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 l934
For the fiscal year ended March 30, 1996 Commission File No. 0-12375
PEACHES ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-2166041
(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:
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 l934 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 $65,000.
As of February 12, 1997 the registrant's transfer agent reported as issued and
outstanding (before the issuance of an additional 20,000,000 shares as reported
below):
19,781,270 Shares of Common Stock
<PAGE>
PART I
Item 1. BUSINESS
Peaches Entertainment Corporation ("PEC" or the "Company"), a Florida
corporation, was incorporated in 1982. Its executive offices are located at 1180
East Hallandale Beach Boulevard, Hallandale, Florida, 33009. Its telephone
number is 954-454-5554. PEC is 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".
URT Industries, Inc. ("URT"), a Florida corporation, presently is the
beneficial owner of approximately 93.5% of PEC's issued and outstanding shares
of common stock and all of its issued and outstanding shares of preferred stock
and controls PEC. The remaining approximately 6.5% of PEC's issued and
outstanding shares of common stock are 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 the 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 PEC's last five
complete fiscal years ended March 30, 1996:
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
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
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<PAGE>
Three of the six stores which were closed by PEC 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 PEC and his brother, a former director
of PEC. (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 ordering, pricing and 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,
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<PAGE>
UNI, WEA, and Bassin. Approximately 81% of the merchandise purchased during the
1996 fiscal 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.
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<PAGE>
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 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, PEC employed approximately 249
persons in all capacities. It is not 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.
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<PAGE>
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 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, PEC's headquarters 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, PEC's
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 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
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<PAGE>
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").
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.
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<PAGE>
(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.
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 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 prepetition 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
PEC's Common Stock is quoted by market makers on the over-the-counter
market. The following table sets forth the high and low, bid and asked
quotations for PEC's Common Stock for the calendar periods indicated, based on
information supplied by the National Quotation Bureau, Incorporated:
<TABLE>
<CAPTION>
Bid Prices Asked Prices
---------- ------------
High Low High Low
<S> <C> <C> <C> <C>
1994
Quarter ended March 31, 1/16 1/16 5/16 1/4
Quarter ended June 30, 1/16 1/16 5/16 1/4
Quarter ended Sept. 30, 1/16 .02 5/16 1/8
Quarter ended Dec. 31, 1/32 .02 9/32 .12
1995
Quarter ended March 31, 1/32 1/32 9/32 7/32
Quarter ended June 30, 1/32 1/32 9/32 7/32
Quarter ended Sept. 30, 1/32 1/32 9/32 7/32
Quarter ended Dec. 31, 1/32 1/32 9/32 7/32
1996
Quarter ended March 31, 1/32 .001 9/32 7/32
Quarter ended June 30, .03125 .03125 .21875 .15625
Quarter ended Sept. 30, .03125 .001 .15625 .15625
Quarter ended Dec. 31, .03125 .005 .15625 .05
1997
Quarter through Feb. 6, .005 .001 .05 .05
</TABLE>
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.
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Dividends
There has been no payment of dividends on PEC's Common Stock since its
inception and payment of dividends on such stock in the future will depend upon
its earnings and needs. PEC is required to pay dividends on its outstanding
shares of preferred stock. In connection with the Chapter 11 proceeding, URT,
the owner of such preferred stock, agreed to waive dividends on such stock for
the period beginning January 1, 1996 and ending March 29, 1997. (See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS").
Approximate Number of Equity Security Holders
The following table indicates the approximate number of holders of record
of each class of PEC's common equity securities as of February 12, 1997, based
on information supplied by PEC's transfer agent:
Number of Record
Title of Class Holders
-------------- -------
Common Stock, $.01 par value 1,515
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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 31,960,953 36,303,455 37,861,389 35,565,512
Net income (loss) (2,416,051) (1,995,408) (108,456) 296,426 (328,890)
Income (loss) per common share (.12) (0.10) (0.01) 0.01 (0.02)
Weighted average
number of common
shares outstanding 19,781,270 19,781,270 19,781,270 19,781,270 19,781,270
Balance sheet data:
Working capital
excluding liabilities
subject to compromise in 1996 $ 6,083,691 2,058,184 3,550,371 3,514,978 2,679,448
Total assets 9,442,616 11,224,889 13,390,533 14,025,154 12,698,325
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 1,429,226 3,890,277 5,945,685 6,114,141 5,877,715
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 $ 268 246 265 271 245
space
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", "anticipate", "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 a 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.
The Company 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 other factors mentioned 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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<PAGE>
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 due to a reduction in retail prices in an
effort to meet the 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 17.1%
compared to 1995. Such decrease is attributable to a decrease in store operating
expenses of stores that opened or closed during 1996 versus 1995 (15.0%) and a
decrease in corporate overhead (2.5%), offset by an increase in comparable store
expenses (0.4%). SG&A expenses, as a percentage of net sales, increased from
35.9% in 1995 to 40.2% 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 $2,416,000 in 1996 versus a net
loss of approximately $1,995,000 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 the 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 6.3%
compared to 1994. Such decrease is attributable to a decrease in comparable
store expenses (1.1%), a decrease in store operating expenses of stores that
opened or closed during 1995 versus 1994 (2.9%), a decrease in corporate
overhead (1.9%), and a decrease in the cost of store openings (0.4%). SG&A
expenses, as a percentage of net sales, increased from 33.7% in 1994 to 35.8% 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 $1,995,000 in 1995 versus a net
loss of approximately $108,000 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.
-13-
<PAGE>
FISCAL YEAR ENDED APRIL 2, 1994 (1994) COMPARED TO FISCAL YEAR ENDED APRIL
3, 1993 (1993)
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 costs 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 1.8%
compared to 1993. Such increase is attributable to an increase in comparable
store expenses (1.9%), an increase in corporate overhead (1.6%), an increase in
the cost of store openings (0.8%), offset by a decrease in store expenses that
opened or closed during 1994 versus 1993 (1.5%), and a decrease due to the fact
that 1993 included 53 weeks of operations (1.0%). SG&A expenses, as a percentage
of net sales, increased from 31.8% in 1993 to 33.7% 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 $108,000 in 1994 versus net
income of approximately $296,000 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 $6,083,691 at March 30, 1996 (excluding
liabilities subject to compromise in 1996) compared to working capital of
$2,058,184 at April 1, 1995 and a current ratio (the ratio of total current
assets to total current liabilities) of 5.6 to 1 at March 30, 1996 (excluding
liabilities subject to compromise in 1996) compared to a current ratio of 1.35
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.
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.
-14-
<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.
The Company has issued and outstanding 2,500 shares of $100 par, 11%, Series A
Cumulative Convertible Preferred Stock and 2,500 shares of $100 par, 13%, Series
B Cumulative Convertible Preferred Stock. All of such shares are owned by URT.
During the 1996 fiscal year, the Company paid dividends of $45,000 to its
preferred shareholder, based on the dividends requirements relating to the
outstanding Series A and Series B Preferred Stock, less the amount agreed to be
waived by such shareholder. The Company recently agreed to issue to URT certain
shares of Series C preferred stock containing a cumulative preferred dividend of
10% per annum. (See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS").
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.
-15-
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PEACHES ENTERTAINMENT CORPORATION
Table of Contents
Independent Auditors' Report 17
Financial Statements:
Balance Sheets as of March 30, 1996 and April 1, 1995 18
Statements of Operations for each of the years in the three
year period ended March 30, 1996 19
Statements of Shareholders' Equity for each of the years in
the three year period ended March 30, 1996 20
Statements of Cash Flows for each of the years in the three
year period ended March 30, 1996 21
Notes to Financial Statements 23
-16-
<PAGE>
Independent Auditors' Report
Directors and Shareholders
Peaches Entertainment Corporation
Hallandale, Florida:
We have audited the accompanying balance sheets of Peaches Entertainment
Corporation (the "Company") as of March 30, 1996 and April 1, 1995, and the
related statements of operations, shareholders' equity and cash flows for each
of the years in the three-year period ended March 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Peaches Entertainment
Corporation as of March 30, 1996 and April 1, 1995, and the results of its
operations and its cash flows for each of the years in the three-year period
ended March 30, 1996 in conformity with generally accepted accounting
principles.
As discussed in note 3 to the financial statements, the Company changed its
method of accounting for income taxes in 1994 to adopt the provisions of the
Financial Accounting Board's SFAS No. 109, Accounting for Income Taxes.
/s/ KPMG Peat Marwick LLP
June 29, 1996, except as to note 2,
which is as of February 3, 1997
Ft. Lauderdale, Florida
-17-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Balance Sheets
March 30, 1996 and April 1, 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,917,566 1,537,293
Inventories 4,954,260 5,578,737
Prepaid inventory 254,249 --
Pre paid expenses and other current assets 279,346 289,413
Land held for sale -- 300,000
Refundable income taxes 9,136 257,229
------------ ------------
Total current assets 7,414,557 7,962,672
Property and equipment, net 1,843,708 3,072,869
Other assets 184,351 189,348
------------ ------------
$ 9,442,616 11,224,889
============ ============
Liabilities and Shareholders' Equity
Liabilities not subject to compromise
Current liabilities:
Current portion of long-term obligations 124,774 110,028
Accounts payable 103,038 4,130,530
Accrued liabilities 1,103,054 1,663,930
------------ ------------
Total current liabilities 1,330,866 5,904,488
Long-term obligations 810,367 929,654
Deferred rent 200,723 500,470
------------ ------------
Total liabilities not subject to compromise 2,341,956 7,334,612
Liabilities subject to compromise 5,671,434 --
------------ ------------
Total liabilities 8,013,390 7,334,612
------------ ------------
Shareholders' equity:
Preferred stock, $100 par value; 50,000 shares
authorized; 5,000 shares issued and outstanding 500,000 500,000
Common stock, $.01 par value; 40,000,000 shares
authorized; 20,107,850 shares issued 201,079 201,079
Additional paid-in capital 1,284,471 1,284,471
Retained (deficit) earnings (496,429) 1,964,622
------------ ------------
1,489,121 3,950,172
Treasury stock, 326,580 common shares, at cost (59,895) (59,895)
------------ ------------
Total shareholders' equity 1,429,226 3,890,277
Commitments and contingencies
------------ ------------
$ 9,442,616 11,224,889
============ ============
</TABLE>
See accompanying notes to financial statements.
-18-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
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 31,960,953 36,303,455
------------ ------------ ------------
Costs and expenses:
Cost of sales 15,316,441 20,347,493 22,762,742
Selling, general and administrative expenses 9,513,941 11,473,660 12,245,048
Store closing costs 189,623 548,701 278,377
Loss on litigation -- 431,692 --
Management fees 562,500 1,024,386 1,263,010
------------ ------------ ------------
25,582,505 33,825,93 2 36,549,177
------------ ------------ ------------
Loss from operations (1,956,016) (1,864,979) (245,722)
------------ ------------ ------------
Other (expense) income:
Interest expense (111,451) (82,332) (8 8,971
Interest income 22,566 48,891 58,522
------------ ------------ ------------
(88,885) (33,441) (30,449)
------------ ------------ ------------
Loss before reorganization costs,
provision (benefit) for income
taxes and cumulative effect of
change in accounting for income
taxes (2,044,901) (1,898,420) (276,171)
Reorganization costs:
Professional fees (88,223) -- --
Store closing costs (282,927) -- --
------------ ------------ ------------
(371,150) -- --
Loss before provision (benefit) for income taxes
and cumulative effect of change in accounting
for income taxes (2,416,051) (1,898,420) (276,171)
Provision (benefit) for income taxes -- 96,988 (94,000)
------------ ------------ ------------
Loss before cumulative effect of
change in accounting for income taxes (2,416,051) (1,995,408) (182,171)
Cumulative effect of change in accounting for
income taxes -- -- 73,715
Net loss $ (2,416,051) (1,995,408) (108,456)
============ ============ ============
Net loss per common share $ (.12) (.10) (.01)
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
-19-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Shareholders' Equity
For each of the years in the three-year period ended March 30, 1996
<TABLE>
<CAPTION>
Preferred stock Common stock Treasury stock Capital Retained
----------------- ---------------------- --------------------- in excess earnings
Shares Amount Shares Amount Shares Amount of par (deficit) Total
------ --------- ---------- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 3, 1993 5,000 $500,000 20,107,850 $201,079 326,580 $(59,895) 1,284,471 4,188,486 6,114,141
Net loss -- -- -- -- -- -- -- (108,456) (108,456)
Payment of preferred stock
dividend to Parent -- -- -- -- -- -- -- (60,000) (60,000)
------ --------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Balance, April 2, 1994 5,000 500,000 20,107,850 201,079 326,580 (59,895) 1,284,471 4,020,030 5,945,685
Net loss -- -- -- -- -- -- -- (1,995,408) (1,995,408)
Payment of preferred stock
dividend to Parent -- -- -- -- -- -- -- (60,000) (60,000)
------ --------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Balance, April 1, 1995 5,000 500,000 20,107,850 201,079 326,580 (59,895) 1,284,471 1,964,622 3,890,277
Net loss -- -- -- -- -- -- -- (2,416,051) (2,416,051)
Payment of preferred stock
dividend to Parent -- -- -- -- -- -- -- (45,000) (45,000)
------ --------- ---------- ---------- ---------- --------- ---------- ---------- ----------
Balance, March 30, 1996 5,000 $500,000 20,107,850 $201,079 326,580 $(59,895) 1,284,471 (496,429) 1,429,226
====== ========= ========== ========== ========== ========= ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
-20-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
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 $(2,416,051) (1,995,408) (108,456)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 455,156 559,450 518,240
Loss on abandonment of leasehold
improvements
190,601 -- 141,828
Deferred income taxes -- 337,321 (133,715)
Deferred rent (299,747) 15,402 51,134
Changes 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 10,067 27,108 58,223
Refundable income taxes 248,093 (221,229) (36,000)
Other assets 4,997 46,980 (65,985)
Increase (decrease) in:
Accounts payable (4,027,492) (484,050) (402,842)
Accrued liabilities (420,893) 230,012 30,781
Long-term obligations (61,022) 334,573 --
Income taxes payable -- -- (45,659)
Liabilities subject to compromise 5,671,434 -- --
Changes due to reorganization activities:
Loss on abandonment of leasehold
improvements 296,509 -- --
----------- ----------- -----------
Net cash provided by (used in)
operating activities 21,880 (886,262) 195,714
----------- ----------- -----------
Cash flows from investing activities:
Purchases of property and equipment (168,331) (920,477) (176,480)
Proceeds from land, property and equipment 615,243 -- --
----------- ----------- -----------
Net cash provided by (used in)
investing activities 446,912 (920,477) (176,480)
----------- ----------- -----------
Cash flows from financing activities:
Increase in notes payable -- -- 75,000
Repayment of note payable -- (75,000) --
Repayment of long-term obligations (43,519) (131,173) (174,579)
Dividends paid (45,000) (60,000) (60,000)
----------- ----------- -----------
Net cash used in financing
activities (88,519) (266,173) (159,579)
----------- ----------- -----------
</TABLE>
-21-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Statements of Cash Flows, Contiued
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net increase (decrease) in cash
and cash equivalents
$ 380,273 (2,072,912) (140,345)
Cash and cash equivalents, beginning of year 1,537,293 3,610,205 3,750,550
----------- ----------- -----------
Cash and cash equivalents, end of year $ 1,917,566 1,537,293 3,610,205
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest $ 111,451 82,332 88,971
=========== =========== ===========
Income tax payments (refund), net $ (248,093) (19,104) 63,651
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
-22-
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
March 30, 1996, April 1, 1995 and April 2, 1994
(1) Organization and Basis of Presentation
Peaches Entertainment Corporation (the "Company") is engaged in the
business of retailing prerecorded music, video and accessory items,
principally in the southeastern United States. The Company is an 87
percent-owned subsidiary of URT Industries, Inc. (the "Parent").
(2) Petition for Relief Under Chapter 11
On January 16, 1996 (the "Petition Date"), the Company commenced
reorganization proceedings under Chapter 11 of the United States Bankruptcy
Code. On January 17, 1997, the Company's plan of reorganization was
confirmed by the Bankruptcy Court for the Southern District of Florida
("Bankruptcy Court"). In Chapter 11, the Company 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, the Company 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 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, the Company 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 contr act or an unexpired
lease is treated as a general unsecured claim in the Chapter 11
proceedings. The Company affirmed 13 leases (5 of which were modified on
terms more favorable to Peaches) and rejected 8 leases.
-23-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
On August 5, 1996, the Company 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 the Company's inventory
suppliers, but excluding landlords under leases rejected by the
Company, are entitled to 100 percent of their allowed claims (the
total of which is approximately $4,922,000). The Company'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 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 the Company 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 2 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 the Company 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 the Company's authorized common stock, contributed
$350,000 to the capital of the Company, waived an aggregate of $75,000 of
dividends payable by the Company 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 the
Company. 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 the Company.
In March 1997, the Parent and the Company 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
the Company 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 the Company 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.
-24-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(3) Summary of Significant Accounting Policies
(a) 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.
(b) Cash Equivalents
The Company considers highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
Cash equivalents totaled approximately $1,082,100 and $89,000 at March
30, 1996 and April 1, 1995, respectively. The carrying amount
approximates fair 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 $37,000,
respectively, which approximated market. The repos are collateralized
by U.S. government and agency securities.
(c) Inventories
Inventories, comprised of compact discs, cassettes, videos and
accessories, are stated at the lower of cost (principally average)
including freight in, or market.
(d) Property and Equipment
Property and equipment are stated at cost. The assets are depreciated
over their estimated useful lives ranging from five 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.
(e) Income Taxes
The Company files a consolidated income tax return with its Parent.
Any applicable tax charges or credits are allocated to the Company on
a separate return basis. 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.
-25-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
Effective April 4, 1993, the Company adopted the provisions of
Financial Accounting Standards Board's ("SFAS") No. 109, Accounting
for Income Taxes and has reported the cumulative effect of that change
in the method of accounting for income taxes in the statements of
operations. 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.
(f) 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 the years. The weighted
average number of common shares outstanding was 19,781,270 for the
years ended March 30, 1996, April 1, 1995 and April 2, 1994.
(g) 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.
(h) 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.
(i) 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 revenue
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.
-26-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(j) 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.
(k) Reclassifications
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform with the 1996 presentation.
(4) 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 1,867,903 3,356,279
Furniture and equipment 1,602,467 1,587,697
Building under capitalized lease 206,964 206,964
----------- -----------
4,610,997 6,084,603
Less accumulated depreciation and amortization (2,767,289) (3,011,734)
----------- -----------
$ 1,843,708 3,072,869
=========== ===========
-27-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(5) 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 0.5%; 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
(124,774) (110,028)
----------- -----------
Less current portion $ 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 $113,000 for 1996 and $99,000 for 1995 and 1994.
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
========
-28-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
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.
(6) 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 254,517 904,109
---------- ----------
$1,103,054 1,663,930
========== ==========
(7) 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 the Company continued to operate as
a debtor-in-possession.
On January 17, 1997, the Company's 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).
-29-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(8) 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, the Company
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 $1,173,515
1998 1,033,769
1999 855,836
2000 646,112
2001 545,822
Thereafter 511,745
----------
$4,766,799
==========
Rental expense under noncancelable operating leases, included in
selling, general and administrative expenses in the accompanying
statements of operations amounted to $1,853,000, $2,367,000 and
$2,531,000, 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.
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.
-30-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(c) Employment Agreement
On March 18, 1996, the United States Bankruptcy Court Southern
District of Florida approved the settlement of an employment agreement
with a former officer. Peaches is to pay an amount of $273,550 over a
period of four years (note 5). Under the original terms of the
employment, the officer would have been entitled to in excess of
$870,000 in the aggregate.
(d) Management Agreement
On March 29, 1993, as amended, the Company entered into a management
and intercorporate agreement (the "Management Agreement") with the
Parent whereby the Company was required to pay the Parent an annual
fee; the Parent was required to provide the Company with the services
of the person who is the president and chairman; the Parent was
required to pay the Company for certain accounting and administrative
services performed by the Company; and so long as the Parent and the
Company filed consolidated income tax returns, their respective
liabilities for such taxes would be equitably apportioned as provided
in such agreement. Effective as of the close of business on December
31, 1995, the Management Agreement was terminated and replaced with
three new agreements which became effective January 1, 1996. In lieu
of paying a management fee to the Parent, the three new agreements
require payment to the Parent's president and chairman as long as he
continues to provide services similar to those performed under the
original Management Agreement.
(9) Shareholders' Equity
For each of the years in the three-year period ended March 30, 1996, the
Company had 2,500 shares of $100 par, 11 percent, Series A Cumulative
Preferred Stock and 2,500 shares of $100 par, 13 percent, Series B
Cumulative Preferred Stock authorized, issued and outstanding. The Parent
is the owner of all outstanding shares of Preferred Stock. In connection
with the reorganization, the Parent agreed to waive dividends in its shares
for the period beginning January 1, 1996 and ending March 29, 1997. The
Company can issue up to 50,000 shares of preferred stock, and the directors
have the authority to issue such shares in one or more additional series.
Each share of Series A and Series B Cumulative Preferred Stock is entitled
to one vote and has the same voting powers as the common stock, except that
all matters on which the vote of shareholders is required must, in order to
be approved, receive the requisite vote of either (i) both the Series A and
Series B, voting as separate classes or (ii) the common stock and either
the Series A or Series B, voting as separate classes. The shares of Series
A stock may be convertible into shares of the Company's common stock upon
the holders' compliance with cer tain surrender and notice provisions. In
March 1997, the conversion feature was eliminated. The liquidating value
for both the Series A and Series B shares is par value plus all accrued and
unpaid dividends.
(10) Pension Plan
Effective September 15, 1994, the Company curtailed its noncontributory
defined benefit plan which it had maintained with its Parent. 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.
-31-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
(11) Income Taxes
The provision (benefit) for income taxes consists of:
1996 1995 1994
--------- --------- ---------
Current:
Federal $ -- (240,000) (36,000)
State -- -- --
--------- --------- ---------
-- (240,000) (36,000)
Deferred:
Federal -- 292,000 (58,000)
State -- 45,000 --
--------- --------- ---------
-- 337,000 (58,000)
--------- --------- ---------
$ -- 97,000 (94,000)
========= ========= =========
Reasons for differences between income tax provision (benefit) and the
amount computed by applying the statutory federal income tax rate of 34
percent to pretax loss were:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Income tax benefit at applicable statutory tax
rate of loss before income taxes $(821,000) (645,000) (94,000)
Add:
State income tax benefit, net of federal
benefit (81,000) (79,000) --
Change in valuation allowance 852,000 811,000 --
Other 50,000 10,000 --
--------- --------- ---------
Income tax provision (benefit) for the year $ -- 97,000 (94,000)
========= ========= =========
</TABLE>
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>
1996 1995
----------- -----------
<S> <C> <C>
Deferred tax assets:
Inventories, principally due to additional costs
capitalized for tax purposes $ 87,340 50,051
Property and equipment, net, principally due to
differences in depreciation 152,139 187,037
Accrued rent, principally due to accrual for
financial reporting purposes 90,780 202,758
Provision for store closings 80,340 208,114
NOL carry forward 1,099,553 126,026
Accrued expenses 177,185 62,147
Other 28,427 27,125
----------- -----------
Total gross deferred tax assets 1,715,764 863,258
Less valuation allowance (1,715,764) (863,258)
----------- -----------
Net deferred tax assets $ -- --
=========== ===========
</TABLE>
-32-
(Continued)
<PAGE>
PEACHES ENTERTAINMENT CORPORATION
Notes to Financial Statements
At March 30, 1996, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $2,912,000 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.
(12) Fair Value of Financial Instruments
It was not practicable to estimate the fair value of the Company's
financial instruments due to the Chapter 11 proceedings. The impact of the
confirmed plan of reorganization on the estimated fair value of the
Company's financial instruments is disclosed in note 2.
(13) 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.
The Company 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.
-33-
<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 PEC
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 PEC since
its formation in 1982. He has also been the Chief Executive Officer of URT since
its 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 PEC in various capacities and
at various times since 1982 and has been employed by it, full time, since 1992.
He is a son of Allan Wolk. He has been a director of PEC and URT 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 PEC in
various capacities and at various times since 1983 and has been employed by it,
full time, since 1994. He is a son of Allan Wolk. Prior to his full time
employment by PEC, he had been employed as an accountant by KPMG Peat Marwick
LLP. He has been a director of PEC and URT 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.
-34-
<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"). Under the management agreements referred to above, PEC has the
right to use the services of Mr. Wolk. (See "BUSINESS- -Management Agreements
Between URT and PEC").
Item 11. EXECUTIVE COMPENSATION
The following table sets forth compensation paid or accrued by PEC for
services rendered in all capacities to it during the 1996 fiscal year and the
two prior fiscal years to (i) PEC's chief executive officer ("CEO") and (ii)
each of the other most highly compensated executive officers of PEC whose cash
compensation exceeded $100,000 and who were serving as executive officers at the
end of the 1996 fiscal year or for whom disclosure would otherwise be provided
but for the fact that such person was no longer serving as an executive officer
at the end of such fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Long
Options/ Term
Other Stock Incen. All
Annual Restricted App. Plan Other
Name and Fiscal Salary Bonus Compensa- stock Rights Pay-outs Compensa-
position Year ($) ($) tion($) award(s)($) (#) ($) tion($)
- -------- ---- --- --- ------- ----------- --- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Allan Wolk, 1996 125,000(2) -0- -0- (2) -0- -0- -0- 308,222(5)
Chairman 1995 -0- (2) -0- -0- (2) -0- -0- -0- -0-
& CEO 1994 -0- (2) -0- -0- (2) -0- -0- -0- -0-
David Jackowitz, 1996 247,947(1) -0- (4) -0- -0- -0- 244,900(5)
Vice-Pres. & 1995 289,897 -0- (4) -0- -0- -0- -0-
Treas.(1) 1994 326,889 -0- 33,646(3) -0- -0- -0- -0-
</TABLE>
-35-
<PAGE>
- ----------
(1) Mr. Jackowitz is no longer employed by PEC, and no longer holds any
position with PEC or URT, 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) Mr. Wolk is employed and compensated under an employment agreement with URT
which continues in effect until March 31, 2000. PEC receives the services
of Mr. Wolk under the management agreements described above (See
'BUSINESS--Management Agreement Between URT and PEC"). Pursuant to such
agreements, effective only as of January 1, 1996, PEC became obligated to
pay to Mr. Wolk a salary at the rate of $500,000 per annum and the amount
so paid by PEC to Mr. Wolk is credited against the amount payable by URT to
Mr. Wolk pursuant to the employment agreement between them.
(3) Includes life insurance premiums and amounts required to be credited to Mr.
Jackowitz under his then-existing employment agreement with PEC against
amounts which were then owed by him to URT.
(4) 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.
(5) 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
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 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
-36-
<PAGE>
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 PEC and
URT 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
PEC 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 PEC
and any executive officers were conducted by PEC'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 PEC.
Pension Plan
In March of 1995, PEC and URT 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. 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:
-37-
<PAGE>
Name of Individual Amounts
------------------ -------
Allan Wolk $ 308,222
David Jackowitz $ 244,900
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of the date of this filing, URT is the beneficial owner of approximately
37,213,370 shares of PEC common stock, constituting approximately 93.5% of the
issued and outstanding shares of such common stock, and all of PEC's issued and
outstanding shares of Series A and Series B preferred stock. All of such shares
of PEC stock are owned directly with voting and investment power. PEC has also
agreed to issue to URT shares of a new series of preferred stock. (See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS").
As set forth in the following table, Allan Wolk and members of his
immediate family own approximately 30% of 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 and Chairman of PEC, Mr. Wolk may be deemed to have
effective control of PEC.
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, as of
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) *
</TABLE>
-38-
<PAGE>
<TABLE>
<S> <C> <C> <C>
Jason Wolk 17,480(3) *
All officers and
directors as a
group (3 persons) 3,257,718 30.0
Other
Scorpio Music, Inc.
P. O. Box A
Trenton, N.J. 08691 1,195,550(4) 11.0%
</TABLE>
<TABLE>
<CAPTION>
Amount & Nature
of Beneficial Percent
Title of Class Name Ownership of Class
- -------------- ---- --------- --------
<S> <C> <C> <C>
Class B Common Executive Officers and Directors
Stock, par value
$.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
-39-
<PAGE>
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.
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 PEC,
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").
-40-
<PAGE>
In April, 1989, PEC's board of directors authorized PEC to enter into
agreements with its officers and directors under which they would be entitled to
be indemnified by PEC 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
PEC on or about May 22, 1989. On or about July 14, 1995, and pursuant to the
further authorization of the board of directors on such date, PEC 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),
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 audited financial statements 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 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.
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<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. Financial Statements
Table of Contents 16
Independent Auditors' Report 17
Peaches Entertainment Corporation
Financial Statements:
Balance sheets as of March 30,
1996 and April 1, 1995 18
Statements of operations for each of
the years in the three year period
ended March 30, 1996 19
Statements of shareholders' equity
for each of the years in the three
year period ended March 30, 1996 20
Statements of cash flows for each
of the years in the three year period
ended March 30, 1996 21
Notes to financial statements. 23
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
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<PAGE>
Exhibit No.
- -----------
3.1 Articles of Incorporation of Peaches Entertainment Corporation
("PEC") dated March 3, 1982, incorporated by reference to Exhibit
No. 3.3 to URT Industries, Inc. ("URT") and PEC's Registration
Statement No. 2-81065.
3.1-1 Amendment to PEC's Articles of Incorporation dated January 17,
1983, incorporated by reference to Exhibit No. 3.3-1 to URT's and
PEC's Registration Statement No. 2-81065.
3.2 By-Laws of PEC incorporated by reference to Exhibit No. 3.4 to
URT's and PEC's Registration Statement No. 2-81065.
3.3 Form of Amendment to PEC's Articles of Incorporation,
incorporated by reference to Exhibit No. 3.5 to PEC's
Registration Statement No. 2-81065.
10.35 Lease dated July 1, 1984 between Shirley Wolk and PEC applicable
to North Miami Beach, Florida premises, incorporated by reference
to Exhibit No. 13.46 to URT's Registration Statement No. 2-63747.
10.36 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.
10.40 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 No. 10(ss) to URT's Form
10-K Annual Report for the year ended March 29, 1986.
10.47 Indemnification Agreement dated May 22, 1989 between Allan Wolk
and PEC, incorporated by reference to Exhibit 10.47 to PEC's Form
10-K Annual Report dated June 27, 1989.
10.48 Indemnification Agreement dated May 22, 1989 between David
Jackowitz and PEC, incorporated by reference to Exhibit 10.48 to
PEC's Form 10-K Annual Report dated June 27, 1989.
10.54 Lease dated December 22, 1989 between Sunbeam Properties, Inc.
and PEC applicable to Miramar, Florida premises, incorporated by
reference to Exhibit 10.54 to PEC's Form 10-K Annual Report dated
June 27, 1991.
10.57 Management and Intercorporate Agreement dated as of 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.
10.58 Amended and Restated Employment Agreement, dated December 14,
1994, between David Jackowitz and PEC, incorporated by reference
to Exhibit 10(ffff) to URT's Form 10-K Annual Report dated June
29, 1995.
-43-
<PAGE>
10.59 Agreement No. 1 dated as of October 1, 1994 to Management and
Intercorporate Agreement dated May 29, 1993 between URT and PEC,
incorporated by reference to Exhibit 10(iiii) to URT's Form 10-K
Annual Report dated June 29, 1995.
10.60 Letter Agreement dated January 1, 1996 between URT and PEC
pertaining to termination of Management and Intercorporate
Agreement dated March 29, 1993, incorporated by reference to
Exhibit 10(jjjj) to URT's Form 10-K Annual Report dated April 25,
1997.
10.61 Letter Agreement dated January 1, 1996 between URT and PEC
pertaining to services of Allan Wolk, incorporated by reference
to Exhibit 10(kkkk) to URT's Form 10-K Annual Report dated April
25, 1997.
10.62 Indemnification Agreement dated July 14, 1995 between Brian Wolk
and PEC.
10.63 Indemnification Agreement dated July 14, 1995 between Jason Wolk
and PEC.
10.64 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.
10.65 Order Confirming PEC's Amended Plan of Reorganization, as
Modified, dated January 17, 1997, incorporated by reference to
Exhibit 2 to PEC's Form 8-K dated April 7, 1997.
10.66 URT Promissory Note dated January 27, 1997 made by PEC to URT.
10.67 Security Agreement dated January 27, 1997 between PEC and URT.
10.68 Mortgage Agreement with Assignment of Rents, Security Agreement
and Fixture Filing dated January 27, 1997 by PEC in favor of URT.
10.69 Reimbursement Agreement dated January 27, 1997 between PEC and
URT.
10.70 Subordination Agreement dated January 27, 1997 between PEC, URT
and selected creditors.
10.71 Subordination Agreement dated January 27, 1997 between PEC, URT
and creditor.
10.72 Surrender and Waiver Agreement dated January 27, 1997 between PEC
and URT.
10.73 Waiver Agreement dated March 1, 1997 between PEC and URT.
10.74 Stock Purchase Agreement dated March 24, 1997 between PEC and
URT.
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<PAGE>
27 Financial Data Schedule
(b) Reports on Form 8-K.
A report on Form 8-K, dated January 16, 1996, was filed by PEC
on or about January 26, 1996 to report PEC's filing for
protection from its creditors under Chapter 11 of the Bankruptcy
Code and the closing of three stores. PEC 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 such Chapter
11 proceeding on PEC'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
Plan of Reorganization.
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<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.
PEACHES ENTERTAINMENT CORPORATION
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
-46-
<PAGE>
Index of Exhibits to Form 10-K of Peaches Entertainment Corporation
(Commission File No. 0-12375) for year ended March 30, 1996
Exhibit No. Description
10.62 Indemnification Agreement dated July 14, 1995 between Brian Wolk
and PEC.
10.63 Indemnification Agreement dated July 14, 1995 between Jason Wolk
and PEC
10.66 URT Promissory Note dated January 27, 1997 made by PEC to URT.
10.67 Security Agreement dated January 27, 1997 between URT and PEC.
10.68 Mortgage Agreement with Assignment of Rents, Security Agreement
and Fixture Filing dated January 27, 1997 by PEC in favor of URT.
10.69 Reimbursement Agreement dated January 27, 1997 between URT and
PEC.
10.70 Subordination Agreement dated January 27, 1997 between PEC, URT
and selected creditors.
10.71 Subordination Agreement dated January 27, 1997 between PEC, URT
and creditor.
10.72 Surrender and Waiver Agreement dated January 27, 1997 between URT
and PEC.
10.73 Waiver Agreement dated March 1, 1997 between URT and PEC.
10.74 Stock Purchase Agreement dated March 24, 1997 between URT and
PEC.
27 Financial Data Schedule
Exhibit 10.62
<PAGE>
INDEMNIFICATION AGREEMENT
AGREEMENT made as of the 14th day of July, 1995, by and between PEACHES
ENTERTAINMENT CORPORATION (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.
-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.
-3-
<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.
-4-
<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
-6-
<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.
PEACHES ENTERTAINMENT CORPORATION
By s/David Jackowitz
--------------------------
Title Ex. Vice-President
--------------------------
Attest:
By s/Gail Sokolow
-------------------
INDEMNITEE
s/Brian Wolk
--------------------------
-8-
Exhibit 10.63
<PAGE>
INDEMNIFICATION AGREEMENT
AGREEMENT made as of the 14th day of July, 1995, by and between PEACHES
ENTERTAINMENT CORPORATION (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.
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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.
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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
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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.
PEACHES ENTERTAINMENT CORPORATION
By s/David Jackowitz
--------------------------
Title Ex. Vice-President
--------------------------
Attest:
By s/Gail Sokolow
------------------------
INDEMNITEE
s/Jason Wolk
--------------------------
-8-
Exhibit 10.66
<PAGE>
URT PROMISSORY NOTE
$700,000 Hallandale, Florida
January 27, 1997
FOR VALUE RECEIVED, the undersigned, PEACHES ENTERTAINMENT CORP. ("Maker"),
promises to pay to the order of URT INDUSTRIES, INC. ("Payee"), at its offices
located at 1180 East Hallandale Beach Boulevard, Hallandale, Florida 33009, or
at such other place as may be designated by the holder hereof, without offset or
deduction, in lawful money of the United States and in immediately available
funds, the principal sum of SEVEN HUNDRED THOUSAND DOLLARS ($700,000), with
interest thereon at the Prime Rate (as defined below), computed on the actual
days elapsed based on a 360-day year.
For purposes of the foregoing, "Prime Rate" means the rate per annum
announced by The Chase Manhattan Bank, N.A. from time to time as its Prime Rate
in effect at its principal office in the City of New York, which rate of
interest may not be the lowest rate at which The Chase Manhattan Bank will lend
money to its customers, and any change in the interest rate resulting from a
change in said Prime Rate shall be effective on the same date as such change in
the Prime Rate.
- -----------------------------------------------------------------
NOTE TO RECORDER: THIS INSTRUMENT HAS BEEN EXECUTED AND DELIVERED PURSUANT TO AN
ORDER OF THE UNITED STATES BANKRUPTCY COURT, SOUTHERN DISTRICT OF FLORIDA, IN
CASE NO. 96-20153-BKC-RBR (IN RE: PEACHES ENTERTAINMENT CORP.), WHICH ORDER
CONFIRMED THE PLAN OF REORGANIZATION FILED IN SUCH BANKRUPTCY PROCEEDING.
PURSUANT TO 11 U.S.C. ss.1146 OF THE UNITED STATES BANKRUPTCY CODE AND FLORIDA
ADMINISTRATIVE CODE RULE 12b-4.014(16), NO DOCUMENTARY STAMP TAX AND/OR
INTANGIBLE TAX IS DUE AND PAYABLE ON THIS INSTRUMENT.
<PAGE>
Interest shall increase to the Prime Rate plus two percent (2%) per annum
upon the occurrence and during the continuance of an Event of Default hereunder.
This note may be prepaid in whole or in part at any time without penalty or
premium.
If any payment of interest and/or principal hereunder becomes due and
payable on a Saturday, Sunday or business holiday in the state of Florida, the
maturity thereof shall be extended to the next succeeding business day, and
interest shall be payable thereon at the rate herein specified during such
extension.
Principal shall be due and payable in four (4) equal installments to be
paid on the following dates (the "Installment Payment Dates"): February 3, 2000;
February 3, 2001; February 3, 2002; and February 3, 2003. On each Installment
Payment Date, Maker also shall pay to URT all interest that is accrued and
unpaid, as of such Installment Payment Date, on the unpaid principal. The final
payment of principal, together with all accrued and unpaid interest, shall be
due and payable in full on February 3, 2003. Each payment made hereunder
(including any prepayment) shall be credited first to interest then due and
payable, then to any other charges due and payable, and then the remainder
thereof to the unpaid principal balance of this Note, or in such other order as
URT may determine in its discretion.
The term "Liabilities" shall include the liability evidenced by this note
and all other liabilities (for principal, interest or other amounts), direct or
contingent, joint, several or independent, of the undersigned now or hereafter
existing, due or to become due to, or held or to be held by, URT for its own
account or as agent for another or others, whether created directly or acquired
by assignment or otherwise. Upon the occurrence of any of the following, each of
which shall constitute an "Event of Default," this note and all other
Liabilities shall, at the option of URT, be accelerated and become
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<PAGE>
immediately due and payable in full (except for (c) or (g), in which case such
acceleration shall be immediate and automatic): (a) non-payment of any amount
due under this note or of any of the other Liabilities shall occur; (b) failure
of Maker to perform any of its obligations under the Mortgage and Security
Agreement executed and delivered by Maker in connection with this note; (c) the
undersigned shall be dissolved or become insolvent (however evidenced); (d) the
suspension of business of the undersigned or the issuance of any warrant,
process, order of attachment, garnishment or other lien and/or the filing of a
lien as a result thereof against any of the property of the undersigned shall
occur; (e) the undersigned shall fail to promptly provide URT with such
documentation as URT may require in connection with this note; (f) the
undersigned shall make an assignment for the benefit of creditors or a trustee
or receiver shall be appointed for the undersigned or for any of the property
thereof; and (g) any proceeding shall be commenced by or against the undersigned
under any bankruptcy, reorganization, arrangement of debt, insolvency,
readjustment of debt, receivership, liquidation, or dissolution law or statute.
No delay on the part of URT in exercising any of its options, powers or
rights hereunder, nor any partial or single exercise thereof, shall constitute a
waiver thereof. No waiver by URT of any default shall be effective unless given
in writing by an authorized officer of URT, nor shall such waiver operate as a
waiver of such default on another occasion. The rights and remedies expressly
provided in this note are cumulative and not exclusive of any rights or remedies
which URT may otherwise have. The provisions hereof shall survive the
termination of this note and repayment of the loan evidenced hereby.
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<PAGE>
The undersigned hereby expressly waives demand, presentment for payment,
notice of nonpayment, protest, notice of protest and all other notice, filing of
suit and diligence in collecting this note.
The signatory(ies) below represent(s) and warrant(s) to URT that Maker is
in good standing under the laws of the place of its formation and that his or
their execution of this note on behalf of such entity has been duly authorized
by all requisite actions of such entity.
Notices to the undersigned shall be deemed to have been duly given or made
when sent by URT to the undersigned, in writing, by first class mail, at the
address of the undersigned appearing on the records of URT. Notices to URT shall
be effective only after receipt by URT.
The undersigned hereby authorizes URT to record on its account books the
amount of URT's loan to the undersigned and all payments in respect thereof
which recording shall, in the absence of manifest error, be conclusive as to the
outstanding principal amount of said loan.
The undersigned agrees to pay all costs and expenses of URT in connection
with the execution, collection and enforcement of or provision of security for
this note, including applicable taxes (including without limitation any Florida
documentary stamp tax and/or Florida intangible tax) and reasonable attorneys'
fees (including without limitation those for bankruptcy and appellate matters
and those incurred outside of litigation) and attorneys' expenses. This note
shall be governed by and construed in accordance with the laws of the State of
Florida in all respects, including, without limitation, matters of construction,
validity and performance, and the undersigned consents to service of process on
the undersigned at that address of the undersigned appearing on the records of
URT, by certified mail, return receipt requested (if possible), and such service
shall be deemed to be complete five (5) days after the same shall have been so
mailed. In addition, the undersigned
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<PAGE>
hereby irrevocably waives, to the fullest extent it may effectively do so, the
defense of an inconvenient forum to the maintenance of any such lawsuit in any
jurisdiction. The undersigned and URT hereby irrevocably waive trial by jury in
any court in connection with this note, and each hereby certifies that no
representative of the other has expressly or impliedly represented that the
other might not enforce this jury waiver.
From time to time, without notice to any endorser(s) or guarantor(s), this
note may be renewed, amended, modified or supplemented, in whole or in part, the
maturity date of this note may be extended, the rate of interest herein may be
changed, fees in consideration of loan extension and interest on late payments
of principal and/or interest may be imposed by the holder of this note and any
related right or security therefor may be waived, exchanged, surrendered or
otherwise dealt with and any of the acts specified in this note may be done
without affecting the liability of the maker, endorser(s) or guarantor(s), each
of whom agrees to remain liable under this note until the debt represented
hereby is actually paid in full to the holder. The release of any party liable
upon or in respect to this note shall not release any other such party.
Notwithstanding anything to the contrary contained herein, or in the
Agreement (as defined below), or any other agreement between the undersigned and
the holder, the effective rate of interest on the obligation evidenced by this
note shall not exceed the maximum effective rate of interest permitted to be
paid from time to time under the laws of the State of Florida or the laws of the
United States, whichever is higher. Without limiting the generality of the
foregoing, in the event the calculation of interest, the imposition of the
increase in the rate of interest after default or the payment of any fees or
other charges which are construed to be interest under the laws of the State of
Florida or the United States result in an effective rate of interest higher than
that permitted to be
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<PAGE>
paid from time to time under such laws, then such charges shall be reduced by a
sum sufficient to result in an effective rate of interest no greater than the
maximum effective rate of interest permitted to be paid from time to time under
such laws. Upon maturity of this loan, whether by acceleration or in due course,
interest shall be recalculated over the actual life of the loan based upon the
amounts outstanding, and if the total amount of interest theretofore paid,
inclusive of the sums hereinabove referred to, exceeds the amount permitted to
be paid from time to time under the laws of the State of Florida or the United
States, whichever is higher, the excess shall be credited to principal or, if
such excess exceeds the principal amount then due hereunder, refunded to the
undersigned.
This note is issued by Maker pursuant to the terms of the Plan of
Reorganization ("Plan"), filed with and approved by the United States Bankruptcy
Court for the Southern District of Florida, which became effective on January
27, 1997. All capitalized terms not otherwise defined herein shall have the same
meanings as ascribed to them in the Plan.
Repayment of this note is subject to a certain Subordination Agreement,
dated January 27, 1997, between and among the Majors, Alliance and URT.
This note is secured by: (a) a lien on and security interest in the Majors'
Inventory Collateral and Alliance's Inventory Collateral in accordance with that
certain Mortgage and Security Agreement between Peaches and URT, dated January
27, 1997 (the "Mortgage and Security Agreement"), and that certain Security
Agreement, dated January 27, 1997, between Peaches and URT (the "Security
Agreement"), (b) a lien on and security interest in Peaches' Other Inventory (as
defined in the Security Agreement), the Maker's personal property other than the
Majors' Inventory Collateral and Alliance's Inventory Collateral, and (c) a
mortgage and security interest on and in
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<PAGE>
certain real and related personal property owned by the Maker, as described in
the Mortgage and Security Agreement.
This note may not be amended or modified orally, and may only be amended or
modified in a writing executed and delivered by the party against whom any such
amendment or modification is sought to be enforced. In the event of any conflict
between this note and the Plan or any term sheet on which the Plan is based,
this note shall control.
Witness: s/Martha Rosende Maker: Peaches Entertainment Corp.
-------------------
By: s/Jason Wolk
--------------------------
Name: Jason Wolk
Title: Ex. Vice-President
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Exhibit 10.67
<PAGE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated January 27, 1997, is between Peaches
Entertainment Corp., a Florida corporation (the "Debtor"), and URT Industries,
Inc., a Florida corporation (the "Secured Party").
WHEREAS, the Debtor is obligated to the Secured Party for the repayment of
certain indebtedness, as evidenced by that certain URT Promissory Note, dated
January 27, 1997 and that certain Peaches-URT Reimbursement Agreement, dated as
of January 27, 1997; and
WHEREAS, the parties hereto desire to secure the obligations of the Debtor
to the Secured Party;
NOW, THEREFORE, intending to be legally bound, the Debtor and the Secured
party agree as follows:
1. Definitions.
Whenever used herein, the following terms shall, unless the context
otherwise requires, have the following respective meanings:
(a) "Account" means any right to payment for goods sold or leased or for
services rendered which is not evidenced by an instrument or chattel paper.
(b) "Account Debtor" means the Person who is obligated on an Account or
Contract Right.
(c) "Collateral" means all goods (including but not limited to Inventory),
equipment, accounts receivable, Contract Rights, Documents of Title,
instruments, fixtures, chattel paper, and General Intangibles owned by the
Debtor and all Proceeds thereof.
(d) "Contract Right" means any right to payment under a contract
(including, but not limited to, contracts for the sale or leasing of goods or
for the rendering of services) not yet earned by performance and not evidenced
by an instrument or chattel paper.
(e) "Document of Title" means a bill of lading, dock warrant, dock receipt,
warehouse receipt or order for the delivery of goods, and also any other
document which in the regular course of business or financing is treated as
adequately evidencing that the Person in possession of it is entitled to
receive, hold and dispose of the document and the goods it covers.
(f) "Fair Market Value" means the value of property determined in an arm's
length transaction between a willing and informed buyer under no compulsion to
buy and a willing and informed seller under no compulsion to sell.
<PAGE>
(g) "General Intangibles" means things in action, patents, copyrights,
trademarks, royalties, goodwill, literary rights and all other personal property
other than goods, Accounts, Contract Rights, Documents of Title, chattel paper,
instruments and money.
(h) "Interest Rate" means the rate of interest payable by the Debtor under
the URT Promissory Note.
(i) "Inventory" means tangible person property held for sale or lease or to
be furnished under contracts of service, tangible personal property which has
been so leased or furnished, and raw materials, work in process and materials
used, produced or consumed in business, and shall include tangible personal
property sold on a sale or return basis, tangible personal property returned by
the purchaser following a sale thereof and tangible personal property
represented by Documents of Title. All equipment, accessories and parts at any
time attached or added to items of Inventory or used in connection therewith
shall be deemed to be part of the Inventory.
(j) "Liabilities" means all existing and future liabilities, whether
absolute or contingent, of the Debtor to the Secured Party of any nature
whatsoever arising under the URT Promissory Note or under the Peaches-URT
Reimbursement Agreement.
(k) "Person" means an individual, a corporation, a government or
governmental subdivision or agency or instrumentality, a business trust, an
estate, a trust, a partnership, a cooperative, an association, two or more
Persons having a joint or common interest, or any other legal or commercial
entity.
(l) "Proceeds" means whatever is received when Collateral or Proceeds of
Collateral is sold, exchanged, collected or otherwise disposed of and also
includes payments and rights to payment under any policies of insurance with
respect to any Collateral. The term includes the Account arising when the right
to payment is earned under a Contract Right representing such Proceeds and,
without limitation, any accounts receivable representing such Proceeds.
2. Grant of Security.
To secure the payment, promptly when due, and the punctual performance of
all of the Liabilities, the Debtor hereby grants to the Secured Party a
continuing lien upon and security interest in all of the Collateral.
3. Records and Certifications.
The Debtor shall faithfully keep complete and accurate books, records and
lists and make all necessary entries therein to reflect the quantities, costs,
current values and locations of its Inventory, Accounts, accounts receivable,
Contract Rights, Documents of Title, instruments, fixtures and General
Intangibles and the transactions and facts giving rise to such Collateral, and
the Debtor shall keep the Secured Party fully and accurately informed as to the
locations of all such books, lists and
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<PAGE>
records. The Debtor shall permit the Secured Party's agents to have access to
such books, lists and records on the Debtor's premises for the purpose of
examining, auditing and copying them. If the Debtor refuses the Secured Party
access in accordance with this provision, then the Secured Party shall have the
right to take possession of such books, lists and records, which right shall be
enforceable by an action of replevin or by any other appropriate remedy at law
or in equity.
4. Title, Etc.
The Debtor has acquired absolute and exclusive title to each and every item
or unit of the Collateral free and clear of all liens, claims, security
interests and other encumbrances, except those created hereby in favor of the
Secured Party and those created in favor of the Majors and Alliance (as such
entities are defined in the plan of reorganization filed by the Debtor in its
bankruptcy case filed in the United States Bankruptcy Court for the Southern
District of Florida, Case No. 96-20153- BKC-RBR) in accordance with said plan of
reorganization. The Debtor will warrant and defend its title to the Collateral,
subject to the aforesaid rights of the Secured Party, the Majors and Alliance
against the claims and demands of all other persons whomsoever. Without limiting
the generality of the foregoing, the Debtor will not pledge, assign or otherwise
encumber, or permit any liens or security interests to attach to, any of the
Collateral, nor permit any of the Collateral to be levied upon under any legal
process, other than those liens described above. Upon any breach of the
foregoing covenant against encumbrances, the Secured Party may, at its sole
election but without obligation to do so, discharge the encumbrance for the
account of and without notice to the Debtor, and all expenses incurred by the
Secured Party in so doing, together with interest thereon at the Interest Rate,
shall be added to the Liabilities and shall be payable by the Debtor on demand.
Without the prior written consent of the Secured Party in each case, the Debtor
will not sell, exchange, lease, lend, salvage, replace or otherwise dispose of
any item or unit of the Collateral or any of the Debtor's rights therein, except
that so long as the Debtor is not in default hereunder, the Debtor shall have
the right in the ordinary course of its business to process and sell its
Inventory and collect payment therefor in the ordinary course of business.
5. Taxes and Liens.
The Debtor will immediately notify the Secured Party in the event there
ever arises against any of the Collateral any lien, assessment or tax or other
liability, whether or not entitled to priority over the Secured Party's security
interest hereunder. In any such event, whether or not such notice is given, the
Secured Party shall (unless such lien, assessment, tax or other liability is the
subject of an appeal by the Debtor and an appropriate bond has been posted to
stay the effect of any resulting lien) have the right (but shall be under no
obligation) to pay any tax or other liability of the Debtor deemed by the
Secured Party in good faith to affect the Secured Party's interests hereunder.
The Debtor shall repay to the Secured Party on demand all sums which the Secured
Party shall have paid under this section in respect of taxes or other
liabilities of the Debtor, with interest thereon at the Interest Rate, and the
Debtor's liability to the Secured Party for such repayment with interest shall
be included in the Liabilities. The Secured Party shall be subrogated to the
extent of any such payment by it to all the rights and liens of the payee
against the Debtor.
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<PAGE>
6. Insurance.
The Debtor shall bear all risk of loss, destruction and damage to any and
all of the Collateral from any cause whatsoever at any time during the term of
this Agreement, and shall at its own cost and expense obtain and keep in full
force and effect, in kind and form reasonably satisfactory to the Secured Party
and with insurers of recognized standing in the financial community or otherwise
approved by the Secured Party, insurance covering the Collateral wherever the
same may be, insuring against the risks of fire, explosion and theft, all other
risk of physical loss or damage, and such other risks as are customarily insured
against by corporations engaged in the same business and similarly situated with
the Debtor (and specifically including vandalism and malicious mischief
coverage), in an amount or amounts usually carried by corporations engaged in
the same business and similarly situated with the Debtor. All policies of such
insurance shall be written for the benefit of the Debtor and the Secured Party
as the insureds, shall bear an endorsement in form satisfactory to the Secured
Party naming the Secured Party, the Majors, Alliance and the Debtor as loss
payees, as their respective interests may appear, and shall provide for at least
ten (10) days' advance written notice to the Secured Party of any cancellation.
The Secured Party and the Debtor agree that all insurance proceeds shall be
payable to the Debtor if at the time of such payment no Event of Default then
exists. A copy of all such policies (or, in the Secured Party's discretion,
certificates therefor) shall be lodged with the Secured Party. If the Debtor
fails to pay any premium on any such insurance, the Secured Party shall have the
right, but shall be under no obligation, to pay such premium for the Debtor's
account. The Debtor shall repay to the Secured Party on demand all sums which
the Secured Party shall have paid under this section in respect of insurance
premiums, with interest thereon at the Interest Rate, and the Debtor's liability
to the Secured Party for such repayment with interest shall be included in the
Liabilities. The Debtor hereby assigns to the Secured Party, the Majors and
Alliance, as their interests may appear, any return or unearned premium which
may be due upon the cancellation for any reason whatsoever of any policy of
insurance maintained in respect of the Collateral and hereby directs the insurer
to pay the Secured Party, the Majors and Alliance, as their interests may
appear, any amount so due, except that the Secured Party shall have no right to
any such amount unless and until there exists an Event of Default. The Debtor's
right to receive payment of any such return or unearned premium and the proceeds
of any such insurance shall constitute a part of the Collateral.
7. Control of and Access to Inventory.
The Debtor shall maintain possession and control of its Collateral at all
times, provided that upon the occurrence of an Event of Default the Secured
Party shall have the right to take possession of the Collateral or any portion
thereof, and for the purpose of taking custody of such Collateral the Debtor
agrees that upon request of the Secured Party it will lease warehousing space in
the Debtor's own premises to the Secured Party and will erect such structures
and post such signs as the Secured Party may require in order to place such
Collateral under the exclusive control of the Secured Party. Notwithstanding any
taking of possession by the Secured Party of any Collateral, the same shall
remain at all times at the Debtor's sole risk, and to the full extent permitted
by law the Secured Party shall not be responsible for any loss, damage or
diminution in the value thereof. If any of the
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<PAGE>
Collateral is or becomes evidenced by a Document of Title, the Secured Party may
require the Debtor to promptly deliver the same to the Secured Party,
appropriately endorsed to the order of the Secured Party. All costs of
transportation, packaging, custody, processing, storage, insurance and salvage
of any unit or item of the Collateral which may be incurred by the Secured Party
shall be promptly repaid to the Secured Party by the Debtor together with
interest thereon at the Interest Rate, and the Debtor's liability to the Secured
Party for such repayment with interest shall be included in the Liabilities. The
Debtor will afford the Secured Party's agent access to the Collateral from time
to time upon request for purposes of examination, inspection and appraisal and
to verify the Debtor's records pertaining thereto.
8. Notices of Loss, Etc.
The Debtor will immediately notify the Secured Party of any event causing
any material deterioration, loss or depreciation in value of the Collateral.
9. Accounts and Contract Rights.
(a) The Secured Party hereby authorizes the Debtor to collect all Accounts
from the Account Debtors. Upon the occurrence of an Event of Default, the
Secured Party shall have the right, acting if it so chooses in the Debtor's
name, to collect the Debtor's Accounts itself, to sell, assign, compromise,
discharge or extend the time for repayment of any Account, to institute legal
action for the collection of any Account, and to do all reasonable acts and
things necessary or incidental thereto. The Debtor hereby ratifies all that the
Secured Party shall do in accordance with the terms hereof. The Secured Party
may at any time, after the occurrence of an Event of Default, notify any Account
Debtor that the Account payable by such Account Debtor has been assigned to the
Secured Party and is to be paid directly to the Secured Party. At the Secured
Party's request, after the occurrence of an Event of Default, the Debtor shall
so notify Account Debtors and shall indicate on all billings to Account Debtors
that payments thereon are to be made to the Secured Party. Without the written
consent of the Secured Party, the Debtor shall not unreasonably compromise,
discharge, extend the time for payment of or otherwise grant any indulgence or
allowance with respect to any Account.
(b) If any of the Debtor's Accounts is or becomes evidenced by a promissory
note, a trade acceptance or any other instrument for the payment of money, the
Debtor will promptly provide notice to the Secured Party of such instrument and,
upon the written request of the Secured Party, will promptly deliver such
instrument to the Secured Party appropriately endorsed to the order of the
Secured Party. Regardless of the form of such endorsement, the Debtor hereby
waives presentment, demand, notice of dishonor, protest and notice of protest
and all other notices with respect thereto.
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10. Significant Locations.
The Debtor represents and warrants to the Secured Party as follows: (i) the
chief executive office of the Debtor is located at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009, and such chief executive office is the
sole location where the Debtor maintains the records with respect to the
Collateral; and (ii) the locations set forth in Schedule A hereto are the only
locations where the Debtor stores or processes Inventory, other goods,
equipment, and instruments. The Debtor will notify the Secured Party in writing
prior to any change in any of the locations specified above and will reimburse
the Secured Party for the costs of any additional Uniform Commercial Code
filings requested by the Secured Party as a result thereof. If any of the
Collateral or any of the Debtor's records concerning any of the Collateral are
at any time to be located on premises leased by the Debtor, or any premises
owned by the Debtor subject to a mortgage or other lien, the Debtor will provide
notice of such intent to the Secured Party not less than 30 days prior to the
delivery of any such Collateral or records to such premises, and, upon the
written request of the Secured Party, the Debtor will promptly obtain and
deliver to the Secured Party an agreement in form satisfactory to the Secured
Party (a) subordinating the landlord's, mortgagee's or other lienholder's right
to enforce against the Debtor any claims for monies due under the lease,
mortgage or other lien by levy or distraint or other proceedings against the
Collateral or against the Debtor's records concerning the same and (b) assuring
the Secured Party's access to such Collateral and records to facilitate the
Secured Party's exercise of its right to take possession thereof. The Debtor
agrees to notify the Secured Party promptly in the event of a change in the
location of any place of business or the establishment of any additional place
of business of the Debtor.
11. Further Assurances.
The Debtor will execute and deliver to the Secured Party from time to time
all such other agreements, instruments and other documents (including without
limitation all requested financing and continuation statements) and do all such
other further acts and things as the Secured Party may reasonably request in
order to further evidence or carry out the intent of this Agreement or to
perfect the lien and security interest created hereby or intended so to be.
12. Default and Remedies.
The Debtor shall be in default hereunder upon the occurrence of an "Event
of Default" as defined in either of the URT Promissory Note or the Peaches-URT
Reimbursement Agreement.
Upon the occurrence of any Event of Default which shall be continuing, (i)
unless the Secured party shall elect otherwise, the entire unpaid amount of such
of the Liabilities as are not then otherwise due and payable shall become
immediately due and payable without notice to or demand on the Debtor or any
guarantor of any of the Liabilities (the Debtor and all such guarantors being,
collectively, the "Obligors") and (ii) the Secured Party may at its option
exercise from time to time any and all rights and remedies available to it under
the Uniform Commercial Code or otherwise, including the right to collect,
assemble, receipt for or foreclose or otherwise realize upon any of the
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Collateral and to dispose of any of the Collateral at one or more public or
private sales or other proceedings, and the Debtor agrees that the Secured Party
or its nominee may become the purchaser at any such sale or sales. The Debtor
agrees that ten (10) days shall be reasonable prior notice of the date of any
public sale or other disposition of all or any part of the Collateral, or of the
date on or after which any private sale or other disposition of the same may be
made.
All rights and remedies granted the Secured Party hereunder or under any
other agreement between the Secured Party and the Debtor shall be deemed
concurrent and cumulative and not alternative, and the Secured Party may proceed
with any number of remedies at the same time or at different times until all the
Liabilities are fully satisfied. The exercise of any one right or remedy shall
not be deemed a waiver or release of or an election against any other right or
remedy, and the Secured Party may proceed against any one or more of the
Obligors and the Collateral and any other collateral granted by the Debtor to
the Secured Party under any other agreement, all in any order and through any
available remedies. A waiver on any one occasion shall not be construed as a
waiver or bar on any future occasion. All property of any kind held at any time
by the Secured Party as Collateral shall stand as one general, continuing
collateral security for all the Liabilities and may be retained by the Secured
Party as security until all the Liabilities are fully satisfied.
13. Payment of Expenses.
The Debtor will pay to the Secured Party on demand (together with interest
thereon at the Interest Rate) any and all expenses (including all reasonable
attorneys' fees, whether incurred at trial, on appeal or without litigation, and
all legal expenses) which may have been incurred by the Secured Party (i) in the
prosecution or defense of (or otherwise in connection with) any action growing
out of or connected with the subject matter of this Agreement, the Liabilities,
the Collateral or any of the Secured Party's rights therein or thereto; or (ii)
in connection with the custody, preservation, use, operation, preparation for
sale or sale of any of the Collateral, the incurring of all of which are hereby
authorized to the extent the Secured Party in good faith deems the same
advisable. The Debtor's liability to the Secured Party for any such payment with
interest shall be included in the Liabilities. The enumeration of specific
Events of Default shall not compromise the demand character of any Liability
which by its terms is payable on demand, and demand may be made thereon at any
time irrespective of the non-occurrence of any such Event of Default, any
provision hereof to the contrary notwithstanding. The Proceeds of any Collateral
received by the Secured Party at any time before or after default, whether from
a sale or other disposition of Collateral or otherwise, or the Collateral
itself, may be applied with reasonable promptness to the payment in full or in
part of such of the Liabilities and in such order and manner as the Secured
Party may elect. The Debtor, to the extent of its rights in the Collateral,
waives and releases any right to require the Secured Party to collect any of the
Liabilities from any other of the Collateral or any other collateral then held
by the Secured Party under any theory of marshaling of assets or otherwise,
provided, however, that the Secured Party shall be subject to the obligations of
a secured party under the Uniform Commercial Code to act in a commercially
reasonable manner.
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14. Power of Attorney.
The Debtor hereby irrevocably appoints any officer, employee or agent of
the Secured Party as the Debtor's true and lawful attorney-in-fact with power,
upon the occurrence of an Event of Default, to (i) endorse the Debtor's name
upon any notes, checks, drafts, money orders, or other instruments of payment
that may come into the Secured Party's possession and which constitute
Collateral or proceeds of any Collateral; (ii) sign and endorse the Debtor's
name upon any documents of title, invoices, freight or express bills,
assignments, verifications and notices in connection with any of the Collateral,
and any instruments or documents relating thereto or to the Debtor's rights
therein; and (iii) execute in the Debtor's name and file one or more financing
statements covering the Collateral. Any such attorney-in-fact of the Debtor
shall have full power to do any and all things necessary to be done with respect
to the above transactions as fully and effectually as the Debtor might do, and
the Debtor hereby ratifies all that said attorney shall lawfully do or cause to
be done by virtue hereof.
15. Miscellaneous.
(a) At no time during the past five years has the Debtor been known by or
used any name, including any trade or fictitious name, other than that set forth
in the premises of this Agreement. The Debtor shall give the Secured Party
notice prior to any change in its name, or its use of any trade, fictitious or
other additional name.
(b) This Agreement shall commence on the date hereof and shall continue in
full force and effect so long as any of the Liabilities shall exist from time to
time. If after the discharge of all Liabilities the Debtor should subsequently
incur additional Liabilities, this Agreement shall automatically be revived and
thereafter continue in full force and effect until such time as the Debtor,
having no Liabilities then outstanding and not then being entitled to incur any
additional Liabilities, shall give written notice to the Secured Party of its
election to terminate this Agreement.
(c) Absent manifest error, statements of account rendered to the Debtor by
the Secured Party hereunder shall become final and be effective unless objection
thereto is made within thirty (30) days of receipt by the Debtor.
(d) No modification or waiver of any provision hereof shall be effective
unless the same is in writing and signed by the party against whom its
enforcement is sought.
(e) This Agreement may be signed in any number of counterparts and by
different parties in separate counterparts, all with the same effect as if the
signature were on the same counterpart, and all counterparts hereof, taken
together, shall constitute but one and the same Agreement.
(f) The representations, warranties, covenants and agreements contained
herein are all material and continuing, and any material breach of any of them
shall constitute a material breach of this Agreement.
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(g) Words of any gender shall include any other gender, and singular words
shall include the plural and vice versa, whenever the same is necessary to
produce a fair and meaningful construction.
(h) All the rights and remedies of the Secured Party hereunder shall be
cumulative with and not alternative to or in lieu of the Secured Party's rights
and remedies under any other agreement or agreements.
(i) This Agreement shall bind and inure to the benefit of the parties and
their respective successors and assigns, except that the Debtor shall not assign
any of its respective rights hereunder without the prior written consent of the
other party hereto, which consent shall not unreasonably be withheld.
(j) Captions in this Agreement are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
(k) Any provision hereof which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without affecting the validity or
enforceability of the remainder of this Agreement or the validity or
enforceability of such provision in any other jurisdiction.
(l) This Agreement and all issues arising hereunder shall be governed by
the laws of the State of Florida, except to the extent that the enforceability
of any provision of this Agreement or the security interest created hereunder
requires the application of the law of a jurisdiction other than Florida.
(m) This Security Agreement is subject to that certain Subordination
Agreement among URT, the Majors and Alliance, dated January 27, 1997.
IN WITNESS WHEREOF, this Agreement has been duly executed under due
authorization on the day and year first set forth above.
Peaches Entertainment Corp.
By: s/Jason Wolk
--------------------------
Title: Executive Vice-President
URT Industries, Inc.
By: s/Brian Wolk
--------------------------
Title: Executive Vice-President
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<PAGE>
Schedule A
[Omitted]
Exhibit 10.68
<PAGE>
THIS INSTRUMENT PREPARED BY
AND WHEN RECORDED RETURN TO:
Maurice L. Shevin, Esq.
Sirote & Permutt, P.C.
2222 Arlington Avenue
Birmingham, Alabama 35205
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STATE OF ALABAMA )
:
COUNTY OF ____________ )
SPACE ABOVE LINE FOR RECORDER'S USE
MORTGAGE WITH ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
As of January 27, 1997
This MORTGAGE AND SECURITY AGREEMENT ("Mortgage") is made by PEACHES
ENTERTAINMENT CORPORATION ("Mortgagor"), a corporation organized under the laws
of the State of Florida and having an address at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009, in favor of URT INDUSTRIES,
INC.("Mortgagee"),a corporation organized under the laws of the State of Florida
and having a place of business at 1180 East Hallandale Beach Boulevard,
Hallandale, Florida 33009.
THIS INSTRUMENT IS INTENDED TO BE A MORTGAGE, SECURITY AGREEMENT AND
FINANCING STATEMENT OF BOTH REAL AND PERSONAL PROPERTY, INCLUDING GOODS THAT ARE
TO BECOME FIXTURES ON REAL
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NOTE TO RECORDER: THIS INSTRUMENT HAS BEEN EXECUTED AND DELIVERED PURSUANT TO AN
ORDER OF THE UNITED STATES BANKRUPTCY COURT, SOUTHERN DISTRICT OF FLORIDA, IN
CASE NO. 96-20153-BKC-RBR (IN RE: PEACHES ENTERTAINMENT CORP.), WHICH ORDER
<PAGE>
CONFIRMED THE PLAN OF REORGANIZATION FILED IN SUCH BANKRUPTCY PROCEEDING.
PURSUANT TO 11 U.S.C. ss.1146 OF THE UNITED STATES BANKRUPTCY CODE, NO RECORDING
TAX, DOCUMENTARY STAMP TAX AND/OR INTANGIBLE TAX IS DUE AND PAYABLE ON THIS
INSTRUMENT.
PROPERTY DESCRIBED HEREIN AND IS TO BE FILED FOR RECORD IN THE RECORDS WHERE
MORTGAGES OF REAL ESTATE ARE FILED AND SHOULD ALSO BE INDEXED AS A FINANCING
STATEMENT FOR GOODS THAT ARE OR ARE TO BECOME FIXTURES ON THE REAL PROPERTY
DESCRIBED HEREIN.
BACKGROUND
1. Mortgagor has on this date executed and delivered to Mortgagee a
Promissory Note in the principal amount of $700,000(the "Note").
2. Mortgagor has on this date executed and delivered to Mortgagee that
certain Peaches -URT Reimbursement Agreement (the "Reimbursement Agreement"),
pursuant to which Mortgagor has agreed, inter alia, to reimburse Mortgagee for
any payment made by Mortgagee under Mortgagee's guaranty of certain obligations
of Mortgagor to certain creditors of Mortgagor (the "URT Guaranty").
3. For good and valuable consideration and as an inducement to Mortgagee to
make the credit extensions contemplated by the Note and the URT Guaranty, and as
an inducement for Mortgagee to execute and deliver the URT Guaranty for
Mortgagor's benefit, Mortgagor has agreed to execute and deliver this Mortgage
and Security Agreement.
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<PAGE>
GRANT OF MORTGAGE
AND SECURITY AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
Mortgagor hereby acknowledges, and to secure: (a) the repayment to Mortgagee of
all amounts now or hereafter owing Mortgagee under or evidenced by the Note, (b)
the repayment to Mortgagee of all amounts now or hereafter owing Mortgagor under
the Reimbursement Agreement, (c) reimbursement of any and all advances made by
Mortgagee to protect or preserve the Mortgaged Property (as hereinafter defined)
or the lien hereof on the Mortgaged Property, or for taxes, assessments,
insurance premiums or other costs as hereinafter provided, and (d) performance
of each agreement contained herein, Mortgagor hereby mortgages to Mortgagee
(and, in the case of personal property, assigns to Mortgagee and grants to
Mortgagee a security interest in) the property described in clauses A through F
below, in each case whether presently or hereafter existing and whether now
owned or hereafter acquired by Mortgagor (all such property being collectively
the "Mortgaged Property"):
A. The land described in Exhibit "A" hereto (the "Land").
B. All rents, tenements, hereditaments, buildings and other structures,
plants, easements and appurtenances located on, or belonging or in any way
appertaining to, any of the Land and all of the estate, right, title, interest,
possession, claim and demand (in law and/or in equity) of Mortgagor in and to
every part of the Land (collectively, "Improvements and Related Property").
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C. All machinery, apparatus, equipment, fittings, fixtures, and articles of
personal property of every kind and nature located in or upon any part of the
foregoing Mortgaged Property and used or usable in connection with any present
or future operation of any of the foregoing Mortgaged Property, including but
not limited to insurance policies and proceeds, building materials, heating,
lighting, laundry, incinerating, and power equipment, irrigation fixtures and
equipment, engines, pipes, pumps, tanks, motors, conduits, switchboards,
plumbing, lifting, cleaning, fire prevention, fire extinguishing, refrigerating,
ventilating, and communications apparatus, air cooling and air conditioning
apparatus, elevators, furniture, partitions, ducts, compressors and appliances.
D. All awards of payments, including interest thereon, and the right to
receive the same, which may be made with respect to any part of the foregoing
Mortgaged Property as a result of: (a) the exercise of the right of eminent
domain, (b) the alteration of the grade of any street, or (c) any other injury
to or decrease in the value of the foregoing Mortgaged Property.
E. All accounts, accounts receivable, inventory, contract rights, general
intangibles, instruments, chattel paper, actions and rights of action,
machinery, equipment, fixtures, and other personal property (including, but not
limited to, all permits, licenses, books, records, software, plans and
specifications, trade names, and trademarks) now and hereafter located in or
upon, arising from, related to or used or usable in connection with (a) any of
the foregoing Mortgaged Property or (b) any business conducted in or on any of
the foregoing Mortgaged Property.
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<PAGE>
F. All proceeds, products, replacements, additions, substitutions, renewals
and accessions of or to any of the foregoing.
FURTHER AGREEMENTS AND WARRANTIES
Mortgagor hereby agrees with and warrants to Mortgagee as follows:
1. Title Warranties. Mortgagor is indefeasibly seized in fee simple of the
Mortgaged Property and has full power and lawful right to mortgage it. The
Mortgaged Property is free from and unencumbered by any charges, judgments,
taxes, tax titles or tax certificates, liens, assessments, and encumbrances of
any kind except those listed in Exhibit B. Mortgagor fully warrants its title to
the Mortgaged Property and shall defend that title, at Mortgagor's expense,
against the claims of all persons except such claims as are based upon those
matters which are listed as exceptions in the foregoing title insurance
commitment. Mortgagor shall use reasonable efforts to ensure that any contracts
and other items described in clause E under "GRANT OF MORTGAGE" above shall not
prohibit their collateral assignment to Mortgagee.
2. Payment of Indebtedness. Mortgagor shall pay all indebtedness and other
sums secured hereby promptly as they become due.
3. Taxes and Assessments. Mortgagor shall pay or cause to be paid promptly
as they become due and payable all taxes, assessments and other public charges
that may be levied or assessed against the Mortgaged Property and shall, upon
the request of Mortgagee, deliver to
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Mortgagee receipts evidencing the payment of all such taxes, assessments and
other charges. Mortgagor shall keep in force and timely renew any and all
permits and licenses relating to the Mortgaged Property or the use thereof.
4. Taxes and Insurance Escrow. At the discretion of Mortgagee, Mortgagor
may be required, at some time, to deposit monthly installments in amounts
sufficient to discharge Mortgagor's obligations under Paragraphs 3 and 6 when
they become due. Mortgagee, shall, upon determining that an escrow fund is
necessary, determine the amount of the installments to be deposited with
Mortgagee, so that the aggregate of such deposits shall be sufficient for this
purpose, shall be made by Mortgagee in its reasonable discretion. Such amounts
shall be held by Mortgagee without interest and applied to the payment of the
obligations in respect of which such amounts were deposited or, at the option of
Mortgagee, to the payment of those obligations in such order or priority as
Mortgagee determines, on or before the respective dates on which they or any of
them would become delinquent. If one month before the date on which any such
charges become delinquent, the amounts then on deposit with Mortgagee are
insufficient for the payment of such obligations in full, Mortgagor shall,
within 10 days after demand, deposit the amount of the deficiency with
Mortgagee. Nothing contained herein shall affect any right or remedy of
Mortgagee under any provisions of this Mortgage or of any statute or rule of law
to pay any such amount and to add the amount so paid together with interest as
provided hereinafter to the indebtedness secured hereby.
5. Removal of Liens. Mortgagor shall not permit any construction,
mechanic's, materialman's, statutory or other lien (other than a lien for real
estate taxes or special assessments
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that are not yet due and payable and any lien specifically permitted by this
Mortgage) to accrue and remain on any part of the Mortgaged Property for a
period of more than fifteen (15) days prior to removal by transfer to bond or
payment.
6. Insurance. (a) Mortgagor shall procure and maintain during the term of
this Mortgage insurance policies for fire and extended coverage insuring the
Mortgaged Property in form and substance acceptable to Mortgagee, in a minimum
amount sufficient to cover 100% of the full replacement cost of all improvements
on the Mortgaged Property, together with all fixtures, equipment, chattels and
personal property owned by Mortgagor and installed therein or appurtenant
thereto, or otherwise attached to and a part of the Mortgaged Property. In
addition, Mortgagor shall maintain standard form Public Liability Insurance
covering the Mortgaged Property in the minimum amount of $500,000/$1,000,000.
All such policies shall be issued by insurance companies acceptable to Mortgagee
and shall contain a mortgagee clause satisfactory to Mortgagee which shall,
among other things, require the insurer to notify Mortgagee at least 30 days in
advance of any cancellation of the policy. Mortgagor shall deposit originals of,
or certificates for and copies of, all such policies with Mortgagee, and, not
less than 20 days before the expiration date of any such policy, Mortgagor shall
deliver to Mortgagee a renewal policy or certificate therefor and copy thereof.
(b) If the Mortgaged Property is in a Special Flood Hazard Area as
determined by Mortgagee at any time, flood insurance must be provided in an
amount equal to the lesser of $400,000 or the maximum coverage available under
the National Flood Insurance Program for the particular type and location of
property.
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(c) Mortgagee shall have the right to approve the insurance company or
companies (based on accepted industry ratings and financial strength) furnishing
the coverage and the form and content of the policies.
(d) Mortgagee is hereby authorized and empowered to collect and receive the
proceeds from any such insurance policy or policies. After deducting from such
insurance proceeds all of its reasonable expenses incurred in the collection and
administration thereof, including attorneys' fees and expenses, Mortgagee shall
make the net proceeds available, if Mortgagor so requests, to be used for
restoration and/or replacement of the Mortgaged Property (hereafter referred to
as ("Repair") provided no Event of Default exists, and, if the proceeds exceed
$100,000, provided that: (a) Repair is reasonably feasible as determined by an
independent contractor approved by Mortgagee (hereafter referred to as the
"Contractor"), (b) if the proceeds are insufficient to pay in full the costs of
repair, as estimated by the Contractor, Mortgagor shall have deposited with
Mortgagee in escrow, prior to the release of any of the proceeds, sufficient
additional funds to fund such estimated costs, and (c) Mortgagee shall have
approved the building plans of Mortgagor regarding Repair before Repair is
commenced (which approval shall not be unreasonably withheld). Mortgagee may
disburse the proceeds and any amounts deposited with it as aforesaid in
accordance with whatever procedures, safeguards and requirements it elects that
are customary for disbursements by construction lenders of construction loan
proceeds in Mobile County, Alabama and may cease making disbursements and may
apply any portion of the proceeds then remaining to the indebtedness secured
hereby at any time after an Event of Default occurs. Mortgagee shall not
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be held responsible for any failure to collect any insurance proceeds due under
the terms of any policy regardless of the cause of such failure.
7. Repair and Restoration. Mortgagor shall keep the Mortgaged Property in
good condition and repair and shall not commit or permit any waste or
deterioration thereof. Mortgagor shall promptly repair, restore, replace or
rebuild any part of the Mortgaged Property which may be damaged or destroyed by
any casualty.
8. Hazardous Substances. (a) Mortgagor shall comply with any and all laws,
regulations and orders with respect to the discharge and removal from the
Mortgaged Property of hazardous or toxic wastes or other substances
(collectively "Hazardous Substances"), shall pay immediately when due the cost
of removal of any Hazardous Substances and shall keep the Mortgaged Property
free of any lien imposed pursuant to such laws, regulations or orders.
(b) If at any time or from time to time the Mortgagee has reason to believe
that Hazardous Substances may exist or be present on or about the Mortgaged
Property the Mortgagee shall have the right upon 10 days written notice to
Mortgagor to require Mortgagor to promptly obtain and furnish to Mortgagee at
Mortgagor's expense environmental audits, testing and written reports as to the
Mortgaged Property by a qualified environmental testing company acceptable to
Mortgagee. If the reports, audits or tests reveal the presence or likely
presence of Hazardous Substances the Mortgagor shall be required to forthwith
undertake at Mortgagor's expense all necessary remediation to remove the
Hazardous Substances and to otherwise comply with all
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environmental laws and ordinances. Mortgagor shall promptly forward to Mortgagee
all notices that it receives as to environmental matters concerning or affecting
the Mortgaged Property.
(c) If Mortgagor fails to promptly remove any Hazardous Substances after
notice to Mortgagor and the expiration of the cure period permitted under
applicable law, regulation or order, Mortgagee may cause the Hazardous
Substances in question to be removed from the Mortgaged Property (without
waiving its right to consider Mortgagor in default hereof based on Mortgagor's
failure to do so). The cost of any such removal shall be additional indebtedness
secured hereby and shall become immediately due and payable upon demand with
interest thereon at the Note Rate. Mortgagor shall give to Mortgagee and its
agents, contractors and employees access to the Mortgaged Property and hereby
specifically grants to Mortgagee and such other persons a license (effective
upon expiration of the applicable cure periods described above) to remove any
Hazardous Substances. Mortgagor shall indemnify and hold Mortgagee free and
harmless from and against whatever loss, cost, damage (including consequential
damages) and expense (including attorneys' fees and costs) Mortgagee may sustain
by reason of the assertion against Mortgagee by any party of any claim in
connection with Hazardous Substances on or near the Mortgaged Property. Nothing
in this Paragraph 8 shall be construed to impose any obligation on Mortgagee.
(d) Mortgagor shall not install nor permit to be installed in the Mortgaged
Property asbestos or any substance containing asbestos or any other material
considered hazardous by federal, state or local regulations, and, with respect
to any such substance or material currently or hereafter present in the
Mortgaged Property, shall promptly either (a) remove any such material
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which such regulations consider hazardous and require to be removed or (b)
otherwise comply with such federal, state or local regulations, all at
Mortgagor's expense. If Mortgagor fails to so remove any such substance or
otherwise comply as aforesaid, Mortgagee may, after notice to Mortgagor and the
expiration of any cure period permitted under the applicable law, regulation or
order, do whatever is necessary to eliminate the substance from the Mortgaged
Property or otherwise comply with the applicable law, regulation or order
(without waiving its right to consider Mortgagor in default based on Mortgagor's
failure to do so), the cost of which shall be additional indebtedness secured
hereby and shall become immediately due and payable upon demand with interest
thereon at the Note Rate. Mortgagor shall give to Mortgagee and its agents,
contractors and employees access to the Mortgaged Property and hereby
specifically grants to Mortgagee and such other persons a license (effective
upon expiration of the applicable cure periods described above) to remove said
asbestos or any other substance described above. Mortgagor shall indemnify and
hold Mortgagee free and harmless from and against all loss, cost, damage
(including consequential damages) and expense (including attorneys' fees and
costs) claimed or proven against Mortgagee by any party, as a result of the
presence of any asbestos or other substance described above on or in the
Mortgaged Property or any removal thereof or compliance with law or regulations.
9. Alterations. No building or other structure now or hereafter included
within the Mortgaged Property shall be removed, demolished or materially
altered, without the prior written consent of Mortgagee, except that Mortgagor
shall have the right, without such consent, to remove and dispose of, free from
the lien of this Mortgage, such furniture, fixtures and equipment as from time
to time becomes worn out, obsolete or no longer needed, provided that either:
(a)
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simultaneously with or prior to such removal, such furniture, fixtures and
equipment shall be replaced with other furniture, fixtures and equipment of a
value at least equal to that of the replaced equipment and free from any title
retention, security agreement or other encumbrance and from any reservation of
title, and by such removal and replacement Mortgagor shall be deemed to have
subjected such furniture, fixtures and equipment to the lien of this Mortgage,
or (b) any net cash proceeds received from such disposition shall be paid over
promptly to Mortgagee to be applied to the indebtedness secured hereby without
any charge for prepayment.
10. Performance by Mortgagee. If Mortgagor fails to repair or insure the
Mortgaged Property as required hereby, to deliver the insurance policy(ies) (or
certificates therefor together with copies thereof) with premiums paid as herein
agreed, to pay as they become due and payable the taxes, assessments or charges
which may be assessed or imposed with respect to the Mortgaged Property (or any
part thereof), to satisfy the liens or claims which may accrue on or with
respect to the Mortgaged Property (or any part thereof), or to perform any other
obligations of Mortgagor under this Mortgage and such failure continues for 30
days (or, in the case of any failure involving insurance, 3 days) after
notification thereof by Mortgagee to Mortgagor, Mortgagee may, at its election
(but without any obligation), repair the Mortgaged Property, insure the
Mortgaged Property and pay the aforesaid taxes, charges, liens and claims (or
any part thereof) or perform any other obligations of Mortgagor under this
Mortgage without waiving its right of foreclosure or any other right hereunder
and without the necessity of notice to or demand of Mortgagor. Mortgagor shall
reimburse immediately to Mortgagee on demand the sum or sums so paid, with
interest thereon at the Note Rate, and any and all reasonable costs, charges,
abstract fees, attorneys' fees and expenses,
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and other expenses incurred in attempting to collect the same or enforce payment
thereof, and any such sum or sums so paid shall become a part of the
indebtedness secured hereby.
11. No Sale or Further Encumbrance (Due on Sale). Neither the Mortgaged
Property nor any part thereof or interest therein may be transferred, assigned,
conveyed, or further mortgaged (except to Mortgagee) without the prior written
consent of Mortgagee, which may be granted or withheld in Mortgagee's sole and
absolute discretion. The Note shall be accelerated and due and payable in full
upon a violation of this covenant.
12. Default and Acceleration. Any one or more of the following events shall
constitute an event of default (collectively "Events of Default", each an "Event
of Default"):
(a) should any sum of principal, interest or other amount evidenced by the
Note, or any sum due under the Reimbursement Agreement, not be paid on
the date when it becomes due and such default continues for a period
of more than five (5) days after written notice; or
(b) should Mortgagor default under the terms of the Note or the
Reimbursement Agreement (other than the terms set forth in (a) above),
and such default continues for a period of more than ten (10) days
after written notice; or
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(c) should Mortgagor default under any obligation or covenant of this
Mortgage and such default continues for a period of more than ten (10)
days after written notice.
Upon the occurrence of an Event of Default: (a) Mortgagor shall be in default
under this Mortgage, and all obligations secured under the Mortgage and due
under the Note and/or Reimbursement Agreement shall immediately become due and
payable without further notice to Mortgagor; (b) upon demand by Mortgagee,
Mortgagor shall pay to Mortgagee, in addition to all other payments specifically
required under the Note and the Reimbursement Agreement, in monthly
installments, at the times and in the amounts required by Mortgagee from time to
time, sums which when cumulated will be sufficient to pay one month prior to the
time the same become delinquent, all taxes which are or may become a lien
affecting the Mortgaged Property and the premiums for any policies of insurance
to be obtained and maintained in connection with Mortgagee's loan to Mortgagor
(all such payments to be held in a cash collateral account as additional
security for the secured obligations); and (c) Mortgagee may, without notice to
or demand upon Mortgagor, which are expressly waived by Mortgagor (except for
notices or demands otherwise required by applicable laws to the extent not
effectively waived by Mortgagor and any notices or demands specified below), and
without releasing Mortgagor from any of its obligations, exercise any one or
more of the following remedies as Mortgagee may determine:
1. Mortgagee may, either directly or through an agent or court appointed
receiver, and without regard to the adequacy of any security for the secured
obligations:
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(i) enter, take possession of, manage, operate, protect, preserve and
maintain, and exercise any other rights of an owner of, the Mortgaged
Property, and use any other properties or facilities of Mortgagor relating
to the Mortgaged Property, all without payment of rent or other
compensation to Mortgagor;
(ii) make, cancel, enforce or modify leases, obtain and evict tenants, fix
or modify rents and, in its own name or in the name of Mortgagor, otherwise
conduct any business of Mortgagor in relation to the Mortgaged Property and
deal with Mortgagor's creditors, debtors, tenants, agents and employees and
any other persons having any relationship with Mortgagor in relation to the
Mortgaged Property, and amend any contracts between them, in any manner
Mortgagee may determine;
(iii) either with or without taking possession of the Mortgaged Property,
notify obligors on any rights that all payments and other performance are
to be made and rendered directly and exclusively to Mortgagee, and in its
own name supplement, modify, amend, renew, extend, accelerate, accept
partial payments or performance on, make allowances and adjustments and
issue credits with respect to, give approvals, waivers and consents under,
release, settle, compromise, compound, sue for, collect or otherwise
liquidate, enforce or deal with any rights, including collection of amounts
past due and unpaid (Mortgagor agreeing not to take any such action after
the occurrence of an Event of Default without prior written authorization
from Mortgagee);
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(iv) endorse, in the name of Mortgagor, all checks, drafts and other
evidence of payment relating to the Mortgaged Property, and receive, open
and dispose of all mail addressed to Mortgagor and notify the postal
authorities to change the address for delivery of such mail to such address
as Mortgagee may designate; and
(v) take such other action as Mortgagee deems appropriate to protect the
security of this Mortgage.
2. Mortgagee may foreclose this Mortgage either by sale at public outcry or
by proceedings in law or equity, and Mortgagee may become the purchaser at any
foreclosure sale if the highest bidder, and, in the event of sale at public
outcry, Mortgagee may sell or cause to be sold, all and singular, the Mortgaged
Property and all the estate, right, title and interest, claim and demand
therein, such sales or sales to be made at public outcry at the North door of
the courthouse of the county in which the Mortgaged Property is located at such
time or times and upon such terms as may be required by law or as Mortgagee may
determine, after having first given notice of the time, place, terms of sale,
together with the description of the property to be sold, by publication once a
week for three consecutive weeks prior to said sale in any newspaper then
published in the county in Alabama in which the Real Property is located, and
after giving such other notice of the time, place and terms of sale as may be
required by law. In the event of a sale hereunder, Mortgagee or owners of the
debt and Mortgage, or the auctioneer, shall execute to the purchaser for and in
the name of Mortgagor, a good and sufficient deed to the Mortgaged Property.
Mortgagee may sell such property either as a whole or in separate parcels and in
such order as Mortgagee may direct (Mortgagor
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waiving any right to direct the order of sale), at public auction to the highest
bidder for cash in lawful money of the United States (or cash equivalents
acceptable to Mortgagee to the extent permitted by applicable law), payable at
the time of sale. Mortgagee may postpone the sale of all or any part of the
Mortgaged Property by public announcement at such time and place of sale, and
from time to time after any such postponement may postpone such sale by public
announcement at the time fixed by the preceding postponement. Mortgagee shall
deliver to the purchaser at such sale its deed conveying the property so sold,
but without any covenant or warranty, express or implied, and the recitals in
such deed of any matters or facts shall be conclusive proof of the truthfulness
thereof. Any person, including Mortgagee, may purchase at such sale, and any bid
by Mortgagee may be, in whole or in part, in the form of cancellation of all or
any part of the secured obligations.
3. With respect to any personal property of Mortgagor, Mortgagee shall have
in any jurisdiction where enforcement of this Mortgage is sought all remedies of
a secured party under the UCC and may require Mortgagor, on demand, to assemble
all such personal property and make it available to Mortgagee at places that
Mortgagee may select that are reasonably convenient for both parties, whether at
the premises of Mortgagor or elsewhere.
4. Mortgagee may proceed to protect, exercise and enforce any and all other
remedies provided under the Note or the Reimbursement Agreement or by applicable
laws.
All proceeds of collection, sale or other liquidation of the Mortgaged
Property shall be applied first to all costs, fees, expenses and other amounts
(including interest) payable by Mortgagor
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under Paragraph 16 of this Mortgage and to all other secured obligations not
otherwise repaid in such order and manner as Mortgagee may determine, and the
remainder, if any, to the person or person legally entitled thereto.
Each of the remedies provided in this Mortgage is cumulative and not
exclusive of, and shall not prejudice, any other remedy provided in this
Mortgage or by applicable laws or under any other loan document between the
parties. Each remedy may be exercised from time to time as often as deemed
necessary by Mortgagee, and in such order and manner as Mortgagee may determine.
This Mortgage is independent of any other security for the secured obligations,
and upon the occurrence of an Event of Default, Mortgagee may proceed in the
enforcement of this Mortgage independently of any other remedy that Mortgagee
may at any time have with respect to the Mortgaged Property or the secured
obligations or any other security. Mortgagor, for itself and for any other
person claiming by or through Mortgagor, waives, to the fullest extent permitted
by applicable laws, all rights to require a marshalling of assets by Mortgagee
or to require Mortgagee to first resort to any particular portion of the
Mortgaged Property or any other security (whether such portion shall have been
retained or conveyed by Mortgagor) before resorting to any other portion, and
all rights of redemption, stay and appraisal.
13. Inspections. Mortgagee and any persons authorized by Mortgagee shall be
entitled to enter and inspect the Mortgaged Property at all reasonable times.
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14. Rights Cumulative. No enumeration of special rights or powers by any
provisions of this Mortgage shall be construed to limit any grants of general
rights or powers, or to take away or limit any and all rights granted to or
vested in Mortgagee by virtue of the laws of the State of Alabama.
15. Excise Taxes. Mortgagor shall pay any and all documentary stamp,
excise, intangible or other taxes levied on, in connection with or as a result
of this Mortgage and/or any indebtedness or advances secured hereby and shall
indemnify Mortgagee from and against any liability resulting from any breach of
the aforesaid covenant, including interest and penalties.
16. Costs of Enforcement. Mortgagor shall pay any and all costs, expenses
(including without limitation title insurance and title search expenses,
inspection reports and consultants' fees) and attorneys' fees and expenses,
reasonably incurred or paid by Mortgagee because of the failure of Mortgagor to
perform, comply with and abide by the terms, conditions and covenants of this
Mortgage, whether suit be brought or not, whether incurred in bankruptcy, and
whether incurred in trial or appellate proceedings, and any such costs and
expenses shall be secured by the lien of this Mortgage.
17. Modification of Covenants or Restrictions. Mortgagor shall not
terminate, join in, or initiate, consent to or permit any discharge, amendment,
or modification of, any public or private restrictions or covenants or any
zoning ordinances affecting the Mortgaged Property or any zoning
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ordinances affecting it which would adversely affect use of the Mortgaged
Property as presently operated, without first having obtained the written
consent of Mortgagee to such action.
18. Condemnation. If all or any part of the Mortgaged Property is condemned
and taken for public use under the power of eminent domain, Mortgagee will have
the right to demand that all damages awarded on account of the taking of or
damages to the Mortgaged Property (the "Award") be paid to Mortgagee up to the
amount then secured by this Mortgage. Notwithstanding the foregoing, in the
event of a partial taking under the power of eminent domain, any Award will, if
Mortgagor requests, be used for restoration and/or replacement of the Mortgaged
Property (hereafter referred to as "Restoration") provided: (a) no Event of
Default exists, (b) Restoration is reasonably feasible as determined by an
independent contractor approved by Mortgagee (hereafter referred to as the
"Contractor"), (c) if the Award is insufficient to pay in full the costs of
Restoration, as estimated by the Contractor, Mortgagor shall have deposited with
Mortgagee in escrow, prior to the release of any of the Award, sufficient
additional funds to fund such estimated costs, and (d) Mortgagee shall have
approved the building plans of Mortgagor regarding Restoration before
Restoration is commenced (which approval shall not be unreasonably withheld).
Mortgagee may disburse the Award and any amounts deposited with it as aforesaid
in accordance with whatever procedures, safeguards and requirements it elects
that are customary for disbursements by construction lenders of construction
loan proceeds in Mobile County, Alabama and may cease making disbursements and
may apply any portion of the Award then remaining to the indebtedness secured
hereby at any time after an Event of Default occurs.
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19. Estoppel Letters. Mortgagor, upon written request, shall certify, by a
writing duly acknowledged, to Mortgagee or to any proposed assignee of this
Mortgage, the amount of principal and interest then owing on this Mortgage and
whether any offsets or defenses exist against the indebtedness secured hereby,
within 10 days after the mailing of such request and if Mortgagor fails to so
respond within 10 days, the information contained in Mortgagee's request shall
be deemed binding on Mortgagor.
20. No Waiver. Any failure by Mortgagee to insist upon the strict
performance by Mortgagor of any of the terms and provisions hereof shall not be
considered to be a waiver of any of the terms and provisions hereof, and
Mortgagee, notwithstanding any such failure, shall have the right thereafter to
insist upon the strict performance by Mortgagor of any and all of the terms and
provisions of this Mortgage to be performed by Mortgagor. Neither Mortgagor nor
any other person now or hereafter obligated for the payment of the whole or any
part of the indebtedness now or hereafter secured by this Mortgage shall be
relieved of such obligation by reason of the failure of Mortgagee to comply with
any request of Mortgagor or of any other person so obligated to take action to
foreclose this Mortgage or otherwise enforce any of the provisions of this
Mortgage or of any obligations secured by this Mortgage, or by reason of the
release, regardless of consideration, of the whole or any part of any security
held for the indebtedness secured by this Mortgage, or by reason of any
agreement or stipulation between any subsequent owner or owners of the Mortgaged
Property and the Mortgagee extending the time of payment for amounts due under
the Note, the Reimbursement Agreement or this Mortgage or modifying the terms
thereof without first having obtained the consent of Mortgagor or such other
person, and, in the latter event, Mortgagor and all
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such other persons shall continue to be liable to make such payments according
to the terms of any such agreement of extension or modification unless expressly
released and discharged in writing by Mortgagee. Regardless of consideration,
and without the necessity for any notice to or consent by Mortgagor or the
holder of any subordinate lien on the Mortgaged Property, Mortgagee may release
the obligation of anyone at any time liable for any of the indebtedness secured
by this Mortgage or any part of the security held for the indebtedness and may
extend the time of payment or otherwise modify the terms of the Note or this
Mortgage without, as to the security or the remainder thereof, in any way
impairing or affecting the lien of this Mortgage or the priority of such lien,
as security for the payment of the indebtedness as it may be so extended or
modified, over any subordinate lien.
21. Resort to Other Collateral; Waiver of Certain Defenses. Mortgagee may
resort for the payment of the indebtedness secured hereby to any other security
therefor in such order and manner as Mortgagee may elect in its sole discretion.
Mortgagor agrees, to the extent that it may lawfully so agree, that if an Event
of Default occurs, neither Mortgagor nor anyone claiming through or under
Mortgagor shall or will set up, seek or claim to take advantage of any
appraisement, valuation, stay, extension, homestead, redemption, moratorium or
marshaling laws now or hereafter enforced in the jurisdiction where the
Mortgaged Property may be situated in order to prevent or hinder the enforcement
or foreclosure of this Mortgage, or the absolute sale of the Mortgaged Property,
or the final or absolute putting into possession thereof, immediately after such
sale, of the purchaser thereof; and Mortgagor for itself and its successors and
assigns hereby waives, to the full extent that it may lawfully do so, the
benefit of all such laws and any and all right to have the estates
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comprising the security intended to be created hereby marshaled upon any
foreclosure of the lien hereof.
22. Superiority Over Intervening Liens. Any agreement hereafter made
between Mortgagor and Mortgagee relating to this Mortgage, the Mortgaged
Property or any indebtedness now or hereafter secured hereby shall be superior
to the rights of any holder of an intervening lien or encumbrance recorded after
the date this Mortgage is recorded.
23. Furniture, Fixtures, Equipment, Contract Rights, General Intangibles,
Accounts and Personal Property. This Mortgage constitutes and shall be construed
as a security agreement and financing statement under Alabama's Uniform
Commercial Code for the purpose of evidencing and creating a lien on and
security interest in furniture, fixtures, equipment, inventory, accounts,
contract rights, general intangibles and personal property and all accounts
receivable from whatever source included in the Mortgaged Property and shall be
recorded in the real estate records of the county in which the Mortgaged
Property is located. Either the original or a photocopy of this Mortgage shall
suffice as a financing statement for the purposes of Alabama's Uniform
Commercial Code: provided, however, that Mortgagor shall execute, at Mortgagee's
request, such financing statements and amendments thereof as Mortgagee may
request in connection with this Mortgage and Security Agreement, for filing in
said real estate records, with the Alabama Secretary of State, or in such other
locations as Mortgagee in good faith selects. Notification of any sale or other
disposition of such furniture, fixtures, equipment, inventory, contract rights,
accounts, general intangibles and personal property after an Event of Default
shall be considered reasonable if given 10 or more days before
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the disposition. Mortgagor shall notify Mortgagee at least 30 days before it
makes any change in its name, identity or location (as defined in Article 9 of
Alabama's Uniform Commercial Code) and shall execute and deliver to Mortgagee,
before making any such change, all additional financing statements and
amendments that Mortgagee may require to establish or maintain the validity and
priority of Mortgagee's security interest with respect to the Mortgaged
Property.
24. Rents Assignment. (a) Mortgagor hereby assigns to Mortgagee the rents
and profits (the "Rents") arising from any and all present and future leases or
subleases of any part of the Mortgaged Property (the "Leases," each a "Lease")
as further security for repayment of the indebtedness otherwise secured hereby
and hereby irrevocably grants to Mortgagee the right to enter the Mortgaged
Property for the purpose of collecting all or any of the Rents, to apply all or
any of the Rents (after deduction of collection costs) to the indebtedness
secured hereby and to generally perform any other act with respect to the Leases
and the Mortgaged Property to the same extent as Mortgagor could or might do.
Mortgagor hereby irrevocably directs each tenant under any Lease, upon demand
and notice from Mortgagee of an Event of Default under this Mortgage, the Note,
the Reimbursement Agreement or other Loan Documents, to pay to Mortgagee all
Rents hereafter accruing or due under such Lease; and any such tenant shall be
under no obligation, before making such payments, to inquire into or determine
the actual existence of any such Event of Default of which it is notified.
(b) Mortgagor shall indemnify and hold Mortgagee harmless from and against
any and all liability, damages and expenses that Mortgagee may incur under any
of the Leases or by
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reason of any action taken or omitted to be taken by Mortgagee in connection
with any of the Leases (except for liability, damages and expenses caused by
Mortgagee's gross negligence or willful misconduct); and any amount that may
become due from Mortgagor to Mortgagee as a result of the foregoing indemnity
shall be paid by Mortgagor on demand, shall bear interest until paid at the Note
Rate and shall be secured by this Mortgage. Nothing contained herein shall
operate or be construed to obligate Mortgagee to perform any of the terms or
covenants of any Lease.
25. Financial Documents. Mortgagor shall furnish to Mortgagee within ninety
(90) days of the end of each calendar year the annual financial statement of
Mortgagor and the annual financial statement for Mortgagor's operations of the
Mortgaged Property, including operating statements reflecting all material
information with respect to the operations of the Mortgaged Property, both in
form and substance acceptable to Mortgagee, and shall also furnish his annual
federal income tax return to Mortgagee within 10 days of the filing thereof each
year with the Internal Revenue Service.
26. Future Advances. This Mortgage and Security Agreement is given to
secure not only existing indebtedness, but also such future advances, whether
such advances are obligatory or are to be made at the option of Mortgagee, or
otherwise, as are made within twenty years from the date hereof, to the same
extent as if such future advances were made on the date of the execution of this
Mortgage. The total amount of indebtedness that may be so secured may decrease
or increase from time to time, but the total unpaid balance so secured at one
time shall not exceed $700,000, plus interest thereon, and any disbursement made
for payment of taxes, levies or insurance on the Mortgaged Property, with
interest on such disbursements at the highest rate permissible under
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applicable law, plus all amounts due by Mortgagor to Mortgagee pursuant to the
Reimbursement Agreement.
27. Further Assurances. Mortgagor shall execute and deliver, at any time
and from time to time, any such further instruments as may be reasonably
requested by Mortgagee to confirm and perfect the lien of this Mortgage or to
otherwise fulfill or further the objectives hereof.
28. Amendments. This Mortgage may not be changed orally or by any course of
dealing between Mortgagor and Mortgagee, but only by an agreement in writing
signed by the party against whom enforcement of any change, modification or
waiver is sought. In the event of any conflict between this Mortgage and the
Reorganization Plan filed by Peaches in the bankruptcy case that it filed in the
United States Bankruptcy Court for the Southern District of Florida, Case Number
96- 20153-BKC-RBR, or any term sheet on which the Plan is based, this Mortgage
shall control.
29. Terminology. The term "reasonable attorneys' fees" whenever used herein
shall be deemed to include but not be limited to all attorneys' fees and fees of
legal assistants, including those fees incurred in any and all judicial,
bankruptcy, reorganization, administrative arbitration or probate and other
proceedings, including appellate level proceedings, whether such proceedings
arise before or after entry of a final judgment. The term "the Note Rate"
whenever used herein means, at any particular time, the rate of interest then
applicable to the Note (but not to exceed the highest rate permitted by
applicable law). The captions herein are for convenience of reference only and
shall not be used in interpreting the provisions that follow them.
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<PAGE>
30. Binding Effect. The term "Mortgagor" shall be construed, to include the
heirs, executors, administrators, legal or personal representatives, successors
and assigns of each person or entity included within that term; and all the
covenants and agreements of Mortgagor shall extend to and be binding upon all
said persons and shall inure to the benefit of Mortgagee, its successors and
assigns. All obligations of Mortgagor hereunder shall be the joint and several
obligations of each person or entity included within that term.
31. Partial Invalidity. If any provision of this Mortgage or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Mortgage and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
32. Governing Law. This Mortgage shall be governed by and construed in
accordance with the laws of the State of Alabama.
33. Time of the Essence. Time is of the essence of this Mortgage.
34. Performance of Restrictive Covenants. Mortgagor shall perform all its
obligations under any declaration or covenants or restrictions now or hereafter
affecting the Mortgaged Property.
35. Modifications of Notes or Loan Agreement. This Mortgage secures, in
addition to the Note and Reimbursement Agreement, all extensions, renewals,
consolidations and modifications
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<PAGE>
thereof and all substitutions and replacements therefor. The terms the "Note"
and the "Reimbursement Agreement" include all extensions, modifications,
renewals and consolidations of the Note and the Reimbursement Agreement and all
substitutions and replacements therefor.
36. Survival of Indemnities. Mortgagor's liability under any indemnity or
hold harmless agreement contained herein shall survive the release or
satisfaction hereof and repayment of the indebtedness secured hereby.
37. Notices. All notices and other communications provided for hereunder
shall be in writing and be delivered by hand or by telefax or sent by certified
mail, return receipt requested. If to Mortgagor, at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009, and, if to Mortgagee, at its address at
1180 East Hallandale Beach Boulevard, Hallandale, Florida 33009 or, as to each
party, at such other address within the United States as shall be designated by
such party in a written notice to the other party. All such notices and
communications shall, when mailed, be deemed effective upon the first to occur
of (i) actual receipt or (ii) forty-eight (48) hours after deposit in the U.S.
Mail, postage prepaid, certified mail. Copies of all telefax notice shall also
be sent by Certified U.S. Mail.
38. Subordination Agreement Respecting Certain Inventory. With respect to
certain of Mortgagor's inventory, Mortgagee's security interest hereunder is
subject to the terms of that certain Subordination Agreement, dated as of
January 27, 1997, between and among Mortgagor, Mortgagee, BMG Distribution, Sony
Music Entertainment, Inc., UNI Distribution Corporation, Polygram Group
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<PAGE>
Distribution, Warner/Elektra/Atlantic Corp., EMI Music Distribution and Alliance
Entertainment Corp.
39. Prior Mortgage. (a) This Mortgage is subject and subordinate to a
certain first mortgage from Mortgagor to Barnett Bank of Broward County, dated
September 13, 1990 (the "Prior Mortgage").
(b) Any default in the payment or the performance of any of the covenants,
conditions, or agreements contained in the Prior Mortgage shall, at the option
of the Mortgagee, also constitute an Event of Default hereunder and, in such
event, the Mortgagee shall be entitled to accelerate payment of this Mortgage,
the Note and Mortgagor's obligations to Mortgagee under the Reimbursement
Agreement, so that they shall be and become immediately due and payable, and
Mortgagee shall have all such other and further rights and remedies as may be
provided hereunder and by law.
(c) Mortgagor shall duly, promptly, and fully perform the following in
regard to the Prior Mortgage:
(i) Mortgagor shall promptly pay, when due and payable, the interest,
installments of principal, and all other sums and charges mentioned in and
payable under the Prior Mortgage. Mortgagor shall promptly perform and
observe all of the terms, covenants, and
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<PAGE>
conditions required to be performed and observed by the Mortgagor under the
Prior Mortgage, and shall do all things necessary to preserve and keep the
Prior Mortgage free from default.
(ii) Mortgagor shall promptly notify Mortgagee in writing of any
default by Mortgagor in the performance or observance of any of the terms,
covenants, or conditions on the part of Mortgagor to be performed under the
Prior Mortgage.
(iii) Mortgagor shall: (a) promptly notify Mortgagee in writing of the
receipt by Mortgagor of any notice (other than notices customarily sent on
a regular basis) from the mortgagee under the Prior Mortgage and of any
notice alleging or claiming any default by the Mortgagor in the performance
or observance of any of the terms, covenants, or conditions on the part of
the Mortgagor to be performed or observed under the Prior Mortgage, and (b)
promptly cause a copy of each such notice received by Mortgagor from the
mortgagee under the Prior Mortgage to be delivered to Mortgagee.
(iv) Mortgagor shall not, without the prior written consent of
Mortgagee, enter into any agreement or accept the benefit of any
arrangement whereby the mortgagee under the Prior Mortgage waives,
postpones, extends, reduces, or modifies (i) the payment of any installment
of interest or interest and principal or (ii) any other term, covenant, or
condition of the Prior Mortgage.
(v) Mortgagor shall, within ten (10) days after written demand from
Mortgagee, use his best efforts to obtain from the mortgagee of the Prior
Mortgage and deliver to
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<PAGE>
Mortgagee a certificate stating that the Prior Mortgage is in full force
and effect, is unmodified, and that no notice of default thereunder has
been served on the Mortgagor and stating whether or not there are any
defaults thereunder, and specifying the nature of such defaults, if any.
(vi) Mortgagor shall furnish to Mortgagee, upon demand, proof of
payment of all items which are required to be paid by the Mortgagor
pursuant to the Prior Mortgage. Mortgagor shall furnish to Mortgagee,
without notice or demand, proof of payment of all items, notice of which is
required to be given to the mortgagee under the Prior Mortgage.
(vii) Mortgagor shall execute and deliver, on request of Mortgagee,
such instruments as Mortgagee may deem useful or necessary to permit
Mortgagee to cure any default under the Prior Mortgage or permit Mortgagee
to take such other action as Mortgagee considers desirable to cure or
remedy the matter in default and preserve the interest of Mortgagee in the
Mortgaged Property.
(viii) Mortgagor shall promptly forward to Mortgagee all notices,
reports, and documents which Mortgagor is requested to provide the
mortgagee under the Prior Mortgage and pursuant to any other document or
agreement between Mortgagor and the mortgagee under the Prior Mortgage.
(d) If the Mortgagor fails to pay an installment of interest or interest
and principal on the Prior Mortgage when the same become due, the Mortgagee may,
without notice to Mortgagor,
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<PAGE>
pay the same, and Mortgagor shall repay to Mortgagee the amount so paid with
interest thereon at the highest rate of interest permitted to be charged by
applicable law and the same shall be added to the mortgage indebtedness and be
secured by this Mortgage.
40. Waiver of Jury Trial. MORTGAGOR BY EXECUTION HEREOF AND MORTGAGEE BY
ACCEPTANCE HEREOF HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY AND
ALL RIGHTS EACH MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
(INCLUDING BUT NOT LIMITED TO ANY CLAIMS, CROSS CLAIMS OR THIRD PARTY CLAIMS)
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS MORTGAGE AND SECURITY
AGREEMENT. MORTGAGOR AND MORTGAGEE ACKNOWLEDGE THAT THE PROVISIONS OF THIS
PARAGRAPH HAVE BEEN A MATERIAL INDUCEMENT TO MORTGAGEE TO PROVIDE THE LOAN
EVIDENCED BY THE NOTE AND TO EXECUTE AND DELIVER THE URT GUARANTY.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage on the day and
year first above written.
Peaches Entertainment Corp.,
a Florida Corporation
By: s/Brian Wolk
-----------------------
Name: Brian Wolk
Title: Executive Vice President
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<PAGE>
STATE OF FLORIDA )
:
BROWARD COUNTY )
I, the undersigned authority, a Notary Public in and for said County, in
said State, hereby certify that Jason Wolk, an Executive Vice President of
Peaches Entertainment Corp., a Florida corporation, whose name is signed to the
foregoing instrument, and who is known to me, acknowledged before me on this day
that, being informed of the contents of the said instrument, he, as such officer
and with full authority, executed the same voluntarily as of the day the same
bears date.
GIVEN under my hand and seal, this 3 day of February , 1997.
s/ Olga E. Salgado
--------------------------------------
Notary Public
My commission expires: 1/27/98
NOTARIAL SEAL [Notarial Seal Affixed to Execution Copy]
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<PAGE>
Exhibit A
[Omitted]
<PAGE>
Exhibit B
[Omitted]
Exhibit 10.69
<PAGE>
Peaches - URT Reimbursement Agreement
Dated as of January 27, 1997
This Reimbursement Agreement is made between Peaches Entertainment Corp.
("Peaches") and URT Industries, Inc. ("URT").
A. In January 1996, Peaches filed a bankruptcy petition pursuant to chapter
11 of the United States Bankruptcy Code (the "Bankruptcy Code") in the United
States Bankruptcy Court for the Southern District of Florida (the "Bankruptcy
Court"), case number 96-20153-BKC-RBR (the "Bankruptcy Case").
B. Peaches filed a reorganization plan in its Bankruptcy Case, and such
plan was confirmed by the Bankruptcy Court on January 17, 1997 (the "Plan").
(Capitalized terms used herein, unless otherwise defined, shall have the same
meanings ascribed to them in the Plan.)
C. Pursuant to the terms of the Plan, Peaches made certain Allowed Claim
Notes payable to the Majors and Alliance in the original amounts of their
Allowed Claims, less the Initial Payments made to each of them.
D. As an inducement for the Majors and Alliance to accept the Plan and the
Allowed Claim Notes issued under the Plan, URT, a major shareholder of Peaches,
agreed to guarantee payments under the Allowed Claim Notes in accordance with
the terms and conditions
- -----------------------------------------------------------------
THIS INSTRUMENT HAS BEEN EXECUTED AND DELIVERED PURSUANT TO AN ORDER OF THE
UNITED STATES BANKRUPTCY COURT, SOUTHERN DISTRICT OF FLORIDA, IN CASE NO. 96-
20153-BKC-RBR (IN RE: PEACHES ENTERTAINMENT CORP.), WHICH ORDER CONFIRMED THE
PLAN OF REORGANIZATION FILED IN SUCH BANKRUPTCY PROCEEDING. PURSUANT TO 11
U.S.C. ss.1146 OF THE UNITED STATES BANKRUPTCY CODE AND FLORIDA ADMINISTRATIVE
CODE RULE 12b-4.014(16), NO DOCUMENTARY STAMP TAX AND/OR INTANGIBLE TAX IS DUE
AND PAYABLE ON THIS INSTRUMENT.
<PAGE>
of the Guaranty Agreement between and among URT, the Majors and Alliance (the
"URT Guaranty").
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, receipt whereof is acknowledged, it is agreed as follows:
1. Peaches agrees to reimburse URT for each and every payment made by URT
to any of the Majors or Alliance under the URT Guarantee, each such payment
constituting in effect an advance made by URT to Peaches hereunder (the "URT
Advances"), together with interest thereon (as set forth below) and all fees,
expenses and charges (including reasonable attorneys' fees, including without
limitation those for bankruptcy and appellate matters and those incurred outside
of litigation) incurred by URT in connection with the execution, collection, and
enforcement (whether by or against URT) of the URT Guaranty, this Reimbursement
Agreement, the Mortgage and Security Agreement, dated as of January 27, 1997,
between and among Peaches and URT (the "Mortgage and Security Agreement"), the
Subordination Agreement, dated as of January 27, 1997, between and among
Peaches, URT, the Majors, and Alliance, and the Security Agreement, dated as of
January 27, 1997, between Peaches and URT (the "Security Agreement").
2. URT Advances shall bear interest from the date that each Advance is made
(that is, the date payment is made under the URT Guaranty) to the date that such
Advance is repaid, at the Prime Rate (as defined below), computed on the actual
days elapsed based on a 360-day year.
3. For purposes of the foregoing, "Prime Rate" means the rate per annum
announced by The Chase Manhattan Bank, N.A. from time to time as the Prime Rate
in effect at its principal place of business in New York City, which rate of
interest may not be the lowest rate at which The Chase
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<PAGE>
Manhattan Bank will lend money to its customers, and any change in the interest
rate resulting from a change in said Prime Rate shall be effective on the same
date as such change in the Prime Rate.
4. Interest shall increase to the Prime Rate plus two percent (2%) per
annum upon the occurrence and during the continuance of an Event of Default
hereunder.
5. In no event shall the interest rate charged hereunder exceed the maximum
rate permitted by law.
6. If any payment of interest and/or principal hereunder becomes due and
payable on a Saturday, Sunday or business holiday in the state of Florida, the
maturity thereof shall be extended to the next succeeding business day, and
interest shall be payable thereon at the rate herein specified during such
extension.
7. The aggregate principal amount of URT Advances (the "URT Principal")
shall be due and payable in four (4) equal installments to be paid on the
following dates (the "Installment Payment Dates"): February 3, 2000; February 3,
2001; February 3, 2002; and February 3, 2003. On each Installment Payment Date,
Peaches also shall pay to URT all interest that is accrued and unpaid, as of
such Installment Payment Date, on the unpaid URT Principal. The final payment of
the URT Principal, together with all accrued and unpaid interest and any other
unpaid fees, expenses and charges, shall be due and payable in full on February
3, 2003. Each payment made hereunder (including any prepayment) shall be
credited first to interest then due and payable, then to any other fees,
expenses and charges due and payable, and then the remainder thereof to the
unpaid principal balance of this Note, or in such other order as URT may
determine in its discretion.
8. The term "Liabilities" shall include all liabilities of Peaches
evidenced by this Reimbursement Agreement or by that certain Promissory Note,
dated as of January 27, 1997, made
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<PAGE>
by Peaches payable to URT (the "Note"), and all other liabilities (for
principal, interest or other amounts), direct or contingent, joint, several or
independent, of Peaches now or hereafter existing, due or to become due to, or
held or to be held by, URT for its own account or as agent for another or
others, whether created directly or acquired by assignment or otherwise. Upon
the occurrence of any of the following, each of which shall constitute an "Event
of Default," all Liabilities shall, at the option of URT, be accelerated and
become immediately due and payable (except for (c) or (g), in which case such
acceleration shall be immediate and automatic): (a) non-payment of any amount
due under this Reimbursement Agreement, the Note or of any of the other
Liabilities shall occur; (b) failure of Peaches to perform any of its
obligations under the Security Agreement; (c) Peaches shall be dissolved or
become insolvent (however evidenced); (d) the suspension of business of Peaches
or the issuance of any warrant, process, order of attachment, garnishment or
other lien and/or the filing of a lien as a result thereof against any of the
property of Peaches shall occur; (e) Peaches shall fail to promptly provide URT
with such documentation as URT may require in connection with this Reimbursement
Agreement; (f) Peaches shall make an assignment for the benefit of creditors or
a trustee or receiver shall be appointed for the undersigned or for any of the
property thereof; and (g) any proceeding shall be commenced by or against
Peaches under any bankruptcy, reorganization, arrangement of debt, insolvency,
readjustment of debt, receivership, liquidation, or dissolution law or statute.
9. No delay on the part of URT in exercising any of its options, powers or
rights hereunder, nor any partial or single exercise thereof, shall constitute a
waiver thereof. No waiver by URT of any default shall be effective unless given
in writing by an authorized officer of URT, nor shall such waiver operate as a
waiver of such default on another occasion. The rights and
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<PAGE>
remedies expressly provided in this Reimbursement Agreement are cumulative and
not exclusive of any rights or remedies which URT may otherwise have. The
provisions hereof shall survive the termination of this Reimbursement Agreement.
10. Peaches hereby: (a) consents to any extension, rearrangement, or
postponement of the time of payment under the URT Guaranty and to any other
indulgence with respect thereto without notice to, consent of or consideration
for Peaches; and (b) agrees that, notwithstanding the occurrence of any of the
foregoing, Peaches shall be and remain directly and primarily liable for all
sums due under this Reimbursement Agreement and all other Liabilities.
11. Peaches represents and warrants to URT that Peaches is in good standing
under the laws of the place of its formation and that its execution of this
Reimbursement Agreement has been duly authorized by all requisite actions.
12. Each notice or other communication given hereunder or in connection
herewith shall be in writing and shall be sent by first class certified mail,
postage prepaid, return receipt requested, addressed as follows:
URT Industries, Inc.
1180 East Hallandale Beach Blvd.
Hallandale, Florida 33009
Peaches Entertainment Corp.
1180 East Hallandale Beach Blvd.
Hallandale, Florida 33009
or, in each case, at such other address as any above-referenced party, wishing
to change its address for notices, may specify from time to time by notice to
the other party.
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<PAGE>
13. Peaches hereby authorizes URT to record on its account books the amount
of the URT Advances and all payments in respect thereof which recording shall,
in the absence of manifest error, be conclusive as to the outstanding principal
amount of the URT Advances.
14. This Reimbursement Agreement shall be governed by and construed in
accordance with the laws of the State of Florida in all respects, including,
without limitation, matters of construction, validity and performance.
15. Peaches consents to service of process on Peaches at the address of
Peaches set forth above, by certified mail, return receipt requested (if
possible), and such service shall be deemed to be complete five (5) days after
the same shall have been so mailed.
16. Peaches hereby irrevocably waives, to the fullest extent it may
effectively do so, the defense of an inconvenient forum to the maintenance of
any such lawsuit in any jurisdiction. Peaches and URT hereby irrevocably waive
trial by jury in any court in connection with this Reimbursement Agreement, and
each hereby certifies that no representative of any other party has expressly or
impliedly represented that such other party might not enforce this jury waiver.
17. Repayment of the URT Advance pursuant to this Reimbursement Agreement
is subject to a certain Subordination Agreement, dated as of January 27 1997,
between and among the Majors, Alliance and URT.
18. Peaches' obligations to URT under this Reimbursement Agreement, in
accordance with the Mortgage and Security Agreement and the Security Agreement,
are secured by: (a) a security interest in the Majors' Inventory and Alliance's
Inventory (as defined in the aforesaid Subordination Agreement), (b) a security
interest in Peaches' Other Inventory (as defined in said Subordination
Agreement) and Peaches' personal property other than the Majors' Inventory and
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<PAGE>
Alliance's Inventory, and (c) a mortgage and security interest on and in certain
real and related personal property owned by Peaches, as described in the
Mortgage and Security Agreement.
19. This Reimbursement Agreement may not be amended or modified orally, and
may only be amended or modified in a writing executed and delivered by the party
against whom any such amendment or modification is sought to be enforced. In the
event of any conflict between this Reimbursement Agreement and the Plan or any
term sheet on which the Plan is based, this Reimbursement Agreement shall
control.
20. This Reimbursement Agreement shall continue to be effective or be
reinstated, as the case may be, at such time and to the extent that any payment,
or any part thereof, of the principal amount of any URT Advance, any interest
thereon, or any other fee, expense or charge, made by Peaches to URT hereunder,
is rescinded or must otherwise be disgorged or returned to Peaches by URT in
connection with any bankruptcy or reorganization of Peaches that occurs
following the execution and delivery of this Reimbursement Agreement.
21. Peaches agrees to pay all taxes (including without limitation any
Florida documentary stamp and intangible tax) incurred in connection with the
execution, collection or enforcement of or provision of security for this
Reimbursement Agreement.
In witness whereof, Peaches and URT have executed this Reimbursement
Agreement as of the date and year first above written.
s/Martha Rosende Peaches Entertainment Corp.
- --------------------------
Witness
By: s/Jason Wolk
--------------------------
Print Name Martha Rosende Name: Jason Wolk
Title: Ex. Vice-President
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<PAGE>
s/ Olga E. Salgado URT Industries, Inc.
- --------------------------
Witness
By: s/Brian Wolk
--------------------------
Print Name Olga E. Salgado Name: Brian Wolk
Title: Ex. Vice-President
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Exhibit 10.70
<PAGE>
SUBORDINATION AGREEMENT
This Agreement, dated as of January 27,1997, is made between and among
Peaches Entertainment Corp. ("Peaches"); URT Industries, Inc. ("URT"); BMG
Distribution, Sony Music Entertainment, Inc., Polygram Group Distribution,
Warner/Elektra/Atlantic Corp., and EMI Music Distribution (collectively, the
"Majors"); and Alliance Entertainment Corp. ("Alliance"). URT, the Majors, and
Alliance may hereinafter be referred to as the "Creditors." Capitalized terms
not otherwise defined herein shall have the same meanings ascribed to them in
Peaches' plan of reorganization (the "Plan"), confirmed by order of the United
States Bankruptcy Court for the Southern District of Florida (case number
96-20153-BKC-RBR) on January 27, 1997.
WHEREAS:
1. Peaches has incurred obligations, and may in the future incur additional
obligations, to the Creditors, including obligations arising under the Allowed
Claim Notes, the URT Note, the Peaches-URT Reimbursement Agreement, and any
Post-confirmation Credit extended to Peaches (collectively, the "Obligations").
"Post-confirmation Credit" shall mean credit extended, subsequent to the
Effective Date of the Plan, by any Major, Universal Music and Video Distribution
("Universal") and/or Alliance to Peaches for the purchase of product by Peaches
from such Major, Universal and/or Alliance.
2. Peaches also has granted to the Creditors certain security interests to
secure payment of Peaches' Obligations to the Creditors. Each Creditor has filed
or may file financing statements under the Uniform Commercial Code.
3. The Creditors desire to agree as to the relative priority of their
respective claims and interests with respect to both
<PAGE>
payment of Peaches' Obligations to them and the security interests granted to
them by Peaches securing the Obligations.
4. Pursuant to the Plan:
i. Peaches has executed and delivered to each Major an Allowed Claim Note,
in an amount equal to such Major's Allowed Claim, less the Initial Payment made
to such Major on account of its Allowed Claim.
ii. Peaches has granted to each Major, to secure Peaches' obligations to
such Major under such Major's Allowed Claim Note and extension of
Post-confirmation Credit by such Major, a security interest solely in inventory
that was originally distributed by such Major and is held and owned by Peaches.
(The inventory sold by a particular Major to Peaches shall hereinafter be
referred to as the "Individual Major's Inventory," and the inventory sold by all
Majors to Peaches shall hereinafter be referred to as the "Majors' Inventory.")
iii. Peaches has executed and delivered to Alliance an Allowed Claim Note,
in an amount equal to Alliance's Allowed Claim, less the Initial Payment made to
Alliance on account of its Allowed Claim.
iv. Peaches has granted to Alliance, to secure Peaches' obligations to
Alliance under Alliance's Allowed Claim Note and under the extension of
Post-confirmation Credit by Alliance, a security interest in inventory that was
originally distributed by Alliance and is held and owned by Peaches (the
"Alliance Inventory").
v. Peaches has executed and delivered to URT a promissory note (the "URT
Note") evidencing the Effective Date Deficiency Advance made by URT to Peaches.
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<PAGE>
vi. URT has guaranteed Peaches' payment Obligations to the Majors and
Alliance under the Allowed Claim Notes, but not any of the obligations arising
from the extension by the Majors (or any Major) or by Alliance of
Post-confirmation Credit (the "URT Guarantee"), and Peaches has agreed to
reimburse URT for any payments that URT is required to make to the Majors and/or
Alliance pursuant to the URT Guarantee (the "Peaches-URT Reimbursement
Agreement").
vii. Peaches has granted to URT, to secure the URT Note and Peaches'
obligations to URT under the Peaches-URT Reimbursement Agreement, inter alia, a
security interest in the Majors' Inventory, the Alliance Inventory and all other
inventory of Peaches (such other inventory being, "Peaches' Other Inventory").
NOW, THEREFORE, in consideration of the premises and the agreements set
forth hereinbelow, the parties agree as follows:
1. Peaches and the Creditors agree that, solely during any period in which
an Event of Default exists under clauses (i), (iv), (v) or (vi) of any Allowed
Claim Note or an event of default exists under substantially similar terms of
any Post-confirmation Credit extension or if any Allowed Claim Note or any
obligation arising from the extension of Post-confirmation Credit has been duly
accelerated (any of such events or acceleration being an "Event of
Subordination"), Peaches shall not make to URT, and URT shall not accept from
Peaches, any payment on account of Peaches' Obligations to URT under the URT
Note or the Peaches-URT Reimbursement Agreement. The parties agree that the
subordination of the URT Note and the Peaches-URT Reimbursement Agreement as set
forth in the preceding sentence (the "URT Subordination"): (a) shall be
triggered only upon the occurrence of any Event of Subordination, and not upon
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<PAGE>
any other default under any Allowed Claim Note nor any other default under any
term of any Post-confirmation Credit extension, and (b) shall continue only so
long as such Event of Subordination exists (the "Default Period"), shall
terminate upon the curing or termination of such Event of Subordination, and
shall not affect in any way (or require any return or disgorgement, in whole or
in part, of) any payment by Peaches to URT on account of the URT Note or the
Peaches-URT Reimbursement Agreement that is made prior to or after any Default
Period.
2. URT agrees that: (a) it shall not knowingly accept or receive from
Peaches any payment made by Peaches in contravention of the URT Subordination,
and (b) should it, whether inadvertently or otherwise, accept or receive any
such payment from Peaches in contravention of the URT Subordination, then,
unless the payment default by Peaches has been cured or the Allowed Claim Notes
and obligations arising under any Post-confirmation Credit extension have been
paid in full, such payment shall be held in trust by URT and URT shall pay to
the Majors, Universal and Alliance the lesser (the "Returned URT Payments") of:
(i) the amount accepted or received by URT in contravention of the URT
Subordination, and (ii) the aggregate amount of all payments that are due or
past due under the Allowed Claim Notes and obligations arising under terms of
the extension of Post-confirmation Credit (including any Allowed Claim Note held
by, and any obligation under Post-confirmation Credit extended by , Universal).
The portion of the Returned URT Payment that each Major, Universal and Alliance
shall be entitled to shall equal a fraction, the numerator of which shall be the
amount of payments in default to such Major, Universal or Alliance and the
denominator of which shall be the aggregate amount of payments in
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<PAGE>
default to all of the Majors, Universal and Alliance. The payment to the Majors,
Universal and Alliance of the Returned URT Payments, as set forth above, shall
be the sole remedy of the Majors and Alliance against URT for any breach of the
URT Subordination. The Obligations of Peaches to URT shall be increased by the
full amount of all Returned URT Payments, and the indebtedness of Peaches to the
Majors and Alliance shall be decreased by the full amount of the Returned URT
Payments paid to the Majors, Universal and Alliance.
3. The URT Subordination shall be applicable solely to the URT Note,
repayments under the URT - Peaches Reimbursement Agreement and any and all
renewals, enlargements and modifications thereof, and not to any other
obligations of Peaches to URT.
4. Payments in contravention of the URT Subordination may be made by
Peaches to URT with the express written approval of the Majors and Alliance.
5. This Subordination Agreement shall terminate on the date that the
Allowed Claim Notes and the obligations arising under the extension of
Post-confirmation Credit are paid in full (the "Debt Payment Date"); provided,
however, that if any of the Majors or Alliance is required to repay or disgorge
any payment received on account of the Allowed Claim Notes or obligations
arising under the extension of Post-confirmation Credit, this Subordination
Agreement shall be automatically reinstated by the parties hereto. This
Subordination Agreement may be terminated prior to the Debt Payment Date only by
written notice received by URT from the Majors and Alliance.
6. With respect to the security interests granted by Peaches to the
Creditors in the Majors' Inventory and the Alliance Inventory, the Creditors
agree between and among themselves that,
-5-
<PAGE>
irrespective of the time or order of attachment or perfection of security
interests or the time or order of filing of financing statements or the giving
or failure to give notice of the acquisition or expected acquisition of purchase
money or other security interests, the security interest of each Creditor in the
Majors' Inventory and the Alliance Inventory ranks and will rank in priority
according to subsections (a), (b), and (c) of this paragraph 6. Proceeds from
any foreclosure sale, liquidation or other disposition of, or realization upon,
any of the collateral consisting of the Individual Major's Inventory or the
Alliance Inventory (a "Collateral Disposition") shall be applied in the
following manner:
a. First, to the payment of all reasonable costs and expenses,
including reasonable attorneys' fees, relating to such
Collateral Disposition incurred by the Creditor initiating and
conducting such Disposition (the "Collateral Disposition
Expenses").
b. Second, to each Creditor (other than URT) whose collateral
is the subject of such Collateral Disposition in an amount
equal to the lesser of: (i) the proceeds of such
Creditor's collateral, less the Collateral Disposition
Expenses, and (ii) all amounts due and owing to such
Creditor under any Allowed Claim Note or obligation
arising under the extension of Post-confirmation Credit
payable to such Creditor.
c. Third, to URT until URT is paid in full with respect to all
obligations of Peaches to URT (whether or not otherwise due or
payable), including but not limited to all Obligations of
Peaches to URT under the URT Note and the Peaches-URT
Reimbursement Agreement.
7. URT shall be automatically subrogated to the rights and remedies of,
including but not limited to the security interests granted by Peaches to, the
Majors and Alliance with respect to the
-6-
<PAGE>
full amount of each and every payment made by URT to any of the Majors and/or
Alliance pursuant to the URT Guaranty, provided, however, that URT shall not be
entitled to exercise any rights, remedies and/or security interests to which it
is thus subrogated until all indebtedness of Peaches to the Majors and Alliance
under the Allowed Claim Notes and arising on account of the extension of
Post-confirmation Credit has been paid in full. Notwithstanding anything
contained in the preceding sentence, URT shall be permitted to take all lawful
action to protect its subrogation rights, remedies and security interests.
8. Neither the Majors nor Alliance has been granted any security interest
in Peaches' Other Inventory, in Peaches' personal property other than the
Majors' Inventory and the Alliance Inventory, or in any of Peaches' real
property. Peaches has granted to URT a valid, perfected first-priority security
interest in Peaches' Other Inventory and Peaches' personal property other than
the Majors' Collateral and the Alliance Collateral, and has granted to URT a
valid, perfected mortgage on Peaches' real property. Nothing contained in this
Agreement, including but not limited to the URT Subordination, is intended to,
or shall be construed to, limit or restrict or subordinate any rights or
remedies that URT has or may hereafter have: (a) under its mortgage and/or
security agreements with Peaches respecting Peaches Other Inventory, Peaches
personal property other than the Majors' Collateral and the Alliance Collateral,
and Peaches' real property, and (b) with respect to the security interest that
URT has in inventory collateral of any Major (or Alliance) following the full
payment of such Major (or Alliance); all of which rights and remedies of URT are
expressly and fully reserved by URT.
-7-
<PAGE>
9. Except as otherwise specifically provided herein, priority shall be
determined in accordance with applicable law.
10. This Agreement is solely for the benefit of the Creditors and their
successors or assigns and no other person or persons (including without
limitation any bankruptcy trustee or other trustee, receiver or custodian for
Peaches or any of its property) shall have any right, benefit, priority or
interest under, or because of the existence of, this Agreement. Nothing
contained in this Agreement is intended to affect or limit, in any way
whatsoever, any security interest (or any other interest, lien or claim) that
any of the Creditors may otherwise have in any or all of the assets of Peaches,
insofar as the rights of Peaches and third parties are concerned. The Creditors
specifically reserve any and all of their respective rights, security interests,
other interests, liens and claims, and rights to assert any of the same, as
against Peaches and any third parties.
11. Each Creditor agrees that it will give written notice to Peaches
upon its declaration of a default or an event of default under any of the loan
documents relating to Peaches' Obligations to it or its acceleration of any of
those Obligations, and before giving Peaches any instructions with respect to
any of the Majors' Inventory or the Alliance Inventory or taking any actions
with respect to any of the collateral consisting of the Majors' Inventory or the
Alliance Inventory; provided, however, that the failure to provide such notice
shall not affect the respective rights of the parties hereunder. Peaches shall
then notify each of the other Creditors.
12. Each notice or other communication given hereunder or in connection
herewith shall be in writing and shall be sent by first
-8-
<PAGE>
class certified mail, postage prepaid, return receipt requested.
Notices shall be addressed as follows:
Peaches Entertainment Corp. URT Industries, Inc.
1180 East Hallandale Beach Blvd. 1180 East Hallandale Beach Blvd.
Hallandale, Florida 33009 Hallandale, Florida 33009
BMG Distribution Sony Music Entertainment, Inc.
210 Clay Avenue 550 Madison Avenue
Lyndhurst, NJ 07071 New York, NY 10022
Polygram Group Distribution Universal Music and Video
825 8th Avenue Distribution Corp.
New York, NY 10019 60 Universal City Plaza
Universal City, CA 91608
Warner/Elektra/Atlantic Corp. EMI Music Distribution
111 North Hollywood Way 21700 Oxnard Street, Suite 700
Burbank, CA 91505 Woodland Hills, CA 91367-3642
Alliance Entertainment Corp.
15959 N.W. 15th Avenue
Miami, FL 33169
or, in each case, at such other address as a Creditor wishing to change its
address for notices may specify from time to time by notice hereunder to the
other parties hereto.
13. The parties to this Subordination Agreement hereby irrevocably waive
trial by jury in any court in connection with this Subordination Agreement, and
each hereby certifies that no representative of any other party has expressly or
impliedly represented that such other party might not enforce this jury waiver.
14. Each of the several executed counterparts of this Agreement shall be an
original. All such counterparts shall
-9-
<PAGE>
together constitute one and the same instrument. This Agreement may be amended
only by a writing signed by all of the Creditors. In the event of any conflict
between this Agreement and the Plan or any term sheet on which the Plan is
based, this Agreement shall control.
15. This Subordination Agreement shall be governed by and construed in
accordance with the laws of the State of Florida in all respects, including,
without limitation, matters of construction, validity and performance, and the
undersigned consent to service of process on the undersigned at that address of
the undersigned appearing hereinabove by certified mail, return receipt
requested (if possible), and such service shall be deemed to be complete five
(5) days after the same shall have been so mailed. The undersigned further
consent and submit to the jurisdiction of the courts (state and federal) of the
State of Florida in connection with any lawsuit relating hereto. In addition,
the undersigned hereby irrevocably waive, to the fullest extent they may
effectively do so, the defense of an inconvenient forum to the maintenance of
any such lawsuit in any jurisdiction.
16. There shall be no limit under this Subordination Agreement upon the
amount of Post-confirmation Credit that may be extended by any Major and/or
Alliance to Peaches; provided, however, that following the later (the "Material
Event Date") of notification of, or the occurrence of, a Material Event (as
defined below): (a) unless URT agrees otherwise in writing, this Subordination
Agreement shall terminate on the date that Peaches' outstanding obligations,
existing as of the Material Event Date, to all of the Majors and Alliance under
the Allowed Claim Notes and extensions of Postconfirmation Credit (including,
without limitation, the extensions of Post-confirmation Credit evidenced by the
acceptance by any of
-10-
<PAGE>
the Majors and/or Alliance of purchase orders from Peaches on or before the
Material Event Date) (the "Pre-Material Event Obligations") are paid in full,
and (b) all payments made by Peaches to the Majors and Alliance after the
Material Event Date shall be applied first, or shall be deemed to be applied
first, in payment of the Pre-Material Event Obligations, and not in payment of,
inter alia, credit extended after the Material Event Date. URT shall provide
written notice to the Majors and Alliance of the occurrence of any Material
Event. Material Event shall mean: (a) the ownership by URT of less than 51% of
the voting stock of Peaches, (b) the inability of URT to elect a majority of the
directors of Peaches, (c) a trustee, receiver, or person with similar powers or
duties is appointed for Peaches, or (d) a voluntary or involuntary bankruptcy,
receivership, assignment for the benefit of creditors, or similar proceeding is
commenced by or against Peaches.
IN WITNESS WHEREOF, the parties have hereby executed and delivered this
Subordination Agreement on the day and year first set forth above.
Signed and delivered
in the presence of:
PEACHES ENTERTAINMENT
CORP.
____________________________
Witness
Print Name__________________ By: __________________________
Print Name: __________________
____________________________
Witness As Its: ______________________
Print Name__________________
-11-
<PAGE>
URT INDUSTRIES, INC.
s/Beatrice Rodriguez
- ------------------------------
Witness
Print Name Beatrice Rodriguez By: s/Brian Wolk
-----------------------------
Print Name: Brian Wolk
s/Olga E. Salgado
- ------------------------------
Witness As Its: Executive Vice-President
Print Name Olga E. Salgado
BMG DISTRIBUTION
s/Steve Massaro
- ------------------------------
Witness
Print Name Steve Massaro By: s/Joseph Heslin
-----------------------------
Print Name: Joseph Heslin
s/Marie Peros
- ------------------------------
Witness As Its: Director of Credit
Print Name Marie Peros
SONY MUSIC
ENTERTAINMENT, INC.
s/John Marino
- ------------------------------
Witness
Print Name John Marino By: s/Carl A. Schnock
-----------------------------
Print Name: Carl A. Schnock
s/Antonia Figueroa
- ------------------------------
Witness As Its: VP Customer Financial
Relations
Print Name Antonia Figueroa
Signed and delivered
in the presence of:
-12-
<PAGE>
POLYGRAM GROUP DISTRIBUTION
s/Joanne Perez
- ------------------------------
Witness
Print Name Joanne Perez By: s/Robert M. Baker, Jr.
------------------------------
Print Name: Robert M. Baker, Jr.
- ----------------------------
Witness As Its: VP Credit
Print Name__________________
WARNER/ELEKTRA/ATLANTIC CORP.
s/Albert H. Westphal
- ------------------------------
Witness
Print Name Albert H. Westphal By: s/Gregory B. Askey
------------------------------
Print Name: Gregory B. Askey
- ------------------------------
Witness As Its: Senior VP, Credit
Print Name__________________
EMI MUSIC DISTRIBUTION
s/Rainee Redmond
- ------------------------------
Witness
Print Name Rainee Redmond By: s/Scott Simons
------------------------------
Print Name: Scott Simons
s/Jan Waller
- ------------------------------
Witness As Its: Vice-President, Credit
Print Name Jan Waller
Signed and delivered
in the presence of:
ALLIANCE ENTERTAINMENT CORP.
s/Maryann Bock
- ------------------------------
Witness
Print Name Maryann Bock By: s/Christopher Joyce
------------------------------
Print Name: Christopher Joyce
s/Muslima Lewis
- ------------------------------
Witness As Its: Executive Vice President
Print Name Muslima Lewis
-13-
Exhibit 10.71
<PAGE>
SUBORDINATION AGREEMENT
This Agreement, dated as of January 27, 1997, is made between and among
Peaches Entertainment Corp. ("Peaches"); URT Industries, Inc. ("URT"); and
Universal Music and Video Distribution, Inc. ("Universal"). URT and Universal
may be referred to as the "Creditors." Capitalized terms not otherwise defined
herein shall have the same meanings ascribed to them in Peaches' plan of
reorganization (the "Plan"), confirmed by order of the United States Bankruptcy
Court for the Southern District of Florida (case number 96-20153-BKC-RBR) on
January 27, 1997.
WHEREAS:
A. Peaches has incurred obligations, and may in the future incur additional
obligations, to the Creditors under the Allowed Claim Note, the URT Note, the
Peaches-URT Reimbursement Agreement and under any Post-confirmation Credit
extended to Peaches (collectively, the "Obligations"). "Post-confirmation
Credit" shall mean credit extended, subsequent to the Effective Date of the
Plan, by Universal to Peaches for the purchase of product by Peaches from
Universal.
B. Peaches also has granted to the Creditors certain security interests to
secure payment of the Obligations to the Creditors. Each Creditor has filed or
may file financing statements under the Uniform Commercial Code.
C. The Creditors desire to agree as to the relative priority of their
respective claims and interests with respect to both payment of the Obligations
to them and the security interests granted to them by Peaches securing the
Obligations.
D. Pursuant to the Plan:
i. Peaches has executed and delivered to Universal an Allowed Claim
Note, in an amount equal to Universal's Allowed Claim, less the Initial
Payment made to Universal on account of its Allowed Claim.
ii. Peaches has granted to Universal, to secure the Obligation's owing
to Universal under Universal's Allowed Claim Note and any obligation
arising under the extension of Post-confirmation Credit by Universal, a
security interest solely in inventory that was originally distributed by
Universal and is held and owned by Peaches, and all proceeds thereof. (The
inventory sold by Universal to Peaches shall hereinafter be referred to as
"Universal's Inventory.")
<PAGE>
iii. Peaches has executed and delivered to URT a promissory note (the
"URT Note") evidencing the Effective Date Deficiency Advance made by URT to
Peaches.
iv. URT has guaranteed Peaches' payment Obligations to Universal under
the Allowed Claim Notes, but not any of the obligations arising from the
extension of Post-confirmation Credit (the "URT Guarantee"), and Peaches
has agreed to reimburse URT for any payments that URT is required to make
to the Universal pursuant to the URT Guarantee (the "Peaches-URT
Reimbursement Agreement").
v. Peaches has granted to URT, to secure the URT Note and Peaches'
obligations to URT under the Peaches-URT Reimbursement Agreement, inter
alia, a security interest in Universal's Inventory and all other inventory
of Peaches (such other inventory being, "Peaches' Other Inventory").
vi. Peaches and URT have entered into a Subordination Agreement dated
January 27, 1997 with BMG Distribution, Sony Music Entertainment, Inc.,
Polygram Group Distribution, Warner/Elektra/Atlantic Corp., and EMI Music
Distribution (collectively, the "Majors") and Alliance Entertainment Corp.
("Alliance").
NOW, THEREFORE, in consideration of the premises and the agreements set
forth hereinbelow, the parties agree as follows:
1. Peaches and the Creditors agree that, solely during any period in which
an Event of Default exists under clauses (i), (iv), (v) or (vi) of the Allowed
Claim Note or an event of default exists under substantially similar terms of
any Post-confirmation Credit extension or if any Allowed Claim Note or
obligation arising from the extension of Post-confirmation Credit has been duly
accelerated (any of such events or acceleration being an "Event of
Subordination"), Peaches shall not make to URT, and URT shall not accept from
Peaches, any payment on account of Peaches' Obligations to URT under the URT
Note or the Peaches-URT Reimbursement Agreement. The parties agree that the
subordination of the URT Note and the Peaches-URT Reimbursement Agreement as set
forth in the preceding sentence (the "URT Subordination"): (a) shall be
triggered only upon the occurrence of any Event of Subordination, and not upon
any other default under any Allowed Claim Note nor any other default of a term
arising under any Post-confirmation Credit extension, and (b) shall continue
only so long as such Event of Subordination exists (the "Default
-2-
<PAGE>
Period"), shall terminate upon the curing or termination of such Event of
Subordination, and shall not affect in any way (or require any return or
disgorgement, in whole or in part, of) any payment by Peaches to URT on account
of the URT Note or the Peaches-URT Reimbursement Agreement that is made prior to
or after any Default Period.
2. URT agrees that: (a) it shall not knowingly accept or receive from
Peaches any payment made by Peaches in contravention of the URT Subordination,
and (b) should it, whether inadvertently or otherwise, accept or receive any
such payment from Peaches in contravention of the URT Subordination, then,
unless the payment default by Peaches has been cured or the Allowed Claim Notes
and obligations arising under any Post-confirmation Credit extension have been
paid in full, such payment shall be held in trust by URT and URT shall pay to
Universal, the Majors and Alliance the lesser (the "Returned URT Payments") of:
(i) the amount accepted or received by URT in contravention of the URT
Subordination, and (ii) the aggregate amount of all payments that are due or
past due under the Allowed Claim Notes and the terms of any Post-confirmation
Credit extension. The portion of the Returned URT Payment that Universal shall
be entitled to shall equal a fraction, the numerator of which shall be the
amount of payments in default to Universal and the denominator of which shall be
the aggregate amount of the payments in default to Universal, the Majors and
Alliance. The payment to Universal of the Returned URT Payments, as set forth
above, shall be the sole remedy of Universal against URT for any breach of the
URT Subordination. The Obligations of Peaches to URT shall be increased by the
full amount of all Returned URT Payments, and the indebtedness of Peaches to
Universal shall be decreased by the full amount of the Returned URT Payments
paid to Universal.
3. The URT Subordination shall be applicable solely to the URT Note,
repayments under the URT - Peaches Reimbursement Agreement and any and all
renewals, enlargements and modifications thereof, and not to any other
obligations of Peaches to URT.
4. Payments in contravention of the URT Subordination may be made by
Peaches to URT with the express written approval of Universal.
5. This Subordination Agreement shall terminate on the date that the
Allowed Claim Notes and any obligations arising under any Post-confirmation
Credit extension are paid in full (the "Debt Payment Date"); provided, however,
that if Universal is required to repay or disgorge any
-3-
<PAGE>
payment received on account of the Allowed Claim Notes or any obligation arising
under any Post-confirmation Credit extension, this Subordination Agreement shall
be automatically reinstated by the parties hereto. This Subordination Agreement
may be terminated prior to the Debt Payment Date only by written notice received
by URT from Universal.
6. With respect to the security interests granted by Peaches to the
Creditors in Universal's Inventory, the Creditors agree between and among
themselves that, irrespective of the time or order of attachment or perfection
of security interests or the time or order of filing of financing statements or
the giving or failure to give notice of the acquisition or expected acquisition
of purchase money or other security interests, the security interest of each
Creditor in Universal's Inventory ranks and will rank in priority according to
subsections (a), (b), and (c) of this paragraph 6. Proceeds from any foreclosure
sale, liquidation or other disposition of, or realization upon, any of the
collateral consisting of Universal's Inventory (a "Collateral Disposition")
shall be applied in the following manner:
a. First, to the payment of all reasonable costs and expenses,
including reasonable attorneys' fees, relating to such
Collateral Disposition incurred by such Creditor initiating
and conducting such Disposition (the "Collateral Disposition
Expenses").
b. Second, to Universal in an amount equal to the lesser of: (i)
the proceeds of Universal's collateral, less the Collateral
Disposition Expenses, and (ii) all amounts due and owing to
Universal under any Allowed Claim Note or any obligation
arising under any Post-confirmation Credit extension payable
to Universal.
c. Third, to URT until URT is paid in full with respect to all
obligations of Peaches to URT (whether or not otherwise due or
payable), including but not limited to all Obligations of
Peaches to URT under the URT Note and the Peaches-URT
Reimbursement Agreement.
7. URT shall be automatically subrogated to the rights and remedies of,
including but not limited to the security interests granted by Peaches to,
Universal with respect to the full amount of each and every payment made by URT
to Universal pursuant to the URT Guaranty, provided,
-4-
<PAGE>
however, that URT shall not be entitled to exercise any rights, remedies and/or
security interests to which it is thus subrogated until all indebtedness of
Peaches to Universal under the Allowed Claim Notes and any obligation arising
under any Post-confirmation Credit extension has been paid in full.
Notwithstanding anything contained in the preceding sentence, URT shall be
permitted to take all lawful action to protect its subrogation rights, remedies
and security interests.
8. Universal has not been granted a security interest in Peaches' Other
Inventory, in Peaches' personal property other than Universal's Inventory, or in
any of Peaches' real property. Peaches has granted to URT a valid, perfected
first-priority security interest in Peaches' Other Inventory and Peaches'
personal property other than Universal's Collateral, and has granted to URT a
valid, perfected mortgage on Peaches' real property. Nothing contained in this
Agreement, including but not limited to the URT Subordination, is intended to,
or shall be construed to, limit or restrict or subordinate any rights or
remedies that URT has or may hereafter have: (a) under its mortgage and/or
security agreements with Peaches respecting Peaches Other Inventory, Peaches
personal property other than Universal's Collateral, and Peaches' real property,
and (b) with respect to the security interest that URT has in inventory
collateral of Universal following the full payment of Universal; all of which
rights and remedies of URT are expressly and fully reserved by URT.
9. Except as otherwise specifically provided herein, priority shall be
determined in accordance with applicable law.
10. This Agreement is solely for the benefit of the Creditors and their
successors or assigns and no other person or persons (including without
limitation any bankruptcy trustee or other trustee, receiver or custodian for
Peaches or any of its property) shall have any right, benefit, priority or
interest under, or because of the existence of, this Agreement. Nothing
contained in this Agreement is intended to affect or limit, in any way
whatsoever, any security interest (or any other interest, lien or claim) that
any of the Creditors may otherwise have in any or all of the assets of Peaches,
insofar as the rights of Peaches and third parties are concerned. The Creditors
specifically reserve any and all of their respective rights, security interests,
other interests, liens and claims, and rights to assert any of the same, as
against Peaches and any third parties.
11. Each Creditor agrees that it will give written notice to Peaches upon
its declaration of a default or an event of default under any of the loan
documents relating to Peaches' Obligations
-5-
<PAGE>
to it or its acceleration of any of those Obligations and before giving Peaches
any instructions with respect to Universal's Inventory or taking any actions
with respect to any of the collateral consisting of Universal's Inventory ;
provided, however, that the failure to provide such notice shall not affect the
respective rights of the parties hereunder. Peaches shall then notify each other
Creditor.
12. Peaches agrees that it will give written notice to Universal upon the
making by Peaches of any payment to URT arising under the URT Note.
13. Each notice or other communication given hereunder or in connection
herewith shall be in writing and shall be sent by first class certified mail,
postage prepaid, return receipt requested.
Notices shall be addressed as follows:
Peaches Entertainment Corp. URT Industries, Inc.
1180 East Hallandale Beach Blvd. 1180 East Hallandale Beach Blvd.
Hallandale, Florida 33009 Hallandale, Florida 33009
Universal Music and Video Distribution, Inc.
60 Universal City Plaza
Universal City, CA 91608
or, in each case, at such other address as a Creditor wishing to change its
address for notices may specify from time to time by notice hereunder to the
other parties hereto.
14. The parties to this Subordination Agreement hereby irrevocably waive
trial by jury in any court in connection with this Subordination Agreement, and
each hereby certifies that no representative of any other party has expressly or
impliedly represented that such other party might not enforce this jury waiver.
15. Each of the several executed counterparts of this Agreement shall be an
original. All such counterparts shall together constitute one and the same
instrument. This Agreement may be amended only by a writing signed by all of the
Creditors. In the event of any conflict between this Agreement and the Plan or
any term sheet on which the Plan is based, this Agreement shall control.
16. This Subordination Agreement shall be governed by and construed in
accordance with the laws of the State of Florida in all respects, including,
without limitation, matters of construction, validity and performance, and the
undersigned consent to service of process on the undersigned at that address of
the undersigned appearing hereinabove by certified mail, return receipt
requested (if
-6-
<PAGE>
possible), and such service shall be deemed to be complete five (5) days after
the same shall have been so mailed. The undersigned further consent and submit
to the jurisdiction of the courts (state and federal) of the State of Florida in
connection with any lawsuit relating hereto. In addition, the undersigned hereby
irrevocably waive, to the fullest extent they may effectively do so, the defense
of an inconvenient forum to the maintenance of any such lawsuit in any
jurisdiction.
17. There shall be no limit under this Subordination Agreement upon the
amount of Post-confirmation Credit that may be extended by Universal to Peaches;
provided, however, that following the later (the "Material Event Date") of
notification of, or the occurrence of, a Material Event (as defined below): (a)
unless URT agrees otherwise in writing, this Subordination Agreement shall
terminate on the date that Peaches' outstanding obligations, existing as of the
Material Event Date, to Universal under the Allowed Claim Notes and extensions
of Post-confirmation Credit (including without limitation extensions of
Post-confirmation Credit evidenced by the acceptance by Universal of purchase
orders from Peaches on or before the Material Event Date) (the "PreMaterial
Event Obligations") are paid in full, and (b) all payments made by Peaches to
Universal after the Material Event Date shall be applied first, or shall be
deemed to be applied first, in payment of the Pre-Material Event Obligations,
and not in payment of, inter alia, credit extended after the Material Event
Date. URT shall provide written notice to Universal of the occurrence of any
Material Event. Material Event shall mean: (a) the ownership by URT of less than
51% of the voting stock of Peaches, (b) the inability of URT to elect a majority
of the directors of Peaches, (c) a trustee, receiver, or person with similar
powers or duties is appointed for Peaches, or (d) a voluntary or involuntary
bankruptcy, receivership, assignment for the benefit of creditors, or similar
proceeding is commenced by or against Peaches.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties have hereby executed and delivered this
Subordination Agreement on the day and year first set forth above.
Signed and delivered
in the presence of:
PEACHES ENTERTAINMENT
CORP.
- ----------------------------
Witness
Print Name__________________ By: __________________________
Print Name: ___________________
- ----------------------------
Witness As Its: _______________________
Print Name__________________
-8-
<PAGE>
URT INDUSTRIES, INC.
s/Beatriz Rodriguez
- ----------------------------------
Witness
Print Name Beatriz Rodriguez By: s/Brian Wolk
----------------------------------
Print Name: Brian Wolk
s/Olga E. Salgado
- ----------------------------------
Witness As Its: Executive Vice-President
Print Name Olga E. Salgado
UNIVERSAL MUSIC AND VIDEO
DISTRIBUTION, INC.
s/Carla Richardson
- ----------------------------------
Witness
Print Name Carla Richardson By: s/name illegible
----------------------------------
Print Name: name illegible
s/Mireya I. Santos
- ----------------------------------
Witness As Its: title illegible
Print Name Mireya I. Santos
-9-
Exhibit 10.72
<PAGE>
SURRENDER AND WAIVER AGREEMENT
AGREEMENT dated this 27th day of January, 1997 between URT INDUSTRIES, INC.
("URT"), a Florida corporation with offices at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009, and PEACHES ENTERTAINMENT CORPORATION
("PEC"), a Florida corporation with offices at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009.
WHEREAS, URT is the owner of 2,500 shares of the Series A preferred
stock of PEC, and
WHEREAS, the certificate of incorporation of PEC provides that the
holders of outstanding shares of Series A preferred stock of PEC have
the right to convert such shares into shares of common stock of PEC,
and
WHEREAS, the directors of both URT and PEC have determined that it is
in the respective best interests of URT and PEC for URT to surrender
and waive its right to convert such outstanding shares of Series A
preferred stock into shares of PEC common stock,
IT IS, THEREFORE, AGREED:
1. In consideration of $1.00 and other good and valuable consideration
received by it, URT agrees to and does, by the execution and delivery of this
instrument, surrender and waive its right to convert the 2,500 shares of the
Series A preferred stock of PEC which are owned by it into shares of common
stock of PEC as provided for in the certificate of incorporation of PEC.
<PAGE>
2. From and after the date hereof, PEC shall have no obligation to continue
to reserve any shares of its common stock for the possible conversion of the
2,500 shares of Series A preferred stock owned by URT and all shares of common
stock of PEC which had been reserved for such purpose shall be deemed to be part
of the authorized but unissued shares of stock of PEC.
3. URT agrees to execute and deliver such other and further documents at
any time as PEC may reasonably request in order to further evidence such waiver
and surrender.
4. This Agreement shall be governed by the law of the State of Florida.
IN WITNESS WHEREOF, each of the undersigned has executed this document on
the date and year set forth above.
URT INDUSTRIES, INC.
By: s/Brian Wolk
---------------------------------
PEACHES ENTERTAINMENT CORPORATION
By: s/Jason Wolk
---------------------------------
-2-
Exhibit 10.73
<PAGE>
WAIVER AGREEMENT
AGREEMENT dated this 1st day of March, 1997 between URT INDUSTRIES, INC.
("URT"), a Florida corporation with offices at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009, and PEACHES ENTERTAINMENT CORPORATION
("PEC"), a Florida corporation with offices at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009.
WHEREAS, URT is the owner of 2,500 shares of the Series A preferred
stock of PEC and 2,500 shares of the Series B preferred stock of PEC,
all such shares having a par value of $100 per share, and
WHEREAS, URT is entitled to receive a dividend on the shares of Series
A preferred stock of PEC which are owned by it at the rate of 11% per
annum of the par value thereof and a dividend on the shares of Series
B preferred stock of PEC which are owned by it at the rate of 13% per
annum of the par value thereof, and
WHEREAS, the aggregate dividends payable on the shares of both series
of preferred stock of PEC which are owned by URT, for the period from
January 1, 1996 through March 31, 1997, equal $75,000, and
WHEREAS, PEC has recently emerged from Chapter 11 proceedings which
were pending in the U. S. Bankruptcy Court for the Southern District
of Florida, pursuant to a plan of reorganization dated October 23,
1996 which was confirmed by an order of confirmation of such Court
dated January 17, 1997, and
WHEREAS, URT, in addition to other benefits heretofore conferred on
PEC, wishes to assist it during its post-confirmation period by
waiving its right to receive such dividends,
<PAGE>
IT IS, THEREFORE, AGREED:
1. In consideration of $1.00 and other good and valuable consideration
received by it, URT agrees to and does hereby waive its right to receive all
dividends payable on the shares of Series A and Series B preferred stock of PEC,
which are owned by URT, for the period from January 1, 1996 through March 31,
1997, such waived dividends aggregating $75,000.
2. Such waiver shall not apply to any dividends payable after March 31,
1997 by PEC on shares of preferred stock of PEC.
3. URT agrees to execute and deliver such other and further documents at
any time as PEC may reasonably request in order to further evidence such waiver.
4. This Agreement shall be governed by the law of the State of Florida.
IN WITNESS WHEREOF, each of the undersigned has executed this
-2-
<PAGE>
document on the date and year first set forth above.
URT INDUSTRIES, INC.
By: s/Brian Wolk
----------------------------
PEACHES ENTERTAINMENT CORPORATION
By: s/Jason Wolk
----------------------------
-3-
Exhibit 10.74
<PAGE>
STOCK PURCHASE AGREEMENT
AGREEMENT dated this 24th day of March, 1997 between URT INDUSTRIES, INC.
("URT"), a Florida corporation with offices at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009, and PEACHES ENTERTAINMENT CORPORATION
("PEC"), a Florida corporation with offices at 1180 East Hallandale Beach
Boulevard, Hallandale, Florida 33009.
WHEREAS, in January of 1996, PEC, all of whose outstanding shares of
Series A and Series B preferred stock and more than 85% of whose
outstanding shares of common stock are owned by URT, filed a petition
for reorganization under Chapter 11 of the Bankruptcy Code in the
U.S. District Court for the Southern District of Florida; and
WHEREAS, a plan of reorganization formulated by PEC, as modified (the
"Plan") was approved by its creditors and was thereafter confirmed on
January 17, 1997 by the Court; and
WHEREAS, in order to enable the Plan to be approved and confirmed, it
was necessary for URT to lend $700,000 to PEC upon the effective date
of the Plan, to pay $350,000 to PEC on such effective date as
additional capital to enable it to make a portion of the cash
distributions which were required to be made under the Plan, to
guarantee certain Allowed Claim Notes issued by PEC under the Plan to
certain suppliers and to execute and deliver a subordination agreement
among URT, PEC and such suppliers under which URT would subordinate
all of its rights as a creditor of PEC to the rights of such
suppliers; and
WHEREAS, in order to assist PEC during the post-confirmation period,
URT also agreed to waive its right to receive dividends from PEC at
the rate of 11% per annum on the 2,500 shares of the Series A
preferred stock of PEC owned by URT and at the rate of 13% per annum
on the 2,500 shares of the Series B preferred stock of PEC owned by
URT, for the period from January 1, 1996 through March 31, 1997,
amounting to a total of $75,000; and
<PAGE>
WHEREAS, URT agreed to provide all of the foregoing cash and benefits
(the "Consideration") to PEC in exchange for the issuance by PEC to
URT of additional shares of common stock of PEC having an aggregate
value equal to the value of the Consideration; and
WHEREAS, the directors of each of the corporations have determined
that the value of the Consideration equals no less than $500,000 and
that in exchange therefor, URT should receive from PEC such number of
additional authorized shares of the common stock of PEC having an
aggregate value of no less than such amount; and
WHEREAS, it has been determined, based on various factors by the Board
of Directors of each of such corporations, that 20,000,000 shares of
the authorized common stock of PEC should be issued to URT in exchange
for the Consideration; and
WHEREAS, the parties wish to set forth in this document certain
agreements between them relating thereto,
IT IS, THEREFORE, AGREED:
1. Sale of Shares/Purchase Price.
(a) URT agrees to purchase from PEC and PEC agrees to sell to URT for the
purchase price set forth herein, 20,000,000 shares of the common stock of PEC,
$.01 par value (the "Purchased Shares"). Such sale shall be consummated by the
delivery to URT as promptly as practicable after the date hereof of one or more
stock certificates representing the Purchased Shares.
(b) The purchase price for the Purchased Shares is two and one half cents
($.025) per share, or an aggregate purchase price of $500,000.
2. Consideration.
PEC acknowledges that the value of the Consideration is not less than Five
Hundred Thousand Dollars ($500,000) and that it has received all of the
-2-
<PAGE>
Consideration.
3. PEC's Representations and Warranties.
PEC represents and warrants that the execution of and performance of its
obligations under this Agreement have been duly authorized by all necessary
corporate action and that upon their issuance, the Purchased Shares will be
fully paid and non-assessable.
4. URT's Representations and Warranties.
URT represents and warrants that the Purchased Shares have not been
registered or qualified for public offering or sale under the Securities Act of
1933, as amended (the "Act") or any state securities laws and that it is
acquiring such Shares for investment only and solely for its own account and not
with a view to the offer or sale in connection with any distribution thereof and
that it will not sell or transfer or otherwise dispose of any of the Purchased
Shares except in compliance with the Act and the rules and regulations
promulgated thereunder or pursuant to an exemption therefrom and except in
compliance with applicable state securities laws.
5. Legend.
Both parties agree that the stock certificate or certificates representing
the Purchased Shares shall bear an appropriate legend in such form as the
Continental Stock Transfer & Trust Company shall deem appropriate in order to
carry out the provisions of paragraph 4.
6. Other Documents.
Each party agrees to execute and deliver such other and further instruments
and take such other and further action as either party may reasonably request in
order to effectuate the provisions of this Agreement.
7. Governing Law.
This Agreement contains the entire agreement of the parties with respect to
its subject matter and shall be governed by the law of the State of Florida.
-3-
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this agreement as
of the date and year set forth above.
URT INDUSTRIES, INC.
By: s/Brian Wolk
-------------------------
PEACHES ENTERTAINMENT CORPORATION
By: s/Jason Wolk
-------------------------
-4-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
registrant's 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> 1,917,566
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 4,954,260
<CURRENT-ASSETS> 7,414,557
<PP&E> 4,610,997
<DEPRECIATION> 2,767,289
<TOTAL-ASSETS> 9,442,616
<CURRENT-LIABILITIES> 1,330,866
<BONDS> 0
201,079
0
<COMMON> 500,000
<OTHER-SE> 728,147
<TOTAL-LIABILITY-AND-EQUITY> 9,442,616
<SALES> 23,626,489
<TOTAL-REVENUES> 23,626,489
<CGS> 15,316,441
<TOTAL-COSTS> 15,316,441
<OTHER-EXPENSES> 10,266,064
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 111,451
<INCOME-PRETAX> (2,416,051)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,416,051)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,416,051)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
