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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
/X/ AMENDMENT NO. 1 TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-18823
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UNIVERSAL INTERNATIONAL, INC.
(Exact Name of Registrant as Specified in Its Charter)
MINNESOTA 41-0776502
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5000 WINNETKA AVENUE NORTH, 55428
NEW HOPE, MINNESOTA (Zip Code)
(Address of Principal Executive Office)
(612) 533-1169
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS
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COMMON STOCK, $0.05 PAR VALUE
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the 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 .
--- ---
As of April 24, 1998, 9,393,328 shares of common stock of the Registrant
were outstanding of which 3,897,236 shares were held by non-affiliates, and the
aggregate market value of the common stock of the Registrant as of that date
(based upon the $2.50 last reported sale price of the common stock at that date
by the NASDAQ National Market System), held by non-affiliates was approximately
$9,743,000.
DOCUMENTS INCORPORATED BY REFERENCE
1. The Registrant's Report on Form 8-K/A dated January 8, 1998 is incorporated
by reference in this Form 10-K/A.
2. The Registrant's Report on Form 8-K dated February 3, 1998 is
incorporated by reference in this Form 10-K/A.
3. The Registrant's Report on Form 10-K dated March 30, 1998 for the fiscal
year ended December 31, 1997 is incorporated by reference in this
Form 10-K/A.
4. The Registrant's Report on Form 8-K dated April 24, 1998 is incorporated by
reference in this Form 10-K/A.
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Universal International, Inc. (the "Company") hereby amends its Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 previously filed with
the Securities and Exchange Commission on March 31, 1998, to include the
information required by Part III of Form 10-K contained in this Amendment No. 1.
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2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
INFORMATION WITH RESPECT TO DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the current
directors and executive officers of the Company as of April 24, 1998:
AGE AT YEAR FIRST
APRIL 24, ELECTED OR APPOINTED
NAME 1998 DIRECTOR/OFFICER PRINCIPAL OCCUPATION
---- ---- ---------------- --------------------
Richard L. Ennen 45 1997 Chief Executive
Officer; President;
Director
Dennis A. Hill 34 1998 Chief Financial Officer
Robert R. Langer 42 1998 Chief Operating Officer
of Only Deals, Inc.; Director
Jeff Gold 30 1997 Director
Howard Gold 38 1997 Director
Andy Farina 51 1997 Director
RICHARD L. ENNEN Richard L. Ennen became Chief Executive Officer of the
Company in January 1998 and the President of the Company in August 1997; he
has served as a director of the Company since August 1997. Mr. Ennen joined
the Company in September 1996, as Executive Vice President and General
Merchandising Manager and became President of Only Deals, Inc. ("Only
Deals"), a wholly owned subsidiary of the Company, in October 1996. From
1992 to September 1996, Mr. Ennen was Director of Retail Merchandising and
Retail Operations for Holiday Companies, a large grocery, wholesale and
gasoline company based in Bloomington, Minnesota. Mr. Ennen is also a
director of Odd's-N-End's, Inc. ("Odd's-N-End's") which is 40.5% owned by the
Company and its President as of January 1998.
DENNIS A. HILL
Dennis A. Hill became Chief Financial Officer of the Company in January
1998. Mr. Hill joined the Company in January 1996 as Corporate Controller.
Mr. Hill also became the Chief Financial Officer of both Odd's-N-End's and
Only Deals in January 1998. From January 1994 to January 1996, Mr. Hill was
Manager of Financial Reporting for Damark International, a mail order
retailer. From September 1986 to January 1994, Mr. Hill was employed by
Touche Ross/Deloitte & Touche, an international accounting firm, where he
served as Audit Manager from September 1991.
ROBERT R. LANGER
Robert R. Langer became a director of the Company in January 1998. In
August 1996, Mr. Langer became the Chief Operating Officer of Odd's-N-End's and
has been one of its directors since March 1995. Mr. Langer became Chief
Operating Officer of Only Deals in September 1994; he joined Only Deals in
February 1992 as Vice President-Retail Operations. From June 1989 to January
1992, Mr. Langer was Director of the Retail Division for Lieberman Enterprises,
a major music and video distributor. Mr. Langer is also a director of
Odd's-N-End's.
JEFF GOLD
Jeff Gold became a director of the Company in November 1997 in conjunction
with the acquisition by 99CENTS Only Stores, a California corporation
("99CENTS Only Stores"), of 4.5 million shares of the Company's Common Stock.
Pursuant to a
3
Shareholders Agreement made as of November 17, 1997, by and among the Company,
99CENTS Only Stores and Mark Ravich (the "Shareholders Agreement"), so long as
99CENTS Only Stores owns at least 20% of the Company's shares, the Company shall
nominate and recommend the election of designees of 99CENTS Only Stores in such
number that at all times 99CENTS Only Stores' designees constitute at least one
member less than a majority of the members of the Company's Board of Directors.
Mr. Gold is currently, and has been since 1991, a director of 99CENTS Only
Stores. He has served in various managerial capacities for 99CENTS Only Stores
since 1989 and is currently its Senior Vice President of Real Estate and
Information Systems. Mr. Gold received his B.A. degree from the University of
California at Berkeley in 1989. Jeff Gold is the brother of Howard Gold.
HOWARD GOLD
Howard Gold became a director of the Company in November 1997 in
conjunction with 99CENTS Only Stores' acquisition of 4.5 million shares of the
Company's Common Stock pursuant to the Shareholders Agreement. Mr. Gold is
currently, and has been since 1991, a director of 99CENTS Only Stores. He has
served in various managerial capacities for 99CENTS Only Stores since 1982 and
is currently its Senior Vice President of Distribution. Mr. Gold received his
B.S. degree from the University of California at Los Angeles in 1984. Howard
Gold is the brother of Jeff Gold.
ANDY FARINA
Andy Farina became a director of the Company in November 1997 in
conjunction with 99CENTS Only Stores' acquisition of 4.5 million shares of
the Company's Common Stock pursuant to the Shareholders Agreement. Mr.
Farina is currently, and has been since September 1996, the Chief Financial
Officer of 99CENTS Only Stores. From April 1993 through August 1996, Mr.
Farina was Vice President of Finance of Crown BBK, Inc., a food brokerage
business. Mr. Farina was employed by a division of Sara Lee from 1976
through 1988, ultimately in the capacity of President. Mr. Farina began his
career with Arthur Andersen LLP.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers, directors, and
persons who own more than ten percent of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "SEC"). Executive officers, directors
and greater-than-ten percent stockholders are required by SEC regulations to
furnish the Company with all Section 16(a) forms they file. Based solely on its
review of the copies of the forms received by it and written representations
from certain reporting persons that they have complied with the relevant filing
requirements, the Company believes that, during the fiscal year ended December
31, 1997, Messrs. Richard Ennen, Norman Ravich, Mark Ravich and Robert Langer
did not file Form 4s with respect to options they received during the Company's
last fiscal year and will file such Form 4s late. The Company also believes
that Messrs. Jeff Gold, Howard Gold and Andy Farina did not file Form 3s with
respect to each of them becoming a director of the Company and will file such
Form 3s late.
4
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, as to the Chief Executive Officer, the
other three most highly compensated officers whose compensation exceeded
$100,000 during the last fiscal year and an additional individual for whom
disclosure is made pursuant to Item 402(a)(3)(iii) of Regulation S-K (the "Named
Executive Officers"), information concerning all compensation paid for services
to the Company in all capacities for each of the three fiscal years ended
December 31 indicated below.
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------- AWARDS
SECURITIES ($)
($) ($) UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION(1)
--------------------------- ---- ------ ----- ----------- ---------------
Richard L. Ennen. . . . . . . 1997 149,132 25,000 175,000 6,000
CEO and President(2) 1996 44,615 20,783 75,000 2,000
1995 0 0 0 0
Norman J. Ravich (3). . . . . 1997 132,693 0 75,000 0
1996 150,000 0 0 4,140
1995 149,808 50,000 75,000 8,775
Mark H. Ravich (4). . . . . . 1997 157,212 0 50,000 9,000
Formerly CEO 1996 157,212 0 0 9,000
1995 149,808 62,000 150,000 (5) 9,000
Robert R. Langer. . . . . . . 1997 134,940 0 10,000 6,000
Chief Operating Officer 1996 115,866 0 8,000 6,000
1995 110,000 24,800 0 6,000
Stevan Buxbaum (6). . . . . . 1997 140,000 0 0 6,000
President of Universal 1996 105,000 18,958 100,000 14,839
Asset-Based Services, Inc. 1995 0 0 0 0
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(1) Consists of car allowances other than $10,339 to Stevan Buxbaum in 1996 for
reimbursement of moving expenses.
(2) Mr. Ennen became the Company's Chief Executive Officer in January 1998.
(3) Norman Ravich, the Company's founder, served as the Chairman of the Board
until November 1997 and was engaged as a buyer and seller of the Company's
merchandise.
(4) Mark Ravich served as the Company's Chief Executive Officer until January
1998.
(5) Issued upon cancellation of 100,000 options previously issued to Mr.
Ravich.
(6) Stevan Buxbaum served as the President of Universal Asset-Based Services,
Inc. until January 1998 when it was sold by the Company.
5
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding the grant of
stock options made during the fiscal year ended December 31, 1997 to the Named
Executive Officers.
REALIZABLE VALUE
POTENTIAL AT ASSUMED
RATE OF STOCK PRICE
NUMBER OF PERCENT OF APPRECIATION FOR OPTION
SECURITIES TOTAL OPTIONS TERM (4)
UNDERLYING GRANTED TO ($) --------
OPTIONS EMPLOYEES IN EXERCISE OR EXPIRATION ($) ($)
NAME GRANTED FISCAL YEAR (3) BASE PRICE DATE 5% 10%
---- ------- --------------- ---------- ---------- ---- -----
Richard L. Ennen . . . . 75,000 (1) 19.33% 2.50 03/02/02 51,803 114,471
100,000 (1) 25.77% 1.00 08/06/02 27,628 61,051
Norman J. Ravich . . . . 75,000 (2) 19.33% 1.13 10/09/02 23,415 51,741
Mark H. Ravich . . . . . 50,000 (2) 12.89% 1.13 10/09/02 15,610 34,494
Robert R. Langer . . . . 10,000 (1) 2.58% 1.00 10/09/02 2,763 6,105
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(1) Options indicated vest and become exercisable over a five year period from
the date of grant based upon optionee continuing to be employed by the
Company.
(2) Options indicated vested immediately upon issuance.
(3) The Company granted options to purchase a total of 388,000 shares during
the fiscal year ended December 31, 1997.
(4) The potential realizable value is based on the assumption that the Common
Stock appreciates at the annual rate shown (compounded annually) from the
date of grant until the expiration of the option term. These amounts are
calculated pursuant to applicable requirements of the Securities and
Exchange Commission and do not represent a forecast of the future
appreciation of the Common Stock.
STOCK OPTIONS HELD AT FISCAL YEAR END
The following table sets forth, for each of the Named Executive Officers,
the number of shares of Common Stock underlying stock options held at fiscal
year end and the value of options held at fiscal year end based upon the last
reported sales price of the Common Stock on the Nasdaq National Market on
December 31, 1997 ($2.00 per share). No Named Executive Officers exercised
options during 1997.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
----------------- --------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
Norman Ravich . . . . 150,000 0 $ 65,250 0
Mark Ravich . . . . . 200,000 0 43,500 0
Richard L Ennen . . . 15,000 235,000 0 $100,000
Robert R. Langer. . . 17,000 26,000 0 10,000
Stevan Buxbaum. . . . 0 100,000 0 0
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(1) Based on the closing sale price of $2.00 for the Common Stock at December
31, 1997, less the option exercise price.
6
COMPENSATION OF DIRECTORS
The Company no longer compensates any directors for attending regular or
special meetings of the Board of Directors or any committee meetings. Prior
to November 1997, the Company compensated non-employee directors $500 for
attending regular or special meetings of the Board of Directors and $250 for
committee meetings. The Company currently reimburses directors for costs and
expenses in connection with such directors' participation at Board of
Directors meetings. During 1997, the non-employee directors were compensated
an aggregate of $3,750 for attendance at regular, special and committee
meetings. In 1997, non-employee directors did not receive any options to
purchase shares of the Company's Common Stock for the year of service as a
director of the Company. Stock options for 8,750 shares to non-employee
directors vested in 1997.
EMPLOYMENT CONTRACTS
Norman J. Ravich entered into a three year employment agreement in October
1992 which was amended in January 1995 and again on October 9, 1997. Under the
amended employment agreement, Mr. Ravich agreed to serve as the Company's
Chairman for an annual base salary of $60,000 for services rendered from October
4, 1997 through October 4, 1998 and as determined by the Company's Board of
Directors for any time thereafter, but not less than the revised 1997 level.
This agreement further provides that Mr. Ravich shall be entitled to a bonus to
be determined by the Board of Directors at the end of each year. Additionally,
the Company granted Mr. Ravich a five year option to purchase 75,000 shares of
the Company's Common Stock at an exercise price of $1.13 per share, which option
vested upon issuance. The options to purchase 75,000 shares previously granted
to Mr. Ravich were amended to extend their expiration date until March 31, 2001.
Finally, the amended agreement provided for nine months of annual base pay plus
health benefits as severance in the event any investor acquires over 40% of the
Common Stock of the Company and Mr. Ravich was either terminated or left
voluntarily. In April 1998, Mr. Ravich left the Company voluntarily and is
currently being paid pursuant to the severance provision in his employment
contract.
Mark H. Ravich entered into a three year employment agreement in October
1992 which was amended in January 1995 and again on October 9, 1997. Under the
amended employment agreement, Mr. Ravich agreed to serve as the Company's Chief
Executive Officer for an annual base salary of $157,500 for services rendered
through December 31, 1997 and as determined by the Company's Board of Directors
for any time thereafter, but not less than the revised 1997 level. This
agreement further provides that Mr. Ravich shall be entitled to a bonus to be
determined by the Board of Directors at the end of each year. Additionally, the
Company granted Mr. Ravich a five year option to purchase 50,000 shares of the
Company's Common Stock at an exercise price of $1.13 per share, which option
vested upon issuance. The options to purchase 150,000 shares previously granted
to Mr. Ravich were amended to extend their expiration date until March 31, 2001.
Finally, the amended agreement provided for nine months of annual base pay plus
health benefits as severance in the event any investor acquires over 40% of the
Common Stock of the Company and Mr. Ravich was either terminated or left
voluntarily. In February 1998, Mr. Ravich left the Company voluntarily and is
currently being paid pursuant to the severance provision in his employment
contract.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
At the beginning of 1997, the Company's Compensation Committee was
comprised of Mark L. Bartholomay, Ernest M. Simon and Stanford A. Weiner. Mr.
Bartholomay resigned as a director of the Company in February 1997, Mr. Simon
resigned as a director in November 1997 and Mr. Weiner resigned as a director in
March 1998. Mr. Bartholomay was the Company's Chief Financial Officer from
February 1992 through April 1993. Since November 1997, the members of the
Compensation Committee have been Andy Farina, Jeff Gold and Howard Gold. Mr.
Farina is the Chief Financial Officer of 99CENTS Only Stores, a position he has
held since September 1996. Jeff Gold and Howard Gold are brothers, each of whom
is a director and officer of 99CENTS Only Stores.
7
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
OVERVIEW AND PHILOSOPHY
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company as well as the compensation plans
and specific compensation levels for executive officers.
EXECUTIVE OFFICERS' COMPENSATION PROGRAM
There are three basic components to the Company's executive compensation
program: base salary, annual incentive bonus, and long-term equity based
incentive compensation in the form of stock options. Various benefits including
medical and retirement savings plans generally available to employees of the
Company are also made available. While base salaries are fixed pursuant to the
employment agreements, the other components of the executive officers'
compensation are established in light of individual and Company performance,
comparable compensation programs, equity among employees, and cost
effectiveness.
BASE SALARY
Base salaries are designed to be competitive, although conservative as
compared to salary levels for equivalent positions at comparable companies. The
1997 base salary was a fixed amount in the Chief Executive Officer's employment
agreement.
BONUS PLAN
The Company had an established bonus plan which provided for the payment of
cash bonuses payable to executive officers and other management personnel. Such
bonuses were determined either by a formula based on pre-tax profits of the
Company or on a discretionary basis and varied in amount from year to year. The
President's bonus for 1997 was discretionary and determined by the Compensation
Committee in January 1998. Presently, the Company's bonus plan is entirely
discretionary as determined by the Compensation Committee.
STOCK OPTIONS
One of the principal factors considered in granting stock options to the
executive officers of the Company is the ability of the executive officers to
influence the Company's long-term growth and profitability. All options are
granted at or above the market price. Since the value of an option bears a
direct relationship to the Company's stock price, the Committee believes that
options motivate executive officers to manage the Company in a manner which will
also benefit stockholders. The Committee therefore views stock option grants as
an important component of its long-term, performance-based compensation
philosophy. In 1997, stock options exercisable for 175,000 shares of Common
Stock were granted to Richard Ennen, the current Chief Executive Officer and
President of the Company. Seventy-five thousand of these options expire on
March 2, 2002 and one-hundred thousand of these options expire on August 6,
2002. All of Mr. Ennen's options vest over a five year period. In October
1997, Norman Ravich, the Company's founder and Chairman of the Board until
November 1997 received options for 75,000 shares of Common Stock. These options
expire on October 9, 2002 and vested immediately upon issuance. In October
1997, Mark Ravich, the Company's Chief Executive Officer until January 1998,
received options for 50,000 shares of Common Stock. These options expire on
October 9, 2002 and vested immediately upon issuance. In August 1997, Robert
Langer, the Chief Operating Officer of Only Deals since September 1994, received
options for 10,000 shares of the Company's Common Stock. These options expire
on October 9, 2002 and vest over five years.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mark Ravich served as a director of the Company from 1979 to 1997 and as
Chief Executive Officer from September 1990 to January 1998. His base salary
was $157,500 in 1996 and was set at $157,500 for 1997. Mr. Ennen, the
Company's current Chief Executive Officer, will receive a base salary of
$157,500 for 1998 and is eligible for a discretionary bonus. The Compensation
Committee determined the level of compensation paid to the Company's former
and current Chief Executive Officer to be appropriate.
Members of the Compensation Committee
Andy Farina
Jeff Gold
Howard Gold
8
PERFORMANCE GRAPH
The following graph sets forth the percentage change in cumulative total
stockholder return of the Company's Common Stock during the five-year period
from December 31, 1992 to December 31, 1997, compared with the cumulative
returns of the Nasdaq Stock Market (US Companies) Index and an index of peer
companies selected by the Company. The comparison assumes $100 was invested
on January 1, 1993 in the Common Stock and in each of the foregoing indices.
The stock price performance on the following graph is not necessarily
indicative of future stock price performance.
COMPARISON OF CUMULATIVE RETURN AMONG
UNIVERSAL INTERNATIONAL, THE NASDAQ STOCK MARKET INDEX AND THE COMPANY'S
PEER GROUP
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
UNIV NASDAQ PEER GROUP
------ ------ ----------
12/31/92 100 100 100
12/31/93 70.18 114.75 90.33
12/31/94 59.65 111.08 83.62
12/31/95 133.33 155.42 76.91
12/31/96 56.14 190.71 132.61
12/31/97 56.14 240 180.23
The Company's peer group is comprised of other close-out wholesalers and
retailers. The members of the peer group are as follows: Consolidated Stores
Corporation, Tues Morning Corp., Dolgencorp and Family Dollar, Inc.
9
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth as of April 24, 1998 certain information
relating to the ownership of the Common Stock by (i) each person known by the
Company to be the beneficial owner of more than five percent of the outstanding
shares of the Company's Common Stock, (ii) each of the Company's directors,
(iii) each of the Named Executive Officers, and (iv) all of the Company's
executive officers and directors as a group. Except as may be indicated in the
footnotes to the table and subject to applicable community property laws, each
such person has the sole voting and investment power with respect to the shares
owned. The address of each person listed is in care of the Company unless
otherwise set forth below such person's name.
NUMBER OF SHARES OF
COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED %
---------------- ------------------ ---
99 Cents Only Stores 4,500,000 47.91
4000 Union Pacific Avenue
City of Commerce, CA 90023
Mark H. Ravich (1). . . . . . . . . . . . . 1,085,472 11.31
Norman J. Ravich (2). . . . . . . . . . . . 258,620 2.71
Richard L. Ennen (3). . . . . . . . . . . . 30,000 0.32
Robert R. Langer (4). . . . . . . . . . . . 20,500 0.22
Dennis A. Hill (5). . . . . . . . . . . . . 3,700 *
Jeff Gold . . . . . . . . . . . . . . . . . 0 0
Howard Gold . . . . . . . . . . . . . . . . 0 0
Andy Farina . . . . . . . . . . . . . . . . 0 0
Directors and Executive Officers as a group
(6 persons) (6) . . . . . . . . . . . . . . 54,200 0.57
- ---------------
* Less than 0.1%
(1) Includes: (a) 372,472 shares of Common Stock held by Mr. Ravich; (b)
265,000 shares held by the Norman and Sally Ravich Family Trust of which
Mr. Ravich is co-trustee; (c) 220,000 shares held by the Norman J. Ravich
Irrevocable Agreement of which Mark Ravich is sole trustee; (d) 28,000
shares held in trust for Mr. Ravich's children of which he is co-trustee;
and (e) options to purchase 200,000 shares of Common Stock.
(2) Includes options to purchase 150,000 shares of Common Stock.
(3) Includes options to purchase 30,000 shares of Common Stock.
(4) Includes options to purchase 19,500 shares of Common Stock.
(5) Includes options to purchase 2,000 shares of Common Stock.
(6) Includes options to purchase 51,500 shares of Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1997, 99CENTS Only Stores acquired approximately 48% of the
outstanding Common Stock of the Company for $4 million in cash and
merchandise. The Company owns approximately 41% of the outstanding common
stock of Odd's-N-End's. In February 1998, 99CENTS Only Stores announced its
intention to acquire the balance of the Company's shares which it does not
own and the balance of the Odd's-N-End's' shares not owned by the Company.
Subject to the terms and conditions set forth in the registration statement
on Form S-4 filed by 99CENTS Only Stores with the SEC, 99CENTS Only Stores is
offering to exchange one share of its common stock for every sixteen shares
of the Company's Common Stock (the "Exchange Offer").
10
AGREEMENTS RELATING TO EXCHANGE OFFER
THE COOPERATION AGREEMENT
In connection with the Exchange Offer, 99CENTS Only Stores and the Company
entered into a Cooperation Agreement which provides that the Company will
support the Exchange Offer and will provide 99CENTS Only Stores access to the
books and records of the Company, as well as to the Company's officers and
directors for purposes of preparing filings and completing due diligence. In
addition, the Company agreed to file a Schedule 14D-9 with respect to the
Exchange Offer and agreed that it would not oppose the Exchange Offer in the
Schedule 14D-9. The Company also agreed to promptly furnish to 99CENTS Only
Stores mailing labels, security position listings and any other available
listings or computer files containing the names and addresses of the record
holders of Company Common Stock for purposes of mailing Exchange Offer
documents.
Promptly upon the purchase by 99CENTS Only Stores of the Company shares
pursuant to the Exchange Offer (provided that not less than 80% of the
outstanding shares of the Company Common Stock are validly tendered and not
withdrawn (the "Minimum Condition")) and from time to time thereafter, 99CENTS
Only Stores shall be entitled, subject to compliance with Section 14(f) of the
Exchange Act, to designate up to such number of directors, rounded down to the
next whole number (except where such rounding down would cause 99CENTS Only
Stores to not be entitled to designate at least a majority of directors, in
which case, such number will be rounded up) on the Board of Directors of the
Company as will give 99CENTS Only Stores representation on the Board equal to
the product of the number of directors on the Board (giving effect to the
directors elected pursuant to this sentence) multiplied by the percentage that
the aggregate number of shares of Company Common Stock then beneficially owned
by 99CENTS Only Stores and its affiliates following such purchase bears to the
total number of shares of Company Common Stock then outstanding. In the
Cooperation Agreement, the Company has agreed to promptly take all actions
necessary to cause 99CENTS Only Stores' designees to be elected or appointed as
directors of the Company, including increasing the size of the Board or securing
the resignations of incumbent directors or both.
The Company also agreed to assist 99CENTS Only Stores in obtaining the
approval of its shareholders under the Minnesota Control Share Acquisition Act
to provide voting rights to Company Common Stock acquired by 99CENTS Only Stores
in the Exchange Offer. The Company further agreed to take all action necessary
to either (a) amend the Rights Agreement so that the Exchange Offer would not
cause (i) the occurrence of the "Distribution Date" (as such term is defined in
the Rights Agreement) or (ii) the common stock purchase rights issued pursuant
to the Rights Agreement becoming evidenced by, and transferable pursuant to,
certificates separate from the certificates representing Company Common Stock or
(b) redeem the rights before 99CENTS Only Stores becomes an "Acquiring Person"
pursuant to the terms of the Rights Agreement.
STOCKHOLDER SUPPORT AGREEMENTS
On February 24, 1998, 99CENTS Only Stores and each of Mark Ravich, Norman
Ravich and certain trusts for which Mark Ravich is the trustee entered into
separate Stockholder Support Agreements in which each stockholder agreed to vote
its shares of Company Common Stock (i) in favor of the Exchange Offer and (ii)
in favor of any other matter deemed necessary by 99CENTS Only Stores to
effectuate the Exchange Offer or solicited in connection with the Exchange
Offer, and considered and voted upon by the shareholders of the Company. In
addition, each shareholder executing a Stockholder Support Agreement agreed to
tender and sell all of its Company Common Stock to 99CENTS Only Stores pursuant
to the terms of the Exchange Offer.
CONSULTING AGREEMENTS AND OPTION AGREEMENTS
Furthermore, on February 24, 1998, Mark Ravich entered into a Consulting
Agreement with 99CENTS Only Stores whereby Mark Ravich agreed to provide
advisory services to 99CENTS Only Stores in connection with the Exchange Offer
and thereafter to provide sales, management and operations consulting services
in connection with the operation of the business of the Company following
completion of the Exchange Offer. The term of the consulting agreement ends
February 24, 1999. As compensation for the consulting services provided,
99CENTS Only Stores granted to Mark Ravich an option to acquire 9,375 shares of
99CENTS Only Stores Common Stock at $40.00 per share, and an option to acquire
15,000 shares of 99CENTS Only Stores Common Stock at $33.5625 per share pursuant
to separate Option Agreements each dated as of February 26, 1998. Each of the
options terminates
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on the earlier to occur of a termination of the Exchange Offer and February 19,
2005. Each of the options becomes fully exercisable on the first business day
following consummation of the Exchange Offer.
On February 26, 1998, Norman Ravich also entered into a Consulting
Agreement with 99CENTS Only Stores whereby Norman Ravich agreed to provide
advisory services to 99CENTS Only Stores in connection with the Exchange Offer
and thereafter to provide sales, management and operation consulting services in
connection with the operation of the business of the Company following
completion of the Exchange Offer. The Consulting Agreement ends on May 27,
1998. As compensation for the consulting services provided, 99CENTS Only Stores
granted to Norman Ravich an option to purchase 4,688 shares of 99CENTS Only
Stores Common Stock at $40.00 per share pursuant to a separate option agreement
dated February 26, 1998. The option terminates on the earlier to occur of a
termination of the Exchange Offer and February 19, 2005. The option becomes
fully exercisable on the first business day following consummation of the
Exchange Offer.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. The Consolidated Financial Statements, notes thereto, and accountants'
reports thereon are included in the Company's Form 10-K which has been
incorporated by reference.
2. The Consolidated Financial Statements Schedule are included in the
Company's Form 10-K which has been incorporated by reference.
Other financial statement schedules are omitted because they are not
required or are not applicable.
3. Exhibits
See Exhibit Index immediately following signature page.
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K on December 23, 1997, as amended
January 8, 1998, relating to a change in the Company's independent
auditors. The Company filed a Report on Form 8-K during the quarter
ended December 31, 1997 relating to the issuance of 4.5 million shares
of common stock to 99CENTS Only Stores. The Company filed a Report on
Form 8-K on February 10, 1998 relating to the sale of its 95% owned
interest in Universal Asset-Based Services, Inc. The Company also filed
a Report on Form 8-K on April 24, 1998 relating to the amendment of the
Rights Agreement filed as Exhibit 4.7.
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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.
UNIVERSAL INTERNATIONAL, INC.
Date: April 29, 1998 By: /s/ Richard L. Ennen
----------------------
Richard L. Ennen
CHIEF EXECUTIVE OFFICER AND PRESIDENT
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.
NAME TITLE
---- -----
/s/ Richard L. Ennen Chief Executive Officer, President
------------------------- and Director (principal executive officer) April 29, 1998
Richard L. Ennen
/s/ Dennis A. Hill Chief Financial Officer
------------------------- (principal financial and accounting officer) April 29, 1998
Dennis A. Hill
/s/ Robert R. Langer Chief Operating Officer of Only Deals
-------------------------- and Director April 29, 1998
Robert R. Langer
/s/ Jeff Gold
--------------------------
Jeff Gold Director April 29, 1998
/s/ Howard Gold
--------------------------
Howard Gold Director April 29, 1998
/s/ Andy Farina
-------------------------
Andy Farina Director April 29, 1998
14