<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 March 31, 1998.
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)
(734) 414-6100
(Registrant's 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 May 8, 1998 was:
Common Stock, $0.01 par value 8,321,906
- ----------------------------- ------------------
Class Number of shares
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PERCEPTRON, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
<S> <C> <C>
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets - March 31, 1998 3
and December 31, 1997
Condensed Consolidated Statements of Income - Three
Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6-8
ITEM 2 Management's Discussion and Analysis of Financial Condition 8-11
and Results of Operations
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings 11
ITEM 6 Exhibits and Reports on Form 8-K 12
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,828,000 $ 14,448,000
Marketable securities 0 2,000,000
Accounts receivable, net of reserves of $150,000 and $175,000 24,037,000 30,692,000
Inventories, net of reserves of $750,000 and $860,000 10,075,000 8,019,000
Income tax receivable 838,000 0
Prepaid expenses and deferred tax asset 987,000 708,000
------------ ------------
Total current assets 51,765,000 55,867,000
------------ ------------
Property and equipment:
Building and land 5,982,000 5,982,000
Machinery and equipment 6,927,000 6,638,000
Furniture and fixtures 1,312,000 1,312,000
------------ ------------
14,221,000 13,932,000
Less: Accumulated depreciation and amortization (3,372,000) (3,308,000)
------------ ------------
Net property and equipment 10,849,000 10,624,000
Intangible assets, net of accumulated amortization of $479,000 and $394,000 1,509,000 1,651,000
------------ ------------
Total assets $ 64,123,000 $ 68,142,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 2,135,000 2,979,000
Accrued payables and expenses 4,843,000 5,929,000
Accrued compensation expense 1,115,000 1,355,000
------------ ------------
Total current liabilities 8,093,000 10,263,000
------------ ------------
Shareholders' equity:
Preferred Stock, no par value, 1,000,000 shares authorized,
none issued 0 0
Common Stock, $0.01 par value; 19,000,000 shares authorized,
8,256,000 and 8,207,000 issued and outstanding at
March 31, 1998, and December 31, 1997, respectively 83,000 82,000
Cumulative translation adjustments (2,770,000) (2,411,000)
Additional paid-in capital 41,839,000 41,666,000
Retained earnings 16,878,000 18,542,000
------------ ------------
$ 56,030,000 $ 57,879,000
------------ ------------
Total liabilities and shareholders' equity $ 64,123,000 $ 68,142,000
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
----------------------------
<S> <C> <C>
Net sales $ 8,755,000 12,383,000
Cost of sales 4,316,000 5,453,000
----------- ----------
Gross profit 4,439,000 6,930,000
----------- ----------
Selling, general and administrative expense 4,443,000 3,572,000
Engineering, research and development expense 2,743,000 2,209,000
----------- ----------
Income (loss) from operations (2,747,000) 1,149,000
----------- -----------
Interest income, net 245,000 180,000
----------- ----------
Income (loss) before provision for income taxes (2,502,000) 1,329,000
Provision for income taxes (credit) (838,000) 418,000
----------- ----------
Net income (loss) $(1,664,000) $ 911,000
=========== ===========
Earnings (loss) per share:
Basic $ (.20) $ .11
=========== ===========
Diluted $ (.20) $ .11
=========== ===========
Weighted average common shares outstanding:
Basic 8,234,570 7,974,551
=========== ===========
Diluted 8,234,570 8,462,962
=========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------------
1998 1997
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,664,000) $ 911,000
------------ ------------
Adjustments to reconcile net income (loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 543,000 425,000
Changes in operating assets and liabilities:
Accounts receivable and income
tax receivable 5,587,000 6,380,000
Inventories (2,056,000) 66,000
Prepaid expenses and other current assets (279,000) 348,000
Accounts payable (844,000) (1,186,000)
Accrued payables and expenses (1,326,000) (1,204,000)
------------ ------------
Total adjustments 1,625,000 4,829,000
------------ ------------
Net cash provided by (used in) operating activities (39,000) 5,740,000
------------ ------------
Cash flows from investing activities:
Capital expenditures (683,000) (3,283,000)
Sales and maturities of marketable securites 2,000,000 0
------------ ------------
Net cash provided by (used in) investing activities 1,317,000 (3,283,000)
Cash flows from financing activities:
Repayment of short-term debt 0 (830,000)
Proceeds from the exercise of options 627,000 650,000
Repurchase of company stock (453,000) 0
------------ ------------
Net cash provided by (used in) financing activities 174,000 (180,000)
------------ ------------
Effect of exchange rates on cash and cash equivalents (72,000) (265,000)
------------ ------------
Net increase in cash and cash equivalents 1,380,000 2,012,000
Cash and cash equivalents, beginning of year 14,448,000 12,424,000
------------ ------------
Cash and cash equivalents, end of period $ 15,828,000 $ 14,436,000
============ ============
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
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PERCEPTRON, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. FINANCIAL STATEMENT PRESENTATION
Information for the three months ended March 31, 1998 and 1997 is
unaudited, but includes all adjustments, consisting of normal recurring
adjustments, which the management of Perceptron, Inc. ("Perceptron" or the
"Company") consider 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 1997 amounts have been
reclassified to conform to the 1998 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, 1997, which
contain summaries of 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 consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain amounts for
prior periods have been reclassified to conform with current period
presentations.
NOTE 2. 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>
March 31, December 31,
1998 1997
------------- --------------
<S> <C> <C>
Component parts ........................ $ 6,146,000 $ 5,507,000
Work in process ........................ 1,216,000 902,000
Finished goods ........................ 2,713,000 1,610,000
--------------- --------------
Total.................................... $ 10,075,000 $ 8,019,000
=============== ==============
</TABLE>
NOTE 3. EARNINGS (LOSS) PER SHARE
The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share", for financial statements for the year ended December
31, 1997. Adoption of this standard did not have a material effect on reported
earnings per share.
Basic earnings (loss) per share is calculated by dividing net income by
the average number of shares outstanding during the applicable period. Other
obligations, such as stock options and warrants, are considered to be
potentially dilutive common shares. The calculation of diluted earnings per
share takes into account the effect of these potentially dilutive common shares.
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Earnings (loss) per share were as follows:
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
-------------------------------- --------------------------------
Income (loss) Shares Income Shares
<S> <C> <C> <C> <C>
Net income (loss) and shares $(1,664,000) 8,234,570 $ 911,000 7,974,551
Basic earnings (loss) per share $ (.20) $ .11
Net income (loss) and shares (1,664,000) 8,234,570 911,000 7,974,551
Net dilutive effect of stock
options and warrants -- 0 -- 488,411
----------- ----------- ----------- -----------
Diluted income (loss) and shares $(1,664,000) 8,234,570 $ 911,000 8,462,962
Diluted earnings (loss) per share $ (.20) $ .11
</TABLE>
Potentially diluted securities of 177,645 shares were excluded from the
calculation during 1998 because the effect would have been anti-dilutive.
NOTE 4. 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 paragraph.
The Company has been informed that certain of its customers have
received allegations of possible patent infringement involving processes and
methods used in the Company's products. One such customer is currently engaged
in litigation relating to such matter. This customer has notified various
companies from which it has purchased such equipment, including the Company,
that it expects the suppliers of such equipment to indemnify such customer, on a
pro-rata basis, for expenses and damages, if any, incurred in this matter.
Management believes, however, that the processes used in the Company's products
were independently developed without utilizing any previously patented process
or technology. Because of the uncertainty surrounding the nature of any possible
infringement and the validity of any such claim or any possible customer claim
for indemnity, it is not possible to estimate the ultimate effect, if any, of
this matter on the company's financial position.
NOTE 5. CREDIT FACILITIES
The Company has unsecured bank credit facilities of $5.0 million US and
1.0 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 (8.25% as of
April 15, 1998). These credit facilities expire on May 31, 1998 unless canceled
earlier by the Company or the bank. The Company expects to renew these credit
facilities.
NOTE 6. FOREIGN EXCHANGE CONTRACTS
The Company may use, from time to time, a limited hedging program to
minimize the impact of 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 March 31, 1998, the Company had no forward
contracts outstanding.
NOTE 7. COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 130, "Reporting Comprehensive Income," in the first quarter of
1998. This Statement requires that all items recognized under accounting
standards as components of comprehensive income be reported in an annual
financial statement that is displayed with the same prominence as other annual
financial statements. This Statement also requires that an entity classify items
of other
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comprehensive income by their nature in an annual financial statement,
including foreign currency translation adjustments and unrealized gains and
losses on marketable securities classified as available-for-sale, among others.
The Company's total comprehensive income was as follows, in thousands:
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
--------------- --------------
<S> <C> <C>
Net income (loss) ............................... $ (1,664) $ 911
Other comprehensive income (loss), foreign
currency translation adjustments.............. (359) (718)
---------------- --------------
Total comprehensive income (loss)........... $ (2,023) $ 193
================ ==============
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Net Sales. The Company's net sales decreased by 29.0% from $12.4
million in the first quarter of 1997 to $8.8 million in the first quarter of
1998. The decrease of $3.6 million in net sales is primarily attributable to
decreased sales to automotive customers, down by $2.7 million from the same
quarter last year. Domestic automotive sales for the first quarter of 1998 were
down by $2.7 million, from $7.6 million in 1997 to $4.9 million in 1998, and
international automotive sales were even at $2.4 million for 1997 and 1998.
Non-automotive sales were down by $0.9 million for 1998 versus 1997, at $1.5
million versus $2.4 million. The P-1000 product accounted for 44% of sales in
the first quarter of 1998, versus 64% in 1997. The RGS and NCA systems accounted
for 30% of net sales in the first quarter of 1998, up from 10% in 1997. Forest
product sales accounted for 17% of net sales in the first quarter of 1998,
versus 19% in 1997.
New order bookings during the first quarter of 1998 totaled $5.4
million compared to $18.4 million in the first quarter of 1997. The decrease of
$13.0 million is principally attributable to the timing of orders from
Perceptron, Inc. domestic automotive customers, down by $9.5 million on a
comparative basis, in addition to a decrease of $3.1 million on a comparative
basis from European and Asian customers. Non-automotive bookings were down by
$0.3 million for the first quarter, down from $1.0 million in 1997 to $0.7
million in 1998. Bookings for the P-1000 systems accounted for 46% of the total
in the first quarter of 1998, versus 74% of bookings in 1997. RGS and NCA
bookings were 20% of the total in first quarter 1998, versus 9% in 1997. Forest
product bookings represented 13% of the total in the first quarter of 1998,
versus 6% in 1997.
New order bookings are dependent primarily 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.
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Backlog at March 31, 1998, totaled $20.8 million, compared to $24.2
million at December 31, 1997, and $29.2 million at March 31, 1997. 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, 1998.
Gross profit. Gross profit decreased from $6.9 million in the first
quarter of 1997 to $4.4 million in the first quarter of 1998. Gross profit as a
percentage of net sales decreased from 56.0% in the first quarter of 1997 to
50.7% in the first quarter of 1998. The decrease is due primarily to fixed
manufacturing expenses in relationship to the lower sales volumes for 1998.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $3.6 million in the first quarter of 1997
to $4.4 million in the first quarter of 1998. This change is principally due to
increased personnel and related expenses to support the planned 1998 operating
activity, both domestically and internationally. As a percentage of sales,
selling, general and administrative expenses increased from 28.8% in the first
quarter of 1997, to 50.7% in the first quarter of 1998 due to the lower sales
base.
Engineering, research and development expense. Engineering, research
and development expenses increased from $2.2 million in the first quarter of
1997, to $2.7 million in the first quarter of 1998, due primarily to increased
personnel, engineering supplies and contracted design work to support the new
product development efforts. As a percentage of net sales, research and
development expense increased from 17.8% in the first quarter of 1997 to 31.3%
in the first quarter of 1998 due to the lower sales base.
Interest income, net. Interest income increased from $180,000 in the
first quarter of 1997, to $245,000 in the first quarter of 1998, due to the
elimination of interest expense early in 1997 on indebtedness of the
subsidiaries acquired during 1997, which acquisitions were accounted for as
poolings-of-interest.
Income (loss) before provision for income taxes. During the first
quarter of 1997, Perceptron had income before provision for income taxes of $1.3
million, representing 10.7% of net sales, as compared to a loss before provision
for income taxes of $2.5 million, representing (28.6%) of net sales, in the
first quarter of 1998.
Provision for income taxes (credit). For the three months ended March
31, 1998, the Company recorded a $0.8 million tax benefit for income taxes,
representing an estimated effective tax rate of 33.5%. This was compared to the
1997 effective tax rate of 32.5%.
Net income (loss). During the first quarter of 1997, Perceptron had net
income of $911,000 representing 7.4% of net sales, as compared to net loss of
$1.7 million in the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and marketable securities as of
March 31, 1998, totaled $15.8 million, as compared with $16.4 million as of
December 31, 1997. This decrease was due primarily to the net loss recorded in
the quarter and the increase in inventory and
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payments on accounts payable and accrued expenses, partially offset by accounts
receivable collections in the quarter.
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 and equipment purchases will bear interest at the bank's prime
rate (8.25% as of April 15, 1998). The credit facilities expire on May 31, 1998
unless canceled earlier by the Company or the bank. As of March 31, 1998,
Perceptron had no short-term or long-term debt. The Company expects to renew
these credit facilities.
The Company's working capital decreased to $43.7 million at March 31,
1998, from $45.6 million at December 31, 1997. Accounts receivable decreased
from $30.7 million as of December 31, 1997 to $24.0 million as of March 31, 1998
primarily as a result of collections. The increase of approximately $2.1 million
in inventory is due primarily to an increase in component parts inventory in
preparation for future 1998 operating activity. The decrease of $2.2 million in
current liabilities is due primarily to the payment of 1997 accounts payable and
performance bonuses.
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 1998 cash flow
requirements.
The Company has experienced short-term delays in bringing some of its
new products to market. The Company expects the results for the quarter ended
June 30, 1998 to be significantly better than those of the quarter ended March
31, 1998, but below those of the quarter ended June 30, 1997. As a result of the
delays, a net loss is possible for the six months ended June 30, 1998. As these
and other new product introductions take hold, the Company expects to see a
marked improvement in the second half of 1998.
Safe Harbor Statement
Certain statements in this Management's Discussion and Analysis of
Financial Condition and Results of Operation may be "forward looking statements"
within the meaning of the Securities Exchange Act of 1934, including the
Company's expectation as to 1998 revenue and earnings levels and the timing of
new product releases. Actual results could differ materially from those in the
forward looking statements due to a number of uncertainties, including, but not
limited to, the dependence of the Company's revenue on a number of sizable
orders from a small number of customers, the timing of orders and shipments
which can cause the Company to experience significant fluctuations in its
quarterly and annual revenue and operating results, timely receipt of required
supplies and components which could result in delays in anticipated shipments,
general product demand and market acceptance risks, the ability of the Company
to successfully compete with alternative and similar technologies, the timing
and continuation of the automotive industry's retooling programs, the ability of
the Company to resolve technical issues inherent in the development of new
products and technologies, the ability of the Company to identify and satisfy
market needs, general product development and commercialization difficulties,
the quality and cost of competitive products already in existence
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or developed in the future, the level of interest existing and potential new
customers may have in new products and technologies generally, rapid or
unexpected technological changes, and the effect of economic conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has a suit pending against Sensor Adaptive Machines, Inc.
("SAMI") and Timothy Pryor ("Pryor") alleging breach of non-compete agreements
provided by SAMI and Pryor to the Company prior to their expiration in July
1995 and seeking damages and equitable relief. SAMI and Pryor filed
counterclaims against the Company alleging, in part, that the Company is
engaged in unlawful monopolization and tortious interference with business
practice and seeking damages. The Company believes that these counterclaims
are without merit and intends to vigorously pursue its claims and defend these
counterclaims. This matter, which was originally filed in June 1996, is
pending in the U.S. District Court for the Eastern District of Michigan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
3.1 Restated Articles of Incorporation, as amended
through March 23, 1998.
27. Financial Data Schedule
(B) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated
March 25, 1998, which disclosed information under
Item 5 concerning a Rights Agreement entered into by
the Company and the declaration of a dividend
distribution of rights thereunder.
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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: May 13, 1998 By: /S/ Alfred A. Pease
------------------------------
Alfred A. Pease, President
and Chief Executive Officer
Date: May 13, 1998 By: /S/ John G. Zimmerman
------------------------------
John G. Zimmerman
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: May 13, 1998 By: /S/ Paul J. Tripodi
------------------------------
Paul J. Tripodi, Controller
(Principal Accounting Officer)
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Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
3.1 Restated Articles of Incorporation, as amended
through March 23, 1998
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
PERCEPTRON, INC
The following Restated Articles of Incorporation (i) correctly set
forth the provisions of the Articles of Incorporation, originally filed with the
Department of Commerce of the State of Michigan on September 10, 1981, as
amended and restated, and (ii) supersede the original Articles of Incorporation
and all amendments thereto and restatements thereof. The Corporation has had no
previous names.
ARTICLE I
Name
The name of the corporation is: Perceptron, Inc.
ARTICLE II
Purposes
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the Business Corporation
Law of Michigan other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the Michigan
Corporation Code.
ARTICLE III
Agent for Service
The resident agent's name and registered office address in the State of
Michigan of this corporation's agent for service of process is:
Dwight D. Carlson
23855 Research Drive
Farmington Hills, Michigan 48024
ARTICLE IV
Capital Stock
The total number of shares of all classes of stock which the
corporation has authority to issue is Ten Million Two Hundred Ten Thousand Eight
Hundred Fifty (10,210,850) shares, consisting of Ten Million (10,000,000) shares
of Common Stock with a par value of $0.01 per share (the
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"Common Stock"), Ten Thousand (10,000) shares of Series I Preferred Stock with
a par value of One Hundred Dollars ($100.00) per share (the "Series I Preferred
Stock"), Thirty-Three Thousand (33,000) shares of Series II Preferred Stock with
a par value of One Hundred Dollars ($100.00) per share (the "Series II Preferred
Stock"), Forty Thousand Six Hundred (40,600) shares of Series III Preferred
Stock with a par value of One Hundred Dollars ($100.00) per share (the "Series
III Preferred Stock") and One Hundred Twenty-Seven Thousand Two Hundred Fifty
(127,250) shares of Series IV Preferred Stock with a par value of One Hundred
Dollars ($100.00) per share (the "Series IV Preferred Stock"). The Series I
Preferred Stock, the Series II Preferred Stock, the Series III Preferred Stock
and the Series IV Preferred Stock are collectively referred to as the "Preferred
Stock."
(a) COMMON STOCK
Section 1. Voting Rights. The holders of shares of Common Stock shall
be entitled to one vote for each share so held with respect to all matters voted
on by the shareholders of the corporation, subject in all cases to Section
(b)(5) of this Article IV.
Section 2. Liquidation Rights. Subject to the prior and superior right
of the Preferred Stock, upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation, the holders of
Common Stock shall be entitled to receive that portion of the remaining funds to
be distributed. Such funds shall be paid to the holders of Common Stock on the
basis of the number of shares of Common Stock held by each of them.
Section 3. Dividends. Dividends may be paid on the Common Stock as and
when declared by the Board of Directors, provided, however, no such dividends
may be declared or paid as long as any shares of Preferred Stock shall be
outstanding.
(b) PREFERRED STOCK
Section 1. Designation. The Preferred Stock shall consist of four
series to be designated and known as "Series I Preferred Stock," "Series II
Preferred Stock," "Series III Preferred Stock," and "Series IV Preferred Stock."
The number of shares constituting each of the series shall be Ten Thousand
(10,000) shares of Series I Preferred Stock, Thirty-Three Thousand (33,000)
shares of Series II Preferred Stock, Forty Thousand Six Hundred (40,600) shares
of Series III Preferred Stock and One Hundred Twenty-Seven Thousand Two Hundred
Fifty (127,250) shares of Series IV Preferred Stock, respectively. All series of
Preferred Stock shall be identical with each other in all respects except as
otherwise provided herein.
Section 2. Liquidation Rights.
(A) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation, the holders of each
share of Series IV Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds
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of the corporation to the holders of Series I Preferred Stock, Series II
Preferred Stock, Series III Preferred Stock or the Common Stock of the
corporation by reason of their ownership thereof, an amount equal to One Hundred
Dollars ($100.00) per share, plus accrued and unpaid dividends, if any ("Series
IV Liquidation Value"). After such payment shall have been made in full to the
holders of the Series IV Preferred Stock, they shall not be entitled to any
further participation in the assets of the corporation. If assets of the
corporation available for distribution to stockholders are insufficient to
permit payment in full of amounts to which the holders of Series IV Preferred
Stock are entitled pursuant to this paragraph, such holders of Series IV
Preferred Stock shall participate in such available assets in equal amounts per
share.
(B) After discharge in full of the corporation's obligations to holders
of the Series IV Preferred Stock as provided in paragraph (A) of this Section 2,
the holders of each share of Series I Preferred Stock, Series II Preferred Stock
and Series III Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any assets or surplus funds of the corporation
to the holders of the Common Stock of the corporation by reason of their
ownership thereof, an amount equal to One Hundred Dollars ($100.00) per share,
plus accrued and unpaid dividends, if any ("Series I Liquidation Value," "Series
II Liquidation Value" and "Series III Liquidation Value," respectively). After
such payment shall have been made in full to the holders of the Series I
Preferred Stock, Series II Preferred Stock and Series III Preferred Stock, they
shall not be entitled to any further participation in the assets of the
corporation. If assets of the corporation available for distribution to
stockholders are insufficient to permit payment in full of amounts to which the
holders of Series I Preferred Stock, Series II Preferred Stock and Series III
Preferred Stock are entitled pursuant to this paragraph, such holders of Series
I Preferred Stock, Series II Preferred Stock and Series III Preferred Stock
shall participate in such available assets ratably in proportion to the full
preferential amount each such holder would otherwise be entitled to receive.
(C) All the preferential amounts to be paid to the holders of the
Preferred Stock under this Section 2 shall be paid or set apart for payment
before the payment or setting apart for payment of any amount for, or the
distribution of any assets of the corporation to, the holders of the Common
Stock in connection with such liquidation, dissolution or winding up. After the
payment or the setting apart of payment to the holders of the Preferred Stock of
the preferential amounts so payable to them, the holders of Common Stock shall
be entitled to receive all remaining assets of the corporation.
(D) A consolidation or merger of the corporation with another
corporation or entity or a sale of all or substantially all of the assets of the
corporation shall be regarded as a liquidation, dissolution or winding up of the
affairs of the corporation with respect to the Preferred Stock within the
meaning of this Section 2 unless such consolidation or merger is not intended to
effect a change in the ownership or control of the corporation or of its assets
and is not intended to alter materially the business or assets of the
corporation, including, by way of example and without limiting the generality of
the foregoing, a consolidation or merger which merely changes the identity, form
or place of organization of the corporation, or which is between or among the
corporation and any of its direct or indirect subsidiaries; however, any such
event shall not be treated as a liquidation,
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dissolution or winding up unless such treatment is approved by the holders of a
majority of the Preferred Stock then outstanding, voting on an as if converted
basis.
Section 3. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(A) Right to Convert. Each share of each series of Preferred Stock
shall be convertible, without the payment of any additional consideration by the
holder thereof and at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the corporation or any transfer
agent for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing one hundred dollars
($100.00) by the Conversion Price, determined as hereinafter provided, in effect
at the time of conversion for such series of Preferred Stock. The Conversion
Price at which shares of Common Stock shall be deliverable upon conversion
without the payment of any additional consideration by the holder thereof (the
AConversion Price") shall initially be two dollars ($2.00) per share of Common
Stock with respect to Series I Preferred Stock, five dollars ($5.00) per share
of Common Stock with respect to Series II Preferred Stock, ten dollars ($10.00)
per share of Common Stock with respect to Series III Preferred Stock and three
dollars twenty-five cents ($3.25) per share of Common Stock with respect to
Series IV Preferred Stock. Such initial Conversion Price with respect to each
series of Preferred Stock shall be subject to adjustment, in order to adjust the
number of shares of Common Stock into which such series of Preferred Stock is
convertible, as hereinafter provided.
(B) Automatic Conversion. Each share of a series of Preferred Stock
shall automatically be converted into shares of Common Stock at the Conversion
Price in effect with respect to such series of Preferred Stock upon the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the corporation to the
public having an aggregate offering price resulting in net proceeds to the
corporation of not less than Five Million Dollars ($5,000,000) and with a public
offering price per share of not less than $6.50 (in the event of which offering,
the person(s) entitled to receive the Common Stock issuable upon such conversion
of the Preferred Stock shall not be deemed to have converted that Preferred
Stock until immediately prior to the closing of such offering). Each person who
holds of record shares of Series I Preferred Stock or Series II Preferred Stock
immediately prior to such automatic conversion shall be entitled to all
dividends which have accrued to the time of the automatic conversion, but not
paid on such Series I Preferred Stock or Series II Preferred Stock, pursuant to
Section 6 hereof. Such dividends shall be paid to all such holders within thirty
(30) days of the automatic conversion.
(C) Mechanics of Conversion. No fractional shares of Common Stock shall
be issued upon conversion of the Preferred Stock. In lieu of any fractional
shares to which the holder would otherwise be entitled, the corporation shall
pay cash equal to such fraction multiplied by the Conversion Price then in
effect with respect to such series of Preferred Stock. Before any holder of
Preferred Stock shall be entitled to convert the same into full shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of
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any transfer agent for the Preferred Stock, and shall give written notice to the
corporation at such office that he elects to convert the same and shall state
therein his name or the name or names of his nominees in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock, or to his nominee or nominees, a
certificate or certificates for the number of Shares of Common Stock to which he
shall be entitled as aforesaid, together with cash in lieu of any fraction of a
share. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Preferred
Stock to be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon conversion shall be treated for all purposes as
the record holder or holders of such shares of Common Stock on such date.
(D) Adjustments to Conversion Price for Diluting Issues:
(i) Special Definitions. For purposes of this Section
3(D), the following definitions shall apply:
(1) "Option" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(2)"Original Issue Date of a series of Preferred Stock"
shall mean the applicable date on which a share of such series of Preferred
Stock was first issued.
(3) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock and Preferred Stock) or other
securities directly or indirectly convertible into or exchangeable for Common
Stock.
(4) "Additional Shares of Common Stock" shall mean, as
to each series of Preferred Stock, all shares of Common Stock issued (or,
pursuant to Section 3(D)(iii) of Article IV(b), deemed to be issued) by the
corporation after the Original Issue Date applicable to such series of Preferred
Stock, other than shares of Common Stock issued or issuable:
(x) upon conversion of shares of Preferred Stock;
(y) to officers or employees of, or consultants to, the
corporation pursuant to a stock purchase or option plan or other employee stock
incentive program (collectively, the APlans") adopted by the Board of Directors
and approved unanimously by the director or directors designated by the holders
of the Preferred Stock as provided in Section 5 of Article IV(b);
(z) by way of dividend or other distribution on shares
of Common Stock excluded from the definition of Additional Shares of Common
Stock by the foregoing clauses (X) and (Y) or this clause (Z) or on shares of
Common Stock so excluded.
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(ii) No Adjustment of Conversion Price. No adjustment in
the number of shares of Common Stock into which a series of Preferred Stock is
convertible shall be made, by adjustment in the Conversion Price of such series
of Preferred Stock in respect of the issuance of Additional Shares of Common
Stock or otherwise, unless the consideration per share for an Additional Share
of Common Stock issued or deemed to be issued by the corporation is less than
the Conversion Price in effect with respect to such series of Preferred Stock on
the date of, and immediately prior to, the issue of such Additional Share.
(iii) Issue of Securities Deemed Issue of Additional
Shares of Common Stock.
(1) Options and Convertible Securities. In the event
the corporation at any time or from time to time after the Original Issue Date
applicable to each respective series of Preferred Stock shall issue any Options
or Convertible Securities or shall fix a record date for the determination of
holders of any class of securities entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
for a subsequent adjustment of such number) of Common Stock issuable upon the
exercise of such Options or, in the case of Convertible Securities and Options
therefor, the conversion or exchange of such Convertible Securities, shall be
deemed to be Additional Shares of Common Stock issued as of the time of such
issue or, in case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued with respect to a series of Preferred
Stock unless the consideration per share (determined pursuant to Section 3(D)(v)
hereof), of such Additional Shares of Common Stock would be less than the
Conversion Price in effect with respect to such series of Preferred Stock on the
date of and immediately prior to such issue, or such record date, as the case
may be, and provided further that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(A) no further adjustment in the Conversion Price in
effect with respect to a series of Preferred Stock shall be made upon the
subsequent issue of Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such Convertible
Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the corporation, or decrease in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the Conversion Price in effect with respect to such series of Preferred
Stock computed upon the original issue thereof (or upon the occurrence of a
record date with respect thereto), and any subsequent adjustments based thereon,
shall, upon any such increase or decrease becoming effective, be recomputed to
reflect such increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible Securities;
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion
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Price in effect for such series of Preferred Stock computed upon the original
issue thereof (or upon the occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, shall, upon such expiration, be
recomputed as if:
(I) in the case of Convertible Securities or Options
for Common Stock the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the corporation upon such exercise, or
for the issue of all such Convertible Securities which were actually converted
or exchanged, plus the additional consideration, if any, actually received by
the corporation upon such conversion or exchange, and
(II) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the corporation
(determined pursuant to Section 3(D)(v)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(D) no readjustment pursuant to clause (B) or (C)
above shall have the effect of increasing the Conversion Price in effect with
respect to any series of Preferred Stock to an amount which exceeds the lower of
(i) the Conversion Price in effect for such series of Preferred Stock on the
original adjustment date, or (ii) the Conversion Price in effect for such series
of Preferred Stock that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date and such
readjustment date;
(E) In the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof, no adjustment of
the Conversion Price in effect with respect to any series of Preferred Stock
shall be made until the expiration or exercise of all such Options, whereupon
such adjustment shall be made in the same manner provided in clause (C) above;
and
(F) if such record date shall have been fixed and
such Options or Convertible securities are not issued on the date fixed
therefor, the adjustment previously made in the Conversion Price with respect to
such series of Preferred Stock which became effective on such record date shall
be cancelled as of the close of business on such record date, and thereafter the
Conversion Price in effect with respect to such series of Preferred Stock shall
be adjusted pursuant to this subparagraph 3(D)(iii) as of the actual date of
their issuance.
(2) Stock Dividends, Stock Distributions and
Subdivisions. In the event the corporation at any time or from time to time
after the Original issue Date applicable to each respective series of Preferred
Stock shall declare or pay any dividend or make any other distribution
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on the Common Stock payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then and in any such event, Additional
Shares of Common Stock shall be deemed to have been issued:
(A) in the case of any such dividend or
distribution, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend or distribution, or
(B) in the case of any such subdivision, at the
close of business on the date immediately prior to the date upon which such
corporate action becomes effective.
If such record date shall have been fixed and such
dividend shall not have been fully paid on the date fixed therefor, the
adjustment previously made in the Conversion Price with respect to each
respective series of Preferred Stock which became effective on such record date
shall be cancelled as of the close of business on such record date, and
thereafter the Conversion Price in effect with respect to each series of
Preferred Stock shall be adjusted pursuant to this subparagraph 3(D)(iii) as of
the time of actual payment of such dividend.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 3(D)(iii), but excluding Additional
shares of Common Stock issued or issuable to officers or employees of, or
consultants to, the corporation pursuant to the Plans and excluding Additional
Shares of Common Stock deemed to be issued pursuant to Section 3(D)(iii)(2),
which event is dealt with in Section 3(D)(vi) hereof) for a consideration per
share less than the Conversion Price in effect with respect to any series of
Preferred Stock on the date of and immediately prior to such issue, then and in
such event, the Conversion Price in effect with respect to such series of
Preferred Stock shall be reduced, concurrently with such issue as follows:
(1) With respect to Series I Preferred Stock and Series
IV Preferred Stock, to a price (calculated to the nearest cent) equal to the
consideration per share for which such Additional Shares are issued;
(2) With respect to Series II Preferred Stock and Series
III Preferred Stock to a price (calculated to the nearest cent) determined by
multiplying the Conversion Price in effect with respect to such series of
Preferred Stock by a fraction (x) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issue (including
shares of Common Stock issuable upon conversion of any outstanding Preferred
Stock or Convertible Securities), plus (2) the number of shares of Common Stock
which the aggregate consideration received by the corporation for the total
number of Additional Shares of Common Stock so issued would purchase at the
Conversion Price in effect with respect to such series of Preferred Stock, and
(y) the denominator of which shall be (1) the number of shares of Common Stock
outstanding
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immediately prior to such issue (including shares of Common Stock issuable upon
conversion of any outstanding Preferred Stock or Convertible Securities), plus
(2) the number of such Additional Shares of Common Stock so issued;
provided, however, the Conversion Price with respect to each respective series
of Preferred Stock shall not be so reduced at such time if the amount of such
reduction would be an amount less than $0.05, but any such amount shall be
carried forward and the reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $0.05 or more.
(v) Determination of Consideration. For purposes of this
Section 3(D), the consideration received by the corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the corporation excluding amounts paid
or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The
consideration per share received by the corporation for Additional Shares of
Common Stock deemed to have been issued pursued to Section 3(D)(iii)(1),
relating to Options and Convertible Securities, shall be determined by dividing
(x) the total amount, if any, received or receivable
by the corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, by
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
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(vi) Adjustment for Dividends, Distributions,
Subdivisions, Combinations or Consolidation of Common Stock.
(1) Stock Dividends, Distributions or Subdivisions.
In the event the corporation shall issue Additional Shares of Common Stock
pursuant to Section 3(D)(iii)(2) in a stock dividend, stock distribution or
subdivision, the Conversion Price in effect with respect to each series of
Preferred Stock immediately prior to such stock dividend, stock distribution or
subdivision shall, concurrently with the effectiveness of such stock dividend,
stock distribution or subdivision, be proportionately decreased.
(2) Combinations or Consolidations. In the event the
outstanding shares of Common Stock shall be combined or consolidated, by
reclassification or otherwise, into a lesser number of shares of Common Stock,
the Conversion Price in effect with respect to each series of Preferred Stock
immediately prior to such combination or consolidation shall, concurrently with
the effectiveness of such combination or consolidation, be proportionately
increased.
(vii) Adjustment for Merger or Reorganization, etc. In
case of any consolidation or merger of the corporation with or into another
corporation or the conveyance of all or substantially all of the assets of the
corporation to another corporation, each share of each respective series of
Preferred Stock shall thereafter be convertible into the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock of the corporation deliverable upon conversion of such series of
Preferred Stock would have been entitled upon such consolidation, merger or
conveyance; and, in any such case, appropriate adjustment (as determined in good
faith by the Board of Directors) shall be made in the application of the
provisions herein set forth with respect to the rights and interest thereafter
of the holders of each respective series of Preferred Stock, to the end that the
provisions set forth herein (including provisions with respect to changes in and
other adjustments of the Conversion Price in effect with respect to each series
of Preferred Stock) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the conversion of each respective series of Preferred Stock.
(E) No Impairment. The corporation will not, by amendment of its
Articles of Incorporation or By-Laws or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by the corporation but
will at all times in good faith assist in the carrying out of all the provisions
of this Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of each
series of Preferred Stock against impairment.
(F) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price in effect with respect to
each series of Preferred Stock pursuant to this Section 3, the corporation at
its expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each holder of Preferred Stock a
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certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The corporation
shall, upon the written request at any time of any holder of Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Conversion Price at the time in
effect with respect to each series of Preferred Stock and (iii) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of each series of
Preferred Stock.
(G) Notices of Record Date. In the event of any taking by the
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend which is the same as cash dividends paid in
previous quarters) or other distribution, the corporation shall mail to each
holder of Preferred Stock at least ten (10) days prior to the date specified
herein, a notice specifying the date on which any such record is to be taken for
the purpose of such dividend or distribution.
(H) Common Stock Reserved. The corporation shall reserve and keep
available out of its authorized but unissued Common Stock such number of shares
of Common Stock as shall from time to time be sufficient to effect conversion of
the Preferred Stock.
Section 4. Redemption.
(A) Each holder of Preferred Stock shall have the right to compel the
corporation to redeem (i) on February 1, 1991 through January 31, 1992, at the
Redemption Price, as hereafter defined, one-third of the Base Number of the
shares of each series of Preferred Stock held by such holder, rounded upward to
the nearest whole share; (ii) on February 1, 1992 through January 31, 1993 at
the Redemption Price one-third of the Base Number of the shares of each series
of Preferred Stock held by such holder, rounded upward to the nearest whole
share, plus, if such holder or its predecessor did not redeem the full amount of
shares of a series of Preferred Stock it was entitled to redeem pursuant to
clause (i) of this paragraph (A), such additional amount of shares of that
series of Preferred Stock; and (iii) on or after February 1, 1993 at the
Redemption Price all shares of Preferred Stock held by such holder. The
Redemption Price of each share of each series of Preferred Stock shall mean the
Liquidation Value of such series on the date on which the shares are redeemed by
payment in cash in full. Upon payment in full for redeemed Preferred Stock, the
rights of the holder of Preferred Stock shall cease with respect to such
redeemed stock. "Base Number" shall mean the number of shares of each series of
Preferred Stock which each holder of Preferred Stockholders holds on February 1,
1991. For purposes of determining the number of shares which are redeemable, a
successor or transferee of a holder of Preferred Stock on February 1, 1991 shall
be entitled to redeem the pro rata portion of the Base Number of the predecessor
holder of the series of Preferred Stock, based upon the number of shares the
successor or transferee holds relative to such Base Number.
(B) If the corporation has insufficient funds legally available to
redeem all series of Preferred Stock pursuant to Section 4(A), then the
Corporation shall, prior and in preference to any
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redemption of the Series I Preferred Stock, Series II Preferred Stock and Series
III Preferred Stock, redeem the Series IV Preferred Stock it is then obligated
to redeem. If funds of the corporation available for payment of such redemptions
are insufficient to permit payment in full of amounts to which the holders of
Series IV Preferred Stock are entitled, then such holders will participate in
such available funds in equal amounts per share. If after discharge in full of
the corporation's obligations to the holders of Series IV Preferred stock there
remains additional funds legally available to redeem the other series of
Preferred Stock, then such holders of other series of Preferred Stock will
participate in such available funds ratably in proportion to the full redemption
amount each such holder would otherwise be entitled to receive. The corporation
shall redeem the remainder of the Preferred Stock it was obligated to redeem as
soon as it has funds legally available therefor.
(C) The corporation will take all actions necessary to maintain
unimpaired and protect the redemption rights provided for in this Section 4 and
to assure prompt and timely payment of all moneys owed as a result of the
redemptions provided for in this Section 4, including, but not limited to,
reappraisal of its corporate assets.
(D) A holder of Preferred Stock wishing to have shares of Preferred
Stock redeemed shall give the corporation not less than thirty days' prior
written notice of intention to redeem Preferred Stock, which notice shall state
the number of shares and series of Preferred Stock to be redeemed and the
desired redemption date. Prior to the designated redemption date, the holder
shall deliver to the corporation or its transfer agent certificates representing
the shares of Preferred Stock being redeemed, duly endorsed for transfer. If
less than all shares represented by such certificates are redeemed, a new
certificate shall forthwith be issued for the unredeemed shares.
Section 5. Voting Rights
Except as otherwise required by law, the holders of Preferred Stock and
the holders of the Common Stock shall be entitled to notice of any shareholders'
meeting and to vote upon any matter submitted to a shareholder for a vote, on
the following basis: (i) holders of issued and outstanding Common Stock shall
have one vote per share; and (ii) holders of Preferred Stock issued and
outstanding shall have that number of votes per share as is equal to the number
of shares of Common Stock into which each such share of Preferred Stock held by
such holders is convertible.
Section 6. Dividend Rights.
(a) Dividends may be paid on the Preferred Stock when and as declared
by the Board of Directors, provided that the amount of the dividend declared on
each share of Preferred, whatever the series, is equal and provided further that
no such dividend may be declared or paid until all Preferred Stock which is
required to be redeemed has been redeemed by payment of cash in full or by the
setting aside of funds equal to such redemption payment in full.
(b) No holder of any shares of Preferred Stock shall be entitled to
either a fixed dividend rate or any dividend cumulated or accrued after the date
of the filing of these Restated Articles of
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Incorporation, except a holder of Series I Preferred Stock or Series II
Preferred Stock who did not elect to receive dividends which accrued on such
stock prior to the filing of these Restated Articles of Incorporation in Series
IV Preferred Stock shall be entitled to such accrued dividends, when and as
declared by the Board of Directors.
(c) Notwithstanding any provisions in subsections 6(a) and 6(b) hereof,
dividends which have accrued on any series of Preferred Stock but not been paid
prior to an automatic conversion pursuant. to. subsection 3(B) hereof shall be
payable within thirty (30) days of the closing, as contemplated in that
subsection 3(B), to each person who holds of record any shares of such series of
Preferred Stock immediately prior to the automatic conversion.
Section 7. Covenants.
(A) So long as any shares of Preferred Stock shall be outstanding (as
adjusted for all subdivisions and combinations) and except as provided in
Subsection 7(B) below, the corporation shall not, without first obtaining the
affirmative vote or written consent of the holders of two-thirds of the total of
(1) the aggregate number of shares of Common Stock into which all shares of
outstanding Preferred Stock are convertible and (2) the aggregate number of
shares of outstanding Common Stock issued to all holders of Preferred Stock upon
conversion of their Preferred Stock:
(i) amend, repeal or acquiesce in, any provision of, or add any
provision to, the corporation's Articles of Incorporation or By-Laws if such
action would alter, change, conflict with, or limit the preferences, rights,
privileges or powers of, or the restriction provided for the benefit of, the
Preferred Stock, provided however, the corporation shall not take any such
action which would increase or decrease to a number of shares less than the
number of such shares of such series then issued and outstanding the aggregate
number of authorized shares of any series of Preferred Stock, or alter or change
the powers, preferences or special rights of the shares of any series of
Preferred Stock so as to affect such series adversely, without the vote of the
holders of two-thirds of the series of such series so affected.
(ii) reclassify any Common Stock into shares having any preference or
priority as to dividends or assets superior to or on a parity with any such
preference or priority of the Preferred Stock;
(iii) pay or declare any dividend or distribution on any shares of
Common Stock or apply any of its assets to the redemption, retirement, purchase
or other acquisition directly or indirectly, through subsidiaries or otherwise,
of any shares of Common Stock except from employees of the corporation upon
termination of employment;
(iv) sell, lease or dispose of a material portion of its assets; or
(v) become a party to any merger, consolidation, reorganization or
other acquisition or commitment to take any such action.
13
<PAGE> 14
(B) Notwithstanding any requirements set forth in subsection A of this
Section 7, the corporation can (i) upon obtaining the affirmative vote or
written consent of the holders of a majority of the outstanding shares entitled
to vote thereon and, in addition, the affirmative vote or written consent of the
holders of two-thirds of the outstanding shares of Series I Preferred Stock
alter the conversion formula set forth in Article IV(b) Section 3(D)(iv)(1) for
the Series I Preferred Stock, or (ii) upon obtaining the affirmative vote or
written consent of the holders of a majority of the outstanding shares entitled
to vote thereon and, in addition, the affirmative vote or written consent of the
holders of two-thirds of the outstanding shares of Series IV Preferred Stock
alter the conversion formula set forth in Article IV(b) Section 3(D)(iv)(1) for
the Series IV Preferred Stock.
Section 8. Residual Rights. All rights accruing to the outstanding
shares of the corporation not expressly provided for to the contrary herein
shall be vested in the Common Stock.
ARTICLE V
Any action required or permitted by the Michigan Business Corporation
Law to be taken at an annual or special meeting of shareholders may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, is signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take the action at a meeting at which all shares
entitled to vote thereof were present and voted.
Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to shareholders who have
not consented in writing.
These Restated Articles of Incorporation were duly adopted by the
shareholders on June 13, 1985 in accordance with the provisions of Section 642,
Act 284, Public Acts of 1972, as amended. The necessary number of shares as
required by statute consented in writing to the adoption of these Restated
Articles of Incorporation in accordance with Section 407(1), Act 234, Public
Acts of 1972, as amended.
Signed this 13th day of June, 1985.
By /s/ DWIGHT D. CARLSON
-------------------------------
Dwight D. Carlson, President
14
<PAGE> 15
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: Perceptron, Inc.
2. The corporation identification number (CID) assigned by the Bureau
is: 272-233.
3. The location of its registered office is: 23855 Research Drive,
Farmington Hills, MI 48024.
4. Article IV(b), Section 4(A) of the Articles of Incorporation is hereby
amended to read as follows:
See Exhibit A attached hereto.
The foregoing amendment to the Articles of Incorporation was duly adopted on the
27th day of March, 1991. The amendment was duly adopted by the written consent
of the shareholders having not less than the minimum number of votes required by
statute in accordance with Section 407(1) of the Act. Written notice to
shareholders who have not consented in writing has been given.
Signed this 30th day of April, 1991.
By /S/ DWIGHT D. CARLSON
----------------------------------
Dwight D. Carlson, President
15
<PAGE> 16
EXHIBIT A
Section 4. Redemption.
(A) Each holder of Preferred Stock shall have the right to compel the
corporation to redeem (i) on February 1, 1993 through January 31, 1994, at the
Redemption Price, as hereafter defined, one-third of the Base Number of the
shares of each series of Preferred Stock held by such holder, rounded upward to
the nearest whole share; (ii) on February 1, 1994 through January 31, 1995 at
the Redemption Price one-third of the Base Number of the shares of each series
of Preferred Stock held by such holder, rounded upward to the nearest whole
share, plus, if such holder or its predecessor did not redeem the full amount of
shares of a series of Preferred Stock it was entitled to redeem pursuant to
clause (i) of this paragraph (A), such additional amount of shares of that
series of Preferred Stock; and (iii) on or after February 1, 1995 at the
Redemption Price all shares of Preferred Stock held by such holder. The
Redemption Price of each share of each series of Preferred Stock shall mean the
Liquidation Value of such series on the date on which the shares are redeemed by
payment in cash in full. Upon payment in full for redeemed Preferred Stock, the
rights of the holder of Preferred Stock shall cease with respect to such
redeemed stock. "Base Number" shall mean the number of shares of each series of
Preferred Stock which each holder of Preferred Stock holds on February 1, 1993.
For purposes of determining the number of shares which are redeemable, a
successor or transferee of a holder of Preferred Stock on February 1, 1993 shall
be entitled to redeem the pro rata portion of the Base Number of the predecessor
holder of the series of Preferred Stock, based upon the number of shares the
successor or transferee holds relative to such Base Number.
16
<PAGE> 17
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: Perceptron, Inc.
2. The corporation identification number (CID) assigned by the Bureau is:
272-233.
3. The location of its registered office is: 23855 Research Drive,
Farmington Hills, MI 48335.
4. Article IV(b), Section 3(B) of the Articles of Incorporation is
hereby amended to read in its entirety in the form contained in Exhibit
A hereto and a new Article VI is hereby added in the form contained in
Exhibit A hereto.
The foregoing amendment to the Articles of Incorporation was duly adopted on the
27th day of April, 1992. The amendment was duly adopted by the written consent
of the shareholders having not less than the minimum number of votes required by
statute in accordance with Section 407(1) of the Act. Written notice to
shareholders who have not consented in writing has been given.
Signed this 27th day of April, 1992.
By /S/ DWIGHT D. CARLSON
----------------------------------
Dwight D. Carlson, President
17
<PAGE> 18
EXHIBIT A
PERCEPTRON, INC.
PROPOSED AMENDMENTS TO
RESTATED ARTICLES OF INCORPORATION
ARTICLE IV(b), Section 3(B)
(B) Automatic Conversion. Each outstanding share of a series of
Preferred Stock shall automatically be converted into shares of Common Stock at
the Conversion Price in effect with respect to such series of Preferred Stock on
the closing of a firm commitment underwritten public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering the offer and sale of Common Stock for the account of the corporation
to the public having an aggregate offering price resulting in net proceeds to
the corporation of not less than Five Million Dollars ($5,000,000) and with a
public offering price per share of not less than $6.50 (in the event of which
offering, the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Preferred Stock shall not be deemed to have converted that
Preferred Stock until immediately prior to the closing of such offering). Upon
such automatic conversion of all outstanding shares of Preferred Stock, all such
shares of Preferred Stock and any shares of Preferred Stock which theretofore
were authorized and unissued shall be cancelled and the corporation shall not
have any further authority to issue any such series of Preferred Stock.
ARTICLE VI
To the fullest extent permitted by law, no director of the corporation
shall be personally liable for damages for breach of the director's fiduciary
duty.
18
<PAGE> 19
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Certificate:
1. The present name of the corporation is: Perceptron, Inc.
2. The corporation identification number (CID) assigned by the Bureau is:
272-233.
3. The location of its registered office is: 23855 Research Drive,
Farmington Hills, MI 48335.
4. Article IV of the Articles of Incorporation is hereby amended to read
as follows:
See Exhibit A attached hereto.
The foregoing amendment to the Articles of Incorporation was duly adopted on the
23rd day of June, 1994. The amendment was duly adopted in accordance with
Section 611(2) of the Act by the vote of the shareholders. The necessary votes
were cast in favor of the amendment.
Signed this day of June, 1994.
By /S/ JAMES A. RATIGAN
------------------------------------------
James A. Ratigan, Executive Vice President
19
<PAGE> 20
PERCEPTRON, INC.
EXHIBIT A
ARTICLE IV
Capital Stock
The total authorized shares of the corporation are as follows:
COMMON STOCK
The total number of authorized shares of Common Stock, with a
par value of $0.01 per share (the "Common Stock"), which the corporation has
authority to issue is Nineteen Million (19,000,000) shares. The holders of
shares of Common Stock shall be entitled to one vote for each share so held with
respect to all matters voted on by the holders of the Common Stock of the
corporation. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the corporation, the holders of Common Stock shall
be entitled to receive that portion of the remaining funds to be distributed,
subject to the prior and superior right of any outstanding preferred stock of
the corporation. Such funds shall be paid to the holders of Common Stock on the
basis of the number of shares of Common Stock held by each of them. Dividends
may be paid on the Common Stock as and when declared by the Board of Directors,
subject to the prior and superior right of any outstanding preferred stock of
the corporation.
PREFERRED STOCK
The total number of authorized shares of Preferred Stock, without par
value (the "Preferred Stock"), which the corporation has authority to issue is
One Million (1,000,000) shares. The Board of Directors of the corporation is
authorized to issue shares of Preferred Stock from time to time in one or more
series of such number of shares with such distinctive serial designations and
(a) may have such voting powers, full or limited, or may be without voting
powers; (b) may be subject to redemption at such time or times and at such
prices; (c) may be entitled to receive dividends (which may be cumulative or
non-cumulative) at such rate or rates, on such conditions, and at such times and
payable in preference to, or in such relation to, the dividends payable on any
other class or classes or series of shares; (d) may have such rights upon the
dissolution of, or upon any distribution of the assets of, the corporation; (e)
may be made convertible into, or exchangeable for, shares of the same or any
other class or classes, or of any other series of the same or any other class or
classes, of shares of the corporation, at such price or prices or at such rates
of exchange, and with such adjustments; and (f) may have such other relative,
participating, optional or other special rights, qualifications, limitations or
restrictions thereof, all as shall hereafter be stated and expressed in the
resolution or resolutions providing for the issue of each such series of
Preferred Stock from time to time adopted by the Board of Directors of the
corporation pursuant to authority so to do which is hereby expressly vested in
the Board of Directors. Such resolutions, when filed, shall constitute
amendments to these Articles of Incorporation.
20
<PAGE> 21
CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC CORPORATIONS
Pursuant to the provisions of Act 284, Public Acts of 1972, the
undersigned corporation executes the following Certificate:
FIRST: That the name of the corporation is Perceptron, Inc. (the
"Corporation").
SECOND: That Corporation identification number (CID) assigned by the
Bureau is: 272-233.
THIRD: The location of its registered office is: 47827 Halyard Drive,
Plymouth, Michigan 48170-2461.
FOURTH: That pursuant to the authority conferred upon the Board of
Directors by the Articles of Incorporation of said Corporation, the Board of
Directors of the Corporation on March 23, 1998, duly adopted the following
resolution creating a series of 190,000 shares of Preferred Stock, no par value,
designated as Series A Preferred Stock:
RESOLVED, That it is hereby declared to be in the best interests of the
Corporation that the Articles of Incorporation of the Corporation, as amended to
date, be further amended to create a new series of Preferred Stock to consist of
190,000 shares and to be designated as Series A Preferred Stock, no par value,
and to determine the preferences, limitations and relative rights of the Series
A Preferred Stock by adding the following to Article IV of such Articles of
Incorporation to read as follows:
SERIES A PREFERRED STOCK, NO PAR VALUE
A. Designation and Amount. The shares of such series shall be
designated as "Series A Preferred Stock, no par value," and the number of shares
constituting such series shall be 190,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors of the
Corporation; provided, that no decrease shall reduce the number of shares of
Series A Preferred Stock to a number less than the number of shares then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding options, rights or warrants or upon the conversion of any
outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.
B. Dividends and Distributions.
(1) Subject to any prior and superior rights of the holders of
any series of Preferred Stock ranking prior and superior to the shares of Series
A Preferred Stock with respect to dividends that may be authorized by the
Articles of Incorporation, the holders of shares of Series A Preferred
21
<PAGE> 22
Stock shall be entitled prior to the payment of any dividends on shares ranking
junior to the Series A Preferred Stock to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the last day of January, April, July and October in
each year (each such date being referred to herein as a "Quarterly Dividend
Payment Date"), commencing on the first Quarterly Dividend Payment Date after
the first issuance of a share or fraction of a share of Series A Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification
or otherwise), declared on the Common Stock, par valuer $l.00 per share, of the
Corporation (the "Common Stock") since the immediately preceding Quarterly
Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of Series A
Preferred Stock. In the event the Corporation shall at any time after March 23,
1998 (the "Rights Declaration Date") (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock,
or (iii) combine the outstanding Common Stock into a smaller number of shares,
then in each such case the amount to which holders of shares of Series A
referred Stock were entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(2) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (1) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during the
period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(3) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro
22
<PAGE> 23
rata on a share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
(4) Dividends in full shall not be declared or paid or set
apart for payment on the Series A Preferred Stock for a dividend period
terminating on the Quarterly Dividend Payment Date unless dividends in full have
been declared or paid or set apart for payment on the Preferred Stock of all
series (other than series with respect to which dividends are not cumulative
from a date prior to such dividend date) for the respective dividend periods
terminating on such dividend date.
C. Voting Rights. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
(1) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder
thereof to 100 votes on all matters voted on at a meeting of the
shareholders of the Corporation. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, or (ii) subdivide the
outstanding Common Stock, or (iii) combine the outstanding Common Stock
into a smaller number of shares, then in each such case the number of
votes per share to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(2) Except as otherwise provided herein, in any other
Amendment to the Articles of Incorporation of the Corporation or by
law, the holders of shares of Series A Preferred Stock and the holders
of shares of Common Stock and any other capital stock of the
Corporation having general voting rights shall vote together as one
voting group on all matters voted on at a meeting of shareholders of
the Corporation.
(3) Except as set forth herein or by law, holders of Series A
Preferred Stock shall have no special voting rights and their consent
shall not be required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for taking any
corporate action.
D. Certain Restrictions.
(1) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in Section B.
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
23
<PAGE> 24
(a) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(b)declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(c)redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
A Preferred Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any such junior stock
in exchange for shares of any stock of the Corporation ranking junior
(either as to dividends or upon dissolution, liquidation or winding up)
to the Series A Preferred Stock;
(d)redeem or purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock or any shares of
stock ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares and
the Series A Preferred Stock upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes,
shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(2) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (1) of
this Section D, purchase or otherwise acquire such shares at such time and in
such manner.
E. Liquidation, Dissolution or Winding Up.
(1) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock unless, prior thereto, the holders
of shares of Series A Preferred Stock shall have received $100.00 per share,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Preferred Stock unless, prior thereto, the holders of
shares of Common Stock shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) 100 (as appropriately adjusted
24
<PAGE> 25
as set forth in subparagraph (3) below to reflect such events as stocks splits,
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Preferred Stock and Common Stock,
respectively, holders of Series A Preferred Stock and holders of shares of
Common Stock shall receive their ratable and proportionate share of the
remaining assets to be distributed, with the holders of Series A Preferred Stock
entitled to receive an aggregate per share amount equal to 100 times (as
appropriately adjusted as set forth in subparagraph (3) below to reflect such
events as stock splits, stock dividends and recapitalizations with respect to
the Common Stock) the aggregate amount to be distributed per share to holders of
shares of Common Stock.
(2) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, which rank on a parity with the Series A Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares and the Series A Preferred Stock in proportion to their respective
liquidation preferences.
(3) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii)
combine the outstanding Common Stock into a smaller number of shares, then in
each such case the Adjustment Number in effect immediately prior to such event
shall be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
F. Merger, Consolidation, etc. In case the Corporation shall enter into
any merger, consolidation, combination or other transaction in which the shares
of Common Stock are exchanged or changed into other stock or securities, cash
and/or any other property, then in any such case each share of Series A
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of Series A Preferred
Stock shall be adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
G. Redemption. The shares of Series A Preferred Stock shall not be
redeemable.
25
<PAGE> 26
H. Ranking. The Series A Preferred Stock shall rank junior to all other
series of the Corporation's Preferred Stock as to the payment of dividends and
other distribution of assets, unless, in accordance with authorization in the
Articles of Incorporation, the terms of any such series shall provide otherwise.
I. Reacquired Shares. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and canceled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of preferred
stock and may be reissued as part of a new series of preferred stock subject to
the conditions and restrictions on issuance set forth herein, in the Articles of
Incorporation, or in any other Amendment to the Articles of Incorporation
creating a series of preferred stock or any similar stock or as otherwise
required by law.
J. Amendment. The Articles of Incorporation of the Corporation shall
not be further amended in any manner which would alter or change the powers,
preferences or special rights of the Series A Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of a majority of the
outstanding shares of Series A Preferred Stock, voting separately as one voting
group.
K. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
5. This Amendment to the Articles of Incorporation of the Corporation was duly
adopted by the Board of Directors of the Corporation on March 23, 1998, without
shareholder action, which shareholder action was not required.
IN WITNESS WHEREOF, the undersigned has executed and subscribed this
Certificate and does affirm the foregoing as true this 23rd day of March, 1998.
PERCEPTRON, INC.
By: /S/ JOHN G. ZIMMERMAN
------------------------------------------
John G. Zimmerman
Vice President and Chief Financial Officer
Attest:
/S/ THOMAS S. VAUGHN
- -----------------------
Secretary
26
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 15,828,000
<SECURITIES> 0
<RECEIVABLES> 24,187,000
<ALLOWANCES> (150,000)
<INVENTORY> 10,075,000
<CURRENT-ASSETS> 51,765,000
<PP&E> 14,221,000
<DEPRECIATION> (3,372,000)
<TOTAL-ASSETS> 64,123,000
<CURRENT-LIABILITIES> 8,093,000
<BONDS> 0
0
0
<COMMON> 83,000
<OTHER-SE> 55,947,000
<TOTAL-LIABILITY-AND-EQUITY> 64,123,000
<SALES> 8,755,000
<TOTAL-REVENUES> 8,755,000
<CGS> 4,316,000
<TOTAL-COSTS> 7,186,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (245,000)
<INCOME-PRETAX> (2,502,000)
<INCOME-TAX> (838,000)
<INCOME-CONTINUING> (1,664,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,664,000)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
