Exhibit 10(b)
STATE STREET BANK 000 Xxxxxxxx Xxxxxx
Xxxxxx, Xx 00000-0000
April 25, 1997
Westerbeke Corporation
Avon Industrial Park
Avon, MA 02322
RE: Loan Facility
Ladies and Gentlemen:
State Street Bank and Trust Company (the "Bank") is pleased to make
available to Westerbeke Corporation, an organization organized under the
laws of The Commonwealth of Massachusetts (the "Borrower") a $300,000
revolving line of credit (the "Revolving Line of Credit") and term loan
facility "Term Loan") on the following terms and conditions:
I. The Revolving Line of Credit
1. Term. The Revolving Line of Credit shall commence on the date
hereof and expire on June 30, 1997 (the "Revolving Maturity Date"), unless
extended by mutual agreement.
2. Notice and Manner of Borrowings. Subject to the terms and
conditions hereof, the Bank agrees to make revolving loans provided for
herein (each, a "Revolving Loan")(the Revolving Loans and the Term Loan, as
hereinafter defined, collectively, the "Loans"). If a request for a
Revolving Loan is made orally, it shall be immediately confirmed in writing
if requested by the Bank. The outstanding amount of all Revolving Loans
hereunder shall not at any time exceed $300,000.
3. Evidence of Indebtedness. All Revolving Loans will be evidenced
by a promissory note in the form attached hereto as Exhibit A (the "Note").
The Borrower hereby authorizes the Bank to record each Loan and the
corresponding information on the schedule forming part of the Note, and,
absent manifest error, this record shall be conclusive and binding.
4. Interest Rate. Principal on each outstanding Revolving Loan shall
bear interest at a floating rate per annum equal to the Bank's Prime Rate.
Interest on each Loan shall be calculated on the basis of a 360-day year for
the actual number of days elapsed. As used herein, "Prime Rate" shall mean
the rate of interest per annum announced from time to time by the Bank in
Boston, Massachusetts as its Prime Rate.
5. Payments and Prepayment. Interest on Revolving Loans shall be
payable monthly in arrears on the first business day of each month
commencing May 1, 1997, or on the first business day of the month following
advancement of the initial Revolving Loans, and on the same day when
principal is payable, whether upon acceleration following an Event of
Default as defined herein or on the Revolving Maturity Date. On the
Revolving Maturity Date all Revolving Loans, shall be paid in full,
provided, however that so long as no default has occurred and is continuing
hereunder, on the Revolving Maturity Date, all outstanding Revolving Loans
shall be converted into a Term Loan (the "Term Loan") and shall be payable
as provided herein. Revolving Loans may be prepaid without penalty and any
amounts prepaid may be reborrowed subject to the terms hereof. All payments
of principal and interest shall be made in immediately available United
States dollars at the main office of the Bank.
6. Use of Funds. Proceeds of Revolving Loans may be used only for
purchase of equipment for which the Bank has been provided an invoice and
adequate description of the equipment to be purchased.
II. The Term Loan
On the Revolving Maturity Date, unless an Event of Default has
occurred and is continuing, the outstanding amount of all Revolving Loans
shall be converted to the Term Loan. Principal outstanding under the Term
Loan shall be payable in equal consecutive monthly installments on the first
business day of each month commencing July 1, 1997 each in an amount
necessary to fully amortize the outstanding amount of the Term Loan in 60
such monthly installments. Interest on principal outstanding under the Term
Loan shall be payable at either a floating rate equal to the Bank's Prime
Rate per annum or a fixed rate of interest quoted by the Bank as its
applicable cost of funds, determined in the discretion of the Bank, plus
2.25% percent per annum (such rate, the "Fixed Interest Rate"). Interest on
the Term Loan is payable commencing on July 1, 1997 and on the first
business day of each month thereafter with all outstanding principal
outstanding under the Term Loan with accrued and unpaid interest due and
payable in full on June 30, 2002 (the "Maturity Date"). The Term Loan shall
be evidenced by the Note and may be prepaid without penalty in the event the
Term Loan bears interest at the Prime Rate, and only if the Borrower
simultaneously pays all Lost Interest Income, cost and expense of the Bank
in connection with such prepayment in the event the Term Loan bears interest
at the Fixed Interest Rate. As used herein, "Lost Interest Income" shall be
computed by the Bank by determining the interest rate differential between
the Fixed Interest Rate on the Term Loan and the yield on a United States
Government Treasury instrument with a similar maturity as the remaining term
of the Term Loan. In the event that the rate differential is such that the
yield on such treasury instrument is greater than the Fixed Interest Rate,
no Lost Interest Income shall be payable. In the event that the Fixed
Interest Rate is greater than the yield on such treasury instrument, the
difference shall be multiplied by the principal amount of the Term Loan
being prepaid computed monthly for the remaining term of the Term Loan and
the present value (using 6 month treasury rate) of such monthly compensation
shall be calculated and paid to the Bank as "Lost Net Interest Income".
Amounts of the Term Loan which are prepaid may not be reborrowed.
III. General Loan Terms
1. Security. The Loans will be secured by the equipment purchased
with the proceeds of the Revolving Loans as described in a Security
Agreement dated January 23, 1996 from the Borrower to the Bank (the
"Security Agreement").
2. Covenants. Until all Obligations have been paid in full, the
Borrower covenants and agrees as follows:
a) To maintain as of the end of each fiscal quarter Working
Capital of not less than $4,500,000;
b) To maintain as of the end of each fiscal quarter
Consolidated Tangible Net Worth of not less than $8,500,000 plus 40%
of net income earned during the previous fiscal quarter on a
cumulative basis;
c) To maintain as of the end of each fiscal year a Debt Service
Coverage Ratio of not less than 4 to 1;
d) To maintain as of the end of each fiscal quarter a Leverage
Ratio of not more than 1 to 1;
e) Not to create, incur, assume or guarantee any Indebtedness
other than (i) Indebtedness to the Bank, (ii) Indebtedness existing as
of the date of this letter agreement and disclosed on Exhibit B, and
(iii) other Indebtedness with the prior consent of the Bank;
f) Not to create, incur, assume or suffer to exist any
mortgage, pledge, security interest, lien or other charge or
encumbrance upon any of its assets or properties, other than (i) those
in favor of the Bank, (ii) those shown on Exhibit B and (iii) those
for which the Bank has given its prior written approval;
g) To (i) duly observe and comply with all applicable laws,
including without limitation, those pertaining to environmental
matters and the release or threat of release of hazardous substances,
and pension and retirement plans, and pay all taxes and governmental
charges prior to the time they become delinquent, (ii) maintain in
full force and effect all licenses and permits necessary in any
material respect for the proper conduct of its business, (iii) keep
its properties and assets in good repair and insured in such amounts
as is customary in the industry and as the Bank may require, (iv)
remain engaged substantially in the business in which it is currently
engaged, (v) not sell or dispose of any assets except in the ordinary
course of business or merge or consolidate with or into any entity,
(vi) not pay any dividends on any class of stock or make any other
distribution or payment on account of such stock in any fiscal year in
excess of net income earned in such fiscal year, (vii) comply with all
terms and provisions of all documents evidencing or securing any
Indebtedness to any party other than the Bank ("Other Indebtedness"),
(viii) immediately notify the Bank of any default or event of default
with respect to Other Indebtedness and to provide to the Bank a copy
of any notice received by the Borrower relating thereto or any notice
or claim of any such default, and (ix) immediately notify the Bank of
any default or event of default hereunder and of any litigation or
governmental proceeding commenced or threatened in writing against the
Borrower;
h) To permit the Bank upon reasonable notice to visit and
inspect the properties of the Borrower and make copies or abstracts
from the Borrower's books and records;
i) To pay (i) all fees, costs and expenses incurred or paid by
the Bank in connection with the administration, enforcement or
amendment of this letter agreement or any other documents executed in
connection herewith including any fees associated with commercial
finance exams conducted by the Bank;
j) Until the Maturity Date, to submit to the Bank: (i) within
60 days of the end of each fiscal quarter of the Borrower, Xxxxxxxx's
financial statements, including balance sheet and income statement,
together with a certificate of compliance executed by the chief
financial officer of the Borrower in a form acceptable to the Bank,
(ii) within 120 days of the end of each fiscal year of the Borrower,
Xxxxxxxx's annual financial statements audited/reviewed by a certified
public accountant acceptable to the Bank, (iii) such other financial
statements and information as the Bank may reasonably request from
time to time and (iv) within 10 days after the making of any Revolving
Loan, a copy of the invoice with respect to equipment purchased using
the proceeds of such Revolving Loan; and
k) Execute and deliver such additional instruments and take
such further action as the Bank may reasonably request solely to
effect the purpose of this letter agreement and the Loans evidenced by
the Note.
3. Representations and Warranties. The Borrower represents and
warrants that:
a) It is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation,
has all requisite corporate power and authority to own its property
and conduct its business as is now conducted, is duly qualified and in
good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where the nature of its properties or
business requires such qualification and maintains no permanent
offices, assets, employees or business operations in any state other
than in The Commonwealth of Massachusetts, provided, however that the
Borrower may from time to time maintain personnel and assets
temporarily at locations outside of The Commonwealth of Massachusetts;
b) The execution, delivery and performance of this letter
agreement, the Note and the Security Agreement (i) are, and will be,
within its corporate power and authority, (ii) have been authorized by
all necessary corporate proceedings, (iii) do not, and will not,
require the consent of the stockholders of the Borrower or approvals
of any governmental authority, (iv) will not contravene any provision
of the charter documents or by-laws of the Borrower or any law, rule
or regulation applicable to the Borrower, (v) will not constitute a
default under any other agreement, order or undertaking binding on the
Borrower, and (vi) will not require the consent or approval of any
obligee or holder of any instrument relating to the Other
Indebtedness;
c) This letter agreement, the Note, the Security Agreement and
related documents constitute the legal, valid, binding and enforceable
obligations of the Borrower, except as the same may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally and by
general equitable principles;
d) All financial statements previously furnished to the Bank by
it were prepared in accordance with generally accepted accounting
principles and present fairly and completely the financial position of
the Borrower. Since the date of such statements, there has been no
material, adverse change in the assets, liabilities, financial
condition or business of the Borrower other than in the ordinary
course of business;
e) The Borrower has good and marketable title to all its
material properties, assets and rights of every name and nature
purportedly owned by it, except for encumbrances shown on Exhibit B;
f) There is no litigation, arbitration, proceeding or
investigation pending, or to the best of the Borrower's knowledge
threatened, against the Borrower except those previously disclosed by
the Borrower to the Bank in writing; and
g) The making of each Loan hereunder shall be deemed to be a
reaffirmation by the Borrower as to the representations and
warranties contained in this paragraph and confirmation that no Event
of Default has occurred hereunder.
4. Availability of Loans. The availability of Revolving Loans under
this facility is subject to satisfaction of the following:
a) Receipt by the Bank of a duly executed copy of this letter,
the Note and a Clerk's certificate relating to corporate proceedings;
b) There shall have occurred (i) no Event of Default continuing
beyond any applicable cure periods under this letter agreement or the
Security Agreement and no Event of Default shall occur after giving
effect to the making of the requested loan, and (ii) no material
adverse change in the assets, liabilities, financial condition,
business or prospects of the Borrower, as determined by the Bank
acting in good faith; and
c) Completion of such due diligence and other matters and
receipt of such additional documentation as the Bank may reasonably
require.
5. Events of Default. It will be an Event of Default hereunder if
any of the following events occurs:
a) the Borrower fails to pay when due any amount of principal
or interest on any Loan or any fees or expenses payable hereunder or
under the Note on the due date therefor; or
b) the Borrower fails to perform any term, covenant or
agreement contained in this letter agreement, which in the case of
section III2g) of this letter agreement only continues for 15 days
from the earlier of the date when the Borrower first becomes aware of
such failure or receives notice from the Bank as to such failure, the
Note or the Security Agreement or any other agreement or document
executed in connection with this letter agreement continuing beyond
any applicable grace periods; or
c) there shall occur any material adverse change in the assets,
liabilities, financial condition, business or prospects of the
Borrower as determined by the Bank acting in good faith or a change in
the senior management or controlling ownership interest of the
Borrower from that existing on the date hereof; or
d) any representation or warranty of the Borrower made in this
letter agreement, the Note, the Security Agreement or any other
document executed in connection with this letter agreement shall prove
to have been false in any material respect upon the date when made or
deemed to have been made; or
e) the Borrower fails to pay or perform any obligation to the
Bank, including under the revolving line of credit made available by
the Bank to the Borrower in the original principal amount of
$3,000,000 and subsequently increased to $4,000,000 and revolving line
of credit/term loan facility made available by the Bank to the
Borrower in the original principal amount of $500,000, as either or
both of such facilities may be increased, amended, superseded or
replaced or an Event of Default occurs under any document evidencing
or securing such obligation, or the Borrower fails to pay at maturity,
or within any applicable period of grace, any obligations for borrowed
monies or advances, or for the use of real or personal property, or
fails to observe or perform any term, covenant or agreement evidencing
or securing such obligations for borrowed monies or advances or
relating to such use of real or personal property, the result of which
failure is to permit the holder or holders of such Indebtedness to
cause such Indebtedness to become due prior to its stated maturity
upon delivery of required notice, if any; or
f) the Borrower (i) applies for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar official of itself or of all or a substantial
part of its property, (ii) is generally not paying its debts as such
debts become due, (iii) makes a general assignment for the benefit of
its creditors, (iv) commences any case or proceeding under any law
relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, or any other law providing for the
relief of debtors, (v) fails to contest in a timely or appropriate
manner, or acquiesces in writing to, any petition filed against it in
an involuntary case under the Federal Bankruptcy Code or other law, or
(vi) takes any action under the laws of its jurisdiction of
incorporation or organization similar to any of the foregoing; or
g) a proceeding or case shall be commenced, without the
application or consent of the Borrower in any court of competent
jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding-up, or composition or readjustment of its debts,
(ii) the appointment of a trustee, receiver, custodian, liquidator or
the like of it or of all or any substantial part of its assets, or
(iii) similar relief in respect of it, under any law relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts or any other law providing for the relief of
debtors, and such proceeding or case shall continue undismissed, or
unstayed and in effect, for a period of 30 days; or an order for
relief shall be entered in an involuntary case under the Federal
Bankruptcy Code, against the Borrower or action under the laws of the
jurisdiction of incorporation or organization of the Borrower or
similar to any of the foregoing shall be taken with respect to the
Borrower and shall continue unstayed and in effect for any period of
30 days; or
h) a final judgment or final order for the payment of money is
entered against the Borrower by any court, or an execution or similar
process is issued or levied against property of the Borrower, that in
the aggregate exceeds $100,000 in value and such judgment, order,
warrant or process shall continue undischarged or unstayed for 30 day;
or
i) the Borrower permits any employee pension benefit plan, as
that term is defined in the Employment Retirement Income Security Act
of 1974, as amended ("Erisa") maintained by it to (a) engage in any
prohibited transaction as that term is defined in Section 4975 of the
internal Revenue Code of 1986, as amended, (b) incur any "accumulated
funding deficiency" as that term is defined in Erisa, whether or not
waived, or (c) terminate in any manner which would result in the
imposition of a lien or encumbrance on the assets of the Borrower
pursuant to Section 4058 of Erisa.
6. Remedies. Upon the occurrence of an Event of Default described in
subsections 5.1(f) and (g), immediately and automatically, and upon the
occurrence of any other Event of Default continuing beyond any applicable
cure periods, at any time thereafter while such Event of Default is
continuing, at the Bank's option and upon the Bank's declaration:
(a) The Revolving Line of Credit established hereunder shall
terminate and outstanding amounts thereunder will be due and payable
on the Revolving Maturity Date and will not be converted to the Term
Loan as provided herein;
(b) the unpaid principal amount of the Loans together with
accrued interest and all other Obligations shall become immediately
due and payable without presentment, demand, protest or further notice
of any kind, all of which are hereby expressly waived; and
(c) the Bank may exercise any and all rights it has under this
Agreement, the Note, the Security Agreement and any other document
executed in connection herewith, and proceed to protect and enforce
the Bank's rights by any action at law, in equity or other appropriate
proceeding.
7. Notices. All notices hereunder shall be in writing and shall be
deemed to have been given when delivered by hand, when properly deposited in
the mails postage prepaid, when sent by facsimile or when delivered to
overnight courier. Notices to the Bank shall be given to State Street Bank
and Trust Company 000 Xxxxxxxx Xxxxxx Xxxxxx, Xxxxxxxxxxxxx 00000 Attn:
Xxxxxxx X. Xxxxx or Corporate Banking Division Executive and notice to the
Borrower shall be deemed to have been given if given at the address stated
at the beginning of this letter agreement, Attention: Xxxxxxxx Xxxxxx.
8. Miscellaneous. No waivers shall be effective unless in writing.
All amendments hereto must be in writing signed by all parties hereto. Any
amounts owing from the Bank to the undersigned, including deposits, may be
set off against past due obligations of any of the undersigned to the Bank.
This letter and the Note shall be governed by the laws of The Commonwealth
of Massachusetts. The Borrower may not assign or transfer or participate
any of its rights hereunder and under the Note without consent of the
Borrower.
9. Definitions. Except as otherwise defined herein, all financial
terms shall be defined in accordance with generally accepted accounting
principles. The following defined terms as used herein shall have the
following meanings:
"Capital Expenditures" shall mean any expenditures made or
obligations incurred by the Borrower in connection with the
acquisition of any equipment or other property constituting
fixed assets.
"Consolidated Current Liabilities" shall mean at any date as of
which the amount thereof shall be determined, all amounts that
should, in accordance with generally accepted accounting
principles, be included as current liabilities on the
consolidated balance sheet of the Borrower at such date, plus,
to the extent not already included therein, all Loans made
hereunder, and all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless
such Indebtedness is renewable or extendable at the option of
the Borrower to a date more than one year from the date of
determination.
"Consolidated Tangible Net Worth" shall mean" the total assets
of the Borrower and its Subsidiaries minus (x) the sum of any
amounts attributable to (i) goodwill, (ii) intangible items such
as unamortized debt discount and expense, patents, trade marks
and names, service marks and names, copyrights and research and
development expenses except prepaid expenses, and (iii) any
write-up in the book value of assets resulting from any
revaluation thereof subsequent to the date of the financial
statements last delivered to the Bank and (y) Consolidated Total
Liabilities of the Borrower and its Subsidiaries.
"Consolidated Total Liabilities" shall mean at any date as of
which the amount thereof shall be determined, all obligations
that should, in accordance with generally accepted accounting
principles, be classified as liabilities on the consolidated
balance sheet of the Borrower and its Subsidiaries, including in
any event all Indebtedness.
"Debt Service Coverage Ratio" shall mean, at any date as of
which the amount thereof shall be determined, the ratio of the
total of the Borrower's and its Subsidiaries' (x) net income
after taxes for such period, excluding any extraordinary items,
plus (b) depreciation, amortization and interest for such
period, minus (c) Capital Expenditures for such period not
financed by the Bank to (y) current maturities of long term
Indebtedness for such period.
"Indebtedness" shall mean all obligations for borrowed money and
other extensions of credit to the Borrower, secured or
unsecured, absolute or contingent, whether or not evidenced by a
note, bond or other instrument, all guarantees, all obligations
reflecting the deferred purchase price of property or other
accounts payable, and all obligations of the Borrower secured by
a mortgage, lien, pledge or other security interest, together
with any interest, charges and fees payable on any of the
foregoing.
"Leverage Ratio" shall mean the ratio of the Borrower's
Consolidated Tangible Net Worth to the Borrower's Consolidated
Total Liabilities for such period.
"Obligations" shall mean any and all obligations of the Borrower
to the Bank of every kind and description, direct or indirect,
absolute or contingent, primary or secondary, due or to become
due, now existing or hereafter arising, regardless of how they
arise or by what agreement or instrument, if any, and including
obligations to perform acts and refrain from taking action as
well as obligations to pay money.
"Subsidiary" shall mean any corporation, association, or
similar organization of which 50% or more of the ordinary voting
power for the election of a majority of the board of directors
or other governing body of such entity is held or controlled by
the Borrower or Subsidiary of the Borrower and including, in any
event, Guarantor; or any other such organization the management
of which is directly or indirectly controlled by the Borrower or
a Subsidiary of the Borrower through the exercise of voting
power or otherwise; or any joint venture, whether incorporated
or not, in which the Borrower has a 50% ownership interest.
"Working Capital" shall mean the amount by which consolidated
current assets of the Borrower and its Subsidiaries exceeds
Consolidated Current Liabilities of the Borrower and its
Subsidiaries at the time of determination.
If the foregoing satisfactorily sets forth the terms and conditions of
this credit facility, please execute and return the enclosed copy of this
letter agreement, the Note, the applicable Security Agreement and such other
documents and agreements as the Bank may request each of which when received
will be considered to be an agreement executed under seal to be governed by
the laws of The Commonwealth of Massachusetts effective when received by the
Bank. We are pleased to provide this loan facility and look forward to the
ongoing development of our relationship.
Sincerely,
STATE STREET BANK AND TRUST COMPANY
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Assistant Vice President
Acknowledged and accepted:
WESTERBEKE CORPORATION
By: /s/ Xxxxxxxx X. Xxxxxx III
Xxxxxxxx X. Xxxxxx III
Executive VP and COO
Date: April 25,1997
Exhibits
A-Note
B-Indebtedness/Encumbrances
