<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 1997.
Commission file number: 0-20206
PERCEPTRON, INC.
(Exact name of registrant as specified in its charter)
Michigan 38-2381442
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
47827 Halyard Drive, Plymouth, Michigan 48170-2461
(Address of principal executive offices)
(313) 414-6100
(Registrants telephone number, including area code)
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 proceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
The number of shares outstanding of each of the issuer's classes of common
stock as of August 6, 1997 was:
Common Stock, $0.01 par value 8,044,850
- ----------------------------- --------------------
Class Number of shares
1
<PAGE> 2
PERCEPTRON, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM I Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1997 3
and December 31, 1996
Condensed Consolidated Statements of Income - Three and
Six Months Ended June 30, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6-8
ITEM 2 Management's Discussion and Analysis of Financial Condition 8-12
and Results of Operations
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 12
PART II. OTHER INFORMATION
ITEM 2 Changes in Securities 13
ITEM 4 Submission of Matters to a Vote of Security Holders 14
ITEM 6 Exhibits and Reports on Form 8-K 15
</TABLE>
2
<PAGE> 3
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $16,473,000 $14,924,000
Accounts receivable and other receivables,
net of reserves of $175,000 and $108,000 23,064,000 22,750,000
Inventory, net of reserves of $895,000 and $860,000 6,983,000 7,176,000
Income tax receivables 0 2,103,000
Prepaid expenses and deferred tax asset 2,362,000 2,500,000
----------- ------------
Total current assets 48,882,000 49,453,000
----------- ------------
Property and equipment:
Building and land 5,983,000 0
Machinery and equipment 6,400,000 4,986,000
Furniture and fixtures 480,000 376,000
Leasehold improvements 15,000 12,000
Construction in progress 0 6,202,000
----------- ------------
12,878,000 11,576,000
Less: Accumulated depreciation and amortization (2,540,000) (1,925,000)
----------- ------------
Net property and equipment 10,338,000 9,651,000
Intangible assets, net 1,890,000 2,352,000
----------- ------------
Total assets $61,110,000 $61,456,000
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Due to bank $0 $980,000
Accounts payable 2,131,000 4,892,000
Accrued payables 6,906,000 6,223,000
Accrued compensation and stock option expense 1,387,000 2,914,000
----------- ------------
Total current liabilities 10,424,000 15,009,000
----------- ------------
Shareholders' equity:
Preferred Stock, no par value, 1,000,000 shares
authorized, none issued 0 0
Common Stock, $.01 par value; 19,000,000 shares
authorized, 8,031,000 and 7,950,000 issued and
outstanding at June 30, 1997 and December 31, 1996,
respectively 80,000 80,000
Cumulative translation adjustments (2,138,000) (929,000)
Additional paid-in capital 40,327,000 39,560,000
Retained earnings 12,417,000 7,736,000
----------- -----------
Total shareholders' equity 50,686,000 46,447,000
----------- -----------
Total liabilities and shareholders' equity $61,110,000 $61,456,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 4
PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ----------------------------
1997 1996 1997 1996
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Net sales $18,806,000 $13,823,000 $31,190,000 $23,940,000
Cost of sales 6,648,000 5,581,000 12,101,000 9,750,000
-------------- -------------- ------------- -------------
Gross profit 12,158,000 8,242,000 19,089,000 14,190,000
Selling, general and administrative expense 4,495,000 3,234,000 8,069,000 6,389,000
Engineering, research and development expense 2,306,000 1,798,000 4,515,000 3,267,000
Non-cash stock compensation expense 0 2,315,000 0 2,736,000
-------------- -------------- ------------- -------------
Income from operations 5,357,000 895,000 6,505,000 1,798,000
Interest income, net 250,000 173,000 430,000 333,000
-------------- -------------- ------------- -------------
Income before provision for income taxes 5,607,000 1,068,000 6,935,000 2,131,000
-------------- -------------- ------------- -------------
Provision for income taxes 1,836,000 104,000 2,254,000 412,000
-------------- -------------- ------------- -------------
Net income $ 3,771,000 $ 964,000 $ 4,681,000 $ 1,719,000
============== ============== ============= =============
Net income per weighted average share $ .45 $ .12 $ .55 $ .21
============== ============== ============= =============
Weighted average common and common
equivalent shares 8,458,726 8,374,143 8,490,626 8,280,122
============== ============== ============= =============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 5
PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,681,000 $ 1,719,000
----------- -----------
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,077,000 382,000
Non-cash stock compensation expense 0 2,736,000
Changes in operating assets and liabilities:
Accounts receivable (1,162,000) (1,061,000)
Inventory 193,000 (1,793,000)
Prepaid expenses and other current assets 2,241,000 533,000
Accounts payable (2,761,000) (900,000)
Accrued expenses (844,000) 124,000
----------- -----------
Total adjustments (1,256,000) 21,000
----------- -----------
Net cash provided by operating activities 3,425,000 1,740,000
----------- -----------
Cash flows (used in) investing activities:
Capital expenditures (1,302,000) (2,624,000)
----------- -----------
Cash flows from financing activities:
Principal payments under capital lease obligations 0 (25,000)
Proceeds from issuance of short-term debt 0 145,000
Repayment of short-term debt (980,000) 0
Proceeds from exercise of options and other 767,000 1,180,000
----------- -----------
Net cash provided (used in) by financing activities (213,000) 1,300,000
----------- -----------
Effect of exchange rates on cash and cash equivalents (361,000) (87,000)
----------- -----------
Net increase in cash and cash equivalents 1,549,000 329,000
Cash and cash equivalents, beginning of year 14,924,000 15,442,000
----------- -----------
Cash and cash equivalents, end of period $16,473,000 $15,771,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE> 6
PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. FINANCIAL STATEMENT PRESENTATION
Information for the three and six months ended June 30, 1997 and 1996 is
unaudited, but includes all adjustments, consisting of normal recurring
adjustments, which the management of Perceptron, Inc. ("Perceptron" or the
"Company") considers necessary for fair presentation of financial position,
results of operations and cash flows. In accordance with the instructions for
the completion of the Quarterly Report on Form 10Q, certain information and
footnote disclosures necessary to comply with generally accepted accounting
principles have been condensed or omitted. Certain 1996 amounts have been
reclassified to conform to the 1997 presentation.
These financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 and
Current Report on Form 8-K filed July 21, 1997, which contain Perceptron's
accounting principles and other footnote information. The results of
operations for any interim period are not necessarily indicative of the results
of operations for a full year.
The condensed consolidated financial statements of the Company have been
prepared to give retroactive affect to the acquisitions by the Company of
Autospect, Inc. ("Autospect"), which acquisition was consummated on February 3,
1997, and Trident Systems Inc. ("Trident") and Nanoose Systems Corporation
("Nanoose"), which acquisitions were consummated on April 30, 1997. These
acquisitions are accounted for as a pooling of interests.
NOTE 2. ACQUISITIONS
On February 3, 1997, the Company consummated the 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 (the "Merger"). 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.
On April 30, 1997, the Company consummated the acquisition of Trident
Systems, Inc., ("Trident") through the merger of a wholly-owned subsidiary of
the Company with and into Trident for aggregate consideration consisting of
219,962 shares of Common Stock of the Company. Trident, based
in Atlanta, Georgia, 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 purchases TriCam and
LASAR-based systems from the Company for integration into systems sold by
Trident to the forest and wood products industry.
On April 30, 1997, a wholly owned subsidiary of the Company acquired all of
the outstanding stock of the shareholders of Nanoose Systems Corporation
("Nanoose") and an outstanding option to purchase Nanoose common stock and the
Company delivered to the shareholders of the corporate shareholders of Nanoose
and holder of the option to purchase Nanoose common stock 89,820 shares of
Common Stock of the Company (the "Purchase"). Nanoose, based in British
Columbia, Canada, is a software design and engineering company, specializing in
industrial scanning and optimization systems. Optimization
6
<PAGE> 7
software written by Nanoose is an important element of the systems sold by
Trident to the forest and wood products industry.
Net sales and net income for the acquired companies and Perceptron for the
periods proceeding the acquisitions were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, 1997 June 30, 1996
Net Sales Net Income Net Sales Net Income
---------------------------- -------------------------
<S> <C> <C> <C> <C>
Perceptron, as previously reported 10,330 793 20,725 1,516
Trident and Nanoose 2,324 118 3,370 248
Autospect 1,243 58
Consolidation adjustments (270) (21) (1,398) (103)
----------- ------- --------- --------
Combined 12,384 890 23,940 1,719
=========== ======= ========= ========
</TABLE>
NOTE 3. INVENTORY
Inventory is stated at the lower of cost or market. The cost of inventory
is determined by the first in, first out (FIFO) method. Inventory, net of
reserves, is comprised of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Component parts......... $4,830,000 $4,627,000
Work in process......... 1,505,000 1,829,000
Finished goods ......... 648,000 720,000
---------- ------------
Total ............ $6,983,000 $7,176,000
========== ============
</TABLE>
NOTE 4. 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.
Statement of Financial Accounting Standards No. 128 ("SFAS 128"),
"Earnings per Share", was issued in February 1997. Adoption of SFAS 128,
effective for the year ending after December 31, 1997, is not expected to have
a significant effect on reported earnings.
NOTE 5. COMMITMENTS AND 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,
7
<PAGE> 8
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 which alleged that the
Company's TriCam sensor violated a patent held by the plaintiff and which
sought preliminary and permanent injunctions and damages. In May 1997, this
matter was settled with Applied Scanning Technology Inc. ("AST") acknowledging
that there was no infringement of the AST patents covered by the suit by the
Company, Trident or Nanoose and agreeing to dismiss, with prejudice, all claims
against the Company, Trident and Nanoose.
NOTE 6. CREDIT FACILITIES
The Company has unsecured bank credit facilities of $5.0 million US and
1.0 million DM, which may be used to finance working capital needs and
equipment purchases or capital leases. Any borrowings for working capital
needs or equipment purchases will bear interest at the bank's prime rate (8.5%
as of August 10, 1997). In June 1997, the Company renewed these credit
facilities through May 31, 1998. At June 30, 1997, there were no borrowings
against these facilities.
NOTE 7. FOREIGN EXCHANGE CONTRACTS
The Company uses, from time to time, a limited hedging program to minimize
the impact of foreign currency fluctuations. As the Company exports products,
it may enter 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 June 30, 1997, the Company had no forward
contracts outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND 1996
Net Sales. The Company's net sales increased by 36% from $13.8 million in
the second quarter of 1996 to $18.8 million in the second quarter of 1997. The
increase of $5.0 million in net sales is primarily attributable to increased
sales to automotive customers, up by $4.6 million from the same quarter last
year. Domestic automotive sales for the second quarter of 1997 were $10.9
million, up $2.8 million over 1996, and international automotive sales were
$5.5 million, up $1.8 million over 1996. Non-automotive sales were up by $0.4
million for the second quarter of 1997 versus 1996, at $2.4 million for the
second quarter of 1997 compared to $2.0 million for 1996.
8
<PAGE> 9
New order bookings during the second quarter of 1997 totaled $10.5 million
compared to $19.6 million in the second quarter of 1996. The decrease of $9.1
million is attributable to the timing of orders from automotive customers, down
by $10.2 million on a comparative basis. Domestic automotive bookings were
$5.7 million for the second quarter of 1997 versus $13.8 million in 1996.
International automotive bookings were $2.1 million for the second quarter of
1997 versus $4.2 million for 1996. Non-automotive bookings were $2.7 million
for the second quarter of 1997 versus $1.6 million for the second quarter of
1996.
New order bookings are dependent on the timing of customer re-tooling
programs, and accordingly may vary significantly from month to month. The
amount of new order bookings during any particular period is not necessarily
indicative of the future operating performance of the Company.
Backlog at June 30, 1997 totaled $20.9 million, compared to $24.0 million
at December 31, 1996. 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.
Gross profit. Gross profit increased from $8.2 million in the second
quarter of 1996 to $12.2 million in the second quarter of 1997. Gross profit
as a percentage of net sales increased from 59.6% in the second quarter of 1996
to 64.6% in the second quarter of 1997, due primarily to the higher volume
produced in the quarter.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $3.2 million in the second quarter of
1996 to $4.5 million in the second quarter of 1997. This change is principally
due to increased personnel and related expenses to support the planned 1997
operating activity and, to a lesser extent, costs associated with the recent
acquisitions. As a percentage of sales, selling, general and administrative
expenses increased from 23.4% in the second quarter of 1996, to 23.9% in the
second quarter of 1997.
Engineering, research and development expense. Engineering, research and
development expenses increased from $1.8 million in the second quarter of 1996,
to $2.3 million in the second quarter of 1997, due primarily to increased
personnel. The Company's new engineering personnel are principally involved in
new product development efforts and were hired in anticipation of higher sales
volumes in 1997. As a percentage of net sales, research and development
expense decreased from 13.0% in the second quarter of 1996 to 12.3% in the
second quarter of 1997.
Non-cash stock compensation expense. During the second quarter of 1996,
the Company recorded non-cash compensation expense reflecting the use by some
participants in the Company's stock option plan of Perceptron stock options to
pay the exercise price of stock options issued under the plan. This expense
totaled $2.3 million in the second quarter of 1996.
Interest income, net. Interest income increased from $173,000 in the
second quarter of 1996, to $250,000 in the second quarter of 1997, due to
higher cash balances and related investments.
9
<PAGE> 10
Income before provision for income taxes. During the second quarter of
1996, Perceptron had income before provision for income taxes of $1.1 million,
representing 7.7% of net sales, as compared to income before provision for
income taxes of $5.6 million, representing 29.8% of net sales, in the second
quarter of 1997.
Provision for income taxes. For the three months ended June 30, 1997, the
Company recorded a $1.8 provision for income taxes, representing an estimated
effective tax rate of 32.5%. This was up from the 1996 effective tax rate of
30%. This compares to a provision for income taxes of $0.1 million in 1996.
Net income. During the second quarter of 1996, Perceptron had net income
of $1.0 million representing 7.0% of net sales, as compared to net income of
$3.8 million representing 20.1% of net sales in the second quarter of 1997.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Net Sales. The Company's net sales increased by 30% from $23.9 million in
the first half of 1996 to $31.2 million in the first half of 1997. The
increase of $7.3 million is primarily attributable to increased sales to
automotive customers, up $5.8 million, from $20.6 million in 1996 to $26.4
million in 1997. Domestic automotive sales were up $2.9 million, from $15.6
million in the six month period for 1996 to $18.5 million for the comparable
period in 1997, and international automotive sales were also up $2.9 million,
from $5.0 million in the first six months of 1996 to $7.9 million for the first
six months of 1997.
Non-automotive sales were up $1.5 million, from $3.3 million for the first
six months of 1996, to $4.8 million for 1997.
New order bookings during the first six months totaled $28.9 million for
1997, down from the $30.3 million for 1996. The decrease of $1.4 million is
mainly attributable to the timing of orders from automotive customers, down
$1.5 million from $26.7 million in the first six months of 1996 to $25.2
million for the first six months of 1997. Domestic automotive bookings were
down $0.7 million, from $19.0 million in the first six months of 1996 to $18.3
million in the first six months of 1997, and international automotive bookings
were down $0.8 million, from $7.7 million in the first six months of 1996 to
$6.9 million in the first six months of 1997.
Non-automotive bookings were even at $3.7 million for the six months of
1996 and 1997.
Gross Profit. Gross profit increased by $4.9 million for the six month
period, from $14.2 million for 1996 to $19.1 million for 1997. Gross profit as
a percentage of net sales increased from 59.3% for the first six months of 1996
to 61.2% for 1997, primarily as a result of the higher volumes for 1997.
Additionally, gross profit as a percentage of net sales in 1996 had been
adversely affected by 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 and sold as a
complete system.
Selling, general and administrative expenses. Selling, general, and
administrative expenses increased by $1.7 million, from $6.4 million for the
first six months of 1996 to $8.1 million for 1997. This change is primarily
due to increased personnel and related expenses to support the 1997 planned
operating activity and, to a lesser extent, costs associated with the recent
acquisitions. As a percentage of sales, SG&A expenses decreased from 26.7% in
the six month period 1996 to 25.9% for 1997.
10
<PAGE> 11
Engineering, research and development expense. Engineering, research and
development expenses increased by $1.2 million, from $3.3 million in the six
month period of 1996 to $4.5 million during 1997, due primarily to increased
personnel. As a percentage of net sales, research and development expenses
increased from 13.6% in the first six months of 1996 to 14.5% in 1997.
Non-cash stock compensation expense. During 1996, the Company recorded
non-cash compensation expense reflecting the use by some participants in the
Company's stock option plan of Perceptron stock options to pay the exercise
price of stock options issued under the plan. This expense totaled $2.7
million in the six month period of 1996.
Interest income, net. Interest income increased from $333,000 in the six
month period of 1996 to $430,000 in 1997 due to higher cash balances and
related investments.
Income before provision for income taxes. During the first half of 1996,
Perceptron had income before provision for income taxes of $2.1 million, or
8.9% of net sales, as compared to $6.9 million in the comparable period of
1997, or 22.2% of net sales.
Provision for income taxes. For the six months ended June 30, 1997, the
Company recorded a $2.3 million provision for income taxes, representing an
estimated effective tax of 32.5%. This compares to a provision for income
taxes of $0.4 million in 1996.
Net income. During the first six months of 1996, Perceptron had net
income of $1.7 million, or 7.2% of net sales, as compared to $4.7 million in
the comparable period of 1997, or 15.0% of net sales.
11
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents as of June 30, 1997 totaled $16.5
million, as compared with $14.9 million as of December 31, 1996. This increase
was due primarily to net income recorded in the six months and the collection of
income tax receivables, partially offset by capital expenditures and payments of
accounts payable, accrued compensation expense, and repayment of bank lines of
the newly acquired subsidiaries.
At June 30, 1997 the Company has unsecured credit facilities totaling $5.0
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 or equipment purchases will bear interest
at the bank's prime rate (8. 5% as of August 10, 1997). The credit facilities
were recently renewed, and expire on May 31, 1998 unless canceled earlier by
the Company or the bank. As of June 30, 1997, Perceptron had no short-term or
long-term debt.
The Company's working capital increased to $38.5 million at June 30, 1997,
from $34.4 million at December 31, 1996. Accounts receivable increased from
$22.7 million as of December 31, 1996 to $23.1 million as of June 30, 1997
primarily as a result of new sales. The decrease of approximately $0.2 million
in inventory is due primarily to the higher volume delivered in the quarter.
The decrease of $4.6 million in current liabilities is due primarily to the
payments of 1996 performance bonuses and payments on the new facility.
During the first quarter of 1997, construction of the Company's new
headquarters facility in Plymouth, Michigan was completed and the sale of the
facility to the Company was consummated. This is reflected in the Property and
Equipment portion of the Perceptron, Inc. and Subsidiary's Balance Sheet for
the period ended June 30, 1997.
The Company does not believe that inflation has had any significant impact
on historical operations, and does not expect any significant near-term
inflationary impact.
The Company believes that available cash on hand and existing credit
facilities will be sufficient to fund its currently anticipated 1997 cash flow
requirements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On April 30, 1997, the Company consummated the acquisition of Trident
Systems, Inc., ("Trident") through the merger of a wholly-owned subsidiary of
the Company with and into Trident for aggregate consideration consisting of
219,962 shares of Common Stock of the Company (the "Merger"). Trident, based
in Atlanta, Georgia, 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 purchases TriCam and
LASAR-based systems from the Company for integration into systems sold by
Trident to the forest and wood products industry. Common Stock of the Company
was issued in the Merger pursuant to Rule 506 of Regulation D promulgated under
the Securities Act of 1933, as amended, to the three shareholders of Trident,
all of whom were accredited investors. In connection with the Merger, the
shareholders of Trident received disclosure regarding the Company in accordance
with Subsection (b) of Rule 502 of Regulation D ("Rule 502"). No form of
general solicitation or advertising was used in connection with the issuance of
the Common Stock of the Company to the shareholders of Trident. The shares of
Common Stock of the Company received by the shareholders of Trident in the
Merger are subject to limitations on resale as required by Rule 502(d). The
Company registered with the Securities and Exchange Commission for resale 54%
of the shares of Common Stock issued in the Merger and has agreed to also
register one-half of the remainder of such shares on each of the first and
second anniversaries of the closing of the Merger.
On April 30, 1997, a wholly owned subsidiary of the Company acquired all
of the outstanding stock of the shareholders of Nanoose Systems Corporation
("Nanoose") and an outstanding option to purchase Nanoose common stock and the
Sellers (as defined below) received from the Company 89,820 shares of Common
Stock of the Company (the "Purchase"). 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 wood products industry. This software accepts scanner information from the
Company's TriCam and LASAR systems. The shareholders of the corporate
shareholders of Nanoose and the holder of the option to purchase Nanoose common
stock are referred to herein as the "Sellers". Common Stock of the Company was
issued in the Purchase pursuant to Rule 506 of Regulation D promulgated under
the Securities Act of 1933, as amended, to the three Sellers, two of whom were
accredited investors and the other one of whom, based on information provided
by him to the Company, was believed by the Company to have such knowledge and
experience in financial and business matters to be capable of evaluating the
merits and risks of the acquisition of the Common Stock of the Company. In
connection with the Purchase, the Sellers received disclosure regarding the
Company in accordance with Subsection (b) of Rule 502. No form of general
solicitation or advertising was used in connection with the issuance of the
Common Stock of the Company to the Sellers. The shares of Common Stock of the
Company received by the Sellers in the Purchase are subject to limitations on
resale as required by Rule 502(d). The Company registered with the Securities
and Exchange Commission for resale 54% of the shares of Common Stock issued in
the Purchase and has agreed to also register one-half of the remainder of such
shares on each of the first and second anniversaries of the closing of the
Purchase.
13
<PAGE> 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on June 20, 1997 at
which the following action was taken:
1. The Shareholders elected the following persons as the Company's Board of
Directors, and the results of the vote on this matter were as follows:
<TABLE>
<CAPTION>
Broker
Name For Against Abstained Non-Votes
----------------- --------- ------- --------- ---------
<S> <C> <C> <C> <C>
David J. Beattie 6,200,108 135,856 0 -
Philip J. DeCocco 6,198,740 137,224 0 -
Robert S. Oswald 6,200,457 135,507 0 -
Alfred A. Pease 6,200,757 135,207 0 -
Harry T. Rein 6,200,757 135,207 0 -
Louis R. Ross 6,200,757 135,207 0 -
Terryll R. Smith 6,198,440 137,524 0 -
</TABLE>
2. The Shareholders approved an amendment to the 1992 Stock Option Plan to
increase the shares of Common Stock available for grant under such plan by
300,000 shares. As to this proposal, 5,722,347 shares voted "for",
567,519 shares voted "against", 46,098 shares "abstained", and 0 were
broker non-votes.
14
<PAGE> 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
4.4 Credit Authorization Agreement dated
June 25, 1997, between Perceptron, Inc., and NBD Bank and
Related Master Demand Business Loan Note.
Other instruments, notes or extracts from agreements
defining the rights of holders of long-term debt of the
Company or its subsidiaries have not been filed because
(i) in each case the total amount of long-term debt
permitted thereunder does not exceed 10% of the Company's
consolidated assets, and (ii) the Company hereby agrees
that it will furnish such instruments notes and extracts
to the Securities and Exchange Commission upon its
request.
11. Statement re: computation of earnings
per share.
27. Financial Data Schedule
(B) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated April 25,
1997 which disclosed information under Item 5 and contained
condensed financial information.
The Company filed a Current Report on Form 8-K dated May 6,
1997, which disclosed information under Item 5.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PERCEPTRON, INC.
(Registrant)
Date: August 11, 1997 By: /S/ Alfred A. Pease
---------------------------
Alfred A. Pease, President
and Chief Executive Officer
Date: August 11, 1997 By: /S/ John G. Zimmerman
---------------------------
John G. Zimmerman
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 11, 1997 By: /S/ Paul J. Tripodi
---------------------------
Paul J. Tripodi, Controller
(Principal Accounting Officer)
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
4.4 Credit Authorization Agreement dated June 25,
1997, between Perceptron, Inc., and NBD Bank
and Related Master Demand Business Loan Note.
11. Statement re: computation of earnings per
share.
27. Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 4.4
[NBD LOGO]
Credit Authorization Agreement
NBD BANK (the "Bank"), 611 Woodward Avenue, Detroit, Michigan 48226-3947, has
approved the credit facilities listed below (collectively, the "Credit
Facilities," and, individually, as designated below) to: PERCEPTRON, INC. (the
"Borrower"), 47827 Halyard Drive, Plymouth, Michigan 48170, subject to the
terms and conditions set forth in this agreement.
1.0 CREDIT FACILITIES. (Check and complete applicable sections)
1.1 UNCOMMITTED CREDIT AUTHORIZATIONS. The Bank has approved the
uncommitted credit authorizations listed below collectively, the "Credit
Authorizations," and, individually, as designated below) subject to the terms
and conditions of this agreement and the Bank's continuing satisfaction with
the Borrower's financial status. Disbursements under the Credit Authorizations
are solely at the Bank's discretion. Any disbursement on one or more occasions
shall not commit the Bank to make any subsequent disbursement.
/X/ A. FACILITY A. The Bank has approved an uncommitted Credit
Authorization to the Borrower in the principal sum not to exceed
$3,500,000.00 in the aggregate at any one time outstanding
("Facility A"). Credit under Facility A shall be in the form of
disbursements evidenced by credits to the Borrower's account and
shall be repayable as set forth in a Master Demand Note executed
concurrently (referred to in this agreement both singularly and
together with any other promissory notes referenced in this Section
I as the "Notes"). The proceeds of Facility A shall be used for
the following purpose: working capital . Facility A shall expire on
May 31, 1998 unless earlier withdrawn.
/ / B. FACILITY B (INCLUDING LETTERS OF CREDIT). The Bank has
approved an uncommitted Credit Authorization to the Borrower in the
principal sum not to exceed $_________________ in the aggregate at
any one time outstanding ("Facility B"). Facility B shall include
the issuance of [commercial/standby] letters of credit not
exceeding $____________ in the aggregate at any one time
outstanding, expiring not later than ______________________, 199__
[which shall include time drafts expiring not later than
______________________, 199__] (the "Letters of Credit"). (Strike
bracketed words if inapplicable.) Each Letter of Credit shall be
in form acceptable to the Bank and shall bear a fee of ____% per
year of the face amount of each standby Letter of Credit plus an
issuance fee of $_____________ upon issuance of each Letter of
Credit. (If no fee is listed, the Letters of Credit shall bear a
fee to be agreed upon by the Bank and the Borrower). Credit under
Facility B shall be in the form of disbursements evidenced by
credits to the Borrower's account and shall be repayable as set
forth in a Master Demand Note executed concurrently (referred to in
this agreement both singularly and together with any other
promissory notes referenced in this Section I as the "Notes") or by
issuance of a Letter of Credit upon completion of an application
acceptable to the Bank. The proceeds of Facility B
<PAGE> 2
shall be used for the following purpose:
____________________________________________________________________
____________________________________________. Facility B shall
expire on __________, 199__ unless earlier withdrawn.
/X/ C. FACILITY C (PURCHASE MONEY TERM LOANS). The Bank has
approved an uncommitted credit authorization to the Borrower in the
principal sum not to exceed $500,000.00 in the aggregate at any one
time outstanding ("Facility C"). Facility C shall be in the form
of loans evidenced by the Borrower's notes on the Bank's form
(referred to in this agreement both singularly and together with
any other promissory notes referenced in this Section I as the
"Notes"), the proceeds of which shall be used to purchase equipment
and vehicles. Interest on each loan shall accrue at a rate to be
agreed upon by the Bank and the Borrower at the time the loan is
made. The maturity of each note shall not exceed 36 months from
the note date. Notwithstanding the aggregate amount of Facility C
stated above, the original principal amount of each loan shall not
exceed the lesser of 80% of the cost of the equipment purchased
with loan proceeds or $ 500,000.00. Facility C shall expire on May
31, 1998 unless earlier withdrawn.
/ / 1.2 TERM LOANS. The Bank agrees to extend credit to the Borrower in the
form of term loan(s) (whether one or more, the "Term Loans") in the principal
sum(s) of ________________________________ respectively, bearing interest and
payable as set forth in the Term Note(s) executed concurrently (referred to in
this agreement both singularly and together with any other promissory notes
referenced in this Section I as the "Notes"). The proceeds of the Term Loans
shall be used for the following purpose:_______________________________________
________________________________________________________________.
2.0 CONDITIONS PRECEDENT.
2.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. Before the first
extension of credit under this agreement, whether by disbursement of a loan,
issuance of a letter of credit, or otherwise, the Borrower shall deliver to the
Bank, in form and substance satisfactory to the Bank:
A. LOAN DOCUMENTS. The Notes; the letter of credit applications
required by Section 1.2; the security agreements, Financing statements,
mortgages and other documents required by Section 5. 1; the guaranties required
by Section 6.0; the subordination agreements required by Section 7.0; and any
other loan documents which the Bank may reasonably require to give effect
to the transactions contemplated by this agreement:
B. EVIDENCE OF DUE ORGANIZATION AND GOOD STANDING. Evidence
satisfactory to the Bank of the due organization and good standing of the
Borrower and every other business entity that is a party to this agreement
or any other loan document required by this agreement; and
C. EVIDENCE OF AUTHORITY TO ENTER INTO LOAN DOCUMENTS. Evidence
satisfactory to the Bank that (i) each party to this agreement or any other
loan document required by this agreement is authorized to enter into the
transactions contemplated by this agreement and the other loan documents, and
(ii) the person signing on behalf of each such party is authorized to do so.
2
<PAGE> 3
2.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. Before any
extension of credit under this agreement, whether by disbursement of a loan,
issuance of a letter of credit, or otherwise, the following conditions shall
have been satisfied:
A. REPRESENTATIONS. The representations contained in Section 10 shall be
true on and as of the date of the extension of credit;
B. NO EVENT OF ACCELERATION. No event of acceleration shall have occurred
and be continuing or would result from the extension of credit.
C. CONTINUED SATISFACTION. The Bank shall have remained satisfied with
the Borrower's managerial and financial status;
D. ADDITIONAL APPROVALS, OPINIONS, AND DOCUMENTS. The Bank shall have
received such other approvals, opinions and documents as it may reasonably
request; and
E. OTHER CONDITIONS. ____________________________________________
______________________________________________________________________________.
3.0 BORROWING BASE/ANNUAL PAY DOWN.
3.1 BORROWING BASE. (complete if applicable) Notwithstanding any other
provision of this agreement, the aggregate principal amount outstanding at any
one time under (check applicable clauses)
/ / Facility A
/ / Facility B
shall not exceed the lesser of the Borrowing Base or $_______________________.
Borrowing Base means: (check and complete applicable clauses)
/ / A. ______% of the Borrower's trade accounts receivable in
which the Bank has a perfected first priority, security interest,
excluding accounts more than 90 days past due from the date of
invoice, accounts subject to offset or defense, government, bonded.
affiliate and foreign accounts, accounts from trade debtors of
which more than ____ % of the aggregate amount owing from the trade
debtor to the Borrower is more than ____ days past due, and
accounts otherwise unacceptable to the Bank, plus
/ / B. Inventory of the Borrower in which the Bank has a
perfected, first priority, security interest, valued at the lower
of cost or market, but not exceeding $________ in aggregate, as
follows:
/ /(1) ________% of aggregate inventory, or
/ /(1) ________% of raw material inventory; and
/ /(2) ________% of work-in-process inventory; and
/ /(3) ________% of finished goods inventory, plus
/ / C. _____% of the ________ value of the Borrower's machinery
and equipment in which the Bank has a perfected, first priority,
security interest, but not exceeding $________, plus
/ / D. Additional Borrowing Base provisions are contained in the
attached addendum.
3
<PAGE> 4
3.2 ANNUAL PAY DOWN. (complete if applicable) Notwithstanding
any other provision of this agreement, there shall be no debt
outstanding under ______________________ for a period of__________
__________________________________________________________________
(Facility A, Facility B, etc.)
consecutive months during each fiscal year of the Borrower.
4.0 FEES AND EXPENSES. (complete if applicable)
4.1 FEES. Upon execution of this agreement. the Borrower
shall pay the Bank the following fees, all of which the Borrower
acknowledges have been earned by the Bank:
4.2 OUT-OF POCKET EXPENSES. In addition to any fee set forth
in Section 4.1 above, the Borrower shall reimburse the Bank for its
out-of-pocket expenses and reasonable attorney's fees (including
the fees of in-house counsel) allocated to the Credit Facilities.
5.0 SECURITY.
5.1 Payment of all amounts owing under the Credit Facilities
shall be secured by the Borrower's grant of a continuing first
security interest and/or real estate mortgage. as the case may be,
covering its interest in the following property and all its
additions, substitutions, increments, proceeds and products,
present and future, whether now owned or later acquired, (the
"Collateral"): (check and complete applicable clauses)
/ / A. ACCOUNTS RECEIVABLE. All of the Borrower's accounts,
chattel paper, general intangibles, instruments, and documents (as
those terms are defined in the Uniform Commercial Code), rights to
refunds of taxes paid at any time to any governmental entity, and
any letters of credit and drafts under them given in support of the
foregoing, wherever located. The Borrower shall deliver to the
Bank executed security agreements and financing statements in form
and substance satisfactory to the Bank.
/ / B. INVENTORY. All of the Borrowers inventory, wherever
located. The Borrower shall deliver to the bank executed security
agreements and financing statements in form and substance
satisfactory to the Bank.
/ / C. EQUIPMENT. All of the Borrower's equipment, wherever
located. The Borrower shall deliver to the Bank executed security
agreements and financing statements in form and substance
satisfactory to the Bank.
/ / D. REAL ESTATE. The real property, including improvements,
located at ______________________________________________________.
The Borrower shall deliver to the Bank an executed mortgage ALTA
mortgage title insurance policy without exceptions with mortgage
survey certified to the Bank and the title company, and, where
applicable, an assignment of rents, subordinations of leases and
assignments of land contracts, all in form and substance
satisfactory to the Bank.
/ / E. ______________________________________________________.
5.2 No forbearance or extension of time granted any subsequent
owner of the Collateral shall release the Borrower from liability.
5.3 ADDITIONAL COLLATERAL/SETOFF. To further secure payment
of all amounts owing under the Credit Facilities and all of the
Borrower's other liabilities to the Bank, the Borrower grants to
the
4
<PAGE> 5
Bank a continuing security interest in: (i) all securities and
other property of the Borrower in the custody, possession or
control of the Bank (other than property held by the Bank solely in
a fiduciary capacity), and (ii) all balances of deposit accounts of
the Borrower with the Bank. The Bank shall have the right at any
time to apply its own debt or liability to the Borrower, or to any
other party liable for payment of the Credit Facilities, in whole
or partial payment of the Credit Facilities or other present or
future liabilities, without any requirement of mutual maturity.
5.4 CROSS LIEN. Any of the Borrower's other property in which
the Bank has a security interest to secure payment of any other
debt, whether absolute. contingent, direct or indirect, including
the Borrower's guaranties of the debts of others, shall also secure
payment of and be part of the Collateral for the Credit Facilities.
6.0 GUARANTIES. (complete if applicable)
Payment of the Borrower's liabilities under the Credit
Facilities shall be guaranteed by ________________________________
______________________________, by execution of the Bank's form of
guaranty agreement. The liability of the guarantors, if more than
one, shall be joint and several.
7.0 SUBORDINATION. (complete if applicable)
The Credit Facilities shall be supported by the subordination
of debt owing from the Borrower to ______________________________,
including without limitation debt currently owing in the amount of
$__________________ in manner and by agreement satisfactory to the
Bank.
8.0 AFFIRMATIVE COVENANTS. So long as any debt remains
outstanding under the Credit Facilities, the Borrower, and each of
its subsidiaries, if any, shall:
8.1 INSURANCE. Maintain insurance with financially sound and
reputable insurers covering its properties and business against
those casualties and contingencies and in the types and amounts as
shall be in accordance with sound business and industry practices.
8.2 EXISTENCE. Maintain its existence and business operations
as presently in effect in accordance with all applicable laws and
regulations, pay its debts and obligations when due under normal
terms, and pay on or before their due date all taxes, assessments,
fees and other governmental monetary obligations, except as they
may be contested in good faith if they have been properly reflected
on its books and, at the Bank's request, adequate funds or security
has been pledged to insure payment.
8.3 FINANCIAL RECORDS. Maintain proper books and records of
account. in accordance with generally accepted accounting
principles where applicable, and consistent with financial
statements previously submitted to the Bank.
8.4 NOTICE. Give prompt notice to the Bank of the occurrence
of (i) any event of acceleration. and (ii) any other development.
financial or otherwise. which would affect the Borrower's business,
properties or affairs in a materially adverse manner.
8.5 COLLATERAL AUDITS. (complete if applicable) Permit the
Bank or its agents to perform ______________________ (monthly,
annual, etc.) audits of the Collateral. The Borrower shall
compensate the Bank for those audits in accordance with the Bank's
schedule of fees as may be amended from time to time. Whether or
not this section has been completed. the Bank shall retain
5
<PAGE> 6
the right to inspect the Collateral and business records
related to it at such times and at such intervals as the Bank may
reasonably require.
8.6 MANAGEMENT. (complete if applicable) Maintain ___________
___________ as ____________________________________________.
8.7 FINANCIAL REPORTS. Furnish to the Bank whatever
information, books and records the Bank may reasonably request,
including at a minimum: (Check and complete applicable clauses.
If the Borrower has subsidiaries, all Financial statements required
will be provided on a consolidated and on a separate basis.)
/X/ A. Within 60 days after each quarterly period, a balance
sheet as of the end of that period and statements of
income, retained earnings, and cash flows from the
beginning of that fiscal year to the end of that period,
certified as correct by one of its authorized agents.
/X/ B. Within 90 days after and as of the end of each of its
fiscal years, a detailed audit including a balance
sheet and statements of income, retained earnings, and
cash flows certified by an independent certified public
accountant of recognized standing.
/ / C. Within ______ days after and as of the end of each
calendar month, the following lists, each certified as
correct by one of its authorized agents: (check applicable
clauses)
/ / (1) a list of accounts receivable, aged from date of
invoice;
/ / (2) a list of accounts payable, aged from date of
receipt;
/ / (3) a list of inventory, valued at the lower of
cost or market.
/ / D. Within _______ days after and as of the end of each
calendar year, the signed personal financial statement
of _______________________________________.
(Borrower/Guarantor/other)
/ / E. Within 5 days after filing, a signed copy of the annual
tax return, with exhibits, of
________________________________________________________.
(Borrower/Guarantor/other)
/ / F. An Environmental Certificate on the Bank's form on and
as of the date of this agreement, and thereafter as
required by the Environmental Certificate.
/ / G. ____________________________________________________
_________________________________________________________
_________________________________________________________.
9.0 NEGATIVE COVENANTS.
9.1 DEFINITIONS. As used in this agreement. the following terms
have the following respective meanings:
A. "Subordinated Debt" means debt subordinated to the Bank in
manner and by agreement satisfactory to the Bank.
B. "Tangible Net Worth" means total assets less intangible
assets and total liabilities. Intangible assets include goodwill,
patents, copyrights, mailing lists, catalogs, trademarks, bond
discount and underwriting expenses, organization expenses, and all
other intangibles.
6
<PAGE> 7
9.2 Unless otherwise noted, the financial requirements set forth in this
section shall be computed in accordance with generally accepted accounting
principles applied on a basis consistent with financial statements previously
submitted by the Borrower to the Bank.
9.3 Without the written consent of the Bank, so long as any debt remains
outstanding under the Credit Facilities, the Borrower shall not: (where
appropriate, covenants shall apply on a consolidated basis - clauses H-0 apply
only if completed.)(1)
A. DIVIDENDS. Acquire or retire any of its shares of capital stock, or
declare or pay or make any other distributions upon any of its shares of
capital stock, except dividends payable in its capital stock, and dividends
payable to "Subchapter S" corporation shareholders, in amounts sufficient to
pay the shareholder(s) income tax obligations related to the Borrower's taxable
income.
B. SALE OF SHARES. Issue, sell or otherwise dispose of any shares of its
capital stock or other securities, or rights, warrants or options to purchase
or acquire any such shares or securities.
C. DEBT. Incur, or permit to remain outstanding, debt for borrowed money
or installment obligations, except debt reflected in the latest financial
statement of the Borrower furnished to the Bank prior to execution of this
agreement and not to be paid with proceeds of borrowings under the Credit
Facilities. For purposes of this covenant, the sale of any accounts receivable
shall be deemed the incurring of debt for borrowed money.
D. GUARANTIES. Guarantee or otherwise become or remain secondarily liable
on the undertaking of another, except for endorsement of drafts for deposit and
collection in the ordinary course of business.
E. LIENS. Create or permit to exist any lien on any of its property, real
or personal, except: existing liens known to the Bank, liens to the Bank; liens
incurred in the ordinary course of business securing current nondelinquent
liabilities for taxes, worker's compensation, unemployment insurance, social
security and pension liabilities; and liens for taxes being contested in good
faith.
F. ADVANCES AND INVESTMENTS. Purchase or acquire any securities of, or
make any loans or advances to. or investments in, any person. firm or
corporation. except obligations of the United States Government, open market
commercial paper rated one of the top two ratings by a rating agency of
recognized standing, or certificates of deposit in insured financial
institutions.
G. USE OF PROCEEDS. Use, or permit any proceeds of the Credit Facilities
to be used, directly or indirectly, for the purpose of "purchasing or carrying
any margin stock" within the meaning of Federal Reserve Board Regulation U. At
the Banks request, the Borrower shall furnish to the Bank a completed Federal
Reserve Board Form U-1.
H. WORKING CAPITAL. Permit the difference between its current assets
[less all sums owing from stockholders, members or partners, as the case may
be, and from officers, managers and directors) and current liabilities [plus
all sums (other than Subordinated Debt) owing to stockholders, members or
partners, as the case may be, and to officers, managers and directors] to be
less than $________________________ (Strike bracketed words if not applicable.)
I. TANGIBLE NET WORTH [PLUS SUBORDINATED DEBT]. Permit its Tangible Net
Worth [plus Subordinated Debt] to be less than $__________________. (Strike
bracketed words if not applicable).
J. CURRENT RATIO. Permit the ratio of its current assets to its current
liabilities to be less
_________________________
(1)/ 9.3 shall be deleted in its entirety with the exception of 9.3E and 9.3G,
which will remain in full force and effect.
7
<PAGE> 8
than ___________________ to 1.00.
K. LEVERAGE RATIO. Permit the ratio of its total liabilities to its
Tangible Net Worth [plus Subordinated Debt] to exceed ______________ to 1.00.
(Strike bracketed words if not applicable).
L. FIXED ASSETS. Expend for, contract for, lease, rent, or otherwise
acquire Fixed assets, if the expense to the Borrower, and all subsidiaries, if
any, shall exceed $_____________ in the aggregate in any one fiscal year.
M. LEASES. Contract for or assume in any manner, lease obligations if the
aggregate of all payments shall exceed $_________________ in any fiscal year.
N. COMPENSATION. Pay, or award compensation of any kind, in any one
fiscal year, to ____________________ exceeding $_________________.
O. __________________________________________________________________.
10.0 REPRESENTATIONS BY BORROWER. Each Borrower represents that: (a) the
execution and delivery of this agreement and the Notes and the performance of
the obligations they impose do not violate any law, conflict with any agreement
by which it is bound, or require the consent or approval of any governmental
authority or any third party; (b) this agreement and the Notes are valid and
binding agreements, enforceable according to their terms; and (c) all balance
sheets, income statements, and other financial statements furnished to the Bank
are accurate and fairly reflect the financial condition of the organizations
and persons to which they apply on their effective dates, including contingent
liabilities of every type, which financial condition has not changed materially
and adversely since those dates. Each Borrower, if other than a natural
person, further represents that: (a) it is duly organized, existing and in good
standing under the laws of the jurisdiction under which it was organized; and
(b) the execution and delivery of this agreement and the Notes and the
performance of the obligations they impose (i) are within its powers; (ii) and
have been duly authorized by all necessary action of its governing body, and
(iii) do not contravene the terms of its articles of incorporation or
organization, its by laws, or any partnership, operating or other agreements
governing its affairs.
11.0 ACCELERATION.
11.1 EVENTS OF ACCELERATION. If any of the following events occur, the
Credit Facilities shall terminate and all borrowings under them shall become
due immediately, without notice. at the Bank's option. whether or not the Bank
has made demand.
A. The Borrower or any guarantor of any of the Credit Facilities
("Guarantor") fails to pay when due any amount payable under the Credit
Facilities or under any agreement or instrument evidencing debt for borrowed
money.
B. The Borrower or any Guarantor (a) fails to observe or perform any
other term of this agreement or the Notes; (b) makes any materially incorrect or
misleading representation, warranty or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial statement or
other information delivered to the Bank; or (d) defaults under the terms of any
agreement or instrument relating to any debt for borrowed money (other than
borrowings under the Credit Facilities) such that the creditor declares the
debt due before its maturity.
C. There is a default under the terms of any loan agreement, mortgage,
security agreement or any other document executed as part of the Credit
Facilities, or any guaranty of the
8
<PAGE> 9
liabilities under the Credit Facilities becomes unenforceable in whole or in
part, or any Guarantor fails to promptly perform under its guaranty.
D. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension Benefit
Guaranty Corporation to terminate any employee benefit plan of the Borrower or
any affiliate of the Borrower.
E. The Borrower or any Guarantor becomes insolvent or unable to pay its
debts as they become due.
F. The Borrower or any Guarantor (a) makes an assignment for the benefit
of creditors; (b) consents to the appointment of a custodian, receiver or
trustee for it or for a substantial part of its assets; or (c) commences any
proceeding under any bankruptcy, reorganization, liquidation or similar laws of
any jurisdiction.
G. A custodian, receiver or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without its consent and is
not removed within 60 days after the appointment.
H. Proceedings are commenced against the Borrower or any Guarantor under
any bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and those proceedings remain undismissed for 60 days after
commencement; or the Borrower or Guarantor consents to the commencement of the
proceedings.
I. Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy or garnishment is issued against any property of the Borrower
or any Guarantor, which is not satisfactorily discharged within 60 days after
such judgement is entered.
J. The Borrower or any Guarantor dies.
K. The Borrower or any Guarantor, without the Bank's written consent: (a)
is dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business outside
the ordinary course of business, (d) leases, purchases, or otherwise acquires a
material part of the assets of any other corporation or business entity, except
in the ordinary course of business, or (e) agrees to do any of the foregoing
(notwithstanding the foregoing, any subsidiary may merge or consolidate with
any other subsidiary, or with the Borrower, so long as the Borrower is the
survivor).
L. The loan-to-value ratio of any pledged securities at any time exceeds
____%, and such excess continues for five (5) days after notice from the Bank
to the Borrower.
M. There is a substantial change in the existing or prospective Financial
condition of the Borrower or any Guarantor which the Bank in good faith
determines to be materially adverse.
N. The Bank in good faith shall deem itself insecure.
11.2 REMEDIES. If the amounts owing under the Credit Facilities are not
paid at maturity, whether by demand, acceleration, or otherwise, the Bank shall
have all of the rights and remedies provided by any law or agreement. Any
requirement of reasonable notice shall be met if the Bank sends the notice to
the Borrower at least seven (7) days prior to the date of sale, disposition or
other event giving rise to the required notice. The Bank is authorized to
cause all or any part of the Collateral to be transferred to or registered in
its name or in the name of any other person, firm or corporation, with or
without designation of the capacity of such nominee. The Borrower shall be
liable for any deficiency remaining after disposition of any Collateral. The
Borrower is liable to the Bank for all reasonable costs and expenses of every
kind incurred in the making or collection of the Credit Facilities, including,
without limitation, reasonable attorneys' fees and court costs (whether
9
<PAGE> 10
attributable to the Bank's in-house or outside counsel.) These costs and
expenses shall include, without limitation, any costs or expenses incurred by
the Bank in any bankruptcy, reorganization, insolvency or other similar
proceeding.
12.0 MISCELLANEOUS.
12.1 Notice from one party to another relating to this agreement shall be
deemed effective if made in writing (including telecommunications) and
delivered to the recipient's address, telex number or fax number set forth
under its name below by any of the following means: (a) hand delivery, (b)
registered or certified mail, postage prepaid, with return receipt requested,
(c) first class or express mail, postage prepaid, (d) Federal Express, or like
overnight courier service, or (e) fax, telex or other wire transmission with
request for assurance of receipt in a manner typical with respect to
communication of that type. Notice made in accordance with this section shall
be deemed delivered upon receipt if delivered by hand or wire transmission,
three (3) business days after mailing if mailed by first class, registered or
certified mail, or one business day after mailing or deposit with an overnight
courier service if delivered by express mail or overnight courier.
12.2 No delay on the part of the Bank in the exercise of any right or
remedy shall operate as a waiver. No single or partial exercise by the Bank of
any right or remedy shall preclude any other future exercise of it or the
exercise of any other right or remedy. No waiver or indulgence by the Bank of
any default shall be effective unless in writing and signed by the Bank, nor
shall a waiver on one occasion be construed as a bar to or waiver of that right
on any future occasion.
12.3 This agreement, the Notes, and any related loan documents embody the
entire agreement and understanding between the Borrower and the Bank and
supersede all prior agreements and understandings relating to their subject
matter. If any one or more of the obligations of the Borrower under this
agreement or the Notes shall be invalid. illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
obligations of the Borrower shall not in any way be affected or impaired, and
such validity, illegality or unenforceability in one jurisdiction shall not
affect the validity, legality or enforceability of the obligations of the
Borrower under this agreement or the Notes in any other jurisdiction.
12.4 The Borrower, if more than one, shall be jointly and severally
liable.
12.5 This agreement is delivered in the State of Michigan and governed by
Michigan law. This agreement is binding on the Borrower and its successors,
and shall inure to the benefit of the Bank, its successors and assigns.
12.6 Section headings are for convenience of reference only and shall not
affect the interpretation of this agreement.
13.0 WAIVER OF JURY TRIAL. The Bank and the Borrower. after consulting or
having had the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this agreement or any related
instrument or agreement, or any of the transactions contemplated by this
agreement, or any course of conduct, dealing, statements (whether oral or
written), or actions of either of them. Neither the Bank nor the Borrower
shall seek to consolidate, by counterclaim or otherwise, any action in which a
jury trial has been waived with any other action in which a jury trial cannot
be or
10
<PAGE> 11
has not been waived. These provisions shall not be deemed to have been
modified in any respect or relinquished by either the Bank or the Borrower
except by a written instrument executed by both of them.
Executed by the parties on: June 25, 1997
"BANK": "BORROWER":
NBD PERCEPTRON, INC.
By: /s/ ANDREW W. OTTAWAY By: /s/ JOHN G. ZIMMERMAN
------------------------------ -------------------------------------
Andrew W. Ottaway, Assistant John G. Zimmerman, Vice President
Vice President
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES:
38601 Twelve Mile Road 47827 Halyard Drive
Farmington Hills, Michigan 48331 Plymouth, Michigan 48170
Fax/Telex No. 248-488-0634 Fax/Telex No.
---------------------------
11
<PAGE> 12
MASTER DEMAND BUSINESS LOAN NOTE
Due on Demand $3,500,000.00
No. Date June 25, 1997
-------------
PROMISE TO PAY: For value received, the undersigned (the "Borrower") promises
to pay ON DEMAND to NBD BANK (the "Bank"), or order, at any office of the Bank
in the State of Michigan, the sum of THREE MILLION FIVE HUNDRED THOUSAND AND
00/100 DOLLARS ($3,500,000.00), or such lesser sum as is indicated on Bank
records, plus interest computed on the basis of the actual number of days
elapsed in a year of 360 days at the rate of:
_________________% per annum until demand or maturity, whether by
acceleration or otherwise (the "Note Rate") and at the
rate of 3% per annum above the Note Rate on overdue
principal from the date when due until paid; or
See attached 0 % per annum above the rate announced from time to
addendum for time by the Bank as its "prime" rate (the "Note
additional terms Rate"), which rate may not be the lowest rate charged by the
Bank to any of its customers, until maturity, whether
by demand, acceleration or otherwise, and at the rate of 3%
per annum above the Note Rate on overdue principal from the
date when due until paid. Each change in the "prime" rate
will immediately change the Note Rate.
In no event shall the interest rate exceed the maximum rate allowed by law; any
interest payment which would for any reason be deemed unlawful under applicable
law shall be applied to principal.
Interest will be computed on the unpaid principal balance from the date of each
borrowing.
The Borrower will pay this sum on demand. Until demand, the Borrower will pay
consecutive monthly installments of interest only commencing June 30, 1997.
MASTER DEMAND NOTE: The Bank has authorized an uncommitted credit facility to
the Borrower in a principal amount not to exceed the face amount of this note.
The credit facility is in the form of loans made from time to time by the Bank
to the Borrower at the Bank's sole discretion. This note evidences the
Borrower's obligation to repay those loans. The aggregate principal amount of
debt evidenced by this note shall be the amount reflected from time to time in
the records of the Bank but shall not exceed the face amount of this note. The
Borrower acknowledges and agrees that no provision of this note and no course
of dealing by the Bank shall commit the Bank to make loans to the Borrower and
that notwithstanding any provision of this note or any other instrument or
document, all loans evidenced by this note are due and payable on demand, which
may be made by the Bank at any time, whether or not any event of acceleration
then exists.
CREDIT AGREEMENT: This note evidences a debt under the terms of a Credit
Authorization Agreement between the Bank and the Borrower dated concurrently
and any amendments.
SECURITY: To secure the payment of this note and any other present or future
liability of the Borrower, whether several, joint, or joint and several, the
Borrower pledges and grants to the Bank a continuing security interest in the
following described property and all of its additions, substitutions,
increments, proceeds and products, whether now owned or later acquired
("Collateral"):
1. All securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the Bank
solely in a fiduciary capacity);
2. All property or securities declared or acknowledged to constitute
security for any past, present or future liability of the Borrower to the
Bank;
3. All balances of deposit accounts of the Borrower with the Bank;
4. The following additional property:________________________________________
__________________________________________________________________________
_________________________________________________________________________.
<PAGE> 13
BANK'S RIGHT TO SETOFF: The Bank shall have the right at any time to apply its
own debt or liability to the Borrower or to any other party liable on this note
in whole or partial payment of this note or other present or future
liabilities, without any requirement of mutual maturity.
REPRESENTATIONS BY BORROWER: Each Borrower represents that: (a) the execution
and delivery of this note and the performance of the obligations it imposes do
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or any third
party; (b) this note is a valid and binding agreement, enforceable according to
its terms; and (c) all balance sheets, income statements, and other financial
statements furnished to the Bank are accurate and fairly reflect the financial
condition of the organizations and persons to which they apply on their
effective dates, including contingent liabilities of every type, which
financial condition has not changed materially and adversely since those dates.
Each Borrower, if other than a natural person, further represents that: (a) it
is duly organized, existing and in good standing under the laws where it is
organized; and (b) the execution and delivery of this note and the performance
of the obligations it imposes (i) are within its powers; (ii) have been duly
authorized by all necessary action of its governing body; and (iii) do not
contravene the terms of its articles of incorporation or organization, its
bylaws, or any agreement governing its affairs.
WAIVER OF JURY TRIAL: The Bank and the Borrower, after consulting or having had
the opportunity to consult with counsel, knowingly, voluntarily and
intentionally waive any right either of them may have to a trial by jury in any
litigation based upon or arising out of this note or any related instrument or
agreement or any of the transactions contemplated by this note or any course of
conduct, dealing, statements (whether oral or written), or actions of either of
them. Neither the Bank nor the Borrower shall seek to consolidate, by
counterclaim or otherwise, any action in which a jury trial has been waived
with any other action in which a jury trial cannot be or has not been waived.
These provisions shall not be deemed to have been modified in any respect or
relinquished by either the Bank or the Borrower except by a written instrument
executed by both of them.
SEE REVERSE SIDE FOR ADDITIONAL TERMS AND CONDITIONS INCLUDING EVENTS OF DEFAULT
BORROWER:
Address: 47827 Halyard Drive Perceptron, Inc.
Plymouth, MI 48170
By: /s/ JOHN G. ZIMMERMAN
-------------------------------
John G. Zimmerman,
Vice President
ADDITIONAL TERMS AND CONDITIONS
EVENTS OF DEFAULT/ACCELERATION: If any of the following events occurs, this
note shall be due immediately without notice at the Bank's option whether or
not the Bank has made demand.
1. The Borrower or any guarantor of this note ("Guarantor") fails to pay
when due any amount payable under this note or under any agreement or
instrument evidencing debt to any creditor;
2. The Borrower or any Guarantor (a) fails to observe or perform any other
term of this note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (d) defaults
under the terms of any agreement or instrument relating to any debt for
borrowed money (other than the debt evidenced by this note) such that the
creditor declares the debt due before its maturity;
3. There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of the loan
evidenced by this note, or any guaranty of the loan evidenced by this note
becomes unenforceable in whole or in part, or any Guarantor fails to
promptly perform under its guaranty;
4. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of the
Borrower or any affiliate of the Borrower;
5. The Borrower or any Guarantor becomes insolvent or unable to pay its
debts as they become due;
2
<PAGE> 14
6. The Borrower or any Guarantor (a) makes an assignment for the benefit of
creditors; (b) consents to the appointment of a custodian, receiver, or
trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction;
7. A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without its consent and
is not removed within 60 days after such appointment;
8. Proceedings are commenced against the Borrower or any Guarantor under
any bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and such proceedings remain undismissed for 60 days after
commencement; or the Borrower or Guarantor consents to the commencement of
such proceedings;
9. Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantor;
10. The Borrower or any Guarantor dies;
11. The Borrower or any Guarantor, without the Bank's written consent, (a) is
dissolved, (b) merges or consolidates with any third party, (c) leases,
sells or otherwise conveys a material part of its assets or business
outside the ordinary course of business, (d) leases, purchases or
otherwise acquires a material part of the assets of any other corporation
or business entity except in the ordinary course of business, or (e)
agrees to do any of the foregoing (notwithstanding the foregoing, any
subsidiary may merge or consolidate with any other subsidiary, or
with the Borrower so long as the Borrower is the survivor);
12. The loan-to-value ratio of any pledged securities at any time exceeds
____%, and such excess continues for five (5) days after notice from the
Bank to the Borrower;
13. There is a substantial change in the existing or prospective financial
condition of the Borrower or any Guarantor which the Bank in good faith
determines to be materially adverse;
14. The Bank in good faith deems itself insecure.
REMEDIES: If this note is not paid at maturity, whether by demand,
acceleration or otherwise, the Bank shall have all of the rights and remedies
provided by any law or agreement. Any requirement of reasonable notice shall
be met if the Bank sends the notice to the Borrower at least seven (7) days
prior to the date of sale, disposition or other event giving rise to the
required notice. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or in the name of any
other person, firm or corporation, with or without designation of the capacity
of such nominee. The Borrower shall be liable for any deficiency remaining
after disposition of any Collateral. The Borrower is liable to the Bank for
all reasonable costs and expenses of every kind incurred in the making or
collection of this note, including, without limitation, reasonable attorneys'
fees and court costs. These costs and expenses shall include, without
limitation, any costs or expenses incurred by the Bank in any bankruptcy,
reorganization, insolvency or other similar proceeding.
WAIVER: Each endorser and any other party liable on this note severally
waives demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
Collateral, to the addition of any party, and to the release or discharge of,
or suspension of any rights and remedies against, any person who may be liable
for the payment of this note. No delay on the part of the Bank in the exercise
of any right or remedy shall operate as a waiver. No single or partial
exercise by the Bank of any right or remedy shall preclude any other future
exercise of it or the exercise of any other right or remedy. No waiver or
indulgence by the Bank of any default shall be effective unless in writing and
signed by the Bank, nor shall a waiver on one occasion be construed as a bar to
or waiver of that right on any future occasion.
MISCELLANEOUS: The Borrower, if more than one, shall be jointly and severally
liable, and the term "Borrower" shall mean any one or more of them. This note
shall be binding on the Borrower and its successors, and shall benefit the
Bank, its successors and assigns. Any reference to the Bank shall include any
holder of this note. This note is delivered in the State of Michigan and
governed by Michigan law. Section headings are for convenience of reference
only and shall not affect the interpretation of this note.
3
<PAGE> 15
ADDENDUM TO MASTER DEMAND BUSINESS LOAN NOTE
This Addendum is a part of Perceptron, Inc. ("Borrower") Master Demand Business
Loan Note in favor of NBD Bank ("Bank") in the principal amount of
$3,500,000.00, dated June 25, 1997.
1.0 DEFINITIONS. Certain capitalized terms used in this addendum are
defined in the attached glossary entitled "EURODOLLAR RATE DEFINITIONS."
2.0 UNCOMMITTED CREDIT AUTHORIZATION.
2.1 INTEREST RATES. This note evidences Loans under the uncommitted
credit authorization (the "Credit Facility") described in the Credit
Authorization Agreement of even date between the Bank and the Borrower (the
"Credit Agreement"). Each Loan under the Credit Facility may be outstanding
as either a Prime Loan or a Eurodollar Loan as provided below.
2.2 NOTICE AND MANNER OF BORROWING. The Borrower shall give the Bank
written notice (effective upon receipt) of any Loan under the Credit Facility
no later than I 1:00 A.M. Detroit time, one (1) Business Day before each Prime
Loan and three (3) Business Days before each Eurodollar Loan specifying: (A)
the date of the Loan, (B) the amount of the Loan, (C) the type of the Loan
(Prime Loan or Eurodollar Loan), and (D) in the case of a Eurodollar Loan, the
duration of the applicable Interest Period. Each Eurodollar Loan shall be in a
minimum amount of $1,000,000.00. By the Bank's close of business on the date of
the Loan and upon fulfillment of the conditions set forth in Section 2.0 of the
Credit Agreement, the Bank shall make the Loan available to the Borrower in
immediately available funds by crediting the amount of the Loan to the
Borrower's account with the Bank.
2.3 CONVERSION AND RENEWALS. The Borrower may elect from time to time to
convert one type of Loan into another or to renew any Loan by giving the Bank
notice no later than 1 1:00 A.M. Detroit time one (1) Business Day before
conversion into a Prime Loan and three (3) Business Days before conversion into
or renewal of a Eurodollar Loan, specifying: (A) the renewal or conversion
date, (B) the amount of the Loan to be converted or renewed, (C) in the case of
conversion, the type of Loan to be converted into (Prime Loan or Eurodollar
Loan), and (D) in the case of renewals of or conversion into a Eurodollar Loan,
the applicable Interest Period, provided that (1) the minimum principal amount
of each Eurodollar Loan outstanding after a renewal or conversion shall be
$1,000,000.00 and (2) a Eurodollar Loan can only be converted on the last day
of the Interest Period for the Loan. All notices given under this Section 2.3
shall be irrevocable. If the Borrower fails to give the Bank the notice
specified above for the renewal or conversion of a Eurodollar Loan prior to the
end of the Interest Period for that Loan, the Loan shall automatically be
converted to a Prime Loan on the last day of the Interest Period for the Loan.
2.4 INTEREST RATES. The Borrower shall pay interest to the Bank on the
outstanding and unpaid principal amount of each Loan at a rate per annum as
follows:
(A) For a Prime Loan at the Prime Rate, and
(B) For a Eurodollar Loan at the Eurodollar Rate.
2.5 INTEREST PAYMENTS. Interest on the Loans shall be paid as follows:
<PAGE> 16
(A) For each Prime Loan, on the first day of each month beginning with the
first full month following disbursement of the Loan and at the maturity of the
Loan;
(B) For each Eurodollar Loan, on the last day of the Interest Period for
the Loan.
2.6 INTEREST CALCULATION. Interest shall be calculated on the basis of the
actual number of days elapsed in a year of 360 days.
2.7 INTEREST RATE LIMITATION. In no event shall the interest rate
applicable to any Loan exceed the maximum rate allowed by law. Any interest
payment which would for any reason be deemed unlawful under applicable law
shall be applied to principal.
2.8 OVERDUE AMOUNTS. Any principal amount not paid when due (at maturity,
by acceleration, or otherwise) shall bear interest thereafter until paid in
full, payable on demand, at a per annum rate equal to:
(A) For each Prime Loan a rate equal to the Prime Rate plus three percent
(3%).
(B) For each Eurodollar Loan, a rate equal to the Eurodollar Rate plus
three percent (3%) from the time of default in payment of principal until the
end of the then current Interest Period for the Loan and after that at a rate
equal to the Prime Rate plus three percent (3%).
2.9 BANK RECORDS. The Bank shall, in the ordinary course of business,
make notations in its records of the date, amount, interest rate and Interest
Period of each Loan, the amount of each payment on the Loans, and other
information. Such records shall, in the absence of manifest error, be
conclusive as to the outstanding principal balance of and interest rate or
rates applicable to the Loans.
2.10 PREPAYMENT. The Borrower may prepay all or any part of any Prime
Loan at any time without premium or penalty. The Borrower may prepay any
Eurodollar Loan only at the end of an Interest Period.
2.11 FUNDING LOSS INDEMNIFICATION. Upon the Bank's request, the Borrower
shall pay the Bank amounts sufficient (in the Bank's reasonable opinion) to
compensate it for any loss, cost, or expense incurred as a result of:
(A) Any payment of a Eurodollar Loan on a date other than the last day of
the Interest Period for the Loan, including, without limitation, acceleration
of the Loans by the Bank pursuant to this note or the Loan Documents; or
(B) Any failure by the Borrower to borrow or renew a Eurodollar Loan on
the date for borrowing or renewal specified in the relevant notice under
Section 2.2 or Section 2.3.
2.12 NO SETOFF OR DEDUCTION. All payments of principal and interest
shall be made by the Borrower without setoff or counterclaim, and free and
clear of, and without deduction or withholding for, or on account of, any
present or future taxes, levies, imposts, duties, fees, assessments, or other
charges of whatever nature,
2
<PAGE> 17
imposed by any governmental authority, or by any department, agency or other
political subdivision or taxing authority.
2.13 ADDITIONAL COSTS. If any applicable domestic or foreign law,
treaty, government rule or regulation now or later in effect (whether or not
it now applies to the Bank) or the interpretation or administration thereof by
a governmental authority charged with such interpretation or administration,
or compliance by the Bank with any guideline, request or directive of such an
authority (whether or not having the force of law), shall (A) affect the basis
of taxation of payments to the Bank of any amounts payable by the Borrower
under this note or the Loan Documents (other than taxes imposed on the overall
net income of the Bank by the jurisdiction or by any political subdivision or
taxing authority of the jurisdiction in which the Bank has its principal
office), or (B) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement against assets of, deposits with or for the
account of, or credit extended by the Bank, or (C) shall impose any other
condition with respect to this note or the Loan Documents and the result of
any of the foregoing is to increase the cost to the Bank of maintaining any
Eurodollar Loan or to reduce the amount of any sum receivable by the Bank on
such a Loan, then the Borrower shall pay to the Bank, from time to time, upon
request by the Bank, additional amounts sufficient to compensate the Bank for
the increased cost or reduced sum receivable. Whenever the Bank shall learn
of circumstances described in this section which are likely to result in
additional costs to the Borrower pursuant hereto, the Bank shall give prompt
written notice to Borrower of the basis for and the estimated amount of any
such anticipated additional costs. A statement as to the amount of the
increased cost or reduced sum receivable, prepared in good faith and in
reasonable detail by the Bank and submitted by the Bank to the Borrower, shall
be conclusive and binding for all purposes absent manifest error in
computation.
2.14 ILLEGALITY. If any applicable domestic or foreign law, treaty, rule
or regulation now or later in effect (whether or not it now applies to the
Bank) or the interpretation or administration thereof by a governmental
authority charged with such interpretation or administration, or compliance by
the Bank with any guideline, request or directive of such an authority
(whether or not having the force of law), shall make it unlawful or impossible
for the Bank to maintain or fund the Eurodollar Loans, then, upon notice to
the Borrower by the Bank, the outstanding principal amount of the Eurodollar
Loans, together with accrued interest and any other amounts payable to the
Bank under this note or the Loan Documents on account of the Eurodollar Loans
shall be repaid (A) immediately upon demand of the Bank if such change or
compliance with such requests, in the judgment of the Bank, requires immediate
repayment, or (B) at the expiration of the last Interest Period to expire
before the effective date of any such change or request provided, however,
that subject to the terms and conditions of this note and the Loan Documents
the Borrower shall be entitled to simultaneously replace the entire
outstanding balance of any Eurodollar Loan repaid in accordance with this
section with a Prime Loan in the same amount.
2.15 INABILITY to DETERMINE INTEREST RATE. If the Bank determines that
(A) quotations of interest rates for the relevant deposits referred to in the
definition of Eurodollar Rate are not being provided in the relevant amounts
or for the relevant maturities for purposes of determining the interest rate
on a Eurodollar Loan as provided in this note, or (B) the relevant interest
rates referred to in the definition of Eurodollar Rate do not accurately cover
the cost to the Bank of making or maintaining Eurodollar Loans, then the Bank
shall forthwith give notice of such circumstances to the Borrower, whereupon
(1) the obligation of the Bank to make Eurodollar Loans shall be suspended
until the Bank notifies the Borrower that the circumstances giving rise to the
3
<PAGE> 18
suspension no longer exists, and (2) the Borrower shall repay in full
the then outstanding principal amount of each Eurodollar Loan, together with
accrued interest, on the last day of the then current Interest Period
applicable to the Loan, provided, however, that, subject to the terms and
conditions of this note and the Loan Documents, the Borrower shall be entitled
to simultaneously replace the entire outstanding balance of any Eurodollar Loan
repaid in accordance with this section with a Prime Loan in the same amount.
2.16 RISK-BASED CAPITAL. If any applicable domestic or foreign law,
treaty, rule or regulation now or later in effect (whether or not it now
applies to the Bank), or any interpretation or administration thereof by any
governmental authority charged with its interpretation or administration, or
compliance by the Bank with any guideline, request or directive of such an
authority (whether or not having the force of law), including any risk-based
capital guidelines, affects or would affect the amount of capital required or
expected to be maintained by the Bank (or any corporation controlling the
Bank) and the Bank determines that the amount of such capital is increased by
or based upon the existence of the Bank's obligations under this note or the
Loan Documents and the increase has the effect of reducing the rate of return
on the Bank's (or its controlling corporation's) capital as a consequence of
the obligations under this note or the Loan Documents to a level below that
which the Bank (or its controlling corporation) could have achieved but for
such circumstances (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by the Bank to be material, then the
Borrower shall pay to the Bank, from time to time, upon request by the Bank,
additional amounts sufficient to compensate the Bank (or such controlling
corporation) for any increase in the amount of capital and reduced rate of
return which the Bank reasonably determines to be allocable to the existence
of the Bank's obligations under this note and the Loan Documents. A statement
as to the amount of such compensation, prepared in good faith and in
reasonable detail by the Bank and submitted by the Bank to the Borrower, shall
be conclusive and binding for all purposes absent manifest error in
computation.
2.17 OBLIGATIONS DUE ON NON-BUSINESS DAY. Whenever any payment under
this note becomes due and payable on a day that is not a Business Day, if no
event of default has occurred and is continuing, the maturity of the payment
shall be extended to the next succeeding Business Day, except, in the case of
a Eurodollar Loan, if the result of the extension would be to extend the
payment into another calendar month, the payment must be made on the
immediately preceding Business Day.
EURODOLLAR RATE DEFINITIONS
As used in this addendum, the following terms have the following respective
meanings.
"BUSINESS DAY" means a day other than a Saturday or Sunday, or other day
that commercial banks in Detroit, Michigan are authorized or required to close
under the laws of the state of Michigan and, with respect to any Eurodollar
Loan, on which dealings in United States Dollar deposits are carried out in
the interbank market selected by the Bank for purposes of determining the
Eurodollar Rate.
"CREDIT AGREEMENT" is defined in Section 2.1 of this addendum.
"CREDIT FACILITY" is defined in Section 2.1 of this addendum.
"EURODOLLAR LOAN" means any borrowing under the Credit Facility when and
to the extent that its interest rate is determined by reference to the
Eurodollar Rate.
4
<PAGE> 19
"EURODOLLAR RATE" means, with respect to any Eurodollar Loan and the
related Interest Period, the per annum rate that is equal to the sum of:
(A) Two hundred (200) basis points, plus
(B) the rate obtained by dividing (i) the per annum rate of interest at
which deposits in United States Dollars for the Interest Period and in an
aggregate amount comparable to the amount of the Loan are offered to the Bank
by other prime banks in an interbank market, selected in the Bank's discretion,
at approximately I 1:00 a.m. London or Nassau time, as the case may be, on the
second Business Day prior to the first day of the Interest Period by (ii) an
amount equal to one minus the stated maximum rate (expressed as a decimal) of
all reserve requirements (including, without limitation, any marginal,
emergency, supplemental, special or other reserves) specified on the first day
of such Interest Period by the Board of Governors of the Federal Reserve System
(or any successor agency) for determining the maximum reserve requirement with
respect to eurocurrency funding required to be maintained by a Federal Reserve
System member bank; all as conclusively determined by the Bank, such sum to be
rounded up, if necessary, to the nearest whole multiple of one one-hundredth of
one percent (1/100 of 1%).
"INTEREST PERIOD" means, with respect to any Eurodollar Loan, a period of
one, two, or three months agreed upon by the Borrower and the Bank, commencing
on the Business Day the Loan is made. If the Interest Period would end on a
day which is not a Business Day, the Interest Period shall end on the next
succeeding Business Day unless such Business Day would fall in the next
calendar month, in which case the Interest Period shall end on the immediately
preceding Business Day.
"LOAN" means a Eurodollar Loan or a Prime Loan and "LOANS" shall mean all
Eurodollar Loans and Prime Loans.
"LOAN DOCUMENTS" means this note, the Credit Agreement, and any other
documents executed in connection with the Credit Facility.
"PRIME LOAN" means any borrowing under the Credit Facility when and to the
extent that its interest rate is determined by reference to the Prime Rate.
"PRIME RATE" means the per annum rate of interest announced by the Bank as
its "prime rate" in effect from time to time, which shall not necessarily be
the lowest rate charged by the Bank to any of its customers.
5
<PAGE> 1
PERCEPTRON, INC. AND SUBSIDIARIES
EXHIBIT 11, STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Earnings Per Share Earnings Per Share
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ----------------------
1997 1996 1997 1996
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
A. Net income $3,771,000 $ 964,000 $4,681,000 $1,719,000
---------- --------- ---------- ----------
Weighted average number of common shares outstanding 8,017,923 7,588,183 7,996,357 7,520,830
Effect of the issuance of stock options and assumed
exercise of stock options at prices which are lower
than the average market price of the common shares
during the period, using the treasury stock method 440,803 785,960 494,269 759,292
B. Weighted average number of common shares and common ---------- --------- ---------- ----------
equivalent shares for primary earnings per share 8,458,726 8,374,143 8,490,626 8,280,122
---------- --------- ---------- ----------
Weighted average number of common shares outstanding 8,017,923 7,588,183 7,996,357 7,520,830
Effect of the issuance of stock options and assumed
exercise of stock options at prices which are lower
than the market price of the common shares at the
end of the period, using the treasury stock method 440,803 825,855 494,269 869,909
C. Weighted average number of common shares and common
equivalent shares for fully diluted earnings ---------- --------- ---------- ----------
per share 8,458,726 8,414,038 8,490,626 8,390,739
---------- --------- ---------- ----------
Primary earnings per share (A/B) $ 0.45 $ 0.12 $ 0.55 $ 0.21
========== ========= ========== ==========
Fully diluted earnings per share (A/C) $ 0.45 $ 0.11 $ 0.55 $ 0.20
========== ========= ========== ==========
</TABLE>
17
<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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 16,473,000
<SECURITIES> 0
<RECEIVABLES> 23,239,000
<ALLOWANCES> (175,000)
<INVENTORY> 6,983,000
<CURRENT-ASSETS> 48,882,000
<PP&E> 12,878,000
<DEPRECIATION> (2,540,000)
<TOTAL-ASSETS> 61,110,000
<CURRENT-LIABILITIES> 10,424,000
<BONDS> 0
0
0
<COMMON> 80,000
<OTHER-SE> 50,606,000
<TOTAL-LIABILITY-AND-EQUITY> 61,110,000
<SALES> 31,190,000
<TOTAL-REVENUES> 31,190,000
<CGS> 12,101,000
<TOTAL-COSTS> 12,584,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (430,000)
<INCOME-PRETAX> 6,935,000
<INCOME-TAX> 2,254,000
<INCOME-CONTINUING> 4,681,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,681,000
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
</TABLE>
