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EXHIBIT 4.4
SECOND AMENDMENT AND WAIVER TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT AND WAIVER (this "Second Amendment"), dated as of
April 12, 2001, to that certain Loan and Security Agreement dated as of June 30,
2000 (as amended by that certain First Amendment dated as of March 1, 2001, the
"Agreement"), is entered into by A-OK CONTROLS ENGINEERING, INC., a Michigan
corporation ("Borrower"), and LASALLE BUSINESS CREDIT, INC., a Delaware
corporation ("Lender"). Capitalized terms used but not otherwise defined herein
shall have the meanings assigned thereto in the Agreement.
RECITALS
A. Borrower and Lender are party to the Agreement, pursuant to which
Lender has agreed to make, and has made, certain loans, advances and credit
accommodations to Borrower pursuant to the terms and conditions set forth in the
Agreement.
B. Nematron and Lender are party to the Nematron Loan Agreement,
pursuant to which Lender has agreed to make, and has made, certain loans,
advances and credit accommodations to Nematron pursuant to the terms and
conditions set forth in the Nematron Loan Agreement.
C. Borrower is a wholly-owned Subsidiary of Nematron and has materially
benefited, and will materially benefit, from the loans, advances and credit
accommodations made, and to be made, to Nematron pursuant to the Nematron Loan
Agreement.
D. Pursuant to paragraph 14(m)(i) of the Nematron Loan Agreement,
Nematron and its Subsidiaries (including, without limitation, Borrower), on a
consolidated basis, were required at all times to maintain a Tangible Net Worth
plus Subordinated Indebtedness of not less than $1,250,000 during Fiscal Year
ending December 31, 2000, and $2,500,000 during Fiscal Year ending December 31,
2001.
E. The Tangible Net Worth plus Subordinated Indebtedness of Nematron
and its Subsidiaries, on a consolidated basis, as of June 30, 2000 and each
subsequent calendar month end in the Fiscal Year ended December 31, 2000, and
January 31, 2001 and February 28, 2001, according to the financial covenant
calculations accompanying Nematron's Officer's Certificates, was less than the
applicable required minimum amount referenced in Recital D above, thus
constituting breaches and violations of paragraph 14(m)(i) of the Nematron Loan
Agreement.
F. Pursuant to paragraph 14(m)(ii) of the Nematron Loan Agreement,
Nematron and its Subsidiaries (including, without limitation, Borrower), on a
consolidated basis, were required to maintain an Interest Coverage Ratio as of
the end of each fiscal quarter for that portion of the Fiscal Year then ended,
commencing with the fiscal quarter ending December 31, 2000, of not less than
1.50 to 1.00.
G. The Interest Coverage Ratio of Nematron and its Subsidiaries, on a
consolidated basis, for the full Fiscal Year ended December 31, 2000 was 0.44 to
1.00, according to the financial covenant calculations accompanying an Officer's
Certificate of Nematron, thus constituting a breach and violation of paragraph
14(m)(ii) of the Nematron Loan Agreement.
H. Pursuant to paragraph 14(m)(iii) of the Nematron Loan Agreement,
Nematron and its Subsidiaries (including, without limitation, Borrower), on a
consolidated basis, were required to maintain a Debt Service Coverage Ratio, as
of the end of each fiscal quarter for that portion of the Fiscal Year then
ended, commencing with the fiscal quarter ending December 31, 2000, of not less
than 0.75 to 1.00.
I. The Debt Service Coverage Ratio of Nematron and its Subsidiaries, on
a consolidated basis, for the full Fiscal Year ended December 31, 2000 was
(1.48) to 1.00, according to the financial covenant calculations accompanying an
Officer's Certificate of Nematron, thus constituting a breach and violation of
paragraph 14(m)(iii) of the Nematron Loan Agreement.
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J. Pursuant to paragraph 14(h) of the Nematron Loan Agreement, Nematron
is prohibited from incurring any indebtedness (other than certain specified
liabilities) or guaranteeing the obligations of any Person without Lender's
prior written consent, and pursuant to paragraph 14(i) of the Nematron Loan
Agreement, Nematron may not create any new Subsidiary (other than certain
specified Subsidiaries) without Lender's prior written consent.
K. Nematron has acquired (the "Optimation Acquisition") 100% of the
issued and outstanding capital stock ("Optimation Stock") of Optimation, Inc.,
an Alabama corporation ("Optimation"), pursuant to the terms of that certain
Stock Purchase Agreement dated as of March 30, 2001, among Xxxxxx X. Xxxxx,
Xxxxxx X. Xxxxx, Xxxxxxx Xxxxxxx, Xxxxx Xxxxxxx (all of the foregoing persons
are "Sellers"), Optimation and Nematron, in the form attached hereto as Exhibit
A (the "Stock Purchase Agreement").
L. Each breach or violation described in Recitals E, G and I above, and
the lapse of thirty (30) days from the occurrence thereof, constitutes an Event
of Default under paragraph 16(o) of the Agreement, and the breach or violation
described in Recital K above, and the lapse of thirty (30) days from the
occurrence thereof, constitutes an Event of Default under paragraph 16(b) of the
Agreement (each is a "Subject Default").
M. Pursuant to paragraph 2 of the Agreement, following the occurrence
and during continuation of an Event of Default, Lender may cease making any
further Loans, in addition to Lender's other remedies under the Agreement.
N. Borrower has requested that Lender waive the Subject Defaults, and
Lender is willing to do so subject to the terms and conditions set forth in this
Second Amendment.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Borrower and Lender agree as follows:
1. AMENDMENTS TO THE AGREEMENT.
1.1 Paragraph 12. Clauses (a) and (b) of Paragraph 12 of the Agreement
are hereby amended and restated to read, in their entirety, as follows:
(a) This Agreement shall be in effect from the date hereof
until November 12, 2003 ("ORIGINAL TERM") and shall automatically renew
itself from year to year thereafter (each such one year renewal being
referred to herein as a "RENEWAL TERM") unless (i) the due date of the
Liabilities is accelerated pursuant to paragraph 17 hereof; (ii) both
Borrower and Nematron elect, or LaSalle elects, to terminate both this
Agreement and the Nematron Loan Agreement at the end of the Original
Term or at the end of any Renewal Term by giving the other parties
written notice of such election at least sixty (60) days prior to the
end of the Original Term or the then current Renewal Term, in which
case Borrower and Nematron shall pay all of the Liabilities in full on
the last day of such term; or (iii) both Borrower and Nematron elect to
terminate both this Agreement and the Nematron Loan Agreement at any
other time during the Original Term or any Renewal Term upon not less
than sixty (60) days' prior written notice to the other parties, in
which case Borrower and Nematron shall pay all of the Liabilities in
full on the date specified in such written notice. If one or more of
the events specified in subparagraphs (i), (ii) or (iii) occurs, this
Agreement shall terminate on the date thereafter on which the
Liabilities are paid in full; provided, however, that the security
interests and liens created under this Agreement, the Nematron Loan
Agreement and the Other Agreements shall survive such termination until
the date upon which payment and satisfaction in full of the Liabilities
shall have occurred. At such time as Borrower and Nematron have repaid
all of the Liabilities and both this Agreement and the Nematron Loan
Agreement have been terminated, (A) Borrower shall deliver to LaSalle a
release, in form and substance reasonably satisfactory to LaSalle, of
all obligations and liabilities of LaSalle and its officers, directors,
employees, agents, parents, subsidiaries and affiliates to Borrower,
and if Borrower is obtaining new financing from another lender,
Borrower shall deliver such lender's indemnification of LaSalle, in
form and substance reasonably satisfactory to LaSalle, for checks which
LaSalle has credited to Borrower's account, but which subsequently are
dishonored for
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any reason and, (B) LaSalle shall deliver to Borrower a release in form
and substance reasonably satisfactory to Borrower.
(b) If this Agreement is terminated prior to the end of the
Original Term, Borrower agrees to pay to LaSalle, as a prepayment fee,
in addition to the payment of all other Liabilities owing by Borrower,
an amount equal to: (i) two percent (2%) of the Loan Commitment if this
Agreement is terminated during the first year of the Original Term;
(ii) one percent (1.0%) of the Loan Commitment if this Agreement is
terminated during the second year of the Original Term; (iii) one
percent (1.0%) of the Loan Commitment if this Agreement is terminated
during the third year of the Original Term; and (iv) one-half of one
percent (0.50%) of the Loan Commitment if this Agreement is terminated
on or after November 12, 2002; provided, however, that such prepayment
fee shall not be payable if this Agreement is terminated (A) at the end
of the Original Term pursuant to the terms set forth herein, or (B) at
any other time by LaSalle if no Default or Event of Default shall have
occurred and be continuing, or (C) by the Borrower following the
issuance of any Capital Adequacy Demand, or (D) by the Borrower
following the merger of LaSalle with and into, or the sale of
substantially all of LaSalle's assets to, any Person which is not an
Affiliate of LaSalle and where LaSalle is not the surviving entity, or
(E) by the Borrower following any sale, assignment, transfer or other
disposition by LaSalle of its rights under this Agreement and the Other
Agreements (other than a participation interest herein or therein) to
any Person other than an Affiliate of LaSalle; provided, further, that
any such prepayment fee shall be waived if Borrower refinances all
Liabilities with Standard Federal on or after December 31, 2001. In
light of the extreme difficulty of accurately calculating actual
damages arising out of any early termination, LaSalle and Borrower have
agreed that the prepayment fee provided for above is a reasonable
estimate of actual damages that would be incurred.
1.2 Paragraph 14(p). Paragraph 14(p) of the Agreement is hereby amended
and restated to read, in its entirety, as follows:
(p) Borrower shall not enter into or be a party to, or permit
any Subsidiary to enter into or be a party to, any transaction with any
Affiliate of Borrower except in the ordinary course of business for
fair consideration and on terms no less favorable to Borrower or such
Subsidiary as are available from unaffiliated third parties. Accounts
related to sales of products or services performed among the Borrower
and any Subsidiaries or among any Subsidiaries shall be due and payable
within thirty (30) days after the stated invoice date or date of
delivery or performance, whichever is earlier;
2. WAIVER. Lender hereby waives the Subject Defaults, effective as of
December 31, 2000.
3. REPRESENTATIONS AND WARRANTIES. To induce Lender to enter into this
Second Amendment and to temporarily continue to make available Loans pursuant to
Section 2 above, Borrower represents and warrants to Lender that:
3.1 Organization and Existence. Borrower is duly organized and validly
existing under the laws of the State of Michigan. Borrower has filed all annual
reports required to be filed on or before the date hereof with the Secretary of
State of Michigan. Borrower has not filed nor authorized the filing of, articles
of dissolution with the Secretary of State of Michigan.
3.2 Authority, Authorization and Enforceability. Borrower has the
requisite power and authority to execute and deliver this Second Amendment and
to perform its obligations hereunder and under the Agreement as amended hereby.
Borrower has duly authorized the execution and deliver of this Second Amendment
and the performance of its obligations hereunder and under the Agreement as
amended hereby. This Second Amendment and the Agreement as amended hereby are
the legal, valid and binding obligations of Borrower and are enforceable against
Borrower in accordance with their respective terms.
3.3 No Violation of Law or Contract. Borrower's execution and delivery
of this Second Amendment, and Borrower's performance of its obligations
hereunder and under the Agreement as amended hereby, does not and shall not
conflict with the provisions of any statutes, regulation, ordinance or rule of
law, or any agreement, contract or other document binding on Borrower.
3.4 No Default, Event of Default or Material Adverse Effect. After
giving effect to the waiver set forth in Section 2 hereof, (a) no Default or
Event of Default has occurred or is continuing, and (b) no Material Adverse
Effect has occurred since the Closing Date.
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3.5 General Representations and Warranties Remade. Except as expressly
identified herein, all representations, warranties and covenants made as of the
Closing Date pursuant to the Agreement are hereby remade as of the date of this
Second Amendment.
4. GENERAL.
4.1 Expenses. Borrower agrees to pay Lender, on the date hereof and
from time to time hereafter upon demand, all expenses, including reasonable
attorneys' and legal assistants' fees, incurred by Lender in connection with the
preparation, negotiation and execution of this Second Amendment and any document
required to be furnished herewith.
4.2 Entire Agreement. This Second Amendment, the Agreement as amended
hereby, and all of the Other Agreements constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede all other
understandings, oral or written, with respect to the subject matter hereof.
4.3 Effect of Amendment; No Waiver. Except as expressly amended
pursuant to Section 1 hereof, the Agreement and the Other Agreements shall
remain in full force and effect and are hereby ratified and confirmed in all
respects. EXCEPT AS EXPRESSLY SET FORTH IN SECTION 2 HEREOF, THIS SECOND
AMENDMENT SHALL NOT OPERATE AS A WAIVER OF ANY RIGHT, POWER OR REMEDY OF LENDER
UNDER THE AGREEMENT OR ANY OF THE OTHER AGREEMENTS, AND LENDER RESERVES ALL
RIGHTS AND REMEDIES (INCLUDING, WITHOUT LIMITATION, RIGHTS AND REMEDIES ACCRUING
OR EXISTING BY REASON OF THE SUBJECT DEFAULTS).
4.4 Miscellaneous Provisions. THIS SECOND AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAW OF THE STATE OF
WISCONSIN. Section headings in this Second Amendment are included for the
convenience of reference only and shall not constitute a part of this Second
Amendment for any other purpose. Whenever possible, each provision of this
Second Amendment shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Second Amendment shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Second Amendment. This Second Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one instrument. This Second Amendment
shall be binding upon, and inure to the benefit of, Borrower and Lender and
their respective successors and assigns.
[Execution Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be executed and delivered by their respective officers thereunto
duly authorized as of the date first written above.
LENDER
LASALLE BUSINESS CREDIT, INC.
By: /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx, Vice President
BORROWER
A-OK CONTROLS ENGINEERING, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
Vice President-Finance and
Administration, and Secretary
