion on the
Nasdaq National Market].
15. The disclosures in the Prospectus concerning the effects of
federal, state and local statutes and regulations and legal or governmental
proceedings on the Company's business as currently conducted and as
<PAGE>
4
contemplated are correct in all material respects and fairly present the
information required to be disclosed therein.
16. We hereby confirm to you that we have been advised by the
Commission that the Registration Statement has become effective under the
Act and that no order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or is pending, threatened or contemplated.
17. We hereby further confirm to you that there are no actions,
suits, proceedings or investigations pending or, to our knowledge, overtly
threatened in writing against the Company or any of its Subsidiaries, or
any of their respective officers or directors in their capacities as such,
before or by any court, governmental agency or arbitrator which (i) seek to
challenge the legality or enforceability of the Agreement, (ii) seek to
challenge the legality or enforceability of any of the Documents filed, or
required to be filed, as exhibits to the Registration Statement, (iii) seek
damages or other remedies with respect to any of the Documents filed, or
required to be filed, as exhibits to the Registration Statement,
(iv) except as set forth in or contemplated by the Registration Statement
and the Prospectus, seek money damages in excess of $100,000 or seek to
impose criminal penalties upon the Company, any of its Subsidiaries or any
of their respective officers or directors in their capacities as such and
of which we have knowledge or (v) seek to enjoin any of the business
activities of the Company or any of its Subsidiaries or the transactions
described in the Prospectus and of which we have knowledge.
We have participated in the preparation of the Registration
Statement and the Prospectus and, without assuming any responsibility for
the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, nothing has come to our attention that causes us to believe that,
both as of the Effective Date and as of the Closing Date and the Option
Closing Date, the Registration Statement or any amendment thereto contained
or contains any untrue statement of a material fact or omitted or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading or that any Prospectus or any
amendment or supplement thereto, at the time such Prospectus was issued, at
the time any such amended or supplemented Prospectus was issued, at the
Closing Date and the Option Closing Date, contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances in which they were made, not misleading
<PAGE>
5
(except that we express no opinion as to financial statements, schedules
and other financial data contained in the Registration Statement or the
Prospectus.
The foregoing opinion is subject to the qualification that the
enforceability of the Agreement may be: (i) subject to bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally; and (ii) subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding at
law or in equity) including principles of commercial reasonableness or
conscionability and an implied covenant of good faith and fair dealing.
This letter is furnished by us solely for your benefit in
connection with the transactions referred to in the Agreement and may not
be circulated to, or relied upon by, any other person, except that this
letter may be relied upon by your counsel in connection with the opinion
letter to be delivered to you pursuant to Section 5(f) of the Agreement.
<PAGE>
EXHIBIT E
Form of Opinion
of Counsel to the
Selling Shareholders
--------------------
1. Each of the Selling Shareholders has full power and
authority to enter into the Agreement and the Agreement and Power of
Attorney and to sell, transfer and deliver such Shares pursuant to the
Agreement and the Agreement and Power of Attorney. All authorizations and
consents necessary for the execution and delivery of the Agreement and the
Agreement and Power of Attorney on behalf of each of the Selling
Shareholders has been given. The delivery of the Shares on behalf of the
Selling Shareholders pursuant to the terms of the Agreement and payment
therefor by the Underwriters will transfer good and marketable title to the
Shares to the several Underwriters purchasing the Shares, free and clear of
all liens, encumbrance and claims whatsoever.
2. Each of the Agreement and the Agreement and Power of Attor-
ney has been duly authorized, executed and delivered by or on behalf of
each of the Selling Shareholders, is a valid and binding agreement of each
Selling Shareholder and, except for the indemnification and contribution
provisions of the Agreement, the Agreement and the Agreement and Power of
Attorney are enforceable against the Selling Shareholders in accordance
with the terms thereof.
3. No consent, approval, authorization or order of, or any
filing or declaration with, any court or governmental agency or body is
required in connection with the authorization, issuance, transfer, sale or
delivery of the Shares by or on behalf of the Selling Shareholders, in
connection with the execution, delivery and performance of the
Agreement1/ and the Agreement and Power of Attorney by or on behalf of
-
the Selling Shareholders or in connection with the taking by or on behalf
of the Selling Shareholders of any action contemplated thereby [or, if so
required, all such consents, approvals, authorizations and orders [speci-
fying the same] have been obtained and are in full force and effect],
except such as have been obtained under the Act or the Rules and
Regulations and such as may be required under state securities or "Blue
Sky" laws or by the by-laws and rules of the NASD in connection with the
purchase and distribution by the Underwriters of the Shares to be sold by
the Selling Shareholders.
- --------------------
1/ All refere1nces in this opinion to the Agreement shall include the
- - Price Determination Agreement.
<PAGE>
2
4. The execution and delivery by the Selling Shareholders of,
and the performance by the Selling Shareholders of their agreements in, the
Agreement and the Agreement and Power of Attorney, do not and will not
(i) violate the certificate of incorporation or by-laws of any corporate
Selling Shareholder, (ii) breach or result in a default under, cause the
time for performance of any obligation to be accelerated under, or result
in the creation or imposition of any lien, charge or encumbrance upon any
of the assets of any Selling Shareholder pursuant to the terms of, (x) any
indenture, mortgage, deed of trust, loan agreement, bond, debenture, note
agreement, capital lease or other evidence of indebtedness of which we have
knowledge, (y) any voting trust arrangement or any contract or other
agreement to which any Selling Shareholder is a party that restricts the
ability of any such Selling Shareholder to issue securities and of which we
have knowledge or (2) any other contract or other agreement of which we
have knowledge, (iii) breach or otherwise violate any existing obligation
of any Selling Shareholder under any court or administrative order,
judgment or decree of which we have knowledge or (iv) violate applicable
provisions of any statute or regulation in the States of [Delaware and New
York or of the United States.
5. There are no transfer or similar taxes payable in connection
with the sale and delivery of the Shares by the Selling Shareholders to the
several Underwriters, except as specified in such opinion.
The foregoing opinion is subject to the qualification that the
enforceability of the Agreement and the Agreement and Power of Attorney may
be: (i) subject to bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally; and (ii) subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity), including principles of
commercial reasonableness or conscionability and an implied covenant of
good faith and fair dealing.
This letter is furnished by us solely for your benefit in
connection with the transactions referred to in the Agreement and may not
be circulated to, or relied upon by, any other person, except that this
letter may be relied upon by your counsel in connection with the opinion
letter to be delivered to you pursuant to Section 6(g) of the Agreement.
Exhibit 10.6
OFFICER'S CERTIFICATE
OF
GREENMAN BROS. INC.
------------------------------
The undersigned, William A. Johnson, Jr. on behalf of Greenman
Bros. Inc., a New York corporation (the "Company"), does hereby certify as
follows:
1. I am the Vice President, Chief Financial Officer and
Secretary of the Company.
2. Attached hereto as Exhibit A is a complete and accurate copy
of certain resolutions of the Board of Directors of the Company (the
"Board") which were unanimously adopted by the Board on October 26, 1995
and approved by the Company's stockholders at a special meeting of
stockholders on December 11, 1995, and which remain in full force and
effect.
IN WITNESS WHEREOF, the undersigned has affixed his signature
this 13th day of December, 1995.
/s/ William A. Johnson, Jr.
----------------------------
William A. Johnson, Jr.
Vice President, Chief Financial
Officer and Secretary
<PAGE>
Exhibit A
---------
RESOLUTIONS OF THE
BOARD OF DIRECTORS
OF GREENMAN BROS. INC.
WHEREAS the Board of Directors deems it desirable and in the
best interests of the Company and its stockholders that the Company's
1994 Outside Directors' Stock Option Plan (the "Plan") be amended to
increase the total number of Plan shares and to increase the number of
shares automatically granted under the Plan;
NOW, THEREFORE, it is
RESOLVED, that Section 3 (a) of the Plan be, and it hereby is,
amended to read as follows:
"Shares of common stock of the Company
("Common Stock") transferred upon the
exercise of options granted under the Plan
shall be authorized and unissued or treasury
shares. Subject to Section 3(b), the
aggregate number of shares of Common Stock
which may be transferred pursuant to the Plan
shall be 125,000 shares. Any shares of
Common Stock that are subject to a stock
option under the Plan and that have not been
transferred at the time such option is
cancelled or terminated shall again be
available for awards under the Plan;" and it
is further,
RESOLVED, that Section 5 (c) of the Plan be, and it hereby is,
amended to read as follows:
"As of April 26, 1996, and each April 26
thereafter, each person who is then an Eligi-
ble Director and who has been an Eligible
Director for at least six months shall be
granted an option to purchase 4,000 shares of
Common Stock."
Exhibit 23.1
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors of Noodle Kidoodle, Inc.
(formerly Greenman Bros. Inc.)
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ JANOVER RUBINROIT, LLC
JANOVER RUBINROIT, LLC
New York, New York
December 13, 1995
