<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, 1998
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)
(248) 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, 1998 was 9,024,901.
1
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
----------------------------------
(Unaudited)
(In thousands)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 778 $ 831
Accounts receivable, less allowance of $400 9,397 10,682
Inventories 10,890 14,227
Costs and estimated earnings in excess of billings on incomplete
contracts 1,540 2,568
Other current assets 922 881
----------------------------------
TOTAL CURRENT ASSETS 23,527 29,189
PROPERTY, PLANT AND EQUIPMENT
Land and land improvements 377 377
Building and building improvements 6,317 6,317
Production and engineering equipment 3,906 3,791
Furniture and fixtures 1,025 1,022
Vehicles 858 875
Computer equipment 5,030 5,241
----------------------------------
17,513 17,623
Less accumulated depreciation 8,466 8,021
----------------------------------
9,047 9,602
OTHER ASSETS
Capitalized computer software development costs, net
of amortization 5,363 10,796
Patents 2,064 2,127
Other 1,377 1,444
----------------------------------
8,804 14,367
----------------------------------
$ 41,378 $ 53,158
==================================
</TABLE>
See accompanying notes.
2
<PAGE> 3
CONSOLIDATED BALANCE SHEETS - CONTINUED
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
------------------------------
(Unaudited)
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 3,812 $ 4,472
Employee compensation 998 1,110
Accrued and other liabilities 666 714
Current maturities of long term debt 18,470 19,415
------------------------------
TOTAL CURRENT LIABILITIES 23,946 25,711
LONG-TERM DEBT, less current maturities 4,757 4,892
STOCKHOLDERS' EQUITY
Common stock, without par value, stated value $.20 per share; 15,000,000
shares authorized; 9,024,901 shares issued and
outstanding 1,805 1,805
Additional paid-in capital 31,187 31,187
Retained-earnings deficit (20,373) (10,444)
Accumulated translation adjustment 56 7
------------------------------
TOTAL STOCKHOLDERS' EQUITY 12,675 22,555
------------------------------
$ 41,378 $ 53,158
==============================
</TABLE>
See accompanying notes.
3
<PAGE> 4
CONSOLIDATED STATEMENTS OF OPERATIONS
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1998 1997
---------------------------------------------
(Unaudited)
(In thousands, except per share data)
<S> <C> <C>
Net revenues $ 6,627 $ 10,211
Direct costs of sales 6,135 7,434
---------------------------------------------
492 2,777
Product restructuring charges (Note B) 6,973
---------------------------------------------
Gross Margin (Loss) (6,481) 2,777
Other costs and expenses:
Marketing 977 1,032
General and administrative 806 618
Research, development, and engineering 1,033 616
---------------------------------------------
2,816 2,266
Interest:
Expense 646 497
Income (14) (12)
---------------------------------------------
632 485
---------------------------------------------
Net Earnings (Loss) $ (9,929) $ 26
=============================================
Basic and diluted earnings (loss) per share $ (1.10) $ 0
=============================================
Weighted average number of shares of common stock and
common stock equivalents, where applicable 9,025 8,893
=============================================
</TABLE>
4
See accompanying notes.
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
MEDAR, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1998 1997
-----------------------------------
(Unaudited)
(In thousands)
OPERATING ACTIVITIES
<S> <C> <C>
Net earnings (loss) $ (9,929) $ 26
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities:
Depreciation and amortization 1,578 1,465
Changes in operating assets and liabilities 3,454 1,598
Restructuring charges 6,973
-----------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,076 3,089
INVESTING ACTIVITIES
Purchase of property and equipment (189) (28)
Investment in capitalized software and patents (909) (1,309)
-----------------------------------
NET CASH USED IN INVESTING ACTIVITIES (1,098) (1,337)
FINANCING ACTIVITIES
Decrease in long term debt (1,080) (1,178)
Effect of exchange rate changes on cash 49 114
-----------------------------------
INCREASE (DECREASE) IN CASH (53) 688
Cash at beginning of period 831 215
===================================
CASH AT END OF PERIOD $ 778 $ 903
===================================
</TABLE>
See accompanying notes.
5
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MEDAR, INC. AND SUBSIDIARIES
March 31, 1998
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, 1998
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1998. 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,
1997.
Note B - Restructuring of Operations
Early in the second quarter of 1998, management completed an evaluation of
competitive conditions and product offerings in the vision and welding
divisions. A charge of $6,973,000 was recorded as of March 31,1998 to give
effect to the impairment of assets identified in this review. The charge
consisted of $5,268,000 related to capitalized software development costs,
$1,402,000 related to inventory and $303,000 of other accruals.
Note C - 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:
MARCH 31 DECEMBER 31
1998 1997
----------------------------------------
(In thousands)
Raw materials $ 4,736 $ 6,076
Work-in-process 2,018 1,654
Finished goods 4,136 6,497
----------------------------------------
$ 10,890 $ 14,227
========================================
Note D - 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 D - 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
1998 1997
--------------------------------------
(In thousands)
<S> <C> <C>
Contract costs to date $ 6,022 $ 3,499
Estimated contract earnings 3,973 3,377
--------------------------------------
9,995 6,876
Less billings to date (8,455) (4,308)
--------------------------------------
Costs and estimated earnings in excess of billings
on incomplete contracts $ 1,540 $ 2,568
======================================
</TABLE>
Note E - Long Term Debt and Other Financing Arrangements
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
------------------------------
(In thousands)
<S> <C> <C>
Revolving note payable to bank $11,281 $12,258
Subordinated debentures, interest at 12.95%, (Net of unaccreted
value assigned to related warrents of $486,000) 6,514 6,490
Term notes payable to bank 3,548 3,660
Patent license to corporation, payable $300,000 yearly including
interest 1,715 1,715
Other 169 184
----------------------
23,227 24,307
Less current maturities 18,470 19,415
----------------------
$ 4,757 $ 4,892
======================
</TABLE>
The revolving note payable to bank is due August 31, 1999, and provides for
advances of up to $12,000,000 (subsequently reduced to $10,000,000) based upon
levels of eligible accounts receivable and inventory. At March 31,1998,
$11,956,000 was available for advances and interest was at the bank's prime rate
plus 1/4%. Under the terms of a related agreement with the bank, the Company
agreed, among other covenants, to maintain net worth and the ratio of debt to
net worth, all as defined, at specified levels. Substantially all company assets
not previously pledged under term notes (see below), have been pledged as
collateral for this indebtedness.
The term notes to bank are payable as follows:
- $62,500 quarterly plus interest at the bank's prime rate, plus 1/4%,
due June 29, 2002; collateralized by a first mortgage on the Company's
Grand River facility;
- $14,111 monthly, plus interest at 7.7%, due October 31, 2000;
collateralized by a first mortgage on the Company's Crestview facility;
- $2,189 monthly, plus interest at the bank's prime rate, plus 1/4%; due
March 20, 2002;
The subordinated debentures mature $700,000 on each June 30 in the years 2000 to
2004, with the balance due June 30, 2005. Interest on the debentures is payable
quarterly at 12.95%. Terms with respect to the maintenance of levels of net
worth and net worth ratios are the same as with the bank under the agreements
related to the revolving note. Substantially all company assets are secondarily
pledged as collateral for the debentures.
The debenture holders have warrants for the purchase of 1,400,000 shares of
Medar common stock at $6.86. These warrants expire June 30, 2005.
7
<PAGE> 8
Note E - Long Term Debt and Other Financing Arrangements (cont)
At March 31, 1998, the Company's equity did not meet the levels required in debt
agreements related to the Company's revolving bank loan and subordinated
debentures. Although the lenders waived this shortfall as of March 31, 1998, no
waivers for possible future violations were obtained. As the company does not
expect to attain the equity levels required in the loan agreements as of June
30,1998 and it expects it will have to approach the lenders for additional
waivers of forbearance at that time, the debt issues are classified as current
liabilities.
While there can be no assurance that the lenders will grant waivers for any
violations that might be incurred, management believes that the expenditure
reductions already initiated and other actions to raise cash through excess
asset sales as well as the possible recovery of sales levels later in the year
will be sufficient to convince the lenders that it will be prudent for them to
forbear any actions that they may be legally entitled to take under terms of the
agreements related to the Company's debt.
The patent license payable relates to future payments to a corporation for use
of certain patents. The payments are due in eight remaining installments and
have been discounted at 8%.
The fair values of these financial instruments approximates their carrying
amounts at March 31, 1998.
Maturties of long-term debt and capitalized lease obligations, excluding those
payable within twelve months from March 31, 1998 (which are stated as current
maturties of long-term debt) are $686,000 in 1999; $2,348,000 in 2000; $486,000
in 2001, $476,000 in 2002 and $761,000 thereafter.
Note F - Income Taxes
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>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
--------------------------------------
(In thousands)
Deferred tax liabilities:
<S> <C> <C>
Deductible software development costs, net of amortization $ 1,951 $ 3,609
Tax over book depreciation 88 275
Percentage of completion 524 873
--------------------------------------
Total deferred tax liabilities 2,563 4,757
Deferred tax assets:
Net operating loss carry forwards 8,022 7,592
Credit carry forwards 1,061 1,061
Reserve for warranty 68 68
Reserve for inventory 834 144
Other 193 181
--------------------------------------
Total deferred tax assets 10,178 9,046
Valuation allowance for deferred tax assets 7,615 4,289
--------------------------------------
Net deferred tax assets 2,563 4,757
--------------------------------------
Net deferred tax liabilities $ -0- $ -0-
======================================
</TABLE>
8
<PAGE> 9
Note F - 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>
1998 1997
-------------------------
(In thousands)
<S> <C> <C>
Tax at U.S. statutory rates $(3,376) $ 9
Change in valuation allowance 3,326
Utilization of net operating loss carry forward (9)
Other 50
-------------------------
$ - $ -
=========================
</TABLE>
Note G - Earnings per Share
The following table sets forth the computation of basic and diluted earnings per
share for the three months ended March 31:
<TABLE>
<CAPTION>
1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C>
Numerator:
Net loss for basic and diluted earnings
per share: $ (9,929) $ 26
*there was no effect of dilutive
securities
Denominator:
Denominator for basic earnings per share
- - weighted-average shares 9,025,000 8,852,000
Effect of dilutive securities:
Employee stock options 41,000
-------------------------------
Denominator for diluted earnings per
share - adjusted weighted-average shares 9,025,000 8,893,000
Basic and diluted earnings (loss) per
share $ (1.10) $ 0.00
===============================
</TABLE>
For additional disclosures regarding stock options and warrants see Note H.
Warrants to purchase 1,400,000 shares of common stock and options to purchase
662,100 shares of common stock were outstanding during 1998 but were not
included in the computation of diluted earnings per share because the inclusion
of these options would have an antidilutive effect.
Note H - Stock Options and Warrants
At March 31, 1998, there were options outstanding to purchase 662,100 shares at
prices ranging from $1.75 to $9.25 per share and warrants outstanding to
purchase 1,400,000 shares at $6.86 per share.
9
<PAGE> 10
Note I - Segment Data
Quarter Ended March 31, 1998
<TABLE>
<CAPTION>
Vision-based Resistance Welding
Inspection Systems Controls Consolidated
- -------------------------------------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C>
Net revenues $ 1,594 $ 5,033 $ 6,627
Amortization of software development cost 820 212 1,032
Research, development and engineering expense 828 205 1,033
Loss from operations (a) (7,950) (1,347) (9,297)
Net interest expense 632
- -------------------------------------------------------------------------------------------------------------
Earnings before income taxes $(9,929)
=============================================================================================================
</TABLE>
Quarter Ended March 31, 1997
<TABLE>
<CAPTION>
Vision-based Resistance Welding
Inspection Systems Controls Consolidated
- --------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C>
Net sales $ 3,504 $ 6,707 $10,211
Amortization of software development cost 595 233 828
Research, development and engineering expense 329 287 616
Earnings (loss) from operations (698) 1,209 511
Net interest expense 485
- --------------------------------------------------------------------------------------------------------
Earnings before income taxes $ 26
========================================================================================================
</TABLE>
(a) loss from operations for the quarter ended March 31, 1998 includes
restructuring charges of $5,785 for Vision-based Inspection Systems and $1,188
for Resistance Welding Controls (see note B).
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Three Months Ended March 31, 1998 Compared to March 31, 1997.
Net sales in the first quarter of 1998 decreased 35% to $6.6 million from $10.2
million. The decrease resulted from decreases of welding product revenues of
$1.7 million and optical inspection product revenues of $1.9 million. Welding
product sales decreased as fewer large automotive programs were scheduled in the
first quarter of 1998 as compared to the first quarter of 1997. Optical
inspection product revenues were down due to decreases in sales of CD inspection
products resulting from slow consumer acceptance of DVD products and lower sales
in Asia caused by economic conditions in that region.
Gross margin decreased to $(6.5) million from $2.8 million and as a percentage
of net sales decreased to (98)% from 27%. The decrease was due to charges
totaling $7.0 million related to impaired assets as a result of restructuring
activities combined with decreases in sales of higher margin optical inspection
products as well as effects of fixed overhead costs applied to lower total sales
volume.
Sales backlog for the Company at March 31, 1998 was $4.8 million compared to
$5.5 million at March 31, 1997. The decrease is due to less orders received for
CD vision equipment.
Marketing expense remained at $1.0 million and increased as a percentage of net
sales to 14.7% from 10.1% due primarily to lower sales volumes and the costs
being essentially fixed.
General and administrative expense increased to $.8 million from $.6 million and
as a percentage of net sales to 12.2% from 6.1%, due primarily to lower sales
volumes and costs being essentially fixed.
Research and development expense increased to $1.0 million from $.6 million and
as a percentage of net sales to 15.6% from 6.0% due to lower sales volumes
combined with less capitalization of software development costs.
Net interest expense increased to $.6 million from $.5 million and as a
percentage of sales to 9.5% from 4.9%, due to lower sales volumes combined with
increased average debt and debt at higher interest rates.
Liquidity and Capital Resources
At March 31, 1998 the Company had a revolving note payable to bank, due August
1999, subordinated debentures due 2000 through 2005 and various term notes some
of which mature in 2 to 4 years. Levels of advances under the revolving note are
based upon levels of acceptable accounts receivable and inventory. The revolving
note payable provided for advances up to $12,000,000 at March 31,1998. During
the second quarter this amount was reduced to $10,000,000. At March 31, 1998
$11,956,000 was available for advances of which $11,281,000 had been advanced.
The Company is prohibited from paying dividends under the terms of the credit
agreements.
The agreements related to the revolving note and the subordinated debentures
require that the Company maintain certain levels of tangible net worth as
defined and certain debt to equity ratios. The Company's tangible net worth at
March 31, 1998 did not meet the levels required in the debt agreements. Both the
bank and the subordinated debt holders have waived the shortfall as of March 31,
1998 however no waivers for possible future violations were obtained. If the
company is not successful in adding to tangible net worth, it will again be in
violation of its agreements and will require further waivers from the lenders
and there is no assurance that waivers will be granted. In addition, in the
event that waivers are not granted, it is not known what position the lenders
will take with respect to the loans outstanding, including further reducing
availability or declaring the loan to be immediately payable. The amount of
defined tangible net worth can be increased by net operating earnings or by
reducing the amount of capitalized software.
Management believes that it has options available for increasing tangible net
worth through the sales of certain tangible and intangible assets in addition to
expense reductions that will either bring the Company into compliance with the
lender agreements or which will show sufficient progress towards compliance that
the lenders will issue
11
<PAGE> 12
additional waivers. There can be no assurance however that management's plans
will be successful or that the lenders will grant any required waivers.
The Company generated $2.2 million of cash from operations in the first quarter
of 1998. This cash was used to fund $1.1 million of additions to property and
equipment and capitalized software and to pay down debt by $1.1 million. The
Company has no material commitments for the purchase of property and equipment
or software development costs. The amount of software development costs incurred
and capitalized in 1998 will be dependent on determinations throughout the year
of long and short term revenue opportunities in the various products the Company
continues to support in both the welding and the vision divisions. In no case
would it be expected that total capitalization of software costs would exceed
amortization.
The Company believes that its current financial resources together with any cash
generated from operations or asset sales are adequate to meet cash needs for the
next twelve months.
12
<PAGE> 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description of Document
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).
4.1 Note and Warrant Purchase Agreement (filed as Exhibit 4.1 to the
registrants Form 8-K dated July 15, 1997, SEC file 0-12728, and
incorporated herein by reference).
4.2 Form of 12.95% Senior Subordinated Secured Note (filed as Exhibit 4.2
to the registrants Form 8-K dated July 15, 1997, SEC file 0-12728, and
incorporated herein by reference).
4.3 Form of Medar, Inc. Common Stock Purchase Warrant Certificate (filed as
Exhibit 4.3 to registrants Form 8-K dated July 15, 1997, 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).
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).
13
<PAGE> 14
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).
10.15 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).
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 (filed as Exhibit 10.24 to the registrant's
Form 10-Q for the quarter ended March 31, 1996, SEC file 0- 12728, and
incorporated herein by reference).
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 (filed as Exhibit 10.25 to the registrant's Form 10-Q for
the quarter ended March 31, 1996, SEC file 0-12728, and incorporated
herein by reference).
14
<PAGE> 15
10.26 General Security Agreement dated March 29, 1996 by and between Medar,
Inc. and NBD Bank (filed as Exhibit 10.26 to the registrant's Form 10-Q
for the quarter ended March 31, 1996, SEC file 0-12728, and
incorporated herein by reference).
10.27 General Security Agreement dated March 29, 1996 by and between Integral
Vision-AID, Inc. and NBD Bank (filed as Exhibit 10.27 to the
registrant's Form 10-Q for the quarter ended March 31, 1996, SEC file
0-12728, and incorporated herein by reference).
10.28 General Security Agreement dated May 1, 1996 by and between Medar
Canada Ltd. and NBD Bank (filed as Exhibit 10.28 to the registrant's
Form 10-Q for the quarter ended June 30,1996, SEC file 0-12728, and
incorporated herein by reference).
10.29 Composite Guarantee and Debenture dated May 29, 1996 by and between
Integral Vision Ltd. and NBD Bank (filed as Exhibit 10.29 to the
registrant's Form 10-Q for the quarter ended June 30,1996, SEC file
0-12728, and incorporated herein by reference).
10.30 Fourth Amendment to Revolving Credit and Loan Agreement dated August
11, 1996 by and between Medar, Inc., Integral Vision-AID, Inc.,
Integral Vision Ltd. and NBD Bank (filed as Exhibit 10.30 to the
registrant's Form 10-Q for the quarter ended September 30, 1996, SEC
file 0-12728, and incorporated herein by reference).
10.31 Fifth Amendment to Revolving Credit and Loan Agreement dated February
27, 1997 by and between Medar, Inc. and Integral Vision, Ltd. and NBD
Bank (filed as Exhibit 10.31 to the registrant's Form 10-K for the year
ended December 31, 1996, SEC file 0-12728, and incorporated herein by
reference).
10.32 Over Formula Loan Note dated February 27, 1997 by and between Medar,
Inc., Integral Vision, Ltd., and NBD Bank (filed as Exhibit 10.32 to
the registrant's Form 10-K for the year ended December 31, 1996, SEC
file 0-12728, and incorporated herein by reference).
10.33 BridgeLoan Note dated February 27, 1997 by and between Medar, Inc.,
Integral Vision, Ltd., and NBD Bank (filed as Exhibit 10.33 to the
registrant's Form 10-K for the year ended December 31, 1996, SEC file
0-12728, and incorporated herein by reference).
10.34 Sixth Amendment to Revolving Credit and Loan Agreement dated March 28,
1997 by and between Medar, Inc. and Integral Vision, Ltd. and NBD bank
(filed as Exhibit 10.34 to the registrant's Form 10-Q for the quarter
ended June 30, 1997, SEC file 0-12728, and incorporated herein by
reference).
10.35 Seventh Amendment to Revolving Credit and Loan Agreement dated June 27,
1997 by and between Medar, Inc. and Integral Vision, Ltd. and NBD bank
(filed as Exhibit 10.35 to the registrant's Form 10-Q for the quarter
ended June 30, 1997, SEC file 0-12728, and incorporated herein by
reference).
10.36 Eighth Amendment to Revolving Credit and Loan Agreement dated July 15,
1997 by and between Medar, Inc. and Integral Vision, Ltd. and NBD bank
(filed as Exhibit 10.36 to the registrant's Form 10-Q for the quarter
ended June 30, 1997, SEC file 0-12728, and incorporated herein by
reference).
10.37 Amended and Restated Term Note dated July 15, 1997 by and between
Medar, Inc. and NBD bank (filed as Exhibit 10.37 to the registrant's
Form 10-Q for the quarter ended June 30, 1997, SEC file 0-12728, and
incorporated herein by reference).
15
<PAGE> 16
10.38 Collateral Assignment of Property Rights and Security Agreement dated
July 15, 1997 by and between Medar, Inc. and NBD bank (filed as Exhibit
10.38 to the registrant's Form 10-Q for the quarter ended June 30,
1997, SEC file 0-12728, and incorporated herein by reference).
10.39 Stock Purchase Agreement between Maxco, Inc. and Medar, Inc. dated July
23, 1997 (filed as Exhibit 10.39 to the registrant's Form 10-Q for the
quarter ended June 30, 1997, SEC file 0-12728, and incorporated herein
by reference).
10.40 Ninth Amendment to Revolving Credit and Loan Agreement dated March 9,
1998 by and between Medar, Inc. and Integral Vision, Ltd. and NBD bank
( filed as Exhibit 10.40 to the registrant's Form 10-K for the year
ended December 31, 1997, SEC file 0-12728, and incorporated herein by
reference).
10.41 Waiver of debt covenants from sub-debt holders ( filed as Exhibit 10.41
to the registrant's Form 10-K for the year ended December 31, 1997, SEC
file 0-12728, and incorporated herein by reference).
10.43 Waiver and Amendment to Revolving Credit and Loan Agreement dated May
12, 1998 by and between Medar, Inc. and Integral Vision, Ltd. and NBD
bank.
(b) There were no reports on Form 8-K filed in the quarter ended March 31,
1998.
* 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.
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.
/S/CHARLES J. DRAKE 5/14/98
- --------------------------------------------------------------------------------
Charles J. Drake
CEO and Chairman of the Board
Medar, Inc.
(Principal Executive Officer)
/S/RICHARD R. CURRENT 5/14/98
- --------------------------------------------------------------------------------
Richard R. Current
Executive Vice President, Finance & Operations
Medar, Inc.
(Principal Financial & Accounting Officer)
16
<PAGE> 17
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
10.43 Waiver and Amendment to Revolving Credit and Loan Agreement
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.43
EXHIBIT TO FORM 10-K
MEDAR, INC.
QUARTER ENDED MARCH 31, 1998
COMMISSION FILE NUMBER 0-12728
10.43 Waiver and Amendment to Revolving Credit and Loan Agreement
<PAGE> 2
May 12, 1998
Richard R. Current, CFO
Medar, Inc.
38700 Grand River Ave.
Farmington Hills, MI 48335
Re: Waiver and Amendment
Dear Rick:
We are sending you this letter in connection with 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 Second Amendment to Revolving Credit and
Loan Agreement dated October 31, 1995, the Third Amendment to Revolving Credit
and Loan Agreement dated March 29, 1996, the Fourth Amendment to Revolving
Credit and Loan Agreement dated August 11, 1996, the Fifth Amendment to
Revolving Credit and Loan Agreement dated February 27, 1997, the Sixth Amendment
to Revolving Credit and Loan Agreement dated March 28, 1997, the Seventh
Amendment to Revolving Credit and Loan Agreement dated June 27, 1997, the Eighth
Amendment to Revolving Credit and Loan Agreement dated July 15, 1997, and the
Ninth Amendment to Revolving Credit and Loan Agreement dated March 15, 1998,
among Medar, Inc., Integral Vision Ltd. and NBD Bank. Capitalized terms not
otherwise defined in this letter are defined in the Loan Agreement.
Section 6.2(a) of the Loan Agreement provides that the Borrowers will
maintain a minimum amount of Tangible Net Worth and Section 6.2(b) provides that
the Borrowers will not have a Debt to Worth Ratio in excess of a certain maximum
amount. The Borrowers did not meet these covenants as of March 31, 1998. NBD and
the borrowers have agreed that they will amend and restate the current Loan
Agreement, which restated agreement will include the terms set forth in the
letter to you dated April 10, 1998, from Glenn Ansiel of NBD, and renegotiated
financial covenants.
NBD has agreed to give this conditional waiver of the existing defaults
in order to allow the parties time to negotiate and document the amended and
restated loan agreement. This waiver is conditioned on Borrowers' agreement to
the following revisions to the definitions of "Borrowing Base" and "Commitment"
in Section 1.1 of the Loan Agreement, to be effective as of the date of this
letter:
"Borrowing Base" means the sum of the following
(a) 80% of the book value of Eligible Accounts Receivables of the
Borrowers and Guarantor; plus
(b) 32.5% of the lower of costs or market value of Eligible Inventory
of the Borrowers and Guarantor. Notwithstanding the foregoing, in no
event will the amount advanced against Eligible Inventory exceed
$3,500,000.
"Commitment" means the commitment of NBD to make Revolving Loans
pursuant to the terms of Section 2.1 in the aggregate amount of
$10,000,000, as such amount may be further reduced from time to time
pursuant to section 2.2
Effective immediately for the month of April, 1998 and on the 19th day
of each month hereafter, and in addition to all other amounts documented and
owed, NBD Bank will earn a $20,000.00 fee as compensation for increased
servicing and for providing the revolving loans.
Subject to Borrowers' acceptance of the above amendments as evidenced
by their execution of the acknowledgment below, NBD agrees to waive until May
30, 1998, any default under the Loan Agreement that arises for failure to comply
with Sections 6.2(a) or 6.2(b) of the Loan Agreement for the period ending March
31, 1998.
<PAGE> 3
The violations of Sections 6.2(a) or 6.2(b) of the Loan Agreement are
the only violations of the Loan Agreement of which NBD is currently aware and
NBD is not waiving any other defaults which may exist under the Loan Agreement
and any related documents (including, without limitation, any Event of Default
caused by a default under the documents evidencing the Company's subordinate
loans). Furthermore, NBD reserves the right to declare a default with respect to
any violation of the Loan Agreement which may arise in the future, other than
the limited wavier specified above, including any future breach of Sections
6.2(a) or 6.2(b) of the Loan Agreement for any period after March 31, 1998.
A facsimile of this letter shall be as valid as the original. This
letter may be executed in counterparts, which when taken together shall
constitute one original.
Sincerely,
NBD Bank
By: /S/ James D. Keyes
----------------------------
James D. Keyes
Its: Loan Officer
Accepted and Agreed to by:
MEDAR, INC.
By: /S/ Charles J. Drake
----------------------------
Charles J. Drake
Its: Chief Executive Officer
INTEGRAL VISION, LTD.
By: /S/ Richard R. Current
----------------------------
Richard R. Current
Its: Company Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 778
<SECURITIES> 0
<RECEIVABLES> 9,397
<ALLOWANCES> 400
<INVENTORY> 10,890
<CURRENT-ASSETS> 23,527
<PP&E> 17,513
<DEPRECIATION> 8,466
<TOTAL-ASSETS> 41,378
<CURRENT-LIABILITIES> 23,946
<BONDS> 4,757
0
0
<COMMON> 1,805
<OTHER-SE> 10,870
<TOTAL-LIABILITY-AND-EQUITY> 41,378
<SALES> 6,627
<TOTAL-REVENUES> 6,627
<CGS> 12,928
<TOTAL-COSTS> 12,928
<OTHER-EXPENSES> 2,816
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 646
<INCOME-PRETAX> (9,929)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,929)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,929)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
