<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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
0-12728
MEDAR, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Michigan 38-2191935
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
38700 Grand River Ave., Farmington Hills, Michigan 48335
- -------------------------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
(810) 471-2660
------------------------------
Registrant's telephone number, including area code)
(not applicable)
----------------------------------------------------
(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 required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of the registrant's Common Stock, no
par value, stated value $.20 per share, as of April 30, 1996 was 8,801,401.
Page 1
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1996
------------------------
(Unaudited)
(In thousands)
ASSETS
<S> <C> <C>
CURRENT ASSETS - Note D
Cash $ 486 $ 1,556
Accounts receivable, less allowance of $390,000 at March 31,
1996 and $355,000 at December 31, 1995 9,242 8,618
Inventories - Note B 12,883 13,167
Costs and estimated earnings in excess of billings on incomplete
contracts - Note C 1,731 681
Other current assets 730 849
-----------------------
TOTAL CURRENT ASSETS 25,072 24,871
PROPERTY, PLANT AND EQUIPMENT - Note D
Land and land improvements 329 329
Building and building improvements 6,117 6,109
Production and engineering equipment 2,958 2,733
Furniture and fixtures 960 891
Vehicles 724 660
Computer equipment 4,469 3,907
-----------------------
15,557 14,629
Less accumulated depreciation 5,367 4,965
-----------------------
10,190 9,664
OTHER ASSETS
Capitalized computer software development costs, net of
amortization 7,050 6,761
Patents 2,427 2,507
Other 925 920
-----------------------
10,402 10,188
-----------------------
$ 45,664 $ 44,723
=======================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 3
CONSOLIDATED BALANCE SHEETS - CONTINUED
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
------------------------
(Unaudited)
(In thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 10
Accounts payable 3,582 $ 3,202
Employee compensation 902 674
Accrued and other liabilities 1,194 1,567
Current maturities of long term debt - Note D 725 752
-----------------------
TOTAL CURRENT LIABILITIES 6,413 6,195
LONG-TERM DEBT, less current maturities - Note D 15,890 15,685
DEFERRED INCOME TAXES 76
STOCKHOLDERS' EQUITY - Note F
Common stock, without par value, stated value $.20
per share; 10,000,000 shares authorized; 8,801,401
shares issued and outstanding (8,711,589 shares at
December 31, 1995) 1,760 1,742
Additional paid-in capital 29,698 29,438
Retained earnings deficit (7,995) (8,321)
Accumulated translation adjustment (102) (92)
-----------------------
TOTAL STOCKHOLDERS' EQUITY 23,361 22,767
-----------------------
$ 45,664 $44,723
=======================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF OPERATIONS
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1996 1995
---------------------------
(Unaudited)
(In thousands, except for per share data)
<S> <C> <C>
Net sales $10,222 $11,358
Cost of sales 6,755 7,588
----------------------
GROSS MARGIN 3,467 3,770
Costs and expenses:
Marketing 1,121 1,079
General and administrative 741 812
Research and development 1,022 424
Patent litigation costs 750
Excessive product quality, warranty and other costs 450
----------------------
2,884 3,515
----------------------
EARNINGS FROM OPERATIONS 583 255
Interest:
Expense 325 69
Income (9) (43)
----------------------
316 26
----------------------
EARNINGS BEFORE INCOME TAXES 267 229
Provision (credit) for income taxes - Note E (60) 82
----------------------
NET EARNINGS 327 147
======================
Net earnings per share $ .04 $ .02
======================
Weighted average number of shares of common stock outstanding 8,995 9,008
======================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1996 1995
---------------------------------
(Unaudited)
(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 327 $ 147
Adjustments to reconcile net earnings to net cash provided by (used
in) operating activities:
Depreciation and amortization 1,149 706
Provision for deferred income taxes (75) 65
Changes in operating assets and liabilities (1,457) (3,531)
--------------------------
NET CASH USED IN OPERATING ACTIVITIES (56) (2,613)
INVESTING ACTIVITIES
Sale of short-term investments 4,018
Purchase of property and equipment (553) (680)
Investment in capitalized software (948) (831)
--------------------------
NET CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (1,501) 2,507
FINANCING ACTIVITIES
Net increase (decrease) in borrowings under line of credit 10 (149)
Debt repayments on long-term debt and capital lease obligations (4,953) (128)
Proceeds from long-term borrowings 5,156 398
Proceeds from exercise of stock options 277 128
--------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 490 249
--------------------------
Effect of exchange rate changes on cash (3) 3
--------------------------
INCREASE (DECREASE) IN CASH (1,070) 146
Cash at beginning of period 1,556 586
--------------------------
CASH AT END OF PERIOD $ 486 $ 732
==========================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MEDAR, INC. AND SUBSIDIARIES
MARCH 31, 1996
Note A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three month
period ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included in
the Registrant Company and Subsidiaries' annual report on Form 10-K for the year
ended December 31, 1995.
Certain items in the 1995 financial statements have been reclassified to
conform with the corresponding 1996 presentation.
Note B - Inventories
Inventories are stated at the lower of first-in, first-out cost or market, and
the major classes of inventories at the dates indicated were as follows:
<TABLE>
<CAPTION>
MARCH 31 MARCH 31
1996 1995
------------------------------
(In thousands)
<S> <C> <C>
Raw materials $ 6,426 $ 7,095
Work-in-process 4,309 3,305
Finished goods 2,148 2,767
------------------------------
$ 12,883 $ 13,167
==============================
</TABLE>
Note C - Costs and Estimated Earnings in Excess of Billings on Incomplete
Contracts
Revenues on long-term contracts are recognized using the
percentage of completion method. The effects of changes to estimated total
contract costs are recognized in the period determined and losses, if any, are
recognized fully when identified. Costs incurred and earnings recognized in
excess of amounts billed are classified under current assets as costs and
estimated earnings in excess of billings on incomplete contracts. Long-term
contracts include a relatively high percentage of engineering costs and are
generally less than one year in duration.
6
<PAGE> 7
Note C - Costs and Estimated Earnings in Excess of Billings on Incomplete
Contracts (cont)
Activity on long-term contracts is summarized as follows:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
---------------------------
(In thousands)
<S> <C> <C>
Contract costs to date $ 4,784 $ 4,278
Estimated contract earnings 2,682 1,985
--------------------------
7,466 6,263
Less billings to date (5,735) (5,582)
Costs and estimated earnings in --------------------------
excess of billings on
incomplete contracts $ 1,731 $ 681
==========================
</TABLE>
Note D - Long Term Debt and Other Financing Arrangements
Long-term debt at March 31, 1996 and December 31, 1995 consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1996 1995
(In thousands)
---------------------------
<S> <C> <C>
Revolving note payable to bank $ 10,078 $ 9,818
Term notes payable to bank 4,358 4,463
Patent license payable 2,000 2,000
Other 179 156
--------------------------
16,615 16,437
Less current maturities 725 752
--------------------------
$ 15,890 $ 15,685
==========================
</TABLE>
The revolving notes payable to bank has a maximum balance of $16,000,000
($548,000 available at March 31, 1996) based on eligible accounts receivable and
inventory as defined. This note expires August 31, 1998 and has advances which
bear interest at the bank's prime rate (8.25% at March 31, 1996 and 8.5% at
December 31, 1995). In connection with this note, as amended, the Company has
agreed, among other covenants, to maintain net worth and debt to equity, as
defined, at specified levels.
The Company has two term notes payable to bank. One is payable in quarterly
installments of $62,500 plus interest at the bank's prime rate, with the balance
becoming due June 29, 1998. The second note is payable in monthly installments
of $14,111 plus interest at the bank's prime rate or other rates made available
under the terms of the agreement, with the balance becoming due September 30,
2000. The notes are collateralized by the Medar office and production
facilities in Farmington Hills, Michigan, and machinery and equipment, inventory
and accounts receivable at all North American locations.
The patent license payable relates to future payments to be made to Square D
Company related to the settlement of patent litigation. The payments are due in
ten equal installments and have been discounted at 8%.
The fair values of these financial instruments approximates their carrying
amounts at March 31, 1996.
7
<PAGE> 8
Note D - Long Term Debt and Other Financing Arrangements (cont)
Maturities of long-term debt, excluding those payable within twelve months from
March 31, 1996 (which are stated as current maturities of long-term debt), are
$478,000 in 1997; $11,806,000 in 1998; $368,000 in 1999; $2,043,000 in 2000; and
$1,195,000 thereafter.
Note E - Income Taxes
Significant components of the provision for income taxes for the three months
ended March 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------
(In thousands)
<S> <C> <C>
Current:
Federal $ 15
Foreign $ 5
State 12
------------------
15 17
------------------
Deferred:
Federal 43
Foreign (credit) (75) 22
------------------
(75) 65
------------------
$ (60) $ 82
==================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets are as follows:
<TABLE>
MARCH 31 DECEMBER 31
1996 1995
--------------------------
(In thousands)
<S> <C> <C>
Deferred tax liabilities:
Deductible software development costs,
net of amortization $ 2,365 $ 2,224
Tax over book depreciation 340 346
Percentage of completion 184 184
---------------------
Total deferred tax liabilities 2,889 2,754
Deferred tax assets:
Net operating loss carryforwards 4,881 4,840
Credit carryforwards 1,012 987
Reserve for warranty 237 237
Other 526 510
---------------------
Total deferred tax assets 6,656 6,574
Valuation allowance for deferred tax assets 3,767 3,896
---------------------
Net deferred tax assets 2,889 2,678
---------------------
Net deferred tax liabilities $ 0 $ 76
=====================
</TABLE>
8
<PAGE> 9
Note E - Income Taxes (cont)
The reconciliation of income taxes computed at the U.S. federal statutory
rates to income tax expense for the three months ended March 31 is as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------
(In thousands)
<S> <C> <C>
Tax at U.S. statutory rates $ 91 $ 78
Utilization of net operating loss carryforward (181)
Other 30 (8)
State income taxes 12
----------------
$ (60) $ 82
================
</TABLE>
Note F - Stock Options
At March 31, 1996, there were options to purchase 786,900 shares outstanding
ranging in price from $1.50 to $11.50.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Net sales decreased to $10.2 million from $11.4 million (10.0%) in the first
quarter of 1996. The decrease was due to a decrease in volume of resistance
welding sales.
Cost of sales decreased to $6.8 million from $7.6 million and as a percentage
of net sales to 66.1% from 66.8%.
Sales backlog for the Company at March 31, 1996 was $12.5 million, compared to
$7.5 million at March 31, 1995.
Marketing expense remained relatively level from year to year at $1.1 million,
but increased as a percentage of net sales to 11.0% from 9.5%. The increase in
percentage was the result of the decrease in sales volume.
General and administrative expense decreased to $0.7 million from $0.8 million
but increased as a percentage of net sales to 7.2% from 7.1%.
Research and development expense increased to $1.0 million from $0.4 million
and as a percentage of net sales to 10.0% from 3.7%. The increase is due to
the addition of engineering resources as well as the concentration of more
engineering resources on development projects.
Net interest expense increased as a percentage of net sales to 3.1% from 0.2%.
The increase is primarily the result of increased debt in 1996. There was no
balance on the revolving note with the bank at March 31, 1995 and one of the
term notes and the patent license payable were not added until after March 31,
1995.
The credit for income taxes in 1996 is the result of losses experienced at the
Company's UK subsidiary. In addition, the Company has a lower U.S. effective
tax rate in 1996 due to net operating loss carryforwards generated during the
latter portion of 1995.
Liquidity and Capital Resources
The Company has a revolving note payable to its bank with a maximum balance of
$16,000,000 ($548,000 available at March 31, 1996) based on eligible accounts
receivable and inventory as defined. This note expires August 31, 1998 and
has advances which bear interest at the bank's prime rate.
During the three months ended March 31, 1996, the Company utilized cash
generated from operations and cash on hand at December 31, 1995 to fund the
increase in accounts receivable, costs and estimated earnings in excess of
billings on incomplete contracts, the purchase of property and equipment, and
the investment in capitalized software.
The Company believes that current financial resources (working capital and its
ability to obtain additional financing, if needed), together with cash
generated from operations, will be adequate to meet known cash requirements.
No significant commitments for capital expenditures existed as of March 31,
1996. The company expects to capitalize approximately $3,500,000 of software
development costs in 1996 and has no other plans for any significant capital
expenditures.
10
<PAGE> 11
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
2.1 Stock Purchase Agreement of Integral Vision effective January 1, 1995 (filed as Exhibit 2.1 to the registrant's
Form 8-K dated March 2, 1995, SEC file 0-12728, and incorporated herein by reference).
2.2 Stock Purchase Agreement for Preference Shares of Integral Vision effective January 1, 1995 (filed as Exhibit 2.2
to the registrant's Form 8-K dated March 2, 1995, SEC file 0-12728, and incorporated herein by reference).
3.1 Articles of Incorporation, as amended (filed as Exhibit 3.1 to the registrant's Form 10-K for the year ended
December 31, 1995, SEC file 0-12728, and incorporated herein by reference).
3.2 Bylaws of the Registrant, as amended (filed as Exhibit 3.1 to the registrant's Form 10-K for the year ended
December 31, 1994, SEC file 0-12728, and incorporated herein by reference).
10.1 Incentive Stock Option Plan of the Registrant as amended (filed as Exhibit 10.4 to the registrant's Form S-1
Registration Statement effective July 2, 1985, SEC File 2-98085, and incorporated herein by reference).
10.2 Second Incentive Stock Option Plan (filed as Exhibit 10.2 to the registrant's Form 10-K for the year ended
December 31, 1992, SEC File 0-12728, and incorporated herein by reference).
10.3 Amendment to Medar, Inc. Incentive Stock Option Plan dated May 10, 1993 (filed as Exhibit 10.3 to the registrant's
Form 10-K for the year ended December 31, 1993, SEC File 0-12728, and incorporated herein by reference).
10.4 Non-qualified Stock Option Plan (filed as Exhibit 10.3 to the registrant's Form 10-K for the year ended December
31, 1992, SEC File 0-12728, and incorporated herein by reference).
10.5 Medar, Inc. Employee Stock Option Plan (filed as Exhibit 10.5 to the registrant's Form 10-Q for the quarter ended
September 30, 1995, SEC file 0-12728, and incorporated herein by reference).
10.6 Form of Confidentiality and Non-Compete Agreement Between the Registrant and its Employees (filed as Exhibit 10.4
to the registrant's Form 10-K for the year ended December 31, 1992, SEC File 0-12728, and incorporated herein by
reference).
10.7 Contract between Shanghai Electric Welding Machine Works, Medar, Inc. and Lida U.S.A. dated August 30, 1993,
related to joint venture agreement (both the original Chinese version and the English translation) (filed as
Exhibit 10.7 to the registrant's Form 10-K for the year ended December 31, 1993, SEC File 0-12728, and incorporated
herein by reference).
10.8 Asset Purchase Agreement between Medar, Inc. and Air Gage Company dated February 28, 1994 (filed as Exhibit 10.8
to the registrant's Form 10-K for the year ended December 31, 1993, SEC File 0-12728, and incorporated herein by
reference).
</TABLE>
11
<PAGE> 12
<TABLE>
<S> <C>
10.9* License Agreement number 9303-004 between Medar, Inc. and Allen-Bradley Company, Inc. dated April 12, 1993 (filed
as Exhibit 10.9 to the registrant's Form 10-K for the year ended December 31, 1993, SEC File 0-12728, and
incorporated herein by reference).
10.10* License Agreement number 9304-009 between Medar, Inc. and Allen-Bradley Company, Inc. dated May 10, 1993 (filed as
Exhibit 10.10 to the registrant's Form 10-K for the year ended December 31, 1993, SEC File 0-12728, and
incorporated herein by reference).
10.11 Agreement by and between Medar, Inc. and ABB Robotics, Inc. dated December 1992 regarding joint development to
integrate a weld controller into the S3 robot control (filed as Exhibit 10.11 to the registrant's Form 10-K for
the year ended December 31, 1993, SEC File 0-12728, and incorporated herein by reference).
10.12 1993 Incentive Program (filed as Exhibit 10.14 to the registrant's Form 10-K for the year ended December 31, 1993,
SEC File 0-12728, and incorporated herein by reference).
10.13 1994 Incentive Program (filed as Exhibit 10.12 to the registrant's Form 10-K for the year ended December 31, 1994,
SEC file 0-12728, and incorporated herein by reference).
10.14 Term Note dated June 29, 1993 by and between Medar, Inc. and NBD Bank, N.A. (filed as Exhibit 4.2 to the
Registrant's Form 10-Q for the quarter ended June 30, 1993, SEC File 0-12728, and incorporated herein by reference).
10.15 Amended and Restated Mortgage and Security Agreement dated June 29, 1993 by and between Medar, Inc. and NBD Bank,
N.A. (filed as Exhibit 4.5 to the registrant's Form 10-K for the year ended December 31, 1993, SEC File 0-12728,
and incorporated herein by reference).
10.16 Revolving Credit and Loan Agreement dated August 10, 1995 by and between Medar, Inc., Automatic Inspection Devices,
Inc. and Integral Vision, Ltd. and NBD Bank (filed as Exhibit 10.1 to the registrant's Form 10-Q for the quarter
ended June 30, 1995, SEC File 0-12728, and incorporated herein by reference).
10.17 Amendment No. 2 to Loan and Credit Agreement and Term Note dated August 10, 1995 by and between Medar, Inc.,
Automatic Inspection Devices, Inc. and NBD Bank (filed as Exhibit 10.2 to the registrant's Form 10-Q for the
quarter ended June 30, 1995, SEC File 0-12728, and incorporated herein by reference).
10.18 First Amendment to Revolving Credit and Loan Agreement dated October 12, 1995, by and between Medar, Inc.,
Automatic Inspection Devices, Inc. and Integral Vision, Ltd. and NBD Bank (filed as Exhibit 10.18 to the
registrant's Form 10-Q for the quarter ended September 30, 1995, SEC File 0-12728, and incorporated herein by
reference).
10.19 Second Amendment to Revolving Credit and Loan Agreement dated October 31, 1995, by and between Medar, Inc.,
Automatic Inspection Devices, Inc. and Integral Vision, Ltd. and NBD Bank (filed as Exhibit 10.20 to the
registrant's Form 10-Q for the quarter ended September 30, 1995, SEC File 0-12728, and incorporated herein by
reference).
10.20 Mortgage dated October 31, 1995 by and between Medar, Inc. and NBD Bank (filed as Exhibit 10.21 to the registrant's
Form 10-Q for the quarter ended September 30, 1995, SEC File 0-12728, and incorporated herein by reference).
10.21 Installment Business Loan Note dated October 31, 1995, by and between Medar, Inc. and NBD Bank (filed as Exhibit
10.22 to the registrant's Form 10-Q for the quarter ended September 30, 1995, SEC File 0-12728, and incorporated
herein by reference).
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C>
10.22 Guarantee and Postponement of Claim dated August 10, 1995 between Medar Canada, Ltd. and NBD Bank (filed as
Exhibit 10.23 to the registrant's Form 10-Q for the quarter ended September 30, 1995, SEC File 0-12728, and
incorporated herein by reference).
10.23* Patent License Agreement dated October 4, 1995 by and between Medar, Inc. and Square D Company (filed as Exhibit
10.24 to the registrant's Form 10-Q for the quarter ended September 30, 1995, SEC File 0-12728, and incorporated
herein by reference).
10.24 Third Amendment to Revolving Credit and Loan Agreement dated March 29, 1996 by and between Medar, Inc., Integral
Vision-AID, Inc., Integral Vision Ltd. and NBD Bank.
10.25 Third Amended and Restated Revolving Note dated March 29, 1996 by and between Medar, Inc., Integral Vision-AID,
Inc., Integral Vision Ltd. and NBD Bank.
10.26 General Security Agreement dated March 29, 1996 by and between Medar, Inc. and NBD Bank.
10.27 General Security Agreement dated March 29, 1996 by and between Integral Vision-AID, Inc. and NBD Bank.
11 Calculation of Earnings per Share.
(b) There were no reports on Form 8-K filed in the quarter ended March 31, 1996.
* The Company has been granted confidential treatment with respect to certain portions of this exhibit pursuant
to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
</TABLE>
13
<PAGE> 14
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.
//CHARLES J. DRAKE// 5/10/96
- -----------------------------------
Charles J. Drake
President & Chairman of the Board
Medar, Inc.
(Principal Executive Officer)
//RICHARD R. CURRENT// 5/10/96
- -----------------------------------
Richard R. Current
Executive Vice President, Finance & Operations
Medar, Inc.
(Principal Financial & Accounting Officer)
14
<PAGE> 15
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.24 Third Amendment to Revolving Credit and Loan Agreement
dated March 29, 1996 by and between Medar, Inc., Integral
Vision-AID, Inc., Integral Vision Ltd. and NBD Bank.
10.25 Third Amended and Restated Revolving Note dated March 29,
1996 by and between Medar, Inc., Integral Vision-AID, Inc.,
Integral Vision Ltd. and NBD Bank.
10.26 General Security Agreement dated March 29, 1996 by and
between Medar, Inc. and NBD Bank.
10.27 General Security Agreement dated March 29, 1996 by and
between Integral Vision-AID, Inc. and NBD Bank.
11 Calculation of Earnings per Share.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.24
THIRD AMENDMENT TO
REVOLVING CREDIT AND LOAN AGREEMENT
This THIRD AMENDMENT TO REVOLVING CREDIT AND LOAN AGREEMENT ("Third
Amendment") is dated as of March 29, 1996 and is among MEDAR, INC., a Michigan
corporation (the "Company"), INTEGRAL VISION-AID, INC. (formerly known as
Automatic Inspection Devices, Inc.), an Ohio corporation ("AID") and INTEGRAL
VISION LTD., a corporation established under the laws of the United Kingdom
("Integral"), as Borrowers, and NBD BANK, a Michigan banking corporation
("NBD"). This Third Amendment amends the Revolving Credit and Loan Agreement
dated as of August 10, 1995 (as amended, the "Loan Agreement"), as amended by
the First Amendment to Revolving Credit and Loan Agreement dated October 12,
1995 (the "First Amendment") and the Second Amendment to Revolving Credit and
Loan Agreement dated October 31, 1995 (the "Second Amendment") among the
Company, AID, Integral and NBD. The Company, AID and Integral are collectively
referred to as the "Borrowers" and individually as a "Borrower". Capitalized
terms not otherwise defined in this Third Amendment shall have the meanings
given to them in the Loan Agreement.
WHEREAS, the Borrowers have requested that NBD increase the amount of
the line of credit to Borrowers and make certain revisions to the financial
covenants in the Loan Agreement and NBD has agreed that it will make such
changes pursuant to the terms and conditions of this Third Amendment, which
includes granting a security interest to NBD in Borrowers' and Guarantor's
assets.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows:
1. Revised Definitions.
(a) The following definitions contained in Section 1.1 of the Loan
Agreement are hereby amended effective March 29, 1996 to read as follows:
"Commitment" means the commitment of NBD to make Revolving Loans
pursuant to Section 2.1 in the amount of $16,000,000, as such amount
may be reduced from time to time pursuant to Section 2.2.
"Loan Documents" means this Agreement, the Notes, the Guaranty
Agreement, the L/C Documents, NBD Guaranty Documents, the Equipment
Loan Documents, the Security Documents, the Mortgage, the First
Amendment, the Second Amendment, the Third Amendment and all other
agreements, documents or instruments now or hereafter executed by or
on behalf of any of the Borrowers or the Guarantor and delivered to
NBD in connection with this Agreement or any amendment thereof.
<PAGE> 2
"Termination Date" means the earlier to occur of (a) August 31, 1998,
and (b) the date on which the Commitment shall be terminated pursuant
to Section 2.2 or 7.2.
(b) The following definitions are hereby added in alphabetical
order to Section 1.1 of the Loan Agreement effective March 29, 1996 to read as
follows:
"Borrowing Base" means the sum of the following:
(a) 80% of the book value of Eligible Accounts
Receivables of the Borrowers and Guarantor; and
(b) 40% of the lower of costs or market value of Eligible
Inventory of the Borrowers and Guarantor for calculations on or prior
to December 30, 1996 and decreasing to 25% of the lower of costs or
market value of Eligible Inventory of the Borrowers and Guarantor for
calculations on and after December 31, 1996. Notwithstanding the
foregoing, in no event will the amount advanced against Eligible
Inventory exceed $7,000,000 for calculations on or prior to December
30, 1996 and $5,000,000 for calculations on or after December 31,
1996.
"Eligible Accounts Receivable" means each account owing to any of the
Borrowers or Guarantor ("Loan Party") which meets the following
specifications:
(a) it arose from a bona fide sale of goods, in the
ordinary course of business, such goods having been delivered or
shipped to the account debtor and the appropriate Loan Party has
genuine purchase orders, invoices and shipping documents or receipts;
(b) has been outstanding for no more than 120 days from
the date of shipment or delivery for calculations on or prior to
December 30, 1996 and no more than 90 days from the date of shipment
or delivery for calculations on or after December 31, 1996;
(c) it is owned by the appropriate Loan Party, free and
clear of any Lien, other than the perfected, first priority Lien
created in favor of NBD;
(d) it is enforceable against the account debtor for the
amount included in the Borrowing Base, is in compliance with
applicable laws and regulations, is not subject to any set-off, credit
allowance or adjustment (except discounts for prompt payment reflected
in the computation thereof) and the account debtor has not returned
the goods or disputed liability with respect to such account;
(e) none of the Loan Parties have notice or knowledge of
any fact or occurrence which could reasonably be expected to impair
the credit worthiness of the account debtor;
2
<PAGE> 3
(f) the account debtor is not an Affiliate of any Loan
Party, nor is it the United States of America, or any agency thereof;
(g) the account debtor has its principle place of
business in the United States, Britain or a Canada, or the account is
covered by acceptable credit insurance; and
(h) NBD has not notified the Borrowers that the account
or account debtor is unsatisfactory, in the discretion of NBD.
"Eligible Inventory" means finished goods, work-in-progress or raw
material inventory of any of the Loan Parties which meets the
following specifications:
(a) it is owned by the appropriate Loan Party free and
clear of any Lien other than the perfected, first priority Lien
created in favor of NBD;
(b) it is in good and saleable condition and does not
consist of returned goods, or damaged, obsolete or slow-moving
inventory;
(c) it is located at a location owned or leased by a Loan
Party and NBD is properly perfected on inventory in such location; and
(d) NBD has not notified the Borrowers that the Inventory
is unsatisfactory, in the discretion of NBD.
"Security Documents" means the Security Agreements and other documents
from any Borrower or Guarantor which grant or perfect a lien in favor
of NBD.
2. Borrowing Formula. Section 2.1(a) of the Loan Agreement is
hereby amended effective March 29, 1996 to read as follows:
2.1 Revolving Loan Commitment.
(a) Commitment. Subject to the terms and conditions of this
Agreement, NBD agrees to make Revolving Loans to the Borrowers, jointly
and severally, on a revolving basis from the Effective Date and before
the Termination Date as the Borrowers may from time to time request
from NBD; provided, however, that the aggregate principal amount of all
Revolving Loans which NBD shall be committed to have outstanding
hereunder, when added to the aggregate face amount of all outstanding
L/Cs and Guaranties Issued by NBD, shall not at any time exceed the
lesser of (i) the Borrowing Base at such time; (ii) the Activated
Amount at such time, or (iii) the Commitment. The Revolving Loans,
whether payable in Dollars or Pounds Sterling, shall be evidenced by
the Revolving Note of the Borrowers. Interest shall accrue on the
unpaid principal balance of the Revolving Loans from
3
<PAGE> 4
time to time outstanding at the Applicable Rate(s) and shall be
payable in accordance with Section 4.2. Within the limits of the
Activated Amount of the Commitment and subject to the other terms and
conditions of this Agreement, the Revolving Loans may be borrowed,
repaid and reborrowed prior to the Termination Date. Although the
Revolving Note shall be expressed to be payable in the maximum amount
of the Commitment, the Borrowers shall be obligated to pay only the
unpaid balance of the Revolving Loans together with interest thereon
and other amounts due in connection therewith as provided herein and
in the Revolving Note. The proceeds of Revolving Loans shall be used
by the Borrowers for working capital or other general corporate
purposes.
3. New Note. Borrowers will deliver to NBD simultaneously with
the Third Amendment a new promissory note, substantially in the form of Exhibit
2.1 (3rd) to this Third Amendment, and all references to the "Revolving Note"
will hereafter refer to such new note.
4. Activation. As of March 29, 1996, the Activated Amount is
$16,000,000.
5. Reporting. New subsections (vii) and (viii) are hereby added
to Section 6.1(d) of the Loan Agreement to read as follows:
(vii) as soon as available, and in any event within 20 days after the
end of each month, a Borrowing Base Certificate in a form and detail
reasonably acceptable to NBD, executed by the chief financial officers
of the Borrowers and completed as of the end of the preceding month;
and
(viii) as soon as available, and in any event within 20 days after the
end of each month, an inventory report and accounts receivable aging
as of the end of the preceding month for each Borrower and Guarantor.
6. Revised Financial Covenants. Sections 6.2(a) and (b) of the
Loan Agreement are hereby amended in their entirely to read as follows:
(a) Tangible Net Worth. Permit or suffer Tangible Net Worth to
be: (i) after the Effective Date to December 30, 1995, less than
$20,000,000; (ii) from December 31, 1995 to September 29, 1996, less
than $12,750,000; and (iii) from September 30, 1996 and thereafter,
less than $15,000,000.
(b) Debt to Worth Ratio. Permit or suffer the Debt to Worth Ratio
to exceed: (i) from the Effective Date to December 30, 1995, 1.25 to
1.00; (ii) from December 31, 1995 to December 30, 1996, 2.25 to 1.00;
and (iii) from December 31, 1996 and thereafter, 2.00 to 1.00.
7. London Office. Effective March 29, 1996, all notices and
other transactions with the "London Branch" as defined in the Loan Agreement,
shall be sent to and completed with:
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<PAGE> 5
The First National Bank of Chicago
90 Long Acre
London WC2E 9RB England
Telephone 011-44-171-240-7240
Telecopy 011-44-171-306-9076
8. Conditions. Notwithstanding any other term of this Third
Amendment or the Loan Agreement, NBD will not be required to increase the
Commitment unless the following conditions have been met:
(a) NBD shall have received a facility fee of $30,000
from the Borrowers prior to or simultaneously with the execution and delivery
of this Third Amendment. The facility fee is in addition to all interest and
fees otherwise payable to NBD and will be deemed to be fully earned upon
execution and delivery of this Third Amendment.
(b) NBD shall have received a fully executed copy of this
Third Amendment and the Revolving Note attached as Exhibit 2.1 (3rd).
(c) NBD shall have received the General Security
Agreements in form and substance satisfactory to NBD (as amended and restated
from time to time, the "Security Agreements"), from each of the Company and
AID, and related UCC financing statements.
(d) NBD shall have been granted a first priority,
perfected lien on the assets of Integral and Guarantor, on terms and conditions
acceptable to NBD, by April 30, 1996.
(e) NBD shall have obtained an acceptable credit
insurance policy covering accounts receivable which are owed by parties located
outside the United States, Canada or Britain by April 30, 1996, at the
Borrowers' expense.
(f) Borrowers will cooperate with NBD to allow it to
conduct a field audit of Borrowers' assets and business and will pay the costs
and expenses of the audit to NBD and will pay the costs and expenses of any
field audits subsequently requested by NBD.
(g) NBD shall have received a copy of the resolutions
authorizing the Borrowers and Guarantor to complete the transactions
contemplated in this Third Amendment and Second Amendment, certified by the
secretary of each Borrower and Guarantor, by April 30, 1996.
(h) NBD shall have received the opinion of counsel to the
Borrowers and Guarantor, in form and substance satisfactory to NBD and its
counsel, covering matters related to this Third Amendment, by April 30, 1996.
(i) All of the terms and conditions in Section 3.7 of the
Loan Agreement continue to be met.
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<PAGE> 6
9. Reaffirmation of Loan Agreement; Conflicts. The parties
hereto acknowledge and agree that the terms and provisions of this Third
Amendment, amend, add to and constitute a part of the Loan Agreement. Except
as expressly modified and amended by the terms of this Third Amendment, all of
the other terms and conditions of the Loan Agreement and all of the documents
executed in connection therewith or referred or incorporated therein, remain in
full force and effect and are hereby ratified, confirmed and approved. If
there is an express conflict between the terms of this Third Amendment and the
terms of the Loan Agreement, or any of the other agreements or documents
executed in connection therewith or referred to or incorporated therein, the
terms of this Third Amendment shall govern and control. Any reference in any
other document or agreement to the Loan Agreement shall hereafter refer to the
Loan Agreement as amended by this Third Amendment.
10. Representations True. The representations and warranties of
the Borrowers contained in the Loan Agreement are true on the date hereof and
there does not exist any Default or Event of Default under the Loan Agreement.
11. Expenses. Borrowers acknowledge and agree that the Borrowers
will pay all attorneys' fees and out-of-pocket costs of NBD in connection with
or with respect to this Third Amendment and the conditions set forth herein.
IN WITNESS WHEREOF, the Borrowers and NBD have executed the foregoing
document by their duly authorized officers as of the day and year first written
above.
NBD BANK
By: /s/ Richard P. Haslinger
---------------------------------
Richard P. Haslinger
Its: First Vice President
and
By: /s/ Glenn Ansiel
---------------------------------
Glenn Ansiel
Its: Loan Officer
MEDAR, INC.
By: /s/ Charles Drake
---------------------------------
Charles Drake
Its: President
(Signatures continue on next page)
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<PAGE> 7
INTEGRAL VISION-AID, INC.
By: /s/ Charles Drake
----------------------------
Charles Drake
Its: President
INTEGRAL VISION LTD.
By: /s/ Richard Current
----------------------------
Richard Current
Its: Company Secretary
7
<PAGE> 8
REAFFIRMATION OF GUARANTY
The undersigned, Medar Canada Ltd., hereby acknowledges the terms of
this Third Amendment to Revolving Credit and Loan Agreement and hereby
reaffirms each and every term of its Guarantee and Postponement of Claim dated
August 10, 1995, given in favor of NBD Bank with respect to the obligations of
Medar, Inc., Automatic Inspection Devices, Inc. (now known as Integral
Vision-AID, Inc.) and Integral Vision Ltd., and agrees to provided the security
to NBD Bank called for in the Third Amendment.
MEDAR CANADA LTD.
By: /s/ Charles Drake
-----------------------------
Charles Drake
Its: President
<PAGE> 1
EXHIBIT 10.25
THIRD
AMENDED AND RESTATED
REVOLVING NOTE
$16,000,000 March 29, 1996
Detroit, Michigan
FOR VALUE RECEIVED, the undersigned, MEDAR, INC. ("Medar"), INTEGRAL
VISION-AID, INC. ("AID"), and INTEGRAL VISION, LTD. ("Integral"), jointly and
severally (collectively, "Borrowers"), hereby promise to pay to the order of
NBD Bank, ("Bank"), pursuant to that Revolving Credit and Loan Agreement,
entered into as of August 10, 1995, as amended by the First Amendment to
Revolving Credit and Loan Agreement dated October 12, 1995, the Second
Amendment to Revolving Credit and Loan Agreement dated October 31, 1995 and the
Third Amendment to Revolving Credit and Loan Agreement dated the date hereof
(as amended from time to time, the "Loan Agreement"), among Borrowers and Bank,
at the main office of Bank in Detroit, Michigan with respect to Revolving Loans
made in U.S. Dollars, and at the office of The First National Bank of Chicago
in London, England ("London Office") with respect to Revolving Loans made in
Pounds Sterling, in accordance with the Loan Agreement, in immediately
available funds, the principal sum of Sixteen Million and 00/100 Dollars (U.S.
$16,000,000), or such lesser amount as is recorded on the books and records of
Bank, on August 31, 1998, or such later Termination Date as may be agreed to
under the Loan Agreement as amended from time to time, together with interest
on the outstanding balance thereof as provided in the Loan Agreement. All
payments of principal and interest shall be made (i) if the Revolving Loan is
in Dollars and advanced by Bank in the United States, then in lawful money of
the United States of America, and (ii) if the Revolving Loan is in Pounds
Sterling and advanced by the London Office, then in lawful money of the United
Kingdom.
Bank is hereby authorized by Borrowers to record on its books and
records, the date and amount of each Revolving Loan, the currency, the Loan
Period, the applicable interest rate (including any changes therein), the
amount of each payment of principal thereon and such other information as
appropriate, which books and records shall constitute rebuttable presumptive
evidence of the information so recorded, provided, however, that any failure by
Bank to record any such information shall not relieve Borrowers of their
obligation to repay the outstanding principal amount of all Revolving Loans
made by Bank, all accrued interest thereon and any amount payable with respect
thereto in accordance with the terms of this Note and the Loan Agreement.
Capitalized terms used but not defined in this Note shall have the respective
meanings assigned to them in the Loan Agreement.
This Note is subject to, and evidences the Revolving Loans made by
Bank under, the Loan Agreement, to which reference is hereby made for a
statement of the circumstances and terms under which all or a portion of this
Note is subject to prepayment and under which its due date may be accelerated
and other terms applicable to this Note. An Event of Default under the Loan
Agreement constitutes a default hereunder. During the period that any amount
owing on this Note is not paid in full when due (whether at stated maturity, by
acceleration or otherwise), such amount shall bear interest at the Default Rate
applicable to each Revolving Loan in effect from time to time or the maximum
rate permitted by law, whichever is lower, for the period
<PAGE> 2
commencing on the due date until the same is paid in full. In addition to the
foregoing, during the period that any other Event of Default has occurred and
shall be continuing, Borrower shall pay on demand, at the election of Bank,
interest at the Default Rate or the maximum rate permitted by law, whichever is
lower, on the outstanding principal amount of all the Obligations which are
outstanding during such period from and after the date of any such demand.
This Amended and Restated Revolving Note amends and restates, but does
not satisfy, certain existing obligations of the Borrowers evidenced by the
Second Amended and Restated Revolving Note in the principal amount of
$10,000,000 dated October 12, 1995, from the Borrowers to Bank, the Amended and
Restated Revolving Note in the principal amount of $8,000,000 dated August 10,
1995, from the Borrowers to Bank and the Master Promissory Note in the
principal amount of $5,000,000 dated June 13, 1994, from Medar and AID to Bank
(f/k/a NBD Bank, N.A.).
Borrowers and each endorser or guarantor hereof waive demand,
presentment, protest, diligence, notice of dishonor and any other formality in
connection with this Note. Borrowers further agree to pay, in addition to the
principal, interest and other sums due and payable hereon, all costs of
collecting this Note, including reasonable attorneys' fees and expenses.
This Note is made under, and shall be governed by and construed in
accordance with, the laws of the State of Michigan applicable to contracts made
and to be performed entirely within the State of Michigan and without giving
effect to the choice of law principles of the State of Michigan.
MEDAR, INC.,
a Michigan corporation
By: /s/ Charles Drake
--------------------------------
Charles Drake
Its: President
INTEGRAL VISION-AID, INC.
an Ohio corporation
By: /s/ Charles Drake
---------------------------------
Charles Drake
Its: President
INTEGRAL VISION, LTD.
an English corporation
By: /s/ Richard Current
----------------------------------
Richard Current
Its: Corporate Secretary
2
<PAGE> 1
EXHIBIT 10.26
GENERAL SECURITY AGREEMENT
This General Security Agreement (this "Agreement"), dated as of March
29, 1996, is made by Medar, Inc., a Michigan corporation ("Debtor"), in favor of
NBD Bank ("NBD").
Recitals
A. Debtor and its subsidiaries, Integral Vision-AID, Inc.
(formerly known as Automatic Inspection Devices, Inc.) and Integral Vision Ltd.
(collectively such subsidiaries and Debtor are referred to as the "Borrowers")
and NBD have entered into a Revolving Credit and Loan Agreement dated August
10, 1995, as amended by a First Amendment to Revolving Credit and Loan
Agreement date October 12, 1995 and a Second Amendment to Revolving Credit and
Loan Agreement dated October 31, 1995 (as amended from time to time, the "Loan
Agreement") pursuant to which NBD has agreed to make certain credit facilities
available to the Borrowers, including, without limitation, a revolving line of
credit in the maximum principal amount of $10,000,000, and various term loans,
all as more fully described in the Loan Agreement.
B. The Borrowers have requested that NBD increase the amount of
the line of credit to Borrower and make certain revisions to the financial
covenants in the Loan Agreement and NBD has agreed that it will make such
changes pursuant to the terms and conditions of a Third Amendment to Revolving
Credit and Loan Agreement dated the date hereof ("Third Amendment").
C. It is a condition precedent to NBD to enter into the Third
Amendment that Debtor execute and deliver this Agreement to NBD.
THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees with NBD as follows:
1. Defined Terms. In addition to those terms defined elsewhere
in this Agreement, terms defined in the Loan Agreement shall have their
defined meanings when used herein (unless otherwise defined herein) and the
following terms shall have the following meanings, unless the context otherwise
requires:
"Accounts" means any "account" or "chattel paper," as such terms are
defined in Sections 9-106 and 9-105, respectively, of the Code, now or
hereafter owned by Debtor, and shall also mean and include (i) all accounts
receivable, contract rights, book debts, notes, drafts, instruments, documents,
acceptances, payments under leases and other forms of obligations, now owned or
hereafter received or acquired by or belonging or owing to Debtor (including
under any trade names, styles or divisions thereof) whether arising out of
goods sold or leased or services rendered by it or from any other transaction,
whether or not the same involves the sale of goods or services by Debtor
(including, without limitation, any such obligation which might be
characterized as an account, contract right, general intangible or chattel
paper under the Uniform Commercial Code in effect in any jurisdiction); (ii)
all of Debtor's rights in, to and under all
<PAGE> 2
purchase orders now owned or hereafter received or acquired by it for goods or
services, and all of Debtor's rights to any goods represented by any of the
foregoing (including returned or repossessed goods and unpaid sellers' rights
of rescission, replevin, reclamation and stopping in transit); and (iii) all
monies due to or to become due to Debtor under all contracts for the sale or
lease of goods or the performance of services by it (whether or not yet earned
by performance on the part of Debtor) now in existence or hereafter arising,
including, without limitation, the right to receive the proceeds of such
purchase orders and contracts and all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing.
"Chattel Paper" means all "chattel paper" as such term is defined in
Section 9-105(b) of the Code.
"Code" means the Uniform Commercial Code as in effect on the date
hereof in the State of Michigan.
"Collateral" has the meaning provided in Section 2.
"Contract Rights" means all rights of Debtor (including, without
limitation, all rights to payment) under each Contract.
"Contract(s)" means, collectively, all licensing agreements and any
and all other contracts, instruments, undertakings, documents or other
agreements in or under which Debtor may now or hereafter have any right, title
or interest and which pertain to the lease, sale or other disposition by Debtor
of any Inventory or Equipment, fixtures, real property or any interest in real
property, as any of the same may from time to time be amended, supplemented or
otherwise modified.
"Equipment" means any "equipment," as such term is defined in Section
9-109(2) of the Code, now or hereafter owned by Debtor, and shall also mean and
include all machinery, equipment, vehicles, furnishings and fixtures (as such
term is defined in Section 9-313(a) of the Code) now owned or hereafter
acquired by Debtor, including, without limitation, all items of machinery and
equipment of any kind, nature and description, whether affixed to real property
or not, as well as all additions to, substitutions for, replacements of or
accessions to any of the foregoing items and all attachments, components, parts
(including spare parts) and accessories whether installed thereon or affixed
thereto.
"General Intangibles" means all "general intangibles," as such term is
defined in Section 9-106 of the Code, now or hereafter owned by Debtor,
including, without limitation, all tax refunds, customer lists, rights in
intellectual property, goodwill, trade names, service marks, trade secrets,
patents, trademarks, copyrights, applications therefor, permits and licenses
now owned or hereafter acquired by Debtor, but excluding items described in the
definition of "Accounts."
"Instruments" means all "instruments," as such term is defined in
Section 9-105(i) of the Code.
2
<PAGE> 3
"Inventory" means any "inventory," as such term is defined in Section
9-109(4) of the Code, wherever located, now owned or hereafter acquired by
Debtor or in which Debtor now has or hereafter may acquire any right, title or
interest including, without limitation, all goods and other personal property
now or hereafter owned by Debtor which are leased or are held for sale or lease
or are furnished or are to be furnished under a contract of service or which
constitute raw materials, work in process or materials used or consumed or to
be used or consumed in Debtor's business, or in the processing, packaging or
shipping of the same, and all finished goods.
"Lien Termination Date" has the meaning provided in Section 20.
"Obligations" has the meaning provided in the Loan Agreement.
"Proceeds" shall have the meaning provided it under the Code and, in
any event, shall include, but not be limited to, (i) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to Debtor from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any Person acting under color of governmental
authority) and (iii) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral.
"Requirement of Law" shall mean, as to any Person, the charter and
by-laws or other organizational or governing documents of such Person, and any
material law, treaty, rule or regulation or determination of arbitration or a
court or other governmental authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Secured Obligations" shall have the meaning provided in Section 2(a).
2. Grant of Security Interest.
(a) General. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of all the Obligations and any other indebtedness or
obligation owed by Debtor or the other Borrowers to NBD (collectively, with the
Obligations, the "Secured Obligations"), and in order to induce NBD to enter
into the Loan Agreement and make loans to Debtor and the other Borrowers in
accordance with the terms thereof, Debtor hereby grants to NBD a continuing
security interest in all of the following property now owned, or at any time
hereafter acquired, by Debtor or in which Debtor now has or at any time in the
future may acquire any right, title or interest (all of which is hereinafter
collectively referred to as the "Collateral"):
(i) all existing and future Contracts;
3
<PAGE> 4
(ii) all existing and future Accounts, Contract Rights and
General Intangibles (including, without limitation, (a) all money due
and to become due under any Contract, (b) any damages arising out of
or for breach or default in respect of any Contract or Account, (c)
all other amounts from time to time paid or payable under or in
connection with any Contract or Account, and (d) the right of Debtor
to terminate any Contract or to perform or exercise all remedies
thereunder);
(iii) all existing and future Equipment;
(iv) all existing and future Inventory; and
(v) to the extent not otherwise included, all Proceeds
and products of any or all of the foregoing.
(b) Business Records. In addition to the grant of the
security interest under subsection 2(a), Debtor hereby grants to NBD a Lien and
first security interest in all of Debtor's books and records pertaining to the
Collateral, including without limitation, all books of accounts, ledgers,
computer software, computer printouts and other computerized records and
cabinets in which there are reflected or maintained the Collateral in which NBD
has a security interest, or which relate to any other Collateral NBD may hold
from Debtor and all supporting evidence and documents relating to such security
in the form of written applications, credit information, account cards, payment
records, correspondence, delivery and installation certificates, invoice
copies, delivery receipts, notes and other evidences of indebtedness, insurance
certificates and the like. For convenience, these books, records and documents
are called "Business Records." The Business Records, presently included in
this Agreement, are described as follows:
accounts receivable subsidiary ledger including unpaid invoice
file, cash receipts journal, cash disbursements journal and
filing cabinets containing customer orders, correspondence,
paid invoice files and any other books and records, filing
cabinets, or places of storage of data and information,
including all computer storage facilities, records and
software usually located at Debtor's places of business
identified on Schedule I or elsewhere.
3. Rights of NBD; Limitations on NBD's Obligations. It is
expressly agreed by Debtor that, anything herein to the contrary
notwithstanding, Debtor shall remain liable under each of the Accounts and
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise to such Account and in accordance with the terms and
provisions of each such Contract. NBD has no obligation or liability under any
Account (or agreement giving rise thereto) or under any Contract by reason of
or arising out of this Agreement or its assignment to NBD or the receipt by NBD
of any payment relating to any Account or Contract pursuant hereto, nor will
NBD be required or obligated in any manner to perform or fulfill any of the
obligations of Debtor under or pursuant to any Account (or any agreement giving
rise thereto)
4
<PAGE> 5
or under or pursuant to any Contract, to make any payment, to make any inquiry
as to the nature or the sufficiency of any payment received by any of them or
as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto) or under any Contract, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to any of them or to which any of
them may be entitled at any time or times.
4. Representations and Warranties. Debtor hereby represents and
warrants to NBD that:
(a) Title; No Other Security Interests. Except for the
security interest granted hereunder to NBD and Permitted Liens under the Loan
Agreement, Debtor owns each item of the Collateral free and clear of any and
all security interests or claims of others.
(b) Addresses. The Debtor's chief executive office and
the place where its records concerning the Accounts and other Collateral are
kept and the other addresses of Debtor's business, if any, are set forth on
Schedule I hereto. The states in which Collateral is located, and Debtor's
chief executive office and principal place of business in each state, shall not
be changed without prior written notice to NBD, but the Collateral, wherever
located, is covered by this Agreement. Debtor shall immediately advise NBD in
writing of any change in its name, address or form of organization.
(c) Trade Names. Any and all trade names under which
Debtor transacts any part of its business, and all former names of Debtor, are
set forth on Schedule I hereto.
(d) Accuracy of Information. All information,
certificates or statements given to NBD pursuant to this Agreement shall be
true and complete in all material respects, when given.
5. Covenants. Debtor covenants and agrees with NBD that from and
after the date of this Agreement until the Secured Obligations are fully
satisfied:
(a) Further Documentation; Pledge of Instruments. At
any time and from time to time, upon the written request of NBD, and at the
sole expense of Debtor, Debtor will promptly and duly execute and deliver any
and all such further instruments and documents and take such further action as
NBD may reasonably request for the purpose of obtaining the full benefits of
this Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests granted hereby. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
5
<PAGE> 6
(b) Maintenance of Records. If an Event of Default has
occurred and is continuing and if requested by NBD, Debtor will mark the
Business Records pertaining to the Collateral to evidence this Agreement and
the security interests granted hereby.
(c) Indemnification. Debtor agrees to pay, and to save
NBD harmless from, any and all liabilities, costs and expenses (including,
without limitation, legal fees and expenses) (i) with respect to, or resulting
from, any delay in paying any and all excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral, (ii)
with respect to, or resulting from, any delay in complying with any Requirement
of Law applicable to any of the Collateral or (iii) in connection with any of
the transactions contemplated by this Agreement. In any suit, proceeding or
action brought by NBD under any Account or Contract for any sum owing
thereunder, or to enforce any provisions of such Account or Contract, Debtor
will save, indemnify and keep NBD harmless from and against all expense, loss
or damage suffered by reason of any defense, set-off, counterclaim, recoupment
or reduction or liability whatsoever of the account debtor or obligor
thereunder, arising out of a breach by Debtor of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to or in favor of such account debtor or obligor or its successors from Debtor,
and all such obligations of Debtor shall be and remain enforceable against and
only against Debtor and shall not be enforceable against NBD.
(d) Payment of Obligations. Debtor will pay promptly
when due, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits therefrom, as well
as all claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if and to the extent not required to be paid
pursuant to the Loan Agreement.
(e) Limitation on Security Interests on Collateral.
Debtor will not create, incur or permit to exist, and will defend the
Collateral against, and will take such other action as is necessary to remove,
any security interest or claim on or to the Collateral other than the security
interests created hereby, and other than Permitted Liens pursuant to the Loan
Agreement, and will defend the right, title and interest of NBD in and to any
of the Collateral against the claims and demands of all Persons whomsoever.
Debtor will not sell or otherwise dispose of any type or item of Collateral
except as expressly permitted by this Agreement or the Loan Agreement.
(f) Limitations on Modifications of Contracts, Accounts;
No Waivers, Extensions. Other than in the ordinary course of business, Debtor
will not (i) amend, modify, terminate or waive any provision of any Contract or
any agreement giving rise to an Account in any manner which might materially
adversely affect the value of such Contract or Account as Collateral, or (ii)
fail to exercise promptly and diligently each and every right which it may have
under each Contract and each agreement giving rise to an Account (other than
any right of termination) in any manner which could materially adversely affect
the value of such Contract.
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<PAGE> 7
(g) Limitations on Discounts, Compromises, Extension of
Accounts. Other than in the ordinary course of business, Debtor will not grant
any extension of the time of payment of any of the Accounts, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any person liable for the payment thereof or allow any
credit or discount whatsoever thereon.
(h) Maintenance of Insurance. Debtor will maintain
insurance policies as required by the Loan Agreement.
(i) Right of Inspection. NBD at all times have full and
free access during normal business hours to all the books, correspondence and
records of Debtor, and NBD or its representatives may examine the same, take
extracts therefrom and make photocopies thereof, and Debtor agrees to render to
NBD, at Debtor's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. NBD and its representatives, will at
all times also have the right to enter into and upon any premises where any of
the Inventory or Equipment is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein. NBD will take
reasonable steps to maintain the confidentiality of information obtained by
them pursuant to this subsection, except as required by law.
(j) Maintenance. Debtor will keep the Equipment in good
repair and operating condition.
6. Sale and Collections.
(a) Sale of Inventory. So long as no Event of Default
has occurred and is continuing, Debtor may sell or otherwise dispose of
Inventory in the ordinary course of Debtor's business.
(b) Proceeds of Collateral. After an Event of Default
and upon the written request of NBD, all full and partial payments on any
Collateral thereafter received by Debtor shall immediately be (i) delivered by
Debtor to NBD in their original form, except for endorsement where necessary,
to be held as cash collateral in a special bank account (the "Collateral
Account") maintained by NBD subject to withdrawal by NBD only or (ii) deposited
in accounts at other financial institutions acceptable to NBD and thereafter be
transferred directly to the Collateral Account. Until such payments are so
delivered or deposited and transferred, Debtor shall hold such payments in
trust for and as NBD's property and Debtor shall not commingle such payments
with any of Debtor's own funds. Immediately upon receipt of any funds in the
Collateral Account from a depository bank which participates in Debtor's cash
management program acceptable to NBD or deposit in the Collateral Account for
collection of other checks and instruments and NBD, in its sole discretion,
may: (A) hold funds therein; (B) apply funds on deposit therein to the payment
of the Secured Obligations in such order as NBD may elect; or (C) transfer
funds on deposit therein to the Debtor's general checking account with NBD for
its general use; provided, however, that any application to the Secured
Obligations is conditioned upon final payment of any check or other instrument.
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<PAGE> 8
(c) Verification. NBD may verify Collateral in any
reasonable manner and Debtor shall assist NBD in so doing. Anything contained
herein to the contrary notwithstanding, NBD may at any time during the
continuance of an Event of Default enforce collection of, settle, compromise,
extend or renew the indebtedness of such account debtors. NBD may also,
notwithstanding any other provision of this Agreement, notify the bailee of any
Inventory of its security interest therein.
7. Settlement of Insurance Claims. In the event of any casualty
to the Equipment or other Collateral which is covered by insurance, Debtor
authorizes NBD, if default has occurred under the Loan Agreement, to settle any
claim or proceed to suit and judgment for all insurance proceeds arising out of
the casualty to the Equipment or other Collateral, and, whether or not default
has occurred under the Loan Agreement, upon receipt of payment of such proceeds
Lender, at its option, may apply all payments to the Secured Obligations in any
order NBD determines or to the restoration or replacement of the Equipment or
other Collateral.
8. NBD's Appointment as Attorney-in-Fact.
(a) General Appointment. Debtor hereby irrevocably
constitutes and appoints NBD, with power of substitution to appoint any person
to act on its behalf where such appointment is required by applicable law, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of Debtor and in the name of Debtor or in its own name,
from time to time in NBD's discretion, for the purpose of carrying out the
terms of this Agreement, on behalf of Debtor, to do the following:
(i) to ask, demand, collect, receive and give
acquittances and receipts for any and all monies due and to become due
under any Contract or Account and, in the name of Debtor or its own
name or otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the
payment of monies due under any Contract or Account and to file any
claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by NBD for the purpose of
collecting any and all such monies due under any Contract or Account
whenever payable;
(ii) to pay or discharge taxes, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Agreement and to pay all or any part of the premiums
therefor and the costs thereof; and
(iii) (A) to direct any party liable for any payment under
any of the Collateral to make payment of any and all monies due and to
become due thereunder directly to NBD or as NBD shall direct; (B) to
receive payment of and give receipt for any and all monies, claims and
other amounts due and to become due at any time in respect of or
arising out of any Collateral; (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments,
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<PAGE> 9
verifications and notices in connection with Accounts and other
documents relating to the Collateral; (D) to commence and prosecute
any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any thereof and to
enforce any other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against Debtor with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action
or proceeding described above and, in connection therewith, to give
such discharges or releases as NBD may deem appropriate; and (G) to
do, at NBD's option and Debtor's expense, at any time, or from time
to time, all acts and things which NBD deems necessary or desirable to
protect, preserve or realize upon the Collateral and NBD's security
interest therein, in order to effect the intent of this Agreement, all
as fully and effectively as Debtor might do.
This power of attorney is a power coupled with an interest and
shall be irrevocable until the Lien Termination Date.
(b) Duties of NBD. The powers conferred on NBD hereunder
are solely to protect its interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. NBD shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers
and neither NBD nor any of its officers, directors, employees or agents shall
be responsible to Debtor for any act or failure to act, except for its own
gross negligence or willful misconduct.
9. Performance by NBD of Debtor's Obligations. If Debtor fails
to perform or comply with any of its agreements contained herein and NBD, as
provided for by the terms of this Agreement, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the costs and
expenses of NBD incurred in connection with such performance or compliance,
together with interest thereon at the default rate provided for in the Loan
Agreement, shall be payable by Debtor to NBD on demand and shall constitute
Secured Obligations secured hereby.
10. Proceeds as Collateral. During the continuance of an Event of
Default, any and all such Proceeds received by NBD (whether from Debtor or
otherwise) may, in the sole discretion of NBD, be held by NBD as collateral
security for, or then or at any time thereafter applied in whole or in part by
NBD, against all or any part of the Secured Obligations in the manner provided
in Section 13. Any balance of such payments held by NBD and remaining after
payment in full of all the Secured Obligations shall be paid over to Debtor in
the manner provided in Section 20.
11. Events of Default. The occurrence of an Event of Default
under the Loan Agreement shall be deemed an Event of Default hereunder.
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<PAGE> 10
12. Remedies.
(a) General. If an Event of Default shall occur and be
continuing, NBD may exercise in addition to all other rights and remedies
granted to it in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the Code. Without limiting the generality of
the foregoing, Debtor expressly agrees that in any such event NBD may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, or otherwise dispose of and
deliver such Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange or broker's board or at any of NBD's offices or elsewhere at such
prices as it may deem best for cash or on credit or for future delivery without
assumption of any credit risk. NBD will have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of such Collateral so sold, free of
any right or equity of redemption in Debtor which right or equity is hereby
waived or released. Debtor further agrees, at NBD's request, to assemble the
Collateral, make it available to NBD, as requested, at places which NBD shall
reasonably select, whether at Debtor's premises or elsewhere, at Debtor's sole
cost and expense. NBD shall pay over the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any or all of the Collateral or in any
way relating to the rights of NBD hereunder, including, without limitation,
attorneys' fees and legal expenses, to NBD for application by them to the
payment in whole or in part of the Secured Obligations, in the manner provided
in Section 13, and only after so paying over such net proceeds and after the
payment by NBD of any other amount required by any provision of law, including
Section 9-504(l)(c) of the Code, will NBD be required to account for the
surplus, if any, to Debtor. To the extent permitted by applicable law, Debtor
waives all claims, damages, and demands against NBD arising out of the
repossession, retention or sale of the Collateral. Debtor agrees that NBD need
not give more than ten days' notice of the time and place of any public sale or
of the time after which a private sale may take place and that such notice is
reasonable notification of such matters. Debtor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which NBD are entitled, Debtor also being
liable for the fees of any attorneys employed by NBD to collect such
deficiency.
(b) Costs. Debtor also agrees to pay all costs of NBD,
including, without limitation, attorneys' fees and legal expenses, incurred
with respect to the collection of any of the Secured Obligations and the
enforcement by NBD of any of its rights hereunder.
13. Application of Proceeds.
(a) Payment of Expenses. All monies collected by NBD
upon any sale or other disposition of the Collateral, together with all other
monies received by NBD hereunder, shall first be applied to the payment of all
costs and expenses incurred by NBD in connection with such sale, the delivery
of the Collateral or the collection of any such monies (including, without
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limitation, attorneys' fees and expenses) and the balance of such monies (the
"Remaining Proceeds") shall be applied by NBD as required below.
(b) Payment of Obligations. Prior to the Lien
Termination Date, the Remaining Proceeds shall be applied to satisfy the
Obligations in accordance with the Loan Agreement.
(c) Payment of Other Secured Obligations. Prior to the
Lien Termination Date, any Remaining Proceeds not otherwise applied pursuant to
Section 13(b) shall be applied to satisfy any other Secured Obligations.
(d) Payment to Debtor. At the Lien Termination Date, any
Remaining Proceeds of the Collateral not otherwise applied pursuant to this
Section 13, shall in each case be paid over to Debtor pursuant to the terms of
Section 20, except as otherwise required by law.
14. Limitation on NBD's Duty in Respect of Collateral. NBD's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as NBD deals with similar property
for its own account. Neither NBD nor any of its directors, officers, employees
or agents shall be liable for failure to demand, collect or realize upon all or
any part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
Debtor or otherwise.
15. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Section Headings, etc. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof. All references to Sections, Schedules and Exhibits are to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified.
18. No Waiver; Cumulative Remedies. NBD will not by any act
(except a written instrument pursuant to Section 19 hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Event of Default or in any breach of the terms and
conditions hereof. A waiver by NBD of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which NBD would
otherwise have had on any future occasion. No failure to exercise nor any
delay in exercising on the part of NBD any right, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder
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preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive
of any rights and remedies provided by the Loan Agreement, any other Loan
Document or applicable law.
19. Waivers and Amendments; Successors and Assigns; Governing Law.
None of the terms or provisions of this Agreement may be waived, altered,
modified or amended except by a written instrument, duly executed by Debtor and
NBD. This Agreement and all obligations of Debtor hereunder shall be binding
upon the successors and assigns of Debtor, and shall, together with the rights
and remedies of NBD hereunder, inure to the benefit of NBD and its successors
and assigns; provided that Debtor may not assign or transfer any of its rights
or obligations hereunder without the prior written consent of NBD. This
Agreement shall be governed by, and be construed and interpreted in accordance
with, the internal laws (and not the laws of conflict) of the State of
Michigan.
20. Termination; Release.
(a) Releases Prior to Termination Date. Collateral may
be released in whole or in part only with the consent of NBD; provided that,
without NBD's consent, (i) Debtor may sell Inventory in the ordinary course of
business and (ii) Collateral may be released pursuant to the terms of the Loan
Agreement. Upon any such release of Collateral, NBD shall, at the request and
expense of Debtor, release the Collateral being sold and execute and deliver to
Debtor a proper instrument or instruments acknowledging the release of such
Collateral from this Agreement, and will duly assign, transfer and deliver to
Debtor (without recourse and without any representation or warranty) the
Collateral being sold as described above.
(b) Lien Termination Date. Upon the irrevocable payment
by Debtor of all the Obligations under the Loan Documents including, without
limitation, the repayment in full of all loans made to Debtor or Parent, the
termination of any guaranties given by Debtor in favor of NBD and the
termination of any obligation on the part of the NBD to make further loans
under the Loan Agreement (the "Lien Termination Date"), this Agreement shall
terminate, and NBD, at the request and expense of Debtor, will promptly execute
and deliver to Debtor a proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement, and will duly assign, transfer
and deliver to Debtor (without recourse and without any representation or
warranty) such of the Collateral as may be in the possession of NBD and which
has not theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any monies at the time held by NBD hereunder.
(c) Certificate of Debtor. At any time that Debtor
desires that Collateral be released as provided in the foregoing Sections 20(a)
and (b), it shall deliver to NBD a certificate signed by a senior or financial
officer of Debtor stating that the release of the respective Collateral is
permitted pursuant to Section 20(a) or (b), as the case may be.
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21. Notices. All notices, requests and other communications that
are required or may be given under this Agreement shall be in writing, and
shall be deemed to have been given on the date of delivery, if delivered by
hand, telecopy or courier, or two Business Days after mailing, if mailed by
certified or registered mail, postage prepaid, return receipt requested,
addressed as set forth below (which addresses may be changed, from time to
time, by notice given in the manner provided in this Section):
If to Debtor: Medar, Inc.
38700 Grand River Ave.
Farmington Hills, MI 48335
Telecopy: 810/477-8897
Attention: Richard Current
If to NBD: NBD Bank
235 Sheldon Rd.
Plymouth, Michigan 48170
Telecopy: (313) 454-7723
Attention: Glenn Ansiel
22. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, Debtor and NBD have caused this Agreement to be
executed by their duly authorized officers on the date first set forth above.
MEDAR, INC.,
a Michigan corporation
By: /s/ Charles Drake
----------------------------------------
Its: President
------------------------------
NBD BANK
By: /s/ Glenn Ansiel
----------------------------------------
Its: Loan Officer
------------------------------
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SCHEDULE I
Medar, Inc.
Places of Business, Trade Names
Names we do business under:
Integral
Integral Vision-AID
Medar
Business/Inventory
Medar, Inc./Inventory Integral Vision-AID
38700 Grand River Avenue 1708 N. Westwood
Farmington Hills, Michigan 48335 Toledo, Ohio 43607
Medar, Inc.
24775 Crestview Court
Farmington Hills, Michigan 48335
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<PAGE> 1
EXHIBIT 10.27
GENERAL SECURITY AGREEMENT
This General Security Agreement (this "Agreement"), dated as of March
29, 1996, is made by Integral Vision-AID, Inc., an Ohio corporation ("Debtor"),
in favor of NBD Bank ("NBD").
Recitals
A. Debtor (formerly known as Automatic Inspection Devices, Inc.)
and its affiliates, Medar, Inc. and Integral Vision Ltd. (collectively such
affiliates and Debtor are referred to as the "Borrowers") and NBD have entered
into a Revolving Credit and Loan Agreement dated August 10, 1995, as amended by
a First Amendment to Revolving Credit and Loan Agreement date October 12, 1995
and a Second Amendment to Revolving Credit and Loan Agreement dated October 31,
1995 (as amended from time to time, the "Loan Agreement") pursuant to which NBD
has agreed to make certain credit facilities available to the Borrowers,
including, without limitation, a revolving line of credit in the maximum
principal amount of $10,000,000, and various term loans, all as more fully
described in the Loan Agreement.
B. The Borrowers have requested that NBD increase the amount of
the line of credit to Borrower and make certain revisions to the financial
covenants in the Loan Agreement and NBD has agreed that it will make such
changes pursuant to the terms and conditions of a Third Amendment to Revolving
Credit and Loan Agreement dated the date hereof ("Third Amendment").
C. It is a condition precedent to NBD to enter into the Third
Amendment that Debtor execute and deliver this Agreement to NBD.
THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor hereby agrees with NBD as follows:
1. Defined Terms. In addition to those terms defined elsewhere
in this Agreement, terms defined in the Loan Agreement shall have their
defined meanings when used herein (unless otherwise defined herein) and the
following terms shall have the following meanings, unless the context otherwise
requires:
"Accounts" means any "account" or "chattel paper," as such terms are
defined in Sections 9-106 and 9-105, respectively, of the Code, now or
hereafter owned by Debtor, and shall also mean and include (i) all accounts
receivable, contract rights, book debts, notes, drafts, instruments, documents,
acceptances, payments under leases and other forms of obligations, now owned or
hereafter received or acquired by or belonging or owing to Debtor (including
under any trade names, styles or divisions thereof) whether arising out of
goods sold or leased or services rendered by it or from any other transaction,
whether or not the same involves the sale of goods or services by Debtor
(including, without limitation, any such obligation which might be
characterized as an account, contract right, general intangible or chattel
paper under the Uniform Commercial Code in effect in any jurisdiction); (ii)
all of Debtor's rights in, to and under all
<PAGE> 2
purchase orders now owned or hereafter received or acquired by it for goods or
services, and all of Debtor's rights to any goods represented by any of the
foregoing (including returned or repossessed goods and unpaid sellers' rights
of rescission, replevin, reclamation and stopping in transit); and (iii) all
monies due to or to become due to Debtor under all contracts for the sale or
lease of goods or the performance of services by it (whether or not yet earned
by performance on the part of Debtor) now in existence or hereafter arising,
including, without limitation, the right to receive the proceeds of such
purchase orders and contracts and all collateral security and guarantees of any
kind given by any Person with respect to any of the foregoing.
"Chattel Paper" means all "chattel paper" as such term is defined in
Section 9-105(b) of the Code.
"Code" means the Uniform Commercial Code as in effect on the date
hereof in the State of Michigan.
"Collateral" has the meaning provided in Section 2.
"Contract Rights" means all rights of Debtor (including, without
limitation, all rights to payment) under each Contract.
"Contract(s)" means, collectively, all licensing agreements and any
and all other contracts, instruments, undertakings, documents or other
agreements in or under which Debtor may now or hereafter have any right, title
or interest and which pertain to the lease, sale or other disposition by Debtor
of any Inventory or Equipment, fixtures, real property or any interest in real
property, as any of the same may from time to time be amended, supplemented or
otherwise modified.
"Equipment" means any "equipment," as such term is defined in Section
9-109(2) of the Code, now or hereafter owned by Debtor, and shall also mean and
include all machinery, equipment, vehicles, furnishings and fixtures (as such
term is defined in Section 9-313(a) of the Code) now owned or hereafter
acquired by Debtor, including, without limitation, all items of machinery and
equipment of any kind, nature and description, whether affixed to real property
or not, as well as all additions to, substitutions for, replacements of or
accessions to any of the foregoing items and all attachments, components, parts
(including spare parts) and accessories whether installed thereon or affixed
thereto.
"General Intangibles" means all "general intangibles," as such term is
defined in Section 9-106 of the Code, now or hereafter owned by Debtor,
including, without limitation, all tax refunds, customer lists, rights in
intellectual property, goodwill, trade names, service marks, trade secrets,
patents, trademarks, copyrights, applications therefor, permits and licenses
now owned or hereafter acquired by Debtor, but excluding items described in the
definition of "Accounts."
"Instruments" means all "instruments," as such term is defined in
Section 9-105(i) of the Code.
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"Inventory" means any "inventory," as such term is defined in Section
9-109(4) of the Code, wherever located, now owned or hereafter acquired by
Debtor or in which Debtor now has or hereafter may acquire any right, title or
interest including, without limitation, all goods and other personal property
now or hereafter owned by Debtor which are leased or are held for sale or lease
or are furnished or are to be furnished under a contract of service or which
constitute raw materials, work in process or materials used or consumed or to
be used or consumed in Debtor's business, or in the processing, packaging or
shipping of the same, and all finished goods.
"Lien Termination Date" has the meaning provided in Section 20.
"Obligations" has the meaning provided in the Loan Agreement.
"Proceeds" shall have the meaning provided it under the Code and, in
any event, shall include, but not be limited to, (i) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to Debtor from time to
time with respect to any of the Collateral, (ii) any and all payments (in any
form whatsoever) made or due and payable to Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency (or any Person acting under color of governmental
authority) and (iii) any and all other amounts from time to time paid or
payable under or in connection with any of the Collateral.
"Requirement of Law" shall mean, as to any Person, the charter and
by-laws or other organizational or governing documents of such Person, and any
material law, treaty, rule or regulation or determination of arbitration or a
court or other governmental authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
"Secured Obligations" shall have the meaning provided in Section 2(a).
2. Grant of Security Interest.
(a) General. As collateral security for the prompt and
complete payment and performance when due (whether at the stated maturity, by
acceleration or otherwise) of all the Obligations and any other indebtedness or
obligation owed by Debtor or the other Borrowers to NBD (collectively, with the
Obligations, the "Secured Obligations"), and in order to induce NBD to enter
into the Loan Agreement and make loans to Debtor and the other Borrowers in
accordance with the terms thereof, Debtor hereby grants to NBD a continuing
security interest in all of the following property now owned, or at any time
hereafter acquired, by Debtor or in which Debtor now has or at any time in the
future may acquire any right, title or interest (all of which is hereinafter
collectively referred to as the "Collateral"):
(i) all existing and future Contracts;
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(ii) all existing and future Accounts, Contract Rights and
General Intangibles (including, without limitation, (a) all money due
and to become due under any Contract, (b) any damages arising out of
or for breach or default in respect of any Contract or Account, (c)
all other amounts from time to time paid or payable under or in
connection with any Contract or Account, and (d) the right of Debtor
to terminate any Contract or to perform or exercise all remedies
thereunder);
(iii) all existing and future Equipment;
(iv) all existing and future Inventory; and
(v) to the extent not otherwise included, all Proceeds
and products of any or all of the foregoing.
(b) Business Records. In addition to the grant of the
security interest under subsection 2(a), Debtor hereby grants to NBD a Lien and
first security interest in all of Debtor's books and records pertaining to the
Collateral, including without limitation, all books of accounts, ledgers,
computer software, computer printouts and other computerized records and
cabinets in which there are reflected or maintained the Collateral in which NBD
has a security interest, or which relate to any other Collateral NBD may hold
from Debtor and all supporting evidence and documents relating to such security
in the form of written applications, credit information, account cards, payment
records, correspondence, delivery and installation certificates, invoice
copies, delivery receipts, notes and other evidences of indebtedness, insurance
certificates and the like. For convenience, these books, records and documents
are called "Business Records." The Business Records, presently included in
this Agreement, are described as follows:
accounts receivable subsidiary ledger including unpaid invoice
file, cash receipts journal, cash disbursements journal and
filing cabinets containing customer orders, correspondence,
paid invoice files and any other books and records, filing
cabinets, or places of storage of data and information,
including all computer storage facilities, records and
software usually located at Debtor's places of business
identified on Schedule I or elsewhere.
3. Rights of NBD; Limitations on NBD's Obligations. It is
expressly agreed by Debtor that, anything herein to the contrary
notwithstanding, Debtor shall remain liable under each of the Accounts and
Contracts to observe and perform all the conditions and obligations to be
observed and performed by it thereunder, all in accordance with the terms of
any agreement giving rise to such Account and in accordance with the terms and
provisions of each such Contract. NBD has no obligation or liability under any
Account (or agreement giving rise thereto) or under any Contract by reason of
or arising out of this Agreement or its assignment to NBD or the receipt by NBD
of any payment relating to any Account or Contract pursuant hereto, nor will
NBD be required or obligated in any manner to perform or fulfill any of the
obligations of Debtor under or pursuant to any Account (or any agreement giving
rise thereto)
4
<PAGE> 5
or under or pursuant to any Contract, to make any payment, to make any inquiry
as to the nature or the sufficiency of any payment received by any of them or
as to the sufficiency of any performance by any party under any Account (or any
agreement giving rise thereto) or under any Contract, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to any of them or to which any of
them may be entitled at any time or times.
4. Representations and Warranties. Debtor hereby represents and
warrants to NBD that:
(a) Title; No Other Security Interests. Except for the
security interest granted hereunder to NBD and Permitted Liens under the Loan
Agreement, Debtor owns each item of the Collateral free and clear of any and
all security interests or claims of others.
(b) Addresses. The Debtor's chief executive office and
the place where its records concerning the Accounts and other Collateral are
kept and the other addresses of Debtor's business, if any, are set forth on
Schedule I hereto. The states in which Collateral is located, and Debtor's
chief executive office and principal place of business in each state, shall not
be changed without prior written notice to NBD, but the Collateral, wherever
located, is covered by this Agreement. Debtor shall immediately advise NBD in
writing of any change in its name, address or form of organization.
(c) Trade Names. Any and all trade names under which
Debtor transacts any part of its business, and all former names of Debtor, are
set forth on Schedule I hereto.
(d) Accuracy of Information. All information,
certificates or statements given to NBD pursuant to this Agreement shall be
true and complete in all material respects, when given.
5. Covenants. Debtor covenants and agrees with NBD that from and
after the date of this Agreement until the Secured Obligations are fully
satisfied:
(a) Further Documentation; Pledge of Instruments. At
any time and from time to time, upon the written request of NBD, and at the
sole expense of Debtor, Debtor will promptly and duly execute and deliver any
and all such further instruments and documents and take such further action as
NBD may reasonably request for the purpose of obtaining the full benefits of
this Agreement and of the rights and powers herein granted, including, without
limitation, the filing of any financing or continuation statements under the
Uniform Commercial Code in effect in any jurisdiction with respect to the
security interests granted hereby. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing statement for
filing in any jurisdiction.
5
<PAGE> 6
(b) Maintenance of Records. If an Event of Default has
occurred and is continuing and if requested by NBD, Debtor will mark the
Business Records pertaining to the Collateral to evidence this Agreement and
the security interests granted hereby.
(c) Indemnification. Debtor agrees to pay, and to save
NBD harmless from, any and all liabilities, costs and expenses (including,
without limitation, legal fees and expenses) (i) with respect to, or resulting
from, any delay in paying any and all excise, sales or other taxes which may be
payable or determined to be payable with respect to any of the Collateral, (ii)
with respect to, or resulting from, any delay in complying with any Requirement
of Law applicable to any of the Collateral or (iii) in connection with any of
the transactions contemplated by this Agreement. In any suit, proceeding or
action brought by NBD under any Account or Contract for any sum owing
thereunder, or to enforce any provisions of such Account or Contract, Debtor
will save, indemnify and keep NBD harmless from and against all expense, loss
or damage suffered by reason of any defense, set-off, counterclaim, recoupment
or reduction or liability whatsoever of the account debtor or obligor
thereunder, arising out of a breach by Debtor of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to or in favor of such account debtor or obligor or its successors from Debtor,
and all such obligations of Debtor shall be and remain enforceable against and
only against Debtor and shall not be enforceable against NBD.
(d) Payment of Obligations. Debtor will pay promptly
when due, all taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits therefrom, as well
as all claims of any kind (including, without limitation, claims for labor,
materials and supplies) against or with respect to the Collateral, except that
no such charge need be paid if and to the extent not required to be paid
pursuant to the Loan Agreement.
(e) Limitation on Security Interests on Collateral.
Debtor will not create, incur or permit to exist, and will defend the
Collateral against, and will take such other action as is necessary to remove,
any security interest or claim on or to the Collateral other than the security
interests created hereby, and other than Permitted Liens pursuant to the Loan
Agreement, and will defend the right, title and interest of NBD in and to any
of the Collateral against the claims and demands of all Persons whomsoever.
Debtor will not sell or otherwise dispose of any type or item of Collateral
except as expressly permitted by this Agreement or the Loan Agreement.
(f) Limitations on Modifications of Contracts, Accounts;
No Waivers, Extensions. Other than in the ordinary course of business, Debtor
will not (i) amend, modify, terminate or waive any provision of any Contract or
any agreement giving rise to an Account in any manner which might materially
adversely affect the value of such Contract or Account as Collateral, or (ii)
fail to exercise promptly and diligently each and every right which it may have
under each Contract and each agreement giving rise to an Account (other than
any right of termination) in any manner which could materially adversely affect
the value of such Contract.
6
<PAGE> 7
(g) Limitations on Discounts, Compromises, Extension of
Accounts. Other than in the ordinary course of business, Debtor will not grant
any extension of the time of payment of any of the Accounts, compromise,
compound or settle the same for less than the full amount thereof, release,
wholly or partially, any person liable for the payment thereof or allow any
credit or discount whatsoever thereon.
(h) Maintenance of Insurance. Debtor will maintain
insurance policies as required by the Loan Agreement.
(i) Right of Inspection. NBD at all times have full and
free access during normal business hours to all the books, correspondence and
records of Debtor, and NBD or its representatives may examine the same, take
extracts therefrom and make photocopies thereof, and Debtor agrees to render to
NBD, at Debtor's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto. NBD and its representatives, will at
all times also have the right to enter into and upon any premises where any of
the Inventory or Equipment is located for the purpose of inspecting the same,
observing its use or otherwise protecting its interests therein. NBD will take
reasonable steps to maintain the confidentiality of information obtained by
them pursuant to this subsection, except as required by law.
(j) Maintenance. Debtor will keep the Equipment in good
repair and operating condition.
6. Sale and Collections.
(a) Sale of Inventory. So long as no Event of Default
has occurred and is continuing, Debtor may sell or otherwise dispose of
Inventory in the ordinary course of Debtor's business.
(b) Proceeds of Collateral. After an Event of Default
and upon the written request of NBD, all full and partial payments on any
Collateral thereafter received by Debtor shall immediately be (i) delivered by
Debtor to NBD in their original form, except for endorsement where necessary,
to be held as cash collateral in a special bank account (the "Collateral
Account") maintained by NBD subject to withdrawal by NBD only or (ii) deposited
in accounts at other financial institutions acceptable to NBD and thereafter be
transferred directly to the Collateral Account. Until such payments are so
delivered or deposited and transferred, Debtor shall hold such payments in
trust for and as NBD's property and Debtor shall not commingle such payments
with any of Debtor's own funds. Immediately upon receipt of any funds in the
Collateral Account from a depository bank which participates in Debtor's cash
management program acceptable to NBD or deposit in the Collateral Account for
collection of other checks and instruments and NBD, in its sole discretion,
may: (A) hold funds therein; (B) apply funds on deposit therein to the payment
of the Secured Obligations in such order as NBD may elect; or (C) transfer
funds on deposit therein to the Debtor's general checking account with NBD for
its general use; provided, however, that any application to the Secured
Obligations is conditioned upon final payment of any check or other instrument.
7
<PAGE> 8
(c) Verification. NBD may verify Collateral in any
reasonable manner and Debtor shall assist NBD in so doing. Anything contained
herein to the contrary notwithstanding, NBD may at any time during the
continuance of an Event of Default enforce collection of, settle, compromise,
extend or renew the indebtedness of such account debtors. NBD may also,
notwithstanding any other provision of this Agreement, notify the bailee of any
Inventory of its security interest therein.
7. Settlement of Insurance Claims. In the event of any casualty
to the Equipment or other Collateral which is covered by insurance, Debtor
authorizes NBD, if default has occurred under the Loan Agreement, to settle any
claim or proceed to suit and judgment for all insurance proceeds arising out of
the casualty to the Equipment or other Collateral, and, whether or not default
has occurred under the Loan Agreement, upon receipt of payment of such proceeds
Lender, at its option, may apply all payments to the Secured Obligations in any
order NBD determines or to the restoration or replacement of the Equipment or
other Collateral.
8. NBD's Appointment as Attorney-in-Fact.
(a) General Appointment. Debtor hereby irrevocably
constitutes and appoints NBD, with power of substitution to appoint any person
to act on its behalf where such appointment is required by applicable law, as
its true and lawful attorney-in-fact with full irrevocable power and authority
in the place and stead of Debtor and in the name of Debtor or in its own name,
from time to time in NBD's discretion, for the purpose of carrying out the
terms of this Agreement, on behalf of Debtor, to do the following:
(i) to ask, demand, collect, receive and give
acquittances and receipts for any and all monies due and to become due
under any Contract or Account and, in the name of Debtor or its own
name or otherwise, to take possession of and endorse and collect any
checks, drafts, notes, acceptances or other instruments for the
payment of monies due under any Contract or Account and to file any
claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by NBD for the purpose of
collecting any and all such monies due under any Contract or Account
whenever payable;
(ii) to pay or discharge taxes, security interests or
other encumbrances levied or placed on or threatened against the
Collateral, to effect any repairs or any insurance called for by the
terms of this Agreement and to pay all or any part of the premiums
therefor and the costs thereof; and
(iii) (A) to direct any party liable for any payment under
any of the Collateral to make payment of any and all monies due and to
become due thereunder directly to NBD or as NBD shall direct; (B) to
receive payment of and give receipt for any and all monies, claims and
other amounts due and to become due at any time in respect of or
arising out of any Collateral; (C) to sign and endorse any invoices,
freight or express bills, bills of lading, storage or warehouse
receipts, drafts against debtors, assignments,
8
<PAGE> 9
verifications and notices in connection with Accounts and other
documents relating to the Collateral; (D) to commence and prosecute
any suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any thereof and to
enforce any other right in respect of any Collateral; (E) to defend
any suit, action or proceeding brought against Debtor with respect to
any Collateral; (F) to settle, compromise or adjust any suit, action
or proceeding described above and, in connection therewith, to give
such discharges or releases as NBD may deem appropriate; and (G) to
do, at NBD's option and Debtor's expense, at any time, or from time
to time, all acts and things which NBD deems necessary or desirable to
protect, preserve or realize upon the Collateral and NBD's security
interest therein, in order to effect the intent of this Agreement, all
as fully and effectively as Debtor might do.
This power of attorney is a power coupled with an interest and
shall be irrevocable until the Lien Termination Date.
(b) Duties of NBD. The powers conferred on NBD hereunder
are solely to protect its interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. NBD shall be accountable only for
amounts that it actually receives as a result of the exercise of such powers
and neither NBD nor any of its officers, directors, employees or agents shall
be responsible to Debtor for any act or failure to act, except for its own
gross negligence or willful misconduct.
9. Performance by NBD of Debtor's Obligations. If Debtor fails
to perform or comply with any of its agreements contained herein and NBD, as
provided for by the terms of this Agreement, shall itself perform or comply, or
otherwise cause performance or compliance, with such agreement, the costs and
expenses of NBD incurred in connection with such performance or compliance,
together with interest thereon at the default rate provided for in the Loan
Agreement, shall be payable by Debtor to NBD on demand and shall constitute
Secured Obligations secured hereby.
10. Proceeds as Collateral. During the continuance of an Event of
Default, any and all such Proceeds received by NBD (whether from Debtor or
otherwise) may, in the sole discretion of NBD, be held by NBD as collateral
security for, or then or at any time thereafter applied in whole or in part by
NBD, against all or any part of the Secured Obligations in the manner provided
in Section 13. Any balance of such payments held by NBD and remaining after
payment in full of all the Secured Obligations shall be paid over to Debtor in
the manner provided in Section 20.
11. Events of Default. The occurrence of an Event of Default
under the Loan Agreement shall be deemed an Event of Default hereunder.
9
<PAGE> 10
12. Remedies.
(a) General. If an Event of Default shall occur and be
continuing, NBD may exercise in addition to all other rights and remedies
granted to it in this Agreement and in any other instrument or agreement
securing, evidencing or relating to the Secured Obligations, all rights and
remedies of a secured party under the Code. Without limiting the generality of
the foregoing, Debtor expressly agrees that in any such event NBD may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and may forthwith sell, lease, assign, or otherwise dispose of and
deliver such Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange or broker's board or at any of NBD's offices or elsewhere at such
prices as it may deem best for cash or on credit or for future delivery without
assumption of any credit risk. NBD will have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of such Collateral so sold, free of
any right or equity of redemption in Debtor which right or equity is hereby
waived or released. Debtor further agrees, at NBD's request, to assemble the
Collateral, make it available to NBD, as requested, at places which NBD shall
reasonably select, whether at Debtor's premises or elsewhere, at Debtor's sole
cost and expense. NBD shall pay over the net proceeds of any such collection,
recovery, receipt, appropriation, realization or sale, after deducting all
reasonable costs and expenses of every kind incurred therein or incidental to
the care, safekeeping or otherwise of any or all of the Collateral or in any
way relating to the rights of NBD hereunder, including, without limitation,
attorneys' fees and legal expenses, to NBD for application by them to the
payment in whole or in part of the Secured Obligations, in the manner provided
in Section 13, and only after so paying over such net proceeds and after the
payment by NBD of any other amount required by any provision of law, including
Section 9-504(l)(c) of the Code, will NBD be required to account for the
surplus, if any, to Debtor. To the extent permitted by applicable law, Debtor
waives all claims, damages, and demands against NBD arising out of the
repossession, retention or sale of the Collateral. Debtor agrees that NBD need
not give more than ten days' notice of the time and place of any public sale or
of the time after which a private sale may take place and that such notice is
reasonable notification of such matters. Debtor shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which NBD are entitled, Debtor also being
liable for the fees of any attorneys employed by NBD to collect such
deficiency.
(b) Costs. Debtor also agrees to pay all costs of NBD,
including, without limitation, attorneys' fees and legal expenses, incurred
with respect to the collection of any of the Secured Obligations and the
enforcement by NBD of any of its rights hereunder.
13. Application of Proceeds.
(a) Payment of Expenses. All monies collected by NBD
upon any sale or other disposition of the Collateral, together with all other
monies received by NBD hereunder, shall first be applied to the payment of all
costs and expenses incurred by NBD in connection with such sale, the delivery
of the Collateral or the collection of any such monies (including, without
10
<PAGE> 11
limitation, attorneys' fees and expenses) and the balance of such monies (the
"Remaining Proceeds") shall be applied by NBD as required below.
(b) Payment of Obligations. Prior to the Lien
Termination Date, the Remaining Proceeds shall be applied to satisfy the
Obligations in accordance with the Loan Agreement.
(c) Payment of Other Secured Obligations. Prior to the
Lien Termination Date, any Remaining Proceeds not otherwise applied pursuant to
Section 13(b) shall be applied to satisfy any other Secured Obligations.
(d) Payment to Debtor. At the Lien Termination Date, any
Remaining Proceeds of the Collateral not otherwise applied pursuant to this
Section 13, shall in each case be paid over to Debtor pursuant to the terms of
Section 20, except as otherwise required by law.
14. Limitation on NBD's Duty in Respect of Collateral. NBD's sole
duty with respect to the custody, safekeeping and physical preservation of the
Collateral in its possession, under Section 9-207 of the Code or otherwise,
shall be to deal with it in the same manner as NBD deals with similar property
for its own account. Neither NBD nor any of its directors, officers, employees
or agents shall be liable for failure to demand, collect or realize upon all or
any part of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
Debtor or otherwise.
15. Powers Coupled with an Interest. All authorizations and
agencies herein contained with respect to the Collateral are irrevocable and
powers coupled with an interest.
16. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
17. Section Headings, etc. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof. All references to Sections, Schedules and Exhibits are to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified.
18. No Waiver; Cumulative Remedies. NBD will not by any act
(except a written instrument pursuant to Section 19 hereof), delay, indulgence,
omission or otherwise be deemed to have waived any right or remedy hereunder or
to have acquiesced in any Event of Default or in any breach of the terms and
conditions hereof. A waiver by NBD of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which NBD would
otherwise have had on any future occasion. No failure to exercise nor any
delay in exercising on the part of NBD any right, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder
11
<PAGE> 12
preclude any other or future exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are not exclusive
of any rights and remedies provided by the Loan Agreement, any other Loan
Document or applicable law.
19. Waivers and Amendments; Successors and Assigns; Governing Law.
None of the terms or provisions of this Agreement may be waived, altered,
modified or amended except by a written instrument, duly executed by Debtor and
NBD. This Agreement and all obligations of Debtor hereunder shall be binding
upon the successors and assigns of Debtor, and shall, together with the rights
and remedies of NBD hereunder, inure to the benefit of NBD and its successors
and assigns; provided that Debtor may not assign or transfer any of its rights
or obligations hereunder without the prior written consent of NBD. This
Agreement shall be governed by, and be construed and interpreted in accordance
with, the internal laws (and not the laws of conflict) of the State of
Michigan.
20. Termination; Release.
(a) Releases Prior to Termination Date. Collateral may
be released in whole or in part only with the consent of NBD; provided that,
without NBD's consent, (i) Debtor may sell Inventory in the ordinary course of
business and (ii) Collateral may be released pursuant to the terms of the Loan
Agreement. Upon any such release of Collateral, NBD shall, at the request and
expense of Debtor, release the Collateral being sold and execute and deliver to
Debtor a proper instrument or instruments acknowledging the release of such
Collateral from this Agreement, and will duly assign, transfer and deliver to
Debtor (without recourse and without any representation or warranty) the
Collateral being sold as described above.
(b) Lien Termination Date. Upon the irrevocable payment
by Debtor of all the Obligations under the Loan Documents including, without
limitation, the repayment in full of all loans made to Debtor or Parent, the
termination of any guaranties given by Debtor in favor of NBD and the
termination of any obligation on the part of the NBD to make further loans
under the Loan Agreement (the "Lien Termination Date"), this Agreement shall
terminate, and NBD, at the request and expense of Debtor, will promptly execute
and deliver to Debtor a proper instrument or instruments acknowledging the
satisfaction and termination of this Agreement, and will duly assign, transfer
and deliver to Debtor (without recourse and without any representation or
warranty) such of the Collateral as may be in the possession of NBD and which
has not theretofore been sold or otherwise applied or released pursuant to this
Agreement, together with any monies at the time held by NBD hereunder.
(c) Certificate of Debtor. At any time that Debtor
desires that Collateral be released as provided in the foregoing Sections 20(a)
and (b), it shall deliver to NBD a certificate signed by a senior or financial
officer of Debtor stating that the release of the respective Collateral is
permitted pursuant to Section 20(a) or (b), as the case may be.
12
<PAGE> 13
21. Notices. All notices, requests and other communications that
are required or may be given under this Agreement shall be in writing, and
shall be deemed to have been given on the date of delivery, if delivered by
hand, telecopy or courier, or two Business Days after mailing, if mailed by
certified or registered mail, postage prepaid, return receipt requested,
addressed as set forth below (which addresses may be changed, from time to
time, by notice given in the manner provided in this Section):
If to Debtor: Integral Vision-AID, Inc.
38700 Grand River Ave.
Farmington Hills, MI 48335
Telecopy: 810/477-8897
Attention: Richard Current
If to NBD: NBD Bank
235 Sheldon Rd.
Plymouth, Michigan 48170
Telecopy: (313) 454-7723
Attention: Glenn Ansiel
22. Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
IN WITNESS WHEREOF, Debtor and NBD have caused this Agreement to be
executed by their duly authorized officers on the date first set forth above.
INTEGRAL VISION-AID, INC.
By: /s/ Charles Drake
----------------------------------------
Its: President
------------------------------
NBD BANK
By: /s/ Glenn Ansiel
----------------------------------------
Its: Loan Officer
------------------------------
13
<PAGE> 14
SCHEDULE I
Medar, Inc.
Places of Business, Trade Names
Names we do business under:
Integral
Integral Vision-AID
Medar
Business/Inventory
Medar, Inc./Inventory Integral Vision-AID
38700 Grand River Avenue 1708 N. Westwood
Farmington Hills, Michigan 48335 Toledo, Ohio 43607
Medar, Inc.
24775 Crestview Court
Farmington Hills, Michigan 48335
14
<PAGE> 1
EXHIBIT 11
CALCULATION OF EARNINGS PER SHARE
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1996 1995
---------------------------
(In thousands, except per share data)
<S> <C> <C>
Per common share and common share equivalents:
Outstanding shares - beginning of period 8,712 7,976
Shares issued to acquire Integral Vision Ltd. 654
Weighted average of:
Exercise of stock options 79 18
Net effect of dilutions based on treasury stock method using
average market price 204 360
---------------------
TOTAL SHARES 8,995 9,008
=====================
Net earnings $ 327 $ 147
=====================
Net earnings per share $ .04 $ .02
=====================
Per common share assuming full dilution:
Outstanding shares - beginning of period 8,712 7,976
Shares issued to acquire Integral Vision Ltd. 654
Weighted average of:
Exercise of stock options 79 18
Net effect of dilutive stock options based on treasury stock
method using quarter-end market price if higher than average
market price 229 360
---------------------
TOTAL SHARES 9,020 9,008
=====================
Net earnings $ 327 $ 147
=====================
Net earnings per share $ .04 $ .02
=====================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 486
<SECURITIES> 0
<RECEIVABLES> 9,632
<ALLOWANCES> 390
<INVENTORY> 12,883
<CURRENT-ASSETS> 25,072
<PP&E> 15,557
<DEPRECIATION> 5,367
<TOTAL-ASSETS> 45,664
<CURRENT-LIABILITIES> 6,413
<BONDS> 16,615
0
0
<COMMON> 1,760
<OTHER-SE> 21,601
<TOTAL-LIABILITY-AND-EQUITY> 45,664
<SALES> 10,222
<TOTAL-REVENUES> 10,231
<CGS> 6,755
<TOTAL-COSTS> 6,755
<OTHER-EXPENSES> 2,884
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 325
<INCOME-PRETAX> 267
<INCOME-TAX> (60)
<INCOME-CONTINUING> 327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 327
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
