SEC 1746 (12-91)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _______)*
Pharmhouse Corp.
-------------------------------------
(Name of Registrant)
Common Stock, $.01 Par Value
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(Title of Class of Securities
717137103
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(CUSIP Number)
Brad Arberg
Hemisphere Trading Co., Inc.
5796 Shelby Oaks Drive, Suite 12 Memphis, TN 38134-7333
Telephone: (901) 383-8977
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
January 9, 1997
-------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [X].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are
to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
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CUSIP No. 717137103 Page 2 of 8 Pages
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1 | NAME OF REPORTING PERSON
| S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
| Hemisphere Trading Co., Inc.
| I.D. No. 621505218
- ------|-------------------------------------------------------------------------
2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
| (b) [ ]
|
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3 | SEC USE ONLY
|
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4 | SOURCE OF FUNDS*
|
| WC
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5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
| TO ITEMS 2(d) OR 2(e) [ ]
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6 | CITIZENSHIP OR PLACE OR ORGANIZATION
| Tennessee
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| 7 SOLE VOTING POWER
| 0
NUMBER OF | -------------------------------------------------------
SHARES | 8 SHARED VOTING POWER
BENEFICIALLY | 209,600
OWNED BY | -------------------------------------------------------
EACH | 9 SOLE DISPOSITIVE POWER
REPORTING | 0
PERSON | -------------------------------------------------------
WITH | 10 SHARED DISPOSITIVE POWER
| 209,600
- ------|-------------------------------------------------------------------------
11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
| 209,600
- ------|-------------------------------------------------------------------------
12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
| [ ]
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13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
| 9.0%
- ------|-------------------------------------------------------------------------
14 | TYPE OR REPORTING PERSON*
| CO IA
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
Page 2 of 8
<PAGE>
Item 1. Security and Registrant.
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This Schedule 13D relates to the shares of Common Stock, $.01 par
value, ("Common Stock"), of Pharmhouse Corp., a New York corporation, (the
"Registrant"), with its principal executive offices located at 860 Broadway, New
York, New York 10003.
Item 2. Identity and Background.
- ------ -----------------------
This Statement is filed by Hemisphere Trading Co., Inc. (the "Reporting
Entity"). The Reporting Entity is a corporation organized under the laws of the
State of Tennessee, with its principal executive offices located at 5796 Shelby
Oaks Drive, Memphis, Tennessee 38134-7333, telephone (901) 383-8977. The
Reporting Entity is an investment advisor registered with the Securities and
Exchange Commission.
The officers and directors of the Reporting Entity, their respective
places of citizenship, and the principal occupation and business address of each
such person not principally employed by the Reporting Entity, are as follows:
Position; Other
Name Citizenship Occupation and Address
---- ----------- ----------------------
Gloria Felsenthal USA Chairman, Chief Executive Officer, President,
Treasurer and Director
Brad Arberg USA Vice President, Secretary and Director
Ms. Felsenthal is the sole stockholder of the Reporting Entity.
During the past five years, none of the persons described in this Item
2 have been convicted in a criminal proceeding. None of such persons is, and
during the past five years none has been, subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws, or finding any violations with
respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
- ------ -------------------------------------------------
As of the close of business on January 15, 1997, the Reporting Entity
owned 209,600 shares of Common Stock acquired in brokered transactions for an
aggregate purchase price, including commissions and net of sales to date if any,
of shares of Common Stock of $1,131,840. The source of funds for acquisition of
such Common Stock was available investment capital of the Reporting Entity, and,
from time to time, borrowings in margin accounts regularly maintained at Lehman
Brothers Inc.. See Exhibit A.
Item 4. Purpose of Transaction.
- ------ ----------------------
The Reporting Entity has acquired the Common Stock for investment
purposes. The Reporting Entity will continuously evaluate its investment in the
Common Stock based on factors, including, without limitation, the Registrant's
business, prospects and financial condition, the market for the Common Stock,
alternatively available investment opportunities, general economic conditions,
stock market conditions, and availability of funds. The Reporting Entity
expressly reserves the right to increase or decrease its holdings
Page 3 of 8
<PAGE>
in Common Stock on such terms or at such times as it may determine. Any purchase
or sale of Common Stock may be executed in the open market or in one or more
privately negotiated transactions.
The Reporting Entity proposes that the Registrant undertake
consideration of certain actions of the type described in Item 4 of Schedule
13D. On January 9, 1996, the Reporting Entity initiated contact with an
investment banker to discuss actions of the type described in Item 4. The
Reporting Entity may initiate contact with additional investment bankers or
others and may seek to introduce such bankers and/or others to the Registrant
for purposes of analyzing, recommending, introducing and/or initiating such a
transaction.
On January 15, 1997, the Reporting Entity sent the following letter to
the Board of Directors of the Registrant (a copy of which is attached hereto as
Exhibit B):
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Board of Directors:
As of January 14th, 1997 Hemisphere Trading Company and entities
controlled by Hemisphere Trading Company owned 209,600 shares of
Pharmhouse common stock (9.0% of the common shares outstanding).
We believe that the current share price of $8.875 does not reflect the
full value of the company given management's success over the last four
quarters in steadily 1) reducing SGA as a percent of revenues; 2)
increasing gross margins; 3) increasing operating margins. In addition,
over the last three months there has been significant consolidation in
the discount drug and general merchandise industry, and as such, we
believe that the current consolidation environment is ideal for
maximizing shareholder value. Thus we propose that the board of
directors immediately hire an outside investment bank for the purpose
of maximizing shareholder value through the acquisition of Pharmhouse
by a larger entity, public or private.
We would be open to discussing this matter in greater detail at your
convenience.
- --------------------------------------------------------------------------------
Except to the extent set forth above, or in any other Item hereof, the
Reporting Entity and, to the best of its knowledge, the persons listed in Item 2
hereof, do not have any present plans or proposals that relate to or would
result in any of the actions required to be described in this Item 4 of Schedule
13D, but the Reporting Entity retains the right to take all such actions as it
may deem appropriate to maximize capital appreciation in the Common Stock owned
by it.
Item 5. Interest in Securities of the Registrant.
- ------ ----------------------------------------
(a) As of the close of business on January 15, 1997, the Reporting
Entity was the owner of record and had direct beneficial
ownership of 209,600 shares, or approximately 9.0%, of the
outstanding Common Stock.
Ms. Felsenthal and Mr. Arberg may, by virtue of their status
of officers, directors and shareholders of the Reporting
Entity, be deemed to have beneficial ownership of the Common
Stock owned of record by the Reporting Entity; however, each
of them disclaims such beneficial ownership and, to the best
knowledge of the Reporting Entity and accept as may be
specifically otherwise set forth herein, neither of them has
any other beneficial ownership of Common Stock.
Page 4 of 8
<PAGE>
(b) The power to vote or direct the vote and the power to dispose
or direct the disposition of the 209,600 shares of Common
Stock as to which the Reporting Entity is the record owner may
be deemed to be shared between the Reporting Entity and the
owner of any investment account which it manages, although the
Reporting Entity is generally vested with sole control of such
matters.
(c) Except as set forth below, there have been no transactions in
the class of securities reported on that were effected during
the past sixty (60) days by the Reporting Entity or by any of
the persons included in Item 2.
# of Shares Purchased
Date $ Price Per Share (Disposed)
---- ----------------- ----------------------
1/13/97 7.59 3,000
1/10/97 7.85 300
1/9/97 8.60 500
1/7/97 8.98 500
1/6/97 8.46 1,100
12/30/96 8.42 800
12/23/96 8.25 1,000
12/20/96 8.98 3,000
12/19/96 8.35 400
(d) The power to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the 209,600
shares of Common Stock as to which the Reporting Entity is the
record owner may be deemed to be shared between the Reporting
Entity and the owner of any investment account which it
manages, although the Reporting Entity is generally vested
with sole control of such matters.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Registrant.
---------------------------------------------------------------------
Except as set forth in this Schedule 13D, there are no contracts,
arrangements, understandings, or relationships (legal or otherwise) among the
persons and entities named in Item 2, or between such persons or entities and
any person, with respect to any securities of the Registrant.
Item 7. Material to be Filed as Exhibits.
- ------ --------------------------------
Exhibit A - Form of Brokerage Agreement.
Exhibit B - Letter dated January 15, 1997, from the Reporting Entity to
the Registrant.
Page 5 of 8
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
January 16, 1997 HEMISPHERE TRADING CO., INC.
----------------
(Date)
/s/ Brad Arberg
--------------------------
Vice President
Page 6 of 8
Exhibit A
Lehman Brothers --------------------------------------------------
Customer Account Services Client Agreement CPI 3025
P.O. Box 3760
New York, NY 10008-3760 Before you sign this agreement, read it thoroughly
and return this completed and signed agreement to
Lehman Brothers at the address on the left side of
this page. Subsequently you will receive
literature containing important information about
new accounts. Read the information carefully and
retain it for future reference.
| ---------------------------------------|
| Account |
| Number | | | | |
| Branch | Account |T |C |N |
| | | | | | | | | | | | | |
| ---------|--------------|--|--|--------|
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Account Title/Name
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Account Title/Name
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Mailing Address
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A. Tax Certification. Under penalties of perjury, I certify that the number
shown below (and to the left) is my correct taxpayer identification number or if
not, then the number I have entered below (and to the right) is my correct tax
identification number, and that I am not subject to backup withholding because
(a) I have not been notified by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of failure to report all interest or
dividends, or (b) the IRS has notified me that I am no longer subject to backup
withholding (see below), or (c) I am exempt from backup withholding (see below).
Note: You must cross out (b) above if you are currently subject to backup
withholding because of underreporting interest or dividends on your tax return.
The Internal Revenue Service does not require your consent to any provisions of
this document other than the certifications required to avoid backup
withholding.
For those exempt from backup withholding (see instructions on page 4), write
the word "EXEMPT" here: _________________________.
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B. Client Acknowledgement. I (we) hereby acknowledge that I (we) have read,
understand and agree to the terms of this agreement. If this is a joint account,
we further acknowledge that we have read, understand and agree to the terms of
this agreement contained in paragraph 21. Note: Texas residents must execute a
Texas Joint Account Supplement Agreement (form 3882). I (We) acknowledge that I
(we) have received a copy of the agreement which contains a pre-dispute
arbitration clause at paragraph 22; I (We) have read it and agree to its terms.
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1. Account Owner's Signature (Please sign in box) | Date
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2. Account Owner's Signature (Please sign in box) | Date
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3. Account Owner's Signature (Please sign in box) | Date
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4. Account Owner's Signature (Please sign in box) | Date
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C. Name Disclosure. Please indicate your choice as to the release or withholding
of your name, address, and securities positions to issuing corporations.
my name, address and securities positions
[ ] NO, I do not want } disclosed to any companies, upon their request, in
[ ] YES, I do want } which I own securities that are being held for me
at Lehman Brothers Inc. ("Lehman") or any firm
acting as a clearing broker for Lehman.
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D. Money Market Fund Agreement. Lehman will be authorized (but not required) to
invest or "sweep" available cash in your account into one of its money market
funds unless you elect otherwise below. If you want to choose a particular money
market fund or you do not want available cash swept into a money market fund,
please indicate below. If you wish to discuss or change your choice of money
market funds, please contact your Investment Representative.
(Note to Wisconsin Residents: You must indicate below specifically whether or
not you wish to have a money market sweep for your account.)
[ ] NO, I do not want cash balances in my account automatically swept into a
money market fund.
[ ] YES, I want the cash balances in my account automatically swept into the
fund of my choice.
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E. Joint Account With Rights Of Survivorship. If the account has more than one
owner, this agree establishes a Joint Account With Rights of Survivorship. If
you and the other account owners wish to establish a Tenancy in Common instead,
each of you must execute a Joint Account Agreement As Tenants in Common in
addition to this Client Agreement. Note: Texas residents must execute a Texas
Joint Account Supplement agreement (form 3882).
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F. Margin Account Agreement. Complete this section only if you accept the margin
agreement described in paragraphs 16 through 19 of this agreement.
In consideration of your opening and maintaining one or more margin accounts on
my behalf, I (we) hereby acknowledge that I (we) have read, understand and agree
to the terms of a margin account contained in paragraphs 16 through 19 of this
agreement. By signing this agreement, I (we) acknowledge that my (our)
securities may be loaned to you or loaned out to others. If this is a joint
account, all parties must sign.
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1. Account Owner's Signature (Please sign in box) | Date
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2. Account Owner's Signature (Please sign in box) | Date
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3. Account Owner's Signature (Please sign in box) | Date
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4. Account Owner's Signature (Please sign in box) | Date
|
|
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Note for joint accounts: The Social Security Number of this account is the
number of the client whose name appears first in the account title. Do not
enter the number of any other account owner.
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The Social Security Number or | Taxpayer Identification Number
Tax Identification Number on |
Lehman Brothers' records is | | | | | | | | |
- --------------------------------------------------------------------------------
The Social Security Number or | Taxpayer Identification Number
Tax Identification Number |
shown to the left is | | | | | | | | |
incorrect. The CORRECT
number is
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1
LBF 3025 (10/96)
<PAGE>
In consideration of Lehman accepting my account and agreeing to act as my
broker, I agree to the following with respect to any of my accounts with you for
extensions of credit and the purchase and sale of securities, options, and other
property. This agreement shall not become effective until accepted by you in
your New York office. Acceptance may be evidenced by your internal records.
Throughout this agreement, "I," "me," "my," "we," and "us" refer to the client
and all others who are legally obligated on my accounts. "You" and "your" refer
to Lehman, its subsidiaries and parents and any and all divisions, their
officers, directors, agents and/or employees.
1. MY REPRESENTATIONS. I represent that I am of the age of majority according to
the laws of my place of residence. I further request that I am not an employee
of any exchange or the National Association of Securities Dealers, Inc.
("NASD")., or of a member firm of any exchange or the NASD or of a bank trust
company, insurance company, registered investment company or registered
investment advisory firm unless I have notified you to that effect. If I become
so employed, I agree to notify you promptly. I also represent that no persons
other than those signing this agreement have an interest in my account. I
understand that Lehman is prohibited under the NASD's "Free Riding and
Withholding Interpretation" from selling securities in certain public offerings
to persons restricted by such rules. To my best knowledge, I am not presently so
restricted, and if I become so restricted I agree to notify you promptly.
I represent that the financial information objectives provided to you are
accurate in all material respects and that I will promptly inform you of any
material changes in my financial or other circumstances, including my investment
objectives.
2. DEFINITION OF "PROPERTY". In this agreement the word "property" means
securities of all kinds, certificates of deposit, commercial paper, monies,
options, commodities and contracts for the future delivery of, or otherwise
relating to, commodities or securities and all other property usually and
customarily dealt in by brokerage firms.
3. ORDERS, EXECUTIONS, DELIVERIES, SETTLEMENTS AND ORAL AUTHORIZATIONS. In
giving orders to sell, I will inform you which sales are "short" and which are
"long" sales. A "short sale" means any sale of a security not owned by the
seller or any sale that is consummated by delivery of a borrowed security. The
designation of a sale order as "long" is my representation that I own the
security, and if the security is not in your possession at the time of the
contract for sale, I agree to deliver it to you by settlement date. In case of
non-delivery of a security, you are authorized to purchase the security to cover
my position and charge any loss, commissions and fees to my account. I agree
that if you fail to receive payment for securities purchased you may, without
prior demand or notice, sell securities or other property held by you in any of
my accounts and any resulting loss will be charged to my account. Unless I
direct that an order to purchase or sell securities be executed on a specified
exchange or market and you agree to such execution, you will, at your sole
discretion and without prior notification to me, execute the order on the
over-the-counter market in any location or on any exchange, including a foreign
exchange where such security is traded, either on a principal or agency basis. I
agree that you shall incur no liability in acting upon oral instructions given
to you concerning my account.
4. OPTION POSITIONS--MARGIN DEPOSITS. I agree not to enter into any purchase or
sale of equity, debt, foreign currency or index put & call options without
having read and fully understood the terms, conditions and risks, as forth in
the Characteristics and Risks of Standardized Options booklet and applicable
supplements which you agree to furnish me prior to such transactions. I
understand clients' short options positions are assigned on an automated random
basis. All short options positions can be assigned at any time including the day
written. I agree that solely for purposes of entering into options positions,
you may treat my account as a margin account: except that you may not pledge,
repledge, hypothecate or rehypothecate my property in your possession or under
your control unless I execute the margin agreement provided herein. I also agree
not to exceed the position or exercise limits set by the options exchange,
either acting alone or in concert with others.
5. NOTICE TO EXERCISE OPTIONS. If I purchase any listed option, I will notify
you of my intention to exercise such option no later than two hours before the
expiration time of the option (one hour in the case of an over-the-counter
option). Failure to give such notice will constitute an abandonment of the
option, in which event it may be exercised for my account if it would be
profitable to do so. Except as required by the Options Clearing Corporation
Rules, you have no obligation to exercise any option absent specific
instructions form me to that effect. If it would not be profitable for my
account ??? to commission expenses, it may be permitted to ????? or, at your
discretion, sold or acquired by you for some equitable payment to me based on
your expenses and risk, without any liability or responsibility on your part to
me.
6. IMPARTIAL LOTTERY ALLOCATION SYSTEM; CALL FEATURES. When you hold on my
behalf bonds or preferred stocks in ??? or bearer form which are callable in
part, I agree to participate in the impartial lottery allocation system of the
called securities in accordance with the change to provisions of the New York
Stock Exchange, Inc. ("NYSE") rules. Further, I understand when the call is
favorable, no allocation will be made to my account in which you, your officers,
or employees, have a financial interest, until all other clients' positions in
such securities are satisfied on an impartial lottery basis.
For debt securities, call or other redemption features, in addition to those
disclosed on the trade confirmation, may exist. Debt securities subject to call
or redemption features, such as sinking funds, may be redeemed in whole or in
part before maturity, or before the first scheduled call dates. The existence of
sinking funds, or other special mandatory redemption features, may not be
disclosed on a trade confirmation. It is my obligation or review all
prospectuses and offering statements I may receive, and to understand the risks
of extraordinary calls or early redemptions, which may affect yield. Issuers may
from time to time publish notices of offers to redeem debt securities within
limited time, price and tender parameters. I understand that you are not
obligated to notify me of such published calls, nor will you tender any
securities on my behalf.
7. RESTRICTIONS ON TRADING; TERMINATION. I understand that you may in your sole
discretion prohibit or restrict trading of securities or substitution of
securities in any of my accounts and refuse to enter into any transaction with
me. You have the right to terminate any of my accounts (including multiple owner
accounts) at any time by notice to me.
8. TRANSFER OF FUNDS BY WIRE. By giving you instructions to transfer funds by
wire from my accounts to any bank or other entity, I agree to provide you with
an accurate account number designating the account to receive such funds. I
acknowledge that the bank or other receiving entity may be under no obligation
to verify the identity of the beneficiary of the funds transfer and may rely
exclusively upon the account number provided by me. I agree to indemnify and
hold you harmless from and against all liabilities arising from the provision by
me of an inaccurate account number.
9. TRANSFER OF EXCESS FUNDS; EXCHANGE RATE FLUCTUATIONS. You may transfer excess
funds (also called "free credit balances") between any of my accounts (including
commodity accounts) for any reason not in conflict with the Commodity Exchange
Act or any other applicable law. If you effect any transactions for me requiring
a foreign currency, any profit or loss as a result of a fluctuation in the
applicable exchange rate will be charged or credited to my account.
10. PRINCIPAL, INTEREST AND DIVIDEND PAYMENTS. With respect to principal and
interest payments on debt instruments, you may credit my account with principal
and interest due on the payment dates and are entitled to recover any such
payments from me if the same are not actually received by your from the trustee
or payment agent. You may redeem any money market fund shares, without notice,
to the extent necessary to satisfy and debits arising in any of my accounts. I
acknowledge that interest will not be paid to me on credit balances in any of my
accounts unless specifically agreed to by you in writing. You are not required
to remit interest or dividends to me on a daily basis.
11. FEES AND CHARGES. I understand that you may impose various service charges
and other fees relating to my account as well as charge commissions and other
fees for execution of transactions to purchase and sell securities, options or
other property, and I agree to pay such charges, commissions and fees at your
prevailing rates. I also understand that such charges, commissions and fees may
be changed from time to time without notice to me and I agree to be bound
thereby. I may be subject to an administrative fee on any of my accounts which
produce insufficient commission revenue for any calendar year and you will
notify me prior to applying this fee. I agree to pay a late charge, to the
extent permitted by law, if I purchase securities on a cash basis and fail to
pay for such securities by settlement date. Any late charge you may impose will
be at the maximum rate of interest set forth in your disclosure statement and
may be charged from the settlement date to the date of payment.
12. ACCURACY OF REPORTS; COMMUNICATIONS. Confirmation of orders and statements
of my accounts shall be conclusive if not objected to in writing within ten days
after mailing by you to me. In the event I fail to receive a confirmation within
ten days from the date of a transaction in my account, I agree to notify you
immediately in writing. Until you have received notice in writing from me of a
different address, communications mailed to me at the address specified by me
shall be deemed to have been personally delivered to me and I agree to waive all
claims resulting from failure to receive such communications.
13. INTRODUCED ACCOUNTS. If my account has been introduced to you and is carried
by you only as a clearing broker, I agree that you are not responsible for the
conduct of the introducing broker and your only responsibilities to me relate to
your execution, clearing and bookkeeping of transactions in my account.
14. SECURITY INTEREST. As security for the payment of all liabilities or
indebtedness presently outstanding or to be incurred under this or any other
agreement between us, I grant you a security interest in any and all property
belonging to me or in which I may have an interest, held by you or carried in
any of my accounts including individual, multiple owner or commodity accounts.
All property shall be subject to such security interest as collateral for the
discharge of my obligations to you, wherever or however arising and without
regard to whether or not you have made loans with respect to such property. You
are authorized to sell and/or purchase any and all property in any of my
accounts or to liquidate any open options, commodity futures or forward
contracts or redeem money market funds in any of my accounts without notice in
order to satisfy such obligations. In enforcing your security interest, you
shall have the discretion to determine the amount, order and manner of property
to be sold and shall have all the rights and remedies available to a secured
party under the New York Uniform Commercial Code. Without your prior written
consent, I will not cause or allow any of the collateral held in my account,
whether now owned or hereafter acquired, to be or become subject to any liens,
security interests, mortgages or encumbrances of any nature other than your
security interest.
15. LIQUIDATION OF COLLATERAL OR ACCOUNT. You may sell any or all property held
in any of my accounts and cancel my open orders for the purchase or sale of any
property without notice in the event at my death or whenever in your discretion
you consider it necessary for your protection. In such events you also may
borrow or buy-in all property required to make delivery against any sale,
including a short sale, effected for me. Such sale or purchase may be public or
private and may be made without advertising or notice to me and in such manner
as you may in your discretion determine. No demands, calls, _____ or notices
by you shall invalidate this waiver by me. At any such ____ you may purchase the
property free of any right of redemption and I shall be liable for any remaining
deficiency in any of my accounts.
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MARGIN AGREEMENT:
PARAGRAPHS 16 THROUGH 19 APPLY ONLY TO MARGIN ACCOUNTS.
16. MARGIN LOANS. From time to time you may, at your discretion, make loans to
me for the purpose of purchasing, carrying or trading in securities ("Margin
Loans"). Pursuant to Regulation 7, Margin Loans will be made in a Margin
Account. The minimum and maximum amount of any particular loan may be
established by you in your discretion regardless of the amount of collateral
delivered to you and you may change such minimum and maximum amounts from time
to time.
17. PAYMENT OF LOANS ON DEMAND. I agree to pay ON DEMAND any balance owing on
any of my accounts, including interest, commissions and late charges and any
costs of collection (including attorneys' fees, if incurred by you). I
understand that you may demand full payment of the balance due in my accounts
plus any interest charges at your sole option, at any time and whether or not
such demand is made for your protection. I understand that all loan
LBF 3025 (10/96) 2
<PAGE>
or loans made are not for any specific term or duration but are due and payable
at your discretion upon demand for payment made to me. I agree that all payments
received for my accounts including interest, dividends, premiums, principal or
other payments may be applied by you to any balances due in any of my accounts.
18. MAINTENANCE OF COLLATERAL. I understand that the properties in my Margin
Account may be carried as general loans and may be pledged or hypothecated by
you separately or in common with other properties. The pledge or hypothecation
by you may secure your indebtedness equal to or greater than the amount owed to
you by me. If hypothecated, I understand that Lehman Brothers will return to me
identical securities, and make distributions to me equivalent to those on the
underlying securities. I further understand that if such securities are
hypothecated, this will not diminish my risk of loss or opportunity for gain. I
agree to deposit additional collateral, as you may in your discretion require
from time to time, in the form of cash or securities in accordance with the
rules and regulations of the Federal Reserve Board, the NYSE, the American Stock
Exchange, Inc. ("AMEX"), other national securities exchanges, associations or
regulatory agencies under whose jurisdiction you are subject and your own
minimum house margin maintenance requirements. If I no longer maintain a debit
balance or an indebtedness to you, you will fully segregate all securities in my
accounts in your safekeeping or control (directly or through a clearing house)
and/or deliver them to me upon my request.
19. INTEREST CHARGES AND PAYMENTS. I agree to pay interest, to the extent not
prohibited by the laws of the State of New York, upon all amounts advanced and
other balances due in my accounts in accordance with your current disclosure
statement, which by this reference is herein specifically incorporated. By
entering into any transactions with you after I receive your current disclosure
statement, I acknowledge that I have read and agree to its terms for all past
and future transactions in my account. I understand that interest on all debit
balances shall be payable ON DEMAND and that in the absence of any demand
interest shall be due on the first business day of each interest period. My
daily net debit balance will include accrued interest I have not paid from prior
interest periods, if any. Thus, to the extent permitted by applicable law you
may charge me compound interest. Payments of interest and principal and all
other payments made by me under this agreement shall be made to your main office
in New York, New York. You may, in your discretion, not deem any check or other
remittance to constitute payment until it has been paid by the drawee and the
funds representing such payment have become available to you.
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20. CREDIT AND BUSINESS CONDUCT INFORMATION AND INVESTIGATION. I authorize you
at your discretion to obtain reports and to provide information to others
concerning my credit standing and my business conduct. You may ask credit
reporting agencies for reports of my credit history. Upon my request you will
inform me whether you have obtained any such consumer reports and if you have,
you will inform me of the name and address of the credit reporting agency that
furnished the reports to you.
21. JOINT ACCOUNTS; DESIGNATION OF TENANCY. a. If this is a Joint Account, we
agree that each of us shall have the authority on behalf of the account to buy,
sell (including short sales) and otherwise deal in, through you as brokers or
dealers, securities, options or other property on margin or otherwise; to
receive for the account, confirmations, statements and communications of every
kind; to receive for the account and to dispose of money, securities and other
property; to make, terminate, or modify for the account, agreements relating to
these matters or waive any of the provisions of such agreements; and generally
to deal with you as if each of us alone were the account owner, all without
notice to all account owners. We agree that notice to any account owner shall be
deemed to be notice to all account owners. Each account owner shall be jointly
and severally liable for this account.
b. You may follow the instructions of any of us concerning this account and make
deliveries to any of us, of any or all securities or other property in this
account, and make payments to any of us, of any or all monies in this account as
any of us, may order and direct, even if such deliveries and/or payments shall
be made to one of us personally or to third parties. You shall be under no
obligation to inquire into the purpose of such demand for delivery of
securities, property, or payment of monies, and you shall not be bound to see to
the application or disposition of the said securities, property, and/or so
delivered or paid to any of us. Notwithstanding the foregoing, you are
authorized, in your discretion, to require joint action by the joint tenants
with respect to any matter concerning the joint account, including the giving or
cancellation of orders and the withdrawal or transfer of monies, securities or
other property.
c. In the event of the death of any of us, the survivor(s) shall immediately
give you written notice thereof, and you may, before or after receiving such
notice, take such actions, require such papers, return such portion of the
account and/or restrict transactions in the account as you may deem advisable to
protect you against any tax liability, penalty or loss under any present or
future laws or otherwise. The estate of any of us who shall have died shall be
liable and each survivor will be liable, jointly and severally, to you for any
debt or loss in this account resulting from the completion of transactions
initiated prior to your receipt of a written notice of such death or incurred in
the liquidation of the account or the adjustment of the interests of the
respective parties.
d. Any taxes or other expenses becoming a lien against or being payable out of
the account as a result of the death of any of us, or through the exercise by
his or her estate or representatives of any rights in the account shall be
chargeable against the interest of the survivor(s) as well as against the
interest of the estate of the decedent. This provision shall not release the
decedent's estate from any liability provided for in this agreement.
e. It is express intention of us to create an estate or account as joint tenants
with rights of survivorship and not as tenants-in-common, unless a separate
Tenancy-in-Common form is properly completed. In the event of the death of
either or any of us, the entire interest in the joint account shall be vested in
the survivor(s) on the same terms and conditions as theretofore held, without in
any manner releasing the descendant's estate from the liability, unless properly
designated as a Tenancy-in-Common.
22. ARBITRATION.
* Arbitration is final and binding on the parties.
* The parties are waiving their right to seek remedies in court, including the
right to a jury trial.
* Pre-arbitration discovery is generally more limited than and different from
court proceedings.
* The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings
by the arbitrators is strictly limited.
* The panel of arbitrators will typically include a minority of arbitrators who
were or are affiliated with the securities industry.
Any controversy: (1) arising out of or relating to any of my accounts with you,
maintained individually or jointly with any other party, in any capacity; or (2)
with respect to transactions of any kind executed by, through or with you, your
officers, directors, agents and/or employees; or (3) relating to my transactions
or accounts with any of your predecessor firms by merger, acquisition or other
business combination from the inception of such accounts; or (4) with respect to
this agreement or any other agreements entered into with you relating to my
accounts, or the breach thereof, shall be resolved by arbitration conducted only
at the NYSE, NASD, or AMEX or any other self-regulatory organization ("SRO")
subject to the jurisdiction of the Securities and Exchange Commission and
pursuant to the arbitration procedures then in effect at any such exchange or
SRO as I select. If I do not make such election by registered mail addressed to
you at your main office within 5 days after demand by you that I make such
election, then you will have the right to elect the arbitration tribunal of your
choice. Judgment with any award returned by the arbitrators may be entered in
any court having jurisdiction thereof. No person shall bring a proactive or
certified class action to arbitration, nor seek to enforce any pre-dispute
arbitration agreement against any person who has initiated in court a punitive
class action, or who is a member of a punitive class but has not opted out of
the class with respect to any claims encompassed by the _____ class action,
until: (i) the class certification is denied; (ii) the class action is ____; or
(iii) such person is excluded from the class by the court. Such forbearance to
enforce an agreement to arbitrate shall not constitute a waiver of any rights
under this agreement except to the extent posted herein. The foregoing agreement
to arbitrate does not ____ me to obtain arbitration of claims that would be
barred by the relevant statutes of limitations if such claims were brought in a
court of competent jurisdiction. If, at the time that a demand for arbitration
is made or an election or notice of intention to arbitrate is served, the claims
sought to be arbitrated would have been barred by the relevant statute of
limitations or other time bar any party to this agreement may assert the
limitation as a bar to the arbitration either before the arbitrators or by
applying to any court of competent jurisdiction. I expressly agree that my
issues relating to the application of a statute of limitation or other time bar
are referrable in such court.
23. GOVERNING LAW AND APPLICABLE REGULATIONS. This agreement, including the
arbitration provisions in paragraph 22, shall be governed by the laws of the
State of New York without giving effect to the choice of law or conflict of laws
provisions thereof. All transactions entered into under this agreement shall be
subject to any applicable constitution, rules, regulations, customs and usages
of the exchange or market and its clearinghouse, if any, where such transactions
are executed by Lehman or its agents and to all applicable laws, rules,
regulations of governmental authorities and SROs (collectively the "Rules"). Any
reference to such Rules in this agreement shall in no way be construed to create
a cause of action arising from any violation of such Rules. If any Rule is
enacted that would be inconsistent with any of the provisions of this agreement
the provision so affected shall be deemed modified or superseded by this
enactment, but the remaining provisions of this agreement shall remain in full
force and effect.
24. BINDING EFFECT; ASSIGNMENT. This agreement and its terms shall be binding
upon my heirs, executors, successors, administrators, assigns, committee and/or
conservators ("successors"). In the event of my death, incompetency, or
disability, whether or not any successors of my estate and property shall have
qualified or been appointed, you may continue to operate as though I were alive
and competent and you may liquidate my account as described in Paragraph 15
above without prior notice to or demand upon my successors. This agreement shall
inure to the benefit of you assigns and successors, by merger, consolidation or
otherwise (and you may transfer my accounts to any such successors and assigns
at your discretion).
25. WAIVER NOT IMPLIED. Your failure to insist at any time upon strict
compliance with this agreement or with any of its terms or any continued course
of such conduct on your part shall not constitute or be considered a waiver by
you of any of your rights.
26. NO ORAL MODIFICATION; EFFECT ON PRIOR AGREEMENTS. No modification of this
agreement shall be effective unless in writing and executed by you and me. The
signing of this agreement supersedes any prior agreement (except those governing
transactions in my commodity accounts) made with you or any of your predecessors
or assignors. To the extent this agreement is inconsistent with any other
agreement governing my account, the provisions of this agreement shall govern.
27. FOREIGN SECURITIES. If my account contains securities issued by a foreign
issuer, I acknowledge that you are acting solely as a custodian with respect to
such securities and have no obligation to provide me with any proxies, annual
statements or other disclosures from the issuer or facilitate my participation
in any rights offer or other transaction that the issuer may conduct with or
offer to holders of its securities.
28. NOTICES; CLEARING ARRANGEMENTS. You will endeavor to notify me in advance of
any calls in my Margin Account and to provide various other notices relating to
activities in my accounts. But I understand that you reserve the right to take
any necessary or appropriate action with respect to my accounts permitted by
this Agreement and/or required by law or regulation without prior notice to me
in advance of any such action. I acknowledge and consent that you may, from time
to time, monitor and/or electronically record conversations between me/us and
your employees or agents for the purpose of quality assurance, employee
training, and the mutual protection of both of us. Any such recordings may be
offered by you as evidence in any arbitration or other proceedings relating to
this agreement. During the term of any clearing agreement between Lehman and any
broker/dealer that is providing Lehman clearing services, Lehman's rights and
benefits (but not its obligations) under this agreement shall inure to any such
clearing firm.
3
EXHIBIT B
[Hemisphere Trading Co. Letterhead]
January 15, 1997
Board of Directors
Pharmhouse Corp.
860 Broadway
New York City, NY 10003
Board of Directors:
As of January 14th, 1997 Hemisphere Trading Company and entities controlled by
Hemisphere Trading Company owned 209,600 shares of Pharmhouse common stock (9.0%
of the common shares outstanding).
We believe that the current share price of $8.875 does not reflect the full
value of the company given management's success over the last four quarters in
steadily 1) reducing SGA as a percent of revenues; 2) increasing gross margins;
3) increasing operating margins. In addition, over the last three months there
has been significant consolidation in the discount drug and general merchandise
industry, and as such, we believe that the current consolidation environment is
ideal for maximizing shareholder value. Thus we propose that the board of
directors immediately hire an outside investment bank for the purpose of
maximizing shareholder value through the acquisition of Pharmhouse by a larger
entity, public or private.
We would be open to discussing this matter in greater detail at your
convenience.
Sincerely,
/s/ Brad Arberg
Brad Arberg
