<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
- -
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- - SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
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
UNIVERSAL INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-0776502
--------- ----------
(State or jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5000 Winnetka Avenue North, New Hope, Minnesota 55428
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(612) 533-1169
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---------- ---------
On July 31, 1996 there were 4,893,328 shares of the registrant's $.05 par
value Common Stock outstanding.
This document contains 14 pages.
1
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UNIVERSAL INTERNATIONAL, INC.
INDEX
PART I FINANCIAL INFORMATION Page
----
Item 1. Consolidated Financial Statements:
Consolidated Statements of Operations
for the three and six months ended June 30,
1996 and 1995................................... 3
Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995............. 4
Consolidated Statements of Cash Flows
for the six months ended June 30,
1996 and 1995................................... 5
Notes to Consolidated Financial Statements...... 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition... 7
PART II OTHER INFORMATION.................................... 12
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
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UNIVERSAL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(In thousands, except per share data)
Three months ended Six months ended
-------------------- ------------------
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
--------- --------- -------- --------
Net sales $18,509 $17,206 $35,066 $32,116
Cost of goods sold 11,767 11,369 22,656 20,961
------- ------- ------- -------
Gross margin 6,742 5,837 12,410 11,155
Selling, general and
administrative expenses 7,922 6,055 15,150 11,787
------- ------- ------- -------
Operating loss (1,180) (218) (2,740) (632)
Other income (expense):
Miscellaneous income
(expense), net 8 12 2 20
Interest expense (273) (155) (485) (260)
------- ------- ------- -------
(265) (143) (483) (240)
------- ------- ------- -------
Loss before non-controlling
interest in subsidiary (1,445) (361) (3,223) (872)
Non-controlling interest in
subsidiary's net loss 63 117 496 316
------- ------- ------- -------
Net loss $(1,382) $ (244) $(2,727) $ (556)
------- ------- ------- -------
------- ------- ------- -------
Net loss per common share $ (.28) $ (.05) $ (.56) $ (.11)
------- ------- ------- -------
------- ------- ------- -------
Weighted average number of
common shares outstanding 4,893 4,893 4,893 4,893
------- ------- ------- -------
------- ------- ------- -------
See accompanying notes to unaudited
consolidated financial statements
3
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UNIVERSAL INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
June 30, December 31,
1996 1995
------------ ------------
ASSETS (unaudited)
Current assets:
Cash $ 403 $ 811
Accounts receivable, less
allowance for doubtful
accounts of $203 for 1996
and $200 for 1995 4,828 3,432
Inventories 27,269 22,401
Other current assets 1,814 1,472
Deferred income taxes 179 179
-------- --------
Total current assets 34,493 28,295
Equipment and improvements, net 8,411 7,042
Other assets, net 164 172
-------- --------
Total assets $43,068 $35,509
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 421 $ 421
Accounts payable 9,476 6,822
Accrued expenses 1,937 2,411
-------- --------
Total current liabilities 11,834 9,654
Deferred income taxes 526 526
Borrowings under revolving credit
agreement 11,309 2,323
Long-term debt, less current portion 1,337 1,721
-------- --------
Total liabilities 25,006 14,224
-------- --------
Non-controlling interest in subsidiary - 496
Shareholders' equity:
Common stock, $.05 par value,
75,000 shares authorized;
4,893 shares issued and
outstanding for 1996 and 1995 245 245
Additional paid-in capital 22,917 22,917
Accumulated deficit (5,100) (2,373)
-------- --------
Total shareholders'equity 18,062 20,789
-------- --------
Total liabilities and
shareholders' equity $43,068 $35,509
-------- --------
-------- --------
See accompanying notes to unaudited
consolidated financial statements
4
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UNIVERSAL INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited) (In thousands)
Six months ended
-----------------------
June 30, June 30,
1996 1995
---- ----
Cash flows from operating activities:
Net loss $ (2,727) $ (556)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Depreciation and amortization 504 340
Provision for losses on accounts
receivable 72 30
Provision for inventory obsolescence
and shrinkage 561 438
Non-controlling interest in
subsidiary's net loss (496) (316)
Changes in operating assets and
liabilities:
Accounts receivable (1,468) (1,295)
Inventories (5,449) (2,541)
Other current assets (342) 15
Accounts payable 2,654 (1,046)
Store closing allowance - (194)
Other current liabilities (400) (421)
------- -------
Net cash used by operating
activities (7,091) (5,546)
------- -------
Cash flows from investing activities:
Additions to equipment and
improvements (1,919) (382)
------- -------
Net cash used by investing
activities (1,919) (382)
------- -------
Cash flows from financing activities:
Net change in borrowings under
revolving credit agreement 8,986 3,688
Payments of long-term debt (384) (56)
------- -------
Net cash provided by financing
activities 8,602 3,632
------- -------
Net decrease in cash (408) (2,296)
Cash, beginning of period 811 2,991
------- -------
Cash, end of period $ 403 $ 695
------- -------
------- -------
Schedule of noncash investing transactions:
Writeoff of equipment and improvements
related to store closings $ 74 $ 633
See accompanying notes to unaudited
consolidated financial statements
5
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NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The financial statements included in this Form 10-Q have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed, or omitted, pursuant to such rules and regulations. These
financial statements should be read in conjunction with the financial
statements and related notes included in the Company's 1995 Form 10-K.
The financial statements presented herein as of June 30, 1996 and for the
three and six months then ended reflect, in the opinion of management, all
adjustments necessary, consisting of normal recurring items, for a fair
presentation of financial position and the results of operations for the
periods presented. The results of operations for any interim period are
not necessarily indicative of results for the full year.
2. Principles of Consolidation
The consolidated financial statements include the accounts of the Company;
its wholly-owned subsidiary, Only Deals, Inc.; effective April 1, 1996, its
newly formed 95% owned subsidiary, Universal Asset-Based Services, Inc.;
and the full consolidation of the accounts of its 40.5% owned subsidiary,
Odd's-N-End's, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation, and the non-controlling interest in
Odd's-N-End's results is presented separately in the financial statements.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
On December 28, 1994, the Company acquired for $953,000, a 40.5 percent interest
in Odd's-N-End's, Inc. ("Odd's-N-End's"), a Buffalo, New York-based close-out
retailer with 23 retail stores. The Company's investment was under a court
approved plan of reorganization of Odd's-N-End's which emerged from bankruptcy
on December 28, 1994. In early 1995, the Company assumed control over day to
day operations of Odd's-N-End's. Accordingly, commencing in 1995, the Company
is fully consolidating the results of Odd's-N-End's with those of the Company
with elimination of intercompany transactions, including those under a supply
agreement.
In addition, the Company has entered into an agreement, as amended, to advance
up to $5 million to Odd's-N-End's, collateralized by a secondary interest in
substantially all assets, with interest payable at prime plus 2.5%. There were
advances totaling $3,845,000 and $2,228,000 under this agreement as of June 30,
1996 and December 31, 1995, respectively.
During the second quarter of 1996, the Company formed a 95% owned subsidiary,
Universal Asset-Based Services, Inc. ("Asset-Based Services"), which provides
inventory valuation and liquidation services to a wide range of financial
institutions, retailers and manufacturers.
Results of Operations
The following table sets forth, for the periods indicated, certain items from
the Company's statement of operations expressed as a percentage of net sales.
Three Months Six Months
Ended June 30, Ended June 30,
----------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
(unaudited) (unaudited)
Net sales........................ 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............... 63.6 66.1 64.6 65.3
----- ----- ----- -----
Gross margin..................... 36.4 33.9 35.4 34.7
Selling, general and
administrative expenses......... 42.8 35.2 43.2 36.7
----- ----- ----- -----
Loss from operations......... (6.4) (1.3) (7.8) (2.0)
Interest and other expenses, net. (1.4) (.8) (1.4) (.7)
Loss before non-controlling
interest in subsidiary.... (7.8) (2.1) (9.2) (2.7)
Non-controlling interest in
subsidiary's net loss.......... .3 .7 1.4 1.0
----- ----- ----- -----
Net loss......................... (7.5)% (1.4)% (7.8)% (1.7)%
----- ----- ----- -----
----- ----- ----- -----
7
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The following table sets forth, for the periods indicated, certain information
relating to the Company's operations.
<TABLE>
<CAPTION>
(In Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- Increase ---------------- Increase
1996 1995 (Decrease) Percent 1996 1995 (Decrease) Percent
-------------------- ---------------------- ---------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales:
Wholesale $6,800 $7,842 $(1,042) (13.3%) $12,966 $14,980 $(2,014) (13.4%)
Retail:
Only Deals 6,673 4,016 2,657 66.2% 12,395 7,781 4,614 59.3%
Odd's-N-End's 4,857 5,348 (491) (9.2%) 9,526 9,355 171 1.8%
Gross Margin:
Wholesale 1,443 1,665 (222) (13.3%) 2,759 3,287 (528) (16.1%)
Retail:
Only Deals 2,938 1,808 1,130 62.5% 5,365 3,491 1,874 53.7%
Odd's-N-End's(1) 2,182 2,364 (182) (7.7%) 4,107 4,377 (270) (6.2%)
Selling, General and
Administrative Expenses:
Wholesale 1,677 1,886 (209) (12.5%) 3,538 3,629 (91) (2.5%)
Retail:
Only Deals 3,846 2,091 1,755 83.9% 7,142 4,205 2,937 69.8%
Odd's-N-End's 2,214 2,078 136 6.5% 4,285 3,953 332 8.4%
</TABLE>
(1) Excludes impact of intercompany profit under the supply agreement with
Universal, which has been eliminated in consolidation.
NET SALES
Net sales for the second quarter and six months ended June 30, 1996 increased
by $1,303,000 or 7.6% and $2,950,000 or 9.2%, respectively, from the
corresponding periods last year. Management expects that wholesale sales for
1996 will be approximately the same as the 1995 wholesale sales of $29.3
million. Net sales by the Only Deals retail subsidiary increased primarily
due to the addition of 18 new stores since June 30, 1995. At June 30, 1996,
the Company had 39 Only Deals retail stores in operation (including one store
reserved for closing) compared to 22 (including two stores reserved for
closing) at June 30, 1995. The decrease in net sales by Odd's-N-End's for the
quarter ended June 30, 1996 was due to heavy promotional sales last year due
to the grand reopening promotion in May 1995. Despite the decrease in net
sales by Odd's-N-End's in the second quarter of 1996, net sales for the first
six months of 1996 increased primarily due to increased comparable store
sales during the first quarter of 1996. Net sales for Asset-Based Services were
$179,000 during the quarter ended June 30, 1996.
8
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GROSS MARGINS
Gross margins for the second quarter and six months ended June 30, 1996
increased by $905,000 or 15.5% and $1,255,000 or 11.2%, respectively, from
the corresponding periods of 1995. Gross margins in the wholesale business
decreased primarily as a result of decreased sales. Wholesale gross margins
were 21.2% and 21.3% of sales for the quarter and six months ended June 30,
1996, respectively, compared to 21.2% and 21.9% for the corresponding periods
of 1995. Gross margins for Only Deals increased due to increased sales.
Gross margins for Only Deals decreased as a percent of sales from 45.0% and
44.9% for the quarter and six months ended June 30, 1995 to 44.0% and 43.3%
for the quarter and six months ended June 30, 1996, respectively, primarily
due to increased markdowns and reduced margins resulting from changes in
product mix. Gross margins for Odd's-N-End's decreased during the second
quarter of 1996 due to decreased sales. Gross margins for the second quarter
of 1996 increased slightly as a percent of sales from 44.2% to 44.9%. Gross
margins as a percent of sales decreased to 43.1% for the first six months of
1996 compared to 46.8% for the same period of the prior year primarily due to
higher than planned markdowns of seasonal merchandise during the first
quarter of 1996 and reduced margins resulting from changes in product mix.
The Company expects margins to improve in both retail chains during the
second half of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the quarter and six months
ended June 30, 1996 increased by $1,867,000 or 30.8% and $3,363,000 or 28.5%,
respectively, from the corresponding periods of 1995. This increase
primarily resulted from the significant increase in retail operations, which
incur much higher operating costs than wholesale operations. The increase in
selling, general and administrative expenses as a percent of sales in the
wholesale business from 24.2% to 27.3% for the first six months was due to
the decline in wholesale sales, since most of the wholesale operating costs
are relatively fixed. The increase in selling, general and administrative
expenses as a percent of sales for Only Deals from 54.0% to 57.6% for the
first six months of 1996 was primarily due to pre-opening expenses incurred
by the nine new stores opened during the first six months of 1996 in addition
to increased infrastructure costs incurred to support the growth of the
retail business. Selling, general and administrative expenses increased as a
percent of sales for Odd's-N-End's from 42.3% to 45.0% for the first six
months of 1996 as compared to the same period last year. Selling, general
and administrative expenses for Asset-Based Services for the quarter ended
June 30, 1996 were $185,000.
9
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INTEREST
Interest expense increased to $273,000 in the second quarter and $485,000 in
the first six months of 1996 compared to $155,000 in the second quarter and
$260,000 in the first six months of 1995 due to an increase in borrowings
under the revolving credit facility to support the Only Deals expansion and
Odd's-N-End's working capital needs.
NET LOSS
The Company incurred a net loss of $1.4 million during the second quarter of
1996 compared to a net loss of $244,000 during the second quarter of 1995.
The Company incurred a net loss of $2.7 million during the first six months
of 1996 as compared to a net loss of $556,000 during the first six months of
1995. The net loss in the second quarter and first six months of 1996 was
primarily the result of increased selling, general and administrative
expenses due to costs incurred to build the infrastructure necessary to
implement the significant increase in retail operations; lower wholesale net
sales; seasonally typical lower net sales in the retail business; and lower
retail gross margins due to higher than planned markdowns.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company had available a $16 million revolving line of
credit expiring in January 1998. In July 1996, the agreement was amended to
increase the maximum loan amount to $18 million through December 31, 1996, at
which time the maximum loan amount is reduced to $16 million. The line of
credit is collateralized by inventories, accounts receivable, and equipment
and improvements of the Company. The Company may borrow against a borrowing
base derived from the level of qualifying accounts receivable and inventory.
The amount available at June 30, 1996, based on the borrowing base, was $16
million, of which there were outstanding borrowings of $11.3 million and
outstanding letters of credit of $1.3 million. As amended the line of credit
and related documents restrict the Company from declaring cash dividends;
require maintenance of minimum net worth; limit the amount of advances during
1996 to Odd's-N-End's to $5 million and limit the amount of annual capital
expenditures to $4 million in 1996. Prior to amendment, the agreement
limited the amount of advances to Odd's-N-End's to $3.5 million during 1996.
As of May 31, 1996 and June 30, 1996, the Company was in violation of this
covenant. In connection with the amendment, the lender waived this violation
and increased the limitation on advances to $5 million.
10
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Net cash used by operating activities was $7.1 million for the six months
ended June 30, 1996 principally due to a $2.7 million net loss, a $1.5
million increase in accounts receivable, a $5.4 million increase in
inventories, offset by a $2.7 million increase in accounts payable. Capital
expenditures of $1.9 million, payments of long-term debt totaling $0.4
million, and the $7.1 million net cash used by operating activities were
funded primarily by a $9.0 million increase in borrowings under the revolving
credit facility.
The Company is expanding the Only Deals chain by opening from 20 to 25 new
stores in 1996, of which nine stores were opened as of June 30, 1996. In
connection with store openings, working capital is required primarily to fund
the cost of acquiring additional inventory and the overhead associated with
opening new stores. A portion of the inventory needs for new stores is
already present in the Company's warehouses. The Company expects future
stores will require an investment of approximately $290,000 each to open,
inclusive of inventory. The Company intends to fund operations and the Only
Deals expansion during the remainder of 1996 through a combination of
internally generated cash flow and additional borrowings under its present
line of credit.
11
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PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting on June 26, 1996 in Minneapolis,
Minnesota. The Company solicited proxies and filed definitive proxy
statements with the Commission pursuant to Regulation 14A. The
matters voted upon at that meeting and the votes cast were as follows:
PROPOSAL
--------
(1) The election of the
following people to the
Board of Directors: Vote
--------------------
Withhold
For Authority
--- ---------
Norman J. Ravich 4,540,438 131,000
Mark H. Ravich 4,540,638 130,800
Wesley J. Laseski 4,530,638 140,800
Mark L. Bartholomay 4,532,638 138,800
Ernest M. Simon 4,522,638 148,800
Stanford A. Weiner 4,532,638 138,800
(2) Approval of an amendment
of the Company's Articles
of Incorporation to
increase the authorized
number of shares of common
stock from 10,000,000 to
75,000,000 shares
Vote
-----------------------------
For Against Abstain
--- ------- -------
4,212,928 449,170 9,340
12
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Item 4. Continued:
(3) Approval of an increase
in the number of shares
of common stock reserved
for issuance under the
Company's 1990 Stock
Option Plan from 300,000
to 450,000 shares
Vote
---------------------------
For Against Abstain
--- ------- -------
4,294,978 325,290 51,170
(4) Adoption of Stockholder
Rights Plan
Vote
-----------------------------------------
Broker
For Against Abstain Non-Vote
--- ------- ------- --------
2,377,867 245,340 10,150 2,038,081
(5) Ratification of the
appointment of Coopers
& Lybrand L.L.P. as the
Company's independent
auditors for fiscal year
ending December 31, 1996
Vote
--------------------------
For Against Abstain
--- ------- -------
4,660,738 3,300 7,400
Item 5. Other information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 10.11.1 Waiver and First Amendment to Loan
and Security Agreement dated July
30, 1996.
Exhibit 10.12.1 Alonge dated July 30, 1996 to
Revolving Note with Odd's-N-End's, Inc.
No Form 8-K's were filed during the quarter ended June
30, 1996.
13
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SIGNATURE
Pursuant to the requirements 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: August 14, 1996 By: /s/
----------------------------
Mark H. Ravich
Chief Executive Officer
14
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EXHIBIT 10.11.1
WAIVER AND FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Waiver and First Amendment to Loan and Security Agreement
("Amendment") is entered into as of July 30, 1996, by and between BankAmerica
Business Credit, Inc. (the "Lender") and Universal International, Inc. and
Only Deals, Inc. (collectively, the "Borrowers," and individually, the
"Borrower").
RECITALS
This Amendment is entered into in reference to the following facts:
(a) The Borrowers and the Lender entered into a certain Loan and
Security Agreement (as amended, modified, and supplemented prior to the date
hereof, the "Loan Agreement"), dated as of November 21, 1995. All
capitalized terms, not expressly defined herein, shall have the meanings
assigned thereto in the Loan Agreement.
(b) An Event of Default has occurred under the Loan Agreement.
(c) The Borrowers desire that the Lender waive the Event of
Default and amend the Loan Agreement in certain respects.
(d) The Lender is willing to waive the Event of Default and amend
the Loan Agreement subject to the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto hereby agree as follows:
ARTICLE 1 - WAIVERS
1.1 WAIVER OF EVENT OF DEFAULT. (a) The Lender hereby waives the
following Event of Default: the aggregate outstanding loans, advances, and
other financial accommodations extended by the Borrowers to Odd's-N-End's
during May and June 1996 exceeded, from time to time, the sum of $3,500,000,
in breach of Section 10.22 of the Loan Agreement.
(b) The foregoing waiver is only applicable to and shall only be
effective in the specific instance made. The waiver is limited to the facts
and circumstances referred to herein and shall not operate as (i) a waiver of
or consent to non-compliance with any other section or provision of the Loan
Agreement, (ii) a waiver
1
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of any right, power, or remedy of the Lender under the Loan Agreement, or
(iii) a waiver of any other Event of Default or Default which may exist under
the Loan Agreement.
ARTICLE 2 - AMENDMENTS
2.1 AMENDMENT OF SECTION 1.1 Section 1.1 of the Loan Agreement is
hereby amended by the addition of two new definitions which shall read in
their entirety as follows:
"MAXIMUM REVOLVING LOAN AMOUNT" means (a) Eighteen Million Dollars
($18,000,000) prior to January 1, 1997, and (b) Sixteen Million Dollars
($16,000,000) at all times thereafter.
"MAXIMUM INVENTORY REVOLVING LOAN SUBLIMIT" means (a) Fifteen
Million Five Hundred Thousand Dollars ($15,500,000) prior to January 1, 1997,
and (b) Thirteen Million Five Hundred Thousand Dollars ($13,500,000) at all
times thereafter.
2.2 AMENDMENT OF SUBSECTION 2.1(a) The first sentence of Subsection
2.1(a) of the Loan Agreement is hereby amended and restated to read in its
entirety as follows:
"The Lender shall, upon either Borrower's request from time to
time, make revolving loans (the "REVOLVING LOANS") to such Borrower up to the
limits of the Availability for such Borrower, PROVIDED, HOWEVER, that the
aggregate outstanding Revolving Loans for both Borrowers shall at no time
exceed the Maximum Revolving Loan Amount, LESS (i) the aggregate undrawn face
amount of all outstanding standby Letters of Credit and all outstanding
documentary Letters of Credit which do not satisfy the conditions set forth
in clause (ii) below which the Lender has caused to be issued or obtained for
either Borrower's account and (ii) fifty percent (50%) of the aggregate
undrawn face amount of all outstanding documentary Letters of Credit which
the Lender has caused to be issued or obtained for either of the Borrower's
account and with respect to which the Lender is named as the consignee of (on
all applicable bills of lading and other documents), and has a first
perfected Lien on, the goods which are the subject of such Letters of Credit,
PROVIDED, FURTHER, HOWEVER, that the aggregate outstanding Revolving Loans
made to the Borrowers and predicated against Eligible Inventory shall at no
time exceed the Maximum Inventory Revolving Loan Sublimit and the aggregate
outstanding Revolving Loans made to the Borrowers predicated against Aged
Inventory shall at no time exceed the lesser of (x) One Million Three Hundred
Fifty Thousand Dollars ($1,350,000), and (y) ten percent (10%) of the
aggregate Eligible Inventory for the Borrowers (exclusive of all Aged
Inventory)."
2.3 AMENDMENT OF SUBSECTION 2.1(b). Clause "(i)" of
2
<PAGE>
Subsection 2.1(b) of the Loan Agreement is hereby amended and restated to
read in its entirety as follows:
"(i) Each Borrowing shall be made upon a Borrower's irrevocable
written notice ("Notice of Borrowing") delivered to the Lender which must be
received by the Lender prior to noon (Chicago time) three (3) Business Days
prior to the requested Funding Date in the case of LIBOR Rate Loans, and no
later than noon on the requested Funding Date in the case of Reference Rate
Loans, specifying:"
2.4 AMENDMENT OF SUBSECTIONS 3.1(a). Subsection 3.1(a) of the Loan
Agreement is hereby amended by the addition of new clause "(iii)" which shall
be inserted in the Loan Agreement immediately after clause "(ii)" of
Subsection 3.1(a) and which shall read in its entirety as follows:
"(iii) For all Obligations (including LIBOR Rate Loans) in excess
of $16,000,000, at a rate of one percent (1.0%) per annum in addition to the
rates of interest payable under clauses (i) and (ii) above."
2.5 AMENDMENT OF SECTION 10.20. Section 10.20 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
"10.20 CAPITAL EXPENDITURES. Neither Borrower nor any of its
Subsidiaries shall make or incur any Capital Expenditure if, after giving
effect thereto, the aggregate amount of all Capital Expenditures by the
Borrowers and their Subsidiaries would exceed Four Million Dollars
($4,000,000) during Fiscal Year 1996, and Four Million Eight Hundred Thousand
Dollars ($4,800,000) during any Fiscal Year thereafter."
2.6 AMENDMENT OF SECTION 10.22. Section 10.22 of the Loan Agreement is
hereby amended and restated to read in its entirety as follows:
"10.22 ADVANCES TO ODD'S-N-END'S. Aggregate outstanding loans,
advances, and other financial accommodations extended by the Borrowers to
Odd's-N-End's will not exceed Five Million Dollars ($5,000,000) at any time
during any Fiscal Year."
ARTICLE 3 - CONDITIONS PRECEDENT
The waivers and amendments to the Loan Agreement provided for in the
Amendment shall become effective upon satisfaction of all of the conditions
precedent specified in this Article 3.
3.1 DELIVERY OF DOCUMENTS. The Lender shall have received
3
<PAGE>
all of the following documents, each duly executed where appropriate and
dated the date of execution thereof (or such other date as shall be
acceptable to the Lender), in form and substance satisfactory to the Lender:
(a) this Amendment and (b) a copy, certified by the secretary or an assistant
secretary of the Borrowers, of resolutions of the board of directors of the
Borrowers authorized or ratifying the execution and delivery of this
Amendment and the borrowings under the Loan Agreement, as amended hereby.
3.2 AMENDMENT FEE. As part of the consideration to the Lender for
entering into this Amendment, the Borrowers shall have paid to the Lender an
amendment fee of $15,000. The Lender, in its sole and absolute discretion,
may permit such fee to be paid from the proceeds of a Reference Rate Loan
under the Loan Agreement.
ARTICLE 4 - GENERAL PROVISIONS
4.1 WARRANTIES AND ABSENCE OF DEFAULTS. In order to induce the Lender
to enter into this Amendment, the Borrowers hereby warrant to the Lender, as
of the date of the execution of this Amendment by the Borrowers, that: (a)
except to the extent permitted by the Loan Agreement, as herein amended, the
warranties of the Borrowers contained in the Loan Agreement are true and
correct as of such date as if made on such date, and (b) no Event of Default
or Default exists which is continuing as of such date.
4.2 EXPENSES. The Borrowers agree to pay on demand all costs and
expenses of the Lender (including the reasonable fees and expenses of
in-house counsel for the Lender) in connection with the preparation,
negotiation, execution, and delivery of this Amendment and all other
instruments or documents provided for herein or delivered or to be delivered
hereunder or in connection herewith.
4.3 GOVERNING LAW. This Amendment shall be a contract made under and
governed by the internal laws of the state of Illinois.
4.4 COUNTERPARTS. This Amendment may be executed in any number of
counterparts, and by the parties hereto on the same or separate counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be
an original, but all such counterparts shall together constitute but one and
the same Amendment.
4.5 SUCCESSORS. This Amendment shall be binding upon the Borrowers,
the Lender, and their respective successors and assigns, and shall inure to
the benefit of the Lender and the successors and assigns of the Lender.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized and delivered
as of the date first written above.
"BORROWERS"
UNIVERSAL INTERNATIONAL, INC.
By ___________________________
Name__________________________
Title_________________________
ONLY DEALS, INC.
By____________________________
Name__________________________
Title_________________________
"LENDER"
BANKAMERICA BUSINESS CREDIT, INC.
By____________________________
5
<PAGE>
EXHIBIT 10.12.1
ALONGE
THIS ALONGE to Revolving Note dated February 29, 1995, made by
Odd's-N-End's, Inc. in the principal amount of $2,000,000.00 shall be
attached thereto and made part thereof.
The principal sum of $2,000,000.00 is hereby deleted
and inserted in lieu thereof shall be the principal sum
of $5,000,000.00.
ODD'S-N-END'S, INC.
Dated: July 30, 1996 By:/s/
--------------------- ---------------------
Its
------------------
6
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