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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1996 Commission File No. 0-12361
Richton International Corporation
(Exact name of registrant as specified in its charter)
Delaware 05-012205
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
340 Main Street, Madison, New Jersey 07940
(Address of principal executive offices) (Zip Code)
Issuer's telephone number ...................................... (201) 966-0104
Securities registered under Name of Exchange on which Registered:
Section 12(b) of the Exchange Act:
Common Stock, par value $.10 American Stock Exchange
Securities registered under Section 12(g) of the Exchange Act:
Series A Preferred Stock, par value $1.00. Purchase Right
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 dates. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant.
Aggregate market value at March 1, 1997 amounted to $8,100,000
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock, as of the latest practicable date.
Common Stock, par value $.10, 2,949,447 shares at March 1, 1997
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December 31, 1996
are incorporated by reference into I and II.
Portions of the proxy statement for the annual shareholders meeting to be held
April 28, 1997 are incorporated by reference into Part III.
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<PAGE>
PART I
Item 1. Business
Richton International Corporation (the "Company" or "Richton") is a
diversified service company with two operating subsidiaries, Century Supply
Corp. ("Century") and CBE Technologies, Inc. ("CBE"). Richton was formerly
engaged, until 1992, in the manufacture and marketing of fashion jewelry. In
November 1992 the Company sold its principal operating subsidiary, Coro Canada
Inc. Subsequently, Richton pursued a new direction with the acquisition of
Century on October 27, 1993.
CBE was acquired in March 1995 by issuance of $5.0 million in notes
including $3.0 million in senior debt to a Michigan Bank and assumption of
certain liabilities.
Century is a leading full-service wholesale distributor of sprinkler
irrigation systems, outdoor lighting and decorative fountain equipment.
Headquarted in Michigan Heights, Michigan it has branches in 16 States in the
Eastern half of the country and Ontario, Canada. Irrigation products have
historically been sold by manufacturers primarily through wholesale distributors
and Century is the leading distributor of irrigation equipment in the geographic
areas it serves. Century is currently a distributor for three of the leading
original equipment manufacturers (OEM) of turf irrigation equipment in the
United States.
In January 1997, Century entered into a cooperative marketing arrangement
with Shemin Nurseries, Inc. a major wholesale distributor of nursery and
landscape materials and related products. Initially, Century will open outlets
in eight of the fourteen Shemin locations. These fully stocked outlets will
provide Century with increased market penetration by providing under a single
roof all the supplies and services required by nursery, landscape and irrigation
contractors. Shemin Nurseries, Inc. is headquartered in Danbury, Connecticut.
Century's primary customers are irrigation and landscape contractors who
install irrigation systems for commercial, residential and golf course watering
systems. Approximately 93% of revenues are derived from irrigation products,
with the remaining 7% from lighting and fountains. Century represents more than
60 suppliers and provides a complete product line to approximately 6,500
customers through 54 branches.
Century is organized into three regions, each with a regional team that
manages branches within a specific geographic area. Purchasing, accounts
receivable, accounting and cash management are centralized functions. Close
control is maintained over receivables, inventory and other key factors through
a centralized order entry management information system. All branches are linked
to the on-line system, and substantially all of Century's business is conducted
in a real time order entry environment.
Century assets constitute a material portion of Richton's business.
Although Century has a history of operating profitability, its business is
impacted by both the economic and climatic conditions in the geographic areas
where its branches are located. Since irrigation and landscape contractors are
Century's primary customers, business is best when commercial and residential
construction is strong and general economic conditions and consumer confidence
are favorable. Weather is also a significant noncontrollable element affecting
Century's business. Business is better during warm dry periods, especially in
spring months and when general construction is strong. Climatic factors that can
adversely affect Century principally relate to above-average rainfall during the
primary selling season or other unusual weather-related conditions. Century's
geographic diversity makes it much less susceptible to weather than many of its
competitors who operate in a more limited geographic area. Century has mitigated
some of the impact of both economic and climatic conditions by pursuing an
aggressive growth program. By opening or acquiring branches (see Competition) in
new areas and continuing to grow its business in existing markets, Century has
created both geographic diversity and consistent growth. Even so, seasonality
causes a significant disparity in quarterly sales and results.
CBE Technologies, Inc. ("CBE") headquartered in Boston, Massachusetts with
satellite offices in New York, Los Angeles and Portland, Maine is a Systems
Integrator providing network consulting, design, and installation; network
management and related support; technical services outsourcing; comprehensive
hardware maintenance; and equipment sales.
CBE's technical certifications include; Novell Platinum reseller, Microsoft
Channel partner, Banyan Enterprise Network dealer, Novell authorized Training
Center, as well as a Novell Authorized Service Center.
1
<PAGE>
Physical resources include a fully integrated network lab with a
functioning model of most computer operating systems; a network management lab
to support remote management; training labs at both Boston and Portland sites to
support in-house training programs.
CBE is also a authorized service and warranty center for most of the
leading PC manufacturers including IBM, Conpaq, Hewlett Packard, Apple, AST, and
service most every other make of PC and printer. The field staff is supported by
a fully automated call control and dispatch center; a parts depot with an
extensive inventory; and a complete diagnostic/repair lab for PC's, printers and
monitors.
CBE's business is impacted by technological changes both in software and
hardware. There can be no assurance that CBE can (a) continue to maintain the
highly qualified and experienced technicians and engineers, and (b) that those
technicians continue to remain technically proficient in an environment in which
technology changes occur regularly.
Suppliers
Century maintains a broad base of suppliers that enables the Company to
offer a wide range of irrigation equipment. Products are obtained from more than
60 suppliers with no one supplier comprising more than 30% of average annual
purchases. Century has master distrubutor agreements in place with Rain Bird,
Hunter, Hardie, and Legacy as well as with other OEM suppliers that authorize
Century as a distributor of their products for specific geographic areas. These
agreements are renewable annually, and there is no assurance that these
agreements will be renewed. Therefore, Century's business is subject to change
in these distribution agreements with manufacturers or in manufacturers pursuing
alternate channels of distribution. However, Century maintains excellent vendor
relations with these suppliers and management believes the wholesale
distribution channel will continue to be the dominant professional channel for
the irrigation industry.
CBE acquires its products from OEM suppliers as well as wholesalers and
distributors, such as Tech Data Corporation, Ingrim Micro, and Gates Arrow
Electronics which accounts for approximately 17%, 12% and 10% of CBE's
purchases, respectively.
Competition
Historically, irrigation distribution, like the wholesale distribution
industry in general, has been fragmented with many small distributorships
serving specific geographic markets. However, the more recent trend in
distribution has been one of consolidation, where larger wholesaler chains have
been created as a result of mergers, acquisitions and distributors moving into
new territories to expand market share and achieve economy of scale. Within the
irrigation industry, Century has been a leader in the trend toward
consolidation.
During the period of Richton ownership, Century has grown from 29 branches
and $43 million in sales for 1993 to the current 54 branches, and $74 million in
sales for 1996. Since Century has a sophisticated computer system supporting its
branch operations and most of its administrative functions are centralized,
Century has been able to achieve significant economies of scale as a result of
consolidation and growth.
This growth has resulted in Century facing different competitors in almost
every market it serves. Century competes with these other distributors by
providing local warehousing linked to a centralized computer system that enables
Century customers to get product when they need it, and by providing value-added
services, such as design assistance, training seminars, incentive programs and
sales leads to its customers. Century also competes against large discount
stores and plumbing supply companies that sell irrigation products, but who do
not provide the range of services that Century offers. While some of its
competitors in specific markets are larger than the corresponding Century
operations, none are larger when only the irrigation business is considered.
CBE competes in maintenance service with many companies, both larger and
smaller than CBE. Larger companies generally are OEM suppliers that also provide
network installation and maintenance services and offer a broader line of
product and service than CBE.
Employee Relations
At December 31, 1996, the Company employed approximately 370 full-time
employees. None of these employees are covered by a collective bargaining
agreement.
2
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The Company considers its people to be one of its greatest assets and
provides training courses on sales, product features and benefits, management
skills, and communication. This has created an effective, knowledgeable and
self-motivated work force with a strong focus on customer service.
Working Capital
Century's business is seasonal due principally to the fact that irrigation
systems are normally installed during warm weather and a majority of Century's
branches are located in the northern half of the United States. As a result
Century's monthly and quarterly sales, operating results and working capital
requirements fluctuate significantly. Century relies on short-term borrowing to
finance its working capital needs. During the first quarter Century's working
capital requirements are at minimum, with short-term borrowings, historically,
approximately $6.0 million. Beginning in April needs expand. By July short-term
borrowings have increased to approximately $14 million. During the remaining
months receivables are liquidated, releasing substantial amounts of cash that
may be used to reduce short-term borrowing. (See Note 6 of Notes to Consolidated
Financial Statements for a description of the Company's credit line.)
Business Acquisitions
On March 29, 1995 the Company, through its wholly owned subsidiary,
Century, acquired all the operating assets and business of CBE Technologies,
Inc. for $5.0 million plus assumption of certain liabilities which was financed
by bank borrowings of $3.0 million, a $1.0 million unsecured promissory note to
the former owners and a $1.0 million note to the Chairman of Richton. The note
to the Chairman was subject to a fairness opinion of an independent advisor
chosen by Richton's Board of Directors. The note to the former owners, which is
guaranteed by both Century and Richton, is to be paid over the next four years.
During 1996 each of the Company's two operating subsidiaries acquired
businesses. Century acquired five branch operations for $1.8 million including
inventories and accounts receivables that generated approximately $10 million in
sales in 1996. CBE acquired three operations in Maine, New York and Los Angeles
for $.3 million that contributed approximately $3.3 million in sales in 1996.
Liquidity
The Company's financial condition continues to improve. The net worth as of
December 31, 1996 has increased to $7.0 million. Tangible net worth, which at
the end of 1995 was nil has increased to nearly $3.0 million as of December 31,
1996. At December 31, 1996, the Company's long-term debt was nearly $9.0
million, including $5.2 million of senior secured debt owed to a Michigan bank.
Of the balance of the outstanding debt, $1.8 million is owed to Fred R.
Sullivan, Chairman and Chief Executive Officer of Richton. Notes issued to Mr.
Sullivan were subject to a fairness opinion issued by an independent advisor
chosen by Richton's Board of Directors. The bank debt carries with it a loan
covenant that restricts upstreaming of funds to Richton from Century and
precludes distribution of funds to shareholders.
The operating cash flow of the Company--before working capital
requirements--improved to $4.44 million as compared to $3.88 million last year.
These funds were used to retire nearly $1.9 million of term and subordindated
debt which came due during the year, fund a portion of the increase in working
capital not provided by the line of credit financing, and partially fund the
acquistions noted above.
At December 31, 1996 working capital increased nearly $2.6 million to $5.6
million from $3.0 million last year. Acquisitions accounted for nearly $1.0
million of this increase and the balance came from operations driven by higher
sales.
Though the Company has continued to generate sufficient cash to liquidate
its term and suborinated debt as it becomes due, and make acquisitions necessary
for it's growth, there is no assurance, given the high degree of leverage, the
seasonality of its principal business, and the decreasing availability of the
deferred tax benefit--currently at $2.8 million--that it can continue to do so
in the future.
3
<PAGE>
ITEM 2. Properties
Richton's executive offices at 340 Main St. Madison, New Jersey, are leased
on a month-to-month basis. Century's principal offices are in Madison Heights,
Michigan, under a lease that expires in October 2000. Century owns a 15,000
square foot facility in Sarasota, Florida. In addition, Century leases warehouse
and sales space in its other branches. The aggregate of such leased space is
approximately 226,000 square feet. Expiration dates extend to July 2006. Eight
of these facilities are leased from the former owner of Century under a lease
agreement which approximates current market value. These leases expire in
October, 2000. One facility is leased from a partnership which includes the
President of Century. The lease, which is currently on a month to month basis
approximates current market value. In addition, during 1996 Century acquired a
10,000 square foot facility in Sarasota, Florida which it had previously leased.
CBE's principal offices are located in Boston. Mass. This office is leased under
an agreement which expires in June, 1998. CBE leases approximately 10,000 square
feet of additional office space at its other locations. Richton believes that
its properties are adequately equipped, maintained and suited to the purpose for
which they are used.
ITEM 3. Legal Proceedings
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the fourth
quarter of fiscal 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
For the information about the executive officers of Richton required to be
included in this Part I, see "Executive Officers of Registrant" in Part III
below, which is incorporated into Part I by reference.
4
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder Matters
(a) Market information:
The Company's Common Stock trades on the American Stock Exchange under the
symbol "RHT". The following table sets forth the high and low sales prices for
the Common Stock. The quotations shown are as reported by the American Stock
Exchange.
1996 1995
------------------ ----------------
Calendar Quarter High Low High Low
--------------- ------- -------- -------- ------
First ..................... $3 7/16 $3 1/8 $3 3/4 $2 3/8
Second .................... 4 7/16 3 7/16 3 3/8 2 5/8
Third ..................... 4 3/16 3 13/16 4 1/8 3
Fourth .................... 4 7/16 4 3/8 3 11/16 3 1/16
(b) Approximate Number of Equity Stockholders:
Approximate Number
of Record Holders
Title of Class at February 28, 1997
----------- ------------------
Common Stock, $ .10 par value 612
(c) Dividends:
No cash dividends were paid by the Company in 1996, 1995.
ITEM 6. Selected Financial Data
SUMMARY OF OPERATIONS
(In thousands, except percentages and per share amounts)
<TABLE>
<CAPTION>
December 31
-------------------------------------------- April
1996 1995 1994 1993 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales ..................... $ 87,750 $ 66,659 $ 50,306 $ 11,080 --
Gross Profit percentage ....... 28% 28% 28% 27% --
Operating Profit .............. 3,832 3,466 2,702 (847) --
Interest expense. net ......... 1,216 1,092 817 21 $ 55
Income (loss) from operations . 1,766 1,365 1,004 (573) (1,001)
Income (loss) from Discontinued
Operations ................. -- -- -- (426) 164
Net Income ( loss) ............ 1,766 1,365 1,004 (999) (837)
Net Income (loss) per share ... $ 0.54 $ 0.43 $ 0.34 $ (0.37) $ (0.32)
</TABLE>
FINANCIAL POSITION
(In thousands, except ratios)
December 31
------------------------------------------ April
1996 1995 1994 1993 1993
--------- --------- --------- --------- ---------
Total Assets ............ 32,374 26,114 15,801 15,849 3,096
Long-term Debt .......... 6,986 7,150 3,834 6,621 --
Working Capital ......... 5,620 3,029 2,341 2,537 2,682
Current ratio ........... 1.31 to 1 1.22 to 1 1.28 to 1 1.32 to 1 6.66 to 1
Notes to Selected Financial Data:
Note a -- The Registrant acquired CBE effective March 29, 1995
Note b -- The Registrant acquired Century effective August 31, 1993
Note c -- The Registrant was a shell company with no operating units from May,
1992 until August, 1993
5
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following information should be read along with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements on page F-6
through F-14.
RESULTS OF OPERATIONS
1996 Compared with 1995
Sales for the year ended December 31, 1996 were $87.8 million, an increase
of $21.1 million over the 1995 amount of $66.7 million. Century contributed
nearly $17 million of this increase due largely to favorable weather conditions
in most of it's market areas and to geographical expansion. A significant
portion of this expansion has occurred in the Eastern half of the Country from
North Carolina to New Jersey. Presently, Century has 54 branches. As has been
noted earlier, CBE's sales reflects a full year for 1996. It was acquired
effective March 30, 1995. CBE's sales in 1996, on a full year basis, have
increased more than 20% over 1995 levels principally due to expansion through
the acquisition of two businesses in Maine and another in Los Angeles,
California.
Gross profit for the year ended December 31, 1996 was $24.8 million an
increase of $6.2 million or approximately 33% over the 1995 amount of $18.6
million. This increase is due primarily to the higher sales noted above. While
CBE continued to experience declining typewriter maintenance revenues, its
overall gross profit percentage was about the same as the prior year.
Selling, general and administration expenses for the year ended December
31, 1996 increased $5.8 million or 38.4% to $20.9 million from $15.1 million for
the year ended December 31, 1995. The geographical expansion noted above
accounted for nearly $4.2 million of this increase. The balance of this increase
relates to CBE's costs associated with acquiring and expanding into three new
market areas during 1996 and to higher goodwill amortization charges--$.56
million--principally associated with the typewriter contract maintenance
business.
Interest expense, net for the year ended December 31, 1996 increased $.1
million or 10% over the year earlier period to $1.2 million. This increase
reflects the higher term debt and higher line of credit facility incurred in
acquiring the various businesses noted above and in carrying the higher working
capital, partially offset by a slightly lower borrowing rate.
The federal, state and foreign income tax provision for the year ended
December 31, 1996 was $.85 million, a decrease of approximately $.16 million
from last year. The lower tax rate is principally due the recognition of
deferred tax benefit associated with the goodwill amortization and to lower
state taxes.
Net income for the year ended December 31, 1996 was $1.76 million, or $.54
per share. This compares with $1.36 million or $.43 per share reported for the
year ended December 31, 1995. The higher net income is due principally to higher
sales.
1995 Compared with 1994
Sales for the year ended December 31, 1995 were $66.7 million, an increase
of $16.4 million over the 1994 amount of $50.3 million. The acquisition of CBE
in March contributed $7.7 million of the increase (See Acquisitions). The
balance of the increase was principally due to acquisitions by Century of
additional branches in Georgia and Virginia and to increased penetration of
existing markets. The markets served by Century had generally favorable weather
conditions throughout the selling season. The CBE results reflect approximately
10% improvement over that experienced by its predecessor company in 1994. The
increase was driven by higher sales of computer maintenance contracts and
network installations, offset by a decline in typewriter maintenance contract
revenues.
Gross profit for the year ended December 31, 1995 increased $4.5 million to
$18.6 million, 31.6% over the 1994 amount of $14.1 million. The sales increase
noted above contributed to all of the gross profit increase. CBE's gross profit
percentage was below prior year results due principally to decline in typewriter
maintenance contracts, which carry a high gross profit percentage. Thus, while
sales and gross profit for CBE increased year to year, gross profit percentage
declined. The Company expects this trend of declining typewriter based revenue
to continue.
6
<PAGE>
Selling, general and administrative expenses for the year ended December
31, 1995 increased $3.7 million to $15.1 million from $11.4 million reported for
the year ended December 31, 1994. The addition of CBE accounted for $2.6 million
of the increase. Included in the administrative expenses for CBE for the period
ended December 31, 1995 was a $1.0 million charge attributable to the impairment
of goodwill . This charge relates to the typewriter portion of CBE's business,
which as noted, above experienced a decline in sales below that reported last
year. The balance of the increase in selling and administrative expenses is
principally due to the increase in the number of Century branches.
Interest expense for the year ended December 31, 1995 increased to $1.1
from $.8 million in the year ended December 31, 1994 . The increase is
principally due to the additional $5.0 term debt for the acquisition of CBE,
partially offset by lower borrowing for working capital.
Federal and state income tax provision for the year ended December 31, 1995
was approximately $1.0 million, an increase of approximately $.1 million over
the year ended December 31, 1994. The effective higher tax rate for 1994 is
principally due to a $.15 million non-recurring charge included in the 1994
amount relating to federal tax audit of Century's prior year tax returns.
Net income for the year ended December 31, 1995 was $1.365 million or $.43
per share. This compares with the $1.0 million or $.34 per share reported for
the year ended December 31, 1994. The higher net income is due to higher sales.
Financial Condition
The Company's financial condition continues to improve. The net worth as of
December 31, 1996 has increased to $7.0 million. Tangible net worth, which at
the end of 1995 was nil has increased to nearly $3.0 million as of December 31,
1996. The Company still has $8.9 million of term and subordinated debt
outstanding at December 31, 1996. This compares to $9.2 million outstanding at
the end of last year.
As was noted last year, the Company continues to rely on short-term
borrowings to finance it's working capital. During the first quarter of each
year Century's working capital requirements are at a low point, with short-term
borrowings, historically, of $6.0 million. During the second quarter working
capital requirements begin to expand and by July of each year the amount
necessary to carrying the working capital historically expands to approximately
$14.0 million. From July through the remainder of the year, receivables are
liquidated, releasing substantial amounts of cash that may be used to reduce
short-term debt. The operating cash flow of the Company--before working capital
requirements--improved to $4.44 million from $3.88 million last year. The
Company was thus able to retire nearly $1.9 million of term and subordinated
debt which came due during the year. This amount is approximately the same as
last year.
At December 31, 1996 working capital has increased approximately $2.6
million to $5.6 million from $3.0 million last year. Acquisitions accounted for
nearly $1.0 million of this increase and the balance came from operations driven
by higher sales financed in part by operating cash flow.
During the second quarter of 1996 the Company for the second time in as
many years renegotiated its revolving credit facility and long-term debt
agreement with Michigan National Bank. The revised agreement (a) lowered the
rate of interest charged on the line of credit to prime less an eighth from
prime, (b) offered a lower rate of interest on the Term-Debt and (c) converted
$1.4 million of line of credit facility to term-debt without increasing the
quarterly repayment amount. Century and CBE's expansion into new markets was
financed by the increase in the term debt.
Though the Company has continued to generate sufficient cash to liquidate
its term and subordinated debt as it becomes due, and make acquisitions
necessary for it's growth, there is no assurance, given the high degree of
leverage, the seasonality of its principal business, and the decreasing
availability of the deferred tax benefit--currently at $2.7 million--that it can
continue to do so in the future.
7
<PAGE>
ITEM 8. Financial Statements
The financial statements required by this Item, are set forth below:
Page
Description Number
----------- ------
Report of Independent Public Accountants ......................... F-1
Consolidated Balance Sheets at December 31, 1996 and
December 31, 1995 ............................................. F-2
Consolidated Statements of Operations for the three years
ended December 31, 1996 ....................................... F-3
Consolidated Statements of Shareholders' Equity for the
three years ended December 31, 1996 ........................... F-4
Consolidated Statements of Cash Flows for the three years
ended December 31, 1996 ....................................... F-5
Notes to Consolidated Financial Statements ....................... F-6
Richton International Corporation
Quarterly analysis of sales, operating margin, net income and earnings per
share
<TABLE>
<CAPTION>
Net Equivalent
Pre-Tax Income Earnings Shares
Sales Gross $ Profit % Profit (Loss) Per Share Outstanding
----- ------- -------- ------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1st Qtr. 1996 10,449,000 2,445,000 23.40 (1,373,000) (872,000) (0.27) 3,185,000
1995 5,165,000 1,237,000 23.95 (1,256,000) (794,000) (0.28) 2,866,000
2nd Qtr. 1996 27,903,000 8,773,000 31.44 2,962,000 1,860,000 0.57 3,236,000
1995 24,840,000 7,124,000 28.68 2,593,000 1,634,000 0.52 3,166,000
3rd Qtr. 1996 32,660,000 9,714,000 29.74 1,829,000 1,107,000 0.34 3,247,000
1995 23,089,000 6,407,000 27.75 1,561,000 872,000 0.28 3,152,000
4th Qtr. 1996 16,738,000 3,852,000 23.01 (802,000) (329,000) (0.10) 3,290,000
1995 13,565,000 3,790,000 27.94 (524,000) (347,000) 0.11 3,161,000
---------- --------- ----- -------- -------- ---- ---------
Year 1996 87,750,000 24,784,000 28.24 2,616,000 1,766,000 0.54 3,290,000
1995 66,659,000 18,558,000 27.84 2,374,000 1,365,000 0.43 3,161,000
</TABLE>
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
8
<PAGE>
PART III
ITEM 10. Executive Officers of Registrant
Identification of the executive officers:
Name Age Positions and Offices Officer Since
---- --- --------------------- -------------
Fred R. Sullivan 82 Director, Chairman of the Board 1989
& Chief Executive Officer
Cornelius F. Griffin 57 Vice President & Chief 1985
Financial Officer
Marshall E. Bernstein 58 Secretary 1985
There is no family relationship among any of the executive officers and
directors of the Company. Each executive officer holds office for one year or
until a respective successor is chosen, except that each officer may be removed
from office, with or without cause, at any time by the Board of Directors.
The business experience of the executive officers is:
Fred R. Sullivan--Director, Chairman of the Board & Chief Executive Officer
for more than five years.
Cornelius F. Griffin--Vice President & Chief Financial Officer for more
than five years.
Marshall E. Bernstein--For more than five years a Member of the law firm of
Robinson, Brog, Leinwand, Greene, Genovese & Gluck P.C. and predecessor.
ITEM 11. Executive Compensation
The information required by Item 11 is incorporated by reference to the
Company's definitive proxy statement to be filed with the Securities and
Exchange Commission not later than April 30, 1997.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated by reference to the
Company's definitive proxy statement to be filed with the Securities and
Exchange Commission not later than April 30, 1997.
ITEM 13. Certain Relationships and Related Transaction
The information required by Item 13 is incorporated by reference to the
Company's definitive proxy statement to be filed with the Securities and
Exchange Commission not later than April 30, 1997.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) (2) The list of financial statements and financial statement
schedules by this item are included in Item 8 on page 6.
(a) Exhibits:
(2) Exhibits
2.1 -- Stock Purchase Agreeement dated as of July 31, 1993 and
amendment thereto dated August 27, 1993 and among Ernest
Hodas as trustee of the Ernest Hodas Revocable Trust, The
Hodas Family Limited Partnership, Ernest Hodas, Century
Supply Corp., Century Acquisition Corporation and Richton
International Corporation
-- Incorporated by reference to Exhibit 2.1 to Registrant's
Current report on Form 8--for January 5, 1994
2.2 -- Agreement for the Purchase of Assets dated March 29, 1995 by
and among CBE Acquisition Corp., (the "Buyer"), Century
Supply Corp., Richton International Corporation and CBE
Technologies, Inc. (the "Seller")
9
<PAGE>
-- Incorporated by reference to Exhibit 2.1 to Registrant's
Current report on Form 8-K for April 5, 1995
(3) Exhibits
3.1 -- Certificate of Incorporation of Richton International
Corporation
-- Incorporated by reference to Exhibit 99.1 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995
3.2 -- By laws of Richton International Corporation
-- Incorporated by reference to Exhibit 99.1 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995
(4) Exhibits
4.1 -- Stock Certificate (Specimen)
(10) Exhibits -- Material contracts
10.1 -- 1990 Long-Term Incentive Plan
-- Incorporated by reference to Exhibit (b) to Registrant's
Annual Report on Form 10-K for the fiscal year ended April
30, 1990
10.2 -- Amendment to the 1990 Long Term Incentive Plan providing for
additional 150,000 shares for issuance under the Plan
-- Incorporated by reference to Exhibit 10(b) to Registrant's
Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994 Incorporated
10.3 -- Retirement Plan for Employees of Richton International
Corporation dated February 1986
-- Incorporated by reference to Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the fiscay year ended April
30, 1986
10.4 -- Amendment dated April 10, 1987 to Retirement Plan for
Employees of Richton International Corporation
-- Incorporated by reference to Exhibit 10(k) to Registrant's
Annual Report on Form 10-K for the fiscal year ended April
30, 1987
10.5 -- Amendment dated August 1, 1989 to Retirement Plan for
Employees of Richton International Corporation
-- Incorporated by reference to Exhibit (10m) to Registrant's
Annual Report on Form 10-K for the fiscal year ended April
30, 1990
10.6 -- Amendment dated December 31, 1994 to Retirement Plan for
Employee of Richton International Corporation
-- Incorporated by reference to Exhibit 10(f) to Registrant's
Annual Report on Form 10-KSB for the year ended December 31,
1994
10.7 -- Restated Excess Benefit Plan for Salaried Employees of
Richton International Corporation dated July 15, 1986
-- Incorporated by reference to Exhibit 10(l) to Registrant's
Annual Report on Form 10-K for the fiscal year ended April
30, 1987
10.8 -- Amendment dated June 4, 1987 to Restated Excess Benefit Plan
for Salaried Employees of Richton International Corporation
-- Incorporated by reference to Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the fiscal year ended April
30, 1987
10.9 -- Rights Agreement dated January 26, 1987
-- Incorporated by reference to Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the fiscal year ended April
30, 1987
10.10 -- Amendment dated November 1, 1994 to Rights Agreement
-- Incorporated by reference to Exhibit 10(j) to Registrant's
Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1994
10
<PAGE>
10.11 -- Loan and Financing Agreement dated October 27, 1993 between
Michigan National Band and Century Supply Corp.
-- Incorporated by reference to Exhibit 28.1 to Registran'ts
Current report on Form 8-- for January 5, 1994
10.12 -- Letter Agreement dated March 21, 1994 amending the Credit
Note with Michigan National Bank
-- Incorporated by reference to Exhibit 10(l) to Registrant's
Annual Report on Form 10-KSB for the year ended December 31,
1994
10.13 -- Letter Agreement dated June 23, 1994 amending the Credit
Note with Michigan National Bank
-- Incorporated by reference to Exhibit 10(m) to Registrant's
Annual Report on Form 10-KSB for the year ended December 31,
1994
10.14 -- Letter Agreement dated April 27, 1995 amending the Loan and
Financing Agreement dated October 27, 1993 between Michigan
National Bank and Century Supply Corp.
10.15 -- Letter Agreement dated June 17, 1996 amending the Loan and
Financing Agreement dated October 27, 1993 between Michigan
National Bank and Century Supply Corp.
10.16 -- A Term note for $3.0 million dated October 27, 1993 made by
Century Supply Corp. (the "borrower") in favor of Michigan
National Bank (the "payee")
-- Incorporated by reference to Exhibit 28.2 to Registrant's
Current report on Form 8-- for January 5, 1994
10.17 -- A Credit note for $8.0 million dated October 27, 1993 made
by Century Supply Corp. (the "borrower") in favor of
Michigan National Bank (the "payee")
-- Incorporated by reference to Exhibit 28.3 to Registrant's
Current report on Form 8-- for January 5, 1994
10.18 -- Subordination Agreement dated October 27, 1993 among
Michigan National Bank (the "bank), Century Supply Corp.
(the "borrower") and Richton International Corporation (the
"Subordinating Creditor")
-- Incorporated by reference to Exhibit 28.4 to Registrant's
Current report on Form 8-- for January 5, 1994
10.19 -- Subordination Agreement dated October 27, 1993 among
Michigan National Bank (the "bank"), Richton International
Corporation and Ernest Hodas, as Trustee of the Ernest Hodas
Revocable Trust (the "Trustee") and the Hodas Family Limited
Partner-ship") and Ernest Hodas (collectively referred to a
"Subordinating Creditor")
-- Incorporated by reference to Exhibit 28.5 to Registrant's
Current report on Form 8-- for January 5, 1994
10.20 -- The Purchase Price Promissory Note for $500,000 dated
October 27, 1993 between Century Acquisition Corporation and
Ernest Hodas as agent for the Hodas Family Limited
Partner-ship and Ernest Hoads as Trustee of the Ernest Hodas
Revocable Trust
-- Incorporated by reference to Exhibit 2.2 to Registrant's
Current report on Form 8-- for January 5, 1994
10.21 -- Non-Competition and Non-Disclosure Agreement dated October
27, 1993 by and between Ernest Hodas and Century Supply
Corp.
-- Incorporated by reference to Exhibit 2.3 to Registrant's
Current report on Form 8-- for January 5, 1994
10.22 -- Consulting Agreement dated October 27, 1993 by and between
Century Supply Corp. and Ernest Hodas
-- Incorporated by reference to Exhibit 2.4 to Registrant's
Current report on Form 8-- for January 5, 1994
10.23 -- Promissory Note for $510,691 dated October 27, 1993 between
Century Supply Corp. and Ernest Hodas
-- Incorporated by reference to Exhibit 2.5 to Registrant's
Current report on Form 8-- for January 5, 1994
11
<PAGE>
10.24 -- Guaranty dated October 27, 1993 by Richton International
Corporation in favor of the Hodas Family Limited
Partner-ship and Ernest Hodas, as Trustee of the Ernest
Hodas Revo-cable Trust and Ernest Hodas
-- Incorporated by reference to Exhibit 2.6 to Registrant's
Current report on Form 8-- for January 5, 1994
10.25 -- Subordination Agreement dated October 27, 1993 between
Michigan National Bank, Century Supply Corp. (the
"borrower"), Ernest Hodas, as Trustee of the Ernest Hodas
Revocable Trust and the Hodas Family Limited Partnerhsip and
Ernest Hodas (collectively referred to as "Subordinating
creditor")
-- Incorporated by reference to Exhibit 28.6 to Registrant's
Current report on Form 8-- for January 5, 1994
10.26 -- Stock Pledge Agreement dated October 27, 1993 by and between
Richton International Corporation and Michigan National Bank
-- Incorporated by reference to Exhibit 28.6 to Registrant's
Current report on Form 8-- for January 5, 1994
10.27 -- Stock Pledge Agreement dated April 27, 1995 by and between
Richton International Corporation and Michigan National Bank
10.28 -- Guarantee dated October 27, 1993 by Richton International
Corporation and issued to Michigan National Bank on behalf
of Century Supply Corp.
-- Incorporated by reference to Exhibit 28.8 to Registrant's
Current report on Form 8-- for January 5, 1994
10.29 -- Amended and restated Guaranty Agreement dated April 27, 1995
by Richton International Corporation and issued to Michigan
National Bank on behalf of Century Supply Corp.
10.30 -- Series A Warrant to Purchase 236,250 shares of Common Stock
of Richton International Corporation
-- Incorporated by reference to Exhibit 28.9 to Registrant's
Current report on Form 8-- for January 5, 1994
10.31 -- Subordinated Note issued by Richton International Corp.
dated October 26, 1993 to Mr. Fred R. Sullivan in the
principal amount of $1,181,250.
-- Incorporated by reference to Exhibit 28.10 to Registrant's
Current report on Form 8-- for January 5, 1994
10.32 -- Subordinated Promissory Note for $1.0 million dated March
29, 1995 between CBE Acquisition Corp. and CBE Liquidating
Corp.
-- Incorporated by reference to Exhibit 2.2 to Registrant's
Current report on Form 8K-- for April 5, 1995
10.33 -- Subordinated Promissory Note for $1.0 million dated March
29, 1995 between Richton International Corporation and Fred
R. Sullivan
-- Incorporated by reference to Exhibit 2.3 to Registrant's
Current report on Form 8K-- for April 5, 1995
10.34 -- Guaranty dated March 29, 1995 by Richton International Corp.
in favor of the CBE Liquidating
-- Incorporated by reference to Exhibit 2.4 to Registrant's
Current report on Form 8K-- for April 5, 1995
10.35 -- Guaranty dated March 29, 1995 by Century Supply Corp. in in
favor of the CBE Liquidating Corp.
-- Incorporated by reference to Exhibit 2.5 to Registrant's
Current report on Form 8K-- for April 5, 1995
12
<PAGE>
(11) Exhibit
11.1 -- Calculation of earnings per share
(21) Exhibits-- Subsidiaries of the Registrant
(99) Exhibits-- Other
99.1 -- Fairness Opinion received from Quirk, Carson & Pettit
relating to the $1.0 million the promissory note agreement
between F.R. Sullivan and the Registrant
-- Incorporated by reference to Exhibit 99.1 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995
99.2 -- Fairness Opinion received from Quirk, Carson & Pettit
relating to the $1.0 million the promissory note agreement
between F.R. Sullivan and the Registrant
-- Incorporated by reference to Exhibit 99.1 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1995
(b) Reports on Form 8-K
None.
13
<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.
RICHTON INTERNATIONAL CORPORATION
(Registrant)
By: /s/ FRED R. SULLIVAN
---------------------------------
Fred R. Sullivan
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: March 7, 1997
By: /s/ CORNELIUS F. GRIFFIN
---------------------------------
Cornelius F. Griffin
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ FRED R. SULLIVAN Chairman of the Board and March 7, 1997
----------------------- Chief Executive Officer
Fred R. Sullivan (Principal Executive Officer)
/s/ CORNELIUS F. GRIFFIN Vice President and Chief March 7, 1997
----------------------- Financial Officer (Principal
Cornelius F. Griffin Financial and Accounting Officer)
/s/ NORMAN E. ALEXANDER Director March 7, 1997
Norman E. Alexander
/s/ PHILIPPE GUTZWILLER Director March 7, 1997
-----------------------
Philippe Gutzwiller
/s/ THOMAS J. HILB Director March 7, 1997
-----------------------
Thomas J. Hilb
/s/ STANLEY J. LEIFER Director March 7, 1997
-----------------------
Stanley J. Leifer
/s/ PETER A. WHITE Director March 7, 1997
-----------------------
Peter A. White
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Richton International Corporation:
We have audited the accompanying consolidated balance sheets of Richton
International Corporation (a Delaware corporation) and subsidiaries as of
December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Richton
International Corporation and subsidiaries, as of December 31, 1996 and 1995 and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Detroit, Michigan
March 6, 1997
F-1
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents .................................... $ 372,000 $ 467,000
Notes and Accounts Receivable, net of allowance for
doubtful accounts of $700,000 and $590,000, respectively . 13,004,000 8,882,000
Inventories .................................................. 9,550,000 6,511,000
Prepaid Expenses and Other Current Assets .................... 467,000 442,000
Deferred Taxes ............................................... 568,000 420,000
------------ ------------
Total Current Assets ....................................... 23,961,000 16,722,000
Property, Plant and Equipment, ................................. 2,287,000 1,419,000
Less: Allowance for Depreciation and Amortization ............ (747,000) (445,000)
------------ ------------
1,540,000 974,000
Other Assets: Deferred taxes ................................... 2,224,000 3,044,000
Goodwill ..................................................... 4,050,000 5,201,000
Other ........................................................ 599,000 173,000
------------ ------------
TOTAL ASSETS ................................................... $ 32,374,000 $ 26,114,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long Term Debt ............................ $ 1,879,000 $ 2,004,000
Notes Payable ................................................ 7,947,000 5,275,000
Accounts Payable,Trade ....................................... 3,978,000 2,015,000
Accrued Liabilities .......................................... 2,387,000 2,495,000
Deferred Income .............................................. 2,160,000 1,904,000
------------ ------------
Total Current Liabilities .................................. 18,351,000 13,693,000
Noncurrent Liabilities
Long Term Senior Debt ........................................ 5,200,000 4,400,000
Subordinated Debt ............................................ 3,665,000 4,754,000
Less: Current Portion of Long-term Debt ...................... (1,879,000) (2,004,000)
------------ ------------
6,986,000 7,150,000
Stockholders' Equity
Preferred Shares,$1.00 par value; authorized
500,000 shares; none issued ................................ -- --
Common Shares, $.10 par value; authorized
4,000,000 shares; issued and outstanding 3,088,347 shares at
December 31, 1996 and December 31, 1995 .................... 309,000 309,000
Additional Paid-in Capital ................................... 17,661,000 17,661,000
Retained Earnings ............................................ (10,518,000) (12,284,000)
Treasury Stock ............................................... (415,000) (415,000)
------------ ------------
Total Shareholders' Equity ................................. 7,037,000 5,271,000
------------ ------------
Total Liabilities and Shareholders' Equity ................... 32,374,000 26,114,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
F-2
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Twelve Months ended December 31
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net Sales ............................................. $ 87,750,000 $ 66,659,000 $ 50,306,000
Cost of Sales ......................................... 62,966,000 48,101,000 36,202,000
------------ ------------ ------------
Gross Profit .......................................... 24,784,000 18,558,000 14,104,000
Selling, general & administrative expenses ............ 20,952,000 15,092,000 11,402,000
Interest (income) ..................................... (407,000) (349,000) (339,000)
Interest expense ...................................... 1,623,000 1,441,000 1,156,000
------------ ------------ ------------
Income before Taxes ................................... 2,616,000 2,374,000 1,885,000
Provision for income taxes ............................ 850,000 1,009,000 881,000
------------ ------------ ------------
Net Income ............................................ $ 1,766,000 $ 1,365,000 $ 1,004,000
============ ============ ============
Net Income Per share: ................................. $ 0.54 $ 0.43 $ 0.34
============ ============ ============
Average Common and Common Equivalent Shares Outstanding 3,290,000 3,161,000 2,975,000
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
F-3
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Cumulative
Common Paid-in Accumulated Treasury Translation
Shares Capital Deficit Stock Adjustment
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $ 292,000 $ 17,277,000 $(14,653,000) $ (415,000) $ --
Issuances of 109,097
common shares ........... 11,000 213,000
Cumulative Translation
Adjustment .............. 3,000
Net Income ................. 1,004,000
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1994 303,000 17,490,000 (13,649,000) (415,000) 3,000
Issuances of 58,877
common shares ........... 6,000 171,000
Cumulative Translation
Adjustment .............. (3,000)
Net Income ................. 1,365,000
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995 309,000 17,661,000 (12,284,000) (415,000) 0
Net Income ................. 1,766,000
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1996 $ 309,000 $ 17,661,000 $(10,518,000) $ (415,000) $ 0
============ ============ ============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
F-4
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Twelve Months ended December 31
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income ........................................... $ 1,766,000 $ 1,365,000 $ 1,004,000
Reconciliation of net cash provided by (used by)
operating activities:
Depreciation and amortization of assets ...... 302,000 424,000 207,000
Amortization of goodwill and impairment ...... 1,558,000 1,000,000
Deferred income .............................. (115,000) (95,000)
Other working capital items, assets .......... (4,839,000) (3,658,000) 297,000
Other working capital items, liabilities ..... 625,000 131,000
Decrease in deferred taxes ................... 672,000 1,275,000 683,000
Decrease (increase) in other assets .......... 142,000 (180,000) 41,000
----------- ----------- -----------
Net cash provided by operating activities ......... 111,000 262,000 2,232,000
INVESTING ACTIVITIES
Capital expenditures ................................. (350,000) (147,000) (292,000)
Cash (paid) or received for businesses acquired,net .. (2,093,000) (166,000)
----------- ----------- -----------
Net cash used by investing activities ............. (2,443,000) (313,000) (292,000)
FINANCING ACTIVITIES
Increase (decrease) of long-term debt ................ 1,400,000 (1,310,000) (1,622,000)
Increase (decrease) in subordinated debt ............. (1,235,000)
Repayment of term-debt ............................... (600,000)
Increase (decrease) in line of credit ................ 2,672,000 1,800,000 (354,000)
----------- ----------- -----------
Net cash provided by (used in) financing activities 2,237,000 490,000 (1,976,000)
Effect of exchange rate on cash balances ............. (3,000) 3,000
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents ..... (95,000) 436,000 (33,000)
Cash and cash equivalents, beginning of period ....... 467,000 31,000 64,000
----------- ----------- -----------
Cash and cash equivalents, end of period ............. $ 372,000 $ 467,000 $ 31,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash payments during the period for interest ...... $ 1,391,000 $ 1,408,000 $ 1,030,000
Cash payments during the period for income taxes .. $ 430,000 $ 366,000 $ 61,000
</TABLE>
Supplemental Disclosure of Non-Cash Activities
During the year ended December 31, 1995, the Company issued 58,877 shares
of the Company's common stock to the Chairman in lieu of compensation and
interest owed to him of $177,000.
During 1995, the Company issued $3.0 million of term debt and $2.0 million
of unsecured subordinated notes to acquire CBE Technologies, Inc.
During the year 1994, the Company issued 109,097 shares of common stock to
the Chairman in lieu of compensation and interest owed to him of $224,000.
The accompanying notes to consolidated financial statements are an
integral part of these consolidated financial statements.
F-5
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business:
Richton International Corporation ("Richton") is a holding company with two
principal subsidiaries, Century Supply Corp. ("Century") and CBE Technologies
Inc, ("CBE"), collectively the "Company." Century is a leading full-service
wholesale distributor of sprinkler irrigation systems, outdoor lighting and
decorative fountain equipment. Branches are in 14 States on the Eastern half of
The United States and Ontario, Canada. Irrigation products have historically
been sold by manufacturers primarily through wholesale distributors. Century is
a major distributor in the United States for three of the four leading original
equipment manufacturers (OEM) in the irrigation systems field.
CBE Technologies, Inc. ("CBE") headquartered in Boston, Massachusetts with
satellite offices in New York, Los Angeles and Portland, Maine is a Systems
Integrator providing, network consulting, design, and installation; network
management and related support; technical services outsourcing; comprehensive
hardware maintenance; and equipment sales. CBE's technical certifications
include; Novell Platinum reseller, Microsoft Channel partner, Banyan
Enterprise/Network dealer, Novell authorized Training Center, as well as a
Novell Authorized Service Center.
2. Summary of Significant Accounting Policies:
Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of Richton and all wholly-owned subsidiaries.
All intercompany accounts and transactions have been eliminated in
consolidation.
As of August 31, 1993 Richton acquired 100% of the issued and outstanding
shares of Century Supply Corp. On March 30, 1995 Richton acquired CBE (See Note
3).
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents--Cash and Cash Equivalents are defined as cash on
demand at a bank, and certificates of deposit and or government securities
purchased with maturities of less than three months.
Allowance For Doubtful Accounts--The Company provides an allowance for
doubtful accounts arising from operations of the business, which allowance is
based upon a specific review of certain outstanding amounts and historical
collection performance. In determining the amount of the allowance, the Company
is required to make certain estimates and assumptions and actual results may
differ from these estimates and assumptions.
Inventories -- The Company values inventory at the lower of cost or market
using the first-in first-out ("FIFO") method of accounting.
Goodwill -- Goodwill is amortized on a straight-line basis over periods of
5--15 years as follows:
<TABLE>
<CAPTION>
Amortization 12/31/95 12/31/96
Period Balance Additions Reductions Balance
------------ ------- --------- ---------- -------
<S> <C> <C> <C> <C> <C>
Typewriter Maintenance .... 5 years 1,700,000 1,310,000(a) 390,000
Computer Maintenance ...... 15 years 3,360,000 167,000 227,000 3,300,000
Irrigation ................ 5 years 141,000 239,000 21,000 360,000
--------- ------- --------- ---------
5,201,000 406,000 1,558,000 4,050,000
========= ======= ========= =========
</TABLE>
(a) Includes third quarter 1996 impairment charge of $.8 million.
F-6
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Long-Lived Assets -- During 1995, the Company adopted the provisions of
Statement of Financial Accounting Standard No. 121 "Accounting for the
Impairment of Long Lived Assets" ("SFAS 121"). SFAS 121 requires, among other
things, that an entity review its long-lived assets and certain related
intangibles for impairment whenever changes in circumstances indicate that the
carrying amount of an asset may not be fully recoverable. As a result, the
Company continually evaluates whether events and circumstances have occurred
that indicate the remaining estimated useful life of long-lived assets,
including goodwill, may not be recoverable. The acquisition of CBE (See Note 3)
resulted in goodwill of approximately $6.0 million which was based on CBE's two
major lines of business - computer maintenance and network installation services
and typewriter services. Subsequent to the acquisition of CBE, the typewriter
contract maintenance business experienced a decline in revenues and it was
determined that expected future cash flows (undiscounted and without interest
charges) would be less than the carrying amount of goodwill allocated to the
typewriter maintenance business. Based on discounted estimated future cash flow,
the Company recorded a write-down of Goodwill in the amount of $1.0 million in
1995, and based on further deterioration of that business, an additional charge
of $.8 million in the third calendar quarter of 1996, which is included in
selling, general and administrative expenses in the consolidated statement of
operations for the respective periods involved.
Deferred Income -- Deferred income represents income received from
customers related to service contracts that extend for specified periods of
time, less than one year. Income is recognized proportionally over the life of
the contract.
Income Taxes -- The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS No. 109). This statement requires the Company to recognize deferred
tax assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
Under this method, deferred tax assets and liabilities are determined based on
the difference between the financial statement carrying amounts and the tax
basis of assets and liabilities.
Accounting for Stock Based Compensation -- The Company has elected to
account for stock-based compensation using the intrinsic value method prescribed
in Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to
Employees," and related interpretations. Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of grant over the amount the employee must pay
to acquire the stock in the accompanying Statements of Income. As supplemental
information, the Company has provided pro forma disclosure of the fair value at
the date of grant of stock options granted during 1995 and 1996 in Note 10, in
accordance with the requirements of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123).
3. Acquisitions:
In August 1993, Richton acquired all of the outstanding shares of Century
for $6.2 million in cash, 150,000 shares of Richton's common stock and $1.7
million payable to the former owner over a period of six years, a portion of
which is subject to a right of off-set, as defined. The transaction has been
accounted for using the purchase method of accounting. Accordingly, the purchase
price has been allocated to the assets acquired and the liabilities assumed
based on the estimated fair value at date of acquisition. The excess of purchase
price over the estimated fair value of the net assets acquired has been recorded
as a Deferred Tax Benefit reflecting the likely ability to utilize Richton's net
operating loss carry forward, which benefit will be amortized as earnings are
realized. (See Note 5) The operating results of Century are included in the
Company's consolidated results of operations from the effective date of
acquisition, August 31, 1993.
On March 29, 1995 the Company, through its wholly owned subsidiary,
Century, acquired all the operating assets and business of CBE Technologies,
Inc. for $5.0 million plus assumption of certain liabilities. The $5 million was
financed by bank borrowings of $3.0 million, a $1.0 million unsecured promissory
note to the former owners and a $1 million unsecured subordinated note to the
F-7
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
Chairman of Richton. The note to the Chairman was subject to a fairness opinion
of an independent advisor chosen by Richton's Board of Directors.
The following unaudited pro forma summary presents the 1995 consolidated
results of operations as if the acquisition of CBE had occurred on January 1,
1995. These pro forma results do not purport to be indicative of what would have
occurred had the acquisition been made as of that date or of the results which
may occur in the future.
Twelve Months Ended
December 31 1995
(Unaudited)
-------------------
Net Sales .............................. $69,066,000
===========
Net Income ............................. $ 1,377,000
===========
Net Income per Share ................... $ .44
===========
4. Property and Equipment:
December 31
-----------------------
1996 1995
---------- ----------
Land ........................................... $ 80,000 $ --
Property held for sale or future use ........... 108,000 --
Building and Improvements ...................... 820,000 474,000
Autos and Trucks ............................... 445,000 372,000
Machinery and Equipment ........................ 479,000 242,000
Furniture and Fixtures ......................... 355,000 331,000
---------- ----------
$2,287,000 $1,419,000
Less: Accumulated Depreciation and Amoritization 747,000 445,000
---------- ----------
$1,540,000 $ 974,000
========== ==========
All fixed assets are currently depreciated over five years except building
improvements which are based upon the respective lease terms which are from 2-10
years.
5. Income Taxes:
At December 31, 1996, the Company has deferred tax assets of approximately
$2.8 million. Significant components of the deferred tax assets as of December
31, are as follows:
1996 1995
----------- -----------
Current:
Allowance for bad debts ............. $ 238,000 $ 200,000
Accrued Pension Cost ................ 97,000 97,000
Other ............................... 233,000 123,000
----------- -----------
$ 568,000 $ 420,000
=========== ===========
Long Term:
Net operating loss carry forward .... $ 1,383,000 $ 2,748,000
Goodwill ............................ 666,000 261,000
Depreciation ........................ 40,000
Other ............................... 175,000 (5,000)
----------- -----------
$ 2,224,000 $ 3,044,000
=========== ===========
F-8
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
At December 31, 1996, the Company has available approximately $4,067,000
of net operating loss carry forwards, expiring in varying amounts between 2004
and 2007, as follows:
2004 ............................. $2,114,000
2005 ............................. 6,000
2006 ............................. 276,000
2007 ............................. 1,671,000
----------
$4,067,000
==========
Under SFAS 109, a valuation reserve is not required if it is determined
that it is more likely than not that the related benefit of deferred tax assets
will be realized. Based on prior utilization and estimates of future taxable
income, the company expects that the remaining net operating loss carryforward
will be utilized. As a result, no valuation allowance has been provided. For the
years ended December 31, 1996, 1995 and 1994 $4,014,000, $3,158,000 and
$3,392,000 of net operating loss carry forward has been utilized to offset
taxable income. The provision for income taxes for the three years ended
December 31, 1996 consists of the following:
1996 1995 1994
----------- ----------- -----------
Federal
Current Payable ...... $ 109,000 $ (436,000) $
Deferred ............. 672,000 1,275,000 791,000
State & Local .......... 50,000 151,000 90,000
Foreign ................ 19,000 19,000
----------- ----------- -----------
$ 850,000 $ 1,009,000 $ 881,000
=========== =========== ===========
A reconciliation of the Federal provision for income taxes at the statutory
rate to the actual provision for income taxes for the three years ended December
31, 1996, is as follows:
1996 1995 1994
--- --- ---
Federal ...................... 34% 35% 34%
State & Local ................ 3 7 5
Other ........................ (4) 7
--- ---
33% 42% 46%
=== === ===
6. Statement of Cash Flows:
The components of other working capital items included in the Consolidated
Statement of Cash Flows are as follows:
For Twelve Months Ended
December 31
-----------------------
1996 1995
------- -------
(in thousands)
Receivables .................................... $(3,232) $(2,388)
Inventories .................................... (1,595) (1,238)
Prepaid Expenses ............................... (12) (32)
------- -------
Increase in Working Capital Items, Assets ...... $(4,839) $(3,658)
======= =======
Accounts Payable ............................... 775 (35)
Accrued Expenses ............................... (150) 166
------- -------
Increase Working Capital Items, Liabilities .... $ 625 $ 131
======= =======
F-9
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
7. Bank Borrowing:
During 1996, the Company completed a modification of the Loan and
Financing agreement with its bank. The principal modifications of this agreement
were (a) an increase in the term loan to $5.6 million from $4.2 million, (b) a
reduction in the interest rate on the credit line to prime less .125% or LIBOR
plus 2.35%, from prime, (c) provide for a potential reduction on the interest
rate of the Term loan by adding an option to select LIBOR plus 2.5% on a 30, 60,
or 90 day basis, (d) increase the line of credit facility to $18.0 million from
$15.0 million and increase the basis upon which that line is determined. The
term loan will continue to amortize at the rate of $.2 million per quarter. In
addition, certain financial covenants and distribution restrictions were also
modified. All obligations due the seller or related parties and amounts advanced
by Richton to Century are subordinated to the Agreement. Certain covenants, some
of which are financial in nature, must be maintained. In addition, the Agreement
imposes certain restrictions on the distributions of funds from Century to
Richton.
8. Long-Term Debt:
The Company has the following long-term debt as of December 31, 1996:
1996 1995
---------- ----------
Term note payable to a bank, secured by accounts
receivable, inventory, fixtures and equipment,
interest at prime (8.25% as of December 31, 1996),
payable in quarterly installments of $200,000,
final payment due April 27, 1998. .................. $5,200,000 $4,400,000
Installments payable to former owner of Century,
unsecured and subordinated to the bank debt,
payable in quarterly installments of $50,000,
final payment due September 30, 2001 ............... 668,000 868,000
Note payable to related party, unsecured and
subordinated to bank debt, interest at 9%, payable
in semi-annual installments of $118,125 commencing
April 1996, final payment due October 31, 2000 -
net of discount (A) ................................ 887,000 1,095,000
Note payable to former owner of Century, unsecured
and subordinated to the bank debt, interest at 8% .. 100,000
Notes payable to former owner of Century and
unrelated third-party, unsecured and subordinated
to the bank debt, interest at 9%, payable in
monthly installments of approximately $10,800, due
October 1997 ....................................... 106,000 234,000
Note payable to related party, unsecured and
subordinated to the term note payable to bank,
interest at 10%, payable in 10 installments of
$100,000 on October 15th and May 15th, final
payment April 2000 (B) ............................. 900,000 1,000,000
Note payable to seller's of CBE Technologies,Inc
unsecured and subordinated to the all bank debt,
interest at 9% payable in 10 installments of
$100,000 on October 15th and May 15th, final
payment due May 2000. .............................. 700,000 1,000,000
Other .............................................. 404,000 457,000
---------- ----------
8,865,000 9,154,000
Less - Current Portion ........................... 1,879,000 2,004,000
---------- ----------
$6,986,000 $7,150,000
========== ==========
(A): The Company issued in 1993, 236,250 warrants to acquire 236,250 shares
of the common stock of Richton at $1 3/8 per share in connection with this loan.
The warrants were valued at $143,000.
F-10
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
(B): The Company issued in 1995, 100,000 warrants to acquire 100,000 shares
of Richton's common stock at $3.0 per share - the fair market value at the time
of issuance
The scheduled future maturities of long-term debt at December 31, 1996, are
as follows:
1997 .................................. $1,879,000
1998 .................................. 1,760,000
1999 .................................. 4,565,000
2000 .................................. 633,000
2001 .................................. 28,000
----------
$8,865,000
==========
9. Retirement Plans:
The Company's Richton employees were covered by a noncontributory, defined
benefit plan ( the "Retirement Plan") sponsored by Richton. Effective, January
1, 1995 the Plan was frozen and the accrual of benefits thereafter ceased. The
Company subsequently decided, effective December 31, 1995 to terminate the
Retirement Plan. In respect of this event, Richton during 1996 paid out its
obligations to all of its former employees and participants in the Retirement
Plan. At December 31, 1996 Richton's remaining obligations to three current
employees is estimated at approximately $.55 million in excess of Plan assets,
which has been accrued for in the accompanying financial statements. Because the
amount actually payable is determined based upon interest rates and mortality
assumptions applicable on the date of settlement the actual payment of this
remaining liability may differ from this amount.
Pension expense reflected in the consolidated statements of income for this
Plan was $37,000 and $155,000 in 1995 and 1994, respectively.
Century and CBE have Tax Deferred Savings Plans under Section 401 ( k) (the
"Plans") of the Internal Revenue Code. The Plans allows employees to defer up to
15% of eligible compensation on a pre-tax basis through contributions to the
Plans. In line with the provisions of the Plans, Century has elected to
contribute, for every dollar the employee contributes, 50 % of the employee's
amount, up to 4 % of eligible compensation. Century may also make discretionary
contributions. The charge to income for employer contributions to the Century
Plan was approximately $224,000, $184,000 and $152,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. Century's discretionary
contribution to the Plan were $170,000, $100,000 and $100,000 in each of the
three years ended in December 31, 1996, respectively. CBE has elected to not
contribute to its Plan.
10. Stock Options:
The Company has as part of its 1990 Long-Term Compensation Plan, a Stock
Option Plan ("the Plan"). Richton accounts for this plan under APB Opinion No.
25, under which no compensation cost has been recognized. Had compensation cost
for this plan been determined consistent with SFAS 123 the Company's net income
and earnings per share would have been approximately the same.
1996 1995
------------- -------------
Net Income:
As reported .............. $ 1,766,000 $ 1,365,000
Pro Forma ................ 1,766,000 1,361,000
EPS:
As reported .............. $ .54 $ .43
Pro Forma ................ .54 .43
Because the SFAS 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
F-11
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
The Company may grant options for up to 275,000 shares under the Plan. The
Company has granted options on 275,000 shares through December 31, 1996. Under
the Plan, the option exercise price equals the stock's market price on date of
grant except for options granted to Mr. Sullivan. The exercise price for Mr.
Sullivan's options are at 110% of the current market price at date of grant.
A summary of the status of the Company stock option plan at December 31,
1996, 1995 and 1994 is presented in the table below:
<TABLE>
<CAPTION>
1996 1995 1994
--------------------- --------------------- ---------------------
Wtd Avg Wtd Avg Wtd Avg
Shares ex price Shares ex price Shares ex price
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of Year .. 270,000 $ 2.15 210,000 $ 1.98 125,000 $ 1.89
Granted ........................... 5,000 5.09 60,000 2.72 85,000 2.12
Exercised ......................... -- -- -- -- -- --
Forfeited ......................... -- -- -- -- -- --
Expired ........................... -- -- -- -- -- --
--------- --------- --------- --------- --------- ---------
Outstanding at End of Year ........ 275,000 $ 2.20 270,000 $ 2.15 210,000 $ 1.98
Exercisable at End of Year ........ 270,000 2.15 260,000 2.10 210,000 1.98
</TABLE>
The Company has issued warrants to purchase 336,250 shares of Common Stock
in connection with several debt agreements ( see Note 5). These warrants are
currently exercisable and will expire in seven years from date of issue.
11. Earnings per Common Share and Common Share Equivalent:
Earnings per common share equivalent were calculated on the basis of
3,290,000, 3,161,000 and 2,975,000 weighted average common and common equivalent
shares outstanding in the years ending December 31, 1996, 1995, and 1994,
respectively.
12. Stockholders' Equity:
During 1995 and 1994, respectively, the Company issued 58,877 and 109,097
shares of the Common Stock to its Chairman in lieu of compensation and interest
owed to him of $177,000 and $224,000 respectively. The number of shares issued
was determined based on the quoted market price of the shares at the time of
issuances.
13. Long-term Leases and other Commitments:
The Company leases its corporate offices, distribution facilities and data
processing equipment under agreements which expire at varying dates through
2007. Minimum annual rental commitments at December 31, 1996, are as follows:
1997 ..................................... $1,213,000
1998 ..................................... 1,074,000
1999 ..................................... 881,000
2000 ..................................... 665,000
2001 ..................................... 190,000
Thereafter ............................... 178,000
----------
$4,201,000
==========
Rent expense under the Company's various operating leases was $1,478,000,
$1,374,000 and $1,123,000 for the years ended December 31, 1996, 1995, and 1994
respectively.
F-12
<PAGE>
RICHTON INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- Continued
14. Segment Data:
The Company operates in two industry segments, wholesale distribution, and
computer services. See Notes 1 and 3 for description of businesses and detail of
the 1995 and 1996 acquisitions of business. There are no intersegment sales and
all sales occur in North America. Income (loss) from operations by industry
segment consists of net sales less related cost and expenses. In computing
income (loss) from operations by segment, cost of borrowed funds for working
capital have been included. Corporate includes the general and corporate
expenses and interest, incurred to acquire the two business. Corporate operating
expenses, directly traceable to industry segments, if any, have been allocated
to those segments. Amortization of goodwill and related impairment charges are
considered segment related and accordingly charged to the related industry
segment. Identifiable assets by industry segment are those assets that are used
in the Company's operation in each industry segment and do not include general
corporate assets. General corporate assets consist primarily of cash, deferred
taxes, corporate property.
Corporate
Wholesale Computer Charges/
Distribution Services Interest Total
------------ -------- -------- -------
(in millions)
------------------------------------------------
Sales ................... $ 73.8 $ 14.0 $ 87.8
======= ======= ======= =======
Pre-Tax Income .......... 5.5 (2.0) $ (.9) $ 2.6
======= ======= ======= =======
Identifiable Assets ..... $ 23.0 $ 6.4 $ 2.8 $ 32.2
======= ======= ======= =======
15. Shareholder Rights Plan:
On January 26, 1988, the Board of Directors of the Company declared a
dividend distribution of one Right for each outstanding share of Common Stock,
to stockholders of record at the close of business on February 5, 1988 Except as
set forth below, each Right entitles the registered holder to purchase from the
Company one one-hundredth of a shares of Series A Preferred Stock, par value
$1.00 per share, at a price of $14.00 (the "Purchase Price"), subject to
adjustment. The Purchase Price shall be paid in cash. The Description and terms
of the Rights are set forth in the Rights Agreement (the "Right Agreement")
between the Company and First City Transfer Company as Rights Agent. Initially,
no separate Rights Certificate will be distributed. Until the earlier to occur
of (i) 20 business days following a public announcement that a person or group
of affiliated or associated persons (an "Acquiring Person") has acquired, or
obtained the right to acquire, beneficial ownership of 30% or more of the
outstanding Common Stock or (ii) 20 business days following as defined the
commencement of a tender offer or exchange offer if, upon consummation thereof,
such person or group would be the beneficial owner of 30% or more of such
outstanding Common Stock (the earlier of such dates being called the
"Distribution Date"), the Rights will be evidenced, with respect to any Common
Stock outstanding as of the Record Date, by the certificates representing such
Common Stock. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights will be mailed to holders of record of the
Common Stock as of the close of business on the Distribution Date and,
thereafter, such separate Rights Certificates alone will evidence the Rights. As
of December 31, 1996 no Rights have been issued.
F-13
THIRD AMENDMENT TO LOAN AND FINANCING AGREEMENT
This Third Amendment to Loan and Financing Agreement ("Amendment") is
entered into on this 27 day of April, 1995, by and among Michigan National Bank,
a national banking association with offices located at 27777 Inkster Road,
Farmington Hills, Michigan 48333 ("Bank"), Century Supply Corp., a Michigan
corporation with offices located at 31691 Dequindre Avenue, Madison Heights, MI
48071-1522 ("Borrower") and Richton International Corporation, a Delaware
corporation with offices located at 340 Main Street, Madison, New Jersey 07940
("Guarantor").
RECITALS
A. On October 27, 1993, Bank and Borrower executed a Loan and Financing
Agreement (as amended from time to time hereafter, the "Loan Agreement")
pursuant to which Bank extended certain financing to Borrower;
B. The Loan Agreement has been amended pursuant to a First Amendment to
Financing Agreement dated March 21, 1994 and a letter agreement dated June 23,
1994;
C. Borrower has requested that Bank modify the Loan Agreement to extend
additional financing and modify certain terms and conditions and Bank is willing
to do so, subject to the terms and conditions contained in this Amendment;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties agree as follows:
1. Capitalized terms not defined in this Amendment shall have the meaning
given to them in the Loan Agreement.
2. Section 1.6 of the Loan Agreement is amended to read in its entirety as
follows:
1.6 "Borrowing Base" means and includes an amount equal to the aggregate of
Eighty percent (80%) of the Security Value of Eligible Accounts plus an
amount equal to (x) an amount equal to 50% of Eligible Inventory from
February 1 of each year until August 31 of each year, but in an amount
which shall not exceed Four Million Five Hundred Thousand and 00/100
($4,500,000) or (y) an amount equal to 25% of Eligible Inventory during the
period from September 1 of each year until January 31 of each year.
3. The Loan Agreement is amended to add the following definitions as
Sections 1.8.A and 1.8.B.:
1.8.A. "CBE" means CBE Acquisition Corporation, a Delaware corporation.
1
<PAGE>
1.8.B. "CBE Acquisition" means the acquisition by CBE of all of the assets
and the assumption by CBE of certain of the liabilities of CBE
Technologies, Inc., a Massachusetts corporation.
4. Section 1.9 of the Loan Agreement is amended to read in its entirety as
follows:
1.9 "Collateral" means and includes all goods, Equipment, Inventory,
Accounts Receivable, contract rights, general intangibles, fixtures,
chattel paper, instruments and/or documents whether now owned or
hereinafter acquired by Borrower, wheresoever located and the proceeds
and/or products thereof, including all returns and/or repossessions thereof
and all personal property which is now, or may hereafter come within the
control and/or possession of Bank. Collateral shall also specifically
include (i) all of the issued and outstanding capital stock of CBE and (ii)
an assignment of key man life insurance on Wayne Miller, in an amount not
less than One Million Five Hundred Thousand and 00/100 Dollars
($1,500,000.00).
5. Section 1.12(a)(ii) of the Loan Agreement is amended to read in its
entirety as follows:
(ii) with regard to any Accounts Receivable which by its terms does not
become due and payable until after the 10th day of the month next following
the month in which such Accounts Receivable shall arise but which shall
become due and payable before Sixty (60) days after such date, all such
Accounts Receivable in the aggregate at any one time outstanding in excess
of Three Million Dollars and 00/100 ($3,000,000.00).
6. Section 1.21 of the Loan Agreement is hereby deleted.
7. Section 1.33 of the Loan Agreement is amended to read in its entirety as
follows:
1.33. "Subordinated Indebtedness" means and refers to that certain
indebtedness owing by Borrower to those holders set forth on the Schedule
of Subordinated Indebtedness attached to, made a part of and labeled
Exhibit 1.33 to the Third Amendment to Loan Agreement, the payment of which
is subordinated in time and right of payment to the Indebtedness pursuant
to the Subordination Agreements, as defined in Section 1.34 of the Loan
Agreement.
8. Section 2 of the Loan Agreement is deleted in its entirety and replaced
with the following Section 2:
"2.1 Bank does loan to Borrower and Borrower does borrow from Bank the sum
of Four Million Eight Hundred Thousand and 00/100
2
<PAGE>
Dollars ($4,800,000.00) (hereinafter referred to as the "Term Loan"). The
proceeds of the Term Loan shall be used solely for the purpose of (i)
providing Borrower with the funds required to pay and refinance the
Indebtedness evidenced by that term note dated October 27, 1993 pursuant to
which Borrower borrowed Three Million and 00/100 Dollars from Bank and (ii)
providing Borrower with funds to finance the CBE Acquisition.
2.2 Borrower promises and agrees to repay the Term Loan, with interest, in
accordance with the terms and conditions hereof and with the Promissory
Note (hereinafter referred to as the "Term Note") executed by Borrower on
April _, 1995, and any extensions or renewals, which Term Note shall be
payable with interest at the main office of the Bank as follows:
(a) the principal shall be repaid in quarterly installments of not
less than Two Hundred Thousand and 00/100 Dollars ($200,000.00) each,
which sums do not include interest, commencing on June 30, 1995 and
continuing on each September 30, December 31, March 31 and June 30
thereafter, until April _, 1998, at which time the then outstanding
principal balance shall become due and payable, in its entirety.
Installments of principal as provided above have been calculated based
upon an amount necessary to amortize the entire debt evidenced under
the Term Note, without interest, over a six (6) year period. Borrower
acknowledges that the above described amortization shall result in a
balloon payment due upon maturity of the Term Note.
(b) Interest on the Term Note shall be paid on each June 30, September
30, December 31 and March 31 during the term of the Term Note at the
per annum rate equal to Michigan National Bank Prime Rate, as declared
from time to time, computed on the basis of a 360 day year for the
actual number of days elapsed in a month, until April _, 1998, at
which time all accrued and unpaid interest shall be due and payable in
its entirety. After maturity (whether by acceleration or otherwise),
interest shall be at the per annum rate of Two percent in excess of
the foregoing rate.
(c) All payments received hereunder on the Term Note shall be applied
first to the payment of interest and, thereafter, to the payment of
principal.
2.3 Bank may, at its option, charge Borrower's account(s) maintained at the
Bank with the amount of any installment of principal and/or interest at any
time on or after the date such installment becomes due.
3
<PAGE>
2.4 Borrower shall have the right to prepay, without penalty, all or any
part of the Term Loan; provided, however, that all accrued interest on the
principal outstanding balance of the Term Loan shall be paid simultaneously
with such prepayment, and that all principal prepayments shall be applied
to the principal installments hereunder in the inverse order of their
maturity.
2.5 In consideration of Bank's agreement to extend the Term Loan to the
Borrower, Borrower agrees to pay Bank, in addition to all other sums
payable pursuant to the Term Loan, the sum of Seven Thousand Five Hundred
and 00/100 Dollars ($7,500.00) as a commitment fee."
9. Section 3.1 of the Loan Agreement is amended to read in its entirety as
follows:
"3.1 Provided that no Event of Default exists under this Loan and Financing
Agreement and provided that no event has occurred and is continuing which
with the passage of time would cause an Event of Default hereunder, Bank
shall make loans to Borrower from time to time, but in no event after April
_, 1996, in an aggregate principal amount up to, but not exceeding at any
one time, the lesser of the Borrowing Base or the sum of Fifteen Million
and 00/100 Dollars ($15,000,000.00) (hereinafter referred to as "Credit
Loan"). The proceeds of the Credit Loan shall be used solely for Borrower's
general working capital purposes."
10. Section 3.2(b) of the Loan Agreement is hereby amended to read in its
entirety as follows:
"(b) Interest on said Credit Loan shall be payable monthly, at the per
annum rate equal to the Michigan National Bank Prime Rate, as declared from
time to time, computed on the basis of a 360 day year for the actual number
of days elapsed in a month. After maturity (whether by acceleration or
otherwise), interest shall be at the per annum rate of Two percent in
excess of the foregoing rate."
11. Section 5.3 of the Loan Agreement is hereby amended to read as follows:
"5.3 Except for CBE and Century Supply Corp. of Canada, Ltd., Borrower does
not own or have an interest in any subsidiary corporations, partnerships,
joint ventures or other business organizations."
12. The Loan Agreement is amended to add the following 6.8.A:
4
<PAGE>
"6.8.A. Furnish to Bank, a copy of Richton's Form 10-K Annual Reports
within ten (10) days after filing the same with the Securities and Exchange
Commission."
13. Section 7.2 of the Loan Agreement is amended to add the following
sentence as the last sentence of said Section:
"For the purposes of the limitation contained in this Section 7.2, the CBE
Acquisition shall be deemed to be a permitted Investment."
14. Section 7.7 of the Loan Agreement is amended to add the following
sentence as the last sentence of said Section:
"If Borrower's net income exceeds One Million Eight Hundred Thousand and
00/ 100 Dollars ($1,800,000) for the year ended December 31, 1995, then the
amount of Permitted Distributions shall be increased to Six Hundred
Thousand and 00/100 Dollars ($600,000.00)."
15. Clause (ii) in Section 7.9 of the Loan Agreement is amended to read as
follows:
"(ii) the sum of Four Hundred Thousand and 00/100 in any calendar year
thereafter"
16. Sections 7.21, 7.23, 7.24 and 7.26 of the Loan Agreement are deleted.
17. Section 7.22 of the Loan Agreement is amended to read in its entirety
as follows:
"7.22 Suffer of permit the ratio of its total liabilities, current and long
term, less Subordinated Debt, to its Tangible Net Worth plus Subordinated
Debt, greater than the following ratios as of December 31 of each of the
following fiscal periods:
(i) for the fiscal year ending December 31, 1994, 2.0:1;
(ii) for the fiscal year ending December 31, 1995, 3.75:1;
(iii) for the fiscal year ending December 31, 1996, 3.0:1.
As used herein, the term "Tangible Net Worth" shall have its meaning in
accordance with generally accepted accounting principles; provided,
however, there shall be excluded from the computation of Tangible Net Worth
all intangible assets in the nature of good will, patents, copyrights,
secret processes and other such intangible items as Bank may determine; and
5
<PAGE>
further provided, Bank may exclude from or reduce the valuation of assets
comprising Tangible Net Worth those Accounts and/or Accounts Receivable and
items or amounts of Inventory, Equipment and other properties which it
deems should be written off or reduced to more accurately reflect the net
worth of Borrower."
18. Section 7.25 is amended to read in its entirety as follows:
"7.25 Suffer or permit its "Tangible Net Worth plus Subordinated Debt" to
be reduced below the following amounts as of December 31 of each of the
following fiscal periods:
(i) for the fiscal year ending December 31, 1994, not less than Two
Million Five Hundred Thousand and 00/100 Dollars ($2,500,000.00);
(ii) for the fiscal year ending December 31, 1995, not less than Three
Million and 00/100 Dollars ($3,000,000.00);
(iii) for the fiscal years ending December 31, 1996 and thereafter,
not less than Four Million and 00/100 Dollars ($4,000,000.00).
As used herein, the term Tangible Net Worth shall have the meaning defined
in Section 7.22."
19. By executing this Amendment, Borrower is expressly reconfirming the
truthfulness of all representations, warranties and covenants contained in the
Loan Agreement as of the date of this Amendment. Borrower further certifies that
it has no knowledge, after due inquiry, of any Event of default or act which
with the passage of time, delivery of notice or both, would constitute an Event
of Default hereunder. Borrower agrees to provide Bank with corporate resolutions
authorizing the execution and delivery of this Amendment and the documents
executed in conjunction with the Amendment and the performance of its
obligations to Bank.
20. Guarantor consents to the modifications contained in this Amendment and
expressly acknowledges that the Guaranty remains in full force and effect.
Guarantor agrees to provide Bank with corporate resolutions authorizing the
execution and delivery of this Amendment and the documents executed in
conjunction with the Amendment and the performance of its obligations to Bank.
21. Except as expressly modified by this Amendment, all of the terms,
conditions and provisions contained in the Loan Agreement remain in full force
and effect.
6
<PAGE>
22. This Amendment is governed by and construed in accordance with the laws
of the State of Michigan, without reference to choice of law provisions. This
Amendment may only be modified by a written agreement signed by all parties
hereto.
IN WITNESS WHEREOF, this Third Amendment to Loan and Financing Agreement
has been duly executed and delivered as of the date first above written.
MICHIGAN NATIONAL BANK, a national
banking association
/s/ Joseph M. Redoutey
-----------------------------------
By: Joseph M. Redoutey
Its: Second Vice President
Century Supply Corp., a Michigan
corporation
/s/ Wayne R. Miller
-----------------------------------
By: Wayne R. Miller
Its: President
Richton International Corporation,
a Delaware corporation
/s/ Cornelius F. Griffin
-----------------------------------
By: Cornelius F. Griffin
Its: Vice President - Finance
7
FOURTH AMENDMENT TO LOAN AND FINANCING AGREEMENT
This Fourth Amendment to Loan and Financing Agreement (the "Amendment") is
entered into on this 17th day of June, 1996, by and among Michigan National
Bank, a national banking association with offices located at 27777 Inkster Road,
Mail Code 10-36, Farmington Hills, Michigan 48333-9065 (the "Bank"), Century
Supply Corp., a Michigan corporation with offices located at 31691 Dequindre
Road, Madison Heights, Ml 48071-1522 (the "Borrower") and Richton International
Corporation, a Delaware corporation with offices located at 340 Main Street,
Madison, New Jersey 07940 (the "Guarantor"").
RECITALS
A. On October 27, 1993, Bank and Borrower executed a Loan and Financing
Agreement (as amended from time to time, the "Loan Agreement") pursuant to which
Bank extended certain financing to Borrower.
B. The Loan Agreement has been amended pursuant to a First Amendment to
Financing Agreement dated March 21, 1994, a letter agreement dated June 23, 1994
and a Third Amendment to Loan and Financing Agreement dated April 27, 1995.
C. Borrower has requested that Bank modify the Loan Agreement to extend
additional financing and modify certain terms and conditions and Bank is willing
to do so, subject to the terms and conditions contained in this Amendment.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is expressly acknowledged, the parties agree as follows:
1. Capitalized terms not defined in this Amendment shall have the meaning
given to them in the Loan Agreement.
2. Section 1.6 of the Loan Agreement is amended to read in its entirety as
follows:
"1.6 "Borrowing Base" means and includes an amount equal to the aggregate
of 80% of the Security Value of Eligible Accounts plus 50% of Eligible Inventory
from February through August of each year but in an amount which shall not
exceed Four Million and 00/100 Dollars ($4,000,000.00) or 30% of Eligible
Inventory from September through January of each year."
3. The Loan Agreement is amended to add the following Section 1.6.1, which
shall read in its entirety as follows:
"1.6.1 "Borrowing Base-CBE" means and includes an amount equal to an
aggregate of 80% of the Security Value of Eligible Accounts."
4. The last sentence of Section 1.9 of the Loan Agreement is amended to
read in its entirety as follows:
"Collateral shall also specifically include {i) all of the issued and
outstanding capital stock of CBE which may be pledged by Guarantor to
secure its obligations under the Guaranty and (ii) an assignment of key man
life insurance on Wayne Miller, in an amount not less than One Million Five
Hundred Thousand and 00/100 Dollars {$1,500,000.00)."
<PAGE>
5. The Loan Agreement is amended to add the following Sections 1.21, 1.21.1
and 1.21.2, which shall read in their entirety as follows:
"1.21 LIBOR means, with respect to any LIBOR Interest Period for which
LIBOR is the Index referenced when calculating the Effective Interest Rate,
(A) the London Interbank Offered Rate, determined as the arithmetic mean,
truncated to the nearest one-hundredth of a percent, of interbank interest
rates offered by major banks in the London, United Kingdom market at 11:00
a.m. London Time two (2) Business Days immediately preceding the
commencement of the LIBOR Interest Period for immediately available U.S.
dollar denominated deposits delivered on the first day of the LIBOR
Interest Period for the number of days comprised therein, as referenced and
reported by one of the following sources, selected by Bank on an
availability basis in descending order of priority: (1 } the Dow Jones
Telerate System "LIBO Page" report of such interest rates as determined by
Reuter's News Service; (21 the Dow Jones Telerate System "Page 3750" report
of such interest rates as determined by the British Bankers Association; or
{3) the Wall Street Journal, Midwest Edition, report of such interest rate;
or (4) any other generally accepted authoritative source as Bank may
reference (the "Unadjusted LIBOR"); (B) AS ADJUSTED for the LIBOR Reserve,
if any, in accordance with the formula:
LIBOR = Unadjusted LIBOR / (1 - LIBOR Reserve).
LIBOR, as so determined, will be the fixed rate of interest
utilized to calculate the Effective Interest Rate for each
calendar day of such LIBOR Interest Period.
1.21.1 LIBOR Interest Period means, relative to a Loan for which LIBOR is
referenced as the Index, the period of thirty (30) days, sixty (60) days or
ninety (90) days commencing with, and including, the date on which such
Loan is made or on which LIBOR is first referenced as the Index for such
Loan, if later, and each successive such period commencing with, and
including, the first Business Day following the last day of the immediately
preceding LIBOR Interest Period; provided that:
(a) if any LIBOR Interest Period otherwise would end on a day which is
not a Business Day, such LIBOR Interest Period will end on the next
succeeding Business Day unless such next succeeding Business Day is
the first Business Day of a calendar month, in which case such LIBOR
Interest Period will end on the Business Day next preceding such
numerically corresponding day; and,
(b) if any LIBOR Interest Period otherwise would end on a day which is
later than the Due Date of the Loan, such LIBOR Interest Period will
end on the Due Date of the Loan and LIBOR will be determined for the
actual number of days of such LIBOR Interest Period as though such
LIBOR Interest Period were a period of thirty (30) days, whichever
most nearly approximates the length of such LIBOR Interest Period.
1.21.2 LIBOR Reserve means, with respect to any LIBOR Interest Period for
which LIBOR is the Index referenced when calculating the Effective Interest
Rate, a percentage (expressed as a decimal) equal to the maximum aggregate
percentage, if any, in effect two {2) Business Days prior to the first day
of such LIBOR Interest Period, as specified by regulations issued from time
to time by the Board of Governors of the Federal Reserve System, or any
successor agency, for determining reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements) applicable to "Eurocurrency Liabilities", as currently
defined in Regulation D of the Board of Governors of the Federal Reserve
System. For purposes of this definition, every Loan for which the Effective
Interest Rate during such LIBOR Interest Period
2
<PAGE>
is to be calculated by reference to an Index which is LIBOR will be deemed
a "Eurocurrency Liability" as defined in said Regulation D."
6. Section 1.33 of the Loan Agreement is hereby amended to read in its
entirety as follows:
"1.33. "Subordinated Indebtedness" means and refers to that certain
indebtedness owing by Borrower to those holders set forth on the Schedule
of Subordinated Indebtedness attached to, made a part of and labeled
Exhibit 1.33 to the Fourth Amendment to Loan and Financing Agreement, the
payment of which is subordinated in time and right to the Indebtedness
pursuant to the Subordination Agreements, as defined in Section 1.34 of the
Loan Agreement."
7. Section 2 of the Loan Agreement is amended to read in its entirety as
follows:
"2.1 Bank does loan to Borrower and Borrower does borrow from Bank the sum
of Five Million Six Hundred Thousand and 00/100 Dollars {$5,600,000.00)
(hereinafter referred to as the "Term Loan"). The proceeds of the Term Loan
shall be used solely for the purpose of (i) providing Borrower with the
funds required to pay and refinance the Indebtedness evidenced by that term
note dated April 27, 1995 pursuant to which Borrower borrowed Four Million
Eight Hundred Thousand and 001100 Dollars ($4,800,000.00), (ii) to pay off
certain subordinated indebtedness and (iii) to provide acquisition
financing for Borrower and CBE.
2.2 Borrower promises and agrees to repay the Term Loan, with interest, in
accordance with the terms and conditions hereof and with the Promissory
Note (hereinafter referred to as the "Term Note") executed by Borrower on
June 12,1996, and any extensions or renewals, which Term Note shall be
payable with interest at the main office of the Bank as follows:
(a) the principal shall be repaid in quarterly installments of not
less than Two Hundred Thousand and 00/100 Dollars ($200,000.00) each,
which sums do not include interest, commencing on June 30, 1996 and
continuing on each September 30, December 31, March 31 and June 30
thereafter until March 31, 1999, at which time the then outstanding
principal balance shall become due and payable, in its entirety.
Installments of principal as provided above have been calculated based
upon an amount necessary to amortize the entire debt evidenced under
the Term Note, without interest, over a seven (7) year period.
Borrower acknowledges that the above described amortization shall
result in a balloon payment due upon maturity of the Term Note.
(b) Subject to the provisions of Section 2.5 of this Loan Agreement,
interest on the Term Note shall be paid on each June 30, September 30,
December 31 and March 31 during the term of the Term Note at either
(i) Michigan National Bank Prime Rate, as declared from time to time
or (ii) LIBOR plus 2.50%. Interest shall be calculated on the basis of
a 360 day year, for the actual number of days elapsed in a month,
until March 31,1999, at which time all accrued and unpaid interest
shall be due and payable in its entirety. After maturity (whether by
acceleration or otherwise), interest shall be at the per annum rate of
Two percent in excess of the foregoing rate.
(c) All payments received hereunder on the Term Note shall be applied
first to the payment of interest and thereafter, to the payment of
principal.
2.3 Bank may, at its option, charge Borrower's account(s) maintained at the
Bank with the amount of any installment of principal and /or interest at
any time on or after the date such installment becomes due.
3
<PAGE>
2.4 Borrower shall have the right to prepay, without penalty, all or any
part of the Term Loan; provided, however, that all accrued interest on the
principal outstanding balance of the Term Loan shall be paid simultaneously
with such prepayment, and that all principal prepayments shall be applied
to the principal installments hereunder in the inverse order of maturity.
Notwithstanding the foregoing, if LIBOR is used to calculate the interest
rate applicable to the Term Loan, Borrower shall only be allowed to prepay
the Term Loan upon the conclusion of any LIBOR Interest Period.
2.5 Borrower shall notify Bank of the Interest Rate selected at the time of
closing of the Term Loan and at least three (3) business days prior to the
expiration of the LIBOR Interest Period, Borrower shall notify Bank, in
writing or verbally (and subsequently confirmed in writing) of which rate
shall apply to the Term Loan after the expiration of any LIBOR Interest
Period. If Borrower fails to provide three (3) business days notice of its
intended interest rate, then the Term Loan shall bear interest at Michigan
National Bank Prime Rate. Borrower shall have no right to have LIBOR apply
to the Term Loan if an Event of Default has occurred and is continuing.
Borrower may not elect a LIBOR Interest Period which would extend beyond
the Due Date of the Term Loan."
8. Section 3.1 of the Loan Agreement is amended to read in its entirety as
follows:
"3.1 Provided that no Event of Default exists under this Loan and Financing
Agreement and provided that no event has occurred and is continuing which
with the passage of time would cause an Event of Default hereunder, Bank
shall make loans to Borrower from time to time, but in no event after July
15,1997, in an aggregate principal balance of up to, but not exceeding at
any one time, the lesser of the Borrowing Base or the sum of Eighteen
Million and 00/ 100 Dollars ($18,000,000.00) (hereinafter referred to as
the "Credit Loan")."
9. Section 3.2(b) of the Loan Agreement is hereby amended to read in its
entirety as follows:
"(b) Interest on said Credit Loan shall be paid monthly, at the per annum
rate equal to either (i) one eighth of one percent 1.125%) less than the
Michigan National Bank Prime Rate, as declared from time to time or (ii)
2.35% in excess of LIBOR. Interest shall be computed on the basis of a 360
day year for the actual number of days elapsed in a month. After maturity
(whether by acceleration or otherwise), interest shall be at the per annum
rate of Two percent in excess of the foregoing rate."
10. The Loan Agreement is amended to add Section 3.2(d), which shall read
in its entirety as follows:
"(d) Borrower shall notify Bank of the Interest Rate selected at the time
of each Advance under the Credit Loan and at least three (3) business days
prior to the expiration of the LIBOR Interest Period, Borrower shall!
notify Bank, in writing or verbally (and subsequently confirmed in writing)
of which rate shall apply to the Credit Loan after the expiration of any
LIBOR Interest Period. If Borrower fails to provide three (3) business days
notice of its intended interest rate, then the Credit Loan shall bear
interest at Michigan National Bank Prime Rate. Borrower shall have no right
to have LIBOR apply to the Credit Loan if an Event of Default has occurred
and is continuing. Borrower may not elect a LIBOR Interest Period which
would extend beyond the Due Date of the Credit Loan."
11. Bank hereby waives compliance with Section 6.24 for the payment of
Excess Cash Flow required to be made on June 1, 1996. This waiver is limited to
this specific payment and does not constitute a waiver of the obligation of
Borrower to make future payments of Excess Cash Flow.
4
<PAGE>
12. The first sentence of Section 7.7 of the Loan Agreement is amended to
read in its entirety as follows:
"Pay or declare any dividend, in cash or in other property, or make any
other distribution upon its Capital Stock; provided, however, subject to
the provisions hereof, Borrower may make cash and/or non-cash distributions
("Permitted Distributions") to Guarantor, either by way of dividends or
otherwise, during each of Borrowers fiscal years ending December 31 in an
amount not to exceed One Million and 00/100 Dollars ($1,000,000.00)."
13. Section 7.22 (iii) of the Loan Agreement is amended to read in its
entirety as follows:
"(iii) for the fiscal year ending December 31, 1996 and all subsequent
fiscal years, 3.50 to 1.00."
14. Section 7.25(iii) of the Loan Agreement is amended to read in its
entirety as follows:
"(iii) for the fiscal year ending December 31, 1996, and all subsequent
fiscal years, not less than Five Million Five Hundred Thousand
($5,500,000.00)."
15. The first sentence of Section 7.27 of the Loan Agreement is amended to
read in its entirety as follows:
"7.27 Suffer or permit its "Debt Service Coverage Ratio" at any time to
less than 1.25 to 1.00."
16. By executing this Amendment, Borrower is expressly reconfirming the
truthfulness of all representations, warranties and covenants contained in this
Loan Agreement as of the date of this Amendment. Borrower further certifies that
it has no knowledge, after due inquiry, of any Event of Default or act which
with the passage of time, delivery of notice or both, would constitute an Event
of Default hereunder. Borrower agrees to provide Bank with corporate resolutions
authorizing the execution and delivery of this Amendment and the documents
executed in conjunction with the Amendment and the performance of its
obligations to Bank.
17. Guarantor consents to the modifications contained in this Amendment and
expressly acknowledges that the Guaranty remains in full force and effect.
Guarantor agrees to provide Bank with corporate resolutions authorizing the
execution and delivery of this Amendment and the documents executed in
conjunction with the Amendment and the performance of its obligations to Bank.
18. Except as expressly modified by this Amendment, all of the terms,
conditions and provisions contained in the Loan Agreement remain in full force
and effect.
19. This Amendment is governed by and construed in accordance with the laws
of the State of Michigan, without reference to choice of law provisions. This
Amendment may only be modified by a written agreement signed by all parties
hereto. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which, when taken together, shall
constitute one and the same document.
5
<PAGE>
IN WITNESS WHEREOF, this Fourth Amendment to Loan and Financing Agreement
has been duly executed and delivered as of the date first above written.
MICHIGAN NATIONAL BANK,
a national banking association
By: /s/ Joseph M. Redouty
-----------------------------------
Joseph M. Redouty
Its: Vice President
CENTURY SUPPLY CORP.,
a Michigan corporation
By: /s/ Wayne R. Miller
-----------------------------------
Wayne R. Miller
Its: President
RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation
By: /s/ Cornelius F. Griffin
-----------------------------------
Cornelius F. Griffin
Its: Vice President-Finance
6
PLEDGE AGREEMENT
Date: April 27, 1995, but effective
as of March 1 5, 1 995
In this agreement, the words you and your mean anyone signing this
agreement, and the words we, us and our mean MICHIGAN NATIONAL BANK, a national
banking association, located at 27777 Inkster Road, Farmington Hills, Michigan
48333-9065. The word borrower means CENTURY SUPPLY CORP., a Michigan
corporation.
YOUR PROPERTY
In this agreement, the words your property means any warehouse receipt,
letter of credit, promissory note, stock, bond, debenture, certificate of
deposit, and any other instrument, document, or security described below, and
any money, stock, bond, dividend, or other security issued directly or
indirectly from such property, all renewals of any certificate of deposit, and
all replacement property as you deliver or cause to be delivered to us from time
to time.
You are delivering to us your property described below:
200 shares, which constitutes 100% of the voting stock of CBE Acquisition
Corporation
If your above property is a certificate of deposit, you agree that we may
automatically renew the certificate of deposit at maturity. You agree to
promptly deliver to us within twenty-one (21) days after your receipt, all
dividends, money, interest, stock dividends, promissory notes, and all other
property, documents, or agreements which you receive and which are related to
any of your property described above and here delivered to us.
SECURITY INTEREST
By signing this agreement you are pledging and giving us a security
interest in your property described above, in all money and other property
payable or issued directly or indirectly on account of your property, and all
proceeds of your property, to secure the payment of indebtedness and obligations
to us, of every kind, nature and description, direct or indirect, absolute or
contingent, now existing or hereafter arising or acquired, now due or hereafter
becoming due, and whether joint, several or joint and several, including,
without limitation, your agreements herein and the agreements contained in every
promissory note, guaranty, security agreement, loan agreement, "swap agreement"
(within the meaning of the United States Bankruptcy Code of 1978, as amended, 11
USC 101 et seq.) or other document, instrument or agreement, now existing or
hereafter executed or delivered to us, with respect to any existing or future
loan, "swap" (within the meaning of the Bankruptcy Code of 1978, as amended, 11
USC 101 et seq.), deposit account overdraft or other financial accommodation we
make to you [ ] or to the borrower, with the interest, fees and charges provided
for in any such document, instrument or agreement, or by law, all renewals,
extensions, modifications, and refinancings thereof and all costs, expenses and
reasonable attorneys' and paralegals' fees (including without limitation the
allocated expenses of our in-house attorneys and paralegals) when they disburse,
administer, enforce or collect any such indebtedness or obligation, protect,
maintain or liquidate your property or defend, pay or compromise any claim or
action related to or arising from your indebtedness or obligation to us. A
person with a security interest in your property has, among other rights, the
right to sell your property under certain circumstances. You agree to promptly
pay all taxes, fees, and charges concerning the purchase or ownership of your
property. If you do not, we can do so, and you agree to reimburse us for all
amounts we pay, plus interest on those amounts at the same rate of interest
charged to the borrower.
OWNERSHIP OF YOUR PROPERTY
You promise us that you own your property free of any and all claims by
anyone other than you or us, that no one other than you owns your property, and
that all of the owners of your property have signed this agreement.
CARE OF YOUR PROPERTY
You agree that we will have taken reasonable care of your property if we
treat it in the same way as we treat our own property of the same kind, but that
we are not responsible for taking any steps necessary to preserve or protect
your rights in your property against any prior or other parties. You agree that
if your property is of a kind which can be registered in our name, we can at any
time register your property in our name or in the name of someone who holds
securities for us, and you agree to sign all documents which we think are needed
to do so.
<PAGE>
AUTHORITY TO EXERCISE RIGHTS IN YOUR PROPERTY
In general, you agree that as long as we have possession of your property,
we may do anything concerning your property that you could do, but we are not
required to do so. Without limiting this general power, we, or if we have your
property registered in the name of someone other than you that person, will have
all of your rights in your property (such as the right to vote securities and
the right to receive dividends or interest) but neither we nor such other person
are required to exercise any of those rights on your behalf. If you have
previously given authority to exercise rights in your property to someone other
than us, by signing this agreement you are revoking that authority previously
given. You agree that we can apply any money, such as cash dividends or
interest, which we receive from your property to pay any loans or other
obligations secured by your property, applying this money in any order we
choose, whether or not the loans or other obligations secured by your property
are then due.
MARGIN REQUIREMENTS
You understand and agree that if your property is "margin stock," as that
term is defined in Regulation U of Federal Reserve Board Regulations, and is
pledged to us to directly or indirectly secure the purchase or carrying of any
margin stock, we can not at anytime allow the unpaid balance of borrower's
loan(s) to exceed the maximum loan value prescribed under Regulation U. You
agree that if at any time the loan value of your margin stock exceeds the
maximum loan value allowed under Regulation U, you will immediately reduce or
cause to be reduced the unpaid balance of the loan(s) directly or indirectly
secured by your margin stock, or will immediately pledge to us additional margin
stock, so that the maximum loan value prescribed under Regulation U is not
exceeded.
SALE OF YOUR PROPERTY
You agree that we can sell your property if any of the following events
occur:
1. Any loan or other obligation owed us by you or by the borrower, either
now or in the future, is not paid or performed when the payment or
performance is due;
2. You or the borrower violate the provisions of this or any other
agreement with us, either now or in the future;
3. You or the borrower die;
4. You or the borrower make any false or misleading statement about any
important matter in an agreement or application with us.
Unless your property is likely to speedily decline in value or is property
commonly sold on a recognized market, we will give you at least fifteen (15)
days written notice before selling your property, sending the notice by regular
mail to your current address shown in our records. Upon your receipt of our
notice that we intend to sell your property, you can redeem it by paying in full
all loans, obligations, and costs secured by your property, prior to sale of
your property. Upon our sale of your property, we will apply the sale proceeds
to pay any attorney fees and other costs and expenses we have incurred on the
loans or obligations secured by your property, and then to the loans or other
obligations secured by your property, in any order we choose. If there is a
surplus remaining after applying the proceeds from sale of your property to our
fees, costs, and expenses and to the loans and obligations secured by your
property, we will promptly return the surplus to you.
You understand that our ability to sell your property may be limited
because of special laws and regulations applying to the sale of securities. You
agree to do anything we think is needed to help us sell your property, whether
needed because of these special laws and regulations or for any other reason,
and you agree that we will have a continuing power of attorney to sign your name
on any document necessary to sell your property if any of the events listed in
1. through 5. above occur.
CHANGE OF ADDRESS/NOTICE TO US
If your address changes, you agree to promptly notify us in writing of your
new address. Any notice you give us must be in writing and must be sent to our
address shown in this agreement.
NO NOTICE OR LOSS OF RIGHTS
You agree that we may, but are not required to, notify you if any loan or
obligation secured by your property is not paid or performed, and that we can
exercise any of our rights without losing any other rights against you or your
property. You agree that we can do any of the following without notifying you or
losing any rights against you or your property:
2
<PAGE>
1. Allow additional time for payment or otherwise amend any loan
agreements with the borrower;
2. Delay exercising any rights against you, the borrower, your property,
and any other person or property;
3. Fail to protect or enforce our interest in any of your property.
ATTORNEY'S FEES AND COURT COSTS
If we hire an attorney to enforce or defend our rights in your property, to
perform any legal services in connection with the holding or sale of your
property, or in connection with the loans or obligations secured by your
property, you agree to pay us reasonable attorney fees and any court costs which
we have to pay.
OTHER AGREEMENTS
Any changes in this agreement must be in writing and signed by you and by
us. This agreement is the complete agreement between you and us concerning the
security interest in your property given by this agreement and supersedes all
prior agreements, written or oral. If any part of this agreement is determined
to be invalid, the rest of this agreement will remain in effect. All questions
about this agreement will be decided according to Michigan law.
AGREEMENT TERMINATION
This agreement will end when we return all of your property described in
the beginning of this agreement. We will return your property to you at such
time as neither you nor the borrower is indebted or otherwise obligated to us.
YOUR RESPONSIBILITY
You and everyone else signing this agreement will be, individually and
together, liable under it, and you understand that we can sue you to enforce
this agreement even if we do not sue anyone else. You agree that you have read
and understand and agree to be bound by all of the provisions of this agreement,
and that we have provided you with an opportunity to review this agreement with
legal counsel of your choice before signing this agreement.
WITNESSES: CENTURY SUPPLY CORP.,
a Michigan corporation
By: /s/ Wayne R. Miller
- --------------------------- -----------------------------
Joseph M. Redoutey Wayne R. Miller
Its: President
3
AMENDED AND RESTATED GUARANTY
Dated: April 27, 1995, but
effective as of March 15, 1995.
This Guaranty amends and restates in its entirety, a Guaranty dated October
27, 1993.
IN CONSIDERATION of and in order to induce MICHIGAN NATIONAL BANK, a
national banking association, with offices located at 27777 Inkster Road,
Farmington Hills, Ml 48333-9065 (the "Bank"), to loan money, extend credit to,
or to purchase, accept or discount notes, instruments or other evidences of
indebtedness of or from, and generally to engage in financial accommodations and
to do business with CENTURY SUPPLY CORP., a Michigan corporation (the
"Borrower"), the undersigned, jointly and severally (hereinafter individually
and collectively referred to as the "Guarantor"), hereby covenant and agree with
the Bank as follows:
1. Guarantor unconditionally guarantees to Bank the full and prompt payment
when due of all Indebtedness (as hereinafter defined) of Borrower due and to
become due to the Bank. The Bank may have immediate recourse against Guarantor
for the full and immediate payment of the Indebtedness, or any part thereof,
which has not been paid in full at maturity (whether at fixed maturity or
maturity accelerated by reason of the Borrower's default under the terms of any
instrument governing the Indebtedness or any agreement securing the
Indebtedness).
2. The term "Indebtedness" shall mean all indebtedness, liabilities, and
obligations of Borrower to Bank, of every kind, nature and description, direct
or indirect, absolute or contingent, now existing or hereafter arising or
acquired, now due or as may hereafter become due, and whether joint, several or
joint and several, including, without limitation, the covenants and agreements
contained in this Guaranty and every promissory note, guaranty, security
agreement, loan agreement, " swap agreement" (within the meaning of the United
States Bankruptcy Code of 1978, as amended, 11 USC 101 et sea.) or other
document, instrument or agreement, now existing or hereafter executed or
delivered to the Bank, with respect to any existing or future loan, "swap"
(within the meaning of the Bankruptcy Code of 1978, as amended, 11 USC 101 et
seq.), deposit account overdraft or other financial accommodation to the
Borrower, with such interest, fees and charges as are provided for in the
evidence(s)) thereof or by applicable law, all renewals, extensions,
modifications, or refinancings thereof and all costs, expenses and reasonable
attorneys' and paralegals' fees (including without limitation the allocated
expenses of in-house attorneys and paralegals) incurred to disburse, administer,
enforce or collect any Indebtedness, to protect, maintain or liquidate any
security therefor or to defend, pay or compromise any claim or action related to
or arising therefrom (" Indebtedness" ) .
3. This is a guarantee of payment and not of collection, and Guarantor
agrees that the Bank shall not be obligated prior to seeking recourse against or
receiving payment from Guarantor, to do any of the following (although the Bank
may do so, in whole or in part, at its sole option), the performance of which
are hereby unconditionally waived by Guarantor:
(a) Take any steps to collect the Indebtedness from Borrower or to file
any claim of any kind against Borrower; or
(b) Take any steps to enforce, accept, perfect the Bank's interest in,
foreclose upon, or realize on any collateral security for the payment
of the Indebtedness or any other guaranty of the Indebtedness; or
(c) In any other respect exercise any diligence whatever in collecting or
attempting to collect the Indebtedness by any means.
4. Guarantor's liability for payment of the Indebtedness shall be absolute
and unconditional, and nothing except final and full payment to the Bank of all
of the Indebtedness shall operate to discharge Guarantor's liability under this
Guaranty. Accordingly, Guarantor unconditionally and irrevocably waives each and
every defense which under principles of guaranty or suretyship law would
otherwise operate to impair or diminish the liability of Guarantor for the
Indebtedness. Without limiting the generality of the foregoing waiver, Guarantor
agrees that none of the following acts, omissions, or occurrences shall diminish
or impair the liability of Guarantor in any respect (all of which acts,
omissions or occurrences may be done without notice to Guarantor):
(a) Any extension, modification, indulgence, compromise, settlement, or
variation of any of the terms of the Indebtedness;
(b) The discharge or release of any obligations of the Borrower or of any
other person now or hereafter liable on the Indebtedness by reason of
bankruptcy or insolvency laws or otherwise;
(c) The acceptance or release by the Bank of any collateral security or
any other Guaranty, or any settlement, compromise or extension with
respect to any collateral security or other Guaranty;
(d) The application or allocation by the Bank of payments, collections, or
credits on the Indebtedness or any other obligations of the Borrower
to the Bank;
<PAGE>
(e) The creation of any new Indebtedness by Borrower;
(f) The making of demand, or absence of demand, for payment of the
Indebtedness, or giving, or failing to give, any notice of dishonor or
protest, or any other notice.
5. Guarantor further unconditionally and irrevocably waives:
(a) All rights Guarantor may have, at law or in equity, to seek or claim
subrogation, contribution, indemnification, or any other form of
reimbursement from the Borrower by virtue of any payment(s) made to
Bank under this Guaranty or otherwise until the Indebtedness shall
have been fully and finally paid;
(b) Any acceptance of this Guaranty;
(c) Any set-offs or counterclaims against the Bank which would impair or
affect the Bank's rights against Guarantor;
(d) Any notice of the disposition of any collateral security and any right
to object to the commercial reasonableness of the disposition of any
such collateral security;
(e) Any defenses related to the validity or enforceability of any
documentation executed - by Borrower or by Guarantor in connection
with the Indebtedness.
6. Guarantor acknowledges and agrees with Bank that if Bank shall at any
time be required to return or restore to Borrower or to any trustee in
bankruptcy, any payment(s) made upon the Indebtedness, this guaranty shall
continue in full force and effect or shall be fully reinstated as the case may
be, and Guarantor's obligation to Bank under this guaranty shall be increased by
the amount of any such payment(s) upon the Indebtedness as Bank shall be obliged
to return or restore, plus interest thereon at the default rate provided in the
evidence of Indebtedness applicable to any such payment(s) from the date(s) the
payment(s) upon the Indebtedness was originally made. Guarantor agrees to
indemnify and hold Bank harmless from and against any and all costs, fees and
expenses including, without limitation, reasonable attorneys' fees and allocated
costs of in-house counsel, in connection with Bank's defending any preference or
fraudulent conveyance claim or action brought against Bank in any bankruptcy
proceeding concerning Borrower.
7. This Guaranty shall inure to the benefit of the Bank and its successors
and assigns, including every holder of any of the Indebtedness here guaranteed.
In the event that any person other than the Bank shall become a holder of any of
the Indebtedness, each reference to the Bank shall be construed to refer to each
such holder.
8. This Guaranty shall be binding upon Guarantor and Guarantor's heirs,
successors, and estate representatives, and shall continue in effect until
Guarantor delivers to the Bank at the above address, thirty (30) days advance
written notice of termination, provided that this Guaranty shall continue in
full force and effect thereafter with respect to all Indebtedness in existence
on the effective date of such termination (including all extensions and renewals
thereof and all subsequently accruing interest and other charges thereon) until
all such Indebtedness shall be fully and finally paid to Bank.
9. Guarantor represents and warrants to the Bank that all financial
statements concerning Guarantor's financial condition are true and correct in
all material respects as of the date of such statements and, if such statements
are not current, that there has been no material adverse change in the financial
condition of Guarantor from the date of such statement to the date of delivery
of this Guaranty to the Bank. Guarantor acknowledges that in accepting this
Guaranty the Bank has relied upon such financial statements and Guarantor agrees
to provide the Bank with a statement of Guarantor's current financial condition,
in form satisfactory to Bank, at least annually and within thirty (30) days
after Bank's request.
10. This Guaranty and all rights and obligations hereunder, including
matters of construction, validity, and performance, shall be governed by the
laws of the State of Michigan, and Guarantor consents to both jurisdiction and
venue in the Michigan courts.
11. The term "Guarantor" shall mean all and each one of the persons
executing this Guaranty agreement and their obligations to the Bank shall be
joint and several.
12. Notwithstanding anything to the contrary contained herein, the
liability of each Guarantor named below shall be UNLIMITED.
13. The performance of Guarantor's obligations under this Guaranty is
secured by a Stock Pledge Agreement dated October 27, 1993.
14. This Guaranty agreement and the terms and provisions of any
agreement(s) described in Paragraph 13 above constitute Guarantor's entire
agreement with Bank, and there are no other agreements, either written or oral,
which modify or supplement Guarantor's said agreement(s) with Bank. Guarantor
acknowledges and agrees with Bank that this Guaranty cannot be modified or
amended in any respect except by an additional writing signed by both Guarantor
and Bank.
2
<PAGE>
15. THIS GUARANTY IS FREELY AND VOLUNTARILY GIVEN TO THE BANK BY GUARANTOR
WITHOUT DURESS OR COERCION, AND AFTER GUARANTOR HAS EITHER CONSULTED WITH
COMPETENT LEGAL COUNSEL OR HAS BEEN GIVEN AN OPPORTUNITY TO DO SO, AND GUARANTOR
HAS FULLY AND CAREFULLY READ AND UNDERSTANDS ALL OF THE TERMS AND PROVISIONS OF
THIS GUARANTY.
16. GUARANTOR HEREBY RELEASES AND DISCHARGES BANK OF AND FROM ANY AND ALL
CLAIMS, HARM, INJURY, AND DAMAGE OF ANY AND EVERY KIND, KNOWN OR UNKNOWN, LEGAL
OR EQUITABLE, WHICH GUARANTOR HAS AGAINST THE BANK FROM THE DATE OF BORROWER'S
FIRST CONTACT WITH BANK TO THE DATE OF THIS GUARANTY. GUARANTOR EXPRESSLY
CONFIRMS TO BANK THAT GUARANTOR HAS REVIEWED THE EFFECT OF THIS RELEASE WITH
COMPETENT LEGAL COUNSEL, OR HAS BEEN AFFORDED THE OPPORTUNITY TO DO SO. PRIOR TO
EXECUTION OF THIS GUARANTY AND ACKNOWLEDGES AND AGREES THAT BANK IS RELYING UPON
THIS RELEASE OF CLAIMS.
17. GUARANTOR ALSO KNOWINGLY, VOLUNTARILY, AND INTELLIGENTLY WAIVES
GUARANTOR'S CONSTITUTIONAL RIGHT TO A TRIAL BY JURY WITH RESPECT TO ANY CLAIM,
DISPUTE, CONFLICT, OR CONTENTION, IF ANY, AS MAY ARISE UNDER THIS GUARANTY, AND
AGREES THAT ANY LITIGATION BETWEEN THE PARTIES CONCERNING THIS GUARANTY AND ANY
COLLATERAL SECURITY DESCRIBED IN PARAGRAPH 13 HEREOF, SHALL BE HEARD BY A COURT
OF COMPETENT JURISDICTION SITTING WITHOUT A JURY. GUARANTOR HEREBY CONFIRMS TO
BANK THAT GUARANTOR HAS REVIEWED THE EFFECT OF THIS WAIVER OF JURY TRIAL WITH
COMPETENT LEGAL COUNSEL, OR HAS BEEN AFFORDED THE OPPORTUNITY TO DO SO, PRIOR TO
SIGNING THIS GUARANTY AND ACKNOWLEDGES AND AGREES THAT BANK IS RELYING UPON THIS
WAIVER.
WITNESSES: GUARANTOR:
RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation
[ILLEGIBLE] /s/ Cornelius F. Griffin
- -------------------------------- -----------------------------------
Cornelius F. Griffin
Its: Vice President - Finance
3
<PAGE>
CORPORATE BORROWING
RESOLUTION AND CERTIFICATE
I hereby certify that I am the duty elected and qualified Secretary and the
custodian of the corporate records and corporate seal of CENTURY SUPPLY CORP., a
Michigan corporation (the "Corporation"), and that following is the true and
complete text of a resolution duly adopted by the Board of Directors of this
Corporation, in accordance with all applicable laws and the Corporation's
Articles of Incorporation and Bylaws, on April 27, 1995, and that the said
resolution has not been amended or revoked and remains in full force and effect
as of April 27, 1995, the date of this Certificate:
"RESOLVED That the President, Vice President, Treasurer of this
Corporation, or any one { 1 ) of them (the "Authorized Officers"), are hereby
authorized, directed, and empowered in the name of and on behalf of this
Corporation, to negotiate and procure loans, letters of credit, and any and all
other financial accommodations from Michigan National Bank ("the Bank") as from
time to time said Authorized Officers deem necessary and upon such terms and
conditions as the Bank may require, and the Authorized Officers are further
hereby authorized and empowered, on behalf of this Corporation, to execute,
endorse, acknowledge, and deliver to the Bank such loan agreements, promissory
notes, drafts, mortgages, assignments, security agreements, letter of credit
agreements, financing statements, pledges, leases, and any and all other
documents, instruments, and agreements encumbering the real or personal property
of this Corporation as may be requested by the Bank in connection with any such
loan, letter of credit, or other financial accommodation and any amendment,
renewal, restatement, or extension thereof.
FURTHER RESOLVED that this Resolution shall remain in full force and
effect, and the Bank shall be entitled to, rely on this Resolution, until
written notice of amendment or revocation shall have been received by Bank, but
any such notice of amendment or revocation shall not affect this Corporation's
obligation and liability to the Bank under any agreement, instrument, or
document executed prior to Bank's receipt of any such amendment or revocation.
FURTHER RESOLVED that the authority hereby granted to the Authorized
Officers shall apply with equal force and effect to their successors in office,
and the Secretary of this Corporation is hereby authorized and directed to
certify to the Bank this Resolution, the names and titles of the incumbent
officers of this Corporation, and to promptly certify to the Bank any amendment
or revocation of this Resolution and any changes in the incumbent officers of
this Corporation."
I certify that following are the titles, names, and genuine signatures of
the duly qualified and elected officers of this Corporation as of the date of
this Certificate:
TITLE NAME SIGNATURE
President WAYNE R. MILLER /s/ WAYNE R. MILLER
-------------------------
Vice President CORNELIUS F. GRIFFIN /s/ CORNELIUS F. GRIFFIN
-------------------------
Secretary MARSHALL E. BERNSTEIN /s/ MARSHALL E. BERNSTEIN
-------------------------
Treasurer SCOTT FOERSTNER /s/ SCOTT FOERSTNER
-------------------------
I further certify to Michigan National Bank that: this Corporation is duly
organized, validly existing and in good standing under and by virtue of the laws
of the above stated State of incorporation; there are no provisions in the
Articles of Incorporation or Bylaws of this Corporation, nor is the Corporation
a party to any agreement, judgment, or order, which restricts or limits in any
way the authority of the Board of Directors to adopt the foregoing Resolutions
or which require approval of the foregoing Resolutions by the vote or consent of
the Corporation's shareholders or by any other person or entity; the Corporation
has full corporate power to own its property and to carry on its business as now
being conducted; there are no proceedings for dissolution, liquidation,
consolidation, or merger instituted by or against this Corporation as of the
date hereof.
IN WITNESS WHEREOF I have signed my name as Secretary of the Corporation
and have affixed the seal of the Corporation on this 27th day of April, 1995.
/s/ Marshall E. Bernstein
-----------------------------------
Marshall E. Bernstein, Secretary
(Corporate Seal)
Attest:
/s/ Wayne R. Miller
- ----------------------------------
(Signature of Corporation Director other than Secretary)
Wayne R. Miller, President
Date: April 27, 1995
RICHTON INTERNATIONAL CORPORATION
DETERMINATION OF AVERAGE SHARES OUTSTANDING
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
average
-------
Shares outstanding weighted average -- 2,949,447
amount exer price ave mkt price
-------- ---------- -------------
Warrants
236,250 1.375 4.625
100,000 3 4.625 201,149
Options
270,000 2.20 4.625 139,422
----------
Total 3,290,018
==========
RICHTON INTERNATIONAL CORPORATION
ANNUAL REPORT ON FORM 10-K
EXHIBIT (21) LIST OF SUBSIDIARIES
For the year ended DECEMBER 31, 1996
PARENT COMPANY:
- ---------------
RICHTON INTERNATIONAL CORPORATION
t.i.n. 05-0122205
subsidiaries:
CENTURY SUPPLY CORP.
t.i.n. 38-1775601
CBE TECHNOLOGIES, INC(subsidiary of Century Supply Corp.)
t.i.n. 04-3267622
CENTURY SUPPLY CORP. OF CANADA, LTD(subsidiary of Century Supply Corp)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 372,000
<SECURITIES> 0
<RECEIVABLES> 13,704,000
<ALLOWANCES> 700,000
<INVENTORY> 9,550,000
<CURRENT-ASSETS> 23,961,000
<PP&E> 1,540,000
<DEPRECIATION> 747,000
<TOTAL-ASSETS> 32,374,000
<CURRENT-LIABILITIES> 18,351,000
<BONDS> 0
0
0
<COMMON> 309,000
<OTHER-SE> 6,728,000
<TOTAL-LIABILITY-AND-EQUITY> 32,374,000
<SALES> 87,750,000
<TOTAL-REVENUES> 87,750,000
<CGS> 62,966,000
<TOTAL-COSTS> 20,952,000
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,216,000
<INCOME-PRETAX> 2,616,000
<INCOME-TAX> 850,000
<INCOME-CONTINUING> 1,766,000
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