SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended March 30, 1996 Commission File No. 0-6882
URT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1167907
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1180 East Hallandale Beach Boulevard, Hallandale, Florida 33009
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 454-5554
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, par value $.01 per share
Class B Common Stock, par value $.01 per share
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 ___ NO _X_
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.
YES ___ NO _X_
The aggregate market value (based on the closing bid and asked prices) of the
voting stock held by non-affiliates of the registrant was, as of February 6,
1997, approximately $384,000.
As of February 12, 1997, the registrant's transfer agent reported as issued and
outstanding:
10,857,068 Shares of Class A Common Stock
1,348,141 Shares of Class B Common Stock
<PAGE>
PART I
Item 1. BUSINESS
URT Industries, Inc. ("URT" or the "Company"), a Florida corporation, was
incorporated in 1967, the year it succeeded to the business of two companies
which had commenced operations in 1961 and 1965, respectively. Its executive
offices are located at 1180 East Hallandale Beach Boulevard, Hallandale,
Florida, 33009. Its telephone number is 954-454-5554.
Since 1981, URT has been engaged in the operation of retail stores which
sell prerecorded music, videos, and related products (the "Retail Business") in
the Southeastern part of the United States under the name "PEACHES". Such
business is operated by its subsidiary, Peaches Entertainment Corporation
("PEC"), a Florida corporation. URT is the beneficial owner of approximately
93.5% of its issued and outstanding shares of common stock and all of its issued
and outstanding shares of preferred stock. The remaining approximately 6.5% of
PEC's common stock is owned by non-affiliated persons.
Petition for Relief under Chapter 11
On January 16, 1996 (the "Petition Date"), PEC filed a voluntary petition
for relief under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the Southern
District of Florida (the "Bankruptcy Court"). During the pendency of such
proceeding (the "Chapter 11 proceeding"), PEC continued to manage its affairs
and operate its business as a debtor-in-possession (subject to the approval of
the Bankruptcy Court with respect to transactions outside of the ordinary course
of business), while it developed a Plan of Reorganization that would allow it to
continue in business. PEC's Amended Plan of Reorganization, dated October 23,
1996, as modified by the Bankruptcy Court's Order of January 17, 1997 (the "Plan
of Reorganization"), was confirmed by the Bankruptcy Court on such date, and was
to become effective on February 3, 1997, subject to satisfaction of certain
conditions. Such conditions were satisfied on February 19, 1997, and the Plan of
Reorganization became effective on such date (the "Effective Date"). For a
discussion of the Plan of Reorganization and other action taken in connection
with the Chapter 11 proceeding, see "LEGAL PROCEEDINGS" below.
The Peaches Stores
The following table sets forth the number of stores which were open at the
beginning of the year, which opened during the year, which closed during the
year and which were open at the end of the year, with respect to URT's last five
complete fiscal years ended March 30, 1996:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ----- ----- ----
<S> <C> <C> <C> <C> <C>
Number of stores:
At beginning of period 19 20 21 22 21
Opened during period 0 1 0 0 2
Closed during period (6) (2) (1) (1) (1)
--- --- --- --- ---
At end of period 13 19 20 21 22
</TABLE>
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Three of the six stores which were closed during the fiscal year ended
March 30, 1996 (the "1996" fiscal year) were closed prior to the Petition Date.
The other three stores were closed on or about the Petition Date. All six of
such stores had been operating unprofitably, and pursuant to its rights under
the Bankruptcy Code, PEC obtained approval of the Bankruptcy Court to reject the
unexpired term of the leases pertaining to such stores. (See "LEGAL
PROCEEDINGS"). As to the remaining thirteen stores which are presently in
operation, PEC has renegotiated five of the leases pertaining to such stores on
terms which are more favorable to PEC. The other eight stores are either
operated under the same leases as were in effect prior to the Petition Date or,
as to the one store which is owned rather than leased by PEC, is not subject to
any leasehold arrangement.
The thirteen "Peaches" stores (the "'Peaches' stores") which are presently
in operation are located in the following four states: Florida (seven stores),
Virginia (three stores), North Carolina (two stores), and Alabama (one store).
The utilized space of the stores ranges from approximately 7,000 square feet to
approximately 14,000 square feet. Each store either has its own parking area or
is located in a shopping center which provides parking. PEC has options to renew
most of its leases for various periods.
Two of the Florida stores, one in Fort Lauderdale and the other in Orlando,
are currently leased from the Chairman of URT and his brother, a former director
of URT. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
For information concerning real property owned by PEC, see "Properties".
Trademarks
PEC is the registered owner of and owns nationwide rights to the tradename,
service mark and trademark "PEACHES" (the "Trademarks") in connection with the
operation of the Retail Business.
Operation of the Peaches Stores
The "Peaches" stores are all similar in appearance. They have distinct,
wood panelled interiors, are decorated in a manner which identifies them as
"Peaches" stores and carry a wide selection of prerecorded music as well as
recorded and blank video tapes, accessory items and specialty items such as
T-shirts and crates. Some stores are free standing and others are contiguous to
other stores in shopping centers. At present, each "Peaches" store is managed by
an individual director who is responsible for displaying merchandise sold in the
store, hiring and firing personnel and other matters relating to store
administration, including re-orders of merchandise. Certain other matters,
including relationships with landlords and the purchase and allocation of new
releases, are handled by the home office. PEC has a computerized inventory
control system in place at each of its stores.
As of the last day of the 1996 fiscal year, PEC purchased merchandise from
approximately 59 suppliers, among whom the principal ones were BMG, CEMA, PGD,
SONY, UNI, WEA, and Bassin. Approximately 81% of the merchandise purchased
during the 1996 fiscal
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year came from such seven principal suppliers. Purchases from given suppliers
are, to a great extent, determined by which of them are manufacturing or
distributing the most popular prerecorded music products at a given time, as
well as the credit and other terms on which such suppliers are willing to sell
to PEC. PEC is not obligated to purchase merchandise from any supplier. It has
numerous alternate sources of supply for inventory, although in some cases, the
expenses are or would be greater if such alternate sources are utilized.
Merchandise is delivered directly by suppliers to the stores.
Prior to its filing for protection from its creditors, the usual terms
received by PEC from suppliers provided for payment to be made within 60 days
from the end of the month in which a purchase is made. In addition, PEC normally
received an additional 30 to 120 days to pay for certain purchases during the
course of the year. Such terms are usual in the industry.
Prior to its filing for protection from its creditors, PEC was also able to
return merchandise, without limitation, to all suppliers, who charged a penalty
if returns exceeded certain percentages of the dollar amounts of gross
purchases. Such return policies did not have any adverse effect on PEC's
business.
For a short period after the Chapter 11 filing, PEC was not able to obtain
delivery from any of its principal suppliers of merchandise, except Bassin
(which supplied the inventory which might otherwise have been ordered through
other suppliers), and was not able to return merchandise in accordance with the
return policies described above. Eventually, during the course of the Chapter 11
proceeding all of PEC's principal suppliers resumed shipping merchandise to PEC
and agreed to allow PEC to make returns of unneeded inventory for credit against
pre-petition indebtedness. In some cases, suppliers also agreed to ship
merchandise on credit. During the pendency of the Chapter 11 proceeding, PEC was
able to obtain approximately 80% of its inventory on credit, and was able to
return most of its unused inventory for credit against prepetition indebtedness.
Because of the resumption in deliveries from suppliers, as well as the use of
alternate sources of merchandise, the Chapter 11 filing did not have a
materially negative effect on PEC's ability to obtain inventory or to return
unused inventory for credit, although the cost of such inventory was generally
higher than it would otherwise have been and the terms for the return of unused
inventory were sometimes different than those which were in effect prior to the
Petition Date.
Subsequent to the Effective Date, all of PEC's seven principal suppliers
and most of its other suppliers have agreed on terms with respect to payment for
merchandise and the return of unused merchandise for credit which are the same
or similar to the terms which were in effect prior to the Chapter 11 proceeding.
Advertising in local newspapers and media is determined by consultation
between each store director and PEC management. PEC also engages in cooperative
advertising with suppliers who pay a portion of the cost. In addition to the
director, each "Peaches" store is staffed with managers, cashiers and sales and
stock room personnel. The stores are open seven days a week. Based on
management's experience to date, retail business sales fluctuate during the year
and are generally at their highest levels during the holiday season, i.e.,
between October and December. During the last three fiscal years, sales between
January and March were approximately 22% of
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total sales for each year; sales between April and June were approximately 24%
of total sales; sales between July and September were approximately 22% of total
sales; and sales between October and December were approximately 32% of total
sales.
Competition
The retail sale of prerecorded music and video products is highly
competitive. There are hundreds of retail stores and department, discount and
variety stores and supermarkets which offer such merchandise to the public.
PEC's share of the retail market in the Southeastern United States is not
significant. In recent years, in addition to usual competition, there has been a
proliferation of non-traditional music outlets, such as appliance and computer
retailers and superbookstores, some of whom have used very aggressive price
cutting tactics including selling some products below actual cost in order to
attract customers and sell non-music and video products. For a discussion of
action taken to attempt to address such competitive factors, see "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
Employees
As of the last day of the 1996 fiscal year, URT and PEC (hereinafter,
collectively, the "URT Companies") employed approximately 250 persons in all
capacities. Neither URT nor PEC is a party to any collective bargaining
agreements. Relations with employees have been satisfactory and there have been
no work stoppages.
Management Agreements Between URT and PEC
Pursuant to a management agreement, as amended, which was in effect between
URT and PEC through December 31, 1995, URT was required to provide PEC with the
services of Allan Wolk as President and Chairman of PEC, PEC was entitled to
payment from URT for certain accounting and administrative services performed by
PEC for URT at the rate of $39,600 per annum (subject to periodic equitable
adjustment depending upon the amount of such services), and so long as URT and
PEC filed consolidated income tax returns, their respective liabilities for such
taxes were required to be equitably apportioned as provided in such agreement.
For the above described services of Allan Wolk, PEC was required to pay URT, in
equal weekly installments, a fee at the rate of $750,000 per annum for that
portion of the 1996 fiscal year ending on December 31, 1995, as compared to a
fee at the rate of $1,000,000 per annum with respect to the preceding
approximately six month period commencing October 2, 1994 and ending April 1,
1995, and a fee during earlier periods based on a percentage of PEC's net sales.
The management agreement described above was terminated by URT and PEC
effective as of December 31, 1995, and replaced by three new agreements, each
effective from and after January 1, 1996. Under the three new agreements, two
between URT and PEC and the third between URT and Allan Wolk, the following
arrangements have been agreed to: URT and PEC will continue to equitably
apportion taxes so long as they continue to file a consolidated federal return;
for the period from January 1, 1996 through March 31, 2000, URT will continue to
provide
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to PEC the services of Allan Wolk as PEC's Chairman, President and Chief
Executive Officer; PEC, in lieu of paying a management fee to URT, is required
to pay to Mr. Wolk during such period, so long as he continues to provide such
services, a salary at the rate of $500,000 per annum; and the amount so paid by
PEC to Mr. Wolk pursuant to such arrangement shall be credited against the
amount payable by URT to Mr. Wolk pursuant to the employment agreement between
them.
As a result of the above-described arrangements, the amounts required to be
paid by PEC, as management fees to URT or as salary to Allan Wolk were reduced
from $1,024,386 during the fiscal year ended April 1, 1995 (the "1995 fiscal
year") to $687,500 during the 1996 fiscal year (without accounting for the
expenses as described above of approximately $39,600 for which URT reimbursed
PEC during the 1995 fiscal year). This resulted in a net savings to PEC in the
approximate amount of $297,000. The $687,500 so paid by PEC during the 1996
fiscal year consisted of management fees to URT of $562,500 (covering the period
through December 31, 1995 when the prior management agreement was in effect),
and compensation to Allan Wolk in the amount of $125,000 (covering the period
beginning January 1, 1996 when the three new agreements came into effect).
During both the 1996 and 1995 fiscal years, Mr. Wolk devoted approximately
75% of his working time to the business of PEC.
Item 2. PROPERTIES
Since April, 1996, the headquarters for URT and PEC (the "URT Companies")
have been located in Hallandale, Florida in a building which is leased by PEC.
Such building contains a total of approximately 6,000 square feet of office
space. Prior to April, 1996, the URT Companies' headquarters had been located in
a larger and more expensive facility of approximately 26,000 square feet in
Miramar, Florida in a building which was leased by PEC and included both office
and warehouse space. The new headquarters has no warehouse space, as all
merchandise is shipped directly from suppliers to stores. The move to smaller
facilities with no warehouse space, and the elimination of the payroll expenses
associated with the old warehouse facility, has resulted in savings to PEC in
excess of $200,000 per year. The lease for the old headquarters was among the
leases which PEC rejected in connection with the Chapter 11 proceeding. (See
"LEGAL PROCEEDINGS").
PEC owns real property in Mobile, Alabama on which it constructed and
operates a "Peaches" store. Such property is subject to a first mortgage to an
institutional lender and to a second mortgage to URT. PEC made all payments on
the first mortgage as they became due during the Chapter 11 proceeding, and
negotiated a longer payout of such mortgage during the course of such
proceeding. The second mortgage secures a debt owed by PEC to URT as a result of
a loan which was made by URT to PEC in January, 1997 in order for PEC to satisfy
certain of its obligations to creditors under the Plan of Reorganization. (See
"LEGAL PROCEEDINGS").
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<PAGE>
All "Peaches" stores, other than the Mobile, Alabama store discussed
immediately above, are leased. For information concerning such other stores
operated by PEC, see "BUSINESS--The Peaches Stores".
Item 3. LEGAL PROCEEDINGS
PEC's above-described voluntary petition for relief under Chapter 11 of the
Bankruptcy Code resulted in the above-described Plan of Reorganization. The Plan
of Reorganization, as so confirmed by the Bankruptcy Court, provided for the
following:
(a) All unsecured creditors, including all of PEC's inventory
suppliers, but excluding landlords under leases rejected by PEC, are
entitled to 100% of their allowed claims (the total of which is
approximately $4,922,000). PEC's seven principal suppliers (whose allowed
claims total approximately $4,372,000 out of such $4,922,000) are entitled
to payment and inventory returns equal to approximately 70% of their
allowed claims (80% in the case of one such supplier) within approximately
60 days after the Effective Date. The balance of the payments to such seven
principal suppliers (approximately $1,284,000) is payable with interest at
the prime rate charged by Chase Manhattan Bank, N.A. over a period of 24
months commencing in March, 1997. The amounts due to such suppliers are
secured by a perfected first lien and security interest in the inventory
originally distributed by the secured party which was sold to PEC or is
otherwise in the possession of and owned by PEC. The remaining unsecured
creditors (whose allowed claims total approximately $550,000) were entitled
to and received the full amount of their allowed claims on the Effective
Date.
(b) Landlords under the leases which were rejected by PEC in
connection with the bankruptcy filing were entitled to approximately
$311,000 (30% of the approximately $1,000,000 in allowed claims with
respect to such leases), all of which was paid on the Effective Date.
(c) PEC's sole secured creditor, the holder of the first mortgage with
respect to the store property owned by PEC in Mobile, Alabama, whose
allowed claim was approximately $466,000, will receive 100% of such amount,
with interest, in accordance with the amortization schedule previously in
effect, except that the balloon payment on such mortgage which would
otherwise have been due in September, 1997 was extended to September, 2002.
(d) The priority tax claim in the approximate amount of $118,000 which
is owed to the Florida Department of Revenue will be payable with interest
over a period of two years commencing 30 days from the Effective Date.
(e) The priority administrative claims, including professional fees in
the approximate amount of $200,000 which were incurred in connection with
the reorganization, were paid on the Effective Date.
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In order for PEC to be able to effect the Plan of Reorganization on the
terms described above, URT, in exchange for the issuance to it of 20,000,000
shares of PEC's authorized common stock (including 218,730 treasury shares),
agreed that, subject to the terms of the Amended Plan, it would contribute
$350,000 to the capital of PEC, waive an aggregate of $75,000 of dividends
payable by PEC to URT, guarantee the approximately $1,284,000 which is due to
the principal suppliers after the Effective Date pursuant to the arrangements
described in subparagraph (a) above, and lend $700,000 to PEC on the Effective
Date. The loan by URT to PEC is required to be paid back by PEC with interest
over a period of four years beginning on the third anniversary of the Effective
Date. The debt so owed by PEC to URT is subordinate to the amounts owed to PEC's
principal suppliers, and is secured by a second mortgage on PEC's Mobile,
Alabama property. (For additional information pertaining to such arrangements
between PEC and URT, see "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
During the course of the Chapter 11 proceeding, the Bankruptcy Court issued
orders authorizing the following:
(a) PEC's rejection of the unexpired portion of the leases covering
PEC's former corporate headquarters in Miramar, Florida, as well as the six
stores closed by PEC during the 1996 fiscal year (See "PROPERTIES" and
"BUSINESS--The Peaches Stores").
(b) PEC's rejection of the unexpired portion of the lease covering a
store in Charlotte, North Carolina which had been closed by PEC during the
1991 fiscal year and as to which PEC remained responsible for the shortfall
between the amount payable under PEC's lease for such store and the amount
being paid by a subtenant of such store.
(c) PEC's assumption of the unexpired portion of the leases covering
PEC's new corporate headquarters and the stores which are leased and are to
be kept in operation.
(d) PEC's execution of a settlement agreement containing a reduction
of the amounts payable by PEC to its former Executive Vice-President under
a consulting arrangement with him (See "EXECUTIVE COMPENSATION--Employment
Contracts").
(e) PEC's entry into post-petition agreements with its suppliers of
inventory under which PEC was permitted to return merchandise to such
suppliers for a credit against pre-petition claims, and under which PEC was
entitled to purchase merchandise on credit from certain of such suppliers.
(See "BUSINESS - Operation of the Peaches Stores").
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Price Range of Common Stock
URT's Class A and Class B Common Stock are quoted by market makers on the
over-the-counter market. The following table sets forth the high and low, bid
and asked quotations for the Class A Common Stock for the calendar periods
indicated, based on information supplied by the National Quotation Bureau,
Incorporated:
Bid Prices Asked Prices
---------- ------------
High Low High Low
---- --- ---- ---
1994
Quarter ended March 31, .18 1/16 .36 .23
Quarter ended June 30, .16 1/8 .36 .22
Quarter ended Sept. 30, .16 .09 .50 .19
Quarter ended Dec. 31, .16 .09 .50 .19
1995
Quarter ended March 31, .14 .10 1/2 .19
Quarter ended June 30, .14 .10 1/2 .19
Quarter ended Sept. 30, .13 .05 1/2 .15
Quarter ended Dec. 31, .13 1/32 3/8 .11
1996
Quarter ended March 31, .08 1/32 .20 .11
Quarter ended June 30, .08 .07 .11 .10
Quarter ended Sept. 30, .07 .07 .10 .09
Quarter ended Dec. 31, .07 .03 .09 .06
1997
Quarter through Feb. 6, .04 .03 .05 .05
The following table sets forth the high and low, bid and asked quotations
for the Class B Common Stock for the calendar periods indicated, based on
information supplied by the National Quotation Bureau, Incorporated:
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Bid Prices Asked Prices
---------- ------------
High Low High Low
---- --- ---- ---
1994
Quarter ended March 31, 1/4 1/8 5/8 1/2
Quarter ended June 30, 1/4 1/8 5/8 1/2
Quarter ended Sept. 30, 1/4 1/8 5/8 5/16
Quarter ended Dec. 31, 1/8 1/8 5/8 5/16
1995
Quarter ended March 31, .13 1/8 5/8 5/16
Quarter ended June 30, .13 1/8 5/8 5/16
Quarter ended Sept. 30, .13 1/8 5/8 5/16
Quarter ended Dec. 31, .13 1/16 5/8 5/16
1996
Quarter ended March 31, 1/8 1/16 1/4 3/16
Quarter ended June 30, .125 .05 .25 .12
Quarter ended Sept. 30, .05 .05 .12 .12
Quarter ended Dec. 31, .05 .05 .12 .12
1997
Quarter through Feb. 6, .03 .03 .12 .12
The above over-the-counter quotations represent prices between dealers, do
not include retail markups, markdowns or commissions and do not necessarily
represent actual transactions.
Dividends
There has been no payment of dividends during the past five years and
payment of dividends in the future will depend on URT's earnings and needs.
Approximate Number of Equity Security Holders
The following table indicates the approximate number of holders of record
of each class of URT's equity securities as of February 12, 1997, based on
information supplied by URT's transfer agent:
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Number of Record
Title of Class Holders
-------------- -------
Class A Common Stock, $.01 par value 4,846
Class B Common Stock, $.01 par value 1,198
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Item 6. Selected Financial Data
The following table sets forth selected financial data and other operating
information of the Company. The selected financial data should be read in
conjunction with the financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
March 30, April 1, April 2, April 3, March 28,
1996 1995 1994 1993(1) 1992
---- ---- ---- ------- ----
<S> <C> <C> <C> <C> <C>
Operating statement data:
Net sales $ 23,626,489 31,960,986 36,303,498 37,861,440 35,566,752
Net income (loss) (2,161,535) (1,759,085) (153,053) 290,085 (269,333)
Income (loss) per common share (.17) (0.14) (0.01) 0.02 (0.02)
Weighted average number of common
shares outstanding 12,637,634 12,674,448 12,695,136 12,594,531 12,753,748
Balance sheet data:
Working capital excluding
liabilities subject to compromise
in 1996 9,188,083 5,168,136 6,651,083 6,520,743 5,540,347
Total assets 12,788,918 14,647,795 16,805,328 17,504,370 15,999,575
Current portion of long-term
obligations 124,774 110,028 131,173 174,579 188,524
Long-term obligations 810,367 929,654 705,109 836,282 1,010,861
Liabilities subject to compromise 5,671,434 -- -- -- --
Shareholders' equity 4,503,401 6,702,841 8,507,621 8,646,416 8,322,299
Store data:
Weighted average square feet of
selling space 88,012 130,157 137,145 139,850 145,279
Weighted average sales per square
foot of selling space 268 246 265 271 245
Number of stores open at end of
period 13 19 20 21 22
</TABLE>
There were no cash dividends declared for common stock in any of the periods
presented.
(1) Includes 53 weeks of operations.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
From time to time, the Company may make certain statements that contain
"forward-looking" information (as defined in the Private Securities Litigation
Reform Act of 1995). Words such as "believe", "estimate", "project" and similar
expressions are intended to identify such forward-looking statements.
Forward-looking statements may be made by management orally or in writing,
including, but not limited to, in press releases, as part of this Management's
Discussion and Analysis of Financial Condition and Results of Operations and as
part of other sections of this Annual Report or other filings. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their respective dates, and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize, or should any of the underlying assumptions prove
incorrect, actual results of current and future operations may vary materially
from those anticipated, estimated or projected.
Results of Operations
FISCAL YEAR ENDED MARCH 30, 1996 (1996) COMPARED TO FISCAL YEAR ENDED
APRIL 1, 1995 (1995)
Net sales for 1996 decreased 26.1% compared to 1995. Such decrease is attributed
principally to the closing of unprofitable stores during 1996, as well as the
effect of the opening of new stores during 1996 by certain of PEC's competitors.
11.8% of such decrease was attributable to comparable store sales and 14.3% of
such decrease was attributable to stores that opened or closed during 1996
versus 1995.
During the last few years, non-traditional music retailers such as appliance and
computer retailers and super bookstores have begun to sell prerecorded music and
video products. They have adopted policies of selling music product at near or
below wholesale cost as a means of attracting customers to sell other products.
PEC continued to suffer the effect of such competition during 1996 and, as a
result, filed its voluntary petition for relief under Chapter 11 of the
Bankruptcy Code on January 16, 1996.
Recently, the Company's primary suppliers have taken steps to help protect the
retail marketplace from certain low cost retailers of music. These steps include
not disbursing cooperative advertising funds to retailers which engage in low
cost selling practices in violation of the minimum advertised pricing policies
of such suppliers. Management believes that such initiatives, in combination
with the additional factors set forth immediately below, should help the Company
to restore itself to a competitive position in subsequent fiscal years. Other
factors which, in management's opinion, should help the Company to restore
itself to a competitive position in the future are the closing of the six
unprofitable stores which were closed during 1996, the closing of the former
headquarters and warehouse, the termination of other unprofitable business
arrangements as described herein and concentration on advantages which PEC has
over certain of its competitors, including large inventory, convenient store
locations and a high level of customer service.
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The cost of sales for 1996 was lower than that for 1995 due principally to a
decrease in net sales. Cost of sales as a percentage of net sales has increased
from 63.7% in 1995 to 64.8% in 1996 as a result of a reduction in retail prices
due to increased competition, a change in terms with PEC's principal suppliers
during the Chapter 11 proceeding and the effects of buying a portion of PEC's
inventory during the Chapter 11 proceeding from alternate sources with higher
prices.
Selling, general, and administrative (SG&A) expenses in 1996 decreased 18.4%
compared to 1995. Such decrease is attributable to a decrease in store operating
expenses of stores that opened or closed during 1996 versus 1995 (13.6%) and a
decrease in corporate overhead (5.2%), offset by an increase in comparable store
expenses (0.3%). SG&A expenses, as a percentage of net sales, increased from
39.6% in 1995 to 43.7% in 1996 due to the fixed nature of certain expenses and
the decrease in net sales in addition to the aforementioned items.
The Company incurred a net loss of approximately $2,162,000 in 1996 versus a net
loss of approximately $1,759,000 in 1995 due principally to the costs associated
with the closing of four stores, professional fees associated with the Chapter
11 proceeding and the reduction of net sales and gross profits as described
above. The two other stores closed during 1996 are reflected in the financial
statements for 1995.
FISCAL YEAR ENDED APRIL 1, 1995 (1995) COMPARED TO FISCAL YEAR ENDED APRIL
2, 1994 (1994)
Net sales for 1995 decreased 12.0% compared to 1994. Such decrease is attributed
to an 8.2% decrease in comparable store sales, and a 3.8% decrease in sales in
those stores that opened or closed during 1995 versus 1994.
The cost of sales for 1995 was lower than that for 1994 due to a decrease in net
sales. Cost of sales as a percentage of net sales increased from 62.7% in 1994
to 63.7% in 1995 due to a reduction in retail pricing in an effort to meet the
increased competition.
Selling, general and administrative (SG&A) expenses in 1995 decreased 6.8%
compared to 1994. Such decrease is attributable to a decrease in comparable
store expenses (1.0%), a decrease in store operating expenses of stores that
opened or closed during 1995 versus 1994 (2.6%), a decrease in corporate
overhead (2.8%), and a decrease in the cost of store openings (0.4%). SG&A
expenses, as a percentage of net sales, increased from 37.4% in 1994 to 39.7% in
1995 due to the fixed nature of certain expenses and the decrease in net sales
in addition to the aforementioned items.
Store closing costs increased in 1995 over 1994 due to the fact that the cost of
closing 1 store is included in 1994, and the cost of closing 4 stores is
included in 1995.
The Company incurred a net loss of approximately $1,759,000 in 1995 versus a net
loss of approximately $153,000 in 1994 due to costs of closing four stores, a
loss on litigation, and the reduction in net sales and gross profit as described
above.
FISCAL YEAR ENDED APRIL 2, 1994 (1994) COMPARED TO FISCAL YEAR ENDED APRIL
1, 1993 (1993).
-14-
<PAGE>
Net sales for 1994 decreased 4.1% compared to 1993. Such decrease is attributed
to the fact that 1993 included 53 weeks of operations (1.7%), a decrease in
comparable store sales (1.6%), store closings due to inclement weather (0.3%)
and a decrease in sales in those stores that opened or closed during 1994 versus
1993 (0.5%).
The cost of sales for 1994 was lower than that for 1993 due to decreased net
sales. Cost of sales as a percentage of net sales for both 1994 and 1993 was
62.7%.
Selling, general, and administrative (SG&A) expenses in 1994 increased 1.3%
compared to 1993. Such increase is attributable to an increase in comparable
store expense (1.7%), an increase in corporate overhead (1.2%), an increase in
the cost of store openings (0.7%), offset by a decrease in store expenses that
opened or closed during 1994 versus 1993 (1.4%), and a decrease due to the fact
that 1993 included 53 weeks of operations (0.9%). SG&A expenses, as a percentage
of net sales, increased from 35.4% in 1993 to 37.4% in 1994 due to the fixed
nature of certain expenses and the decrease in net sales in addition to the
aforementioned items.
In 1994, the Company adopted the provisions of Financial Standards No. 109 (SFAS
109) Accounting for Income Taxes, which established new financial accounting and
reporting standards for income taxes. Such adoption resulted in a cumulative
adjustment of approximately $74,000 of income which has been reflected in the
statement of operations for 1994.
The Company incurred a net loss of approximately $153,000 in 1994 versus net
income of approximately $291,000 in 1993 due to the decrease in net sales and an
increase in certain SG&A expenses as discussed above. Approximately $55,000 of
net income in 1993 is due to the fact that 1993 included 53 weeks of operations.
Liquidity and Capital Resources
The Company had working capital of $9,188,083 at March 30, 1996 (excluding
liabilities subject to compromise in 1996) compared to working capital of
$5,168,136 at April 1, 1995 and a current ratio (the ratio of total current
assets to total current liabilities) of 7.4 to 1 at March 30, 1996 (excluding
liabilities subject to compromise in 1996) compared to a current ratio of 1.86
to 1 at April 1, 1995. The amount of the liabilities which were subject to
compromise is $5,671,434.
At March 30, 1996, the Company had long-term obligations of $810,367 (which does
not include liabilities subject to compromise of $5,671,434). Management
anticipates that its ability to repay its long-term obligations will be
satisfied primarily through funds generated from its operations.
For a discussion of URT's guaranty of certain PEC obligations to creditors in
connection with the Chapter 11 proceeding, see "LEGAL PROCEEDINGS".
Management anticipates that cash generated from operations and cash equivalents
on hand will provide sufficient liquidity to maintain adequate working capital
for operations. Management would attempt to obtain financing for the opening of
any new stores which it may plan to open during the next few years.
-15-
<PAGE>
Inflation trends have not had an impact upon revenues because increases in costs
have been passed along to customers.
The Company's business is seasonal in nature, with the highest sales and
earnings occurring in the third fiscal quarter, which includes the Christmas
selling season.
For a discussion of recent developments and uncertainties affecting the
Company's liquidity and capital resources, see note 2 (Petition for Relief under
Chapter 11) to the financial statements which are set forth at Item 8 below.
In March, 1995, the Financial Accounting Standards Board issued Statement No.
121, Accounting for the Impairment of Long-Lived Assets and for Long Lived
Assets to be Disposed Of, which became effective for fiscal years beginning
after December 15, 1995. This standard establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles and goodwill
related to those assets and certain intangibles to be disposed of. The Company
believes that adoption of this standard will not have a material impact on the
financial condition or operating results of the Company.
-16-
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
KPMG
URT INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Financial Statements
March 30, 1996 and April 1, 1995
(With Independent Auditors' Report Thereon)
-17-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Table of Contents
Independent Auditors' Report 19
Consolidated Financial Statements:
Consolidated Balance Sheets as of March 30, 1996 and April 1, 1995 20
Consolidated Statements of Operations for each of
the years in the three year period ended March 30, 1996 21
Consolidated Statements of Shareholders' Equity for each of
the years in the three year period ended March 30, 1996 22
Consolidated Statements of Cash Flows for each of
the years in the three year period ended March 30, 1996 23
Notes to Consolidated Financial Statements 25
-18-
<PAGE>
Independent Auditors' Report
Directors and Shareholders
URT Industries, Inc. and Subsidiaries
Miramar, Florida:
We have audited the accompanying consolidated balance sheets of URT Industries,
Inc. and subsidiaries (the "Company") as of March 30, 1996 and April 1, 1995,
and the related consolidated statements of operations, shareholders' equity and
cash flows for each of the years in the three-year period ended March 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of URT Industries, Inc.
and subsidiaries as of March 30, 1996 and April 1, 1995, and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 30, 1996 in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
June 29, 1996, except as to note 2,
which is as of February 3, 1997
Ft. Lauderdale, Florida
-19-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 30, 1996 and April 1, 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,258,061 2,014,147
Marketable investment securities 1,761,336 2,649,534
Inventories 4,954,260 5,578,737
Prepaid inventory 254,249 --
Current portion due from officers/shareholders 30,832 28,470
Land held for sale -- 300,000
Prepaid expenses and other current assets 350,197 368,205
Refundable income taxes 9,136 257,229
------------ ------------
Total current assets 10,618,071 11,196,322
Property and equipment, net 1,868,246 3,102,928
Due from officers/shareholders 110,722 139,550
Other assets 191,879 208,995
------------ ------------
$ 12,788,918 14,647,795
============ ============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current portion of long-term obligations 124,774 110,028
Accounts payable 103,038 4,130,530
Accrued liabilities 1,202,176 1,787,628
------------ ------------
Total current liabilities 1,429,988 6,028,186
Long-term obligations 810,367 929,654
Deferred rent 200,723 500,470
Minority interest in a subsidiary 173,005 486,644
------------ ------------
Total liabilities not subject to compromise 2,614,083 7,944,954
Liabilities subject to compromise 5,671,434 --
------------ ------------
Total liabilities 8,285,517 7,944,954
------------ ------------
Shareholders' equity:
Common stock, $.01 par value; 30,000,000 shares
authorized; 15,317,454 shares issued 153,175 153,175
Additional paid-in capital 5,542,152 5,542,152
Retained (deficit) earnings (173,591) 1,987,944
------------ ------------
5,521,736 7,683,271
Treasury stock, 3,159,245 and 2,781,253 common
shares in 1996 and 1995, respectively, at cost (1,018,335) (980,430)
------------ ------------
Total shareholders' equity 4,503,401 6,702,841
------------ ------------
Commitments and contingencies $ 12,788,918 14,647,795
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-20-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For each of the years in the three-year period ended March 30, 1996
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net sales $ 23,626,489 31,960,986 36,303,498
Costs and expenses:
Cost of sales 15,316,441 20,347,493 22,762,742
Selling, general and administrative expenses 10,321,334 12,651,133 13,576,007
Store closing costs 189,623 548,701 278,377
Loss on litigation -- 431,692 --
------------ ------------ ------------
25,827,398 33,979,019 36,617,126
------------ ------------ ------------
Loss from operations (2,200,909) (2,018,033) (313,628)
------------ ------------ ------------
Other (expense) income:
Interest expense (111,451) (84,478) (88,971)
Interest income 202,845 204,810 148,796
Other income 5,491 -- --
------------ ------------ ------------
96,885 120,332 59,825
------------ ------------ ------------
Loss before reorganization costs,
provision (benefit) for income taxes
and minority interest in net loss of
consolidated subsidiary (2,104,024) (1,897,701) (253,803)
Reorganization costs:
Professional fees (88,223) -- --
Store closing costs (282,927) -- --
------------ ------------ ------------
(371,150) -- --
Loss before provision (benefit) for
income taxes and minority interest in
net loss of consolidated subsidiary (2,475,174) (1,897,701) (253,303)
Provision (benefit) for income taxes -- 120,417 (86,000)
------------ ------------ ------------
Loss before minority interest in net loss
of consolidated subsidiary (2,475,174) (2,018,118) (167,803)
Minority interest in net loss of consolidated subsidiary (313,639) (259,033) (14,750)
------------ ------------ ------------
Net loss $ (2,161,535) (1,759,085) (153,053)
============ ============ ============
Net loss per common share $ (.17) (.14) (.01)
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
-21-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For each of the years in the three year period ended March 30, 1996
<TABLE>
<CAPTION>
Common stock issued Treasury stock
------------------------------------- -------------------------------------
Shares Shares
------------------------ ------------------------
Class "A" Class "B" Amount Class "A" Class "B" Amount
---------- --------- ----------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, April 3, 1993 13,505,838 1,552,866 $ 150,587 2,200,370 187,297 $ (907,673)
Treasury stock purchased, at cost -- -- -- 69,800 -- (23,034)
Issuance of common stock (note 10) 172,500 -- 1,725 -- -- --
Benefit from subsidiary's treasury
stock transactions -- -- -- -- -- --
Net loss -- -- -- -- -- --
---------- --------- ----------- --------- ------- -----------
Balance, April 2, 1994 13,678,338 1,552,866 152,312 2,270,170 187,297 (930,707)
Treasury stock purchased, at cost -- -- -- 271,500 52,286 (49,723)
Issuance of common stock (note 10) 86,250 -- 863 -- -- --
Benefit from subsidiary's treasury
stock transactions -- -- -- -- -- --
Net loss -- -- -- -- -- --
---------- --------- ----------- --------- ------- -----------
Balance, April 1, 1995 13,764,588 1,552,866 153,175 2,541,670 239,583 (980,430)
Treasury stock purchased, at cost -- -- -- 365,850 12,142 (37,905)
Net loss -- -- -- -- -- --
---------- --------- ----------- --------- ------- -----------
Balance, March 30, 1996 13,764,588 1,552,866 $ 153,175 2,907,520 251,725 $(1,018,335)
========== ========= =========== ========= ======= ===========
</TABLE>
Capital Retained
in excess earnings
of par (deficit) Total
---------- ---------- ----------
Balance, April 3, 1993 5,503,420 3,900,082 8,646,416
Treasury stock purchased, at cost -- -- (23,034)
Issuance of common stock (note 10) 32,775 -- 34,500
Benefit from subsidiary's treasury
stock transactions 2,792 -- 2,792
Net loss -- (153,053) (153,053)
---------- ---------- ----------
Balance, April 2, 1994 5,538,987 3,747,029 8,507,621
Treasury stock purchased, at cost -- -- (49,723)
Issuance of common stock (note 10) 16,387 -- 17,250
Benefit from subsidiary's treasury
stock transactions (13,222) -- (13,222)
Net loss -- (1,759,085) (1,759,085)
---------- ---------- ----------
Balance, April 1, 1995 5,542,152 1,987,944 6,702,841
Treasury stock purchased, at cost -- -- (37,905)
Net loss -- (2,161,535) (2,161,535)
---------- ---------- ----------
Balance, March 5,542,152 (173,591) 4,503,401
========== ========== ==========
See accompanying notes to consolidated financial statements.
-22-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For each of the years in the three-year period ended March 30, 1996
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(2,161,535) (1,759,085) (153,053)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 460,678 565,946 531,154
Loss on abandonment of leasehold improvements
190,601 -- 141,828
Deferred income taxes -- 342,014 (49,100)
Deferred rent (299,747) (4,538) 51,134
Minority interest in net loss of consolidated
subsidiary (313,639) (259,033) (14,750)
Change in assets and liabilities affecting
cash flows from operating activities:
(Increase) decrease in:
Inventories 624,477 263,579 188,165
Prepaid inventory (254,249) -- --
Prepaid expenses and other current assets 18,008 8,756 57,657
Refundable income taxes 248,093 (232,829) (24,400)
Other assets 17,116 46,965 (66,711)
Increase (decrease) in:
Accounts payable (4,027,492) (484,050) (402,841)
Accrued liabilities (445,470) 266,468 22,500
Long-term obligations (61,022) 334,573 --
Income taxes payable -- -- (73,659)
Liabilities subject to compromise 5,671,434 -- --
Changes due to reorganization activities:
Loss on abandonment of
leasehold improvements 296,509 -- --
----------- ------------ ------------
Net cash (used in) provided by
operating activities (36,238) (911,234) 207,924
----------- ----------- -----------
Cash flows from investing activities:
Purchase of marketable investment securities -- (2,649,534) --
Sale of marketable investment securities 888,198 -- --
Purchases of property and equipment (168,331) (922 ,536) (176,480)
Due from officers/shareholders 26,466 26,285 24,273
Proceeds from land, property and equipment 615,243 -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities 1,361,576 (3,545,785) (152,207)
----------- ----------- -----------
</TABLE>
-23-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from financing activities:
Increase in note payable $ -- -- 75,000
Repayment of note payable -- (75,000) --
Repayment of long-term obligations (43,519) (131,173) (174,579)
Proceeds from issuance of stock -- 17,250 34,500
Acquisition of treasury stock (37,905) (49,723) (23,034)
Acquisition of subsidiary stock -- (13,222) (40,260)
----------- ----------- -----------
Net cash used in financing
activities (81,424) (251,868) (128,373)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 1,243,914 (4,708,887) (72,656)
Cash and cash equivalents, beginning of year 2,014,147 6,723,034 6,795,690
----------- ----------- -----------
Cash and cash equivalents, end of year $ 3,258,061 2,014,147 6,723,034
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 111,451 84,478 88,971
=========== =========== ===========
Income tax payments (refund), net $ (248,093) (11,232) 63,651
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-24-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 30, 1996, April 1, 1995 and April 2, 1994
(1) Organization and Basis of Presentation
URT Industries, Inc. and subsidiaries (the "Company") is engaged in the
business of retailing prerecorded music, video and accessory items,
principally in the southeastern United States. The consolidated financial
statements include the accounts of URT Industries, Inc. (the "Parent") and
its wholly owned nonoperating subsidiary, whose business was discontinued
in 1984, and its 87 percent-owned subsidiary, Peaches Entertainment
Corporation ("Peaches").
(2) Petition for Relief Under Chapter 11
On January 16, 1996 (the "Petition Date"), Peaches Entertainment
Corporation commenced reorganization proceedings under Chapter 11 of the
United States Bankruptcy Code. On January 17, 1997, the plan of
reorganization was confirmed by the Bankruptcy Court for the Southern
District of Florida ("Bankruptcy Court"). In Chapter 11, Peaches continued
to manage its affairs and operate its business as debtor-in-possession
while it developed a plan of reorganization to restructure and allow its
emergence from Chapter 11. As debtor-in-possession in Chapter 11, Peaches
could not engage in transactions outside of the ordinary course of business
without approval, after notice and hearing, of the Bankruptcy Court.
Under Chapter 11 proceedings, litigation and actions by creditors to
collect certain claims in existence at the petition date ("prepetition")
are stayed, absent specific bankruptcy court authorization to pay such
claims. The Company believes that appropriate provisions have been made in
the accompanying consolidated financial statements for the prepetition
claims that could be estimated at the date of these financial statements.
Such claims are reflected as "liabilities subject to compromise" at March
30, 1996. Additional claims (liabilities subject to compromise) may arise
subsequent to the filing date resulting from the rejection of executory
contracts, including leases and from the determination of the court (or
agreed to by parties-in-interest) of allowed claims for contingencies and
disputed amounts.
As debtor-in-possession, Peaches has the right, subject to Bankruptcy Court
approval and certain other limitations, to assume or reject certain
executory contracts, including unexpired leases. Any claim for damages
resulting from the rejection of an executory contract or an unexpired lease
is treated as a general unsecured claim in the Chapter 11 proceedings.
Peaches affirmed 13 leases (5 of which were modified on terms more
favorable to Peaches) and rejected 8 leases.
-25-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On August 5, 1996, Peaches filed its plan of reorganization with the
Bankruptcy Court. An amended plan of reorganization was filed on October
23, 1996. The amended plan of reorganization was confirmed by the
Bankruptcy Court on January 17, 1997 (the "confirmation date"), and became
effective February 3, 1997 (the "effective date"), subject to all
conditions precedent being satisfied in which all conditions precedent were
satisfied on February 19, 1997. Among the principle terms of the confirmed
plan, subject to certain changes contained in the order of approval, are
the following:
o All unsecured creditors, including all of Peaches' inventory
suppliers, but excluding landlords under leases rejected by Peaches,
are entitled to 100 percent of their allowed claims (the total of
which is approximately $4,922,000). Peaches' seven principal suppliers
(whose allowed claims total approximately $4,372,000 out of such
$4,922,000) are entitled to payment and inventory returns equal to
approximately 70 percent of their allowed claims (80 percent in the
case of one such supplier) within approximately 60 days after the
effective date, and the balance (approximately $1,284,000) is payable
with interest at prime over a period of 24 months commencing March
1997. The remaining unsecured creditors (whose allowed claims total
approximately $550,000) were entitled to and received the full amount
of their allowed claims on the effective date. The principal suppliers
will be secured by a perfected first lien and security interest in the
inventory originally distributed by the secured party which was sold
to the Company or is otherwise in the possession and owned by the
Company.
o Landlords under the leases rejected by Peaches in connection with the
bankruptcy filing will be entitled to 30 percent of the allowed claims
with respect to such leases, all of which will be payable on the
effective date.
o The mortgage holder will receive 100 percent of the allowed claim,
with interest, in accordance with the amortization schedule previously
in effect, except that the balloon payment on such mortgage which
would otherwise have been due in September 1997 was extended to
September 2002. All mortgage payments under the amortization schedule
were paid timely during the Chapter 11 proceedings.
o The priority tax claim in the approximate amount of $118,000, which is
owed to the Florida Department of Revenue, will be payable with
interest at 8 percent over two years from the effective date.
o The priority administrative claims, including professional fees in the
approximate amount of $200,000 which have been incurred in connection
with the reorganization, are payable on the effective date.
In order for Peaches to be able to effect the Plan of Reorganization on the
terms described above, the Parent in exchange for the issuance to it of 20
million shares of Peaches authorized common stock, has contributed $350,000
to the capital of Peaches, waived an aggregate of $75,000 of dividends
payable by Peaches to the Parent, guaranteed, subject to the terms of the
Plan, the approximately $1,284,000 which is due the principal suppliers in
accordance with the foregoing, and loaned $700,000 to Peaches. The loan
will be repaid to the Parent with interest at prime over a period of four
years beginning on the third anniversary of the effective date, subordinate
to the amounts owed to the principal suppliers, and secured by inventory
and all the assets of Peaches.
In March 1997, the Parent and Peaches agreed that the above-described
$700,000 loan would be reduced by an amount equal to the lesser of $200,000
or the difference between $1,000,000 and the total shareholders' equity of
Peaches as of the end of its 1997 fiscal year, without taking such debt
reduction into account, and cause the amount of such aggregate debt
reduction to be transferred to the capital account of Peaches in exchange
for shares of a new class of cumulative preferred stock, entitled Series C
preferred stock, in an amount as shall be determined by dividing the amount
of such aggregate debt reduction by $100. The Series C preferred stock to
be so issued shall have a par value of $100 and a cumulative preferred
dividend of 10% per annum. The approval of the holders of a majority of the
shares of Series C preferred stock, voting as a separate class, shall be
required with respect to all matters on which the shareholders have a right
to vote.
-26-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of URT
Industries, Inc. and its subsidiaries. All significant intercompany
balances and transactions have been eliminated. Reference to the
Company encompasses any or all of the aforementioned entities.
(b) Fiscal Year
The Company's fiscal year consists of 52 or 53 weeks ending on the
Saturday closest to the end of March. The fiscal years ended March 30,
1996, April 1, 1995 and April 2, 1994 consisted of 52 weeks,
respectively.
(c) Cash Equivalents
The Company considers highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
Cash equivalents totaled $2,385,945 and $486,192 at March 30, 1996 and
April 1, 1995, respectively. The carrying amount of cash and cash
equivalents approximates fair market value because of the short-term
maturity of these investments. The fair values are estimated based on
quoted market prices for these or similar instruments.
The Company has an agreement to purchase securities overnight under
agreements to resell ("repos"). At March 30, 1996 and April 1, 1995,
the outstanding repos, included above, approximated $0 and $385,000,
respectively, which approximated market. The repos are collaterized by
U.S. government and agency securities.
(d) Marketable Investment Securities
The Company adopted Statement of Financial Accounting Standards No.
115 ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities, effective April 3, 1994. There was no cumulative
effect as a result of adopting SFAS 115 in 1995. Investments, which
are comprised of treasury bills with maturities exceeding one year,
are classified as available-for-sale at March 30, 1996, and are
reported at their fair market value which approximates cost.
(e) Inventories
Inventories, comprised of compact discs, cassettes, videos and
accessories, are stated at the lower of cost (principally average)
including freight in, or market.
(f) Property and Equipment
Property and equipment are stated at cost. The assets are depreciated
over their estimated useful lives ranging from 5 to 31.5 years using
both straight-line and accelerated methods. The Company's policy is to
retire assets from its accounts as they become fully depreciated.
-27-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(g) Income Taxes
The Company files a consolidated income tax return with its
subsidiaries. Provision is made for deferred income taxes which result
from certain items of income and expense being reported for tax
purposes in periods different than those reported for financial
reporting purposes. These items relate principally to the methods of
accounting for store leases with future scheduled rent payment
increases, inventory and the utilization of different methods of
depreciation for financial statement and income tax purposes.
Effective April 4, 1993, the Company adopted the provisions of
Financial Accounting Standards Board's ("SFAS") No. 109, Accounting
for Income Taxes. There was no cumulative effect as a result of
adopting SFAS No. 109. Under the asset and liability method of SFAS
No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. Under SFAS No. 109, the effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(h) Loss Per Common Share
Loss per common share was computed by dividing net loss, after
deducting preferred dividend requirements by the weighted average
number of common shares outstanding during each of the periods which
was 12,637,634, 12,674,448 and 12,695,136 for the years ended March
30, 1996, April 1, 1995 and April 2, 1994, respectively.
(i) Store Closing Costs
Store closing costs are recorded in the period the Company decides to
close the store. Such costs include the book value of abandoned
leasehold improvements, provision for the present value of future
lease obligations, less estimated sub-rental income as well as other
costs incident to the store closing.
(j) Reorganization Costs
Reorganization costs include: (a) professional fees relating to legal,
accounting and consulting services provided in connection with the
Chapter 11 proceedings, (b) costs and expenses associated with the
closing of locations, including an estimated accrual for the expected
allowed claims related to rejected executory contracts.
(k) Use of Estimates by Management
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reported period. Actual results could differ
from those estimates. See discussion in note 2 concerning
uncertainties due to Chapter 11 proceedings.
-28-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(l) New Accounting Standard
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long Lived Assets to be Disposed Of, which became effective
for fiscal years beginning after December 15, 1995. This standard
establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used and for long-lived assets and certain
intangibles to be disposed of. The Company believes that adoption of
this standard will not have a material impact on the financial
condition or operating results of the Company.
(m) Reclassifications
Certain amounts in the 1995 and 1994 consolidated financial statements
have been reclassified to conform with the 1996 presentation.
(4) Due From Officers/Shareholders
Due from officers/shareholders consist of the following at March 30, 1996
and April 1, 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Unsecured loans made to one officer/shareholder and one former
officer/shareholder; proceeds of the loans were used to
purchase shares of the Company's Class A and Class B
common stock in the open market from an unrelated party,
interest 8 percent. $141,554 168,020
Less current portion (30,832) (28,470)
-------- --------
$110,722 139,550
======== =======
</TABLE>
The promissory note agreements with the two officers/shareholders are
payable with interest at 8 percent in 96 equal, consecutive monthly
installments through March 31, 2000.
Under amended and restated employment agreements with these
officers/shareholders (note 9c), the required loan payments will be
credited as compensation for the officer/shareholder. Effective March 1996,
the former officer/shareholder is required to repay the loan in consecutive
monthly installments of $471.
Interest income on these loans amounted to $16,610, $18,460 and $11,594 in
each of the years in the three-year period ended March 30, 1996,
respectively, and is included in interest income in the accompanying
consolidated statements of operations.
-29-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Property and Equipment, net
Property and equipment consist of the following at March 30, 1996 and April
1, 1995:
1996 1995
---- ----
Land $ 395,570 395,570
Building 538,093 538,093
Leasehold improvements 1,895,438 3,383,814
Furniture and equipment 1,635,361 1,620,590
Building under capitalized lease 206,964 206,964
----------- ---------
4,671,426 6,145,031
Less accumulated depreciation and amortization (2,803,180) (3,042,103)
----------- ----------
$ 1,868,246 3,102,928
=========== ==========
(6) Long-term Obligations
Long-term obligations consists of the following at March 30, 1996 and April
1, 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Capital lease obligation, due in monthly installments of $3,382,
including interest at 17.5%; final payment due March 2005
$183,353 191,096
Mortgage payable, due in equal installments of $2,981 per month,
plus interest at prime plus .5%; collateralized by the
mortgaged property with depreciated cost of $819,244; final
balloon payment of $284,500 due September 2002 (note 2)
478,238 514,013
Lease obligation on closed store, net of sublease rentals,
including interest at 10%, payable in monthly installments
until November 2004, subject to compromise at March 30, 1996
(note 2) -- 334,573
Settlement agreement with former director/shareholder, due in
monthly installments of $5,699, final payment due January 2000
273,550 --
-------- ----------
935,141 1,039,682
Less current portion (124,774) (110,028)
-------- ----------
$810,367 929,654
======== ==========
</TABLE>
The capital lease pertains to the building portion of property owned by one
director and one former director. The rent expense on the land portion of
this lease was approximately $113,000 for 1996 and $99,000 for 1995 and
1994.
-30-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The following represents future minimum lease payments under the capital
lease obligation:
Fiscal year Amount
----------- ------
1997 $ 40,600
1998 40,600
1999 40,600
2000 40,600
2001 40,600
Thereafter 162,160
---------
Total minimum lease payments 365,160
Less amount representing interest (181,807)
---------
Present value of minimum lease payments $ 183,353
=========
Maturities of long-term obligations, excluding the capital lease
obligation, to maturity, are as follows:
Fiscal year Amount
----------- ------
1997 $ 115,560
1998 104,162
1999 104,163
2000 92,765
2001 35,775
Thereafter 299,363
---------
$ 751,788
=========
The Company has a standby letter of credit of $64,800 available to a
landlord that was not drawn upon as of March 30, 1996. The letter of credit
is fully collateralized by a certificate of deposit, which is included in
other assets. In addition, the Company has an irrevocable letter of credit
of $150,000 that was not drawn upon as of March 30, 1996.
(7) Accrued Liabilities
Accrued liabilities consist of the following at March 30, 1996 and April 1,
1995:
1996 1995
---- ----
Gift certificate and credit slip liability 371,647 484,501
Payroll and related benefits 196,699 141,002
Taxes payable 280,191 134,318
Other 353,639 1,027,807
----------- -----------
$ 1,202,176 $ 1,787,628
=========== ===========
-31-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Liabilities Subject to Compromise
Liabilities subject to compromise at March 30, 1996 include the following:
Lease rejection claims $ 600,000
Trade and other miscellaneous claims 5,071,434
----------
$5,671,434
==========
Liabilities subject to compromise under the Chapter 11 proceedings include
substantially all trade and other payables as of the petition date. As
discussed in note 2, payment of these liabilities, including the maturity
of debt obligations, were stayed while Peaches continued to operate as a
debtor-in-possession.
On January 17, 1997, Peaches' plan of reorganization was confirmed by the
Bankruptcy Court. During fiscal 1997, the Company recorded an extraordinary
gain of approximately $488,000 as a result of the settlement of lease
rejection claims and vendor liabilities (note 2) (unaudited).
(9) Commitments and Contingencies
(a) Leases
The Company is a lessee under various operating leases, several of
which provide for percentage rent. An insignificant amount of
percentage rent was incurred in each of the years in the three-year
period ended March 30, 1996. Most of the leases contain renewal
options. In connection with the Chapter 11 filing, Peaches affirmed 13
leases (5 of which were modified on terms more favorable to Peaches)
and rejected 8 leases. The aggregate minimum rental commitments under
all noncancelable operating leases at March 30, 1996 (including any
modifications due to leases rejected and affirmed), which are subject
to further modification in the Chapter 11 proceedings, are as follows:
Fiscal year Amount
----------- ------
1997 $1,204,485
1998 1,051,835
1999 855,836
2000 646,112
2001 545,822
Thereafter 511,745
----------
$4,815,835
==========
Rental expense under noncancelable operating leases, included in
selling, general and administrative expenses in the accompanying
consolidated statements of operations, amounted to $1,887,000,
$2,410,000 and $2,561,000, respectively, for each of the years in the
three-year period ended March 30, 1996.
Rental expense on two stores owned by two directors and/or their
relatives was $215,417, $251,667 and $245,250, respectively, for each
of the years in the three-year period ended March 30, 1996.
(b) Legal Matters
The Company has been party to a lawsuit involving the Company's
closing of a store which it had leased in Charlotte, North Carolina
and its refusal to pay rent with respect to such store from and after
February 1991. In February 1995, the Court entered a judgment ordering
the Company to pay the sum of $405,460 to plaintiff. The Company
recorded a charge to operations for the year ended April 1, 1995
related to the loss on such litigation and paid such amount in March
1995.
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<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company is a party to various other claims, legal actions and
complaints arising in the ordinary course of its business in the
opinion of management, all such matters are without merit or involve
such amounts that unfavorable disposition will not have a material
impact on the financial position or results of operations of the
Company.
(c) Employment Agreements
As amended January 1, 1996, the Company entered into an amended and
restated employment agreement with an officer, which expires March 31,
2000. In addition, the officer shall be credited, as compensation,
with the monthly amounts payable by him to the Company under
promissory note (note 4). The respective employment agreement provides
the officer with the use of an automobile, full medical coverage,
reimbursement for life insurance policies, paid vacations and
severance pay if the Company refuses to renew the employment agreement
upon expiration, or in the event of termination upon mutual consent or
termination in certain other events. On March 18, 1996, the United
States Bankruptcy Court Southern District of Florida approved the
settlement of an employment agreement with one of its former officer.
Peaches is to pay an amount of $273,550 over a period of four years
(note 6). Under the original terms of employment, the officer would
have been entitled to in excess of $870,000 in the aggregate.
(10) Shareholders' Equity
Authorized shares of common stock as of March 30, 1996 and April 1, 1995
were 10,000,000 Class B and 20,000,000 Class "A" shares, both classes
having a par value of $.01. The two classes of the Company's common stock
are identical except that each class votes separately so that all matters
requiring the vote of stockholders require the approval of both classes of
common stock voting as separate classes.
The Company had agreed to sell to two officers shares of Class "A" common
stock in 96 equal consecutive monthly installments, starting April 1, 1992,
each installment involving the purchase of an aggregate of 14,375 shares
for $2,875 ($.20 per share). The amounts required to purchase such shares
were required to be credited as compensation to the two officers. Effective
October 1, 1994, the agreements were terminated.
-33-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Pension Plan
Effective September 15, 1994, the Company curtailed its noncontributory
defined benefit plan. As a result of this curtailment all future benefit
accruals were eliminated and accrued benefits became fully vested. The net
impact of this curtailment and settlement in plan liabilities is a loss of
$24,949 which is reflected in selling, general and administrative expenses
in fiscal year 1995.
(12) Income Taxes
The provision (benefit) for income taxes consists of:
1996 1995 1994
---- ---- ----
Current:
Federal $ -- (222,000) (26,000)
State -- -- 1,000
--- -------- -------
-- (222,000) (25,000)
Deferred:
Federal -- 296,000 (61,000)
State -- 46,000 --
--- -------- -------
-- 342,000 (61,000)
----- -------- -------
$ -- 120,000 (86,000)
===== ======== =======
Reasons for differences between income tax provision (benefit) and the
amount computed by applying the statutory federal income tax rate of 34
percent to loss before income taxes (benefit) and minority interest were:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income tax benefit at applicable statutory
tax rate of loss before income taxes $(842,000) (645,000) (86,000)
Add:
State income tax benefit, net of federal
benefit (81,000) (64,000) --
Change in valuation allowance 874,000 811,000 --
Other 49,000 18,000 --
--------- -------- -------
Income tax provision (benefit) for the year
$ -- 120,000 (86,000)
========= ======== =======
</TABLE>
-34-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at March 30, 1996 and April 1, 1995 are
presented below.
<TABLE>
<CAPTION>
Deferred tax assets: 1996 1995
---- ----
<S> <C> <C>
Inventories, principally due to additional costs
capitalized for tax purposes $ 87,340 50,051
Property and equipment, net, principally due to differences
in depreciation 166,151 200,840
Accrued rent, principally due to accrual for financial
reporting purposes 98,157 210,136
Provision for store closings 80,340 208,114
NOL carryforward 1,121,154 126,026
Accrued expenses 172,388 57,350
Other 28,797 27,497
----------- --------
Total gross deferred tax assets 1,754,327 880,014
Less valuation allowance (1,754,327) (880,014)
----------- --------
Net deferred tax assets $ -- --
=========== =========
</TABLE>
At March 30, 1996, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $2,970,000 which is available
to offset future federal taxable income, if any, through 2011.
A valuation allowance is provided to reduce deferred tax assets to a level
which, more likely than not, will be realized. The net deferred assets
reflect management's estimate of the amount which will be realized from
future profitability which can be predicted with reasonable certainty.
(13) Fair Value of Financial Instruments
It was not practicable to estimate the fair value of the Company's
financial instruments as the Company's subsidiary filed for Chapter 11. The
impact of the confirmed plan of reorganization on the estimated fair value
of the financial instruments is discussed in note 2.
The fair value of due from officers/shareholders was determined using
interest rates based on the credit worthiness of the note holders; the fair
values approximate carrying values.
(14) Business and Credit Concentrations
The retail sale of prerecorded music and video products is highly
competitive. The Company's share of the retail market in the
Southeastern United States is not significant. However, management
believes the Company has certain competitive advantages, including more
convenient store locations, a large selection of inventory and superior
customer service.
-35-
<PAGE>
URT INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Peaches purchased approximately 81 percent of its merchandise from seven
principal suppliers (BMG, CEMA, PGD, Sony, Uni, WEA and Bassin) during the
fiscal year ended March 30, 1996. Purchases from given suppliers are, to a
great extent, determined by which of them are manufacturing or distributing
the most popular prerecorded music products at a given time, as well as the
credit and other terms on which such suppliers are willing to sell to the
Company.
The Company is not obligated to purchase merchandise from any supplier. It
has numerous alternate sources of supply for inventory, although in some
cases, the expenses are or would be greater if such alternate sources are
utilized.
(15) Condensed Financial Information
The following table summarizes condensed financial statement information
for the subsidiary included in the consolidated financial statements:
Balance Sheet 1996 1995
------------- ---- ----
Total current assets $7,414,557 7,962,672
========== ==========
Total assets $9,442,616 11,224,889
========== ==========
Total current liabilities $1,330,866 5,904,488
========== ==========
Total liabilities subject to compromise $5,671,434 --
========== ==========
Total liabilities $8,013,390 7,334,612
========== ==========
Total shareholders' equity $1,429,226 3,890,277
========== ==========
Statement of Operations 1996 1995 1994
----------------------- ---- ---- ----
Net Sales $23,626,489 31,960,953 36,303,455
=========== ========== ==========
Loss from operations $(1,956,016) (1,864,979) (245,722)
=========== ========== ==========
Reorganization costs $ (371,150) -- --
=========== ========== ==========
Net loss (2,416,051) (1,995,408) (108,456)
=========== ========== ==========
-36-
<PAGE>
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
As of the date of this filing, the directors and executive officers of URT
are:
Name Position Age
---- -------- ---
Allan Wolk Chairman of the Board,
President (Chief Executive
Officer) and Director 58
Brian Wolk Executive Vice-President and Director 31
Jason Wolk Executive Vice-President, Chief
Financial Officer (Principal Financial
and Accounting Officer), Treasurer and Director 29
Allan Wolk has been the Chief Executive Officer and a director of URT and
PEC since their formation. He has been engaged in the prerecorded music business
for more than 35 years, principally in the rack merchandising and retail
segments thereof.
Brian Wolk, an attorney, has been employed by the URT Companies in various
capacities and at various times since 1982 and has been employed by them, full
time, since 1992. He is a son of Allan Wolk. He has been a director of URT and
PEC since 1994 and a vice-president of both companies since June of 1995. He was
appointed Executive Vice-President of both companies in March, 1996.
Jason Wolk, a certified public accountant, has been employed by the URT
Companies in various capacities and at various times since 1983 and has been
employed by them, full time, since 1994. He is a son of Allan Wolk. Prior to his
full time employment by the URT Companies, he had been employed as an accountant
by KPMG Peat Marwick LLP. He has been a director of URT and PEC since 1994 and a
vice-president and the secretary of both companies since June, 1995. He was
appointed Treasurer and Chief Financial Officer (Principal Financial and
Accounting Officer) of both companies in September, 1995, and was appointed
Executive Vice-President of both companies in March, 1996.
-37-
<PAGE>
The term of office of each director continues until the next annual meeting
of the stockholders and until his or her successor is elected. Mr. Wolk has an
employment agreement with URT. (See "EXECUTIVE COMPENSATION--Employment
Contracts").
Item 11. EXECUTIVE COMPENSATION
The following table sets forth compensation paid or accrued by the URT
Companies for services rendered in all capacities during the 1996 fiscal year
and the two prior fiscal years to (i) URT's chief executive officer ("CEO") and
(ii) each of the other most highly compensated executive officers of the URT
Companies whose cash compensation exceeded $100,000 and who were serving as
executive officers at the end of the 1996 fiscal year or for whom disclosure
would otherwise be provided but for the fact that such person was no longer
serving as an executive officer at the end of such fiscal year.
<TABLE>
<CAPTION>
Summary Compensation Table
- --------------------------
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Long
Options/ Term
Other Stock Incen. All
Annual Restricted App. Plan Other
Name and Fiscal Salary Bonus Compensa- stock Rights Pay-outs Compensa-
position Year ($) ($) tion($) award(s)($) (#) ($) tion($)
- -------- ---- --- --- ------- ----------- --- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allan Wolk, 1996 662,500 -0- 95,431(2) -0- -0- -0- 308,222(4)
Chairman 1995 810,380 -0- 109,704(2) -0- -0- -0- -0-
& CEO 1994 918,923 -0- 125,771(2) -0- -0- -0- -0-
David Jackowitz, 1996 247,947(1) -0- (3) -0- -0- -0- 244,900(4)
Pres. & 1995 289,897 -0- (3) -0- -0- -0- -0-
Treas.(1) 1994 326,889 -0- 33,646(2) -0- -0- -0- -0-
</TABLE>
-38-
<PAGE>
- ----------
(1) Mr. Jackowitz is no longer employed by the URT Companies, and no longer
holds any such position with them, due to the termination of his
employment, effective as of September 30, 1995. The salary listed as paid
to him with respect to 1996 represents ordinary salary payments through the
date of termination ($115,576) and consulting fees paid subsequent to such
termination ($132,371) pursuant to a consulting arrangement with him. Such
consulting arrangement has since been terminated by PEC in connection with
the Chapter 11 proceeding. (See "EXECUTIVE COMPENSATION--Employment
Contracts" and "LEGAL PROCEEDINGS").
(2) Includes, for the years to which this footnote applies, life insurance
premiums ($60,211 for Mr. Wolk in fiscal 1996) and amounts credited to Mr.
Wolk and Mr. Jackowitz under their respective employment agreements against
amounts owed to URT.
(3) Pursuant to applicable rules, information is not included with respect to
other annual compensation which does not exceed the lesser of $50,000 or
10% of the salary and bonus reported for the named executive officer.
(4) The amounts set forth above represent a one-time distribution to such
individuals as a result of the termination of the pension plan described
below.
Employment Contracts
Effective October 1, 1994, URT and Mr. Wolk entered into the employment
agreement between them which is presently in effect (the "1994 Agreement").
Under the 1994 Agreement, as under the March 31, 1992 employment agreement (the
"1992 Agreement") which the 1994 Agreement replaces, the period of employment
continues until March 31, 2000. The 1994 Agreement reduced the annual rate of
his base salary to $725,380 for the period from October 1, 1994 though March 31,
1995, to $575,380 for the next eighteen month period ending September 30, 1996
and to $784,048 for the balance of the term of employment (as compared to an
annual base salary at the rate of $834,048 under his 1992 Agreement). The 1994
Agreement eliminated provisions contained in the 1992 Agreement under which Mr.
Wolk was entitled to cost of living increases based on increases in the consumer
price index and changes in U. S. individual income tax rates. It reduced certain
monthly credits to which he was entitled under the 1992 Agreement effective
October 1, 1994 from $5,435 per month to $2,935 per month but retained the
provision that if he died or became disabled during the term of such agreement,
the credits which he would have received through March 31, 2000 (but in the
reduced amount under the 1994 Agreement) if he had survived and not become
disabled would be accelerated to the date of death or disability. The 1994
-39-
<PAGE>
Agreement also provided that URT would pay or reimburse him for the premiums on
term or other life insurance coverage to be selected by URT and payable to his
designee in the amount of $2,600,000 for the duration of his life (rather than
being reduced to $1,500,000 after age 70 as provided in the 1992 Agreement). Mr.
Wolk was also permitted under the 1994 Agreement (as he had been under the 1992
Agreement) to repay certain loans which are hereinafter described in "Certain
Relationships and Related Transactions"), over the term of his employment.
The 1994 Agreement also continued to provide (as had the 1992 Agreement)
that during his employment period URT would furnish Mr. Wolk with an automobile,
reimburse him for business expenses, including socially related business
expenses incurred by him, and provide him with hospital and medical benefits;
that upon termination of his employment, he would not compete with the URT
Companies for a period of three years and for the additional period during which
he accepted severance payments; that upon the termination of his period of
employment and URT's refusal to continue to employ him on terms no less
favorable than those contained in his employment agreement or in the event of
the earlier termination of his employment for any reason other than death, URT
was required to pay him as severance payments, an amount equal to his annual
base salary which was in effect at the time of termination and thereafter, upon
each anniversary of the termination date until his death, 50% of such annual
base salary (except for the elimination of provisions which had been in the 1992
Agreement under which he could have been entitled to additional amounts if
adjustments were made due to increases in the consumer price index, changes in
the income tax laws or certain other contingencies), as reduced by any payments
he received under any pension or profit sharing plan of the URT Companies and if
applicable, any disability insurance policy; that so long as he was entitled to
receive severance payments, URT was required to continue to furnish him with an
automobile, pay the premiums on the above described life insurance coverage and
provide medical insurance coverage for him and his family which would continue
during his lifetime and that of his wife, if she survived him; that as a
condition of receiving such severance payments and benefits, he was required to
be available to the URT Companies as a consultant; that if any persons,
excluding officers and directors of URT, should acquire effective control of URT
while he was in its employ, he would be entitled to receive, in addition to all
other payments required to be made to him under his employment agreement, an
amount equal to the maximum amount permitted to be paid by URT without such
payment being considered a "parachute payment" under the Internal Revenue Code;
that such provision was designed to deter corporate raiders and would require
that a substantial payment be made to him in the event that any such persons
acquired effective control of URT. The amount to which Mr. Wolk would be
entitled under the circumstances described above would depend on his
compensation during the five tax years immediately preceding any such change in
control. If, for illustrative purposes, such change in control had occurred
during the 1996 tax year, the payment to Mr. Wolk would have been approximately
$2,900,000.
The 1994 Agreement also permits Mr. Wolk to obtain a loan from URT on a
single occasion not to exceed $400,000 for a period of up to five years at an
interest rate of 3% per annum, which is required to be collateralized by
adequate security and made upon such other terms and conditions as URT's
directors with the advice of counsel deem necessary to protect URT.
When the 1996 fiscal year began, an Amended and Restated Employment
Agreement dated December 14, 1994 (the "Jackowitz agreement") had been in place
between PEC and David
-40-
<PAGE>
Jackowitz, who also served as President, Treasurer and a director of URT. Such
employment was terminated by PEC effective as of September 30, 1995 pursuant to
a provision of the Jackowitz agreement which so authorized PEC to terminate Mr.
Jackowitz' employment, without cause, at any time beginning on such date.
Pursuant to the provisions of the Jackowitz agreement pertaining to the
termination of his employment, Mr. Jackowitz was required to provide consulting
services to PEC, up to a maximum of 10 hours per month, beginning on the
effective date of his termination and continuing until September 3, 2005. PEC,
in consideration for such consulting services, was required to provide a variety
of health and other benefits to Mr. Jackowitz, and was further required to pay
to him compensation at the rate of $225,000 per annum during the first year,
$125,000 per annum during the second year and $65,000 per annum during the
balance of the consulting period.
As a result of the Chapter 11 proceeding, PEC took action to reject the
executory portion of the Jackowitz agreement. Mr. Jackowitz contended that he
was entitled to the full amount provided under such agreement. Such position on
the part of Mr. Jackowitz was challenged by PEC, and ultimately resulted in a
settlement with him. Pursuant to the terms of such settlement, which was
approved by the Bankruptcy Court, the Jackowitz agreement is rejected, and Mr.
Jackowitz received the sum of $9,000, as an administrative claim, upon
confirmation of the Plan, and, as reflected in the financial statements for the
1996 fiscal year, is entitled to payment of the sum of $273,550 over a period of
4 years, payable in equal monthly installments commencing February, 1996.
Pursuant to the terms of such settlement, Mr. Jackowitz also released the URT
Companies from any and all liabilities (except those described immediately
above) and also executed a confidentiality agreement and an indemnification
agreement in the same form as agreements previously signed by him. Under the
agreement with Mr. Jackowitz which had previously been in effect (and which is
described in the preceding paragraph), the amount that would have been payable
to Mr. Jackowitz if such agreement had remained in effect would have exceeded
$870,000.
Compensation Committee Interlocks
and Insider Participation
URT does not have a compensation committee or other board committee
performing equivalent functions. During the 1996 fiscal year, all deliberations
concerning executive officer compensation or any other arrangements between URT
and any executive officers were conducted by URT's full board of directors,
provided, however, that no director voted on compensation payable to him as an
executive officer or any other arrangement between him and URT.
Pension Plan
In March of 1995, the URT Companies decided to terminate the PEC defined
benefit pension plan and trust (the "Pension Plan"), effective May 12, 1995, and
to file documents with the Internal Revenue Service for such purpose. On
February 7, 1996, the Internal Revenue Service issued a determination letter
that the termination of the Pension Plan does not adversely affect its
qualification for federal tax purposes. As a result, the assets of the Pension
Plan have been distributed to Pension Plan participants.
Interests in the Pension Plan were computed on the basis of compensation
and service.
-41-
<PAGE>
As a result of the termination of the Pension Plan, the following executive
officers or former executive officers received one-time distributions in the
amounts set forth below:
Name of Individual Amounts
------------------ -------
Allan Wolk $ 308,222
David Jackowitz $ 244,900
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information concerning the number of shares of
each class of URT's common stock which was owned by each person who, on February
12, 1997, owned, beneficially, more than 5% thereof, and the number of shares of
each class of such stock owned beneficially, directly or indirectly, by each
executive officer and director and by all directors and executive officers as a
group on such date:
<TABLE>
<CAPTION>
Amount & Nature
of Beneficial Percent
Title of Class Name Ownership of Class
- -------------- ---- --------- --------
<S> <C> <C> <C>
Class A Common Executive Officers
Stock, par value and Directors
$.01 per share
Allan Wolk 3,194,186(1) 29.4%
Allan Wolk and
Lawrence Strauss,
as Trustees 33,072(2) *
Brian Wolk 12,980(3) *
Jason Wolk 17,480(3) *
---------
All officers and
directors as a
group (3 persons) 3,257,718 30.0
</TABLE>
-42-
<PAGE>
<TABLE>
<CAPTION>
Other
-----
<S> <C> <C> <C>
Scorpio Music, Inc.
P. O. Box A
Trenton, N.J. 08691 1,195,550(4) 11.0%
<CAPTION>
Amount & Nature
of Beneficial Percent
Title of Class Name Ownership of Class
- -------------- ---- --------- --------
<S> <C> <C> <C>
Class B Common Executive Officers and
Stock, par value Directors
$.01 per share Allan Wolk 786,654(5) 58.4%
=========
All officers and
directors as a
group (1 person) 786,654 58.4%
</TABLE>
(1) Includes 3,150,786 shares owned by Allan Wolk, 25,920 shares owned by his
wife and 17,480 shares held by him for his daughter. However, Mr. Wolk has
renounced all voting and investment power with respect to those shares of
URT which are held by him for his daughter. He believes that his wife will
vote the shares owned by her in favor of proposals which he favors, but
disclaims beneficial ownership of any shares owned by her or held for the
benefit of his daughter.
(2) Such shares are held by Lawrence Strauss and Allan Wolk as trustees for the
benefit of children of Sheffield Wolk, Mr. Wolk's brother. Allan Wolk has
renounced all voting and investment power with respect to those shares of
URT which are so held in trust for the benefit of children of Mr. Wolk's
brother. All such powers as trustee are exercised exclusively by the
co-trustee, and Mr. Wolk disclaims beneficial ownership of such shares.
(3) Such shares are held in the name of Allan Wolk, as custodian. However, Mr.
Wolk has renounced all voting and investment power with respect to those
shares of URT which are held by him for his two sons, and disclaims
beneficial ownership of such shares. Such shares, being listed separately
here, are not included under the shares listed as beneficially owned by
Allan Wolk.
(4) Based on information supplied by URT's transfer agent. Does not include
160,000 shares reported in a Schedule 13D, dated June 14, 1989, as owned by
John T. Gervasoni, Scorpio's reported president and 100% shareholder, as to
which no confirmation of ownership has been made by URT's transfer agent.
(5) Includes 780,174 shares owned by Allan Wolk and 6,480 shares owned by his
wife. Mr. Wolk believes that his wife will vote the shares owned by her in
favor of proposals which he favors, but disclaims beneficial ownership of
such shares. (*) Less than one percent.
-43-
<PAGE>
As set forth in the above table and footnotes, Allan Wolk and members of
his immediate family own approximately 30% or URT's Class A common stock and
approximately 58% of URT's Class B common stock. The two classes of URT's common
stock are identical except that each class votes separately so that all matters
requiring the vote of stockholders require the approval of both classes of
common stock voting as separate classes. By reason of such ownership and his
position as Chairman of URT, Mr. Wolk may be deemed to have effective control of
URT.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of their purchase in 1983 from an unaffiliated third party
seller, Allan Wolk and his brother, Sheffield Wolk, a former director of URT,
are the owners of the land and building on which the PEC store in Fort
Lauderdale, Florida is located. Such property was and continues to be subject to
a lease with PEC as tenant, which had been negotiated by the prior owner. During
the 1995 fiscal year, PEC made and paid for certain renovations to the premises.
Based on the provisions of the lease, the owners agreed to be responsible for
$26,225 of the cost of such renovations which, with interest, is being deducted
by PEC over a period of 36 months.
In December, 1984, PEC entered into a long-term lease with Allan Wolk and
Sheffield Wolk for premises owned by them in Orlando, Florida. The lease term
commenced in December, 1984, and is for a period of twenty years with two
additional five year terms. The lease is a triple net lease. The lease provides
for a net minimum rental rate of $125,000 per annum from the rental commencement
date through March 31, 1985; a rate of $140,000 per annum during the following
five year period; a rate of $145,000 per annum during the next five year period;
a rate of $160,000 during the next five year period; and increases of $5,000
during every five year period thereafter. Notwithstanding the foregoing,
commencing with the sixth rental year, if net sales at the store during any
rental year are less than $1,800,000, the annual net minimum rental rate for
such year will be the same as that which had been in effect during the preceding
five year period. The lease was approved by disinterested directors and, in the
opinion of management, is as reasonable as those which could have been obtained
from unaffiliated third parties.
Because of the profitability of the above-referenced Fort Lauderdale and
Orlando stores, the leases for such two stores were among the leases which PEC
elected to assume during its Chapter 11 proceeding with the approval of the
Bankruptcy Court (See "LEGAL PROCEEDINGS").
During the first approximately nine months of the 1996 fiscal year, there
had been a lease in effect between PEC, as tenant, and Allan Wolk, his sister
and two children of his brother, as landlord, applicable to a store operated by
PEC in North Miami Beach, Florida. Because the North Miami Beach store had
recently become unprofitable for PEC, and remained unprofitable for PEC even
after the landlord had authorized PEC, in July 1995, to begin paying rent at a
lower amount than that required under the lease between the parties, the lease
applicable to such store was among the leases as to which PEC elected, with the
approval of the Bankruptcy Court, to exercise its right to reject as a result of
the Chapter 11 proceeding. Such lease had previously been approved by
disinterested directors (See "LEGAL PROCEEDINGS").
-44-
<PAGE>
In August, 1987, URT made loans to Allan Wolk and its then president, David
Jackowitz, of $392,872 and $63,748, respectively, and in March, 1988 made
additional loans of $123,000 and $21,000, respectively. The principal amounts of
the August, 1987 loans were payable in five years, with interest payable at the
rate of 7.9% per annum and the principal amounts of the March, 1988 loans were
payable in six years, with interest payable at the rate of 7.86% per annum. As
consideration, in part, for the agreements of Mr. Wolk and Mr. Jackowitz to
reduce the amounts of compensation which would have been payable to them under
employment agreements dated as of February 1, 1991, which were then in effect,
the promissory notes evidencing the above-described indebtedness were replaced
by new promissory notes which permitted such indebtedness to be repaid over a
period of eight years, from April 1, 1992 through March 31, 2000, with interest
at the rate of 8.0% per annum, in 96 consecutive monthly installments of $2,935
and $471, respectively. The loans are unsecured. Under the above-described
provisions of Mr. Wolk's 1994 Agreement (which took effect on October 1, 1994),
he is entitled to be credited, as additional compensation through March 31,
2000, when his agreement expires, at the rate of $2,935 per month. Under the
above-described provisions of the Jackowitz agreement, he had been entitled to
be credited, as additional compensation, at the rate of $471 per month during
the period of employment and the consulting period so provided in the Jackowitz
agreement, until the amount owed has been paid. As a result of the rejection of
the Jackowitz agreement by the Bankruptcy Court on or about March 18, 1996 (See
"LEGAL PROCEEDINGS"), Mr. Jackowitz is no longer entitled to be credited, as
additional compensation, for the amount still payable by him under his note.
As a result of the arrangements described in the preceding paragraph,
during the 1996 fiscal year, Mr. Wolk was credited with a total of $24,529 and
Mr. Jackowitz was credited with a total of $ 4,710 with respect to the above
described loans. As of March 30, 1996, the outstanding principal amount of Mr.
Wolk's loans was $120,237 and the outstanding principal amount of Mr. Jackowitz'
loans was $19,312. The highest amount outstanding on Mr. Wolk's loans during the
1996 fiscal year was $144,766 and the highest amount outstanding amount on Mr.
Jackowitz' loans was $23,252. Mr. Wolk and Mr. Jackowitz used the funds lent to
them to purchase shares of URT's Class A and Class B Common Stock from
independent third parties. The disinterested directors authorized URT to finance
such purchases as above-described, because they believed that such action would
give Mr. Wolk and Mr. Jackowitz continued incentive to remain with URT and to
work to increase the value of its shares.
In December, 1995, URT purchased from David Jackowitz, its former President
and Director, and from certain inter-vivos trusts which had been created for the
benefit of David Jackowitz' grandchildren, the following shares of URT stock:
365,850 shares of Class A Common Stock and 7,922 shares of Class B Common Stock.
The price paid by URT for such shares was $0.10 per share. The transaction was
approved by the directors of URT, who determined that the acquisition of such
shares is in URT's interest and that the price agreed to was fair and reasonable
based on the bid and asked prices for such shares.
In April, 1989, URT's board of directors authorized URT to enter into
agreements with its officers and directors under which they would be entitled to
be indemnified by URT and have their expenses advanced to them in the event of
any claim against them in their capacities as officers and directors. Such
agreements were entered into with all then-existing officers and directors of
URT on or about May 22, 1989. On or about July 14, 1995, and pursuant to the
further authorization of the
-45-
<PAGE>
board of directors on such date, URT entered into indemnification agreements
with the two additional officers and directors, Brian Wolk and Jason Wolk, who
were appointed to their respective positions subsequent to 1989. The
indemnification agreements so entered into with Brian Wolk and Jason Wolk are in
the same form as the indemnification agreements entered into in 1989 with the
then-existing officers and directors.
On or about October 16, 1995, URT loaned to PEC the sum of $250,000 for its
short term holiday season cash needs. Such loan was evidenced by a promissory
note under which PEC was required to repay such amount to PEC on November 19,
1995 with interest at the rate of 7% per annum. Such amount was so repaid by PEC
to URT on or about December 13, 1995.
In order for PEC to be able to effect the Plan of Reorganization on the
terms described above, URT, in exchange for the issuance to it of 20,000,000
shares of PEC's authorized common stock (including 218,730 treasury shares), has
agreed that, subject to the terms of the Plan, it would contribute $350,000 to
the capital of PEC, waive an aggregate of $75,000 of dividends payable by PEC to
URT with respect to the period running from January 1, 1996 to March 31, 1997,
guarantee the approximately $1,284,000 which is due to PEC's principal suppliers
after the Effective Date pursuant to the arrangements described in "LEGAL
PROCEEDINGS" above, and lend $700,000 to PEC. In order to facilitate the
issuance of such shares to URT, URT also waived its right to convert to common
stock the Series A preferred stock of PEC which is owned by URT. The loan by URT
to PEC was made on the Effective Date and is required to be paid back by PEC
with interest at the prime rate charged by Chase Manhattan Bank, N.A. over a
period of four years beginning on the third anniversary of the Effective Date.
The debt so owed by PEC to URT is subordinate to the amounts owed to PEC's
principal suppliers, and is secured by a second mortgage on PEC's Mobile,
Alabama property.
On or about March 25, 1997, URT and PEC agreed that the above-described
$700,000 loan from URT to PEC would be reduced by an amount equal to the lesser
of $200,000 or the difference between $1,000,000 and the total shareholders'
equity of PEC determined in the financial statements as of the end of the 1997
fiscal year, without taking such debt reduction into account, and cause the
amount of such aggregate debt reduction to be transferred to the capital account
of PEC in exchange for shares of a new class of cumulative preferred stock,
entitled Series C preferred stock, in an amount as shall be determined by
dividing the amount of such aggregate debt reduction by $100. The Series C
preferred stock to be so issued will have a par value of $100 and a cumulative
preferred dividend of 10% per annum. The approval of the holders of a majority
of the shares of Series C preferred stock, voting as a separate class, shall be
required with respect to all matters on which the shareholders have a right to
vote.
-46-
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
Page
----
1. Consolidated Financial Statements
Table of Contents 18
Independent Auditors' Report 19
URT Industries, Inc. and
Subsidiaries Consolidated
Financial Statements:
Consolidated Balance Sheets as
of March 30, 1996 and April 1, 1995. 20
Consolidated Statements of
Operations for each of the years
in the three year period ended
March 30, 1996. 21
Consolidated Statements of
Shareholders' Equity for each of
the years in the three year period
ended March 30, 1996. 22
Consolidated Statements of Cash
Flows for each of the years in
the three year period ended
March 30, 1996. 23
Notes to Consolidated Financial
Statements. 25
2. Financial Statement Schedules
Schedules have been omitted which are not
applicable or where the required information is
shown in the financial statements or the notes
thereto.
3. Exhibits.
-47-
<PAGE>
Exhibit No.
- -----------
3.1 Articles of Incorporation of URT Industries, Inc. ("URT") and all
amendments thereto through January 11, 1973, incorporated by
reference to Exhibit No. 3.1 to URT's Registration Statement No.
2-36263.
3.1-1 Amendment to URT's Articles of Incorporation dated January 2, 1975,
incorporated by reference to Exhibit No. 3.1-1 to URT's Registration
Statement No. 2-59153.
3.1-2 Amendment to URT's Articles of Incorporation dated November 10, 1976,
incorporated by reference to Exhibit No. 3.1-2 to URT's Registration
Statement No. 2-59153.
3.1-3 Amendment to URT's Articles of Incorporation dated September 21,
1979, incorporated by reference to Exhibit No. 3.1-3 to URT's
Registration Statement No. 2-63747.
10 (mm) Lease dated December 13, 1984 between Allan Wolk and Sheffield Wolk
and PEC applicable to Orlando, Florida premises, incorporated by
reference to Exhibit No. 13.47 to URT's Registration Statement No.
2-63747.
10 (ss) Amendment to Lease dated February 25, 1986 between Allan Wolk and
Sheffield Wolk and PEC applicable to Orlando, Florida premises
incorporated by reference to Exhibit 10(ss) to URT's Form 10-K Annual
Report filed on June 27, 1986.
10 (kkk) Indemnification Agreement dated May 22, 1989 between Allan Wolk and
URT, incorporated by reference to Exhibit 10(kkk) to URT's Form 10-K
Annual Report dated June 27, 1989.
10 (lll) Indemnification Agreement dated May 22, 1989 between David Jackowitz
and URT, incorporated by reference to Exhibit 10(lll) to URT's Form
10-K Annual Report dated June 27, 1989.
10 (nnn) Indemnification Agreement dated May 22, 1989 between Ann Krouse and
URT, incorporated by reference to Exhibit 10(nnn) to URT's Form 10-K
Annual Report dated June 27, 1989.
10 (ppp) By-Laws of URT, as amended and restated, incorporated by reference to
Exhibit 10 (ppp) to URT's Form 10-K Annual Report dated June 28,
1990.
10 (xxx) Promissory Note dated March 31, 1992 made by Allan Wolk to URT, as
payee, incorporated by reference to Exhibit 10(xxx) to URT's Form
10-K Annual Report dated June 25, 1992.
10(bbbb) Promissory Note dated March 31, 1992 made by David Jackowitz to URT,
as payee, incorporated by reference to Exhibit 10(bbbb) to URT's Form
10-K Annual Report dated June 25, 1992.
-48-
<PAGE>
10(dddd) Management and Intercorporate Agreement dated March 29, 1993 between
URT and PEC, incorporated by reference to Exhibit 10(dddd) to URT's
Form 10-K Annual Report dated June 25, 1993.
10(eeee) Amended and Restated Employment Agreement, dated October 1, 1994,
between Allan Wolk and URT, incorporated by reference to Exhibit
10(eeee) to URT's 10-K Annual Report dated June 29, 1995.
10(ffff) Amended and Restated Employment Agreement, dated December 14, 1994,
between David Jackowitz and PEC, incorporated by reference to Exhibit
10(ffff) to URT's 10-K Annual Report dated June 29, 1995.
10(iiii) Amendment No. 1 dated as of October 1, 1994 to Management and
Intercorporate Agreement dated March 29, 1993 between URT and PEC,
incorporated by reference to Exhibit 10(iiii) to URT's 10-K Annual
Report dated June 29, 1995.
10(jjjj) Letter Agreement dated January 1, 1996 between URT and PEC pertaining
to termination of Management and Intercorporate Agreement dated March
29, 1993.
10(kkkk) Letter Agreement dated January 1, 1996 between URT and PEC pertaining
to services of Allan Wolk.
10(llll) Letter Agreement dated January 1, 1996 between Allan Wolk and URT.
10(mmmm) Indemnification Agreement dated July 14, 1995 between Brian Wolk and
URT.
10(nnnn) Indemnification Agreement dated July 14, 1995 between Jason Wolk and
URT.
10(oooo) PEC's Amended Plan of Reorganization, dated October 23, 1996,
incorporated by reference to Exhibit 1 to PEC's Form 8-K dated April
7, 1997.
10(pppp) Order Confirming PEC's Amended Plan or Reorganization, as Modified,
dated January 17, 1997, incorporated by reference to Exhibit 2 to
PEC's Form 8-K dated April 7, 1997.
10(qqqq) URT Promissory Note dated January 27, 1997 made by PEC to URT,
incorporated by reference to Exhibit 10.66 of PEC's 10-K Annual
Report dated April 25, 1997.
10(rrrr) Security Agreement dated January 27, 1997 between URT and PEC,
incorporated by reference to Exhibit 10.67 of PEC's 10-K Annual
Report dated April 25, 1997.
10(ssss) Mortgage Agreement with Assignment of Rents, Security Agreement and
Fixture Filing dated January 27, 1997 by PEC in favor of URT,
incorporated by reference to Exhibit 10.68 of PEC's 10-K Annual
Report dated April 25, 1997.
-49-
<PAGE>
10(tttt) Reimbursement Agreement dated January 27, 1997 between URT and PEC,
incorporated by reference to Exhibit 10.69 of PEC's 10-K Annual
Report dated April 25, 1997.
10(uuuu) Subordination Agreement dated January 27, 1997 between URT, PEC and
selected creditors, incorporated by reference to Exhibit 10.70 of
PEC's 10-K Annual Report dated April 25, 1997.
10(vvvv) Subordination Agreement dated January 27, 1997 between URT, PEC and
creditor, incorporated by reference to Exhibit 10.71 of PEC's 10-K
Annual Report dated April 25, 1997.
10(wwww) Surrender and Waiver Agreement dated January 27, 1997 between URT and
PEC, incorporated by reference to Exhibit 10.72 of PEC's 10-K Annual
Report dated April 25, 1997.
10(xxxx) Waiver Agreement dated March 1, 1997 between URT and PEC,
incorporated by reference to Exhibit 10.73 of PEC's 10-K Annual
Report dated April 25, 1997.
10(yyyy) Stock Purchase Agreement dated March 24, 1997 between URT and PEC,
incorporated by reference to Exhibit 10.74 of PEC's 10-K Annual
Report dated April 25, 1997.
22 Subsidiaries of URT.
27 Financial Data Schedule
(b) Reports on Form 8-K.
PEC filed a report on Form 8-K, dated January 16, 1996, on or about January
26, 1996 in order to report its filing for protection from its creditors under
Chapter 11 of the Bankruptcy Code and the closing of three stores. URT filed
Forms 8-K, dated July 10, 1996, August 22, 1996 and November 22, 1996, on or
about such dates, in order to report the effects of PEC's Chapter 11 proceeding
on URT's ability to file this annual report and certain quarterly reports. PEC
filed a report on Form 8-K, dated April 7, 1997, on or about such date, in order
to report on the certain information pertaining to the confirmation of its Plan
of Reorganization.
-50-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
URT INDUSTRIES, INC.
By: s/Allan Wolk
-------------------------
Allan Wolk,
Chairmain of the Board
Dated: April 25, 1997
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 dates indicated.
Title Date
----- ----
By: s/Allan Wolk April 25, 1997
----------------------------------
Allan Wolk,
Chairman of the Board ,
President (Principal
Executive Officer) and Director
By: s/Brian Wolk April 25, 1997
----------------------------------
Brian Wolk, Executive
Vice President and Director
By: s/Jason Wolk April 25, 1997
----------------------------------
Jason Wolk, Executive
Vice President, Treasurer,
Principal Financial and Accounting
Officer, Secretary and Director
-51-
<PAGE>
Index of Exhibits to Form 10-K of URT Industries, Inc.
(Commission File No. 0-6882) for year ended March 30, 1996
Exhibit Description
10(jjjj) Letter Agreement dated January 1, 1996 between URT and PEC
pertaining to termination of Management and Intercorporate
Agreement dated March 29, 1993.
10(kkkk) Letter Agreement dated January 1, 1996 between URT and PEC
pertaining to services of Allan Wolk.
10(llll) Letter Agreement dated January 1, 1996 between Allan Wolk
and URT.
10(mmmm) Indemnification Agreement dated July 14, 1995 between Brian
Wolk and URT.
10(nnnn) Indemnification Agreement dated July 14, 1995 between Jason
Wolk and URT.
22 Subsidiaries
27 Financial Data Schedule
Exhibit 10(jjjj)
<PAGE>
[Letterhead of URT Industries, Inc.]
January 1, 1996
Peaches Entertainment Corporation
3451 Executive Way
Miramar, FL 33025
Gentlemen:
It is the purpose of this letter to confirm the following agreement between
our two companies, URT Industries, Inc. ("URT") and Peaches Entertainment Corp.
("PEC"):
1. the Management and Intercorporate Agreement dated as of March 29, 1993,
as heretofore amended (the "Management Agreement"), between URT and PEC
terminated effective as of the close of business on December 31, 1995 and has no
further force or effect.
2. So long as URT and PEC file a consolidated Federal Tax Return:
(a) If such consolidated return shows a tax to be payable and if both
PEC and URT and its subsidiaries other than PEC ("URT Consolidated") would have
paid taxes if they had filed separate returns, then the gross savings resulting
from filing a consolidated return ("Tax Saving") shall be computed and each
party shall pay a tax equal to the amount hwich it would have paid if it had
filed separately less its pro-rata share of the Tax Saving.
(b) If such consolidated return shows a tax to be payable and if only
either URT Consolidated or PEC (but not both) would have paid a tax if they had
filed separate returns, then the party which would have had to pay a tax if it
had filed a separate return shall pay the entire tax and, in addition, pay to
the other party the amount of the Tax Saving which it realized as a result of
the filing of the consolidated tax return.
(c) If such consolidated return shows no tax to be payable but if either
PEC or URT Consolidated would have had to pay a tax if it had filed separately,
then no tax shall be paid by either party and the party which would have had to
pay a tax shall pay to the other party the amount of the Tax Saving which it
realized as a result of the filing of the consolidated tax return.
(d) All state taxes shall be similarly adjusted.
(e) All determinations provided for hereunder shall be made by the
independent public accountants who are hired by the parties to prepare the
consolidated tax return and such determinations by such accountants shall be
final and binding upon the parties.
<PAGE>
Peaches Entertainment Corporation
January 1, 1996
Page 2
(f) URT will use its best efforts to timely prepare and file the
consolidated tax return for URT and subsidiaries and PEC hereby agrees that it
will cooperate with URT in the preparation and filing of same. PEC shall provide
to URT promptly upon request, all financial and otehr information required by
URT for such prupose.
Please sign below to evidence our agreement.
Very truly yours,
URT INDUSTRIES, INC.
By:/s/Brian Wolk
------------------------------
Vice-President
AGREED AND APPROVED:
PEACHES ENTERTAINMENT CORPORATION
By: /s/Jason Wolk
------------------------------------
Vice-President
Exhibit 10(kkkk)
<PAGE>
[Letterhead of URT Industries, Inc.]
January 1, 1996
Peaches Entertainment Corporation
3451 Executive Way
Miramar, FL 33025
Gentlemen:
It is the purpose of this letter agreement to confirm that for the period
from January 1, 1995 through March 31, 2000, URT Industries, Inc. ("URT") will
provide to Peaches Entertainment Corporation ("PEC") the services of Allan Wolk
("Wolk"), as PEC's Chairman, President and Chief Executive Officer and that, in
consideration thereof, PEC agrees to:
(a) pay to Wolk during such period, so long as he continues to provide such
services, a salary at the rate of Five Hundred Thousand Dollars ($500,000) per
annum, payable monthly, on the first day of each month;
(b) issue to Wolk annually a form W-2 with respect thereto; and
(c) make all other required filings with all governmental authorities which
relate thereto.
Please sign below to evidence our agreement.
Very truly yours,
URT INDUSTRIES, INC.
By:/s/Brian Wolk
-----------------------------
AGREED AND APPROVED:
PEACHES ENTERTAINMENT CORPORATION
By:/s/Jason Wolk
----------------------------------
Vice-President
Exhibit 10(llll)
<PAGE>
Allan Wolk
3451 Executive Way
Miramar, FL 33025
January 1, 1996
URT Industries, Inc.
3451 Executive Way
Miramar, FL 33025
Gentlemen:
I understand that URT is simultaneously entering into a letter agreement
dated January 1, 1996 (the "Intercorporate Agreement") with its subsidiary,
Peaches Entertainment Corporation ("PEC"), which provides the URT will make
available to PEC, for the balance of the Period of Employment described in my
Employment Agreement with URT dated October 1, 1994 (the "Employment
Agreement"), my services as PEC's Chairman, President and Chief Executive
Officer and that PEC will pay directly to me, as compensation for such services,
the amount described in the Intercorporate Agreement.
It is the purpose of this letter agreement to confirm that:
1. I agree to perform for PEC the services described in the
Intercorporate Agreement.
2. If, and to the extent that and so long as I receive from PEC the
compensation described in the Intercorporate Agreement, as it may be increased
or decreased from time to time, it shall be credited against the base salary
which is payable to me by URT under the Employment Agreement.
3. URT may rely on this letter agreement in executing the Intercorporate
Agreement.
Sincerely yours,
s/Allan Wolk
--------------------------
Allan Wolk
AGREED AND APPROVED:
URT INDUSTRIES, INC.
By: s/Brian Wolk
------------------------
Vice-President
Exhibit 10(mmmm)
<PAGE>
INDEMNIFICATION AGREEMENT
AGREEMENT made as of the 14th day of July, 1995, by and between URT
INDUSTRIES, INC. (the "Company"), a Florida corporation, whose address is 3451
Executive Way, Miramar, Florida 33025 , and BRIAN WOLK, whose office address is
3451 Executive Way, Miramar, Florida 33025 (the "Indemnitee").
The Company believes that in order to induce competent persons to
continue to serve as officers and directors and to attract and retain
additional persons to serve in such capacities, it is in the best
interests of the Company to provide them with adequate protection
against inordinate risks of claims and actions against them arising
out of such service;
It believes that it is reasonable, prudent and necessary for the
Company, contractually, to obligate itself to indemnify such persons
so that they will serve or continue to serve the Company free from
undue concern that they will not be so indemnified; and
The Indemnitee is willing to serve, to continue to serve and to take
on additional service for or on behalf of the Company on the condition
that Indemnitee be so indemnified.
IT IS, THEREFORE, AGREED:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the
following meanings:
1.1 "Board" means the Board of Directors of the Company.
1.2 "Corporation Act" means the Florida General Corporation Act.
1.3 "Corporate Position" means the position of a person as a director
or officer of the Company.
1.4 "Company" means Peaches Entertainment Corporation.
<PAGE>
1.5 "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
1.6 "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and other disbursements or expenses customarily incurred
in connection with defending, preparing to defend, investigating, or being or
preparing to be a witness in a Proceeding.
1.7 "Independent Counsel" means a law firm, or a member of a law firm
which is selected as provided under paragraph 4(c) of Section 607.014 of the
Corporation Act.
1.8 "Proceeding" means any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
(a) initiated by Indemnitee, unless the Board of Directors consents, or (b)
pending on or before the date hereof.
ARTICLE II
Term of Agreement
This Agreement shall become effective on the date hereof and terminate upon
the later of (a) 10 years after the date that Indemnitee ceases to hold a
Corporate Position, or (b) 120 days after the final termination of (i) all
pending Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and (ii) any adjudication
or arbitration commenced by Indemnitee under Article VIII of this Agreement.
ARTICLE III
Services By Indemnitee, Notice of Proceedings
3.1 Services. Indemnitee agrees to serve the Company in the Corporate
Position to which he is elected, subject to his acceptance of such position.
However, Indemnitee shall have no obligation to continue in any such Position by
virtue of his execution of this Agreement.
3.2 Notice of Proceeding. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
which may be subject to indemnification or advancement of Expenses covered
hereunder.
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<PAGE>
ARTICLE IV
Indemnification
4.1 In General. Without limiting any other rights of the Company or
Indemnitee, as provided in Article IX hereof, the Company agrees to indemnify
and advance Expenses to Indemnitee as provided in this Agreement, if by reason
of Indemnitee's Corporate Position, Indemnitee is, or is threatened to be made,
a party to any threatened, pending or completed Proceeding, including any
Proceeding by or in the right of the Company, unless a judgment or other final
adjudication should establish that his actions or omissions to act were material
to the cause of action so adjudicated and constitute: (i) a violation of the
criminal law unless the Indemnitee had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; or
(ii) a transaction from which the Indemnitee derived an improper personal
benefit; or (iii) in the case of a director, a circumstance under which the
liability provisions of Section 607.144 of the Corporation Act are applicable;
or (iv) willful misconduct or a conscious disregard for the best interests of
the Company in a proceeding by or in the right of the Company to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder.
4.2 Indemnification for Expenses of a Witness. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of Indemnitee's Corporate Position, a witness in any Proceeding to which
Indemnitee is not a party, Indemnitee shall be indemnified against all Expenses
actually and reasonably incurred by Indemnitee or on Indemnitee's behalf in
connection therewith.
ARTICLE V
Advancement of Expenses
The Company shall advance all reasonable Expenses which, by reason of
Indemnitee's Corporate Position, were incurred by or on Indemnitee's behalf in
connection with any threatened, pending or completed Proceeding within 20 days
after receipt by the Company of (a) a statement or statements from Indemnitee
requesting such advance or advances, whether before or after final disposition
of such Proceeding and (b) an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses. All statements shall
reasonably evidence the Expenses incurred by Indemnitee. Any advance and any
undertaking to repay advances under this Article shall be unsecured and interest
free.
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<PAGE>
ARTICLE VI
Procedures For Determination of Entitlement to Indemnification
6.1 Initial Request. To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request, including such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
6.2 Method of Determination. A determination (if required by
applicable law) with respect to Indemnitee's entitlement to indemnification
shall be made in the specific case (a) by the Board by a majority vote of a
quorum consisting of disinterested Directors, (b) if a quorum of the Board
consisting of Disinterested Directors is not obtainable, or even if obtainable,
if the Board so directs, by Independent Counsel selected by the Board, in a
written opinion to the Board, a copy of which shall be delivered to Indemnitee.
6.3 Selection, Payment and Discharge of Independent Counsel. If the
determination of entitlement to indemnification is to be made by Independent
Counsel under Section 6.2 of this Agreement, the Independent Counsel shall be
selected by the Board, and the Company shall give written notice to Indemnitee
advising Indemnitee of the identity of the Independent Counsel so selected. The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with his functioning
as such pursuant to this Agreement.
6.4 Cooperation. Indemnitee shall cooperate with the person, persons
or entity making the determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. All reasonable costs or expenses, including
attorneys' fees and disbursements, incurred by Indemnitee in so cooperating with
the person, persons or entity making such determination shall be borne by the
Company, irrespective of the determination as to Indemnitee's entitlement to
indemnification.
6.5 Payment. If it is determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within 10 days after such
determination.
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<PAGE>
ARTICLE VII
Presumptions and Effect of Certain Proceedings
7.1 Burden of Proof. In making a determination with respect to
entitlement to indemnification hereunder, the person, persons or entity making
such determination shall presume that Indemnitee is entitled to indemnification
under this Agreement, and the Company shall have the burden of proof to overcome
that presumption in connection with the making by any person, persons or entity
of any determination contrary to that presumption.
7.2 Effect of Other Proceedings. The termination of any Proceeding, or
of any claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, adversely affect the right of Indemnitee to indemnification or create a
presumption of any kind against Indemnitee.
ARTICLE VIII
Remedies of Indemnitee
8.1 Application. This Article shall apply in the event of a Dispute.
For purposes of this Article, "Dispute" shall mean any of the following events:
(a) a determination under Article VI that Indemnitee is not
entitled to indemnification;
(b) failure to make timely advancement of Expenses under Article V;
(c) failure to make the determination as to entitlement to
indemnification under Section 6.2 by the later of (i) 30 days after receipt by
the Company of the request for indemnification and (ii) 30 days after the final
disposition of a Proceeding;
(d) failure to make payment of indemnification within 10 days after
a determination has been made that Indemnitee is entitled to indemnification.
8.2 Adjudication. In the event of a Dispute, Indemnitee shall be
entitled to an adjudication in an appropriate court of the State of Florida, or
in any other court of competent jurisdiction, of Indemnitee's entitlement to
such indemnification or advancement of Expenses. Alternatively, Indemnitee, at
Indemnitee's option, may seek an award in arbitration to be conducted by a
single arbitrator in Miami, Florida, under the Commercial Arbitration Rules of
the American Arbitration Association. Indemnitee shall commence any action under
this Agreement seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the right to commence such
action under this Section 8.2.
-5-
<PAGE>
8.3 De Novo Review. If a determination is made under Article VI that
Indemnitee is not entitled to indemnification, any adjudication or arbitration
commenced under this Article shall be conducted in all respects as a de novo
trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by
reason of such adverse determination. In any such adjudication or arbitration,
the Company shall have the burden of proving that Indemnitee is not entitled to
indemnification.
8.4 Company Bound. If a determination is made under Article VI that
Indemnitee is entitled to indemnification, the Company shall be bound by such
determination in any adjudication or arbitration absent (a) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification or the furnishing of information under Section 6.4,
or (b) a prohibition of such indemnification under applicable law.
8.5 Expenses of Adjudication. If, in accordance with this Article,
Indemnitee seeks an adjudication or an award in arbitration to enforce
Indemnitee's rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company any and all expenses
(of the types described in the definition of Expenses in Section 1.6) actually
and reasonably incurred by Indemnitee in such adjudication or arbitration, but
only if Indemnitee prevails therein. If it shall be determined in such
adjudication or arbitration that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses sought, the Indemnitee
shall be entitled to recover expenses from the Company on a pro-rata basis.
ARTICLE IX
Non-Exclusivity, Subrogation
9.1 Non-Exclusivity. The indemnification and advancement of Expenses
provided under this Agreement shall not be deemed to be exclusive of any other
rights to indemnification and advancement of expenses which Indemnitee may have,
or any other right or power which the Company may have to provide
indemnification and advancement of expenses to Indemnitee, under the Corporation
Act, the certificate of incorporation or by-laws of the Company or any affiliate
of the Company, any other agreement, a vote of stockholders, a resolution of
directors or otherwise. No amendment, alteration, rescission or replacement of
this Agreement or any provision hereof shall be effective as to Indemnitee with
respect to any action taken or omitted by such Indemnitee in Indemnitee's
Corporate Position before such amendment, alteration, rescission or replacement.
9.2 Subrogation. In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
9.3 No Duplicative Payment. The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent
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<PAGE>
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
ARTICLE X
General Provisions
10.1 Employee Benefit Plans. Reference to "fines" in this Agreement
shall include without limitation any excise taxes assessed on Indemnitee with
respect to any employee benefit plan. An Indemnitee who acted in good faith and
in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall not be deemed
to have acted in violation of paragraphs 7(a) through (d) of Section 6071014 of
the Corporation Act.
10.2 Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and Indemnitee's heirs, executors and administrators.
10.3 Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation each portion of any
section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the remaining provisions of
this Agreement (including, without limitation, each portion of any section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the entire Agreement.
10.4 No Adequate Remedy. The parties acknowledge that it is impossible
to measure in money the damages which will accrue to either party by reason of a
failure to perform any of the obligations under this Agreement. Therefore, if
either party shall institute any action or proceeding to enforce the provisions
hereof, the party against whom such action or proceeding is brought hereby
waives the claim or defense that the party bringing such action has an adequate
remedy at law, and the party against whom the action is brought shall not assert
in any such action or proceeding the claim or defense that the other party has
an adequate remedy at law.
10.5 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be considered an original and all of
which together shall constitute one Agreement.
10.6 Headings. The headings in this Agreement are for convenience of
reference
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<PAGE>
only and shall not affect its interpretation or construction.
10.7 Waiver. A party shall not be deemed to have waived a right or
remedy provided in or relating to this Agreement unless the waiver is in writing
and duly executed by the party.
10.8 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed (which receipt shall be required to be
given upon such delivery); or (ii) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed, at the address indicated after each party's name on page 1 hereof or to
such other address as may have been furnished to Indemnitee by the Company or to
the Company by Indemnitee, as the case may be in the manner provided by this
Agreement.
10.9 Governing Law. The law of Florida shall govern the validity,
interpretation, construction and effect of this Agreement.
10.10 Entire Agreement. This Agreement completely states the rights
and duties of the parties, sets forth their entire understanding and merges all
prior and contemporaneous representations, promises, proposals, discussions and
understandings by or between the parties, insofar as the subject matter of this
Agreement is concerned. It may be amended only by another written agreement duly
executed by the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
URT INDUSTRIES, INC.
By /s/David Jackowitz
---------------------
Title President
Attest:
By /s/Gail Sokolow
------------------
INDEMNITEE
/s/Brian Wolk
-------------------------
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Exhibit 10(nnnn)
<PAGE>
INDEMNIFICATION AGREEMENT
AGREEMENT made as of the 14th day of July, 1995, by and between URT
INDUSTRIES, INC. (the "Company"), a Florida corporation, whose address is 3451
Executive Way, Miramar, Florida 33025 , and JASON WOLK, whose office address is
3451 Executive Way, Miramar, Florida 33025 (the "Indemnitee").
The Company believes that in order to induce competent persons to
continue to serve as officers and directors and to attract and retain
additional persons to serve in such capacities, it is in the best
interests of the Company to provide them with adequate protection
against inordinate risks of claims and actions against them arising
out of such service;
It believes that it is reasonable, prudent and necessary for the
Company, contractually, to obligate itself to indemnify such persons
so that they will serve or continue to serve the Company free from
undue concern that they will not be so indemnified; and
The Indemnitee is willing to serve, to continue to serve and to take
on additional service for or on behalf of the Company on the condition
that Indemnitee be so indemnified.
IT IS, THEREFORE, AGREED:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the
following meanings:
1.1 "Board" means the Board of Directors of the Company.
1.2 "Corporation Act" means the Florida General Corporation Act.
1.3 "Corporate Position" means the position of a person as a director
or officer of the Company.
1.4 "Company" means Peaches Entertainment Corporation.
<PAGE>
1.5 "Disinterested Director" means a director of the Company who is not
and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
1.6 "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and other disbursements or expenses customarily incurred
in connection with defending, preparing to defend, investigating, or being or
preparing to be a witness in a Proceeding.
1.7 "Independent Counsel" means a law firm, or a member of a law firm
which is selected as provided under paragraph 4(c) of Section 607.014 of the
Corporation Act.
1.8 "Proceeding" means any action, suit, arbitration, alternate dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding whether civil, criminal, administrative or investigative, except one
(a) initiated by Indemnitee, unless the Board of Directors consents, or (b)
pending on or before the date hereof.
ARTICLE II
Term of Agreement
This Agreement shall become effective on the date hereof and terminate
upon the later of (a) 10 years after the date that Indemnitee ceases to hold a
Corporate Position, or (b) 120 days after the final termination of (i) all
pending Proceedings in respect of which Indemnitee is granted rights of
indemnification or advancement of Expenses hereunder and (ii) any adjudication
or arbitration commenced by Indemnitee under Article VIII of this Agreement.
ARTICLE III
Services By Indemnitee, Notice of Proceedings
3.1 Services. Indemnitee agrees to serve the Company in the Corporate
Position to which he is elected, subject to his acceptance of such position.
However, Indemnitee shall have no obligation to continue in any such Position by
virtue of his execution of this Agreement.
3.2 Notice of Proceeding. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
which may be subject to indemnification or advancement of Expenses covered
hereunder.
-2-
<PAGE>
ARTICLE IV
Indemnification
4.1 In General. Without limiting any other rights of the Company or
Indemnitee, as provided in Article IX hereof, the Company agrees to indemnify
and advance Expenses to Indemnitee as provided in this Agreement, if by reason
of Indemnitee's Corporate Position, Indemnitee is, or is threatened to be made,
a party to any threatened, pending or completed Proceeding, including any
Proceeding by or in the right of the Company, unless a judgment or other final
adjudication should establish that his actions or omissions to act were material
to the cause of action so adjudicated and constitute: (i) a violation of the
criminal law unless the Indemnitee had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; or
(ii) a transaction from which the Indemnitee derived an improper personal
benefit; or (iii) in the case of a director, a circumstance under which the
liability provisions of Section 607.144 of the Corporation Act are applicable;
or (iv) willful misconduct or a conscious disregard for the best interests of
the Company in a proceeding by or in the right of the Company to procure a
judgment in its favor or in a proceeding by or in the right of a shareholder.
4.2 Indemnification for Expenses of a Witness. Notwithstanding any other
provision of this Agreement, to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Position, a witness in any Proceeding to which Indemnitee
is not a party, Indemnitee shall be indemnified against all Expenses actually
and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection
therewith.
ARTICLE V
Advancement of Expenses
The Company shall advance all reasonable Expenses which, by reason of
Indemnitee's Corporate Position, were incurred by or on Indemnitee's behalf in
connection with any threatened, pending or completed Proceeding within 20 days
after receipt by the Company of (a) a statement or statements from Indemnitee
requesting such advance or advances, whether before or after final disposition
of such Proceeding and (b) an undertaking by or on behalf of Indemnitee to repay
any Expenses advanced if it shall ultimately be determined that Indemnitee is
not entitled to be indemnified against such Expenses. All statements shall
reasonably evidence the Expenses incurred by Indemnitee. Any advance and any
undertaking to repay advances under this Article shall be unsecured and interest
free.
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<PAGE>
ARTICLE VI
Procedures For Determination of Entitlement to Indemnification
6.1 Initial Request. To obtain indemnification under this Agreement,
Indemnitee shall submit to the Company a written request, including such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shall, promptly upon
receipt of such a request for indemnification, advise the Board in writing that
Indemnitee has requested indemnification.
6.2 Method of Determination. A determination (if required by applicable
law) with respect to Indemnitee's entitlement to indemnification shall be made
in the specific case (a) by the Board by a majority vote of a quorum consisting
of disinterested Directors, (b) if a quorum of the Board consisting of
Disinterested Directors is not obtainable, or even if obtainable, if the Board
so directs, by Independent Counsel selected by the Board, in a written opinion
to the Board, a copy of which shall be delivered to Indemnitee.
6.3 Selection, Payment and Discharge of Independent Counsel. If the
determination of entitlement to indemnification is to be made by Independent
Counsel under Section 6.2 of this Agreement, the Independent Counsel shall be
selected by the Board, and the Company shall give written notice to Indemnitee
advising Indemnitee of the identity of the Independent Counsel so selected. The
Company shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with his functioning
as such pursuant to this Agreement.
6.4 Cooperation. Indemnitee shall cooperate with the person, persons or
entity making the determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity any
documentation or information which is not privileged or otherwise protected from
disclosure and which is reasonably available to Indemnitee and reasonably
necessary to such determination. All reasonable costs or expenses, including
attorneys' fees and disbursements, incurred by Indemnitee in so cooperating with
the person, persons or entity making such determination shall be borne by the
Company, irrespective of the determination as to Indemnitee's entitlement to
indemnification.
6.5 Payment. If it is determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within 10 days after such
determination.
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<PAGE>
ARTICLE VII
Presumptions and Effect of Certain Proceedings
7.1 Burden of Proof. In making a determination with respect to
entitlement to indemnification hereunder, the person, persons or entity making
such determination shall presume that Indemnitee is entitled to indemnification
under this Agreement, and the Company shall have the burden of proof to overcome
that presumption in connection with the making by any person, persons or entity
of any determination contrary to that presumption.
7.2 Effect of Other Proceedings. The termination of any Proceeding, or
of any claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, adversely affect the right of Indemnitee to indemnification or create a
presumption of any kind against Indemnitee.
ARTICLE VIII
Remedies of Indemnitee
8.1 Application. This Article shall apply in the event of a Dispute. For
purposes of this Article, "Dispute" shall mean any of the following events:
(a) a determination under Article VI that Indemnitee is not entitled to
indemnification;
(b) failure to make timely advancement of Expenses under Article V;
(c) failure to make the determination as to entitlement to
indemnification under Section 6.2 by the later of (i) 30 days after receipt by
the Company of the request for indemnification and (ii) 30 days after the final
disposition of a Proceeding;
(d) failure to make payment of indemnification within 10 days after a
determination has been made that Indemnitee is entitled to indemnification.
8.2 Adjudication. In the event of a Dispute, Indemnitee shall be
entitled to an adjudication in an appropriate court of the State of Florida, or
in any other court of competent jurisdiction, of Indemnitee's entitlement to
such indemnification or advancement of Expenses. Alternatively, Indemnitee, at
Indemnitee's option, may seek an award in arbitration to be conducted by a
single arbitrator in Miami, Florida, under the Commercial Arbitration Rules of
the American Arbitration Association. Indemnitee shall commence any action under
this Agreement seeking an adjudication or an award in arbitration within 180
days following the date on which Indemnitee first has the right to commence such
action under this Section 8.2.
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<PAGE>
8.3 De Novo Review. If a determination is made under Article VI that
Indemnitee is not entitled to indemnification, any adjudication or arbitration
commenced under this Article shall be conducted in all respects as a de novo
trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by
reason of such adverse determination. In any such adjudication or arbitration,
the Company shall have the burden of proving that Indemnitee is not entitled to
indemnification.
8.4 Company Bound. If a determination is made under Article VI that
Indemnitee is entitled to indemnification, the Company shall be bound by such
determination in any adjudication or arbitration absent (a) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification or the furnishing of information under Section 6.4,
or (b) a prohibition of such indemnification under applicable law.
8.5 Expenses of Adjudication. If, in accordance with this Article,
Indemnitee seeks an adjudication or an award in arbitration to enforce
Indemnitee's rights under, or to recover damages for breach of, this Agreement,
Indemnitee shall be entitled to recover from the Company any and all expenses
(of the types described in the definition of Expenses in Section 1.6) actually
and reasonably incurred by Indemnitee in such adjudication or arbitration, but
only if Indemnitee prevails therein. If it shall be determined in such
adjudication or arbitration that Indemnitee is entitled to receive part but not
all of the indemnification or advancement of expenses sought, the Indemnitee
shall be entitled to recover expenses from the Company on a pro-rata basis.
ARTICLE IX
Non-Exclusivity, Subrogation
9.1 Non-Exclusivity. The indemnification and advancement of Expenses
provided under this Agreement shall not be deemed to be exclusive of any other
rights to indemnification and advancement of expenses which Indemnitee may have,
or any other right or power which the Company may have to provide
indemnification and advancement of expenses to Indemnitee, under the Corporation
Act, the certificate of incorporation or by-laws of the Company or any affiliate
of the Company, any other agreement, a vote of stockholders, a resolution of
directors or otherwise. No amendment, alteration, rescission or replacement of
this Agreement or any provision hereof shall be effective as to Indemnitee with
respect to any action taken or omitted by such Indemnitee in Indemnitee's
Corporate Position before such amendment, alteration, rescission or replacement.
9.2 Subrogation. In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
9.3 No Duplicative Payment. The Company shall not be liable under this
Agreement to make any payment of amounts otherwise indemnifiable hereunder if
and to the extent
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<PAGE>
that Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
ARTICLE X
General Provisions
10.1 Employee Benefit Plans. Reference to "fines" in this Agreement
shall include without limitation any excise taxes assessed on Indemnitee with
respect to any employee benefit plan. An Indemnitee who acted in good faith and
in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall not be deemed
to have acted in violation of paragraphs 7(a) through (d) of Section 6071014 of
the Corporation Act.
10.2 Successors and Assigns. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and Indemnitee's heirs, executors and administrators.
10.3 Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining
provisions of this Agreement (including without limitation each portion of any
section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable that is not itself invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the remaining provisions of this
Agreement (including, without limitation, each portion of any section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the entire Agreement.
10.4 No Adequate Remedy. The parties acknowledge that it is impossible
to measure in money the damages which will accrue to either party by reason of a
failure to perform any of the obligations under this Agreement. Therefore, if
either party shall institute any action or proceeding to enforce the provisions
hereof, the party against whom such action or proceeding is brought hereby
waives the claim or defense that the party bringing such action has an adequate
remedy at law, and the party against whom the action is brought shall not assert
in any such action or proceeding the claim or defense that the other party has
an adequate remedy at law.
10.5 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be considered an original and all of
which together shall constitute one Agreement.
10.6 Headings. The headings in this Agreement are for convenience of
reference
-7-
<PAGE>
only and shall not affect its interpretation or construction.
10.7 Waiver. A party shall not be deemed to have waived a right or
remedy provided in or relating to this Agreement unless the waiver is in writing
and duly executed by the party.
10.8 Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed (which receipt shall be required to be
given upon such delivery); or (ii) mailed by certified or registered mail with
postage prepaid, on the third business day after the date on which it is so
mailed, at the address indicated after each party's name on page 1 hereof or to
such other address as may have been furnished to Indemnitee by the Company or to
the Company by Indemnitee, as the case may be in the manner provided by this
Agreement.
10.9 Governing Law. The law of Florida shall govern the validity,
interpretation, construction and effect of this Agreement.
10.10 Entire Agreement. This Agreement completely states the rights and
duties of the parties, sets forth their entire understanding and merges all
prior and contemporaneous representations, promises, proposals, discussions and
understandings by or between the parties, insofar as the subject matter of this
Agreement is concerned. It may be amended only by another written agreement duly
executed by the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
URT INDUSTRIES, INC.
By /s/David Jackowitz
----------------------------
Title:President
Attest:
By /s/Gail Sokolow
-------------------------
INDEMNITEE
/s/Jason Wolk
------------------------------
-8-
URT INDUSTRIES, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
Subsidiary State of Incorporation
---------- ----------------------
United Record & Tape Industries, Inc. Florida
Peaches Entertainment Corporation Florida
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's consolidated financial statements as of and for the year ended
March 30, 1996, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-30-1996
<PERIOD-END> MAR-30-1996
<CASH> 3,258,061
<SECURITIES> 1,761,336
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,954,260
<CURRENT-ASSETS> 10,618,071
<PP&E> 4,671,426
<DEPRECIATION> 2,803,180
<TOTAL-ASSETS> 12,788,918
<CURRENT-LIABILITIES> 1,429,988
<BONDS> 0
153,175
0
<COMMON> 0
<OTHER-SE> 4,350,226
<TOTAL-LIABILITY-AND-EQUITY> 12,788,918
<SALES> 23,626,489
<TOTAL-REVENUES> 23,626,489
<CGS> 15,316,441
<TOTAL-COSTS> 15,316,441
<OTHER-EXPENSES> 10,510,957
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 111,451
<INCOME-PRETAX> (2,475,174)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,161,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,161,535)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
