U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended May 31, 1999
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-18253
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NDC Automation, Inc.
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(Exact name of small business issuer as specified in its charter)
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Delaware 56-1460497
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
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3101 Latrobe Drive, Charlotte, North Carolina 28211-4849
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(Address of principal executive offices)
(704) 362-1115
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(Issuer's telephone number)
N/A
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(Former name, former address, and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
- --
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes___No___
APPLICABLE ONLY TO CORPORATE ISSUERS
As of June 30, 1999, there were 3,453,451 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one):
Yes___; No X
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I N D E X
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PAGE
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Balance Sheets
May 31, 1999 (Unaudited) and November 30, 1998 3- 4
Condensed Statements of Operations
Three and Six months ended May 31, 1999 and May 31, 1998
(Unaudited) 5
Condensed Statements of Cash Flows Six months ended May 31, 1999
and May 31, 1998
(Unaudited) 6
Notes to Condensed Financial Statements 7 - 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
(a) Exhibits -- Press Releases and other Exhibits 16
(b) Reports on Form 8-K 16
SIGNATURES 17
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2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NDC AUTOMATION, INC.
CONDENSED BALANCE SHEETS
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MAY 31, November 30,
1999 1998
(UNAUDITED)
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<S> <C> <C>
ASSETS (Note 4)
CURRENT ASSETS
Cash and cash equivalents $ 28,644 $ 62,923
Accounts receivables, net 1,200,222 805,891
Inventories 436,704 593,794
Costs and estimated earnings in excess of
billings on uncompleted contracts 2,959 136,547
Prepaid expenses and other assets 29,785 47,583
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Total current assets $ 1,698,314 $ 1,646,738
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PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures and office equipment, 151,841 138,746
Machinery and equipment 62,886 59,325
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$ 1,641,350 $ 1,624,694
Less accumulated depreciation 605,617 564,782
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$ 1,035,733 $ 1,059,912
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=====================================================================================================================
$ 2,734,047 $ 2,706,650
=====================================================================================================================
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Note: The Condensed Balance sheet at November 30, 1998 has been taken from the
Audited Financial Statements at that date.
See Notes to Condensed Financial Statements
3
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<CAPTION>
MAY 31, November 30,
1999 1998
(UNAUDITED)
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable, bank (Note 4) $ 371,229 $ 346,657
Current maturities of long-term debt (Note 4) 259,882 1,239,472
Accounts payable and accrued expenses;
including affiliates $402,384 at 1999
and $169,837 at 1998 618,335 508,002
Billings in excess of costs and estimated
earnings on uncompleted contracts 283,809 116,332
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Total current liabilities $ 1,533,255 $ 2,210,463
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LONG-TERM DEBT (Note 4) $ 955,171 $ 114,889
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share
authorized 1,000,000 shares; no shares issued $ - $ -
Common stock, par value $.01 per share;
11,000,000 shares authorized
at 1999 and 1998; 3,453,451 shares
issued at 1999 and 1998 34,534 34,534
Additional paid-in capital 4,211,566 4,211,566
Accumulated deficit (4,000,479) (3,864,802)
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$ 245,621 $ 381,298
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$ 2,734,047 $ 2,706,650
=====================================================================================================================
</TABLE>
4
<PAGE>
NDC AUTOMATION, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
Three Months Ended Six Months Ended
MAY 31, May 31, MAY 31, May 31,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Net revenues $ 1,225,864 $ 895,302 $ 2,157,893 $ 1,641,197
Cost of goods sold 655,657 538,680 1,231,538 972,585
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Gross profit $ 570,207 $ 356,622 $ 926,355 $ 668,612
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Operating expenses:
Selling $ 171,697 $ 191,104 $ 363,456 $ 356,853
General and administrative 315,332 303,519 573,811 563,935
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$ 487,029 $ 494,623 $ 937,267 $ 920,788
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Operating income (loss) $ 83,178 $(138,001) $ (10,912) $ (252,176)
Net interest expense (62,079) (80,108) (124,765) (144,704)
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Income (loss) before income taxes $ 21,099 $(218,109) $ (135,677) $ (396,880)
Federal and state income taxes (Note 2) - - - -
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Net Income (loss) $ 21,099 $(218,109) $ (135,677) $ (396,880)
=============================================================================================================================
Weighted average number of common
shares outstanding 3,453,451 3,453,451 3,453,451 3,453,451
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) per common share - basic (Note 3) $ 0.01 $ (0.06) $ (0.04) $ (0.11)
Income (loss) per common share - diluted (Note 3) $ 0.01 $ (0.06) $ (0.04) $ (0.11)
=============================================================================================================================
Dividends per common share $ - $ - $ - $ -
=============================================================================================================================
</TABLE>
See Notes to the Condensed Financial Statements
5
<PAGE>
NDC AUTOMATION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended
MAY 31, May 31,
1999 1998
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 73,328 $ (66,956)
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment $ - $ -
Purchase of property and equipment (16,656) (3,491)
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NET CASH USED IN
INVESTING ACTIVITIES $ (16,656) $ (3,491)
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CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings on revolving credit agreement $ 24,572 $ 138,253
Principal payments on long-term borrowings (139,308) (31,932)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $ (114,736) $ 106,321
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Effect of foreign currency exchage rates changes
on cash and cash equivalents $ 23,785 $ -
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents $ (34,279) $ 35,874
Cash and cash equivalents:
Beginning 62,923 72,368
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Ending $ 28,644 $ 108,242
=======================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for:
Interest $ 114,832 $ 132,822
Income taxes $ - $ -
=======================================================================================================================
</TABLE>
See Notes to the Condensed Financial Statements
6
<PAGE>
NDC AUTOMATION, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1.
The unaudited internal condensed financial statements and related notes have
been prepared by NDC Automation, Inc. (the "Company"), without audit pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows at May 31, 1999, and for all periods presented, have
been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these condensed financial statements be
read in conjunction with the Company's audited financial statements and notes
thereto for the fiscal year ended November 30, 1998. The results of operations
for the six months ended May 31, 1999 are not necessarily indicative of the
operating results for the full year.
NOTE 2. INCOME TAXES
The Company did not recognize any income tax benefits in 1998 and 1999 for its
current losses as utilization of operating loss carryforwards in the future are
not assured to be realized.
NOTE 3. EARNINGS (LOSS) PER COMMON SHARE:
The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS
No.128) Earnings Per Share, which supersedes APB Opinion No. 15. SFAS No. 128
requires the presentation of earnings per share by all entities that have common
stock or potential common stock, such as options, warrants, and convertible
securities, outstanding that trade in a public market. Basic per share amounts
are computed, generally, by dividing net income or loss by the weighted-average
number of common shares outstanding. Diluted per share amounts assume the
conversion, exercise, or issuance of all potential common stock instruments
unless the effect is antidilutive, thereby reducing a loss or increasing the
income per common share. The Company had options outstanding under two separate
plans to purchase a total of 81,777 and 146,833 shares of common stock,
respectively, at a weighted-average exercise price of varying amounts. The
inclusion of those potential common shares in the calculation of diluted earning
(loss) per share would have an antidilutive effect. Therefore, basic and diluted
earnings (loss) per share amounts are the same in 1999 and 1998.
7
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NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 4. PLEDGED ASSETS, NOTE PAYABLE, BANK AND LONG-TERM DEBT
The Company has the following note payable to a Bank at May 31, 1999:
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Note Payable Agreement that allows the Company to borrow up to $1,250,000 and
bears interest at the lender's prime rate plus 2.75% per annum . The Company's
loan outstanding shall not exceed the lesser of (a) U.S. $1,250,000 or (b) 80%
of i) Qualified Accounts receivable ( as defined in the Loan Agreement) that are
non-project Qualified Accounts and ii) Qualified Accounts that are project
Qualified Accounts plus 50% of all eligible inventory ( as defined in the Loan
Agreement) , but in no event shall (A) Inventory Value be in excess of $300,000
and (B) Inventory Value and Qualified Accounts that are project Qualified
Accounts be in excess of $450,000. The loan agreement is further secured by 1)
an Inventory Repurchase Agreement and 2) a $450,000 irrevocable Letter of Credit
issued by a Swedish Bank. Netzler & Dahlgren Co. AB (NDCab) is obligated to
repay the letter of credit bank any funds it disburses under the Letter of
Credit. The Company is ultimately responsible to repay to NDCab any amounts it
pays in reimbursing the Letter of Credit Bank . The Repurchase Agreement
guarantees that NDCab will repurchase on certain conditions up to $300,000 worth
of inventory, thereby providing funds to pay lender should the Company be in
default on its loan obligations. The Loan Agreement terminates upon demand by
the Bank or October 31, 1999. (1)(2) $ 371,229
==================================================================================================== ================
Long-term debt consists of the following at May 31, 1999:
Mortgage note payable to a bank, based on a 9.5% fixed rate. Original principal
balance of $1,013,484 to be repaid in twelve (12) consecutive monthly principal
and interest payments of $13,912, with one final payment of approximately
$939,666 due on June 16, 2000 . The note is collaterized by the Company's land
and building with a carrying value of $958,276. The loan also contains certain
financial covenants to which the Company must adhere. $ 1,013,484
Note payable to Netzler & Dahlgren Co AB, based on a 16.0% fixed rate. Original
principal balance of $402,182 to be repaid in twenty-four (24) consecutive
monthly principal payments of 133,529 Swedish Krona, or approximately US$16,757
per month depending on the exchange rate at time of payment, plus interest. The
note is collaterized by a secondary position on the Company's land and building
with a carrying value of $958,276. 201,569
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$ 1,215,053
Less current maturities: 259,882
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$ 955,171
==================================================================================================== ================
(1) The prime rate at May 31, 1999 was 7.75%
(2) The line of credit is secured by a first priority security interest in the Company's accounts receivable, inventory,
software and intangibles.
Maturities of long-term debt at May 31, 1999 are as follows:
Year Ending
May 31,
- -------------------- ---------------------------------------------------------------------------------- -----------------
1999 $ 259,882
2000 955,171
==================== ================================================================================== =================
$ 1,215,053
==================== ================================================================================== =================
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8
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 5. CONTINUED OPERATIONS
The Company has suffered significant losses from operations in 1998 and 1997.
This raised substantial doubt about the Company's ability to continue as a going
concern. However, during the second quarter of 1999 the Company received new
orders totaling in excess of $3,000,000, and showed a positive result for the
second quarter of 1999.
Management is continuing to explore various ways to increase revenues and
minimize losses. These approaches include the following :
o Establish and develop strategic alliances with selected customers
o Pursue AGV system business in selected market niches
o Grow the distribution business by adding new supplementary products
o Expand the aftermarket sales business
o Explore raising additional equity directly and/or possibly through a business
combination
There can be no assurance that these approaches will be successful.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the financial statements (including the notes thereto) presented elsewhere
herein.
OVERVIEW
The Company derives virtually all of its revenues from the sale of
hardware, software and engineering services in connection with projects
incorporating its Automated Guided Vehicle (AGV) control technology. In prior
years the Company's net revenues from AGV systems, vehicles and technology were
derived primarily from sales to customers serving two industries -- textiles and
newspaper publishing. Net revenues since 1995 however have been derived from
other industries, e.g. automotive, CD manufacturing, food, paper. The Company's
results of operations can be expected to continue to depend substantially upon
the capital expenditure levels in those industries and in other industries that
it may enter. During 1996 and for the first three quarters of 1997, the Company
refocused its sales efforts to existing original equipment manufacturers (OEMs)
and system integrators in the AGV systems industry. Such OEMs and system
integrators have historically sold products to end users to whom the Company
occasionally had direct sales. The Company reduced its sales effort to such end
users to avoid competing with its intended OEM customers. In September of 1997,
however, the Company began to again pursue AGV system sales directly to end
users in selected market niches to supplement revenues obtained from sales to
OEMs and system integrators.
Due to the long sales cycle involved, uncertainties in timing of projects,
and the large dollar amount a typical project usually bears to the Company's
historical and current quarterly and annual net revenues, the Company has
experienced, and may be expected to continue to experience, substantial
fluctuations in its quarterly and annual results of operations.
The Company sells its products and services primarily in two ways.
Vehicles, technology and other products and services may be sold in a "project"
that becomes an integrated AGV system. The primary business is to sell hardware,
software and services as standard items, with less involvement by the Company in
overall system design. The Company generally would recognize lower net revenue
but would realize a higher gross profit margin percentage in selling standard
items, in each case compared to the sale of a project, due to the inclusion in
project sales of other vendors' products and services with margins generally
lower than the Company's own products and services. Between any given accounting
periods, the levels of and mixture of standard item sales and project sales can
cause considerable variance in net revenues, gross profit, gross profit margin,
operating income and net income.
Revenues from standard item sales are recognized upon shipment, while
revenues from project sales are recognized under the "percentage of completion"
method. Under this method, with respect to any particular customer contract,
revenues are recognized as costs are incurred relative to each major component
of the project. Although the percentage of completion method will ordinarily
smooth out over time the net revenue and profitability effects of large
projects, such method nevertheless subjects the Company's results of operations
to substantial fluctuations dependent upon the progress of work on project
components. Such components can differ markedly from one another in amount and
in gross profit margin.
Project contracts are billed upon attainment of certain "milestones." The
Company grants payment terms of 30 to 90 days to its customers. It typically
receives a cash advance ranging from 10% to 20% of the total contract amount.
Bills are thereafter delivered as milestones are reached. Upon delivery of the
project, the customer typically reserves a "retainage" of 10% to 20% pending
system acceptance.
Notwithstanding the receipt by the Company of cash advances and periodic
payments upon reaching project milestones, the Company requires external
financing for its costs and estimated earnings in excess of billings on
uncompleted contracts, inventories, receivable and other assets.
The Company's backlog consists of all amounts contracted to be paid by
customers but not yet recognized as net revenues by the Company.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
STRATEGY DIVERSIFICATION: The Company has decided to pursue a strategy
diversification that is explained in note 5 of the financial statement. Positive
results from this diversification in terms of new business and increased
bookings and backlog have been noted, and the Company intends to continue this
strategy actively. However, there can be no assurance that these approaches will
continue to be successful.
HARCON AGREEMENT AND NEW ORDERS: On January 27, 1999 the Company signed an
agreement with Harcon Engineering, Inc. ("Harcon") of Roseville, Michigan with
the objective of jointly pursuing material handling systems projects, primarily
in the automotive industry. The Company received in January 1999 an order from
Harcon for the design phase of a major laser guided AGV system to be installed
at a new DaimlerChrysler facility in the Detroit area. The design phase order
together with manufacturing orders received in May of 1999 related to the
project have increased the Company's backlog at May 31, 1999 to the highest
level since November 1995. The recent orders confirm management's efforts to
increase revenues and minimize losses.
US POSTAL SERVICE: The Company successfully installed an AGV pilot system
for the US Postal Service ("USPS") during the second quarter of 1999. The system
was tested by an independent consulting firm with the goal to identify a
technology or technologies that the USPS could use to automate a portion of its
operations. The Company was awarded the order in competition with many other
AGVS supplier. Based on Company contacts with USPS, it appears USPS's automation
needs will increase significantly over the next five year period. Due to the
successful installation of the pilot project, the Company is hopeful that it has
positioned itself to receive directly or indirectly sales opportunities from
USPS.
ENTERTAINMENT INDUSTRY AND POWERWAY PRODUCTS: The Company received during
the second quarter an order of approximately $130,000 for its Powerway products
from a major entertainment customer. The order is extremely important to the
Company because it is the first significant order for the Powerway product line.
The Powerway line was introduced as part of the Company's strategy to expand it
distribution revenues and profitability. This same major entertainment customer
has ordered a pilot project involving the Company's AGV technology outside North
America . The Company does not generate revenues from projects outside its
territory (such sales per the MLA are handled by Netzler and Dahlgren or their
licenses) but these projects may provide significant opportunities for the
Company should similar projects be pursued in North America.
RISK ASSOCIATED WITH YEAR 2000: The Company, in its day to day operations,
relies upon various computer software and hardware that may be adversely
affected by a change in the millennium, from 1999 to 2000. In general,
information systems experts have predicted that a wide variety of problems, from
system failures to data entry and transfer errors, will result from the turn of
the century. Repeated system failures, data entry and transfer errors and
similar computer problems would result in a material adverse effect on the
Company and its operations. However, the Company has examined most of its
computer hardware and software and, based on such examination, does not
reasonably anticipate any significant internal problems as a result of the
change in millennium.
The Company has assessed its accounting, network, communication and other
material systems for Y2K compliance. The investigation has revealed that these
systems are not Y2K compliant, but such software or hardware can be purchased or
upgraded to comply. The present time frame to upgrade the accounting system is
scheduled for the end of July 1999 and completion of testing by the end of
August 1999. Hardware systems are to be upgraded or purchased and tested also by
the end of August 1999. Costs associated with the Company's Y2K compliance are
estimated to be approximately $20,000 for software upgrades and approximately
$70,000 for hardware. The Company expects to lease such upgrades and purchases
for approximately $3,000 a month, which is in line with management's operating
and maintenance budgets.
11
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MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
The Company may, however, be adversely affected by external systems
problems, problems over which the Company has minimal control. In order to
minimize its risks, the Company is assessing critical third parties that supply
material or services to the Company. Such investigations include direct contacts
with such vendors and reviewing information supplied by such vendors through
Internet sites or direct mailings. To date the critical vendors are addressing
their Y2K issues and are at different phases in their plans. To date none have
communicated that they will have significant problems due to the change in the
millennium. The Company expects such work related to Y2K to continue with its
critical vendors until such vendors issue statements of full Y2K compliance.
It is difficult to provide a description of a worst case Y2K scenario.
There are so many things that are beyond the Company's control such as local and
foreign government operations as well as transportation and delivery services.
The Company has to assume that there will not be an extended total break down of
common business operations in the USA and Europe; if this would occur, the
Company would not be in a position to operate as a going concern. In analyzing
the Company's current operations, the worst case scenario would most likely be
that the equipment and software it plans to purchase fails to solve its Y2K
issues. In such a situation the Company would be forced to a manual system of
operation which could be implemented in a relatively short period due to the
present size of the Company.
The Company's present contingency plan should a worst case scenario
event occur includes but is not limited to:
a) Employee awareness and training for modified operations;
b) Hard copy print outs and software backups of all information;
c) Continued relations with a qualified Y2K specialist;
d) Increased inventory of certain critical components to meet potential
demands from our customer service department; and
e) Active information to and support of the Company's existing customer base
with regard to Y2K issues.
FORWARD-LOOKING STATEMENTS: This report (including information included or
incorporated by reference herein) contains certain forward-looking statements
with respect to the financial condition, results of operation, plans,
objectives, future performance and business of the Company.
These forward-looking statements involve certain risk and uncertainties.
Factors that may cause actual results to differ materially from those
contemplated by such forward-looking statements include, among others, the
following possibilities:
a) Revenues from end user systems sales, new OEMs and new niches may be lower
than expected or delayed.
b) New product lines from Thrige, Netzler & Dahlgren (Teach-in), Powerway may
not be well received in the North American industrial truck market or AGV
market, thereby restricting growth opportunities for the Company.
c) The Company's existing bank relationships may not be extended which would
cause the Company to default on its current obligations.
d) The Company might be unable to raise the additional working capital needed,
directly or through a business combination, to finance the current business
strategy which may have a serious impact on the Company's ability to sell
its current and future products, as well as satisfy existing banking
relationships.
e) General economic or business conditions, either nationally or in the
markets in which the Company is doing business, may be less favorable than
expected resulting in, among other things, a deterioration of market share
or reduced demand for its products.
12
<PAGE>
RESULTS OF OPERATIONS
The table below shows (a) the relationship of income and expense items
relative to net revenues, and (b) the change between the comparable prior period
and current period, for the three-month and six-month periods ended May 31, 1999
and 1998, respectively. This table should be read in the context of the
Company's condensed statements of income presented elsewhere herein:
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Percentage of Change
Period to Period
Percentage of Net Revenues Increase(Decrease)
- ---------------------------------- ------------------------------------------------------ ----------------------------
<S> <C> <C> <C> <C> <C> <C>
Three
Months Six Months
Three Months Six Months Ended May Ended
Ended Ended 31, May 31,
May 31, May 31, May 31, May 31, 1998 to 1998 to
1999 1998 1999 1998 1999 1999
% % % % % %
- ---------------------------------- ---------- ------------- ------------- ------------- ------------- -------------
Net Revenues 100.0 100.0 100.0 100.0 36.9 31.5
Cost of Goods Sold 53.5 60.2 57.1 59.3 21.7 26.6
- ---------------------------------- ---------- ------------- ------------- ------------- ------------- -------------
Gross Profit 46.5 39.8 42.9 40.7 59.9 38.6
- ---------------------------------- ---------- ------------- ------------- ------------- ------------- -------------
Operating expenses:
Selling 14.0 21.4 16.8 21.7 (10.2) 1.9
General and administrative 25.7 33.9 26.6 34.4 3.9 1.8
- ---------------------------------- ---------- ------------- ------------- ------------- ------------- -------------
39.7 55.3 43.4 56.1 (1.5) 1.8
- ---------------------------------- ---------- ------------- ------------- ------------- ------------- -------------
Operating income (loss) 6.8 (15.5) (0.5) (15.4) * 95.7
Net interest expense: (5.1) (8.9) (5.8) (8.8) (22.5) (13.8)
- ---------------------------------- ---------- ------------- ------------- ------------- ------------- -------------
Income (loss) before income taxes 1.7 (24.4) (6.3) (24.2) * (65.8)
Federal and state income taxes
(benefit) - - - - - -
================================== ========== ============= ============= ============= ============= =============
Net Income (loss) 1.7 (24.4) (6.3) (24.2) * (65.8)
================================== ========== ============= ============= ============= ============= =============
</TABLE>
* Because the data changes from negative to positive, or from positive to
negative, the percentage of change is not meaningful.
QUARTER ENDED MAY 31, 1999 COMPARED TO THE QUARTER ENDED MAY 31, 1998
Net revenues increased by $330,562 or 36.9% from $895,302 in the earlier period
to $1,225,864 in the latter period. The increase is primarily due to the
increased distribution product sales which include approximately $130,000 of
Powerway products and the Company's refocus on providing system solutions to its
customer thereby increasing such revenues compared to the prior year. The
Company received orders in excess of $3,000,000 during the current quarter
primarily from the automotive industry. Such orders provide a good backlog and
revenue recognizing opportunities for the coming quarters.
Cost of goods sold increased from $538,680 to $655,657 or 21.7% due primarily to
higher net revenues in 1999. As a percentage of net revenues, cost of goods sold
decreased compared to 1998 due to a favorable foreign currency exchange rate
during the current quarter as well as a good mix of product sales versus project
revenues . Gross profit increased by $213,585 or 59.9% from $356,622 to
$570,207, while gross profit as a percentage of net revenues increased to 46.5%
from 39.8% due to the same factor.
Selling expenses decreased from $191,104 to $171,697 or 10.2 % primarily due to
a major show related expenses being realized in the first quarter of 1999 where
such similar show expenses were incurred in the second quarter of 1998. General
and administrative expenses increased from $303,519 to $315,332, or 3.9% due
primarily to increased training personnel cost compared to the prior year. As a
percentage of net revenues, general and administrative expenses decreased from
33.9% to 25.7%.
13
<PAGE>
Primarily as a result of the foregoing, operating income increased by $221,179
from an operating loss of $138,001 in the earlier period to an operating income
of $83,178 in the latter period.
Net interest expense decreased from $80,108 to $62,079, a decrease of $18,029,
lower borrowings compared to the prior year were the primary reason for the
decline. Such reductions are not expected to continue due to increase cash
requirements from the current backlog as well as accruing interest on delayed
payments to Netzler & Dahlgren trade payables.
The Company did not recognize any tax benefits in 1999 domestically for its
current loss as utilization of operating loss carryforwards in the future are
not assured.
Primarily due to higher revenues in 1999 as described above the Company
incurred a net income of $21,099 in 1999 compared to a net loss of $218,109 in
1998.
BACKLOG. Backlog consists of all amounts contracted to be paid by customers but
not yet recognized as net revenues by the Company. At May 31, 1999, the Company
had a backlog of approximately $2,770,000 compared to approximately $1,020,000
one year earlier. The primary reason for the significant increase is the receipt
of a major order from Harcon in May 1999 for a major installation at a
DaimlerChrysler facility in Detroit. The backlog as of May 31, 1999 is the
highest backlog that the Company has had in several years and positions the
Company to improve its results for the fiscal year ending 1999 compared to 1998.
SIX MONTHS ENDED MAY 31, 1999 COMPARED TO SIX MONTHS ENDED MAY 31, 1998
Net revenues increased by $516,696, or 31.5%, from $1,641,197 in the earlier
period to $2,157,893 in the latter period. The increase is primarily due to the
increased distribution product sales which include approximately $130,000 of
Powerway products and the Company's refocus on providing system solutions to its
customer thereby increasing such revenues compared to the prior year.
Cost of goods sold increased from $972,585 to $1,231,538, or 26.6%, due
primarily to the higher level of net revenues recognized in 1999. As a
percentage of net revenues, cost of goods sold decreased from 59.3% to 57.1%.
Gross profit increased by $257,743, or 38.6%, from $668,612 to $926,355, while
gross profit as a percentage of net revenues increased from 40.7% to 42.9%.
Selling expenses increased from $356,853 to $363,456, or 1.9% while the
Company's revenues and bookings increased significantly. General and
administrative expenses remained fairly constant increasing from $563,935 to
$573,811, or only 1.8%, compared to the prior year.
Primarily as a result of the foregoing, the operating loss for the period was
$10,912 compared to an operating loss of $252,176 the prior year.
Net interest expense decreased from $144,704 to $124,765, an increase of 13.8 %.
The Company did not recognize any tax benefits in 1999 domestically for its
current loss as utilization of operating loss carryforwards in the future are
not assured.
Primarily due to higher revenues in 1999 as described above, the Company reduced
its a net loss by $261,203 or by 65.8% from $396,880 in 1998 to $135,677 in
1999. Management remains optimistic about its current strategy due to recent
bookings and the present backlog.
14
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company experiences needs for external sources of financing to support its
working capital, capital expenditures and acquisition requirements when such
requirements exceed its cash generated from operations in any particular fiscal
period. The amount and timing of external financing requirements depend
significantly upon the nature, size, number and timing of projects and
contractual billing arrangements with customers relating to project milestones.
The Company has relied upon bank financing under a revolving working capital
facility, as well as long-term debt and capital leases and proceeds of its
public offerings, and private offerings, to satisfy its external financing
needs.
During the six months ended May 31, 1999 net cash provided from operating
activities was $73,328. As of May 31, 1999 the Company had been delaying
payments of approximately $240,000 to Netzler & Dahlgren due to cash not being
available under the current line of credit. Had the funds been available and
Netzler and Dahlgren been paid when due the Company would have used
approximately $165,000 of cash from operation activities.
The Company entered into an Inventory and Accounts Receivable Loan and Security
Agreement ("Loan Agreement") on February 28, 1997 with the National Bank of
Canada and National Canada Business Corp. (herein collectively called the
"Lender"). The Loan Agreement was amended and restated on April 30, 1999 and
allows the Company to borrow up to a maximum of $1,250,000. Loans made under the
new Loan Agreement are evidenced by a demand promissory Note. The Loan Agreement
allows the Company to borrow pursuant to a borrowing formula which is secured by
Company's personal property as collateral. The Company's outstanding loan amount
at any one time shall not exceed the lesser of (a) U.S $1,250,000 or (b) 80% of
i) Qualified Accounts receivable (as defined in the Loan Agreement) that are
non-project Qualified Accounts and ii) Qualified Accounts that are project
Qualified Accounts plus 50% of all eligible inventory (as defined in the Loan
Agreement) , but in no event shall (A) Inventory Value be in excess of $300,000
and (B) Inventory Value and Qualified Accounts that are project Qualified
Accounts be in excess of $450,000. The borrowed funds will bear interest at the
Lender's prime rate plus 2.75% per annum . The Loan Agreement is further secured
by 1) an Inventory Repurchase Agreement and 2) a $450,000 irrevocable Letter of
Credit issued by a Swedish bank. Netzler & Dahlgren Co. AB (NDCab) is obligated
to repay the letter of credit bank any funds it disburses under the Letter of
Credit. The Company is ultimately responsible to repay to NDCab for any amounts
it pays in reimbursing the letter of credit bank. The Repurchase Agreement
guarantees that NDCab will repurchase from the Company on certain conditions up
to $300,000 worth of inventory, thereby providing funds to pay the Lender should
the Company default on its loan obligations.
The lender, at its discretion, may demand payment upon written notice to the
Company. The maturity date has been extended to October 31, 1999, or upon demand
by the Bank. The extension was conditional upon Netzler & Dahlgren extending its
$450,000 irrevocable Letter of Credit to the Bank through November 1, 1999. To
further secure Netzler & Dahlgren for providing the Letter of Credit the Company
entered into a Reimbursement Agreement under which the Company granted to
Netzler and Dahlgren a security interest in the Company's land and building;
such collateral is a junior lien to the primary mortgage lender's security
interest.
During May 1999, the mortgage loan maturity date was extended for thirteen
months from May 16, 1999 to June 16, 2000. The interest rate on the note
remained at 9.5%, and the combined principle and interest monthly payment of
$13,912 was also unchanged .
During the second quarter of 1999 the Company delayed payments of approximately
$240,000 to its affiliate Netzler and Dahlgren so not to exceed current
borrowing maximums from the demand promissory note. Such past due payable are
accruing interest at 16% per annum. The Company continues to have difficulty
obtaining adequate lines of credit to meet its operating needs due to the poor
results of the last two years and its low equity position. Bank relations have
improved especially since the new bookings received during the second quarter
but the banks are still very cautious. This is evidenced by short extensions of
credits, increased interest rates and the continued requirement to have
guarantees from Netzler and Dahlgren. The Company has no assurances that such
support will continue from Netzler and Dahlgren leaving the Company very
dependent under the present conditions.
The Company is exploring the possibility of raising additional equity capital,
subordinated debt directly or possibly through a business combination in order
to improve its financial position, its independence and have the working capital
to address potential growth opportunities. There can be no assurance that the
Company will be successful in raising the additional capital or subordinated
debt to improve its financial position. The Company's ability to continue as a
going concern would be adversely affected if financial support from Netzler &
Dahlgren does not continue or equity and/or debt financing is not obtained in
the near future or if revenues do not increase to consistently provide earnings
for the Company.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of shareholders of the Company was held on May 7,
1999.
(b) The following individuals were elected directors of the Company:
Goran P. R. Netzler
Ralph Dollander
Jan H. L. Jutander
Richard Schofield
Raymond O. Gibson
(c) Other matters voted upon and voting were as follows:
(i) Ratification of the selection of McGladrey & Pullen, LLP by the Board of
Directors as the Company's independent auditors.
For Abstain Against
--- ------- -------
3,237,328 12,765 32,345
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Press Releases:
None
(b) Reports on Form 8-K
Receipt of purchase orders for Laser Guided vehicle Systems to be
installed at DaimlerChrysler facilities file May 24, 1999 on Form 8K.
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NDC AUTOMATION, INC.
(Registrant)
BY: /s/ Ralph Dollander
Ralph Dollander
President
BY: /s/ Claude Imbleau
Claude Imbleau
VP - Finance & Administration
(Chief Financial Officer)
Date: July 14,1999
17
<PAGE>
EXHIBIT INDEX
The following documents are included in this Form 10-QSB as an Exhibit:
<TABLE>
<CAPTION>
Designation Number
Under Item 601 of
Exhibit Number Regulation S-K Exhibit Description Page Number
- ------------------- --------------------- ------------------------------------------------------------ ------------
<S> <C> <C> <C>
(A) Exhibits:
1. 10 Second amendment to inventory and accounts receivable loan
and security agreement between NDC Automation, Inc. and
National Bank of Canada dated April 30, 1999 19
2. 10 Amended, restated and substituted secured note between NDC
Automation, Inc. and National bank of Canada dated April
30, 1999. 22
3. 10 North Carolina Note Modification between NDC Automation,
Inc. and First Citizens Bank & Trust Company dated May 21,
1999 25
4. 10 Employment Agreement between NDC Automation, Inc. and
Claude Imbleau dated March 1, 1999. 31
5. 27 Financial schedule 35
</TABLE>
18
EXHIBIT 10.1
SECOND AMENDMENT TO INVENTORY AND
ACCOUNTS RECEIVABLE LOAN AND
SECURITY AGREEMENT
THIS SECOND AMENDMENT, dated as of the 30th day of April, 1999, is to
that certain Inventory and Accounts Receivable Loan and Security Agreement dated
as of February 28, 1997, as amended as of October 27, 1998 (as amended thereby
and hereby, the "Loan Agreement") by and among
NDC AUTOMATION, INC., a corporation organized and existing under the
laws of the State of Delaware (the "Borrower");
NATIONAL BANK OF CANADA, a Canadian chartered bank ("NBC"); and
NATIONAL CANADA BUSINESS CORP., a Delaware corporation ("NCBC"
hereinafter NBC and NCBC may be referred to collectively as the "Lenders").
RECITALS:
- ---------
A. The Borrower has requested that the Lenders make certain changes to
the Loan Agreement.
B. The Lenders have agreed to make certain changes to the Loan
Agreement as set forth herein.
NOW, THEREFORE, the parties hereto agree as follows:
A. Section 3 of the Loan Agreement is deleted in its entirety and
replaced with the following.
"3. LOANS. Subject to the terms and provisions of this
Agreement, Lender will make such loans to Borrower as from time to time
Lender elects to make which are secured by Borrower's Collateral and
the proceeds thereof. The aggregate unpaid principal of all such loans
outstanding at any one time shall not exceed the lesser of (a) One
Million Two Hundred Fifty Thousand (U.S. $1,250,000.00) or (b) eighty
percent (80%) of the unpaid face amount of (i) Qualified Accounts that
are non-project Qualified Accounts and (ii) Qualified Accounts that are
project Qualified Accounts, as defined below, (or such other
percentages thereof as may from time to time be fixed by the Lender
upon notice to Borrower), plus fifty percent (50%) of the cost or
market value, whichever is lower, of all Eligible Inventory, as defined
below, (hereinafter called the "Inventory Value"), but in no event
shall (A) Inventory Value be in excess of Three Hundred Thousand
Dollars (U.S. $300,000.00) and (B) Inventory Value and Qualified
Accounts that are project Qualified Accounts be in excess of Four
Hundred Fifty Thousand Dollars (U.S. $450,000.00). The sum produced by
applying at any given time the then prevailing percentages to the
Inventory Value and to the total of Qualified Accounts is herein called
the "Borrowing Base". All such loans shall bear interest, and where
appropriate under the Lender's prevailing policy shall bear a service
charge at the rate agreed on from time to time by the parties, and at
the option of Lender shall be evidenced by notes in form satisfactory
to Lender, but in the absence of notes shall be conclusively evidenced
by the Lender's record of disbursements and repayments. The Borrower's
loans are presently evidenced by that certain Secured Note ("Secured
Note") bearing even date herewith. The unpaid principal balances of the
borrower's loans shall bear interest from the date hereof upon
disbursed and unpaid principal balances (calculated on the basis of a
year of 360 days) at a rate per annum which shall, from day to day, be
equal to two and three quarters of one percent (2.75%) per annum for
amounts outstanding under the Note, plus the rate for commercial loans
announced from time to
19
<PAGE>
time in the United States as its prime rate ("Prime Rate") by Bank,
each change in the rate to be charged hereon to become effective,
without notice to the Borrower, on the effective date of each change
in the Prime Rate, and interest shall be payable monthly in arrears on
the 1st day of each month, commencing on the 1st day of May, 1999. The
Prime Rate is a reference rate and is not necessarily the lowest rate
charged by Lender or Bank for extensions of credit. The Bank's Prime
Rate is, as of the date hereof, seven and three-quarters of one percent
(7.75%) per annum. All such loans shall be payable on demand or, if no
demand then, on the Termination Date as that term is defined in the
Secured Note."
B. All references to the "Loan Agreement" set forth in the documents
executed in connection with the Loan Agreement shall be deemed to be references
to the Loan Agreement as amended by this Second Amendment.
C. The Borrower represents and warrants that, as of the date hereof, it
is not in default of the terms of the Loan Agreement, as amended hereby, or any
of the other documents executed among the Borrower and the Lenders in connection
therewith.
D. This Second Amendment may be executed in any number of counterparts,
each of which when so executed and delivered shall be deemed an original.
E. This Second Amendment and the Loan Agreement, as amended hereby,
shall be deemed to be contracts made under and for all purposes shall be
construed in accordance with the laws of the State of New York.
20
<PAGE>
IN WITNESS WHEREOF, the Borrower and the Lenders have caused
this Second Amendment to be executed under seal by their duly authorized
corporate officers all as of the day and year first above written.
NDC AUTOMATION
By: /s/ Claude Imbleau
------------------------------
Name: Claude Imbleau
Title: CFO
NATIONAL BANK OF CANADA
By: /s/ signature on file
------------------------------
Name:
Title:
By: /s/ signature on file
------------------------------
Name:
Title:
NATIONAL CANADA BUISNESS CORP.
By: /s/ signature on file
------------------------------
Name:
Title:
By: /s/ signature on file
------------------------------
Name:
Title:
21
EXHIBIT 10.2
AMENDED, RESTATED AND SUBSTITUTED SECURED NOTE
U.S. $1,250,000.00 New York, New York
April 30, 1999
ON DEMAND, AND IF NO DEMAND MADE, ON OR BEFORE October 31, 1999
("Termination Date "), for value received, the undersigned, which term wherever
used herein shall mean all and each of the signers of this note, promises to pay
to the order of NATIONAL BANK OF CANADA ("Bank"), a commercial banking
institution organized and existing under the laws of Canada with a United States
branch office located in New York, New York, and NATIONAL CANADA BUSINESS CORP.
("NCBC "), a Delaware corporation having its principal place of business in New
York, New York (the Bank and NCBC being herein collectively called the
"Lenders"), or order, the principal sum of One Million Two Hundred Fifty
Thousand Dollars (U.S. $ 1,250,000.00), with interest from the date hereof upon
disbursed and unpaid principal balances from time to time outstanding at a rate
per annum which shall, from day to day, be equal to two and three-quarters of
one percent (2.75%) per annum for amounts outstanding under this Note, plus the
rate for commercial loans announced from time to time in the United States as
its prime rate ("Prime Rate") by Bank, each change in the rate to be charged
hereon to become effective, without notice to the undersigned, on the effective
date of each change in the Prime Rate, such interest to be computed based on a
360 day year and payable months in arrears on the 1st day of each month,
commencing on the I st day of May, 1999. The Prime Rate is a reference rate and
is not necessarily the lowest rate charged by NCBC or Bank for extensions of
credit. The Bank's Prime Rate, as of the date hereof, is seven and
three-quarters of one percent (7.75%) per annum.
This Note is secured by a certain Inventory And Accounts Receivable
Loan And Security Agreement dated February 28, 1997, as amended as of October
27, 1998 and as of the date hereof (as amended, the "Loan Agreement"), and may
now or hereafter be secured by other mortgages, trust deeds, assignments,
security agreements, or other instruments of pledge or hypothecation.
The Termination Date may be extended pursuant to the provisions of the
Loan Agreement; and if so extended, such extended date shall thereupon
constitute the Termination Date.
This Note is payable at the offices of NCBC, at 125 West 55th Street,
23rd Floor, New York, New York 10019, or at such other place as the holder may
designate in writing, in lawful money of the United States of America, which
shall be legal tender in payment of all debts and dues, public and private, at
the time of payment.
Upon demand of Lenders (or either of them), or if no demand, upon the
Termination Date, or at the option of the Lenders (or either of them), (a) if
the undersigned shall fail to make payment of any installment of interest, as
above provided, or (b) upon any default in the terms and provisions of any of
the Loan Agreement, or any security agreement, trust deed, mortgage, or other
instrument of pledge or hypothecation which now or hereafter secures the payment
of the indebtedness evidenced hereby, or (c) upon default in the prompt payment
when due (whether by reason of demand, acceleration, maturity or otherwise) of
any other indebtedness, liabilities, or obligations of the undersigned to the
Lenders, whether now existing or hereafter created or arising (or if there is
any cure period applicable thereto, upon the lapse of such cure period), the
entire unpaid balance of the indebtedness hereby evidenced, together with all
interest then accrued, shall at once become due and payable for all purposes.
If this Note is placed in the hands of an attorney for collection, by
suit or otherwise, or to protect the security for its payment, or to enforce its
collection, the undersigned will pay all costs of collection and litigation,
together with a reasonable attorney's fee.
22
<PAGE>
The Proceeds of the loan represented by this note may be paid to any
one or more of the undersigned.
No delay or omission on the part of the holder in exercising any right
hereunder shall operate as a waiver of such right or of any other right of such
holder, nor shall any delay, omission or waiver on any one occasion be deemed a
bar to or waiver of the same or any other right on any future occasion. Every
one of the undersigned and every endorser of guarantor of this note regardless
of the time, order or place of signing waives presentment, demand, protest and
notices of every kind (including notice of dishonor and agrees that this Note
may be extended, in whole or in part, without limit as to the number of such
extensions or the period or periods thereof, and without notice to them and
without affecting their liability hereon and each such party assents to any
other indulgences, to any substitutions, exchanges or releases of collateral,
and to the additions or releases of any other parties or persons primarily or
secondarily liable for the payment of the indebtedness hereby evidenced.
All rights and obligations hereunder shall be governed and construed
according to the internal statutes and laws of the State of New York (without
regard to principles of conflicts of law), in which state it is delivered,
accepted and is payable.
THE UNDERSIGNED HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ALL STATE AND FEDERAL COURTS SITTING IN NEW YORK
COUNTY, NEW YORK AND AGREES THAT ALL SUMMONS AND OTHER COURT PROCESS ISSUED BY
SAID COURTS MAY BE SERVED UPON THE UNDERSIGNED, WITHIN OR OUTSIDE SAID COURTS'
TERRITORIAL JURISDICTION, BY MAILING THE SAME, BY REGISTERED OR CERTIFIED MAIL,
OR BY PERSONAL SERVICE, TO THE UNDERSIGNED AT ITS ADDRESS SPECIFIED IN THE LOAN
AGREEMENT; PROVIDED THAT NOTHING CONTAINED HEREIN SHALL LIMIT LENDER(S) RIGHT TO
SUE THE UNDERSIGNED IN ANY OTHER COURT HAVING JURISDICTION OVER THE UNDERSIGNED
OR ITS ASSETS AND TO SERVE SUMMONS OR OTHER COURT PROCESS UPON THE UNDERSIGNED
IN ANY MANNER PERMITTED BY APPLICABLE LAWS.
It is the intention of the Lenders and the undersigned to comply
strictly with all applicable usury laws; and, accordingly, in no event and upon
no contingency shall the holder hereof ever be entitled to receive, collect, or
apply as interest any interest, fees, charges or other payments equivalent to
interest, in excess of the maximum rate which the Lender may lawfully charge
under applicable statutes and laws from time to time in effect; and, in the
event that the holder hereof ever receives, collects, or applies as interest,
any such excess, such amount which, but for this provision, would be excessive
interest, shall be applied to the reduction of the principal amount of the
indebtedness evidenced hereby; and, if the principal amount of the indebtedness
evidenced hereby, and all lawful interest thereon, is paid in full, any
remaining excess shall forthwith be paid to the undersigned, or other party
lawfully entitled thereto. All interest paid or agreed to be paid by the
undersigned shall, to the maximum extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal, so that the interest hereon for such full
period shall not exceed the maximum amount permitted by applicable law. Any
provision hereof, or of any other agreement between the Lenders and the
undersigned, that operates to bind, obligate or compel the undersigned to pay
interest in excess of such maximum lawful contract rate shall be construed to
require the payment of the maximum rate only. The provisions of this paragraph
shall be given precedence over any other provision contained herein or in any
other agreement between the Lenders and the undersigned that is in conflict with
the provisions of this paragraph.
This Note is effective only upon delivery to and acceptance by the
Lenders in New York, New York. The undersigned hereby waives notice of
acceptance of this Note.
23
<PAGE>
This Note shall be binding upon each of the undersigned and upon each
undersigned's successors, assigns, heirs and legal representatives and shall
inure to the benefit of Lenders and their successors and assigns.
This Note is an amendment to, and is in substitution and replacement
of, that certain promissory note dated as of February 28, 1997 in the original
principal amount of $1,250,000.00 executed by the undersigned in favor of the
Lenders (the "Replaced Note"). This Note represents the same indebtedness
represented by the Replaced Note and is not intended to constitute a novation in
any manner whatsoever.
BORROWER:
NDC AUTOMATION, INC.
ATTEST:
By: /s/ Ralph Dollander By: /s/ Claude Imbleau
------------------- -------------------
Ralph Dollander Claude Imbleau
- --------------------- ----------------------
(Print or type name) (Print or type name)
Title: President Title: CFO
--------- ---
24
EXHIBIT 10.3
CITIZENS BANK & TRUST COMPANY
NORTH CAROLINA NOTE MODIFICATION AGREEMENT
<TABLE>
<CAPTION>
<S> <C> <C>
May 21, 1999 Account# 41730 Future Obligation
- -------------------------------- ------- ---------
Date of this Agreement
$1,136,695.60 Obligator# 41730 Current Obligation # 17616
- -------------------------------- ------- -------
Outstanding Principal Balance as of the Date of this Agreement
</TABLE>
The Parties to this Note Modification Agreement (this "Agreement") are:
o First Citizens Bank & Trust Company ("Lender"), the current owner and
holder of the Note and secured party under the terms of each instrument
which secures repayment of the Note.
o The following parties (collectively, the "Borrower," whether one or more),
each of whom is obligated under the terms of the Note as an original maker
or as one who has assumed the obligations of an original maker: NDC
AUTOMATION, INC.
o The following parties (collectively, the "Guarantor" whether one of more),
if any, each of whom is obligated as a surety, guarantor or endorser of the
Note:
- --------------------------------------------------------------------------------
ORIGINAL NOTE
This Agreement modifies, amends and supplements that note (the "Note")
identified as follows:
o Original amount of Note $1,387,000.00
o Original date of Note February 17, 1993
o Original payee: The original payee of the Note was First Citizens Bank &
Trust Company, unless the following blank is completed, in which case the
original payee was:
o Original maker(s): The original makers(s) of the Note was/were the
Borrower(s) identified in this Agreement unless the following blank is
completed, in which case the original maker(s) was/were the following.
- --------------------------------------------------------------------------------
Borrower has requested that the Note and other Loan Documents be modified.
Lender has agreed to the modifications, subject to the terms and provisions of
this Agreement. For and in consideration of the premises, the parties to this
Agreement agree that the terms of the Note identified above and all other Loan
Documents executed in connection therewith are modified, amended and
supplemented as of the date of the Agreement (unless otherwise specified) to
effect the following changes to the loan transaction: (Complete applicable
sections. Sections not completed are deleted.)
1. REPAYMENT OF THE INDEBTEDNESS EVIDENCED BY THE NOTE. The outstanding
principal balance on the Note shall be payable, with interest (and with credit
insurance premiums, if applicable) as follows:
INTEREST RATE: Interest shall accrue on the outstanding principal balance
(Complete Section A or B or C)
(A) At the rate of 9.50 percent per annum
(B) At the rate of percent per annum above ( or below, if
checked) the Prime Rate established from the time to time by First
Citizens Bank & Trust Company (the "Index Rate"), not to exceed a
maximum total rate of ________percent per annum nor fall below a
minimum total rate of
25
<PAGE>
_______percent per annum. Unless otherwise checked below, increases or
decreases in the total rate due to changes in the Index Rate shall
become effective on the calendar day each such change in the Index Rate
occurs.
Increases or decreases in the total rate due to changes in the
Index Rate shall be effective on the first day of the calendar month
following the month in which such change in the Index Rate occurs. If
multiple changes in the Index Rate during a calendar month, the Index
Rate on the last day of the calendar month shall be applicable.
(C) See Note Modification Agreement Addendum for interest rate provisions,
the terms and provisions of which are incorporated herein by reference.
PAYMENT TERMS: (Complete Section A or B or C.)
(A) Amortizing Payments. The outstanding principal balance and accrued
interest (and credit insurance premiums, if applicable shall be
payable in 12 equal consecutive monthly (monthly, quarterly,
semi-annually, etc.) payments of $13,911.64 each commencing on
June 16, 1999 (the "Regular Payment Commencement Date") and on the
same day of each such calendar period thereafter and one final
payment of the balance due on June 16, 2000 (hereinafter referred
to as "Maturity"), unless sooner paid. The payment amount specified
includes principal and interest (and credit insurance premiums, if
applicable).
Prior to the Regular Payment Commencement Date, interest on the
outstanding principal balance (and credit insurance premiums, if
applicable) shall be payable____________(monthly, quarterly,
semi-annually, etc.) beginning and consecutively on the same day of
each such calendar period thereafter until the Regular Payment
Commencement Date.
(B) PRINCIPAL PAYMENT TERMS.The outstanding principal balance shall be:
(Complete section 1 or 2 or 3)
1. Payable in one single payment on _______________________(hereafter
referred to as "Maturity).
2. Payable in ______________equal consecutive _______________(monthly,
quarterly, semi-annually, etc.) payments of $__________each
commencing on __________________and on the same day of each such
calendar period thereafter and one final payment of the balance due
on _____________________(hereafter referred to as "Maturity"),
unless sooner paid.
3. Payable on demand. (Note: This option is available only for
letter of credit).
INTEREST AND INSURANCE PREMIUM PAYMENT TERMS: In addition to the
principal payment(s) identified above, interest on the outstanding
principal balance (and credit insurance premiums, if applicable)
shall be (Complete Section 1 or 2).
1. Payable in full on demand (if the Note contains a call
provision or is payable on demand) or at Maturity, whichever first
occurs.
2. Payable ________________ (monthly, quarterly, semi-annually. etc.)
beginning _________________and consecutively on the same day of
each such calendar period thereafter, with any accrued but unpaid
interest (and credit insurance premiums, if applicable) due and
payable in full on demand (if the Note contains a call provision or
is payable on demand) or at Maturity, whichever first occurs.
26
<PAGE>
(C) OTHER. See Note Modification Agreement Addendum for payment terms
the terms and provisions of which are incorporated herein by reference.
2. CALL PROVISION. At any time after __________________Lender has the right and
option to "call" the Note due and payable and to demand payment in full of
the entire unpaid principal balance due under the Note, together with all
interest and other charges then accrued hereunder.
3. MODIFICATION FEE. A loan modification fee of $2,840.00 is due and payable
to Lender upon the signing of this Agreement.
4. COLLATERAL. All collateral securing the Note shall remain as collateral for
the Note as modified by this Agreement unless expressly released by Lender.
The following ADDITIONAL collateral and/or instruments is/are being given to
secure repayment of the Note.
5. OTHER MODIFICATIONS:
ALL OF THE "ADDITIONAL PROVISIONS" APPEARING ON THE REVERSE SIDE OF THIS
AGREEMENT ARE INCORPORATED HEREIN BY REFERENCE AND ARE A MATERIAL PART OF THIS
AGREEMENT.
IN WITNESS WHEREOF, (i) each individual signing this Agreement has hereunto set
his or her hand and adopted as his or her seal the word "SEAL" set forth beside
his or her name, intending this to be a sealed instrument, (ii) Lender has
caused this Agreement to be executed in its name by a person or persons duly
authorized, and (iii) each other entity has caused this Agreement to be executed
in its name by a person or persons duly authorized and, if a corporation, its
corporate seal to be affixed hereto, otherwise having adopted the word "SEAL"
set forth beside its name as its seal, intending this to be a sealed instrument,
all by authority duly given and alias of the date of this Agreement.
- -------------------------------------------------------------------------------
BUSINESS ENTITY
NDC AUTOMATION, INC.___________________________(SEAL)
BY: /s/ Ralph Dollander (SEAL)
------------------------------------------
NAME: Ralph Dollander
TITLE: President (SEAL)
BY/Attest: /s/ Claude Imbleau (SEAL)
-----------------------------------
NAME: Claude Imbleau
TITLE: VP Finace & Administration (SEAL)
- -------------------------------------------------------------------------------
See Signature Addendum for additional signatures of Borrower(s) and Guarantor(s)
- ------------------------------------------------------------------------------
INDIVIDUALS
_____________________________________________(SEAL)
_____________________________________________(SEAL)
_____________________________________________(SEAL)
_____________________________________________(SEAL)
_____________________________________________(SEAL)
- ------------------------------------------------------------------------------
27
<PAGE>
- -------------------------------------------------------------------------------
INSURANCE DISCLOSURE
Credit insurance is not required to obtain credit and will not be provided
unless I sign and agree to pay the additional cost. I want the following
insurance.
Type Premium
___ Credit Life $___________________
___ Joint Credit Life $___________________
___ Credit Disability/Accident TOTAL $___________________
& Health ("A&H") (Available only on Borrower A)
- ------------------------------------------------------
Borrower A Age/DOB
- ------------------------------------------------------
Borrower B (Joint Life Only) Age/DOB
- ------------------------------------------------------
Note: Credit insurance is available only for an individual borrower and
co-borrowers - it is NOT available for guarantors or endorsers. Credit insurance
is not available for directors or officers of corporations, partners or limited
partners of partnerships, or managers or members of limited liability companies
unless such persons sign individually as makers or co-makers on the Note. A&H
Insurance is not available for commercial purpose loans.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO CREDIT INSURANCE
I do not desire any credit insurance. I request the cancellation of any credit
insurance presently in force for my loan and the refund of any unearned premium.
- --------------------------------------------
Borrower A
- --------------------------------------------
Borrower B
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPERTY INSURANCE
If I am required to have property insurance for this loan, I may furnish it
through existing policies I own or I may obtain it through any insurer
authorized to transact insurance business in this state. If I get the insurance
through Lender. I will pay $_______________ for a policy period of _____________
months.
- --------------------------------------------------------------------------------
AGREED: FIRST CITIZENS BANK & TRUST COMPANY (SEAL)
BY: /s/ J. Lynne Walker
-------------------
Sales Associate# 20001 Bldg.# 030
28
<PAGE>
ADDITIONAL PROVISIONS OF NOTE MODIFICATION
1. DEFINITION OF TERMS: References to "First Citizens Bank & Trust Company"
include any financial institution merged with and into First Citizens Bank &
Trust Company. The term "Note" as used in this Agreement referred to the
original Note identified on the front of this Agreement. The Note, an
instruments executed to secure repayment of the Note, all loan commitment
letters and loan agreements, and all other loan documents executed in connection
With the loan transaction evidenced by the Note are collectively referred to in
this Agreement as the Loan Documents." The terms "Note" and "Loan Documents"
include any prior renewals, extensions or modifications thereof.
2. PRIME RATE: The Lender's "Prime Rate" of interest, as, that term is used in
this Agreement, means that rate established from time to time by Lender and
identified as such within Lender's offices.. The term "Prime Rate" shall be used
as a mean's of identifying a rate of interest index and not as a representation
by Lender that the Prime Rate is necessarily the lowest or most favorable rate
of interest offered to borrowers by Lender generally, and no Borrower or
Guarantor shall have any claim or right of action based on such premise.
3. VARIABLE RATE: Notwithstanding any other provision of the Note or this
Agreement, if the interest rate increases during the remaining term of the loan,
Lender may (1) increase the amount of the periodic payment to have the loan
fully amortized at Maturity, (2) extend the Maturity, or (3) require the
resulting increase to be paid at Maturity, or any combination of the foregoing,
all in Lender's discretion as determined from time to time by Lender. (Except
that if this loan is subject to the federal Truth in Lending Act and its
implementing regulations, the foregoing shall not be enforced in conflict with
the disclosures given pursuant thereto.).
4. LATE CHARGE: Unless the principal and interest are repayable in one single
payment, there shall be a late charge of 4% of the unpaid balance or any payment
past due for 15 days or more. If this is a modification of a "PayAnyDay" loan
(i.e., a loan under which payments are not past due until the last day of the
calendar month in which a payment is due, then a payment will be considered
"late" for purposes of assessing a late charge if a payment is made after the
last day of the calendar month in which it is due.
5. FUTURE MODIFICATIONS: Any subsequent modifications, Extensions or renewals of
the Note or any of the other Loan Documents may, at Lender's option, be made on
Lender's standard forms. Such forms may identity Lender as the original lender,
payee on the Note, beneficiary of any deed of trust, and secured party in any
security instrument, notwithstanding the fact that First Citizens Bank & Trust
Company may not have been designated as the original payee or secured party in
the original Loan Documents.
6. SECURITY INSTRUMENTS: This Agreement amends, modifies, and supplements any
instrument given to secure repayment of the Note to reflect the changes to the
loan transaction described herein. (in addition, each instrument given to secure
repayment of the Note is hereby amended by adding the Following language
thereto:
"THE TERMS OR THE NOTE EVIDENCING THE INDEBTEDNESS SECURED BY THIS INSTRUMENT
MAY BE MODIFIED FROM TIME TO TIME BY AGREEMENT BETWEEN THE PARTIES OBLIGATED
THEREON AND THE HOLDER OF THE NOTE, INCLUDING, BUT NOT LIMITED TO, A
MODIFICATION TO INCREASE (THE INTEREST RATE, TO CHANGE THE PAYMENT AND/OR
PAYMENT SCHEDULE, TO CHANGE THE MATURITY DALE, AND/OR TO EXTEND TIME FOR THE
PAYMENT OF SUCH INDEBTEDNESS AND SUCH NOTE AS SO MODIFIED SHALL CONTINUE TO BE
SECURED HEREBY AND WITH A PRIORITY AS OR THE DATE OF THIS INSTRUMENT (OR, IF
THIS INSTRUMENT HAS BEEN RECORDED, AS OF THE DATE OF RECORDATION), REGARDLESS OF
WHETHER ANY SUCH MODIFICATION IS REDUCED TO WRITING OR RECORDED."
7. NOTE MODIFICATION AGREEMENT ADDENDUM: Any Note Modification Agreement
Addendum incorporated into this Agreement by reference shall be fully binding
on each Borrower and Guarantor, jointly and severally, when signed or initialed
by or on behalf of any one or more of the Borrowers.
29
<PAGE>
8. LOAN DOCUMENTS: All of the Loan Documents are hereby modified, amended and
supplemented to the extent necessary to effect the changes to the loan
transaction specified in this Agreement. The terms of the Note and at(other
Loan Documents remain unchanged and in full force and effect, except as modified
by this Agreement.
9. LIABILITY OF PARTIES: The Note, as modified by this Agreement, shall be the
joint and several obligation of each Borrower, regardless of whether such
Borrower was an original maker of the Note. Each Guarantor (whether surety,
guarantor or endorser) consents to the terms of this Agreement and agrees to be
bound by the terms of this Agreement as a part of the Guarantor's continuing
obligation. Sureties, guarantors and endorsers who do not sign this Agreement
will nonetheless be bound by the terms of this Agreement as a part of their
continuing obligation. This Agreement shall not release or diminish the
liability of any surety, guarantor or endorser.
10. MISCELLANEOUS: This Agreement shall be binding upon, and inure to the
benefit of, the parties to this Agreement and their successors interest. This
Agreement is not a novation, rather, it constitutes a modification to the (terms
of an existing contractual relationship between the parties and is not intended
as a cancellation of the original debt or the creation of a new debt. The
parties to this instrument confirm and ratify the terms of the Note and all
other Loan Documents, as modified by this Agreement.
30
EXHIBIT 10.4
Employment Agreement
This Employment Agreement ("Agreement") is made as of this First day of March,
1999, by and between NDC Automation, Inc., a Delaware corporation with its
principal offices located at 3101 Latrobe Drive, Charlotte, North Carolina 28211
("Company") and Claude Imbleau, an individual residing at 5015 Hardison Road,
Charlotte, North Carolina, 28226. ("Employee")
1. Statement of Background, Purpose and Intent.
Employee was appointed Chief Financial Officer (CFO) by the Company's Board of
Directors ("BOD"). The purpose of this Agreement is to outline all terms,
conditions and duties of this position.
2. Employment.
Company hereby employs Employee and Employee accepts such employment pursuant to
the terms and conditions of this Agreement.
3. Duties.
Employee shall serve as the Chief Financial Officer (CFO) of the Company and
shall perform diligently and conscientiously and to the best of his ability
those executive duties as are customarily rendered by and required of a Chief
Financial Officer, and as the Company's President may reasonably require.
Employee shall at an times discharge his duties in consultation with and under
the supervision of the Company President. Employee shall serve the Company
faithfully and shall comply with all applicable laws, the Company's policies and
procedures and prevailing commercial and industrial practices, in that order.
Employee shall also discharge specific duties as directed by the Company
President or the Board of Directors (BOD).
4. Full - time services.
Employee shall devote his full time, attention and best efforts to the Company's
business. During the term of this Agreement, Employee shall not engage in any
other business activity which would interfere with his ability to devote all
time reasonably necessary to satisfactorily discharge his duties to the Company.
5. Compensation.
5.1 Base salary
Company shall pay Employee for all services rendered with a current salary of
one hundred thousand dollars ($100,000) per year, payable in equal bi-monthly
installments. Salary payments shall be subject to withholding and applicable
taxes. Company may adjust Employee's salary each year after review by the
Compensation Committee. In no event shall Employee's salary be made less than
the current salary without the written consent of the Employee.
5.2 Bonus and Stock options.
The Compensation Committee will establish a yearly bonus and/or stock option
plan for Employee. The Compensation Committee will set the performance goal
requirements necessary to qualify for the bonus or stock options. The minimum
bonus opportunity will be equal to 20% of the current annual salary.
6. Benefits.
6.1 Insurance and general benefits.
Company shall purchase and maintain in effect during the term hereof, major
medical, health and dental insurance for Employee and his immediate family,
immediate family being defined as spouse and dependent children under the age of
19 or until age 26 if a full time student. Life and long term disability
insurance shall be maintained in conformance with Company policy for all
employees and executive officers. The death benefit for any life insurance shall
not be less than one (1) year's salary plus $20,000.00. Employee shall be
eligible to participate in any other employee benefit which the BOD may, from
time to time, make available to executives or other employees of Company.
7. Vacation and Holidays.
Employee shall be entitled to a minimum of four (4) weeks annual paid vacation
during the term of this Agreement. Additional vacation time may be granted as
recommended by the President and approved by the BOD. Employee's vacation shall
be planned and coordinated with the other executives of the Company. In
31
<PAGE>
addition, Employee shall be entitled to the same paid holidays, sick and
personal time as are available to all other employees of the Company pursuant to
its then current policies and procedures.
8. Automobile.
Company shall provide Employee with an automobile for his use. The Company
furnished automobile shall be not more than the cost equivalent of a standard
full-size automobile. The Company shall pay for appropriate insurance, all
maintenance and operating costs. In the event this Agreement expires or
terminates for any reason, except Employee's discharge for cause, the Company
shall continue to provide Employee with the use and maintenance of the
automobile for a period of up to one (1) year.
9. Working facilities.
Employee shall have an adequate private office in the Company's headquarters
building and other facilities and services appropriate for his position and for
the execution of his duties.
10. Expenses.
The Company shall reimburse Employee for all actual and reasonable business
related expenses incurred in the performance of his duties hereunder.
Reimbursement shall be pursuant to the Company's then current policies and
procedures and shall require an accounting by Employee, including presentation
of receipts and vouchers. If the Company requires Employee to attend functions
at which a presence of a spouse or guest is expected and appropriate, then The
Company shall pay the expenses of such accompanying persons' actual and
reasonable expenses.
11. Restrictive covenants.
11.1 Employee acknowledges that the Company may have proprietary and
confidential information constituting protectable trade secrets under applicable
law. As to any such protectable trade secrets, Employee covenants and agrees
(all of which covenants and agreements shall survive the expiration or
termination of this Agreement) that during the term of this Agreement and for
three (3) years after its expiration or termination, Employee shall keep
confidential and shall not use or disclose (except as necessary to discharge his
duties hereunder) any such trade secrets.
11.2 Employee agrees that during the term of this Agreement and for one year
after its expiration or termination for any reason, he will not take any action
or make any statement, the natural consequence of which would be to discredit
the reputation of the Company or its products or services. If the Employee is
terminated, the Company agrees that it will in the case of inquiries, only
provide dates of employment and position (s) held while working for the Company.
11 .3 During the term of his Agreement and for a period of one year after its
expiration or termination, Employee shall not be employed by, render services
to, own, advise or assist (whether as an employee, officer, director, agent,
consultant or independent contractor) any business activity or entity located in
the Restricted Territory, which competes with the Company, provided this
provision and restriction shall apply only in the event Employee is terminated
for cause as provided in paragraph 14.1 or in the event of Employee's voluntary
termination of the Agreement pursuant to paragraph 13, provided Employee
receives the payments and benefits provided in paragraph 13.2.
For purposes of this paragraph 11.3, a business shall be deemed to compete with
the Company if the business activity which the Employee primarily assists is to
provide engineering services and/or electronic guidance and control equipment to
manufacturers, or other providers of automated guided vehicle systems (AGVS)
located in North America to commercial, institutional or industrial end users.
Employee shall not be deemed to have violated this covenant if he accepts
employment by or renders services to any company now affiliated with the Company
by significant common ownership or control.
Employee acknowledges that any breach of this Agreement could cause the Company
irreparable harm and, in the event of any breach or impending breach, the
Company shall be entitled to the issuance of a restraining order, preliminary or
permanent injunction, restraining or enjoining such breach by Employee or any
entity or person acting in concert with Employee. Such remedy shall be
additional to and not in limitation of any other remedy which may be otherwise
available to the Company.
For purpose of this paragraph 11.3, the phrase "Restricted Territory" shall mean
the largest territory which may be judicially enforced of the following:
(a) North America;
(b) the United States of America; and
(c) the State of North Carolina.
11.4 For as long as this Agreement is in effect and for a period of one year
32
<PAGE>
after its expiration or termination, except pursuant to paragraph 13, Employee
shall not solicit, induce, aid, or suggest or counsel any employees, consultants
to other persons having substantial contractual relationship with the Company to
leave such employment, cease counseling or terminate such contractual
relationships with the Company.
12. Termination on Account of Death or Disability.
The Company shall have the right to terminate this Agreement in the event of
Employee's death, or if Employee becomes permanently and totally disabled or if
Employee becomes partially disabled for a period exceeding twenty-four (24)
consecutive months. The Company shall provide and maintain disability insurance
coverage for Employee as outlined in Article 6.1.
For the purposes of this Agreement, total disability shall mean the inability to
perform satisfactorily Employee's regular duties for at least sixty-five (65%)
of Employee's full-time work week and Employee is eligible to collect insurance
benefits. Partial disability shall mean the inability to perform consistently
and satisfactorily Employee's regular duties for at least eighty percent (80%),
but not less than sixty-five percent (65%), of Employee's full-time work week.
Any total disability which continues without interruption for three (3)
consecutive months or for a total of four (4) months in any six (6) consecutive
months shall be deemed permanent, unless in the written medical opinion of the
physician primarily responsible for the medical treatment of Employee, Employee
will be able to resume performing consistently his regular, full-time duties
within a period of six (6) months from the date on which the period of total
disability commenced. In any event, if total disability exists for a period of
one year, the Company shall thereafter no longer be obligated to pay any
compensation to Employee or, if partial disability continues for a period of
twenty-four (24) consecutive months, then the Company shall be entitled to
reduce Employee's compensation proportionately to his disability, in either case
until Employee resumes his full-time duties.
13. Termination in the Event of Change in Control or of Termination of Business.
13.1 Notwithstanding anything in this Agreement to the contrary, Employee may
terminate this Agreement by giving thirty (30) days written notice thereof to
the Company at any time within six months following the occurrence of any of the
following events (each, a Change of Control or Termination of Business):
13.1.1 The Company sells all or substantially all of its assets to a single
purchaser or group of associated purchasers in a single transaction or series of
related transactions;
13.1.2 At least fitly (50%) of the outstanding voting shares of the Company are
sold, exchanged or otherwise disposed of in a single transaction or a series of
related transactions;
13.1.3 The Company terminates its business or liquidates its assets; or
13.1.4 There is a merger or consolidation of the Company in a single transaction
or series of related transactions pursuant to which the Company's shareholders
receive less than fifty percent (50%) of the outstanding voting shares in the
surviving corporation.
13.2 In the event a Change of Control according to paragraphs 13.1.1, 13.1.2,
13.1.3 and 13.1.4 occurs and Employee elects to terminate this Agreement, the
Company shall pay severance equal to twelve (12) months base salary plus health
benefits in accordance with current labor laws. Severance pay shall be paid out
in equal monthly payments for twelve (12) months.
14 Term and Termination.
14.1 Except as provided in this section 14.1 or in Articles 12 or 13, this
Agreement shall continue in full force and effect for a period of three (3)
years beginning on the date hereof. Following the expiration of the initial
three (3) year term, this Agreement shall renew for successive one (1) year
terms unless the Company gives written notice to the Employee at least three (3)
months prior to the expiration of the current term of employment.
Notwithstanding the above, Employee may terminate this Agreement for any reason
at any time. In such case no severance, salary or other reimbursement will be
paid to employee after his resignation. The Company may terminate Employee and
this Agreement only for cause, which shall mean conviction of a felony,
malfeasance in office, a material breach of this Agreement or unsatisfactory
performance of his duties as determined by a vote of the Company's BOD. Employee
shall not be dismissed for cause except upon a majority vote of the Company's
BOD.
14.2 Employee shall be entitled to retain all unexercised, unexpired stock
options previously granted him, and may exercise them thereafter, according to
their terms and the terms of the Stock Option Plan pursuant to which they were
issued, despite the expiration or termination of this Agreement for any reason.
33
<PAGE>
14.3 In the event the Company elects not to renew Employee's contract as
provided in 14.1, or Employee elects to terminate his Employment because of an
event as outlined in paragraph 13, Employee will receive severance equal to
twelve (12) months base salary plus health benefits in accordance with current
labor laws. Severance pay shall be paid out in equal monthly payments for twelve
(12) months, and may be withheld by the Company during any period oftime in
which Employee is in violation of his covenants under Article 11 .(Restrictive
covenants)
14.4 The Company shall provide adequate Director and Officer liability insurance
for Employee for the full term of this Agreement and for five (5) years after
its expiration or termination.
14.5 In the event this Agreement expires or terminates for any reason, the
parties agree not to make any public statement concerning the same without the
approval of the other.
15. Arbitration
Any claim or controversy arising out of or related to this Agreement, or its
breach (except an action seeking a restraining order or injunction pursuant to
Paragraph 11.3), shall be finally settled by binding arbitration in the City of
Charlotte, North Carolina, in accordance with the then governing rules of the
American Arbitration Association, Judgment upon the award rendered may be
entered and enforced in any court of competent jurisdiction. This Agreement
shall be interpreted and construed according to the laws of the State of North
Carolina. If the Arbitration panel rules in favor of the Employee, all costs for
the arbitration shall be borne by the Company. If the Arbitration panel rules in
favor ofthe Company, the costs for the arbitration shall be shared between the
two parties on a 50/50 basis. Each side shall, in any event, bear the cost of
its own legal counsel.
16. Assignment
This Agreement shall be binding upon the Company, its successors and assigns,
but it may not be assigned by the Company except as part of a general assignment
or conveyance by the Company of substantially all of its assets or business.
This Agreement may not be assigned by Employee.
17. Entire Agreement
This Agreement constitutes the complete understanding of the parties, all prior
agreement representation and discussions being merged herein. This Agreement may
not be changed or amended orally, but only by a written agreement signed by both
parties.
IN WITNESS WHEREOF, the parties have executed this Agreement in duplicate
originals, under seal, as of the First day of March 1999.
EMPLOYEE NDC AUTOMATION, INC.
/s/ Claude Imbleau /s/ Goran Netzler, Chairman
ATTEST;
/s/ Jan Jutander, Director, NDC Automation Inc.
34
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000859621
<NAME> NDC AUTOMATION, INC.
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> MAY-31-1999
<EXCHANGE-RATE> 1.00
<CASH> 28,644
<SECURITIES> 0
<RECEIVABLES> 1,265,222
<ALLOWANCES> 65,000
<INVENTORY> 436,704
<CURRENT-ASSETS> 1,698,314
<PP&E> 1,641,350
<DEPRECIATION> 605,617
<TOTAL-ASSETS> 2,734,047
<CURRENT-LIABILITIES> 1,533,255
<BONDS> 0
0
0
<COMMON> 34,534
<OTHER-SE> 211,087
<TOTAL-LIABILITY-AND-EQUITY> 2,734,047
<SALES> 2,157,893
<TOTAL-REVENUES> 2,157,893
<CGS> 1,231,538
<TOTAL-COSTS> 1,231,538
<OTHER-EXPENSES> 937,267
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (124,765)
<INCOME-PRETAX> (135,677)
<INCOME-TAX> 0
<INCOME-CONTINUING> (135,677)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (135,677)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
