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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [FEE REQUIRED]
For the fiscal year ended November 30, 1999 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [NO FEE REQUIRED]
For the transition period from______________to______________
Commission file number 0-18253
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NDC AUTOMATION, INC.
(Name of small business issuer in its charter)
Delaware 56-1460497
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3101 Latrobe Drive, Charlotte, North Carolina 28211-4849
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (704) 362-1115
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Securities registered pursuant to Section 12(b) of the Exchange Act:
Name of each exchange on
Title of each class which registered
None None
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Securities registered pursuant to Section 12(g) of the Exchange Act:
.01 Par Value Common Stock
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(Title of Class)
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
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
[X]
State issuer's revenues for its most recent fiscal year: $5,818,222
The aggregate market value of the voting stock held by non-affiliates
of the Registrant was $1,317,358 based upon the closing sales price of Common
Stock on OTC Bulletin Board on January 31, 2000 of $0.60 per share.
As of January 31, 2000, 3,586,451 shares of Registrant's Common Stock,
par value $.01 per share, were outstanding.
Portions of the Registrant's Annual Report to the security holders
filed pursuant to Rule 14a-3(b) under the Securities Exchange Act of 1934 are
incorporated by reference in Part II, Items 6 and 7. In addition, portions of
the Registrant's definitive proxy statement for the 1999 Annual Meeting of
Shareholders to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 are incorporated by reference in Part III, Items 9, 10, 11
and 12.
Transitional Small Business Disclosure Format (check one): Yes No X
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<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
NDC Automation, Inc. conducts the business previously carried on by Netzler
and Dahlgren Company Technologies, Inc. ("NDCT"), NDC Systems, Inc. ("NDCS"),
and another company also called NDC Automation, Inc. ("NDCA") (all collectively
referred to hereunder as the "Company").
NDCT was founded in 1982 as the North American affiliate of NDC, Netzler &
Dahlgren Co. AB ("Netzler & Dahlgren"), a Swedish Company. NDCT's strategy was
to acquire or license European control technologies and products, and to
enhance, modify, and otherwise adapt them for use by customers in North America.
In 1984, NDCS was organized to market radio frequency identification
("RFID") technology products.
Automation Technologies, Inc. ("ATI") was formed in 1985, but did not
engage in the active conduct of business.
In 1987, NDCA was formed to provide standard hardware and software packages
for original equipment manufacturers ("OEMs") to expand applications of
automatic guided vehicle systems ("AGVS") and RFID technologies into industries
that traditionally did not use such technologies.
Effective December 1, 1987, NDCT, NDCS, and NDCA were all merged into ATI.
The surviving corporation changed its name to NDC Automation, Inc. The effect of
the merger was to combine the business activities of three separate, but
market-related, companies into a single, integrated enterprise. The Company
became a Delaware corporation in December 1989 through a merger entered into for
the purpose of changing the Company's state of incorporation. At that time its
sole subsidiary was N/S Technology, Inc., an inactive North Carolina corporation
which was dissolved in 1994.
On March 28, 1990, the Company's successfully completed its initial public
offering netting $1,996,598 to improve its financial position for potential
growth opportunities.
On June 30, 1991, the Company acquired all of the common stock of
Southeastern Software Developers, Inc. ("SSDI"), a South Carolina corporation,
from its shareholders for stock in the Company and cash. SSDI developed and
owned proprietary control and monitoring software used primarily in the textile
industry. The Company has essentially absorbed the operations of SSDI and
dissolved SSDI's corporate charter in 1996.
Effective July 1, 1992, the Company acquired for cash and stock all of the
outstanding shares of NDC Technology Australia PTY Ltd. ("NDCTA"), a company
formed to acquire, develop, market, and sell hardware, software and engineering
services incorporated into and used to control AGVS in the international market.
NDCTA was sold on November 30, 1995 to its managing director.
On June 22, 1993, the Company purchased the assets of AutoNavigator AB
("ANAB"), of Lulea, Sweden. A subsidiary of the Company, NDC Laser AB ("NDC
Laser"), was formed to produce and distribute ANAB's laser device and related
software, enhancing the Company's know-how in the AGV area. NDC Laser was sold
November 30, 1995 to Netzler & Dahlgren.
During the fiscal year ending November 30, 1996, the Company discontinued
its marketing and distribution of the radio frequency identification products to
primarily focus on its AGVS business. The Company also refocused its marketing
and sales of AGVS equipment to OEM customers and system suppliers. In September
1997 the Company expanded it sales efforts to provide turn key AGV systems to
end users in cases where the Company's OEM customers and system suppliers are
not involved.
1
<PAGE>
BUSINESS OF THE ISSUER
The Company's core business is to be a supplier of controls hardware,
software, engineering services and other components that are incorporated into
automated guided vehicles ("AGV's" or "vehicles") and into systems that
incorporate one or more such vehicles ("AGV systems"). AGV's are driverless,
computer-controlled vehicles that are programmed to transport materials through
designated pickup and delivery routines within a particular facility (usually a
manufacturing or distribution facility) and to transmit information concerning
system status, inventory tracking and system controls to a system controller. In
1999, sales of AGV related products and services accounted for almost all of the
Company's net revenues as it did in 1998.
The Company's AGV system products and services have been used in a variety
of industries, including textiles, automotive, newspaper publishing and
electronics. These control products are designed to be of such general
applicability as to be incorporated into many kinds of material handling
vehicles. Consequently, they are used not only in custom-designed AGV vehicles
and systems, but also to automate conventional material handling equipment such
as forklifts and pallet jacks.
The Company markets a laser guidance AGV control system, Lazerway(TM), which
is viewed by management as superior to the traditional "wire guidepath"
technology or other non-wire technologies for controlling the direction of an
AGV. The laser technology permits the end user to alter the guidepaths of AGV's
without changes in the user's facility. For further information regarding AGVS,
see "AUTOMATED GUIDED VEHICLE SYSTEMS" below.
The Company's traditional philosophy is to sell its hardware, software and
engineering services to OEMs customers, i.e. manufacturers of AGVs, AGV systems
and other vehicles that can be equipped for automation to fit the end-users'
needs. The Company will sell such services through regular distribution or as a
sub-contractor to such OEM customers. However, the Company may supply, from time
to time, an end user in circumstances where the Company's OEM customer or system
supplier is not available to implement or support such end user.
The Company was organized in North Carolina in 1987 and reincorporated in
Delaware in 1989, although its predecessors had been in existence since 1982.
Its principal office is located at 3101 Latrobe Drive, Charlotte, North
Carolina, 28211, and its telephone number is (704) 362-1115.
2
<PAGE>
STRATEGY
The Company's mission is to strengthen its core business through active
marketing, distribution and support of AGV system control technology,
engineering and related products through sales to AGV manufacturers, material
handling system integrators and other equipment manufacturers who typically
integrate the Company's products into system products for sale to the actual
users of AGV systems.
The Company is focusing its marketing efforts on its laser technology,
Lazerway(TM), towards OEM customers as well as to existing users of AGV systems
for up-grading and retrofitting purposes. The Company will also pursue system
business direct with end-users when appropriate.
The Company has divested itself of all previous acquisitions to focus on its
core business in North America. The Company's strategy is to increase awareness
of its AGVS technology and system capabilities among end users while creating
new relationships with AGVS suppliers and system suppliers that would be
qualified to distribute the products or systems to end users. As part of the
strategy, the Company intends to pursue potential niche markets of end users
through distribution relationships. The Company believes that its focus on laser
technology rather than on wire technology can give it an advantage in the
existing and future market place. Further recent developments and attempts to
broaden the present market include:
o Netzler & Dahlgren are developing a new product called LAZERWAY TEACH-IN
for the industrial truck market. LAZERWAY TEACH-IN simplifies the layout
and programming of driving routes and loading positions, and can be used by
customer personnel. No computer skills are needed in using the product.
This product could open new markets and applications for the Company's
technology.
The Company also has introduced other but related product lines such as private
labeled batteries and chargers, under the POWERWAY label, that can be
distributed to targeted customers to supplement its existing AGV business.
Revenues for such products were good in 1999.
The Company will continue to review its strategy as it monitors the market,
competition and growth opportunities for its products. Results of such reviews
may affect the above strategies. There can be no assurance, however, that any of
the above strategies or future strategies will meet management's objectives for
success or growth.
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<PAGE>
AUTOMATED GUIDED VEHICLE SYSTEMS
GENERAL
AGV's are driverless, computer-controlled vehicles that are programmed to
transport materials through designated pickup and delivery routines within a
particular facility (usually a manufacturing or distribution facility) and to
transmit system status, inventory tracking and control and other information. In
many manufacturing and distribution processes, material handling needs are met
by roller tables, conveyors, manually operated vehicles and other conventional
methods. The vehicles can be rerouted within the constraints imposed by the
particular system. The Company's AGV system products and services have been used
in a variety of industries, e.g. warehousing, textiles, newspaper publishing and
electronics. Control systems and technology supplied by the Company are used for
guidance and control of AGV systems in numerous existing production facilities.
The vehicles can be made to move and stop, load and unload, and perform
other functions. The AGV's load handling equipment is adapted to the type and
weight of the material that it handles and may consist of a roller table,
forklift, mechanical arm or other device. The vehicle's wheel and drive
configurations vary, depending upon the degree of maneuverability required
within the manufacturing or distribution facility.
Automatic guided vehicles can be guided between pick-up and delivery points
by several methods. The traditional method is an inductive loop, called a wire
guidepath, which is embedded in the floor of the facility when the AGV system is
installed. The vehicles in an AGV system are equipped with a sensor and guidance
equipment that cause them to follow the guidepath. Because the installation of a
wire guidepath requires cutting a channel in the floor of the facility, the wire
guidepath method makes rerouting of AGV's less flexible. Moreover, this method
of installation of the system makes it inappropriate for clean room environments
and certain other applications.
An alternative vehicle guidance method uses laser technology, which
eliminates the need for extensive facility reconfiguration upon installation.
The laser guidance technology employs a rotating laser beam emitted from a
vehicle to sweep the room and calculate angles to detected reflectors. The data
gathered in this manner is used by the vehicle's computer to determine its
location and progress towards its destination. The vehicle can be rerouted
remotely by computer. Management believes that the Company's laser guidance is
superior to traditional technology because it permits the end user to alter the
designated routines of AGV's without extensive reconfiguration of the facility .
The end users of AGV systems typically are firms that need to move objects
by vehicle within a single manufacturing or distribution facility. For example:
A leading car manufacturer transport engines in their
production facility with AGV's.
A significant number of newspapers use AGV systems
incorporating the Company's products to move paper rolls and finished editions
through their printing plants.
The Company offers over 20 standard items of equipment and over 10 standard
software products with multiple options to its customers. In many instances
customers incorporate NDCA products into their own AGV systems for sale to end
users. These control products are designed to be of such general applicability
as to be useful in many kinds of material handling vehicles. Consequently, they
are used not only in custom-designed AGV vehicles and systems, but also to
upgrade conventional material handling equipment such as forklifts and pallet
jacks.
4
<PAGE>
AGV systems are custom-designed by system houses and OEMs, and occasionally
by end users, to satisfy the material handling needs of an end user's
facilities. The more complex AGV systems perform several functions and are
controlled by highly sophisticated computer software. These systems track and
maintain the flow of materials through an entire manufacturing or distribution
process. In doing so, they use numerous vehicles to move parts and assemblies
through the various operations necessary to produce the finished product. The
AGV system's own computers provide host production computers with the
information necessary for management to make real-time production decisions.
THE MASTER LICENSE AGREEMENT
The Company's AGV system products and services incorporate technology
licensed by, and products purchased from, Netzler and Dahlgren Co. AB, a Swedish
based company ("Netzler & Dahlgren"), as well as technology that it has acquired
or developed itself. In accordance with the Master License Agreement ("MLA")
dated December 1, 1987, as restated November 30, 1995, the Company receives
Netzler & Dahlgren's AGV technology, hardware, software, know-how and consulting
services. The Master License Agreement provides that the Company has the sole
rights to commercially and technically utilize, apply and sub-license Netzler &
Dahlgren's AGV system control technology and to sell its AGV system products in
North America to OEMs who manufacture vehicles in North America. The MLA,
however, does not prohibit customers in North America from purchasing complete
AGVs equipped with Netzler & Dahlgren controls from a licensee of Netzler &
Dahlgren who manufactures vehicles outside of North America. Netzler & Dahlgren
products do not include standard or custom vehicle frames for AGVs. Ongoing use
by the Company of AGVS technology unavailable from Netzler & Dahlgren, however,
would allow Netzler & Dahlgren to terminate the Company's rights under the MLA.
On November 30, 1995, the Company sold its laser technology to Netzler &
Dahlgren and extended the Master License Agreement. The restated agreement
continues to allow the Company to distribute the Netzler & Dahlgren laser
technology as described above in North America. The Master License Agreement
further provides that any enhancements or improvements of existing technology
sponsored or developed by one party shall be the property of the original
developer (subject to a royalty-free grant back to the other party for marketing
outside the owner's territory). The agreement was extended for ten (10) years
and will expire on December 1, 2005 and is subject to automatic two year
extensions unless and until one party, in compliance with certain procedures,
notifies the other of its intention to terminate the agreement. It provides for
payment of a 10% royalty on sub-license fees received by the Company with
respect to AGV system technology. It also provides for the sale of products at
prices determined annually. Royalties are due 30 days following receipt of
payment by the Company. During the fiscal year ended November 30, 1999, the
Company incurred no royalties to Netzler & Dahlgren with respect to technology
sub-licenses and purchased an aggregate of $844,414 of hardware, software and
engineering consulting services from Netzler & Dahlgren.
The Company is pursuing modifications to the existing MLA. The primary reason
for any adjustments would to better address the current and future AGV market
for the Company. There can be no assurances that any such changes will be agreed
to by Netzler and Dahlgren.
CUSTOMERS
A substantial portion of the Company's business in any given year is
derived from a limited number of customers, although the identity of those
customers varies somewhat from year to year. For the fiscal year ended November
30, 1999, orders from the three largest customers accounted for 24.3%, 8.3% and
6.4% of the Company's net revenues. For fiscal 1998, orders from the three
largest customers accounted for 12.2%, 12.0% and 11.4% of the Company's net
revenues. For fiscal 1997, orders from the three largest customers accounted for
15.0%, 14.5% and 8.8% of the Company's net revenues.
5
<PAGE>
End users of the Company's products and services are reached generally by
the Company's sales to system suppliers and OEMs.
The Company sold products to over 11 system supplier and OEM customers in
1999 that acquire the Company's products under various types of agreements.
Depending on the terms of such agreements, the system supplier can obtain
hardware, software and access the Company's specific AGV system know-how.
AGV system products and services sold to system suppliers, OEMs and Netzler
& Dahlgren as a group accounted for approximately 57%, 57% and 76% of the
Company's net revenues in the fiscal years ended November 30, 1999, 1998 and
1997, respectively. For the fiscal year ended November 30, 1999, such customers
accounted for approximately $3.3 million in net revenues.
The Company also sold in 1999 its AGV system products and services directly
to end users to incorporate such components and equipment into AGV systems
suitable for their particular needs. These end users often are major
manufacturing concerns experienced in the application of sophisticated material
handling systems for in-house use. System sales to end users have historically
occurred in situations in which no suitable Company's OEM supplier could be
identified for certain end users or when the Company desires to maintain its
application know-how by dealing directly with such end users. AGV system
products and services sold directly to end users accounted for approximately
43%, 43% and 24% of the Company's net revenues in the fiscal years ended
November 30, 1999, 1998 and 1997, respectively.
MARKETING
The Company's marketing strategy is to promote the advantages of its AGV
control technology to the whole market, particularly the Lazerway(TM) system.
The technology consists of a family of products, both hardware and software,
capable of being incorporated into a broad variety of systems while preserving
the identity and independence of the system supplier. The Company sales and
distribution efforts are directed toward its OEM customers and system suppliers
and end users in identified market segments. In its approach to certain
prospective customers, the Company will suggest a teamed technology arrangement.
In such an arrangement, the Company will work with its OEM customer to integrate
the Company's products and services with their equipment. The goal is to fashion
a material movement system that will satisfy the end user's particular needs.
Such technology once installed can be maintained by factory floor technicians.
This approach has been used in more than 1000 AGV systems with over 7,000
vehicles (composed of as few as one vehicle and as many as 50 vehicles).
The Company's marketing program is led by its President, and implemented by
its Marketing Manager and Sales Group, who are responsible for developing
relationships with system suppliers, OEMs, distributors and end users. The
Company attends the major trade shows held by the materials handling industry
and advertises in various industry publications.
Although the Company actively markets all of its products and services, a
substantial part of its business is unsolicited. For example, a potential end
user of the Company's products might solicit requests for proposals from more
than one system supplier. A system supplier will incorporate the features of the
Company's products and services in the technical specifications of its bid, in
which case the pricing of its bid would reflect the cost of such products and
services. It is possible for several system suppliers or OEMs to incorporate
features of the Company's products and services into their bids, thus enhancing
the likelihood that such products and services will be included in the AGV
system finally selected by the end user. The bidding process takes, on the
average, three months to one year for completion. The design, manufacture and
installation of AGV systems utilizing the Company's products and services
require an additional six to twelve months.
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BACKLOG
Backlog consists of all amounts contracted to be paid by customers but not
yet recognized as net revenues by the Company. At November 30, 1999, the Company
had a backlog of approximately $1,650,000 compared to $780,000 total backlog one
year earlier. Substantial fluctuations in backlog are considered normal due to
the size of AGV system contracts. Substantial fluctuations in the industry
makeup of the Company's backlog also are considered normal.
PATENTS AND PROPRIETARY INFORMATION
The Company has obtained marketing and manufacturing rights to control
technology, components, equipment and know-how developed by Netzler & Dahlgren,
and the Company is not permitted to apply for any patent thereon. Product
developments sponsored and funded by the Company are the property of the Company
and may be patented by the Company. The Company owns and licenses various
patents and trademarks with varying expiration dates.
Management believes that the Company's strong ability to modify and adapt
its products to changing applications is just as significant to the maintenance
of its competitive position as is the protection afforded by its own patents and
trademarks.
RESEARCH AND DEVELOPMENT
The Company's research and development activities are designed to complement
existing products and services and not to innovate radically different
technologies. Management relies upon Netzler & Dahlgren to innovate technology
to which the Company is entitled according to the terms of the Master License
Agreement.
The Company did not spend any amount for R&D in fiscal 1999, 1998 or 1997.
INVENTORY
The Company purchases considerable amounts of hardware and software from
Netzler & Dahlgren. The lead time required for such purchases averages
approximately sixteen weeks. Other manufactured products inventoried by the
Company require similar lead times. Due to the long lead times required, a
general increase in the volume of business can cause increases in inventory
levels.
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COMPETITION
The material handling industry is highly competitive, and technologies are
being continuously developed or improved. The Company is a supplier in North
America of AGV system control technology, products and services designed to be
incorporated into vehicles manufactured by others. Management believes that the
flexibility and functionality of its controls and technology offer a competitive
advantage relative to the technology of system suppliers and OEMs that produce
controls and vehicles only for use in their own AGV systems. There can be no
assurance that this competitive advantage will continue.
While the Company endeavors continually to improve and upgrade its product
and service offerings, there can be no assurance that other firms having greater
financial resources for research, development and marketing will not develop
products with characteristics superior to the Company's products or that render
the Company's products obsolete.
In summary, competition is derived much less from non-OEM companies
supplying AGV control technology than from OEMs who offer turnkey AGV systems
based on their own proprietary AGVS technology. The Company has yet to convert
such major OEMs from their own AGVS technology to the Company's technology,
thereby limiting the Company's access to such markets served by such OEMs.
The terms of the MLA, do not prohibit Netzler & Dahlgren's licensees from
entering the North American market to compete with the Company's sub-licensees
or to supply completed AGVs to the Company's sub-licensees. Should such foreign
licensees be successful in North America, the Company's potential revenues may
significantly decrease. During 1999 and 1998 the Company noted an increased
presence of such foreign licensees in the North American market compared to
prior years. Management presently believes this trend may continue and without a
greater number of North American sub-licensees such competition from Netzler &
Dahlgren foreign licensees could be a material threat to the Company's current
and potential revenues.
EMPLOYEES
The Company presently employs 25 persons full-time. None of the Company's
employees is a party to a collective bargaining agreement. The Company considers
its employee relations to be good.
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ITEM 2. PROPERTIES
The Company owns the premises that it occupies at 3101 Latrobe Drive in
Charlotte. A bank holds a mortgage on the property in an original amount of
$1,387,000, of which $977,846 was outstanding at November 30, 1999. The
productive capacity of the building is approximately 13,000 square feet, all of
which is currently utilized for executive offices, engineering, distribution and
administration space. In addition to the above property the Company leases a
10,000 square foot warehouse and testing facility at 4101-E Barringer in
Charlotte. The lease monthly cost is approximately $4,000.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock previously traded on the National Association of
Securities Dealers, Inc. ("NASDAQ") National Market under the symbol "AGVS". The
Company's common stock began trading on the OTC Bulletin Board in November,
1995. As of November 30, 1999, 3,586,451 of the Company's 11,000,000 authorized
shares of Common Stock were issued and outstanding.
Trading in the Company's securities commenced on March 28, 1990. The table
below indicates quarterly high and low bid and asked information for the years
ended November 30, 1999 and 1998, respectively, as provided to the Company by
NASDAQ and OTC Bulletin Board. The quotations reflect inter-dealer prices,
without dealer mark-up, mark-down, or commission, and may not represent actual
transactions.
The approximate number of holders of record of common stock of the Company
as of January 31, 2000 was 175. The Company believes that there are
approximately 800 owners of beneficial interest of the Company's common stock.
<TABLE>
<CAPTION>
Market Price per Share
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1999 1998
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High Low High Low
Quarter Ended Bid Ask Bid Ask Bid Ask Bid Ask
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
February 28 .40 .65 .15 .15 9/32 13/32 5/32 3/16
May 31 .79 .90 .31 .53 11/32 7/16 9/32 11/32
August 31 .72 .88 .22 .38 .32 7/16 3/16 .24
November 30 .63 .88 .26 .34 .22 .28 .125 .14
======================================================================================================================
</TABLE>
The Company has never paid any cash dividends and has no present intention
to declare or pay cash dividends. The Company intends to retain any
earnings which it may realize in the foreseeable future to finance the
development and expansion of its business.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information under the captions "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in the Registrant's Annual Report
to the security holders furnished to the Commission under Rule 14a-3(b) of the
Securities Exchange Act of 1934 (a copy of which is included in the exhibits
hereto) is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
The Financial Statements in the Registrant's Annual Report to the security
holders furnished to the Commission under Rule 14a-3(b) of the Securities
Exchange Act of 1934 (a copy of which is included in the exhibits hereto) are
incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information under the captions "Election of Directors", "Management" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
Registrant's definitive Proxy Statement are incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information under the captions "Compensation of Directors" and
"Executive Compensation" in the Registrant's definitive Proxy Statement are
incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of
Management and Others" in the Registrant's definitive proxy statement is
incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Certain Transactions" in the
Registrant's definitive proxy statement is incorporated herein by reference.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(b) Reports on Form 8-K
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
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(A) Exhibits:
Exhibit No. Description
3.1 (a)* Certificate of Incorporation of the Company (incorporated
by reference to Exhibit 3.1 to the Company's Form 10-K for
the fiscal year ended November 30, 1990 (the 1990 Form
10-K).
(b)* Certificate of Amendment dated May 27, 1993 (incorporated
by reference to Exhibit 3.1 to the Company from S-1 dated
August 27, 1993).
3.2 * Bylaws of the Company (incorporated by reference to Exhibit
3.2 to the Company's 1990 Form 10-K).
4.1 * Form of Common Stock certificate (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement (No.
33-32925) on Form S-18 (the Form S-18)).
10.1 (a)* Profit Sharing Plan and Trust Agreement dated April 1,
1983, as amended (incorporated by reference to Exhibit 10.1
to the Company's 1990 Form 10-K).
(b)* Nonstandardized Code 401(k) Profit Sharing Plan
(incorporated by reference to Exhibit 10.48 to the
Company's 1990 Form 10-K).
(c)* Adoption Agreement #004 Nonstandard Code 401(k) Profit
Sharing Plan dated October 26, 1992 (incorporated by
reference to Exhibit 10.1(b) to the Company's Form 10-K for
the fiscal year ended November 30, 1992 (the 1992 Form
10-K)).
10.2 (a)* Master License Agreement dated December 1, 1987 (the Master
License Agreement) between Netzler & Dahlgren and the
Company (incorporated by reference to Exhibit 10.2 to the
Form S-18).
(b)* Letter Amendment dated March 28, 1990 between the Company
and Netzler & Dahlgren, amending the Master License
Agreement (incorporated by reference to Exhibit 10.2(b) to
the Company's 1990 Form 10-K).
(c)* Amendment to Master License Agreement dated May 31, 1990
between the Company and Netzler & Dahlgren, amending the
Master License Agreement (incorporated by reference to
Exhibit 10.2(c) to the Company's 1990 Form 10-K).
(d)* Agreement dated October 18,1993 between the Company and
Apogeum AB regarding Conveyance of Laser Know-How and
Rights (incorporated by reference to exhibit 10.2(D) 1994
form 10KSB).
(e)* Restated Master License Agreement dated November 30, 1995
between the Company and Netzler and Dahlgren Co. AB
(incorporated by reference to exhibit 10.2(e) 1995 form
10KSB).
(f)* Letter dated September 10, 1997 from Netzler and Dahlgren
Co. AB to Company pertaining to direct sales to end users
as defined by the Master License Agreement (incorporated by
reference to Exhibit 1 of the August 31, 1997 Form 10QSB).
12
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
(A) Exhibits:
Exhibit No. Description
10.3 (a)* Agreement dated June 20, 1989 between the Company and
Schabmuller GmbH (incorporated by reference to Exhibit 10.4
to the Form S-18).
(b)* Exclusive Distribution Agreement dated February 9, 1995
between the Company and Schabmuller GmbH (incorporated by
reference to exhibit 10.4(b) to the Company's 1994 form
10-KSB).
(c)* Distributorship Agreement dated February 19, 1998 between
the Company and Schabmulerr Gmbh (incorporated by reference
to exhibit 10.4(c) 1998 form 10KSB.
10.4 (a)* Know-How, Firmware and Documentation License Agreement
dated November 30,1990 between the Company and Production
Machinery Corporation (incorporated by reference to Exhibit
10.8(a) to the Company's Form 10-K for the fiscal year
ended November 30, 1991 (the 1991 Form 10-K)).
(b)* Technology License Agreement dated January 30, 1998 between
the Company and Mentor AGVS (incorporated by reference to
exhibit 10.5(b) to the Company's 1998 form 10-KSB).
(c) Technology License Agreement dated December 1, 1999 between
the Company and Mentor AGVS
10.5 (a)* Agreement and Plan of Merger dated September 13, 1999 by
and among NDC Automation, inc., Hornett Acquisition Corp.
and Portec, Inc. (incorporated by reference to Exhibit 2 to
the Company's September 17, 1999 Form 8K)
(b)* Second Restated Master License Agreement between NDC
Automation, Inc. and Netzler et Dahlgren CO.AB dated
September 13, 1999. (incorporated by reference to Exhibit 3
to the Company's September 17, 1999 Form 8K)
(c )* Termination Agreement dated November 15, 1999 of the
contemplated merger between Company and Portec, Inc.
(incorporated by reference to Exhibit 2 to the Company's
November 15, 1999 Form 8K)
(d)* Stock Purchase Agreement dated November 15, 1999 between
the Company and J Richard Industries LP (incorporated by
reference to Exhibit 2 to the Company's November 15, 1999
Form 8K)
10.6 Exclusive Distribution Agreement dated October, 1999
between the Company and MicroPower
10.7 Service and Support Agreement dated December 14, 1999
between the Company and the Raymond Corporation.
13
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
- --- -----------
(A) Exhibits:
Exhibit No. Description
10.8* Employment Contract between Ralph G. Dollander and the
Company. (incorporated by reference to exhibit 10.14, 1995
form 10KSB).
10.9* Employment Agreement dated March 1, 1999 between Claude
Imbleau and the Company (incorporated by reference to
exhibit 4, to the Company's May 31, 1999 form 10QSB).
10.10 (a)* NDC Automation, Inc. 1990 Stock Option Plan, as adopted
October 10, 1990 (incorporated by reference to Exhibit
10.47(a) to the Company's 1990 Form 10-K).
(b)* Form of Stock Option Agreement (incorporated by reference
to Exhibit 10.47(b) to the Company's 1990 Form 10-K).
10.11 (a)* Form of Stock Purchase Agreement dated July 1, 1992 between
the Company and NDC Technologies International, Ltd.
(incorporated by reference to Exhibit 10.50 to the
Company's 1992 Form 10-K).
(b)* Agreement to purchase corporate stock of NDC Technologies
Australia Pty, Ltd. dated November 30, 1995 between the
Company and Tommy Hessler. (incorporated by reference to
Exhibit 10.18(b) to the Company's 1995 Form 10-KSB).
(c)* Guaranty and Pledge Agreement between Tommy Hessler and the
Company dated November 30, 1995. (incorporated by reference
to Exhibit 10.18 (c ) to the Company's 1995 Form 10-KSB).
(d)* Promissory Note dated November 30, 1995 between the Company
and NDC Technology Australia Pty. Ltd. (incorporated by
reference to Exhibit 10.18(d) to the Company's 1995 Form
10-KSB).
10.12 (a)* Promissory Note from the Company to First Citizens
Bank & Trust Company (incorporated by reference to Exhibit
10.56 to the Company's 1992 Form 10-K).
(b)* North Carolina Note Modification Agreement dated May 16,
1997 between the Company and First Citizens Bank & Trust
Company ( incorporated by reference to exhibit 1 to the
Company's May 31, 1997 Form 10QSB).
(c)* North Carolina Note Modification dated May 21, 1999 between
the Company and First Citizens Bank & Trust Company
(incorporated by reference to exhibit 3 to the Company's
May 31, 1999 Form 10QSB).
14
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
- --- -----------
(A) Exhibits:
Exhibit No. Description
10.13 (a)* Commitment letter dated December 18, 1996 for a revolving
line of credit of $1,250,000 to be provided by National
Canada Business Corp's to the Company.
(b)* Inventory and accounts receivable loan and security
agreement dated February 28, 1997 between the Company and
National Bank of Canada and National Canada Business Corp.
(incorporated by reference to report on form 8K dated March
11, 1997).
(c )* Confirmation letter for extending Line of Credit from
National Canada Business Corp. to NDC Automation, Inc.
dated April 1, 1998. ( incorporated by reference to exhibit
1 to the Company's May 31, 1998 Form 10QSB).
(d)* First amendment to Inventory and accounts receivable loan
and security agreement dated October 27, 1998 between the
Company and National Bank of Canada and National Canada
Business Corp. (incorporated by reference to Exhibit
10.11(d) to the Company's 1998 Form 10-KSB).
(e)* First amendment to inventory repurchase agreement dated
October 27, 1998 between the Company and National Bank of
Canada and National Canada Business Corp. and Netzler &
Dahlgren Co AB (incorporated by reference to Exhibit
10.11(e) to the Company's 1998 Form 10-KSB).
(f)* Second amendment to inventory and accounts receivable loan
and security agreement dated April 30 between Company and
National Bank of Canada (incorporated by reference to
exhibit 1 to the Company's May 31, 1999 Form 10QSB).
(g)* Amended, restated and substituted secured note dated April
30, 1999 between Company and National Bank of Canada
(incorporated by reference to exhibit 2 to the Company's
May 31, 1999 Form 10QSB).
10.14 (a)* Reimbursement Agreement between NDC Automation, Inc. and
Netzler & Dahlgren Co AB dated June 29, 1998 (incorporated
by reference to exhibit 2 to the Company's May 31, 1998
Form 10QSB).
(b)* Deed of Trust between NDC Automation, Inc. and Netzler &
Dahlgren Co AB dated June 29, 1998 (incorporated by
reference to exhibit 3 to the Company's May 31, 1998 Form
10QSB).
(c)* Promissory Note between NDC Automation, Inc. and Netzler &
Dahlgren Co AB dated June 30, 1998 (incorporated by
reference to exhibit 4 to the Company's May 31, 1998 Form
10QSB).
10.15* Agreement for sales representation dated January 30, 1998
between the Company and Thrige Electric (incorporated by
reference to exhibit 10.18 to the Company's 1997 form
10-KSB).
10.16* Representation Agreement dated January 27, 1999 between the
Company and Harcon Engineering Inc. (incorporated by
reference to exhibit 10.16 to the Company's 1998 Form
10-KSB).
11.1 Computation of Earnings Per Share for November 30, 1999.
13. Company's 1999 Annual Report.
23.3 Consent of McGladrey & Pullen, LLP to the incorporation by
reference in this Form 10-KSB.
15
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
No. Description
- --- -----------
(A) Exhibits:
Exhibit No. Description
27. Financial Data Schedule.
99.1* United States Letters Patent for Optical Navigation System
for an Automatic Guided Vehicle, and Method (Patent No.
4,626,132; Date of Patent 08/15/89) (incorporated by
reference to Exhibit 28.1 to the Form S-18).
99.2* United States Patent for Method and Apparatus for Providing
Destination and Vehicle Function Information to an
Automatic Guided Vehicle (Patent No. 4,780,817; Date of
Patent 10/25/88) (incorporated by reference to Exhibit 28.2
to the Form S-18).
99.3* United States Patent and Trademark Office Notice of
Recordation of Assignment Document for Automatic Guided
Vehicle Traffic Control System and Method (Document Date
02/19/88) (incorporated by reference to Exhibit 28.3 to the
Form S-18).
99.4* Canadian Letters Patent for Apparatus and Method for
Optical Guidance System for Automatic Guided Vehicle
(Patent No. 1,236,132; Date of Patent 05/17/88)
(incorporated by reference to Exhibit 28.4 to the Form
S-18).
99.5* United States Letters Patent for Automatically Guided
Vehicle Having Steering Mechanism for Enabling Vehicle to
Follow Guidance Wire (Patent No. 4,729,449; Date of Patent
03/08/88) (incorporated by reference to Exhibit 28.5 to the
Form S-18).
99.6* United States Letters Patent for Apparatus and Method for
Optical Guidance System for Automatic Guided Vehicle
(Patent No. 4,626,995; Date of Patent 12/02/86)
(incorporated by reference to Exhibit 28.6 to the Form
S-18).
99.7 * United States Certificate of Registration of Trademark NDC
(No. 1,360,353; Date of Registration 09/17/85)
(incorporated by reference to Exhibit 28.7 to the Form
S-18).
99.8 * United States Certificate of Registration of Trademark
SENS-O-GUIDE (No. 1,360,354; Date of Registration 09/17/85)
(incorporated by reference to Exhibit 28.8 to the Form
S-18).
99.9 * Canadian Certificate of Registration Trademark MAGIC POINT
(No. 331696; Date of Registration 09/04/87) (incorporated
by reference to Exhibit 28.9 to the Form S-18).
99.10* United States Certificate of Registration of Trademark
MAGIC POINT (No. 1,417,335; Date of Registration 11/18/86)
(incorporated by reference to Exhibit 28.10 to the Form
S-18).
99.11* United States Certificate of Registration of Trademark
ESCORT (No. 1,468,835; Date of Registration 12/15/87)
(incorporated by reference to Exhibit 28.11 to the Form
S-18).
* Certain of the exhibits to this Report, indicated by an asterisk, are hereby
incorporated by reference to other documents on file with the Commission, with
which they are filed in fact, to be a part hereof as of their respective dates.
16
<PAGE>
(B) Reports on Form 8-K
1. September 17, 1999 8K filing for Agreement and Plan of Merger dated
September 13, 1999 by and among NDC Automation, inc., Hornett Acquisition
Corp. and Portec, Inc.
2. November 15,1999 8K filing for Termination Agreement dated November 15,
1999 of the contemplated merger between Company and Portec, Inc.
3. December 20, 1999 8k filing in reference to Ralph Dollander resignation
from the Board.
17
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) 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 G. Dollander
President
Chief Executive Officer
By: /s/Claude Imbleau
----------------------------------------
Claude Imbleau
Chief Operating Officer
Chief Financial Officer
Date: February 22, 2000 Chief Accounting Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and date
indicated.
By: /s/Goran P.R. Netzler
----------------------------------------
Goran P. R. Netzler
Chairman of the Board of Directors
By: /s/Jan H.L. Jutander
----------------------------------------
Jan H. L. Jutander
Director
By: /s/Richard D. Schofield
----------------------------------------
Richard D. Schofield
Director
By: /s/Raymond O. Gibson
----------------------------------------
Raymond O. Gibson
Director
Date: February 22, 2000
18
EXHIBIT 10.4C
***: CERTAIN MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES EXCHANGE
COMMISSION.
TECHNOLOGY LICENSE AND SUPPLY AGREEMENT
This Technology License and Supply Agreement is made and entered into
by and between NDC, Automation, Inc., a Delaware corporation, with its principal
place of business at 3101 Latrobe Drive, Charlotte, North Carolina 28211
("SUPPLIER") and Mentor AGVS, Division of Krasny-Kaplan Corporation, an Ohio
corporation, with its principal place of business located at 4899 Commerce
Parkway, Warrensville Heights, OH 44148, "BUYER") as of the 1st day of December,
1999.
WHEREAS, SUPPLIER is the exclusive licensee in North America of certain
patents, software and know-how related to automatic guided vehicle systems and
is the exclusive distributor in North America for certain control components and
equipment based on such patents, software and know-how which has been designed
by, manufactured for, and sold by NDC Netzler et Dahlgren AB ("NDC"), a Swedish
company; and
WHEREAS, BUYER designs, manufactures (or has manufactured), installs
and services complete automatic guided vehicle systems ("AGVS"); and
WHEREAS, BUYER desires to use SUPPLIER's know-how, support and AGVS
control components and equipment in BUYER's AGVS; and
WHEREAS, the purpose of this agreement is to set forth the terms and
conditions pursuant to which SUPPLIER shall license its technology and supply
its products to BUYER and support BUYER in its use of the same.
NOW THEREFORE, in consideration of these premises, the covenants
exchanged herein and other good and valuable consideration, the parties agree as
follows:
A G R E E M E N T
1 Grant of License.
1.1 Subject to the terms and conditions of this Agreement and during its Term,
SUPPLIER grants to BUYER and BUYER accepts a non-exclusive license and right to
use SUPPLIER's
1
<PAGE>
Technology (as hereinafter defined) and AGVS control components
and equipment within the Territory (as hereinafter defined) for the following
purposes:
(1) to market, sell, design, manufacture, assemble, install and
set-up and service AGVS for end-users; notwithstanding the
above, BUYER may sell AGVS to end- users outside the
Territory, using SUPPLIER's Technology, AGVS control
components and equipment, provided that design, manufacturing
and assembly have been done within the Territory
(2) to sublicense third party contractors at its direction to
manufacture, assemble, install, set-up and service AGVS
designed and sold by BUYER.
1.2 The "SUPPLIER's Technology" shall consist of all patents, information,
processes, solutions, techniques, software and documentation licensed to or and
owned by SUPPLIER which relate to any of the navigation, control communication,
or decision-making functions of an AGVS or the design, use, manufacture,
installation, set-up or servicing of an AGVS as the same now exists or may be
developed or acquired by or licensed to SUPPLIER during the Term hereof.
1.3 The "Territory" shall consist of the countries of North America.
2 License Fee.
BUYER shall pay to SUPPLIER an annual license fee of *** payable as follows:
(1) The first annual license fee shall be due and payable upon
execution of this Agreement;
(2) subsequent annual license fees shall be due and payable on
each Anniversary of the date of this Agreement.
3. Performance Credits.
3.1 BUYER agrees to order and accept delivery for engineering, support services
and AGVS control components and equipment totaling at least *** in each Contract
Year during the Term of this Agreement. If BUYER fails to meet this minimum,
SUPPLIER may terminate the Agreement in accordance with paragraph 5.3.
3.2 SUPPLIER will grant to BUYER a *** performance credit in each Contract Year
of this Agreement if SUPPLIER has invoiced BUYER *** or more during the previous
Contract Year, and a *** performance credit in each Contract Year of this
Agreement if SUPPLIER has
2
<PAGE>
invoiced BUYER *** or more during the previous Contract Year for products and
services, including but not limited to AGVS control components and equipment,
motors and drives, batteries and chargers, etc.
3.3 SUPPLIER shall notify BUYER as to the performance credit earned with respect
to the sales made in any Contract Year no later than one month after the
contract year ends.
3.4 BUYER shall be entitled to purchase AGVS control components, equipment,
engineering services, training and other support from SUPPLIER according to the
discount and pricing schedule attached hereto (Exhibit 1). SUPPLIER reserves the
right to revise its prices annually upon giving BUYER sixty (60) days prior
written notice.
3.5 BUYER shall also be entitled to purchase spare parts and services under a
separate Service & Support Agreement and SUPPLIER agrees to negotiate the terms
of such an agreement in good faith with BUYER.
4 Obligations of the Parties.
4.1 SUPPLIER shall provide, upon reasonable advance request and at a mutually
agreeable time, up-date training at rates according to Exhibit 1. SUPPLIER will
also facilitate participation at NDC's scheduled courses in Sweden for BUYER's
qualified employees.
4.2 SUPPLIER shall provide software and upgrades of such software at terms in
accordance with Exhibit 1, as the same may be released generally by SUPPLIER
from time to time.
4.3 BUYER shall pay the travel and living expenses of its personnel when
receiving training or assistance, and BUYER shall reimburse SUPPLIER for its
reasonable out-of-pocket expenses when traveling to provide training or other
support.
5 Term and Termination.
5.1 This Agreement shall be deemed effective from December 1, 1999 upon
execution and shall continue in full force and effect until November 30, 2002,
(the "Term") unless sooner terminated or extended pursuant hereto. This
Agreement shall be automatically extended for successive additional terms of one
year each (each an additional "Term') unless either party, at least ninety (90)
days prior to the expiration of the then current Term gives notice to the other
that the Agreement shall not be renewed.
5.2 The period from December 1 to the following November 30 during any Term
shall be known as a Contract Year.
5.3 This Agreement may be terminated by either party if the other commits a
material breach of this Agreement and does not cure such breach within thirty
(30) days after receiving notice
3
<PAGE>
of the breach and the sender's intent to terminate or immediately upon giving
notice in the event the receiving party ceases business as a going concern,
assigns this Agreement in violation of its terms, files for bankruptcy or for
the appointment of a trustee, receiver, conservator or the like of its business
or assets, dissolves or adopts a plan of dissolution or liquidation.
5.4 This Agreement may also be terminated by mutual, written consent between the
parties.
6 Ownership and Confidentiality.
6.1 All AGVS Technology provided to BUYER by SUPPLIER shall be and remain the
exclusive property of SUPPLIER, and BUYER shall not acquire any right, title or
interest in the same, in the name and style "SUPPLIER" or in the goodwill
thereof.
6.2 BUYER shall and hereby does grant to SUPPLIER, its successors and assigns, a
perpetual, irrevocable, non-exclusive license and right with right to sublicense
to use all improvements to the SUPPLIER Technology and all inventions,
discoveries, patents and information, whether patented or not, which relate to
SUPPLIER or derive from SUPPLIER Technology which it develops, creates or
acquires pursuant to a development contract during the Term of this Agreement,
at terms mutually agreed in writing between the parties.
6.3 BUYER shall not use, copy or distribute SUPPLIER Technology except as
expressly authorized hereby.
6.4 BUYER shall use efforts no less stringent then it uses to protect its own
valuable proprietary information and, in any event, no less than reasonable to
protect the confidentiality of all SUPPLIER Technology. BUYER shall limit
disclosure of SUPPLIER Technology to its own employees who have a need to know
and to outside contractors, consultants or sublicensees who are bound, in
writing, to protect the confidentiality and proprietary nature of the SUPPLIER
Technology and not to use it except in support of BUYER's AGVS projects. Such
writings shall be for SUPPLIER's benefit and may be enforced by it. The
foregoing obligations shall not apply to information which is or becomes
publicly known through no act or omission of BUYER or its contractors,
representatives or sublicensees.
6.5 BUYER shall return all expressions or tangible recordings of AGVS Technology
to SUPPLIER upon the expiration or termination of this Agreement for any reason.
7 General.
7.1 Any notice required or contemplated by this agreement shall be sufficient if
in writing and delivered personally, by courier service such as Federal Express
or if deposited with the U.S. Postal Service, first class, certified or
registered mail, postage paid, addressed as follows or to such other address as
a party may give to the other by notice:
4
<PAGE>
If to SUPPLIER: NDC Automation, Inc.
3101 Latrobe Drive
Charlotte, North Carolina 28211
Attention: Ralph Dollander, President
If to BUYER: MENTOR AGVS
4899 Commerce Parkway
Warrensville Heights, OH 44128
Attention: Michael Urban, Vice President
7.2 All sales of AGVS control components and equipment and engineering services
shall be governed exclusively by the terms of the relevant purchase order and by
SUPPLIER's standard terms and conditions of sale, copies of which are attached
and incorporated herein by reference (Exhibits 2 and 3).
7.3 Neither party may assign this Agreement without the express, prior consent
of the other party. Any purported assignment in violation of this provision
shall be void. Assignment shall include any assignment by operation of law,
including merger.
7.4 The relationship created by this Agreement is solely that of
Supplier/Licensor and Buyer/Licensee. Neither party shall be nor hold itself out
as the legal representative of the other, and no relationship of principal and
agent, franchisor and franchisee, employer and employee is created hereby.
7.5 The failure or delay by one party in enforcing its rights hereunder with
respect to any breach or failure of performance by the other shall not be deemed
a waiver; and the waiver by one party of any right or remedy hereunder on one
occasion shall not be deemed a waiver of any other right or remedy or on any
other occasion.
7.6 This Agreement and any claim or controversy arising out of or related to it
shall be governed exclusively by the domestic law of the State of North
Carolina.
7.7 This Agreement replaces any and all prior agreements and constitutes the
entire expression of agreement between the parties with respect to its terms,
understandings, statements and representations being merged herein. It may not
be amended or modified orally, but only by a written agreement signed by both
parties. Each party represents that the other has not made any statement or
premise on which it has relied which is not expressed herein.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by the signature of
their duly authorized representatives as of the date first above appearing.
MENTOR AGVS NDC AUTOMATION, INC.
By: /s/ Roger Steel By: /s/ Ralph Dollander
------------------------- -----------------------------
Title: President Title: President
------------------------- -----------------------------
6
Exhibit 10.6
***: CERTAIN MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES EXCHANGE
COMMISSION.
DISTRIBUTORSHIP AGREEMENT
BETWEEN
NDC AUTOMATION, INC.
AND
MICROPOWER E.D. AB
This DISTRIBUTORSHIP AGREEMENT ("Agreement") is made and entered into by and
between NDC AUTOMATION, INC. a Delaware, U.S.A. corporation with its principal
place of business in Charlotte, North Carolina ("DISTRIBUTOR"), and MICROPOWER
E.D. AB, a Swedish company with its principal place of business in Vxj, Sweden,
("COMPANY").
Statement of Background, Purpose and Interest
COMPANY manufactures chargers for industrial trucks, automatic guided vehicles
and other electric vehicles and sells these items throughout the world.
COMPANY's primary sales and marketing efforts are made in Europe. DISTRIBUTOR
sells guidance equipment and controls and provides engineering for the design
and implementation of automatic guided vehicle systems, primarily in North
America. DISTRIBUTOR desires to purchase from COMPANY certain products made by
COMPANY and to resell them to customers within North America. The purpose of
this Agreement is to set forth the terms and conditions whereby DISTRIBUTOR acts
as the sole and exclusive distributor for COMPANY in North America.
THEREFORE, in consideration of these premises, the covenants herein given and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
A G R E E M E N T
1. Appointment As DISTRIBUTOR. COMPANY hereby appoints DISTRIBUTOR to be its
exclusive Distributor for COMPANY's "Products" (as hereinafter defined) within
the "Territory" (as hereinafter defined) for the "Term" (as herein defined) of
this Agreement and subject to its terms. As used herein, "Products" shall mean
the Products listed on Schedule 1, attached hereto and incorporated herein by
reference, plus such other products as the parties may hereafter agree to add to
Schedule 1. "Territory" shall mean all countries of North America, their
possessions and territories wherever located. The "Term" of this Agreement shall
mean the period of time defined in paragraph 8.1 herein.
1
<PAGE>
2. Obligations of DISTRIBUTOR.
2.1 DISTRIBUTOR shall use reasonable commercial efforts to sell and to promote
sales of Products and to protect and promote the good name and best interests of
COMPANY and the Products in the Territory.
***
Should the DISTRIBUTOR not comply with any requirement specified in the
preceding paragraph, the COMPANY may in addition to all other remedies he may
have and at his option, by giving 60 days written notice, either terminate this
Agreement or convert the exclusive sales right granted under this Agreement into
a non-exclusive right.
2.2 DISTRIBUTOR may promote or distribute the products of other companies and
otherwise represent other companies, with the exception of products identical or
similar to the Products as per Schedule I, unless mutually agreed between the
parties. Nothing in this Agreement shall be construed to prevent DISTRIBUTOR
from selling its own products.
2.3 DISTRIBUTOR shall purchase and resell Products for its own account and its
own risk. DISTRIBUTOR shall have the right to sell Products under its private
label "PowerWay(TM)" and the parties shall negotiate in good faith the
terms and conditions for such arrangement.
2.4 DISTRIBUTOR shall pay for all Products ordered from COMPANY in accordance
with the prices, terms of payment and other terms and conditions of sale which
are attached hereto as Schedule 1. COMPANY warrants that such prices are and
will remain at least *** below COMPANY's export list prices for such products
for sale to end users.
2.5 DISTRIBUTOR shall maintain a proper place of business including offices,
warehouse space, demonstration, test and showroom space, maintenance and
training facilities and spare parts storage. DISTRIBUTOR shall maintain the
capability to demonstrate the operation of Products.
2.6 DISTRIBUTOR shall maintain an inventory of Products and spare parts adequate
to meet routine commercial demand with reasonable lead-times at DISTRIBUTOR'S
discretion and shall provide spare parts and training, installation and
maintenance services to its customers upon their request.
2
<PAGE>
2.7 DISTRIBUTOR shall provide trained and skilled sales and other personnel
sufficient to promptly and efficiently discharge its responsibilities hereunder.
2.8 DISTRIBUTOR shall provide installation, and other normal after-sales
services to its customers at its expense. Subject to paragraph 4.2 of this
Agreement, DISTRIBUTOR may provide warranty service to its customers.
DISTRIBUTOR may charge its customers for all such services except for those
covered by COMPANY's warranty, if any.
2.9 DISTRIBUTOR shall advertise and promote the Products for sale within the
Territory at its own expense or as mutually agreed between the Parties.
2.10 DISTRIBUTOR shall provide COMPANY with annual market plans, including sales
forecasts, sales and marketing activities, market information, competition,
etc., the first such report within thirty (30) days after the date hereof and
thereafter on or before September 30 each consecutive year. DISTRIBUTOR shall
also keep COMPANY up-dated on progress and important events regarding its sales
of the Products in the Territory.
3. Obligations of COMPANY.
3.1 COMPANY shall not appoint or support any commercial sales representative or
other distributor of Products within and/or for the Territory. COMPANY shall
advise its customers outside the Territory that the COMPANY is represented by
the DISTRIBUTOR and use its best efforts to encourage such customers to buy
Products from DISTRIBUTOR in cases when sales are considered by the COMPANY to
its customers for final delivery to or installations inside the Territory.
If COMPANY's other customers than DISTRIBUTOR want to buy or make an inquiry
concerning the PRODUCTS, COMPANY is obliged to inform DISTRIBUTOR immediately.
3.2 COMPANY shall, free of charge, provide technical training and sales support
to qualified DISTRIBUTOR personnel at convenient times and places as mutually
agreed between the Parties. Direct expenses for travelling and accommodation
shall be borne by each Party for his personnel. COMPANY shall provide price
lists, sales literature, technical product bulletins, material safety data
sheets and other technical information to DISTRIBUTOR as reasonably necessary
for the promotion, sales and servicing of the Products at no cost to
DISTRIBUTOR.
3.3 COMPANY shall keep DISTRIBUTOR informed of technical modifications and
developments of the Products and of other important events that may be material
to the DISTRIBUTOR'S execution of his obligations under this agreement.
4. Product Quality, Warranties, and Representations.
3
<PAGE>
4.1 COMPANY warrants to DISTRIBUTOR and to the first purchaser of Products from
DISTRIBUTOR that, at the time of delivery, all goods sold shall conform to all
technical specifications and all descriptions of function or performance
contained in documents provided to DISTRIBUTOR by COMPANY and to all models,
demonstrations and samples of Products so furnished to DISTRIBUTOR and shall be
free from defects in material or workmanship. COMPANY shall repair or replace
any Product which fails to meet the foregoing warranty for a period of twelve
months (12) from date of commissioning by first purchaser and for a period of
eighteen (18) months from date of delivery by COMPANY to DISTRIBUTOR, whichever
occurs first. At COMPANY's request, DISTRIBUTOR shall perform warranty services
on defective Products, and COMPANY shall reimburse DISTRIBUTOR the cost of all
spare or replacement parts used in providing such warranty services and shall
pay DISTRIBUTOR its normal labour rates for labour repair services per work.
COMPANY also warrants that all products comply with technical and/or functional
standards and norms in the Territory required by law or regulation, e.g. UL
certification. DISTRIBUTOR agrees to advise COMPANY of such requirements to the
best of his ability, and COMPANY reserves the right to adjust its prices to
reflect cost effects from such requirements.
The specified terms and conditions of warranty are attached hereto as
Schedule 2.
4.2 For the term of this Agreement and for a period of five (5) years
thereafter, COMPANY shall and hereby does indemnify and hold DISTRIBUTOR
harmless from any and all claims, proceedings and causes of action brought by
third parties and all damages, awards, judgements, costs, fees and expenses
(including reasonable attorneys' fees) arising out of or related to such claims,
which claims arise out of or are related to defects or claims of defects or
inherently dangerous conditions in or with respect to the Products at the time
of delivery. COMPANY shall procure and maintain in full force and effect
throughout the term of this Agreement and for a period of five (5) years
thereafter, comprehensive liability insurance coverage including product
liability coverage with respect to such claims in an amount not less than USD
1,000,000 (one million), with DISTRIBUTOR named as an additional insured. The
policy shall provide that the insurer shall not cancel such policy for any
reason without first giving at least thirty (30) days prior written notice to
DISTRIBUTOR. At DISTRIBUTOR's request, COMPANY shall provide DISTRIBUTOR with a
certificate from the insurer of such coverage.
4.3 DISTRIBUTOR agrees to indemnify and hold COMPANY harmless from and against
any and all claims, causes of action, costs, fees, and expenses (including
reasonable attorneys' fees) arising out of, or attributable to any claim or
proceeding asserted or brought against COMPANY, which relates to or arises out
of any breach of warranty or misrepresentation, express or implied, made solely
by DISTRIBUTOR, its agents or
4
<PAGE>
employees or any intentional or negligent act of DISTRIBUTOR, its agents or
employees in its marketing activities, sales, handling, labelling or servicing
of Products.
4.4 COMPANY agrees to indemnify and hold DISTRIBUTOR harmless from and against
any and all claims, causes of action, costs, fees, and expenses (including
reasonable attorneys' fees) arising out of, or attributable to any claim or
proceeding asserted or brought against DISTRIBUTOR, which relates to or arises
out of any breach of warranty or misrepresentation, express or implied, made
solely by COMPANY, its agents or employees or any intentional or negligent act
of COMPANY, its agents or employees in its marketing activities, sales,
handling, labelling or manufacture of Products.
5. Restrictive Covenant. Both parties acknowledge that from time to time during
the term of this Agreement they will acquire information concerning secret
processes, designs, formulae, know-how, prices, margins, plans, strategies,
customers, markets and other confidential information of or concerning the other
party, their affiliates or the Products or processes of the other party or their
affiliates, which information is valuable, gives both parties a competitive
advantage and which both parties use reasonable means and ways to keep secret
("Confidential Information"). Both parties acknowledge the other party's
exclusive right, title and interest in the Confidential Information and in its
trademarks, trade names, patents and copyrighted material and agree to do
nothing during or after the term of this Agreement to impair such right, title,
and interest or to disclose to any third party any Confidential Information
acquired pursuant to this Agreement or otherwise. Both parties agree that all
Confidential Information of the other party shall at all times be the exclusive
property of that party. Both parties further agree to discontinue all use of the
other party's name, trademarks, patents, copyrighted material and Confidential
Information immediately upon the termination or expiration of this Agreement for
any reason. The obligation to maintain the confidentiality of Confidential
Information shall not extend to:
(a) Information which is or becomes part of the public domain through no fault
of DISTRIBUTOR;
(b) Information which can be shown to have been legally disclosed to DISTRIBUTOR
by a third party which has not breached any obligation as to non-disclosure;
(c) Information which can be shown by DISTRIBUTOR to have been acquired by
DISTRIBUTOR without restriction prior to disclosure of the same information to
it by COMPANY;
(d) Information which can be shown by DISTRIBUTOR to have been developed by it
independently of any disclosure of Confidential Information to it pursuant to
this Agreement; or
In the event of an actual or threatened violation of this restrictive covenant
by DISTRIBUTOR, COMPANY shall have the right to terminate this Agreement
immediately upon
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giving written notice of termination to DISTRIBUTOR and to obtain temporary and
permanent injunctive relief to prevent any such violation.
6. Patent Infringement. DISTRIBUTOR shall notify COMPANY promptly upon learning
of any claim of infringement brought against DISTRIBUTOR or its customers of any
patent or intellectual property owned or assigned to any other person or
business on account of the sale or use of any of the Products within the
Territory. Upon notification, COMPANY shall undertake to defend, settle or
dispose of any such claim, charge or proceeding and to pay the final amount of
any settlement agreed to by COMPANY or any judgement awarded against DISTRIBUTOR
or COMPANY. COMPANY reserves the sole right to defend or not to defend and to
settle or not to settle any such claim, and DISTRIBUTOR shall cooperate with
COMPANY in its lawful disposition of such claim. COMPANY shall indemnify, defend
and hold DISTRIBUTOR harmless against any costs or expenses DISTRIBUTOR incurs
in relation to any matters dealing with such patents or intellectual property
infringements. COMPANY shall keep DISTRIBUTOR fully informed of all actions
taken or to be taken by it to dispose of any such claim of infringement.
Term and Termination.
7.1 Unless earlier terminated as provided for herein, the Term of this Agreement
shall be three (3) years, beginning October 1, 1999, and expiring on September
30, 2000; provided, that this Agreement shall automatically be extended for
successive one year periods unless either party gives written notice not less
than six (6) months prior to the end of the initial term (or any succeeding
term) that it does not wish to further extend this Agreement ("Notice of
Expiration").
7.2 In addition to the rights of termination provided elsewhere in this
Agreement, this Agreement may be terminated:
(a) By an agreement in writing between COMPANY and DISTRIBUTOR; or
(b) By either party in the event the other party does or attempts to do any of
the following:
(i) assigns its rights or obligations hereunder without the other party's
consent
(ii) ceases business as a going concern;
(iii) liquidates, dissolves or adopts a plan to liquidate or dissolve;
(iv) files for bankruptcy or seeks to have a receiver, trustee or conservator of
its assets appointed or takes other action to gain relief from its creditors
generally;
(v) is the subject of an involuntary petition for bankruptcy, or for the
appointment of a receiver, trustee or conservator of its assets or any other
judicial proceeding for relief from creditors generally and the same is not
dismissed within sixty days after filing;
(vi) commits a material breach of any provision of this Agreement;
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The party who wishes to terminate shall by a written notice identifying the
reason to terminate or the breach of the Agreement and does not cure such reason
or breach by the end of the notice period - thirty (30) days - the party can
immediately terminate the Agreement.
c) By either party by ninety (90) days prior written notice in case mutually
agreed objectives or events have not been accomplished for the foregoing
planning period and not been cured by the end of the notice period.
8. Effect of Termination.
8.1 All rights extended to either party under this Agreement shall immediately
cease upon the expiration or termination of this Agreement for any reason, but
such expiration or termination shall not extinguish any past due obligation of
either party hereunder.
8.2 The acceptance of any Product order or renewal parts order from, or sale of
any Products or renewal parts, to DISTRIBUTOR after the expiration of this
Agreement shall be in the sole discretion of COMPANY. Any such acceptance or
sale shall not be construed as a renewal or extension thereof nor as a waiver of
expiration or termination.
8.3 In the event COMPANY terminates this Agreement in accordance with paragraph
7.1 not for cause, and COMPANY terminates all sales in the Territory, COMPANY
shall, at DISTRIBUTOR's request given within thirty days after the expiration or
termination of this Agreement, repurchase from DISTRIBUTOR and DISTRIBUTOR
agrees to sell at the net invoice price paid by DISTRIBUTOR less *** plus actual
transportation and any import duties thereon (if not included in the invoice
price), any or all new Products and spare parts shipped by COMPANY to
DISTRIBUTOR within twelve (12) months prior to termination and in good
marketable condition, and special tools and equipment for servicing Products of
which DISTRIBUTOR is then the owner. DISTRIBUTOR shall in any event make
available to COMPANY free of charge all such Products, spare parts, materials,
tools and equipment which COMPANY has made available to DISTRIBUTOR free of
charge.
8.4 If COMPANY terminates, or decides not to renew, this Agreement for any other
reasons than those under paragraph 7.2. COMPANY agrees to compensate DISTRIBUTOR
according to the following formula:
*** on COMPANY's net sales in the Territory during the first 6 month period
after the expiration of the Agreement; and
*** on COMPANY's net sales in the Territory during the second 6 month period
after the expiration
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9. Benefit and Assignment. The rights, duties, and obligations of the parties
under this Agreement shall inure to the benefit and shall be binding upon their
respective successors and permitted assigns.
10. Status of DISTRIBUTOR. With respect to the Products, the relationship
between COMPANY and DISTRIBUTOR is solely that of vendor and vendee, and nothing
in this Agreement shall constitute DISTRIBUTOR as the agent, partner, joint
venturer or legal representative of COMPANY for any purpose whatsoever; nor
shall DISTRIBUTOR hold itself out as such. DISTRIBUTOR shall have no authority
to bind or commit COMPANY in any manner or for any purpose but rather shall act
and conduct itself in all respects as an independent contractor with respect to
the Products and the conduct of its business.
11. Force Majeure. No party to this Agreement shall be deemed to be in breach or
default of any provisions hereof by reason of delay or failure in the discharge
or performance of any duty or obligation hereunder due to strikes, lock-outs,
natural calamity, war, civil disorder, force majeure or any other cause beyond
the reasonable control of the party so affected.
12. Severability; Survival. The provisions of this Agreement are hereby deemed
by the parties to be severable, and the invalidity or unenforceability of any
one or more of the provisions of this Agreement shall not affect the validity
and enforceability of the remaining provisions thereof. The provisions of
Sections 4, 5, 6, 14 and 15 shall survive termination of this Agreement for any
reason.
13. Notices. Any notice contemplated or required or permitted to be given under
this Agreement shall be sufficient if in writing and if delivered personally, or
sent registered or certified mail, return receipt requested, to the parties'
respective addresses below. Such notices shall be deemed received on the date of
the receiving party's signing the receipt of notice.
If to DISTRIBUTOR: NDC AUTOMATION, INC.
3101 Latrobe Drive
Charlotte, NC 28211, USA
If to COMPANY: MICROPOWER E.D. AB
Idavaegen 1
S-352 46 Vaxjo, SWEDEN
or to such other address as either party may direct by notice give to the other
as herein provided.
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Disputes. All disputes arising in connection with this Agreement, or the breach
thereof, shall be finally settled under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by one or more arbitrators
appointed in accordance with the said rules, supplemented as necessary by the
procedural rules of the law of Sweden if initiated by DISTRIBUTOR or of the law
of the State of North Carolina if initiated by COMPANY. Any settlement shall
take place in Vaxjo, Sweden, if initiated by DISTRIBUTOR and in Charlotte, N.C.
if initiated by COMPANY.
Construction of Agreement. This Agreement may be executed in counterparts in
order to provide each party with a fully-executed original hereof. Except as
otherwise provided herein, this Agreement may not be changed, modified or
amended except by an agreement in writing signed by both parties. The waiver by
any party to this Agreement of any breach or violation of any provisions of this
Agreement by any other party hereto shall not operate as a waiver of any other
breach. This Agreement reflects the complete understanding of the parties and
constitutes their entire agreement, superseding all prior negotiations,
representations, agreements, understandings, and statements.
*****
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IN WITNESS WHEREOF, the parties have executed this Agreement by signature of
their respective duly authorised representatives as of the day and year first
above written.
MICROPOWER E.D. AB
By: /s/ Thomas Svensson
----------------------------
Title: President
-------------------------
NDC AUTOMATION, INC.
By: /s/ Ralph Dollander
----------------------------
Title: President
-------------------------
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WARRANTY
This warranty shall apply when the swedish company Micropower E.D. Marketing AB
(MEDAB), Idavagen 1, 352 46 Vaxjo, Sweden, delivers electrical and associated
electronic products to a buyer situated outside Denmark, Finland, Norway and
Sweden.
Deviation from this warranty shall not be applied unless agreed in writing.
The warranty under the Orgalime S 92 general conditions for supply of
mechanical, electrical and associated electronic products, Brussels, October
1992, under the headline LIABILITY FOR DEFECTS, is valid if there are any items
about warranty which are not mentioned in this document.
1. The defect charger (s) will normally be repaired at site by concerned
service staff. Before the repair, a judgement must be done whether the
repair costs will be reasonable in comparison with a new charger.
2. The service department at Micropower will assist field staff by proposing
correct spare parts and how to check the charger.
3. Necessary spare parts can be ordered directly from Micropower and have to
be sent by a suitable carrier (for example Skypack, delivery within 3
days).
4. Micropower does not pay for travels, hotel accommodation, meals etc.
5. Micropower will pay labour costs to a reasonable extent. May not exceed 5
hours.
6. Purchaser has to report to Micropower following data:
a) Site where the charger is located
b) Type of charger
c) Serialnumber
d) Specification of defect parts
e) Used time for the repair
7. Defect mains fuses, varistors etc due to transients on the incoming mains,
will not be regarded as a warranty claim.
8. Defect spare parts must be returned to Micropower together with the service
order, which you will find on the packing list for spare parts.
<PAGE>
[LOGO]
ORGALIME
GENERAL CONDITIONS
for the
SUPPLY OF MECHANICAL, ELECTRICAL AND ASSOCIATED ELECTRONIC PRODUCTS
Brussels, October 1992
PREAMBLE
1. These General Conditions shall apply when the parties agree in writing or
otherwise thereto. When the General Conditions apply to a specific
contract, modifications of or deviations from them must be agreed in
writing.
The object(s) to be supplied under these conditions is(are) hereinafter
referred to as the Product.
PRODUCT INFORMATION
2. All information and data contained in product brochures and price lists are
binding only to the extent that they are by reference expressly included in
the contract.
DRAWINGS AND DESCRIPTIONS
3. All drawings and technical documents relating to the Product or its
manufacture submitted by one party to the other, prior or subsequent to the
formation of the contract, shall remaining the property of the submitting
party.
Drawings, technical documents or other technical information received by
one party shall not, without the consent of the other party, be used for
any other purpose than erection, commissioning, operation or maintenance of
the Product. They may not, without the consent of the submitting party,
otherwise be used or copied, reproduced, transmitted or communicated to a
third party.
4. At the start of the period referred to in Clause 23 the Supplier shall, if
so requested by the Purchaser, free of charge provide information and
drawings which are necessary to permit the Purchaser to erect, commission,
operate and maintain the Product. Such information and drawings shall be
supplied in the number of copies agreed upon or at least one copy of each.
The supplier shall not be obliged to provide manufacturing drawings for the
Product or spare parts.
ACCEPTANCE TESTS
5. Acceptance tests provided for in the contract shall, unless otherwise
agreed, be carried out at the place of manufacture during normal working
hours. If the contract does not specify the technical requirements, the
tests shall be carried out in accordance with general practice in the
appropriate branch of industry concerned in the country of manufacture.
6. The Supplier shall notify the Purchaser of the acceptance tests in
sufficient time to permit the Purchaser to be represented at the tests. If
the Purchaser is not represented, the test report shall be sent to the
Purchaser and shall be accepted as accurate.
7. If the acceptance tests show the Product not to be in accordance with the
contract, the Supplier shall without delay remedy any deficiencies in order
to ensure that the Product complies with the contract. New tests shall then
be carried out at the Purchaser's request, unless the deficiency was
insignificant.
8. The Supplier shall bear all costs for acceptance tests carried out at the
place of manufacture. The Purchaser shall however bear all travelling and
living expenses for his representatives in connection with such tests.
DELIVERY, PASSING OF RISK
9. Any agreed trade term shall be construed in accordance with the INCOTERMS
in force at the formation of the contract. If no trade term is specifically
agreed the delivery shall be Ex works (EXW). If, in the case of delivery Ex
works, the Supplier, at the request of the Purchaser, undertakes to send
the Product to its destination, the ??????? not later than when the Product
is handed over to the first carrier.
<PAGE>
TIME FOR DELIVERY, DELAY
10. If the parties, instead of specifying the date for delivery, have specified
a period of time on the expiry of which delivery shall take place, such
period shall start to run on the date when the Supplier receives the
Purchaser's order or the date of formation of the contract, whichever is
the later.
11. If the Supplier anticipates that he will not be able to deliver the Product
at the time for delivery, he shall forthwith notify the Purchaser thereof
in writing, stating the reason, and, if possible, the time when delivery
can be expected.
12. If delay in delivery is caused by any of the circumstances mentioned in
Clause 39 or by an act or omission on the part of the Purchaser, including
suspension under Clauses 20 or 42, the time for delivery shall be extended
by a period which is reasonable having regard to all the circumstances in
the case. This provision applies regardless of whether the reason for the
delay occurs before or after the agreed time for delivery.
13. If the Product is not delivered at the time for delivery (as defined in
Clauses 10 and 12), the Purchaser is entitled to liquidated damages from
the date on which delivery should have taken place.
The liquidated damages shall be payable at a rate of 0.5 per cent of the
purchase price for each completed week of delay. The liquidated damages
shall not exceed 7.5 per cent of the purchase price.
If only part of the Product is delayed, the liquidated damages shall be
calculated on that part of the purchase price which is attributable to such
part of the Product as cannot in consequence of the delay be used as
intended by the parties.
The liquidated damages become due at the Purchaser's written demand but not
before delivery has been completed or the contract is terminated under
Clause 14.
The Purchaser shall forfeit his right to liquidated damages if he has not
lodged a claim for such damages within six months after the time when
delivery should have taken place.
14. If the delay in delivery is such that the Purchaser is entitled to maximum
liquidated damages under Clause 13 and if the Product is still not
delivered, the Purchaser may in writing demand delivery within a final
reasonable period which shall not be less than one week. If the Supplier
does not deliver within such final period and this is not due to any
circumstance for which the Purchaser is responsible, then the Purchaser may
by notice in writing to the Supplier terminate the contract in respect of
such part of the Product as cannot in consequence of the Supplier's failure
to deliver be used as intended by the parties.
If the Purchaser terminates the contract he shall be entitled to
compensation for the loss he has suffered as a result of the Supplier's
delay. The total compensation, including the liquidated damages which are
payable under Clause 13, shall not exceed 15 per cent of that part of the
purchase price which is attributable to the part of the Product in respect
of which the contract is terminated.
15. Liquidated damages under Clause 13 and termination of the contract with
limited compensation under Clause 14 are the only remedies available to the
Purchaser in case of delay on the part of the Supplier. All other claims
against the Supplier based on such delay shall be excluded, except where
the Supplier has been guilty of gross negligence.
In these conditions gross negligence shall mean an act or omission implying
either a failure to pay due regard to serious consequences, which a
conscientious supplier would normally format as likely to ensue, or a
deliberate disregard of the consequences of such act or omission.
16. If the Purchaser anticipates that he will be unable to accept delivery of
the Product at the delivery time, he shall forthwith notify the Supplier
thereof stating the reason, and, if possible, the time when he will be able
to accept delivery.
If the Purchaser fails to accept delivery at the delivery time he shall
nevertheless pay any part of the purchase price which becomes due on
delivery as if delivery had taken place. The Supplier shall arrange for
storage of the Product at the risk and expense of the Purchaser. The
Supplier shall also, if the Purchaser so requires, insure the Product at
the Purchaser's expense.
17. Unless the Purchaser's failure to accept delivery is due to any such
circumstance as mentioned in Clause 39, the Supplier may by notice in
writing require the Purchaser to accept delivery within a final reasonable
period.
If, for any reason for which the Supplier is not responsible, the Purchaser
fails to accept delivery within such period, the Supplier may by notice in
writing terminate the contract in whole or in part. The Supplier shall then
be entitled to compensation for the loss he has suffered by reason of the
Purchaser's default. The compensation shall not exceed that part of the
purchase price which is attributable to that part of the Product in respect
of which the contract is terminated.
PAYMENT
18. Unless otherwise agreed, the purchase price shall be paid with one third at
the formation of the contract and one third when the Supplier notifies the
Purchaser that the Product, or the essential part of it, is ready for
delivery. Final payment shall be made when the Product is delivered.
19. Whatever the means of payment used, payment shall not be deemed to have
been affected before the Supplier's account has been fully and irrevocably
credited.
20. If the Purchaser fails to pay by the stipulated date, the Supplier shall be
entitled to interest from the day on which payment was due. The rate of
interest shall be as agreed between the parties. If the parties fail to
agree on the rate of interest, is shall be 12 per cent per annum.
In case of late payment the Supplier may, after having notified the
Purchaser in writing, suspend his performance of the contract until he
receives payment.
If the Purchaser has not paid the amount due within three months the
Supplier shall be entitled to terminate the contract by notice in writing
to the Purchaser and to claim compensation for the loss he has incurred.
The compensation shall not exceed the agreed purchase price.
<PAGE>
RESERVATION OF TITLE
21. The Product shall remain the property of the Supplier until paid for in
full to the extent that such retention of property is valid under the
applicable law.
The Purchaser shall at the request of the Supplier assist him in taking any
measures necessary to protect the Supplier's title to the Product in the
country concerned.
The retention of title shall not affect the passing of risk under Clause 9.
LIABILITY FOR DEFECTS
22. Pursuant to the provisions of Clauses 23-27 inclusive, the Supplier shall
remedy any defect resulting from faulty design, materials or workmanship.
23. The Supplier's liability is limited to defects which appear within a period
of one year from delivery. If the daily use of the Product exceeds that
which is agreed, this period shall be reduced proportionately.
24. When a defect in a part of the Product has been remedied, the Supplier
shall be liable for defects in the repaired or replaced part under the same
terms and conditions as those applicable to the original Product for a
period of one year. For the remaining parts of the Product the period
mentioned in Clause 23 shall be extended only by a period equal to the
period during which the Product has been out of operation as a result of
the defect.
25. The Purchaser shall without undue delay notify the Supplier of any defect
which appears. Such notice shall under no circumstances be given later than
two weeks after the expiry of the period given in Clause 23.
Where the defect is such that it may cause damage, the notice shall be
given immediately.
The notice shall contain a description of the defect.
If the Purchaser does not notify the Supplier of a defect within the
time-limits set forth in this Clause, he shall lose his right to have the
defect remedied.
26. On receipt of the notice in writing under Clause 25 the Supplier shall
remedy the defect without undue delay and at his own cost as stipulated in
Clause 23-37 inclusive.
Repair shall be carried out at the place where the Product is located
unless the Supplier deems it appropriate that the defective part or the
Product is returned to him for repair or replacement.
The Supplier is obliged to carry out dismantling and re-installation of the
part if this requires special knowledge. If such special knowledge is not
required, the Supplier has fulfilled his obligations in respect of the
defect when he delivers to the Purchaser a duly repaired or replaced part.
27. If the Purchaser has given such notice as mentioned in Clause 25, and no
defect is found for which the Supplier is liable, the Supplier shall be
entitled to compensation for the costs he has incurred as a result of the
notice.
28. The Purchaser shall at his own expense arrange for any dismantling and
reassembly of equipment other than the Product, to the extent that this is
necessary to remedy the defect.
29. Unless otherwise agreed, necessary transport of the Product and/or parts
thereof to and from the Supplier in connection with the remedying of
defects for which the Supplier is liable shall be at the risk and expense
of the Supplier. The Purchaser shall follow the Supplier's instructions
regarding such transport.
30. Unless otherwise agreed, the Purchaser shall bear any additional costs
which the Supplier incurs for repair, dismantling, installation and
transport as a result of the Product being located in a place other than
the destination stated in the contract or -- if no destination is stated --
the place of delivery.
31. Defective parts which have been replaced shall be made available to the
Supplier and shall be his property.
32. If, within a reasonable time, the Supplier does not fulfil his obligations
under Clause 26, the Purchaser may, by written notice, fix a final time for
completion of the Supplier's obligations.
If the Supplier fails to fulfil his obligations within such final time, the
Purchaser may himself undertake or employ a third party to undertake
necessary remedial works at the risk and expense of the Supplier.
Where successful remedial works have been undertaken by the Purchaser or a
third party, reimbursement by the Supplier of reasonable costs incurred by
the Purchaser shall be in full settlement of the Supplier's liabilities for
the said defect.
33. Where the defect has not been successfully remedied,
a) the Purchaser is entitled to a reduction of the purchase price in
proportion to the reduced value of the Product, provided that under no
circumstance shall such reduction exceed 15 per cent of the purchase
price, or
b) where the defect is so substantial as to significantly deprive the
Purchaser of the benefit of the contract, the Purchaser may terminate
the contract by written notice to the Supplier. The Purchaser is then
entitled to compensation for the loss he has suffered up to a maximum
of 15 per cent of the purchase price.
34. The Supplier is not liable for defects arising out of materials provided
by, or a design stipulated or specified by the Purchaser.
35. The Supplier is liable only for defects which appear under the conditions
of operation provided for in the contract and under proper use of the
Product.
The Supplier's liability does not cover defects which are caused by faulty
maintenance, incorrect erection or faulty repair by the Purchaser, or by
alterations carried out without the Supplier's consent in writing. Finally
the Supplier's liability does not cover normal wear and tear or
deterioration.
36. Notwithstanding the provisions of Clauses 22-35 the Supplier shall not be
liable for defects in any part of the Product for more than two years from
the beginning of the period given in Clause 23.
<PAGE>
37. Save as stipulated in Clauses 22.36, the Supplier shall not be liable for
defects. This applies to any loss the defect may cause including loss of
production, loss of profit and other indirect loss. This limitation of the
Supplier's liability shall not apply if he has been guilty of gross
negligence as defined in Clause 15.
DIVISION OF LIABILITY FOR DAMAGE CAUSED BY THE PRODUCT
38. The Supplier shall not be liable for any damage to property caused by the
Product after it has been delivered and whilst it is in the possession of
the Purchaser. Nor shall the Supplier be liable for any damage to products
manufactured by the Purchaser, or to products of which the Purchaser's
products form a part.
If the Supplier incurs liability towards any third party for such damage to
property as described in the preceding paragraph, the Purchaser shall
indemnify, defend and hold the Supplier harmless.
If a claim for damage as described in this Clause is lodged by a third
party against one of the parties, the latter party shall forthwith inform
the other party thereof in writing.
The Supplier and the Purchaser shall be mutually obliged to let themselves
be summoned to the court or arbitral tribunal examining claims for damages
lodged against one of them on the basis of damage allegedly caused by the
Product.
The limitation of the Supplier's liability in the first paragraph of this
Clause shall not apply where the Supplier has been guilty of gross
negligence as defined in Clause 15.
FORCE MAJEURE
39. Either party shall be entitled to suspend performance of his obligations
under the contract to the extent that such performance is impeded or made
unreasonably onerous by any of the following circumstances: industrial
disputes and any other circumstance beyond the control of the parties such
as fire, war (whether declared or not), extensive military mobilization,
insurrection, requisition, seizure, embargo, restrictions in the use of
power and defects or delays in deliveries by sub-contractors caused by any
such circumstances referred to in this Clause.
A circumstance referred to in this Clause which had occured prior to the
formation of the contract shall give a right to suspension only if its
effect on the performance of the contract could not be foreseen at the time
of the formation of the contract.
40. The party claiming to be affected by Force Majeure shall notify the other
party in writing without delay on the intervention and on the cessation of
such circumstance.
If Force Majeure prevents the Purchaser from fulfilling his obligations, he
shall compensate the Supplier for expenses incurred in securing and
protecting the Product.
41. Regardless of what might otherwise follow from these General Conditions,
either party shall be entitled to terminate the contract by notice in
writing to the other party if performance of the contract is suspended
under Clause 39 for more than six months.
ANTICIPATED NON-PERFORMANCE
42. Notwithstanding other provisions in these conditions regarding suspension,
each party shall be entitled to suspend the performance of his obligations
under the contract, where it is clear from the circumstances that the other
party will not be able to perform his obligations. A party suspending his
performance of the contract shall forthwith notify the other party thereof
in writing.
CONSEQUENTIAL LOSSES
43. Save as elsewhere stated in these conditions there shall be no liability
for either party towards the other party for loss of production, loss of
profit, loss of use, loss of contracts or for any consequential, economic
or indirect loss whatsoever.
DISPUTES AND APPLICABLE LAW
44. All disputes arising in connection with the contract shall be finally
settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in
accordance with the said rules, supplemented as necessary by the procedural
rules of the law of the country of the Supplier's place of business most
closely connected with the contract.
45. The contract shall be governed by the substantive law of the country of the
Supplier's place of business most closely connected with the contract.
This is an Orgalime publication. Orgalime groups the central trade
federations of the mechanical, electrical, electronic and metalworking
industries in sixteen European countries and provides liaison between these
organisations in the legal, technical and economic fields.
All rights reserved
(copyright)
Editeur responsable - T.F. GAY
ORGALIME (Liaison group of the European mechanical, electrical, electronic and
metalworking industries)
???????????????????? Tel ?????????? Fax: 512.99 70
Exhibit 10.7
***: CERTAIN MATERIAL HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. SUCH OMITTED MATERIAL HAS BEEN FILED WITH THE SECURITIES EXCHANGE
COMMISSION.
SERVICE AND SUPPORT AGREEMENT
AGREEMENT, made this 14 day of December, 1999 by and between The
Raymond Corporation, Greene, New York (hereinafter "Raymond") and NDC
Automation, Inc., Charlotte, North Carolina (hereinafter "NDC").
WHERAS, Raymond in the past manufactured and sold Automated Guided
Vehicle Systems to a variety of end-users; and
WHEREAS, Raymond no longer manufactures Automated Guided Vehicle
Systems, but has and continues to provide parts and service support to existing
Raymond Automated Guided Vehicle System's Customer and Dealers; and
WHEREAS, Raymond wishes to transfer to NDC the responsibility for all
future parts and service support of Automated Guided Vehicle Systems previously
sold by Raymond.
NOW, THERFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, receipt of which is
acknowledged, the parties agree as follows:
1. Definitions
For the purposes of this Agreement, the following terms shall have the
definitions set forth below:
1.1 "AGVS" shall mean the Automated Guided Vehicle and Systems
manufactured by Raymond and designated as Models 55, 56, 57,
58 and Load Transfer Stations and including, among other
things, line drivers, vehicles, floor controllers, station
controllers, remote address terminals, function controllers
and interface boxes associated therewith.
<PAGE>
1.2 "AGVS Service and Support" shall mean after market support and
service including, but not limited to, providing repair parts, technical
support, and training to Dealers and Customers for all AGVS.
1.3 "Customer" shall mean any end-user of an AGVS during the term of
this Agreement whether acquired from a Dealer, directly from Raymond or
otherwise.
1.4 "List Price" shall mean the customer list price for repair parts as
shown on Exhibit A.
1.5 "Dealer" shall mean the Raymond dealers with AGVS installed in
their territory as shown on Exhibit B.
1.6 "Dealer Net" shall mean the dealer net price for repair parts as
shown on Exhibit A.
2. Assumption of Support Obligations
2.1 NDC agrees to provide all agreed to AGVS Service to Customers and
Dealers during the term of this agreement.
2.2 NDC shall use its best efforts to maintain a reasonable inventory
of service parts that will allow it to supply most parts ordered by Dealers or
Customers within 24 hours after the receipt of an order and to respond in a
reasonable manner to all requests from Dealers or Customers for technical
support within four (4) hours during normal business hours.
2.3 As a part of AGVS Service and Support hereunder, NDC shall use its
best commercial efforts to manufacture or obtain parts of the quantity and
quality necessary to allow each Customer to maintain their AGVS in good
operating condition.
2.4 NDC agrees to provide AGVS Service and Support hereunder in a
professional manner at least equivalent in quality to that provided by NDC to
its AGVS customers during the twelve- (12) months prior to the date of this
Agreement.
2.5 NDC shall assume the responsibility to administer warranty claims
for replacement service parts sold by Raymond and for which a Raymond
Replacement Parts warranty is still effect.
3. Obligations of Raymond
3.1 Raymond will deliver to NDC after the date of this Agreement
according to a mutually agreed time schedule for the following information, to
the extent it exists and is in the
2
<PAGE>
possession of Raymond, related to AGVS Service and Support (hereinafter to as
the "AGVS Material"):
(a) all unique manufacturing documentation including vehicle
drawings, together with copies of drawings used in AGVS which are common with
other Raymond vehicles;
(b) prints;
(c) Bills of Material;
(d) Manufacturing tooling;
(e) Service manuals;
(f) Parts manuals;
(g) Service bulletins;
(h) Software source code; and
(i) Software development notes.
3.2 Raymond agrees to transfer its entire AGVS service parts inventory
to NDC pursuant to section 6 of this Agreement.
3.3 Raymond agrees to provide up to a five- (5) day training course for
NDC free of charge at Raymond's facility in Greene, New York at a mutually
convenient time and date. NDC shall have to right to select up to 6 NDC
personnel to attend such training. The training shall pertain to the basic
technology of AGVS and relevant aspects of AGVS parts sales administration. The
specific contents of the training course shall be as set forth in Exhibit "C".
3.4 Raymond shall use its best efforts to provide telephone support to
NDC at no charge for twelve (12) months after the date of this Agreement
("Initial Support Period"). After the Initial Support Period, Raymond agrees to
provide telephone service for the remainder of the term of this Agreement at a
rate of *** per hour based upon the actual hours or any fraction thereof used.
Telephone support shall be available only during business hours for Raymond's
facility in Greene, New York. Notwithstanding , any provisions to the contrary,
Raymond shall only render such telephone support 1) as reasonably necessary to
facilitate NDC's performance of its obligations hereunder, 2) that does not
interfere with the operation of Raymond's other business, 3) is of a
non-repetitive nature, or 4) does not pertain to information already in the
possession of NDC, the significance and location of which has been the subject
of a prior request for telephone support by NDC.
3.5 During the term of this Agreement, and so long a NDC is not in
material breach of this Agreement, Raymond shall not sell or offer for sale to
third parties any AGVS products of this Agreement, Raymond not sell or offer for
sale to third parties any AGVS products
3
<PAGE>
or services.
3.6 Raymond agrees to use its best efforts to encourage its Dealers to
continue to market AGVS parts and services to AGV Customers. Within thirty (30)
days after the date of this Agreement, Raymond shall inform each of its dealers
that AGVS Service and Support is available from NDC. Raymond will use its best
efforts to encourage Dealers to work with NDC in regard to AGVS Service and
Support and to forward all sales leads in regard to new AGVS requirements to
NDC.
4. Obligations of NDC
4.1 NDC shall provide AGVS Service and Support in accordance with
Section 2 hereof.
4.2 NDC shall pay Raymond for the AGVS service parts inventory received
from Raymond in accordance with Section 6 of this Agreement.
4.3 With respect to inventory supplied to NDC by Raymond, NDC agrees to
charge Dealers only the Dealer Net current as of the time of transfer and agrees
to charge Customers no more than list price current of the time of transfer for
those parts. With respect to parts not received from Raymond and procured
separately by NDC, NDC agrees that it will follow commercially reasonable
pricing practices, and will exercise prudent business judgment to avoid price
increases not required by the necessities of the business.
4.4 NDC shall be responsible for designing and implementing any changes
in the design of AGVS, AGVS components or service parts or for upgrading or
replacing any existing AGVS, as NDC in its sole discretion deems necessary to
provide the AGVS Service and Support during the term of this Agreement, whether
required for field modifications, or due to the unavailability or obsolescence
of one or more parts or components; or the inability of NDC or any third party
to manufacture or supply one or more AGVS, NDC shall assure that all Raymond
labels, badging and other methods of identification are removed and replaced
with NDC or a third party's product identification.
4.5 NDC agrees to implement an effective program for processing field
modification request. Raymond agrees to notify its Dealers of the need to
receive approval from NDC for all field modification. Any design or aftermarket
modification to an AGVS during the terms of this Agreement shall be reviewed by
NDC and approved or rejected. If NDC approves a modification of an AGVS, then
before any modified AGVS or component thereof is delivered
4
<PAGE>
to a third party, NDC shall assure that all Raymond labels, badging and other
methods of identification of the modified AGVS as a Raymond product are removed
and replaced with NDC or a third party's' product identification.
4.6 NDC shall use its best efforts to gain the confidence and support
of the Dealers. NDC will not attempt to recruit Dealers to also become dealers
of NDC products, without the prior written consent of Raymond.
4.7 NDC shall not utilize third party service organizations to provide
any part of the AGVS Service and Support hereunder, without the prior written
consent of Raymond.
5. Term and Termination
5.1 The term of this Agreement shall be for a period of five (5) years
from the date of this Agreement.
5.2 Either party may immediately terminate this Agreement, if (1) a
Trustee shall be appointed for the other party or its property, (2) the other
party makes an assignment for the benefit of creditors, (3) the other party
becomes the subject of any proceeding under the Bankruptcy Act, (4) the other
party becomes insolvent, (5) a change of control occurs at the other party,
whether by virtue of a sale of assets, stock transaction, or otherwise, or (6)
NDC attempts to sell, transfer, encumber or part with possession of AGVS
Material or its AGVS Service and Support obligation. Further, this Agreement may
be terminated by either party upon ninety (90) days notice if the other party
has breached a material term hereof and failed to cure such breach within ten
(10) days after written notice thereof.
5.2.1 It shall be considered a breach of a material term of the
Agreement if either party fails or refuses to perform any of
its obligations set forth in Section 4.
5.2.2 In the event that Raymond terminates the Agreement for the
reasons set forth in Section 5.2., NDC will cease all AGVS
Service and Support on the date of termination; will not hold
itself out as a provider of AGVS Service and Support
thereafter; will return to Raymond within thirty (30) days
after the date of notice of termination all unsold service
parts received under this Agreement; will return to Raymond
within ten (10) days after the date of notice of termination
copies of all information, (and will return any and all copies
of such information within ten (10) days after the date of
termination) received under this Agreement; and will
5
<PAGE>
pay to Raymond an amount equal to twenty-five percent (25%) of
the difference between the cost to Raymond of all unreturned
service parts and the cost to Raymond of all service parts set
forth on Exhibit A. The payment by NDC to Raymond is designed
to compensate Raymond for damages that are difficult to
calculate and are a reasonable pre-estimate of the Raymond's
Probable loss in the event that the Agreement is terminated as
a result of a material breach of the Agreement by NDC. The
remedies provided to Raymond hereunder are cumulative in
nature and shall be in addition to all other remedies
available to Raymond in law or equity.
6. Service Parts Inventory
Raymond shall transfer ownership of its entire AGVS service parts
inventory to NDC on the following terms and conditions.
6.1 Raymond shall identify and inventory the AGVS service parts
inventory maintained at its Syracuse, N.Y. facility within fifteen (15) business
days after the execution of this Agreement by both parties and shall provide an
up to date list of such inventory to NDC, (hereinafter referred to as the
"Inventory List").
6.2 NDC shall have ten (10) business days after receipt thereof to
verify the accuracy of the Inventory List and shall send a written notice to
Raymond within this ten (10) day period setting forth any items of inventory
which it disputes. Upon receipt of such notice hereunder, Raymond shall review
the disputed inventory and the parties shall jointly revise the Inventory List,
as necessary.
6.3 All right, title and interest in and to all of the items on the
Inventory List as submitted by Raymond or revised by the parties shall be
transferred from Raymond to NDC upon the later of ten (10) business days after
receipt of the Inventory List by NDC or, if NDC disputes any items on the
Inventory List, the date a revised Inventory List is approved by both parties
("Transfer Date"). NDC shall bear all shipping and freight costs incurred in
transferring such Inventory from Raymond to NDC.
6.4 All risk of loss of the items on the Inventory List shall pass to
NDC on the Transfer Date.
6.5 As the Purchase Price for the items on the Inventory List, NDC
shall pay Raymond an amount equal to *** of the gross sales revenue received by
6
<PAGE>
NDC from the sale of items on the Inventory List during the first twelve (12)
months after the Transfer Date. NDC agrees that inventory supplied by Raymond
shall be sold first, before the same or similar parts obtained from any other
source.
6.6 NDC shall pay Raymond the entire Purchase Price, pursuant to
paragraph 6.5, no later than the last day of the thirteenth month after the
Transfer Date. Any unsold portion of the Service Parts Inventory that remains
after the first twelve (12) months after the Transfer Date will become NDC's
property free of charge, subject to the provisions of Section 5.2.
6.7 NDC shall maintain detailed records of the disposition of each item
on the Inventory List and the revenues resulting from any such disposition for
(12) months after the Transfer Date and shall retain such records for a period
of eighteen (18) months after the Transfer Date, Raymond and/or its designated
representatives shall have the right, upon prior written notice, to audit all
record related to the disposition of items on the Inventory List and any revenue
collected by NDC as a result of such disposition, for the purpose of verifying
the amount owed to Raymond pursuant to Section 6.5 hereof.
7. Year 2000 Statement
AGVS is not equipped with technology that incorporates time-of-day clock and
calendar functions.
8. License
8.1 Raymond hereby grants to NDC a license to use, modify and copy the
AGVS Material for the purpose of performing the AGVS Service and Support under
this Agreement and for no other purpose.
8.2 If this Agreement is not terminated pursuant to section 5.2 prior
to the end to the Term hereof, then all right, title and interest in the AGVS
Material shall automatically be transferred to NDC upon the expiration of this
Agreement, without further action by either party. Notwithstanding this
provision, however, NDC shall retain AGVS Material in perpetuity or until such
time as no AGVS to which it pertains is in operation and Raymond shall have the
right to access AGVS Material and obtain a copy of the same for the limited
purposes of responding to a governmental inquiry or an action at law or in
equity brought against it, its officers, directors, employees, agents,
subsidiaries, affiliates, or parent.
9. Confidentiality
NDC acknowledges and agrees that the AGVS Material received from
Raymond
7
<PAGE>
pursuant to section 3.1 is not generally known outside of Raymond and that such
information is both the property of, and proprietary to, Raymond.
The parties acknowledge and agree that they may receive additional
information from other party that is not generally known outside of the party
providing the information, including, without limitation, the AGVS Material and
information relating to the disclosing party's products, sales, dealers,
designs, methods, prices, business affairs, or employees (collectively referred
to as "Confidential Information") and that such information is the property of
the disclosing party. The receiving party agrees to receive and maintain all
Confidential Information in the strictest confidence, except as provided herein,
shall not use Confidential Information for its own benefit or disclose it or
otherwise make it available in whole or in part to third parties without the
prior written consent of the disclosing party. Except as specifically provided
in Paragraph 8, nothing in this Agreement nor the furnishing of any confidential
Information by either party shall be construed as granting or conferring any
rights by license or otherwise in any (1) Confidential Information of the
disclosing party except for the limited purposes of performance hereunder, (2)
patents, (3) trademarks or (4) copyrights
10. Indemnification
10.1 NDC hereby indemnifies and holds harmless Raymond and all of its
officers, directors, employees, agents, affiliates, subsidiaries, or parent from
and against any and all actions, causes of action, liabilities, suits, claims,
losses, damages, costs, and expenses (including reasonable attorneys' fees)
arising out of or related to the performance hereunder of the AGVS Service and
Support by NDC, including but not limited to field modifications and design
changes.
10.2 Raymond hereby indemnifies and holds harmless NDC and all of its
officers, directors, employees, agents, affiliates, subsidiaries, or parent from
and against any and all causes of action, liabilities, suits, claims, losses,
damages, costs, and expenses (including reasonable attorneys' fees) arising out
of or related to claims for defective service provided by Raymond up to and
through the date this Agreement is signed. In addition, for a period of three
years from the date of this Agreement, Raymond hereby indemnifies and holds
harmless NDC and all of its officers, directors, employees, agents, affiliates,
subsidiaries, or parent from and against any and all causes of action,
liabilities, suits, claims, losses, damages, costs, and expenses (including
reasonable attorneys' fees) from any product liability claims relating to the
design of AGVS manufactured and sold by Raymond, so long as the
8
<PAGE>
product at issue in the suit has not modified in a manner which is causative of
the underlying accident.
11. Warranty and Limitation of Liability
11.1 Raymond warrants to NDC that the AGVS service parts inventory
transferred to NDC pursuant to section 6 if this agreement
were designed and manufactured to the Raymond specifications
for such parts. In the event that any such service part is
found not to be in compliance with this limited warranty, then
Raymond shall not be entitled to compensation for such parts.
NDC shall retain all noncomplying parts for inspection by
Raymond. THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES
EXPRESSED, IMPLIED OR STATUTORY. THERE ARE NO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE, AND ALL
OTHER WARRANTIES ARE HEREBY EXPRESSLY EXCLUDED.
11.2 EXCEPT AS OTHERWISE PROVIDED IN SECTION 5.2.2, NEITHER PARTY SHALL
BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES,
INCLUDING BUT NOT LIMITED TO COSTS OF PROCURING SUBSTITUTE PRODUCTS OR SERVICES,
LOSS OF USE, OR LOST, OR LOST PROFITS, ARISING FROM OR IN CONNECTION WITH ANY
BREACH OF THIS AGREEMENT.
11.3 As to service parts sold by Raymond and for which Raymond's
limited warranty is still in effect, NDC will honor a bonafide Dealer warranty
claim and be reimbursement by Raymond in accordance with Raymond's usual and
customary warranty reimbursement practices. NDC shall be allowed to use Service
Parts from inventory free of charge to provide such warranty service.
12. Assignment
This agreement shall not be assignable by either party without the
prior written consent of the other party. This agreement will be binding upon
and inure to the benefit of NDC and Raymond and their respective successors and
assigns.
13. Limitation of Authority
This agreement does not constitute NDC or Raymond as the legal
representative of the other for any purpose whatsoever, and neither of them has
the authority to assume or create any
9
<PAGE>
obligation whatsoever, expressed or implied, on behalf of or in the name of the
other, nor to bind the other, nor to bind the other in any manner whatsoever.
14. Notice
All notices, demands and other communications required hereunder, will
be made in writing and will be deemed to have been duly given if delivered
personally or within three days after being sent by certified mail, return
receipt, requested, postage prepaid to the addressees set forth below:
If to NDC: NDC Automation, Inc.
3101 Latrobe Drive
Charlotte, NC 28211-4849
ATTN. Ralph Dollander
If to Raymond: The Raymond Corporation
PO Box 130
20 south canal street
Green, NY 123778
ATTN: General Counsel
15. Entire Agreement
This Agreement represents the entire understanding and agreement
between the parties as to the subject matter hereof, and supersedes all
negotiations, prior discussions, agreements, arrangements and understandings,
written or oral, relating to the subject matter of this Agreement.
16. Waiver
The failure of any party to enforce any provision of this agreement
shall not be construed to be a waiver of such party's right thereafter to
enforce the same, and no waiver of any breach shall be construed as an agreement
to waive any further or subsequent breach of the same or other provisions of
this Agreement.
17. Handling of Disputes, Applicable Law and Forum Selection
To minimize expenses and the impact on each party, the parties agree to
attempt
10
<PAGE>
to resolve any dispute, controversy or claim arising out of or related to this
Agreement in good faith. For this purpose, each party shall appoint one
representative whose task it will be to come to a mutually agreeable resolution
within (30) days. In the event such attempt fails, the dispute, controversy or
claim shall be submitted to binding arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association using one
(1) arbitrator acceptable to both parties. In the event Raymond initiates such
proceedings, arbitration shall take place in Charlotte, North Carolina, pursuant
to North Carolina law. In the event NDC initiates such proceedings, arbitration
shall take place in Greene, New York, pursuant to New York law.
Unless otherwise agreed to by the parties, each party shall continue to
perform all of its obligations in accordance with this Agreement during any
dispute resolution and arbitration proceedings.
18. Counterparts
This Agreement may be executed in one or more counterparts, all of
which, when taken together, shall constitute but one and the same instrument.
19. Amendments
No amendment, modification, extension or waiver of any of the
provisions contained herein shall be binding upon any party unless made in a
writing referring to this Agreement and signed by all parties hereto.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
NDC AUTOMATION, INC. THE RAYMOND CORPORATION
By: /s/Ralph Dollander, /s/Claude Imbleau By: /s/ James W. Davis
------------------------------------- -----------------------
Name: Ralph Dollander, Claude Imbleau By: James W. Davis
----------------------------------- -----------------------
Title: President, CEO Title: VP Engineering
---------------------------------- --------------------
VP Finance & Adm., COO, CFO
11
ANNUAL REPORT 1999
COVER PAGE
<PAGE>
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
===================================================================================================================
98 TO 99 97 TO 98
At or For Year Ended November 30 1999 1998 1997 % CHANGE % CHANGE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net revenues $ 5,818,222 $ 4,015,698 $ 4,076,897 44.9 (1.5)
Operating income (loss) $ 257,662 $ (31,418) $ (864,398) * (96.4)
Income (loss) before income taxes (benefit) $ 19,753 $ (276,283) $(1,060,360) * (73.9)
Net income (loss) $ 19,753 $ (276,283) $(1,060,360) * (73.9)
Weighted average common shares outstanding 3,458,552 3,453,451 3,453,451 0.1 -
- -------------------------------------------------------------------------------------------------------------------
PER SHARE DATA^
- -------------------------------------------------------------------------------------------------------------------
Net income (loss) $ .01 $ (.08) $ (.31) * (74.2)
Cash dividends $ - $ - $ - NA NA
Stockholders' equity $ .13 $ .11 $ .19 18.2 (42.1)
- -------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
- -------------------------------------------------------------------------------------------------------------------
Assets $3,392,190 $2,706,650 $ 2,757,331 25.3 (1.8)
Working capital (deficit) $ (560,625) $ (563,725) $ 570,259 0.5 *
Property and equipment $1,011,676 $1,059,912 $ 1,129,377 (4.6) (6.2)
Long-term debt, less current maturities $ - $ 114,889 $ 1,042,055 (100.0) (89.0)
Stockholders' equity $ 451,051 $ 381,297 $ 657,581 18.3 (42.0)
- -------------------------------------------------------------------------------------------------------------------
Number of employees 25 22 25
Number of stockholders approx. 800 approx. 800 approx. 1200
- -------------------------------------------------------------------------------------------------------------------
* Because the data changes from negative to positive, the percentage of change
is not meaningful.
^ Earnings (loss) per share, assuming full dilution, are equivalent to earnings
(loss) per share.
===================================================================================================================
INDEX
Financial Summary 1
Letter to Shareholders 2
Selected Financial Data 4
Management's Discussion and Analysis 5
Independent Auditor's Report 13
Balance Sheets 14
Statements of Operations 16
Statements of Stockholders' Equity 17
Statements of Cash Flows 18
Notes to the Financial Statements 20
Shareholder Information 32
Directors and Officers 32
</TABLE>
1
<PAGE>
DEAR FELLOW SHAREHOLDER:
================================================================================
The results in 1999 have indeed confirmed that our strategy of diversification
that was introduced in the fall of 1997 has allowed the Company to grow. Most
aspects of our business improved compared with 1998. Bookings and revenues have
increased approximately 50%, our backlog at the end of 1999 was twice as large
as that at the end of 1998, and we have returned the Company to profitability.
The major contributors to our improved performance in 1999 have been our AGV
system business and our product distribution business.
Other items in 1999 that contributed to the improved performance are the
introduction of an improved and even more user-friendly generation of the
Lazerway (TM) technology and the hiring of highly qualified people for our
engineering department. The Company implemented a re-organization effective
December 1, 1999 to focus its resources on future growth areas.
On September 13, 1999 the Company signed a merger agreement with Portec, Inc.,
which was later mutually terminated on November 15. Although the termination of
the merger was seen as a setback at the time, the improved performance of the
Company in 1999 should allow the Company to continue to grow from a stronger
platform.
The Company has invested considerable time and resources to develop a number of
strategic market segments for our AGV system solutions and technology during the
last two years. Our efforts have generated several new business opportunities.
We are very hopeful that we will see these opportunities come to fruition in the
next couple of years.
Some notable events in 1999:
o Through our partner, Harcon Engineering, we were awarded a large
order from DaimlerChrysler for a turnkey AGV system to be installed
and commence operation in the year 2000 at a new facility in
Detroit.
o The Company received an order for a turnkey AGV system from one of
the largest commercial printing companies in North America.
o The Company completed registration of its new trademark PowerWay(TM)
under which it will market and sell batteries, chargers and other
AGV-related products.
o A distribution agreement was signed with Micropower, a Swedish
manufacturer of smart battery chargers, giving NDCA exclusive
marketing rights for the AGV market in North America for an initial
period of three years.
2
<PAGE>
================================================================================
o A distribution agreement was signed with a world leader in
batteries, giving the Company exclusive marketing rights for the
AGV market in North America for a new line of highly advanced
batteries.
o Several orders were received from the entertainment industry for
the Company's line of drive motors and its new PowerWay product
line of batteries and battery chargers.
o Negotiations with the Raymond Corporation, a leading manufacturer
of industrial "forklift" trucks, were concluded in December 1999
for a cooperation agreement between the two companies, in which
NDCA assumes the responsibility for the service and support of
Raymond's installed base of AGV systems in North America. This
agreement offers NDCA valuable access to a large number of Fortune
500 companies and to Raymond's prominent dealer organization.
I want to take this opportunity to give a special thanks to Mr. Ralph Dollander
for all the hard work he performed while being President of the Company. He was
instrumental in turning the Company around in 1999 and we are now well
positioned to carry this positive trend into the new year. I also need to thank
the employees as well as the shareholders of NDC Automation for all your support
and loyalty during the past year as we continue our quest for a successful
future.
February 2000
Sincerely yours,
Claude Imbleau
Chief Operating Officer
3
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
==================================================================================================================================
At or For Year Ended November 30
-------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------------------
Statements of Operations Data:
<S> <C> <C> <C> <C> <C>
Net revenues $ 5,818,222 $ 4,015,698 $ 4,076,897 $ 6,142,954 $ 7,851,147
Cost of goods sold 3,614,922 2,387,342 2,695,289 3,864,393 5,597,305
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit $ 2,203,300 $ 1,628,356 $ 1,381,608 $ 2,278,561 $ 2,253,842
- ----------------------------------------------------------------------------------------------------------------------------------
Net gain from restructuring of operations $ - $ - $ - $ - $ 366,764
- ----------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 723,162 $ 662,780 $ 693,106 $ 656,537 $ 776,907
General and administrative 1,222,476 996,994 1,552,900 1,422,586 3,288,619
Research and development - - - 3,942 141,220
- ----------------------------------------------------------------------------------------------------------------------------------
$ 1,945,638 $ 1,659,774 $ 2,246,006 $ 2,083,065 $ 4,206,746
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 257,662 $ (31,418) $ (864,398) $ 195,496 $ (1,586,140)
- ----------------------------------------------------------------------------------------------------------------------------------
Net interest income (expense):
Interest income $ - $ - $ - $ 7,771 $ 9,025
Interest expense (237,909) (244,865) (195,962) (186,665) (669,157)
- ----------------------------------------------------------------------------------------------------------------------------------
$ (237,909) $ (244,865) $ (195,962) $ (178,894) $ (660,132)
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes (benefit) $ 19,753 $ (276,283) $ (1,060,360) $ 16,602 $ (2,246,272)
Federal and state income taxes (benefit) - - - (28,829) 97,891
- ----------------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 19,753 $ (276,283) $ (1,060,360) $ 45,431 $ (2,344,163)
==================================================================================================================================
Weighted average number of
common shares outstanding
(Basic and fully diluted) 3,458,552 3,453,451 3,453,451 3,453,451 2,904,322
==================================================================================================================================
Basic and diluted earnings (loss) per share $ .01 $ (.08) $ (.31) $ .01 $ (.81)
==================================================================================================================================
Cash dividend declared per common share $ - $ - $ - $ - $ -
==================================================================================================================================
Balance Sheets Data:
Working capital (deficit) $ (560,625) $ (563,725) $ 570,259 $ 1,416,912 $ 1,227,144
Total assets $ 3,392,190 $ 2,706,650 $ 2,757,331 $ 4,556,794 $ 5,084,450
Long-term debt, less current maturities $ - $ 114,889 $ 1,042,055 $ 1,102,264 $ 1,170,311
Total liabilities $ 2,941,139 $ 2,325,353 $ 2,099,750 $ 2,838,853 $ 3,411,940
Stockholders' equity $ 451,051 $ 381,297 $ 657,581 $ 1,717,941 $ 1,672,510
</TABLE>
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
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. In September of 1997, however, the Company began
to again pursue AGV system sales 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 can 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. Another way 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 30% 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, receivables 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.
5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
TERMINATED ACQUISITION OF NDCA BY PORTEC: On September 13, 1999 the Company
entered into a definitive agreement to merge with a subsidiary of Portec, Inc.
Portec, Inc. is a subsidiary of J Richard Industries (See Company's 8-K filing
dated September 17, 1999). The transaction was structured as a merger in which a
newly-formed subsidiary of Portec would merge with and into the Company, with
the Company surviving as a wholly owned subsidiary of Portec. In the merger,
stockholders of the Company were to receive $0.75 per share in cash for a total
stock transaction value in excess of $2.5 million. In addition, as part of the
merger closing, the Company's bank debt (line of credit and mortgage) was to be
paid in full as well as the Netzler & Dahlgren note payable. It was estimated
that such debt would be in excess of $1.3 million at closing. The transaction
was subject to customary conditions including approval by the Company's
shareholders.
The Company retained Willamette Management Associates as its financial
advisor. Willamette had rendered its opinion to the Board of Directors that the
consideration to be paid in the merger was fair to the stockholders from a
financial point of view.
J Richard Industries, L.P. is a Toledo, Ohio-based manufacturer and
distributor of components used in the materials handling, sports, fitness and
automotive markets. Portec is a leading manufacturer of highly engineered
materials handling subsystems in the industrial automation market. Its products
include specialty conveyor systems such as power turns, spirals and chutes,
electronic wire guidance controllers for lift trucks, and conveyor systems used
in the material handling and sorting of recycled materials.
The merger was expected to provide financial support for NDCA to pursue its
strategic business plan while providing a cash return to the Company's
shareholders.
On November 15, 1999 the Company and Portec jointly announced the
termination of the Agreement and Plan of Merger dated as of September 13, 1999.
As a result of this termination, NDCA continued as a public company and was not
acquired by Portec.
As part of the termination agreement, Portec reimbursed NDCA for
$75,000 in merger related expenses and J Richard Industries LP, provided $50,000
in equity in return for 133,000 newly issued common shares of NDCA. The $50,000
increased NDCA's working capital for general corporate purposes. The new shares
were restricted shares, meaning that they cannot be resold unless registered
under applicable securities laws or pursuant to an exemption from registration.
NDCA will continue to actively pursue new business combinations and
financing to improve its working capital. Additional working capital, which was
one of the objectives of the merger, is primarily needed to secure proper
financing from banks to allow the Company to actively pursue its identified
strategic markets. Under present borrowing arrangements with NDCA's primary
bank, Netzler & Dahlgren Co AB has provided an irrevocable Letter of Credit of
$450,000, in order for the Company to retain its line of credit. Netzler &
Dahlgren subsequent to year end extended the irrevocable Letter of Credit to the
end of February 2001.
STRATEGY DIVERSIFICATION: The Company is continuing to pursue a strategy of
diversification 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 supplementary products
o Expand the aftermarket sales business
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.
6
<PAGE>
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 in connection with
the project significantly increased the Company's revenues in 1999.
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 was important to the Company
because it was the first significant order for the Powerway product line. The
Powerway line was introduced as part of the Company's strategy to expand its
distribution revenues and profitability. This same major entertainment customer
ordered a pilot project involving the Company's AGV technology for a site
outside North America . As part of this project the Company received an order in
excess of $500,000 for Schabmuler drives and Powerway products. Although the
Company does not generate revenues from NDC products utilized from projects
outside its territory (such sales per the Master License Agreement are handled
by Netzler & Dahlgren or their licensees) these projects may provide significant
opportunities for the Company should similar projects be pursued in North
America.
RAYMOND CORPORATION: In December, 1999, negotiations were finalized with
the Raymond Corporation, a leading manufacturer of industrial trucks ( "forklift
trucks"), with regard to a co-operation agreement whereby the Company assumes
the responsibility for Raymond's installed base of AGV systems in North America.
The Agreement will be implemented during the first quarter of Fiscal year 2000.
YEAR 2000: The Company successfully installed new hardware and software
for its operations during 1999 and incurred no problems relating to the date
change in the new millennium. The Company also experienced no Y2K related
problems with its products supplied to customers.
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 of the Company (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 might be unable to raise the additional working capital needed,
directly or through a business combination, to finance the current business
strategy, which would have a serious impact on the Company's ability to sell
its current and future products, as well as to satisfy existing banking
requirements.
d) 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.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
RESULTS OF OPERATIONS
The table below shows the relationship of income and expense items relative
to net revenues for the fiscal years ended November 30, 1999, 1998 and 1997,
respectively.
<TABLE>
<CAPTION>
Percentage of Change
Period to Period
Percentage of net Revenues Increase (Decrease)
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
For year Ended November 30, November 30,
1999 1998 1997 1998 to 1999 1997 to 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Revenues 100.0 % 100.0 % 100.0 % 44.9 % (1.5) %
Cost of goods sold 62.1 59.5 66.1 51.4 (11.4)
- ----------------------------------------------------------------------------------------------------------------------
Gross profit 37.9 40.5 33.9 35.3 17.9
Operating expenses:
Selling 12.4 16.5 17.0 9.1 (4.4)
General and administrative 21.0 24.8 38.1 22.6 (35.8)
- ----------------------------------------------------------------------------------------------------------------------
33.4 41.3 55.1 17.2 (26.1)
- ----------------------------------------------------------------------------------------------------------------------
Operating income (loss) 4.4 (0.8) (21.2) * (96.4)
Net interest expense (4.1) 6.1 4.8 (2.8) 25.0
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before income
taxes (benefit) .3 (6.9) (26.0) * (73.9)
Income Tax (benefit) - - - - -
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) .3 % (6.9) % (26.0) % * (73.9) %
======================================================================================================================
* Because the data changes from negative to positive, or from positive to
negative, the percentage of change is not meaningful.
</TABLE>
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
FISCAL YEAR ENDED NOVEMBER 30, 1999 COMPARED TO FISCAL YEAR ENDED NOVEMBER 30,
1998.
Net revenues in 1999 increased significantly compared to the prior year.
Revenues increased by $1,802,524 or 44.9%, from $4,015,698 for the fiscal year
ended November 30, 1998 to $5,818,222 for the fiscal year ended November 30,
1999. The Company's strategy to increase revenues by selectively selling turnkey
systems to end users and system integrators in September of 1997 accounted for
the majority of the increase in revenues in 1999. The large order received from
the automotive market through Harcon was the primary reason for the increased
systems revenues. The Company also continued to aggressively pursue distribution
of new products and technology in 1999 to the AGVS market to increase its
revenues. The Company received two major orders from the entertainment industry
for its Motor-In-Wheel-Drive units, batteries and chargers which represented
approximately $450,000 in revenues in 1999. The Company will continue to focus
on increasing revenues in 2000 by providing more turnkey systems when
appropriate and expanding its existing product line.
Cost of goods sold increased from $2,387,342 to $3,614,922, or 51.4%, due
primarily to the increased revenues. As a percentage of net revenues, cost of
goods sold increased to 62.1% compared to 59.5% the prior year. The primary
reason for the increase is the Company experienced lower margins on engineering
revenues. Margins on turnkey systems are generally lower than distribution
revenues. Gross profit increased by $574,944, or 35.3%, from $1,628,356 to
$2,203,300.
Selling expenses increased from $662,780 to $723,162, or 9.1% due primarily
to increased travel, advertising and marketing expenses. General and
administrative expenses increased by $225,482 from $996,994 to $1,222,476, or
22.6%. The increase compared to the prior year was primarily due to the
following 1) an unusual expense of $67,000 relating to the terminated merger
with Portec 2) increased incentive to the officers of approximately $40,000, 3)
rent cost increases due to a new test facility of approximately $25,000 4) Y2K
related expense of approximately $20,000 and 5) increased expenses in
recruiting, training, personnel and other general expenses.
Primarily as a result of the foregoing, the operating results improved by
$289,080 from an operating loss of $31,418 to an operating income of $257,662
for the current year.
Net interest expense decreased from $244,865 to $237,909, a decrease of
2.8%.
Primarily as a result of the foregoing, the net results improved by
$296,036 from a net loss of $276,283 to a net income of $19,753.
BACKLOG
Backlog consists of all amounts contracted to be paid by customers but not
yet recognized as net revenues by the Company. At November 30, 1999, the Company
had a backlog of approximately $1,650,000 compared to approximately $780,000 one
year earlier.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
FISCAL YEAR ENDED NOVEMBER 30, 1998 COMPARED TO FISCAL YEAR ENDED NOVEMBER 30,
1997.
Net revenues in 1998 did not change significantly compared to the prior
year. Revenues decreased by $61,199 or 1.5%, from $4,076,897 for the fiscal year
ended November 30, 1997 to $4,015,698 for the fiscal year ended November 30,
1998. The Company's strategy to increase revenues by selectively selling turnkey
systems to end users and system integrators in September of 1997 did not
generate significant revenues in 1998, but resulted in an expansion of its
customer base and markets. Orders were received in 1998 from such industries as
entertainment, automotive, postal service and airport security, some of which
were new to the Company. The Company's strategy to align itself with Munck
Automation, Inc. ("Munck") did not generate the projected business volume from
Munck. Munck was acquired by Swisslog Management Ltd. headquartered in Aurau,
Switzerland, a world leader in material handling equipment and solutions. In
December 1998 the Company terminated its strategic alliance agreement with Munck
in order to facilitate negotiations of a new agreement more consistent with the
future direction of both companies. The Company also aggressively pursued
distribution of new products and technology in 1998 to the AGVS market to
increase revenues. The primary products were motors for industrial truck
manufacturers and batteries and chargers for the AGV market. Such new products
did produce interest in the marketplace but did not result in significant
revenues for the Company in 1998.
Cost of goods sold decreased from $2,695,289 to $2,387,342, or 11.4%, due
primarily to the lower engineering cost. As a percentage of net revenues, cost
of goods sold decreased to 59.5% compared to 66.1% the prior year. The primary
reason for the decrease is the Company experienced higher margins on revenues
related to its aftermarket and engineering revenues. Gross profit increased by
$246,748, or 17.9%, from $1,381,608 to $1,628,356 due to the same factors.
Selling expenses decreased from $693,106 to $662,780, or 4.4% due primarily
to lower advertising and marketing expenses. General and administrative expenses
decreased from $1,552,900 to $996,994, or 35.8% primarily due to lower cost
related to depreciation, amortization of intangibles in 1998 compared to 1997.
The Company also did not write down any intangibles in 1998 compared to a write
down of $52,394 in 1997. Lower equipment leases cost, and general cost reduction
relating to a cutback in personnel in May of 1998 contributed to lower general
and administrative expenses compared to the prior year.
Primarily as a result of the foregoing, the operating loss decreased by
$832,980 or 96.4%, from $864,398 in 1997 to an operating loss of $31,418 for
1998.
Net interest expense increased from $195,962 to $244,865, an increase of
25.0%. The increase is primarily due to increased borrowings relating to a two
year term loan from Netzler and Dahlgren.
Primarily as a result of the foregoing, the net loss decreased by $784,077
or 73.9%, from $1,060,360 in 1997 to a net loss of $276,283 in 1998.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
================================================================================
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, long-term debt, capital leases and proceeds of its public and private
offerings, to satisfy its external financing needs.
During the year ended November 30, 1999 net cash provided from operating
activities was $395,332. However, as of November 30, 1999 the Company had been
delaying payments of approximately $200,000 in trade payables to Netzler &
Dahlgren due to cash not being available under the current line of credit.
During the third quarter the Company's working capital decreased by $1,070,046
to a deficit of $904,987 on August 31, 1999 compared to a working capital of
$165,059 on May 31,1999. The large decline in the Company's working capital was
the result of the Company's mortgage becoming a current liability in June of
1999 (see Note 4 of the Company's Financial Statements). The Company's working
capital deficit at year end was $560,625 compared to $563,725 in 1999.
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
the 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 January 31, 2001, or upon demand
by the Bank. The extension was approved when Netzler & Dahlgren extended its
$450,000 irrevocable Letter of Credit to the Bank through February 28, 2001. 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.
The Company's strategy depends heavily on securing project business to grow.
Such business is traditionally not financed by the banking community due to
perceived risk associated with such jobs. In addition, in 1999 the Company was
informed by the lender that unless the Company's assets or equity were
significantly higher and the Company could show consistent earnings that such
project receivable financing would not be readily available. Under the present
banking relationship the Company can realistically only borrow approximately
$250,000 for such project receivables when the availability needed for inventory
is taken into account. At the end of November 1999 the Company had approximately
$1,100,000 of such project receivables which could not be fully utilized by the
present borrowing formulae. By not being able to fully utilize its project
assets for the line of credit, the Company experiences negative
11
<PAGE>
cash flows until such cash is received from the customer. Due to the above
factors the Company delayed payments of approximately $200,000 to its affiliate
Netzler & Dahlgren so not to exceed current borrowing maximums from the demand
promissory note. Such past due payable is accruing interest at 16% per annum.
The Company was current at November 30, 1999 on the Note payable to Netzler &
Dahlgren.
The Company had difficulty obtaining an adequate line of credit to meet its
operating needs due to the poor results of the 1997 and 1998 and the Company's
low equity position. Bank relations have improved especially since the new
bookings received during the second quarter, and the positive results of 1999,
but the banks are still very cautious. This was evidenced by short extensions of
credits, increased interest rates and the continued requirement to have
guarantees from Netzler & Dahlgren. One of the primary reasons for the merger
with Portec was to provide adequate financing for the continued operations of
the Company. When the merger was terminated, Netzler & Dahlgren extended its
letter of credit to the bank to February 2001. The last quarter results
considerably improved the financial condition compared to the end of the third
quarter, Netzler & Dahlgren , however, must continue to accept delayed payments
from the Company. Netzler & Dahlgren presently does not have the financial
resources to properly finance the growth of the Company under the current
strategy.
The Company had been exploring the possibility of raising additional equity
capital, or subordinated debt, either 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. Management
currently believes that its present working capital needs are close to or
greater than $1.5 million. The Company will continue to pursue equity and/or
debt financing, unless revenues that can be financed by the banking community
increase substantially to consistently provide earnings for the Company. There
can be no assurance that the Company will be successful in raising the
additional capital or subordinated debt to improve its financial position
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 principal and interest monthly payment of
$13,912 was also unchanged. The Company has made all payments on a timely basis
on the mortgage.
12
<PAGE>
Independent Auditor's Report
To the Board of Directors
NDC Automation, Inc.
Charlotte, North Carolina
We have audited the accompanying balance sheets of NDC Automation, Inc. as of
November 30, 1999 and 1998, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended November 30, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NDC Automation, Inc. as of
November 30, 1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended November 30, 1999 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 14 to the
financial statements, there is substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note 14. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
McGLADREY & PULLEN, LLP
Charlotte, North Carolina
January 14, 2000, except for the last
sentence of the second paragraph of
Note 4, as to which the date is February 22, 2000
13
<PAGE>
BALANCE SHEETS
<TABLE>
<CAPTION>
=====================================================================================================================
November 30,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
ASSETS (Note 4)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents (Note 12) $ 45,240 $ 62,923
Accounts receivable, net (Notes 2 and 5) 1,882,293 805,891
Inventories (Note 8) 366,365 593,794
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 3) 35,024 136,547
Prepaid expenses and other assets 51,592 47,583
- ---------------------------------------------------------------------------------------------------------------------
Total current assets $ 2,380,514 $ 1,646,738
- ---------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Land $ 300,000 $ 300,000
Building and improvements 1,126,623 1,126,623
Furniture, fixtures, and office equipment 168,505 138,746
Machinery and equipment 63,415 59,325
- ---------------------------------------------------------------------------------------------------------------------
$ 1,658,543 $ 1,624,694
Less accumulated depreciation 646,867 564,782
- ---------------------------------------------------------------------------------------------------------------------
$ 1,011,676 $ 1,059,912
- ---------------------------------------------------------------------------------------------------------------------
$ 3,392,190 $ 2,706,650
=====================================================================================================================
</TABLE>
See Notes to Financial Statements
14
<PAGE>
BALANCE SHEETS
<TABLE>
<CAPTION>
=====================================================================================================================
November 30,
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Note payable, bank (Note 4) $ 168,153 $ 346,657
Current maturities of long- term debt (Note 4) 1,087,740 1,239,472
Accounts payable and accrued expenses;
including affiliates $416,581 at 1999
and $169,837 at 1998 (Note 8) 1,475,974 508,002
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 3) 209,272 116,332
- ---------------------------------------------------------------------------------------------------------------------
Total current liabilities $ 2,941,139 $ 2,210,463
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT (Note 4) $ - $ 114,889
- ---------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 9 )
STOCKHOLDERS' EQUITY (Notes 10 and 11)
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; 3,586,451 shares
and 3,453,551 were issued at 1999
and 1998, respectively 35,864 34,534
Additional paid-in capital 4,260,236 4,211,566
Accumulated deficit (3,845,049) (3,864,803)
- ---------------------------------------------------------------------------------------------------------------------
$ 451,051 $ 381,297
- ---------------------------------------------------------------------------------------------------------------------
$ 3,392,190 $ 2,706,649
=====================================================================================================================
</TABLE>
15
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
======================================================================================================================
Years ended November 30,
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenues (Notes 5 and 8) $ 5,818,222 $ 4,015,698 $ 4,076,897
Cost of goods sold (Note 8) 3,614,922 2,387,342 2,695,289
- ----------------------------------------------------------------------------------------------------------------------
Gross profit $ 2,203,300 $ 1,628,356 $ 1,381,608
- ----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Selling $ 723,162 $ 662,780 $ 693,106
General and administrative (Note 9) 1,222,476 996,994 1,552,900
- ----------------------------------------------------------------------------------------------------------------------
$ 1,945,638 $ 1,659,774 $ 2,246,006
- ----------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 257,662 $ (31,418) $ (864,398)
- ----------------------------------------------------------------------------------------------------------------------
Net interest expense (Note 8): $ (237,909) $ (244,865) $ (195,962)
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes $ 19,753 $ (276,283) $ (1,060,360)
Federal and state income taxes (benefit) (Note 6) - - -
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 19,753 $ (276,283) $ (1,060,360)
======================================================================================================================
Basic and diluted earnings (loss) per share $ .01 $ (.08) $ (.31)
======================================================================================================================
Weighted average common shares outstanding 3,458,552 3,453,451 3,453,451
======================================================================================================================
Dividends per common share $ - $ - $ -
======================================================================================================================
</TABLE>
See Notes to Financial Statements
16
<PAGE>
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
====================================================================================================================================
Years Ended November 30,
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
AMOUNT SHARES Amount Shares Amount Shares
------ ------ ------ ------ ------ ------
COMMON STOCK:
<S> <C> <C> <C> <C> <C> <C>
Balance, beginning $ 34,534 3,453,451 $ 34,534 3,453,451 $ 34,534 3,453,451
Stock options exercised (Note 11) - - - - - -
Issuance of common stock (Note 10) 1,330 133,000 - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, ending 35,864 3,586,451 $ 34,534 3,453,451 $ 34,534 3,453,451
====================================================================================================================================
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning $4,211,566 $ 4,211,566 $ 4,211,566
Stock options exercised (Note 11) - - -
Issuance of common stock (Note 10) $ 48,670 - -
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, ending $4,260,236 $ 4,211,566 $ 4,211,566
====================================================================================================================================
ACCUMULATED DEFICIT:
Beginning deficit $ (3,864,802) $(3,588,519) $ (2,528,159)
Net income (loss) 19,753 (276,283) (1,060,360)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending deficit $ (3,845,049) $(3,864,802) $ (3,588,519)
====================================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity at November 30 $ 451,051 3,586,451 $ 381,298 3,453,451 $ 657,581 3,453,451
====================================================================================================================================
</TABLE>
See Notes to Financial Statements
17
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
======================================================================================================================
Years ended November 30,
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income (loss) $ 19,753 $ (276,283) $ (1,060,360)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation 82,085 82,825 114,564
Amortization - - 89,818
Increase (decrease) in provision for doubtful accounts - (5,000) 26,281
(Gain) loss on sale of property and equipment - (1,637) 26,027
Write-off of intangibles - - 52,394
Loss (gain) on foreign currency exchange rate (15,959) (7,715) 3,652
Change in assets and liabilities:
(Increase) decrease in accounts receivable (1,076,402) (130,402) 829,620
Decrease in inventories 227,429 220,071 312,533
(Increase) decrease in costs and estimated earnings in
excess of billings on uncompleted contracts 101,523 (113,141) 25,871
(Increase) decrease in prepaid expenses
and other assets (4,009) 243 4,109
(Increase) decrease in other assets - - 21,281
Decrease (increase) in accounts payable
and accrued expenses 967,972 (27,199) (167,104)
Increase (decrease) in billings in excess of costs and
estimated earnings on uncompleted contracts 92,940 86,494 (88,819)
- ----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 395,332 $ (171,744) $ 189,867
- ----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of property and equipment $ - $ 2,142 $ 6,535
Purchase of property and equipment (33,849) (13,865) (36,703)
- ----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN
INVESTING ACTIVITIES $ (33,849) $ (11,723) $ (30,168)
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements
18
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
======================================================================================================================
Years ended November 30,
1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (payments) on revolving credit agreement $ (178,504) $ (80,977) $ (419,583)
Proceeds from current and long-term borrowings - 402,183 -
Principle payments on long-term borrowings (266,621) (154,899) (63,597)
Net proceeds from common stock issued 50,000 - -
- -----------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES $ (395,125) $ 166,307 $ (483,180)
- -----------------------------------------------------------------------------------------------------------------------
Effect of foreign currencies exchange rate changes
on cash and cash equivalents $ 15,959 $ 7,715 $ (3,652)
- -----------------------------------------------------------------------------------------------------------------------
Decrease in cash and cash equivalents $ (17,683) $ (9,445) $ (327,133)
Cash and cash equivalents:
Beginning 62,923 72,368 399,501
- -----------------------------------------------------------------------------------------------------------------------
Ending $ 45,240 $ 62,923 $ 72,368
=======================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash payments for :
Interest $ 233,533 $ 244,828 $ 204,684
</TABLE>
19
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS:
The Company was formed to acquire, develop, market, and sell hardware, software
and engineering services that are incorporated into and used to control
automatic guided vehicle systems ("AGVS"). The Company markets its products and
services to designers of integrated automation systems, original equipment
manufacturers, and end users primarily within the North American continent.
A summary of the Company's significant accounting policies follows:
REVENUE RECOGNITION:
The Company recognizes revenue from the sales of commercial products as
shipments are made.
The Company recognizes revenues under long-term contracts on the percentage of
completion method, measured by the percentage of each component cost incurred to
date to estimated total component contract costs for each component in the
contract. Component costs include material, direct labor, subcontracts,
engineering overhead, and miscellaneous costs. Provisions for estimated losses
are made in the period in which they first become determinable.
"Costs and estimated earnings in excess of billings on uncompleted contracts"
represent revenue recognized in excess of amounts billed. "Billings in excess of
costs and estimated earnings on uncompleted contracts" represent billings in
excess of revenues recognized.
ESTIMATES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
CASH AND CASH EQUIVALENTS:
For purposes of reporting the statements of cash flows, the Company considers
all cash accounts (see Note 12), and all highly liquid debt instruments
purchased with a maturity of three months or less, to be cash equivalents. The
Company maintains demand deposits with a financial institution which are in
excess of the federally insured amount.
INVENTORIES:
The inventories are priced at the lower of cost or market, with cost being
determined by the weighted average method. Inventories consist primarily of
parts for computerized material handling systems purchased from the affiliate
Netzler & Dahlgren and motor-in-wheel drive units purchased from Schabmuller
GMBH.
20
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT:
Property and equipment is stated at cost. Depreciation and amortization are
primarily computed using the straight-line method over the following useful
lives:
Years
-----
Building and improvements 21-28
Furniture, fixtures and office equipment 4-7
Machinery and equipment 3-5
Vehicles 3-5
FOREIGN CURRENCY TRANSLATION:
Payables to foreign companies that are denominated in foreign currencies are
translated at rates that approximate the year-end foreign exchange rates.
Resultant gains or losses are reflected in cost of goods sold. The costs of
items of foreign origin which are included in inventory have been translated at
historical exchange rates prevailing at the date of acquisition.
INCOME TAXES:
Provisions for income taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences, operating
losses, and tax credit carryforwards, and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
21
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSSES) 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 initially applied Statement No. 128 for the
year ended November 30, 1998, and as required by the statement, has restated the
per share information for the the prior years to conform to the statement. As
described in Note 11, at November 30, 1999, 1998 and 1997 the Company had
options outstanding to purchase a total of 134,092, 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 loss per share would have an antidilutive effect. Therefore, basic and
diluted loss per share amounts are the same in 1999, 1998 and 1997.
ADVERTISING:
The Company follows the policy of charging production cost of advertising to
expense as incurred. Advertising expenses for the years ending November 30,
1999, 1998 and 1997 were $21,759, $15,640, and $91,340 respectively.
22
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
====================================================================================================================
NOTE 2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at November 30, 1999 and 1998,
respectively:
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Trade and contract $ 1,926,825 $ 850,336
Less: Allowance for doubtful accounts (50,000) (50,000)
- ----------------------------------------------------------------------------------------------------------------------
$ 1,876,825 $ 800,336
Other 364 1,847
Officers and employees 5,104 3,708
- ----------------------------------------------------------------------------------------------------------------------
$ 1,882,293 $ 805,891
======================================================================================================================
NOTE 3. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS
Costs and estimated earnings on uncompleted contracts consist of the following
at November 30, 1999 and 1998, respectively:
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 1,524,468 $ 591,370
Estimated earnings 699,610 232,273
- ----------------------------------------------------------------------------------------------------------------------
$ 2,224,708 $ 823,643
Less billings to date (2,398,326) (803,428)
- ----------------------------------------------------------------------------------------------------------------------
$ ( 174,148) $ 20,215
======================================================================================================================
Included in the accompanying balance sheets under the following captions:
<CAPTION>
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Costs and estimated earnings in excess of billings
on uncompleted contracts $ 35,024 $ 136,547
Billings in excess of costs and estimated earnings
on uncompleted contracts (209,272) (116,332)
- ----------------------------------------------------------------------------------------------------------------------
$ (174 ,148) $ 20,215
======================================================================================================================
</TABLE>
23
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
===================================================================================================================
<S> <C> <C>
NOTE 4. PLEDGED ASSETS, NOTE PAYABLE, BANK AND LONG-TERM DEBT
1999 1998
- ----------------------------------------------------------------------------------------------------------------------
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 (as defined in the Loan Agreement) plus 50% of all eligible
inventory, 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 January 31, 2001. (1)(2) $ 168,153 $ 346,657
======================================================================================================================
Long-term debt consists of the following :
- ----------------------------------------------------------------------------------------------------------------------
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 $937,621. The loan also contains certain
financial covenants to which the Company must adhere. As of November 20, 1999,
the Company obtained waivers for certain financial covenants as specified by the
Mortgage note agreement.
$ 977,846 $ 1,042,520
Note payable to Netzler & Dahlgren Co AB, based on a 16.0% fixed rate. Original
principal balance to be repaid in twenty-four (24) consecutive monthly principal
payments of 133,529 Swedih Krona, or approximately US$16,757 depending on the
exchange rate at time of payment, plus interest. The note is collaterized by the
Company's land and building with a carrying value of $937,621.
109,894 311,841
- ----------------------------------------------------------------------------------------------------------------------
Less current maturities: 1,087,740 1,239,472
- ----------------------------------------------------------------------------------------------------------------------
$ - $ 114,889
======================================================================================================================
(1) The prime rate at November 30, 1999 was 8.50% and 7.75% at November 30,
1998.
(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 November 30, 1999 are as follows:
Year Ending
November 30
- ----------------------------------------------------------------------------------------------------------------------
2000 $1,087,740
2001 -
- ----------------------------------------------------------------------------------------------------------------------
$1,087,740
======================================================================================================================
</TABLE>
24
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 5. MAJOR CUSTOMERS
Net revenues and accounts receivable as of and for the years ended November 30,
1999, 1998, and 1997, respectively, include sales to the following major
customers (each of which accounted for 10% or more of the total net revenues of
the Company for those years):
Amount of Net Revenues
Year Ended November 30,
CUSTOMER 1999 1998 1997
- -------------------------------------------------------------------------------
A $ 1,410,915 $ * $ *
B * 482,826 *
C * 457,365 *
D * 488,603 *
E * * 612,226
F * * 590,588
Accounts Receivable
November 30,
1999 1998 1997
- -------------------------------------------------------------------------------
A $ 629,890 $ * $ *
B * 63,108 *
C * 162,899 *
D * 51,711 *
E * * 61,075
F * * 295,363
*Not a major customer.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
===================================================================================================================
NOTE 6. INCOME TAXES
Income taxes (benefit) consist of the following components for the years ended
November 30, 1999, 1998, and 1997, respectively:
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current $ - $ - $ -
Deferred - - -
- ----------------------------------------------------------------------------------------------------------------------
$ - $ - $ -
======================================================================================================================
Net deferred tax assets consist of the following components as of November 30,
1999 and 1998, respectively:
Deferred tax assets:
Allowance for doubtful accounts $ 19,558 $ 19,558
Inventory valuation reserves 27,381 15,646
Capitalized cost in ending inventory 3,857 8,757
Net operating loss carryforward 1,480,171 1,479,799
General business credit carryforwards 45,367 45,367
Depreciation 20,257 13,847
Other reserves 12,838 17,236
- -
- ----------------------------------------------------------------------------------------------------------------------
$1,609,429 $ 1,600,210
Less valuation allowance 1,609,429 1,600,210
- ----------------------------------------------------------------------------------------------------------------------
Net deferred taxes $ - $ -
======================================================================================================================
The changes in the valuation allowance for the years ended November 30, 1999,
1998 and 1997 were $9,219, $95,299 and $406,909, respectively. The valuation
reserve is the result of management's determination that the Company may not be
able to generate sufficient future taxable income to realize the recorded
deferred tax assets.
A reconciliation of the statutory income tax to the income tax expense (benefit)
included in the Statements of Operations is as follows:
<CAPTION>
Years Ended November 30,
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
% OF % of % of
DOLLAR PRE-TAX Dollar Pre-tax Dollar Pre-tax
AMOUNT INCOME Amount Income Amount Income
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Statutory federal income
tax (benefit) 6,716 $ 34.0 $(93,936) (34.0) $(360,522) (34.0)
Increase (decrease) in
taxes resulting from:
State income taxes 988 5.0 (13,814) (5.0) (53,018) (5.0)
Changes in valuation allowance (9,219) (46.7) 95,299 34.0 406,909 38.0
Other 1,515 7.7 12,451 5.0 6,631 1.0
- ----------------------------------------------------------------------------------------------------------------------
$ - - $ - - $ - -
======================================================================================================================
</TABLE>
26
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 7. 401(K) PROFIT SHARING PLAN
The Company has a profit sharing plan, the contributions to which are
discretionary.
The Company established a 401(k) profit sharing plan to which both the Company
and eligible employees may contribute. The Company may, at its discretion, match
the participant's contribution quarterly, up to a maximum of $700 per plan year.
The Company's contribution for the years ended November 30, 1999, 1998 and 1997
amounted to $15,225, $13,587, and $17,340, respectively.
NOTE 8. RELATED PARTY TRANSACTIONS
The Company is related to NDC, Netzler & Dahlgren Co. AB (Netzler & Dahlgren)
through common ownership .
Netzler & Dahlgren is the Company's largest supplier of AGVS control technology.
Accordingly, the Company's success is dependent upon its ability to obtain such
products on a timely basis. Although the Company has entered into a written
agreement with Netzler & Dahlgren for the supply of such products, there can be
no assurance that this company will continue to fulfill its obligations under
the agreement.
On November 30, 1995, the Company signed a ten (10) year master license
agreement with Netzler & Dahlgren to purchase certain products at stipulated
prices. The Master License Agreement provides for certain royalty payments based
on 10% of revenues on license fee contracts entered into after November 30,
1995.
On November 30, 1995 the Company sold certain intangibles related to its laser
technology and its stock in NDC Laser to Netzler & Dahlgren for $1,000,000. As
part of the sales price the Company receives contingent laser fees from Netzler
& Dahlgren for the years ending 1997 and 1998. For the year ending November 30,
1998 and 1997 the Company earned and netted against trade payables $59,250 and
$109,750 respectively, in laser fees from Netzler & Dahlgren.
The Company had the following transactions with Netzler & Dahlgren for the years
ended November 30, 1999, 1998, and 1997, respectively:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 77,986 $ 252,621 $ 153,176
======================================================================================================================
Purchases of hardware, software & engineering services $ 844,414 $ 490,656 $ 689,059
======================================================================================================================
Interest expense $ 70,178 $ 76,499 $ 17,968
======================================================================================================================
</TABLE>
There was no royalty expense for the three years ended November 30, 1999.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 9. COMMITMENTS
At November 30, 1999, the Company had no outstanding forward exchange contracts.
These contracts are purchased as needed from time to time to hedge identifiable
foreign currency commitments.
The Company leases property and equipment under long-term operating leases
expiring on various dates through August, 2001. In addition, the Company has
rental expenses for facilities rented on a short term basis and on a
month-to-month basis, such expenses were $38,610, $15,187, and $16,103 for the
years ended November 30, 1999, 1998, and 1997, respectively.
Minimum rental commitments under long-term operating leases at November 30, 1999
were as follows:
2000 $ 39,574
2001 29,174
2002 13,142
2003 951
-----------------
$ 82,841
=================
The Company has an employment contract with the Chief Operating Officer which
provides for a minimum annual base salary of $110,000. The base salary is
subject to annual reviews. The contract expires on March 1, 2002.
NOTE 10. ISSUANCE OF COMMON STOCK
On November 15, 1999, the Company sold 113,000 shares of common stock, par value
$.01 per share in a private placement . The net proceeds to the Company from the
sale of the shares was $50,000. The Company applied the proceeds to working
capital needs and other general corporate needs.
28
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 11. STOCK OPTION PLANS
The Company has adopted Statement of Financial Accounting Standards (`SFAS') No.
123, Accounting for Stock-Based Compensation. FASB Statement No.123, requires
that the Company account for its stock based compensation plans using a fair
value based method which measures compensation cost at the grant date based upon
the value of the awards, which is then recognized over the vesting period. The
accounting requirements of the statement apply to awards to employees entered
into fiscal years that begin after December 15, 1995 and to transactions with
non-employees entered into after December 15, 1995. The Statement allows and the
Company has elected to continue to use APB Opinion No. 25 Accounting for Stock
Issued to Employees to measure compensation cost, but is required to disclose
the pro forma effect on net income and earnings per share to reflect the
difference between the compensation cost from applying APB Opinion No. 25 and
the related cost measured by the fair value method defined in the statement for
all awards granted in years beginning after December 15, 1994. The Statement did
not change the reporting required for the Plans discussed below.
1990 AND 1993 STOCK OPTION PLANS:
On October 10, 1990, the Compensation Committee of the Board of Directors
adopted the NDC Automation, Inc. 1990 Stock Option Plan ("the 90 Plan"), the
adoption of which was ratified by the shareholders at the annual meeting held on
April 10, 1991. In September 1992, the Company registered up to 178,613 shares
of common stock for issuance. On October 23, 1993, the Compensation Committee of
the Board of Directors adopted the NDC Automation, Inc. 1993 Stock Option Plan
("the 93 Plan"), the adoption of which was ratified by the shareholders at the
annual meeting held on May 5, 1994.
Options to purchase 174,375 shares of common stock were granted pursuant to the
90 Plan and are available for exercise upon achievement by the Company of
certain financial performance targets set by the Board of Directors on an annual
basis. The options will be exercisable for a term of ten years, commencing on
the date of the grant at an exercise price of $.7917 to $1.56 for new employees.
The 93 Plan authorized 100,000 options to purchase common stock, of which
100,000 were granted and are available for exercise upon achievement by the
Company of certain financial performance targets set by the Board of Directors
on an annual basis. On October 24, 1994, the 93 Plan options were repriced with
approval by the Compensation Committee at an exercise price of $1.56.
Of the 274,375 total shares of common stock granted, the Compensation Committee
granted to the Company's current and former executive officers options to
purchase 120,375 shares of common stock at an exercise price of $.7917 for the
90 Plan, and 18,000 shares of common stock for the 93 Plan at an exercise price
of $1.56. The exercise price of the options granted is based on the average fair
market value of the common stock for the five business days preceding the date
of the grant.
1997 STOCK OPTION PLAN:
On December 7, 1996 , the Compensation Committee of the Board of Directors
adopted The NDC Automation, Inc. 1997 Stock Option Plan ("the 97 Plan"), the
adoption of which was ratified by the shareholders at the annual meeting held
April 25, 1997. The 97 Plan authorized 225,000 options to all officers and
employees in the form of incentive stock options, of which 210,000 were granted
in January 1997 at an exercise price of $0.50 per share upon achievement by the
Company of certain financial performance targets set by the Board of Directors
on an annual basis. No pro forma compensation expense has been disclosed due to
financial performance targets not being obtained in 1998 or 1997 and due to
uncertainty of financial performance targets being obtained prospectively.
29
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 11. STOCK OPTION PLANS ( CONTINUED)
Transactions involving these plans for the years ended November 30, 1999, 1998
and 1997 respectively, are summarized as follows:
<TABLE>
<CAPTION>
STOCK OPTIONS 1999* 1998*
- ---------------------------------------------------------------------------------------------------
90 PLAN 93 PLAN 97 PLAN TOTAL 90 Plan 93 Plan 97 Plan Total
----------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding, December 1 29,677 52,100 167,250 249,027 63,233 83,600 199,520 346,333
Granted - - - - - - - -
Canceled (135) (300) (9,000) (9,435) (33,556) (31,500) (32,250) (97,306)
Exercised - - - - - - - -
- ------------------------------------------------------------ ----------------------------------
Outstanding, November 29,542 51,800 158,250 239,592 29,677 52,100 167,250 249,027
30
============================================================ ==================================
Exercisable, November 29,542 51,800 52,750 134,092 29,677 52,100 - 81,777
30
============================================================ ==================================
<CAPTION>
STOCK OPTIONS 1997*
- ------------------------------------------------------------
90 Plan 93 Plan 97 Plan Total
-----------------------------------
<S> <C> <C> <C> <C>
Outstanding, December 1 63,233 84,100 147,333
Granted - - 210,000 210,000
Canceled - (500) (10,500) (11,000)
Exercised - - - -
- ------------------------------------------------------------
Outstanding, November 63,233 83,600 199,500 346,333
30
============================================================
Exercisable, November 63,233 83,600 - 146,833
30
============================================================
</TABLE>
* The weighted average exercise price per share of options outstanding, granted,
canceled, exercised, or exercisable for the 90 Plan is $0.7917, for the 93 Plan
is $1.56 and for the 97 Plan is $0.50.
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
================================================================================
NOTE 12. RESTRICTED CASH AND CREDIT RISK
Under the Company's line of credit agreement, the Company's cash disbursements
are controlled and approved by the bank. Cash received by the Company is
deposited into bank-monitored cash collateral accounts where cash funds are used
to pay down the bank line of credit. Daily cash operating requirements of the
Company are then funded through advances under the borrowing base formula of the
line of credit (see Note 4).
NOTE 13. FASB AND PROPOSAL REGULATIONS
The FASB has issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, which the Company has not been required to adopt as of
November 30, 1999. This Statement, which is effective for fiscal years beginning
after June 15, 2000, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. If certain conditions are met, a derivative may be
specifically designated as (a) a hedge of the exposure to changes in the fair
value of a recognized asset or liability or an unrecognized firm commitment, (b)
a hedge of the exposure of variable cash flows of a forecasted transaction, or
(c) a hedge of the foreign currency exposure of a net investment in a foreign
operation, an unrecognized firm commitment, an available for sale security, or a
foreign currency denominated forecasted transaction. The statement is not
expected to have a significant impact on the Company.
NOTE 14. CONTINUED OPERATIONS
The Company has historically suffered operating losses with a small net income
in 1999. This has left the Company with limited equity and negative working
capital. The Company is also not in compliance with convenants of certain debt
agreements. These issues raise substantial doubt about the Company's ability to
continue as a going concern.
Management has made plans in regards to these matters to develop an operating
plan that will increase revenues and minimize losses. This plan includes a
reorganization of present resources to support 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
The Company is also pursuing raising additional equity to assist in reaching its
goals.
Although the Company believes that its strategic plans will permit it to meet
its 2000 working capital needs, there can be no assurance that the Company can
successfully meet the objectives of such plans.
31
<PAGE>
SHAREHOLDER INFORMATION
<TABLE>
<CAPTION>
====================================================================================================================================
<S> <C>
ANNUAL MEETING DIRECTORS
The annual meeting will be held at 10:00 am, Friday,
May 5, 2000, at NDC Automation's Corporate offices Goran P.R. Netzler
in Charlotte, North Carolina. Chairman of the Board of Directors, NDC Automation, Inc.
President
SHAREHOLDER RELATIONS Netzler and Dahlgren Co. AB
A COPY OF NDC'S ANNUAL REPORT AND FORM 10-KSB,
WHICH IS FILED WITH THE SECURITIES AND EXCHANGE Jan H.L. Jutander
COMMISSION, WILL BE SENT TO ANY SHAREHOLDER UPON Vice President, Operation
WRITTEN REQUEST TO MANAGER-INVESTOR RELATIONS Netzler and Dahlgren Co. AB
NDC AUTOMATION, INC.,
3101 LATROBE DRIVE Richard D. Schofield
CHARLOTTE, NORTH CAROLINA 28211-4849 Director
CORPORATE OFFICES Raymond O. Gibson
NDC Automation, Inc. VP Operations
3101 Latrobe Drive Terion, Inc.
Charlotte, North Carolina 28211-4849
(704) 362-1115 Telephone
(704) 364-4039 Facsimile
STOCK EXCHANGE LISTINGS OFFICERS
Over the Counter: OTC Bulletin Board
OTC Symbol: "AGVS" Ralph Dollander
President and
TRANSFER AGENT Chief Executive Officer (prior to March 1, 2000)
First Citizens bank
Raleigh, North Carolina Claude Imbleau
Chief Operating Officer
LEGAL COUNSEL Chief Financial Officer
Parker, Poe, Adams and Bernstein, LLP
Charlotte, North Carolina E. Thomas Watson
Secretary, NDC Automation, Inc.
Shumaker, Loop and Kendrick, LLP Partner
Charlotte, North Carolina Parker, Poe, Adams and Bernstein LLP
AUDITORS
McGladrey & Pullen, LLP
Charlotte, North Carolina
<CAPTION>
====================================================================================================================================
COMMON STOCK DATA
Market Price Per Share
---------------------------------------------------------------------------------------------
1999 - 1998
------------------------------------------- ---------------------------------------
Quarter Ended High Low High Low
Bid Ask Bid Ask Bid Ask Bid Ask
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
February 28 0.40 0.65 0.15 0.15 9/32 13/32 5/32 3/16
May 31 0.79 0.90 0.31 0.53 11/32 7/16 9/32 11/32
August 31 0.72 0.88 0.22 0.38 .32 7/16 3/16 .24
November 30 0.63 0.88 0.26 0.34 .22 .28 .125 .14
====================================================================================================================================
</TABLE>
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITOR
We hereby consent to the incorporation by reference in this Form 10-KSB of our
report dated January 14, 2000, except for the last sentence of the second
paragraph of Note 4, as to which date is February 22, 2000, which appears on
page 13 of the 1999 Annual Report of NDC Automation, Inc.
/S/ McGladrey & Pullen, LLP
Charlotte, North Carolina
February 22, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000859621
<NAME> NDC AUTOMATION, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1999
<CASH> 45,240
<SECURITIES> 0
<RECEIVABLES> 1,932,293
<ALLOWANCES> 50,000
<INVENTORY> 366,365
<CURRENT-ASSETS> 2,380,514
<PP&E> 1,658,543
<DEPRECIATION> 646,867
<TOTAL-ASSETS> 3,392,190
<CURRENT-LIABILITIES> 2,941,139
<BONDS> 0
0
0
<COMMON> 35,864
<OTHER-SE> 415,187
<TOTAL-LIABILITY-AND-EQUITY> 3,392,190
<SALES> 5,818,222
<TOTAL-REVENUES> 5,818,222
<CGS> 3,614,922
<TOTAL-COSTS> 3,614,922
<OTHER-EXPENSES> 1,945,638
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (237,909)
<INCOME-PRETAX> 19,753
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,753
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
