Exhibit 4.01
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LOAN MODIFICATION AGREEMENT AND
AMENDMENT TO LOAN DOCUMENTS
THIS LOAN MODIFICATION AGREEMENT AND AMENDMENT TO LOAN DOCUMENTS (this
"Agreement") is being entered into as of the 3rd day of October, 2003, by and
between COMPASS BANK, an Alabama state banking corporation (the "Bank") and
OPTIMATION, INC., an Alabama corporation (the "Borrower"), and NEMATRON
CORPORATION, a Michigan corporation.
P R E A M B L E
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The Borrower is the maker of a certain Revolving Credit Commercial Note
in the original principal amount of $450,000.00 dated June 26, 1998, as amended
by that certain Revolving Credit Commercial Note from Borrower to Compass Bank
in the original principal amount of $650,000.00 dated July 9, 1999, as amended
by that certain Revolving Credit Commercial Note from Borrower to Compass Bank
in the original principal amount of $650,000.00 dated July 19, 2000, as amended
by that certain Revolving Credit Commercial Note from Borrower to Compass Bank
in the original principal amount of $620,000.00 dated June 8, 2001, as amended
by that certain Revolving Credit Commercial Note from Borrower to Compass Bank
in the original principal amount of $465,000.00 dated November 27, 2001, as
amended by that certain extension and amendment to promissory note from Borrower
to Compass Bank in the original principal amount of $405,000.00 dated February
25, 2002, as amended by that certain Extension and Amendment to Promissory Note
from Borrower to Compass Bank in the original principal amount of $385,000.00
dated May 5, 2002, as amended by that certain Extension and Amendment to
Promissory Note from Borrower to Compass Bank in the original principal amount
of $385,000.00 dated July 5, 2002, as amended by that certain Amended and
Restated Promissory Note from Borrower to Compass Bank in the original principal
amount of $335,000.00 dated October 4, 2002, as amended by that certain Amended
and Restated Promissory Note from Borrower to Compass Bank in the original
principal amount of $270,000.00 dated as of January 3, 2003, as amended by that
certain Amended and Restated Promissory Note from Borrower to Compass Bank in
the original principal amount of $225,000.00 dated as April 3, 2003, as amended
by that certain Amended and Restated Promissory Note in the original principal
amount of $108,750.00 dated as of the date hereof (as amended from time to time,
the "Note"), which evidences a certain term loan from the Bank to the Borrower
(the "Loan"). The Loan was extended pursuant to that certain Revolving Credit
and Security Agreement executed between Borrower and Lender dated June 26, 1998,
as amended by that certain Modification Agreement and Amendment to Loan
Documents dated December 15, 1998, as amended by that certain Revolving Credit
and Security Agreement dated July 9, 1999, as amended by that certain
Modification Agreement and Amendment to Loan Documents dated July 19, 2000, as
amended by that certain Modification Agreement and Amendment to Loan Documents
dated June 8, 2001, as amended by that certain Modification Agreement and
Amendment to Loan Documents dated November 27, 2001, as amended by that certain
Modification Agreement and Amendment to Loan Documents dated February 25, 2002,
as amended by that certain Modification Agreement and Amendment to Loan
Documents dated May 5, 2002, as amended by that certain Modification Agreement
and Amendment to Loan Documents dated July 5, 2002, as amended by that certain
Modification Agreement and Amendment to Loan Documents dated October 4, 2002, as
amended by that certain Modification Agreement and Amendment to Loan Documents
dated as of January 3, 2003, as amended by that certain Modification Agreement
and Amendment to Loan Documents dated as of April 3, 2003 (as amended, the "Loan
Agreement"), and is secured by, among other things, the Loan Agreement,
Continuing Guaranty Agreement executed by Nematron Corporation dated as of March
20, 2001, and UCC-1 financing statements executed by Borrower in favor of
Lender.
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The Bank and the Borrower have agreed to renew and modify the Loan, and
to amend the documents and instruments evidencing, securing, relating to,
guaranteeing or executed or delivered in connection with the Loan (collectively,
the "Loan Documents").
Accordingly, the Bank and the Borrower have agreed that the Loan shall
be modified and renewed, and that the Loan Documents shall be amended as set
forth below.
A G R E E M E N T
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NOW, THEREFORE, in consideration of the premises, the mutual agreements
of the parties as set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
to induce Bank to renew and modify the Loan, the parties, intending to be
legally bound hereby, agree as follows:
A. Modification Fee. The Borrower shall pay to Bank in consideration of the
Bank's commitment to modify the Loan, a non-refundable modification fee in
the amount of $250.00, which shall be deemed earned as of the date of
Bank's commitment, and shall be paid on or before the date hereof.
B. Modification of Loan. The amount of the Loan shall be changed to
$108,750.00. The Maturity Date of the Loan shall be changed to April 30,
2004.
C. Amendment of Loan Agreement. The Loan Agreement shall be and the same
hereby is amended as follows:
(i) Section 3.1 shall be and hereby is deleted in its entirety and the
following inserted in place thereof:
"3.1 At no time shall the outstanding principal amount of the Loan exceed the
Borrowing Base. In the event the outstanding principal balance of the Loan
exceeds the Borrowing Base, Borrower shall promptly make such principal
reduction payment in immediately available funds as is necessary to bring
the outstanding principal balance of the Loan to an amount which is equal
to or less than the Borrowing Base. The "Borrowing Base" shall be
calculated pursuant to the following formula: eighty percent (80%) of
Borrower's Eligible Accounts Receivable, not to exceed $108,750.00 at any
one time outstanding, plus fifty percent (50%) of the value of Borrower's
Eligible Inventory, not to exceed the amount of $50,000.00 at any one time
outstanding. Notwithstanding the foregoing, advances under the Loan shall
not be revolving and no future advances of principal will be allowed."
(ii) Section 7.4 shall be and hereby is deleted in its entirety and the
following inserted in place thereof:
"7.4 Borrower shall maintain a minimum Tangible Net Worth of not less than
$965,000.00 between the date hereof and December 30, 2003 and to increase
by fifty percent (50%) of Borrower's net profit on and after December 31,
2003."
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(iii) Section 8.7 is hereby deleted in its entirety and the following inserted
in place thereof:
"8.7 Borrower shall not make any payments or distribute any funds to Nematron
Corporation, Nematron, Ltd., or any other subsidiaries or affiliates
thereof, in excess of One Thousand Dollars ($1,000.00) per month, with the
exception of the following:
(a) Payment to Nematron Corporation for Dennis Sierk's salary and benefits in
monthly payments not to exceed the aggregate amount of $11,343.00 per
month;
(b) Payment to Nematron Corporation for Charles Garrett's salary and benefits,
in monthly payments not to exceed the aggregate amount of $9,578.00 per
month."
(iv) Section 8 is hereby amended by inserting the following provisions 8.9,
8.10, 8.11, 8.12 and 8.13:
"8.9 Borrower shall maintain, serve and invoice directly all of Borrower's
customers, with the exceptions, however of:
(a) with respect to that certain product known as "Pointe Controller," which
may be sold and invoiced by Nematron Corporation; provided, however, that
Borrower shall be paid by Nematron Corporation for at least Borrower's
direct material costs for such product, plus twenty percent (20%), within
ten (10) days from the date Nematron Corporation, Nematron, Ltd., or any
other subsidiaries or affiliates thereof receive payment for such product
from their respective customers, and in no event later than 45 days from
the date of invoice from Borrower, which invoice Borrower agrees to
promptly issue; and
(b) with respect to those certain products known as the "Legacy" products,
orders for which may be received and invoiced by Nematron Corporation for
joint customers of Nematron Corporation and Borrower; provided, however,
that Borrower shall be paid by Nematron Corporation for at least Borrower's
bill of material costs plus unreimbursed shipping costs for such product,
plus twenty percent (20%), within ten (10) days from the date Nematron
Corporation, Nematron, Ltd., or any other subsidiaries or affiliates
thereof receive payment for such product from the customers, and in no
event later than 45 days from the date of invoice from Borrower, which
invoice Borrower agrees to promptly issue.
8.10 There shall be no co-mingling of any assets, including without limitation,
cash, Accounts Receivables, Inventory and equipment, between Borrower and
Nematron Corporation, Nematron, Ltd., or any other subsidiaries or
affiliates thereof.
8.11 All of the Collateral shall remain at 2800 Bob Wallace Avenue, Suite L-3,
Huntsville, Alabama 35805.
8.12 Borrower shall provide to Bank any and all amendments to its Articles of
Organization and/or Bylaws within ten (10) days of the execution thereof.
8.13 Borrower shall furnish weekly to Bank its invoice register, sales register,
and cash receipts register for the immediately preceding week."
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D. Effect on Loan Documents. Each of the Loan Documents shall be deemed
amended as set forth hereinabove and to the extent necessary to carry out
the intent of this Agreement. Without limiting the generality of the
foregoing, each reference in the Loan Documents to the "Note", the "Loan
Agreement", or any other "Loan Documents" shall be deemed to be references
to said documents, as amended hereby, each reference to the amount of the
Loan shall be changed to $108,750.00 and each reference to the Maturity
Date shall be changed to April 30, 2004. Except as is expressly set forth
herein, all of the Loan Documents shall remain in full force and effect in
accordance with their respective terms and shall continue to evidence,
secure, guarantee or relate to, as the case may be, the Loan.
E. Representations and Warranties. Each representation and warranty contained
in the Loan Documents is hereby reaffirmed as of the date hereof. The
Borrower hereby represents, warrants and certifies to Bank that no Event of
Default nor any condition or event that with notice or lapse of time or
both would constitute an Event of Default, has occurred and is continuing
under any of the Loan Documents or the Loan, and that Borrower has no
offsets or claims against Bank arising under, related to, or connected with
the Loan, the Loan Agreement or any of the other Loan Documents. Borrower
expressly understands and agrees that this Agreement is subject to
Borrower's strict and literal compliance with the terms, covenants and
provisions set forth herein, and further, Borrower expressly understands
and agrees that this Agreement shall not estop Lender from taking any
action permitted under the Note in the event of default, which may
hereafter occur or exist under the terms of said Note, Loan Agreement or by
reason of failure of Borrower to pay to Lender any one or more of payments
on said Note. Each individual executing this Agreement represents and
warrants that he or she is duly authorized to execute and deliver this
Agreement.
F. Additional Documentation; Expenses. Borrower shall provide to Bank (i) if
Borrower or any Guarantor is a business organization, certified resolutions
properly authorizing the transactions contemplated hereby and the execution
of this Agreement and all other documents and instruments being executed in
connection herewith; and (ii) all other documents and instruments required
by Bank; all in form and substance satisfactory to Bank. Borrower shall pay
any recording and all other expenses incurred by Bank and Borrower in
connection with the modification of the Loan and any other transactions
contemplated hereby, including without limitation, title or other insurance
premiums, survey costs, legal expenses, recording fees and taxes.
G. Execution by Guarantor. Guarantor has executed this Agreement to evidence
its consent to the modification and amendments as described herein, and to
acknowledge the continuing effect of its Guaranty and the obligations
contained therein.
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IN WITNESS WHEREOF, the undersigned have caused this instrument to be
duly executed as of the date first set forth above.
BORROWER:
ATTEST: OPTIMATION, INC., an Alabama corporation
By: /s/ John H. Dunlap By: /s/ Dennis A. Sierk
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John Dunlap Dennis A. Sierk
Its: Secretary Its: President
[CORPORATE SEAL]
BANK:
WITNESS: COMPASS BANK
/s/Tina M. Raiford By: /s/ Arlene Stackhouse
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Arlene Stackhouse
Its: Senior Vice President
GUARANTOR:
ATTEST: NEMATRON CORPORATION, a Michigan
corporation
By: /s/ John H. Dunlap By: /s/ Matthew S. Galvez
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John Dunlap Matthew S. Galvez
Its: Secretary Its: President
[CORPORATE SEAL]
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