Document:

exv4w1

 

EXHIBIT 4.1

COMSTOCK RESOURCES, INC.,

GUARANTORS

NAMED HEREIN

and

THE BANK OF NEW YORK TRUST COMPANY, N.A.

Trustee

 

FOURTH SUPPLEMENTAL INDENTURE

dated as of May 20, 2005

to

INDENTURE

dated as of February 25, 2004

 

6 7/8% Senior Notes due 2012

 

 

     THIS FOURTH SUPPLEMENTAL INDENTURE dated as of May 20, 2005 (as originally executed and as it
may from time to time be supplemented or amended by one or more indentures supplemental hereto
entered into pursuant to the applicable provisions hereof, this “Fourth Supplemental Indenture”),
is among COMSTOCK RESOURCES, INC., a Nevada corporation (hereinafter called the “Company”), the
GUARANTORS (as defined in the Indenture) and THE BANK OF NEW YORK TRUST COMPANY, N.A., as Trustee
(hereinafter called the “Trustee”). Capitalized terms used herein but not otherwise defined shall
have the meanings ascribed to them in the Indenture (as defined below).

RECITALS OF THE COMPANY

     WHEREAS, the Company, the Guarantors and the Trustee entered into an Indenture dated as of
February 25, 2004 (the “Original Indenture”), as the same was amended and supplemented by that
certain First Supplemental Indenture dated as of February 25, 2004 (the “First Supplemental
Indenture”), and by that certain Second Supplemental Indenture dated as of March 11, 2004 (the
“Second Supplemental Indenture”), and by that certain Third Supplemental Indenture dated July 16,
2004 (the “Third Supplemental Indenture,” and together with the Original Indenture, the First
Supplemental Indenture and the Second Supplemental Indenture, the “Indenture”), providing for the
issuance by the Company from time to time, and the establishment of the terms of, the Company’s 6
7/8% Senior Notes due 2012;

     WHEREAS, effective July 16, 2004, Comstock Offshore, LLC, a Nevada limited liability company
and indirect wholly-owned subsidiary of the Company (“Comstock Offshore”), transferred
substantially all of its assets to Bois d’Arc Energy, LLC, a Nevada limited liability company
(“Bois d’Arc LLC”), in exchange for an approximately 59.9% ownership interest in Bois d’Arc LLC;

     WHEREAS, (i) Bois d’Arc Holdings, LLC, a Nevada limited liability company (“BDA Holdings”), is
a wholly-owned subsidiary of Bois d’Arc LLC that owns a 0.1% general partner interest in Bois d’Arc
Properties, LP, a Nevada limited partnership (“BDA Properties”), and (ii) Bois d’Arc Oil & Gas
Company, LLC, a Nevada limited liability company (“BDAOG”), is a wholly-owned subsidiary of Bois
d’Arc LLC that owns a 1% general partnership interest in Bois d’Arc Offshore, Ltd., a Nevada
limited partnership (“BDAO,” and collectively with BDAOG, BDA Properties, BDA Holdings and Bois
d’Arc LLC, the “BDA Subsidiaries”), (iii) Bois d’Arc LLC owns a 99.9% limited partnership interest
in BDA Properties, and (iv) Bois d’Arc LLC owns a 99.0% limited partnership interest in BDAO;

     WHEREAS, each of Bois d’Arc LLC and the BDA Subsidiaries became a Restricted Subsidiary
effective July 16, 2004 and became a Guarantor under the Indenture; and

     WHEREAS, on May 10, 2005 Bois d’Arc LLC was converted to a Nevada corporation and renamed Bois
d’Arc Energy, Inc. (“Bois d’Arc Inc.”);

     WHEREAS, on May 11, 2005, Bois d’Arc Inc. completed an initial public offering of its common
stock (the “IPO”);

 

 

     WHEREAS, in connection with the completion of the IPO, Bois d’Arc Inc. will repay all
outstanding amounts owed to the Company pursuant to a credit facility provided by the Company to
Bois d’Arc Inc., and in connection therewith, Bois d’Arc Inc. and the BDA Subsidiaries will be
released as guarantors under the Bank Credit Facility;

     WHEREAS, as a result of the IPO and immediately following the completion thereof, Comstock
Offshore’s ownership interest in Bois d’Arc Inc. has been reduced to 46.7% of the outstanding
voting stock of Bois d’Arc Inc., and therefore, Bois d’Arc Inc. and the BDA Subsidiaries are no
longer Subsidiaries of the Company;

     WHEREAS, Section 9.3 of the First Supplemental Indenture provides that upon being released of
other Indebtedness of the Company, including Indebtedness under the Bank Credit Facility, each
Guarantor is to be released and discharged from its Guarantee; and

     WHEREAS, upon completion of the IPO, (a) no “person” or “group” will own a greater percentage
of the Voting Stock of Bois d’Arc Inc. than will the Company and (b) the Company’s Leverage Ratio
on a pro forma basis with respect to the period of four full fiscal quarters ending March 31, 2005
does not exceed 1.75 to 1.00, thereby satisfying the requirements of clause (ix) of the definition
of “Permitted Investments.”

     NOW, THEREFORE, for the purposes stated herein and for and in consideration of the premises
and covenants contained in the Indenture and in this Fourth Supplemental Indenture and for other
good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, it is
mutually covenanted and agreed as follows:

ARTICLE I

     Section 1.1 Release of Guarantors. From the date of this Fourth Supplemental
Indenture, each of Bois d’Arc Inc. and the BDA Subsidiaries is hereby automatically and
unconditionally released and discharged from its Guarantee and all related obligations under the
Indenture, all upon the terms and conditions set forth in Section 9.3 of the First Supplemental
Indenture.

     Section 1.2 Cessation of Status as Subsidiary. From the date of this Fourth
Supplemental Indenture, Bois d’Arc Inc. and the BDA Subsidiaries are no longer Subsidiaries of the
Company.

ARTICLE II

     Section 2.1 Ratification of Indenture.

     As supplemented by this Fourth Supplemental Indenture, the Indenture is in all respects
ratified and confirmed, and the Indenture as supplemented by this Fourth Supplemental Indenture
shall be read, taken and construed as one and the same instrument.

     Section 2.2 Conflict with Trust Indenture Act.

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     If any provision hereof limits, qualifies or conflicts with another provision hereof which is
required to be included in this Fourth Supplemental Indenture by any provision of the Trust
Indenture Act, such required provisions shall control.

     Section 2.3 Counterparts.

     This Fourth Supplemental Indenture may be executed in any number of counterparts, each of
which shall be an original; but such counterparts shall together constitute but one and the same
instrument.

     Section 2.4 Governing Law.

     This Fourth Supplemental Indenture and the Guarantees contained herein shall be governed by,
and construed and enforced in accordance with, the laws of the State of New York but without giving
effect to applicable principles of conflicts of law to the extent that the application of the laws
of another jurisdiction would be required thereby.

[Reminder of Page Intentionally Left Blank]

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     IN WITNESS WHEREOF, the parties hereto have caused this Fourth Supplemental Indenture to be
duly executed, all as of the day and year first above written.

	 	 	 	 	 
	 	COMPANY:

COMSTOCK RESOURCES, INC.

 	 
	 	By:  	/s/ Roland O. Burns
 	 
	 	 	Roland O. Burns 	 
	 	 	Senior Vice President, Chief Financial Officer,

Secretary and Treasurer 	 
	 

	 	 	 	 	 
	 	GUARANTORS:

COMSTOCK OIL & GAS, LP

 	 
	 	By:  	/s/ Roland O. Burns
 	 
	 	 	Roland O. Burns 	 
	 	 	Senior Vice President, Chief Financial Officer,

Secretary and Treasurer of Comstock Resources,
Inc., a Nevada corporation, acting in its
capacity as the sole member of Comstock Oil & Gas
GP, LLC, a Nevada limited liability company, and
as the sole member of such entity, acting on
behalf of such entity in such entity’s capacity
as the sole general partner of Comstock Oil &
Gas, LP, a Nevada limited partnership 	 
	 

	 	 	 	 	 
	 	COMSTOCK OIL & GAS HOLDINGS, INC.

 	 
	 	By:  	/s/ Roland O. Burns
 	 
	 	 	Roland O. Burns 	 
	 	 	Senior Vice President, Chief Financial Officer,

Secretary and Treasurer 	 
	 

[Signature Pages Continue]

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	 	COMSTOCK OIL & GAS-LOUISIANA, LLC

 	 
	 	By:  	/s/ Roland O. Burns
 	 
	 	 	Roland O. Burns 	 
	 	 	Manager, Senior Vice President, Chief Financial
Officer, Secretary and Treasurer 	 
	 

	 	 	 	 	 
	 	COMSTOCK OFFSHORE, LLC

 	 
	 	By:  	/s/ Roland O. Burns
 	 
	 	 	Roland O. Burns
Manager, Senior Vice President, Chief Financial
Officer, Secretary and Treasurer 	 
	 

	 	 	 	 	 
	 	COMSTOCK OIL & GAS GP, LLC

 	 
	 	By:  	/s/ Roland O. Burns
 	 
	 	 	Roland O. Burns 	 
	 	 	Senior Vice President, Chief Financial
Officer, Secretary and Treasurer of Comstock
Resources, Inc., a Nevada corporation, acting on
behalf of such entity in its capacity as the sole
member of Comstock Oil & Gas GP, LLC 	 
	 

	 	 	 	 	 
	 	COMSTOCK OIL & GAS INVESTMENTS, LLC

 	 
	 	By:  	/s/ Roland O. Burns
 	 
	 	 	Roland O. Burns 	 
	 	 	Manager 	 
	 

[Signature Pages Continue]

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	 	ADDITIONAL GUARANTORS:

 

BOIS D’ARC ENERGY, INC.

 	 
	 	By:	/s/ Roland O. Burns	 
	 	 	Roland O. Burns 	 
	 	 	Senior Vice President,
Chief Financial Officer and Secretary 	 
	 

	 	 	 	 	 
	 	BOIS D’ARC HOLDINGS, LLC

 	 
	 	By:  	Bois d’Arc Energy, Inc., its sole member	 
	 

	 	 	 	 	 
	 	By:  	/s/ Roland O. Burns	 
	 	 	Roland O. Burns 	 
	 	 	Senior Vice President,
Chief Financial Officer and Secretary 	 

	 	 	 	 	 
	 	BOIS D’ARC PROPERTIES, LP

 	 
	 	By:  	Bois d’Arc Holdings, LLC,
 	 
	 	 	its general partner 	 

	 	 	 	 	 
	 	 	 
	 	By:  	Bois d’Arc Energy, Inc.,	 
	 	 	its sole member 	 
	 	 	 	 

	 	 	 	 	 
	 	By:  	                /s/ Roland O. Burns
 	 
	 	 	Roland O. Burns 	 
	 	 	Senior Vice President,
Chief Financial Officer
and Secretary 	 

	 	 	 	 	 
	 	BOIS D’ARC OIL & GAS COMPANY, LLC

 	 
	 	By:  	Bois d’Arc Energy, Inc., its sole member

 	 
	 	 	By:  	/s/ Roland O. Burns
	 	 	 	Roland O. Burns 
	 	 	 	Senior Vice President,
Chief Financial Officer and Secretary 

[Signature Pages Continue]

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	 	BOIS D’ARC OFFSHORE, LTD.

 	 
	 	By:  	Bois d’Arc Oil & Gas Company, LLC,
 	 
	 	 	its general partner 	 

	 	 	 	 	 
	 	By:  	              Bois d’Arc Energy, Inc.,
 	 
	 	 	its sole member 	 

	 	 	 	 	 
	 	By:  	                            /s/ Roland O. Burns
 	 
	 	 	Roland O. Burns 	 
	 	 	Senior Vice President,
Chief Financial Officer
and Secretary 	 

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	 	TRUSTEE:

THE BANK OF NEW YORK TRUST COMPANY, N.A.

 	 
	 	By:  	/s/ Patrick T. Giordano
 	 
	 	 	Patrick T. Giordano 	 
	 	 	Vice President 	 
	 

-8-exv10w1

 

EXHIBIT 10.1

AMENDMENT NO. 1

TO

CREDIT AGREEMENT

     THIS AMENDMENT is entered into effective as of the 15th day of April, 2004, by and between
WINLAND ELECTRONICS, INC., a Minnesota corporation (the “Borrower”) and M&I MARSHALL & ILSLEY BANK,
a banking corporation organized and existing under the laws of Wisconsin (“Bank”).

     WHEREAS, Borrower and the Bank have entered into that certain Credit and Security Agreement
dated as of June 30, 2003 (the “Credit Agreement”) pursuant to which Bank has agreed to provide a
revolving credit facility to Borrower on the terms and conditions contained therein; and

     WHEREAS, Borrower and Bank desire to amend certain provisions of the Credit Agreement.

     NOW, THEREFORE, Bank and Borrower hereby agree as follows:

     1. Certain Definitions. Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Credit Agreement.

     2. Definition Changes and Additions. Section 1.1 of the Credit Agreement is hereby
amended as follows:

(a) The definition of “Advance” set forth in Section 1.1 is hereby amended by
deleting said definition in its entirety and replacing the same with the following:
“Advance” means, collectively, Revolving Advances made from time to time pursuant to
Section 2.1 and Term Advances made from time to time pursuant to Section 2.1A.

(b) The definition of “Borrowing Base” set forth in Section 1.1 is hereby amended
by deleting said definition in its entirety and replacing the same with the following:
“Borrowing Base” means, at any time, the lesser of:

(a) the Maximum Line; or

(b) the sum of (i) 75% of Eligible Accounts, plus (ii) the lesser of (a) 50%
of Eligible Inventory, or (b) $1,250,000.

(c) The definition of “Credit Facility” set forth in Section 1.1 of the Credit
Agreement is hereby amended by deleting said definition in its entirety and replacing
the same with the following: “Credit Facility” means, collectively, the credit
facilities being made available to the Borrower by the Lender pursuant to Article II.

 

 

(d) The definition of “Note” set forth in Section 1.1 of the Credit Agreement is
hereby amended by deleting said definition in its entirety and replacing the same with
the following: “Note” means, collectively, (i) the Borrower’s promissory note, payable
to the order of the Lender in substantially the form of Exhibit A hereto (the
“Revolving Note”), and (ii) the Borrower’s promissory notes, payable to the order of
the Lender in substantially the form of Exhibit A-1 hereto (the “Term Note”), in each
case together with any note or notes issued in substitution therefor, as the same may
hereafter be amended, supplemented or restated from time to time.

(e) A new definition of “Fixed Rate” is hereby added to Section 1.1, reading as
follows: “Fixed Rate” means, at the time of determination, the rate per annum equal to
the sum of (i) the 2-year LIBOR swap rate at such time, as determined by Lender, plus
(b) two and one-half percent (2.50%).

     3. Revolving Advances. Section 2.1 of the Credit Agreement is hereby amended by
deleting said Section in its entirety and replacing the same with the following:

“Section 2.1. Revolving Advances. The Lender agrees, on the terms and subject
to the conditions herein set forth, to make advances to the Borrower from time to time from
the date all of the conditions set forth in Section 4.1 are satisfied (the “Funding Date”)
to the Termination Date, on the terms and subject to the conditions herein set forth (the
“Revolving Advances”). The Lender shall have no obligation to make a Revolving Advance if,
after giving effect to such requested Revolving Advance, the sum of the outstanding and
unpaid Revolving Advances under this Section 2.1 or otherwise would exceed the Borrowing
Base less the L/C Amount. The Borrower’s obligation to pay the Revolving Advances shall be
evidenced by the Note and shall be secured by the Collateral as provided in Article III.
Within the limits set forth in this Section 2.1, the Borrower may borrow, prepay pursuant to
Section 2.12 and reborrow. The Borrower agrees to comply with the following procedures in
requesting Revolving Advances under this Section 2.1:

(a) The Borrower shall make each request for a Revolving Advance to the Lender
before 2:00 p.m. (Minneapolis time) of the day of the requested Revolving Advance.
Requests may be made in writing or by telephone, specifying the date of the
requested Revolving Advance and the amount thereof. Each request shall be by (i)
any officer of the Borrower; or (ii) any person designated as the Borrower’s agent
by any officer of the Borrower in a writing delivered to the Lender; or (iii) any
person whom the Lender reasonably believes to be an officer of the Borrower or such
a designated agent.

(b) Upon fulfillment of the applicable conditions set forth in Article IV, the
Lender shall disburse the proceeds of the requested Revolving Advance by crediting
the same to the Borrower’s demand deposit account maintained with the Lender unless
the Lender and the Borrower shall agree in writing to another manner of
disbursement. Upon the Lender’s request, the Borrower shall promptly confirm each
telephonic request for a Revolving Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Borrower
shall repay all Revolving Advances even if the Lender does not receive such
confirmation and, so long as the Lender reasonably believed such person to be
authorized to request a Revolving Advance, even if the person requesting a

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Revolving
Advance was not in fact authorized to do so. Any request for a Revolving Advance,
whether written or telephonic, shall be deemed to be a representation by the
Borrower that the conditions set forth in Section 4.2 have been satisfied as of the
time of the request.

     4. Term Loan Facility. The Credit Agreement is hereby amended by adding thereto a new
Section 2.1A., reading as follows:

“Section 2.1A. Term Loan Advances. The Lender agrees, on the terms and subject to
the conditions herein set forth, to make up to two separate advances to the Borrower from
time to time from April 15, 2004 through and including July 15, 2004, on the terms and
subject to the conditions herein set forth, and in a maximum aggregate amount not to exceed
$1,500,000.00 (the “Term Advances”). The Borrower’s obligation to pay each Term Advance
shall be evidenced by a Term Note, executed and delivered contemporaneously with each such
Term Advance, and shall be secured by the Collateral as provided in Article III. The
facility described in this Section 2.1A is a multiple advance facility, but is not a
revolving credit facility, and the Borrower shall not have the right or ability to borrow,
prepay and reborrow any Term Advances. The Borrower shall make each request for a Term
Advance to the Lender before 2:00 p.m. (Minneapolis time) of the day of the requested Term
Advance. Requests may be made in writing or by telephone, specifying the date of the
requested Term Advance and the amount thereof. Each request shall be by (i) any officer of
the Borrower; or (ii) any person designated as the Borrower’s agent by any officer of the
Borrower in a writing delivered to the Lender; or (iii) any person whom the Lender
reasonably believes to be an officer of the Borrower or such a designated agent. Upon
fulfillment of the applicable conditions set forth in Section 4.2, the Lender shall disburse
the proceeds of the requested Term Advance by crediting the same to the Borrower’s demand
deposit account maintained with the Lender unless the Lender and the Borrower shall agree in
writing to another manner of disbursement. Upon the Lender’s request, the Borrower shall
promptly confirm each telephonic request for a Term Advance by executing and delivering an
appropriate confirmation certificate to the Lender. The Borrower shall repay all Term
Advances even if the Lender does not receive such confirmation and, so long as the Lender
reasonably believed such person to be authorized to request a Term Advance, even if the
person requesting a Term Advance was not in fact authorized to do so. Any request for a
Term Advance, whether written or telephonic, shall be deemed to be a representation by the
Borrower that the conditions set forth in Section 4.2 have been satisfied as of the time of
the request.”

     5. Interest. Section 2.6 (a) of the Credit Agreement is hereby amended by deleting
said Section in its entirety and replacing the same with the following:

“(a) Note. Except as set forth in Sections 2.6(b), 2.6(c) and 2.6(d), the outstanding
principal balance of the Revolving Note shall bear interest at the Floating Rate, and the
outstanding principal balance of each Term Note shall bear interest at the Floating Rate
or at the Fixed Rate, as elected by the Borrower at the time of execution of each such Term
Note.”

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     6. Prepayment; Termination. Section 2.10 of the Credit Agreement is hereby amended by
deleting said Section in its entirety and replacing the same with the following:

“Section 2.10 Voluntary Prepayment; Reduction of the Maximum Line; Termination of the
Credit Facility by the Borrower. The Borrower may prepay the Revolving Advances in
whole at any time or from time to time in part without penalty. The Borrower may prepay the
Term Advances in whole at any time or from time to time in part without penalty; provided,
however, that if the Borrower prepays all or any portion of the Term Advances which bear
interest at a Fixed Rate, then the Borrower shall pay, contemporaneously with such
prepayment, a prepayment fee in an amount equal to (i) three percent (3.0%) of the amount
prepaid, if the prepayment occurs on or before April 15, 2005, (ii) two percent (2.0%) of
the amount prepaid, if the prepayment occurs after April 15, 2005 but on or before April 15,
2006, (iii) one percent (1.0%) of the amount prepaid, if the prepayment occurs after April
15, 2006 but on or before April 15, 2007. The Borrower may terminate the Credit Facility or
reduce the Maximum Line at any time. If the Borrower reduces the Maximum Line to zero, all
Obligations shall be immediately due and payable. Upon termination of the Credit Facility
and payment and performance of all Obligations, the Lender shall release or terminate the
Security Interest and the Security Documents to which the Borrower is entitled by law.

     7. Mandatory Prepayment. Section 2.11 of the Credit Agreement is hereby amended by
deleting said Section in its entirety and replacing the same with the following:

“Section 2.11 Mandatory Prepayment. Without notice or demand, if the sum of the
outstanding principal balance of the Revolving Advances plus the L/C Amount shall at any
time exceed the Borrowing Base, the Borrower shall (i) first, immediately prepay the
Revolving Advances to the extent necessary to eliminate such excess; and (ii) if prepayment
in full of the Revolving Advances is insufficient to eliminate such excess, pay to the
Lender in immediately available funds for deposit in the Special Account an amount equal to
the remaining excess. Any payment or prepayment received by the Lender under this Section
2.11 shall be applied, first to the outstanding principal balance of the Revolving Advances
and second, to any other Obligations, in such order and in such amounts as the Lender, in
its discretion, may from time to time determine.”

     8. Use of Proceeds. Section 2.14 of the Credit Agreement is hereby amended by
deleting said Section in its entirety and replacing the same with the following:

“Section 2.14 Use of Proceeds. The Borrower shall use the proceeds of the Revolving
Advances, and each Letter of Credit, if any, for ordinary working capital purposes and for
the purpose of paying all amounts owed by the Borrower to Wells Fargo Bank Minnesota,
National Association, and shall use the proceeds of the Term Advances for the purpose of
acquiring machinery, equipment and other similar assets.”

     9. Term Note. The Credit Agreement is hereby amended by attaching thereto as Exhibit
A-1 the form of Term Note attached hereto as Exhibit A-1.

     10. Capital Expenditures. Section 7.10 of the Credit Agreement is hereby amended by
deleting said Section in its entirety and replacing the same with the following:

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“Section 7.10 Capital Expenditures. The Borrower will not incur or contract to
incur Capital Expenditures of more than $1,750,000 in the aggregate during its fiscal year
ending December 31, 2004, or more than $250,000 in the aggregate during any fiscal year
thereafter.”

     11. Miscellaneous. Except as specifically set forth herein, the Credit Agreement
shall remain in full force and effect, with no other modification or waiver. This Amendment shall
be governed by, and construed in accordance with, the laws of the State of Wisconsin. This
Amendment may be executed in two or more counterparts, each of which shall be deemed an original,
but all of which taken together shall constitute one and the same agreement. The Borrower hereby
restates and reaffirms its obligation under the Credit Agreement to pay on demand all costs and
expenses, including (without limitation) attorneys’ fees, incurred by the Lender in connection with
the Obligations, this Amendment, the Loan Documents, and any other document or agreement related
hereto, and the transactions contemplated hereby.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to Credit Agreement to
be executed as of the day and year first written above.

	 	 	 	 	 	 	 
	M&I Marshall & Ilsley Bank	 	Winland Electronics, Inc.
	 
	 	 	 	 	 	 
	By

	 	/s/ Doug Pudvah	 	By	 	/s/ Jennifer A. Thompson
	 

	 	Doug Pudvah	 	 	 	Jennifer A. Thompson
	 

	 	Its Vice President	 	 	 	Its Chief Financial Officer
	 
	 	 	 	 	 	 
	By

	 	/s/ John W. Howard
	 	 
	 	 
	 

	 	John W. Howard
	 	 	 	 
	 

	 	Its Senior Vice President
	 	 	 	 

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EXHIBIT A-1

TERM NOTE

	 	 	 
	$1,000,000.00

	 	Milwaukee, Wisconsin

April 15, 2004

     For value received, the undersigned, Winland Electronics, Inc., a Minnesota corporation; (the
“Borrower”), hereby promises to pay to the order of M&I MARSHALL & ILSLEY BANK, a Wisconsin banking
corporation (the “Lender”), at its office in Milwaukee, Wisconsin, or at any other place designated
at any time by the holder hereof, in lawful money of the United States of America and in
immediately available funds, the principal sum of one million and 00/100 Dollars ($1,000,000.00),
together with interest on the principal amount hereunder remaining unpaid from time to time,
computed on the basis of the actual number of days elapsed and a 360-day year, from the date hereof
until this Note is fully paid at the [“Fixed Rate” or “Floating Rate”, as applicable] (as defined
in the “Credit Agreement”, defined below).

     Accrued interest on this Note shall be due and payable on the first (1st) day of
each calendar month, commencing with the calendar month following the date of this Note, and
continuing thereafter through and including the date which is four (4) years after the date of this
Note (the “Maturity Date”). The principal amount of this Note shall be paid in (i) forty-seven
(47) equal consecutive monthly installments, each in an amount equal to 1/48th of the
original principal amount of this Note, commencing on the first (1st) day of the first
calendar month after the date of this Note and continuing on the first (1st) day of each
calendar month thereafter, and (ii) one final installment on the Maturity Date, equal to the entire
then-outstanding balance of this Note. Notwithstanding anything herein to the contrary, the entire
unpaid principal balance of this Note, and all accrued and unpaid interest thereon, shall be due
and payable in full on the Maturity Date, or such earlier date as may be applicable pursuant to the
“Credit Agreement” (as defined below).

     This Note is issued pursuant, and is subject, to that certain Credit and Security Agreement
dated as of June 30, 2003 by and between the Borrower and the Lender, as amended (the “Credit
Agreement”), which provides, among other things, for acceleration hereof. This Note is a Term Note
referred to in the Credit Agreement. This Note is secured, among other things, pursuant to the
Credit Agreement and the Security Documents as therein defined, and may now or hereafter be secured
by one or more other security agreements, mortgages, deeds of trust, assignments or other
instruments or agreements. Prepayment of this Note is permitted only in accordance with the
provisions of the Credit Agreement, and is subject to a prepayment fee as provided therein.

     The Borrower hereby agrees to pay all costs of collection, including reasonable attorneys’
fees and legal expenses in the event this Note is not paid when due, whether or not legal
proceedings are commenced.

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     Presentment or other demand for payment, notice of dishonor and protest are expressly waived.

	 	 	 
	 

	 	WINLAND ELECTRONICS, INC.
	 
	 	 
	 

	 	By /s/ Jennifer A. Thompson
	 

	 	Its Chief Financial Officer

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