10-K 1 b325546_10k.txt ANNUAL REPORT FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended March 31, 2003 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________________ to _____________________ Commission file number 333-66221 ---------

R.A.B. HOLDINGS, INC. R.A.B. ENTERPRISES, INC. ------------------------------------------------------~~-------~~ ------------------------------------------------------~~---------~~ (Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter) DELAWARE DELAWARE ------------------------------------------------------~~-------~~ ------------------------------------------------------~~---------~~ (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization) 13-3893246 13-3988873 ------------------------------------------------------~~-------~~ ------------------------------------------------------~~---------~~ (I.R.S. Employer identification no.) (I.R.S. Employer identification no.) 444 Madison Avenue, New York, New York 10022 ------------------------------------------------------------- --------------------------------------------------------------- (Address of principal executive offices) (Zip Code)

Registrants' telephone number, including area code (212) 688-4500 -------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- The registrant's common stock is not publicly held or publicly traded. INDEX

~~INDEX~~ Page ---- PART I Item 1. Business.................................................................................. 1 (a) General Development of Business................................................ 1 (b) Financial Information about Industry Segments.................................. 1 (c) Narrative Description of Business.............................................. 2 (d) Other Matters.................................................................. 8 (e) Financial Information about Foreign and Domestic Operations.................... 9 Item 2. Properties................................................................................ 9 Item 3. Legal Proceedings......................................................................... 10 Item 4. Submission of Matters to a Vote of Security Holders....................................... 10 PART II Item 5. Market for Registrants' Common Equity and Related Stockholder Matters..................... 10 Item 6. Selected Financial Data................................................................... 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................................. 11 Item 7a. Quantitative and Qualitative Disclosures about Market Risk................................ 1921 Item 8. Financial Statements and Supplementary Data............................................... 1921 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure................................................................... 1921 PART III Item 10. Directors and Executive Officers of the Registrants....................................... 2022 Item 11. Executive Compensation.................................................................... 2224 Item 12. Security Ownership of Certain Beneficial Owners and Management............................ 2426 Item 13. Certain Relationships and Related Transactions............................................ 2527 Item 14. Controls and Procedures................................................................... 29 PART IV Item 1415. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.......................... 2729

PART I Item 1. Business (a) General Development of Business On May 6, 1996, R.A.B. Holdings, Inc., a Delaware corporation ("Holdings"), was formed to build a fully integrated specialty food business by acquiring food manufacturers with strong brand names and integrating their products with a strong distribution network. On March 31, 1997, Holdings acquired Millbrook Distribution Services Inc., a Delaware corporation ("Millbrook"), which is one of the nation's largest value-added full service independent distributors of specialty foods, health and beauty care products and general merchandise. On January 26, 1998, Holdings formed a wholly-owned subsidiary, R.A.B. Enterprises, Inc., a Delaware corporation ("Enterprises"). On May 1, 1998, Enterprises acquired The B. Manischewitz Company, LLC, a Delaware limited liability company ("Manischewitz"). Manischewitz is among the nation's leading manufacturers of processed kosher food products including matzos, noodles, crackers, cake mixes, cookies, soups and processed fish products. Concurrent with the Manischewitz acquisition, Holdings contributed its wholly-owned subsidiary Millbrook to Enterprises. The contribution was accounted for as an "as if" pooling of interests. Prior to the acquisitions of Millbrook and Manischewitz, Holdings and Enterprises had no operations. Holdings and Enterprises are referred to collectively as the "Companies". On January 31, 2000, Millbrook acquired certain of the assets and operations of I. Epstein & Sons, Inc. ("Epstein"). Epstein was a full service distributor of kosher and specialty food products. The acquisition included its Season(R) brand of canned fish, vegetables and other specialty food products. Concurrent with the acquisition, the management and ownership of the Season brand was assumed by Manischewitz. On April 17, 2000, Millbrook acquired substantially all of the assets and operations of the Miller Buckeye Biscuit Company, Inc. ("Miller Buckeye"). Miller Buckeye was a distributor of specialty foods, cookies, crackers and snacks to supermarkets and other retail establishments in Ohio, Pennsylvania, West Virginia and Western New York. On November 1, 2000, Manischewitz acquired substantially all of the assets and operations of Guiltless Gourmet, Inc. ("Guiltless"). Guiltless owned the number two selling national brand and was a leader in the development of original baked, not fried, tortilla chips. Guiltless organic baked tortilla chips, bean dips and salsas are found in natural food supermarkets, supermarket chains and other grocery and food outlets. (b) Financial information about Industry Segments Industry segment information with respect to the operations of Holdings and Enterprises is included in the notes to the Consolidated Financial Statements of Holdings and Enterprises for the years ended March 31, 2003, 2002 and 2001 and in Item 8 herein. 1 (c) Narrative Description of Business Millbrook Distribution Services Inc. The Industry. Distributors provide value-added services to both manufacturers and retailers. Manufacturers benefit from distributors broad geographic coverage, efficient order processing and inventory management. Distributors provide retailers access to broad product lines, the ability to place small quantity orders and shelf and inventory management. Large distributors with broad geographic coverage and an extensive offering of items generally have a competitive advantage. Due to consolidations over the past several years, the number of manufacturers and retailers has decreased. Additionally, retailers have increasingly focused on reducing their supply chain costs with corresponding improvements in their margins. As a result, we believe that manufacturers and retailers are increasingly dependent on distributors to provide a range of in-store retailing and merchandising functions previously performed by retail and/or manufacturer personnel. Distributors increasingly are participating in all stages of marketing for the products distributed, including category management, promotions, schematic design and display of products. To efficiently provide such services, technological innovation has become an essential element in the distribution industry. For smaller distributors, the costs of the required investments in technology can be prohibitive. Millbrook is one of only a few distributors that focuses specifically on the distribution of specialty foods, health and beauty care products and general merchandise. The fast growing specialty food business encompasses a wide range of items in categories such as imported and domestic gourmet foods, as well as natural, health and ethnic foods. Specialty foods typically generate higher margins for retailers than those realized on other mainstream grocery categories sold in supermarkets. In addition, the demographic trends in the United States have sparked consumer demand for more specialty food products. As a result, supermarkets are adding more specialty food items to their product offerings, and aggressively promoting them in an attempt to capture a higher market share. Retailers are employing a number of marketing techniques to increase the sales of high margin specialty food items. Stores are using kiosks and free standing displays to attractively present the products to the consumer. In addition, retailers have segregated specialty foods into specific categories, such as ethnic foods, natural foods, cookies and sauces. By utilizing a "store-within-a-store" approach for specialty food, the products receive prime shelf space within the store. Retailers also integrate specialty foods into general product categories to familiarize consumers with unique and higher margin products with the objective of increasing awareness and generating trial usage among the broader consumer market. Merchandising expertise is a key criteria for a retailer in determining its choice of a specialty food distributor. The health and beauty care segment includes baby care, cosmetics, deodorants, first-aid, hair care, over-the-counter medications, toiletries, oral hygiene and skin care products. The general merchandise segment covers a wide variety of non-food categories including housewares, pet supplies, stationery, baby needs, photo and cleaning supplies. Competition in both the health and beauty care and general merchandise categories has been intense due to the growth of mass merchandisers that have captured market share by offering larger assortments at "everyday low pricing." Despite losing market share, supermarkets have maintained a stable base of customers and are expected to continue to be a key outlet for health and beauty care products and general merchandise by expanding product variety and offering customers one-stop shopping. 2 Products Distributed. Through its comprehensive product offerings, Millbrook distributes a wide variety of products to its customers. Specialty Foods. For the years ended March 31, 2003, 2002 and 2001, specialty food sales were approximately $241.1 million, $287.3 million and $298.9 million and represented 52.5%, 52.4% and 49.2% of Millbrook's total revenues, respectively. The decline in specialty food sales is primarily related to a decision made by a prior customer to move to self-distribution, customer financial difficulties and customer bankruptcies. Millbrook's specialty food category consists of approximately 14,500 items including ethnic, gourmet, organic and natural foods and supplements. Millbrook offers ethnic foods such as kosher, Asian, Italian, Irish, Mexican, Greek and German products, and gourmet foods such as teas, coffees, spices, baking ingredients, condiments, candies, crackers, cookies, jams and jellies. Millbrook's organic and natural food products and supplements include items such as grains, cereals, snacks, beverages, energy bars, baking ingredients, pasta and sauces. We continue to view the specialty food category as an opportunity for future growth. Due to the higher margins associated with specialty foods, supermarkets continue to add new specialty food items to their product offerings. To accommodate its retail customers' desire for a broader offering of specialty foods, Millbrook carries a wide variety of specialty food products. We believe that Millbrook's product breadth, together with its merchandising expertise and advanced technology in supply chain management, will continue to enable its retail customers to capture the advantages of this product category. Health and Beauty Care. For the years ended March 31, 2003, 2002 and 2001, health and beauty care sales were approximately $183.7 million, $202.5 million and $223.5 million and represented 40.0%, 37.0% and 36.8% of Millbrook's total revenues, respectively. The decline in health and beauty care sales is principally due to customer bankruptcies. Millbrook currently carries approximately 16,000 health and beauty care items, including a full line of national and private label brands. Health and beauty care product offerings have grown due to new product introductions and the growth in over-the-counter medications. This creates the need for retailers to maximize variety in minimal shelf space. In recent years, supermarkets, Millbrook's primary customer base, have lost market share in health and beauty care products to mass merchandisers and drug store chains. However, supermarkets have begun to recapture lost market share by increasing the shelf space allocated to health and beauty care items and expanding the variety of those items carried. We believe that Millbrook's capabilities and extensive product selection make it qualified to serve both the growing mass merchandiser demand and meet the needs of the supermarket retailers for health and beauty care items. General Merchandise. For the years ended March 31, 2003, 2002 and 2001, general merchandise sales were approximately $34.7 million, $58.0 million and $85.4 million and represented 7.5%, 10.6% and 14.0% of Millbrook's total revenues, respectively. The decline in general merchandise sales reflects the change in Millbrook's customer base due to a decision made by a prior customer to move to self-distribution, customer financial difficulties and customer losses. Millbrook currently carries approximately 8,500 general merchandise items. Although the traditional supermarket cannot afford to devote as much space to the general merchandise category as compared to the mass merchandisers, supermarkets have the advantage of more frequent customer traffic. This consumer traffic ensures that supermarkets will remain a key outlet for general merchandise. In addition, targeting certain departments such as pet, bath, candle and stationery as destination categories adds to the importance of general merchandise in supermarkets. 3 Retail Services. Millbrook traditionally has supplemented its product distribution with full supporting services such as schematic development (including planogramming), space management, new store installations, remodeling of existing stores, order writing, stocking, new item placement and development and management of promotions. Over time, gross profit margins for these services have eroded principally as a result of the retail strategy of "everyday low pricing." As a result, Millbrook utilizes a system to "unbundle" each of the elements of the full-service program and use activity-based costing to charge the customer for each supporting service on a stand-alone basis. Millbrook offers these services to its customers through its Millbrook Retail Solutions(SM) group, which is solely focused on providing merchandising services. By using a predominantly part-time hourly workforce, management believes Millbrook Retail Solutions has cost advantages over manufacturers and retailers. Consequently, outsourcing these functions to Millbrook Retail Solutions' experienced personnel, combined with Millbrook's established customer base and technology infrastructure, appropriately position Millbrook in the competitive retail service industry. In particular, we believe that Millbrook's advanced technology in planogramming and its category management capabilities enable it to provide service offerings that are not readily available from the competition. Customers. Millbrook's top ten customers, which collectively represented approximately 64%, 63% and 61% of its revenues during the years ended March 31, 2003, 2002 and 2001, respectively, have been customers for an average of 18 years. For the year ended March 31, 2003, supermarkets represented approximately 90% of revenues and mass merchandisers and chain drug stores represented approximately 10% of revenues. While Millbrook enjoys long-term relationships with most of its customers, consistent with industry practice, substantially all of Millbrook's customer supply agreements are on a month-to-month basis. Millbrook does have multi-year supply agreements with certain of its significant customers. None of these supply agreements is for a period of greater than three years. For the year ended March 31, 2003, Millbrook's two largest customers, Shaw's Supermarkets and Royal Ahold N.V., together represented approximately 37% of its total revenues. For the years ended March 31, 2002 and 2001, Millbrook's two largest customers, Shaw's Supermarkets and Ames Department Stores ("Ames"), together represented approximately 32% and 28% of its total revenues, respectively. During the year ended March 31, 2003, Ames announced its decision to liquidate under Chapter 7 of the Bankruptcy Code. Suppliers. Millbrook purchases products from leading suppliers in each of its categories. For the year ended March 31, 2003, the five largest suppliers in each of Millbrook's three principal product categories were: (i) for specialty foods, World Finer Foods, The Hain Celestial Group, The B. Manischewitz Company, LLC, Unilever (Best Foods and Lipton) and R.C. Bigelow; (ii) for health and beauty care products, Procter & Gamble, Johnson & Johnson, Pfizer/Warner Lambert, Unilever HPC and Wyeth Consumer Health Care; and (iii) for general merchandise, Signature Brands, Hartz Mountain Corp., General Electric, Mead Products and Bradshaw International. For the year ended March 31, 2003, the five largest suppliers represented (i) for specialty foods, 15% of total purchases; (ii) for health and beauty care products, 19% of total purchases; and (iii) for general merchandise, 2% of total purchases. 4 The B. Manischewitz Company, LLC The Industry. According to Progressive Grocer, the U.S. grocery industry has been characterized by relatively stable growth based on modest price and population increases, with total sales of approximately $535.4 billion in 2002 reflecting a compound annual growth rate of 4.4% for the five years ended 2002. According to Integrated Marketing Communications, Inc., kosher foods remain one of the fastest growing categories of the specialty food segment and are characterized by a stable base of loyal consumers represented primarily by the Jewish population. According to Integrated Marketing Communications, Inc. and Packaged Facts, since 1992, sales of kosher foods have increased significantly among non-Jewish consumers due to heightened awareness of the quality of ingredients, rabbinical supervision and processing techniques used in manufacturing kosher foods, together with growing interest in healthier foods and the trend toward healthier lifestyles. Kosher foods are manufactured in accordance with Jewish dietary laws, which require strict adherence to quality and cleanliness standards. Achieving such standards requires specialized knowledge and the supervision of a designated kosher certification agency. Due to the production methods used, kosher products generally are considered to contain higher quality and healthier ingredients. According to Integrated Marketing Communications, Inc., approximately 40% of the overall kosher category is kosher for Passover products, which are prepared under even more stringent guidelines than kosher products consumed throughout the year. Products. Manischewitz' core businesses consist of traditional products sold primarily to Jewish consumers under the Manischewitz brand; canned fish and condiments under the Season brand; and natural and organic snack foods sold under the Guiltless Gourmet(R) brand. Manischewitz is a manufacturer of products historically consumed during certain Jewish holidays, principally Passover which occurs during the spring, and Rosh Hashanah which occurs during the fall. Manischewitz believes that, among the Jewish population, approximately 100% recognize the Manischewitz brand name and 90% have tried one or more Manischewitz products. Manischewitz believes that, among the non-Jewish population, approximately 80% are familiar with the Manischewitz brand name and over 50% have tried one or more Manischewitz products. Guiltless Gourmet and Season products are consumed throughout the year. Manischewitz has built its brand awareness and consumer base by offering a broad assortment of products that can be consumed throughout the year, as well as expanding its product offerings to accommodate changing tastes and the popularity of various food items. Manischewitz' recent product offerings include a line of pasta products, concord grape matzo and the introduction of canister packaging for its meal, starch and farfel products. Many of the new product offerings are intended to appeal to the mainstream population to expand the customer base for Manischewitz' product line. Manischewitz also licenses its name to other entities for use in the manufacture, distribution and sale of certain kosher products including wine and other food products. For each of the years in the three year period ended March 31, 2003, licensing revenues represented less than 2% of Manischewitz' total revenues. Baked Products. Baked products include daily matzo, Passover matzo (which is produced to more exacting standards dictated by religious tenets for Passover) and crackers. The majority of these products are baked at Manischewitz' Jersey City, New Jersey facilities. Matzo products in this category are sold under the Manischewitz(R), Horowitz Margareten(R) and Goodman's brand names. Matzo product sales generated approximately 30.1%, 29.7% and 33.5% of Manischewitz' total revenues in fiscal 2003, 2002 and 2001, respectively. Manischewitz has a license agreement with Goodman's to use its name on matzo products and matzo-related products through 2005. In fiscal 2003, matzo products and matzo-related products sold under the Goodman's name represented less than 1% of Manischewitz' total revenues. 5 Manufactured Products. Manufactured products consist of a variety of soups, sauces, fish, borscht and other processed foods. The majority of these products are produced at Manischewitz' Vineland, New Jersey facility. Manufactured product sales accounted for approximately 16.5%, 16.6% and 17.6% of Manischewitz' total revenues in fiscal 2003, 2002 and 2001, respectively. Co-Packed Products. Manischewitz markets a number of co-packed products, including cookies, confectionery products, noodles, pasta, tortilla chips, salsa, condiments, dry soup mixes and canned fish principally under the Manischewitz, Horowitz Margareten, Goodman's, Season and Guiltless Gourmet brand names. Manischewitz expects to continue to employ co-packers as a capital efficient means of bringing its new products to market. Co-packed products generated approximately 52.4%, 52.3% and 46.4% of Manischewitz' total revenues in fiscal 2003, 2002 and 2001, respectively. Marketing and Product Development. In fiscal 2003, 2002 and 2001, spending on marketing and trade promotion represented approximately 5.7%, 5.9% and 5.1% of total revenues, respectively. Consistent with its overall business strategy, management focused its spending on advertising, marketing and promotion of Manischewitz' products and expanding the distribution of its Guiltless Gourmet and Season product lines. In addition, during fiscal 2002, Manischewitz began sponsoring "Jewish Cooking in America" on Public Broadcasting Service. The Manischewitz product line continues to be expanded to strengthen and broaden its popular appeal. Packaging has been updated to better communicate good taste and high quality, enhance visibility on store shelves and attract a broader spectrum of Jewish and non-Jewish consumers. Manischewitz has introduced no-fat and low-fat items to reinforce the positive health aspects of its products. Where appropriate, recipes have been improved and new flavors introduced. In addition, Manischewitz has introduced new products targeted at both Jewish and non-Jewish consumers and has begun to capitalize on the positive Manischewitz brand image among consumers. Further, the Guiltless Gourmet brand allows Manischewitz to capitalize on the growth of natural and organic foods by developing new products to broaden the brand's presence and take advantage of Manischewitz' distribution base. Distribution. Manischewitz principally sells its products to independent distributors operating throughout the U.S. and Canada. Manischewitz' two largest distributors, together represented approximately 53.9%, 49.9% and 50.7% of total revenues in fiscal 2003, 2002 and 2001, respectively. For each of the years in the three year period ended March 31, 2003, one of the two largest distributors was Manischewitz' affiliate, Millbrook. Among its customer base, supermarkets represented approximately 90% of Manischewitz' fiscal 2003 total revenues and other customers represented approximately 10%. We believe that Manischewitz' largest supermarket customers are Albertson's, Kroger, Safeway, Wakefern, Publix and Royal Ahold. We estimate that Manischewitz' products are sold in a majority of the supermarkets throughout the U.S. Due to their importance to Jewish consumers, Manischewitz' products are "must carry" items for many supermarkets in the U.S. We continue to seek to obtain shelf space from supermarkets in sections other than in the kosher aisle. The ability to display Manischewitz' products in the non-kosher supermarket aisles for products such as crackers, noodles, soups and side dishes, will enhance awareness of Manischewitz' products, particularly among non-Jewish consumers. We believe the Guiltless Gourmet brand will benefit from expanded distribution in both the natural and snack food aisles in supermarkets. 6 Raw Materials The Companies, through their Manischewitz subsidiary, utilize a number of raw materials in the manufacture of its matzo and matzo-related products, principally flour. Manischewitz utilizes significant quantities of various fish in the manufacture of its gefilte fish and the co-packing of its other canned fish products. Manischewitz also purchases organic corn and spices for the co-packing of its Guiltless tortilla chips. Supplies of these ingredients are readily available from a number of sources and are purchased based on quality and price. Competition Millbrook Distribution Services Inc. Specialty Foods. The competition in the specialty foods segment is fragmented among approximately 100 distributors, most of which are small and geographically limited. Millbrook is able to compete effectively in the specialty foods segment based on its breadth of products and its logistics capabilities. Its "piece pick" capability gives Millbrook's retailers product variety without the inventory investment in slower-moving, high margin specialty food products. Unlike most other specialty food distributors, Millbrook offers a single source of supply for specialty foods, health and beauty care products and general merchandise. This generates transportation and distribution efficiencies for Millbrook. Millbrook's principal competitors in this segment are Gourmet Awards, Haddon House, Distribution Plus, Inc. and Kehe Food Distributors, Inc. Health and Beauty Care. Supermarkets historically have placed health and beauty care products wherever shelf space was available. As supermarkets do not have the available shelf space to compete with the breadth of health and beauty care items carried by mass merchandisers, they have become reliant on delivery and inventory techniques that maximize product variety. Management is of the opinion that Millbrook's "piece pick" capability and breadth of health and beauty care product assortment allows its supermarket customers to effectively compete with mass merchandisers in this product category. Millbrook's principal competitors in this segment are SuperValu, Nash Finch and Associated Wholesale Grocers. General Merchandise. Supermarkets are refocusing their efforts to carry general merchandise specifically matched to their customer profiles and rethinking the manner in which they allocate shelf space. We believe product competition in selection and promotion at the retail level favors distributors such as Millbrook. Millbrook's buying power results in a large assortment of general merchandise that is continually tailored to meet its customers' and the consumers' needs. Through Millbrook's "piece pick" capability, this assortment is available to the retailers with a lower inventory investment and space allocation. Millbrook's principal competitors in this segment are SuperValu, Nash Finch and Associated Wholesale Grocers. Retail Services. The retail services industry is competitive and is predominantly comprised of a large number of small organizations that are either retailer, channel or region specific. In the opinion of management, there are numerous retail service companies competing with Millbrook Retail SolutionsSM . The principal competitive factors within the industry include (i) breadth and quality of client services; (ii) price; (iii) the ability to execute specific client priorities rapidly and consistently over a wide geographical region; and (iv) technological capability. We believe the combination of the quality of Millbrook Retail Solutions' client services and Millbrook's breadth of expertise, including its retail-oriented technology, experience at store level and logistics capabilities is unique in the industry. 7 The B. Manischewitz Company, LLC Manischewitz competes within a small group of branded kosher food manufacturers. In the matzo category, all of the domestic producers have been in the industry for over 80 years. The strength of Manischewitz' brand names and the complexities of complying with kosher manufacturing requirements have all contributed to the stability of the competitive environment faced by Manischewitz. Management's business strategy includes promoting and marketing Manischewitz products in the non-kosher aisles of supermarkets. However, outside the kosher aisle, Manischewitz products compete with the products of a significant number of companies of varying sizes, including divisions or subsidiaries of larger companies. Many of these competitors have multiple product lines as well as substantially greater financial and other resources available to them. Manischewitz' primary competitor in the production and distribution of matzo is Streit's, a New York based family-owned regional marketer. Within the gefilte fish market, Manischewitz competes primarily with Rokeach and its related brands, including Mothers, Old Vienna and Mrs. Adlers. For Manischewitz' Guiltless Gourmet brand, the primary competitors in the marketing and distribution of its all-natural snack products are Frito Lay, a division of PepsiCo, Inc. and Skinny, a division of nSpired Natural Foods. For Manischewitz' Season brand, the primary competitors in the marketing and distribution of its canned fish products are Beach Cliff, Brunswick, King Oscar and Bumble Bee Seafoods, LLC. Management believes that Manischewitz' loyal customer base and name recognition make the brand less vulnerable to competition with respect to its core products. Trademarks Manischewitz owns a number of registered trademarks in the U.S., Canada, Europe, Israel, South Africa and South America. The registered trademarks in the U.S. include Manischewitz(R), Horowitz Margareten(R), Onion Tams(R), Passover Pantry(R), Tam Tam(R), Vege-Matzo(R), Wheat Tams(R), Design Star of David(R), Star of David & Lion Design(R), Fishlets(R), Design of Star, Lion & Scroll(R), Deborah Ross & Design(R), Bakit(R), Garlic Tam(R), Horowitz Margareten & Design(R), Season(R), Season Kosher Select(R), Gold Boat(R), Atlantic Gourmet(R), Moadim(R), Guiltless Gourmet(R), Gourmet without Guilt(R) and Noshables(R). Manischewitz has granted exclusive licenses under certain of its trademarks to others for the manufacture and sale of wine and other food products. Such licenses are limited in scope to certain territories and entitle Manischewitz to royalties based on the net sales or revenues of the licensed products sold. Management is not aware of any facts that would have a material adverse impact on the continued use of any of its trademarks and trade names. (d) Other Matters Employees As of March 31, 2003, we had approximately 1,400 full-time employees, 120 part-time employees and the ability to draw upon 300 service merchandisers on-call nationwide. Millbrook has approximately 180 unionized workers. Most of the unionized workers are located at the East Brunswick, NJ and Youngstown, OH distribution centers. These workers are represented under contracts with Teamsters Local 802 in East Brunswick, which was ratified in December 2000 and will expire in June 2006 and Teamsters Local 377 in Youngstown, which was ratified in April 2000 and will expire in July 2004. 8 Manischewitz has approximately 130 unionized workers at the Jersey City, NJ and Vineland, NJ facilities. Most of the unionized workers at the Jersey City, NJ facility are represented under a contract with Bakery, Confectionery and Tobacco Workers International Union (AFL-CIO, Local 3), which was ratified in October 2000 and will expire in September 2005. The unionized workers at the Vineland, NJ facility are represented under a contract with United Food and Commercial Workers Union (Local 56), which was ratified in May 2000 and will expire in April 2005. Management believes that Manischewitz' and Millbrook's relations with their employees and the unions representing certain groups of employees are generally good. (e) Financial Information about Foreign and Domestic Operations Millbrook provides distribution services to retail locations in 43 states throughout the United States, primarily east of the Rocky Mountains. Manischewitz' products are primarily sold through distributors throughout the United States. Revenues generated by sales to distributors primarily in Canada, Europe and the Middle East accounted for less than 4% of Manischewitz' revenues in each of the years in the three year period ended March 31, 2003. Item 2. Properties Facilities. Millbrook's corporate headquarters, where management and administrative functions are performed, is located in Leicester, Massachusetts. Millbrook currently uses five distribution centers:

Approximate Lease Square Expiration Property Location Own or Lease Footage Date -------- -------- ------------ ----------- ---------- National Support Center/Distribution Center......... Harrison, AR Own 1,200,000 -- Corporate Headquarters/Distribution Center.......... Leicester, MA Lease ~~340~~188,000 11/30/06 Distribution Center................................. Youngstown, OH Lease 262,000 03/31/07 Distribution Center................................. Worcester, MA Lease 241,300 08/31/0207 Distribution Center................................. E. Brunswick, NJ Lease 177,600 07/31/08

During the year ended March 31, 2001, Millbrook closed its Ozark, AL distribution center and it is presently being marketed for sale. In addition, Millbrook uses 49 transfer depots located in 18 states. Millbrook owns or leases its fleet of approximately 80 tractors, 230 trailers and 120 vans. Manischewitz' corporate headquarters, where management and administrative functions are performed, is located in Jersey City, New Jersey. Manischewitz occupies the following properties, all of which are used in connection with its food business:

Approximate Square Property Location Own or Lease Footage -------- -------- ------------ ----------- Bakery/Warehouse/Office............................. Jersey City, NJ Own 139,100 Manufacturing facility.............................. Vineland, NJ Own 67,700

The Jersey City, New Jersey bakery operates on a two-shift basis during four months of the year and a three-shift basis during seven months of the year. Each shift consists of eight hours. The plant, which has computerized production equipment, is shut down for the month of July for maintenance and to prepare the plant to meet the kosher requirements for Passover production. 9 The Vineland, New Jersey manufacturing and warehousing facility is located on a five-acre site. It has the capacity to produce 11,000 pounds of processed fish per shift. The facility generally operates on a single shift basis throughout the year, with its primary maintenance period in April. Item 3. Legal Proceedings Holdings and Enterprises are subject to various legal actions, regulatory investigations and proceedings and claims threatened or pending in the normal course of their business. Neither Holdings nor Enterprises is a party to any action or proceeding which, in the opinion of management, to the extent not provided for through insurance, indemnification or established reserves, is likely to have a material adverse effect on their consolidated financial condition or consolidated results of operations. Item 4. Submission of Matters to a Vote of Security Holders None. PART II Item 5. Market for Registrants' Common Equity and Related Stockholder Matters None. Item 6. Selected Financial Data The selected consolidated financial data of Holdings and Enterprises presented below as of March 31, 2003 and 2002 and for each of the years in the three year period ended March 31, 2003 were derived from the audited consolidated financial statements of Holdings and Enterprises (the "Consolidated Financial Statements") set forth herein. The selected consolidated financial data as of March 31, 2001, 2000 and 1999 and for the years ended March 31, 2000 and 1999 were derived from the Consolidated Financial Statements of Holdings and Enterprises which are not presented herein. The data should be read in conjunction with the Consolidated Financial Statements, related notes and other financial information included herein.

Holdings Enterprises ----------------------------------------------- ---------------------------------------------- ~~Predecessor~~ For the years ended March 31, ~~1997 1998~~ 1999 2000 2001 ~~1998~~2002 2003 1999 2000 2001 2002 2003 ----------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- (Dollars in Thousands) Statement of Operations Data: Revenues.....................~~......~~ $~~476,175 $470,201 $~~508,293 $580,~~616~~531 $ 652,~~439~~331 $~~470~~596,~~201~~302 $508,082 $508,293 $580,~~570~~485 $652,~~439~~331 $596,302 $508,082 Gross profit.................~~......~~ ~~111,413 110,039~~ 123,457 138,~~174~~089 162,~~831~~723 ~~110~~147,~~039~~665 123,184 123,457 138,~~128~~043 162,~~831~~723 147,665 123,184 Operating expenses...........~~......~~ ~~104,038 102,664~~ 113,533 122,~~209~~124 ~~154~~153,~~073~~965 ~~102~~137,~~656~~740 110,142 113,533 122,~~188~~103 153,~~996~~888 137,674 110,035 Operating income.............~~......~~ ~~7,375 7,375~~ 9,924 15,965 8,758 79,~~383~~925 13,042 9,924 15,940 8,835 9,991 13,149 Interest expense, net........~~......~~ ~~3,843 5,079~~ 20,020 18,960 20,357 519,~~079~~047 16,771 14,949 15,888 17,193 ~~Non-operating~~15,722 ~~income~~14,495 ~~other........ 69~~ Provision (benefit) for income taxes.....................~~......~~ ~~1,660 1,122~~ (3,174) (1,146) (3,411) 1(2,~~122~~602) 4,908 (1,399) 288 (2,139) ~~Income~~ (~~loss~~1,642) 4,308 Loss before extraordinary item~~..............~~ ~~1,941 1,174~~ (6,922) (1,849) (8,188) 1(6,~~182~~520) (8,637) (3,626) (236) (6,219) ~~Extraordinary~~(4,089) ~~gain~~(5,654) ~~net~~Extraordinary ofloss ~~income~~on ~~taxes~~modification of debt....... (500) Extraordinary gain, net of income taxes........... 12,914 3,194 4,742 3,194 ~~Net~~Cumulative ~~income~~effect ~~(loss)~~of change in accounting principle...... (24,230) (24,230) Net income (loss)............ ~~1,941 1,174~~ (6,922) 11,065 (4,994) 1(6,~~182~~520) (33,367) (3,626) 4,506 (3,025) (4,089) (29,884) Balance Sheet Data: Working capital..............~~......~~ $ ~~36,535 $ 30,798 $~~ 51,288 $ 54,549 $ 76,310 $ 3046,~~796~~106 $ 45,782 $ 46,382 $ 55,066 $ 77,137 $ 50,412 $ 50,670 Property, plant and equipment, ~~net............................. 15,017 23,395~~ 38,467 37,199 32,629 2329,~~395~~486 25,285 38,467 37,199 32,629 ~~Total~~29,486 ~~assets~~25,285 net....................... ~~102,731~~Total ~~108,772~~assets................. 297,992 290,~~393~~178 ~~312~~311,~~635~~008 ~~108~~262,~~875~~104 222,127 279,838 285,715 ~~312~~310,~~028~~668 264,573 226,536 Total debt...................~~......~~ ~~38,110~~ 184,049 170,089 204,973 38168,~~110~~592 165,327 136,049 145,089 179,973 143,592 140,340

10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of Holdings' and Enterprises' financial condition and results of operations should be read in conjunction with the financial information included in their Consolidated Financial Statements. Overview Holdings was formed in 1996 to build a fully integrated specialty food business by acquiring food manufacturers with strong brand names and integrating their products with a strong distribution network. On March 31, 1997, Holdings acquired Millbrook from McKesson. On May 1, 1998, Enterprises, a wholly-owned subsidiary of Holdings, acquired Manischewitz. The results of operations of Manischewitz are included in the consolidated results of operations since its date of acquisition. Concurrent with the Manischewitz acquisition, Holdings contributed Millbrook to Enterprises. This contribution was accounted for as an "as if" pooling of interests. Prior to its acquisition of Millbrook, Holdings had no operations. Enterprises, which was formed in 1998 to acquire Manischewitz, had no operations prior to that acquisition. On January 31, 2000, Millbrook acquired certain of the assets and operations of Epstein. On April 17, 2000, Millbrook acquired substantially all of the assets and operations of Miller Buckeye. On November 1, 2000, Manischewitz acquired substantially all of the assets and operations of Guiltless. The operating results of Epstein's distribution business and Miller Buckeye are reflected in the operating results of Millbrook since their respective dates of acquisition. The operating results of the Season brand business and Guiltless are reflected in the operating results of Manischewitz since their respective dates of acquisition. General Holdings' and Enterprises' operating subsidiaries are Millbrook and Manischewitz. Operating costs and expenses consist of cost of sales, distribution and warehousing and selling, general and administrative expenses. Cost of sales includes the cost of products manufactured and purchased by Manischewitz, including raw materials, products purchased under co-packing arrangements and manufacturing payroll and related employee benefit costs, and the cost of products distributed by Millbrook. Distribution and warehousing expenses include payroll and related employee benefit costs of Millbrook's distribution operation, Manischewitz' third-party storage costs and transportation costs. Selling, general and administrative expenses include payroll and related employee benefit costs of Millbrook's and Manischewitz' various sales organizations and other general and administrative functions. Year Ended March 31, 2003 Compared to the year ended March 31, 2002 Revenues. Revenues for the year ended March 31, 2003 decreased $88.2 million or 14.8% to $508.1 million as compared to $596.3 million for the year ended March 31, 2002. Revenues include: (i) Millbrook's revenues of $459.5 million for the year ended March 31, 2003 as compared to $547.8 million for the year ended March 31, 2002; (ii) Manischewitz' revenues of $62.1 million for the year ended March 31, 2003 as compared to $60.5 million for the year ended March 31, 2002; and 11 (iii) Intersegment sales, which are eliminated in consolidation, of $13.5 million for the year ended March 31, 2003 as compared to $12.0 million for the year ended March 31, 2002. Millbrook's revenues decreased $88.3 million or 16.1% for the year ended March 31, 2003 as compared to the prior year. The decrease in revenues is principally due to decreased sales to certain customers as a result of several factors, including a decision made by a prior customer to move to self-distribution; customer financial difficulties and bankruptcies; customer losses; and an overall decline in specialty food revenues resulting from lower than expected retail sales at a number of Millbrook's customers, the aggregate of which exceeded the growth of sales to certain other customers. The customer financial difficulties include Ames Department Stores, one of Millbrook's significant customers, announcing its decision to liquidate under Chapter 7 of the Bankruptcy Code in August, 2002. Manischewitz' revenues increased $1.6 million or 2.6% for the year ended March 31, 2003 as compared to the prior year. This increase is principally due to increased sales of Manischewitz brand products resulting from new product introductions, product packaging innovation and an overall reduction in the number and amount of promotional selling programs. Gross Profit. Gross profit for the year ended March 31, 2003 was $123.2 million as compared to $147.7 million for the year ended March 31, 2002, a decrease of $24.5 million or 16.6%. As a percentage of revenues, the gross profit margin was 24.2% for the year ended March 31, 2003 as compared to 24.8% for the year ended March 31, 2002. The decrease in gross profit dollars and its impact on gross profit margin is primarily due to the following: (i) decreased gross profit dollars associated with Millbrook's lower revenues ($23.6 million) and decreased gross profit margin (0.3%) resulting from the shift in Millbrook's customer base from serviced to non-serviced customers and a shift in product mix from higher margin specialty food products to lower margin health and beauty care products; and (ii) decreased gross profit margin (0.2%) for Guiltless Gourmet brand products at Manischewitz resulting from the promotional costs of launching several new Guiltless Gourmet products during fiscal 2003. Operating Expenses. Distribution and warehousing expenses for the year ended March 31, 2003 were $45.5 million as compared to $54.1 million for the year ended March 31, 2002. As a percentage of revenues, distribution and warehousing expenses decreased to 9.0% for the year ended March 31, 2003 as compared to 9.1% for the year ended March 31, 2002. Distribution and warehousing costs were impacted by the following: (i) lower warehousing headcount due to reductions made during the second half of fiscal 2002 and during the year ended March 31, 2003 directly related to customer losses and additional headcount reductions realized from a cost reduction program implemented by Millbrook's management to more efficiently deploy warehouse personnel; and (ii) lower transportation costs realized from cost reduction programs implemented by Millbrook's management to achieve more efficient routing and enhanced utilization of its fleet. 12 Selling, general and administrative expenses for the year ended March 31, 2003 were $64.6 million as compared to $79.4 million for the year ended March 31, 2002. As a percentage of revenues, selling, general and administrative expenses decreased to 12.7% for the year ended March 31, 2003 as compared to 13.3% for the year ended March 31, 2002. This decrease is principally due to the following: (i) lower headcount in Millbrook's salesforce due to reductions made during the second half of fiscal 2002 and during the year ended March 31, 2003 directly related to customer losses and the shift in Millbrook's customer base from serviced to non-serviced customers; and (ii) lower headcount in Millbrook's selling, general and administrative functions realized from a cost reduction program implemented by Millbrook's management to streamline its workforce. Amortization of intangibles was approximately $43,000 for the year ended March 31, 2003, as compared to $4.2 million for the year ended March 31, 2002. This decline resulted from the adoption of SFAS No. 142, which provides that only intangible assets with definite lives continue to be amortized. Following the quarter ended June 30, 2002, the Company did not have any remaining intangible assets with definite lives. Interest Expense. Interest expense for the year ended March 31, 2003 was $16.8 million (consisting of $2.3 million for Holdings and $14.5 million for Enterprises, respectively) as compared to $19.0 million (consisting of $3.3 million for Holdings and $15.7 million for Enterprises, respectively) for the year ended March 31, 2002. The decrease in interest expense is primarily attributable to lower interest rates on lower levels of debt outstanding under the Company's Credit Agreement and the amendment by Holdings of the Indenture underlying 92% ($23.0 million) of its 13% Notes outstanding. The amendment, among other things, reduced the interest rate to 6% per annum and increased the aggregate outstanding principal by approximately $1.5 million, representing the deferred May 2002 interest payment. The average interest rate on Holdings' and Enterprises' debt outstanding during the year ended March 31, 2003 was 8.9%. Taxes. The provision for income taxes for the year ended March 31, 2003 was $4.9 million for Holdings and $4.3 million for Enterprises as compared to an income tax benefit of $2.6 million for Holdings and $1.6 million for Enterprises for the year ended March 31, 2002. Historically, the Company did not need a valuation allowance (with the exception of Holdings' state tax loss carryforwards) for the portion of the tax effect of net operating losses equal to the amount of tax-deductible amortization of identified intangibles expected to occur during the carryforward period of the net operating losses based upon the timing of the reversal of other temporary differences. As a result of the adoption of SFAS No. 142, the reversal will probably not occur during the carryforward period of the net operating losses. Therefore, Holdings and Enterprises recorded a deferred non-cash income tax expense of approximately $4.7 million and $4.2 million, respectively, during the year ended March 31, 2003. In addition, Holdings and Enterprises recorded non-cash valuation allowances to offset their respective income tax benefits from operations and the extraordinary loss on modification of debt of $2.7 million and $1.8 million, respectively. Both the deferred non-cash income tax benefit and the non-cash valuation allowances recorded in the Company's operating results would have not been required prior to the adoption of SFAS No. 142. 13 Cumulative Effect of Change in Accounting Principle. Effective April 1, 2002, the Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets". Under this standard, goodwill and intangibles with indefinite useful lives, including trademarks and tradenames are no longer systematically amortized. Instead, they are reviewed for impairment and written down and charged to results of operations when their carrying amount exceeds their estimated fair values. With the assistance of an independent professional appraisal firm, the Company performed impairment tests on the excess of cost over net assets acquired ("goodwill") and intangibles. The previous method for determining impairment prescribed by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," utilized an undiscounted cash flow approach for the impairment assessment, while SFAS No. 142 utilizes a fair value approach. The Company has two reporting units (Millbrook and Manischewitz) with goodwill and intangibles, which also represent the Company's reporting segments. Goodwill and intangibles were reviewed for impairment at the level of each reporting unit. This review indicated that the goodwill recorded at the Company's Manischewitz subsidiary was impaired as the carrying value of the subsidiary was in excess of its estimated fair value. In determining the amount of the goodwill writedown, SFAS No. 142 requires an allocation of the estimated fair value to Manischewitz' net assets. This allocation resulted in a significant increase in the value of the subsidiary's trademarks and tradenames, which under the provisions of SFAS No. 142 may not be written up from their historical carrying value. Since the allocation process utilizes the increased value of the trademarks and tradenames in arriving at the remaining amount of goodwill to be compared to the historical carrying value of goodwill, the amount of goodwill writedown is increased. As a result, the Company recorded a $24.2 million non-cash charge as a cumulative effect of a change in accounting principle for the writedown of goodwill to its estimated fair value during the year ended March 31, 2003. The goodwill writedown was not deductible for income taxes and, as a result, no income tax benefit was recorded in relation to the charge. Extraordinary Item - Modification of Debt. Effective May 1, 2002, Holdings amended the Indenture underlying 92% ($23.0 million) of its 13% Notes outstanding. The amendment (i) reduced the interest rate to 6% per annum, (ii) extended their maturity date from May 1, 2008 to May 1, 2010 and (iii) increased the aggregate outstanding principal by approximately $1.5 million, representing the deferred May 2002 interest payment. Holders of the amended Notes received warrants granting them the right to purchase up to approximately 5% of Holdings' common stock. The Company, at its option, may defer the payment of cash interest on the 6% Notes for ten semi-annual interest payment dates through May 1, 2007. The changes contained in the amendment constitute a material modification of the Indenture requiring the historical deferred debt issuance costs to be written off. Accordingly, debt issuance costs of $0.5 million were written off and reported as an extraordinary item in the accompanying statement of operations during the year ended March 31, 2003. The income tax benefit of $0.2 million related to the extraordinary item was offset by a valuation allowance required by the adoption of SFAS No. 142. Net Income (Loss). As a result of the foregoing, the net loss for the year ended March 31, 2003 was $33.4 million for Holdings and $29.9 million for Enterprises as compared to $6.5 million for Holdings and $4.1 million for Enterprises for the year ended March 31, 2002. Given the non-cash impact of the adoption of SFAS No. 142 and the related income tax valuation allowances recorded, management believes the presentation of net income (loss) on a basis comparable with the prior year provides useful information to the Company's various constituencies. Excluding the impact of SFAS No. 142 and the amortization of indefinite-lived intangible assets in fiscal 2002, the net loss for the year ended March 31, 2003 was $2.9 million for Holdings and $800,000 for Enterprises as compared to $4.1 million for Holdings and $1.7 million for Enterprises for the year ended March 31, 2002. 14 Year Ended March 31, 2002 Compared to the year ended March 31, 2001 Revenues. Revenues for the year ended March 31, 2002 decreased $56.0 million or 8.6% to $596.3 million as compared to $652.3 million for the year ended March 31, 2001. Revenues include: (i) Millbrook's revenues of $547.8 million for the year ended March 31, 2002 as compared to $607.8 million for the year ended March 31, 2001; (ii) Manischewitz' revenues of $60.5 million for the year ended March 31, 2002 as compared to $56.9 million for the year ended March 31, 2001; and (iii) Intersegment sales, which are eliminated in consolidation, of $12.0 million for the year ended March 31, 2002 as compared to $12.4 million for the year ended March 31, 2001. Millbrook's revenues decreased $60.0 million or 9.9% for the year ended March 31, 2002 as compared to the prior year. The decrease in revenues is principally due to decreased sales to certain customers as a result of several factors, including customer decisions to move toward self-distribution, customer financial difficulties, customer losses (principally during the second half of fiscal 2001) and industry consolidation, the aggregate of which exceeded the growth of sales to certain other customers. During the two years ended March 31, 2002, Millbrook's revenues were negatively impacted by the financial difficulties of three of its significant customers (Bradlees, Ames and K-Mart), all of which filed for protection under Chapter 11 of the Bankruptcy Code. Bradlees ultimately liquidated in March 2001. As of March 31, 2002, Ames and K-Mart were operating in bankruptcy and developing their reorganization plans and Millbrook only had a significant continuing business relationship with Ames. Manischewitz' revenues increased $3.6 million or 6.3% for the year ended March 31, 2002 as compared to the prior year. This increase is principally due to the following: (i) sales to new customer accounts gained as a result of the Guiltless Gourmet acquisition in November 2000 and increased sales of Season brand products ($5.6 million); partially offset by (ii) decreased sales of Manischewitz brand products ($1.3 million). Gross Profit. Gross profit for the year ended March 31, 2002 was $147.7 million as compared to $162.7 million for the year ended March 31, 2001, a decrease of $15.0 million or 9.3%. As a percentage of revenues, the gross profit margin was 24.8% for the year ended March 31, 2002 as compared to 24.9% for the year ended March 31, 2001. The decrease in gross profit dollars and its impact on gross profit margin is primarily due to the following: (i) decreased gross profit dollars associated with Millbrook's lower revenues ($17.7 million) and decreased gross profit margin resulting from the shift in Millbrook's customer base from serviced to non-serviced customers (0.1%); partially offset by (ii) increased gross profit dollars on sales to new customer accounts gained as a result of the Guiltless Gourmet acquisition in November 2000 and sales of Season brand products ($3.4 million). 15 Operating Expenses. Distribution and warehousing expenses for the year ended March 31, 2002 were $54.1 million as compared to $59.8 million for the year ended March 31, 2001. As a percentage of revenues, distribution and warehousing expenses decreased to 9.1% for the year ended March 31, 2002 as compared to 9.2% for the year ended March 31, 2001. Distribution and warehousing costs were impacted by the following: (i) lower headcount resulting from the closure of Millbrook's distribution center in Greenville, North Carolina and the consolidation of its Cincinnati, Ohio refrigerated facility into its Youngstown, Ohio distribution center; and (ii) lower transportation costs realized from cost reduction programs implemented by Millbrook's management to achieve more efficient routing and enhanced utilization of its fleet; partially offset by (iii) increased distribution costs associated with sales to new customer accounts gained as a result of the Guiltless Gourmet acquisition in November 2000. Selling, general and administrative expenses for the year ended March 31, 2002 were $79.4 million as compared to $90.1 million for the year ended March 31, 2001. As a percentage of revenues, selling, general and administrative expenses decreased to 13.3% for the year ended March 31, 2002 as compared to 13.8% for the year ended March 31, 2001. This decrease is principally due to the following: (i) lower headcount in Millbrook's salesforce due to reductions made during the year ended March 31, 2002 directly related to customer losses; (ii) lower headcount in Millbrook's general and administrative departments as a result of the consolidation in August 2000 and April 2001 of the Epstein and Miller Buckeye operations, respectively, which were acquired in the prior fiscal year; and (iii) lower headcount in Millbrook's selling, general and administrative functions realized from a cost reduction program implemented by Millbrook's management to streamline its workforce; partially offset by (iv) incremental compensation and related employee benefit costs resulting from the Guiltless Gourmet acquisition in November 2000. Amortization of intangibles was $4.2 million for the year ended March 31, 2002 as compared to $4.1 million for the year ended March 31, 2001. This increase is due to amortization resulting from the Guiltless acquisition. Interest Expense. Interest expense for the year ended March 31, 2002 was $19.0 million (consisting of $3.3 million for Holdings and $15.7 million for Enterprises, respectively) as compared to $20.4 million (consisting of $3.2 million for Holdings and $17.2 million for Enterprises, respectively) for the year ended March 31, 2001. The decrease in interest expense is primarily attributable to lower interest rates on the Company's revolving credit borrowings and slightly lower levels of debt outstanding under the Company's Credit Agreement. The average interest rate on Holdings' and Enterprises' debt outstanding during the year ended March 31, 2002 was 9.8% and 9.3%, respectively. 16 Taxes. For the year ended March 31, 2002, the benefit for income taxes was $2.6 million and $1.6 million for Holdings and Enterprises, respectively, as compared to a benefit of $3.4 million and $2.1 million for Holdings and Enterprises for the year ended March 31, 2001. The change of $0.8 million and $0.5 million for Holdings and Enterprises, respectively, principally relates to the results of operations. The benefit for income taxes for the year ended March 31, 2002 also includes a valuation allowance of $0.4 million established to offset the portion of the deferred tax asset related to Holdings' state tax loss carryforwards. Extraordinary Item - Early Extinguishment of Debt. The extraordinary gain on early extinguishment of debt for the year ended March 31, 2001 was $3.2 million (net of income taxes of $2.1 million). This gain resulted from Enterprises' repurchase of approximately $18.8 million of its outstanding 10.5% Notes. Net Income (Loss). As a result of the foregoing, the net loss for the year ended March 31, 2002 was $6.5 million for Holdings and $4.1 million for Enterprises as compared to $5.0 million for Holdings and $3.0 million for Enterprises for the year ended March 31, 2001. Financial Condition, Liquidity and Capital Resources Operations for the year ended March 31, 2003, excluding non-cash charges for the loss on modification of debt at Holdings, the cumulative effect of a change in accounting principle, depreciation and amortization, deferred income taxes and other non-cash charges, provided cash of $2.2 million for Holdings and $4.3 million for Enterprises as compared to providing cash of $2.6 million for Holdings and $5.2 million for Enterprises for the year ended March 31, 2002. During the year ended March 31, 2003, other changes in assets and liabilities resulting from operating activities provided cash of $4.1 million for Holdings and $1.5 million for Enterprises as compared to providing cash of $29.9 million for Holdings and $28.1 million for Enterprises for the year ended March 31, 2002. As a result, net cash provided by operating activities were $6.3 million for Holdings and $5.8 million for Enterprises in fiscal 2003 as compared to $32.5 million for Holdings and $33.3 million for Enterprises in fiscal 2002. Investing activities, which principally consisted of the acquisitions of plant and equipment in both fiscal years resulted in a use of cash of approximately $500,000 and $1.9 million for both Holdings and Enterprises for the years ended March 31, 2003 and 2002, respectively. During the year ended March 31, 2003, financing activities, which principally consisted of $3.2 million of repayments under the credit agreement by Holdings and Enterprises, and debt modification costs of approximately $600,000 for Holdings, utilized cash of $3.8 million for Holdings and $3.3 million for Enterprises. During the year ended March 31, 2002, financing activities, which principally consisted of the repayment of $36.4 million under the credit agreement by Holdings and Enterprises, offset by a $1.6 million payment from the interest escrow account by Holdings and debt modification costs of approximately $700,000 for Holdings, utilized cash of $35.5 million for Holdings and $36.4 million for Enterprises. The amounts repaid under the credit agreement during the years ended March 31, 2003 and 2002, include the utilization of approximately $500,000 and $6.8 million, respectively, of cash surrender value available under Millbrook's deferred compensation arrangements. At March 31, 2003, outstanding borrowings under the credit agreement were $60.0 million. Under the terms of the credit agreement, substantially all of Millbrook's assets and the accounts receivable and inventory of Manischewitz are pledged to provide collateral for borrowings and Enterprises is restricted from making distributions to Holdings to pay dividends. At March 31, 2003, Millbrook and Manischewitz had approximately $6.5 million of cash and approximately $14.0 million of available borrowing capacity under the credit agreement. In addition, there were approximately $7.2 million of cumulative unpaid dividends on Holdings' series A and series B preferred stock. 17 At March 31, 2003, the Company's balance sheets include a $10.7 million deferred income tax liability related to the taxable temporary differences resulting from different amortization periods for identified intangibles. With the adoption of SFAS No. 142, the Company's tax deductible goodwill and indefinite-lived intangible assets are no longer amortized for financial reporting purposes. Therefore, this deferred income tax liability will not reverse and will not be payable unless the underlying assets are sold or an impairment is recognized for tax purposes. The following information provides a summary of Holdings' and Enterprises' contractual obligations and other commercial commitments as of March 31, 2003:

~~Name~~(Dollars ~~Age~~in ~~Position~~Thousands) Less Than After 5 Contractual Obligations Total 1 Year 1 - 3 Years 4-5 Years Years -------------------- ---- ------------------------------- -------- --------- ----------- ---------- -------- ~~Richard~~Long-Term ADebt ........................................ Bernstein*$165,327 55$ ~~Chairman~~- $140,340 ~~President~~$ 2,229 ~~Chief~~$ ~~Executive~~22,758 ~~Officer~~Capital ~~and~~Lease ~~Director~~Obligations ~~Lewis~~............................. J89 73 16 - - Operating Leases ...................................... Korman*18,841 565,004 ~~Vice~~8,720 ~~Chairman~~4,846 ~~and~~271 ~~Director~~Unconditional ~~Steven~~Purchase MObligations .................... Grossman*2,059 402,059 ~~Executive~~- ~~Vice~~- ~~President~~- Other Long-Term Obligations (at maturity) ............. 19,479 ~~Chief~~938 ~~Financial~~2,155 ~~Officer~~1,618 ~~Treasurer~~14,768 ~~and~~-------- ~~Director~~-------- ~~James~~-------- A-------- -------- Total Contractual Cash Obligations .................... ~~Cohen~~$205,795 Esq.*$ 558,074 ~~Senior~~$151,231 ~~Vice~~$ ~~President~~8,693 -$ ~~Legal~~37,797 ~~Affairs~~======== ~~and~~======== ~~Secretary~~======== ~~and~~======== ~~Director~~======== ofTotal ~~Enterprises~~Amounts ~~Ira~~Less A.Than Gomberg*After 575 ~~Senior~~Other ~~Vice~~Commercial ~~President~~Commitments ~~Hal~~Committed B.1 Weiss*Year 441 ~~Assistant~~- ~~Treasurer~~3 ~~Richard~~Years H.4-5 ~~Hochman~~Years 55Years ~~Director~~------------------------------------------------------- of------------- ~~Holdings~~--------- ~~Jenny~~----------- ~~Morgenthau~~---------- 56-------- ~~Director~~Lines of ~~Holdings~~Credit ~~Michael A~~....................................... ~~Pietrangelo~~$ 59- ~~Director~~$ of- ~~Holdings~~$ ~~Senior~~- ~~executive~~$ ~~officer~~- $ - Standby Letters of ~~Millbrook:~~Credit ~~Robert~~............................. A5,616 5,616 - - - Guarantees ............................................ ~~Sigel~~- 47- ~~President~~- ~~and~~- ~~Chief~~- ~~Executive~~Other ~~Officer~~Commercial ofCommitments ~~Millbrook~~.......................... ~~and~~90 ~~Director~~90 of- ~~Holdings~~- ~~Senior~~- ~~executive~~-------- ~~officer~~-------- of-------- ~~Manischewitz:~~------- ~~Michael~~------ PTotal Commercial Commitments .......................... ~~Schall~~$ 465,706 ~~President~~$ ~~and~~5,706 ~~Chief~~$ ~~Executive~~- ~~Officer~~$ of- ~~Manischewitz~~$ ~~and~~- ~~Director~~======== of======== ~~Holdings~~======== ======= ======

Holdings and Enterprises expect capital expenditure spending for the year ending March 31, 2004 to be approximately $2.0 million. Such expenditures include, among other things, leasehold improvements and the acquisition of computer equipment and software, manufacturing machinery and equipment. It is anticipated that these capital commitments for 2004 will be financed through working capital, operating leases and cash flow from operations. Given the continuing instability of the U.S. supermarket industry and its impact on certain of our customers, Holdings and Enterprises continue to anticipate some loss of revenues in its health and beauty care category, which tends to be more of a commodity nature, as acquirors seek to achieve consolidation synergies by utilizing existing infrastructure. These anticipated reductions in revenue, as well as unforeseen customer financial difficulties, may occur at the same time that we continue to implement our strategy of expanding the specialty food category of our business. Holdings' and Enterprises' results of operations will be dependent upon obtaining, and the timing of, increased revenues from existing and new specialty food customers in light of anticipated losses from the health and beauty care category and unforeseen customer financial difficulties. While Holdings and Enterprises believe the transition of a greater percentage of their composite business to the specialty food category can be accomplished by increasing sales to existing customers and obtaining new customers, there can be no assurance that Holdings and Enterprises can accomplish the goals of their strategy. 18 Effective May 1, 2002, Holdings amended the Indenture underlying 92% ($23.0 million) of its 13% Notes outstanding. The amendment (a) reduces the interest rate to 6% per annum, (b) extends their maturity date from May 1, 2008 to May 1, 2010 and (c) increases the aggregate outstanding principal by approximately $1.5 million, representing the deferred May 2002 interest payment. Holders of these Notes received warrants granting them the right to purchase up to approximately 5% of Holdings' common stock. Holdings, at its option, may defer the payment of cash interest on the 6% Notes for ten semi-annual interest payment dates through May 1, 2007. On November 1, 2002 and May 1, 2003, Holdings elected to defer the cash payment of interest on its 6% Notes. Interest payments on the senior notes and borrowings under the credit agreement represent significant obligations of Holdings, Enterprises and their subsidiaries. The primary source of liquidity of Holdings and Enterprises will be cash flows from the operations of Millbrook and Manischewitz and borrowings under the credit agreement. Subject to the preceding discussion, Holdings and Enterprises believe that, based upon current and anticipated financial performance, asset sales, cash flows from operations and borrowings under the credit agreement will be adequate to meet anticipated requirements for capital expenditures, working capital and scheduled interest payments on the senior notes. However, the aforementioned capital requirements of Holdings and Enterprises may change. The Companies are in compliance with the covenants contained in the credit agreement and the indentures relating to the senior notes and expect to be in compliance in the future. At March 31, 2003, Holdings and Enterprises had total outstanding indebtedness of $165.3 million and $140.3 million, respectively. The ability of Holdings and Enterprises to satisfy capital requirements, to borrow under the credit agreement and to repay or refinance the senior notes will depend on the future financial performance of Holdings and Enterprises, which in turn will be subject to general economic conditions and to financial, business and other factors, including factors beyond Holdings' and Enterprises' control. Effects of Inflation and Other Matters For the year ended March 31, 2003, Holdings' and Enterprises' cost of product remained relatively stable. To the extent possible, Holdings' and Enterprises' objective is to offset the impact of inflation through productivity enhancements, cost reductions and price increases. Holdings and Enterprises are not involved in any significant environmental matters. Accounting Pronouncements - Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998. SFAS No. 133 requires the recognition of all derivatives in the consolidated balance sheet as either assets or liabilities measured at fair value. We adopted SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, during the year ended March 31, 2001. The adoption of SFAS No. 133 did not have a material impact on our financial position or overall trends in results of operations and has not resulted in significant changes to our financial risk management practices. Emerging Issues Task Force ("EITF") Issue No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" was issued in September 2000. EITF No. 00-25 requires the reclassification of certain consideration paid to a reseller by a vendor as a reduction of income on the vendor's income statement. We adopted EITF No. 00-25 effective April 1, 2001. The adoption of EITF No. 00-25 did not have a material impact on our overall trends in results of operations. 19 SFAS No. 143 "Accounting for Asset Retirement Obligations" was issued in August 2001 and is effective for fiscal years beginning after June 15, 2001. SFAS No. 143 establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued in October 2001 and is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets. We adopted SFAS No. 143 and 144 effective April 1, 2002. The adoption of SFAS No. 143 and 144 did not have a material impact on our financial position or overall trends in results of operations. SFAS No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" was issued in April 2002 and is effective for fiscal years beginning after May 15, 2002. SFAS No. 145 eliminates the requirement to classify gains and losses from the extinguishment of debt as extraordinary, requires certain lease modifications to be treated the same as a sale-leaseback transaction and makes other non-substantive technical corrections to existing pronouncements. We will adopt SFAS No. 145 when it becomes effective. SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" was issued in June 2002 and is effective prospectively for exit or disposal activities initiated after December 31, 2002, with earlier adoption encouraged. SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operations, plant closing, or other exit or disposal activities. The Companies will adopt SFAS No. 146 for any future exit or disposal activities. SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" was issued in April 2003 and is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after that date. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities under SFAS No. 133. The adoption of SFAS No. 149 will not have a material impact on our financial position or overall trends in results of operations and will not result in any significant change to our financial risk management practices. SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" was issued in May 2003 and is effective for instruments entered into or modified after May 15, 2003. SFAS No. 150 requires that certain financial instruments including mandatorily redeemable instruments and forward purchase contracts be reported as liabilities by their issuers. We will adopt SFAS No. 150 when it becomes effective. Critical Accounting Policies Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires the use of estimates, judgments, and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Actual results may differ significantly from the estimates previously applied by the Companies which were based on different assumptions and conditions. The significant accounting principles which we believe are the most important to aid in fully understanding our financial results are the following: 20 Concentration of Credit Risk - Trade accounts receivable potentially subject the Companies to credit risk. The Companies extend credit to their customers, principally in the U.S. supermarket industry, based upon an evaluation of the customer's financial condition and credit history and generally do not require collateral. The Companies' allowances for doubtful accounts are based upon the expected collectability of trade accounts receivable. The Companies' operating subsidiaries, Millbrook and Manischewitz, generate 90% of their revenues from customers in the U.S. supermarket industry. Inventories - Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out ("LIFO") method. Revenue Recognition - Revenue is recognized when products are shipped or services are provided to customers. Provisions for returns, rebates and allowances and bad debts are based upon historical experience and known events. Forward-Looking Statements The foregoing discussion in "Management's Discussion and Analysis of Financial Condition and Result of Operations" contains "forward-looking" statements. Additionally, written materials issued and oral statements made from time to time by Holdings and Enterprises may contain forward-looking statements. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts and by their use of words such as "goals", "expects", "plans", "believes", "estimates", "forecasts", "projects", "intends" and other words of similar meaning. Execution of business and acquisition strategies, expansion of product lines and increase of distribution networks or product sales are areas, among others, whose future success may be difficult to predict. They are based on management's then-current information, assumptions, plans, expectations, estimates and projections regarding the food and wholesale distribution industries. However, such statements are not guarantees of future performance, and actual results and outcomes may differ materially from what is expressed depending on a variety of factors, many of which are outside of Holdings' and Enterprises' control. Among the factors that could cause actual outcomes or results to differ materially from what is expressed in these forward-looking statements are changes in the demand for, supply of, and market prices of Holdings' and Enterprises' products, the financial condition of customers, the action of current and potential new competitors, the continuing instability of the U.S. supermarket industry, changes in technology and economic conditions. Item 7a. Quantitative and Qualitative Disclosures about Market Risk Market risk represents the risk of loss that may impact the consolidated financial position, results of operations or cash flows of Holdings and Enterprises due principally to adverse conditions in commodity market prices and interest rate risk related to debt obligations outstanding. Holdings and Enterprises do not use financial instruments or derivatives for any trading or other speculative purposes. Holdings and Enterprises secure future commitments for certain commodities based upon historical and projected consumption such that reasonable possible near term changes in commodity prices would not result in a material effect on future earnings, fair values or cash flows of Holdings and Enterprises. Holdings and Enterprises manage interest rate risk through the strategic use of fixed and variable rate debt. Item 8. Financial Statements and Supplementary Data Refer to the Index to Financial Statements on page F-1 for the required information. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 21 PART III Item 10. Directors and Executive Officers of the Registrants The directors and executive officers of Holdings and Enterprises, and where indicated, the senior executive officer of each of Millbrook and Manischewitz is as set forth in the table below:

~~Long-Term Compensation Annual Compensation ------------ ------------------- Options/SARs~~ Name ~~and~~Age ~~Principal~~ Position ~~Year Salary ($)(1)(2) Bonus ($) (#)~~ ----~~-----------------------~~ ---- ---------- ~~---------- ------------ Holdings and Enterprises~~ Richard A. Bernstein* ~~2001~~56 ~~$ -- $ -- --~~ Chairman, President, ~~and~~ Chief ~~2000~~Executive $Officer --and $Director --Lewis --J. ~~Executive~~Korman* ~~Officer~~58 ~~1999~~Vice $Chairman --and $Director ~~-- --~~ Steven M. Grossman* ~~2001~~42 $Executive ~~260~~Vice President,~~000~~ $Chief --Financial --Officer, ~~Executive~~Treasurer ~~Vice~~and ~~President,~~Director ~~2000~~James $A. ~~243~~Cohen,~~750~~ $Esq.* --57 Senior Vice President -- ~~Chief~~Legal ~~Financial~~Affairs ~~Officer~~and Secretary and ~~1999~~Director $of ~~225,000~~Enterprises $Ira --A. --Gomberg* ~~Treasurer~~59 ~~James~~Senior AVice President Hal B. ~~Cohen~~Weiss* ~~2001~~46 $Assistant ~~214,500~~Treasurer $Richard --H. --Hochman ~~Senior~~57 ~~Vice~~Director ~~President~~of -Holdings ~~Legal~~Jenny ~~2000~~Morgenthau $58 ~~192,000~~Director $of --Holdings --Michael ~~Affairs~~A. ~~1999~~Pietrangelo $61 ~~160,000~~Director $of --Holdings --Senior executive officer of Millbrook: Robert A. Sigel ~~2001~~49 $President ~~400,465~~and ~~$ -- --~~ Chief Executive Officer ~~2000~~of $Millbrook ~~391,619~~and $Executive --Vice --President and ~~President~~Director of ~~Millbrook~~Holdings ~~1999~~Senior $executive ~~368,319~~officer $of ~~-- --~~ Manischewitz: ~~Michael~~Bruce PW. ~~Schall~~Glickstein ~~2001~~57 $President ~~94,231(3)~~and ~~$ -- --~~ Chief Executive Officer of Manischewitz and ~~President~~Director of ~~Manischewitz~~Holdings

* Titles of these individuals are the same for Holdings and Enterprises unless otherwise specified. Richard A. Bernstein has served as Chairman, President and Chief Executive Officer of Holdings and Enterprises and as a director of Enterprises since its inception in March, 1998 and of Holdings since its inception in May, 1996. In addition to his positions with Holdings and Enterprises, Mr. Bernstein is a member of the Board of Directors and Chairman of Millbrook and is the Chairman and Manager of Manischewitz. Mr. Bernstein is Chairman and Manager of RABCO Luxury Holdings LLC, a New York limited liability company ("RABCO"), a diversified holding entity for luxury products, which has the exclusive right, through its subsidiaries, to distribute watches and timepieces for several watch brands in the United States, Canada, Mexico and throughout the Caribbean. Mr. Bernstein is also President of P&E Properties, Inc., a private commercial real estate ownership/management company of which Mr. Bernstein is the sole shareholder. Mr. Bernstein was the Chairman and Chief Executive Officer and a director of Western Publishing Group, Inc. from 1984 to May 1996. Mr. Bernstein also served as Chairman of the Board and Chief Executive Officer of RABCO Health Services, Inc. and General Medical Corporation, a medical and surgical supply distribution company, from April 1987 through August 1993, and Chairman and Chief Executive Officer of Harris Wholesale Company, a pharmaceutical and health and beauty care distribution company, from 1989 through May 1992. Mr. Bernstein is a trustee of New York University and a Director and Vice President of the Police Athletic League. He also devotes substantial time to other business and charitable activities. 22 Lewis J. Korman has been Vice Chairman of Holdings and Enterprises since their inception and is a director of Holdings and Enterprises. Mr. Korman is also a member of the Board of Managers of Manischewitz. He also is a principal in or serves as a consultant to companies involved in the entertainment industry. Mr. Korman is a principal in and a member of the Board of Managers of a non-affiliated company which provides, through on-line and traditional publishing channels, preparation and testing for (i) occupations which require certification, and (ii) students and schools where standardized examinations are administered for assessment or advancement. Prior to joining Holdings in January 1997, Mr. Korman was President and Chief Operating Officer of Savoy Pictures Entertainment, Inc. from its founding in 1992 until its merger with Silver King Communications, Inc. in December 1996. Prior thereto, Mr. Korman was Senior Vice President and Chief Operating Officer of Columbia Pictures Entertainment, Inc. and Chairman of its Motion Picture Group until its sale to Sony Corporation at the end of 1989. Steven M. Grossman has been Executive Vice President, Chief Financial Officer and Treasurer and a director of Holdings and Enterprises since their inception. In addition to his positions with Enterprises and Holdings, Mr. Grossman is a member of the Board of Directors and Executive Vice President - Finance and Administration of Millbrook and is a member of the Board of Managers and the Executive Vice President, Chief Financial Officer and Treasurer of Manischewitz. Mr. Grossman is also Executive Vice President and Chief Financial Officer of RABCO and each of its subsidiaries and Chief Financial Officer of P&E Properties, Inc. Mr. Grossman was Executive Vice President and Chief Financial Officer of Western Publishing Group, Inc. from June 1994 to May 1996 and Vice President - Financial Planning of Western Publishing Group, Inc. from July 1992 to June 1994 and of RABCO Health Services, Inc. from July 1992 to August 1993. Mr. Grossman also serves on the Board of Directors of 4Kids Entertainment, Inc., a New York Stock Exchange company. Mr. Grossman is a certified public accountant licensed in New York. James A. Cohen, Esq. has been Senior Vice President - Legal Affairs and Secretary of Holdings and Enterprises since their inception and is a director of Enterprises. In addition to his positions with Enterprises and Holdings, Mr. Cohen is a member of the Board of Directors and the Senior Vice President - Legal Affairs of Millbrook and Manischewitz and is a member of Manischewitz' Board of Managers. Mr. Cohen is also Senior Vice President - Legal Affairs of RABCO and each of its subsidiaries and a senior executive of P&E Properties, Inc. Mr. Cohen was Senior Vice President - Legal Affairs and Secretary of Western Publishing Group, Inc. from 1984 to May 1996 and Senior Vice President - Legal Affairs and Secretary of RABCO Health Services, Inc. from April 1987 through August 1993. Ira A. Gomberg has been Senior Vice President of Holdings and Enterprises since their inception. In addition to his position with Holdings and Enterprises, Mr. Gomberg is a Senior Vice President of Millbrook and Manischewitz. Mr. Gomberg is also Senior Vice President of RABCO and each of its subsidiaries and a senior executive of P&E Properties, Inc. Mr. Gomberg was Senior Vice President of Western Publishing Group, Inc. from 1986 to May 1996 and Senior Vice President of RABCO Health Services, Inc. from April 1987 through August 1993. Hal B. Weiss has been Assistant Treasurer of Holdings and Enterprises since their inception. In addition to his position with Holdings and Enterprises, Mr. Weiss is a Vice President and Assistant Treasurer of Millbrook and Manischewitz. Mr. Weiss is also the Assistant Treasurer of RABCO and each of its subsidiaries and Controller of P&E Properties, Inc. Mr. Weiss served as Assistant Treasurer of Western Publishing Group, Inc. from 1990 through May 1996 and Assistant Treasurer of RABCO Health Services, Inc. from April 1987 through August 1993. Mr. Weiss is a certified public accountant licensed in New York. 23 Richard H. Hochman is Chairman of Regent Capital Management Corp. a private investment company, making equity and mezzanine investments in companies, and has served in that capacity since April 1995. From 1990 through April 1995, he was a Managing Director of the Corporate Finance Department of Paine Webber Incorporated and served as a member of its Debt and Equity Commitment Committees. Prior to joining PaineWebber, Mr. Hochman served as a Managing Director of Drexel Burnham Lambert, Inc. from 1984 through 1990. Mr. Hochman also serves on the Board of Directors of Cablevision Systems Corp. and Evercom, Inc. Jenny Morgenthau has been Chief Executive Officer of The Fresh Air Fund, one of New York's preeminent charitable corporations, since 1983. Prior to joining The Fresh Air Fund, Ms. Morgenthau worked for New York City's Special Services for Children, the Department of City Planning and the New York State Urban Development Corporation. Ms. Morgenthau serves on the Board of Directors of a number of charitable and cultural organizations. Michael A. Pietrangelo is of Counsel in the Memphis, Tennessee law firm of Pietrangelo Cook PLC, which he joined in February 1998. Previously, Mr. Pietrangelo was President of Johnson Products Co., a subsidiary of IVAX Corporation that manufactured and sold cosmetic and health and beauty care products, principally intended for the African-American consumer. Mr. Pietrangelo also has held a number of executive positions in the consumer products industry at Schering-Plough Corporation, including President of the Personal Care Products Group, and has served as President and Chief Operating Officer of Western Publishing Group, Inc. and President and Chief Executive Officer of Cleo, Inc., a subsidiary of Gibson Greetings, Inc. Mr. Pietrangelo also serves on the Board of Directors of Medicis Pharmaceutical Corporation, a New York Stock Exchange company. Robert A. Sigel has been President, Chief Executive Officer and director of Millbrook since it was acquired by Holdings from McKesson in March 1997. Mr. Sigel became a director of Holdings in March 1999 and an Executive Vice President of Holdings in June 2002. Mr. Sigel has been associated with Millbrook's business since 1977, having served as Vice President, Sales and Merchandising, Executive Vice President, President and Chief Executive Officer of Millbrook Distributors, Inc. and President and Chief Executive Officer of the service merchandising division of McKesson, which became the current Millbrook. From 1995 through March 1997, Mr. Sigel also served as a Corporate Vice President of McKesson and on McKesson's Management Board. Bruce W. Glickstein has been President and Chief Executive Officer of Manischewitz since January 2002. Mr. Glickstein became a director of Holdings in January 2002. From July 1985 to January 1995, Mr. Glickstein held senior sales and marketing positions with General Medical Corporation and American Hospital Supply Corporation, two of the leading medical products companies in the United States. Item 11. Executive Compensation The following table sets forth the compensation earned or paid, including deferred compensation of the Chief Executive Officer and the most highly compensated executive officers of Holdings, Enterprises, Millbrook and Manischewitz for services rendered for each of the fiscal years indicated. None of Holdings, Enterprises, Millbrook or Manischewitz pays a salary to Messrs. Bernstein, Grossman and Cohen. Enterprises reimburses P&E Properties, Inc., an entity of which Mr. Bernstein is the sole shareholder ("P&E Properties"), for providing various services, including executive services rendered by certain of its executive officers. Although Mr. Bernstein does not receive any salary from P&E Properties, a portion of these amounts may be deemed indirect compensation to Mr. Bernstein. Messrs. Grossman and Cohen receive a salary from P&E Properties for executive services rendered to Holdings, Enterprises, Millbrook and Manischewitz. See "Certain Relationships and Related Transactions - Related Party Transactions" on page 28. 24

~~Number~~Long-Term ofCompensation ~~Number~~Annual ofCompensation ~~Number~~------------ of-------------------------- ~~Shares~~Options/SARs of Percentage Shares of Percentage Shares of Percentage Series A of Total Series B of Total Common of Total Preferred Shares of Preferred Shares of Stock of Shares of Stock of Series A Stock of Series B Holdings Common Holdings Preferred Holdings Preferred Name ofand ~~Beneficially~~Principal ~~Stock~~Position ofYear ~~Beneficially~~Salary ~~Stock~~($)(1)(2) ofBonus ~~Beneficially~~($) ~~Stock~~(#) ~~of Beneficial Owner Owned Holdings Owned Holdings Owned Holdings~~ ---------------- ----- ------ ---- ---------- --------- ----- -------- Holdings and Enterprises Richard A. Bernstein~~...............~~ ~~42,500~~2003 ~~40.4%~~$ ~~12,500~~-- ~~50.0%~~$ 1-- -- Chairman,~~000~~ ~~100.0%~~President ~~Robert~~and A.Chief ~~Sigel....................~~2002 ~~6,600~~$ ~~6.3~~-- ~~250~~$ ~~1.0~~-- ~~James~~-- A.Executive ~~Cohen,~~Officer ~~Esq................~~2001 ~~3,610~~$ ~~3.4~~-- ~~150~~$ .6-- -- Steven M. Grossman~~.................~~ 32003 $295,~~490~~750 ~~3.3~~$ ~~100~~-- .4-- ~~Lewis~~Executive J.Vice ~~Korman....................~~President, 32002 $295,~~450~~750 ~~3.3~~$ ~~500~~-- ~~2.0~~-- ~~Ira~~Chief A.Financial ~~Gomberg.....................~~Officer 2and 2001 $260,~~850~~000 ~~2.7~~$ ~~250~~-- ~~1.0~~-- ~~Michael~~Treasurer P.James ~~Schall~~A.~~.................~~ 2Cohen 2003 $234,~~500~~000 ~~2.4~~$ -- -- ~~Hal~~Senior B.Vice ~~Weiss.......................~~President ~~1,460~~- ~~1.4~~Legal ~~150~~2002 .6$234,000 ~~Richard~~$ H.-- ~~Hochman.................~~-- ~~1,200~~Affairs ~~1.1~~2001 $214,500 ~~2.0~~$ ~~Michael~~-- -- Millbrook Robert A. ~~Pietrangelo.............~~Sigel ~~360~~2003 .3$475,000 ~~150~~$ .6-- ~~Jenny~~-- ~~Morgenthau...................~~Chief ~~300~~Executive .3Officer ~~125~~2002 .5$445,000 ~~All~~$ ~~directors~~-- -- and ~~executive~~President ~~officers~~of asMillbrook a2001 ~~group~~$400,465 ~~(11~~$ ~~persons)...~~-- ~~68,320~~-- 65Manischewitz Bruce W.0% 14Glickstein 2003 $250,~~675~~844 ~~58.7%~~$ 1-- -- Chief Executive Officer 2002 $ 48,~~000~~077(3) ~~100.0%~~$ -- -- and President of Manischewitz

(1) These amounts do not include amounts paid on behalf of executive officers under the Companies' benefit plans. Such benefit plans, which are offered to all full-time employees of the Companies include a retirement and profit-sharing plan, medical and dental insurance, disability insurance and life insurance. (2) Other compensation in the form of perquisites and other personal benefits has been omitted as such benefits constituted less than the lesser of $50,000 or 10% of the total annual salary and bonus for each of the named officers for each fiscal year. (3) Mr. Glickstein became Chief Executive Officer and President of Manischewitz in January 2002. 25 Item 12. Security Ownership of Certain Beneficial Owners and Management The following table contains, as of March 31, 2003, information regarding the beneficial ownership of the common stock and preferred stock of Holdings: (1) by each person who is known by Holdings to own beneficially more than 5% of the outstanding shares of common stock or preferred stock of Holdings; (2) by each of the directors and executive officers of Holdings; and (3) by all directors and executive officers of Holdings as a group. Based on information furnished by those owners, we believe that the beneficial owners of the securities listed below have investment and voting power for all the shares of common stock and preferred stock of Holdings shown as being beneficially owned by them. The securities are subject to the voting agreement described under the heading "Certain Relationships and Related Transactions--Voting Agreement" on page 27. Holdings owns 200 shares of the common stock of Enterprises, which represents all of the issued and outstanding capital stock of Enterprises.

Number of Number of Shares of Percentage Shares of Percentage Number of Series A of Total Series B of Total Shares of Percentage Preferred Shares of Preferred Shares of Common Stock of Total Stock of Series A Stock of Series B of Holdings Shares of Holdings Preferred Holdings Preferred Name of ~~Address~~Beneficially Common Stock Beneficially Stock of ~~Beneficial~~Beneficially ~~Owner~~Stock of Beneficial Owner Owned of Holdings Owned Holdings Owned Holdings ---------------- ------------ ------------ ------------ ----------- ------------ --------- Richard A. Bernstein ~~James A~~............... ~~Cohen~~42,500 ~~Esq~~40.4% ~~Steven~~12,500 M50.0% ~~Grossman~~1,000 ~~Lewis J~~100.0% ~~Korman~~Robert ~~Ira~~ A. ~~Gomberg Hal B~~Sigel. ~~Weiss~~................... 6,600 6.3 250 1.0 James A. Cohen, Esq................~~...~~ ~~R.A.B. Holdings~~3,610 ~~Inc~~3.4 ~~444~~150 ~~Madison~~.6 ~~Avenue,~~Steven ~~Suite 601 New York, New York 10022 Robert A~~M. ~~Sigel~~Grossman................. 3,490 3.3 100 .4 Lewis J. Korman.................. ~~Millbrook Distribution Services Inc~~.. ~~Route 56 88 Huntoon Memorial Highway Leicester~~3,450 ~~Massachusetts~~3.3 ~~01524~~500 ~~Michael~~2.0 PIra A. ~~Schall~~Gomberg..................... 2,850 2.7 250 1.0 Bruce W. Glickstein............ ~~The B~~.... ~~Manischewitz Company~~2,500 ~~LLC~~2.4 ~~One~~-- ~~Manischewitz~~-- ~~Plaza~~Hal ~~Jersey City, New Jersey 07302 Richard H~~B. ~~Hochman~~Weiss.......................~~............~~ ~~Regent~~1,460 ~~Capital~~1.4 ~~Management~~150 ~~Corp~~.6 ~~505~~Richard ~~Park Avenue, 17th Floor New York, New York 10022 Michael A~~H. ~~Pietrangelo~~Hochman.................~~..............~~ ~~Pietrangelo Cook PLC International Plaza 6410 Poplar~~1,200 ~~Suite~~1.2 ~~190~~500 ~~Memphis,~~2.0 ~~Tennessee~~Michael ~~38119~~A. ~~Jenny Morgenthau~~Pietrangelo............. 360 .3 150 .6 Jenny Morgenthau................... 300 .3 125 ..5 ~~The~~All ~~Fresh~~directors ~~Air~~and ~~Fund~~executive ~~633~~officers ~~Third~~as ~~Avenue,~~a ~~14th~~group ~~Floor~~(11 ~~New~~persons)... ~~York~~68,320 ~~New~~65.0% ~~York~~14,675 ~~10017~~58.7% 1,000 100.0%

~~/s/~~Name ~~Richard~~of A.Address ~~Bernstein~~of ~~Chairman,~~Beneficial ~~President,~~Owner ~~Chief~~Beneficial ~~Executive~~Owner ~~Officer July 12, 2001~~ ---------------- ------------------ ~~and Director~~ Richard A. Bernstein ~~(principal~~James ~~executive~~A. ~~officer)~~Cohen, ~~/s/~~Esq. Steven M. Grossman ~~Executive~~Lewis ~~Vice~~J. ~~President,~~Korman ~~Chief~~Ira ~~Financial~~A. ~~July~~Gomberg ~~12,~~Hal ~~2001~~B. ~~----------------------------------~~Weiss......................................... ~~Officer~~R.A.B. Holdings, ~~Treasurer~~Inc. ~~and~~444 ~~Director~~Madison ~~Steven~~Avenue, M.Suite ~~Grossman~~601 ~~(principal~~New ~~financial~~York, ~~and~~New ~~accounting~~York ~~officer)~~10022 ~~/s/~~Robert ~~Lewis~~A. JSigel...................................... ~~Korman~~Millbrook ~~Vice~~Distribution ~~Chairman~~Services ~~and~~Inc. ~~Director~~Route ~~July~~56 ~~12,~~88 ~~2001~~Huntoon ~~----------------------------------~~Memorial ~~Lewis~~Highway J.Leicester, ~~Korman~~Massachusetts ~~/s/~~01524 ~~Robert~~Bruce AW. ~~Sigel~~Glickstein.................................. ~~Director~~The ~~July~~B. 12Manischewitz Company, ~~2001~~LLC ~~----------------------------------~~One ~~Robert~~Manischewitz A.Plaza ~~Sigel~~Jersey ~~/s/~~City, ~~Michael~~New P.Jersey ~~Schall~~07302 ~~Director~~Richard ~~July~~H. ~~12,~~Hochman................................... ~~2001~~Regent ~~----------------------------------~~Capital ~~Michael~~Management PCorp. ~~Schall~~505 ~~/s/~~Park ~~Richard~~Avenue, H.17th ~~Hochman~~Floor ~~Director~~New ~~July 12~~York, ~~2001~~New ~~----------------------------------~~York ~~Richard~~10022 HMichael A. ~~Hochman~~Pietrangelo............................... ~~/s/~~Pietrangelo ~~Jenny~~Cook ~~Morgenthau~~PLC ~~Director~~International ~~July~~Plaza 126410 Poplar, ~~2001~~Suite ~~----------------------------------~~190 Memphis, Tennessee 38119 Jenny Morgenthau..................................... ~~/s/~~The ~~Michael~~Fresh A.Air ~~Pietrangelo~~Fund ~~Director~~633 ~~July~~Third 12Avenue, ~~2001~~14th ~~----------------------------------~~Floor ~~Michael~~New A.York, ~~Pietrangelo~~New York 10017

Item 13. Certain Relationships and Related Transactions Voting Agreement Mr. Bernstein is a party to a voting agreement with each of the holders of the series A preferred stock and common stock of Holdings. Under the voting agreement these stockholders agreed to vote all of their shares of series A preferred stock and common stock as Mr. Bernstein directs or, if Mr. Bernstein does not give direction, in a manner consistent with the manner in which he votes his shares of series A preferred stock and common stock. The voting agreement also provides that the stockholders shall execute any written consent of holders of series A preferred stock or common stock as Mr. Bernstein directs or, if Mr. Bernstein does not give direction, in a manner which is consistent with his vote or written consent on the matter. Pursuant to the voting agreement, the stockholders have agreed not to execute any other consent of holders of series A preferred stock or common stock. 27 In the event that a stockholder fails to comply with the voting provisions above, Mr. Bernstein holds a proxy to vote the stockholder's shares or execute a written consent in any manner as he may determine in his discretion. Under the voting agreement, Mr. Bernstein shall not be liable to any stockholder or anyone making a claim under that stockholder as a result of any vote or the exercise of any proxy by Mr. Bernstein. This is true even if that vote or exercise of proxy adversely affects, or results in the decrease in the value of, such stockholder's shares. The voting agreement shall terminate on the earliest of (i) the date a stockholder, and that stockholder's heirs, personal representatives, donees and trustees of any trusts in which that stockholder has an interest, during the stockholder's life or when he or she dies, ceases to own any of the shares of Holdings; (ii) the date on which the common stock of Holdings is listed or admitted to trade on any national securities exchange or is quoted on the NASDAQ system or similar means; or (iii) March 31, 2007. Related Party Transactions At the time of the acquisition of Millbrook by Holdings and the acquisition of Manischewitz by Enterprises, Millbrook and Manischewitz entered into separate arrangements with P&E Properties. In these arrangements, Millbrook agreed to pay a quarterly management fee of $100,000 and Millbrook and Manischewitz agreed to reimburse P&E Properties for providing various services, including executive services and out-of-pocket and other expenses incurred on Millbrook's and Manischewitz' behalf. These services include among other things, treasury, cash management, certain financial reporting, legal, labor and lease negotiation and employee benefits administration. For the year ended March 31, 2003, P&E Properties was (i) paid $400,000 in management fees by Millbrook; (ii) reimbursed $1,100,000 for services provided to Millbrook; and (iii) reimbursed $540,000 for services provided to Manischewitz. The aforementioned fees include the reimbursement for executive salaries disclosed in Item 11 on page 24. The services provided are based upon (i) the number of hours incurred at the applicable pay rate; and (ii) out-of-pocket expenses, related to the services provided. In addition, in fiscal 2003, Millbrook and Manischewitz reimbursed P&E Properties approximately $103,000 and $23,000, respectively for use of an airplane owned by P&E Properties. When commercial flights were reasonably available to the destination, the reimbursement was determined at the rate of the normal first class fare. When commercial flights were not available, the reimbursement amount was equal to the hourly variable costs of the airplane multiplied by the number of hours of use. In the opinion of management, these methodologies provided a reasonable basis for such allocations. In addition, each of Holdings, Enterprises, Millbrook and Manischewitz believe that the terms of the arrangement with P&E Properties were no less favorable than could have been obtained from unaffiliated third parties on an arm's length basis. 28 Shareholders Agreements Each employee of Millbrook or Manischewitz who owns shares of the common stock of Holdings is a party to a shareholders agreement with Holdings. These agreements prohibit transfer of such shares other than to a member of the employee shareholder's immediate family or a trustee of a trust for the benefit of the employee shareholder or his immediate family. In the event of the termination of such employee, Holdings has the option or obligation, under certain circumstances, to purchase all the employee shareholder's shares at prices not greater than their fair market value. Item 14. Controls and Procedures (a) Evaluation of disclosure controls and procedures As required by new Rule 13a - 14 under the Securities Exchange Act of 1934, within 90 days prior to the date of this report, the Companies carried out an evaluation under the supervision and with the participation of the Companies' management, including the Companies' Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companies' disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companies' disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Companies in the reports it files or submits under the Securities Exchange Act is included in such reports. (b) Changes in internal controls There were no significant changes in the Companies' internal controls or in other factors that could significantly affect these controls subsequent to the date of their most recent evaluation. PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) 1. The Financial Statements listed in the accompanying Index to Financial Statements and Schedules are filed as part of this report. 2. The exhibits listed in the accompanying Index to Exhibits are filed as part of this report. (b) Reports on Form 8-K filed in Fourth Quarter of fiscal 2003. None. (c) Index to Exhibits. Exhibit No. Description of Document ----------- ----------------------- 2.1 Purchase Agreement dated as of March 3, 1998 among R.A.B. Food Holdings, Inc., MANO Holdings I, LLC, KBMC Acquisition Company, L.P., MANO Holdings Corporation and the stockholders of MANO Holdings Corporation (incorporated by reference to Exhibit 2.1 to the Registrants' Registration Statement No. 333-66221 on Form S-4, filed on October 28, 1998 (the "Registration Statement")). 3.1 Certificate of Incorporation of R.A.B. Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement). 29 Exhibit No. Description of Document ----------- ----------------------- 3.2 Certificate of Amendment of Certificate of Incorporation of R.A.B. Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement). 3.2.1 Certificate of Designation of R.A.B. Holdings, Inc. for the Series A Preferred Stock. (incorporated by reference to Exhibit 3.2.1 to the Registrants' Annual Report on Form 10-K for the fiscal year 2000 (the "2000 Form 10-K")). 3.2.2 Certificate of Designation of R.A.B. Holdings, Inc. for the Series B Preferred Stock. (incorporated by reference to Exhibit 3.2.2 to the 2000 Form 10-K). 3.3 Bylaws of R.A.B. Holdings, Inc. (incorporated by reference to Exhibit 3.3 to the Registration Statement). 3.4 Certificate of Incorporation of R.A.B. Enterprises, Inc. (incorporated by reference to Exhibit 3.4 to the Registration Statement). 3.5 Amendment of Certificate of Incorporation of R.A.B. Enterprises, Inc. (incorporated by reference to Exhibit 3.5 to the Registration Statement). 3.6 Bylaws of R.A.B. Enterprises, Inc. (incorporated by reference to Exhibit 3.6 to the Registration Statement). 3.7 Certificate of Incorporation of Millbrook Distribution Services Inc. (incorporated by reference to Exhibit 3.7 to the Registration Statement). 3.8 Bylaws of Millbrook Distribution Services Inc. (incorporated by reference to Exhibit 3.8 to the Registration Statement). 3.9 Certificate of Formation of The B. Manischewitz Company, LLC (incorporated by reference to Exhibit 3.9 to the Registration Statement). 3.10 Operating Agreement of The B. Manischewitz Company, LLC (incorporated by reference to Exhibit 3.10 to the Registration Statement). 4.1 Indenture, dated as of May 1, 1998, among R.A.B. Holdings, Inc. and PNC Bank, National Association, as Trustee, relating to the Holdings Notes (incorporated by reference to Exhibit 4.1 to the Registration Statement). 4.1.1 Amended and Restated Indenture, dated as of May 1, 1998, Amended and Restated as of May 1, 2002, between R.A.B. Holdings, Inc., and JPMorgan Chase Bank, as Trustee (incorporated by reference to Exhibit 4.1.1 to the Registrants' Annual Report on Form 10-K for the fiscal year 2002 (the "2002 Form 10-K")). 30 Exhibit No. Description of Document ----------- ----------------------- 4.2 Form of Old Holdings Note (included as Exhibit A to Exhibit 4.1 to the Registration Statement) (incorporated by reference to Exhibit 4.2 to the Registration Statement). 4.3 Form of New Holdings Note (included as Exhibit B to Exhibit 4.1 to the Registration Statement) (incorporated by reference to Exhibit 4.3 to the Registration Statement). 4.3.1 Form of 6% Senior Note of R.A.B. Holdings, Inc., due 2010, dated May 1, 2002 (incorporated by reference to Exhibit 4.3.1 to the 2002 Form 10-K). 4.3.2 Form of 13% Senior Note of R.A.B. Holdings, Inc., due 2008, dated May 1, 2002 (incorporated by reference to Exhibit 4.3.2 to the 2002 Form 10-K). 4.4 Indenture, dated as of May 1, 1998, among R.A.B. Enterprises, Inc. and PNC Bank, National Association, as Trustee, relating to the Old Enterprises Notes (incorporated by reference to Exhibit 4.4 to the Registration Statement). 4.5 Form of Old Enterprises Note (included as Exhibit A to Exhibit 4.4 hereto) (incorporated by reference to Exhibit 4.5 to the Registration Statement). 4.6 Form of New Enterprises Note (included as Exhibit B to Exhibit 4.4 hereto) (incorporated by reference to Exhibit 4.6 to the Registration Statement). 4.7 Exchange and Registration Rights Agreement, dated as of May 1, 1998 between Holdings and Chase Securities Inc. relating to the Old Holdings Notes (incorporated by reference to Exhibit 4.7 to the Registration Statement). 4.8 Exchange and Registration Rights Agreement, dated as of May 1, 1998 among Enterprises, the Guarantors named therein and Chase Securities Inc. relating to the Old Enterprises Notes (incorporated by reference to Exhibit 4.8 to the Registration Statement). 4.9 Purchase Agreement, dated April 28, 1998 among Holdings, Enterprises, Millbrook and Chase Securities, Inc. (incorporated by reference to Exhibit 4.9 to the Registration Statement). 4.10 Form of Warrant to Purchase Common Stock of R.A.B. Holdings, Inc., dated as of May 1, 2002 (incorporated by reference to Exhibit 4.10 to the 2002 Form 10-K). 31 Exhibit No. Description of Document ----------- ----------------------- 4.11 Form of Securityholders Agreement, dated as of May 1, 2002, by and among R.A.B. Holdings, Inc., Mr. Richard A. Bernstein and each securityholder which is a party thereto (incorporated by reference to Exhibit 4.11 to the 2002 Form 10-K). 4.12 Form of Registration Rights Agreement, dated as of May 1, 2002 by and among R.A.B. Holdings and each securityholder which is a party thereto (incorporated by reference to Exhibit 4.12 to the 2002 Form 10-K). 9.1 Form of Voting Agreement (incorporated by reference to Exhibit 9.1 to Amendment No. 1 to the Registration Statement, filed on December 29, 1998). 10.1 Credit Agreement, dated as of May 1, 1998 among Millbrook, Manischewitz, the Lenders party thereto, The Chase Manhattan Bank, as administrative and collateral agent for the Lenders, and NationsBank, N.A., as Co-Agent and Documentation Agent (the "Amended and Restated Credit Agreement") (incorporated by reference to Exhibit 10.1 to the Registration Statement). 10.1.1 Amendment dated as of February 8, 1999 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.1 to the Registrants' Annual Report on Form 10-K for the fiscal year 1999 (the "1999 Form 10-K")). 10.1.2 Amendment dated as of February 19, 1999 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.2 to the 1999 Form 10-K). 10.1.3 Amendment dated as of March 24, 1999 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.3 to the 1999 Form 10-K). 10.1.4 Amendment dated as of April 5, 1999 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.4 to the 2000 Form 10-K). 10.1.5 Amendment dated as of January 31, 2000 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.5 to the 2000 Form 10-K). 10.1.6 Consent and Amendment dated as of April 17, 2000 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.6 of the Registrants' Annual Report on Form 10-K for the fiscal year 2001 (the "2001 Form 10-K")). 10.1.7 Amendment dated as of April 24, 2000 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.7 to the 2001 Form 10-K). 32 Exhibit No. Description of Document ----------- ----------------------- 10.1.8 Amendment dated as of June 9, 2000 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.8 to the 2001 Form 10-K). 10.1.9 Consent and Amendment dated as of November 1, 2000 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.9 to the 2001 Form 10-K). 10.1.10 Consent and Amendment dated as of June 29, 2001 to the Amended and Restated Credit Agreement, dated as of May 1, 1998. (incorporated by reference to Exhibit 10.1.10 to the 2001 Form 10-K). 10.1.11 Amendment and Consent dated as of April 30, 2002 to the Amended and Restated Credit Agreement, dated as of May 1, 1998 (incorporated by reference to Exhibit 10.1.11 to the 2002 Form 10-K). 10.1.12 Amendment Agreement dated as of October 31, 2001 to the Amended and Restated Credit Agreement, dated as of May 1, 1998 (incorporated by reference to Exhibit 10.1.12 to the 2002 Form 10-K). * 10.1.13 Amendment Agreement dated as of February 14, 2003 to the Amendment and Restated Credit Agreement, dated as of May 1, 1998. 10.2 Stock Purchase Agreement dated as of February 21, 1997 between R.A.B. Holdings, Inc. and McKesson Corporation (incorporated by reference to Exhibit 10.2 to Amendment No. 1 to the Registration Statement, filed on December 29, 1998). 10.3 Pledge Agreement dated as of September 14, 2001, by and between Holdings and The Chase Manhattan Bank (incorporated by reference to Exhibit 10.3 to the 2002 Form 10-K). 10.4 Non-Recourse Pledge Agreement and Irrevocable Proxy dated as of October 31, 2001, by and between MANO Holdings Corporation and The Chase Manhattan Bank (incorporated by reference to Exhibit 10.4 to the 2002 Form 10-K). 10.5 Second Amended and Restated Non-Recourse Pledge Agreement and Irrevocable Proxy dated as of October 31, 2001, by and between R.A.B. Enterprises, Inc., and The Chase Manhattan Bank (incorporated by reference to Exhibit 10.5 to the 2002 Form 10-K). 10.6 Amended and Restated Security Agreement, dated as of October 31, 2001, by and among Manischewitz and The Chase Manhattan Bank (incorporated by reference to Exhibit 10.6 to the 2002 Form 10-K). 21.1 List of subsidiaries of the Co-Registrants (incorporated by reference to Exhibit 21.1 to the Registration Statement). 33 Exhibit No. Description of Document ----------- ----------------------- * 99.1 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Executive Officer. * 99.2 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 by Chief Financial Officer. * Filed herewith. (d) Financial Statement Schedules. The financial statements schedules are listed in the accompanying Index to Financial Statements and Schedules. 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of New York, state of New York on the 24th day of June, 2003. R.A.B HOLDINGS, INC. /s/ Richard A. Bernstein ---------------------------------------- Richard A. Bernstein, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

/s/ Richard A. Bernstein Chairman, President, Chief Executive Officer ~~July~~June 1224, ~~2001~~2003 ---------------------------------------- and Director ~~Richard A. Bernstein~~ (principal executive officer) Richard A. Bernstein /s/ Steven M. Grossman Executive Vice President, Chief Financial ~~July~~June 1224, ~~2001~~2003 ---------------------------------------- Officer, Treasurer and Director Steven M. Grossman (principal financial and accounting officer) /s/ Lewis J. Korman Vice Chairman and Director ~~July~~June 1224, ~~2001~~2003 ---------------------------------------- Lewis J. Korman /s/ ~~James~~Robert A. ~~Cohen~~Sigel ~~Senior~~Executive Vice President and Director June 24, 2003 ---------------------------------------- ~~Legal~~Robert ~~Affairs~~A. Sigel /s/ Bruce W. Glickstein Director June 24, ~~July~~2003 12---------------------------------------- Bruce W. Glickstein /s/ Richard H. Hochman Director June 24, ~~2001~~2003 ---------------------------------------- ~~Secretary~~Richard ~~and~~H. Hochman /s/ Jenny Morgenthau Director ~~James~~June 24, 2003 ---------------------------------------- Jenny Morgenthau /s/ Michael A. ~~Cohen~~Pietrangelo Director June 24, 2003 ---------------------------------------- Michael A. Pietrangelo

~~Financial~~/s/ ~~Statements~~Richard ~~Page~~A. Bernstein Chairman, President, Chief Executive Officer June 24, 2003 -------------------- -------------------- ~~Consolidated~~and ~~Financial~~Director ~~Statements~~Richard ~~of R.~~A.B. ~~Holdings,~~Bernstein ~~Inc.~~(principal ~~And~~executive ~~Subsidiaries~~officer) ~~and~~/s/ ~~R.A.B.~~Steven ~~Enterprises, Inc~~M. ~~And~~Grossman ~~Subsidiaries~~Executive ~~Independent~~Vice ~~Auditors'~~President, ~~Report.................................................................................~~Chief ~~F-2~~Financial ~~Consolidated~~June ~~Balance Sheets as of March 31~~24, ~~2001~~2003 ~~and 2000.................................................... F~~-3--------------------------------------- ~~Consolidated Statements of Operations for the Years Ended March 31~~Officer, ~~2001,~~Treasurer ~~2000~~ and ~~1999.............................................................................~~Director ~~F-4~~Steven ~~Consolidated~~M. ~~Statements~~Grossman ~~of Stockholders' Equity~~ (~~Holdings)~~principal ~~for~~financial ~~the Years Ended March 31, 2001, 2000~~ and ~~1999.............................................................................~~accounting ~~F-5~~officer) ~~Consolidated Statements of Stockholder'~~/s/ ~~Equity~~Lewis ~~(Enterprises)~~J. ~~for~~Korman ~~the~~Vice ~~Years~~Chairman ~~Ended~~and ~~March~~Director ~~31,~~June ~~2001~~24, ~~2000~~2003 ~~and 1999............................................................................. F~~-6--------------------------------------- ~~Consolidated~~Lewis ~~Statements~~J. ofKorman ~~Cash~~/s/ ~~Flows~~James ~~for~~A. ~~the~~Cohen ~~Years~~Senior ~~Ended~~Vice ~~March~~President ~~31, 2001, 2000 and 1999............................................................................. F~~-7 ~~Notes~~Legal toAffairs, ~~Consolidated~~June ~~Financial~~24, ~~Statements...................................................................~~2003 F-~~8 Schedules I~~ - ~~Condensed Financial Information of Registrants......................................................... S~~-~~1 II~~ ------------------------------------- ~~Valuation~~Secretary and ~~Qualifying~~Director ~~Accounts~~James A.~~.....................................................................~~ ~~S-5~~Cohen

Supplemental information to be furnished with reports filed pursuant to Section 15(d) of the Act by registrants which have not registered securities pursuant to Section 12 of the Act. No annual report or proxy material has been sent to security holders of each registrant. 36 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Richard A. Bernstein, certify that: 1. I have reviewed this annual report on Form 10-K for the year ended March 31, 2003 by R.A.B. Holdings, Inc., a Delaware corporation ("Holdings"), and R.A.B. Enterprises, Inc., a Delaware corporation ("Enterprises" and, together with Holdings, the "Registrant"); 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's Board of Directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. June 24, 2003 /s/ Richard A. Bernstein -------------------------- Richard A. Bernstein Chief Executive Officer 37 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Steven M. Grossman, certify that: 1. I have reviewed this annual report on Form 10-K for the year ended March 31, 2003 by R.A.B. Holdings, Inc., a Delaware corporation ("Holdings"), and R.A.B. Enterprises, Inc., a Delaware corporation ("Enterprises" and, together with Holdings, the "Registrant"); 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this annual report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the Registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The Registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the Registrant's auditors and the audit committee of Registrant's Board of Directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant's ability to record, process, summarize and report financial data and have identified for the Registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal controls; and 6. The Registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. June 24, 2003 /s/ Steven M. Grossman ---------------------- Steven M. Grossman Chief Financial Officer 38 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

~~-----------------------------------------------------------------------------------------------------------------------------------~~Financial ~~March~~Statements ~~31,~~Page ~~2001 2000~~ --------------------~~----------------------------------------------~~ ----~~----------------------------~~ ~~-------------------------------~~Consolidated ~~Holdings~~Financial ~~Enterprises~~Statements ~~Holdings~~of ~~Enterprises~~R.A.B. ~~--------------- --------------- --------------- -------------- ASSETS Current assets: Cash $ 9~~Holdings,~~522~~ $Inc. ~~9,520~~And $Subsidiaries ~~4,637~~and $R.A.B. 4Enterprises,~~618~~ ~~Accounts~~Inc. ~~receivable~~And ~~53,048~~Subsidiaries ~~53,048~~Independent ~~54,985~~Auditors' ~~54,985~~Report................................................................................. ~~Inventories 72,555 72,555 65,286 65,286 Restricted investments 1,629~~ F-2 ~~3,145~~Consolidated -Balance ~~Other~~Sheets ~~current~~as ~~assets~~of ~~12,429~~March 1431,~~363~~ ~~6,142~~2003 7,190 -------- -------- --------- -------- Total current assets 149,183 149,486 134,195 132,079 Noncurrent assets: Restricted investments - - 1,582 - Other assets 12,365 11,455 13,158 12,178 -------- -------- --------- -------- Total noncurrent assets 12,365 11,455 14,740 12,178 Property, plant and ~~equipment,~~2002.................................................... ~~net 32,629 32,629 37,199 37,199 Intangibles, net 118,458 118,458 104,259 104,259~~ F-~~-------~~3 ~~--------~~Consolidated ~~---------~~Statements ~~-------- Total assets $312,635 $312,028 $ 290,393 $285,715 ======== ======== ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current maturities~~ of ~~long-term~~Operations ~~debt~~for $the ~~1,866~~Years $Ended ~~1,866~~March ~~$ 1~~31,~~946~~ ~~$ 1~~2003,~~946~~ ~~Accounts~~2002 ~~payable~~and ~~47,090~~2001............................................................................. ~~47,090 50,966 50,966 Other current liabilities 23,917 23,393 26,734 24,101~~ F-------- -------- --------- -------- Total current liabilities 72,873 72,349 79,646 77,013 Noncurrent liabilities: Long-term debt 203,107 178,107 168,143 143,143 Deferred compensation 9,508 9,508 9,319 9,319 Deferred income taxes 7,954 7,954 9,539 9,539 Other liabilities 6,537 6,537 4~~,998~~ ~~4,998~~Consolidated ~~--------~~Statements ~~--------~~of ~~--------- -------- Total noncurrent liabilities 227,106 202,106 191,999 166,999 Commitments and contingencies~~ Stockholders' ~~equity:~~(Deficit) ~~Preferred~~Equity ~~stock,~~(Holdings) ~~$500~~for ~~par~~the ~~value,~~Years ~~100,000~~Ended ~~shares~~March ~~authorized~~31, 242003,~~875~~ ~~shares~~2002 ~~of Series A issued~~ and ~~outstanding~~2001............................................................................. ~~12,344~~ F-5 ~~12,344~~Consolidated -Statements ~~1,000 shares~~ of ~~Series~~Stockholder's BEquity ~~issued~~(Enterprises) ~~and~~for ~~outstanding~~the ~~500~~Years -Ended ~~500~~March -31, ~~Common stock~~2003, ~~$.01~~2002 and $12001.00............................................................................ ~~par value, 1,000,000 shares and 200 shares authorized, issued 105,100 shares and 200 shares 1~~ F-6 1Consolidated -Statements ~~Additional~~of ~~paid-in~~Cash ~~capital~~Flows ~~436~~for ~~39,482~~the ~~428~~Years ~~39,482~~Ended ~~Retained~~March ~~earnings (deficit) 323 (963) 5~~31,~~317~~ 22003,~~062~~ ~~Accumulated~~2002 ~~other~~and ~~comprehensive~~2001............................................................................. ~~(loss) income (946) (946) 159 159~~ F-~~-------~~7 ~~--------~~Notes ~~---------~~to ~~--------~~Consolidated ~~12,658~~Financial ~~37,573~~Statements................................................................... ~~18,749 41,703 Less common stock in treasury 2,000 shares and 700 shares 2~~ F-8 1Schedules - -------- ~~--------~~I -~~--------~~ ~~--------~~Condensed ~~Total~~Financial ~~stockholders'~~Information ~~equity~~of ~~12,656~~Registrants......................................................... ~~37,573 18,748 41,703~~ S-~~-------~~1 ~~--------~~II -~~--------~~ ~~--------~~Valuation ~~Total liabilities~~ and ~~stockholders'~~Qualifying ~~equity~~Accounts..................................................................... ~~$312,635 $312,028 $ 290,393 $285,715 ======== ======== ========= ========~~S-5

Schedules which are not included have been omitted because either they are not required or are not applicable or because the required information has been included elsewhere in the consolidated financial statements or notes thereto. F-1 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of R.A.B. Holdings, Inc. New York, New York To the Board of Directors and Stockholder of R.A.B. Enterprises, Inc. New York, New York We have audited the accompanying consolidated financial statements and financial statement schedules of R.A.B. Holdings, Inc. and subsidiaries and R.A.B. Enterprises, Inc. (a wholly-owned subsidiary of R.A.B. Holdings, Inc.) (collectively the "Companies") and its subsidiaries listed in the foregoing index. These financial statements and financial statement schedules are the responsibility of the Companies' management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial positions of R.A.B. Holdings, Inc. and subsidiaries and R.A.B. Enterprises, Inc. and subsidiaries as of March 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2003, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in Note 7 to the consolidated financial statements, the Companies changed their method of accounting for goodwill and other intangible assets during the year ended March 31, 2003 to conform to Statement of Financial Accounting Standards No. 142. DELOITTE & TOUCHE LLP June 19, 2003 New York, New York F-2 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except for share and per share data) -------------------------------------------------------------------------------

~~------------------------------------------------------------------------------------------------------------------------------------ For the years ended~~ March 31, ~~2001~~2003 ~~2000~~2002 ~~1999~~ --------------------------------------------------------------------- --------------------------- --------------------------~~----------~~ Holdings Enterprises Holdings Enterprises ~~Holdings Enterprises~~ --------- ----------- -~~-------~~ ----------- -------- ----~~--------~~ ~~Revenues~~ASSETS ~~$652,439~~Current $assets: ~~652,439~~Cash $ ~~580~~6,~~616~~452 $ ~~580~~6,~~570~~444 $~~508~~ 4,~~293~~526 $ ~~508~~4,~~293~~456 ~~Costs~~Accounts ~~and~~receivable, ~~expenses:~~net ~~Cost of sales 489~~38,~~608~~352 ~~489~~38,~~608~~352 ~~442~~38,~~442~~058 ~~442~~38,~~442~~058 ~~384~~Inventories 50,~~836~~960 ~~384~~50,~~836~~960 ~~Selling~~ 59,~~825~~006 59,~~825~~006 48Other current assets 6,~~305~~653 4812,~~305~~205 4811,~~115~~649 4815,~~115~~889 ~~Distribution~~--------- ~~and~~--------- ~~warehousing~~--------- 59--------- Total current assets 102,~~797~~417 59107,~~797~~961 46113,~~172~~239 46117,~~172~~409 38Other assets 4,~~767~~453 383,~~767~~318 ~~General~~5,134 ~~and~~3,433 ~~administrative 30~~Property,~~384~~ 30plant and equipment,~~307~~ 24net 25,~~646~~285 2425,~~625~~285 2329,~~861~~486 2329,~~861~~486 ~~Amortization~~Goodwill of50,010 ~~intangibles~~50,010 474,~~067~~240 474,~~067~~240 3Intangibles,~~086~~ 3net 39,~~086~~962 239,~~790~~962 240,~~790~~005 40,005 --------- ---------- --------- --------- Total assets $ 222,127 $ 226,536 $ 262,104 $ 264,573 ========= ========= ========= ========= LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY Current liabilities: Current maturities of long-term debt $ -~~-------~~ $ -~~--------~~ ~~Total~~$ ~~costs~~2,767 ~~and~~$ ~~expenses~~2,767 ~~643~~Accounts payable 34,~~681~~347 ~~643~~34,~~604~~347 ~~564~~41,~~651~~421 ~~564~~41,~~630~~421 ~~498~~Other current liabilities 22,~~369~~288 ~~498~~22,~~369~~944 ~~--------~~22,945 22,809 ---------- --------- ---------- --------- Total current liabilities 56,635 57,291 67,133 66,997 Noncurrent liabilities: Long-~~--------~~term ~~Operating~~debt ~~income~~165,327 8140,~~758~~340 8165,~~835~~825 15140,~~965~~825 15Deferred compensation 9,~~940~~044 9,~~924~~044 9,~~924~~238 ~~Interest~~9,238 ~~expense~~Deferred income taxes 10,662 ~~net~~10,662 207,~~357~~640 177,~~193~~640 18Other liabilities 8,~~960~~830 158,~~888~~830 207,~~020~~015 147,~~949~~015 --------- ---------- --------- --------- Total noncurrent liabilities 193,863 168,876 189,718 164,718 Commitments and contingencies Stockholders' (deficit) equity: Preferred stock, $500 par value, 100,000 shares authorized, 24,875 shares of Series A issued and outstanding 12,344 - 12,344 - 1,000 shares of Series B issued and outstanding 500 - 500 - Common stock, $.01 and $1.00 par value, 1,000,000 shares and 200 shares authorized, issued 105,100 shares and 200 shares 1 -~~----~~ 1 -~~--------~~ Notes receivable from stock sales (~~Loss~~92) ~~income~~- ~~before~~ (~~benefit~~195) ~~provision~~- ~~for~~Additional ~~income~~paid-in ~~taxes~~capital ~~(11~~2,~~599~~622 39,482 373 39,482 Retained earnings (deficit) (839,~~358~~564) (234,~~995~~936) 52 (106,~~096~~197) (5,~~025~~052) ~~(Benefit)~~Accumulated ~~provision~~other ~~for~~comprehensive ~~income~~loss ~~taxes~~ (34,~~411~~177) (24,~~139~~177) (1,~~146~~572) ~~288~~ (~~3,174) (~~1,~~399~~572) --------- ---------- --------- ---------- ~~-------- --------- Loss before extraordinary item~~ (828,~~188~~366) ~~(6,219)~~369 (15,~~849)~~254 ~~(236) (6~~32,~~922)~~858 ~~(3,626)~~Less ~~Extraordinary~~common ~~gain~~stock onin ~~early~~treasury ~~extinguishment of debt~~4,600 ~~net~~shares ofand ~~income~~600 ~~taxes~~shares ~~of $2.1 million at March 31, 2001 and $8.~~5 ~~million~~- ~~and $3.~~1 ~~million at March 31, 2000, respectively 3,194 3,194 12,914 4,742~~ - - -------- --------- --------- --------- Total stockholders' (deficit) equity (28,371) 369 5,253 32,858 --------- --------- --------- --------- ~~Net~~Total ~~(loss)~~liabilities ~~income~~and $stockholders' (~~4,994~~deficit) $equity ~~(3,025)~~ $ 11222,~~065~~127 $ 4226,~~506~~536 $ (6262,~~922)~~104 $ (3264,~~626)~~573 ======== =~~=========~~ ========= ========== ======== =~~========~~

See notes to Consolidated Financial Statements F-3 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands) -------------------------------------------------------------------------------

For the years ended March 31, 2003 2002 2001 --------------------------------------------------- ----------------------- ------------------------ -----------------------~~-----------~~ ~~For~~Holdings ~~the~~Enterprises ~~years~~Holdings ~~ended~~Enterprises ~~March~~Holdings ~~31,~~Enterprises ~~2001 2000 1999~~ --------- ----------- ---------- ----------- --------- -----------~~-----------------------------------------------------------------------~~ ~~Shares~~Revenues ~~Amounts~~$ ~~Shares~~508,082 ~~Amounts~~$ ~~Shares~~508,082 ~~Amounts~~$ ~~------~~596,302 ~~-------~~$ ~~------~~596,302 ~~-------~~$ ~~------ ------ Preferred stock~~652,331 $~~500~~ ~~par value~~652,331 ~~100,000~~Costs ~~shares~~and ~~authorized~~expenses: ~~Series~~Cost ~~A: Balance at beginning~~ of ~~period~~sales 24384,~~875~~898 $384,898 12448,~~344~~637 20448,~~000~~637 ~~$ 9~~489,~~906~~608 20489,~~000~~608 $Selling 939,~~906~~733 ~~Issuance~~39,733 of51,398 ~~stock~~51,398 ~~- - 4~~59,~~875~~032 259,~~438~~032 -Distribution -and ~~--------~~warehousing ~~---------~~45,520 ~~---------~~45,520 ~~-------~~54,108 ~~-------~~54,108 ~~-------~~59,797 ~~Balance~~59,797 atGeneral ~~end~~and ofadministrative ~~period~~ 24,~~875~~846 1224,~~344~~739 2428,~~875~~021 1227,~~344~~955 2031,~~000~~069 930,~~906~~992 ~~--------~~Amortization ~~---------~~of ~~---------~~intangibles ~~-------~~43 ~~-------~~43 ~~-------~~4,213 ~~Series~~4,213 B:4,067 ~~Balance at beginning of period 1~~4,~~000~~067 ~~500~~ - - - - ~~Issuance of stock~~ - - ~~1,000 500~~ - -- --------- --------- --------- ------- -- ----- ----~~---~~ ~~Balance~~Total atcosts ~~end~~and ofexpenses ~~period~~495,040 1494,~~000~~933 ~~500~~586,377 1586,~~000~~311 ~~500~~643,573 -643,496 - -------- --------- --------- --------- --------- --------- ~~Common~~Operating ~~stock~~income 13,042 ~~$.01~~13,149 ~~par~~9,925 ~~value~~9,991 18,~~000~~758 8,~~000~~835 ~~shares~~Interest ~~authorized:~~expense, ~~Balance~~net at16,771 ~~beginning of period 105~~14,~~100~~495 ~~1 104~~19,~~100~~047 ~~1 100~~15,~~000~~722 ~~1 Issuance of stock - - 1~~20,~~000~~357 ~~- 4~~17,~~100~~193 - -------- --------- --------- ------- --~~-----~~ ------- ~~Total 105,100 1 105,100 1 104,100 1~~ --~~------~~ --------- ~~---------~~Loss ~~-------~~before ~~-------~~provision ~~-------~~(benefit) ~~Treasury~~for ~~shares~~income attaxes ~~beginning of period~~ (~~700~~3,729) (1,346) (19,~~600~~122) (~~2) Purchase of treasury shares (~~5,~~900~~731) (611,599) (~~900~~8,358) ~~(1)~~Provision (~~2,800~~benefit) ~~(4)~~for ~~Issuance~~income oftaxes ~~stock~~4,908 4,~~600~~308 5(2,602) ~~200~~(1,642) -(3,411) 4(2,~~400~~139) 6 --------- --------- --------- --------- --------- --------- ~~Treasury~~Loss ~~shares~~before atextraordinary ~~end~~items and cumulative effect of ~~period~~change in accounting principle (28,~~000~~637) (25,654) (~~700~~6,520) (14,089) 0(8,188) -(6,219) ~~--------~~Extraordinary ~~---------~~loss ~~---------~~on ~~-------~~modification ~~------- ------- Balance at end~~ of ~~period~~debt ~~103,100~~ (1500) ~~104,400~~ - ~~104,100 1~~ -~~-------~~ -~~--------~~ -~~--------~~ -~~------~~ ~~-------~~Extraordinary ~~-------~~gain ~~Additional~~on ~~paid-in~~early ~~capital:~~extinguishment ~~Balance~~of atdebt, ~~beginning~~net of ~~period~~income ~~428~~taxes ~~332 98 Issuance~~ of ~~treasury~~$2.1 ~~shares~~million ~~and~~- ~~common~~- ~~stock~~- 8- 963,194 ~~234~~3,194 --------- --------- --------- ~~Balance at end of period 436 428 332~~ --------- --------- --------- ~~Retained~~Loss ~~earnings~~before ~~(deficit):~~cumulative ~~Balance~~effect atof ~~beginning~~change ofin ~~period~~accounting 5principle (9,~~317~~137) (5,~~748~~654) 1(6,~~174~~520) ~~Net~~ (~~loss~~4,089) ~~income~~ (4,994) ~~11,065~~ (63,~~922~~025) ~~---------~~Cumulative ~~-------~~effect ~~-------~~of ~~Balance~~change atin ~~end~~accounting ofprinciple ~~period 323 5~~(24,~~317~~230) (524,~~748~~230) - - - - ----- ----~~---~~ ------- ~~Other comprehensive (loss) income: Unrealized gain on securities available~~-~~for~~-~~sale~~ ~~196 159 214 Minimum pension liability adjustment (1,142)~~ - ~~(74)~~ --------- ------- --~~-----~~ ~~Other comprehensive income (946) 159 140~~ --------- ------- --~~-----~~ ~~Total~~Net ~~stockholders'~~loss ~~equity~~$ (33,367) $ 12(29,~~656~~884) $18 (6,~~748~~520) $ (4,~~631~~089) $ (4,994) $ (3,025) ========= ========= ========= ========= ========= =========

See notes to Consolidated Financial Statements F-4 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY (In thousands except for share data) -------------------------------------------------------------------------------

For the years ended March 31, 2003 2002 2001 ---------------------------------------------------------- --------------------- ---------------------- ---------------------- Shares Amounts Shares Amounts Shares Amounts ---------- ~~For~~--------- ~~the~~--------- ~~years~~---------- ~~ended~~--------- ~~March~~---------- 31Preferred stock, ~~2001~~$500 ~~2000~~par ~~1999~~value, 100,000 shares authorized: Series A: Balance at beginning of period 24,875 $ 12,344 24,875 $ 12,344 24,875 $ 12,344 Issuance of stock - - - - - - --------- --------- --------- --------- --------- --------- Balance at end of period 24,875 12,344 24,875 12,344 24,875 12,344 --------- --------- --------- --------- --------- --------- Series B: Balance at beginning of period 1,000 500 1,000 500 1,000 500 Issuance of stock - - - - - - --------- --------- ~~Shares~~--------- ~~Amounts~~--------- ~~Shares~~--------- ~~Amounts~~--------- ~~Shares~~Balance ~~Amounts~~at end of period 1,000 500 1,000 500 1,000 500 --------- --------- --------- --------- --------- --------- Common stock, $1.0001 par value, ~~200~~1,000,000 shares authorized: Balance at beginning of period ~~200~~105,100 $1 105,100 1 105,100 1 Issuance of stock - ~~200~~- $- - ~~200~~- $- --------- --------- --------- --------- --------- --------- Total 105,100 1 105,100 1 105,100 1 --------- --------- --------- --------- --------- --------- Treasury shares at beginning of period (600) (1) (2,000) (2) (700) (1) Purchase of treasury shares (6,300) (6) (5,900) (6) (5,900) (6) Issuance of stock 2,300 2 7,300 7 4,600 5 --------- --------- --------- --------- --------- --------- Treasury shares at end of period (4,600) (5) (600) (1) (2,000) (2) --------- --------- --------- --------- --------- --------- Balance at end of period ~~200~~100,500 (4) 104,500 - ~~200~~103,100 (1) --------- ~~200~~--------- --------- --------- --------- --------- Notes receivable from stock sales: Balance at beginning of period (195) (267) (215) Repayment (issuance) of notes 103 72 (52) --------- --------- --------- Balance at end of period (92) (195) (267) --------- --------- --------- Additional paid-in capital: Balance at beginning of period ~~39,482~~373 ~~39,482~~436 ~~10,100~~428 ~~Equity~~Issuance ~~investment~~of ~~from~~warrants ~~Holdings~~2,357 - - ~~29,382~~(Purchase) issuance of treasury shares and common stock (108) (63) 8 --------- --------- --------- Balance at end of period 392,~~482~~622 ~~39,482~~373 ~~39,482~~436 --------- --------- --------- Retained earnings (deficit): Balance at beginning of period ~~2,062~~ (26,~~444~~197) 1323 5,~~182~~317 Net (loss) ~~income~~ (333,~~025~~367) 4(6,~~506~~520) (34,~~626~~994) --------- --------- --------- Balance at end of period (~~963~~39,564) ~~2,062~~ (26,~~444~~197) 323 --------- --------- --------- ~~Other~~Accumulated other comprehensive (loss) income: Unrealized gain on securities available-for-sale ~~196~~165 ~~159~~25 ~~214~~196 Minimum pension liability adjustment (4,342) (1,~~142~~597) - (741,142) --------- --------- --------- ~~Other~~Accumulated other comprehensive ~~income~~loss (~~946~~4,177) ~~159~~(1,572) ~~140~~(946) --------- --------- --------- Total ~~stockholder~~stockholders's (deficit) equity $37 (28,~~573~~371) $41 5,~~703~~253 $ 3712,~~178~~389 ========= ========= =========

See notes to Consolidated Financial Statements F-5 R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (In thousands except for share data) -------------------------------------------------------------------------------

~~------------------------------------------------------------------------------------------------------------------------------------~~ For the years ended March 31, ~~2001~~2003 ~~2000~~2002 ~~1999~~2001 ---------------------------------------------------------- -------------------- ------------------- -------------------~~----------------~~ ~~Holdings~~Shares ~~Enterprises~~Amounts ~~Holdings~~Shares ~~Enterprises~~Amounts ~~Holdings~~Shares ~~Enterprises~~Amounts -------- --------~~---~~ -------- -------~~----~~ -------- -------~~----~~ ~~Cash~~Common ~~flows from operating activities: Net (loss) income $ (4~~stock,~~994)~~ $1.00 ~~(3,025)~~par ~~$ 11~~value,~~065~~ $200 ~~4,506~~shares ~~$ (6,922) $ (3,626) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities~~authorized: ~~Depreciation~~Balance ~~and~~at ~~amortization~~beginning ~~6,955 6,849 6,651 6,522 7,027 6,758 Amortization~~ of ~~intangibles~~period ~~4,067~~200 ~~4,067~~$ ~~3,086 3,086 2,790 2,790 Loss on impairment of assets held for sale 370 370~~ - -200 -$ - ~~Extraordinary~~200 ~~gain~~$ ~~on early extinguishment of debt, net of income taxes (3,194) (3,194) (12,914) (4,742)~~ - - Loss (gain) on disposition of equipment 74 74 57 57 (82) (82) Deferred income taxes (1,000) (800) 3,810 2,035 (2,388) (613) Changes in assets and liabilities: Accounts receivable 8,544 8,544 (1,996) (1,996) (8,461) (8,461) Inventories (1,467) (1,467) 3,779 3,779 (13,750) (13,750) Other current assets (789) (3,190) 2,822 1,757 (2,989) (2,869) Accounts payable (11,754) (11,754) (5,947) (5,947) 23,378 23,378 Other current liabilities (6,021) (4,668) (1,098) (1,030) 6,786 4,087 Other assets and liabilities (4,865) (2,606) (10,599) (4,790) (2,398) (1,378) -------- -------- -------- -------- -------- -------- ~~Net~~Balance ~~cash~~at ~~(used~~end ~~in)~~of ~~provided~~period by200 ~~operating~~- ~~activities~~200 ~~(14,074)~~- ~~(10,800)~~200 ~~(1,284)~~- ~~3,237 2,991 6,234~~ -------- -------- -------- -------- -------- -------- ~~Cash~~Additional ~~flows~~paid-in ~~from~~capital: ~~investing~~Balance ~~activities:~~at ~~Purchase~~beginning of ~~Miller~~period ~~Buckeye Biscuit Company~~39,482 ~~Inc.~~39,482 ~~net of cash acquired (17~~39,~~591)~~482 ~~(17,591)~~ - - - - ~~Purchase of Guiltless Gourmet, Inc. (4,894) (4,894)~~ - - - - ~~Purchase of I. Epstein & Sons, Inc.~~ - - ~~(14,986) (14,986)~~ - - ~~Purchase of The B. Manischewitz Company, LLC, net of cash acquired~~ - - -- -------- ~~(126,155)~~Balance ~~(126,155)~~at ~~Acquisitions~~end of ~~plant~~period ~~and equipment (2~~39,~~682)~~482 (239,~~682)~~482 (339,~~373)~~482 ~~(3,373) (3,419) (3,419) Proceeds from disposition of equipment 154 154 38 38 233 233~~ -------- -------- -------- ~~--------~~Retained ~~--------~~earnings ~~-------~~(deficit): ~~Net~~Balance ~~cash~~at ~~used~~beginning inof ~~investing~~period ~~activities~~ (255,~~013~~052) (~~25,013~~963) ~~(18~~2,~~321)~~062 Net loss (1829,~~321~~884) (~~129~~4,~~341~~089) (~~129~~3,~~341~~025) -------- -------- -------- ~~--------~~Balance ~~--------~~at ~~-------~~end ~~Cash flows from financing activities: Proceeds from issuance and (repurchase~~ of) ~~long-term~~period ~~debt~~ (1234,~~979~~936) (125,~~979~~052) (~~21,016~~963) ~~(12,266) 168,000 120,000 Payment of debt issuance costs~~ - - - - ~~(6,489) (4,759) Funding of interest escrow account~~ - - - - ~~(16,991)~~ - ~~Payment from interest escrow account 3,250~~ - ~~10,247~~ - ~~3,120~~ - ~~Borrowings (repayments) under Credit Agreement 53,694 53,694 29,890 29,890 (22,061) (22,061) Proceeds from the issuance of preferred stock~~ - - ~~3,000~~ - - - ~~Proceeds from issuance and repurchase of common stock 7~~ - 33 - ~~236~~ - ~~Equity investment from Holdings~~ - - - - -Accumulated ~~29,382~~other ~~--------~~comprehensive ~~--------~~(loss) ~~--------~~income: ~~--------~~Unrealized ~~--------~~gain on securities available-for-~~-----~~sale ~~Net~~165 ~~cash~~25 ~~provided~~196 byMinimum ~~financing~~pension ~~activities~~liability ~~43,972~~adjustment 40(4,~~715~~342) 22(1,~~154~~597) 17(1,~~624~~142) ~~125,815 122,562~~ -------- -------- -------- ~~--------~~Accumulated ~~--------~~other ~~-------~~comprehensive ~~Net~~loss ~~increase~~ (~~decrease) in cash~~ 4,~~885~~177) ~~4,902 2,549 2,540~~ (~~535~~1,572) (~~545~~946) ~~Cash, beginning of year 4,637 4,618 2,088 2,078 2,623 2,623~~ -------- -------- -------- ~~--------~~Total ~~--------~~stockholder's ~~-------~~equity ~~Cash, end of year~~ $ ~~9,522~~369 $ 932,~~520~~858 $ 437,~~637~~573 ~~$ 4,618 $ 2,088 $ 2,078~~ ======== ======== ======== ======== ======== ======= Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 18,907 $ 15,657 $ 19,504 $ 14,950 $ 11,229 $ 8,109 Income taxes $ 4,382 $ 512 $ 1,073 $ 196 $ 828 $ 828

See notes to Consolidated Financial Statements F-6 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) -------------------------------------------------------------------------------

For the years ended March 31, ~~2001~~2003 ~~2000~~2002 2001 --------- ------------------------------------------------ ---------------------- ---------------------- ---------------------- Holdings Enterprises Holdings Enterprises Holdings Enterprises --------- ----------- -------- ----------- --------- ----------- ~~Accrued~~Cash ~~compensation~~flows ~~and~~from ~~fringe~~operating ~~benefits..................~~activities: Net loss $(33,367) 11$(29,~~534~~884) $ 11(6,~~534~~520) $ 11(4,~~358~~089) $ 11(4,~~358~~994) ~~Accrued~~$ ~~interest......................~~(3,025) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 6,192 5,~~478~~786 6,305 6,206 6,955 6,849 Amortization of intangibles 43 43 4,~~133~~213 4,213 4,067 4,067 Loss on impairment of assets held for sale - - - - 370 370 Extraordinary loss on modification of debt 500 - - - - - Extraordinary gain on early extinguishment of debt, net of income taxes - - - - (3,194) (3,194) Cumulative effect of change in accounting principle 24,230 24,230 - - - - (Gain) loss on disposition of equipment (65) (65) (63) (63) 74 74 Deferred income taxes 4,701 4,234 (1,321) (1,054) (1,000) (800) Changes in assets and liabilities: Accounts receivable (294) (294) 14,990 14,990 8,544 8,544 Inventories 8,046 8,046 13,549 13,549 (1,467) (1,467) Other current assets 4,996 3,684 838 (1,735) (789) (3,190) Accounts payable (7,074) (7,074) (4,309) (4,309) (11,754) (11,754) Other current liabilities 1,298 2,090 (476) (88) (6,~~116~~021) (4,~~747~~668) ~~Accrued~~Other assets and liabilities (2,948) (5,037) 5,250 5,635 (4,865) (2,606) -------- -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities 6,258 5,759 32,456 33,255 (14,074) (10,800) -------- -------- -------- -------- -------- -------- Cash flows from investing activities: Purchase of Miller Buckeye Biscuit Company, Inc., net of cash acquired - - - - (17,591) (17,591) Purchase of Guiltless Gourmet, Inc.~~.................~~ 6- - - - (4,~~905~~894) 7(4,~~726~~894) 9Acquisitions of plant and equipment (630) (630) (2,~~260~~019) (2,019) (2,682) (2,682) Proceeds from disposition of equipment 111 111 81 81 154 154 -------- -------- -------- -------- -------- -------- Net cash used in investing activities (519) (519) (1,938) (1,938) (25,013) (25,013) -------- -------- -------- -------- -------- -------- Cash flows from financing activities: Proceeds from repurchase of long-term debt - - - - (12,979) (12,979) Payment of debt modification costs (556) - (768) - - - Payments from interest escrow account - - 1,625 - 3,250 - (Repayments) borrowings under Credit Agreement (3,252) (3,252) (36,381) (36,381) 53,694 53,694 (Repurchase) and proceeds from issuance of common stock (5) - 10 - 7 - -------- -------- -------- -------- -------- -------- Net cash (used in) provided by financing activities (3,~~996~~813) (3,252) (35,514) (36,381) 43,972 40,715 -------- -------- -------- -------- -------- -------- Net increase (decrease) in cash 1,926 1,988 (4,996) (5,064) 4,885 4,902 Cash, beginning of year 4,526 4,456 9,522 9,520 4,637 4,618 -------- -------- -------- -------- -------- -------- Cash, end of year $ 236,~~917~~452 $ 236,~~393~~444 $ 264,~~734~~526 $ 244,~~101~~456 $ 9,522 $ 9,520 ========= ========= ======== ======== ======== ======== Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $12,659 $12,404 $17,281 $14,055 $18,907 $15,657 Income taxes $ 54 $ 54 $ 174 $ 174 $ 4,382 $ 512

See notes to Consolidated Financial Statements F-7 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary Of Significant Accounting Policies The Summary of Significant Accounting Policies below and the other notes to the consolidated financial statements on the following pages are integral parts of the accompanying consolidated financial statements of R.A.B. Holdings, Inc. ("Holdings") and R.A.B. Enterprises, Inc. ("Enterprises"), its direct wholly-owned subsidiary (the "Consolidated Financial Statements"). Holdings is a holding company with no substantial assets or operations other than its investment in Enterprises. Enterprises is a holding company with no substantial assets or operations other than its investments in Millbrook Distribution Services Inc. ("Millbrook") and The B. Manischewitz Company, LLC ("Manischewitz"). Millbrook is one of the nation's largest, independent value-added distributors of specialty foods, health and beauty care products and general merchandise. Manischewitz manufactures (i) processed kosher and other ethnic foods including, among others, matzos, cake mixes, cookies, soups, noodles and processed fish products under its Manischewitz(R) brand; (ii) canned fish, vegetables and other specialty food products under its Season(R) brand; and (iii) organic baked tortilla chips, bean dips, salsas and other specialty food products under its Guiltless Gourmet(R) brand. In addition, Manischewitz licenses its name to third parties for which it receives royalties. Holdings and Enterprises are referred to collectively as the "Companies". Principles of Consolidation - The Consolidated Financial Statements include the accounts of the Companies and their subsidiaries. All significant intercompany transactions and balances are eliminated in consolidation. Certain reclassifications have been made in the prior year financial statements to conform with the current year presentation. Use of Estimates - The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Concentration of Credit Risk - Trade accounts receivable potentially subject the Companies to credit risk. The Companies extend credit to their customers, principally in the U.S. supermarket industry, based upon an evaluation of the customer's financial condition and credit history and generally do not require collateral. The Companies' allowances for doubtful accounts are based upon the expected collectability of trade accounts receivable. Fiscal Year - The Companies' fiscal years end on March 31. Inventories - Inventories are stated at the lower of cost or market. Cost is determined by the last-in, first-out ("LIFO") method. At March 31, 2003 and 2002, the replacement cost of inventories valued using the LIFO method exceeded the net carrying amount of such inventories by approximately $987,000 and $1,240,000, respectively. For the year ended March 31, 2002, the liquidation of certain LIFO layers decreased costs of products sold by approximately $360,000. Marketable Securities - Marketable securities held by the Companies are classified as available-for-sale. The aggregate excess of fair value over cost, net of related income taxes is included as a separate component of stockholders' equity. F-8 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary Of Significant Accounting Policies (Continued) Property, Plant and Equipment - Property, plant and equipment are recorded at cost. For financial reporting purposes, depreciation is provided on the straight-line method over the following estimated useful lives: Buildings and improvements................... 5- 35 years Machinery and equipment...................... 2- 15 years Rolling stock................................ 3- 8 years Expenditures which significantly increase value or extend useful lives are capitalized, while ordinary maintenance and repairs are expensed as incurred. The cost and related accumulated depreciation of assets replaced, retired or disposed of are removed from the accounts and any related gains or losses are reflected in operations. Intangibles - Historically, intangibles were amortized on a straight-line basis over their estimated useful lives ranging from 4 to 40 years. Effective April 1, 2002, the Companies adopted Statement of Financial Accounting Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets", which eliminated the periodic charge to earnings for intangible amortization of goodwill and long-lived intangible assets for fiscal 2003 and future years. In addition, as required by SFAS No. 142, an initial assessment of recorded goodwill for possible impairment was conducted as of April 1, 2002. Annual testing for possible goodwill impairment will be performed as of March 31 of each year. See Note 7 for additional disclosures related to SFAS No. 142. Long-Lived Assets - The Companies review their long-lived assets and related intangibles for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Such changes in circumstances may include, among other factors, a significant change in technology that may render an asset obsolete or noncompetitive or a significant change in the extent or manner in which an asset is used. The assessment for potential impairment is based upon the Companies' abilities to recover the unamortized balance of their long-lived assets from expected future cash flows on an undiscounted basis (without interest charges). If such expected future cash flows are less than the carrying amount of the asset, an impairment loss would be recorded. Revenue Recognition - Revenue is recognized when products are shipped or services are provided to customers. Provisions for returns, rebates and allowances and bad debts are based upon historical experience and known events. Royalty Income - The Companies have licensing agreements under which they receive royalty payments. Royalty payments due under licensing agreements are recognized as income either based upon shipment reports from manufacturers, where available, or estimated shipments by such manufacturers. Income Taxes - Deferred income taxes result primarily from temporary differences between financial and tax reporting and acquisition basis differences. The tax effects of these differences are calculated using enacted rates in effect for the year in which they are expected to reverse and are recorded as deferred tax assets and liabilities. F-9 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary Of Significant Accounting Policies (Continued) Comprehensive (Loss) Income - For the years ended March 31, 2003, 2002 and 2001, Holdings' and Enterprises' comprehensive (loss) income was ($35,972,000) and ($32,489,000), respectively, ($7,146,000) and ($4,715,000), respectively, and ($6,099,000) and ($4,130,000), respectively. Accounting Pronouncements - Statement of Financial Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and Hedging Activities" was issued in June 1998. SFAS No. 133 requires the recognition of all derivatives in the consolidated balance sheet as either assets or liabilities measured at fair value. The Companies adopted SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, during the year ended March 31, 2001. The adoption of SFAS No. 133 did not have a material impact on the Companies' financial position or overall trends in results of operations and has not resulted in significant changes to its financial risk management practices. Emerging Issues Task Force ("EITF") Issue No. 00-25 "Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor's Products" was issued in September 2000. EITF No. 00-25 requires the reclassification of certain consideration paid to a reseller by a vendor as a reduction of income on the vendor's income statement. The Companies adopted EITF No. 00-25 effective April 1, 2001. The adoption of EITF No. 00-25 did not have a material impact on the Companies' overall trends in results of operations. SFAS No. 143 "Accounting for Asset Retirement Obligations" was issued in August 2001 and is effective for fiscal years beginning after June 15, 2001. SFAS No. 143 establishes accounting standards for recognition and measurement of a liability for an asset retirement obligation and the associated asset retirement cost. SFAS No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" was issued in October 2001 and is effective for fiscal years beginning after December 15, 2001. SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets. The Companies adopted SFAS No. 143 and 144 effective April 1, 2002. The adoption of SFAS No. 143 and 144 did not have a material impact on the Companies' financial position or overall trends in results of operations. SFAS No. 145 "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" was issued in April 2002 and is effective for fiscal years beginning after May 15, 2002. SFAS No. 145 eliminates the requirement to classify gains and losses from the extinguishment of debt as extraordinary, requires certain lease modifications to be treated the same as a sale-leaseback transaction and makes other non-substantive technical corrections to existing pronouncements. The Companies will adopt SFAS No. 145 when it becomes effective. SFAS No. 146 "Accounting for Costs Associated with Exit or Disposal Activities" was issued in June 2002 and is effective for exit or disposal activities initiated after December 31, 2002, with earlier adoption encouraged. SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operations, plant closing, or other exit or disposal activities. The Companies will adopt SFAS No. 146 for any future exit or disposal activities. F-10 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Summary Of Significant Accounting Policies (Continued) SFAS No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" was issued in April 2003 and is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after that date. SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities under SFAS No. 133. The adoption of SFAS No. 149 will not have a material impact on our financial position or overall trends in results of operations and will not result in any significant change to our financial risk management practices. SFAS No. 150 "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" was issued in May 2003 and is effective for instruments entered into or modified after May 15, 2003. SFAS No. 150 requires that certain financial instruments including mandatorily redeemable instruments and forward purchase contracts be reported as liabilities by their issuers. The Companies will adopt SFAS No. 150 when it becomes effective. 2. Formation On May 6, 1996, Holdings, a Delaware corporation, was formed. On March 31, 1997, Holdings acquired Millbrook for a purchase price of approximately $67 million, including transaction costs. Holdings had no operations prior to April 1, 1997. On January 26, 1998, Holdings formed Enterprises, a wholly-owned subsidiary and Delaware corporation. Effective March 3, 1998, Enterprises entered into a purchase agreement with MANO Holdings I, LLC, KBMC Acquisition Company, L.P., MANO Holdings Corporation ("MANO") and the stockholders of MANO to acquire all of the outstanding membership interests of Manischewitz. On May 1, 1998, Enterprises acquired all of the outstanding interests of Manischewitz for approximately $126.2 million through the issuance of $120 million Senior Notes due 2005 bearing interest at 10.5% ("10.5% Notes") and the issuance by Holdings of $48 million Senior Notes due 2008 bearing interest at 13% ("13% Notes"). The 10.5% Notes are fully and unconditionally guaranteed on a joint and several basis by Millbrook and Manischewitz. Accordingly, as the combined financial statements of the subsidiaries guaranteeing the 10.5% Notes (the Companies' only consequential subsidiaries) are substantially equivalent to the consolidated financial statements of Enterprises, no separate financial statements of Millbrook and Manischewitz are presented since management has determined that such information is not material to investors. 3. Accounts Receivable Accounts receivable for Holdings and Enterprises consisted of the following (in thousands):

March 31, ~~2001~~2003 ~~2000~~2002 --------- ------------------------ ------------------------- ~~Holdings Enterprises Holdings Enterprises~~ ---- ----- --------~~---~~ -------- -----~~------~~ ~~10.5%~~Accounts ~~Notes due 2005~~receivable.................. ~~$ 80,340 $ 80,340 $ 99,150 $ 99,150 13% Notes due 2008~~.................... ~~25,000 - 25,000 - Revolving credit facility~~.....~~........~~ ~~95,000~~$ 9540,~~000~~088 ~~39,000~~$ 3941,~~000~~479 ~~Term~~Allowance ~~loan~~for doubtful accounts............................. ~~4,633 4,633 6,939 6,939 --------- --------- --------- --------- 204,973 179,973 170,089 145,089 Less current maturities~~..~~.............~~ (1,~~866~~736) 1(3,~~866~~421) ~~1,946 1,946~~ --------- ----~~-----~~ --------- ----~~-----~~ $ ~~203~~38,~~107~~352 $ ~~178~~38,~~107~~058 ~~$ 168,143 $ 143,143~~ ========= ====~~=====~~ ========= ===~~======~~

F-11 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Inventories Inventories for Holdings and Enterprises consisted of the following (in thousands):

March 31, ~~2001~~2003 ~~2000~~2002 ~~1999~~ --------- --------------------- --------------------- -----------~~----------~~ ~~Holdings Enterprises Holdings Enterprises Holdings Enterprises~~ -------- -----~~------~~ -------- -----~~------~~ ~~--------~~Raw ~~----------- Currently (receivable) payable: Federal~~materials...................... ~~$ (2,041) $ (995) $ (4,329) $ (1,564) $ (671) $ (671) State~~........................... ~~(370)~~$ ~~(344) (627) (183) (115) (115) -------- -------- -------- -------- -------- -------- (2,411) (~~1,~~339)~~849 ~~(4,956)~~$ (1,~~747)~~821 ~~(786)~~Finished ~~(786) -------- -------- -------- -------- -------- -------- Deferred (benefit) liability: Federal~~goods...................... ~~$ (658) $ (658) $ 3,759 $ 1,984 $ (2,582) (807) State~~.......................... ~~(342) (142) 51 51 194 194 -------- -------- -------- -------- -------- -------- (1~~49,~~000)~~111 ~~(800) 3~~57,~~810~~185 ~~2,035 (2,388) (613)~~ -------- -----~~---~~ -------- -----~~---~~ ~~-------- --------~~ $ (350,~~411)~~960 $ (259,~~139)~~006 ~~$ (1,146) $ 288 $ (3,174) $ (1,399)~~ ======== =====~~===~~ ======== =====~~=== ======== ========~~

5. Other Current Assets During the year ended March 31, 2001, Millbrook realigned certain of its distribution operations which resulted in the closure of its Ozark, Alabama facility. The carrying amount of this asset was reduced by $370,000 to its estimated net realizable value and is classified as a component of Other Current Assets on the Companies' balance sheets as of March 31, 2003 and 2002. 6. Property, Plant & Equipment Property, plant and equipment for Holdings and Enterprises consisted of the following (in thousands):

~~For the years ended~~ March 31, ~~2001~~2003 ~~2000~~2002 ~~1999~~ ----------------------------- --------------------- ------------~~---------~~ -------------~~--------~~ ~~Holdings Enterprises Holdings Enterprises Holdings Enterprises~~ -------- -----~~------~~ ~~--------~~Land.......................................................... ~~-----------~~$ ~~--------~~2,673 ~~-----------~~$ ~~Statutory~~2,673 ~~rate~~Buildings and improvements.................. ~~(35~~.~~0%) (35~~.~~0%) (35~~.~~0%) 35~~.~~0% (35~~.~~0%) (35~~.~~0%)~~............ ~~State~~15,419 ~~income taxes~~15,249 ~~net~~Machinery ofand ~~Federal benefit~~equipment............ (4.~~0) (3~~.~~8) (2~~.~~6) 116~~.6 .~~5 1~~.0..................... ~~Nondeductible~~31,916 ~~amortization~~31,704 ofRolling ~~intangibles~~stock................ 4.~~6 6~~.~~3 16~~.~~4 945~~.~~0 4~~.~~5 9~~.0........................... ~~Change~~2,219 in2,755 ~~valuation~~Construction ~~allowances~~in progress.. ~~- - (23~~.~~3) (657~~.~~7) - - Other~~........................... 5.~~0 6~~.~~9 6~~.~~2 115~~.~~3 (1~~.~~4) (2~~.8). 33 - ---- --------- ----- -------- 52,260 52,381 Less accumulated depreciation and amortization................ 26,975 22,895 ------------- ------------- ~~(29.4%)~~$ (25~~.6%)~~,285 ~~(38.3%)~~$ ~~554.2%~~29,486 ~~(31.4%) (27.8%)~~ ===== ===== ===== ===== ===== =====

7. Intangibles Effective April 1, 2002, the Company adopted SFAS No. 142 "Goodwill and Other Intangible Assets". Under this standard, goodwill and intangibles with indefinite useful lives, including trademarks and tradenames are no longer systematically amortized. Instead, they are reviewed for impairment and written down and charged to results of operations when their carrying amount exceeds their estimated fair values. Amortization expense for the year ended March 31, 2003 was approximately $43,000 representing the amortization of the remaining net book value of identified intangibles still required to be amortized under SFAS No. 142. F-12 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Intangibles (Continued) With the assistance of an independent professional appraisal firm, the Companies performed impairment tests on the excess of cost over net assets acquired ("goodwill") and intangibles. The previous method for determining impairment prescribed by SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," utilized an undiscounted cash flow approach for the impairment assessment, while SFAS No. 142 utilizes a fair value approach. The Companies have two reporting units (Millbrook and Manischewitz) with goodwill and intangibles, which also represent the Companies' reporting segments. Goodwill and intangibles were reviewed for impairment at the level of each reporting unit. This review indicated that the goodwill recorded at the Companies' Manischewitz subsidiary was impaired as the carrying value of the subsidiary was in excess of its estimated fair value. In determining the amount of the goodwill writedown, SFAS No. 142 requires an allocation of the estimated fair value to Manischewitz' net assets. This allocation resulted in a significant increase in the value of the subsidiary's trademarks and tradenames, which under the provisions of SFAS No. 142 may not be written up from their historical carrying value. Since the allocation process utilizes the increased value of the trademarks and tradenames in arriving at the remaining amount of goodwill to be compared to the historical carrying value of goodwill, the amount of the goodwill writedown is increased. As a result, the Companies recorded a $24.2 million non-cash charge as a cumulative effect of a change in accounting principle for the writedown of goodwill to its estimated fair value during the year ended March 31, 2003. The goodwill writedown was not deductible for income taxes and, as a result, no income tax benefit was recorded in relation to the charge. The cumulative impact of adopting this change in accounting principle is reflected in the accompanying statement of operations, but does not affect the Companies' operations and has no impact on cash flows. The provisions of SFAS No. 142 require an annual assessment of goodwill and intangibles to determine any possible future impairment. The Companies elected to perform this annual assessment as of March 31 of each year. As of March 31, 2003, the Companies' annual assessment of each reporting unit indicated that goodwill and intangibles were not impaired. The effect of adopting SFAS No. 142 on the net loss for the years ended March 31, 2003, 2002 and 2001 are as follows (in thousands):

~~2000~~2003 2002 2001 ---------------------- ------------------------ ----------------------- Holdings ~~and~~Enterprises ~~March~~Holdings ~~31,~~Enterprises Holdings Enterprises ~~Enterprises~~----------- ----------- ---------- ------------- ---------- ----------- ~~Deferred~~Net ~~Tax~~Loss ~~Assets: Accounts receivable~~$(33,367) ~~principally due to allowances for doubtful accounts...........~~ $ 1(29,~~785~~884) $ 1(6,~~785~~520) $ 1(4,~~701~~089) ~~Deferred~~$ ~~compensation........................~~ (4,~~066~~994) ~~4,066~~$ (3,~~982~~025) ~~Net~~Add: ~~operating~~cumulative ~~loss~~effect ~~carryforwards.............~~of ~~200~~change -in -accounting ~~Liability~~principle ~~accruals........................... 4~~24,~~535~~230 424,~~535~~230 ~~4,049~~- ~~Other,~~- ~~net...................................~~- ~~1,193~~- ~~1,193~~-------- ~~682~~-------- ~~Deferred~~-------- ~~Tax~~-------- ~~Liabilities:~~-------- ~~Inventories~~-------- Net Loss, ~~principally~~excluding ~~due~~cumulative toeffect ~~acquisition~~of ~~basis~~change ~~differences~~in ~~and~~accounting ~~financial~~principle ~~statement~~(9,137) ~~allowances.............~~(5,654) (46,~~228~~520) (4,~~228~~089) (4,~~886~~994) ~~Property~~(3,025) ~~plant~~Add: &amortization ~~equipment~~of indefinite-lived intangible assets, ~~principally~~net ~~due~~of totax ~~basis~~- ~~differences...................~~- (52,~~351)~~396 (52,~~351)~~396 (52,~~979)~~333 ~~Identified intangibles~~2,333 ~~due~~Add: tovaluation ~~basis~~allowances ~~differences~~recorded as a result of the impact of SFAS No.~~.........................~~ ~~(9,269)~~142 (96,~~269)~~240 (94,~~135)~~831 - - - - -------- -------- -------- -------- -------- -------- Net ~~deferred~~Loss, ~~tax~~excluding ~~liabilities.................~~cumulative effect of change in accounting principle and valuation allowances in 2003 and amortization of indefinite-lived intangible assets in 2002 and 2001 $ (72,~~069~~897) $ (7823) $ (4,~~269~~124) $ (91,~~586~~693) $ (2,661) $ (692) ======== ======== ======== ======== ======== ========

F-13 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Intangibles (Continued) The changes in the carrying amount of goodwill and intangible assets during the year ended March 31, 2003, including the effect of adopting SFAS No. 142 are as follows (in thousands):

~~For~~Millbrook ~~the~~Manischewitz ~~period ended March 31, 2001 2000~~ ----------------~~--------------~~ ---- ---- ~~Other Post~~- ~~Other Post~~- ~~Pension Retirement Pension Retirement Benefits Benefits Benefits Benefits~~ -------- ----------- ~~--------~~Intangible ~~-----------~~Goodwill ~~Change~~Goodwill inAssets ~~benefit~~Total obligation Benefit obligation at beginning of period...... $ 12,152 $ 1,608 $ 13,481 $ 1,697 Service cost................................... 126 24 157 21 Interest cost.................................. 909 140 876 112 Actuarial (gain) loss.......................... 601 325 (1,224) (134) Benefits paid.................................. (960) (108) (1,138) (88) -------- -------- -------- ----~~----~~ ~~Benefit obligation at end of period............ 12,828 1,989 12,152 1,608~~ -------- ----~~----~~ -------- -~~-------~~ ~~Change~~Balance ~~in plan assets Fair value of plan assets~~ at ~~beginning~~March ~~of period.................................... 13~~31,~~145~~ ~~- 11~~2002,~~391~~ -net ~~Actual~~of ~~return~~accumulated onamortization ~~plan~~$ ~~assets................... (2~~15,~~387)~~103 -$ 159,~~893~~137 -$ ~~Employer contributions......................... 1~~40,005 ~~108 1~~$114,~~000~~245 88Less: ~~Benefits~~goodwill ~~paid..................................~~writedown ~~(960)~~recognized ~~(108)~~as ~~(1,138)~~a ~~(88)~~cumulative ~~--------~~effect ~~-------- -------- -------- Fair value~~ of ~~plan~~change ~~assets~~in ataccounting ~~end~~principle of- ~~period..... 10~~24,~~803~~230 - 1324,~~145~~230 -Less: ~~--------~~intangible ~~--------~~amortization -~~-------~~ -~~-------~~ ~~Funded~~43 ~~status..................................~~43 ~~(2,025) (1,989) 993 (1,608) Unrecognized actuarial (gain) loss............. 1,926 226 (2,097) (99)~~ -------- -------- -------- -------- ~~Net~~Balance ~~amount~~at ~~recognized..........................~~March ~~$ (99) $ (1~~31,~~763)~~ ~~$ (1~~2003,~~104)~~ $net ~~(1,707) ======== ======== ======== ======== Amount recognized in the statement~~ of ~~financial~~accumulated ~~position~~amortization ~~consists of: Accrued benefit liability......................~~ $ (115,~~989)~~103 $ (134,~~763)~~907 $ (139,~~104)~~962 $ (189,~~707)~~972 ~~Accumulated other comprehensive income......... 1,890 - - - -------- -------- -------- -------- Net amount recognized.......................... $ (99) $ (1,763) $ (1,104) $ (1,707)~~ ======== ======== ======== ======== Weighted-average assumptions: Discount rate.................................. 7.25% 7.25% 7.75% 7.75% Expected return on assets...................... 7.50% - 7.50% - Rate of compensation increase.................. 4.00% - 4.00% -

At March 31, 2003, Manischewitz' intangible assets were comprised of trademarks and tradenames. 8. Other Current Liabilities Other current liabilities for Holdings and Enterprises consisted of the following (in thousands):

~~For the period ended~~ March 31, ~~2001~~2003 ~~2000~~2002 ------------------------------ ---- ---- ~~Other Post~~-------------------------- ~~Other Post~~---------------------------- ~~Pension~~Holdings ~~Retirement~~Enterprises ~~Pension~~Holdings ~~Retirement~~Enterprises ~~Benefits Benefits Benefits Benefits~~ -------- ------------------- ------------ ---------------- ~~Components~~Accrued ofcompensation ~~net~~and ~~periodic~~fringe ~~benefit cost Service cost~~benefits..................~~................~~ $ ~~126~~9,083 $ 249,083 $ ~~157~~11,038 $ 2111,038 ~~Interest~~Accrued ~~cost~~rebates and promotional allowances...........~~......................~~ ~~909~~5,437 ~~140~~5,437 ~~876~~3,941 ~~112~~3,941 ~~Expected~~Accrued ~~return on assets~~interest...................... ~~(975)~~5,201 -4,470 ~~(845)~~5,380 -4,034 ~~Recognized~~Accrued ~~net actuarial gain~~liabilities................... ~~(59)~~2,567 -3,954 -2,586 -3,796 ----------- ----------- ----------- ------------ ~~Net periodic pension cost.....................~~ $ 122,288 $ ~~164~~22,944 $ ~~188~~22,945 $ ~~133~~22,809 =========== =========== =========== ============

On January 31, 2000, Millbrook acquired certain of the assets and operations of I. Epstein & Sons, Inc. ("Epstein"). On April 17, 2000, Millbrook acquired substantially all of the assets and operations of the Miller Buckeye Biscuit Company, Inc. ("Miller Buckeye"). The liabilities assumed in the Epstein and Miller Buckeye acquisitions included a $1.7 million provision for minor restructurings of their respective operations as a result of these acquisitions. These liabilities are principally comprised of a portion of future lease payments. As of March 31, 2003 and 2002, the balance of this provision of approximately $800,000 and $900,000, respectively, has been included as a component of Other Current Liabilities and Other Liabilities on the Companies' balance sheets. F-14 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Long-term Debt Long-term debt for Holdings and Enterprises consisted of the following (in thousands):

1March 31, 2003 2002 -~~Percentage~~-~~Point~~------------------------------------ -------------------------- ~~Increase~~---------------------------- ~~Decrease~~Holdings Enterprises Holdings Enterprises ----------- ------------- ~~(In~~----------- ~~thousands)~~-------------- ~~Effect~~10.5% onNotes ~~total~~due of2005.................. ~~service~~$ ~~and~~80,340 ~~interest~~$ ~~cost~~80,340 ~~components~~$ 80,340 $ 80,340 13% Notes due 2008.................... $2,000 17- $25,000 ~~(14)~~- ~~Effect~~6% onNotes ~~postretirement~~due ~~benefit~~2010..................... ~~obligation~~22,987 - - - Revolving credit facility............. 60,000 60,000 60,485 60,485 Term loan............................. - - 2,767 2,767 ----------- ----------- ----------- ------------ 165,327 140,340 168,592 143,592 Less current maturities............... - - 2,767 2,767 ----------- ----------- ----------- ------------ $ ~~174~~165,327 $ ~~(150)~~140,340 $ 165,825 $ 140,825 =========== =========== =========== ============

Millbrook and Manischewitz have a credit agreement with a group of commercial lending institutions providing for a credit facility consisting of revolving credit loans up to $105 million (the "Credit Agreement"). Borrowings under this long-term facility, which expires October 28, 2004, are supported by specified assets in accordance with a borrowing base formula, as defined in the Credit Agreement. Additionally, the Credit Agreement requires the maintenance of a minimum level of cash flow, as defined and imposes restrictions on investments, capital expenditures, cash dividends, management fees and advances to the parent and other indebtedness. At March 31, 2003, substantially all of the assets of Enterprises' subsidiaries are unavailable for dividends. At March 31, 2003, Millbrook and Manischewitz had available, under the Credit Agreement, unused borrowing capacity of approximately $14.0 million, net of outstanding letters of credit of approximately $5.7 million. The Credit Agreement is secured by Millbrook's and Manischewitz' accounts receivable and inventories, mortgages on certain real property and Manischewitz' pledge of certain unencumbered fixtures and equipment, Millbrook's stock and the membership interests of Manischewitz. Borrowings under the Credit Agreement bear interest at either the London interbank offered ("LIBO") rate plus a margin (up to 3.50%) or the bank's alternate base rate ("ABR") plus a margin (up to 1.50%). The margin, which ranged from 3.25% to 3.50% for LIBO and 1.25% to 1.50% for ABR during the year ended March 31, 2003, is based upon availability pursuant to the borrowing base calculation. At March 31, 2003 and 2002, borrowings under the LIBO option were $60,000,000 and $62,767,000, respectively. At March 31, 2003 and 2002, the interest rates on the outstanding LIBO loans ranged from 4.59% to 4.63% and 5.13% to 5.55%, respectively. At March 31, 2003 and 2002, Millbrook's and Manischewitz' outstanding debt under the Credit Agreement approximates fair value. At March 31, 2003 and 2002, the fair value of Holdings' 13% Notes was $100,000 and $5.0 million, respectively. At March 31, 2003, the fair value of Holdings' 6% Notes was $2.3 million. At March 31, 2003 and 2002, the fair value of Enterprises' 10.5% Notes was $32.1 million and $28.1 million, respectively. F-15 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Long-term Debt (Continued) The Companies (i) do not engage in derivative activity for trading or speculative purposes; (ii) periodically evaluate the financial position of the counterparty; and (iii) do not expect non-performance by the counterparty. During the year ended March 31, 2003, Holdings amended the Indenture underlying 92% ($23.0 million) of its 13% Notes outstanding. The amendment (i) reduced the interest rate to 6% per annum, (ii) extended their maturity date from May 1, 2008 to May 1, 2010 and (iii) increased the aggregate outstanding principal by approximately $1.5 million, representing the deferred May 2002 interest payment. Holders of the amended Notes received warrants granting them the right to purchase up to approximately 5% of Holdings' common stock. See Note 10 for additional disclosures related to the warrants. The Company, at its option, may defer the payment of cash interest on the 6% Notes for ten semi-annual interest payment dates through May 1, 2007. The changes contained in the amendment constitute a material modification of the Indenture requiring the historical deferred debt issuance costs to be written off. Accordingly, debt issuance costs of $500,000 were written off and reported as an extraordinary item in the accompanying statement of operations during the year ended March 31, 2003. The income tax benefit of $200,000 related to the extraordinary item was offset by a valuation allowance required by the adoption of SFAS No. 142. On November 1, 2002 and May 1, 2003, Holdings elected to defer the cash payment of interest on its 6% Notes. During the year ended March 31, 2001, Enterprises repurchased approximately $18.8 million of its outstanding 10.5% Notes resulting in a gain of approximately $3.2 million, net of income taxes of approximately $2.1 million. This transaction was recorded as an extraordinary item. Future maturities of long-term debt at March 31, 2003 were as follows (in thousands): Holdings Enterprises ------------- --------------- 2004.................... $ - $ - 2005.................... 60,000 60,000 2006.................... 80,340 80,340 2007.................... - - 2008.................... 2,229 - Thereafter.............. 22,758 - ---------- ----------- $ 165,327 $ 140,340 ========== =========== F-16 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Stockholders' Equity In conjunction with its acquisition of Millbrook in 1997, Holdings sold 20,000 shares of Series A Preferred Stock at $500 per share and 100,000 shares of Common Stock at $1.00 per share. During the year ended March 31, 2000, Holdings sold an additional 5,000 shares of Series A Preferred Stock at $500 per share and 1,000 shares of Series B Preferred Stock at $500 per share. The holders of the Series A and B Preferred Stock are entitled to cumulative preferential cash dividends of $50 per year (10%), per share. At March 31, 2003, the amount of accumulated unpaid dividends per share on the Series A Preferred Stock was $300 for shares issued in 1997 and $200 for each of the Series A and B Preferred Stock issued in 1999, aggregating approximately $7.2 million. Unless all accumulated and unpaid dividends on the Series A and B Preferred Stock are paid, no dividends shall be declared or paid on Holdings' Common Stock. The Series A and B Preferred Stock are each subject to an optional redemption by Holdings at any time, in whole or in part, at the redemption price per share of $500 plus an amount equal to all accumulated and unpaid dividends. In connection with the amendment of the Indenture underlying 92% ($23.0 million) of its 13% Notes outstanding, Holdings issued warrants granting holders of the amended Notes the right to purchase 5,060 shares of common stock at a nominal price. The warrants, which expire in April, 2010, were valued at approximately $2.5 million. 11. Commitments And Contingencies Leases The Companies lease certain facilities, machinery and vehicles under various non-cancelable capital and operating lease agreements. The Companies are required to pay property taxes, insurance and normal maintenance costs for certain of their facilities. Future minimum lease payments required under such leases in effect at March 31, 2003 were as follows (in thousands):

~~For~~Capital ~~the~~Lease ~~years~~Operating ~~ended~~Obligations ~~March~~Leases ~~31, 2001 2000 1999~~ ---------------~~--------------~~ ---------------~~------------~~ --------------------------- --------------------------- (in thousands) Holdings Enterprises Holdings Enterprises Holdings Enterprises ------------ ------------ ------------ ------------ ------------ ------------ Revenues Millbrook2004........................ ~~$ 607,096 $ 607,096 $ 537,872 $ 537,872 $ 464,785 $ 464,785 Manischewitz~~........... $ 73 $ 5,004 2005.......... ~~57,695 57,695 50,321 50,321 46,549 46,549 --------- --------- --------- --------- --------- --------- Total segment revenues~~......... ~~664,791 664,791 588,193 588,193 511,334 511,334 Corporate items, principally the elimination of intercompany sales~~................ ~~(12,352)~~16 ~~(12~~4,~~352) (7,577) (7,623) (3,041) (3,041) --------- --------- --------- --------- --------- --------- $ 652,439 $ 652,439 $ 580,616 $ 580,~~570 ~~$ 508,293 $ 508,293 ========= ========= ========= ========= ========= ========= Operating income Millbrook~~2006........................ ~~$ 12,478 $ 12,478 $ 15,009 $ 15,009 $ 7,985 $ 7,985 Manischewitz~~........... - 4,150 2007.......... ~~9,623 9,623 11,666 11,666 12,520 12,520 --------- --------- --------- --------- --------- --------- Total segment operating income~~......................... ~~22,101~~- 223,~~101~~469 ~~26,675 26,675 20,505 20,505 Corporate items and eliminations~~2008................... (13,343) (13,266) (10,710) (10,735) (10,581) (10,581) --------- --------- --------- --------- --------- --------- $ 8,758 $ 8,835 $ 15,965 $ 15,940 $ 9,924 $ 9,924 ========= ========= ========= ========= ========= ========= Identifiable assets Millbrook................ - 1,377 Thereafter........ ~~$ 141,271 $ 141,271 $ 133,072 $ 133,072 $ 126,719 $ 126,719 Manischewitz~~..................... ~~49,532 49,532 49,199 49,199 47,324 47,324~~ -~~--------~~ ~~---------~~271 --------- -~~--------~~ --------- --~~-------~~ ~~Total~~Future ~~segment~~minimum ~~assets~~lease payments........... ~~190,803~~$ ~~190,803~~89 ~~182,271~~$ ~~182~~18,~~271~~841 ~~174,043~~=========== ~~174,043~~Less: ~~Corporate~~Interest ~~items,~~and ~~principally~~executory ~~intangibles not allocated to segments~~costs.....~~...............~~ ~~121,832~~6 ~~121,225 108,122 103,444 123,949 105,795~~ --------- -~~--------~~ ~~---------~~Total ~~---------~~capital ~~---------~~lease ~~---------~~obligations........ $ ~~312,635~~83 ~~$ 312,028 $ 290,393 $ 285,715 $ 297,992 $ 279,838~~ ========= =~~======== ========= ========= ========= =========~~

F-17 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Commitments And Contingencies (Continued) Capital lease obligations have been included as a component of Other Current Liabilities and Other Liabilities on the Companies' balance sheets. Interest rates on capital lease obligations vary from 9.0% to 13.3%. The net carrying amount of assets under capital leases at March 31, 2003 were approximately $72,000. Total rent expense for all operating leases was $7.9 million, $8.3 million and $8.9 million for the years ended March 31, 2003, 2002, and 2001, respectively. Commitments At March 31, 2003 and 2002, Manischewitz had approximately $2.1 million and $1.6 million, respectively, of purchase commitments with certain vendors. Contingencies The Companies are subject to various legal actions, regulatory investigations and proceedings and claims threatened or pending in the normal course of their business. While it is not feasible to predict or determine the outcome of these actions, claims and proceedings, it is the opinion of management that their outcome, to the extent not provided for through insurance, indemnification or established reserves, will not have a materially adverse effect on the Companies' financial position or future results of operations. 12. Income Taxes The provision (benefit) for income taxes consisted of the following (in thousands):

~~For~~March ~~the~~31, ~~three months ended Fiscal 2001~~ --------- 2003 2002 2001 ------------------------- ------------------------ ------------------------ Holdings Enterprises Holdings Enterprises Holdings Enterprises --------- -----------~~----~~ ~~(in thousands) June 30, September 30, December 31, March 31,~~ --------~~----~~ ------------ --------~~----~~ ------------ ~~Holdings~~Currently ~~Revenues~~(receivable) payable: Federal ............................ $ ~~157,334~~- $ ~~154,646~~- $ ~~172~~(1,~~579~~281) $ ~~167~~(588) $(2,~~880~~041) ~~Gross~~$ ~~profit~~(995) State ..................... ~~38,314 37,343 40,700 46,474 Operating income (loss)~~ .......... ~~423~~207 74 - - (~~413~~370) ~~1,771~~(344) ~~6,977~~------- ~~Net~~------- ~~income~~------- ------- ------- ------- 207 74 (~~loss~~1,281) (1588) ~~............. 387~~ (32,~~318~~411) (21,~~218~~339) ~~155~~------- ~~Enterprises~~------- ~~Revenues~~------- ------- ------- ------- Deferred (benefit) liability: Federal ............................ ~~157~~(1,~~334~~378) ~~154,646~~(603) ~~172~~(1,~~579~~212) ~~167,880~~(748) ~~Gross~~(658) ~~Profit~~(658) State ..................... ~~38,314 37,343 40,700 46,474 Operating income (loss)~~ .......... ~~426~~(276) (~~409~~109) (544) (306) (342) (142) ------- ------- ------- ------- ------- ------- (1,~~797~~654) 7(712) (1,~~021~~756) ~~Net income~~ (~~loss~~1,054) (1,000) (800) ------- ------- ------- ------- ------- ------- Change in Valuation Allowances ........................... ~~861~~6,355 4,946 435 - - - ------- ------- ------- ------- ------- ------- $ 4,908 $ 4,308 $(2,~~861~~602) $(1,~~707~~642) ~~682~~$(3,411) $(2,139) ======= ======= ======= ======= ======= =======

F-18 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. Income Taxes (Continued) A reconciliation of the statutory United States Federal income tax rate to the Companies effective income tax (benefit) rates follows:

For the ~~three~~years ~~months~~ ended ~~Fiscal~~March ~~2000~~31, 2003 2002 2001 --------- --------------------------- -------------------------- -------------------------- Holdings Enterprises Holdings Enterprises Holdings Enterprises ---------- ---------- ~~(in thousands) June 30, September 30, December 31, March 31,~~ ----- ---------- ------------ -- ----------- ------------- ~~Holdings~~Statutory ~~Revenues~~ rate.................... (35.0%) (35.0%) (35.0%) (35.0%) (35.0%) $(35.0%) ~~125,571~~State $income ~~144~~taxes,~~536~~ $net ~~145,852~~of $Federal ~~164,657 Gross profit~~ benefit.............. (4.8) (5.3) (3.9) (3.5) (4.0) (3..8) ~~27,993~~Nondeductible ~~31,541~~amortization ~~32,797~~of ~~45,843 Operating income (loss)~~ intangibles.......... ~~136 1,498 2,242 12,089 Net income (loss)(2)~~ ........ 0.2 0.~~...~~5 5.8~~,329~~ ~~(310)~~9.3 ~~(1,670)~~ 4~~,716~~.6 ~~Enterprises~~6.3 ~~Revenues~~Change in valuation allowances................... 170.5 367.5 4.~~...~~8 ~~125,525~~- ~~144,536~~- ~~145,852~~- ~~164,657 Gross Profit~~ Other..................... ~~27,947 31,541 32,797 45,843 Operating income (loss)~~ ........ 0..8 ~~93 1,501 2,255 12,091 Net income~~ (~~loss~~7.6) (0.2) 0.5 5.0 6.9 ---------- -------------- ----------- -------------- ----------- ------------ 131.7% 320.1% (28.5%) (28.7%) (29.4%) (25.~~....~~6%) ~~613~~========== ~~149~~============== ~~(1,200)~~=========== ~~4,944~~============== =========== ============

The income tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands):

~~BALANCE~~2003 ~~SHEETS~~2002 ~~(In thousands except for share and per share data)~~ -------------------------- --------------------------~~-----------------------------------------------------------------------------~~ March 31, ~~2001~~Holdings ~~2000~~Enterprises Holdings Enterprises -------------------------------------------------- ----------~~-------~~ ------------- -----------~~-----~~ ------------~~-----------------~~ ~~Holdings~~Deferred ~~Enterprises~~Tax ~~Holdings~~Assets: ~~Enterprises~~Accounts ~~------------~~receivable, ~~---------------~~principally ~~------------~~due ~~---------------~~to ~~ASSETS~~allowances ~~Current~~for ~~assets:~~doubtful ~~Cash~~accounts........... $ 3790 $ -790 $ 191,879 $ -1,879 ~~Restricted~~Deferred ~~investments~~compensation........................ 13,~~629~~992 - 3,~~145~~992 -4,064 ~~Other current assets 3~~4,~~847~~064 6Net 8operating 41loss ~~--------~~carryforwards............. ~~--------~~4,588 ~~--------~~2,544 ~~--------~~1,644 ~~Total~~742 ~~current~~Liability ~~assets~~accruals........................... 5,~~479~~256 65,256 34,~~172~~651 414,651 ~~Noncurrent~~Other, ~~assets:~~net................................... ~~Restricted~~945 ~~investments~~945 ~~- -~~ 1,~~582~~298 ~~- Intercompany notes receivable - 70~~1,~~470~~298 -Deferred ~~64,502~~Tax ~~Other~~Liabilities: ~~assets 910 1~~Inventories,~~857~~ ~~980~~principally ~~2,853~~due ~~--------~~to ~~--------~~acquisition ~~--------~~basis ~~--------~~differences ~~Total~~and ~~noncurrent~~financial ~~assets~~statement ~~910~~allowances............. 72(2,~~327~~202) (2,~~562~~202) 67(3,~~355~~644) ~~Investments in subsidiaries 37~~(3,~~573 50,~~644) 41Property,~~703~~ ~~77,822~~plant ~~--------~~& ~~--------~~equipment, ~~--------~~principally ~~--------~~due ~~Total~~to ~~assets~~basis $differences................... 43(4,~~962~~972) ~~$122~~(4,~~977~~972) ~~$ 47~~(5,~~437~~359) ~~$145~~(5,~~218~~359) ~~========~~Identified ~~======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accrued interest $ 1~~intangibles,~~345~~ $due ~~3,498~~to $basis ~~1,369~~differences.......................... ~~$ 4~~(10,~~348~~662) ~~Other current liabilities 4~~(10,~~961~~662) 1(9,~~566~~436) 2(9,~~320~~436) 17 -------- --~~------~~ -------- ---~~-----~~ ~~Total current liabilities 6,306 5,064 3,689 4,365 Noncurrent liabilities: Long~~-~~term debt 25,000 80,340 25,000 99,150~~ -------- -~~-------~~ -------- ---~~-----~~ Total ~~noncurrent~~deferred ~~liabilities~~tax 25,000 80,340 25,000 99,150 Stockholders' equity: Preferred stock, $500 par value, 100,000 shares authorized, 24,875 shares of Series A issued and outstanding 12,344 - 12,344 - 1,000 shares of Series B issued and outstanding 500 - 500 - Common stock, $liabilities.~~01 and $1~~.00............. ~~par value~~(2,265) ~~1,000,000 shares and 200 shares authorized, issued 105,100 shares and 200 shares 1 - 1 - Additional paid-in capital 436 39,482 428 39,482 Retained earnings~~ (~~deficit~~4,309) ~~323~~ (~~963~~4,903) (5,~~317~~805) ~~2,062~~Valuation ~~Accumulated~~allowances......................... ~~other comprehensive~~ (~~loss~~8,397) ~~income~~ (~~946~~6,353) (~~946~~435) ~~159 159~~ -~~-------~~ -------- --~~------~~ -------- ~~12,658 37,573 18,749 41,703 Less common stock in treasury~~ - ~~2,000 shares and 700 shares 2~~ - 1 - -------- --~~------~~ -------- ---~~-----~~ ~~Total~~Net ~~stockholders'~~deferred ~~equity~~tax ~~12,656 37,573 18,748 41,703 -------- -------- -------- -------- Total~~ liabilities................. ~~and stockholders' equity~~ $ 43(10,~~962~~662) $~~122~~ (10,~~977~~662) $ 47(5,~~437~~338) $~~145~~ (5,~~218~~805) ========== =========== ========== ===========

F-19 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 12. Income Taxes (Continued) At March 31, 2003, Holdings and Enterprises had consolidated net operating loss carryforwards, the tax effect of which was approximately $3.4 million and $2.0 million, respectively, available to reduce future Federal income tax liabilities, which expire in fiscal 2022 and 2023. Holdings and Enterprises also had state operating loss carryforwards, the tax effect of which was approximately $1.2 million and $552,000, respectively. SFAS No. 109, "Accounting for Income Taxes", requires that deferred tax assets be reduced by a valuation allowance, if based on available evidence, it is more likely than not that the deferred tax assets will not be realized. Under generally accepted accounting principles, available evidence includes the reversal of existing taxable temporary differences. As of March 31, 2003, Holdings and Enterprises had net deferred tax liabilities before the impact of SFAS No. 142 of approximately $2.9 million and $4.3 million, respectively; each including a deferred tax liability for taxable temporary differences resulting from different amortization periods for identified intangibles of approximately $10.7 million. With the adoption of SFAS No. 142 in the first quarter of fiscal 2003, the Company can no longer amortize tax deductible goodwill and indefinite-lived intangible assets for financial reporting purposes. Therefore, the deferred tax liability related to the taxable temporary differences resulting from different amortization periods for identified intangibles will not reverse unless the underlying assets are sold or an impairment is recognized for tax purposes. Without this deferred tax liability, Holdings and Enterprises would have had net deferred tax assets of approximately $7.8 million and $6.4 million, respectively, as of March 31, 2003. Historically, the Companies did not need a valuation allowance (with the exception of Holdings' state tax loss carryforwards) for the portion of the tax effect of net operating losses equal to the amount of tax-deductible amortization of identified intangibles expected to occur during the carryforward period of the net operating losses based upon the timing of the reversal of other temporary differences. As a result of the adoption of SFAS No. 142, the reversal will probably not occur during the carryforward period of the net operating losses. Therefore, Holdings and Enterprises recorded a deferred non-cash income tax expense of approximately $4.8 million and $4.7 million, respectively, during the year ended March 31, 2003. In addition, Holdings and Enterprises recorded non-cash valuation allowances to offset their respective income tax benefits from operations and the extraordinary loss on modification of debt of $2.7 million and $1.8 million, respectively. Both the deferred non-cash income tax benefit and the non-cash valuation allowances recorded in the Companies' operating results would have not been required prior to the adoption of SFAS No. 142. At March 31, 2002, Holdings and Enterprises had consolidated net operating loss carryforwards, the tax effect of which was approximately $957,000 and $490,000, respectively, available to reduce future Federal income tax liabilities, which expire in fiscal 2022. Holdings and Enterprises also had state operating loss carryforwards, the tax effect of which was approximately $687,000 and $252,000, respectively. A valuation allowance of approximately $435,000 was established to offset the portion of the deferred tax asset related to Holdings' state tax loss carryforwards. F-20 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Employee Benefit Plans Retirement and Savings Plan The Companies have a retirement and savings plan ("401(k) Plan") covering substantially all of their employees. The 401(k) Plan provides for matching contributions by the Companies. In addition, the Companies may make annual discretionary contributions to employee accounts based, in part, on the Companies' financial performance. For each of the years ended March 31, 2003, 2002 and 2001, the Companies' provided approximately $700,000, $1.6 million and $2.0 million, respectively, for matching and discretionary contributions. Deferred Compensation Deferred compensation principally relates to a compensation arrangement implemented in 1984 by a predecessor of Millbrook in the form of a non-qualified defined benefit plan and a supplemental retirement plan which permitted former officers and certain management employees, at the time, to defer portions of their compensation and to earn specified maximum benefits upon retirement. The future benefit obligations, which are fixed in accordance with the plan, have been recorded at a discount rate of 8%. These plans do not allow new participants. In an effort to provide for the benefits associated with these plans, Millbrook's predecessor purchased whole-life insurance contracts on the plan participants. The value of these policies is included in Other Assets. During the years ended March 31, 2003 and 2002, $500,000 and $6.8 million, respectively, of cash surrender value available under these policies was utilized to reduce outstanding borrowings under the Credit Agreement. At March 31, 2003, future payment obligations, assuming commencement of payments at an individual's retirement age, as defined under the deferred compensation arrangement were approximately $709,000, $787,000, $909,000, $776,000, $842,000 and $14.8 million for the years ending March 31, 2004, 2005, 2006, 2007, 2008 and thereafter, respectively. F-21 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Employee Benefit Plans (Continued) Pension Plan and Other Postretirement Benefits An analysis of Manischewitz' pension plan and accumulated benefit obligation for its postretirement health plan follows (in thousands):

~~---------------------------------------------------------------------------------------------------------------------------------~~ For the ~~years~~period ended March 31, ~~2001~~2003 ~~2000~~2002 ------------------------------ ---- ---- Other Post- Other Post- Pension Retirement Pension Retirement Benefits Benefits Benefits Benefits -------- ---------- --------- ------------- Change in benefit obligation Benefit obligation at beginning of period...... $ 12,772 $ 2,287 $ 12,828 $ 1,989 Service cost................................... 139 25 157 31 Interest cost.................................. 874 141 888 158 Actuarial (gain) loss.......................... 630 65 (233) 229 Plan amendments................................ - (1,357) 158 - Benefits paid.................................. (1,013) (128) (1,026) (120) ---------~~-----~~ --------- --------- ----------- ~~Holdings~~Benefit ~~Enterprises~~obligation ~~Holdings~~at ~~Enterprises~~end of period............ 13,402 1,033 12,772 2,287 ---------~~---~~ ---------~~------~~ ---------~~---~~ ---------~~------~~ ~~Equity~~Change in ~~net~~plan ~~(loss)~~assets ~~income~~Fair value of ~~subsidiaries~~plan $assets ~~(3,025)~~at $beginning ~~(5,443)~~of $period.................................... 49,~~506~~520 $- 110,~~386~~803 ~~Revenues~~ - -Actual 46return -on ~~--------~~plan ~~--------~~assets................... ~~--------~~(825) -~~-------~~ (~~3,025~~257) ~~(5,443)~~- ~~4,552~~Employer ~~1,386~~contributions......................... ~~General~~75 ~~and~~128 ~~administrative~~- ~~expenses~~120 77Benefits 54paid.................................. 20(1,013) 17(128) (1,026) (120) --------- --------- --------- --------- ~~Operating~~Fair ~~(loss)~~value ~~income (3,102) (5,497) 4,532 1,369 Interest expense, net~~ of ~~Holdings'~~plan ~~interest~~assets ~~income~~at ofend ~~$158 and $368 and Enterprises' intercompany interest income~~ of ~~$8,020~~period..... ~~and $8~~7,~~502~~757 ~~3,163~~- 19,~~233~~520 ~~3,073~~- ~~3,032~~ --------- --------- --------- --------- ~~(Loss)~~Funded ~~income~~status.................................. ~~before benefit for income taxes~~ (65,~~265~~645) (61,~~730~~033) 1(3,~~459~~252) (12,~~663~~287) ~~Benefit~~Unrecognized ~~for~~net ~~income~~prior ~~taxes~~service cost............ 131 (1,~~271~~319) 144 - Unrecognized actuarial (~~511~~gain) (1loss............. 4,~~434)~~885 (1457 2,~~427)~~787 426 --------- --------- --------- --------- ~~(Loss)~~Net ~~income~~amount ~~before~~recognized.......................... ~~extraordinary~~$ ~~item~~(629) $ (41,~~994~~895) $ (~~6,219~~321) ~~2,893~~$ (~~236~~1,861) ~~Extraordinary~~========= ~~gain~~========= on========= ~~early~~========= ~~extinguishment~~Amount ofrecognized ~~debt,~~in ~~net~~the statement of ~~income~~financial ~~taxes~~position consists of: $2Accrued benefit liability.1..................... ~~million~~$ at(5,514) ~~March~~$ 31(1,895) ~~2001~~$ ~~and~~(3,107) $~~5.4~~ ~~million~~(1,861) ~~and~~Intangible $3asset.1.............................. ~~million~~131 at- ~~March~~144 ~~31,~~- ~~2000,~~Accumulated ~~respectively~~other -comprehensive ~~3,194~~income......... 84,~~172~~754 4- 2,~~742~~642 - --------- --------- --------- --------- Net ~~(loss)~~amount ~~income~~recognized.......................... $ (~~4,994~~629) $ (31,~~025~~895) $ ~~11,065~~(321) $ 4(1,~~506~~861) ========= ========= ========= ========= Weighted-average assumptions: Discount rate.................................. 6.50% 6.50% 7.25% 7.25% Expected return on assets...................... 8.50% - 8.50% -

For measurement purposes, a 7.25% annual rate of increase in the per capita cost of covered health care benefits was assumed for 2003. The rate was assumed to decrease to 5% in 2010 and remain at that level thereafter. F-22 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Employee Benefit Plans (Continued)

For the ~~years~~period ended March 31, ~~2001~~2003 ~~2000~~2002 ------------------------------ ---- ---- Other Post-~~-----------------------------~~ Other Post-~~--------------------------------------------------~~ ~~Holdings~~Pension ~~Enterprises~~Retirement ~~Holdings~~Pension ~~Enterprises~~Retirement Benefits Benefits Benefits Benefits -------- --------~~---~~ -------- --------~~---~~ ~~CASH~~Components ~~FLOWS~~of ~~FROM~~net ~~OPERATING~~periodic ~~ACTIVITIES:~~benefit ~~Net~~cost ~~(loss)~~Service ~~income~~cost.................................. $ ~~(4,994)~~139 $ ~~(3,025)~~25 $ ~~11,065~~157 $ ~~4,506~~31 ~~Adjustments~~Interest tocost................................. ~~reconcile~~874 ~~net~~141 ~~(loss)~~888 ~~income~~158 toExpected ~~net~~return ~~cash provided by (used in) operating activities: Equity in net (income) loss of subsidiaries 3,025 5,443 (4,506) (1,386) Amortization 106 474 129 628 Extraordinary gain~~ on ~~early extinguishment of debt, net of income taxes -- (3,194) (8,172) (4,742) Deferred income taxes -- -- 1,775 1,710 Changes in~~ assets..................... ~~and liabilities: Intercompany notes receivable -- -- -- -- Accrued interest~~ (24767) ~~(850) (1,244) (929)~~ -~~-------~~ ~~-------- -------- -------- Net cash used in operating activities~~ (~~1,887~~874) ~~(1,152) (953) (213)~~ -~~-------~~ ~~--------~~Amortization ~~-------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repurchase~~ of ~~long-term~~prior ~~debt~~service --cost............ ~~(12,979)~~14 (~~8,750~~39) ~~(12,266)~~14 ~~Payment from interest escrow account 3,250~~ -- ~~10,247~~Recognized --net ~~Proceeds~~actuarial ~~from~~gain................. ~~issuance~~123 of34 ~~purchased~~37 ~~stock~~29 -- -- ~~3,000~~ -- ~~Proceeds from issuance and repurchase of common stock 7~~ -- 33 -- ~~Distributions from subsidiaries~~ -- ~~20,629~~ -- ~~16,495 Other (1,386) (6,498) (3,568) (4,016)~~ -----~~---~~ -------- -~~-------~~ -------- ~~Net cash provided by financing activities 1,871 1,152 962 213~~ --~~------~~ ~~-------- -------- --------~~ Net ~~(decrease)~~periodic ~~increase~~pension incost..................... ~~cash (16) -- 9 -- Cash, beginning of year 19 -- 10 -- -------- -------- -------- -------- Cash, end of year~~ $ 3383 $ --161 $ 19222 $ --218 ========= ========= ========= ======== ~~Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 3,250 $ 8,779 $ 4,554 $ 11,946 Income taxes $ 3,870 $ -- $ 876 $ --~~==

The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the pension plan with accumulated benefit obligations in excess of plan assets were $13,402,000, $13,271,000 and $7,757,000, respectively, as of the end of the period, and $12,772,000, $12,628,000 and $9,520,000, respectively, as of the beginning of the period. Manischewitz provides health benefits to eligible retired employees under its postretirement health care plan. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one-percentage-point change in assumed health care cost trend rates would have the following effect:

1-~~--------------------------------------------------------------------------------------------------------------------------------~~Percentage ~~Additions~~Point ------------------~~----------------~~ ~~Balance~~Increase atDecrease ~~Charged to Charged to Balance at beginning costs and other end Description of period expenses accounts (1) Deductions (2) of period~~ --------~~------------------------------~~ --------~~--------~~ ~~----------------~~(In ~~----------------~~thousands) ~~----------------~~Effect ~~---------------~~on ~~Year~~total ~~ended~~of ~~March~~service ~~31,~~and ~~2001~~interest ~~Allowance~~cost ~~for~~components....... ~~doubtful accounts~~ $ ~~4,251~~15 ~~643 267 (437)~~ $ ~~4,724 Year ended March 31, 2000 Allowance for doubtful accounts $ 3,303 1,032 -~~ (8413) $Effect ~~4,251~~on ~~Year~~postretirement ~~ended~~benefit ~~March~~obligation................... ~~31, 1999 Allowance for doubtful accounts~~ $ ~~2,441 152 879 (~~169) $ ~~3,303~~(146)

F-23 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Related Party Transactions Concurrent with Millbrook's acquisition by Holdings, Millbrook entered into an arrangement with an entity owned by the controlling shareholder of Holdings whereby Millbrook agreed (i) to pay a quarterly management fee of $100,000; and (ii) to reimburse the entity for providing various services, including executive services and out-of-pocket and other expenses incurred on its behalf. Concurrent with Manischewitz' acquisition by Enterprises, Manischewitz entered into an arrangement with the entity owned by the controlling shareholder of Holdings whereby Manischewitz agreed to reimburse the entity for providing various services, including executive services and out-of-pocket and other expenses incurred on its behalf. The services provided under both arrangements include, among other things, treasury, cash management, certain financial reporting, legal, labor and lease negotiation and employee benefits administration. For each of the years ended March 31, 2003, 2002 and 2001, Millbrook paid $400,000 for management fees and $1,100,000 for services provided by this entity pursuant to its aforementioned arrangement. For the years ended March 31, 2003, 2002 and 2001, Manischewitz paid approximately $540,000, $510,000, and $510,000, respectively, for services provided by this entity pursuant to its aforementioned arrangement. The services provided under each of these arrangements are based upon (i) the number of hours incurred at the applicable pay rate; and (ii) out-of-pocket expenses, related to the services provided. In addition, during the years ended March 31, 2003, 2002 and 2001, Millbrook reimbursed the aforementioned entity approximately $103,000, $74,000 and $111,000, respectively, and Manischewitz reimbursed the aforementioned entity approximately $23,000, $5,000 and $12,000, respectively, for use of its airplane. When commercial flights were available to the destination, the reimbursement was determined at the rate of the normal first class fare. When commercial flights were not available, the reimbursement amount was equal to the hourly variable costs of the airplane multiplied by the number of hours of use. In the opinion of management, these methodologies provided a reasonable basis for such allocations. In addition, the Companies believe that the terms of the arrangement with this entity were no less favorable than could have been obtained from unaffiliated third parties on an arm's length basis. 15. Segment Reporting SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", established standards for reporting information about operating segments in financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Companies' chief decision-maker is its Chairman and Chief Executive Officer. F-24 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 15. Segment Reporting (Continued) The Companies' reportable operating segments are Millbrook and Manischewitz. The operating segments are managed separately as each operating segment represents a strategic business entity. The accounting policies of these operating segments are the same as those described in the Summary Of Significant Accounting Policies except that the disaggregated financial results have been prepared using a management approach, which is consistent with the basis and manner in which each company's management internally disaggregates financial information for the purposes of assisting in making internal operating decisions. The Companies evaluate performance based on each business entity's stand-alone operating income before depreciation of property, plant and equipment and amortization of intangibles, non-recurring items, corporate charges, including certain bad debt and profit sharing costs, management fees and services provided to the operating segments by an entity owned by Holdings' majority stockholder. Intersegment sales are generally accounted for as sales to third parties.

F-25 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Concluded) 16. Significant Customers For the year ended March 31, 2003, combined revenues from the Companies' two largest customers, Shaw's Supermarkets and Royal Ahold N.V., together represented approximately 33% of total revenues. For the years ended March 31, 2002 and 2001, combined revenues from the Companies' two largest customers, Shaw's Supermarkets and Ames Department Stores, together represented approximately 29% and 26% of total revenues, respectively. During the year ended March 31, 2003, Ames announced its decision to liquidate under Chapter 7 of the Bankruptcy Code. 17. Quarterly Financial Data (Unaudited)

F-26 R.A.B. HOLDINGS, INC. - PARENT ONLY R.A.B. ENTERPRISES, INC. - PARENT ONLY BALANCE SHEETS (In thousands except for share and per share data) --------------------------------------------------------------------------------

See notes to parent only financial statement schedules S-1 R.A.B. HOLDINGS, INC. - PARENT ONLY R.A.B. ENTERPRISES, INC. - PARENT ONLY STATEMENTS OF OPERATIONS (In thousands) --------------------------------------------------------------------------------

See notes to parent only financial statement schedules S-2 R.A.B. HOLDINGS, INC. - PARENT ONLY R.A.B. ENTERPRISES, INC. - PARENT ONLY STATEMENTS OF CASH FLOWS (In thousands) --------------------------------------------------------------------------------

See notes to parent only financial statement schedules S-3 R.A.B. HOLDINGS, INC. - PARENT ONLY R.A.B. ENTERPRISES, INC. - PARENT ONLY NOTES TO PARENT ONLY FINANCIAL STATEMENT SCHEDULES Basis of Presentation The accompanying financial statements are presented on the basis of recording investments in subsidiaries on the equity method of accounting. Certain reclassifications have been made in the prior year financial statements to conform with the current year presentation. R.A.B. Enterprises, Inc. ("Enterprises") is a wholly owned-subsidiary of R.A.B. Holdings, Inc. ("Holdings"). On January 26, 1998, Holdings formed Enterprises and on May 1, 1998 contributed its wholly-owned subsidiary Millbrook Distribution Services Inc. to Enterprises. This contribution was accounted for as an "as if" pooling of interests. S-4 R.A.B. HOLDINGS, INC. AND SUBSIDIARIES R.A.B. ENTERPRISES, INC. AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED MARCH 31, 2003, 2002 AND 2001 (In thousands) --------------------------------------------------------------------------------

(1) For the year ended March 31, 2003, the amount was reclassified to other current liabilities. For the year ended March 31, 2001, the amount principally relates to the acquisition of the Miller Buckeye Biscuit Company, Inc. (2) Amounts written off. S-5

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