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EXHIBIT 4.2
TERM NOTE
Amount: $1,800,000.00 No.____________________
Due Date: February 1, 2002 Date: February 12, 1997
PROMISE TO PAY. NEMATRON CORPORATION, a Michigan corporation (referred to in
this Note as, "Borrower") promises to pay to KeyBank National Association
("Lender"), or order, in lawful money of the United States of America, the
principal amount of One Million Eight Hundred Thousand & 00/100 Dollars
($1,800,000.00), together with interest at the rate per annum equal to the
LIBOR Rate plus two and one half per cent (2.5%) per annum ("Effective Rate"),
on February 1, 2002 when the entire principal and interest balance owing under
this Note shall be due and payable.
The "LIBOR Rate", as used herein, means the average rate [rounded up, if
necessary, to the next highest one sixteenth of one percent (1/16%)] of
interbank offered effective rates for thirty (30) day U.S. dollar deposits in
the London market based on quotations at major banks as determined by reference
to the Wall Street Journal("WSJ") edition published on its last publication
date of every month ("Determination Date") and distributed in Ann Arbor,
Michigan. In the event such average rate is not published in the WSJ or the
WSJ is not otherwise available to Bank on the Determination Date, Bank may use
the London interbank offered rate for thirty (30)day dollar deposits (or its
equivalent as determined in the sole discretion of Bank) as reported by any
nationally recognized financial reporting service on the Determination Date.
Borrower acknowledges that the published or reported LIBOR Rate may be with
respect to contracts entered into as of a date other than the Determination
Date.
The Effective Rate shall be adjusted as of the first day of each month based
the LIBOR Rate published or reported on the Determination Date, as applicable.
Interest shall accrue on the unpaid principal balance from the date of each
advance under this Note and be calculated upon the actual number of days
elapsed over a year assumed to have 360 days. Interest shall be payable monthly
beginning March 1, 1997, and on the first day of each month thereafter until
maturity of this note.
The LIBOR Rate is used as an index only, and funds for Borrower's loans
are not being purchased or otherwise matched by the Bank from or on the London
Interbank Market.
INSTALLMENT PAYMENTS. Borrower will pay this loan in monthly installments of
$30,000 plus interest. Borrower's first payment is due March 1, 1997, and all
subsequent payments are
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due on the same day of each month after that. Borrower's final payment due
February 1, 2002, will be for all principal and all accrued interest not yet
paid. Interest on this Note is computed on a 365/360 simple interest basis;
that is, by applying the ratio of the annual interest rate over a year of 360
days, times the outstanding principal balance, times the actual number of days
the principal balance is outstanding. Unless otherwise agreed or required by
applicable law, payments will be applied first to accrued unpaid interest, then
to principal, and any remaining amount to any unpaid collection costs and late
charges.
SECURITY. To secure the payment of this Note and any or all other liabilities
of the undersigned to the Bank, howsoever arising or evidenced, whether direct
or indirect, absolute or contingent, due or to become due, now existing or
hereafter arising, several or joint, including any renewals, extensions,
modifications, etc., the undersigned hereby pledges to Bank and grants to Bank
a continuing security interest in the following described property, whether
real or personal, and in all additions, substitutions, and proceeds thereof:
(i) All property described in Security Agreements, Mortgages,
Assignments and Documents listed in Section 3.11 of the Loan
Agreement.
(ii) All securities and other property of the undersigned now or
hereafter in the possession or custody of the Bank, together with
substitutions, increments and proceeds;
(iii)Any other property declared or acknowledged to constitute
security for the indebtedness of the undersigned to the Bank,
together with substitutions, increments and proceeds thereof, and
(iv) All balances of deposit accounts of the undersigned now or
at any time hereafter with the Bank.
The Bank shall have the right at any time to apply its own indebtedness or
liability to the undersigned or to any endorser or other party liable hereon in
whole or partial payment of this Note, either before or after its maturity, or
in whole or partial payment of any other liability due or to become due from
the undersigned to the Bank.
LOAN FEES. Borrower agrees that all loan fees are earned fully as of the date
of the loan and will not be subject to refund upon early payment (whether
voluntary or as a result of default), except as otherwise required by law.
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LATE CHARGE. If a payment is late, Borrower will be charged 2.000% of the
unpaid portion of the regularly scheduled payment or $200.00, whichever is
less.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due, (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform
when due any other term, obligation, covenant, or condition contained in this
Note, a certain Loan Agreement dated September 30, 1996 as amended by First
Amendment of even date ("Loan Agreement") or any agreement related to this
Note, or in any other agreement or loan Borrower has with Lender, (c) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished, (d) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws, (e) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender, (f) Any guarantor dies or any of the other events described in
this default section occurs with respect to any guarantor of this Note, (g) A
material adverse change occurs in Borrower's financial condition, or Lender
believes the prospect of payment or performance of the indebtedness is
impaired, (h) Lender in good faith deems itself insecure.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including
failure to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the interest rate on this Note to the
Effective Rate plus three per cent (3.00%). The interest rate will not exceed
the maximum rate permitted by applicable law. Lender may hire or pay someone
else to help collect this Note if Borrower does not pay. Borrower also will
pay Lender that amount. This includes, subject to any limits under applicable
law, Lender's reasonable attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including reasonable attorneys' fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. If not prohibited by applicable law, Borrower also will pay any
court costs, in addition to all other sums provided by law. This Note has been
delivered to Lender and accepted by Lender in the State of Michigan. If there
is a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Washtenaw County, the State
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of Michigan, Lender and Borrower hereby waive the right to any jury trial
in any action, proceeding, or counterclaim brought by either Lender or Borrower
against the other. This Note shall be governed by and construed in accordance
with the laws of the State of Michigan.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Each Borrower understands and
agrees that, with our without notice to Borrower, Lender may with respect to
any other Borrower (a) make one or more additional secured or unsecured loans
or otherwise extend additional credit; (b) after, compromise, renew, extend,
accelerate, or otherwise change one or more times, the time for payment or
other terms any indebtedness, including increases and decreases of the rate of
interest on the indebtedness, (c) exchange, enforce, waive, subordinate, fail
or decide not to perfect, and release any security, with or without the
substitution of new collateral; (d) apply such security and direct the order or
manner of sale thereof, including without limitation, any nonjudicial sale
permitted by the terms of the controlling security agreements, as lender in its
discretion may determine; (e) release, substitute, agree not to sue, or deal
with any one or more of Borrower's sureties, endorsers, or other guarantors on
any terms or in any manner Lender may choose; and (f) determine how, when and
what application of payments and credits shall be made on any other
indebtedness owing by such other borrower. Borrower and any other person who
signs, guaranties or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any
change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor
accommodation makes or endorses, shall be released from liability. All such
parties agree that Lender may renew or extend (repeatedly and for any length of
time) this loan, or release any party or guarantor or collateral, or impair,
fail to release or perfect Lender's security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or
notice to anyone. All such parties also agree that Lender may modify the loan
without the consent of or notice to anyone other than the party with whom the
modification is made.
BORROWER:
NEMATRON CORPORATION
By: /s/ David P. Gienapp
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David P. Gienapp
Vice President of Finance
and Administration and Treasurer
5840 Interface Drive
Ann Arbor, MI 48103