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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 [FEE REQUIRED] OR [ ]
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: 0-20206
PERCEPTRON, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-2381442
(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
47827 Halyard Drive
Plymouth, Michigan 48170-2461
(313) 414-6100
(Registrant's telephone number, including area code)
Securities registered pursuant to section 12(b) of the act: None
Securities registered pursuant to section 12(g) of the act:
COMMON STOCK, $0.01 PAR VALUE
(TITLE OF CLASS)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes__X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the Common Stock on March
14, 1997, as reported by The Nasdaq Stock Market, was approximately
$254,000,000 (assuming, but not admitting for any purpose, that all directors
and executive officers of the registrant are affiliates).
The number of shares of Common Stock, $0.01 par value, issued and
outstanding as of March 14, 1997 was: 7,694,628.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following document, to the extent specified in this report, are
incorporated by reference in the Part III of this report:
Document Incorporated by reference in:
------------------------------ -----------------------------
Proxy Statement for 1997
Annual Meeting of Shareholders Part III, Items 10-13
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PART I
ITEM 1: DESCRIPTION OF BUSINESS
GENERAL
Perceptron, Inc. ("Perceptron" or the "Company") designs, manufactures and
markets information based process measurement and guidance solutions which help
customers improve performance by providing process control systems that
precisely measure and monitor component parts for conformance to design intent,
systems that guide robots to perform precise tasks on the assembly line and
systems that address certain other applications. Perceptron's product
offerings are designed to improve productivity, increase product quality and
decrease costs in the manufacturing workplace.
The Company has two distinct three-dimensional machine vision
technologies: TriCam(TM) and LASAR(TM). The TriCam technology uses structured
laser light triangulation techniques to obtain accurate three-dimensional
measurements. This third-generation system, introduced in late 1993, is
primarily used to measure formed parts for process control, to provide robot
guidance for automated assembly tasks and to perform non-contact alignment
functions. LASAR technology uses laser radar technology and provides accurate
three-dimensional measurements of all points in a scene over a larger field of
view than does TriCam.
The systems that employ TriCam technology have been primarily sold to the
automotive industry. However, these products have also been sold into other
industries, such as the appliance industry and the forest and wood products
industry. Over 500 of the Company's three-dimensional machine vision systems,
incorporating over 11,000 non-contact sensors, have been installed worldwide.
LASAR based systems have been sold primarily to the forest and wood
products industry. Perceptron believes that there may be potential
applications for the LASAR system in a number of diverse industries. The
foregoing statement may be deemed to be a "forward looking statement" within
the meaning of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). See "Business Strategy" for a discussion of certain factors affecting
the Company's expansion plans.
Perceptron's design philosophy is to create systems which incorporate
sophisticated proprietary software and hardware to minimize the need for
customer application engineering. The Company's products are used by
factory-floor personnel for in-line manufacturing or in other operating
environments, are re-configurable and are amenable to networking. The systems
provide graphical displays, in addition to numerical reports.
From its incorporation in 1981 until August 1992, Perceptron's Common
Stock ("Common Stock") was held by private investors. On August 20, 1992, the
Company completed the Initial Public Offering ("IPO") of shares of its Common
Stock. In 1995, the Company announced a three-for-two stock split of the
Company's Common Stock in the form of a stock dividend payable on November 30,
1995 to shareholders of record on November 20, 1995. All reported historical
information has been adjusted accordingly to reflect the impact of this stock
split. On February 3, 1997, the Company consummated its acquisition of
Autospect, Inc. ("Autospect") through the merger of a wholly owned subsidiary
of the Company with and into Autospect for aggregate consideration consisting
of 387,093 shares of Common Stock of the Company. Autospect, based in Ann
Arbor, Michigan, designs, develops and manufactures information-based coatings
inspection and defect detection systems primarily for use in the automotive
industry. Historical financial information included in the Form 10-K for 1996
or prior periods does not include any financial results for Autospect, except
where indicated.
The Company recently signed letters of intent to acquire Trident Systems,
Inc. ("Trident") and Nanoose Systems Corporation ("Nanoose"). The closing of
these acquisitions is subject to a number of factors, including the
negotiation, approval and execution of definitive documents and completion of
satisfactory due diligence. The proposed consideration for these acquisitions
will be shares of Common Stock of the Company, aggregating less than 5% of the
outstanding Common Stock. Trident is a full service systems integrator for the
solid woods sector of the forest and wood products industry, providing
applications that address a wide spectrum of mill processes. Trident and the
Company are currently parties to a sales agreement pursuant to which Trident
purchases TriCam and LASAR based systems from the Company for integration into
systems sold by Trident to the forest and wood products industry. Nanoose,
based in British Columbia, Canada, is a software design and engineering
company, specializing in industrial scanning and optimization systems primarily
for the forest and wood products industry. Optimization software written by
Nanoose is an important element of the systems sold by Trident to the forest
and wood products industry. This software accepts scanner information from the
Company's TriCam and LASAR systems.
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The Company was incorporated in Michigan in 1981. Its headquarters are
located at 47827 Halyard Drive, Plymouth, Michigan 48170-2461, (313) 414-6100.
The Company also has operations in Munich, Germany; Rotterdam, The
Netherlands; Sao Paulo, Brazil and Nagoya, Japan.
PRODUCT OVERVIEW
TriCam and LASAR. The Company's two families of laser based
three-dimensional machine vision systems, TriCam and LASAR, use solid-state
lasers, proprietary high speed electronics and optics to capture
three-dimensional images. The captured images are then converted into
dimensions or locations by proprietary digital signal processing electronics
and a sophisticated rectification process. Perceptron's products provide its
customers with solutions for a variety of applications.
The TriCam family of products uses structured laser light triangulation
techniques for obtaining accurate three-dimensional measurements. LASAR
sensors incorporate a completely different technology, known as light detection
and ranging (LIDAR or laser radar), to obtain three-dimensional imagery. In
such imagery, the distance (range) to every point in the image is directly
indicated, thus providing the basis for modeling and measuring an entire scene.
TriCam based systems are currently used to measure large formed parts for
process control, to provide robot guidance for automated assembly tasks, to
provide non-contact measurement capability for wheel alignment systems in
automotive assembly plants and for certain applications in non-automotive
industries. The Company's LASAR sensors provide accurate three-dimensional
images over a larger field of view than does TriCam.
With the increased emphasis on continuous improvement in manufacturing as
a fundamental strategy to simultaneously reduce cost and improve quality,
manufacturers are recognizing the need for sophisticated process control
systems. Capabilities provided by Perceptron products include the following:
Measurement. The Company's products are used for in-process measurement
of manufacturing performance. The Company's products first locate the process
mean relative to design intent, and then measure any part-to-part variation to
determine the process range. To rapidly accomplish both of these tasks,
measurements must be taken in-process, at line speed rates, with sufficient
accuracy to analyze and control the process performance to ensure that the
manufactured part is as close to design intent as possible. Deviation from
design intent or part-to-part variation in a process result in lower quality
and increased cost.
Guidance. In many applications, a manufacturing workpiece must be
visually and accurately located to guide a robot or an unmanned vehicle to
perform its tasks.
Autospect. Autospect's products, based primarily on machine vision
technology, are used to measure the quality of painted surfaces. The in-line
Quality Measurement System (QMS) provides paint process control and trend
analysis of the shininess, reflection clarity and smoothness of the painted
surface.
The in-line Industrial Dirt Counter (IDC) inspects the painted surface for
dirt and provides data, such as size, location, and amount of the defects, for
both repair information and process trend analysis.
Autospect also markets two lighting systems that aid inspectors in the
location and repair of painted surface defects.
MARKETS
To date, the Company has focused its primary marketing efforts on the
automotive industry. In January 1996, the Company entered into a sales
agreement with Trident Systems, Inc. ("Trident") by which Trident purchases
TriCam and LASAR based systems for integration into systems to be sold by
Trident to the forest and wood products industry. See "Research and
Development". Since December 31, 1995, the Company has received a total of
$4.8 million of orders from Trident Systems, Inc. for a combination of TriCam
and LASAR sensors. The Company believes that there may be potential
applications for its three-dimensional machine vision systems in non-automotive
industries as diverse as appliances, forest and wood products, robot and
autonomous vehicle guidance, and others. The foregoing statement is a "forward
looking statement" within the meaning of the Exchange Act. See "Business
Strategy" for a discussion of certain factors affecting the Company's expansion
plans.
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PRODUCTS AND APPLICATIONS
TriCam Applications. TriCam based three-dimensional machine vision
systems are generally incorporated into application specific products used in
the manufacture of large formed parts and assemblies, such as vehicles. Three
TriCam products, described below, are currently in production. Other
applications and products under development are described below under the
caption "Research and Development".
Assembly Process Control System (P-1000). The P-1000 system has been sold
primarily to automotive manufacturers to measure large formed vehicle body
parts and assembled vehicle bodies. This system, which has also been sold to
the appliance industry, is used by manufacturers of large formed parts and
assemblies for process control. Installed directly in the customer's
manufacturing line, typically in connection with new model re-tooling programs,
the P-1000 system rapidly measures critical dimensions and performs analyses to
reduce part-to-part variation and deviations from design intent. By
continually measuring and analyzing sources of variation, the manufacturer can
more quickly identify and correct manufacturing process faults, thereby
preventing defects from reaching the ultimate customer.
Completing measurement and analysis tasks within a few seconds, the P-1000
enables customers to shorten the time it would otherwise take to launch a new
product. In addition, the P-1000 enables customers to reduce cost and increase
both quality and throughput by measuring and analyzing sources of variation to
achieve continuous process improvement.
Robot Guidance System for automated assembly (RGS). The RGS system, which
is used for flexible assembly, incorporates TriCam sensors and high speed
digital process electronics and proprietary software to provide robots
three-dimensional visual guidance to perform a variety of automated assembly
tasks. The RGS optically locates the position on an object and instructs a
robot to perform work on the located object. This product was developed in
cooperation with Mercedes-Benz, which provided specifications to enable the
system to address a broad range of applications. Other automotive companies,
including General Motors, Ford, Volvo, BMW and Opel, are currently using RGS
systems. Worldwide, over 100 RGS systems have been installed to date.
The RGS system is currently used primarily by automotive companies in the
following applications, among others: windshield insertion, door assembly and
installation, hood and trunk lid installation, fuel tank installation, fender
mounting and instrument panel installation.
Non-Contact Wheel Alignment System (NCA). The NCA system, which uses
TriCam three-dimensional machine vision technology, was developed in close
cooperation with Ford Motor Company, which helped fund and was instrumental in
testing the technology. The NCA system is incorporated into original equipment
manufacturers' ("OEM's") wheel alignment equipment.
The NCA system offers a fast and accurate non-contact method to align
wheels, which reduces costly in-plant maintenance of mechanical wheel alignment
equipment. Since 1993, the Company, pursuant to a long-term licensing
agreement with Schenck Komeg of Germany, has been supplying NCA systems to the
automotive market in Europe, China and Taiwan. The Company recently amended
its licensing agreement with Schenck Komeg to permit the Company to license
others to sell the NCA in Europe and other markets currently covered by Schenck
Komeg's license. The Company has recently entered into an agreement to supply
Burke Porter with NCAs. In connection with the settlement of certain
litigation filed by the Company against Fori Automation alleging infringement
of certain of the Company's patents relating to non-contact wheel alignment
systems, the Company has licensed such patents to Fori on a non-exclusive
basis. The Company has sold NCA systems to a number of domestic OEM's who
installed these systems into various North American automotive assembly plants.
To date, Perceptron has delivered over 90 NCA systems worldwide.
Autospect Products. The QMS-I checks the painted surface quality of each
car as it exits the paint oven, providing quality trend analysis and process
control information by car color, model, shift, etc. With this information
corrective action can be taken before quality drops below acceptable levels.
The QMS-I interfaces with the Autospect "Paint Process Monitor" (PPM), a
network that sends the trend data and quality data to the plant and corporate
paint supervision. The QMS-Battery Portable (QMS-BP) is a hand held meter
providing the same readings as the QMS-I and is used to monitor incoming parts,
and is used in paint laboratories.
The Industrial Dirt Counter (IDC), released in 1997, checks the amount of
dirt and other defects that affect the painted surface quality. The system
prints out a profile of the car and shows the location of the defects to
assist in repair. The system also provides trend analysis and process control
information to assist management in controlling the process. The IDC
interfaces with the Autospect "Dirt Process Monitor" (DPM) which is a network
that sends the trend and quality data to those responsible for supervision of
the paint process.
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The Lightwave and Swirl Detection Lighting Systems aid the inspection of
painted surfaces, helping the inspectors to find and repair surface defects in
a more efficient and reliable manner. Lightwave is distributed by Autospect
in North America pursuant to the terms of a distributor agreement with a
foreign entity.
PROPRIETARY SOFTWARE MODULES
The heart of the Company's products are a number of sophisticated
proprietary software modules which enable the Company to provide easy-to-use,
customer-configurable, application specific products. The software modules are
provided in four integrated levels:
Level I. The first level of software implementing machine vision algorithms
convert the digital images from the sensors into meaningful dimensional
information. This software also performs the complex coordinate transformation
and calibration functions required for the high resolution and accuracy of the
measurement results offered by Perceptron's products.
Level II. The second level analyzes the dimensional information and presents
it in an assortment of reports to provide process status information at a
glance. Additional software modules further analyze the information and
provide it in the form of histograms, Pareto diagrams, X-bar and Range charts
and other useful process control formats.
Level III. The third level provides ease of use proprietary software for
customer set up. Through a graphical CRT interface, the system operator can
completely configure the system, telling it what to measure, where to measure,
how to measure and how to display the measurements. This sophisticated
software capability, which management believes adds significant value to
Perceptron products, offers customers the ability to re-configure the system
rapidly and easily.
Level IV. The fourth level provides network access and database management
capabilities in a client/server environment within a plant (intra-plant
communications) and between plants via remote access (inter-plant
communications). This capability provides wide distribution of the data
presentation obtained from Level II software.
BUSINESS STRATEGY
The Company seeks to expand its customer base and markets. To do this,
the Company has embraced a four-pronged strategy:
- Increase the number of automotive plants served annually.
Many automotive assembly plants continue to use off-line, sampling
measuring techniques which the Company believes places such plants
at a competitive disadvantage to those that use Perceptron
equipment, which, in the case of the P-1000, is in-line and measures
100% of the manufactured parts. Perceptron intends to continue to
work with automotive customers to help them achieve even greater
efficiencies in their processes.
- Increase product sales within a given automotive plant
through derivative products. The RGS and the NCA systems are
examples of derivative products that meet additional needs of
automotive customers. In addition, the Company's recent acquisition
of Autospect expands the product line offered by the Company at a
given automotive plant to include the paint line. The Company plans
to continue to introduce new products, such as those described below
under the caption "Research and Development".
- Expand customer base to include first tier suppliers to the
automotive industry. The Company believes opportunities exist with
these suppliers as they begin to conform to the new quality
standards of the international automotive companies. Toward this
strategy, an order totaling $2.8 million was received in December
1996 from a major first-tier supplier.
- Migrate existing and future information-based machine vision
technologies into new markets. Perceptron is increasing its
activity with potential customers and evaluating potential
applications for its products in industries as diverse as appliance
assembly, forest and wood products, steel processing, robot guidance
and others. Sales in non-automotive markets totaled approximately
5% of the 1996 net sales.
The foregoing statements may be deemed to be "forward looking statements"
within the meaning of the Exchange Act. The Company's ability to expand its
customer base and markets and to successfully execute the strategies set forth
above involves a number of uncertainties, including, but not limited to, the
quality and cost of competitive products already in existence or developed in
the future, the level of interest existing and potential new customers may have
in new products and technologies generally, the ability of the Company to
resolve technical
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issues inherent in the development of new products and
technologies, the ability of the Company to identify and satisfy market needs,
general product development and commercialization difficulties, the
continuation or acceleration of the automotive industries' retooling programs,
rapid or unexpected technological changes, general product demand and market
acceptance risks, the ability of the Company to successfully compete with
alternative and similar technologies, the ability of the Company to negotiate
satisfactory acquisition agreements with Trident and Nanoose and risks inherent
in completing and integrating acquisitions generally, and the effect of
economic conditions. There can be no assurance that the Company will be able
to expand its customer base and markets or successfully execute the strategies
set forth above.
SALES AND MARKETING
To date, the Company has marketed its systems either directly to the end
users of the Company's systems, or to system integrators, value-added resellers
(VAR's) or original equipment manufacturers (OEM's) who in turn sell to the
same end users.
The Company's direct marketing efforts are conducted by the Company's
account executives. These account executives develop a close consultative
selling relationship with the Company's customers. Perceptron's senior
management works in close collaboration with customers' senior executives. The
Company intends to continue this marketing strategy for its assembly process
control systems (P-1000), and for products offered by Autospect.
With respect to the RGS system for robot guidance, the NCA system for
wheel alignment and sales to the forest and wood products industry, the
Company's marketing strategy is focused primarily on sales to system
integrators, OEM's and VAR's who integrate the Company's products into their
systems for sale to end user customers.
The Company's principal customers have historically been automotive
companies that the Company either sells to directly or through system
integrators or OEM's. The Company's products are typically purchased for
installation in connection with new model re-tooling programs undertaken by
these companies. Because sales are dependent on the timing of customers
re-tooling programs, sales by customer vary significantly from year to year, as
do the Company's largest customers. For the year ended December 31, 1996,
approximately 67% of total revenues were derived from three domestic automotive
companies (General Motors, Ford and Chrysler). For the years ended December
1995 and 1994, approximately 64% and 83%, respectively, of total revenues were
derived from the same three customers. Approximately 85% of 1996 revenues for
Autospect were derived from the same three domestic auto companies.
CUSTOMER SUPPORT
The Company's support program for automotive customers begins at the
pre-sales phase with customer consultation regarding strategic dimensional
control strategy for vehicle production. The outcome of this consultation is
incorporated into the Company's sales proposals. In selected instances,
particularly with respect to the P-1000 assembly process control system and the
RGS system, the Company's application and project engineering group works
closely with the customers' tooling engineers. The customer education group
offers extended technical education for the customers' plant personnel in
metrology and process control techniques. Extended education contracts
generally continue for 12 months.
The Company provides similar support to the system integrators, VAR's and
OEM's who resell the Company's systems to end users.
Ongoing hardware and software enhancements to the Company's installed
products are provided through service contracts or through individual purchase
orders. The Company strives to achieve total customer satisfaction through
account teams that provide customers with dedicated sales, customer service,
application and project engineering and customer education staff.
Autospect supports its customers with pre-sales consultation regarding
process control and cost saving benefits derived from the use of its products.
After sale of the products, the Autospect Product Engineering and Installation
Team works closely with the customer to efficiently integrate the system into
the plant, and after installation, to train the customer's personnel on the use
and maintenance of the system. After installation, Autospect personnel monitor
the system's operation and provide preventative maintenance.
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RESEARCH AND DEVELOPMENT
The Company engages in research and development ("R&D") to enhance its
existing products, to adapt existing products to new applications and to
develop new products to meet new market opportunities.
The Company has announced three products which are in late stages of
development:
Optical Checking Fixture (OCF). The OCF is a non-contact
three-dimensional surface scanner, which employs TriCam technology. The
Company plans to market OCF to both automotive and non-automotive
customers for use as a process control device to precisely measure and
monitor large formed parts (stamped or molded) for conformance to design
intent. The Company has sold and installed three of the initial versions
of this system in automotive customer facilities, and beta testing is
continuing.
LASAR. LASAR is a three-dimensional machine vision system that employs
laser radar technology and provides three-dimensional images over a field
of view that is an order of magnitude larger than those covered by
TriCam. Perceptron continues to more fully develop the current version
of the LASAR system. The Company is currently evaluating a number of
different applications within industries as diverse as forest and wood
products, robot guidance and others.
Dimensional Data Management (DDM). The DDM, which is in beta testing,
is a computer system that consolidates in-line measurement data and
provides data analysis tools to help identify, trace, and eliminate
sources of process variation and deviation from design intent. The DDM
product consists of both server and client software. The server collects
and stores dimensional data in a single database from Perceptron
measurement systems and other measurement devices. The client software
provides multiple users, both local and remote, with the capability of
monitoring and analyzing dimensional data.
The Company is involved in a continuous product improvement program for
its products intended to enhance performance, reduce costs and incorporate new
technological advances. To this end, the Company is engaged in strategic
alliances with a number of research and development institutions.
In 1993, the Company was awarded a $1.22 million NIST-ATP grant from the
United States Department of Commerce for software development related to
high-speed image processing techniques for three-dimensional machine vision
systems. This grant, now completed, provided the Company $0.4 million in 1994,
$0.6 million in 1995, and $0.2 million in 1996. The Company includes all
development costs incurred internally and subcontracted to an independent
research organization and to a university in engineering, research and
development expense, and offsets these costs with any reimbursements due from
NIST. Work under this grant has supplied the Company with a substantial
repertoire of widely usable and tested machine vision algorithm components for
use with its TriCam and LASAR products.
In late 1995, Autospect received a $1.8 million NIST grant which will
provide funding of $600,000 per year over three years for development of a
system to measure the thickness of wet film (e.g. paint). Prototype testing of
this system has begun.
As of March 14, 1997, 64 persons employed by the Company are focused
primarily on research, development and engineering relating to
three-dimensional machine vision systems and related software. The Company's
laser based systems use sophisticated proprietary software technology, coupled
with state-of-the-art hardware. The Company believes that continued leadership
in software development is crucial for maintaining and expanding its market
position.
For the three years ended December 31, 1994, 1995 and 1996, the Company's
research, development and engineering expenses were $3.8 million, $4.5 million,
and $5.9 million, respectively.
In addition to investing directly in R&D, the Company has developed close
relationships with the University of Michigan and other research organizations
which are recognized as technological leaders. The Company is a member of the
Auto Body Consortium (the "ABC"), a group of ten companies in
automotive-related businesses and two universities, sponsored by Michigan
Future, Inc. a non-profit corporation. Dwight D. Carlson, Vice Chairman of the
Board of Directors of the Company, is also Chairman of Board of Michigan
Future, Inc. The ABC has created a number of programs to develop improvements
in measurement technology and process control techniques for automotive
applications.
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BACKLOG
As of December 31, 1996, the Company had a backlog of $21.0 million,
compared to $16.3 million as of December 31, 1995. Most of the backlog is
subject to cancellation by the customer. The level of order backlog at any
particular time is not necessarily indicative of the future operating
performance of the Company. The Company expects to be able to fill
substantially all of the orders in backlog by December 31, 1997.
MANUFACTURING AND SUPPLIERS
The Company's manufacturing operations consist primarily of final assembly
and test, together with integrating the Company's software with individual
components, including printed circuit boards, which are manufactured by third
parties according to Company developed designs. With a low level of vertical
integration, the Company believes it gains significant manufacturing
flexibility, while minimizing total product costs.
Since its inception the Company has strived to continuously improve its
proprietary sensor calibration process. This process technology, primarily
software-based, allows each sensor to be calibrated throughout its measurable
space to rectify any inherent manufacturing errors. The Company believes that
this proprietary software reduces the need that would otherwise exist for
capital investment in sensor manufacturing.
The Company purchases a number of component parts and assemblies from
single source suppliers. With respect to most of its components, the Company
believes that alternate suppliers are readily available. Significant delays or
interruptions in the delivery of components or assemblies by suppliers, or
difficulties or delays in shifting manufacturing capacity to new suppliers,
could have a material adverse effect on the Company.
INTERNATIONAL OPERATIONS
The Company's European operations have contributed approximately 11%, 31%,
and 23% of the Company's revenues during the years ended 1994, 1995, and 1996,
respectively. The Company's wholly-owned subsidiary, Perceptron Europe B.V.
("Perceptron B.V."), is located in Rotterdam, The Netherlands. Perceptron B.V.
holds a 100% equity interest in Perceptron Europe GmbH ("Perceptron GmbH"),
which is located in Munich, Germany. Prior to June 23, 1994, a minority
shareholder (Cementia S.A.) held a 12.5% equity interest in Perceptron B.V.,
which was converted into 197,802 shares of Common Stock of Perceptron, Inc. on
that date. The Company currently employs twenty-one people in its European
operations. Autospect currently offers its products internationally through
distributors in Europe.
In 1990, the Company began operating a Joint Project Office with Sumitomo,
located in Nagoya, Japan. The Joint Project Office is currently staffed by
five persons, three employed by the Company and two employed by Sumitomo.
Pursuant to an agreement with the Company, Sumitomo engages in sales and
marketing efforts in Asia on behalf of the Company, and earns commissions on
any sales in Asia. For the years ended December 31, 1994, 1995 and 1996, the
Company's Asian operations generated net sales of $0.5 million, $1.4 million,
and $1.1 million, respectively.
The Company is in the process of establishing a sales office in Sao Paulo,
Brazil to service automotive customers in South America.
The Company's foreign operations are subject to certain risks typically
encountered in such operations, including fluctuations in foreign currency
exchange rates and controls, expropriation and other economic and local
policies of foreign governments, and the laws and policies of the U.S. and
local governments affecting foreign trade and investment. For information
regarding net sales, operating profit (loss) and identifiable assets of the
Company's foreign operations, see Note 11 to the Consolidated Financial
Statements, "Foreign Operations".
On November 26, 1996, the Company's German subsidiary acquired the assets
of a division of HGV Vosseler GmbH ("HGV") engaged in the development and sale
of non-contact three-dimensional measurement systems for aggregate
consideration consisting of 82,150 shares of Common Stock of the Company and DM
300,000. The assets acquired include certain patents, patent applications and
other intellectual property, hardware, software, customer lists, and a
non-competition agreement.
COMPETITION
The Company is not aware of any other entity having three-dimensional
machine vision systems that are as advanced, in terms of completeness of the
solutions provided, as those offered by the Company and sold into those
markets that the Company serves. The Company is, however, aware of a number of
companies that sell similar and/or alternative technologies and methods into
the same markets.
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In 1990, the Company purchased certain assets from Diffracto Corporation
("Diffracto") of Canada, a former direct competitor, and entered into
agreements pursuant to which Diffracto and certain Diffracto employees agreed
not to compete with the Company for a period of five years in certain product
areas ("Diffracto non-compete agreements"). These agreements expired in July
1995. The assets acquired by the Company from Diffracto include the designs
and technology incorporated into the Diffracto "Z Sensor" gauging systems, as
well as a paid up non-exclusive license for fifty-five U.S. patents, forty-six
of which are still in force. In June 1996, the Company filed suit against
Diffracto and certain of the parties subject to the Diffracto Non-compete
Agreements alleging breaches of the Diffracto Non-compete Agreements prior to
their expiration and that products currently offered and sold by such persons
use the technology acquired by Perceptron in violation of Diffracto's
agreements with the Company.
The Company believes that the principal competitive factor in Autospect's
markets is the total capability as a process control system and that
Autospect's products compete favorably with similar and alternative
technologies in this regard. The Company is aware of one foreign and one
domestic competitor for Autospect's portable version of its QMS products and
one domestic competitor for the lighting system. The Company is not aware of
any direct competition for Autospects' other products.
The Company believes that there may be other entities, some of whom may be
substantially larger and have substantially greater resources than the Company,
which may be engaged in the development of technology and products which could
prove to be competitive with those of the Company. In addition, the Company
believes that certain existing and potential customers may be capable of
internally developing their own technology. There can be no assurance that the
Company will be able to successfully compete with any such entities, or that
any competitive pressures will not result in price erosion or other factors
which will adversely affect the Company's financial performance.
PATENTS, TRADE SECRETS AND CONFIDENTIALITY AGREEMENTS
The Company considers its software and hardware to be proprietary and
seeks to protect its technology through a combination of patents, copyrights,
trade secrets, confidentiality and other agreements. The Company deems its
patents and patent applications to be materially important to its business.
However, the Company also believes that its success depends upon its trade
secrets and proprietary know-how, innovative skills, technical competence and
marketing abilities of its employees. There can be no assurance that any of
the above measures will be adequate to protect this proprietary technology.
The Company, including Autospect, owns nine U.S. patents and ten pending
U.S. patent applications which relate to various products and processes
manufactured, used, and/or sold by the Company. In addition, the Company also
owns corresponding foreign patents in Canada, Europe, and Japan. The Vosseller
acquisition also adds several patent applications in foreign locations.
These U.S. patents expire from 2002 through 2010 and the Company's
existing foreign patent rights expire from 2008 through 2011.
The Company has been informed that certain of its customers have received
allegations of possible patent infringement involving processes and methods
used in the Company's products. One such customer is currently engaged in
litigation relating to such matter. This customer has notified various
companies from which it has purchased such equipment, including the Company,
that it expects the suppliers of such equipment to indemnify such customer, on
a pro-rata basis, for expenses and damages, if any, incurred in this matter.
Management believes, however, that the processes and methods used in the
Company's products were independently developed by the Company without
utilizing any previously patented process or technology. Because of the
uncertainty surrounding the nature of any possible infringement and the
validity of any such claim or any possible customer claim for indemnity, it is
not possible to estimate the ultimate effect, if any, this matter may have upon
the Company's financial position and results of operations.
On March 13, 1996, a complaint was filed naming the Company as a
defendant, along with Trident and Nanoose, in an action alleging that the
Company's TriCam sensor violates a patent held by the plaintiff and seeking
preliminary and permanent injunctions and damages. Management believes that
its TriCam sensor was independently developed without utilizing any previously
patented process or technology and intends to vigorously defend its position.
The Company has registered, and continues to register, various trade names
and trademarks, including PERCEPTRON, DATACAM, LASAR, VERISTAR, and TRICAM,
among others, which are used in connection with the conduct of its business.
Autospect has applied for registration of the AUTOSPECT trade name.
9
<PAGE> 10
The Company's software products are copyrighted and generally licensed to
customers pursuant to license agreements that restrict the use of the products
to the customer's own internal purposes on designated Perceptron equipment.
EMPLOYEES
As of March 14, 1997, the Company employed 203 persons. Of these persons,
64 were in research, development and engineering, 32 in sales, marketing and
support, 90 in operations, applications and project engineering and 17 in
general administration and finance. None of the employees are covered by a
collective bargaining agreement and the Company believes its relations with its
employees to be good. At present, Autospect employs 36 persons.
ITEM 2: FACILITIES
Perceptron's principal facilities consist of a 70,000 square foot building
located in Plymouth, Michigan, owned by the Company. Autospect conducts its
operations from a 20,500 square foot leased facility in Ann Arbor, Michigan.
In addition, the Company leases a 3,500 square foot facility in Munich,
Germany, a 1,000 square foot facility in Rotterdam, The Netherlands, an office
in Brazil and utilizes the Joint Project Office facility in Nagoya, Japan
provided by Sumitomo. The Company believes that its current facilities are
sufficient to accommodate its requirement through 1997.
ITEM 3: LEGAL PROCEEDINGS
On March 13, 1996, a complaint was filed in the United States District
Court, Western District of Washington, by Applied Scanning Technology, Inc.
naming the Company as a defendant, along with two other co-defendants (Trident
Systems, Inc. and Nanoose Systems Corporation), in an action alleging that the
Company's TriCam sensor violates a patent held by the plaintiff and seeking
preliminary and permanent injunctions and damages. Management believes that
its TriCam sensor was independently developed without utilizing any previously
patented process or technology and intends to vigorously defend its position.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No response to Item 4 is required.
10
<PAGE> 11
PART II
ITEM 5: MARKET FOR THE REGISTRANTS'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
Perceptron's Common Stock is traded on The Nasdaq Stock Market's National
Market under the symbol "PRCP". The following table shows the reported high
and low sales prices of Perceptron's Common Stock for the fiscal periods
indicated:
<TABLE>
<CAPTION>
Period Prices
--------------------------------------------------------- ------
Low High
------ ------
<S> <C> <C>
1995
---------------------------------------------------------
First Quarter ........................................... $9.83 $15.33
Second Quarter .......................................... $11.00 $14.50
Third Quarter ........................................... $13.17 $19.33
Fourth Quarter .......................................... $14.33 $24.83
1996
---------------------------------------------------------
First Quarter ........................................... $17.75 $27.00
Second Quarter .......................................... $25.50 $39.00
Third Quarter ........................................... $24.50 $37.75
Fourth Quarter .......................................... $23.50 $37.50
1997
---------------------------------------------------------
First Quarter (January 1, 1997 through March 14, 1997) .. $31.75 $38.13
</TABLE>
No cash dividends or distribution on Perceptron's Common Stock have been
paid and it is not anticipated that any will be paid in the foreseeable future.
The Company is prohibited under the terms of its bank line of credit from the
payment of cash dividends or from purchasing or retiring any of its capital
stock without written consent from its bank.
The approximate number of shareholders of record on March 14, 1997, was
330.
On November 26, 1996, the Company issued 82,150 shares of its Common Stock
in connection with the acquisition by its German subsidiary of certain assets
of a division of HGV Vosseler GmbH ("Vosseler"). The issuance was made
pursuant to Regulation D promulgated under the Securities Act of 1933, as
amended. Vosseler is engaged in the development and sale of non-contact three
dimensional measurement systems.
11
<PAGE> 12
ITEM 6: SELECTED CONSOLIDATED FINANCIAL INFORMATION
PERCEPTRON, INC. AND SUBSIDIARIES
(In thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------
Statement of Operations Data(2): 1996 1995 1994 1993 1992
---------- ------------ ------------ ------- -------
(as restated)
<S> <C> <C> <C> <C> <C>
Net sales $49,679 $37,291 $27,835 $17,022 $14,462
Gross profit 30,690 23,116 16,807 10,045 8,528
Income from operations(1) 10,178 7,388 5,720 2,907 2,267
Net income before provision for
income tax(1) 10,964 7,927 5,839 2,702 1,824
Net income(1) 7,894 8,409 5,839 2,702 1,824
Net income per weighted
average common and common
equivalent share(1) $1.03 $1.16 $.83 $.45 $.37
Weighted average common and
common equivalent shares 7,636 7,258 6,998 5,973 4,908
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
--------------------------------------------------------
Balance Sheet Data: 1996 1995 1994 1993 1992
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Working capital $35,089 $27,831 $18,620 $12,605 $6,555
Total assets 56,896 38,581 24,507 16,138 8,966
Shareholders' equity 46,504 30,358 19,737 13,451 7,251
</TABLE>
- ---------------
(1) Excluding amounts for non-cash stock option compensation expense (See
Note 2 to the Consolidated Financial Statements), the reported amounts
would have been:
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from operations 13,380 8,765 5,720 2,907 2,267
Net income before provision
for income tax 14,166 9,304 5,839 2,702 1,824
Net income 9,916 9,304 5,839 2,702 1,824
Net income per weighted
average common and
common equivalent share $1.30 $1.28 $.83 $.45 $.37
</TABLE>
(2) No cash dividends have been declared or paid during the periods presented.
12
<PAGE> 13
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Perceptron, Inc. ("Perceptron" or the "Company") was founded in September
1981, and operated as a development stage company through 1982. From 1983
through 1987, the Company continued to incur significant product development
expenses as it redesigned and modified the initial triangulation based
three-dimensional machine vision system using laser technology in response to
customer input. The Company commenced production and shipment of its initial
products in 1984. In early 1988, the Company introduced its second-generation
(DataCam) system, and in late 1993, released the third-generation (TriCam)
version of its three-dimensional machine vision system. The Company also
offers its proprietary LASAR based three-dimensional machine vision system,
which employs laser radar technology and generates three-dimensional images
over a larger field of view than do TriCam based systems.
The Company's products have been sold primarily to North American,
European and Asian automobile manufacturers. Sales to automotive customers
typically depend on new model re-tooling programs. Accordingly, sales may vary
significantly among customers on a year-to-year and quarter-to-quarter basis.
On November 26, 1996, the Company's German subsidiary acquired the assets
of a division of HGV Vosseler GmbH ("Vosseler") engaged in the development and
sale of non-contact three-dimensional measurement systems for aggregate
consideration consisting of 82,150 shares of Common Stock and DM 300,000 and
recorded $2.3 million in intangible assets relating to the acquisition. See
Note 13 to the Consolidated Financial Statements.
On February 3, 1997, the Company consummated its acquisition of Autospect,
Inc. ("Autospect") through the merger of a wholly owned subsidiary of the
Company with and into Autospect for aggregate consideration consisting of
387,093 shares of Common Stock of the Company. Autospect, based in Ann Arbor,
Michigan, designs, develops and manufactures information-based coatings
inspection and defect detection systems primarily for use in the automotive
industry. The transaction will be accounted for as a pooling of interests.
Autospect's revenues for 1997 are expected to represent less than ten (10%)
percent of the Company's total revenues and to be slightly accretive to
earnings per share for 1997.
The Company recently signed letters of intent to acquire Trident Systems,
Inc. ("Trident") and Nanoose Systems Corporation ("Nanoose"). The closing of
these acquisitions is subject to a number of factors, including the
negotiation, approval and execution of definitive documents and completion of
satisfactory due diligence. The proposed consideration for these acquisitions
will be shares of Common Stock of the Company, aggregating less than 5% of the
outstanding Common Stock. Trident and Nanoose's revenues for 1997 are
expected to represent at least ten (10%) percent of the Company's total
revenues and to be slightly accretive to earnings per share for 1997.
Trident is a full service systems integrator for the solid woods sector of
the forest and wood products industry, providing applications that address a
wide spectrum of mill processes. Trident and the Company are currently parties
to a sales agreement pursuant to which Trident purchases TriCam and LASAR based
systems from the Company for integration into systems sold by Trident to the
forest and wood products industry.
Nanoose, based in British Columbia, Canada, is a software design and
engineering company, specializing in industrial scanning and optimization
systems. Optimization software written by Nanoose is an important element of
the systems sold by Trident to the forest and woods products industry. This
software accepts scanner information from the Company's TriCam and LASAR
systems.
13
<PAGE> 14
The foregoing statements regarding Autospect's 1997 revenues and earnings
and the Company's acquisitions of Trident and Nanoose and the impact of such
acquisitions, if consummated, on 1997 revenues and earnings are "forward
looking statements" within the meaning of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). See "Business Strategy" for a discussion of
certain factors affecting such revenues and earnings and the acquisitions of
Trident and Nanoose.
RESULTS OF OPERATIONS
Year Ended December 31, 1996, Compared to Year Ended December 31, 1995
Net Sales. Net sales, of which substantially all are attributable to the
automotive market, consist primarily of product sales together with training
and service revenue. The Company's net sales increased by 33% from $37.3
million in 1995 to $49.7 million in 1996. Net sales in the North American
market increased from $24.3 million in 1995 to $37.0 million in 1996. Net
sales in the European and Asian markets decreased from $13.0 million in 1995 to
$12.7 million in 1996.
P-1000 systems accounted for 79% of net sales in 1995 and 74% of net sales
in 1996. The RGS and NCA systems combined accounted for 14% of net sales in
both 1995 and 1996. Non-automotive sales accounted for 5% of net sales in 1996
and less than 1% in 1995. Training and service revenues and other product
sales accounted for the remainder of net sales in both years.
New order bookings for 1995 totaled $42.3 million, compared to $54.4
million in 1996. North American orders were up from $29.4 million in 1995 to
$39.5 million in 1996 and European and Asian orders were up from $12.9 million
in 1995 to $14.9 million in 1996. P-1000 systems accounted for 76% of new
order bookings in 1995 and 78% in 1996.
Gross profit. Gross profit increased from $23.1 million in 1995 to $30.7
million in 1996, and as a percentage of net sales decreased from 62.0% in 1995
to 61.8% in 1996. The decrease is due primarily to the lower gross profit
percentage associated with one specific sale by the Company of a new product,
which was integrated into equipment acquired from an original equipment
manufacturer ("OEM"), and sold as a complete system.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 16% from $9.9 million in 1995 to $11.5
million in 1996. This increase is due primarily to increases in personnel and
various operating expenses required to support the increased 1996 operating
activity and, to a lesser extent, to increased management performance bonuses.
The Company's 1996 selling, general, and administrative expenses included a
charge of $113,000 for stock option compensation expense related to the 1993
grants of performance based stock options, compared to a charge of $325,000 in
1995. As a percentage of net sales, selling, general and administrative
expenses decreased from 26.5% in 1995, to 23.1% in 1996.
Engineering, research and development. Engineering, research and
development expenses increased by 31%, from $4.5 million in 1995, to
approximately $5.9 million in 1996, due primarily to increased personnel and,
to a lesser extent, to increased expenditures for materials associated with
products under development. As a percentage of net sales, engineering,
research and development expenses decreased from 12.0% in 1995 to 11.8% in 1996
principally due to the higher sales base.
Non-cash stock compensation expense. Beginning in late 1994, some
participants in the Company's stock option plan have used Perceptron stock
options to pay the exercise price of stock options issued under the plan. The
Company was recently advised that accounting rules require the recording of a
non-cash compensation expense relating to certain of these exercises during
1996 and 1995. See Note 2 to the Consolidated Financial Statements for further
information.
The Company has restated its financial statements to record non-cash stock
compensation expense of $1.4 million in the fiscal 1995 and $3.2 million in
1996. The effect of this non-cash stock compensation charges on net income for
fiscal 1995 was a reduction of $.12 per share, and for 1996 was $0.27 per
share. The Company has taken action to eliminate the provision in its stock
option plans which
14
<PAGE> 15
otherwise might result in similar non-cash stock compensation expense
in 1997 and future years, including seeking to amend all outstanding stock
option agreements to require options to be exercised only in a manner which
does not result in non-cash stock compensation expense.
Interest income, net. Interest income, net, increased from approximately
$0.5 million in 1995 to $0.8 million in 1996, due to increased cash balances
and related investing activities during 1996.
Income before provision for income taxes. In 1995, Perceptron had income
before provision for income taxes of approximately $7.9 million representing
21.3% of net sales, as compared to 1996 income before provision for income
taxes of approximately $11.0 million representing 22.1% of net sales. Without
the non-cash stock compensation charge, the results for 1995 would have been
$9.3 million, or 25% of net sales, as compared to $14.2 million, or 28.5% of
net sales in 1996.
Provision for income taxes. For U.S. federal income tax reporting
purposes, as of December 31, 1996, there were no net operating loss
carryforwards available. Investment tax and research and development credits
of $0.7 million were available to benefit future U.S. earnings.
For financial reporting purposes, because the Company anticipated would
utilize certain of these carryforwards and credits, a deferred tax asset was
recorded in 1995, representing the estimated tax benefit of these items. As a
result, a tax benefit of $482,000 was recorded for the year ended 1995,
principally due to the tax benefits attributable to non-cash stock compensation
expense. See Note 8 to the Consolidated Financial Statements, "Income Taxes".
For the year ended December 31, 1996, the Company recorded a $3.1 million
provision for income taxes, representing an estimated effective tax rate of
28%.
Net income. Net income in 1995 was $8.4 million, or 22.5% of net sales,
resulting in $1.16 per share based on 7.3 million shares and equivalents
outstanding on a weighted average basis. In 1996, net income was $7.9 million,
or 15.9% of net sales, resulting in $1.03 per share based on 7.6 million shares
and equivalents outstanding on a weighted average basis. Without the non-cash
stock compensation expense, net income for 1995 would have been $9.3 million,
or 24.9% of net sales, resulting in $1.28 per share. Excluding the non-cash
stock option compensation expense, the 1996 net income would have been $9.9
million, 20% of net sales, or $1.30 per share, compared to the 1995 earnings,
as if taxed at a comparable rate, of $6.7 million, 18% of net sales or $.92
per share.
Year Ended December 31, 1995, Compared to Year Ended December 31, 1994
Net Sales. Net sales, of which substantially all are attributable to the
automotive market, consist of product sales together with training and service
revenue. The Company's net sales increased by 34% from $27.8 million in 1994
to $37.3 million in 1995. Net sales in the North American market increased
slightly from $24.2 million in 1994 to $24.3 million in 1995. Net sales in the
European and Asian markets increased from $3.6 million in 1994 to $13.0 million
in 1995, as a result of increased demand from the European and Asian automotive
industry.
The P-1000 systems accounted for 80% of net sales in 1994 and 79% of net
sales in 1995. The RGS and NCA systems combined accounted for 12% and 14% of
net sales in 1994 and 1995, respectively. Training and service revenues
accounted for less than 10% of net sales in both years.
New order bookings for 1994 totaled $30.9 million, compared to $42.3
million in 1995. North American orders were up from $25.5 million in 1994 to
$29.4 million in 1995 and European and Asian orders were up from $5.4 million in
1994 to $12.9 million in 1995. The P-1000 systems accounted for 78% of new
order bookings in 1994 and 76% in 1995.
Gross profit. Gross profit increased from $16.8 million in 1994 to $23.1
million in 1995, and as a percentage of net sales increased from 60.4% in 1994
to 62.0% in 1995. The Company charged cost of sales for increased reserves for
obsolete inventory by $340,000 in 1994 and $125,000 in 1995. Without these
charges, gross profit for 1994 and 1995 would have been 61.6% and 62.3%,
respectively.
15
<PAGE> 16
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 36% from $7.3 million in 1994 to $9.9
million in 1995. This increase is due primarily to increases in personnel and
various operating expenses required to support the increased 1995 operating
activity and, to a lesser extent, to increased management performance bonuses.
The Company's 1995 selling, general and administrative expenses included a
charge of $325,000 for stock option compensation expense related to the 1993
grants of performance based stock options, compared to a charge of $390,000 in
1994. As a percentage of net sales, selling, general and administrative
expenses increased slightly from 26.2% in 1994, to 26.5% in 1995.
Engineering, research and development. Engineering, research and
development expenses increased by 17%, from $3.8 million in 1994, to
approximately $4.5 million in 1995, due primarily to increased personnel and,
to a lesser extent, to increased expenditures for materials associated with
products under development. The expenses in 1994 included a one-time charge of
$160,000 for costs incurred in connection with a customer specific development
project, as well as one-time redesign costs of $85,000. Without these one-time
1994 costs, engineering, research and development costs would have increased by
25% in 1995 as compared to 1994. As a percentage of net sales, engineering,
research and development expenses decreased from 13.7% in 1994 to 12% in 1995
principally due to the higher sales base and, to a lesser extent, to the one
time charges and costs in 1994.
Non-cash stock compensation expense. Beginning in late 1994, some
participants in the Company's stock option plan have used Perceptron stock
options to pay the exercise price of stock options issued under the plan. The
Company was recently advised that accounting rules require the recording of a
non-cash compensation expense relating to certain of these exercises during
1996 and 1995, including $1.4 million in 1995. See Note 2 to the Consolidated
Financial Statements for further information.
The Company has restated its financial statements to record non-cash stock
compensation of $1.4 million, or net of taxes, of $895,000 for 1995. The
effect of this non-cash stock compensation charge on net income for 1995 was a
reduction of $.12 per share.
Interest income, net. Interest income, net, increased from approximately
$119,000 in 1994 to $539,000 in 1995, due to increased cash balances and
related investing activities during 1995.
Net income. In 1994, Perceptron had net income of approximately $5.8
million representing 21.0% of net sales, or $0.83 per share based on 7.0
million shares, as compared to 1995 net income of approximately $8.4 million
representing 22.5% of net sales, or $1.16 per share on 7.3 million shares.
During 1995, there was a tax benefit for income taxes in the Consolidated
Statement of Income of $482,000 principally due to the tax benefits
attributable to the non-cash stock compensation expense. See Note 8 to the
Consolidated Financial Statements, "Income Taxes".
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents as of December 31, 1996 totaled
approximately $14.7 million, as compared with approximately $15.0 million as of
December 31, 1995. This decrease was due primarily to increased capital
expenditures relating to the construction of the Company's new facility in
Plymouth, Michigan, and increased working capital requirements, partially
offset by an increase in cash represented by income from operating activities
during 1996.
The Company has unsecured credit facilities totaling $4.0 million U.S. and
1.0 million DM. These facilities may be used to finance working capital needs
and equipment purchases or capital leases. Any borrowings for working capital
needs will bear interest at the bank's prime rate (8.25% as of March 14, 1997);
any borrowings to finance equipment purchases will bear interest at the bank's
prime rate plus 1/2%. The credit facilities expire on May 31, 1997 unless
canceled earlier by the Company or the bank. As of December 31, 1996,
Perceptron had no outstanding borrowings on these facilities. The Company
expects to renew these credit facilities.
16
<PAGE> 17
The credit facility requires the Company to maintain a minimum amount of
tangible net worth and a minimum debt to tangible net worth ratio. The
facility also prohibits the Company from paying dividends, acquiring or
retiring any of its capital stock, or incurring any other debt, liens, or
guarantying any third party debt.
The Company's working capital increased to $35.1 million at December 31,
1996, from $27.8 million at December 31, 1995. Accounts receivable increased
from $14.3 million as of December 31, 1995 to $20.9 million as of December 31,
1996 primarily as a result of increased sales. The increase of approximately
$1.9 million in inventory is due primarily to an increase in component parts
inventory in preparation for delivery of products to customers during 1997.
The increase of $2.2 million in current liabilities is due primarily to an
increase in accounts payable and accrued expenses relating to the increased
operating activity in 1996 and progress payments due on the new facility. As a
result of the reduced net income due to the non-cash stock option compensation
expense and tax overpayments in Germany, an income tax receivable was recorded
of $2.1 million.
The Company does not believe that inflation has had any significant impact
on reported historical operations, and does not expect any significant
near-term inflationary impact.
The Company believes that cash on hand and existing credit facilities will
be sufficient to fund its currently anticipated 1997 cash flow requirements.
The Company expects to expend approximately $3.0 million during 1997 for
capital equipment, although there is no binding commitment to do so.
For a discussion of certain contingencies relating to the Company's
financial position and results of operations, see Note 10 to the Consolidated
Financial Statements, "Contingencies".
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS
128). FAS 128 specifies the computation, presentation, and disclosure
requirements for earnings per share. The Company will adopt FAS 128 as of
December 31, 1997 (earlier adoption is not permitted). Once management has
determined the impact of adoption of FAS 128, the Company will disclose the
results.
RECENT DEVELOPMENTS
The Company believes that new order bookings for the first quarter of
1997 will be more than double the $7.5 million of new order bookings reported
in the first quarter of 1996. However, because of the granular nature of the
Company's business, a portion of the revenues planned to be booked and shipped
during the first quarter of 1997 are now expected to be booked and shipped
during the second quarter of 1997. In addition, certain anticipated first
quarter 1997 orders did not materialize. Accordingly, the Company's first
quarter revenues and earnings will be adversely affected. The foregoing
statements may be forward looking statements within the meaning of the
Securities Exchange Act of 1934. Actual results could differ materially from
those in the forward looking statements due to a number of uncertainties,
including, but not limited to, the dependence of the Company's revenues on a
limited number of sizable orders from a small number of customers, the timing
of orders, which can cause the Company to experience significant fluctuations
in its quarterly and annual revenues and operating results, general product
demand and market acceptance risks, the ability of the Company to successfully
compete with alternative and similar technologies, the ability of the Company
to resolve technical issues inherent in the development of new products and
technologies, the ability of the Company to identify and satisfy market needs,
general product development and commercialization difficulties, the quality and
cost of competitive products already in existence or developed in the future,
the level of interest existing and potential new customers may have in new
products and technologies generally, the timing and continuation of the
automotive industry's retooling programs, rapid or unexpected technological
changes, and the effect of economic conditions.
17
<PAGE> 18
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Accountants ................................... 19
Consolidated Financial Statements:
Balance Sheets - December 31, 1996 and 1995 ................... 20
Statements of Income for the years ended
December 31, 1996, 1995 and 1994 .............................. 21
Statements of Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994 .......... 22
Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994 ................................................. 23
Notes to Consolidated Financial Statements .................... 24-31
</TABLE>
18
<PAGE> 19
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Perceptron, Inc.:
We have audited the accompanying consolidated balance sheets of Perceptron,
Inc. and Subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows, and the
financial statement schedule referred to in item 14A.(2) for each of the three
years in the period ended December 31, 1996. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express and opinion on these financial
statements and financial statement schedule 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 audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Perceptron, Inc.
and Subsidiaries as of December 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
January 31, 1997, except as to note 14
for which the date is February 3, 1997
19
<PAGE> 20
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1996 1995
---------------------------
ASSETS (as restated)
- ------
<S> <C> <C>
Current assets:
Cash and cash equivalents $14,666,000 $ 14,990,000
Accounts receivable, net of reserves of $60,000 and $35,000 20,898,000 14,292,000
Inventories, net of reserves of $860,000 and $670,000 6,001,000 4,114,000
Income tax receivables 2,103,000 ---
Prepaid expenses and deferred tax asset 1,813,000 2,658,000
----------- -------------
Total current assets 45,481,000 36,054,000
----------- -------------
Property and equipment:
Construction in progress 6,202,000 ---
Machinery and equipment 4,077,000 8,014,000
Furniture and fixtures 252,000 492,000
Leasehold improvements 0 95,000
----------- -------------
10,531,000 8,601,000
Less: Accumulated depreciation and amortization (1,416,000) (6,074,000)
----------- -------------
Net property and equipment 9,115,000 2,527,000
Intangible assets 2,300,000 ---
----------- -------------
Total assets $56,896,000 $ 38,581,000
=========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable 4,291,000 2,070,000
Accrued payables 4,171,000 3,869,000
Accrued compensation and stock option expense 1,930,000 2,284,000
----------- -------------
Total current liabilities 10,392,000 8,223,000
----------- -------------
Shareholders' equity:
Preferred Stock, no par value, 1,000,000 shares authorized,
none issued 0 0
Common Stock, $0.01 par value; 19,000,000 shares authorized,
7,253,000 and 6,723,000 issued and outstanding at
December 31, 1996 and 1995, respectively 73,000 67,000
Cumulative translation adjustments (929,000) (474,000)
Additional paid-in capital 39,472,000 30,771,000
Retained earnings (deficit) 7,888,000 (6,000)
----------- -------------
Total shareholders' equity $46,504,000 $ 30,358,000
----------- -------------
Total liabilities and shareholders' equity $56,896,000 $ 38,581,000
=========== =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE> 21
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
(As restated)
Net sales $49,679,000 $37,291,000 $27,835,000
Cost of sales 18,989,000 14,175,000 11,028,000
----------- ----------- ----------
Gross profit 30,690,000 23,116,000 16,807,000
----------- ----------- ----------
Selling, general and administrative expense 11,456,000 9,884,000 7,279,000
Engineering, research and development expense 5,854,000 4,467,000 3,808,000
Non-cash stock compensation expense 3,202,000 1,377,000 ---
----------- ----------- ----------
Income from operations 10,178,000 7,388,000 5,720,000
----------- ----------- ----------
Interest income, net 786,000 539,000 119,000
----------- ----------- ----------
Net income before provision for income taxes 10,964,000 7,927,000 5,839,000
Provision for income taxes 3,070,000 (482,000) ---
----------- ----------- ----------
Net income $7,894,000 $8,409,000 $5,839,000
=========== =========== ==========
Net income per weighted average share $1.03 $1.16 $0.83
=========== =========== ==========
Weighted average common and
common equivalent shares 7,636,296 7,257,784 6,998,380
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE> 22
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1994, 1995 and 1996
<TABLE>
<CAPTION>
Cumulative
Foreign
Common Stock Currency Additional Retained Total
-------------------- Translation Paid-In Earnings Shareholders'
Shares Amount Adjustments Capital (Deficit) Equity
---------- -------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1994 5,841,511 $ 58,000 $ (366,000) $28,013,000 $ (14,254,000) $ 13,451,000
Stock options exercised, net of shares
tendered 538,708 6,000 513,000 519,000
Translation adjustment on investment (72,000) (72,000)
in foreign subsidiaries
Net Income 5,839,000 5,839,000
---------- -------- ----------- ----------- ------------- -------------
Balances, December 31, 1994 6,380,219 $ 64,000 $(438,000) $28,526,000 $ (8,415,000) $ 19,737,000
---------- -------- ----------- ----------- ------------- -------------
Stock options exercised, net of shares
tendered 342,560 3,000 591,000 594,000
Tax benefit of non-qualified stock 150,000 150,000
options exercised
Previously recorded stock option
compensation expense attributable
to options exercised 127,000 127,000
Non-cash stock compensation expense
attributable to options exercised 1,377,000 1,377,000
Translation adjustment on investment
in foreign subsidiaries (36,000) (36,000)
Net Income 8,409,000 8,409,000
---------- -------- ----------- ----------- ------------- -------------
Balances, December 31, 1995 (as restated) 6,722,779 $ 67,000 $(474,000) $30,771,000 $ (6,000) $ 30,358,000
========== ======== =========== =========== ============= =============
Shares issued for intangible assets 82,510 1,000 2,299,000 2,300,000
Stock options exercised, net of
shares tendered 447,278 5,000 2,066,000 2,071,000
Tax benefit of non-qualified stock
options exercised 600,000 600,000
Previously recorded stock option
compensation attributable to
options exercised 534,000 534,000
Non-cash compensation expense
attributable to options exercised 3,202,000 3,202,000
Translation adjustment on investment
in foreign subsidiaries (455,000) (455,000)
Net income 7,894,000 7,894,000
---------- -------- ----------- ----------- ------------- -------------
Balances, December 31, 1996 7,252,567 73,000 (929,000) 39,472,000 7,888,000 46,504,000
========== ======== =========== =========== ============= =============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE> 23
PERCEPTRON, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1996 1995 1994
----------- -------------- -----------
(as restated)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $7,894,000 $8,409,000 $5,839,000
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 720,000 635,000 458,000
Disposal of fixed assets 293,000 --- 134,000
Non-cash stock compensation expense 3,202,000 1,377,000 ---
Changes in operating assets and liabilities:
Accounts receivable and income
tax receivable (8,989,000) (2,645,000) (2,833,000)
Inventories (1,887,000) (851,000) (887,000)
Prepaid expenses and deferred tax asset 845,000 (2,239,000) (164,000)
Accounts payable (47,000) 378,000 267,000
Accrued expenses 482,000 3,583,000 1,356,000
Deferred revenue --- --- 175,000
----------- ----------- -----------
Total adjustments (5,381,000) 238,000 (1,494,000)
----------- ----------- -----------
Net cash provided by operating activities 2,513,000 8,647,000 4,345,000
----------- ----------- -----------
Cash flows (used in) investing activities:
Capital expenditures (5,333,000) (1,999,000) (738,000)
----------- ----------- -----------
Net cash (used in) investing activities (5,333,000) (1,999,000) (738,000)
----------- ----------- -----------
Cash flows from financing activities:
Principal payments under capital leases -0- (94,000) (103,000)
Proceeds from issuance of short-term debt -0- --- 287,000
Principal payments on short-term debt -0- (287,000) ---
Proceeds from the exercise of stock options 2,071,000 594,000 519,000
Tax benefit of non-qualified options exercised 600,000 150,000 ---
----------- ----------- -----------
Net cash provided by financing activities 2,671,000 363,000 703,000
----------- ----------- -----------
Effect of exchange rates on cash and cash equivalents (175,000) 62,000 36,000
----------- ----------- -----------
Net increase/(decrease) in cash and cash equivalents (324,000) 7,073,000 4,346,000
Cash and cash equivalents, beginning of year 14,990,000 7,917,000 3,571,000
----------- ----------- -----------
Cash and cash equivalents, end of year $14,666,000 $14,990,000 $7,917,000
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest expense $0 $28,000 $23,000
=========== =========== ===========
Cash paid during the year for income taxes $ 2,518,000 $100,000 $150,000
=========== =========== ===========
Non-cash transactions:
Equipment acquired under capital leases $0 $0 $101,000
Previously recorded compensation expense
attributable to options exercised 534,000 127,000 0
Intangible assets acquired for stock 2,300,000 0 0
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
23
<PAGE> 24
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
OPERATIONS
Perceptron, Inc. and its wholly-owned subsidiaries (collectively, the
"Company") are involved in the design, development, manufacture, and marketing
of three-dimensional machine vision systems which are used primarily in the
automotive industry, and to a lesser extent, in other industries.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
CURRENCY TRANSLATION
The financial statements of the Company's wholly-owned foreign
subsidiaries have been translated in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 52, with the functional currency being the
local currency in the foreign country. Under this standard, translation
adjustments are accumulated in a separate component of shareholders' equity.
Gains and losses on foreign currency transactions are included in the
consolidated statement of income.
CONCENTRATION OF CREDIT RISK
The Company markets and sells its products primarily to automotive
assembly companies and to system integrators or original equipment
manufacturers, who in turn sell to automotive assembly companies. The
Company's accounts receivable are principally from a small number of large
customers. The Company performs ongoing credit evaluations of its customers.
To date, the Company has not experienced any significant losses related to the
collection of accounts receivable.
A significant portion of the Company's cash and cash equivalents were with
one bank as of December 31, 1996.
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
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 those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market. The cost of
inventories is determined by the first-in, first-out (FIFO) method.
Inventories, net of reserves, are comprised of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1996 1995
------------ ----------
<S> <C> <C>
Component parts $4,234,000 $3,022,000
Work in process 1,247,000 641,000
Finished goods 520,000 451,000
------------ ----------
Total $6,001,000 $4,114,000
============ ==========
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation related to
machinery and equipment and furniture and fixtures is computed on a
straight-line basis over estimated useful lives ranging from three to five
years. Leasehold improvements are amortized over the term of the lease or
estimated useful life, whichever is shorter. Intangible assets recorded in
1996 will be amortized over approximately 5 years.
24
<PAGE> 25
When properties are retired, the costs of such properties and related
accumulated depreciation or amortization are eliminated from the respective
accounts, and the resulting gain or loss is reflected in the consolidated
statement of income.
REVENUE RECOGNITION
The Company's products are generally configured to customer
specifications. Certain customers may require a demonstration of the system
prior to shipment. At the time of satisfactory demonstration, a written
customer acceptance is completed. Revenue is recognized upon the earlier of
written customer acceptance or shipment of the product to the customer.
RESEARCH AND DEVELOPMENT
Research and development costs, including software development costs, are
expensed as incurred.
NET INCOME PER SHARE
Net income per common and common equivalent share is calculated based upon
the weighted average number of shares of Common Stock outstanding, adjusted for
the dilutive effect of stock options and warrants, using the treasury stock
method. The dilutive effect of convertible shares held by a minority
shareholder of a foreign subsidiary has also been included in the calculation
of net income per share up to June 23, 1994, at which time these shares were
converted into Common Stock of the Company.
CASH AND CASH EQUIVALENTS
In accordance with SFAS No. 95, the Company considers all highly liquid
investments purchased with maturities of three months or less to be cash
equivalents. Fair value approximates carrying value because of the short
maturity of the cash equivalents.
RECLASSIFICATIONS
Certain 1995 and 1994 amounts have been reclassified to conform to the
1996 presentation.
IMPAIRMENT OF LONG-LIVED ASSETS AND CERTAIN IDENTIFIABLE INTANGIBLES
The Company adopted Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of," as of January 1, 1996. The effect of adopting this
standard was not material.
The Company evaluates the carrying value of long-lived assets and
long-lived assets to be disposed of for potential impairment on an ongoing
basis. The Company considers projected future operating results, trends and
other circumstances in making such estimates and evaluations.
2. NON-CASH STOCK COMPENSATION EXPENSE
Beginning in late 1994, some participants in the Company's stock option
plan have used Perceptron stock options to pay the exercise price of stock
options issued under the plan. The Company was recently advised by its
independent accounting firm that generally accepted accounting principles
require the recording of a non-cash compensation expense relating to certain
option exercises during 1996 and 1995.
The Company has restated its 1995 financial statements to record non-cash
stock compensation expense, net of taxes, of $895,000.
3. CREDIT FACILITY:
The Company has unsecured credit facilities totaling $4.0 million U.S. and
1.0 million DM. These facilities may be used to finance working capital needs
and equipment purchases or capital leases. Any borrowings for working capital
needs will bear interest at the bank's prime rate (8.25% as of December 31,
1996); any borrowings to finance equipment purchases will bear interest at the
bank's prime rate plus 1/2%. The credit facilities expire on
25
<PAGE> 26
May 31, 1997 unless canceled earlier by the Company or the bank. The Company
expects to renew these credit facilities. At December 31, 1996, the Company
had no outstanding liabilities under these facilities.
The credit facility requires the Company to maintain a minimum amount of
tangible net worth and a minimum debt to tangible net worth ratio. The
agreement also prohibits the Company from paying dividends, acquiring or
retiring any of its capital stock, or incurring any other debt, liens, or
guarantying any third party debt.
4. LEASES:
The following is a summary, as of December 31, 1996, of the future minimum
annual lease payments required under the Company's real estate and other
operating leases having initial or remaining noncancelable terms in excess of
one year:
<TABLE>
<CAPTION>
Year Operating
- ---- ---------
<S> <C>
1997 $158,000
1998 110,000
1999 0
---------
Total minimum lease payments $268,000
=========
</TABLE>
Rental expense for operating leases in 1996, 1995 and 1994 was $352,000,
$380,000 and $365,000, respectively.
5. COMMITMENTS AND OTHER:
The Company has committed to provide funding in the amount of $50,000 to a
university in conjunction with research in manufacturing methods utilizing the
Company's products and technology. At December 31, 1996, the Company had
funded $25,000 of its commitment for the university's fiscal year ended June
30, 1997.
The Company had received a $1.22 million grant from the U.S. Department of
Commerce, through the National Institute of Standards and Technology (NIST),
for software development related to high-speed image processing techniques for
three-dimensional machine vision systems. This grant was for the period which
began on January 1, 1994, and which ended March 31, 1996.
In connection with this grant, the Company had subcontracted a portion of
the research effort to a university and to an independent research institute,
at a total cost of $1.0 million. In addition, the Company granted warrants to
the research institute to purchase 30,000 shares of Common Stock, 15,000 of
which are currently unexercised. The exercise price of these warrants is
$11.17 per share. During 1994, 1995, and 1996, the Company incurred total
costs of $444,000, $558,000, and $250,000 in connection with this grant, which
were substantially reimbursed by NIST. The amounts reimbursed by NIST are not
recognized as net sales by the Company, but are rather treated as a reduction
of engineering, research and development expense.
The Company uses, from time to time, a limited hedging program to minimize
the impact of foreign currency fluctuations. As the Company exports product,
it generally enters into limited hedging transactions relating to the accounts
receivable arising as a result of such shipment. These transactions involve
the use of forward contracts. At December 31, 1996, the Company had no forward
contracts outstanding.
6. SHAREHOLDERS EQUITY:
- Convertible Equity of Subsidiary
On June 23, 1994, the owner of a minority interest in the Company's
European subsidiary converted its equity interest in this subsidiary into
197,802 shares of Common Stock of the Company.
26
<PAGE> 27
- Stock options
The Company maintains 1983 and 1992 Stock Option Plans covering
substantially all company employees and certain other key persons. These Plans
are administered by a committee of the Board of Directors. Activity under
these Plans is shown in the following table:
<TABLE>
<CAPTION>
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Shares subject to option
Outstanding at beginning of period 1,060,943 $ 8.26 1,318,740 $ 5.85 1,466,883 $ 4.35
New grants (based on fair value of
Common Stock at dates of grant) 339,300 25.24 236,350 14.93 253,323 10.08
Exercised* (430,129) 6.07 (353,944) 3.81 (355,333) 2.47
Terminated and expired (16,603) 9.90 (140,203) 7.93 (46,133) 7.63
Outstanding at end of Period** 953,511 15.22 1,060,943 8.26 1,318,740 5.85
Outstanding but not exercisable 799,224 16.35 829,205 8.29 1,094,106 5.88
Exercisable at end of period 154,287 9.36 231,738 8.13 224,634 5.71
</TABLE>
* Exercised at option prices ranging from $.23 to $21.87 during 1996, $.23
to $11.92 during 1995, and $.23 to $7.33 during 1994
** All outstanding shares at December 31, 1996 are under the 1992 Plan.
The following table summarizes information about stock options at December
31, 1996:
<TABLE>
<CAPTION>
Outstanding Stock Options Exercisable Stock Options
------------------------------------------------ -------------------------
Weighted-Average
Range of Remaining Weighted-Average Weighted-Average
Exercise Prices Shares Contractual Life Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$3.00 to $10.00 358,132 6.7 years $6.25 108,703 $6.60
$10.01 to $20.00 198,553 8.1 years $12.29 31,271 $12.92
$20.01 to $30.00 322,875 9.2 years $24.30 14,313 $22.48
$30.01 to $40.00 73,951 9.6 years $36.02 0 $0
- --------------------------------------------------------------------------------------------------
$3.00 to $40.00 953,511 8.1 years $15.22 154,287 $9.36
- --------------------------------------------------------------------------------------------------
</TABLE>
Options outstanding under these Plans generally become exercisable at 25
percent per year beginning one year after the date of the grant and expire five
to ten years after the date of the grant. At December 31, 1996, options
covering 154,287 shares were exercisable and options covering 174,983 shares
were available for future grants under these plans.
The Company also maintains a Director Stock Option Plan covering all
non-employee directors. This Plan is administered by a committee of the Board
of Directors.
<TABLE>
<CAPTION>
1996 1995
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
<S> <C> <C> <C> <C>
Shares subject to option
Outstanding at beginning of period 60,000 $12.58
New grants 64,500 $30.75 60,000 $12.58
Terminated and expired (16,500) $13.55 0
Outstanding at end of period 108,000 $23.28 60,000 $12.58
Outstanding but not exercisable 63,000 $30.75 60,000 $12.58
Exercisable at end of period 45,000 $12.58 0
</TABLE>
At December 31, 1996, the weighted-average remaining exercise period
relating to the outstanding options was approximately 8.6 years.
Each non-employee director at the date the Director Stock Option Plan was
adopted received, and each non-employee director as of the date they are first
elected to the Board of Directors will receive, an option to purchase 15,000
shares of Common Stock (the "Initial Option"). Initial Options become
exercisable in full on the first anniversary of the day of the grant. In
addition, each non-employee director who has been a director for six
27
<PAGE> 28
months before the date of each Annual Meeting of Shareholders automatically will
be granted, as of the date of such Annual Meeting, an option to purchase an
additional 1,500 shares of Common Stock. These Annual Options become
exercisable in three annual increments of 33 1/3% of the shares subject to the
option, and expire ten years from the date of the grant. At December 31, 1996,
45,000 of these options were exercisable and options covering 67,500 shares
were available for future grants under this plan.
The estimated fair value as of the date options were granted in 1996 and
1995, using the Black-Scholes option-pricing model was as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Weighted average estimated fair
value per share of options
granted during the year $16.55 $12.33
Assumptions:
Amortized dividend yield - -
Common Stock price volatility 57.94% 57.94%
Risk-free rate of return 5.78% 6.46%
Expected option term (in years) 6 6
</TABLE>
The Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based
Compensation," effective with the 1996 financial statements, but elected to
continue to measure compensation cost using the intrinsic value method, in
accordance with APB Opinion No. APB 25 ("APB 25"), "Accounting for Stock Issued
to Employees." Accordingly, compensation cost for stock options has been
recognized under the provisions of APB 25. If compensation cost had been
determined based on the estimated fair value of options granted in 1996 and
1995, consistent with the methodology in SFAS 123, the Company's net income and
income per share would have been adjusted to the proforma amount indicated
below:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C> <C>
Net income ..As reported $7,894,000 $8,409,000
..Pro forma 4,795,000 7,543,000
Primary earnings per share ..As reported $1.03 $1.16
..Pro forma $0.63 $1.04
</TABLE>
The Company granted warrants to an independent research institute to
purchase 30,000 shares of Common Stock, 15,000 which were exercised in 1996
and 15,000 of which expire in 1998. The exercise price of these warrants is
$11.17 per share.
7. 401K PLAN:
The Company has a 401(k) tax deferred savings plan that covers all
eligible employees. The Company may make discretionary contributions to the
plan. The Company's contributions to the plan during 1996, 1995 and 1994 were
$251,000, $163,000, and $108,000, respectively.
28
<PAGE> 29
8. INCOME TAXES:
The income tax provision reflected in the statement of income consists of
the following for the years ending December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Current provision
U.S. federal $1,159,000 $ 54,000
Foreign 1,136,000 1,446,000
Deferred taxes 775,000 (1,500,000)
Tax benefit attributable to non-cash stock compensation 0 (482,000)
---------- -----------
3,070,000 (482,000)
========== ===========
</TABLE>
The Company's deferred tax assets are substantially represented by the tax
benefit of minimum tax credits, investment tax credits, research activities
credits, and general business credits carry forwards. The components of
deferred tax assets as of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net operating loss carry forwards $ 0 $1,200,000
Minimum tax credits 400,000 300,000
Investment tax credits 100,000 100,000
Research activities and general business credits 600,000 800,000
Other 325,000 ---
---------- ----------
Subtotal 1,425,000 2,400,000
Valuation reserve 0 (200,000)
---------- ----------
Deferred tax asset $1,425,000 $2,200,000
========== ==========
</TABLE>
With the exception of the minimum tax credits, which have an indefinite
carryforward period, the credits giving rise to the deferred tax assets will
expire, if unused, at various dates from 1998 through 2008.
<TABLE>
<CAPTION>
Rate reconciliation: 1996 1995
---- ----
<S> <C> <C>
Provision at U.S. statutory rate 34% 34%
Recognition of net operating loss carryforwards -- (40%)
Net effect of taxes on foreign activities (4%) 20%
Change in valuation allowance (2%) (20%)
---- ----
28% (6%)
==== ====
</TABLE>
9. INFORMATION ABOUT MAJOR CUSTOMERS:
The Company sells its products directly to both domestic and international
automotive assembly companies. For the year ended December 31, 1996, the
Company derived 49% of its net sales from three such customers, one of which
was a shareholder until October 1994, when this customer sold their shares.
The Company also sells to system integrators or original equipment
manufacturers ("integrators"), who in turn sell to those same automotive
companies. For the year ended December 31, 1996, 18% of net sales were to
integrators, where those products were for the benefit of the same three
automotive assembly companies. In 1996, sales by the Company to each of these
three customers exceeded 13% of the Company's net sales. During 1995, 36% of
total net sales was derived from three domestic automotive companies, and 28%
from sales by integrators to such companies. In 1995, sales by the Company to
each of these three customers exceeded 8% of the Company's net sales. During
1994, 34% of net sales were derived from three automotive companies and 49%
from sales by integrators to such companies. In 1994, sales by the Company to
each of these three companies exceeded 10% of the Company's net sales.
29
<PAGE> 30
10. CONTINGENCIES:
The Company may, from time to time, be subject to legal proceedings and
claims. Litigation involves many uncertainties. Management is currently
unaware of any significant pending litigation affecting the Company, other than
the indemnification matter and the complaint discussed in the following
paragraphs.
The Company has been informed that certain of its customers have received
allegations of possible patent infringement involving processes and methods
used in the Company's products. One such customer is currently engaged in
litigation relating to such matter. This customer has notified various
companies from which it has purchased such equipment, including the Company,
that it expects the suppliers of such equipment to indemnify such customer, on
a pro-rata basis, for expenses and damages, if any, incurred in this matter.
Management believes, however, that the processes used in the Company's products
were independently developed without utilizing any previously patented process
or technology. Because of the uncertainty surrounding the nature of any
possible infringement and the validity of any such claim or any possible
customer claim for indemnity, it is not possible to estimate the ultimate
effect, if any, of this matter on the company's financial position.
On March 13, 1996, a complaint was filed naming the Company as a
defendant, along with Trident and Nanoose, in an action alleging that the
Company's TriCam sensor violates a patent held by the plaintiff and seeking
preliminary and permanent injunctions and damages. Management believes that
its TriCam sensor was independently developed without utilizing any previously
patented process or technology and intends to vigorously defend its position.
11. FOREIGN OPERATIONS:
The Company operates in three primary geographic areas: North America,
Europe and Asia. Geographical area data is as follows ($000):
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Net sales:
North America* $41,352 $ 26,899 $25,341
Europe and Asia 12,686 13,049 3,606
Intercompany Sales (4,359) (2,657) (1,112)
-------- --------- -------
Total Net Sales $49,679 $ 37,291 $27,835
======== ========= =======
Income from operations: (as restated)
North America* $5,581 $ 1,634 $5,513
Europe and Asia 4,597 5,754 207
-------- --------- -------
Total Income from Operations $10,178 $ 7,388 $5,720
======== ========= =======
Identifiable assets at December 31:
North America* $44,399 $ 30,808 $22,209
Europe and Asia 12,497 7,773 2,298
-------- --------- -------
Total Assets $56,896 $ 38,581 $24,507
======== ========= =======
</TABLE>
__________________________
* Includes intercompany amounts; intercompany sales prices are based on
cost plus a transfer fee.
30
<PAGE> 31
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Selected unaudited quarterly financial data for the years ended December
31, 1996 and 1995, are as follows ($000's except earnings per share):
<TABLE>
<CAPTION>
Quarter ended
---------------------------------
1996 3-31 6-30 9-30 12-31
---- ------ ------- ------- -------
<S> <C> <C> <C> <C>
Net Sales $9,062 $11,663 $12,856 $16,098
Gross profit 5,307 7,046 8,140 10,197
Net income 928 588 2,487 3,891
Earnings per share $.12 $.08 $.32 $.50
Weighted average shares 7,468 7,677 7,680 7,706
3-31 6-30 9-30* 12-31
------ ------- ------- -------
1995
----
Net sales $5,989 $8,603 $9,311 $13,388
Gross profit 3,606 5,250 5,823 8,437
Net income 733 1,914 1,621 4,141
Earnings per share $.10 $.27 $.22 $.56
Weighted average shares 7,087 7,127 7,310 7,391
*See Note 2.
</TABLE>
13. INTANGIBLE ASSETS
On November 26, 1996, the Company's German subsidiary acquired the assets
of a division of HGV Vosseler GmbH ("Vosseler") engaged in the development and
sale of non-contact three-dimensional measurement systems for aggregate
consideration consisting of 82,150 shares of Common Stock and DM 300,000 and
recorded $2.3 million in intangible assets relating to the acquisition.
14. SUBSEQUENT EVENTS
On February 3, 1997, the Company consummated its acquisition of Autospect,
Inc. ("Autospect") through the merger of a wholly owned subsidiary of the
Company with and into Autospect for aggregate consideration consisting of
387,093 shares of Common Stock of the Company. Autospect, based in Ann Arbor,
Michigan, designs, develops and manufactures information-based coatings
inspection and defect detection systems primarily for use in the automotive
industry. The transaction will be accounted for as a pooling of interests. As
of and for the year ended December 31, 1996, Autospect's revenues, net income,
and net assets were approximately $4 million, $0.7 million and $2.6 million
respectively.
[UNAUDITED]
The Company recently signed letters of intent to acquire Trident Systems,
Inc. ("Trident") and Nanoose Systems Corporation ("Nanoose"). The closing of
these acquisitions is subject to a number of factors, including the
negotiation, approval and execution of definitive documents and completion of
satisfactory due diligence. The proposed consideration for these acquisitions
will be shares of Common Stock of the Company, aggregating less than 5% of the
outstanding Common Stock.
ITEM 9:CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
No response to Item 9 is required.
31
<PAGE> 32
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the captions "Matters to Come before the
Meeting - Proposal 1: Election of Directors," "Further Information - Executive
Officers" and "Further Information - Share Ownership of Management and Certain
Shareholders - Reporting of Beneficial Ownership by Directors, Executive
Officers and Ten Percent Holders" of the registrant's proxy statement for 1997
Annual Meeting of Shareholders (the "Proxy Statement") is incorporated herein
by reference.
ITEM 11: EXECUTIVE COMPENSATION
The information contained under the caption "Further Information -
Compensation of Directors and Executive Officers" of the Proxy Statement is
incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained under the captions "Further Information - Share
Ownership of Management and Certain Shareholders - Principal Shareholders" and
"Further Information - Share Ownership of Management and Certain Shareholders -
Beneficial Ownership by Directors and Executive Officers" of the Proxy
Statement is incorporated herein by reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the captions "Further Information -
Certain Transactions" of the Proxy Statement is incorporated herein by
reference.
32
<PAGE> 33
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
A. Financial Statements and Schedules Filed
1. Financial Statements - see Item 8 of this report.
2. Financial Statement Schedule - the schedule filed
with this report is listed on page 35.
3. Exhibits - the exhibits filed with this report are
listed on pages 37 through 40.
B. Reports on Form 8-K: The Company did not file any reports on
Form 8-K in the fourth quarter of 1996 with the Securities and
Exchange Commission.
33
<PAGE> 34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
PERCEPTRON, INC.
(Registrant)
By: /S/ Alfred A. Pease
------------------------------------
Alfred A. Pease, Chairman, President
and Chief Executive Officer
Date: March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
- --------------------- --------------------------------------------------- --------------
<S> <C> <C>
/S/ Alfred A. Pease Chairman of the Board, March 27, 1997
- --------------------- President, Chief Executive Officer
Alfred A. Pease
/S/ John G. Zimmerman Vice President and Chief March 27, 1997
- --------------------- Financial Officer (Principal Financial Officer)
John G. Zimmerman
/S/ Paul J. Tripodi Controller (Principal Accounting Officer) March 27, 1997
- ---------------------
Paul J. Tripodi
/S/ Dwight D. Carlson Vice Chairman of the Board of Directors March 27, 1997
- ---------------------
Dwight D. Carlson
Director March 27, 1997
- ---------------------
Philip J. DeCocco
/S/ Robert S. Oswald Director March 27, 1997
- ---------------------
Robert S. Oswald
/S/ Harry T. Rein Director March 27, 1997
- ---------------------
Harry T. Rein
/S/ Paul E. Rice Director March 27, 1997
- ---------------------
Paul E. Rice
/S/ Louis R. Ross Director March 27, 1997
- ---------------------
Louis R. Ross
Director March 27, 1997
- ---------------------
Terryll R. Smith
</TABLE>
34
<PAGE> 35
PERCEPTRON, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS SCHEDULE
Financial Statements Schedule:
<TABLE>
<CAPTION>
Designation Description Page
- ----------- --------------------------------- ----
<S> <C> <C>
Schedule II Valuation and qualifying accounts 36
</TABLE>
The schedules not filed are omitted because they are not required, the
information required to be contained therein is disclosed elsewhere in the
financial statements or the amounts involved are not sufficient to require
submission.
35
<PAGE> 36
PERCEPTRON, INC. AND SUBSIDIARIES
SCHEDULE II, VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
CHARGED TO
BEGINNING COSTS AND ENDING
DESCRIPTION BALANCE EXPENSE CHARGE-OFFS BALANCE
- ---------------------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C>
December 31, 1994:
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS $125,000 $116,000 $ 5,000 $236,000
INVENTORY RESERVES $230,000 $506,000 $ 36,000 $700,000
December 31, 1995:
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS $236,000 $ 35,000 $236,000 $ 35,000
INVENTORY RESERVES $700,000 $125,000 $155,000 $670,000
December 31, 1996:
- ----------------------
ALLOWANCE FOR DOUBTFUL
ACCOUNTS $ 35,000 $ 36,000 $ 11,000 $ 60,000
INVENTORY RESERVES $670,000 $200,000 $ 10,000 $860,000
</TABLE>
36
<PAGE> 37
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION OF EXHIBITS
3. Restated Articles of Incorporation and Bylaws.
3.1 Restated Articles of Incorporation, as amended to date, are
incorporated herein by reference to Exhibit 3.3 of the Company's Report
on Form 10-Q for the Quarter Ended June 30, 1994.
3.2 Bylaws, as amended to date, are incorporated herein by reference to
Exhibit 19 of the Company's Report on Form 10-Q for the Quarter Ended
September 30, 1992.
4. Instruments Defining the Rights of Securities Holders.
4.1 Articles IV and V of the Company's Restated Articles of
Incorporation are incorporated herein by reference to Exhibit 3.3 of
the Company's Report on Form 10-Q for the Quarter Ended June 30, 1994.
4.2 Articles I, II, III, VI, VII and X of the Company's Bylaws are
incorporated herein by reference to Exhibit 19 of the Company's Report
on Form 10-Q for the Quarter Ended September 30, 1992.
4.3 Revised Credit Agreement dated May 22, 1996, between Perceptron,
Inc., Perceptron GmbH and NBD Bank, N.A. and related Demand Business
Loan Note are incorporated herein by reference to Exhibit 4.4 of the
Company's Report on Form 10-Q for the Quarter Ended June 30, 1996.
10. Material Contracts.
10.1 Registration Agreement, dated as of June 13, 1985, as amended,
among the Company and the Purchasers identified therein, is
incorporated by reference to Exhibit 10.3 of the Company's Form S-1
Registration Statement (amended by Exhibit 10.2) No. 33-47463.
10.2 Patent License Agreement, dated as of August 23, 1990, between the
Company and Diffracto Limited, is incorporated herein by reference to
Exhibit 10.10 of the Company's Report on Form S-1 Registration
Statement No. 33-47463.
10.3 Form of Proprietary Information and Inventions Agreement between
the Company and all of the employees of the Company is incorporated
herein by reference to Exhibit 10.11 of the Company's Form S-1
Registration Statement No. 33-47463.
10.4 Form of Confidentiality and Non-Disclosure Agreement between the
Company and certain vendors and customers of the Company is
incorporated herein by reference to Exhibit 10.12 of the Company's Form
S-1 Registration Statement No. 33-47463.
10.5 Two Forms of Agreement Not to Compete between the Company and
certain officers of the Company, is incorporated herein by reference to
Exhibit 10.50 of the Company's Report on Form 10-Q for the Quarter
Ended June 30, 1996.
37
<PAGE> 38
10.6 Co-operative Agreement, dated April 1, 1992, between the Company
and Sumitomo Corporation, is incorporated herein by reference to
Exhibit 10.17 of the Company's Form S-1 Registration Statement No.
33-47463.
10.7 Development and Purchase Agreement between DeMattia Development
Company, Plymouth-West Limited Partnership and Perceptron, Inc. dated
June 2, 1996 is incorporated by reference to Exhibit 10.51 to the
Company's Report on Form 10-Q for the Quarter Ended June 30, 1996.
10.8 Mortgage between DeMattia Development Company and Perceptron, Inc.
dated June 6, 1996 is incorporated by reference to Exhibit 10.52 to the
Company's Report on Form 10-Q for the Quarter Ended June 30, 1996.
10.9 Single Tenant Building Lease, dated March 5, 1996, between Demco
XVI Limited Partnership and Perceptron, Inc. is incorporated by
reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K
for the Year Ended December 31, 1995.
10.10@ 1983 Stock Option Plan, as amended, and forms of Stock Option
Agreement are incorporated herein by reference to Exhibit 10.21 of the
Company's Form S-1 Registration Statement No. 33-47463.
10.11@ Amended and Restated 1992 Stock Option Plan is incorporated herein by
reference to Exhibit 10.53 of the Company's Report on Form 10-Q for the
Quarter Ended September 30, 1996.
10.12@ Form of Stock Option Agreements, for July 1993 Stock Option Grants,
is incorporated herein by reference to Exhibit 10.23 of the Company's
Report on Form 10-Q for the Quarter Ended September 30, 1993 and
Exhibit 10.32 of the Company's Report on Form 10-Q for the Quarter
Ended March 31, 1994.
10.13@ Stock Option Agreement, December 1993 Option Grant, dated December
13, 1993, between the Company and James A. Ratigan is incorporated
herein by reference to Exhibit 10.25 of the Company's Annual Report on
Form 10-K for the Year Ended December 31, 1993.
10.14@ First Amendment to Stock Option Agreement, December 1993 Option Grant
between the Company and James A. Ratigan, is incorporated by reference
to Exhibit 10.41 of the Company's Report on Form 10-Q for the Quarter
Ended September 30, 1995.
10.15@ Stock Option Agreement, Performance Options, dated December 13, 1993,
between the Company and James A. Ratigan is incorporated herein by
reference to Exhibit 10.26 of the Company's Annual Report on Form 10-K
for the Year Ended December 31, 1993.
10.16@ First Amendment to Stock Option Agreement, Performance Options dated
December 13, 1993, between the Company and James A. Ratigan, is
incorporated by reference to Exhibit 10.42 of the Company's Report on
Form 10-Q for the Quarter Ended September 30, 1995.
10.17@ Form of Stock Option Agreements for Performance Options, is
incorporated herein by reference to Exhibit 10.27 of the Company's
Annual Report on Form 10-K for the Year Ended December 31, 1993. The
performance standards under these options were waived effective March
2, 1994.
10.18@ First Amendments to Stock Option Agreements for Performance Options
is incorporated herein by reference to Exhibit 10.20 of the Company's
Annual Report on Form 10-K for the Year Ended December 31, 1994.
38
<PAGE> 39
10.19@ Form of Stock Option Agreements under 1992 Stock Option Plan, (Team
Members and Officers) prior to February 9, 1995, is incorporated herein
by reference to Exhibit 10.28 of the Company's Annual Report on Form
10-K for the Year Ended December 31, 1993.
10.20@ Forms of Master Amendments to Stock Option Agreements (Team Members
and Officers) under 1992 Stock Option Plan, prior to February 9, 1995
is incorporated herein by reference to Exhibit 10.22 to the Company's
Annual Report on Form 10-K for the Year Ended December 31, 1994.
10.21@ Forms of Incentive Stock Option Agreements (Team Members and
Officers) under 1992 Stock Option Plan after February 9, 1995 is
incorporated by reference to Exhibit 10.23 to the Company's Annual
Report on Form 10-K for the Year Ended December 31, 1994.
10.22*@ Forms of Incentive Stock Option Agreements (Team Members and
Officers) and Non-Qualified Stock Option Agreements under 1992 Stock
Option Plan after January 1, 1997 and Amendments to existing Stock
Option Agreements under the 1992 Stock Option Plan.
10.23@ Stock Option Agreement, dated May 21, 1993 between the Company and
James E. McGrath is incorporated herein by reference to Exhibit 10.33
of the Company's Report on Form 10-Q for the Quarter Ended March 31,
1994.
10.24@ Incentive Stock Option Agreement, dated February 14, 1996, between
the Company and Alfred A. Pease is incorporated by reference to Exhibit
10.29 of the Company's Annual Report on From 10-K for the Year Ended
December 31, 1995.
10.25@ Non-qualified Stock Option Agreement, dated February 14, 1996,
between the Company and Alfred A. Pease is incorporated by reference to
Exhibit 10.30 of the Company's Annual Report on Form 10-K for the Year
Ended December 31, 1995.
10.26@ Amended and Restated Directors Stock Option Plan is incorporated by
reference to Exhibit 10.56 to the Company's Report on Form 10-Q for the
Quarter Ended September 30, 1996.
10.27*@ Form of Non-Qualified Stock Option Agreements and Amendments under
the Director Stock Option Plan.
10.28@ Letter Agreement dated December 13, 1993, between the Company and
James A. Ratigan is incorporated herein by reference to Exhibit 10.24
of the Company's Annual Report on Form 10-K for the Year Ended December
31, 1993.
10.29@ Amendment dated October 26, 1995 to Letter Agreement dated December
13, 1993, between the Company and James A. Ratigan, is incorporated
herein by reference to Exhibit 10.40 of the Company's Report on Form
10-Q for the Quarter Ended September 30, 1995.
10.30@ Amendment dated April 19, 1996 to letter agreement dated December 13,
1993, between the Company and James A. Ratigan is incorporated by
reference to Exhibit 10.46 to the Company's Report on Form 10-Q for the
Quarter Ended March 31, 1996.
10.31@ Compensation Arrangement Letter, dated May 21, 1993, between the
Company and James E. McGrath, is incorporated herein by reference to
Exhibit 10.34 of the Company's Report on Form 10-Q for the Quarter
Ended March 31, 1994.
10.32@ 1994 Management Bonus Plan is incorporated herein by reference to
Exhibit 10.30 to the Company's Annual Report on Form 10-K for the Year
Ended December 31, 1994.
10.33@ 1995 Management Bonus Plan is incorporated herein by reference to
Exhibit 10.38 to the Company's Annual Report on Form 10-K for the Year
Ended December 31, 1995.
39
<PAGE> 40
10.34*@ 1996 Management Bonus Plan.
10.35@ Amended and Restated Employee Stock Purchase Plan is incorporated by
reference to Exhibit 10.54 of the Company's Report on Form 10-Q for the
Quarter Ended September 30, 1996.
10.36*@ Letter Agreement, dated February 14, 1996, between the Company and
Alfred A. Pease.
10.37@ Employment Agreement, dated February 12, 1996, between the Company
and Dwight D. Carlson is incorporated by reference to Exhibit 10.42 to
the Company's Annual Report on Form 10-K for the Year Ended December
31, 1995.
10.38 Financial Assistance Award, dated December 17, 1993, received from
the U.S. Department of Commerce - National Institute of Standards and
Technology, and incorporated herein by reference to Exhibit 10.31 of
the Company's Annual Report on Form 10-K for the Year Ended December
31, 1993.
11.* Statement re: computations of per share earnings.
21.* A list of subsidiaries of the Company.
23.* Consent of Experts.
27.* Financial Data Schedule.
- ----------
* Filed with the Company's Annual Report on Form 10K for the year ended
December 31, 1996.
@ Indicates a management contract, compensatory plan or arrangement.
40
<PAGE> 1
EXHIBIT 10.22
USAGE: 2/1/97
INCENTIVE STOCK OPTION AGREEMENT - TEAM MEMBER
UNDER THE PERCEPTRON, INC. 1992 STOCK OPTION PLAN
THIS STOCK OPTION AGREEMENT made this_____day of_____, 19__, by and
between Perceptron, Inc., a Michigan corporation ("the Company"), and_______,
who is currently employed by the Company or one of its subsidiaries
(the "Optionee").
1. GRANT OF OPTION. Subject to the terms and conditions hereof, the
Company hereby grants to the Optionee an option to purchase from the Company up
to, but not exceeding in the aggregate,____shares of the Company's Common
Stock at a price of $______per share. This option is intended to constitute
an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code ("Code").
2. RIGHT TO EXERCISE OPTION. The Optionee may purchase from the Company
on and after the first anniversary of the date of grant, 25% of the shares
covered by this option, and on each succeeding one year anniversary thereof may
exercise an additional 25% of the shares covered by the option, so that on the
fourth anniversary of the date of grant this option shall be fully exercisable.
To the extent not exercised, installments shall accumulate and the Optionee
may exercise them in whole or in part in any subsequent period. Any provision
of this Agreement notwithstanding, no portion of this option shall be
exercisable on or after the tenth anniversary of the date of grant.
3. TERMINATION OF EMPLOYMENT. If, prior to the date that this option
shall first become exercisable, the Optionee's employment with the Company or
any of its subsidiaries shall be terminated for any reason, the Optionee's
right to exercise this option shall terminate and all rights hereunder shall
cease. As used in this Agreement, the term "subsidiary" of the Company means
any "subsidiary corporation" as defined in Section 424(f) of the Code, the term
"employment" means employment with the Company or any subsidiary of the
Company, and the term "disability" means "total and permanent disability," as
defined in Section 22(e) of the Code.
If, on or after the date that this option shall first become exercisable,
the Optionee's employment shall be terminated for any reason other than death
or disability, the Optionee shall have the right, within three months after
such termination of employment, to exercise this option to the extent that it
shall have been exercisable and unexercised on the date of such termination of
services, subject to any other limitation on the exercise of such option in
effect at the date of exercise.
If on or after the date that this option shall first become exercisable
the Optionee's employment shall be terminated due to death or disability, the
Optionee or the executor or administrator of the estate of the Optionee (as the
case may be) or the person or persons to whom the option shall have been
transferred by will or by the laws of descent and distribution, shall have the
right, within one year from the date of the Optionee's death or disability, to
exercise this option to the extent that it was exercisable and unexercised on
the date of the Optionee's death or disability, subject to any other limitation
on exercise in effect at the date of exercise.
<PAGE> 2
The transfer of the Optionee from one corporation to another among the
Company and any of its subsidiaries, or a leave of absence with the written
consent of the Company, shall not be a termination of services for purposes of
this option.
Notwithstanding the provisions of Section 2 "Right to Exercise Option" and
Section 3 "Termination of Employment" of this Agreement, (provided, however, if
this option is an incentive stock option, only if the merger, consolidation or
sale or transfer referred to below occurs after the first anniversary of the
date of grant of this option, and, if this option is held by a person subject
to Section 16(b) of the Securities Exchange Act of 1934, only if such merger,
consolidation or sale or transfer occurs after the date six months after the
date of grant of this option), if, in connection with any merger,
consolidation, or sale or transfer by the Company of substantially all of its
assets, this option is not assumed or continued by the surviving corporation or
the purchaser, the date of termination of this option and the date on or after
which this option, or any portion thereof not then exercisable, may be
exercised, shall be advanced to a date to be fixed by the Committee, which date
shall not be more than 15 days prior to such merger, consolidation, or sale or
transfer; provided however, that the Committee shall have the right, at any
time prior to the occurrence of such merger, consolidation or sale or transfer,
to modify the provisions of this paragraph, including the termination of all of
the Optionee's rights set forth in this paragraph, to the extent required under
applicable accounting and Securities and Exchange Commission rules,
regulations, policies, guidelines or other similar requirements to permit the
Company to account for a then contemplated business combination under
pooling-of-interests accounting.
4. EXERCISE OF OPTION.
(a) At any time that this option may be exercised as provided in this
Agreement, the Optionee may exercise any portion of this option which is then
exercisable, in whole or in part, by delivery to the Company of a written
notice, in the form attached hereto, signed by the Optionee..
(b) In addition, the Optionee shall deliver, on the date of exercise:
(i) cash equal to the purchase price of the shares being purchased,
(ii) such documents as are or may be required under the terms of
Section
5.3 of the Plan to effect a cashless exercise,
(iii) Permitted Shares with a value (determined as of the date of
exercise of the option) equal to the purchase price of the shares being
purchased (the "Delivered Shares Method"), or
(iv) the authorization of the Company to retain (or forfeit) then
exercisable options issued to the Optionee under the Plan ("Forfeited Options")
with a value (as defined in the Plan) equal to the purchase price of the shares
being purchased (the "Forfeiture of Stock Options Method"). In order to use
the Forfeiture of Stock Options Method, the Optionee must then own,
2
<PAGE> 3
and have owned for at least six months prior thereto, a number of shares of
Company Common Stock at least equal in number to the number of shares of Common
Stock underlying the Forfeited Options.
(c) "Permitted Shares" are shares of Company Common Stock to be delivered
to pay the exercise price of the option (the "Delivered Shares"):
(i) which have been owned by the Optionee for at least six months
prior to the date of delivery, or
(ii) if they have not been owned by the Optionee for at least six
months prior to the date of delivery, the Optionee then owns, and has owned for
at least six months prior thereto, a number of shares of Company Common Stock at
least equal in number to the Delivered Shares.
(d) Forfeited Options shall expire and be of no further force and effect
as of the date forfeited.
(e) Shares which have been counted during the prior six months as owned by
the Optionee for purposes of determining whether the Optionee may exercise
options to purchase Common Stock pursuant to the Delivered Shares Method or the
Forfeiture of Stock Options Method:
(i) may not be used as Delivered Shares, and
(ii) may not be counted as owned by the Optionee for purposes of
making calculations under the Delivered Shares Method or Forfeiture of Stock
Options Method.
5. COMPLIANCE WITH SECURITIES LAWS. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock under this
option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities, and
applicable stock exchange requirements, as the Company deems necessary or
advisable.
6. NON-ASSIGNABILITY. The option hereby granted shall not be transferable
by the Optionee other than by will or the laws of descent and distribution, and
the option may be exercised during the Optionee's lifetime only by the
Optionee. Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the option shall
be effective to bind the Company unless the Company shall have been furnished
with written notice thereof and a copy of the will and/or such other evidence
as the Company may deem necessary to establish the validity of the transfer and
the acceptance by the transferee or transferees of the terms and conditions of
this Agreement. No assignment or transfer of this option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, except a transfer by the Optionee by will or by the laws of descent
and distribution, shall vest in the purported
3
<PAGE> 4
assignee or transferee any interest or right herein whatsoever.
7. DISPUTES. As a condition of the granting of the option granted hereby,
the Optionee and the Optionee's successors and assigns agree that any dispute
or disagreement which shall arise under or as a result of this Agreement shall
be determined by the Committee in its sole discretion and judgment and that any
such determination and any interpretation by the Committee of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
8. ADJUSTMENTS. In the event of any stock dividend, stock split,
reclassification, merger, consolidation, or similar transaction affecting the
shares covered by this option, the rights of the Optionee shall be as provided
in Section 8 of the Plan and any adjustment therein provided shall be made in
accordance with Section 8 of the Plan.
9. RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder of the Company with respect to any of the shares covered by this
option until the issuance of a stock certificate or certificates upon the
exercise of the option in full or in part, and then only with respect to the
shares represented by such certificate or certificates.
10. NOTICES. Every notice relating to this Agreement shall be in writing
and if given by mail shall be given by registered or certified mail with return
receipt requested. All notices to the Company shall be delivered to the
Secretary of the Company at the Company's headquarters or addressed to the
Secretary of the Company at the Company's headquarters. All notices by the
Company to the Optionee shall be delivered to the Optionee personally or
addressed to the Optionee at the Optionee's last residence address as then
contained in the records of the Company or such other address as the Optionee
may designate. Either party by notice to the other may designate a different
address to which notices shall addressed. Any notice given by the Company to
the Optionee at the Optionee's last designated address shall be effective to
bind any other person who shall acquire rights hereunder.
11. "OPTIONEE" TO INCLUDE CERTAIN TRANSFEREES. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances where
the provision should logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons.
12. GOVERNING LAW. This Agreement has been made in and shall be construed
in accordance with the laws of the State of Michigan.
13. PROVISIONS OF PLAN CONTROLLING. The provisions hereof are subject to
the terms and provisions of the Plan copies of which are available for review
upon request. In the event of any conflict between the provisions of this
option and the provisions of the Plan, the provisions of the Plan shall
control, except to the extent that the provisions of this option limit or
restrict the rights
4
<PAGE> 5
of the Optionee to a greater extent than set forth in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PERCEPTRON, INC.
By:
---------------------------
Title:
-----------------------
------------------------------
-----------------------, OPTIONEE
5
<PAGE> 6
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
UNDER THE PERCEPTRON, INC.
1992 STOCK OPTION PLAN
Perceptron, Inc.
47827 Halyard Drive
Plymouth, MI 48170
Dear Sir:
An incentive stock option was granted to me on
_______, 19__to purchase______shares of Perceptron, Inc. Common Stock at a
price of $_____per share.
I hereby elect to exercise my incentive stock option with respect to
shares for an aggregate purchase price of $ . I hereby elect to pay
for such shares as follows:
Personal Check $____
Cash $____
Bank Draft $____
Money Order $____
Cashless Exercise $____
Perceptron Common Stock $____
Retention of Stock Options $____
Total $
=====
[A personal check [or cash, bank draft or money order] for the purchase
price [is enclosed herewith.]
[Documents as are required to effect a cashless exercise are enclosed.]
[I hereby elect to exercise my stock option with respect to
shares through a combination of cash payments and shares of Perceptron, Inc.
Common Stock, as described on the attached Exhibit A. A personal check for the
purchase price to be paid in cash is enclosed herewith. Certificates for
shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a
duly executed stock power in proper form for transfer, with all signatures
properly guaranteed by a national bank or member firm of the NYSE or AMEX. [I
represent that the shares of Perceptron, Inc. Common Stock enclosed herewith
have been owned by me for more
1
<PAGE> 7
than six months.] or [I currently own more than____shares of Perceptron, Inc.
Common Stock which have been owned by me for more than six months]. Such
shares have not been counted during the prior six months as owned by me for
purposes of determining whether I may exercise options to purchase Common Stock
pursuant to the Delivered Shares Method or the Forfeiture of Stock Options
Method.]
[I hereby authorize the Company to retain options to purchase____shares
of Perceptron, Inc. Common Stock granted pursuant to this stock option
(the "Forfeited Options"). I hereby acknowledge and agree that, as of the date
set forth below, the Forfeited Options shall no longer be exercisable, and
shall expire and have no further force and effect. I represent that I
currently own more than______shares of Perceptron, Inc. Common Stock which
have been owned by me for more than six months. Such shares have not been
counted during the prior six months as owned by me for purposes of determining
whether I may exercise options to purchase Common Stock pursuant to the
Delivered Shares Method or the Forfeiture of Stock Options Method.]
I agree to notify the Company if prior to two years from the date of grant
and one year from the exercise date, I dispose of any shares acquired pursuant
to my exercise of this incentive stock option.
I represent that the shares of stock that I am purchasing upon this
exercise of my option are being purchased for investment purposes and not with
a view to resale. This representation shall not be binding upon me if the
shares of Common Stock that I am purchasing are subject to an effective
Registration Statement under the Securities Act of 1933.
___________________________
Optionee
Dated _______,19__
2
<PAGE> 8
USAGE: 2/1/97
INCENTIVE STOCK OPTION AGREEMENT - OFFICER
UNDER THE PERCEPTRON, INC. 1992 STOCK OPTION PLAN
THIS STOCK OPTION AGREEMENT made this____day of______, 19__, by and
between Perceptron, Inc., a Michigan corporation ("the Company"),
and_________, who is currently employed by the Company or one of its
subsidi- aries (the "Optionee").
1. GRANT OF OPTION. Subject to the terms and conditions hereof, the
Company hereby grants to the Optionee an option to purchase from the Company up
to, but not exceeding in the aggregate,_____shares of the Company's Common
Stock at a price of $___per share. This option is intended to constitute
an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code ("Code").
2. RIGHT TO EXERCISE OPTION. The Optionee may purchase from the Company
on and after the first anniversary of the date of grant, 25% of the shares
covered by this option, and on each succeeding one year anniversary thereof may
exercise an additional 25% of the shares covered by the option, so that on the
fourth anniversary of the date of grant this option shall be fully exercisable.
To the extent not exercised, installments shall accumulate and the Optionee
may exercise them in whole or in part in any subsequent period. Any provision
of this Agreement notwithstanding, no portion of this option shall be
exercisable on or after the tenth anniversary of the date of grant.
3. TERMINATION OF EMPLOYMENT. If, prior to the date that this option
shall first become exercisable, the Optionee's employment with the Company or
any of its subsidiaries shall be terminated for any reason, the Optionee's
right to exercise this option shall terminate and all rights hereunder shall
cease. As used in this Agreement, the term "subsidiary" of the Company means
any "subsidiary corporation" as defined in Section 424(f) of the Code, the term
"employment" means employment with the Company or any subsidiary of the
Company, and the term "disability" means "total and permanent disability," as
defined in Section 22(e) of the Code.
If, on or after the date that this option shall first become exercisable,
the Optionee's employment shall be terminated for any reason other than death
or disability, the Optionee shall have the right, within three months after
such termination of employment, to exercise this option to the extent that it
shall have been exercisable and unexercised on the date of such termination of
services, subject to any other limitation on the exercise of such option in
effect at the date of exercise.
If on or after the date that this option shall first become exercisable
the Optionee's employment shall be terminated due to death or disability, the
Optionee or the executor or administrator of the estate of the Optionee (as the
case may be) or the person or persons to whom the option shall have been
transferred by will or by the laws of descent and distribution, shall have the
right, within one year from the date of the Optionee's death or disability, to
exercise this option to the extent that it was exercisable and unexercised on
the date of the Optionee's death or disability,
<PAGE> 9
subject to any other limitation on exercise in effect at the date of exercise.
The transfer of the Optionee from one corporation to another among the
Company and any of its subsidiaries, or a leave of absence with the written
consent of the Company, shall not be a termination of services for purposes of
this option.
Notwithstanding the provisions of Section 2 "Right to Exercise Option" and
Section 3 "Termination of Employment" of this Agreement, (i) in the event of a
termination by the Company of the Optionee's employment Without Cause (as
defined below) or Diminishment of the Optionee's Responsibilities Without Cause
(as defined below), following a Change in Control of the Company, or (ii), in
the event of a Change in Control, if one of the corporations surviving the
Change in Control or the person purchasing the Company's assets in the Change
in Control does not assume this option, any portion of this option that is then
not exercisable shall become immediately exercisable; provided, however, that
the foregoing provision shall apply, in case of incentive stock options
("ISOs"), and in the case of options held by a person subject to Section 16(b)
of the Securities Exchange Act of 1934 ("Section 16(b) Grants"), only if the
termination or diminishment referred to in (i) above and the Change in Control
referred to in (ii) above occurs after the first anniversary of the date of
grant of this option, in the case of ISOs, or the date six months after the
date of grant of this option, in the case of Section 16(b) Grants; and,
provided further, however, that the Committee shall have the right, at any time
prior to the occurrence of the termination or diminishment referred to in (i)
above or the Change in Control referred to in (ii) above, to modify the
provisions of this paragraph, including the termination of all of the
Optionee's rights set forth in this paragraph, to the extent required under
applicable accounting and Securities and Exchange Commission rules,
regulations, policies, guidelines or other similar requirements to permit the
Company to account for a then contemplated business combination under
pooling-of-interests accounting. For purposes hereof, "Without Cause" shall
mean the Optionee's employment is terminated by the Company, or there is a
Diminishment of the Optionee's Responsibilities, for any reason except (i)
personal dishonesty; (ii) willful misconduct; (iii) breach of fiduciary duty to
the Company; (iv) conviction for violation of any law (other than traffic
violations or similar offenses); or (v) repeated or intentional failure to
perform duties, after written notice is delivered identifying the failure, and
it is not cured within ten (10) days following receipt of such notice. For
purposes hereof, "Diminishment of the Optionee's Responsibilities" shall mean
the Company, or any successor thereto, (i) reassigning the Optionee substantial
duties which are materially inconsistent with the Optionee's position, duties
and responsibilities with the Company immediately prior to the Change in
Control, except for reassignments of duties which constitute a bona fide
promotion of the Optionee, or (ii) reducing the Optionee's compensation such
that (a) the Optionee's annual base salary is less than eighty (80%) percent of
the Optionee's annual base salary prior to the Change in Control; and (b) the
Optionee's annual base salary and the annual cash bonus which the Optionee is
eligible to earn (including any performance based bonus), combined, is not at
least equal to the combination of the Optionee's annual base salary prior to
the Change in Control and the average of the annual cash bonuses which the
Optionee was eligible to earn (including any performance based bonus, but
excluding any bonus payable to the Optionee for completing the Change in
Control), whether or not actually earned, for the year in which the Change in
Control occurred and for the year prior thereto. For purposes hereof, a
"Change in Control" shall be deemed to have occurred in the event of (i) a
merger involving the Company in which the Company is not the surviving
corporation
<PAGE> 10
(other than a merger with a wholly-owned subsidiary of the Company formed for
the purpose of changing the Company's corporate domicile); (ii) a share
exchange in which the shareholders of the Company exchange their stock in the
Company for stock of another corporation (other than a share exchange in which
all or substantially all of the holders of the voting stock of the Company,
immediately prior to the transaction, exchange, on a pro rata basis, their
voting stock of the Company for more than 50% of the voting stock of such other
corporation); (iii) the sale of all or substantially all of the assets of the
Company; or (iv) any person or group of persons (as defined by Section 13(d) of
the Securities Exchange Act of 1934, as amended) (other than any employee
benefit plan or employee benefit trust benefitting the employees of the
Company) becoming a beneficial owner, directly or indirectly, of securities of
the Company representing more than fifty (50%) percent of either the then
outstanding Common Stock of the Company, or the combined voting power of the
Company's then outstanding voting securities.
Notwithstanding the provisions of Section 2 "Right to Exercise Option" and
Section 3 "Termination of Employment" of this Agreement, (provided, however, if
this option is an incentive stock option, only if the merger, consolidation or
sale or transfer referred to below occurs after the first anniversary of the
date of grant of this option, and, if this option is held by a person subject
to Section 16(b) of the Securities Exchange Act of 1934, only if such merger,
consolidation or sale or transfer occurs after the date six months after the
date of grant of this option), if, in connection with any merger,
consolidation, or sale or transfer by the Company of substantially all of its
assets, this option is not assumed or continued by the surviving corporation or
the purchaser, the date of termination of this option and the date on or after
which this option, or any portion thereof not then exercisable, may be
exercised, shall be advanced to a date to be fixed by the Committee, which date
shall not be more than 15 days prior to such merger, consolidation, or sale or
transfer; provided however, that the Committee shall have the right, at any
time prior to the occurrence of such merger, consolidation or sale or transfer,
to modify the provisions of this paragraph, including the termination of all of
the Optionee's rights set forth in this paragraph, to the extent required under
applicable accounting and Securities and Exchange Commission rules,
regulations, policies, guidelines or other similar requirements to permit the
Company to account for a then contemplated business combination under
pooling-of-interests accounting.
4. EXERCISE OF OPTION.
(a) At any time that this option may be exercised as provided in this
Agreement, the Optionee may exercise any portion of this option which is then
exercisable, in whole or in part, by delivery to the Company of a written
notice, in the form attached hereto, signed by the Optionee.
(b) In addition, the Optionee shall deliver, on the date of exercise:
(i) cash equal to the purchase price of the shares being purchased,
(ii) such documents as are or may be required under the terms of
Section 5.3 of the Plan to effect a cashless exercise,
(iii) Permitted Shares with a value (determined as of the date of
exercise of the
<PAGE> 11
option) equal to the purchase price of the shares being purchased (the
"Delivered Shares Method"), or
(iv) the authorization of the Company to retain (or forfeit) then
exercisable options issued to the Optionee under the Plan ("Forfeited Options")
with a value (as defined in the Plan) equal to the purchase price of the shares
being purchased (the "Forfeiture of Stock Options Method"). In order to use the
Forfeiture of Stock Options Method, the Optionee must then own, and have owned
for at least six months prior thereto, a number of shares of Company Common
Stock at least equal in number to the number of shares of Common Stock
underlying the Forfeited Options.
(c) "Permitted Shares" are shares of Company Common Stock to be delivered
to pay the exercise price of the option (the "Delivered Shares"):
(i) which have been owned by the Optionee for at least six months
prior to the date of delivery, or
(ii), if they have not been owned by the Optionee for at least six
months prior to the date of delivery, the Optionee then owns, and has owned for
at least six months prior thereto, a number of shares of Company Common Stock at
least equal in number to the Delivered Shares.
(d) Forfeited Options shall expire and be of no further force and effect
as of the date forfeited.
(e) Shares which have been counted during the prior six months as owned by
the Optionee for purposes of determining whether the Optionee may exercise
options to purchase Common Stock pursuant to the Delivered Shares Method or the
Forfeiture of Stock Options Method:
(i) may not be used as Delivered Shares, and
(ii) may not be counted as owned by the Optionee for purposes of
making calculations under the Delivered Shares Method or Forfeiture of Stock
Options Method.
5. COMPLIANCE WITH SECURITIES LAWS. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock under this
option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities, and
applicable stock exchange requirements, as the Company deems necessary or
advisable.
6. NON-ASSIGNABILITY. The option hereby granted shall not be transferable
by the Optionee other than by will or the laws of descent and distribution, and
the option may be exercised during the Optionee's lifetime only by the
Optionee. Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the option shall
be effective to bind the Company unless the Company shall have been furnished
with written notice thereof
<PAGE> 12
and a copy of the will and/or such other evidence as the Company may deem
necessary to establish the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions of this Agreement. No
assignment or transfer of this option, or of the rights represented thereby,
whether voluntary or involuntary, by operation of law or otherwise, except a
transfer by the Optionee by will or by the laws of descent and distribution,
shall vest in the purported assignee or transferee any interest or right herein
whatsoever.
7. DISPUTES. As a condition of the granting of the option granted hereby,
the Optionee and the Optionee's successors and assigns agree that any dispute
or disagreement which shall arise under or as a result of this Agreement shall
be determined by the Committee in its sole discretion and judgment and that any
such determination and any interpretation by the Committee of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
8. ADJUSTMENTS. In the event of any stock dividend, stock split,
reclassification, merger, consolidation, or similar
transaction affecting the shares covered by this option, the rights of the
Optionee shall be as provided in Section 8 of the Plan and any adjustment
therein provided shall be made in accordance with Section 8 of the Plan.
9. RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder of the Company with respect to any of the shares covered by this
option until the issuance of a stock certificate or certificates upon the
exercise of the option in full or in part, and then only with respect to the
shares represented by such certificate or certificates.
10. NOTICES. Every notice relating to this Agreement shall be in writing
and if given by mail shall be given by registered or certified mail with return
receipt requested. All notices to the Company shall be delivered to the
Secretary of the Company at the Company's headquarters or addressed to the
Secretary of the Company at the Company's headquarters. All notices by the
Company to the Optionee shall be delivered to the Optionee personally or
addressed to the Optionee at the Optionee's last residence address as then
contained in the records of the Company or such other address as the Optionee
may designate. Either party by notice to the other may designate a different
address to which notices shall addressed. Any notice given by the Company to
the Optionee at the Optionee's last designated address shall be effective to
bind any other person who shall acquire rights hereunder.
11. "OPTIONEE" TO INCLUDE CERTAIN TRANSFEREES. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances where
the provision should logically
apply to any other person or persons to whom the option, in accordance with the
provisions of Section 6 hereof, may be transferred, the word "Optionee" shall
be deemed to include such person or persons.
12. GOVERNING LAW. This Agreement has been made in and shall be construed
in accordance with the laws of the State of Michigan.
<PAGE> 13
13. PROVISIONS OF PLAN CONTROLLING. The provisions hereof are subject to
the terms and provisions of the Plan copies of which are available for review
upon request. In the event of any conflict between the provisions of this
option and the provisions of the Plan, the provisions of the Plan shall
control, except to the extent that the provisions of this option limit or
restrict the rights of the Optionee to a greater extent than set forth in the
Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PERCEPTRON, INC.
By:
-----------------------------
Title:
-------------------------
--------------------------------
-----------------------, OPTIONEE
<PAGE> 14
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
UNDER THE PERCEPTRON, INC.
1992 STOCK OPTION PLAN
Perceptron, Inc.
47827 Halyard Drive
Plymouth, MI 48170
Dear Sir:
An incentive stock option was granted to me on
_____, 19__to purchase_______ shares of Perceptron, Inc. Common Stock at a
price of $___per share.
I hereby elect to exercise my incentive stock option with respect to_____
shares for an aggregate purchase price of $______. I hereby elect to pay
for such shares as follows:
Personal Check $____
Cash $____
Bank Draft $____
Money Order $____
Cashless Exercise $____
Perceptron Common Stock $____
Retention of Stock Options $____
Total $
=====
[A personal check [or cash, bank draft or money order] for the purchase
price [is enclosed herewith.]
[Documents as are required to effect a cashless exercise are enclosed.]
[I hereby elect to exercise my stock option with respect to
shares through a combination of cash payments and shares of Perceptron, Inc.
Common Stock, as described on the attached Exhibit A. A personal check for the
purchase price to be paid in cash is enclosed herewith. Certificates for
shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a
duly executed stock power in proper form for transfer, with all signatures
properly guaranteed by a national bank or member firm of the NYSE or AMEX. [I
represent that the shares of Perceptron, Inc. Common Stock enclosed herewith
have been owned by me for more than six months.] or [I currently own more than
___shares of
<PAGE> 15
Perceptron, Inc. Common Stock which have been owned by me for more than six
months]. Such shares have not been counted during the prior six months as
owned by me for purposes of determining whether I may exercise options to
purchase Common Stock pursuant to the Delivered Shares Method or the Forfeiture
of Stock Options Method.]
[I hereby authorize the Company to retain options to purchase____
shares of Perceptron, Inc. Common Stock granted pursuant to this stock option
(the "Forfeited Options"). I hereby acknowledge and agree that, as of the date
set forth below, the Forfeited Options shall no longer be exercisable, and
shall expire and have no further force and effect. I represent that I
currently own more than_____ shares of Perceptron, Inc. Common Stock which
have been owned by me for more than six months. Such shares have not been
counted during the prior six months as owned by me for purposes of determining
whether I may exercise options to purchase Common Stock pursuant to the
Delivered Shares Method or the Forfeiture of Stock Options Method.]
I agree to notify the Company if prior to two years from the date of grant
and one year from the exercise date, I dispose of any shares acquired pursuant
to my exercise of this incentive stock option.
I represent that the shares of stock that I am purchasing upon this
exercise of my option are being purchased for investment purposes and not with
a view to resale. This representation shall not be binding upon me if the
shares of Common Stock that I am purchasing are subject to an effective
Registration Statement under the Securities Act of 1933.
_____________________________
Optionee
Dated________, 19__
<PAGE> 16
USAGE: 1/1/97
NON-QUALIFIED STOCK OPTION AGREEMENT - OFFICER
UNDER THE PERCEPTRON, INC. 1992 STOCK OPTION PLAN
THIS STOCK OPTION AGREEMENT made this __ day of ________, 19__, by and
between Perceptron, Inc., a Michigan corporation ("the Company"), and __________
________________________, who is currently employed by the Company or one of
its subsidiaries (the "Optionee").
1. GRANT OF OPTION. Subject to the terms and conditions hereof, the
Company hereby grants to the Optionee an option to purchase from the Company up
to, but not exceeding in the aggregate, ____________ shares of the Company's
Common Stock at a price of $_______ per share. This option is not intended to
constitute an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code ("Code").
2. RIGHT TO EXERCISE OPTION. The Optionee may purchase from the Company
on and after the first anniversary of the date of grant, 25% of the shares
covered by this option, and on each succeeding one year anniversary thereof may
exercise an additional 25% of the shares covered by the option, so that on the
fourth anniversary of the date of grant this option shall be fully exercisable.
To the extent not exercised, installments shall accumulate and the Optionee
may exercise them in whole or in part in any subsequent period. Any provision
of this Agreement notwithstanding, no portion of this option shall be
exercisable on or after the tenth anniversary of the date of grant.
3. TERMINATION OF EMPLOYMENT. If, prior to the date that this option
shall first become exercisable, the Optionee's employment with the Company or
any of its subsidiaries shall be terminated for any reason, the Optionee's
right to exercise this option shall terminate and all rights hereunder shall
cease. As used in this Agreement, the term "subsidiary" of the Company means
any "subsidiary corporation" as defined in Section 424(f) of the Code, the term
"employment" means employment with the Company or any subsidiary of the
Company, and the term "disability" means "total and permanent disability," as
defined in Section 22(e) of the Code.
If, on or after the date that this option shall first become
exercisable, the Optionee's employment shall be terminated for any reason other
than death or disability, the Optionee shall have the right, within three
months after such termination of employment, to exercise this option to the
extent that it shall have been exercisable and unexercised on the date of such
termination of services, subject to any other limitation on the exercise of
such option in effect at the date of exercise.
If on or after the date that this option shall first become
exercisable the Optionee's employment shall be terminated due to death or
disability, the Optionee or the executor or administrator of the estate of the
Optionee (as the case may be) or the person or persons to whom the option shall
have been transferred by will or by the laws of descent and distribution, shall
have the right, within one year from the date of the Optionee's death or
disability, to exercise this option
<PAGE> 17
to the extent that it was exercisable and unexercised on the date of the
Optionee's death or disability, subject to any other limitation on exercise in
effect at the date of exercise.
The transfer of the Optionee from one corporation to another among the
Company and any of its subsidiaries, or a leave of absence with the written
consent of the Company, shall not be a termination of services for purposes of
this option.
Notwithstanding the provisions of Section 2 "Right to Exercise Option"
and Section 3 "Termination of Employment" of this Agreement, (i) in the event
of a termination by the Company of the Optionee's employment Without Cause (as
defined below) or Diminishment of the Optionee's Responsibilities Without Cause
(as defined below), following a Change in Control of the Company, or (ii), in
the event of a Change in Control, if one of the corporations surviving the
Change in Control or the person purchasing the Company's assets in the Change
in Control does not assume this option, any portion of this option that is then
not exercisable shall become immediately exercisable; provided, however, that
the foregoing provision shall apply, in case of incentive stock options
("ISOs"), and in the case of options held by a person subject to Section 16(b)
of the Securities Exchange Act of 1934 ("Section 16(b) Grants"), only if the
termination or diminishment referred to in (i) above and the Change in Control
referred to in (ii) above occurs after the first anniversary of the date of
grant of this option, in the case of ISOs, or the date six months after the
date of grant of this option, in the case of Section 16(b) Grants; and,
provided further, however, that the Committee shall have the right, at any time
prior to the occurrence of the termination or diminishment referred to in (i)
above or the Change in Control referred to in (ii) above, to modify the
provisions of this paragraph, including the termination of all of the
Optionee's rights set forth in this paragraph, to the extent required under
applicable accounting and Securities and Exchange Commission rules,
regulations, policies, guidelines or other similar requirements to permit the
Company to account for a then contemplated business combination under
pooling-of-interests accounting. For purposes hereof, "Without Cause" shall
mean the Optionee's employment is terminated by the Company, or there is a
Diminishment of the Optionee's Responsibilities, for any reason except (i)
personal dishonesty; (ii) willful misconduct; (iii) breach of fiduciary duty to
the Company; (iv) conviction for violation of any law (other than traffic
violations or similar offenses); or (v) repeated or intentional failure to
perform duties, after written notice is delivered identifying the failure, and
it is not cured within ten (10) days following receipt of such notice. For
purposes hereof, "Diminishment of the Optionee's Responsibilities" shall mean
the Company, or any successor thereto, (i) reassigning the Optionee substantial
duties which are materially inconsistent with the Optionee's position, duties
and responsibilities with the Company immediately prior to the Change in
Control, except for reassignments of duties which constitute a bona fide
promotion of the Optionee, or (ii) reducing the Optionee's compensation such
that (a) the Optionee's annual base salary is less than eighty (80%) percent of
the Optionee's annual base salary prior to the Change in Control; and (b) the
Optionee's annual base salary and the annual cash bonus which the Optionee is
eligible to earn (including any performance based bonus), combined, is not at
least equal to the combination of the Optionee's annual base salary prior to
the Change in Control and the average of the annual cash bonuses which the
Optionee was eligible to earn (including any performance based bonus, but
excluding any bonus payable to the Optionee for completing the Change in
Control), whether or not actually earned, for the year in which the Change in
Control occurred and for the year prior thereto. For purposes hereof, a
"Change in Control" shall be deemed to have occurred in the
<PAGE> 18
event of (i) a merger involving the Company in which the Company is not the
surviving corporation (other than a merger with a wholly-owned subsidiary of
the Company formed for the purpose of changing the Company's corporate
domicile); (ii) a share exchange in which the shareholders of the Company
exchange their stock in the Company for stock of another corporation (other
than a share exchange in which all or substantially all of the holders of the
voting stock of the Company, immediately prior to the transaction, exchange, on
a pro rata basis, their voting stock of the Company for more than 50% of the
voting stock of such other corporation); (iii) the sale of all or substantially
all of the assets of the Company; or (iv) any person or group of persons (as
defined by Section 13(d) of the Securities Exchange Act of 1934, as amended)
(other than any employee benefit plan or employee benefit trust benefitting the
employees of the Company) becoming a beneficial owner, directly or indirectly,
of securities of the Company representing more than fifty (50%) percent of
either the then outstanding Common Stock of the Company, or the combined voting
power of the Company's then outstanding voting securities.
Notwithstanding the provisions of Section 2 "Right to Exercise Option" and
Section 3 "Termination of Employment" of this Agreement, (provided, however,
if this option is an incentive stock option, only if the merger, consolidation
or sale or transfer referred to below occurs after the first anniversary of the
date of grant of this option, and, if this option is held by a person subject
to Section 16(b) of the Securities Exchange Act of 1934, only if such merger,
consolidation or sale or transfer occurs after the date six months after the
date of grant of this option), if, in connection with any merger,
consolidation, or sale or transfer by the Company of substantially all of its
assets, this option is not assumed or continued by the surviving corporation or
the purchaser, the date of termination of this option and the date on or after
which this option, or any portion thereof not then exercisable, may be
exercised, shall be advanced to a date to be fixed by the Committee, which date
shall not be more than 15 days prior to such merger, consolidation, or sale or
transfer; provided however, that the Committee shall have the right, at any
time prior to the occurrence of such merger, consolidation or sale or transfer,
to modify the provisions of this paragraph, including the termination of all of
the Optionee's rights set forth in this paragraph, to the extent required under
applicable accounting and Securities and Exchange Commission rules,
regulations, policies, guidelines or other similar requirements to permit the
Company to account for a then contemplated business combination under
pooling-of-interests accounting.
4. EXERCISE OF OPTION.
(a) At any time that this option may be exercised as provided in this
Agreement, the Optionee may exercise any portion of this option which is then
exercisable, in whole or in part, by delivery to the Company of a written
notice, in the form attached hereto, signed by the Optionee.
(b) In addition, the Optionee shall deliver, on the date of exercise:
(i) cash equal to the purchase price of the shares being purchased,
(ii) such documents as are or may be required under the terms of Section
5.3 of the Plan to effect a cashless exercise,
<PAGE> 19
(iii) Permitted Shares with a value (determined as of the date of exercise
of the option) equal to the purchase price of the shares being purchased (the
"Delivered Shares Method"), or
(iv) the authorization of the Company to retain (or forfeit) then
exercisable options issued to the Optionee under the Plan ("Forfeited Options")
with a value (as defined in the Plan) equal to the purchase price of the shares
being purchased (the "Forfeiture of Stock Options Method"). In order to use
the Forfeiture of Stock Options Method, the Optionee must then own, and have
owned for at least six months prior thereto, a number of shares of Company
Common Stock at least equal in number to the number of shares of Common Stock
underlying the Forfeited Options.
(c) "Permitted Shares" are shares of Company Common Stock to be delivered
to pay the exercise price of the option (the "Delivered Shares"):
(i) which have been owned by the Optionee for at least six months prior to
the date of delivery, or
(ii), if they have not been owned by the Optionee for at least six months
prior to the date of delivery, the Optionee then owns, and has owned for at
least six months prior thereto, a number of shares of Company Common Stock at
least equal in number to the Delivered Shares.
(d) Forfeited Options shall expire and be of no further force and effect
as of the date forfeited.
(e) Shares which have been counted during the prior six months as owned by
the Optionee for purposes of determining whether the Optionee may exercise
options to purchase Common Stock pursuant to the Delivered Shares Method or the
Forfeiture of Stock Options Method:
(i) may not be used as Delivered Shares, and
(ii) may not be counted as owned by the Optionee for purposes of making
calculations under the Delivered Shares Method or Forfeiture of Stock Options
Method.
5. COMPLIANCE WITH SECURITIES LAWS. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock under this
option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities, and
applicable stock exchange requirements, as the Company deems necessary or
advisable.
6. NON-ASSIGNABILITY. The option hereby granted shall not be transferable
by the Optionee other than by will or the laws of descent and distribution, and
the option may be exercised during the Optionee's lifetime only by the
Optionee. Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the option shall
be
<PAGE> 20
effective to bind the Company unless the Company shall have been furnished with
written notice thereof and a copy of the will and/or such other evidence as the
Company may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of this
Agreement. No assignment or transfer of this option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, except a transfer by the Optionee by will or by the laws of descent
and distribution, shall vest in the purported assignee or transferee any
interest or right herein whatsoever.
7. DISPUTES. As a condition of the granting of the option granted hereby,
the Optionee and the Optionee's successors and assigns agree that any dispute
or disagreement which shall arise under or as a result of this Agreement shall
be determined by the Committee in its sole discretion and judgment and that any
such determination and any interpretation by the Committee of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
8. ADJUSTMENTS. In the event of any stock dividend, stock split,
reclassification, merger, consolidation, or similar transaction affecting the
shares covered by this option, the rights of the Optionee shall be as provided
in Section 8 of the Plan and any adjustment therein provided shall be made in
accordance with Section 8 of the Plan.
9. RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder of the Company with respect to any of the shares covered by this
option until the issuance of a stock certificate or certificates upon the
exercise of the option in full or in part, and then only with respect to the
shares represented by such certificate or certificates.
10. NOTICES. Every notice relating to this Agreement shall be in writing
and if given by mail shall be given by registered or certified mail with return
receipt requested. All notices to the Company shall be delivered to the
Secretary of the Company at the Company's headquarters or addressed to the
Secretary of the Company at the Company's headquarters. All notices by the
Company to the Optionee shall be delivered to the Optionee personally or
addressed to the Optionee at the Optionee's last residence address as then
contained in the records of the Company or such other address as the Optionee
may designate. Either party by notice to the other may designate a different
address to which notices shall addressed. Any notice given by the Company to
the Optionee at the Optionee's last designated address shall be effective to
bind any other person who shall acquire rights hereunder.
11. "OPTIONEE" TO INCLUDE CERTAIN TRANSFEREES. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances where
the provision should logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons.
12. GOVERNING LAW. This Agreement has been made in and shall be construed
in accordance with the laws of the State of Michigan.
<PAGE> 21
13. PROVISIONS OF PLAN CONTROLLING. The provisions hereof are subject to
the terms and provisions of the Plan copies of which are available for review
upon request. In the event of any conflict between the provisions of this
option and the provisions of the Plan, the provisions of the Plan shall
control, except to the extent that the provisions of this option limit or
restrict the rights of the Optionee to a greater extent than set forth in the
Plan.
14. WITHHOLDING. The Optionee hereby authorizes the Company to withhold
from his compensation or agrees to tender the applicable amount to the Company
to satisfy any requirements for withholding of income and employment taxes in
connection with the exercise of the option granted hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PERCEPTRON, INC.
By: ______________________________
Title: ________________________
__________________________________
________________________, Optionee
<PAGE> 22
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION
UNDER THE PERCEPTRON, INC.
1992 STOCK OPTION PLAN
Perceptron, Inc.
47827 Halyard Drive
Plymouth, MI 48170
Dear Sir:
A non-qualified stock option was granted to me on _____________, 19__ to
purchase __________ shares of Perceptron, Inc. Common Stock at a price of
$___________ per share.
I hereby elect to exercise my non-qualified stock option with respect to
shares for an aggregate purchase price of $__________. I hereby elect to
pay for such shares as follows:
Personal Check $_____
Cash $_____
Bank Draft $_____
Money Order $_____
Cashless Exercise $_____
Perceptron Common Stock $_____
Retention of Stock Options $_____
Total $
======
[A personal check [or cash, bank draft or money order] for the purchase
price is enclosed herewith.]
[Documents as are required to effect a cashless exercise are enclosed.]
[I hereby elect to exercise my stock option with respect to
shares through a combination of cash payments and shares of Perceptron, Inc.
Common Stock, as described on the attached Exhibit A. A personal check for the
purchase price to be paid in cash is enclosed herewith. Certificates for
shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a
duly executed stock power in proper form for transfer, with all signatures
properly guaranteed by a national bank or member firm of the NYSE or AMEX. [I
represent that the shares of Perceptron, Inc. Common Stock enclosed herewith
have been owned by me for more than six months.] or [I currently own more than
shares of Perceptron, Inc. Common Stock which have been owned by me for
more than six months]. Such shares have not been counted during the prior six
months as owned by me for purposes of determining whether I may exercise
options to purchase Common Stock pursuant to the Delivered Shares Method or the
Forfeiture of Stock Options Method.]
<PAGE> 23
[I hereby authorize the Company to retain options to purchase
shares of Perceptron, Inc. Common Stock granted pursuant to this stock option
(the "Forfeited Options"). I hereby acknowledge and agree that, as of the date
set forth below, the Forfeited Options shall no longer be exercisable, and
shall expire and have no further force and effect. I represent that I
currently own more than shares of Perceptron, Inc. Common Stock which
have been owned by me for more than six months. Such shares have not been
counted during the prior six months as owned by me for purposes of determining
whether I may exercise options to purchase Common Stock pursuant to the
Delivered Shares Method or the Forfeiture of Stock Options Method.]
I represent that the shares of stock that I am purchasing upon this
exercise of my option are being purchased for investment purposes and not with
a view to resale. This representation shall not be binding upon me if the
shares of Common Stock that I am purchasing are subject to an effective
Registration Statement under the Securities Act of 1933.
__________________________________
Optionee
Dated __________, 19__
<PAGE> 24
AMENDMENT TO STOCK OPTION
AGREEMENTS UNDER THE PERCEPTRON, INC.
1992 STOCK OPTION PLAN
THIS AMENDMENT TO STOCK OPTION AGREEMENTS UNDER THE PERCEPTRON, INC. 1992
STOCK OPTION PLAN, made effective as of the date set forth below, by and
between Perceptron, Inc., a Michigan corporation (the "Company"), and the
person signing as Optionee set forth below (being referred to herein as an
"Optionee") hereby amends all stock option agreements between the Company and
the Optionee currently outstanding under the 1992 Stock Option Plan.
For good and valuable consideration, receipt of which is hereby
acknowledged, including, but not limited to, eligibility to participate in the
1997 Bonus Plan,upon the terms and conditions approved by the Management
Development and Compensation Committee, the Company and the Optionee hereby
agree to amend the Option Agreements as set forth below.
1. DEFINED TERMS. Terms defined in the Option Agreements shall be used in
this Amendment with their defined meanings unless otherwise defined herein.
2. AMENDMENT OF THE OPTION AGREEMENT. Section 4 of the Option Agreements
shall be amended to add the following thereto:
The Optionee may deliver shares of Company Common Stock in payment
of the purchase price of the shares being purchased (the "Delivered
Shares Method") only if either (i) the shares of Company Common Stock
being so delivered (the "Delivered Shares") have been owned by the
Optionee for at least six months prior to the date of delivery, or (ii),
if the Delivered Shares have not been owned by the Optionee for at least
six months prior to the date of delivery, the Optionee, at the date of
delivery of the Delivered Shares, then owns, and has owned for at least
six months prior thereto, a number of shares of Company Common Stock at
least equal in number to the Delivered Shares.
If the Option Agreement permits the Optionee to authorize the
Company to retain exercisable options in payment of the purchase price of
shares being purchased (the "Retention of Stock Options Method"), then
the Optionee may so authorize the Company to retain exercisable options
(the "Retained Options") only if, at the date of such authorization, the
Optionee then owns, and has owned for at least six months prior thereto,
a number of shares of Company Common Stock at least equal in number to
the number of shares of Common Stock underlying the Retained Options.
Shares which have been counted during the prior six months as owned
by the Optionee for purposes of determining whether the Optionee may
exercise options to purchase Common Stock pursuant to the Delivered
Shares Method or the Retention of Stock Options
<PAGE> 25
Method may not be used as Delivered Shares and may not be counted as
owned by the Optionee for purposes of the foregoing calculations.
3. CONTINUED EFFECTIVENESS. Except as specifically amended hereby,
the terms and provisions of the Option Agreements shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment has been executed as of________, 1997.
PERCEPTRON, INC.
By:_______________________
Title:____________________
__________________________
OPTIONEE
<PAGE> 1
EXHIBIT 10.27
USAGE: 2/28/97
NON-QUALIFIED STOCK OPTION AGREEMENT
UNDER THE PERCEPTRON, INC.
DIRECTORS STOCK OPTION PLAN
THIS STOCK OPTION AGREEMENT is made this __ day of __________,__, by
and between Perceptron, Inc., a Michigan corporation (the "Company"), and
_______________, (the "Optionee"). The Optionee is now serving as an Eligible
Director of the Company, and the Company desires to provide additional
incentive to the Optionee to encourage the Optionee to remain as an Eligible
Director of the Company, and as an inducement thereto, the Company has
determined to grant to the Optionee a non-qualified stock option pursuant to
the Company's Directors Stock Option Plan (the "Plan").
NOW, THEREFORE, it is agreed between the parties as follows:
1. Grant of Option. Subject to the terms and conditions hereof, the
Company hereby grants to the Optionee the right and option to purchase from the
Company up to, but not exceeding in the aggregate, ________________ shares of
the Company's Common Stock, at a price of $_____ per share. This option is not
intended to meet the requirements of an incentive stock option under Section
422 of the Internal Revenue Code (the "Code"). Certain capitalized terms used
in this Agreement shall have the same meaning as defined in the Plan.
2. Accrual or Right to Exercise Option. The option hereby granted may not
be exercised prior to ________________. On ________________, this option shall
be fully exercisable. Any provision of this Agreement notwithstanding, this
option shall not be exercisable on or after the date ten years from the date of
grant of this option (the "Expiration Date").
Notwithstanding the foregoing, (i) in the event of a termination by the
Company of the Optionee's membership on the Board or failure to renominate the
Participant for election to the Board, or voluntary resignation by the Optionee
from the Board at the request of the Board, following a Change in Control of
the Company, or (ii), in the event of a Change in Control, if one of the
corporations surviving the Change in Control or the person purchasing the
Company's assets in the Change in Control does not assume this option, any
portion of this option that is then not exercisable shall become immediately
exercisable. For purposes hereof, a "Change in Control" shall be deemed to
have occurred in the event of (i) a merger involving the Company in which the
Company is not the surviving corporation (other than a merger with a
wholly-owned subsidiary of the Company formed for the purpose of changing the
Company's corporate domicile); (ii) a share exchange in which the shareholders
of the Company exchange their stock in the Company for stock of another
corporation (other than a share exchange in which all or substantially all of
the holders of the voting stock of the Company, immediately prior to the
transaction, exchange, on a pro rata basis, their voting stock of the Company
for more than 50% of the voting stock of such other corporation); (iii) the
sale of all or substantially all of the assets of the Company; or (iv) any
person or group of persons (as defined by Section 13(d) of the Exchange Act)
(other than any employee
<PAGE> 2
benefit plan or employee benefit trust benefitting the employees of the
Company) becoming a beneficial owner, directly or indirectly, of securities of
the Company representing more than fifty (50%) percent of either the then
outstanding Common Stock, or the combined voting power of the Company's then
outstanding voting securities.
3. Termination. Subject to certain change in control provisions set forth
in Section 2 above, if the Optionee's term of office as an Eligible Director is
terminated for any reason (including the Optionee becoming an Employee), other
than the Optionee's election or appointment as Chairman, prior to the date that
this option or a portion thereof first becomes exercisable, such option or
portion thereof which is not then exercisable shall terminate and all rights
thereunder shall cease. If the Optionee's term of office as an Eligible
Director terminates due to the Optionee's election or appointment as Chairman
(and the Optionee is not an Employee or does not become an Employee as a result
of such election or appointment), this Option shall not terminate and shall
continue to become exercisable as provided in Section 2 above. If thereafter
such Chairman becomes an Employee, or ceases to be a Director, prior to the
date this option or a portion thereof first becomes exercisable, such option or
portion thereof which is then not exercisable shall terminate and all rights
hereunder relating thereto shall cease.
To the extent this option or any portion thereof is exercisable and
unexercised on the date the Optionee's term of office as an Eligible Director
is terminated for any reason (including the Optionee becoming an Employee),
other than the Optionee's election or appointment as Chairman, this option
shall terminate on the earlier of (i) the Expiration Date of this option, and
(ii) three months after such termination; provided, however, that the exercise
period in clause (ii) shall be extended to one year after termination if the
termination is due to the Optionee's death or Disability. To the extent an
Option or any portion thereof is exercisable and unexercised on the date of the
Optionee's term of office as an Eligible Director is terminated due to the
Optionee's election or appointment as the Chairman (and the Optionee is not an
Employee or does not become an Employee as a result of such election or
appointment), this option shall terminate on the earlier of (i) the Expiration
Date of this option, and (ii) three months after the Optionee becomes an
Employee or ceases to be a Director; provided, however, that the exercise
period in clause (ii) shall be extended to one year after the Optionee ceases
to be a Director if such termination is due to the Optionee's death or
Disability. Notwithstanding the foregoing two sentences, in the event this
option would otherwise expire during any period during which affiliates of the
Company are prohibited from disposing of Common Stock in order to comply with
applicable accounting and Securities and Exchange Commission rules,
regulations, policies, guidelines or other similar requirements so as to permit
the Company to account for a then completed or contemplated business
combination under pooling of interest, the exercise period in clause (ii) of
the foregoing two sentences shall be extended to the tenth business day
following the expiration of any such period in which such dispositions are
prohibited.
4. EXERCISE OF OPTION.
(a) At any time that this option may be exercised as provided in this
Agreement, the
2
<PAGE> 3
Optionee may exercise any portion of this option which is then exercisable, in
whole or in part, by delivery to the Company of a written notice, in the form
attached hereto, signed by the Optionee.
(b) In addition, the Optionee shall deliver, on the date of exercise:
(i) cash equal to the purchase price of the shares being
purchased,
(ii) such documents as are or may be required under the
terms of Section 2.6 of the Plan to effect a cashless
exercise;
(iii) Permitted Shares with a value (determined as of
the date of exercise of the option) equal to the
purchase price of the shares being purchased (the
"Delivered Shares Method"), or
(iv) the authorization of the Company to retain (or
forfeit) then exercisable options issued to the
Optionee under the Plan ("Forfeited Options")
with a value (as defined in the Plan) equal to the
purchase price of the shares being purchased (the
"Forfeiture of Stock Options Method"). In order to
use the Forfeiture of Stock Options Method, the
Optionee must then own, and have owned for at least
six months prior thereto, a number of shares of
Company Common Stock at least equal in number to the
number of shares of Common Stock underlying the
Forfeited Options.
After receipt of the foregoing, and subject to Section 5 below, the
Company shall issue the shares in the name of the Optionee and deliver the
certificates therefor to the Optionee.
(c) "Permitted Shares" are shares of Company Common Stock to be delivered
to pay the exercise price of the option (the "Delivered Shares):
(i) which have been owned by the Optionee for at least
six months prior to the date of delivery, or
(ii) if they have not been owned by the Optionee for at
least six months prior to the date of delivery, the
Optionee then owns, and has owned for at least six
months prior thereto, a number of shares of Company
Common Stock at least equal in number to the
Delivered Shares.
(d) Forfeited Option shall expire and be of no further force and effect as
of the date forfeited.
(e) Shares which have been counted during the prior six months as owned by
the Optionee for purposes of determining whether the Optionee may exercise
options to purchase Common Stock pursuant to the Delivered Shares Method or the
Forfeiture of Stock Options Method:
3
<PAGE> 4
(i) may not be used as Delivered Shares, and
(ii) may not be counted as owned by the Optionee for
purposes of making calculations under the
Delivered Shares Method or Forfeiture of Stock
Options Method.
5. Compliance With Securities Laws. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock under this
Option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities as
the Company deems necessary or advisable. The Company shall not be required to
sell and deliver stock pursuant hereto unless and until it receives
satisfactory proof that the issuance or transfer of such shares will not
violate any of the provisions of the Securities Act of 1933 or the Securities
Exchange Act of 1934 or the rules and regulations of the Securities Exchange
Commission promulgated thereunder or the provisions of any state law governing
the sale of securities, or that there has been compliance with the provisions
of such acts, rules, regulations and state laws. If the Optionee fails to
accept delivery and pay for all or any part of the number of shares specified
by such notice upon tender of delivery thereof the Optionee's right to exercise
this option with respect to such undelivered shares may be terminated by the
Company.
6. Non-Assignability. The option hereby granted shall not be transferable
by the Optionee other than by will or the laws of descent and distribution, and
the option may be exercised during the Optionee's lifetime only by the
Optionee. Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the Option shall
be effective to bind the Company unless the Company shall have been furnished
with written notice thereof and a copy of the will and/or such other evidence
as the Company may deem necessary to establish the validity of the transfer and
the acceptance by the transferee or transferees of the terms and conditions of
this Agreement. No assignment or transfer of this Option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, except a transfer by the Optionee by will or by the laws of descent
and distribution, shall vest in the purported assignee or transferee any
interest or right herein whatsoever.
7. Disputes. As a condition to the granting of the option granted hereby,
the Optionee and the Optionee's successors and assigns agree that any dispute
or disagreement which shall arise under or as a result of this Agreement shall
be determined by the Board in its sole discretion and judgment and that any
such determination and any interpretation by the Board of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
8. Adjustments. In the event of any stock dividend, stock split,
recapitalization, reorganization, merger, consolidation, combination, exchange
or other relevant change in the capital structure of the Company affecting the
shares covered by this option, the rights of the Optionee shall be as provided
in Section 4.1 of the Plan.
9. Rights as Shareholder. The Optionee shall have no rights as a
shareholder of the
4
<PAGE> 5
Company with respect to any of the shares covered by this option until the
issuance of a stock certificate or certificates upon the exercise of the option
in full or in part, and then only with respect to the shares represented by
such certificate or certificates.
10. Notices. Every notice relating to this Agreement shall be in writing
and if given by mail shall be given by registered or certified mail with return
receipt requested. All notices to the Company shall be delivered to the
Company at the principal office of the Company. All notices by the Company to
the Optionee shall be delivered to the Optionee personally or addressed to the
Optionee at the Optionee's last residence address as then contained in the
records of the Company or such other address as the Optionee may designate.
Either party by notice to the other may designate a different address to which
notices shall be addressed. Any notice given by the Company to the Optionee at
the Optionee's last designated address shall be effective to bind any other
person who shall acquire rights hereunder.
11. "Optionee" to Include Certain Transferees. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances where
the provision should logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons.
12. Governing Law. This Agreement has been made in and shall be construed
in accordance with the laws of the State of Michigan.
13. Provisions of Plan Controlling. The provisions hereof are subject to
the terms and provisions of the Plan. In the event of any conflict between the
provisions of this option and the provisions of the Plan, the provisions of the
Plan shall control, except to the extent that the provisions of this option
limit or restrict the rights of the Optionee to a greater extent than set forth
in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PERCEPTRON, INC.
By: __________________________________
Its: _________________________________
______________________________________
____________________________, Optionee
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION
UNDER THE PERCEPTRON, INC.
<PAGE> 6
DIRECTORS STOCK OPTION PLAN
Perceptron, Inc.
47827 Halyard Drive
Plymouth, MI 48170
Dear Sir:
A non-qualified stock option was granted to me on , , to
purchase shares of Perceptron, Inc. Common Stock at a price of $
per share.
I hereby elect to exercise my non-qualified stock option with respect to
shares for an aggregate purchase price of $ . I hereby elect
to pay for such shares as follows:
Personal Check $
---
$
Bank Draft $
Money Order $
Cashless Exercise $
---
Perceptron Common Stock $
---
Retention of Stock Options $
---
Total $
===
[A personal check [or cash, bank draft or money order] for the purchase price
is enclosed herewith].
[Documents as are required to effect a cashless exercise are enclosed.]
[I hereby elect to exercise my stock option with respect to shares
through a combination of cash payments and shares of Perceptron, Inc. Common
Stock, as described on the attached Exhibit A. A personal check for the
purchase price to be paid in cash is enclosed herewith. Certificates for
shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a
duly executed stock power in proper form for transfer, with all signatures
properly guaranteed by a national bank or member firm of the NYSE or AMEX. [I
represent that the shares of Perceptron, Inc. Common Stock enclosed herewith
have been owned by me for more than six months.] or [I currently own more than
shares of Perceptron, Inc. Common Stock which have been owned by me for
more than six months.] Such shares have not been counted during the prior six
months as owned by me for purposes of determining whether I may exercise
2
<PAGE> 7
options to purchase Common Stock pursuant to the Delivered Shares Method or the
Forfeiture of Stock Options Method.]
[I hereby authorize the Company to retain options to purchase
shares of Perceptron, Inc. Common Stock granted pursuant to this stock option
(the "Forfeited Options"). I hereby acknowledge and agree that, as of the date
set forth below, the Forfeited Options shall no longer be exercisable, and
shall expire and have no further force and effect. I represent that I
currently own more than shares of Perceptron, Inc. Common Stock which
have been owned by me for more than six months. Such shares have not been
counted during the prior six months as owned by me for purposes of determining
whether I may exercise options to purchase Common Stock pursuant to the
Delivered Shares Method or the Forfeiture of Stock Options Method.]
__________________________________
________________________, Optionee
Dated ______________________
3
<PAGE> 8
AMENDMENT TO STOCK OPTION
AGREEMENTS UNDER THE PERCEPTRON, INC.
DIRECTORS STOCK OPTION PLAN
THIS AMENDMENT TO THE STOCK OPTION AGREEMENTS listed on Exhibit A (the
"Option Agreements"), made effective as of the date set forth below, by and
between Perceptron, Inc., a Michigan corporation (the "Company"), and the
person signing as Optionee set forth below (being referred to herein as an
"Optionee").
For good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Optionee hereby agree to amend the Option
Agreements as set forth below.
1. DEFINED TERMS. Terms defined in the Option Agreements shall be used in
this Amendment with their defined meanings unless otherwise defined herein.
2. AMENDMENT OF THE OPTION AGREEMENT. Section 4 of the Option Agreements
shall be amended to add the following thereto:
The Optionee may deliver shares of Company Common Stock in payment
of the purchase price of the shares being purchased (the "Delivered
Shares Method") only if either (i) the shares of Company Common Stock
being so delivered (the "Delivered Shares") have been owned by the
Optionee for at least six months prior to the date of delivery, or (ii),
if the Delivered Shares have not been owned by the Optionee for at least
six months prior to the date of delivery, the Optionee, at the date of
delivery of the Delivered Shares, then owns, and has owned for at least
six months prior thereto, a number of shares of Company Common Stock at
least equal in number to the Delivered Shares.
If the Option Agreement permits the Optionee to authorize the
Company to retain exercisable options in payment of the purchase price of
shares being purchased (the "Retention of Stock Options Method") then the
Optionee may so authorize the Company to retain exercisable options (the
"Retained Options") only if, at the date of such authorization, the
Optionee then owns, and has owned for a least six months prior thereto, a
number of shares of Company Common Stock at least equal in number to the
number of shares of Common Stock underlying the Retained Options.
Shares which have been counted during the prior six months as owned
by the Optionee for purposes of determining whether the Optionee may
exercise options to purchase Common Stock pursuant to the Delivered
Shares Method or the Retention of Stock Options Method may not be used as
Delivered Shares and may not be counted as owned by the Optionee for
purposes of the foregoing calculations.
<PAGE> 9
3. CONTINUED EFFECTIVENESS. Except as specifically amended hereby, the
terms and provisions of the Option Agreements shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment has been executed as of __________, 1997.
PERCEPTRON, INC.
By: ______________________________
Title:____________________________
__________________________________
OPTIONEE
<PAGE> 10
EXHIBIT A
Directors Stock Option Plan Grants
Optionee Name:
<TABLE>
<CAPTION>
Date of Number of Exercise
Option Agreement Option Shares* Price*
- ---------------- -------------- --------
<S> <C> <C>
</TABLE>
*For option agreements issued after November 20, 1995, adjusted to reflect
3-for-2 stock split of Perceptron, Inc. Common Stock which was effected in the
form of a stock dividend payable on November 30, 1995 to shareholders of record
on November 20, 1995.
<PAGE> 1
EXHIBIT 10.34
1. Operating Goals:
<TABLE>
<CAPTION>
1996 Operating Goals %Bonus Allocation
-------------------- -----------------
<S> <C> <C>
Bookings Goal $55,000,000 40% of Total
Revenue Goal $50,000,000 30% of Total
Pre-Tax Income Goal $14,448,000 30% of Total
</TABLE>
(Net Income goal is after budgeted expenses for bonus
and stock option compensation expense)
2. Bonus Plans:
<TABLE>
<CAPTION>
Plan Payout Methodology
------------ ---------------------------------------------------
<S> <C>
Officer Plan 1. 70% based on company achievement of operating goals
2. 30% based on the sole discretion of
the Management Development and
Compensation Committee, with the same
discretionary % applied to each
individual officer's bonus
Manager Plan 1. 75% based on company achievement of
operating goals
2. 25% based on the manager's overall
performance, as determined by the
manager's supervisor
Team Plan 1. 100% based on company achievement of
operating goals
</TABLE>
3. Plan Administration:
1. The plan will be administered by the Management
Development and Compensation Committee of the Board of
Directors.
2. No bonuses will be earned under any plan, unless
75% of the net income element of the operating goal is
achieved.
3. Participants must be employed on or before June
30, 1996, and must be employed on December 31, 1996 to be
eligible. Those employed between January 1, 1996 and June 30,
1996, will receive a pro-rata portion of their individual
bonus potential. Each individual will have a specified bonus
potential (yet to be specifically identified).
4. Bonuses to be paid within thirty days of the
completion of the 1996 audit.
5. That portion of the 1996 bonus that is based on
company achievement of operating goals will begin being earned
upon the company achievement of 75% of each of the three
individual operating goal elements (bookings, revenue and net
income).
6. Earned bonuses will be based on the attached
graph (Exhibit I), which demonstrates the percentages of the
bonuses that will be earned beginning at 75% of operating goal
achievement and continuing at achievement levels in excess of
100%. A separate chart will be prepared for each of the three
elements of bookings, revenue and net income The sum of the
three will be the total bonus earned.
<PAGE> 2
PERCEPTRON, INC.
1996 Bonus Payout
Graph indicting the percent of Bonus which is earned if various percentage
levels of operating goals are achieved, with (i) 0% of Bonus earned if 75% of
operating goals are achieved, (ii) increasing linearly to 100% of Bonus earned
if 100% of operating goals are achieved and (iii), thereafter, increasing
linearly at one-half the slope, with 150% of Bonus earned if 125% of operating
goals are achieved and 200% of Bonus earned if 150% of operating goals are
achieved.
<PAGE> 1
EXHIBIT 10.36
February 14, 1996
Mr. Alfred A. Pease
5476 Cleo Court
Livermore, California 94550
Dear Al:
This letter sets forth the terms of your employment with Perceptron, Inc.
(the "Company") as President and Chief Executive Officer.
1. Base Salary. Your base salary shall be $200,000 per annum, subject to
increase from time to time at the sole discretion of the Company's
Management Development and Compensation Committee. Your salary shall be
payable in installments consistent with the Company's regular payroll
practices as they may exist from time to time.
2. Appointment. You have been appointed by the Company's Board of Directors
and shall report to the Board of Directors of the Company (the "Board of
Directors"). You shall serve at the pleasure of the Board of Directors
and may be removed from that position and/or your employment may be
terminated at any time, with or without cause, at the sole discretion of
the Board of Directors. The Board of Directors shall determine your
powers and duties, which may be modified from time to time. You shall
devote your full time, attention and best efforts to the performance of
your duties for the Company. For your information, you have been elected
as a member of the Board of Directors, effective as of the date of this
Agreement.
3. Bonus: You shall have an annual targeted bonus opportunity equal to 60%
of the base salary paid to you in each calendar year, to be earned upon
the achievement of objectives and other terms and conditions established
by the Board of Directors or the Management Development and Compensation
Committee and to be paid within thirty days following completion of the
audit of the Company's financial statements for such calendar year. For
1996, such bonus opportunity shall be earned and payable in accordance
with the provisions of the 1996 Bonus Program - Officer Plan, attached
hereto as Exhibit A. In addition, you may be eligible for such other
bonuses as may be determined by the Board of Directors or Management
Development and Compensation Committee in their sole discretion from time
to time.
<PAGE> 2
Mr. Alfred A. Pease
February 14, 1996
Page 2
4. Benefits: You shall be eligible for the same employee benefits for which
the Company's other executive officers are eligible, except that your
severance benefits shall be solely governed by this Agreement. Such
benefits currently include:
(a) Group life insurance in the amount of $50,000.
(b) A $500,000 life insurance policy with the beneficiary of your
choice, subject to your insurability, with the Company paying the
normal, non-smoking, healthy individual rates for such policy, up to a
maximum of $1,800 per year, and your paying any excess.
(c) Long-term disability income insurance, subject to your
insurability, amounting to 70% of your monthly income, up to a maximum
of $5,000 per month.
(d) Group health insurance, major medical program and a family dental
program. You will be required to contribute a portion of the premium
for family coverage.
(e) Use of an automobile in accordance with the Company's standard
policy.
The employee benefits available to the Company's executive officers, and so
to you, may be changed from time to time to provide greater or lesser
coverage at the sole discretion of the Board of Directors or the Management
Development and Compensation Committee.
The Company shall reimburse you for all reasonable out-of-pocket expenses
incurred by you in the course of performing your duties under this
Agreement which are consistent with the Company's policies in effect from
time to time with respect to reimbursement of travel, entertainment and
other business-related expenses.
5. Relocation Expenses. For a period of up to four months following the
start of your employment, the Company shall reimburse you for your actual
reasonable out-of-pocket housing and related costs (including rent,
insurance, utilities, telephone, laundry) in the state of Michigan, in an
aggregate amount of not more than $1,800 per month. For a period of up to
four months, or if earlier, your relocation of your permanent residence to
the state of Michigan, the Company will reimburse you for your (or your
spouse's) actual reasonable out-of-pocket expenses for round-trip travel
from your present residence in Livermore, California to Michigan, up to an
aggregate of three such trips per month. You agree that you will use your
reasonable best efforts to obtain the most economical fares available for
such trips. The Company shall reimburse you for your actual reasonable
out-of-pocket expenses incurred in connection with the shipment of your
household possessions to the state of Michigan and for your actual
reasonable out-of-pocket lodgings, meals and other travel expenses
incurred en route in moving your family to the state of Michigan. The
following additional direct
<PAGE> 3
Mr. Alfred A. Pease
February 14, 1996
Page 3
expenses incurred by you will be reimbursed by the Company: (a) All real
estate salesman's commissions paid by you on the sale of your current
residence at 5476 Cleo Ct., Livermore, CA 94550 ("Current Residence"), up
to 6% of the gross proceeds realized by you from such sale. (b) Up to 3
points (including loan origination fees) incurred in connection with your
purchase of a residence in Michigan ("New Residence"). (c) Normal and
reasonable closing costs incurred by you in connection with the sale of
your Current Residence if typically paid by the seller and normal and
reasonable closing costs incurred by you in connection with your purchase
of a New Residence if typically paid by the purchaser. Closing costs shall
be defined as transfer taxes, documentary stamp taxes, title insurance
premiums, recording charges, appraisals, inspections, attorneys fees,
escrow fees and such other normal and reasonable closing costs as are
specifically approved by the Chairman of the Board or the Chairman of the
Management Development and Compensation Committee. Closing costs shall not
include payments required at closing for real property taxes or
assessments, or proration of utilities or other prepaid expenses. (d) You
will be reimbursed $17,000 for non-accountable incidental expenses incurred
by you or your family in connection with your relocation to Michigan. Any
housing or relocation expenses to be reimbursed by the Company in addition
to those set forth above will be reviewed by, and subject to the approval
of, the Chairman of the Board or the Chairman of the Management Development
and Compensation Committee, on an as needed basis. The reimbursements for
housing and relocation expenses set forth in this Section 5 shall be
referred to collectively in this Agreement as "Relocation Expense
Reimbursements." The Company shall also pay you an amount (the "Tax
Gross-Up Payment"), calculated as follows:
TGU = R x [1/(1-MT)-1]
Where
TGU = Tax Gross-Up Payment, in dollars
R = Relocation Expense Reimbursements subject to
federal, state or local taxes, in dollars
MT = The actual rate of tax reasonably expected to be
applicable to you with respect to federal, state and
local income taxes payable on the Relocation Expense
Reimbursement, expressed fractionally (for example, 32% = .32)
The Tax Gross-Up Payment shall be paid at the same time as the
reimbursement of the related taxable Relocation Expense Reimbursement. The
portion of the payment that represents the Tax Gross-Up Payment over and
above the Relocation Expense Reimbursement shall be withheld by the Company
and applied to your federal, state, and local income taxes.
<PAGE> 4
Mr. Alfred A. Pease
February 14, 1996
Page 4
6. Severance.
(a) In the event of the termination of your employment Without Cause
(as defined below), upon your execution of a release in the form
attached hereto as Exhibit B, the Company will continue your base
salary and employee benefits ("Severance Benefits") for twelve months
after termination and you shall have the right to earn a Pro Rata
Share of any bonus that you would have earned if you had been employed
by the Company at the end of the bonus period in which your employment
was terminated.
(b) If your employment with the Company terminates for any reason,
other than a termination Without Cause, or is terminated by the
Company as a result of your disability or death, you shall not be
entitled to any severance payments or benefits, to the extent
permitted by law and the terms of such benefit programs, for periods
after your Disability or death, except that in the case of your
Disability or death you shall have the right to earn a Pro Rata Share
of any bonus that you would have earned if you had been employed by
the Company at the end of the applicable bonus period.
(c) The effect of the termination of your employment on options to
purchase the Company's Common Stock held by you shall be governed by
the terms of the agreements pursuant to which such options were
issued.
(d) A Pro Rata Share of any bonus shall mean the total bonus payable
to you multiplied by a fraction, the numerator of which is the number
of days in the applicable bonus period prior to the date of death or
Disability and the denominator of which is the number of days in the
bonus period (or, in the case of 1996, the number of days from the
date of this letter to December 31, 1996).
(e) Termination of your employment "Without Cause" shall be defined
as termination of your employment by the Company for any reason other
than (i) your personal dishonesty in connection with your performance
of services for the Company, (ii) your willful misconduct in
connection with your performance of services for the Company, (iii)
your conviction for violation of any law (other than minor traffic
violations or similar offenses); (iv) your repeated and intentional
failure to perform stated duties, after written notice is delivered
identifying the failure, and it is not cured within ten (10) days
following receipt of such notice, (v) your accepting employment or
rendering services which are detrimental or inimical to the interests
of the Company or engaging in conduct which adversely affects or
conflicts with the interest of the Company, and your failure to cease
the same within five (5) days following written notice to you by the
Company identifying the same and requesting you to cease the same,
(vi) death or (vii) Disability. "Disability" means your inability to
substantially perform your stated
<PAGE> 5
Mr. Alfred A. Pease
February 14, 1996
Page 5
duties for such period as would qualify you for benefits under the
long-term disability insurance policy provided by the Company to
you.
(f) Your severance compensation shall be payable in the same manner
as the Base Salary is paid and any Pro Rata Share of a bonus payable
to you hereunder shall be payable at the time set forth in the bonus
program. Base Salary and bonus payments and employee benefits payable
as severance as described above shall not be reduced or suspended if
you accept other employment, except that the Company is not required
to continue any employee benefits which duplicate employee benefits
and perquisites received by you in connection with such subsequent
employment. For purposes of COBRA, your employment shall be deemed to
have terminated as of the date of actual termination of employment
irrespective of the continuation of Base Salary and benefits for
periods thereafter as provided above.
7. Stock Options. The Company will grant you options (the "Original
Options") to purchase 200,000 shares of the Company's Common Stock, under
the Company's 1992 Stock Option Plan, as amended, at an exercise price
equal to the closing high bid and closing low asked price for such Common
Stock as reported on the Nasdaq Stock Market on the date of your offer
letter in the case of non-qualified stock options and on your first day of
full employment in the case of Incentive Stock Options. These options
will be issued as Incentive Stock Options to the extent requested by you,
up to the maximum amount permitted by law, and the remainder will be
issued as non-qualified stock options. These options will be issued in
accordance with the form of option agreement attached hereto as Exhibit C.
The exercisability of the foregoing options will be subject to
shareholder approval, which approval shall be sought at the next annual
shareholder meeting, which is expected to take place in June 1996.
In the event that the Company is unable to obtain shareholder approval of
such options at its next annual shareholder meeting, the Company will grant
you an option to purchase 100,000 shares of the Company's Common Stock (the
"Substitute Option") on terms no less favorable than those applicable to
the Original Options, options to purchase 100,000 of the Original Options
shall expire and be cancelled and the Company and you shall use your
respective best efforts to obtain shareholder approval for the remainder of
the Original Options (i.e. options to purchase 100,000 shares) (the
"Remaining Option"), including presenting the Remaining Option to
shareholders for approval at each subsequent meeting of shareholders until
the same is approved or expires by its terms.
8. Non-Competition and Restrictive Covenant. During the term of your
employment by the Company (which period shall be referred to as "your
Engagement"), and thereafter during the longer of (i) any period in which
the Company is obligated to make payments to you under this Agreement (the
"Payment Completion Period"), or (ii) 12 months from the end of your
engagement (the "Non-Compete Period"), you shall not engage, directly or
indirectly, as
<PAGE> 6
Mr. Alfred A. Pease
February 14, 1996
Page 6
officer, director, shareholder, partner, member, associate, consultant,
owner, agent, independent contractor, employee or otherwise of any person,
firm, corporation or other business engaged, anywhere in the world, (i) in
any business conducted by the Company during your Engagement, or any
business which the Company contemplated or planned, during your Engagement,
to engage in, or (ii) in any business involving the design, development,
manufacture, sale or servicing of laser-based three-dimensional machine
vision sensors and systems utilizing electro-optical techniques or
component parts utilized in such sensors or system (the "Non-Compete
Provisions"); provided that the ownership of one (1%) percent or less of
the stock in any publicly traded corporation in such a business shall not
be violative of the foregoing covenant. In the event that you shall fail
to comply with any of your obligations under the Proprietary Information
Agreement described in Section 9 or under this Section 8, in addition to
any other remedies that the Company may have at law or in equity, your
employment with the Company as an employee shall automatically terminate
and the Company's obligations to you shall automatically terminate and the
Company's obligations to you under Sections 1 through 7 of this letter
agreement for periods thereafter shall automatically terminate.
9. Confidentiality. You hereby agree to enter into the Company's standard
"Proprietary Information and Inventions Agreement" attached hereto as
Exhibit D.
10. Counterparts. This Agreement may be executed in several counterparts and
all such executed copies shall constitute one agreement, binding upon all
parties.
11. Entirety. All negotiations between the parties are merged into this
Agreement and there are no representations or covenants other than those
expressly set forth herein.
12. Benefit and Succession. This Agreement shall inure to the benefit of,
and be binding upon, the parties hereto, their respective successors,
permitted assigns and legal representatives.
13. Amendments. This Agreement may not be amended, modified or abrogated
except in writing subscribed by the parties.
14. Assignment. This Agreement may not be assigned by you without the prior
written consent of the Company.
15. Separability. In the event any portion of this Agreement is declared
void by a court of competent jurisdiction, then and in that event, that
portion shall be deemed severed from this Agreement and the remaining
portion hereof shall remain in full force and effect.
16. Waiver. Unless otherwise noted, no failure on the part of either party
to exercise, and no delay in exercising or course of dealing with respect
to, any right, power or privilege under this
<PAGE> 7
Mr. Alfred A. Pease
February 14, 1996
Page 7
Agreement (or breach of any obligation under any other agreement) shall
operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privileges under this Agreement or any other agreement
(or breach of any obligation under any other agreement) preclude any other
or further exercise thereof or hereunder, or the exercise of any other
right, power or privilege. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
17. Construction. This Agreement shall be construed in accordance with the
laws of the State of Michigan. This Agreement shall be deemed to have
been written jointly by the parties. Ambiguities shall not be construed
against the interest of either party by reason of it having drafted all or
any part of this Agreement.
18. Threatened Breach. If there is a breach or threatened breach of the
provisions of this Agreement, the Company may, in addition to other
available rights and remedies, apply to any court of competent
jurisdiction for specific performance and/or injunctive relief in order to
enforce, or prevent any violation of, any of the provisions of this
agreement.
19. Survival. The provisions set forth in Section 8 and 9 hereof shall
survive any termination of this Agreement.
20. Captions. The captions preceding the paragraphs and subparagraphs hereof
are for convenience and reference only and shall neither be deemed a part
of this Agreement nor be considered in the interpretation thereof.
Sincerely,
PERCEPTRON, INC.
By: /s/ James A. Ratigan
------------------------------
James A. Ratigan
Its Executive Vice President
Accepted and agreed to this
14th day of February, 1996.
/s/ Alfred A. Pease
- ----------------------------------
ALFRED A. PEASE
<PAGE> 8
EXHIBIT A TO THE EMPLOYMENT
AGREEMENT OF ALFRED A. PEASE
PERCEPTRON, INC.
1996 BONUS PROGRAM
1. Operating Goals:
<TABLE>
<S> <C> <C>
1996 Operating Goals %Bonus Allocation
-------------------- -----------------
Bookings Goal $55,000,000 40% of Total
Revenue Goal $50,000,000 30% of Total
Pre-Tax Income Goal $14,448,000 30% of Total
</TABLE>
(Net Income goal is after budgeted expenses for bonus
and stock option compensation expense)
2. Bonus Plans:
<TABLE>
<CAPTION>
Plan Payout Methodology
------------ ---------------------------------------------------
<S> <C>
Officer Plan 1. 70% based on company achievement of operating goals
2. 30% based on the sole discretion of
the Management Development and
Compensation Committee, with the same
discretionary % applied to each
individual officer's bonus
Manager Plan 1. 75% based on company achievement of operating goals
2. 25% based on the manager's overall
performance, as determined by the
manager's supervisor
Team Plan 1. 100% based on company achievement of
operating goals
</TABLE>
3. Plan Administration:
1. The plan will be administered by the Management
Development and Compensation Committee of the Board of
Directors.
2. No bonuses will be earned under any plan, unless
75% of the net income element of the operating goal is
achieved.
3. Participants must be employed on or before June
30, 1996, and must be employed on December 31, 1996 to be
eligible. Those employed between January 1, 1996 and June 30,
1996, will receive a pro-rata portion of their individual
bonus potential. Each individual will have a specified bonus
potential (yet to be specifically identified).
4. Bonuses to be paid within thirty days of the
completion of the 1996 audit.
5. That portion of the 1996 bonus that is based on
company achievement of operating goals will begin being earned
upon the company achievement of 75% of each of the three
individual operating goal elements (bookings, revenue and net
income).
6. Earned bonuses will be based on the attached
graph (Exhibit I), which demonstrates the percentages of the
bonuses that will be earned beginning at 75% of operating goal
achievement and continuing at achievement levels in excess of
100%. A separate chart will be prepared for each of the three
elements of bookings, revenue and net income The sum of the
three will be the total bonus earned.
<PAGE> 9
EXHIBIT B TO EMPLOYMENT AGREEMENT
OF ALFRED A. PEASE
THIS AGREEMENT ("Agreement") is made _______________________, ________, by
and between ALFRED A. PEASE ("Pease") and PERCEPTRON, INC. ("PRCP").
RECITALS
A. Pease has resigned as President and Chief Executive Officer of PRCP,
effective ___________, ____.
B. Pease has been given the opportunity to review this Agreement, to
consult with legal counsel, and to ascertain his rights and remedies.
C. Pease and PRCP, without any admission of liability, desire to settle
with finality, compromise, dispose of, and release any and all claims and
demands asserted or which could be asserted arising out of Pease's employment
at and separation from PRCP.
In consideration of the foregoing and of the promises and mutual covenants
contained herein, it is hereby agreed between Pease and PRCP as follows:
AGREEMENT
1. In exchange for the good and valuable consideration set forth in this
Agreement, Pease hereby releases, waives and discharges any and all manner of
action, causes of action, claims, rights, charges, suits, damages, debts,
demands, obligations, attorneys' fees, and any and all other liabilities or
claims of whatsoever nature, whether in law or in equity, known or unknown,
including, but not limited to, any claim and/or claim of damages or other
relief for tort, breach of contract, personal injury, negligence, age
discrimination under The Age Discrimination In Employment Act of 1967 (as
amended), employment discrimination prohibited by other federal, state or local
laws including sex, race, national origin, marital status, age, handicap,
height, weight, or religious discrimination, and any other claims, which Pease
has claimed or may claim or could claim in any local, state or federal or other
forum, against PRCP, its directors, officers, employees, agents, attorneys,
affiliates, successors and assigns as a result of or relating to Pease's
employment at and separation from PRCP and as an officer of PRCP; or any claim
and/or claim of damages or other relief, in his capacity as a shareholder, or a
representative of any shareholder, of PRCP, or in any other capacity, as a
result of any acts or omissions by PRCP or any of its directors, officers,
employees, agents, attorneys, affiliates, successors or assigns ("Covered Acts
or Omissions") which occurred prior to the date of this Agreement; excluding
only those (i) to compel the payment of amounts due to Pease as provided in the
Employment Agreement (as defined below), (ii) to enforce Pease's other rights
under this Agreement or the Employment Agreement, (iii) to compel PRCP to issue
shares of Common Stock to Pease in accordance with stock option agreements
between Pease and PRCP (the "Option Agreements") or (iv) for indemnification of
Pease under PRCP's articles of incorporation, bylaws or applicable law by
reason of his service as an officer of PRCP or, at the request of PRCP, as a
director or officer of another corporation, joint venture or enterprise.
B-1
<PAGE> 10
2. PRCP hereby releases, waives and discharges any and all manner of
action, causes of action, claims, rights, charges, suits, damages, debts,
demands, obligations, attorney's fees, or any and all other liabilities or
claims of whatsoever nature, whether in law or in equity, known or unknown,
which PRCP has claimed or may claim or would claim in any local, state or
federal forum, against Pease, other than those arising (i) from this Agreement,
(ii) from the Proprietary Information and Inventions Agreement, dated February
14, 1996, executed by Pease and PRCP (other than Section 3 thereof)
("Proprietary Information Agreement"), (iii) from the Option Agreements or (iv)
from any misconduct, fraud, malfeasance or gross negligence of Pease.
3. Pease agrees to immediately return to PRCP all property, assets,
manuals, materials, information, notes, reports, agreements, memoranda,
customer lists, formulae, data, know-how, inventions, trade secrets, processes,
techniques, and all other assets, materials and information of any kind or
nature, belonging or pertaining to PRCP ("PRCP Information and Property"),
including, but not limited to, computer programs and diskettes or other media
for electronic storage of information containing PRCP Information and Property,
in Pease's possession, and Pease shall not retain copies of any such PRCP
Information and Property, except to the extent specifically approved by the
President of PRCP (the "President") in writing and shall return any such PRCP
Information and Property so retained as requested by the President. Pease
further agrees that from and after the date hereof he will not remove from
PRCP's offices any PRCP Information and Property, nor retain possession or
copies of any PRCP Information and Property, except to the extent specifically
approved by the President.
4. Neither party shall make negative, disparaging, defamatory or other
unfavorable comments regarding the other party, or any officer or director of
any such party, to any person; except (a) by Pease (i) to the President or any
person currently serving as an officer of PRCP and who is serving as an officer
on the date such comment is made, but only to the extent required in connection
with Pease's performance of consulting services to PRCP, (ii) to a member of
the Board of Directors of PRCP, or (iii) in connection with the commencement or
prosecution by Pease of litigation as described in the second sentence of
Section 5 of this Agreement, but such comments may only relate to Covered Acts
or Omissions occurring after the date of this Agreement, and (b) except as
required by law. In the event of a breach by Pease of the provisions of
Section 4 of this Agreement, PRCP shall provide written notice of the same to
Pease, specifically identifying the breach. Pease shall thereafter have ten
(10) business days in which to retract such comment, if so requested by PRCP.
Any such breach by Pease of the provisions of Section 4 of this Agreement shall
not constitute grounds for the termination of this Agreement by PRCP. In the
event that PRCP notifies Pease of breaches of the provisions of Section 4 of
this Agreement as described above, and requests a retraction of the same, on
more than one occasion during any six-month period (the "Notice Breaches"),
then PRCP may seek such remedies as it may have at law or in equity relating to
all such breaches after the Notice Breaches; provided that in no event shall
any such breach constitute grounds for the termination of this Agreement by
PRCP.
5. The parties hereto covenant and agree that they shall never commence or
prosecute, or knowingly encourage, promote, assist or participate in any way,
except as required by law, in the commencement or prosecution, of any claim,
demand, action, cause of action or suit of any nature whatsoever against the
other party to this Agreement or any officer, director, employee or agent of
any such party ("Covered Litigation") that is based upon any claim, demand,
action, cause of action or suit (i) released pursuant to Section 1 above or
involving or based upon the Covered Acts and Omissions,
B-2
<PAGE> 11
in the case of Pease's covenant or (ii) released pursuant to Section 2 above,
in the case of PRCP's covenant, except as required by law. Pease further
agrees that in the event he commences or prosecutes, or knowingly encourages,
promotes, assists or participates in any way, except as required by law, in
the commencement or prosecution of, Covered Litigation based upon Covered Acts
or Omissions occurring after the date of this Agreement, as of the date of any
such action (the "Commencement Date") Pease's employment with PRCP as an
employee shall automatically terminate and PRCP's obligations to Pease under
Sections 1 through 7 of the Letter Employment Agreement between Pease and PRCP
dated February 14, 1996 ("Employment Agreement"), or under any other employment
or consulting agreement then in effect, for periods thereafter shall
automatically terminate.
6. Pease further agrees that he has read this Agreement carefully and
understands all of its terms.
7. Pease understands and agrees that he was advised to consult with an
attorney and did so prior to executing this Agreement.
8. Pease understands and agrees that he has been given twenty-one (21)
days within which to consider this Agreement.
9. Pease understands and agrees that he may revoke this Agreement for a
period of seven (7) calendar days following the execution of this Agreement.
This Agreement is not effective until this revocation period has expired.
Pease understands that any revocation, to be effective, must be in writing and
either (a) postmarked within seven (7) days of execution of this Agreement and
addressed to President, Perceptron, Inc., 23855 Research Drive, Farmington
Hills, Michigan 48335 or (b) hand delivered within seven (7) days of execution
of this Agreement to President, Perceptron, Inc., 23855 Research Drive,
Farmington Hills, Michigan 48335. Pease understands that if revocation is
made by mail, mailing by certified mail, return receipt requested, is
recommended to show proof of mailing.
10. In agreeing to sign this Agreement and separate from PRCP, Pease is
doing so completely voluntarily and of his own free-will and without any
encouragement or pressure from PRCP and agrees that in doing so he has not
relied on any oral statements or explanations made by PRCP or its
representatives.
11. Both parties agree not to disclose the terms of this Agreement to any
third party, except as is required by law, or as is necessary for purposes of
securing counsel from either parties' attorneys or accountants.
12. This Agreement shall not be construed as an admission of wrongdoing by
either Pease or PRCP.
13. This Agreement contains the entire agreement between Pease and PRCP.
Any modification of this Agreement must be made in writing and signed by Pease
and an authorized officer of PRCP.
B-3
<PAGE> 12
14. This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of Michigan, without giving effect to any choice
of law or conflict of law provision or
rule (whether of the State of Michigan or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Michigan.
15. In the event any provision of this Agreement or portion thereof is
found to be wholly or partially invalid, illegal or unenforceable in any
judicial proceeding, then such provision shall be deemed to be modified or
restricted to the extent and in the manner necessary to render the same valid
and enforceable, or shall be deemed excised from this Agreement, as the case
may require, and this Agreement shall be construed and enforced to the maximum
extent permitted by law, as if such provision had been originally incorporated
herein as so modified or restricted, or as if such provision had not been
originally incorporated herein, as the case may be.
16. If there is a breach or threatened breach of the provisions of this
Agreement, PRCP may, in addition to other available rights and remedies, apply
to any court of competent jurisdiction for specific performance and/or
injunctive relief in order to enforce, or prevent any violation of, any of the
provisions of this Agreement.
WITNESSES:
______________________________ ______________________________________
Name: ALFRED A. PEASE
Dated:________________________
PERCEPTRON, INC.
_____________________________ By: __________________________________
Name:
Its: _________________________________
Dated:________________________
B-4
<PAGE> 13
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EXHIBIT C TO EMPLOYMENT AGREEMENT
OF ALFRED A. PEASE
INCENTIVE STOCK OPTION AGREEMENT - OFFICER
UNDER THE PERCEPTRON, INC. 1992 STOCK OPTION PLAN
THIS STOCK OPTION AGREEMENT made this 14th day of February, 1996, by and
between Perceptron, Inc., a Michigan corporation ("the Company"), and Alfred A.
Pease, who is currently employed by the Company or one of its subsidiaries (the
"Optionee").
1. GRANT OF OPTION. Subject to the terms and conditions hereof, the
Company hereby grants to the Optionee an option to purchase from the Company up
to, but not exceeding in the aggregate, 17,020 shares of the Company's Common
Stock at a price of $23.50 per share. This option is intended to constitute an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code ("Code").
2. RIGHT TO EXERCISE OPTION. The Optionee may purchase from the Company
on and after the first anniversary of the date of grant, 25% of the shares
covered by this option, and on each succeeding one year anniversary thereof may
exercise an additional 25% of the shares covered by the option, so that on the
fourth anniversary of the date of grant this option shall be fully exercisable;
provided that the shares covered by this option may be exercised only if the
shareholders of the Company approve an amendment to the 1992 Stock Option Plan,
as amended (the "Plan"), to increase the number of shares covered by the Plan
to include such shares and to provide that no Optionee who is a salaried
employee shall be eligible to receive aggregate option grants under the Plan,
in any fiscal year of the Company, to purchase more than 200,000 shares of the
Company's Common Stock. To the extent not exercised, installments shall
accumulate and the Optionee may exercise them in whole or in part in any
subsequent period. Any provision of this Agreement notwithstanding, no portion
of this option shall be exercisable on or after the tenth anniversary of the
date of grant.
3. TERMINATION OF EMPLOYMENT.
(a) If, prior to the date that this option or any portion thereof shall
first become exercisable, the Optionee's employment with the Company or any of
its subsidiaries shall be terminated for any reason, the Optionee's right to
exercise this option or such unexercisable portion thereof shall terminate and
all rights hereunder shall cease. As used in this Agreement, the term
"subsidiary" of the Company means any "subsidiary corporation" as defined in
Section 424(f) of the Code, the term "employment" means employment with the
Company or any subsidiary of the Company, and the term "disability" means
"total and permanent disability," as defined in Section 22(e) of the Code.
(b) If, on or after the date that this option shall first become
exercisable, the Optionee's employment shall be terminated for any reason other
than death or disability, the Optionee shall have the right, within three
months after such termination of employment, to exercise
<PAGE> 14
this option to the extent (but only to the extent) that it shall have been
exercisable and unexercised on the date of such termination of services,
subject to any other limitation on the exercise of such option in effect at the
date of exercise.
(c) If on or after the date that this option shall first become
exercisable the Optionee's employment shall be terminated due to death or
disability, the Optionee or the executor or administrator of the estate of the
Optionee (as the case may be) or the person or persons to whom the option shall
have been transferred by will or by the laws of descent and distribution, shall
have the right, within one year from the date of the Optionee's death or
disability, to exercise this option to the extent (but only to the extent) that
it was exercisable and unexercised on the date of the Optionee's death or
disability, subject to any other limitation on exercise in effect at the date
of exercise.
(d) The transfer of the Optionee from one corporation to another among the
Company and any of its subsidiaries, or a leave of absence with the written
consent of the Company, shall not be a termination of services for purposes of
this option.
(e) Notwithstanding the provisions of Section 2 "Right to Exercise Option"
and Section 3 "Termination of Employment" of this Agreement, (i) in the event
of a termination by the Company of the Optionee's employment Without Cause (as
defined below) or Diminishment of the Optionee's Responsibilities Without Cause
(as defined below), following a Change in Control of the Company, or (ii), in
the event of a Change in Control, if one of the corporations surviving the
Change in Control or the person purchasing the Company's assets in the Change
in Control does not assume this option, any portion of this option that is then
not exercisable shall become immediately exercisable; provided, however, that
the foregoing provision shall apply, in case of incentive stock options
("ISOs"), and in the case of options held by a person subject to Section 16(b)
of the Securities Exchange Act of 1934 ("Section 16(b) Grants"), only if the
termination or diminishment referred to in (i) above and the Change in Control
referred to in (ii) above occurs after the first anniversary of the date of
grant of this option, in the case of ISOs, or the date six months after the
date of grant of this option, in the case of Section 16(b) Grants; and,
provided further, however, that the Committee shall have the right, at any time
prior to the occurrence of the termination or diminishment referred to in (i)
above or the Change in Control referred to in (ii) above, to modify the
provisions of this paragraph, including the termination of all of the
Optionee's rights set forth in this paragraph, to the extent required under
applicable accounting and Securities and Exchange Commission rules,
regulations, policies, guidelines or other similar requirements to permit the
Company to account for a then contemplated business combination under
pooling-of-interests accounting. For purposes hereof, "Without Cause" shall
mean the Optionee's employment is terminated by the Company, or there is a
Diminishment of the Optionee's Responsibilities, for any reason except (i)
personal dishonesty; (ii) willful misconduct; (iii) breach of fiduciary duty to
the Company; (iv) conviction for violation of any law (other than traffic
violations or similar offenses); or (v) repeated or intentional failure to
perform duties, after written notice is delivered identifying the failure, and
it is not cured within ten (10) days following receipt of such notice. For
purposes
2
<PAGE> 15
hereof, "Diminishment of the Optionee's Responsibilities" shall mean the
Company, or any successorthereto, (i) reassigning the Optionee substantial
duties which are materially inconsistent with the Optionee's position, duties
and responsibilities with the Company immediately prior to the Change in
Control, except for reassignments of duties which constitute a bona fide
promotion of the Optionee, or (ii) reducing the Optionee's compensation such
that (a) the Optionee's annual base salary is less than eighty (80%) percent of
the Optionee's annual base salary prior to the Change in Control; and (b) the
Optionee's annual base salary and the annual cash bonus which the Optionee is
eligible to earn (including any performance based bonus), combined, is not at
least equal to the combination of the Optionee's annual base salary prior to
the Change in Control and the average of the annual cash bonuses which the
Optionee was eligible to earn (including any performance based bonus, but
excluding any bonus payable to the Optionee for completing the Change in
Control), whether or not actually earned, for the year in which the Change in
Control occurred and for the year prior thereto. For purposes hereof, a
"Change in Control" shall be deemed to have occurred in the event of (i) a
merger involving the Company in which the Company is not the surviving
corporation (other than a merger with a wholly-owned subsidiary of the Company
formed for the purpose of changing the Company's corporate domicile); (ii) a
share exchange in which the shareholders of the Company exchange their stock in
the Company for stock of another corporation (other than a share exchange in
which all or substantially all of the holders of the voting stock of the
Company, immediately prior to the transaction, exchange, on a pro rata basis,
their voting stock of the Company for more than 50% of the voting stock of such
other corporation); (iii) the sale of all or substantially all of the assets of
the Company; or (iv) any person or group of persons (as defined by Section
13(d) of the Securities Exchange Act of 1934, as amended) (other than any
employee benefit plan or employee benefit trust benefitting the employees of
the Company) becoming a beneficial owner, directly or indirectly, of securities
of the Company representing more than fifty (50%) percent of either the then
outstanding Common Stock of the Company, or the combined voting power of the
Company's then outstanding voting securities.
(f) Notwithstanding the provisions of Section 2 "Right to Exercise Option"
and Section 3 "Termination of Employment" of this Agreement, (provided,
however, if this option is an incentive stock option, only if the merger,
consolidation or sale or transfer referred to below occurs after the first
anniversary of the date of grant of this option, and, if this option is held by
a person subject to Section 16(b) of the Securities Exchange Act of 1934, only
if such merger, consolidation or sale or transfer occurs after the date six
months after the date of grant of this option), if, in connection with any
merger, consolidation, or sale or transfer by the Company of substantially all
of its assets, this option is not assumed or continued by the surviving
corporation or the purchaser, the date of termination of this option and the
date on or after which this option, or any portion thereof not then
exercisable, may be exercised, shall be advanced to a date to be fixed by the
Committee, which date shall not be more than 15 days prior to such merger,
consolidation, or sale or transfer; provided however, that the Committee shall
have the right, at any time prior to the occurrence of such merger,
consolidation or sale or transfer, to modify the provisions of this paragraph,
including the termination of all of the Optionee's rights set forth in this
paragraph, to the extent required under applicable accounting and Securities
and Exchange Commission rules,
3
<PAGE> 16
regulations, policies, guidelines or other similar requirements to permit the
Company to account for a then contemplated business combination under
pooling-of-interests accounting.
(g) Notwithstanding the provisions of Section 2 "Right to Exercise Option"
and Section 3 "Termination of Employment" of this Agreement, in the event of a
termination by the Company of the Optionee's employment Without Cause (as
defined in a letter agreement between the Optionee and the Company dated
February 14, 1996) on or after February 14, 1998, unless the unexercisable
portion of this option becomes exercisable under Section 2(e) as a result of
such termination of employment, in which case Section 2(e) shall supersede this
Section 2(g), the unexercisable portion of this option shall become exercisable
in full.
4. EXERCISE OF OPTION. The Optionee, from time to time during the period
when the option hereby granted may by its terms be exercised, may exercise the
option in whole or in part as at the time permitted, by delivery to the Company
of: (a) 10 days in advance of the exercise date, a written notice signed by
the Optionee, (i) stating the number of shares that the Optionee has elected to
purchase at that time, (ii) upon the request of the Committee, representing
that the Optionee is acquiring the shares being purchased for investment and
not for resale; and (b) on the date of exercise, (i) cash, (ii) shares of
Company Common Stock in an amount equal to the purchase price of the shares
being purchased, (iii) the authorization of the Company to retain then
exercisable options issued to the Optionee under the Plan with a value (as
defined in the Plan) equal to the purchase price of the shares being purchased,
or (iv) such documents as are or may be required under the terms of the Plan to
affect a cashless exercise. In lieu of paying the full purchase price on the
date of exercise as provided above, the Optionee may pay 50% of the purchase
price at the time of exercise and shall remit a promissory note for the
remaining portion of the purchase price, the terms of such promissory note to
be determined by the Committee at the time of exercise. Options retained by
the Company under the retention of options procedure shall expire and be of no
further force and effect as of the date retained.
5. COMPLIANCE WITH SECURITIES LAWS. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock under this
option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization, issuance or sale of securities, and
applicable stock exchange requirements, as the Company deems necessary or
advisable.
6. NON-ASSIGNABILITY. The option hereby granted shall not be transferable
by the Optionee other than by will or the laws of descent and distribution, and
the option may be exercised during the Optionee's lifetime only by the
Optionee. Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the option shall
be effective to bind the Company unless the Company shall have been furnished
with written notice thereof and a copy of the will and/or such other evidence
as the Company may deem necessary to establish the validity of the transfer and
the acceptance by the transferee or transferees of the terms and conditions of
this Agreement. No assignment or transfer of this option, or of the rights
4
<PAGE> 17
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, except a transfer by the Optionee by will or by the laws of descent
and distribution, shall vest in the purported assignee or transferee any
interest or right herein whatsoever.
7. DISPUTES. As a condition of the granting of the option granted hereby,
the Optionee and the Optionee's successors and assigns agree that any dispute
or disagreement which shall arise under or as a result of this Agreement shall
be determined by the Committee in its sole discretion and judgment and that any
such determination and any interpretation by the Committee of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
8. ADJUSTMENTS. In the event of any stock dividend, stock split,
reclassification, merger, consolidation, or similar transaction affecting the
shares covered by this option, the rights of the Optionee shall be as provided
in Section 8 of the Plan and any adjustment therein provided shall be made in
accordance with Section 8 of the Plan.
9. RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder of the Company with respect to any of the shares covered by this
option until the issuance of a stock certificate or certificates upon the
exercise of the option in full or in part, and then only with respect to the
shares represented by such certificate or certificates.
10. NOTICES. Every notice relating to this Agreement shall be in writing
and if given by mail shall be given by registered or certified mail with return
receipt requested. All notices to the Company shall be delivered to the
Secretary of the Company at the Company's headquarters or addressed to the
Secretary of the Company at the Company's headquarters. All notices by the
Company to the Optionee shall be delivered to the Optionee personally or
addressed to the Optionee at the Optionee's last residence address as then
contained in the records of the Company or such other address as the Optionee
may designate. Either party by notice to the other may designate a different
address to which notices shall addressed. Any notice given by the Company to
the Optionee at the Optionee's last designated address shall be effective to
bind any other person who shall acquire rights hereunder.
11. "OPTIONEE" TO INCLUDE CERTAIN TRANSFEREES. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances where
the provision should logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons.
12. GOVERNING LAW. This Agreement has been made in and shall be construed
in accordance with the laws of the State of Michigan.
13. PROVISIONS OF PLAN CONTROLLING. The provisions hereof are subject to
the terms and provisions of the Plan copies of which are available for review
upon request to the Chief Operating
5
<PAGE> 18
Officer of the Company. In the event of any conflict between the provisions of
this option and the provisions of the Plan, the provisions of the Plan shall
control.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PERCEPTRON, INC.
By: _________________________
James A. Ratigan
Executive Vice President
_____________________________
Alfred A. Pease, OPTIONEE
6
<PAGE> 19
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
UNDER THE PERCEPTRON, INC.
1992 STOCK OPTION PLAN
Perceptron, Inc.
23855 Research Drive
Farmington Hills, MI 48335
Dear Sir:
An incentive stock option was granted to me on February 14, 1996
to purchase 17,020 shares of Perceptron, Inc. Common Stock at a price of $23.50
per share.
I hereby elect to exercise my incentive stock option with respect to
shares for an aggregate purchase price of $ . I hereby elect to pay
for such shares as follows:
Personal Check $____
Cash $____
Bank Draft $____
Money Order $____
Promissory Note $____
Perceptron Common Stock $____
Cashless Exercise $____
Retention of Stock Options $____
Total $
=====
[A personal check [or cash, bank draft or money order] for the purchase
price [is enclosed herewith] or [will be delivered within 10 days hereof]].
[Enclosed is payment for fifty percent of the purchase price, plus my
promissory note, the terms of which have been approved by the Committee, for
the remaining two installments.]
[I hereby elect to exercise my stock option with respect to
shares through a combination of cash payments and shares of Perceptron, Inc.
Common Stock, as described on the attached Exhibit A. A personal check for the
purchase price to be paid in cash is enclosed herewith. [Certificates for
shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a
duly executed stock power in proper form for transfer, with all signatures
properly guaranteed by a national bank or member firm of the NYSE or AMEX, [or
the foregoing documents will be delivered within 10 days hereof.]]
<PAGE> 20
[I hereby authorize the Company to retain options to purchase
shares of Perceptron, Inc. Common Stock granted pursuant to this stock option
(the "Retained Options"). I hereby acknowledge and agree that, as of the date
set forth below, the Retained Options shall no longer be exercisable, and shall
expire and have no further force and effect.]
[Documents as are required to effect a cashless exercise] [are enclosed]
or [will be delivered within 10 days hereof]].
I agree to notify the Company if prior to two years from the date of grant
and one year from the exercise date, I dispose of any shares acquired pursuant
to my exercise of this incentive stock option.
I represent that the shares of stock that I am purchasing upon this
exercise of my option are being purchased for investment purposes and not with
a view to resale. This representation shall not be binding upon me if the
shares of Common Stock that I am purchasing are subject to an effective
Registration Statement under the Securities Act of 1933.
_____________________________
Alfred A. Pease, Optionee
Dated ________________, 19__
2
<PAGE> 21
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EXHIBIT C TO EMPLOYMENT AGREEMENT
OF ALFRED A. PEASE
NON-QUALIFIED STOCK OPTION AGREEMENT - OFFICER
UNDER THE PERCEPTRON, INC. 1992 STOCK OPTION PLAN
THIS STOCK OPTION AGREEMENT made this 14th day of February, 1996, by and
between Perceptron, Inc., a Michigan corporation ("the Company"), and Alfred A.
Pease, who is currently employed by the Company or one of its subsidiaries (the
"Optionee").
1. GRANT OF OPTION. Subject to the terms and conditions hereof, the
Company hereby grants to the Optionee an option to purchase from the Company up
to, but not exceeding in the aggregate, 182,980 shares of the Company's Common
Stock at a price of $20.625 per share. This option is not intended to
constitute an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code ("Code").
2. RIGHT TO EXERCISE OPTION. The Optionee may purchase from the Company
on and after the first anniversary of the date of grant, 25% of the shares
covered by this option, and on each succeeding one year anniversary thereof may
exercise an additional 25% of the shares covered by the option, so that on the
fourth anniversary of the date of grant this option shall be fully exercisable;
provided that the shares covered by this option may be exercised only if the
shareholders of the Company approve an amendment to the 1992 Stock Option Plan,
as amended (the "Plan"), to increase the number of shares covered by the Plan
to include such shares and to provide that no Optionee who is a salaried
employee shall be eligible to receive aggregate option grants under the Plan,
in any fiscal year of the Company, to purchase more than 200,000 shares of the
Company's Common Stock. To the extent not exercised, installments shall
accumulate and the Optionee may exercise them in whole or in part in any
subsequent period. Any provision of this Agreement notwithstanding, no portion
of this option shall be exercisable on or after the tenth anniversary of the
date of grant.
3. TERMINATION OF EMPLOYMENT.
(a) If, prior to the date that this option or any portion thereof shall
first become exercisable, the Optionee's employment with the Company or any of
its subsidiaries shall be terminated for any reason, the Optionee's right to
exercise this option or such unexercisable portion thereof shall terminate and
all rights hereunder shall cease. As used in this Agreement, the term
"subsidiary" of the Company means any "subsidiary corporation" as defined in
Section 424(f) of the Code, the term "employment" means employment with the
Company or any subsidiary of the Company, and the term "disability" means
"total and permanent disability," as defined in Section 22(e) of the Code.
(b) If, on or after the date that this option shall first become
exercisable, the Optionee's employment shall be terminated for any reason other
than death or disability, the
<PAGE> 22
Optionee shall have the right, within three months after such termination of
employment, to exercise this option to the extent (but only to the extent) that
it shall have been exercisable and unexercised on the date of such termination
of services, subject to any other limitation on the exercise of such option in
effect at the date of exercise.
(c) If on or after the date that this option shall first become
exercisable the Optionee's employment shall be terminated due to death or
disability, the Optionee or the executor or administrator of the estate of the
Optionee (as the case may be) or the person or persons to whom the option shall
have been transferred by will or by the laws of descent and distribution, shall
have the right, within one year from the date of the Optionee's death or
disability, to exercise this option to the extent (but only to the extent) that
it was exercisable and unexercised on the date of the Optionee's death or
disability, subject to any other limitation on exercise in effect at the date
of exercise.
(d) The transfer of the Optionee from one corporation to another among the
Company and any of its subsidiaries, or a leave of absence with the written
consent of the Company, shall not be a termination of services for purposes of
this option.
(e) Notwithstanding the provisions of Section 2 "Right to Exercise Option"
and Section 3 "Termination of Employment" of this Agreement, (i) in the event
of a termination by the Company of the Optionee's employment Without Cause (as
defined below) or Diminishment of the Optionee's Responsibilities Without Cause
(as defined below), following a Change in Control of the Company, or (ii), in
the event of a Change in Control, if one of the corporations surviving the
Change in Control or the person purchasing the Company's assets in the Change
in Control does not assume this option, any portion of this option that is then
not exercisable shall become immediately exercisable; provided, however, that
the foregoing provision shall apply, in case of incentive stock options
("ISOs"), and in the case of options held by a person subject to Section 16(b)
of the Securities Exchange Act of 1934 ("Section 16(b) Grants"), only if the
termination or diminishment referred to in (i) above and the Change in Control
referred to in (ii) above occurs after the first anniversary of the date of
grant of this option, in the case of ISOs, or the date six months after the
date of grant of this option, in the case of Section 16(b) Grants; and,
provided further, however, that the Committee shall have the right, at any time
prior to the occurrence of the termination or diminishment referred to in (i)
above or the Change in Control referred to in (ii) above, to modify the
provisions of this paragraph, including the termination of all of the
Optionee's rights set forth in this paragraph, to the extent required under
applicable accounting and Securities and Exchange Commission rules,
regulations, policies, guidelines or other similar requirements to permit the
Company to account for a then contemplated business combination under
pooling-of-interests accounting. For purposes hereof, "Without Cause" shall
mean the Optionee's employment is terminated by the Company, or there is a
Diminishment of the Optionee's Responsibilities, for any reason except (i)
personal dishonesty; (ii) willful misconduct; (iii) breach of fiduciary duty to
the Company; (iv) conviction for violation of any law (other than traffic
violations or similar offenses); or (v) repeated or intentional failure to
perform duties, after written notice is delivered identifying
2
<PAGE> 23
the failure, and it is not cured within ten (10) days following receipt of such
notice. For purposes
hereof, "Diminishment of the Optionee's Responsibilities" shall mean the
Company, or any successor thereto, (i) reassigning the Optionee substantial
duties which are materially inconsistent with the Optionee's position, duties
and responsibilities with the Company immediately prior to the Change in
Control, except for reassignments of duties which constitute a bona fide
promotion of the Optionee, or (ii) reducing the Optionee's compensation such
that (a) the Optionee's annual base salary is less than eighty (80%) percent of
the Optionee's annual base salary prior to the Change in Control; and (b) the
Optionee's annual base salary and the annual cash bonus which the Optionee is
eligible to earn (including any performance based bonus), combined, is not at
least equal to the combination of the Optionee's annual base salary prior to
the Change in Control and the average of the annual cash bonuses which the
Optionee was eligible to earn (including any performance based bonus, but
excluding any bonus payable to the Optionee for completing the Change in
Control), whether or not actually earned, for the year in which the Change in
Control occurred and for the year prior thereto. For purposes hereof, a
"Change in Control" shall be deemed to have occurred in the event of (i) a
merger involving the Company in which the Company is not the surviving
corporation (other than a merger with a wholly-owned subsidiary of the Company
formed for the purpose of changing the Company's corporate domicile); (ii) a
share exchange in which the shareholders of the Company exchange their stock in
the Company for stock of another corporation (other than a share exchange in
which all or substantially all of the holders of the voting stock of the
Company, immediately prior to the transaction, exchange, on a pro rata basis,
their voting stock of the Company for more than 50% of the voting stock of such
other corporation); (iii) the sale of all or substantially all of the assets of
the Company; or (iv) any person or group of persons (as defined by Section
13(d) of the Securities Exchange Act of 1934, as amended) (other than any
employee benefit plan or employee benefit trust benefitting the employees of
the Company) becoming a beneficial owner, directly or indirectly, of securities
of the Company representing more than fifty (50%) percent of either the then
outstanding Common Stock of the Company, or the combined voting power of the
Company's then outstanding voting securities.
(f) Notwithstanding the provisions of Section 2 "Right to Exercise Option"
and Section 3 "Termination of Employment" of this Agreement, (provided,
however, if this option is an incentive stock option, only if the merger,
consolidation or sale or transfer referred to below occurs after the first
anniversary of the date of grant of this option, and, if this option is held by
a person subject to Section 16(b) of the Securities Exchange Act of 1934, only
if such merger, consolidation or sale or transfer occurs after the date six
months after the date of grant of this option), if, in connection with any
merger, consolidation, or sale or transfer by the Company of substantially all
of its assets, this option is not assumed or continued by the surviving
corporation or the purchaser, the date of termination of this option and the
date on or after which this option, or any portion thereof not then
exercisable, may be exercised, shall be advanced to a date to be fixed by the
Committee, which date shall not be more than 15 days prior to such merger,
consolidation, or sale or transfer; provided however, that the Committee shall
have the right, at any time prior to the occurrence of such merger,
consolidation or sale or transfer, to modify the provisions of this paragraph
including the termination of all of the Optionee's rights set forth in this
paragraph, to the
3
<PAGE> 24
extent required under applicable accounting and Securities and Exchange
Commission rules, regulations, policies, guidelines or other similar
requirements to permit the Company to account for a then contemplated business
combination under pooling-of-interests accounting.
(g) Notwithstanding the provisions of Section 2 "Right to Exercise Option"
and Section 3 "Termination of Employment" of this Agreement, in the event of a
termination by the Company of the Optionee's employment Without Cause (as
defined in a letter agreement between the Optionee and the Company dated
February 14, 1996), unless the unexercisable portion of this option becomes
exercisable under Section 2(e) as a result of such termination of employment,
in which case Section 2(e) shall supersede this Section 2(g), the unexercisable
portion of this option shall become exercisable as follows:
<TABLE>
<CAPTION>
Number of Unexercisable Option
Date of Termination Shares Which Become Exercisable
--------------------------------- ----------------------------------------
<S> <C>
If after July 14, 1996, but 66,667
before February 14, 1997
If on or after February 14, 1997, 66,667
but before February 14, 1998
If on or after February 14, 1998 All Remaining Unexercisable Options
</TABLE>
4. EXERCISE OF OPTION. The Optionee, from time to time during the period
when the option hereby granted may by its terms be exercised, may exercise the
option in whole or in part as at the time permitted, by delivery to the Company
of: (a) 10 days in advance of the exercise date, a written notice signed by
the Optionee, (i) stating the number of shares that the Optionee has elected to
purchase at that time, (ii) upon the request of the Committee, representing
that the Optionee is acquiring the shares being purchased for investment and
not for resale; and (b) on the date of exercise, (i) cash, (ii) shares of
Company Common Stock in an amount equal to the purchase price of the shares
being purchased, (iii) the authorization of the Company to retain then
exercisable options issued to the Optionee under the Plan with a value (as
defined in the Plan) equal to the purchase price of the shares being purchased,
or (iv) such documents as are or may be required under the terms of the Plan to
affect a cashless exercise. Options retained by the Company under the
retention of options procedure shall expire and be of no further force and
effect as of the date retained.
5. COMPLIANCE WITH SECURITIES LAWS. Anything to the contrary herein
notwithstanding, the Company's obligation to sell and deliver stock under this
option is subject to such compliance with federal and state laws, rules and
regulations applying to the authorization,
4
<PAGE> 25
issuance or sale of securities, and applicable stock exchange requirements, as
the Company deems necessary or advisable.
6. NON-ASSIGNABILITY. The option hereby granted shall not be transferable
by the Optionee other than by will or the laws of descent and distribution, and
the option may be exercised during the Optionee's lifetime only by the
Optionee. Any transferee of the option shall take the same subject to the
terms and conditions of this Agreement. No such transfer of the option shall
be effective to bind the Company unless the Company shall have been furnished
with written notice thereof and a copy of the will and/or such other evidence
as the Company may deem necessary to establish the validity of the transfer and
the acceptance by the transferee or transferees of the terms and conditions of
this Agreement. No assignment or transfer of this option, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise, except a transfer by the Optionee by will or by the laws of descent
and distribution, shall vest in the purported assignee or transferee any
interest or right herein whatsoever.
7. DISPUTES. As a condition of the granting of the option granted hereby,
the Optionee and the Optionee's successors and assigns agree that any dispute
or disagreement which shall arise under or as a result of this Agreement shall
be determined by the Committee in its sole discretion and judgment and that any
such determination and any interpretation by the Committee of the terms of this
Agreement shall be final and shall be binding and conclusive for all purposes.
8. ADJUSTMENTS. In the event of any stock dividend, stock split,
reclassification, merger, consolidation, or similar transaction affecting the
shares covered by this option, the rights of the Optionee shall be as provided
in Section 8 of the Plan and any adjustment therein provided shall be made in
accordance with Section 8 of the Plan.
9. RIGHTS AS SHAREHOLDER. The Optionee shall have no rights as a
shareholder of the Company with respect to any of the shares covered by this
option until the issuance of a stock certificate or certificates upon the
exercise of the option in full or in part, and then only with respect to the
shares represented by such certificate or certificates.
10. NOTICES. Every notice relating to this Agreement shall be in writing
and if given by mail shall be given by registered or certified mail with return
receipt requested. All notices to the Company shall be delivered to the
Secretary of the Company at the Company's headquarters or addressed to the
Secretary of the Company at the Company's headquarters. All notices by the
Company to the Optionee shall be delivered to the Optionee personally or
addressed to the Optionee at the Optionee's last residence address as then
contained in the records of the Company or such other address as the Optionee
may designate. Either party by notice to the other may designate a different
address to which notices shall addressed. Any notice given by the Company to
the Optionee at the Optionee's last designated address shall be effective to
bind any other person who shall acquire rights hereunder.
5
<PAGE> 26
11. "OPTIONEE" TO INCLUDE CERTAIN TRANSFEREES. Whenever the word
"Optionee" is used in any provision of this Agreement under circumstances where
the provision should logically apply to any other person or persons to whom the
option, in accordance with the provisions of Section 6 hereof, may be
transferred, the word "Optionee" shall be deemed to include such person or
persons.
12. GOVERNING LAW. This Agreement has been made in and shall be construed
in accordance with the laws of the State of Michigan.
13. PROVISIONS OF PLAN CONTROLLING. The provisions hereof are subject to
the terms and provisions of the Plan copies of which are available for review
upon request to the Chief Operating Officer of the Company. In the event of
any conflict between the provisions of this option and the provisions of the
Plan, the provisions of the Plan shall control.
14. WITHHOLDING. The Optionee hereby authorizes the Company to withhold
from his compensation or agrees to tender the applicable amount to the Company
to satisfy any requirements for withholding of income and employment taxes in
connection with the exercise of the option granted hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PERCEPTRON, INC.
By:____________________________
James A. Ratigan
Executive Vice President
_______________________________
Alfred A. Pease, OPTIONEE
6
<PAGE> 27
NOTICE OF EXERCISE OF NON-QUALIFIED STOCK OPTION
UNDER THE PERCEPTRON, INC.
1992 STOCK OPTION PLAN
Perceptron, Inc.
23855 Research Drive
Farmington Hills, MI 48335
Dear Sir:
An non-qualified stock option was granted to me on February 14, 1996 to
purchase 182,980 shares of Perceptron, Inc. Common Stock at a price of $20.625
per share.
I hereby elect to exercise my non-qualified stock option with respect to
___ shares for an aggregate purchase price of $__________. I hereby elect to
pay for such shares as follows:
Personal Check $_____
Cash $_____
Bank Draft $_____
Money Order $_____
Perceptron Common Stock $_____
Cashless Exercise $_____
Retention of Stock Options $_____
Total $
======
[A personal check [or cash, bank draft or money order] for the purchase
price [is enclosed herewith] or [will be delivered within 10 days hereof]].
[I hereby elect to exercise my stock option with respect to
shares through a combination of cash payments and shares of Perceptron, Inc.
Common Stock, as described on the attached Exhibit A. A personal check for the
purchase price to be paid in cash is enclosed herewith. [Certificates for
shares of Perceptron, Inc. Common Stock are enclosed herewith, along with a
duly executed stock power in proper form for transfer, with all signatures
properly guaranteed by a national bank or member firm of the NYSE or AMEX, [or
the foregoing documents will be delivered within 10 days hereof.]]
[I hereby authorize the Company to retain options to purchase
shares of Perceptron, Inc. Common Stock granted pursuant to this stock option
(the "Retained Options"). I hereby acknowledge and agree that, as of the date
set forth below, the Retained Options shall no longer be exercisable, and shall
expire and have no further force and effect.]
<PAGE> 28
[Documents as are required to effect a cashless exercise] [are enclosed]
or [will be delivered within 10 days hereof]].
I represent that the shares of stock that I am purchasing upon this
exercise of my option are being purchased for investment purposes and not with
a view to resale. This representation shall not be binding upon me if the
shares of Common Stock that I am purchasing are subject to an effective
Registration Statement under the Securities Act of 1933.
___________________________________
Alfred A. Pease, Optionee
Dated ________________, 19__
2
<PAGE> 29
EXHIBIT D TO EMPLOYMENT AGREEMENT
OF ALFRED A. PEASE
PERCEPTRON, INC.
Proprietary Information And Inventions Agreement
I recognize that Perceptron, Inc., a Michigan corporation (The "Company",
which term includes any subsidiaries thereof), is engaged in a continuous
program of research, development and production respecting its business,
present and future.
I understand that:
A. As part of employment with the Company, I am expected to make new
contributions and inventions of value to the Company.
B. My employment creates a relationship of confidence and trust between me
and the Company with respect to any information:
(1) Applicable to the business of the Company; or
(2) Applicable to the business of any client or customer of the Company,
which may be made known to me by the Company or by any client or customer of
the Company, or learned by me during the period of my employment.
C. The Company possesses and will continue to possess information that has
been created, discovered or developed, or has otherwise become known to the
Company (including without limitation information created, discovered,
developed or made known to me during the period of or arising out of my
employment by the Company), and/or in which property rights have been assigned
or otherwise conveyed to the Company, which information has commercial value in
the business in which the Company is engaged. All of the aforementioned
information is hereinafter called "Proprietary Information." By way of
illustration, but not limitation, Proprietary Information includes trade
secrets, processes, formulae, data and know-how, improvements, inventions,
techniques, marketing plans, strategies, forecasts and customer lists.
D. As used herein, the period of my employment includes any and all time
in which I may be retained by the Company as an employee.
In consideration of my employment or continued employment as the case may
be, and the compensation received by me from the Company from time to time, I
hereby agree as follows:
1. Prior to entering the employ of the Company I have terminated my
employment with one or more prior employers. I agree to indemnify and hold
harmless the Company, its directors, officers and employees against any
liabilities and expenses, including amounts paid in settlement incurred by any
of them in connection with any claim by any of my prior
<PAGE> 30
employers that the termination of my employment with such employer, my
employment by the Company or the use of any skills and knowledge by the Company
is a violation of contract or law.
2. All Proprietary Information shall be the sole property of the Company
and its assigns, and the Company and its assigns shall be the sole owner of all
patents and other rights in connection therewith. I hereby assign to the
Company any rights it may have or acquire in all Proprietary Information. At
all times, both during my employment by the Company and after its termination,
I will keep in confidence and trust all Proprietary Information, and I will not
use or disclose any Proprietary Information or anything relating to it without
the written consent of the Company, except as may be necessary in the ordinary
course of performing my duties as an employee of the Company.
3. I agree that during the period of my employment by the Company I will
not, without the Company's express written consent, engage, directly or
indirectly, in any employment or activity in any competitive business, other
than for the Company.
4. In the event of termination of my employment by me or by the Company
for any reason, I will deliver to the Company all documents and data of any
nature pertaining to my work with the Company and I will not take with me any
documents or data of any description or any reproduction of any description
containing or pertaining to any Proprietary Information.
I agree that for a period of two years following termination of my
employment with the Company, I will not solicit or in any manner encourage
employees of the Company to leave its employ. I further agree that during such
period I will not offer or cause to be offered employment to any person who was
employed by the Company at any time during the six months prior to the
termination of my employment with the Company.
5. I will promptly disclose to the Company, or any persons designated by
it, all improvements, inventions, formulae, processes, techniques, know-how and
data, whether or not patentable, made or conceived or reduced to practice or
learned by me, either alone or jointly with others, during the period of my
employment which are related to or useful in the business of the Company, or
result from tasks assigned to me by the Company or results from use of premises
owned, leased or contracted for by the Company (all said improvements,
inventions, formulae, processes, techniques, know-how and data shall be
collectively hereinafter called "Inventions").
6. I agree that all Inventions shall be the sole property of the Company
and its assigns, and the Company and its assigns shall be the sole owner of all
patents and other rights in connection therewith. I hereby assign to the
Company any rights it may have or acquire in all Inventions. I further agree
as to all Inventions to assist the Company in every proper way (but at the
Company's expense) to obtain and from time to time enforce patents on
Inventions in any and all countries, and to that end I will execute all
documents for use in applying for and obtaining such patents thereon and
enforcing same, as the Company may desire, together with any assignments
thereof to the Company or persons designated by it. My obligation to assist
the Company in obtaining and enforcing patents for Inventions in any and all
countries shall continue beyond the termination of
2
<PAGE> 31
my employment, but the Company shall compensate me at a reasonable rate after
such termination for time actually spent at the Company's request on such
assistance.
I understand that this Paragraph 6 does not apply to inventions for which
no equipment, supplies, facility or trade secret information of the Company was
used and which were developed entirely on my own time, and (a) which do not
relate (1) to the business of the Company or (2) to the Company's actual or
demonstrably anticipated research or development, or (b) which do not result
from any work performed by me for the Company.
7. All inventions or improvements relevant to the subject matter of my
employment by the Company which I can establish were first made or conceived or
reduced to practice by me alone or jointly with others prior to my engagement
by the Company shall be removed from operation of this Agreement. I must
establish such prior action by me to the reasonable satisfaction of the Company
or to a court of competent jurisdiction through evidence of publication,
corroboration by third parties and/or other independent evidence.
8. I represent that my performance of all the terms of this Agreement and
as an employee of the Company does not and will not breach any agreement or
understanding, whether written or oral, to keep in confidence proprietary
information acquired by me in confidence or in trust prior to my employment by
the Company. I have not entered into, and I agree not to enter into, any
agreement or understanding either written or oral in conflict herewith.
9. I understand as a part of the consideration for the offer of employment
extended to me by the Company and of my employment or continued employment by
the Company, that I have not brought and will not bring with me to the Company
or use in the performance of my responsibilities at the Company any materials
or documents of a former employer which are not generally available to the
public, unless I have obtained written authorization from the former employer
for their possession and use.
Accordingly, this is to advise the Company that the only materials or
documents of a former employer which are not generally available to the public
that I have brought or will bring to the Company or have used or will use, are
identified on Exhibit A attached hereto, and, as to each such item, I represent
that I have obtained prior to the effective date of my employment with the
Company written authorization for their possession and use with the Company.
I also understand that, in my employment with the Company, I am not to
breach any obligation of confidentiality that I may have to former employers,
and I agree that I shall fulfill all such obligations during my employment with
the Company.
I agree that in addition to any other rights and remedies available to the
Company for any breach by me of my obligations hereunder, the Company shall be
entitled to enforcement of my obligations hereunder by court injunction.
3
<PAGE> 32
If any provision of this Agreement shall be declared invalid, illegal or
unenforceable, such provision shall be severed and all remaining provisions
shall continue in full force and effect.
10. This Agreement shall be effective as of the first day of my employment
by the Company, namely:
February 14, 1996
11. This Agreement shall be binding upon me, my heirs, executors, assigns
and administrators and shall inure to the benefit of the Company, its
successors and assigns.
12. This Agreement has been negotiated, executed and delivered, in
Michigan and shall be governed in all respects by the laws of the State of
Michigan.
Date February 14, 1996 BY__________________________________
ALFRED A. PEASE
ACCEPTED AND AGREED TO:
PERCEPTRON, INC.
BY:____________________________
TITLE:_________________________
4
<PAGE> 1
PERCEPTRON, INC. AND SUBSIDIARIES
EXHIBIT 11, STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Earnings Per Share
Year Ended December 31,
-------------------------------------
1996 1995 1994
---------- ------------- ----------
(as restated)
<S> <C> <C> <C>
A. Net Income $7,894,000 $8,409,000 $5,839,000
---------- ------------- ----------
Weighted average number of common shares outstanding 6,964,278 6,554,445 6,129,972
Effect of the issuance of stock options and warrants and assumed
exercise of stock options and warrants at prices which are lower
than the average market price of the common shares
during the period, using the treasury stock method 672,018 703,339 774,655
Effect of convertible shares held by a minority shareholder
of a foreign subsidiary, which were converted into
common stock on June 23, 1994 --- --- 93,753
--------- --------- ---------
B. Weighted average number of common shares and common
equivalent shares for primary earnings per share 7,636,296 7,257,784 6,998,380
--------- --------- ---------
Weighted average number of common shares outstanding 6,964,278 6,554,445 6,129,972
Effect of the issuance of stock options and warrants and assumed
exercised of stock options and warrants at prices which are lower
than the market price of the common shares at the
end of the period, using the treasury stock method 740,229 871,833 946,413
Effect of convertible shares held by a minority shareholder
of a foreign subsidiary, which were converted into
common stock on June 23, 1994 --- --- 93,753
--------- --------- ---------
C. Weighted average number of common shares and common
equivalent shares for fully diluted earnings per share 7,704,507 7,426,278 7,170,138
--------- --------- ---------
Primary earnings per share (A/B) $1.03 $1.16 $.83
========= ========= =========
Fully diluted earnings per share (A/C) $1.02 $1.13 $.81
========= ========= =========
</TABLE>
41
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF PERCEPTRON, INC.
The following three corporations are subsidiaries of Perceptron, Inc.
1. Perceptron Europe B.V., a corporation organized under the laws of the
Netherlands.
2. Perceptron (Europe) GmbH, a corporation organized under the laws
of Germany, is a wholly owned subsidiary of Perceptron Europe B.V.
3. Autospect, Inc., a corporation organized under the laws of
Michigan.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Perceptron, Inc. and Subsidiaries on Form S-8 (File Nos. 33-63666, 33-63664,
33-85656, 33-93910, 333-00446 and 333-00444) and on Form S-3 (File No.
33-78594) of our report dated January 31, 1996, except as to note 14 for which
the date is February 3, 1997, on our audits of the consolidated financial
statements and financial statement schedule of Perceptron, Inc. and
Subsidiaries as of December 31, 1996 and 1995, and for the years ended December
31, 1996, 1995 and 1994, which report is included in this Annual Report on Form
10-K for the year ended December 31, 1996.
COOPERS & LYBRAND LLP
Detroit, Michigan
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 14,666,000
<SECURITIES> 0
<RECEIVABLES> 20,958,000
<ALLOWANCES> (60,000)
<INVENTORY> 6,001,000
<CURRENT-ASSETS> 45,481,000
<PP&E> 10,531,000
<DEPRECIATION> (1,416,000)
<TOTAL-ASSETS> 56,896,000
<CURRENT-LIABILITIES> 10,392,000
<BONDS> 0
<COMMON> 73,000
0
0
<OTHER-SE> 46,431,000
<TOTAL-LIABILITY-AND-EQUITY> 56,896,000
<SALES> 49,679,000
<TOTAL-REVENUES> 49,679,000
<CGS> 18,989,000
<TOTAL-COSTS> 17,310,000
<OTHER-EXPENSES> 3,202,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (786,000)
<INCOME-PRETAX> 10,964,000
<INCOME-TAX> 3,070,000
<INCOME-CONTINUING> 7,894,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,894,000
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.02
</TABLE>
