FOURTH AMENDMENT TO LOAN AND FINANCING AGREEMENT
This Fourth Amendment to Loan and Financing Agreement (the "Amendment") is
entered into on this 17th day of June, 1996, by and among Michigan National
Bank, a national banking association with offices located at 27777 Inkster Road,
Mail Code 00-00, Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000-0000 (the "Bank"), Century
Supply Corp., a Michigan corporation with offices located at 00000 Xxxxxxxxx
Xxxx, Xxxxxxx Heights, Ml 48071-1522 (the "Borrower") and Richton International
Corporation, a Delaware corporation with offices located at 000 Xxxx Xxxxxx,
Xxxxxxx, Xxx Xxxxxx 00000 (the "Guarantor"").
RECITALS
A. On October 27, 1993, Bank and Borrower executed a Loan and Financing
Agreement (as amended from time to time, the "Loan Agreement") pursuant to which
Bank extended certain financing to Borrower.
B. The Loan Agreement has been amended pursuant to a First Amendment to
Financing Agreement dated March 21, 1994, a letter agreement dated June 23, 1994
and a Third Amendment to Loan and Financing Agreement dated April 27, 1995.
C. Borrower has requested that Bank modify the Loan Agreement to extend
additional financing and modify certain terms and conditions and Bank is willing
to do so, subject to the terms and conditions contained in this Amendment.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is expressly acknowledged, the parties agree as follows:
1. Capitalized terms not defined in this Amendment shall have the meaning
given to them in the Loan Agreement.
2. Section 1.6 of the Loan Agreement is amended to read in its entirety as
follows:
"1.6 "Borrowing Base" means and includes an amount equal to the aggregate
of 80% of the Security Value of Eligible Accounts plus 50% of Eligible Inventory
from February through August of each year but in an amount which shall not
exceed Four Million and 00/100 Dollars ($4,000,000.00) or 30% of Eligible
Inventory from September through January of each year."
3. The Loan Agreement is amended to add the following Section 1.6.1, which
shall read in its entirety as follows:
"1.6.1 "Borrowing Base-CBE" means and includes an amount equal to an
aggregate of 80% of the Security Value of Eligible Accounts."
4. The last sentence of Section 1.9 of the Loan Agreement is amended to
read in its entirety as follows:
"Collateral shall also specifically include {i) all of the issued and
outstanding capital stock of CBE which may be pledged by Guarantor to
secure its obligations under the Guaranty and (ii) an assignment of key man
life insurance on Xxxxx Xxxxxx, in an amount not less than One Million Five
Hundred Thousand and 00/100 Dollars {$1,500,000.00)."
5. The Loan Agreement is amended to add the following Sections 1.21, 1.21.1
and 1.21.2, which shall read in their entirety as follows:
"1.21 LIBOR means, with respect to any LIBOR Interest Period for which
LIBOR is the Index referenced when calculating the Effective Interest Rate,
(A) the London Interbank Offered Rate, determined as the arithmetic mean,
truncated to the nearest one-hundredth of a percent, of interbank interest
rates offered by major banks in the London, United Kingdom market at 11:00
a.m. London Time two (2) Business Days immediately preceding the
commencement of the LIBOR Interest Period for immediately available U.S.
dollar denominated deposits delivered on the first day of the LIBOR
Interest Period for the number of days comprised therein, as referenced and
reported by one of the following sources, selected by Bank on an
availability basis in descending order of priority: (1 } the Dow Xxxxx
Telerate System "LIBO Page" report of such interest rates as determined by
Xxxxxx'x News Service; (21 the Dow Xxxxx Telerate System "Page 3750" report
of such interest rates as determined by the British Bankers Association; or
{3) the Wall Street Journal, Midwest Edition, report of such interest rate;
or (4) any other generally accepted authoritative source as Bank may
reference (the "Unadjusted LIBOR"); (B) AS ADJUSTED for the LIBOR Reserve,
if any, in accordance with the formula:
LIBOR = Unadjusted LIBOR / (1 - LIBOR Reserve).
LIBOR, as so determined, will be the fixed rate of interest
utilized to calculate the Effective Interest Rate for each
calendar day of such LIBOR Interest Period.
1.21.1 LIBOR Interest Period means, relative to a Loan for which LIBOR is
referenced as the Index, the period of thirty (30) days, sixty (60) days or
ninety (90) days commencing with, and including, the date on which such
Loan is made or on which LIBOR is first referenced as the Index for such
Loan, if later, and each successive such period commencing with, and
including, the first Business Day following the last day of the immediately
preceding LIBOR Interest Period; provided that:
(a) if any LIBOR Interest Period otherwise would end on a day which is
not a Business Day, such LIBOR Interest Period will end on the next
succeeding Business Day unless such next succeeding Business Day is
the first Business Day of a calendar month, in which case such LIBOR
Interest Period will end on the Business Day next preceding such
numerically corresponding day; and,
(b) if any LIBOR Interest Period otherwise would end on a day which is
later than the Due Date of the Loan, such LIBOR Interest Period will
end on the Due Date of the Loan and LIBOR will be determined for the
actual number of days of such LIBOR Interest Period as though such
LIBOR Interest Period were a period of thirty (30) days, whichever
most nearly approximates the length of such LIBOR Interest Period.
1.21.2 LIBOR Reserve means, with respect to any LIBOR Interest Period for
which LIBOR is the Index referenced when calculating the Effective Interest
Rate, a percentage (expressed as a decimal) equal to the maximum aggregate
percentage, if any, in effect two {2) Business Days prior to the first day
of such LIBOR Interest Period, as specified by regulations issued from time
to time by the Board of Governors of the Federal Reserve System, or any
successor agency, for determining reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking into
account any transitional adjustments or other scheduled changes in reserve
requirements) applicable to "Eurocurrency Liabilities", as currently
defined in Regulation D of the Board of Governors of the Federal Reserve
System. For purposes of this definition, every Loan for which the Effective
Interest Rate during such LIBOR Interest Period
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is to be calculated by reference to an Index which is LIBOR will be deemed
a "Eurocurrency Liability" as defined in said Regulation D."
6. Section 1.33 of the Loan Agreement is hereby amended to read in its
entirety as follows:
"1.33. "Subordinated Indebtedness" means and refers to that certain
indebtedness owing by Borrower to those holders set forth on the Schedule
of Subordinated Indebtedness attached to, made a part of and labeled
Exhibit 1.33 to the Fourth Amendment to Loan and Financing Agreement, the
payment of which is subordinated in time and right to the Indebtedness
pursuant to the Subordination Agreements, as defined in Section 1.34 of the
Loan Agreement."
7. Section 2 of the Loan Agreement is amended to read in its entirety as
follows:
"2.1 Bank does loan to Borrower and Borrower does borrow from Bank the sum
of Five Million Six Hundred Thousand and 00/100 Dollars {$5,600,000.00)
(hereinafter referred to as the "Term Loan"). The proceeds of the Term Loan
shall be used solely for the purpose of (i) providing Borrower with the
funds required to pay and refinance the Indebtedness evidenced by that term
note dated April 27, 1995 pursuant to which Borrower borrowed Four Million
Eight Hundred Thousand and 001100 Dollars ($4,800,000.00), (ii) to pay off
certain subordinated indebtedness and (iii) to provide acquisition
financing for Borrower and CBE.
2.2 Borrower promises and agrees to repay the Term Loan, with interest, in
accordance with the terms and conditions hereof and with the Promissory
Note (hereinafter referred to as the "Term Note") executed by Borrower on
June 12,1996, and any extensions or renewals, which Term Note shall be
payable with interest at the main office of the Bank as follows:
(a) the principal shall be repaid in quarterly installments of not
less than Two Hundred Thousand and 00/100 Dollars ($200,000.00) each,
which sums do not include interest, commencing on June 30, 1996 and
continuing on each September 30, December 31, March 31 and June 30
thereafter until March 31, 1999, at which time the then outstanding
principal balance shall become due and payable, in its entirety.
Installments of principal as provided above have been calculated based
upon an amount necessary to amortize the entire debt evidenced under
the Term Note, without interest, over a seven (7) year period.
Borrower acknowledges that the above described amortization shall
result in a balloon payment due upon maturity of the Term Note.
(b) Subject to the provisions of Section 2.5 of this Loan Agreement,
interest on the Term Note shall be paid on each June 30, September 30,
December 31 and March 31 during the term of the Term Note at either
(i) Michigan National Bank Prime Rate, as declared from time to time
or (ii) LIBOR plus 2.50%. Interest shall be calculated on the basis of
a 360 day year, for the actual number of days elapsed in a month,
until March 31,1999, at which time all accrued and unpaid interest
shall be due and payable in its entirety. After maturity (whether by
acceleration or otherwise), interest shall be at the per annum rate of
Two percent in excess of the foregoing rate.
(c) All payments received hereunder on the Term Note shall be applied
first to the payment of interest and thereafter, to the payment of
principal.
2.3 Bank may, at its option, charge Borrower's account(s) maintained at the
Bank with the amount of any installment of principal and /or interest at
any time on or after the date such installment becomes due.
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2.4 Borrower shall have the right to prepay, without penalty, all or any
part of the Term Loan; provided, however, that all accrued interest on the
principal outstanding balance of the Term Loan shall be paid simultaneously
with such prepayment, and that all principal prepayments shall be applied
to the principal installments hereunder in the inverse order of maturity.
Notwithstanding the foregoing, if LIBOR is used to calculate the interest
rate applicable to the Term Loan, Borrower shall only be allowed to prepay
the Term Loan upon the conclusion of any LIBOR Interest Period.
2.5 Borrower shall notify Bank of the Interest Rate selected at the time of
closing of the Term Loan and at least three (3) business days prior to the
expiration of the LIBOR Interest Period, Borrower shall notify Bank, in
writing or verbally (and subsequently confirmed in writing) of which rate
shall apply to the Term Loan after the expiration of any LIBOR Interest
Period. If Borrower fails to provide three (3) business days notice of its
intended interest rate, then the Term Loan shall bear interest at Michigan
National Bank Prime Rate. Borrower shall have no right to have LIBOR apply
to the Term Loan if an Event of Default has occurred and is continuing.
Borrower may not elect a LIBOR Interest Period which would extend beyond
the Due Date of the Term Loan."
8. Section 3.1 of the Loan Agreement is amended to read in its entirety as
follows:
"3.1 Provided that no Event of Default exists under this Loan and Financing
Agreement and provided that no event has occurred and is continuing which
with the passage of time would cause an Event of Default hereunder, Bank
shall make loans to Borrower from time to time, but in no event after July
15,1997, in an aggregate principal balance of up to, but not exceeding at
any one time, the lesser of the Borrowing Base or the sum of Eighteen
Million and 00/ 100 Dollars ($18,000,000.00) (hereinafter referred to as
the "Credit Loan")."
9. Section 3.2(b) of the Loan Agreement is hereby amended to read in its
entirety as follows:
"(b) Interest on said Credit Loan shall be paid monthly, at the per annum
rate equal to either (i) one eighth of one percent 1.125%) less than the
Michigan National Bank Prime Rate, as declared from time to time or (ii)
2.35% in excess of LIBOR. Interest shall be computed on the basis of a 360
day year for the actual number of days elapsed in a month. After maturity
(whether by acceleration or otherwise), interest shall be at the per annum
rate of Two percent in excess of the foregoing rate."
10. The Loan Agreement is amended to add Section 3.2(d), which shall read
in its entirety as follows:
"(d) Borrower shall notify Bank of the Interest Rate selected at the time
of each Advance under the Credit Loan and at least three (3) business days
prior to the expiration of the LIBOR Interest Period, Borrower shall!
notify Bank, in writing or verbally (and subsequently confirmed in writing)
of which rate shall apply to the Credit Loan after the expiration of any
LIBOR Interest Period. If Borrower fails to provide three (3) business days
notice of its intended interest rate, then the Credit Loan shall bear
interest at Michigan National Bank Prime Rate. Borrower shall have no right
to have LIBOR apply to the Credit Loan if an Event of Default has occurred
and is continuing. Borrower may not elect a LIBOR Interest Period which
would extend beyond the Due Date of the Credit Loan."
11. Bank hereby waives compliance with Section 6.24 for the payment of
Excess Cash Flow required to be made on June 1, 1996. This waiver is limited to
this specific payment and does not constitute a waiver of the obligation of
Borrower to make future payments of Excess Cash Flow.
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12. The first sentence of Section 7.7 of the Loan Agreement is amended to
read in its entirety as follows:
"Pay or declare any dividend, in cash or in other property, or make any
other distribution upon its Capital Stock; provided, however, subject to
the provisions hereof, Borrower may make cash and/or non-cash distributions
("Permitted Distributions") to Guarantor, either by way of dividends or
otherwise, during each of Borrowers fiscal years ending December 31 in an
amount not to exceed One Million and 00/100 Dollars ($1,000,000.00)."
13. Section 7.22 (iii) of the Loan Agreement is amended to read in its
entirety as follows:
"(iii) for the fiscal year ending December 31, 1996 and all subsequent
fiscal years, 3.50 to 1.00."
14. Section 7.25(iii) of the Loan Agreement is amended to read in its
entirety as follows:
"(iii) for the fiscal year ending December 31, 1996, and all subsequent
fiscal years, not less than Five Million Five Hundred Thousand
($5,500,000.00)."
15. The first sentence of Section 7.27 of the Loan Agreement is amended to
read in its entirety as follows:
"7.27 Suffer or permit its "Debt Service Coverage Ratio" at any time to
less than 1.25 to 1.00."
16. By executing this Amendment, Borrower is expressly reconfirming the
truthfulness of all representations, warranties and covenants contained in this
Loan Agreement as of the date of this Amendment. Borrower further certifies that
it has no knowledge, after due inquiry, of any Event of Default or act which
with the passage of time, delivery of notice or both, would constitute an Event
of Default hereunder. Borrower agrees to provide Bank with corporate resolutions
authorizing the execution and delivery of this Amendment and the documents
executed in conjunction with the Amendment and the performance of its
obligations to Bank.
17. Guarantor consents to the modifications contained in this Amendment and
expressly acknowledges that the Guaranty remains in full force and effect.
Guarantor agrees to provide Bank with corporate resolutions authorizing the
execution and delivery of this Amendment and the documents executed in
conjunction with the Amendment and the performance of its obligations to Bank.
18. Except as expressly modified by this Amendment, all of the terms,
conditions and provisions contained in the Loan Agreement remain in full force
and effect.
19. This Amendment is governed by and construed in accordance with the laws
of the State of Michigan, without reference to choice of law provisions. This
Amendment may only be modified by a written agreement signed by all parties
hereto. This Amendment may be executed in any number of counterparts, each of
which shall be an original and all of which, when taken together, shall
constitute one and the same document.
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IN WITNESS WHEREOF, this Fourth Amendment to Loan and Financing Agreement
has been duly executed and delivered as of the date first above written.
MICHIGAN NATIONAL BANK,
a national banking association
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
Its: Vice President
CENTURY SUPPLY CORP.,
a Michigan corporation
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Xxxxx X. Xxxxxx
Its: President
RICHTON INTERNATIONAL CORPORATION,
a Delaware corporation
By: /s/ Xxxxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxxxx X. Xxxxxxx
Its: Vice President-Finance
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