SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: January 27, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15046
Westerbeke Corporation
(Exact name of registrant as specified in its charter)
Delaware 04-1925880
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
Avon Industrial Park, Avon, Massachusetts 02322
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (508) 588-7700
No Change
(Former name, former address and former fiscal year if changed since last
report)
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 to file such
reports.) and (2) has been subject to such filing requirements for
the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Outstanding at
Class January 27, 1996
----- ----------------
<S> <C>
Common Stock, $.01 par value 2,064,450
</TABLE>
WESTERBEKE CORPORATION AND SUBSIDIARY
INDEX
Page
Part I - Financial Information
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets as of January 27, 1996
and October 28, 1995 3
Consolidated Statements Operations for the three
months ended January 27, 1996 and January 28, 1995 4
Consolidated Statements of Cash Flows for the three
months ended January 27, 1996 and January 28, 1995 5
Notes to Consolidated Financial Statements 6-7
Item 2 -
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Part II - Other Information 10
Signatures 11
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 27, October 28,
1996 1995
----------- -----------------
(Unaudited) (Derived from
ASSETS Audited Financial
Statements)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 355,600 $ 1,322,200
Accounts receivable, net of allowance for
doubtful accounts of $60,500 1,520,900 1,541,400
Inventories (Note 2) 5,354,200 4,313,500
Prepaid expenses and other assets 167,900 134,100
Deferred income taxes 330,900 316,200
-----------------------------
Total current assets 7,729,500 7,627,400
Property, plant and equipment, net 1,567,100 1,594,900
Other assets, net 1,135,300 1,140,800
Investment in marketable securities 596,900 486,100
Note receivable - related party 146,300 149,400
-----------------------------
$11,175,100 $10,998,600
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 22,400 $ 22,100
Current portion of obligations under
capital leases 5,100 12,700
Accounts payable 1,552,000 1,077,600
Accrued expenses and other liabilities 306,600 380,400
Accrued income taxes -- 226,300
-----------------------------
Total current liabilities 1,886,100 1,719,100
-----------------------------
Deferred income taxes 134,000 144,200
Long-term debt, net of current portion 38,900 44,700
-----------------------------
172,900 188,900
-----------------------------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; authorized
5,000,000 shares; issued and outstanding
2,064,450 shares 20,600 20,600
Additional paid-in-capital 5,902,100 5,902,100
Unrealized gain on marketable securities 65,000 71,200
Retained earnings 3,128,400 3,096,700
-----------------------------
Total stockholders' equity 9,116,100 9,090,600
-----------------------------
$11,175,100 $10,998,600
=============================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
January 27, January 28,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Net sales $3,929,700 $4,305,400
Cost of sales 3,221,800 3,349,000
------------------------
Gross profit 707,900 956,400
Selling, general and administrative expense 532,100 611,100
Research and development expense 166,800 168,500
------------------------
Income from operations 9,000 176,800
Interest income, net (45,600) (12,900)
------------------------
Income before income taxes 54,600 189,700
Provision for income taxes 23,000 75,700
------------------------
Net income $ 31,600 $ 114,000
========================
Income per share:
Net income per share $ 0.01 $ 0.05
========================
Weighted average common and common
equivalents shares outstanding 2,267,269 2,232,574
========================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
January 27, January 28,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 31,600 $ 114,000
Reconciliation of net income to net cash provided
(used) by operating activities:
Depreciation and amortization 99,100 104,200
Deferred income taxes (24,900) (6,100)
Changes in operating assets and liabilities:
Accounts receivable 20,500 (345,800)
Inventories (1,040,700) (399,600)
Prepaid expenses and other assets (25,200) (52,900)
Accounts payable 474,500 136,400
Accrued expenses and other liabilities (308,600) 57,500
-------------------------
Net cash provided (used) by operating activities (773,700) (392,300)
-------------------------
Cash flows from investing activities:
Purchase of property, plant and equipment (66,200) (67,400)
Proceeds from payment of note receivable - related party 3,100 2,300
Investment in marketable securities, net (116,900) (81,400)
-------------------------
Net cash used in investing activities (180,000) (146,500)
-------------------------
Cash flows from financing activities:
Principal payments on long-term debt and capital lease
obligations (12,900) (42,200)
-------------------------
Net cash used in financing activities (12,900) (42,200)
-------------------------
Decrease in cash and cash equivalents (966,600) (581,000)
Cash and cash equivalents, beginning of period 1,322,200 1,727,600
-------------------------
Cash and cash equivalents, end of period $ 355,600 $1,146,600
=========================
Supplemental cash flow disclosures:
Interest paid $ 400 $ 3,300
Taxes paid $ 282,800 $ 32,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
WESTERBEKE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Summary of Significant Accounting Policies:
-------------------------------------------
A. Financial Statements
--------------------
The condensed consolidated financial statements included herein
have been prepared by Westerbeke Corporation ("the Company"),
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. While certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations, the Company believes that the disclosures made
herein are adequate to make the information presented not
misleading. It is recommended that these condensed statements be
read in conjunction with the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended October 28, 1995.
In the opinion of the Company, all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the
financial position of Westerbeke Corporation and Subsidiary as of
January 27, 1996, the results of their operations for the three
months ended January 27, 1996 and January 28, 1995, and the cash
flows for the three months then ended, have been included.
B. Basis of Presentation
---------------------
The condensed consolidated financial statements include the
accounts of the Company and its wholly owned subsidiary, Westerbeke
International, Inc. (a Foreign Sales Corporation). All significant
intercompany transactions and accounts have been eliminated.
Westerbeke International, Inc., has been inactive since fiscal year
1987.
2. Inventories
-----------
The Company uses the last-in, first-out (LIFO) method to value
inventory.
Inventories are comprised of the following:
<TABLE>
<CAPTION>
January 27, October 28,
1996 1995
----------- -----------
<S> <C> <C>
Raw materials $4,327,100 $3,319,000
Work-in-process 310,900 322,700
Finished goods 716,200 671,800
--------------------------
$5,354,200 $4,313,500
==========================
</TABLE>
The Company has estimated both the year-end inventory levels and
the inflation/deflation which will occur during the fiscal year.
The Company anticipates an increase in its LIFO valuation account
as of October 26, 1996. Accordingly, the Company has recorded an
increase of $15,000, on a pro ratabasis, in the LIFO reserve during
the first three months of fiscal 1996. During the first three
months of 1995, the Company recorded, on a pro rata basis, an
increase of $15,000 in the LIFO reserve. Inventories would have
been $1,219,000 higher at January 27, 1996 and $1,204,000 higher as
of October 28, 1995, if the weighted-average first-in, first-out
(FIFO) method had been used. Inventory cost determination on the
FIFO method approximates replacement or current cost.
Item 2 - Management's Discussion and Analysis
---------------------------------------------
Of Financial Condition and Results Of Operations
------------------------------------------------
Results of Operations -
- -----------------------
Net sales decreased by $375,700, or 8.7%, during the first quarter of
fiscal 1996 as compared to the same period in fiscal 1995. The decrease
in net sales was primarily attributable to lower unit volume of the
Company's diesel propulsion engine products and lower spare parts
revenues. The decrease in revenues from the diesel propulsion engine
products was primarily the result of lower unit sales to the Company's OEM
customers. Lower spare parts revenues were primarily caused by inclement
weather throughout the east coast during the first fiscal quarter of 1996.
Gross profit decreased $248,500, or 26.0% during the first quarter of
fiscal 1996 as compared to the same period in fiscal 1995. As a
percentage of net sales, gross profit decreased to 18.0% during the first
quarter of fiscal year 1996, as compared to 22.2% for the first quarter of
fiscal year 1995. The decrease in gross profit margin is primarily the
result of lower spare parts revenues and a change in product mix to lower
margin generator units.
Operating expenses decreased $80,700 or 10.4% for the first quarter of
fiscal 1996, as compared to the same period in fiscal 1995. The decrease
in operating expenses is primarily the result of lower advertising,
marketing and building maintenance costs.
For the quarter ended January 27, 1996, the Company reported net income of
$31,600, compared to a net income of $114,000 for the same period in
fiscal 1995. The decrease in net income for the first quarter of fiscal
1996 is primarily attributable to lower sales volume in the first quarter
of fiscal 1996 compared to the same period in fiscal 1995.
Liquidity and Capital Resources
- -------------------------------
During the first three months of fiscal 1996, net cash used by operations
was $773,700, compared to net cash used by operations of $392,300 for the
first three months in fiscal 1995. The decrease in cash flow from
operations is primarily attributable to an increase in inventory for the
three month period ended January 27, 1996, as compared to the same period
in fiscal 1995. The increase in inventory is primarily the result of an
unanticipated decrease in sales volume over the prior period and the
planned one-time purchase of engines from a key supplier.
During the three months ended January 27, 1996, the Company purchased
property, plant and equipment of $66,200. The Company plans to incur
capital expenditures of approximately $350,000 for emission testing and
product development equipment during the remainder of fiscal 1996.
On June 4, 1992, the Company entered into a $3,000,000 line of credit
agreement (the "Credit Agreement") with State Street Bank and Trust
Company, collateralized by certain inventory and receivables of the
Company. At January 27, 1996, the Company had approximately $2,822,300 in
unused borrowing capacity under the Credit Agreement and approximately
$177,700 committed to cover the Company's reimbursement obligations under
certain letters of credit. The Credit Agreement expires on March 31,
1996. Management is in the process of renewing the Credit Agreement and
anticipates bank approval.
On January 23, 1996, the Company entered into a $500,000 revolving line of
credit agreement (the "Revolving Line of Credit") and term loan facility
(the "Term Loan") with State Street Bank and Trust Company, collateralized
by various emission testing and product development equipment to be
purchased and subject to working capital and equity covenants. On June 30,
1996, the Revolving Line of Credit will terminate and be automatically
converted into a five year Term Loan bearing an interest rate calculated at
the bank's cost of funds plus 2.25%. At January 27, 1996, the Company had
no borrowings under the Revolving Line of Credit.
Management believes cash flow from operations and borrowings available
under the Credit Agreement and the Revolving Line of Credit will provide
for working capital needs, principal payments on long-term debt, and
capital and operating leases through fiscal 1996.
Domestic inflation is not expected to have a material impact on the
Company's operations.
The cost of engine blocks and other components is subject to foreign
currency fluctuations (primarily the Japanese yen). Exchange rates have
had a minimal impact on the Company during the fist fiscal quarter of
1996.
Part II. Other Information
Item 1 Legal Proceedings
-------------------------
None to report
Item 2 Changes in Securities
-----------------------------
None to report
Item 3 Default Upon Senior Securities
--------------------------------------
None to report
Item 4 Submissions of Matters to a Vote of Security Holders
------------------------------------------------------------
None to report
Item 5 Other Information
-------------------------
None to report
Item 6 Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits
10(a) Loan Facility Agreement dated January 23, 1996
between the Company and State Street Bank and Trust
Company
10(b) Promissory Note of the Company dated January 23, 1996
in the principal amount of $500,000 payable to the order
of State Street Bank and Trust Company
10(c) Security Agreement dated January 23, 1996 between
the Company and State Street Bank and Trust Company
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during
the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERBEKE CORPORATION
(Registrant)
Dated March 12, 1996 /s/ John H. Westerbeke, Jr.
John H. Westerbeke, Jr.
Chairman and President
Dated March 12, 1996 /s/ Carleton F. Bryant III
Carleton F. Bryant III
Executive Vice President
and Principal Financial
and Accounting Officer
(STATE STREET LOGO)
State Street Bank and Trust Company
P.O. Box 351
Boston, Massachusetts 02101
January 23, 1996
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 $500,000
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, 1996 (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
$500,000.
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 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 February 1, 1996, 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 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 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, 1996 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, 2001 (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 executed in connection herewith (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 and 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, Borrower'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,
Borrower'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 qualifications 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, the Security Agreement and insurance certificate, Uniform
Commercial Code financing statements, a Clerk's certificate relating
to corporate proceedings;
b) Receipt by the Bank of a certificate of legal existence and good
standing with respect to the Borrower issued by the Secretary of The
Commonwealth of Massachusetts, evidence of payment of all taxes due
and owing the Borrower which shall either be in the form of a tax
good standing certificate issued by the Massachusetts Department of
Revenue or a certification by the Treasurer of the Borrower that all
such taxes have been duly paid, and copies of the Articles of
Organization certified by the Massachusetts Secretary of the
Commonwealth and By-Laws of the Borrower certified by the Clerk of
the Borrower;
c) 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
d) The Bank shall have filed such UCC financing statements in
appropriate offices and received such releases as the Bank shall
deem to be necessary in order to provide the Bank a first priority
perfected security interest in all Collateral described in the
Security Agreement; and
e) 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 $3,000,000 revolving line of credit made
available by the Bank to the Borrower, 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 benefits
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 laws 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 225 Franklin Street Boston, Massachusetts 02110 Attn:
Suzanne L. Dwyer 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: Carleton Bryant.
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 on year form 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, and 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/ Suzanne L. Dwyer
Title: Loan Officer
Acknowledged and accepted:
WESTERBEKE CORPORATION
By: /s/ Carleton L. Bryant
Title: Executive Vice President
Date: January 23, 1996
Exhibits
A--Note
B--Indebtedness/Encumbrances
WESTERBEKE CORPORATION
PROMISSORY NOTE
$500,000 January 23, 1996
Boston, Massachusetts
For value received, the undersigned hereby promises to pay to State
Street Bank and Trust Company (the "Bank"), or order, at the head office
of the Bank at 225 Franklin Street, Boston, Massachusetts 02110, on the
Revolving Maturity Date the principal amount of Five Hundred Thousand
Dollars ($500,000), or such lesser amount as shall not have been prepaid,
provided, however, that if no Event of Default has occurred under the
Agreement on the Revolving Maturity Date, the outstanding amount of
Revolving Loans on such date shall be converted to a Term Loan which Term
Loan shall be payable commencing on July 1, 1996 and on the first business
day of each month thereafter in amounts necessary to fully amortize the
amount outstanding hereunder on the Revolving Maturity date in 60 equal
installments. All outstanding principal with accrued and unpaid interest
hereunder shall be due and payable in full on June 30, 2001. Until the
Revolving Maturity Date, interest on principal outstanding hereunder shall
be due and payable at the rate per annum equal to the Bank's Prime Rate,
in effect from time to time. Commencing upon conversion to the Term Loan,
interest on principal outstanding under the Term Loan shall be payable at
either the Prime Rate 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% per annum, as selected by the undersigned on the date of
conversion to the Term Loan. Each change in such interest rate shall take
effect simultaneously with the corresponding change in such Prime Rate.
Interest will be payable monthly in arrears on the first business day of
each month beginning on February 1, 1996. "Prime Rate" shall mean the rate
of interest announced by the Bank in Boston from time to time as its
"Prime Rate." Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed, including holidays or other days on
which the Bank is not open for the conduct of banking business.
All loans hereunder and all payments on account of principal and
interest hereof shall be recorded by the Bank. The entries on the records
of the Bank (including any appearing on this Note) shall be prima facie
evidence of amounts outstanding hereunder.
Overdue payments of principal (whether at stated maturity by
acceleration or otherwise), and, to the extent permitted by law, overdue
interest, shall bear interest, compounded monthly and payable on demand in
immediately available funds, at a rate per annum equal to four percent
(4%) above the Bank's Prime Rate in effect from time to time.
This Note is issued pursuant to, and entitled to the benefits of,
and is subject to, the provisions of a certain Letter Agreement dated
January 23, 1996 by and between the undersigned and the Bank (herein, as
the same may from time to time be amended or extended, referred to as the
"Agreement"), but neither this reference to the Agreement nor any
provision thereof shall affect or impair the absolute and unconditional
obligation of the undersigned maker of this Note to pay the principal of
and interest on this Note as herein provided. All terms not otherwise
defined herein shall be used as defined in the Agreement.
This Note is secured by certain equipment of the undersigned
pursuant to the terms of a Security Agreement executed on or near the date
hereof by and between the undersigned and the Bank, as the same may be from
time to time amended or extended.
In case an Event of Default (as defined in the Agreement) shall
occur, the aggregate unpaid principal plus accrued interest on this Note
shall become or may be declared to be due and payable in the manner and
with the effect provided in the Agreement.
The undersigned may at its option prepay all or any part of the
principal of this Note before maturity upon the terms provided in the
Agreement.
Any deposits or other sums at any time credited by or due from the
Bank to the undersigned or any endorser or guarantor hereof and any
securities or other property of the undersigned or any endorser or
guarantor at any time in the possession of the Bank may at all times be
held and treated as collateral for the payment of this Note and any and
all other liabilities (direct or indirect, absolute or contingent, sole,
joint or several, secured or unsecured, due or to become due, not existing
or hereafter arising) of the undersigned to the Bank. Regardless of the
adequacy of collateral, the Bank may apply or set-off such deposits or
other sums against such liabilities at any time in the case of makers but
only with respect to matured liabilities in the case of endorsers and
guarantors.
The undersigned maker and every endorser and guarantor hereof hereby
waives presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance, default
or enforcement hereof and consents that this Note may be extended from
time to time and that no such extension or other indulgence, and no
substitution, release or surrender of collateral and no discharge or
release of any other party primarily or secondarily liable hereon, shall
discharge or otherwise affect the liability of the undersigned, endorser
or guarantor. No delay or omission on the part of the Bank in exercising
any right hereunder shall operate as a waiver of such right or of any
other right hereunder, and a waiver of any such right on any one occasion
shall not be construed as a bar to or waiver of any such right on any
future occasion.
This instrument shall have the effect of an instrument executed
under seal and shall be governed by and construed in accordance with the
laws of The Commonwealth of Massachusetts (without giving effect to any
conflicts of laws provisions contained therein).
WITNESS: WESTERBEKE CORPORATION
David G. Hintz By: Carleton F. Bryant III
Title: Executive Vice President
SCHEDULE I TO NOTE DATED ______________
FROM WESTERBEKE CORPORATION TO THE BANK
Amount of Outstanding
Amount of Principal Principal Notation Made
Date Loan Paid Balance By
- ------------------------------------------------------------------------
SECURITY AGREEMENT
January 23, 1996
Westerbeke Corporation (the "Borrower"), for valuable consideration, receipt
of which is hereby acknowledged, hereby grants to State Street Bank and Trust
Company, a Massachusetts trust company with its principal office at 225
Franklin Street, Boston, Massachusetts 02110 (the "Secured Party"), a
continuing security interest in and to the property described in the
provisions marked below, whether now owned or existing or hereafter arising or
acquired, together with all goods, instruments, documents of title, policies
and certificates of insurance, securities, chattel paper, deposit accounts,
cash or other property owned by the Borrower or in which the Borrower has an
interest that are now or may hereafter be in the possession, custody or
control of the Secured Party; and all additions, substitutions, replacements
and accessions thereto; and all proceeds and products of any of the foregoing
(collectively, the "Collateral"):
X Equipment. All machinery, equipment and fixtures, office
furniture, furnishings and trade fixtures, specialty tools and
parts, motor vehicles and materials handling equipment of the
Borrower the acquisition of which is financed in whole or in part,
directly or indirectly, by advances made under the Line of Credit,
as hereinafter defined, together with the Borrower's interest in,
and right to, any and all manuals, computer programs, data bases
and other materials relating to the use, operation or structure of
any of the foregoing; and all other property constituting
"equipment" as such term is defined in the Uniform Commercial
Code.
---- Accounts. All rights of the Borrower to payment for goods sold
or leased or for services rendered, all sums of money or other
proceeds due or becoming due thereon, all instruments pertaining
thereto, and the Borrower's rights pertaining to interest in such
goods and services, including the right of stoppage in transit,
replevin or reclamation; all insurance proceeds; all other rights
and claims to the payment of money, under contracts or otherwise;
and all other property constituting "accounts" as such term is
defined in the Uniform Commercial Code.
---- Inventory. All goods, merchandise and other personal property of
the Borrower that are held for sale, lease or other disposition,
or for display or demonstration, or leased or consigned, or that
are raw materials, piece goods, work-in-process or materials used
or consumed or to be used or consumed in the Borrower's business,
whether in transit or in the possession of the Borrower or
another; and all other property constituting "inventory" as such
term is defined in the Uniform Commercial Code.
---- General Intangibles. All rights with respect to trademarks,
trade names, patents, copyrights and other proprietary rights; all
rights of the Borrower under contracts to enjoy performance by
others or to be entitled to enjoy rights granted by others; all
tax refunds; all rights, title and interest of the Borrower in and
to all documents, books, records and other information on whatever
medium recorded, and including, without limitation, computer
programs, tapes, discs, punch cards, data processing software and
related property and rights, maintained by the Borrower that
reflect the conduct of the Borrower's business, such as financial
records; all data bases; all customer lists; and all other
property constituting "general intangibles" as such term is
defined in the Uniform Commercial Code.
---- All assets of the Borrower, including, without limitation, all
Equipment, Accounts, Inventory, and General Intangibles.
---- The following specific items of personal property:
-----------------------------------------------------------------
-----------------------------------------------------------------
All references to the Uniform Commercial Code shall refer to the Uniform
Commercial Code as in effect in The Commonwealth of Massachusetts.
The Collateral is pledged, assigned and transferred, and a security
interest in the Collateral is granted to the Secured Party as security for the
payment of all loans or advances made by the Secured Party to the Borrower,
including, without limitation, pursuant to a $500,000 line of credit and term
loan facility (the "Line of Credit") made available by the Secured Party to
the Borrower , evidenced by a note, together with interest thereon, as such
note or facility may be amended, extended or replaced from time to time, as
well as for the payment and performance of any and all other liabilities,
agreements, covenants, warranties and obligations (direct or indirect,
absolute or contingent, sole, joint or several, secured or unsecured, now
existing or hereafter arising of the Borrower to the Secured Party
(collectively, the "Obligations").
The Borrower represents and warrants, covenants and agrees as follows:
1. Name; Collateral Location; Organization; Changes.
(a) The name of the Borrower set forth on the first page of this
Agreement is the true and correct legal name of the Borrower. The Borrower has
not done business as or used any other name.
(b) The address of the Borrower set forth on the first page of this
Agreement is the Borrower's chief executive office and the place where its
business records are kept. All tangible Collateral is located at the chief
executive office of the Borrower indicated on the first page of this
Agreement.
(c) If the Borrower is other than an individual, it is duly organized,
validly existing and in good standing under the law of the state of its
organization and duly qualified and in good standing in every other state in
which the nature of its business or properties requires such qualification.
(d) The Borrower will not change its name, identity or organizational
structure or chief executive office or place where its business records are
kept, or move any tangible Collateral, or merge into or consolidate with any
other entity, unless the Borrower shall have given the Secured Party at least
30 days' prior written notice thereof, and shall have delivered to the Secured
Party such new Uniform Commercial Code financing statements or other
documentation as may be necessary or required by the Secured Party to ensure
the continued perfection and priority of the security interests granted by the
Agreement.
2. Ownership of Collateral; Absence of Liens; Sales and Further Encumbrances.
Except for the security interest created hereunder, the Borrower is, or as to
property acquired after the date hereof, will be, the sole legal and equitable
owner of the Collateral, holding good and marketable title to the Collateral
free from any adverse lien, security interest or encumbrance, except for the
security interest granted hereunder. The Borrower will not transfer or assign
or create, grant, or suffer to exist any pledge, lease, mortgage or other
security interest, lien or encumbrance upon or in respect of the Collateral or
any of the Borrower's other property other than in favor of the Secured Party,
except that the Borrower may sell or dispose of the Inventory in the ordinary
course of business practice and may dispose of Equipment, other than Equipment
specifically identified above, that has become worn out or obsolete or that
has been replaced by other Equipment. The Borrower will defend the Collateral
against all claims and demands of all persons at any time claiming the same or
any interest therein and take any and all necessary action to remove any
encumbrances in the Collateral.
3. First Priority Security Interest. This Agreement, together with the
filing of Uniform Commercial Code financing statements in the appropriate
offices or the location of Collateral at the address shown above create a
valid and continuing first lien on and perfected security interest in the
Collateral, prior to all other encumbrances, and is enforceable as such
against creditors of the Borrower, any owner of the real property where any of
the Collateral is located, any purchaser of such real property and any present
or future creditor obtaining a lien on such real property.
4. Maintenance; Use; Payment of Taxes.
(a) The Borrower will keep Collateral in good order and repair and will
not waste or destroy the Collateral, or any part thereof, and will pay
promptly when due all taxes and assessments on the Collateral or on its use or
operations.
(b) The Borrower will use the Collateral only in a lawful manner not
inconsistent with this Agreement and the terms and conditions of any policy of
insurance regarding it. The Borrower will not use the Collateral in violation
of any statute or ordinance.
5. Insurance. The Borrower shall maintain, with financially sound and
reputable insurance companies, casualty insurance on an "all risks" basis,
workers' compensation and other insurance covering the risks and in the
relative proportionate amounts usually carried by persons or companies engaged
in business similar to the Borrower's, as well as such other insurance as may
from time to time be required by the Secured Party. The Borrower will furnish
the Secured Party with such evidence of insurance as the Secured Party may
from time to time request. All policies of insurance shall provide for thirty
(30) days written minimum cancellation notice to the Secured Party and at the
request of the Secured Party shall be delivered to and held by it.
6. Inspection. The Borrower shall at all reasonable times and from time to
time permit the Secured Party, by or through any of its employees or agents,
to inspect the Collateral and to examine and inspect and make extracts from
the Borrower's books and other records, and to arrange for verification of
Accounts.
7. Accounts; Collection and Delivery of Proceeds. The Borrower will
diligently collect all of its Accounts constituting Collateral until the
Secured Party exercises its rights to collect the Accounts pursuant to this
Agreement. The Borrower shall, at the request of the Secured Party, notify
account debtors of the security interest of the Secured Party in any Account
and that payment thereof is to be made directly to the Secured Party. Upon
request of the Secured Party, any proceeds of Accounts or Inventory
constituting Collateral received by the Borrower, whether in the form of cash,
checks, notes or other instruments, shall be held in trust for the Secured
Party and the Borrower shall deliver said proceeds daily to the Secured Party,
without commingling, in the identical form received (properly endorsed or
assigned where required to enable the Secured Party to collect same).
8. General Intangibles; Registration. The Borrower will apply for, and
pursue diligently applications for registration of its ownership of the
General Intangibles constituting Collateral and for which registration is
appropriate, and will use such other measures as are appropriate to preserve
its rights in its other General Intangibles constituting Collateral.
9. The Secured Party's Rights with Respect to the Collateral. The Secured
Party may, at its option and at any time, whether or not the Obligations are
due, without notice or demand on the Borrower, take the following actions with
respect to the Collateral;
(a) with respect to any Accounts, (i) notify account debtors of the
security interest of the Secured Party in such Accounts and that payment
thereof is to be made directly to the Secured Party; (ii) demand, collect,
receive payment of, receipt for, settle, compromise or adjust, and give
discharges and releases in respect of the Accounts; (iii) commence and
prosecute any suits, actions or proceedings at law or in equity in any court
of competent jurisdiction to collect the Accounts or any of them and to
enforce any other rights in respect thereof or in respect of the services
which have given rise thereto; (iv) defend any suit, action, or proceeding
brought against the Borrower in respect of any Account or the services which
have given rise thereto; (v) to settle, compromise or adjust any suit, action
or proceeding described in clause (iii) or (iv) above, and in connection
therewith, to give such discharge or releases as to the Secured Party may seem
appropriate; (vi) endorse checks, notes, drafts, acceptances, money orders,
bills of lading, warehouse receipts or other instruments or documents
evidencing or securing the Accounts; and (vii) generally to sell, assign,
transfer, pledge, make any agreement in respect of or otherwise deal with any
Account or the goods or services which have given rise thereto as fully and
completely as though the Secured Party were the absolute owner thereof for all
purposes.
(b) with respect to Equipment and Inventory, (i) discharge any taxes,
liens, security interests or other encumbrances to which any Collateral is at
any time subject; (ii) take any steps necessary to preserve its rights in any
Collateral against any prior party, upon the failure of the Borrower so to do;
(iii) purchase insurance on any Collateral; (iv) pay for the repair,
maintenance or preservation of any Collateral; (v) make, adjust and settle
claims under any insurance policy related thereto and place and pay for
appropriate insurance thereon. The Borrower agrees to reimburse the Secured
Party on demand for any payments made or expense incurred by the Secured Party
pursuant to the foregoing authorization. The powers conferred on the Secured
Party by this Agreement are solely to protect the interest of the Secured
Party and shall not impose any duty upon the Secured Party to exercise any
such power, and if the Secured Party shall exercise any such power, it shall
be accountable only for amounts that it actually received as a result thereof
and shall not be responsible to the Borrower except for willful misconduct.
10. Power of Attorney. The Borrower hereby irrevocably constitutes and
appoints the Secured Party, and any officer or agent of the Secured Party,
with full power of substitution, as its true and lawful attorney-in-fact with
full irrevocable power and authority in the place and stead of the Borrower or
in the Bank's own name, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments (such as assignments or instruments of transfer with
respect to the Collateral upon the occurrence of an Event of Default) that may
be necessary or desirable to accomplish the purposes of this Agreement.
11. Events of Default. Any and all Obligations shall, at the option of the
Secured Party and notwithstanding any time allowed by any instrument(s)
evidencing the same, become immediately due and payable, without notice or
demand, upon the happening of any of the following events or conditions (each
an "Event of Default"):
(a) Any warranty, representation, report or statement made or furnished
to the Secured Party by, or on behalf of, the Borrower proves to have been
untrue or false in any materials respect when made or furnished;
(b) Default in the payment or performance of any Obligation, covenant
or liability contained or referred to herein or in any instrument evidencing
the same continuing beyond any applicable grace period;
(c) Any event which results in the acceleration of the maturity of the
indebtedness of the Borrower to others under any indenture, agreement or
undertaking;
(d) Any loss, theft, damage or substantial damage of or to the
Collateral, or the making of any levy, seizure, restraint, or attachment of or
any of the Collateral and not released or discharged within thirty (30) days;
(e) Death, dissolution, termination of existence, insolvency, business
failure, appointment of a receiver of any part of the property of, legal or
equitable assignment, conveyance or transfer of property for the benefit of
creditors by, or the commencement of any proceedings under any bankruptcy or
insolvency laws by or against the Borrower, or any guarantor or surety for the
Borrower, or the issuing of any writ or attachment by trustee process or
otherwise or a restraining order or injunction affecting the Collateral;
(f) Failure of the Borrower to remove any lien on the Collateral within
fifteen (15) days after filing thereof by any municipality, State or Federal
authority;
(g) Failure of the Borrower, at all times during the existence of this
or any obligation to keep in full force and effect all licenses and to conduct
one's self so as not to impair or prejudice such licenses and renewals
thereof.
12. Rights and Remedies Upon Default.
(a) If an Event of Default shall have occurred and be continuing, the
Bank may, without notice to or demand upon the Borrower, declare this
Agreement to be in default, and the Bank shall thereafter have in any
jurisdiction in which enforcement hereof is sought, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial Code, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Bank may, so far as the
Borrower can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Bank may in its
discretion require the Borrower to assemble all or any part of the Collateral
at such location or locations within the state(s) of the Borrower's principal
office(s) or at such other locations as the Bank may designate. Unless the
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, the Bank shall give to the
Borrower at least seven (7) Business Days prior written notice of the time and
place of any public sale of Collateral or of the time after which any private
sale or any other intended disposition is to be made. The Borrower hereby
acknowledges that seven (7) Business Days' prior written notice of such sale
or sales shall be reasonable notice. In addition, the Borrower waives any and
all rights that it may have to a judicial hearing in advance of the
enforcement of any of the Bank's rights hereunder, including, without
limitation, its right following an Event of Default to take immediate
possession of the Collateral and to exercise its rights with respect thereto.
The Borrower agrees to pay on demand all costs and expenses (including
reasonable attorneys' fees) incurred or paid by the Secured Party in
protecting, preserving or enforcing the Secured Party's rights with respect to
the Obligations or any Collateral. After deducting all such costs and expenses
(including legal costs and reasonable attorneys' fees) and all other charges
against the Collateral, the residue of the proceeds of collection or sale of
the Collateral shall be applied to the payment of any and all loans made by
the Secured Party to the Borrower hereunder and any and all other liabilities
hereby secured, due or to become due, in such order of preference as the
Secured Party may determine, proper allowance for interest on liabilities not
then due being made, and, unless otherwise provided by law, any surplus shall
be returned to the Borrower. All of the Secured Party's rights and remedies,
whether evidenced hereby or by any other agreement, instrument or paper, shall
be cumulative and may be exercised separately or concurrently.
13. Deposits. Any and all deposits or other sums at any time credited by, or
due from, the Secured Party to the Borrower and any other property and
securities at any time in the possession of the Secured Party may at all times
be held and treated as additional security for Obligations. The Secured Party
shall have the same rights and remedies with respect to any such property and
securities as provided in this Agreement with respect to the Collateral and,
regardless of the adequacy of any collateral, may at any time apply any such
deposits or other sums to the payment of, or set-off the same against, any
obligations whether or not then due, without notice to the Borrower.
14. Waiver. Any condition or restriction imposed on the Borrower under this
Agreement may be waived, modified or suspended by the Secured Party, but only
on the Secured Party's prior action in writing and only as so expressed in
such writing. The Secured Party shall not be deemed to have waived any of its
rights hereunder or under any other agreement, instrument or paper signed by
the Borrower unless such waiver is in writing and signed by the Secured Party.
With respect to both the Obligations and the Collateral, the Borrower assents
to any extension or postponement of the time of payment or any other
forgiveness or indulgence, to any substitution, exchange or release of
Collateral, to the addition or release of any party or person primarily or
secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromise or adjustment of any thereof, all in such manner and at
such time or times as the Secured Party may deem advisable. The Secured Party
may exercise its rights with respect to the Collateral without resorting, or
regard, to other collateral or sources of reimbursement for Obligations. No
delay or omission on the part of the Secured Party in exercising any right
shall operate as a waiver of such right or any other right. A waiver on any
one occasion shall not be construed as a bar to, or waiver of, any right or
remedy on any future occasion.
15. Notices. All notices hereunder will be in writing and will 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 Secured Party will be given to State Street Bank and
Trust Company, 225 Franklin Street, Boston, Massachusetts 02110 Attn:
Community Lending Department, and notice to the Borrower will be deemed to
have been given if given at the address stated at the beginning of this
Agreement or such other address as appears on the books and records of the
Bank.
16. Further Assurances. Upon the written request of the Secured Party, and
at the sole expense of the Borrower, the Borrower will promptly execute and
deliver such further instruments and documents and take such further actions
as the Secured Party may deem desirable to obtain the full benefits of this
Agreement and of the rights and powers herein granted, including without
limitation, filing of any financing statement under the Uniform Commercial
Code. If any amount payable under or in connection with any of the Collateral
shall be or become evidenced by any promissory note or other instrument, such
note or instrument shall be immediately delivered to the Secured Party, duly
endorsed in a manner satisfactory to it.
17. Waiver of Jury Trial. Except as prohibited by law, neither the Borrower
nor the Secured Party, nor any assignee or successor or the Borrower or the
Secured Party, shall seek a jury trial in any lawsuit, proceeding,
counterclaim or any other litigation procedure based upon or arising out of
this Agreement or any related document or agreement. Neither the Borrower nor
the Secured Party will seek to consolidate any such action, in which a jury
trial had been waived, with any other action in which a jury trial has not
been waived. THE PROVISIONS OF THIS SECTION HAVE BEEN FULLY DISCUSSED BY THE
PARTIES HERETO, AND THE PROVISIONS HEREOF SHALL BE SUBJECT TO NO EXCEPTIONS.
NO PARTY HERETO HAS IN ANY WAY AGREED WITH OR REPRESENTED TO ANY OTHER PARTY
THAT THE PROVISIONS OF THIS SECTION 17 WILL NOT BE FULLY ENFORCED.
18. Miscellaneous. All rights of the Secured Party hereunder shall inure to
the benefit of its successors and assigns, and all obligations of Borrower
shall bind Borrower's heirs, executors or administrators or his or its
successors and assigns. This Agreement and all rights and obligations
hereunder, including matters of construction, validity and performance, shall
be governed by the laws of The Commonwealth of Massachusetts. Headings have
been inserted for convenience and shall not be used in the construction or
interpretation of this Agreement. The invalidity or unenforceability of any
provision hereof shall not affect the validity or enforceability of any other
term or provision hereof. This Agreement is intended to take effect as a
sealed instrument when signed by Borrower and delivered to the Secured Party.
WESTERBEKE CORPORATION
By: /s/ Carleton F. Bryant III
Title: EXECUTIVE VICE PRESIDENT
Accepted:
STATE STREET BANK AND TRUST COMPANY
By: /s/ Suzanne L. Dugan
Title: Loan Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000796502
<NAME> WESTERBEKE CORP.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-26-1996
<PERIOD-END> JAN-27-1996
<CASH> 355,600
<SECURITIES> 0
<RECEIVABLES> 1,520,900
<ALLOWANCES> 60,500
<INVENTORY> 5,354,200
<CURRENT-ASSETS> 7,729,500
<PP&E> 4,451,000
<DEPRECIATION> 2,883,900
<TOTAL-ASSETS> 11,175,100
<CURRENT-LIABILITIES> 1,886,100
<BONDS> 0
0
0
<COMMON> 20,600
<OTHER-SE> 9,116,100
<TOTAL-LIABILITY-AND-EQUITY> 11,175,100
<SALES> 3,929,700
<TOTAL-REVENUES> 3,929,700
<CGS> 3,221,800
<TOTAL-COSTS> 3,221,800
<OTHER-EXPENSES> 698,900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,200
<INCOME-PRETAX> 54,600
<INCOME-TAX> 23,000
<INCOME-CONTINUING> 31,600
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,600
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
