THIS AMENDMENT TO FORM 10-K IS TO REFLECT THE REVISED SCHEDULE OF EXHIBITS AND
TO INCLUDE THE EXHIBITS WHICH WERE NOT IN APPROPRIATE FILING FORM AT THE TIME OF
THE FILING OF THE FORM 10-K, FOR THE YEAR ENDED DECEMBER 31, 1997
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(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, 1997 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 ..................................... (973) 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 non-affiliates of
the Registrant.
Aggregate market value at March 1, 1998 amounted to $10,600,000
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, 2,947,000 shares at March 1, 1998
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual shareholders report for the year ended December 31, 1997
are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual shareholders meeting to be held
April 29, 1998 are incorporated by reference into Part III.
================================================================================
<PAGE>
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 8.
(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")
--Incorporated by reference to Exhibit 2.1 to Registrant's
Current report on Form 8-K for April 5, 1995
9
<PAGE>
(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 --Restated Certificate of Incorporation of Richton
International Corporation
3.3 --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 --Amendment to the 1990 Long-Term Incentive Plan providing
for additional 140,000 shares for issuance under the Plan
--Incorporated by reference to Exhibit 10(b) to
Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 Incorporated
10.4 --Business Loan Agreement with Addendum(s) dated March
4,1998 with Michigan National Bank relating to the $30
million line of credit financing
10.5 --Business Loan Agreement dated March 4,1998 with Michigan
National Bank relating to the $5 million Term Loan
10.6 --Promissory Note with Addendum for $30 million dated March
4, 1998.with Michigan National Bank
10.7 --Promissory Note with Addendum for $5 million dated March
4, 1998 with Michigan National Bank
10.8 --Security Agreement dated March 4, 1998. with Michigan
National Bank
10.9 --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
10.10 --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 Partnership") 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
10.11 --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
10.12 --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
<PAGE>
10.13 --Guaranty dated October 27, 1993 by Richton International
Corporation in favor of the Hodas Family Limited
Partnership 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
10.14 --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
10.15 --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
10.16 --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
10.17 --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
10.18 --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
10.19 --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
10.20 --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 (11) Exhibit
11.1 --Calculation of earnings per share
--Incorporated by reference to Footnote 11 to Notes to
Consolidated Financial Statements of Registrant's Annual
Report on Form 10- K for the year ended December 31, 1997
(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.
11
State of Delaware
Office of the Secretary of State
-------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"RICHTON INTERNATIONAL CORPORATION", FILED IN THIS OFFICE ON THE TWELFTH DAY OF
SEPTEMBER, A.D. 1997, AT 1 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE NEW CASTLE
COUNTY RECORDER OF DEEDS FOR RECORDING
[SECRETARY'S
OFFICE SEAL] /s/ EDWARD J. FREEL
-----------------------------------
Edward J. Freel, Secretary of State
Authentication: 8648631
Date: 09-12-97
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 01:00 PM 09/12/1997
971305139 - 0725326
RESTATED CERTIFICATE OF INCORPORATION
OF
RICHTON INTERNATIONAL CORPORATION
Richton International Corporation (the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify:
FIRST: The present name of the Corporation is Richton International
Corporation. The Corporation was originally incorporated under the name Coro of
Delaware, Inc., and the date of filing the original Certificate of Incorporation
of the Corporation with the Secretary of State of the State of Delaware is
August 25, 1969.
SECOND: The provisions of the Certificate of Incorporation of the
Corporation as heretofore amended are hereby restated and integrated into the
single instrument which is hereinafter set forth and which is entitled Restated
Certificate of Incorporation of Richton International Corporation, without
further amendment and without any discrepancy between the provisions of the
Certificate of Incorporation as heretofore amended and the provisions of the
said single instrument hereinafter set forth.
<PAGE>
THIRD: The Board of Directors of the Corporation has duly adopted this
Restated Certificate of Incorporation pursuant to the provisions of ss.245 of
the General Corporation Law of the State of Delaware, in the form set forth as
follows:
"RESTATED CERTIFICATE OF INCORPORATION
OF
RICHTON INTERNATIONAL CORPORATION
FIRST: The name of the corporation is Richton International Corporation.
SECOND: The registered office of the Corporation is to be located at 1013
Centre Road, in the City of Wilmington, in the County of New Castle, in the
State of Delaware, 19805. The name of its registered agent at that address is
The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law. Without limiting the generality of the foregoing, a purpose of the
Corporation shall be to manufacture and deal in consumer goods, including, among
other things, fashion costume jewelry, wearing apparel, handbags, accessories,
cosmetics, footwear, watches, luggage and gift items.
FOURTH: The total number of shares which the Corporation is authorized to
issue is 6,500,000, which are divided into 6,000,000 shares of Common Stock, par
value $.10 per share ("Common Stock"), and 500,000 shares of Preferred Stock,
par value $1.00 per share ("Preferred Stock").
1. ISSUANCE OF PREFERRED STOCK IN SERIES
Subject to the provisions of Section 151 of the General Corporation law,
the Board of Directors of the Corporation is authorized to issue the Preferred
Stock, from time to time, in one or more series, all of which shall rank equally
and be identical except with respect to he following matters: the voting rights,
if any; the distinctive serial designation of each series and the number of
shares which comprise each series; the rate or rates (which may be contingent on
the happening of certain events) of preferential, participating or
non-participating dividends payable in cash annually, semi-annually, or
quarterly; the times of payment of dividends and whether dividends shall be
cumulative and if cumulative the dates from which dividends shall be cumulative;
whether or not the shares are redeemable, and if redeemable, the price or
prices, the method by which and the time at which the same may be redeemed,
which shall be not less than the par value thereof, plus dividend arrearages, if
any; the notice of redemption required; the amount and terms of the sinking
fund, if any,
- 2 -
<PAGE>
for the purchase or redemption thereof, provided such sinking fund is payable
only out of funds legally available therefor; the terms, conditions, rights,
privileges, and other provisions, if any, respecting conversion into Common
Stock or another series of Preferred Stock; and the preferential amount or
amounts which shall be paid to the holders thereof in the event of liquidation
dissolution, or winding up of the Corporation, whether voluntary or involuntary,
which shall be not less than the par value plus dividend arrearages, if any;
such other preferences and relative, participating, optional or other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof as shall not be inconsistent with this Article Fourth.
All shares of any one series of Preferred Stock shall be identical with
each other in all respects, except that shares of any one series issued at
different times may differ as to the dates from which dividends thereon shall be
cumulative.
2. DIVIDENDS
Subject to the limitations prescribed in this Article Fourth and any
further limitations in accordance herewith, the holders of shares of Common
Stock shall be entitled to receive, when and as declared by the Board of
Directors of the Corporation, out of the assets of the Corporation which are by
law available therefor, dividends payable either in cash, in property, or in
Common Stock. The Board of Directors shall have the power to pay dividends in
Common Stock in relation to the Corporation's treasury Common Stock.
The shares of all series of Preferred Stock shall share ratably in the
payment of all dividends payable thereon, including accumulations, if any, in
accordance with the sums which would be payable on all such shares if all
dividends were declared and paid in full.
3. VOTING RIGHTS
At every meeting of stockholders, each holder of shares of Common Stock
and, except as otherwise provided herein or in the resolution or reduction
providing for any series of Preferred Stock, each holder of shares of Preferred
Stock shall be entitled to one vote for each share held and shall vote together
as one class; provided, however, that if and whenever and as often as dividends
on all series of Preferred Stock shall be in arrears in an aggregate amount
equivalent to six (6) quarterly dividends on all shares of all series of
Preferred Stock at the time outstanding, then and in such event, the holders of
all series of Preferred Stock then outstanding, voting separately as a class,
shall be entitled at each meeting of stockholders thereafter held for the
election of Directors, to elect two of the total number of Directors to be
elected at such meeting. Such class voting right shall continue until such time
as all accumulated dividends on all series of Preferred Stock at the time
outstanding have been paid or declared and set aside for payment, whereupon such
right shall cease until such time, if any as such right shall again accrue as
hereinabove provided.
- 3 -
<PAGE>
In the event of any vacancy occurring in the case of a Director elected by
the Preferred Stock voting as a class (unless at the time when such vacancy
shall occur, all accumulated dividends of Preferred Stock shall have been paid
or declared and set aside for payment), a Special Meeting of the holders of all
series of Preferred Stock shall be called promptly to fill any such vacancy.
Such meeting shall be held within forty days after such call at a place and upon
notice as provided for the holding of meetings of stockholders, except that no
such Special meeting shall be required before the date fixed for the Annual
Meeting of Stockholders. At any such meeting of Preferred Stock, a majority of
the outstanding Preferred Stock shall be required to constitute a quorum for the
election of the Directors or to fill any vacancy. The Directors elected by the
class vote of the Preferred Stock shall serve until the next Annual Meeting of
stockholders or until their successors shall be elected, and shall qualify;
provided, however, that whenever during the term of office of such Directors,
all accumulated dividends shall have been paid or declared and set aside for
payment, the terms of office of such Director shall forthwith terminate.
Notwithstanding the foregoing, the Board of Directors in originally fixing
the voting rights of all series of Preferred Stock, may limit in any manner or
eliminate entirely with respect to the shares of such series, any and all voting
rights prescribed for the Preferred Stock, or, if such series is convertible
into Common Stock of the Corporation, may grant such series increased voting
power which shall not exceed the number of votes per share to which the holder
thereof would be entitled if such conversion right was to be exercised.
4. LIMITATIONS
So long as Preferred Stock of any series shall be outstanding, the
Corporation shall not
(a) without affirmative vote or written consent of the holders of record of
at least 1/3 of the shares of all such series at the time outstanding, by an
amendment to the Certificate of Incorporation or by merger or consolidation or
in any other manner,
(i) authorize any class of stock ranking prior to the Preferred Stock
either in the payment of dividends or in the distribution of assets, or
create any stock or other security convertible into or exchangeable for or
evidencing the right to purchase any such stock so ranking prior to the
Preferred Stock; or increase the authorized number of shares of any such
other class of stock or other security; or
(ii) alter or change the preferences or limitations with respect to
the Preferred Stock in any material respect prejudicial to the holders
thereof, provided, however, that any such alteration or change affecting a
particular series of Preferred Stock which does not adversely affect the
holders of any other series may be effected by the affirmative vote or
written consent of the holders of record of 2/3 of the number of shares of
the particular series affected by such alteration or change without the
necessity of the class vote or written consent of the holders of shares of
all series; or
- 4 -
<PAGE>
(b) without affirmative vote or written consent of the holders of record of
at least a majority of the shares of all such series at the time outstanding, by
an amendment to the Certificate of Incorporation or by merger or consolidation
or in any other manner,
(i) increase the total number of authorized shares of Preferred Stock;
or
(ii) authorize or increase any class of stock ranking on a parity with
the Preferred Stock, or create any stock or other security convertible into
or exchangeable for or evidencing the right to purchase any such stock
ranking on a parity with the Preferred Stock, or increase the authorized
number of shares of any such other class of stock or other security; or
(c) declare or pay, or set apart for payment, any dividends (other than
dividends payable in shares of any class or classes of stock of the Corporation
ranking junior to the Preferred Stock in the payment of dividends or in the
distribution of assets), or make any distribution, on any claim or classes of
stock ranking junior to the Preferred Stock in the payment of dividends or in
the distribution of assets, and will not redeem, purchase or otherwise acquire
or permit any subsidiary to purchase or otherwise acquire, whether voluntarily,
for a sinking fund or otherwise, any shares of any class or classes of stock
ranking junior to the Preferred Stock in the payment of dividends or in the
distribution of assets, and will not redeem, purchase or otherwise acquire or
permit any subsidiary to purchase or otherwise acquire, whether voluntarily, for
a sinking fund, or otherwise, any shares of any class or classes of stock
ranking junior to the Preferred Stock in the payment of dividends or in the
distribution of assets or less than all of the Preferred Stock, if at the time
of making such declaration, payment, setting apart, distribution, redemption,
purchase or acquisition, the Corporation shall not have paid all dividends
payable on or shall be in default with respect to any obligation to retire
shares of Preferred Stock or if after giving effect to such declaration,
payment, setting apart, distribution, redemption, purchase or acquisition, the
capital represented by the Common Stock plus surplus of the Corporation is in
the aggregate less than the aggregate involuntary liquidation value of all
series of Preferred Stock outstanding, provided that notwithstanding the
foregoing, the Corporation may at any time redeem, purchase or otherwise acquire
shares of stock of any such junior class in exchange for, or out of the net cash
proceeds from the concurrent sale of, other shares of stock of any such junior
class;
provided, however, that nothing herein contained shall require a class vote or
consent in connection with (i) any increase in the total number of authorized
shares of Common Stock, (ii) the fixing of any of the specific rights,
preferences and limitations of other series of the Preferred Stock that may be
fixed by the Board of Directors, or (ii) subject to prohibitions of the General
Corporation Law of Delaware, the increase or decrease in the number of shares of
Preferred Stock classified as any series of Preferred Stock, or the
reclassification and reissue of shares of any series of Preferred Stock as a
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors or as part of any other series of
Preferred Stock, the terms of which do not prohibit such reissue and provided
further that no class vote or written consent of the holders of the Preferred
Stock or any series thereof shall be required if at or prior to the time the
issuance of any such prior
- 5 -
<PAGE>
stock is to be made or any such change is to take effect, provision is made for
the redemption of all Preferred Stock at the time outstanding or, if only one or
more series is entitled to such class vote, provision is made for the redemption
of all shares of such series at the time outstanding.
In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Corporation and any
preferential amounts to which the holders of the Preferred Stock shall be
entitled, the holders of the Common Stock and any Preferred Stock entitled to
participation after payment of its preferential amount, shall be entitled to
share ratably in the remaining net assets of the Corporation.
Neither the merger or consolidation of the Corporation, nor the sale, lease
or conveyance of all or a part of its assets, shall be deemed to be a
liquidation, dissolution or winding up of the affairs of the Corporation.
5. SERIES A SHARES
The first series of Preferred Stock, par value $1.00 per share, of the
Corporation shall be, and hereby is, designated "Series A Preferred Shares" (the
"Series A Shares), and the number of shares constituting such series shall be
forty thousand (40,000). The relative rights and preferences of the Series A
Shares shall be as follows:
(a) Dividends and Distributions.
(1) Subject to the prior and superior rights of the holders of any
shares of any series of stock ranking prior and superior to the Series A
Shares with respect to dividends, the holders of Series A Shares, in
preference to the holders of Common Stock, par value $.10 per share, of the
Corporation (the "Common Stock") and of any other junior stock, shall be
entitled to receive, when and as declared by the Board of Directors, out of
any funds lawfully available therefor, cash dividends thereon, payable
quarterly, from the date of issuance thereof, upon the first days of
February, May, August and November in each year (each such date being
referred to herein as a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance of a
Series A Share, in an amount per share (rounded to the nearest cent) equal
to the greater of (a) $0.25 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, and 100 times the aggregate per share amount (payable in kind)
of all non-cash dividends or other distributions, other than a dividend or
distribution payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise),
declared on the Common Stock since the immediately preceding Quarterly
Dividend Payment Date or, with respect to the first Quarterly Dividend
Payment Date, since the first issuance of any Series A Share. In the event
the Corporation shall at any
- 6 -
<PAGE>
time after January 26, 1988 (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common
Stock, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the amounts to which holders of Series A
Shares were entitled immediately prior to such event under clause (a) and
clause (b) of the preceding sentence shall be adjusted by multiplying each
such amount by a fraction the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(2) The Corporation shall declare a dividend or distribution on the
Series A Shares as provided in paragraph (1) of this Section (a)
immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend or distribution payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall have
been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of $0.25 per share on the Preferred Shares shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date;
and provided further that nothing contained in this paragraph (2) shall be
construed so as to conflict with any provision relating to the declaration
of dividends contained in the Charter.
(3) Dividends shall begin to accrue and be cumulative on outstanding
Series A Shares from the Quarterly Dividend Payment Date next preceding the
date of issue of such Series A Shares, unless the date of issue of such
shares is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of Series A Shares entitled to receive a quarterly
dividend and before such Quarterly Dividend Payment Date, in either of
which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the Series A Shares in an amount less
than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of Series A Shares entitled to
receive payment of a dividend or distribution declared thereon.
(b) Redemption. The Series A Shares are not redeemable.
(c) Liquidation. Dissolution or Winding Up. In the event of the voluntary
or involuntary liquidation of the Corporation, the preferential amounts which
the holders of the Series A Shares shall be entitled to receive out of the
assets of the Corporation shall be $100.00 per share plus all accrued and unpaid
dividends thereon.
- 7 -
<PAGE>
(1) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of
stock ranking junior (upon liquidation, dissolution or winding up) to the
Series A Shares unless, prior thereto, the holders of Series A Shares shall
have received $100.00 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date
of such payment (the "Series A Liquidation Preference"). Following the
payment of the full amount of the Series A Liquidation Preference, no
additional distributions shall be made to the holders of Series A Shares
unless, prior thereto, the holders of shares of Common Stock shall have
received an amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Series A Liquidation Preference by
(ii) 100 (as appropriately adjusted as set forth in paragraph (3) of this
Section (c) to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the Common Stock) (such number in clause
(ii), the "Adjustment Number"). Following the payment of the full amount of
the Series A Liquidation Preference and the Common Adjustment in respect of
all outstanding Series A Shares and Common Stock, respec tively, holders of
Series A Shares and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed
in the ratio of the Adjustment Number to one with respect to the Series A
Shares and Common Stock, on a per share basis, respectively.
(2) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other series of preferred stock, if
any, which rank on a parity with the Series A Shares, then all such
available assets shall be distributed ratably to the holders of the Series
A Shares and the holders of such parity shares in proportion to their
respective liquidation preferences. In the event, however, that there are
not sufficient assets available to permit payment in full of the Common
Adjustment, then any such remaining assets shall be distributed ratably to
the holders of Common Stock.
(3) In the event the Corporation shall at any time after January 26,
1988 (i) declare any dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such
event.
(d) Sinking Fund. The Preferred Shares shall not be entitled to the benefit
of any sinking fund for the redemption or purchase of such shares.
- 8 -
<PAGE>
(e) Conversion.
(1) Subject to paragraph (2) of this Section (e), the Preferred Shares
shall not be convertible.
(2) In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the Series A Shares shall at the same time be
similarly exchanged or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged. In the event the Corporation shall at any time declare or pay any
dividend on Common Stock payable in shares of Common Stock, or effect a
subdivision or combination or consolidation of the outstanding shares of Common
Stock (by reclassi fication or otherwise) into a greater or lesser number of
shares of Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of Series A Shares
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event, and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(f) Voting Rights.
(1) The holders of Series A Shares shall have no voting rights except
as provided by Delaware statutes or by paragraph (2) of this Section (f).
(2) So long as any Series A Shares shall be outstanding, and in
addition to any other approvals or consents required by law, without the consent
of the holders of 66-2/3% of the Series A Shares outstanding as of a record date
fixed by the Board of Directors, given either by their affirmative vote at a
special meeting called for that purpose, or, if permitted by law, in writing
without a meeting:
(i) The Corporation shall not sell, transfer or lease all or
substantially all the properties and assets of the Corporation;
provided, however, that nothing herein shall require the consent of
the holders of Series A Shares for or in respect of the creation of
any mortgage, pledge, or other lien upon all or any part of the assets
of the Corporation.
(ii) The Corporation shall not effect a merger or consolidation
with any other corporation or corporations unless as a result of such
merger or consolidation and after giving effect thereto holders of
Series A Shares are entitled to receive a per share amount and type of
consideration equal to 100 times the per share amount and type of
consideration received by holders of shares of Common Stock, or (l)
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<PAGE>
either (A) the Corporation shall be the surviving corporation or (B)
if the Corporation is not the surviving corporation, the successor
corporation shall be a corporation duly organized and existing under
the laws of any state of the United States of America or the District
of Columbia, and all obligations of the Corporation with respect to
the Series A Shares shall be assumed by such successor corporation,
(2) the Series A Shares then outstanding shall continue to be
outstanding, and (3) there shall be no alteration or change in the
designation or the preferences, relative rights or limitations
applicable to outstanding Series A Shares prejudicial to the holders
thereof.
(iii) The Corporation shall not amend, alter or repeal any of the
provisions of its Certificate of Incorporation in any manner which
adversely affects the relative rights, preferences or limitations of
the Series A Shares or the holders thereof.
(g) Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Shares as provided in Section (a) are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on Series A Shares outstanding shall have been paid in full,
the Corporation shall not:
(i) declare or pay dividends on, make any other distributions on,
or redeem or purchase or otherwise acquire for consideration any
shares of stock ranking junior (as to dividends) to the Series A
Shares;
(ii) declare or pay dividends on or make any other distributions
on any shares of stock ranking on a parity (as to dividends) with the
Series A Shares, except dividends paid ratably on the Series A Shares
and all such parity stock on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any stock ranking junior (as to dividends) to the Series A
Shares, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for
shares of any stocks of the Corporation, ranking junior (as to
dividends) to the Series A Shares; and
(iv) purchase or otherwise acquire for consideration any Series A
Shares, or any shares of stock ranking on a parity (as to dividends)
with the Series A Shares, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board
of Directors, after consideration of the respective annual dividend
rates and other relative rights and preferences of the respective
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<PAGE>
series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(2) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (1) of this Section
(g), purchase or otherwise acquire such shares at such time and in such manner.
(h) Fractional Shares. The Corporation may issue fractions and certificates
representing fractions of Series A Shares in integral multiples of 1/100th of a
Series A Share, or in lieu thereof, at the election of the Board of Directors of
the Corporation at the time of the first issue of any Series A Shares, evidence
such fractions by depositary receipts, pursuant to an appropriate agreement
between the Corporation and a depositary selected by it, provided that such
agreement shall provide that the holders of such depositary receipts shall have
all rights, privileges and preferences to which they would be entitled as
beneficial owners of Series A Shares. In the event that fractional Series A
Shares are issued, the holders thereof shall have all the rights provided herein
for holders of full Series A Shares in the proportion which such fraction bears
to a full share.
FIFTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, or any
class thereof, it is further provided:
1. The management of the business and the conduct of the affairs of the
Corporation, including the election of officers, shall be vested in its Board of
Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed, by, or in the manner provided in, the By-Laws. The
phrase "whole Board" and the phrase "total number of directors" shall be deemed
to have the same meaning, to wit, the total number of directors which the
Corporation would have if there were no vacancies. No election of directors need
be by written ballot.
2. Whenever the Corporation shall be authorized to issue only one class of
stock, each outstanding share shall entitle the holder thereof to notice of, and
the right to vote at, any meeting of stockholders. Whenever the Corporation
shall be authorized to issue more than one class of stock, no outstanding share
of any class of stock which is denied voting power under the provisions of the
Certificate of Incorporation shall entitle the holder thereof to notice of, and
the right to vote at, any meeting of stockholders, except as the provisions of
paragraph (d)(2) of section 242 of the General Corporation Law and of sections
251, 252 and 253 of the General Corporation Law shall otherwise require;
provided, that no share of any such class which is otherwise denied voting power
shall entitle the holder thereof to vote upon the increase or decrease in the
number of authorized shares of said class.
3. The Board of Directors shall have power without the assent or vote of
the stockholders to make, alter, amend, change, add to or repeal the By-Laws of
the Corporation.
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<PAGE>
4. The directors in their discretion may submit any contract or act for
approval or ratification at any annual meeting of the stockholders or at any
meeting of the stockholders called for the purpose of considering any such act
or contract, and any contract or act that shall be approved or be ratified by
the vote of the holders of a majority of the stock of the Corporation which is
represented in person or by proxy at such meeting and entitled to vote thereat
(provided that a lawful quorum of stockholders be there represented in person or
by proxy) shall be as valid and as binding upon the Corporation and upon all the
stockholders as though it had been approved or ratified by every stockholder of
the Corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or for any other reason.
SIXTH: 1. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fees and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be or not opposed to the
best interests of the Corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery of the State of Delaware or the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
- 12 -
<PAGE>
3. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraph 1 or 2 of this Article
Sixth, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
4. Any indemnification under paragraph 1 or 2 of this Article Sixth
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth therein. Such determination shall be
made (a) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (b) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
5. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of the director, officer, employee, or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article Sixth.
6. The indemnification and advancement of expenses provided by, or
granted pursuant to the other paragraphs of this Article Sixth shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any statute, by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office.
7. By action of the majority of the whole Board of Directors,
notwithstanding any interest of the directors in the action, the Corporation may
purchase and maintain insurance, in such amounts as the Board of Directors deems
appropriate, on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power or would
be required to indemnify him against such liability under the provisions of this
Article Sixth or of the General Corporation Law of the State of Delaware.
8. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
- 13 -
<PAGE>
9. The directors of the Corporation shall not be held personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is amended after approval by the stockholders of this
paragraph to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended.
SEVENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
EIGHTH: (1) Except as set forth in paragraph (4) of this Article, the
affirmative vote or consent of the holders of four-fifths of all classes of
stock of the Corporation entitled to vote in elections of directors, considered
for the purposes of this Article as one class, shall be required (i) for the
adoption of any agreement for the merger or consolidation of the Corporation
with or into any other corporation, or (ii) to authorize any sale, lease or
exchange of all or substantially all of the assets of the Corporation to, or any
sale, lease or exchange to the Corporation or any subsidiary thereof in exchange
for securities of the Corporation of any assets of, any other corporation,
person or other entity, if, in either case, as of the record date for the
determination of stockholders entitled to notice thereof and to vote thereon or
consent thereto such other corporation, person or entity is the beneficial
owner, directly or indirectly, of more than 10% of the outstanding shares of
stock of the Corporation entitled to vote thereon or consent thereto considered
for the purposes of this Article as one class. Such affirmative vote or consent
shall be in lieu of any lesser vote or consent of the holders of the stock of
the Corporation otherwise required by law or any agreement or contract to which
this Corporation is a party.
(2) For the purpose of this Article, any corporation, person or other
entity shall be deemed to be the beneficial owner of any shares of stock of the
Corporation (i) which it has the right to acquire pursuant to any agreement, or
upon exercise of conversion rights, warrants or options, or otherwise, or (ii)
which are beneficially owned, directly or indirectly (including shares deemed
owned through application of the foregoing clause (i) of this paragraph (2), by
any other corporation, person or entity with which it or its "affiliate" or
"associate" (as defined below) has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of stock of the
Corporation, or which is its "affiliate" or "associate" as those terms are
defined in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect May 31, 1976. Also for purposes of this
Article, the outstanding shares of any class of stock of the Corporation shall
include shares deemed owned through application of the foregoing clauses (i) and
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<PAGE>
(ii) of this paragraph (2), but shall not include any other shares which may be
issuable pursuant to any agreement, or upon exercise of conversion rights,
warrants or options, or otherwise.
(3) The Board of Directors of the Corporation shall have the power and
duty to determine for the purposes of this Article, on the basis of information
known to the Corporation, whether (i) such other corporation, person or other
entity beneficially owns more than 10% of the outstanding shares of stock of the
Corporation entitled to vote in elections of directors, (ii) a corporation,
person, or entity is an "affiliate" or "associate" (as defined above) of another
and (iii) the memorandum of understanding referred to in paragraph (4)of this
Article is substantially consistent with the transaction covered thereby. Any
such determinations shall be conclusive and binding for all purposes of this
Article.
(4) The provisions of this Article shall not be applicable to (i) any
merger or consolidation of the Corporation with or into any other corporation,
or any sale, lease or exchange of all or substantially all of the assets of the
Corporation to, or any sale, lease or exchange to the Corporation or any
subsidiary thereof in exchange for securities of the Corporation of any assets
of, any other corporation, if the Board of Directors of the Corporation shall by
resolution have approved a memorandum of understanding with such other
corporation with respect to and substantially consistent with such transaction
prior to the time that such other corporation shall have become holder of more
than 10% of the outstanding shares of stock of the Corporation entitled to vote
in elections of directors; or (ii) any merger or consolidation of the
Corporation with, or any sale, lease or exchange to the Corporation or any
subsidiary thereof of any of the assets of, any other corporation of which a
majority of the outstanding shares of all classes of stock entitled to vote in
elections of directors is owned of record or beneficially by the Corporation and
its subsidiaries.
NINTH: Notwithstanding any other provision of this Certificate of
Incorporation and any provision of the By-Laws of this Corporation, no amendment
to this Certificate of Incorporation shall amend, alter, change or repeal any
provisions of Article Eighth or this Article Ninth, unless the amendment
effecting such amendment, alteration, change or repeal shall receive the
affirmative vote or consent of the holders of four-fifths of all classes of
stock of the Corporation entitled to vote on such amendment, considered for the
purpose of this Article as one class and no amendment to the ByLaws by action
taken by a vote of stockholders shall amend, alter, change or repeal any
provisions of Article II, Section 2.01 unless the amendment effecting such
amendment, alteration, change or repeal shall receive the affirmative vote or
consent of the holders of four-fifths of all classes of stock of the Corporation
entitled to vote on such amendment, considered for the purpose of this Article
as one class."
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
executed by its officers thereunto duly authorized this 9th day of September,
1997.
RICHTON INTERNATIONAL
CORPORATION
By: /s/ FRED R. SULLIVAN
------------------------
Name: Fred R. Sullivan
Office: Chairman
ATTEST:
/s/ MARSHAL E. BERNSTEIN
- ----------------------------------
Marshall E. Bernstein, Secretary
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BUSINESS LOAN AGREEMENT
The undersigned RICHTON INTERNATIONAL CORPORATION, a Delaware corporation,
("Richton") with its chief executive offices located at 340 Main Street,
Madison, New Jersey 07940, and CENTURY SUPPLY CORP., a Michigan corporation,
("Century") with its chief executive offices located at 31691 Dequindre Road,
Madison Heights, Michigan 48071, (collectively the "Borrower"), has requested
from MICHIGAN NATIONAL BANK, a national banking association, of 27777 Inkster
Road [10-36], Farmington Hills, Michigan 48333-9065 (the "Bank"), and the Bank
agrees to make, or has made, the loan(s) described below (the "Loans") under the
terms and conditions stated in this Business Loan Agreement ("Agreement").
I. LOANS.
The following Loans and any amendments, extensions, renewals or
refinancings thereof are subject to this Agreement:
TYPE OF LOAN LOAN AMOUNT LOAN DATE
Line of Credit $30,000,000.00 03/4/1998
Purpose of Loans listed above:
The Line of Credit has two (2) draws, as follows:
Draw No. 01 is in the amount of Five Million and 00/100 Dollars
($5,000,000.00), and is to be used solely by Richton for working capital
liquidity and other corporate purpose.
Draw No. 02 is in the amount of Twenty Five Million and 00/100 Dollars
($25,000,000.00), and is to be used solely by Century for working capital
liquidity and to pay off an existing Line of Credit, Note No. 02074478.
II. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank, all of which representations and
warranties shall be continuing until all of Borrower's Obligations under
this Agreement and the Related Documents are fully performed, as follows:
A. Borrower's Existence and Authority. Richton is a Delaware corporation, and
Century is a Michigan corporation, the Borrower, and the Person executing
this Agreement has full power and complete authority to execute this
Agreement and all Related Documents.
B. Validity of Indebtedness and Agreement. Borrower's Indebtedness to Bank,
this Agreement, and all Related Documents are valid, binding upon, and
fully enforceable against Borrower in accordance with their respective
terms.
C. Nature of Borrower's Business. The nature of Borrower's business is:
Richton is a Holding Company; Century is a Wholesale distributor of
sprinkler irrigation supplies and supplier to professional irrigation
contractors.
D. Financial Information. All Financial Statements provided to Bank have been
prepared and shall continue to be prepared in accordance with generally
accepted accounting principles ("GAAP"), consistently applied, and fully
and fairly present the financial condition of Borrower. There has been no
material adverse change in Borrower's business, Property, or financial
condition since the date of Borrower's latest Financial Statements provided
to Bank.
E. Title and Encumbrances. Borrower owns all of its Property, and there are no
liens or encumbrances on any of the Property except as have been disclosed
to Bank in writing prior to the date of this Agreement and which are
identified and listed in an attachment to this Agreement (the "Permitted
Encumbrances"). Borrower agrees that Borrower shall not obtain further
loans, leases, or credit extensions from any Person identified in the
Permitted Encumbrances list or otherwise without Bank's prior written
consent.
F. No Litigation. There are no suits or proceedings pending before any court,
government agency, arbitration panel, or administrative tribunal, or, to
Borrower's knowledge, threatened against Borrower, which may result in any
material adverse change in the business, Property or financial condition of
Borrower.
G. No Misrepresentations. All representations and warranties in this Agreement
and the Related Documents are true and correct and no material fact has
been omitted.
H. Employee Benefit Plans. Borrower has not incurred any material accumulated
funding deficiency within the meaning of ERISA, and has not incurred any
material liability to the PBGC in connection with any employee benefit plan
established or maintained by Borrower, and no reportable event or
prohibited transaction, as defined in ERISA, has occurred with respect to
such plan(s).
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
<PAGE>
I. Environmental Compliance. Borrower is in full compliance with all
applicable Environmental Laws. See Section III.H.
J. Year 2000 Compliance. Borrower is aware of and is actively addressing the
so-called "Millennium Bug" to insure that all of Borrower's computer
software and systems will be fully Year 2000 compliant.
III. AFFIRMATIVE COVENANTS.
As of the date of this Agreement and continuing until Borrower's Obligations
under this Agreement and the Related Documents are fully performed,
Borrower shall:
A. Financial Requirements.
1. Maintain a Tangible Net Worth plus Subordinated Debt of not less than
$3,750,000.00 from March 31, 1998 through June 29, 1998; $4,500,000.00
from June 30, 1998 through September 29, 1998; $4,750,000.00 from
September 30, 1998 through December 30, 1998, and $5,000,000.00 from
December 31, 1998 and thereafter; which is to be based on Richton's
consolidated statement;
2. Maintain a Debt Service Coverage Ratio of not less than 1.05 to 1.00,
on a rolling four (4) quarter basis; which is to be based on Richton's
consolidated statement;
3. Funded debt (all interest-bearing debt) to EBITDA not to exceed 5.50
to 1.00, on a rolling four (4) quarter basis; which is to be based on
Richton's consolidated statement.
B. Books and Reports.
1. Financial Statements. Within one hundred twenty (120) days after the
end of each fiscal year, furnish to Bank, in form acceptable to Bank,
audited annual Financial Statements of Richton for the foregoing
period, prepared by a certified public accountant acceptable to Bank,
which includes consolidating subsidiary information of Century Supply
Corp., prepared by management.
2. Financial Statements. Within the earlier of one hundred twenty (120)
days after the end of each fiscal year, or five (5) days of filing
with the Securities and Exchange Commission, furnish Bank, in form
acceptable to Bank, 10K Financial Statements of Richton for the
foregoing period certified to be correct by Borrower's Treasurer or
Chief Financial Officer.
3. Financial Statements. Within the earlier of sixty (60) days after the
end of each fiscal quarter, or five (5) days of filing with the
Securities and Exchange Commission, furnish Bank, in form acceptable
to Bank, 10Q Financial Statements of Richton for the foregoing period
certified to be correct by Borrower's Treasurer or Chief Financial
Officer, which includes consolidating subsidiary information prepared
by management.
4. Financial Statements. Within forty-five (45) days after the end of
each fiscal quarter, furnish Bank, in form acceptable to Bank,
management prepared quarterly Financial Statements of Century for the
foregoing period certified to be correct by Borrower's Treasurer or
Chief Financial Officer.
5. Financial Statements. Within thirty (30) days after the end of each
fiscal month, furnish Bank, in form acceptable to Bank, management
prepared monthly Financial Statements of Century for the foregoing
period certified to be correct by Borrower's Treasurer or Chief
Financial Officer.
6. Projected Financial Statements. Prior to February 28th of each year,
furnish Bank, in form acceptable to Bank, projected annual income
statements and balance sheets, broken down monthly, of Century and CBE
for the coming period certified to be correct and prepared by
Borrower's Treasurer or Chief Financial Officer.
7. Quick Cash Report. Furnish to Bank, in form acceptable to Bank, a
weekly quick cash report, certified to be correct by Borrower's
Treasurer or Chief Financial Officer.
8. Field Audit. Allow the Bank's internal auditors to conduct a field
audit of Century's and CBE's books, records and Property at least
semi-annually, at such times and to such extent as Bank in its sole
discretion may determine, and Borrower agrees to pay for the cost of
said audits.
9. Other. Promptly furnish Bank such other information and reports
concerning Borrower's business, Property, and financial condition as
are provided to Borrower's owners or as Bank requests, and permit Bank
to inspect, confirm, and copy Borrower's books and records at any time
during Borrower's normal business hours.
C. Notice of Adverse Events. Promptly notify Bank in writing of any
litigation, governmental proceeding, default or any other occurrence which
could have a material adverse effect on Borrower's business, Property or
financial condition.
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
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<PAGE>
D. Maintain Business Existence and Operations. Do all things necessary to keep
in full force and effect Borrower's corporate, partnership, proprietorship,
trust, or other existence, as the case may be, and to continue its business
described in Paragraph II.C. as presently conducted. Borrower shall not
change its corporate, partnership, proprietorship, trust, or other
existence, nor sell or merge Borrower's business, in whole or in part, to
or with any other Person, without the prior written consent of Bank.
E. Insurance. Maintain adequate fire and extended risk coverage, business
interruption, workers disability compensation, public liability,
environmental, flood, and such other insurance coverages as may be required
by law or as may be required by Bank. All insurance policies shall be in
such amounts, upon such terms, in form, and carried with such insurers, as
are acceptable to Bank. Borrower shall provide evidence satisfactory to
Bank of all insurance coverages and that the policies are in full force and
effect, and for all insurance coverages upon any Property which is
Collateral, the insurance policy shall be endorsed to provide Bank with a
standard loss payable clause insuring the Bank's interest without regard to
any act, fault or neglect of Borrower, with not less than thirty (30) days
advance written notice to Bank by the insurer of any cancellation or
modification of coverage (CF12181185). Bank shall reasonably consult with
Borrower with respect to disbursements of insurance proceeds. Any failure
to maintain insurance as provided in this Agreement shall be an Event of
Default and Bank may obtain such insurance as the Bank deems necessary or
prudent, in the Bank's sole discretion, without obligation to do so, and
all amounts so expended by Bank shall be added to the Indebtedness or shall
be payable on demand, at Bank's option. Upon Borrower's failure to promptly
provide evidence of such insurance as Bank has required, the Bank may
assume Borrower does not have the required coverage. Upon Borrower's
failure to obtain or maintain any insurance coverages required under this
Agreement, the Bank may assess a service charge for obtaining and servicing
any insurance coverage(s).
F. Payment of Taxes. Pay all taxes, levies and assessments due to all local,
State and Federal agencies, before any interest or penalty thereon becomes
due and payable. Unless Borrower has established a cash reserve and is
actively pursuing a tax appeal, any failure by Borrower to pay promptly any
taxes, levies and assessments shall be an Event of Default.
G. Employee Benefit Plans.
1. At all times meet the minimum funding requirements of ERISA concerning
all of Borrower's employee benefit plans subject to ERISA.
2. At no time shall Borrower (a) allow any event to occur or condition
concerning any employee benefit plan subject to ERISA which might
constitute grounds for termination of the plan or for the appointment
of a trustee to administer the plan; or (b) allow any employee benefit
plan to be the subject of any voluntary or involuntary termination
proceeding.
H. Environmental Laws Compliance/Notices/Indemnity. Strictly comply with all
Environmental Laws applicable to Borrower's business. Borrower agrees to
notify Bank, no later than ten (10) days after Borrower's receipt, of any
summons, notice, lawsuit, citation, letter, or other communication received
by Borrower from any Federal, State, or local agency or unit of government
or other Person, which asserts that Borrower is in violation of any
Environmental Laws. Borrower (and the Obligors) agree to indemnify and hold
Bank harmless from all violations by Borrower of any Environmental Laws,
which indemnity shall include all costs and expenses incurred by Bank,
including legal fees, which are related to any violation by Borrower of any
Environmental Laws, whether or not the Indebtedness has been paid at the
time any such proceeding, claim, or action is instituted against Bank.
Borrower further agrees that Bank may at any time, at Borrower's sole cost
and expense, hire or require Borrower to hire and provide Bank with an
environmental audit prepared by an independent environmental engineering
firm acceptable to Bank to confirm the continuing truth and accuracy of
Borrower's environmental representations and warranties.
I. Use of Proceeds; Purpose of Loans. Use the proceeds of the Loan(s) only for
Borrowers' business described in Paragraph II.C., and only for those
purposes stated in Paragraph I.
J. Account. Until all of the Indebtedness shall be fully repaid to Bank,
Borrower, shall establish and maintain with Bank, a non-interest bearing
deposit account.
K. Maintenance of Records; Change in Place of Business or Name. Keep all of
its books and records at the address set forth in this Agreement, and give
the Bank prompt written notice of any change in its principal place of
business, in the location of Borrower's books and records, in Borrower's
name, and of any change in the location of the Collateral.
L. Employment Laws. Strictly comply with all Federal and State laws pertaining
to Borrower's employees, including by way of illustration but not of
limitation, the Michigan Worker's Disability Compensation Act, MCL 418.101
et seq., as amended, Michigan Employment Security Act, MCL 421.1 et seq.,
as amended, and the Fair Labor Standards Act, 29 USC 201 et seq., as
amended.
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M. General Compliance with Law. At all times operate Borrower's business in
strict compliance with all applicable Federal, State, and local laws,
ordinances and regulations, including the Americans with Disabilities Act
of 1990, and refrain from and prevent Borrower's partners, owners,
directors, officers, employees and agents from engaging in any civil or
criminal activity proscribed by law.
N. Sale of Asset. The proceeds of any asset sale of Borrower greater than
$500,000.00 shall be paid to Bank to pay down any Bank debt solely
outstanding on Draw No. 01 (applying such proceeds first to interest, then
to principal).
IV. NEGATIVE COVENANTS.
Until all of Borrower's Obligations under this Agreement and the Related
Documents are fully performed, without the Bank's prior written consent
Borrower shall not:
A. No Borrowings, Guarantees, or Loans. Borrow money or act as guarantor of
any loan or other obligation or lend any money to any Person without Bank's
prior written consent. Any sale of Borrower's accounts receivable shall be
deemed the borrowing of money.
B. Liens and Encumbrances; Transfer of Assets. Mortgage, assign, or encumber
any of its Property except to Bank.
V. SECURITY FOR LOANS.
A. Security/Mortgage Interests. Borrower and the other Obligor(s) named in
this Agreement have granted or agree to grant to Bank on the date of this
Agreement, security/mortgage interests in certain Property as collateral
security for the Loans and repayment of the Indebtedness, among which are
the following Related Documents:
Two (2) Security Agreements dated March 4, 1998
VI. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an Event of
Default under this Agreement:
A. Failure to Pay Amounts Due. Any principal or interest on any Indebtedness
to Bank is not paid when due.
B. Misrepresentation; False Financial Information. Any statement, warranty or
representation of Borrower in connection with or contained in this
Agreement, the Related Documents, or any Financial Statements now or
hereafter furnished to the Bank by or on behalf of the Borrower, is false
or misleading in any material respect.
C. Noncompliance with Bank Agreements. Borrower breaches any covenant, term,
condition or agreement stated in this Agreement or any other agreement
including, but not limited to the Related Documents, and any such breach is
not cured within thirty (30) days after notice from the Bank or, if such
breach cannot be reasonably cured within such thirty (30) days, if Borrower
has not commenced to take action to cure such breach within such thirty
(30) day period.
D. Cessation/Termination of Existence. Borrower shall cease doing business or
Borrower's existence is terminated by sale, dissolution, merger or
otherwise.
E. Bankruptcy or Receivership. Any conveyance is made of substantially all of
Borrower's assets, any assignment is made for the benefit of creditors, any
receiver is appointed, or any insolvency, liquidation or reorganization
proceeding under the Bankruptcy Code or otherwise shall be filed by or
against Borrower.
F. Attachments; Tax Liens. Any attachment, execution, levy, forfeiture, tax
lien or similar writ or process is issued against the Collateral.
G. Indictment. The institution of any felony criminal proceeding against
Borrower, Borrower's management, or any Obligor.
H. Material Adverse Change. Any material adverse change occurs or is imminent
the effect of which would be to substantially diminish Borrower's financial
condition, business, ability to perform their agreements with the Bank, or
the value of the Collateral.
I. Other Lender Default. Any other indebtedness for borrowed money to the Bank
or any other creditor becomes due and remains unpaid after acceleration of
the maturity or after the maturity stated.
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VII. REMEDIES ON DEFAULT.
A. Acceleration. Upon the occurrence of any Event of Default, the Loans and
all Indebtedness to Bank may, at the option of Bank, and without demand or
notice of any kind, be declared to be immediately due and payable.
B. Remedies Cumulative. The remedies provided for in this Agreement are
cumulative and not exclusive, and Bank may exercise any remedies available
to it at law or in equity, and as are provided in this Agreement, the
Related Documents, and any other agreement between Borrower and Bank.
C. No Waiver. No delay or failure of Bank to exercise any right, remedy, power
or privilege hereunder shall affect that right, remedy, power or privilege,
nor shall any single or partial exercise thereof preclude the exercise of
any other right, remedy, power or privilege. No Bank delay or failure to
demand strict adherence to the terms of this Agreement shall be deemed to
constitute a course of conduct inconsistent with the Bank's right to at any
time, before or after any Event of Default, demand strict adherence to the
terms of this Agreement and the Related Documents.
D. Bank's Right of Set-off. Upon the occurrence of any Event of Default, Bank
shall have the right to apply any or all of Borrower's and any Obligor's
bank accounts or any other Property held by Bank against any Indebtedness
of Borrower to Bank.
VIII. CROSS-DEFAULT.
Any default by Richton and Century under the terms of any Indebtedness to
Bank shall also constitute an Event of Default under this Agreement and any
Event of Default under this Agreement shall be a default under any
Indebtedness of Richton and Century to Bank.
IX. MISCELLANEOUS.
A. Compliance with Bank Agreements. Borrower acknowledges that it has
carefully read, and agrees to fully comply with this Agreement, the Related
Documents, and all other agreements between Borrower and Bank.
B. Expenses. Borrower agrees to pay all of Bank's costs and expenses incurred
to perfect or protect the Bank's security interests and liens, pay any
insurance premiums, Uniform Commercial Code search fees, taxes,
Environmental Laws inspection fees, appraisal fees, and all fees and costs
incurred by Bank for audits, inspection, and copying of Borrower's books
and records. Borrower also agrees to pay all costs and expenses of Bank,
including reasonable attorney fees, in connection with the enforcement of
the Bank's rights and remedies under this Agreement, the Related Documents
and any other agreement, and in connection with the preparation of any
amendments, modifications, waivers or consents with respect to this
Agreement.
C. Further Action. Borrower agrees, from time to time upon Bank's request, to
make, execute, acknowledge, and deliver to Bank such further and additional
instruments, documents, and agreements, and to take such further action as
may be required to carry out the intent and purpose of this Agreement and
repayment of the Loans.
D. Governing Law, Partial Illegality. This Agreement and the Related Documents
shall be interpreted and the rights of the parties determined under the
laws of the State of Michigan. Should any part, term, or provision of this
Agreement be adjudged illegal or in conflict with any law of the United
States or State of Michigan, the validity of the remaining portion or
provisions of the Agreement shall not be affected.
E. Writings Constitute Entire Agreement; Modifications Only in Writing. This
Agreement, the Related Documents and all other written agreements between
Borrower and Bank, constitute the entire agreement of the parties and there
are no other agreements, express or implied. This Agreement supersedes any
and all commitment letters or term sheets heretofore issued in connection
with this Loan, including without limitation a certain letter of December
17, 1997. None of the parties shall be bound by anything not expressed in
writing, and neither this Agreement, the Related Documents, nor any other
agreement can be modified except by a writing executed by Borrower and by
the Bank. This Agreement shall inure to the benefit of and shall be binding
upon all of the parties to this Agreement and their respective successors,
estate representatives, and assigns, provided however, that Borrower cannot
assign or transfer its rights or obligations under this Agreement without
Bank's prior written consent.
F. Credit Inquiries. Borrower hereby authorizes Bank to respond to any credit
inquiries received by Bank from trade creditors or other credit granting
institutions.
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G. Release of Claims Against Bank. In consideration of the Bank making the
Loans described in this Agreement, Borrower and the Obligor(s) do each
hereby release and discharge Bank of and from any and all claims, harm,
injury, and damage of any and every kind, known or unknown, legal or
equitable, which Borrower or any of the Obligor(s) have against the Bank
from the date of their respective first contact with Bank until the date of
this Agreement. Borrower and the Obligor(s) confirm to Bank that they have
reviewed the effect of this release with competent legal counsel of their
choice, or have been afforded the opportunity to do so, prior to execution
of this Agreement and the Related Documents and do each acknowledge and
agree that Bank is relying upon this release in extending the Loans to
Borrower.
H. Waiver of Jury Trial. Borrower and the Obligors do each knowingly,
voluntarily and intelligently waive their constitutional right to a trial
by jury with respect to any claim, dispute, conflict, or contention, if
any, as may arise under this Agreement or under the Related Documents, and
agree that any litigation between the parties concerning this Agreement and
the Related Documents shall be heard by a court of competent jurisdiction
sitting without a jury. Borrower and the Obligor(s) hereby confirm to Bank
that they have reviewed the effect of this waiver of jury trial with
competent legal counsel of their choice, or have been afforded the
opportunity to do so, prior to signing this Agreement and the Related
Documents and do each acknowledge and agree that Bank is relying upon this
waiver in extending the Loans to Borrower.
I. Headings. All section and paragraph headings in this Agreement are included
for convenience only and do not constitute a part of this Agreement.
J. Term of Agreement. This Agreement supersedes and replaces all previous loan
agreements with regard to the Loans described in Paragraph I. Unless
superseded by a later Business Loan Agreement, this Agreement shall
continue in full force and effect until all of Borrower's Obligations to
Bank are fully satisfied and the Loans and Indebtedness are fully repaid.
K. Counterparts. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
L. Tax Loss Carry-forwards. Any tax loss carry-forwards of Richton will be
used to specifically offset, if applicable, income tax expenses of Century,
CBE, and any other subsidiaries.
X. DEFINITIONS.
The following words shall have the following meanings in this Agreement:
A. "Average Investable Balance" means the average daily ledger balance in
Borrower's deposit account referred to in Paragraph III.K. of this
Agreement, less (I) average daily uncollected deposits, (ii) Bank's reserve
requirement, and (iii) amounts necessary to offset applicable service
charges, for the period covered by the account analysis statement provided
by Bank, as shown on such account analysis statement.
B. "Base Rate" or "Prime Rate" means that variable rate of interest from time
to time established by the bank designated in the Loan promissory note(s)
and Section I. of this Agreement as its base or prime commercial lending
rate.
C. "Bank" means Michigan National Bank, a National banking association, and
any successor or assign.
D. "Collateral" means that Property which Borrower and any other Obligor has
pledged, mortgaged, or granted Bank a security interest in, wherever
located and whether now owned or hereafter acquired, together with all
replacements, substitutions, proceeds and products thereof.
E. "Current Ratio" means that ratio obtained by dividing total current assets
by total current liabilities as determined under GAAP.
F. "Debt Service Coverage Ratio" means that ratio obtained by dividing the sum
of Borrower's (I) net income after taxes and distributions, (ii) interest
expense, (iii) depreciation expense, and (iv) amortization expense, by the
sum of Borrower's interest expense plus current maturities of long-term
debt, all as determined under GAAP.
G. "EBITDA" means net income before (i) taxes and distributions, (ii) interest
expense, (iii) depreciation expense, and (iv) amortization expense.
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H. "Environmental Laws" means all laws, regulations, and rules of the United
States of America, State of Michigan, and local authorities which pertain
to the environment, including but not limited to, the Clean Air Act (42 USC
7401 et seq.), Clean Water Act (33 USC 1251 et seq.), Resource Conservation
and Recovery Act of 1976 (42 USC 6901 et seq.), Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (42 USC 9601 et seq.),
Hazardous Materials Transportation Act (49 USC 1801 et seq.), Solid Waste
Disposal Act (42 USC 6901 et seq.), Toxic Substances Control Act (15 USC
2601 et seq.), Michigan Natural Resources and Environmental Protection Act
(MCL 324.101 et seq. as each of said statutes have been or are hereafter
amended, -- ---- together with all rules and regulations promulgated by the
Environmental Protection Agency and Michigan Departments of Natural
Resources and Environmental Quality and all additional environmental laws,
rules, and regulations in effect on the date of this Agreement and as may
be enacted and effective.
I. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor act.
J. "Event of Default" means any of the events described in Section VI. of this
Agreement or in the Related Documents.
K. "Financial Statements" means all balance sheets, cash flows, earnings
statements, and other financial information (whether of the Borrower or an
Obligor) which have been, are now, or are in the future furnished to Bank.
L. "GAAP" means "generally accepted accounting principles" consistently
applied, as set forth from time to time in the Opinion of the Accounting
Principles Board of the American Institute of Certified Public Accountants
and the Financial Accounting Standards Board, or which have other
substantial authoritative support.
M. "Guarantor" means any Person who has guaranteed payment of the Loans.
N. "Indebtedness" or "Obligations" means all Loans, indebtedness, and
obligations of Borrower to the Bank, including but not limited to, any Bank
advances for payments of insurance, taxes, amounts advanced by Bank to
protect its interest in the Collateral, overdrafts in deposit accounts with
Bank, and all other indebtedness, obligations and liabilities of Borrower
to Bank, whether matured or unmatured, liquidated or unliquidated, direct
or indirect, absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising.
O. "Michigan National Bank Prime Rate" or "MICHIGAN NATIONAL BANK Prime" means
that variable rate of interest so designated and from time to time
established as the Michigan National Bank prime commercial lending rate or
such prime commercial lending rate.
P. "Net Worth" means the difference between Borrower's total assets and total
liabilities, as determined under GAAP.
Q. "Obligor" means any person having any obligation to Bank, whether for the
payment of money or otherwise, under this Agreement or under the Related
Documents, including but not limited to any guarantors of Borrower's
Indebtedness.
R. "PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the powers and functions of the Pension Benefit Guaranty
Corporation.
S. "Person" means any individual, corporation, partnership, joint venture,
association, trust, unincorporated association, joint stock company,
government, municipality, political subdivision, agency or other entity.
T. "Property" means all of Borrower's (or other Obligor's, as applicable)
assets, tangible and intangible, real and personal.
U. "Quick Ratio" means the total of Borrower's cash, marketable securities and
accounts receivable, divided by current liabilities, as determined under
GAAP.
V. "Related Documents" means any and all documents, promissory notes, security
agreements, leases, mortgages, guaranties, pledges, and any other documents
or agreements executed in connection with this Agreement. The term shall
include documents existing before, at the time of execution of, this
Agreement, and documents executed after the date of this Agreement.
W. "Subordinated Debt" means all of that indebtedness to others, and all
collateral security therefor.
X. "Tangible Net Worth" means Net Worth less intangible assets.
Y. "Working Capital" means the excess of Borrower's current assets over
current liabilities, determined under GAAP.
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XI. ADDITIONAL AGREEMENTS:
See the Addendum To Business Loan Agreements (Line of Credit) (Draw No. 01)
and (Draw No. 02) for additional terms and conditions.
IN WITNESS WHEREOF the parties have executed this Agreement on this 4th day
of March, 1998.
BORROWER:
RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation
/s/ F.R. Sullivan
By: ----------------------------------
Its: President
and
CENTURY SUPPLY CORP.,
a Michigan corporation
/s/ Wayne R. Miller
By: ----------------------------------
Wayne R. Miller
Its: President
BANK:
MICHIGAN NATIONAL BANK,
a national banking association
/s/ Joseph M. Redoutey
By: ----------------------------------
Joseph M. Redoutey
Its: Relationship Manager
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<PAGE>
ADDENDUM TO
BUSINESS LOAN AGREEMENT
(Line of Credit)
(Draw No. 01)
This Addendum Agreement ("Addendum") is an integral part of the Business
Loan Agreement executed by Borrower, and each and all of the terms, conditions,
provisions and agreements set forth in the Business Loan Agreement are
incorporated by this reference into this Addendum.
I. LINE OF CREDIT LOAN - DRAW NO. 01
Under those terms and conditions set forth in the Business Loan Agreement
and in this Addendum, and provided there shall exist no Event of Default, Bank
agrees to loan to Richton International Corporation ("Richton"), from time to
time at Richton's request, up to but not to exceed the principal sum of FIVE
MILLION AND 00/100 DOLLARS ($5,000,000.00) (the "Line of Credit Loan").
II. LINE OF CREDIT NOTE - DRAW NO. 01
The Line of Credit Loan shall be signified by Richton's execution and
delivery to Bank of a promissory note in the amount of the Line of Credit Loan
(the "Line of Credit Note").
III. EXPIRATION OR SUSPENSION OF BANK'S COMMITMENT
Bank's obligation to Advance any sum to Richton under the Line of Credit
Loan and Line of Credit Note shall automatically (a) cease and terminate upon
the maturity date stated in the Line of Credit Note, and (b) suspend or
terminate (at Bank's option), upon the occurrence of any Event of Default unless
Bank agrees in writing to waive said Event of Default. No subsequent Advance by
Bank shall be construed as a waiver by Bank of the benefit of this provision,
nor shall Bank be estopped thereby to refuse any subsequent Richton Advance
request.
IV. BORROWING PROCEDURE
A. Richton may request an Advance on any day the Bank is open for business,
and Bank will promptly make the Advance available to Richton by crediting
Richton's general deposit account number _________________ in the amount
requested, or in such other manner as Richton shall request in writing,
unless:
(1) Bank's commitment to Richton under the Line of Credit Loan has
expired; or
(2) The requested Advance, when aggregated with all of Richton's previous
unpaid Advances, would cause the unpaid principal balance of the Line
of Credit Note to exceed the Line of Credit Loan Amount.
V. EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an Event of
Default under this Addendum:
A. Any Event of Default under the Business Loan Agreement of which this
Addendum is a part;
B. Any Richton breach of any provision or agreement in this Addendum which is
not cured as set forth in the Business Loan Agreement;
C. Any representation or warranty made under this Addendum is or becomes false
or misleading in any material respect;
D. The aggregate unpaid principal amount of all Advances under the Line of
Credit Note exceeds the Line of Credit Loan.
VI. REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default under this Addendum, Bank shall
have all remedies as are provided by law or by the Business Loan Agreement, the
Line of Credit Note, or any mortgage, security or other collateral agreement.
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VII. DEFINITIONS
As used in this Addendum the following terms shall have the following
meanings:
A. "Advance" or "Advances" shall mean a loan or loans of money from Bank to
Richton.
IN WITNESS WHEREOF, the parties have executed this Addendum on this 4th day
of March, 1998.
BORROWER:
RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation
/s/ Fred R. Sullivan
By: ------------------------------
Its: President
BANK:
MICHIGAN NATIONAL BANK,
a national banking association
/s/ Joseph M. Redoutey
By:-------------------------------
Joseph M. Redoutey
Its: Relationship Manager
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<PAGE>
ADDENDUM TO
BUSINESS LOAN AGREEMENT
(Line of Credit)
(Draw No. 02)
This Addendum Agreement ("Addendum") is an integral part of the Business
Loan Agreement executed by Borrower, and each and all of the terms, conditions,
provisions and agreements set forth in the Business Loan Agreement are
incorporated by this reference into this Addendum.
I. LINE OF CREDIT LOAN - DRAW NO. 02
Under those terms and conditions set forth in the Business Loan Agreement
and in this Addendum, and provided there shall exist no Event of Default, Bank
agrees to loan to Century Supply Corp. ("Century"), from time to time at
Century's request, up to but not to exceed the lesser of the principal sum of
TWENTY FIVE MILLION AND 00/100 DOLLARS ($25,000,000.00) or the maximum of
Advances allowable under the Advance Formula set forth in Section IV of this
Addendum (the "Line of Credit Loan").
II. LINE OF CREDIT NOTE - DRAW NO. 02
The Line of Credit Loan shall be signified by Century's execution and
delivery to Bank of a promissory note in the amount of the Line of Credit Loan
(the "Line of Credit Note").
III. EXPIRATION OR SUSPENSION OF BANK'S COMMITMENT
Bank's obligation to Advance any sum to Century under the Line of Credit
Loan and Line of Credit Note shall automatically (a) cease and terminate upon
the maturity date stated in the Line of Credit Note, and (b) suspend or
terminate (at Bank's option), upon the occurrence of any Event of Default unless
Bank agrees in writing to waive said Event of Default. No subsequent Advance by
Bank shall be construed as a waiver by Bank of the benefit of this provision,
nor shall Bank be estopped thereby to refuse any subsequent Century Advance
request.
IV. ADVANCE FORMULA
All Advances to Century under the Line of Credit Note shall be made under
the following Loan Advance Formula:
1. Borrowing Base of Five Million and 00/100 Dollars ($5,000,000.00), plus
2. 85% of Century's under ninety (90) days Eligible Accounts, plus
3. The lesser of 80% of Century's Extended Term Accounts, not to exceed
$3,000,000.00, plus
4. 55% of Century's Eligible Inventory, not to exceed $10,000,000.00.
V. BORROWING PROCEDURE
A. Century may request an Advance on any day the Bank is open for business,
and Bank will promptly make the Advance available to Century upon receipt,
review and acceptance of Century's Borrowing Base Certificate by crediting
Century's general deposit account number 9860-99386-5 in the amount
requested, or in such other manner as Century shall request in writing,
unless:
(1) Bank's commitment to Century under the Line of Credit Loan has
expired; or
(2) The requested Advance, when aggregated with all of Century's previous
unpaid Advances, would cause the unpaid principal balance of the Line
of Credit Note to exceed the lesser of the Line of Credit Loan Amount
or the maximum Advance amount determined by use of the above Advance
Formula.
VI. BORROWER REPORTS
Until all Advances under the Line of Credit Note, together with accrued
interest thereon, are fully repaid to Bank, Century agrees promptly to provide
Bank with the following periodic reports:
A. Account Aging Report. Century shall furnish to Bank, not later than the
20th day of each calendar month, a report certified by Century's Treasurer
or chief financial officer, showing the number and dollar sum of all of
Century's Accounts outstanding and unpaid at the end of Century's preceding
month, together with an aging schedule showing the number and dollar
amounts of all Accounts outstanding
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<PAGE>
and unpaid at the end of Century's preceding month, together with an aging
schedule showing the number and dollar amounts of all Accounts outstanding
and unpaid for more than 30, 60, and 90 days. All of Century's Account
reports shall be in form satisfactory to the Bank, and upon Bank's request
Century agrees immediately to provide to Bank such additional Accounts
information as Bank shall request, including but not limited to, a list of
the name, address, and amount of each Account Debtor's indebtedness to
Century.
B. Accounts Payable Agings. Century shall furnish to Bank, not later than the
20th day of each calendar month, a report certified by Century's Treasurer
or Chief Financial Officer showing the number and dollar sum of all of
Century's accounts payable outstanding and unpaid for more than 30, 60, and
90 days. Century's accounts payable reports shall be in form satisfactory
to Bank and, upon Bank's request, Century agrees to immediately provide
Bank with such additional information concerning any account payable as
Bank requests, including, but not limited to, a list with the name, address
and amount of each account payable.
C. Eligible Inventory. Century shall weekly furnish Bank with a report, as
stated on the Borrowing Base Certificate, of Century's Eligible Inventory,
signed by Century's Treasurer or Chief Financial Officer, in a report form
satisfactory to Bank. Also, Century shall furnish to Bank, not later than
the 20th day of each calendar month, a report of Century's Eligible
Inventory for the preceding month, certified by Century's Treasurer or
Chief Financial Officer, in a report form satisfactory to Bank A detailed
report listing the Eligible Inventory by location is required not later
than the 15th day of each calendar month after the preceding quarter,
certified by Century's Treasurer or Chief Financial Officer, in a report
form satisfactory to Bank.
D. Borrowing Base Certification. Century shall furnish Bank, not later than
fifteen (15) days from each calendar month end, a report (see attached
exhibit "A"), signed by Century's Treasurer or Chief Financial Officer,
completed in a form satisfactory to Bank. If desired, Century may submit a
report more frequently in order to borrow additional funds under their
formula. A complete aging is not required for interim borrowing and the
report may be dated any day of the month.
E. Verification of Accounts. Bank, at its option, may verify Century's
Accounts with Account Debtors, and Century agrees to promptly take whatever
action and execute such documents as in Bank's determination may be
necessary to aid Bank in such verification.
VII. DETERMINATION OF ELIGIBLE ACCOUNTS AND ELIGIBLE INVENTORY
Upon receipt of Century's above Accounts and Inventory reports, Bank shall
determine which Accounts and Inventory shall be eligible for inclusion in the
Advance Formula.
A. Eligible Accounts. For an Account to be eligible for an Advance, it must
have the characteristics listed in this sub-paragraph VII-A. Century
represents, warrants to, and agrees with Bank, as of the date of this
Addendum and continuing until all of Century's obligations under this
Addendum and the Business Loan Agreement are fully satisfied and all
Advances and accrued interest due under the Line of Credit Note are fully
repaid, that:
1. Each Account arose in the ordinary course of Century's business from the
sale or lease of goods or services which have been delivered to and
accepted by the Account Debtor, is represented by an invoice delivered to
the Account Debtor, and is due and payable;
2. Accounts outstanding for ninety (90) days or more after the due date on
original invoice, shall be excluded from the Advance Formula. If more than
ten percent (10%) of any Account Debtor's Accounts with Century remain
unpaid for more than ninety (90) days after the original invoice due date,
all Accounts with respect to that Account Debtor shall be excluded from the
Advance Formula, with the exception that this paragraph shall not apply to
Accounts of an Account Debtor whose Accounts aggregate to less than One
Hundred Twenty Five Thousand and 00/100 Dollars ($125,000.00);
3. Each Account is an unconditional, valid, legal and enforceable claim due
and owing to Century by the Account Debtor in the amount represented on the
Accounts report(s);
4. The unpaid balance of each Account is not subject to any defense,
counterclaim, setoff, credit, or adjustment for returned or damaged goods
or inferior services and there is no agreement between Century and the
Account Debtor or any other person for any rebate, concession, discount, or
release of liability, in whole or in part, except as has been disclosed to
Bank in writing.
5. Each Account is subject to no security interest or claim other than Bank's
security interest;
6. Century has no knowledge of the insolvency of any Account Debtor or of any
proceeding with respect to bankruptcy or other debtor relief by or against
any Account Debtor;
7. The Account Debtor is not an Affiliate of Century, and is not the United
States of America or a branch, department, agency, or any other subdivision
thereof;
8. The Account Debtor is not an Account Debtor whom Bank has, in the exercise
of Bank's reasonable discretion, determined to be an ineligible Account
Debtor, and as to whom the Bank has given notice to Century that such
Account Debtor shall be considered ineligible.
9. The Account is not a Foreign Account.
10024 (12/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
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<PAGE>
B. Eligible Inventory. For Inventory to be eligible for an Advance, each item
of Inventory must have the characteristics listed in this subparagraph
VII-B. Century represents and warrants to, and agrees with Bank, as of the
date of this Addendum and continuing until all of Century's obligations
under this Addendum and the Business Loan Agreement are fully satisfied and
all Advances and accrued interest due under the Line of Credit Note are
fully repaid, that:
1. The Inventory is of good and merchantable quality, is salable by Century in
the ordinary course of Century's business, and is not obsolete;
2. The Inventory is subject to no security interest or claim other than Bank's
security interest;
3. The Inventory is located at the location or locations disclosed in writing
to Bank and at no other location;
4. All Inventory has been valued at the lesser of cost or fair market value on
Century's Inventory report to Bank.
VIII. EVENTS OF DEFAULT
The occurrence of any of the following events shall constitute an Event of
Default under this Addendum:
A. Any Event of Default under the Business Loan Agreement of which this
Addendum is a part;
B. Any Century breach of any provision or agreement in this Addendum which is
not cured as set forth in the Business Loan Agreement;
C. Any representation or warranty made under this Addendum is or becomes false
or misleading in any material respect;
D. The aggregate unpaid principal amount of all Advances under the Line of
Credit Note exceeds the maximum Advances available as determined under the
Advance Formula.
IX. REMEDIES ON DEFAULT
Upon the occurrence of any Event of Default under this Addendum, Bank shall
have all remedies as are provided by law or by the Business Loan Agreement, the
Line of Credit Note, or any mortgage, security or other collateral agreement.
X. DEFINITIONS
As used in this Addendum the following terms shall have the following
meanings:
A. "Accounts", "Inventory" and "Account Debtor" shall each have the meanings
statutorily provided in Article 9 of the Michigan Uniform Commercial Code.
B. "Advance" or "Advances" shall mean a loan or loans of money from Bank to
Century.
C. "Advance Formula" shall mean Bank's computation of the maximum aggregate
Advances to which Century from time to time will be entitled under the Line
of Credit Loan, by application of the percentages set forth in Section IV
above to Century's Eligible Accounts and/or Inventory determined under
Section VII above.
D. "Affiliate" shall mean any Person which directly or indirectly controls or
is controlled by, or is under common control with Century, and all
shareholders, directors, and officers of Century.
E. "Borrowing Base" shall mean the amount of Advances allowed under the Line
of Credit Note which is not subject to Section IV. 2, 3 and 4 above.
F. "Extended Term Account" shall mean an Account which, when billed, is due on
a date later than the 10th day of the following month, but not later than
sixty (60) days after the 10th day of the following month and is not past
due.
G. "Foreign Account" shall mean any Account for which payment is remitted from
outside of the United States of America, except an Account for which
payment is remitted from Mexico or Canada by either General Motors
Corporation, Ford Motor Company, or Chrysler Corporation, or any of their
divisions or subsidiaries.
10024 (12/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Addendum on this 4th day
of March, 1998.
BORROWER:
CENTURY SUPPLY CORP.,
a Michigan corporation
/s/ Wayne R. Miller
By:-------------------------------------
Wayne R. Miller
Its: President
BANK:
MICHIGAN NATIONAL BANK,
a national banking association
/s/ Joseph M. Redoutey
By:-------------------------------------
Joseph M. Redoutey
Its: Relationship Manager
10024 (12/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
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<PAGE>
EXHIBIT "A"
Borrowing Base Certificate
MICHIGAN NATIONAL BANK DATE:
All amounts in Thousands
MONTHLY BORROWING BASE REPORT CENTURY SUPPLY CORP.
ACCOUNTS RECEIVABLE INVENTORY
aging summary date
Not yet due
Current Finished Goods
31-60 days
61-90 days Total 0
Over 90 days
Over 120 days -------------
Total
=============
* May differ due to rounding
BORROWING BASE CALCULATION
80% of Security Value of Eligible
Accounts Receivable $
Plus: 30% of Security Value of Inventory,
not to exceed + $
$10,000,000.00
Plus: Borrowing Base +
Total Availability under Formula $
Line of Credit Balance $
Funds Available/(Over Formula) $
ACCOUNTS PAYABLE AGING LOANS OUTSTANDING
08/11/97 aging summary date Michigan National Amount
Amount ______________% Line of Credit
Term Loan 0
Current
31-60 days
61-90 days
Over 90 days -------------
Total
=============
ADDITIONAL REPORTING REQUIREMENTS
* Monthly Financial Statements
- --------------------------------------------------------------------------------
The undersigned certifies that the above information is correct to customer's
books and records and that the undersigned has no knowledge of any event or
condition which constitutes an event of default under customer's credit
arrangements with Michigan National Bank or any other creditor. The undersigned
certifies that the customer has not commenced any material legal action and has
not received notice of any material legal action or governmental proceeding
instituted or threatened against it.
_______________________________ ____________________________
Authorized Signatory Date
10024 (12/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
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<PAGE>
EXHIBIT "A"
Borrowing Base Certificate (Continued)
CENTURY SUPPLY CORP
ELIGIBLE A/R IN THOUSANDS
60 DAY ELIGIBLE
REPORTS LESS S/C 10PCT DATING DATING ELIGIBLE A/
NOT YET DUE
CURRENT
30 DAY
60 DAY
90 DAY
120 DAY ------- -------- -------- ------- --------- -----------
TOTAL
======= ======== ======== ======= ========= ===========
TOTAL ELIGIBLE A/R
LESS 90/120 DAYS
NEW ELIGIBLE A/R
80% OF NEW ELIGIBLE A/R
SMALLER OF 3,000 OR
80% OF ELIGIBLE DATING
TOTAL 80% OF SECURITY VALUE OF
ELIGIBLE ACCOUNTS RECEIVABLE
10024 (12/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
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BUSINESS LOAN AGREEMENT
The undersigned RICHTON INTERNATIONAL CORPORATION, a Delaware corporation,
with its chief executive offices located at 340 Main Street, Madison, New Jersey
07940 (the "Borrower"), has requested from MICHIGAN NATIONAL BANK, a national
banking association, of 27777 Inkster Road [10-36], Farmington Hills, Michigan
48333-9065 (the "Bank"), and the Bank agrees to make, or has made, the loan(s)
described below (the "Loans") under the terms and conditions stated in this
Business Loan Agreement ("Agreement").
I. LOANS.
The following Loans and any amendments, extensions, renewals or
refinancings thereof are subject to this Agreement:
TYPE OF LOAN LOAN AMOUNT LOAN DATE
Term Loan $5,000,000.00 03/4/1998
Purpose of Loans listed above:
Payoff existing Term Loan given originally to Century Supply Corp., a
Michigan corporation ("Century"), for the benefit of CBE Technologies,
Inc., a Delaware corporation ("CBE"); pay down on subordinated debt;
working capital liquidity, and other corporate purpose.
II. BORROWER'S REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants to Bank, all of which representations and
warranties shall be continuing until all of Borrower's Obligations under
this Agreement and the Related Documents are fully performed, as follows:
A. Borrower's Existence and Authority. Borrower is a Delaware corporation, and
the Person executing this Agreement has full power and complete authority
to execute this Agreement and all Related Documents.
B. Validity of Indebtedness and Agreement. Borrower's Indebtedness to Bank,
this Agreement, and all Related Documents are valid, binding upon, and
fully enforceable against Borrower in accordance with their respective
terms.
C. Nature of Borrower's Business. The nature of Borrower's business is:
Holding company.
D. Financial Information. All Financial Statements provided to Bank have been
prepared and shall continue to be prepared in accordance with generally
accepted accounting principles ("GAAP"), consistently applied, and fully
and fairly present the financial condition of Borrower. There has been no
material adverse change in Borrower's business, Property, or financial
condition since the date of Borrower's latest Financial Statements provided
to Bank.
E. Title and Encumbrances. Borrower owns all of its Property, and there are no
liens or encumbrances on any of the Property except as have been disclosed
to Bank in writing prior to the date of this Agreement and which are
identified and listed in an attachment to this Agreement (the "Permitted
Encumbrances"). Borrower agrees that Borrower shall not obtain further
loans, leases, or credit extensions from any Person identified in the
Permitted Encumbrances list or otherwise without Bank's prior written
consent.
F. No Litigation. There are no suits or proceedings pending before any court,
government agency, arbitration panel, or administrative tribunal, or, to
Borrower's knowledge, threatened against Borrower, which may result in any
material adverse change in the business, Property or financial condition of
Borrower.
G. No Misrepresentations. All representations and warranties in this Agreement
and the Related Documents are true and correct and no material fact has
been omitted.
H. Employee Benefit Plans. Borrower has not incurred any material accumulated
funding deficiency within the meaning of ERISA, and has not incurred any
material liability to the PBGC in connection with any employee benefit plan
established or maintained by Borrower, and no reportable event or
prohibited transaction, as defined in ERISA, has occurred with respect to
such plan(s).
I. Environmental Compliance. Borrower is in full compliance with all
applicable Environmental Laws. See Section III.H.
J. Year 2000 Compliance. Borrower is aware of and is actively addressing the
so-called "Millennium Bug" to insure that all of Borrower's computer
software and systems will be fully Year 2000 compliant.
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
<PAGE>
III. AFFIRMATIVE COVENANTS.
As of the date of this Agreement and continuing until Borrower's
Obligations under this Agreement and the Related Documents are fully
performed, Borrower shall:
A. Financial Requirements.
1. Maintain a Tangible Net Worth plus Subordinated Debt of not less than
$3,750,000.00 from March 31, 1998 through June 29, 1998; $4,500,000.00
from June 30, 1998 through September 29, 1998; $4,750,000.00 from
September 30, 1998 through December 30, 1998, and $5,000,000.00 from
December 31, 1998 and thereafter; which is to be based on Richton's
consolidated statement;
2. Maintain a Debt Service Coverage Ratio of not less than 1.05 to 1.00,
on a rolling four (4) quarter basis; which is to be based on Richton's
consolidated statement;
3. Funded debt (all interest-bearing debt) to EBITDA not to exceed 5.50
to 1.00, on a rolling four (4) quarter basis; which is to be based on
Richton's consolidated statement.
B. Books and Reports.
1. Financial Statements. Within one hundred twenty (120) days after the
end of each fiscal year, furnish to Bank, in form acceptable to Bank,
audited annual Financial Statements of Richton for the foregoing
period, prepared by a certified public accountant acceptable to Bank,
which includes consolidating subsidiary information of Century Supply
Corp., prepared by management.
2. Financial Statements. Within the earlier of one hundred twenty (120)
days after the end of each fiscal year, or five (5) days of filing
with the Securities and Exchange Commission, furnish Bank, in form
acceptable to Bank, 10K Financial Statements of Richton for the
foregoing period certified to be correct by Borrower's Treasurer or
Chief Financial Officer.
3. Financial Statements. Within the earlier of sixty (60) days after the
end of each fiscal quarter, or five (5) days of filing with the
Securities and Exchange Commission, furnish Bank, in form acceptable
to Bank, 10Q Financial Statements of Richton for the foregoing period
certified to be correct by Borrower's Treasurer or Chief Financial
Officer, which includes consolidating subsidiary information prepared
by management.
4. Financial Statements. Within forty-five (45) days after the end of
each fiscal quarter, furnish Bank, in form acceptable to Bank,
management prepared quarterly Financial Statements of both Century and
CBE for the foregoing period certified to be correct by Borrowers'
Treasurer or Chief Financial Officer.
5. Financial Statements. Within thirty (30) days after the end of each
fiscal month, furnish Bank, in form acceptable to Bank, management
prepared monthly Financial Statements of both Century and CBE for the
foregoing period certified to be correct by Borrowers' Treasurer or
Chief Financial Officer.
6. Projected Financial Statements. Prior to February 28th of each year,
furnish Bank, in form acceptable to Bank, projected annual income
statements and balance sheets, broken down monthly, of Century and CBE
for the coming period certified to be correct and prepared by
Borrowers' Treasurer or Chief Financial Officer.
7. Field Audit. Allow the Bank's internal auditors to conduct a field
audit of Century's and CBE's books, records and Property at least
semi-annually, at such times and to such extent as Bank in its sole
discretion may determine, and Borrower agrees to pay for the cost of
said audits.
8. Other. Promptly furnish Bank such other information and reports
concerning Borrower's business, Property, and financial condition as
are provided to Borrower's owners or as Bank requests, and permit Bank
to inspect, confirm, and copy Borrower's books and records at any time
during Borrower's normal business hours.
C. Notice of Adverse Events. Promptly notify Bank in writing of any
litigation, governmental proceeding, default or any other occurrence which
could have a material adverse effect on Borrower's business, Property or
financial condition.
D. Maintain Business Existence and Operations. Do all things necessary to keep
in full force and effect Borrower's corporate, partnership, proprietorship,
trust, or other existence, as the case may be, and to continue its business
described in Paragraph II.C. as presently conducted. Borrower shall not
change its corporate, partnership, proprietorship, trust, or other
existence, nor sell or merge Borrower's business, in whole or in part, to
or with any other Person, without the prior written consent of Bank.
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
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<PAGE>
E. Insurance. Maintain adequate fire and extended risk coverage, business
interruption, workers disability compensation, public liability,
environmental, flood, and such other insurance coverages as may be required
by law or as may be required by Bank. All insurance policies shall be in
such amounts, upon such terms, in form, and carried with such insurers, as
are acceptable to Bank. Borrower shall provide evidence satisfactory to
Bank of all insurance coverages and that the policies are in full force and
effect, and for all insurance coverages upon any Property which is
Collateral, the insurance policy shall be endorsed to provide Bank with a
standard loss payable clause insuring the Bank's interest without regard to
any act, fault or neglect of Borrower, with not less than thirty (30) days
advance written notice to Bank by the insurer of any cancellation or
modification of coverage (CF12181185). Bank shall reasonably consult with
Borrower with respect to disbursements of insurance proceeds. Any failure
to maintain insurance as provided in this Agreement shall be an Event of
Default and Bank may obtain such insurance as the Bank deems necessary or
prudent, in the Bank's sole discretion, without obligation to do so, and
all amounts so expended by Bank shall be added to the Indebtedness or shall
be payable on demand, at Bank's option. Upon Borrower's failure to promptly
provide evidence of such insurance as Bank has required, the Bank may
assume Borrower does not have the required coverage. Upon Borrower's
failure to obtain or maintain any insurance coverages required under this
Agreement, the Bank may assess a service charge for obtaining and servicing
any insurance coverage(s).
F. Payment of Taxes. Pay all taxes, levies and assessments due to all local,
State and Federal agencies, before any interest or penalty thereon becomes
due and payable. Unless Borrower has established a cash reserve and is
actively pursuing a tax appeal, any failure by Borrower to pay promptly any
taxes, levies and assessments shall be an Event of Default.
G. Employee Benefit Plans.
1. At all times meet the minimum funding requirements of ERISA concerning
all of Borrower's employee benefit plans subject to ERISA.
2. At no time shall Borrower (a) allow any event to occur or condition
concerning any employee benefit plan subject to ERISA which might
constitute grounds for termination of the plan or for the appointment
of a trustee to administer the plan; or (b) allow any employee benefit
plan to be the subject of any voluntary or involuntary termination
proceeding.
H. Environmental Laws Compliance/Notices/Indemnity. Strictly comply with all
Environmental Laws applicable to Borrower's business. Borrower agrees to
notify Bank, no later than ten (10) days after Borrower's receipt, of any
summons, notice, lawsuit, citation, letter, or other communication received
by Borrower from any Federal, State, or local agency or unit of government
or other Person, which asserts that Borrower is in violation of any
Environmental Laws. Borrower (and the Obligors) agree to indemnify and hold
Bank harmless from all violations by Borrower of any Environmental Laws,
which indemnity shall include all costs and expenses incurred by Bank,
including legal fees, which are related to any violation by Borrower of any
Environmental Laws, whether or not the Indebtedness has been paid at the
time any such proceeding, claim, or action is instituted against Bank.
Borrower further agrees that Bank may at any time, at Borrower's sole cost
and expense, hire or require Borrower to hire and provide Bank with an
environmental audit prepared by an independent environmental engineering
firm acceptable to Bank to confirm the continuing truth and accuracy of
Borrower's environmental representations and warranties.
I. Use of Proceeds; Purpose of Loans. Use the proceeds of the Loan(s) only for
Borrower's business described in Paragraph II.C., and only for those
purposes stated in Paragraph I.
J. Account. Until all of the Indebtedness shall be fully repaid to Bank,
Borrower shall establish and maintain with Bank, a non-interest bearing
deposit account.
K. Maintenance of Records; Change in Place of Business or Name. Keep all of
its books and records at the address set forth in this Agreement, and give
the Bank prompt written notice of any change in its principal place of
business, in the location of Borrower's books and records, in Borrower's
name, and of any change in the location of the Collateral.
L. Employment Laws. Strictly comply with all Federal and State laws pertaining
to Borrower's employees, including by way of illustration but not of
limitation, the Michigan Worker's Disability Compensation Act, MCL 418.101
et seq., as amended, Michigan Employment Security Act, MCL 421.1 et seq.,
as amended, and the Fair Labor Standards Act, 29 USC 201 et seq., as
amended.
M. General Compliance with Law. At all times operate Borrower's business in
strict compliance with all applicable Federal, State, and local laws,
ordinances and regulations, including the Americans with Disabilities Act
of 1990, and refrain from and prevent Borrower's partners, owners,
directors, officers, employees and agents from engaging in any civil or
criminal activity proscribed by law.
N. Sale of Asset. The proceeds of any asset sale of Borrower greater than
$500,000.00 shall be paid to Bank to pay down Bank debt (applying such
proceeds first to interest, then to principal).
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
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<PAGE>
IV. NEGATIVE COVENANTS.
Until all of Borrower's Obligations under this Agreement and the Related
Documents are fully performed, without the Bank's prior written consent
Borrower shall not:
A. No Borrowings, Guarantees, or Loans. Borrow money or act as guarantor of
any loan or other obligation or lend any money to any Person without Bank's
prior written consent. Any sale of Borrower's accounts receivable shall be
deemed the borrowing of money.
B. Liens and Encumbrances; Transfer of Assets. Mortgage, assign, or encumber
any of its Property except to Bank, nor sell, transfer or assign any
Property except in the ordinary course of business.
V. SECURITY FOR LOANS.
A. Security/Mortgage Interests. Borrower and the other Obligor(s) named in
this Agreement have granted or agree to grant to Bank on the date of this
Agreement, security/mortgage interests in certain Property as collateral
security for the Loans and repayment of the Indebtedness, among which are
the following Related Documents:
Security Agreement dated March 4, 1998
Guaranty supported by a Guarantor Security Agreement both dated
March 4,1998
B. Guaranty of Payment. The prompt payment of Borrower's Loans and
Indebtedness to Bank has been guaranteed by the following Persons:
Guarantor Name Address
Century Supply Corp., 31691 Dequindre Road
a Michigan corporation Madison Heights, MI. 48071
VI. EVENTS OF DEFAULT.
The occurrence of any of the following events shall constitute an Event of
Default under this Agreement:
A. Failure to Pay Amounts Due. Any principal or interest on any Indebtedness
to Bank is not paid when due.
B. Misrepresentation; False Financial Information. Any statement, warranty or
representation of Borrower in connection with or contained in this
Agreement, the Related Documents, or any Financial Statements now or
hereafter furnished to the Bank by or on behalf of the Borrower, is false
or misleading in any material respect.
C. Noncompliance with Bank Agreements. Borrower breaches any covenant, term,
condition or agreement stated in this Agreement or any other agreement
including, but not limited to the Related Documents, and any such breach is
not cured within thirty (30) days after notice from the Bank or, if such
breach cannot be reasonably cured within such thirty (30) days, if Borrower
has not commenced to take action to cure such breach within such thirty
(30) day period..
D. Cessation/Termination of Existence. Borrower shall cease doing business or
Borrower's existence is terminated by sale, dissolution, merger or
otherwise.
E. Bankruptcy or Receivership. Any conveyance is made of substantially all of
Borrower's assets, any assignment is made for the benefit of creditors, any
receiver is appointed, or any insolvency, liquidation or reorganization
proceeding under the Bankruptcy Code or otherwise shall be filed by or
against Borrower.
F. Attachments; Tax Liens. Any attachment, execution, levy, forfeiture, tax
lien or similar writ or process is issued against the Collateral.
G. Indictment. The institution of any felony criminal proceeding against
Borrower, Borrower's management, or any Obligor.
H. Material Adverse Change. Any material adverse change occurs or is imminent
the effect of which would be to substantially diminish Borrower's and
Century's financial condition, business, ability to perform their
agreements with the Bank, or the value of the Collateral.
I. Other Lender Default. Any other indebtedness for borrowed money to the Bank
or any other creditor becomes due and remains unpaid after acceleration of
the maturity or after the maturity stated.
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
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<PAGE>
VII. REMEDIES ON DEFAULT.
A. Acceleration. Upon the occurrence of any Event of Default, the Loans and
all Indebtedness to Bank may, at the option of Bank, and without demand or
notice of any kind, be declared to be immediately due and payable.
B. Remedies Cumulative. The remedies provided for in this Agreement are
cumulative and not exclusive, and Bank may exercise any remedies available
to it at law or in equity, and as are provided in this Agreement, the
Related Documents, and any other agreement between Borrower and Bank.
C. No Waiver. No delay or failure of Bank to exercise any right, remedy, power
or privilege hereunder shall affect that right, remedy, power or privilege,
nor shall any single or partial exercise thereof preclude the exercise of
any other right, remedy, power or privilege. No Bank delay or failure to
demand strict adherence to the terms of this Agreement shall be deemed to
constitute a course of conduct inconsistent with the Bank's right to at any
time, before or after any Event of Default, demand strict adherence to the
terms of this Agreement and the Related Documents.
D. Bank's Right of Set-off. Upon the occurrence of any Event of Default, Bank
shall have the right to apply any or all of Borrower's and any Obligor's
bank accounts or any other Property held by Bank against any Indebtedness
of Borrower to Bank.
VIII.CROSS-DEFAULT.
Any default by Richton and Century under the terms of any Indebtedness to
Bank shall also constitute an Event of Default under this Agreement and any
Event of Default under this Agreement shall be a default under any
Indebtedness of Richton and Century to Bank.
IX. MISCELLANEOUS.
A. Compliance with Bank Agreements. Borrower acknowledges that it has
carefully read, and agrees to fully comply with this Agreement, the Related
Documents, and all other agreements between Borrower and Bank.
B. Expenses. Borrower agrees to pay all of Bank's costs and expenses incurred
to perfect or protect the Bank's security interests and liens, pay any
insurance premiums, Uniform Commercial Code search fees, taxes,
Environmental Laws inspection fees, appraisal fees, and all fees and costs
incurred by Bank for audits, inspection, and copying of Borrower's books
and records. Borrower also agrees to pay all costs and expenses of Bank,
including reasonable attorney fees, in connection with the enforcement of
the Bank's rights and remedies under this Agreement, the Related Documents
and any other agreement, and in connection with the preparation of any
amendments, modifications, waivers or consents with respect to this
Agreement.
C. Further Action. Borrower agrees, from time to time upon Bank's request, to
make, execute, acknowledge, and deliver to Bank such further and additional
instruments, documents, and agreements, and to take such further action as
may be required to carry out the intent and purpose of this Agreement and
repayment of the Loans.
D. Governing Law, Partial Illegality. This Agreement and the Related Documents
shall be interpreted and the rights of the parties determined under the
laws of the State of Michigan. Should any part, term, or provision of this
Agreement be adjudged illegal or in conflict with any law of the United
States or State of Michigan, the validity of the remaining portion or
provisions of the Agreement shall not be affected.
E. Writings Constitute Entire Agreement; Modifications Only in Writing. This
Agreement, the Related Documents and all other written agreements between
Borrower and Bank, constitute the entire agreement of the parties and there
are no other agreements, express or implied. This Agreement supersedes any
and all commitment letters or term sheets heretofore issued in connection
with this Loan, including without limitation a certain letter of December
17, 1997. None of the parties shall be bound by anything not expressed in
writing, and neither this Agreement, the Related Documents, nor any other
agreement can be modified except by a writing executed by Borrower and by
the Bank. This Agreement shall inure to the benefit of and shall be binding
upon all of the parties to this Agreement and their respective successors,
estate representatives, and assigns, provided however, that Borrower cannot
assign or transfer its rights or obligations under this Agreement without
Bank's prior written consent.
F. Credit Inquiries. Borrower hereby authorizes Bank to respond to any credit
inquiries received by Bank from trade creditors or other credit granting
institutions.
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
-5-
<PAGE>
G. Release of Claims Against Bank. In consideration of the Bank making the
Loans described in this Agreement, Borrower and the Obligor(s) do each
hereby release and discharge Bank of and from any and all claims, harm,
injury, and damage of any and every kind, known or unknown, legal or
equitable, which Borrower or any of the Obligor(s) have against the Bank
from the date of their respective first contact with Bank until the date of
this Agreement. Borrower and the Obligor(s) confirm to Bank that they have
reviewed the effect of this release with competent legal counsel of their
choice, or have been afforded the opportunity to do so, prior to execution
of this Agreement and the Related Documents and do each acknowledge and
agree that Bank is relying upon this release in extending the Loans to
Borrower.
H. Waiver of Jury Trial. Borrower and the Obligors do each knowingly,
voluntarily and intelligently waive their constitutional right to a trial
by jury with respect to any claim, dispute, conflict, or contention, if
any, as may arise under this Agreement or under the Related Documents, and
agree that any litigation between the parties concerning this Agreement and
the Related Documents shall be heard by a court of competent jurisdiction
sitting without a jury. Borrower and the Obligor(s) hereby confirm to Bank
that they have reviewed the effect of this waiver of jury trial with
competent legal counsel of their choice, or have been afforded the
opportunity to do so, prior to signing this Agreement and the Related
Documents and do each acknowledge and agree that Bank is relying upon this
waiver in extending the Loans to Borrower.
I. Headings. All section and paragraph headings in this Agreement are included
for convenience only and do not constitute a part of this Agreement.
J. Term of Agreement. This Agreement supersedes and replaces all previous loan
agreements with regard to the Loans described in Paragraph I. Unless
superseded by a later Business Loan Agreement, this Agreement shall
continue in full force and effect until all of Borrower's Obligations to
Bank are fully satisfied and the Loans and Indebtedness are fully repaid.
K. Counterparts. This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart.
L. Tax Loss Carry-forwards. Any tax loss carry-forwards of Richton will be
used to specifically offset, if applicable, income tax expenses of Century,
CBE, and any other subsidiaries.
X. DEFINITIONS.
The following words shall have the following meanings in this Agreement:
A. "Average Investable Balance" means the average daily ledger balance in
Borrower's deposit account referred to in Paragraph III.K. of this
Agreement, less (I) average daily uncollected deposits, (ii) Bank's reserve
requirement, and (iii) amounts necessary to offset applicable service
charges, for the period covered by the account analysis statement provided
by Bank, as shown on such account analysis statement.
B. "Base Rate" or "Prime Rate" means that variable rate of interest from time
to time established by the bank designated in the Loan promissory note(s)
and Section I. of this Agreement as its base or prime commercial lending
rate.
C. "Bank" means Michigan National Bank, a National banking association, and
any successor or assign.
D. "Collateral" means that Property which Borrower and any other Obligor has
pledged, mortgaged, or granted Bank a security interest in, wherever
located and whether now owned or hereafter acquired, together with all
replacements, substitutions, proceeds and products thereof.
E. "Current Ratio" means that ratio obtained by dividing total current assets
by total current liabilities as determined under GAAP.
F. "Debt Service Coverage Ratio" means that ratio obtained by dividing the sum
of Borrower's (I) net income after taxes and distributions, (ii) interest
expense, (iii) depreciation expense, and (iv) amortization expense, by the
sum of Borrower's interest expense plus current maturities of long-term
debt, all as determined under GAAP.
G. "EBITDA" means net income before (i) taxes and distributions, (ii) interest
expense, (iii) depreciation expense, and (iv) amortization expense.
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
-6-
<PAGE>
H. "Environmental Laws" means all laws, regulations, and rules of the United
States of America, State of Michigan, and local authorities which pertain
to the environment, including but not limited to, the Clean Air Act (42 USC
7401 et seq.), Clean Water Act (33 USC 1251 et seq.), Resource Conservation
and Recovery Act of 1976 (42 USC 6901 et seq.), Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 (42 USC 9601 et seq.),
Hazardous Materials Transportation Act (49 USC 1801 et seq.), Solid Waste
Disposal Act (42 USC 6901 et seq.), Toxic Substances Control Act (15 USC
2601 et seq.), Michigan Natural Resources and Environmental Protection Act
(MCL 324.101 et seq. as each of said statutes have been or are hereafter
amended, together with all rules and regulations promulgated by the
Environmental Protection Agency and Michigan Departments of Natural
Resources and Environmental Quality and all additional environmental laws,
rules, and regulations in effect on the date of this Agreement and as may
be enacted and effective.
I. "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor act.
J. "Event of Default" means any of the events described in Section VI. of this
Agreement or in the Related Documents.
K. "Financial Statements" means all balance sheets, cash flows, earnings
statements, and other financial information (whether of the Borrower or an
Obligor) which have been, are now, or are in the future furnished to Bank.
L. "GAAP" means "generally accepted accounting principles" consistently
applied, as set forth from time to time in the Opinion of the Accounting
Principles Board of the American Institute of Certified Public Accountants
and the Financial Accounting Standards Board, or which have other
substantial authoritative support.
M. "Guarantor" means any Person who has guaranteed payment of the Loans.
N. "Indebtedness" or "Obligations" means all Loans, indebtedness, and
obligations of Borrower to the Bank, including but not limited to, any Bank
advances for payments of insurance, taxes, amounts advanced by Bank to
protect its interest in the Collateral, overdrafts in deposit accounts with
Bank, and all other indebtedness, obligations and liabilities of Borrower
to Bank, whether matured or unmatured, liquidated or unliquidated, direct
or indirect, absolute or contingent, joint or several, due or to become
due, now existing or hereafter arising.
O. "Michigan National Bank Prime Rate" or "MICHIGAN NATIONAL BANK Prime" means
that variable rate of interest so designated and from time to time
established as the Michigan National Bank prime commercial lending rate or
such prime commercial lending rate.
P. "Net Worth" means the difference between Borrower's total assets and total
liabilities, as determined under GAAP.
Q. "Obligor" means any person having any obligation to Bank, whether for the
payment of money or otherwise, under this Agreement or under the Related
Documents, including but not limited to any guarantors of Borrower's
Indebtedness.
R. "PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the powers and functions of the Pension Benefit Guaranty
Corporation.
S. "Person" means any individual, corporation, partnership, joint venture,
association, trust, unincorporated association, joint stock company,
government, municipality, political subdivision, agency or other entity.
T. "Property" means all of Borrower's (or other Obligor's, as applicable)
assets, tangible and intangible, real and personal.
U. "Quick Ratio" means the total of Borrower's cash, marketable securities and
accounts receivable, divided by current liabilities, as determined under
GAAP.
V. "Related Documents" means any and all documents, promissory notes, security
agreements, leases, mortgages, guaranties, pledges, and any other documents
or agreements executed in connection with this Agreement. The term shall
include documents existing before, at the time of execution of, this
Agreement, and documents executed after the date of this Agreement.
W. "Subordinated Debt" means all of that indebtedness to others, and all
collateral security therefor.
X. "Tangible Net Worth" means Net Worth less intangible assets.
Y. "Working Capital" means the excess of Borrower's current assets over
current liabilities, determined under GAAP.
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
-7-
<PAGE>
IN WITNESS WHEREOF the parties have executed this Agreement on this 4th day
of March, 1998.
BORROWER:
RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation
By: /s/ C.F. Griffin
--------------------------------
Its: Vice President
BANK:
MICHIGAN NATIONAL BANK,
a national banking association
By: /s/Joseph M. Redoutey
---------------------
Joseph M. Redoutey
Its: Relationship Manager
AGREEMENT OF GUARANTOR
By executing this Agreement the Guarantor: (1) acknowledges and agrees that the
Guarantor has completely read and understands this Agreement; (2) consents to
all of the provisions of this Agreement relating to Borrower; (3) acknowledges
and agrees that the Guaranty executed and delivered by the undersigned shall
continue in full force and effect; (4) acknowledges receipt of good and lawful
consideration for execution of the guaranty agreement; (5) agrees promptly to
furnish such Financial Statements to Bank concerning the Guarantor as Bank shall
reasonably request; (6) agrees to all of those portions of this Agreement which
apply to Guarantor; (7) acknowledges and agrees that this Agreement has been
freely executed without duress and after an opportunity was provided to
Guarantor for review of this Agreement and the guaranty agreement by competent
legal counsel of Guarantor's choice; and (8) acknowledges that Bank has provided
Guarantor with a copy of this Agreement, the guaranty agreement, and such other
Related Documents as Guarantor has requested.
WITNESSES: GUARANTORS:
CENTURY SUPPLY CORP.,
a Michigan corporation
By: /s/ Wayne R. Miller
-------------------
Wayne R. Miller
Its: President
10028.mst (01/98) (C) 1998 MICHIGAN NATIONAL CORPORATION
-8-
PROMISSORY NOTE
(Line of Credit)
DRAW NO. 02
$25,000,000.00 Note No.: _______________________
Farmington Hills, Michigan
Due Date: March 1, 2001 Dated: March 4, 1998
FOR VALUE RECEIVED on the Due Date, the undersigned, jointly and severally
(the "Borrower"), promise to pay to the order of MICHIGAN NATIONAL BANK, a
national banking association (the "Bank"), at its office set forth below or at
such other place as Bank may designate in writing, the principal sum of TWENTY
FIVE MILLION AND 00/100 DOLLARS ($25,000,000.00) or such lesser sum as shall
have been advanced by Bank to Borrower under the loan account hereinafter
described, plus interest as hereinafter provided, all in lawful money of the
United States of America. The unpaid principal balance of this promissory note
("Note") shall bear interest computed upon the basis of a year of 360 days for
the actual number of days elapsed in a month, at a rate of interest (the
"Effective Interest Rate") which is equal to either:
A. Variable Rate Option: Variable rate option shall be one-quarter
percent (0.25%) per annum less than that rate of interest established
by Bank as its Prime Rate (the "Index"), as such Index may vary from
time to time. Borrower understands and agrees that the Effective
Interest Rate payable to Bank under this Note shall be determined by
reference to the Index and not by reference to the actual rate of
interest charged by the Bank to any particular borrower(s). If the
Index shall be increased or decreased, the Effective Interest Rate
under this Note shall be increased or decreased by the same amount,
effective upon the day of each increase or decrease in the Index.
OR
B. LIBOR Option: One and three-quarters percent (1.75%) per annum in
excess of LIBOR, as defined in the Addendum to Promissory Note (LIBOR
Rate Loans) annexed hereto and incorporated herein. LIBOR shall be
fixed during each LIBOR Interest Period, but shall vary from LIBOR
Interest Period to LIBOR Interest Period. Borrower shall notify Bank
of the Interest Rate selected at (i) the time of each Advance on the
Line of Credit Loan, and (ii) 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 Loan after the expiration of the LIBOR
Interest Period. If Borrower fails to provide three (3) business days
notice of its intended interest rate, then the amount of such Advance
shall bear interest at the Variable Rate Option. Borrower shall have
no right to have the LIBOR Option apply to any portion of this Note if
an Event of Default has occurred and is continuing. Borrower may not
elect a LIBOR Option if the corresponding interest period would extend
beyond the due date of this Note.
Interest on all principal amounts advanced by Bank from time to time and
unpaid by Borrower shall be paid on the first day of April, 1998, and on the
first day of each month thereafter.
Advances of principal, repayment, and readvances may be made under this
Note from time to time, but Bank, in its sole discretion, may refuse to make
advances or readvances hereunder during any period(s) this Note is in default.
All advances made hereunder shall be charged to a loan account in Borrower's
name on Bank's books, and Bank shall debit to such account the amount of each
advance made to, and credit to such account the amount of each repayment made by
Borrower. From time to time, Bank shall furnish Borrower a statement of
Borrower's loan account, which statement shall be deemed to be correct, accepted
by, and binding upon Borrower, unless Bank receives a written statement of
exceptions from Borrower within ten (10) business days after such statement has
been furnished.
For any portion of this Note in which the Variable Rate Option is in
effect, this Note may be paid in full or in part without payment of any
prepayment fee. For any portion of this Note in which the LIBOR Option is in
effect, this Note may be paid in full or in part in accordance with the attached
"Addendum To Promissory Note (LIBOR Rate Loans)". All payments received shall,
at the option of the Bank, first be applied against accrued and unpaid interest
and the balance against principal. Borrower expressly assumes all risks of loss
or delay in the delivery of any payments made by mail, and no course of conduct
or dealing shall affect Borrower's assumption of these risks. Borrower shall not
be required to pay interest at a rate greater than the maximum allowed by law
and any interest payment received by Bank which exceeds the maximum legal rate
shall be automatically credited upon the unpaid principal balance of this Note.
If the Bank determines the Effective Interest Rate is, or may be, usurious or
otherwise limited by law, the unpaid balance of this Note shall, at Bank's
option, become immediately due and payable.
10015 (04/95) (c) 1995 MICHIGAN NATIONAL CORPORATION
<PAGE>
Upon the occurrence of any of the Events of Default described in the
Amended and Restated Business Loan Agreement, executed contemporaneously
herewith, the Bank, at its option, and without notice to Borrower, may declare
the entire unpaid principal balance of this Note and all accrued interest,
together with all other indebtedness of Borrower to Bank, to be immediately due
and payable.
Upon the occurrence of any Event of Default, or upon non-payment of this
Note after demand, the unpaid principal balance of this Note shall bear interest
at a rate which is two percent (2%) greater than the Effective Interest Rate
otherwise applicable. If any payment under this Note is not paid within ten (10)
days after the date due, at the option of Bank a late charge of not more than
five cents ($.05) for each dollar of the installment past due may be charged by
Bank. In addition to any other security interest granted, Borrower hereby grants
Bank a security interest in all of Borrower's bank deposits, instruments,
negotiable documents, and chattel paper which at any time are in the possession
or control of Bank, and after the occurrence of any Event of Default, Bank may
apply its own indebtedness or liability to Borrower or any guarantor to any
indebtedness due under this Note. Borrower agrees to pay all of the Bank's costs
incurred in the collection of this Note, including reasonable attorney fees.
Acceptance by Bank of any payment in an amount less than the amount then
due shall be deemed an acceptance on account only, and Bank's acceptance of any
such partial payment shall not constitute a waiver of Bank's right to receive
the entire amount due. Borrower and all guarantors of this Note do hereby
jointly and severally waive presentment for payment, demand, notice of
non-payment, notice of protest or protest of this Note, and Bank diligence in
collection or bringing suit, and do hereby consent to any and all extensions of
time, renewals, waivers or modifications as may be granted by Bank with respect
to payment or any other provisions of this Note, and to the release of any
collateral or any part thereof, with or without substitution. The liability of
the Borrower under this Note shall be absolute and unconditional, without regard
to the liability of any other party. This Note shall be deemed to have been
executed in Michigan, and all rights and obligations hereunder shall be governed
by the laws of the State of Michigan.
This Note is secured by:
Business Loan Agreement dated March 4, 1998
Two (2) Security Agreements, both dated March 4, 1998
Reference is hereby made to the document(s) and agreement(s) described
above (the "Related Documents") for additional terms and conditions relating to
this Note.
BORROWER:
CENTURY SUPPLY CORP.,
a Michigan corporation
Borrower Address:
By: /s/ Wayne R. Miller
31691 Dequindre Road ----------------------------------
Madison Heights, MI. 48071 Wayne R. Miller
Its: President
Tax ID No.: 38-1775601
Bank Address:
27777 Inkster Road [10-36]
Farmington Hills, MI. 48333-9065
10015 (04/95) (c) 1995 MICHIGAN NATIONAL CORPORATION
-2-
<PAGE>
ADDENDUM TO PROMISSORY NOTE
(LIBOR Rate Loans)
(Draw No. 02)
For any portion of the promissory note, in which the LIBOR Option is in
effect, then this Addendum is an integral part of and shall be construed with a
promissory note ("Note") of even date wherein CENTURY SUPPLY CORP., a Michigan
corporation (therein and herein "Borrower") is the maker and Michigan National
Bank, a national banking association (therein and herein "Bank") is the payee.
All terms and conditions of the Note are incorporated by this reference herein.
PERMITTED PREPAYMENTS. For those advances made under the Note for which the
Borrower has elected the LIBOR Option, Borrower may make additional principal
payment(s) ("Permitted Prepayment(s)") upon the Note at any time prior to the
Due Date, either in full or in any lesser portion which is Five Thousand Dollars
($5,000.00), or more, but only if Borrower delivers to the Bank (a) at least one
(1) Business Day prior to the Early Termination Date, written notice addressed
to the Bank's assigned account officer stating the amount to be paid on the
Early Termination Date, and (b) on the Early Termination Date, payment in full
of the Early Termination Amount and all additional principal, accrued interest,
fees and charges then due upon the Note or any Related Document and the Yield
Maintenance Payment described below. All Permitted Prepayments will be credited
as of the last day of the Interest Period in which the Early Termination Date
occurs, without regard to the actual date of Bank's receipt.
YIELD MAINTENANCE PAYMENT AFTER ACCELERATION OF DUE DATE. If Bank
accelerates the Due Date of the Note after an Event of Default occurs on a day
which is not the last day of an Interest Period, Borrower will pay to Bank the
Yield Maintenance Payment described below as well as all other amounts due and
payable under the Note.
ADDITIONAL DEFINITIONS APPLICABLE TO THIS NOTE AND ADDENDUM
"Business Day" means a day on which the Commercial Loan Department of the
Bank is open for normal commercial business transactions, and, whenever the Note
bears interest determined by reference to LIBOR, relative to any determination
of the date the Note is made or continued, or of the date any required notice is
to be given or LIBOR rate determination is to be made, a day on which dealings
in U.S. dollar currency are carried on in the London interbank market.
"Early Termination Amount" means, as the case may be, (a) a Permitted
Prepayment, or (b) the unpaid balance of the Note on the date Bank accelerates
its Due Date after an Event of Default.
"Early Termination Date" means, as the case may be, (a) a Business Day,
prior to the last Business Day of an Interest Period, on which Borrower elects
to make a Permitted Prepayment, or (b) the date Bank accelerates the Due Date of
the Note after an Event of Default.
"Interest Period" means, relative to any Note which bears interest
determined with reference to LIBOR, the period commencing with, and including,
the date the Note is made or continued as, or converted into, a Note which bears
interest determined with reference to LIBOR, and ending on, but excluding, the
calendar day which numerically corresponds to such date one (1), two (2), three
(3) or six (6) calendar months thereafter; provided, however, that:
(a) if there exists no numerically corresponding calendar day in such
month, such Interest Period shall end on the last Business Day in that
month; and,
(b) if any Interest Period otherwise would end on a day which is later
than the date the Loan is scheduled to mature, that Interest Period
will end on the date the Loan is scheduled to mature and LIBOR will be
determined for the actual number of days of that Interest Period as
though the Interest Period were a period of one (1), two (2), three
(3) or six (6) calendar months, whichever most nearly approximates the
length of such Interest Period, or in the event that two (2) such
Interest Periods are equally proximate to such duration, then
whichever such Interest Period as Bank elects.
"LIBOR" means (A) the London Interbank Offered Rate, determined for any
Interest Period as the arithmetic mean, expressed as a decimal truncated to the
nearest one-hundredth of a percent, of interbank per annum 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 Interest Period
for immediately available U.S. dollar denominated deposits delivered on the
first day of the 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; (2) 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 referenced by the
Note for each calendar day of such Interest Period. Bank's determination of
LIBOR from time to time will be conclusive and binding on Borrower in the
absence of manifest error.
[CONTINUED ON REVERSE]
10008LIB.MST (05/96) (c) 1996 MICHIGAN NATIONAL CORPORATION
<PAGE>
"LIBOR Reserve" means, with respect to any Interest Period for which LIBOR
is the Index referenced when calculating the Effective Interest Rate, a per
annum rate, expressed as a decimal truncated to the nearest one one-hundredth of
a percent, equal to the maximum aggregate percentage, if any, in effect two (2)
Business Days prior to the first day of such Interest Period, 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 Interest Period is to be calculated by reference to an Index
which is LIBOR will be deemed a "Eurocurrency Liability" as defined in said
Regulation D.
"Redeployment Rate" means LIBOR determined for a period of one (1), two
(2), three (3) or six (6) calendar months, whichever most nearly corresponds to
the hypothetical Interest Period commencing on an Early Termination Date and
concluding on the last day of the LIBOR Interest Period in effect for the Note
on the Early Termination Date.
"Yield Maintenance Payment" means the amount which Borrower agrees to pay
to the Bank as compensation for loss of income for which the Bank has bargained
if Borrower does not pay the Note in accordance with its terms. The Bank will
determine this amount (which determination will be conclusive unless the Bank is
manifestly in error) as the product [i.e., (A) x (B) x (C) x (D)] of:
(A) the Early Termination Amount,
(B) the excess (expressed as a decimal truncated to the nearest one ten
thousandth of a percent), if any, of LIBOR determined for the Interest
Period in effect for the Note on the Early Termination Date over the
Redeployment Rate,
(C) one-three hundred sixtieth (1/360), and
(D) the actual number of whole and partial calendar days which on, but
excluding, the Early Termination Date remain until, and including, the
last day of the Interest Period in effect for the Note on the Early
Termination Date;
and discounting that product to present value at the Redeployment Rate;
provided, that the minimum Yield Maintenance Payment will be $200.00.
BORROWER:
CENTURY SUPPLY CORP.,
a Michigan corporation
By: /s/ Wayne R. Miller
------------------------------------
Wayne R. Miller
Its: President
Dated: March 4, 1998
10008LIB.MST (05/96) (c) 1996 MICHIGAN NATIONAL CORPORATION
PROMISSORY NOTE
(Line of Credit)
DRAW NO. 01
$5,000,000.00 Note No.: _______________________
Farmington Hills, Michigan
Due Date: March 1, 2001 Dated: March 4, 1998
FOR VALUE RECEIVED on the Due Date, the undersigned, jointly and severally
(the "Borrower"), promise to pay to the order of MICHIGAN NATIONAL BANK, a
national banking association (the "Bank"), at its office set forth below or at
such other place as Bank may designate in writing, the principal sum of FIVE
MILLION AND 00/100 DOLLARS ($5,000,000.00) or such lesser sum as shall have been
advanced by Bank to Borrower under the loan account hereinafter described, plus
interest as hereinafter provided, all in lawful money of the United States of
America. The unpaid principal balance of this promissory note ("Note") shall
bear interest computed upon the basis of a year of 360 days for the actual
number of days elapsed in a month, at a rate of interest (the "Effective
Interest Rate") which is equal to either:
A. Variable Rate Option: Variable rate option shall be one-quarter
percent (0.25%) per annum less than that rate of interest established
by Bank as its Prime Rate (the "Index"), as such Index may vary from
time to time. Borrower understands and agrees that the Effective
Interest Rate payable to Bank under this Note shall be determined by
reference to the Index and not by reference to the actual rate of
interest charged by the Bank to any particular borrower(s). If the
Index shall be increased or decreased, the Effective Interest Rate
under this Note shall be increased or decreased by the same amount,
effective upon the day of each increase or decrease in the Index.
OR
B. LIBOR Option: One and three-quarters percent (1.75%) per annum in
excess of LIBOR, as defined in the Addendum to Promissory Note (LIBOR
Rate Loans) annexed hereto and incorporated herein. LIBOR shall be
fixed during each LIBOR Interest Period, but shall vary from LIBOR
Interest Period to LIBOR Interest Period. Borrower shall notify Bank
of the Interest Rate selected at (i) the time of each Advance on the
Line of Credit Loan, and (ii) 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 Loan after the expiration of the LIBOR
Interest Period. If Borrower fails to provide three (3) business days
notice of its intended interest rate, then the amount of such Advance
shall bear interest at the Variable Rate Option. Borrower shall have
no right to have the LIBOR Option apply to any portion of this Note if
an Event of Default has occurred and is continuing. Borrower may not
elect a LIBOR Option if the corresponding interest period would extend
beyond the due date of this Note.
Interest on all principal amounts advanced by Bank from time to time and
unpaid by Borrower shall be paid on the first day of April, 1998, and on the
first day of each month thereafter.
Advances of principal, repayment, and readvances may be made under this
Note from time to time, but Bank, in its sole discretion, may refuse to make
advances or readvances hereunder during any period(s) this Note is in default.
All advances made hereunder shall be charged to a loan account in Borrower's
name on Bank's books, and Bank shall debit to such account the amount of each
advance made to, and credit to such account the amount of each repayment made by
Borrower. From time to time, Bank shall furnish Borrower a statement of
Borrower's loan account, which statement shall be deemed to be correct, accepted
by, and binding upon Borrower, unless Bank receives a written statement of
exceptions from Borrower within ten (10) business days after such statement has
been furnished.
For any portion of this Note in which the Variable Rate Option is in
effect, this Note may be paid in full or in part without payment of any
prepayment fee. For any portion of this Note in which the LIBOR Option is in
effect, this Note may be paid in full or in part in accordance with the attached
"Addendum To Promissory Note (LIBOR Rate Loans)". All payments received shall,
at the option of the Bank, first be applied against accrued and unpaid interest
and the balance against principal. Borrower expressly assumes all risks of loss
or delay in the delivery of any payments made by mail, and no course of conduct
or dealing shall affect Borrower's assumption of these risks. Borrower shall not
be required to pay interest at a rate greater than the maximum allowed by law
and any interest payment received by Bank which exceeds the maximum legal rate
shall be automatically credited upon the unpaid principal balance of this Note.
If the Bank determines the Effective Interest Rate is, or may be, usurious or
otherwise limited by law, the unpaid balance of this Note shall, at Bank's
option, become immediately due and payable.
10015 (04/95) (c) 1995 MICHIGAN NATIONAL CORPORATION
<PAGE>
Upon the occurrence of any of the Events of Default described in the
Amended and Restated Business Loan Agreement, executed contemporaneously
herewith, the Bank, at its option, and without notice to Borrower, may declare
the entire unpaid principal balance of this Note and all accrued interest,
together with all other indebtedness of Borrower to Bank, to be immediately due
and payable.
Upon the occurrence of any Event of Default, or upon non-payment of this
Note after demand, the unpaid principal balance of this Note shall bear interest
at a rate which is two percent (2%) greater than the Effective Interest Rate
otherwise applicable. If any payment under this Note is not paid within ten (10)
days after the date due, at the option of Bank a late charge of not more than
five cents ($.05) for each dollar of the installment past due may be charged by
Bank. In addition to any other security interest granted, Borrower hereby grants
Bank a security interest in all of Borrower's bank deposits, instruments,
negotiable documents, and chattel paper which at any time are in the possession
or control of Bank, and after the occurrence of any Event of Default, Bank may
apply its own indebtedness or liability to Borrower or any guarantor to any
indebtedness due under this Note. Borrower agrees to pay all of the Bank's costs
incurred in the collection of this Note, including reasonable attorney fees.
Acceptance by Bank of any payment in an amount less than the amount then
due shall be deemed an acceptance on account only, and Bank's acceptance of any
such partial payment shall not constitute a waiver of Bank's right to receive
the entire amount due. Borrower and all guarantors of this Note do hereby
jointly and severally waive presentment for payment, demand, notice of
non-payment, notice of protest or protest of this Note, and Bank diligence in
collection or bringing suit, and do hereby consent to any and all extensions of
time, renewals, waivers or modifications as may be granted by Bank with respect
to payment or any other provisions of this Note, and to the release of any
collateral or any part thereof, with or without substitution. The liability of
the Borrower under this Note shall be absolute and unconditional, without regard
to the liability of any other party. This Note shall be deemed to have been
executed in Michigan, and all rights and obligations hereunder shall be governed
by the laws of the State of Michigan.
This Note is secured by:
Business Loan Agreement dated March 4, 1998
Two (2) Security Agreements, both dated March 4, 1998
Reference is hereby made to the document(s) and agreement(s) described
above (the "Related Documents") for additional terms and conditions relating to
this Note.
BORROWER:
RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation
Borrower Address:
340 Main Street By: /s/ Fred R. Sullivan
Madison, New Jersey 07940 --------------------------------
Its: President
Tax ID No.: 05-0122205
Bank Address:
27777 Inkster Road [10-36]
Farmington Hills, MI. 48333-9065
10015 (04/95) (c) 1995 MICHIGAN NATIONAL CORPORATION
\
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<PAGE>
ADDENDUM TO PROMISSORY NOTE
(LIBOR Rate Loans)
(Draw No. 01)
For any portion of the promissory note, in which the LIBOR Option is in
effect, then this Addendum is an integral part of and shall be construed with a
promissory note ("Note") of even date wherein RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation (therein and herein "Borrower") is the maker and Michigan
National Bank, a national banking association (therein and herein "Bank") is the
payee. All terms and conditions of the Note are incorporated by this reference
herein.
PERMITTED PREPAYMENTS. For those advances made under the Note for which the
Borrower has elected the LIBOR Option, Borrower may make additional principal
payment(s) ("Permitted Prepayment(s)") upon the Note at any time prior to the
Due Date, either in full or in any lesser portion which is Five Thousand Dollars
($5,000.00), or more, but only if Borrower delivers to the Bank (a) at least one
(1) Business Day prior to the Early Termination Date, written notice addressed
to the Bank's assigned account officer stating the amount to be paid on the
Early Termination Date, and (b) on the Early Termination Date, payment in full
of the Early Termination Amount and all additional principal, accrued interest,
fees and charges then due upon the Note or any Related Document and the Yield
Maintenance Payment described below. All Permitted Prepayments will be credited
as of the last day of the Interest Period in which the Early Termination Date
occurs, without regard to the actual date of Bank's receipt.
YIELD MAINTENANCE PAYMENT AFTER ACCELERATION OF DUE DATE. If Bank
accelerates the Due Date of the Note after an Event of Default occurs on a day
which is not the last day of an Interest Period, Borrower will pay to Bank the
Yield Maintenance Payment described below as well as all other amounts due and
payable under the Note.
ADDITIONAL DEFINITIONS APPLICABLE TO THIS NOTE AND ADDENDUM
"Business Day" means a day on which the Commercial Loan Department of the
Bank is open for normal commercial business transactions, and, whenever the Note
bears interest determined by reference to LIBOR, relative to any determination
of the date the Note is made or continued, or of the date any required notice is
to be given or LIBOR rate determination is to be made, a day on which dealings
in U.S. dollar currency are carried on in the London interbank market.
"Early Termination Amount" means, as the case may be, (a) a Permitted
Prepayment, or (b) the unpaid balance of the Note on the date Bank accelerates
its Due Date after an Event of Default.
"Early Termination Date" means, as the case may be, (a) a Business Day,
prior to the last Business Day of an Interest Period, on which Borrower elects
to make a Permitted Prepayment, or (b) the date Bank accelerates the Due Date of
the Note after an Event of Default.
"Interest Period" means, relative to any Note which bears interest
determined with reference to LIBOR, the period commencing with, and including,
the date the Note is made or continued as, or converted into, a Note which bears
interest determined with reference to LIBOR, and ending on, but excluding, the
calendar day which numerically corresponds to such date one (1), two (2), three
(3) or six (6) calendar months thereafter; provided, however, that:
(a) if there exists no numerically corresponding calendar day in such
month, such Interest Period shall end on the last Business Day in that
month; and,
(b) if any Interest Period otherwise would end on a day which is later
than the date the Loan is scheduled to mature, that Interest Period
will end on the date the Loan is scheduled to mature and LIBOR will be
determined for the actual number of days of that Interest Period as
though the Interest Period were a period of one (1), two (2), three
(3) or six (6) calendar months, whichever most nearly approximates the
length of such Interest Period, or in the event that two (2) such
Interest Periods are equally proximate to such duration, then
whichever such Interest Period as Bank elects.
"LIBOR" means (A) the London Interbank Offered Rate, determined for any
Interest Period as the arithmetic mean, expressed as a decimal truncated to the
nearest one-hundredth of a percent, of interbank per annum 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 Interest Period
for immediately available U.S. dollar denominated deposits delivered on the
first day of the 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; (2) 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 referenced by the
Note for each calendar day of such Interest Period. Bank's determination of
LIBOR from time to time will be conclusive and binding on Borrower in the
absence of manifest error.
[CONTINUED ON REVERSE]
10008LIB.MST (05/96) (c) 1996 MICHIGAN NATIONAL CORPORATION
<PAGE>
"LIBOR Reserve" means, with respect to any Interest Period for which LIBOR
is the Index referenced when calculating the Effective Interest Rate, a per
annum rate, expressed as a decimal truncated to the nearest one one-hundredth of
a percent, equal to the maximum aggregate percentage, if any, in effect two (2)
Business Days prior to the first day of such Interest Period, 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 Interest Period is to be calculated by reference to an Index
which is LIBOR will be deemed a "Eurocurrency Liability" as defined in said
Regulation D.
"Redeployment Rate" means LIBOR determined for a period of one (1), two
(2), three (3) or six (6) calendar months, whichever most nearly corresponds to
the hypothetical Interest Period commencing on an Early Termination Date and
concluding on the last day of the LIBOR Interest Period in effect for the Note
on the Early Termination Date.
"Yield Maintenance Payment" means the amount which Borrower agrees to pay
to the Bank as compensation for loss of income for which the Bank has bargained
if Borrower does not pay the Note in accordance with its terms. The Bank will
determine this amount (which determination will be conclusive unless the Bank is
manifestly in error) as the product [i.e., (A) x (B) x (C) x (D)] of:
(A) the Early Termination Amount,
(B) the excess (expressed as a decimal truncated to the nearest one ten
thousandth of a percent), if any, of LIBOR determined for the Interest
Period in effect for the Note on the Early Termination Date over the
Redeployment Rate,
(C) one-three hundred sixtieth (1/360), and
(D) the actual number of whole and partial calendar days which on, but
excluding, the Early Termination Date remain until, and including, the
last day of the Interest Period in effect for the Note on the Early
Termination Date;
and discounting that product to present value at the Redeployment Rate;
provided, that the minimum Yield Maintenance Payment will be $200.00.
BORROWER:
RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation
By: /s/ Fred R. Sullivan
------------------------------------
Its: President
Dated: March 4, 1998
10008LIB.MST (05/96) (c) 1996 MICHIGAN NATIONAL CORPORATION
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SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement") made on this 4th day of March, 1998,
by and between MICHIGAN NATIONAL BANK, a national banking association, of 27777
Inkster Road [10-36], Farmington Hills, Michigan 48333-9065 (the "Bank"), and
CENTURY SUPPLY CORP., a Michigan corporation, with chief executive offices
located at 31691 Dequindre Road, Madison Heights, Michigan 48071 (the
"Borrower").
WHEREAS Borrower has obtained or may from time to time obtain loans from
Bank or be otherwise obligated to Bank and has agreed to secure its Obligations
(as defined in Paragraph 1. below) to Bank by granting Bank security interests
in that personal property described in this Agreement, and
NOW THEREFORE Borrower and Bank AGREE AS FOLLOWS:
1. GRANT OF SECURITY INTEREST. Borrower hereby grants Bank a continuing
security interest in the collateral described in Paragraph 2. below (all of the
personal property described in Paragraph 2. is individually and collectively
referred to in this Agreement as the "Collateral"), to secure the repayment of
all loans (including all renewals, extensions, modifications, or refinancings
thereof) from Bank to Borrower, together with any and all other obligations now
or in the future owing from Borrower to Bank (including future advances),
however incurred or evidenced, whether primary, secondary, contingent or
otherwise, whether arising under this Agreement, under other security
agreements, promissory notes, guarantys, mortgages, leases, instruments,
documents, or under any other contractual obligation now or hereafter arising
(hereinafter collectively called the "Obligations") together with all costs,
expenses and reasonable attorneys' fees incurred by Bank in the disbursement,
administration and collection of the Obligations or the protection, maintenance,
and liquidation of the Collateral. Borrower agrees not to sell the Collateral
except in the ordinary course of Borrower's business and will not otherwise
assign, transfer, pledge, grant a security interest in, or otherwise dispose of
or encumber the Collateral without Bank's prior written consent.
2. COLLATERAL. The Collateral covered by this Agreement is all of
Borrower's property described below where an "X" or check mark has been placed
in the box applicable thereto, which Borrower now owns or shall hereafter
acquire or create, immediately upon acquisition or creation, and includes, but
is not limited to, any items listed on any schedule or list attached to this
Agreement:
[ ] A. Accounts. All accounts, documents, chattel paper, instruments,
and general intangibles, including any rights to any tax refunds
from any governmental authority (all of which are hereinafter
individually and collectively referred to as "Accounts");
[ ] B. Inventory. All inventory and goods including, but not limited to,
raw materials, work in process, finished goods, tangible
property, stock in trade, wares and merchandise used in, sold by,
or stopped in transit by Borrower;
[ ] C. Equipment. All equipment and fixtures, including all machinery,
furniture, furnishings and vehicles, together with all
accessions, parts, attachments, accessories, tools and dies, or
appurtenances thereto, attached, kept, used, or intended for use
in connection therewith, and all substitutions, improvements,
replacements and additions thereto;
[X] D. All Assets. All of Borrower's personal property described in
Paragraph 2.A. through 2.C. above, inclusively;
For each and every type of Collateral described above, the proceeds of the
Collateral and the proceeds of all insurance, eminent domain, condemnation
awards, and all products of and accessions to the Collateral are also part of
the Collateral. In addition, any and all bank deposits and bank accounts or
other sums at any time credited or due from Bank to Borrower and any and all
instruments, documents, policies, certificates of insurance, securities, goods,
accounts, chattel paper, cash, property and the proceeds thereof which Borrower
owns or in which Borrower has an interest and which are at any time in the
possession or control of Bank or any third party acting on Bank's behalf, shall
also be considered Collateral.
3. PERFECTION OF SECURITY INTEREST. Borrower agrees to promptly execute and
deliver to Bank, concurrently with execution of this Agreement and at any time
or times hereafter at the request of Bank, all financing statements,
assignments, certificates of title, applications for motor vehicle or watercraft
titles, affidavits, reports, notices, schedules of Accounts, designations of
Inventory, letters of authority and any and all other documents and agreements
as Bank may request, in form satisfactory to Bank, to perfect and to at all
times maintain perfected Bank's security interests in the Collateral. Borrower
also agrees to make appropriate entries on its books and records disclosing
Bank's security interests in the Collateral.
10054 (02/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
<PAGE>
4. WARRANTIES. Borrower agrees and warrants to Bank, that: (a) Borrower has
or forthwith will acquire full legal title to the Collateral and is the lawful
owner of all of the Collateral with an unqualified right to subject the
Collateral to the security interest here granted to Bank; (b) except as
specifically stated in any attachment to this Agreement, Bank's security
interest in the Collateral is a first priority security interest, there are no
financing statements covering any of the Collateral in any public office, and
Borrower will defend and indemnify the Bank against the claims and demands of
all other persons claiming an interest in the Collateral; (c) all of the
Collateral is located in the State of Michigan or other States as set forth in
Paragraph 10. of this Agreement or is in the possession of the Bank, and
Borrower agrees not to remove the Collateral outside the State of Michigan, or
other States disclosed to Bank, without Bank's prior written consent, nor use or
permit the Collateral to be used for any unlawful purpose; (d) Borrower shall
not conduct Borrower's business under any other name than that given above, nor
change or reorganize the business entity under which it does business, except
upon the prior written approval of Bank and, if such approval is granted,
Borrower agrees that all documents, instruments, and agreements requested by
Bank shall be prepared, filed and recorded at Borrower's expense, before such
change occurs; (e) Borrower agrees not to remove any records concerning the
Collateral from the address specified above nor keep any of its records at any
other address unless written notice thereof is given to Bank at least ten (10)
days prior to the creation of any new address for the keeping of such records;
(f) Borrower agrees to at all times maintain the Collateral in good condition
and repair; (g) Borrower has full authority, complete power, and is duly
authorized to enter into this Agreement with Bank, and the execution of this
Agreement does not constitute a breach of any provision contained in any other
agreement or instrument to which Borrower is or may become a party or by which
Borrower is or may be bound or affected; (h) all financial statements and
information delivered and to be delivered by Borrower to Bank are true and
correct and have been prepared in accordance with generally accepted accounting
principles and there has been no material adverse change in the financial
condition of Borrower since the last submission of such financial information to
Bank; (i) there are no actions or proceedings either threatened or pending
against Borrower which might result in any material adverse change in Borrower's
financial condition or which might materially affect any of Borrower's assets;
(j) Borrower has filed all Federal, State and local governmental tax returns
which Borrower is required by law to file and all such taxes required to be paid
have been paid in full; (k) no part of the Collateral is classified or
classifiable as hazardous waste under Federal or Michigan environmental laws and
regulations, Borrower is in full compliance with all Federal and Michigan
environmental laws and regulations, and Borrower hereby indemnifies Bank against
any and all expenses and costs, including reasonable attorney fees, arising from
or related to any breach of these warranties. All of Borrower's warranties in
this Paragraph 4. shall be deemed to be continuing warranties until Borrower
shall have no Obligations to Bank.
5. TAXES, INSURANCE. Borrower agrees to: (a) promptly pay all taxes,
levies, assessments, judgments, and charges of any kind upon or relating to the
Collateral, to Borrower's business, and to Borrower's ownership or use of any of
its assets, income, or gross receipts; (b) at its own expense, keep all of the
Collateral fully insured against loss or damage by fire, theft, explosion and
other risks, in such amounts, with such companies, under such policies, and in
such form as shall be satisfactory to Bank, a copy of which policies shall be
delivered to Bank with evidence of premium payment and which policies shall be
endorsed to provide Bank a standard loss payable clause with not less than 30
days notice of cancellation or of any change in coverage (CF 12181185) and the
Bank shall have a security interest in the proceeds of all such insurance and
may apply any such proceeds received by it toward payment of Borrower's
Obligations, whether or not due, in such order of application as Bank may
determine after consulting with Borrower with respect to the reasonable
disbursements of the insurance proceeds; (c) maintain at its own expense public
liability and property damage insurance in such amounts, with such companies,
under such policies, and in such form as shall be satisfactory to Bank, and (d)
upon Bank's request, shall furnish Bank with such original policies and evidence
that such policies have been maintained. If after such request, the Bank does
not promptly receive evidence that any of the insurance coverages required by
this paragraph are being maintained, Bank may assume Borrower does not have the
required coverage. If Borrower at any time fails to obtain or maintain any of
the policies required above or pay any premium relating thereto, or fails to pay
any tax, assessment, levy or charge, or discharge any lien, claim, or
encumbrance, then Bank, without waiving or releasing any obligation or default
of Borrower hereunder, may at any time, without obligation to do so, make such
payment, obtain such discharge, or obtain and maintain such policies of
insurance, pay such premiums, and take such action with respect thereto as Bank
deems advisable. All sums so disbursed by Bank, including reasonable attorney
fees, court costs, expenses, and other charges relating thereto, shall be part
of the Obligations secured hereby, shall be payable on demand, and shall bear
interest until paid at the highest rate of interest then being charged by and
loaned from Bank to Borrower. Upon Borrower's failure to obtain or maintain
insurance upon the Collateral, the Bank may assess a service charge for
obtaining and servicing the required insurance coverage.
6. COLLECTION OF ACCOUNTS.
A. If Paragraph 2.A. or 2.D. abov are checked, Bank hereby conditionally
authorizes Borrower to collect Accounts from Borrower's Account debtors
provided, however, this privilege may be terminated by Bank upon Default (as
subsequently defined). Upon Default, Bank may notify any Account debtor(s) of
Bank's security interest in Borrower's Accounts and shall be entitled to collect
same and Borrower will thereafter receive all Accounts payments as the agent of
and as trustee for Bank, transmitting to Bank on the day of Borrower's receipt,
all original checks, cash, drafts, acceptances, notes and other payments
received on Accounts and, until delivery of same to Bank, Borrower shall not use
or commingle any Accounts payments and shall at all times keep all such
remittances separate and apart from Borrower's own funds, capable of
identification as the property of Bank. After any Default, Borrower agrees to
open all mail only in the presence of a representative of Bank, who may take
therefrom any Account remittance(s). Bank and its' representatives are hereby
authorized to endorse in Borrower's name, payments on or other proceeds of any
of the Collateral, and may sign Borrower's name upon all Accounts, invoices,
assignments, financing statements, notices to debtors, bills of lading, storage
receipts, or other instruments or documents in respect to the Accounts, the
proceeds therefrom, or property related thereto. Borrower agrees to promptly
give Bank copies of all Accounts statements and records, accompanied by such
information and by such documents or copies thereof as Bank may request.
Borrower shall maintain all records with respect to the Accounts and with
respect to the general conduct and operation of Borrower's business, including
balance sheets, operating statements and other financial information, in
accordance with generally accepted accounting principles and as Bank may
request.
10054 (02/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
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<PAGE>
B. If Paragraph 2.B. or 2.D. above is checked, until such time as the
Bank shall notify Borrower of the revocation of such power and authority,
Borrower: (i) may, in the ordinary course of its business only, at Borrower's
expense, sell, lease, or furnish under contracts of service any of the Inventory
normally held by Borrower for such purpose; (ii) may use and consume any raw
materials, work in process or materials, the use and consumption of which is
necessary in order to carry on Borrower's business; and (iii) shall, at its own
expense, endeavor to collect, as and when due, all amounts due with respect to
any of the Collateral, including the taking of such action with respect to such
collection as the Bank may reasonably request or, in the absence of such
request, as Borrower may deem advisable. A sale in the ordinary course of
business does not include a transfer in partial or total satisfaction of any
debt of Borrower.
7. INFORMATION. Borrower agrees to permit Bank or Bank's agents to have
access to and to inspect the Collateral and from time to time inspect and verify
Accounts, Inventory, and Equipment, and check, make copies of or extracts from
the books, records and files of Borrower, and Borrower will make same available
at any time for such purposes. Bank is hereby authorized to conduct from time to
time such investigation of Borrower's continuing creditworthiness as Bank shall
deem appropriate including, without limitation, Bank contact with Borrower's
accountants or other third parties, and Bank is also authorized to respond to
any credit inquiries received from trade creditors or other credit granting
institutions. Borrower agrees to promptly supply Bank with such financial and
other information concerning its financial and business affairs, assets and
liabilities as Bank may from time to time request, and Borrower agrees that Bank
or its agents may from time to time verify Borrower's continuing compliance with
any of Borrower's warranties made in Paragraph 4. above, at Borrower's cost and
expense.
8. DEFAULT.
A. Any Event of Default described in the Business Loan Agreement
executed contemporaneously herewith, together with the delivery of any required
notice, and the expiration of any applicable cure period, as amended from time
to time, shall constitute an Event of Default for the purposes of this
Agreement.
B. Whenever an Event of Default shall exist, the Obligations may, at
Bank's option, and without demand or notice of any kind, be declared, and
thereupon shall immediately become due and payable and the Bank may exercise all
rights and remedies, including the right to immediate possession of the
Collateral, available to it under applicable law. Bank shall have the right to
hold any property then in or upon the Collateral at time of repossession not
covered by this Agreement until return is demanded in writing by the Borrower.
Borrower agrees, upon default, to assemble all the Collateral at a convenient
place acceptable to the Bank, and to pay all costs of collection of the
Obligations, and enforcement of Bank's rights, including reasonable attorney
fees, and all expenses in locating the Collateral and all expenses for any
repairs to any realty or other property to which any of the Collateral may be
affixed. Any notification of intended disposition of any of the Collateral
required by law shall be deemed reasonably and properly given if sent at least
seven (7) calendar days before such disposition, postage prepaid, addressed to
Borrower either at the address shown in this Agreement or at any other address
of Borrower appearing on the records of the Bank.
9. GENERAL. Except as otherwise defined in this Agreement, all terms in
this Agreement shall have the meanings provided by the Michigan Uniform
Commercial Code as amended from time to time. Any Bank delay in exercising any
power, privilege or right hereunder, or under any other instrument or agreement
executed by Borrower in connection herewith shall not operate as a waiver
thereof, and no single or partial exercise shall preclude other or further
exercise thereof, or the exercise of any other power, privilege, or right. The
waiver by Bank of any Event of Default shall not constitute a waiver of any
subsequent default, but shall be restricted only to the default waived. All
rights, remedies and powers of Bank hereunder are irrevocable and cumulative and
not alternative or exclusive, and shall be in addition to all rights, remedies,
and powers given in any other instrument or agreement or by the Michigan Uniform
Commercial Code. This agreement cannot be modified except by a writing signed by
Borrower and by the Bank.
This Agreement has been delivered in Michigan, and shall be construed in
accordance with the laws of the State of Michigan. Whenever possible, each
provision of this Agreement shall be interpreted to be effective and valid under
applicable law, but if any provision of this Agreement is prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity without invalidating the remainder of
such provision or the remaining provisions of this Agreement. The rights and
privileges of the Bank hereunder shall inure to the benefit of its successors
and assigns, and this Agreement shall be binding on all heirs, executors,
administrators, and successors of Borrower. If more than one Borrower has signed
this Agreement their obligations shall be joint and several.
IN WITNESS WHEREOF Borrower and Bank have executed this Security Agreement
on the above-referenced date.
Borrower's Address: BORROWER:
340 Main Street RICHTON INTERNATIONAL CORPORATION,
Madison, New Jersey 07940 a Delaware corporation
By: /s/ C.F. Griffin
------------------------------
Borrower's Tax I.D.: 05-0122205 Its: Vice President
(CONTINUED ON THE FOLLOWING PAGE)
10054 (02/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
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<PAGE>
Address of Bank: BANK:
27777 Inkster Road [10-36] MICHIGAN NATIONAL BANK,
Farmington Hills, MI. 48333-9065 a national banking association
By:/s/ Joseph M. Redoutey
------------------
Joseph M. Redoutey
Its: Relationship Manager
10054 (02/97) (C) 1997 MICHIGAN NATIONAL CORPORATION
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