<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended June 30, 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 August 11, 1998 was:
Common Stock, $0.01 par value 8,241,717
- ----------------------------- ------------------
Class Number of shares
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PERCEPTRON, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets - June 30, 1998 3
and December 31, 1997
Condensed Consolidated Statements of Income - Three and
Six Months Ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6-8
ITEM 2 Management's Discussion and Analysis of Financial Condition 9-13
and Results of Operations
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk 13
PART II. OTHER INFORMATION
ITEM 1 Legal Proceedings 14
ITEM 4 Submission of Matters to a Vote of Security Holders 15
ITEM 6 Exhibits and Reports on Form 8-K 16
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PERCEPTRON, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 10,699,000 $ 14,448,000
Marketable securities 0 2,000,000
Accounts receivable, net of reserves of $140,000
and $175,000 24,727,000 30,692,000
Inventories, net of reserves of $716,000 and $860,000 10,653,000 8,019,000
Income tax receivable 2,074,000 ---
Prepaid expenses and deferred tax asset 1,335,000 708,000
------------ ------------
Total current assets 49,488,000 55,867,000
------------ ------------
Property and equipment:
Building and land 5,982,000 5,982,000
Machinery and equipment 7,659,000 6,638,000
Furniture and fixtures 1,327,000 1,312,000
------------ ------------
14,968,000 13,932,000
Less: Accumulated depreciation and amortization (3,869,000) (3,308,000)
------------ ------------
Net property and equipment 11,099,000 10,624,000
Intangible assets, net of accumulated amortization of
$588,000 and $394,000 1,443,000 1,651,000
------------ ------------
Total assets $ 62,030,000 $ 68,142,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 3,230,000 2,979,000
Accrued payables and expenses 4,351,000 5,929,000
Accrued compensation and stock option expense 325,000 1,355,000
------------ ------------
Total current liabilities 7,906,000 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,
8,241,717 and 8,207,000 issued and outstanding at
June 30, 1998 and December 31, 1997, respectively 82,000 82,000
Cumulative translation adjustments (2,502,000) (2,411,000)
Additional paid-in capital 41,172,000 41,666,000
Retained earnings 15,372,000 18,542,000
------------ ------------
$ 54,124,000 $ 57,879,000
------------ ------------
Total liabilities and shareholders' equity $ 62,030,000 $ 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 June 30, Six Months Ended June 30,
--------------------------- ----------------------------
1998 1997 1998 1997
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Net sales $ 9,555,000 $18,806,000 $ 18,310,000 $31,190,000
Cost of sales 4,536,000 6,648,000 8,852,000 12,101,000
----------- ----------- ------------ -----------
Gross profit 5,019,000 12,158,000 9,458,000 19,089,000
Selling, general and administrative expense 4,868,000 4,495,000 9,310,000 8,069,000
Engineering, research and development
expense 2,590,000 2,306,000 5,333,000 4,515,000
----------- ----------- ------------ -----------
Income (loss) from operations (2,439,000) 5,357,000 (5,185,000) 6,505,000
Interest income, net 173,000 250,000 417,000 430,000
----------- ----------- ------------ -----------
Net income / (loss) before provision
for income taxes (2,266,000) 5,607,000 (4,768,000) 6,935,000
----------- ----------- ------------ -----------
Provision (credit) for income taxes (759,000) 1,836,000 (1,597,000) 2,254,000
----------- ----------- ------------ -----------
Net income / (loss) $(1,507,000) $ 3,771,000 $ (3,171,000) $ 4,681,000
=========== =========== ============ ===========
Earnings (loss) per share:
Basic $ (.18) $ .47 $ (.38) $ .59
=========== =========== ============ ===========
Diluted $ (.18) $ .45 $ (.38) $ .55
=========== =========== ============ ===========
Weighted average common shares outstanding:
Basic 8,287,621 8,017,931 8,250,060 7,996,357
=========== =========== ============ ===========
Diluted 8,287,621 8,458,726 8,250,060 8,436,513
=========== =========== ============ ===========
</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>
Six Months Ended June 30,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (3,171,000) $ 4,681,000
------------ ------------
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization 1,129,000 1,077,000
Changes in operating assets and liabilities:
Accounts receivable and income
tax receivable 3,812,000 (1,162,000)
Inventories (2,634,000) 193,000
Prepaid expenses and other current assets (627,000) 2,241,000
Accounts payable 251,000 (2,761,000)
Accrued payables and expenses (2,608,000) (844,000)
------------ ------------
Total adjustments (677,000) (1,256,000)
------------ ------------
Net cash provided by (used in) operating
activities (3,848,000) 3,425,000
------------ ------------
Cash flows from investing activities:
Capital expenditures (1,395,000) (1,302,000)
Sales and maturities of marketable securites 2,000,000 0
------------ ------------
Net cash provided by (used in) investing
activities 605,000 (1,302,000)
Cash flows from financing activities:
Repayment of short-term debt 0 (980,000)
Proceeds from the exercise of options 946,000 767,000
Repurchase of company stock (1,440,000) 0
------------ ------------
Net cash provided by (used in) financing
activities (494,000) (213,000)
------------ ------------
Effect of exchange rates on cash and cash
equivalents (12,000) (361,000)
------------ ------------
Net increase (decrease) in cash and cash
equivalents (3,749,000) 1,549,000
Cash and cash equivalents, beginning of year 14,448,000 14,924,000
------------ ------------
Cash and cash equivalents, end of period $ 10,699,000 $ 16,473,000
============ ============
</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 and six months ended June 30, 1998 and 1997
is unaudited, but includes all adjustments, consisting of normal recurring
adjustments, which the management of Perceptron, Inc. ("Perceptron" or the
"Company") considers necessary for fair presentation of financial position,
results of operations and cash flows. In accordance with the instructions for
the completion of the Quarterly Report on Form 10Q, certain information and
footnote disclosures necessary to comply with generally accepted accounting
principles have been condensed or omitted.
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
contains 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>
June 30, December 31,
1998 1997
-------------- --------------
<S> <C> <C>
Component parts ........................ $ 6,710,000 $ 5,507,000
Work in process ........................ 1,161,000 902,000
Finished goods ........................ 2,782,000 1,610,000
-------------- --------------
Total ........................ $ 10,653,000 $ 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 June 30,
1998 1997
------------------------ -----------------------
Income (loss) Shares Income Shares
<S> <C> <C> <C> <C>
Net income (loss) and shares $(1,507,000) 8,287,621 $3,771,000 8,017,931
Basic earnings (loss) per share $ (.18) $ .47
Net income (loss) and shares (1,507,000) 8,287,621 3,771,000 8,017,931
Net dilutive effect of stock
options and warrants - 0 - 440,795
----------- --------- ---------- ---------
Diluted income (loss) and shares $(1,507,000) 8,287,621 $3,771,000 8,458,726
Diluted earnings (loss) per share $ (.18) $ (.45)
Six Months Ended June 30,
1998 1997
------------------------- -----------------------
Income (loss) Shares Income Shares
Net income (loss) and shares $(3,171,000) 8,250,060 $4,681,000 7,996,357
Basic earnings (loss) per share $ (.38) $ .59
Net income (loss) and shares (3,171,000) 8,250,060 4,681,000 7,996,357
Net dilutive effect of stock
options and warrants - 0 - 440,156
----------- --------- ---------- ---------
Diluted income (loss) and shares $(3,171,000) 8,250,060 $4,681,000 8,436,513
Diluted earnings (loss) per share $ (.38) $ .55
</TABLE>
Potentially diluted securities of 49,612 shares were excluded from the
calculation during the second quarter of 1998 and 114,217 shares were excluded
from the calculation for the first half of 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
matters discussed below and in Part II Item 1 "Legal Proceedings".
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. Certain of those customers, including
one customer who was a party to a patent infringement suit relating to this
matter, have settled such claims. Prior to this settlement, the customer
involved in the patent infringement suit had notified various companies from
which it had purchased equipment, including the Company, that it expected 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
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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 million DM, which may be used to finance working capital needs and equipment
purchases or capital leases. Any borrowings for working capital needs or
equipment purchases will bear interest at the bank's prime rate (8.5% as of
August 10, 1998). These credit facilities expire on May 31, 1999 unless canceled
earlier by the Company or the bank.
NOTE 6. FOREIGN EXCHANGE CONTRACTS
The Company may use, from time to time, a limited hedging program to
minimize the impact of foreign currency fluctuations. As the Company exports
products, it may enter into limited hedging transactions relating to the
accounts receivable arising as a result of such shipment. These transactions
involve the use of forward contracts. At June 30, 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 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 June 30,
1998 1997
--------------- --------------
<S> <C> <C>
Net income (loss) ........................ $ (1,507) $ 3,771
Other comprehensive income (loss), foreign
currency translation adjustments.............. 268 (491)
--------------- --------------
Total comprehensive income (loss)........... $ (1,239) $ 3,280
=============== ==============
Six Months Ended June 30,
1998 1997
--------------- --------------
Net income (loss) ........................ $ (3,171) $ 4,681
Other comprehensive income (loss), foreign
currency translation adjustments.............. (91) (1,209)
--------------- --------------
Total comprehensive income (loss)........... $ (3,262) $ 3,472
=============== ==============
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Net Sales. The Company's net sales decreased by 49.0% from $18.8
million in the second quarter of 1997 to $9.6 million in the second quarter of
1998. The decrease of $9.2 million in net sales is primarily attributable to
decreased sales to automotive customers, down by $8.9 million from the same
quarter last year. Domestic automotive sales for the second quarter of 1998
were down by $6.8 million, from $10.9 million in 1997 to $4.1 million in 1998,
and international automotive sales were down by $2.1 million from $5.5 million
for 1997 to $3.4 million in 1998. Non-automotive sales were down by $0.4
million for 1998 versus 1997, at $2.0 million versus $2.4 million. The P-1000
product line accounted for 38% of sales in the second quarter of 1998, versus
68% in 1997. The RGS and NCA systems accounted for 22% of net sales in the
second quarter of 1998, compared to 15% in 1997. Forest product sales
accounted for 21% of net sales in the second quarter of 1998, versus 13% in
1997.
New order bookings during the second quarter of 1998 totaled $13.4
million compared to $10.5 million in the second quarter of 1997. The increase
of $2.9 million is principally attributable to the timing of orders from
Perceptron, Inc. domestic automotive customers, up by $1.7 million on a
comparative basis, in addition to an increase of $0.4 million on a comparative
basis from European and Asian customers. Non-automotive bookings were up by
$0.8 million for the second quarter, from $2.7 million in 1997 to $3.5 million
in 1998. Bookings for the P-1000 systems accounted for 57% of the total in the
second quarter of 1998, versus 45% of bookings in 1997. RGS and NCA bookings
were 2% of the total in second quarter 1998, versus 13% in 1997. Forest product
bookings represented 26% of the total in the second quarter of 1998, versus 25%
in 1997.
New order bookings are dependent on the timing of customer re-tooling
programs, and accordingly may vary significantly from month to month. The amount
of new order bookings during any particular period is not necessarily indicative
of the future operating performance of the Company.
Backlog at June 30, 1998 totaled $24.7 million, compared to $24.2
million at December 31, 1997 and $20.9 million at June 30, 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 $12.2 million in the second
quarter of 1997 to $5.0 million in the second quarter of 1998. Gross profit as a
percentage of net sales decreased from 64.6% in the second quarter of 1997 to
52.5% in the second quarter of 1998, due primarily to the lower sales volume in
the quarter.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased from $4.5 million in the second quarter of
1997 to $4.9 million in the second quarter of 1998. This change is principally
due to increased personnel and related expenses to
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support increased sales and marketing programs and the planned 1998 operating
activity. As a percentage of sales, selling, general and administrative expenses
increased from 23.9% in the second quarter of 1997, to 50.9% in the second
quarter of 1998 due to the lower sales base.
Engineering, research and development expense. Engineering, research
and development expenses increased from $2.3 million in the second quarter of
1997, to $2.6 million in the second 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 12.3% in the second quarter of 1997 to 27.1%
in the second quarter of 1998 due to the lower sales base.
Interest income, net. Interest income decreased from $250,000 in the
second quarter of 1997, to $173,000 in the second quarter of 1998 due to lower
cash balances and related investments.
Income (loss) before provision for income taxes. During the second
quarter of 1997, Perceptron had income before provision for income taxes of $5.6
million, representing 29.8% of net sales, as compared to a loss before provision
for income taxes of $2.3 million, representing (23.7%) of net sales, in the
second quarter of 1998.
Provision (credit) for income taxes. For the three months ended June
30, 1997, the Company recorded a $1.8 provision for income taxes, representing
an estimated effective tax rate of 32.5%. This compares to a tax benefit for
income taxes of ($0.8) million in 1998, or an effective rate of (33.5%).
Net income. During the second quarter of 1997, Perceptron had net
income of $3.8 million representing 20.1% of net sales, as compared to a net
loss of $1.5 million representing (15.8%) of net sales in the second quarter of
1998.
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Net Sales. The Company's net sales decreased by 41.3% from $31.2
million in the first half of 1997 to $18.3 million in the first half of 1998.
The decrease of $12.9 million in net sales is primarily attributable to
decreased sales to automotive customers, down by $11.6 million from the same
period last year. Domestic automotive sales for the first half of 1998 were
down $9.5 million, from $18.5 million in 1997 to $9.0 million in 1998, and
international automotive sales were down $2.2 million from $7.9 million for
1997 to $5.7 million in 1998. Non-automotive sales were down by $1.2 million
for 1998 versus 1997, at $3.6 million versus $4.8 million. The P-1000 product
accounted for 41% of sales in the first half of 1998, versus 66% in 1997. The
RGS and NCA systems accounted for 26% of net sales in the first half of 1998,
up from 13% in 1997. Forest product sales accounted for 19% of net sales in the
first half of 1998, versus 15% in 1997.
New order bookings during the first half of 1998 totaled $18.8 million
compared to $28.9 million in the first half of 1997. The decrease of $10.1
million is principally attributable to reduced orders from Perceptron, Inc.
domestic automotive customers, down by $7.7 million on a comparative basis, in
addition to a decrease of $2.8 million on a comparative basis from European and
Asian customers. Non-automotive bookings were up by $0.4 million for the first
half, from $3.7 million in 1997 to $4.1 million in 1998. Bookings for the
P-1000 systems
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accounted for 53% of the total in the first half of 1998, versus 64% of bookings
in 1997. RGS and NCA bookings were 8% of the total in the first half of 1998,
versus 11% in 1997. Forest product bookings represented 22% of the total in the
first half of 1998, versus 13% in 1997.
Gross Profit. Gross profit decreased by $9.6 million for the six month
period, from $19.1 million for 1997 to $9.5 million for 1998. Gross profit as a
percentage of net sales decreased from 61.2% for the first six months of 1997 to
51.7% for 1998, primarily as a result of the lower sales volumes for 1998.
Selling, general and administrative expenses. Selling, general, and
administrative expenses increased by $1.2 million, from $8.1 million for the
first six months of 1997 to $9.3 million for 1998. This change is primarily due
to increased personnel and related expenses to support the 1998 planned
operating activity. As a percentage of sales, SG&A expenses increased from 25.9%
in the six month period 1997 to 50.8% for 1998, due to the lower sales base.
Engineering, research and development expense. Engineering, research
and development expenses increased by $0.8 million, from $4.5 million in the six
month period of 1997 to $5.3 million during 1998, due primarily to increased
personnel. As a percentage of net sales, research and development expenses
increased from 14.5% in the first six months of 1997 to 29.1% in 1998 due to the
lower sales base.
Interest income, net. Interest income decreased slightly from $430,000
in the six month period of 1997 to $417,000 in 1998.
Income (loss) before provision for income taxes. During the first half
of 1997, Perceptron had income before provision for income taxes of $6.9
million, or 22.2% of net sales, as compared to a loss of $4.8 million in the
comparable period of 1998, or (26.0%) of net sales.
Provision for income taxes. For the six months ended June 30, 1998, the
Company recorded a $1.6 million tax benefit for income taxes, representing an
estimated effective tax rate of (33.5%). This compares to a provision for
income taxes of $2.3 million in 1997, or an effective rate of 32.5%.
Net income. During the first six months of 1997, Perceptron had net
income of $4.7 million, or 15.0% of net sales, as compared to a loss of $3.2
million in the comparable period of 1998, or (17.3%) of net sales.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents and marketable securities as of
June 30, 1998, totaled $10.7 million, as compared with $16.4 million as of
December 31, 1997. This decrease was due primarily to the net loss recorded in
the first six months of 1998 and the increase in inventory, payments on accounts
payable and accrued expenses and the repurchase of 92,000 shares of stock,
partially offset by accounts receivable collections in the six months.
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
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the bank's prime rate (8.5% at August 10, 1998). The credit facilities expire on
May 31, 1999, unless canceled earlier at the option of either the Company or the
bank, and are generally due on demand. As of June 30, 1998, Perceptron had no
short-term or long-term debt.
The Company's working capital decreased to $41.6 million at June 30,
1998, from $45.6 million at December 31, 1997. Accounts receivable decreased
from $30.7 million as of December 31, 1997 to $24.7 million as of June 30, 1998
primarily as a result of collections. In addition, an income tax receivable in
the amount of $2.1 million has been recorded as of June 30, 1998. The increase
of approximately $2.7 million in inventory is due primarily to an increase in
component parts inventory in preparation for future 1998 and 1999 deliveries.
The decrease of $2.4 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.
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Each of the Company's business units have experienced delays of orders,
which were expected to be both booked and shipped late in the second quarter of
1998, totaling approximately $5 million. The delayed orders are now expected in
the third quarter of 1998, with shipments for all these delayed orders now
anticipated by the end of 1998. All delayed domestic automotive orders were
destined for large customers and their suppliers. While no orders are expected
to be lost due to the strike at General Motors Corporation, the uncertain
nature of the impact of the strike could affect the timing of some
installations later in the year. Following the settlement of the strike, the
overtime requirements of the plants to fulfill vehicle demands may delay system
installations, startups, and training in the affected plants. Delays in orders
for the non-automotive business were due to changing dynamics in the lumber
industry driven by softening prices for dimension lumber. Because of this
softening market, some sawmills are now seeking process optimization solutions,
such as those offered by the Company, while others have delayed their purchases
of such solutions. The Company does not believe that this dynamic has changed
the overall market prospects for 1998. The Company is continuing development
efforts on a number of new products, including certain paint inspection
products which were expected to be introduced in 1998 and which the Company now
expects to introduce early in 1999.
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, the timing of
receipt and shipment of orders in 1998 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 those
discussed above, 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 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.
NEW ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related Information," effective
for 1998, establishes standards for reporting information about operating
segments in annual financial statements and, beginning in 1999, requires
reporting of selected information about operating segments in interim financial
reports issued to stockholders. It also establishes standards for related
disclosures about products and services, geographic areas, and major customers.
Perceptron, Inc. will adopt SFAS 131 for its consolidated financial statements
for the year ending December 31, 1998. Management is evaluating the impact, if
any, the Statement will have on the company's present segment reporting.
Statement of Financial Accounting Standards No. 133 ("SFAS 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued by
the Financial Accounting Standards Board in June 1998. This Statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. It requires recognition of all derivatives as either assets
or liabilities on the balance sheet and measurement of those instruments at
fair value. If certain conditions are met, a derivative may be designated
specifically as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment (a fair value
hedge), (b) a hedge of the exposure to variable cash flows of a forecasted
transaction (a cash flow hedge), or (c) a hedge of the foreign currency
exposure of a net investment in a foreign operation, and an unrecognized firm
commitment, an available-for-sale security, or a foreign-currency-denominated
forecasted transaction. Perceptron, Inc. will comply with requirements of SFAS
133 when adopted. This Statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Perceptron, Inc. expects to adopt SFAS 133
beginning January 1, 2000. The effect of adopting SFAS 133 is not expected to
be material.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
13
<PAGE> 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously disclosed in Item 1 of the Form 10-Q for the quarter
ended March 31, 1998, the Company has a suit pending in the U.S. District Court
for the Eastern District of Michigan 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. In response to a motion for summary disposition filed by the Company,
the counterclaim for unlawful monopolization was dismissed by the court in June
1998. The Company believes that the remaining counterclaims are without merit
and intends to vigorously pursue its claims and defend the remaining
counterclaims.
The Company is a party to a suit filed by Speroni, S.p.A. ("Speroni")
on June 2, 1998 in the U.S. District Court for the Eastern District of Michigan.
The suit alleges tortious interference by the Company with the business
relationships and expectancies between Speroni and its customers and with
exclusive distributorship contracts between Perceptron B.V., a wholly-owned
subsidiary of the Company, and Speroni relating to distribution of the Company's
P-1000 products in Italy and France. Speroni seeks unspecified compensatory
damages and punitive damages of $10 million. Perceptron B.V. has terminated its
exclusive distributorship contracts with Speroni because of Speroni's breaches.
Perceptron B.V. has sought arbitration of this matter, requesting the I.C.C.
(International Chamber of Commerce) International Court of Arbitration (the
"ICC") to confirm the terminations of the exclusive distributorship contracts
and to award Perceptron B.V. at least $2.3 million in damages. Speroni has filed
counterclaims with the ICC, alleging breach of the exclusive distributorship
contracts by Perceptron B.V., and seeking damages of $6.5 million. The Company
intends to vigorously pursue its claims and defend Speroni's claims.
14
<PAGE> 15
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on June 5, 1998 at
which the following action was taken:
1. The Shareholders elected the following persons as the Company's Board of
Directors, and the results of the vote on this matter were as follows:
<TABLE>
<CAPTION>
Broker
Name For Against Abstained Non-Votes
<S> <C> <C> <C> <C>
David J. Beattie 6,895,919 450,881 0 -
Philip J. DeCocco 7,306,624 40,176 0 -
Robert S. Oswald 7,306,634 40,166 0 -
Alfred A. Pease 7,306,284 40,516 0 -
Harry T. Rein 7,306,074 40,726 0 -
Louis R. Ross 7,304,834 41,966 0 -
Terryll R. Smith 6,829,369 517,431 0 -
</TABLE>
15
<PAGE> 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
4.6 Credit Authorization Agreement dated June 30, 1998,
between Perceptron, Inc. and NBD Bank, Related Master
Demand Business Loan Note, Demand Note Agreement
dated June 30, 1998 between First Chicago NBD Bank,
Canada, Perceptron, Inc. and Perceptron Canada, Inc.
and Related Letter Agreement.
27. Financial Data Schedule
(B) Reports on Form 8-K
None
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PERCEPTRON, INC.
(Registrant)
Date: August 12, 1998 By: /S/ Alfred A. Pease
------------------------
Alfred A. Pease, President
and Chief Executive Officer
Date: August 12, 1998 By: /S/ John G. Zimmerman
------------------------
John G. Zimmerman
Vice President and
Chief Financial Officer
(Principal Financial Officer)
17
<PAGE> 18
Exhibit Index
-------------
Exhibit No. Description
- ----------- -----------
4.6 Credit Authorization Agreement dated June 30, 1998,
between Perceptron, Inc. and NBD Bank, Related Master
Demand Business Loan Note, Demand Note Agreement
dated June 30, 1998 between First Chicago NBD Bank,
Canada, Perceptron, Inc. and Perceptron Canada, Inc.
and Related Letter Agreement.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 4.6
[NBD LOGO]
CREDIT AUTHORIZATION AGREEMENT
================================================================================
NBD BANK (the "Bank"), whose address is 611 Woodward Avenue, Detroit, Michigan
48226-3947, has approved the credit facilities listed below (collectively, the
"Credit Facilities," and, individually, as designated below) to: PERCEPTRON,
INC. (the "Borrower"), whose address is 47827 Halyard Drive, Plymouth, Michigan
48170, subject to the terms and conditions set forth in this agreement.
1.0 CREDIT FACILITIES.
1.1 UNCOMMITTED CREDIT AUTHORIZATIONS. The Bank has approved the
uncommitted credit authorizations listed below (collectively,
the "Credit Authorizations," and, individually, as designated
below) subject to the terms and conditions of this agreement
and the Bank's continuing satisfaction with the Borrower's
financial status. Disbursements under the Credit
Authorizations are solely at the Bank's discretion. Any
disbursement on one or more occasions shall not commit the
Bank to make any subsequent disbursement.
A. FACILITY A. The Bank has approved an uncommitted Credit
Authorization to the Borrower in the principal sum not
to exceed $3,500,000.00 in the aggregate at any one
time outstanding ("Facility A"). Credit under Facility
A shall be in the form of disbursements evidenced by
credits to the Borrower's account and shall be
repayable as set forth in a Master Demand Note executed
concurrently (referred to in this agreement both
singularly and together with any other promissory notes
referenced in this Section I as the "Notes"). The
proceeds of Facility A shall be used for the following
purpose: working capital. Facility A shall expire on
May 31, 1999 unless earlier withdrawn.
B. FACILITY B (PURCHASE MONEY TERM LOANS). The Bank has
approved an uncommitted credit authorization to the
Borrower in the principal sum not to exceed $500,000.00
in the aggregate at any one time outstanding ("Facility
B"). Facility B shall be in the form of loans evidenced
by the Borrower's notes on the Bank's form (referred to
in this agreement both singularly and together with any
other promissory notes referenced in this Section 1 as
the "Notes"), the proceeds of which shall be used to
purchase the following equipment and vehicles. Interest
on each loan shall accrue at a rate to be agreed upon
by the Bank and the Borrower at the time the loan is
made. The maturity of each note shall not exceed 36
months from the note date. Notwithstanding the
aggregate amount of Facility B stated above, the
original principal amount of each loan shall not exceed
the lesser of 80% of the cost of the equipment and
vehicles purchased with loan proceeds or $500,000.00.
Facility B shall expire on May 31, 1999 unless earlier
withdrawn.
2.0 CONDITIONS PRECEDENT.
2.1 CONDITIONS PRECEDENT TO INITIAL EXTENSION OF CREDIT. Before
the first extension of credit under this agreement, whether by
disbursement of a loan, issuance of a letter of credit, or
otherwise, the Borrower shall deliver to the Bank, in form and
substance satisfactory to the Bank:
A. LOAN DOCUMENTS. The Notes, and if applicable, the
letter of credit applications, the security agreement,
financing statements, mortgage, guaranties,
subordination agreements and any other loan documents
which the Bank may reasonably require to give effect to
the transactions contemplated by this agreement;
B. EVIDENCE OF DUE ORGANIZATION AND GOOD STANDING.
Evidence satisfactory to the Bank of the due
organization and good standing of the Borrower and
every other business entity that is a party to this
agreement or any other loan document required by this
agreement; and
<PAGE> 2
C. EVIDENCE OF AUTHORITY TO ENTER INTO LOAN DOCUMENTS.
Evidence satisfactory to the Bank that (i) each party
to this agreement or any other loan document required
by this agreement is authorized to enter into the
transactions contemplated by this agreement and the
other loan documents, and (ii) the person signing on
behalf of each such party is authorized to do so.
2.2 CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. Before any
extension of credit under this agreement, whether by
disbursement of a loan, issuance of a letter of credit, or
otherwise, the following conditions shall have been satisfied:
A. REPRESENTATIONS. The representations contained in this
agreement shall be true on and as of the date of the
extension of credit;
B. NO EVENT OF ACCELERATION. No event of acceleration
shall have occurred and be continuing or would result
from the extension of credit;
C. CONTINUED SATISFACTION. The Bank shall have remained
satisfied with the Borrower's managerial and financial
status;
D. ADDITIONAL APPROVALS, OPINIONS, AND DOCUMENTS. The Bank
shall have received such other approvals, opinions and
documents as it may reasonably request.
3.0 FEES AND EXPENSES.
3.1 OUT-OF POCKET EXPENSES. The Borrower shall reimburse the Bank
for its out-of-pocket expenses and reasonable attorney's fees
(including the fees of in-house counsel) allocated to the
Credit Facilities.
4.0 SECURITY.
4.1 ADDITIONAL COLLATERAL/SETOFF. To further secure payment of the
borrowings under the Credit Facilities and all of the
Borrower's other liabilities to the Bank, the Borrower grants
to the Bank a continuing security interest in: (i) all
securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by
the Bank solely in a fiduciary capacity), and (ii) all
balances of deposit accounts of the Borrower with the Bank.
The Bank shall have the right at any time to apply its own
debt or liability to the Borrower, or to any other party
liable for payment of the Credit Facilities, in whole or
partial payment of such borrowings or other present or future
liabilities, without any requirement of mutual maturity.
4.2 CROSS LIEN. Any of the Borrower's other property in which the
Bank has a security interest to secure payment of any other
debt, whether absolute, contingent, direct or indirect,
including the Borrower's guaranties of the debts of others,
shall also secure payment of and be part of the Collateral for
the Credit Facilities.
5.0 AFFIRMATIVE COVENANTS. So long as any debt remains outstanding
under the Credit Facilities, the Borrower, and each of its
subsidiaries, if any, shall:
5.1 INSURANCE. Maintain insurance with financially sound and
reputable insurers covering its properties and business
against those casualties and contingencies and in the types
and amounts as shall be in accordance with sound business and
industry practices.
5.2 EXISTENCE. Maintain its existence and business operations as
presently in effect in accordance with all applicable laws and
regulations, pay its debts and obligations when due under
normal terms, and pay on or before their due date, all taxes,
assessments, fees and other governmental monetary obligations,
except as they may be contested in good faith if they have
been properly reflected on its
2
<PAGE> 3
books and, at the Bank's request, adequate funds or security
has been pledged to insure payment.
5.3 FINANCIAL RECORDS. Maintain proper books and records of
account, in accordance with generally accepted accounting
principles where applicable, and consistent with financial
statements previously submitted to the Bank. The Bank retains
the right to inspect the Collateral and business records
related to it at such times and at such intervals as the Bank
may reasonably require.
5.4 NOTICE. Give prompt notice to the Bank of the occurrence of
(i) any Event of Acceleration, and (ii) any other development,
financial or otherwise, which would affect the Borrower's
business, properties or affairs in a materially adverse
manner.
5.5 FINANCIAL REPORTS. Furnish to the Bank whatever information,
books and records the Bank may reasonably request, including
at a minimum: If the Borrower has subsidiaries, all financial
statements required will be provided on a consolidated and on
a separate basis.
A. Within 60 days after each Quarterly period, a
Securities and Exchange Commission Form 10-Q
including a balance sheet as of the end of that
period and statements of income, cash flows, and
retained earnings from the beginning of that fiscal
year to the end of that period, certified as correct
by one of its authorized agents.
B. Within 90 days after, and as of the end of, each of
its fiscal years, a Securities and Exchange
Commission Form 10-K including a balance sheet and
statements of income, retained earnings, and cash
flows certified by an independent certified public
accountant of recognized standing.
C. Within 120 days after, and as of the end of, each of
its fiscal years, a detailed audit including a
balance sheet and statements of income, retained
earnings, and cash flows certified by an independent
certified public accountant of recognized standing.
6.0 NEGATIVE COVENANTS.
6.1 DEFINITIONS. As used in this agreement, the following terms
have the following respective meanings:
A. "Subordinated Debt" means debt subordinated to the Bank
in manner and by agreement satisfactory to the Bank.
B. "Tangible Net Worth" means total assets less intangible
assets, total liabilities, and all sums owing from
stockholders, members, or partners, as the case may be,
and from officers, managers, and directors. Intangible
assets include goodwill, patents, copyrights, mailing
lists, catalogs, trademarks, bond discount and
underwriting expenses, organization expenses, and all
other intangibles.
6.2 Unless otherwise noted, the financial requirements set forth
in this section shall be computed in accordance with generally
accepted accounting principles applied on a basis consistent
with financial statements previously submitted by the Borrower
to the Bank.
6.3 Without the written consent of the Bank. so long as any debt
remains outstanding under the Credit Facilities, the Borrower
shall not: (where appropriate, covenants shall apply on a
consolidated basis)
A. LIENS. Create or permit to exist any lien on any of
its property, real or personal, except: existing
liens known to the Bank; liens to the Bank; liens
incurred in the ordinary course of business securing
current nondelinquent liabilities for taxes, worker's
compensation, unemployment insurance, social security
and pension liabilities; and liens for taxes being
3
<PAGE> 4
contested in good faith.
B. USE OF PROCEEDS. Use, or permit any proceeds of the
Credit Facilities to be used, directly or indirectly,
for the purpose of "purchasing or carrying any margin
stock" within the meaning of Federal Reserve Board
Regulation U. At the Bank's request, the Borrower
shall furnish to the Bank a completed Federal Reserve
Board Form U-1.
7.0 REPRESENTATIONS BY BORROWER. Each Borrower represents that:
(a) the execution and delivery of this agreement and the Notes
and the performance of the obligations they impose do not
violate any law, conflict with any agreement by which the
Borrower is bound, or require the consent or approval of any
governmental authority or any third party; (b) this agreement
and the Notes are valid and binding agreements, enforceable
according to their terms; and (c) all balance sheets, profit
and loss statements, and other financial statements furnished
to the Bank are accurate and fairly reflect the financial
condition of the organizations and persons to which they apply
on their effective dates, including contingent liabilities of
every type, which financial condition has not changed
materially and adversely since those dates. Each Borrower, if
other than a natural person, further represents that: (a) it
is duly organized, existing and in good standing under the
laws of the jurisdiction under which it was organized; and (b)
the execution and delivery of this agreement and the Notes and
the performance of the obligations they impose (i) are within
its powers; (ii) have been duly authorized by all necessary
action of its governing body, and (iii) do not contravene the
terms of its articles of incorporation or organization, its
bylaws, or any partnership, operating or other agreement
governing its affairs.
8.0 ACCELERATION.
8.1 EVENTS OF ACCELERATION. If any of the following events occur,
the Credit Facilities shall terminate and all borrowings under
them shall be due immediately, without notice, at the Bank's
option, whether or not the Bank has made demand.
A. The Borrower or any guarantor of any of the Credit
Facilities or the Notes ("Guarantor") fails to pay
when due any amount payable under the Credit
Facilities or under any agreement or instrument
evidencing debt for borrowed money;
B. The Borrower or any Guarantor (a) fails to observe or
perform any other term of this agreement or the
Notes; (b) makes any materially incorrect or
misleading representation, warranty, or certificate
to the Bank; (c) makes any materially incorrect or
misleading representation in any financial statement
or other information delivered to the Bank; or (d)
defaults under the terms of any agreement or
instrument relating to any debt for borrowed money
(other than borrowings under the Credit Facilities)
such that the creditor declares the debt due before
its maturity;
C. There is a default under the terms of any loan
agreement, mortgage, security agreement or any other
document executed as part of the Credit Facilities,
or any guaranty of the borrowings under the Credit
Facilities becomes unenforceable in whole or in part,
or any Guarantor fails to promptly perform under its
guaranty;
D. A "reportable event" (as defined in the Employee
Retirement Income Security Act of 1974 as amended)
occurs that would permit the Pension Benefit Guaranty
Corporation to terminate any employee benefit plan of
the Borrower or any affiliate of the Borrower;
E. The Borrower or any Guarantor becomes insolvent or
unable to pay its debts as they become due;
F. The Borrower or any Guarantor (a) makes an assignment
for the benefit of creditors; (b) consents to the
appointment of a custodian, receiver or trustee for
it or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy,
reorganization, liquidation or similar laws of any
jurisdiction;
G. A custodian, receiver or trustee is appointed for the
Borrower or any Guarantor or for a
4
<PAGE> 5
substantial part of its assets without its consent
and is not removed within 60 days after the
appointment;
H. Proceedings are commenced against the Borrower or any
Guarantor under any bankruptcy, reorganization,
liquidation, or similar laws of any jurisdiction, and
those proceedings remain undismissed for 60 days
after commencement; or the Borrower or Guarantor
consents to the commencement of such proceedings;
I. Any judgment is entered against the Borrower or any
Guarantor, or any attachment, levy or garnishment is
issued against any property of the Borrower or any
Guarantors which is not satisfactorily discharged
within 60 days after such judgement is entered;
J. The Borrower or any Guarantor dies;
K. The Borrower or any Guarantor, without the Bank's
written consent: (a) is dissolved, (b) merges or
consolidates with any third party, (c) leases, sells
or otherwise conveys a material part of its assets or
business outside the ordinary course of business, (d)
leases, purchases, or otherwise acquires a material
part of the assets of any other corporation or
business entity, except in the ordinary course of
business, or (e) agrees to do any of the foregoing
(notwithstanding the foregoing, any subsidiary may
merge or consolidate with any other subsidiary, or
with the Borrower, so long as the Borrower is the
survivor);
L. The loan-to-value ratio of any pledged securities at
any time exceeds N/A%, and such excess continues for
five (5) days after notice from the Bank to the
Borrower;
M. There is a substantial change in the existing or
prospective financial condition of the Borrower or
any Guarantor which the Bank in good faith determines
to be materially adverse; or
N. The Bank in good faith shall deem itself insecure.
8.2 REMEDIES. If the borrowings under the Credit Facilities are
not paid at maturity, whether by demand, acceleration, or
otherwise, the Bank shall have all of the rights and remedies
provided by any law or agreement. Any requirement of
reasonable notice shall be met if the Bank sends the notice to
the Borrower at least seven (7) days prior to the date of
sale, disposition or other event giving rise to the required
notice. The Bank is authorized to cause all or any part of the
Collateral to be transferred to or registered in its name or
in the name of any other person, firm or corporation, with or
without designation of the capacity of such nominee. The
Borrower shall be liable for any deficiency remaining after
disposition of any Collateral. The Borrower is liable to the
Bank for all reasonable costs and expenses of every kind
incurred in the making or collection of the Credit Facilities,
including, without limitation, reasonable attorney's fees and
court costs (whether attributable to the Bank's in-house or
outside counsel). These costs and expenses shall include,
without limitation, any costs or expenses incurred by the Bank
in any bankruptcy, reorganization, insolvency or other similar
proceeding.
9.0 MISCELLANEOUS.
9.1 Notice from one party to another relating to this agreement
shall be deemed effective if made in writing (including
telecommunications) and delivered to the recipient's address,
telex number or fax number set forth under its name below by
any of the following means: (a) hand delivery, (b) registered
or certified mail, postage prepaid, with return receipt
requested, (c) first class or express mail, postage prepaid,
(d) Federal Express, or like overnight courier service, or (e)
fax, telex or other wire transmission with request for
assurance of receipt in a manner typical with respect to
communication of that type. Notice made in accordance with
this section shall be deemed delivered upon receipt if
delivered by hand or wire transmission, three (3) business
days after mailing if mailed by first class, registered or
certified mail, or one business day after mailing or deposit
with an overnight courier service if delivered by express mail
or overnight courier.
9.2 No delay on the part of the Bank in the exercise of any right
or remedy shall operate as a waiver. No single or partial
exercise by the Bank of any right or remedy shall preclude any
other future exercise
5
<PAGE> 6
of it or the exercise of any other right or remedy. No waiver
or indulgence by the Bank of any default shall be effective
unless in writing and signed by the Bank, nor shall a waiver
on one occasion be construed as a bar to or waiver of that
right on any future occasion.
9.3 This agreement, the Notes, and any related loan documents
embody the entire agreement and understanding between the
Borrower and the Bank and supersede all prior agreements and
understandings relating to their subject matter. If any one or
more of the obligations of the Borrower under this agreement
or the Notes shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the
remaining obligations of the Borrower shall not in any way be
affected or impaired, and such validity, illegality or
unenforceability in one jurisdiction shall not affect the
validity, legality or enforceability of the obligations of the
Borrower under this agreement or the Notes in any other
jurisdiction.
9.4 The Borrower, if more than one, shall be jointly and severally
liable.
9.5 This agreement is delivered in the State of Michigan and
governed by Michigan law. This agreement is binding on the
Borrower and its successors, and shall inure to the benefit of
the Bank, its successors and assigns.
9.6 Section headings are for convenience of reference only and
shall not affect the interpretation of this agreement.
10.0 WAIVER OF JURY TRIAL. The Bank and the Borrower knowingly and
voluntarily waive any right either of them have to a trial by
jury in any proceeding (whether sounding in contract or tort)
which is in any way connected with this or any related
agreement, or the relationship established by them. This
provision may only be modified in a written instrument
executed by the Bank and the Borrower.
Executed by the parties on: 6/30/98 .
----------------
NBD BANK BORROWER: PERCEPTRON, INC.
By: /s/ DONNA M. BORIS By:/s/ JOHN G. ZIMMERMAN
--------------------------------------- ----------------------------
Donna M. Boris, Vice President John G. Zimmerman, Vice
President
By: /s/ PAUL J. TRIPODI
----------------------------
Paul J. Tripodi, Controller
ADDRESS FOR NOTICES: ADDRESS FOR NOTICES:
38601 Twelve Mile Road 47827 Halyard Drive
Farmington Hills, Michigan 48331 Plymouth, Michigan 48170
Fax/Telex No. 248-488-0634 Fax/Telex No.
------------------
6
<PAGE> 7
Approved by:
---------------------
OCR# Initials
---------------------
8810 DMB
---------------------
---------------------
Primary OCR #: 8810
---------------------
[LOGO NBD] MASTER DEMAND BUSINESS LOAN NOTE (LIBOR-BASED INTEREST RATE)
- --------------------------------------------------------------------------------
Due on Demand $3,500,000.00
No. Date 6/30/98
--------------- ------------------
PROMISE TO PAY. For value received, the undersigned (the "Borrower") promises to
pay ON DEMAND to NBD BANK (the "Bank"), or order, at any office of the Bank in
the State of Michigan, the sum of THREE MILLION FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($3,500,00.00), or such lesser sum as is indicated on Bank records, plus
interest as provided below.
DEFINITIONS.
As used in this note, the following terms have the following respective
meanings.
"APPLICABLE MARGIN" means with respect to any Floating Rate Loan 0.00%
per annum and with respect to any Eurodollar Loan 2.00% per annum.
"BUSINESS DAY" means a day other than a Saturday or Sunday, or other
day that commercial banks in Detroit, Michigan are authorized or
required to close under the laws of the State of Michigan and, with
respect to any Eurodollar Loan, on which dealings in United States
dollar deposits are carried out in the London interbank market.
"CREDIT AGREEMENT" is defined in the paragraph entitled "CREDIT
AGREEMENT" below.
"CREDIT FACILITY" is defined in the paragraph entitled "MASTER DEMAND
NOTE" below.
"EURODOLLAR LOAN" means any Loan under the Credit Facility when and to
the extent that its interest rate is determined by reference to the
Eurodollar Rate.
"EURODOLLAR RATE" means, with respect to any Eurodollar Loan and the
related Interest Period, the per annum rate that is equal to the sum
of:
(A) the Applicable Margin, plus
(B) the rate obtained by dividing (i) the per annum rate of interest at
which deposits in United States dollars for the Interest Period and in
an aggregate amount comparable to the amount of the Loan are offered to
the First National Bank of Chicago by other prime banks in the London
interbank market, at approximately 11:00 a.m. London time on the second
Business Day prior to the first day of the Interest Period by (ii) an
amount equal to one minus the stated maximum rate (expressed as a
decimal) of all reserve requirements (including, without limitation,
any marginal, emergency, supplemental, special or other reserves)
specified on the first day of such Interest Period by the Board of
Governors of the Federal Reserve System (or any successor agency) for
determining the maximum reserve requirement with respect to
Eurocurrency funding required to be maintained by a Federal Reserve
System member bank;
all as conclusively determined by the Bank, such sum to be rounded up,
if necessary, to the nearest one-hundredth of one percent (1/100 of
1%).
"FLOATING RATE" means the per annum rate of interest equal to the sum
of the rate announced by the Bank as its "prime rate" in effect from
time to time, which is not necessarily the lowest rate charged by the
Bank to any of its customers, plus the Applicable Margin. Any change in
the Bank's "prime rate" shall immediately change the Floating Rate.
"FLOATING RATE LOAN" means any Loan under the Credit Facility when and
to the extent that its interest rate is determined by reference to the
Floating Rate.
"INTEREST PERIOD" means, with respect to any Eurodollar Loan, a period
of one, two, or three months agreed upon by the Borrower and the Bank,
commencing on the Business Day the Loan is made. If the Interest Period
would end on a day which is not a Business Day, the Interest Period
shall end on the next succeeding Business Day unless that Business Day
would fall in the next calendar month, in which case the Interest
Period shall end on the immediately preceding Business Day.
"LOAN" and "LOANS" are defined in the paragraph entitled "MASTER DEMAND
NOTE" below.
"LOAN DOCUMENTS" means this note, the Credit Agreement, and any other
documents executed in connection with the Credit Facility.
MASTER DEMAND NOTE. The Bank has authorized a discretionary credit facility (THE
"CREDIT FACILITY") to the Borrower in a principal amount not to exceed the face
amount of this note. The Credit Facility is in the form of loans (EACH, A
"LOAN", AND, TOGETHER, THE "LOANS") made from time to time by the Bank to the
Borrower at the Bank's sole discretion. This note evidences the Borrower's
obligation to repay those Loans. The Bank shall, in the ordinary course of
business, make notations in its records of the date, amount, interest rate and
Interest Period of each Loan, the amount of each payment on the Loans, and other
information. Such records shall, in the absence of manifest error, be conclusive
as to the outstanding principal balance of and interest rate or rates applicable
to the Loans. The aggregate principal amount of debt evidenced by this note
shall be the amount reflected from time to time in the records of the Bank but
shall not exceed the face amount of this note. The Borrower acknowledges and
agrees that no provision of this note and no course of dealing by the Bank shall
commit the Bank to make Loans to the Borrower and that
1
<PAGE> 8
notwithstanding any provision of this note or any other instrument or document,
all Loans evidenced by this note are due and payable on demand, which may be
made by the Bank at any time, whether or not any event of acceleration then
exists.
CREDIT AGREEMENT. This note evidences a debt under the terms of a Credit
Authorization Agreement between the Bank and the Borrower dated concurrently,
and any amendments (the "CREDIT AGREEMENT").
INTEREST RATES. Each Loan under the Credit Facility may be outstanding as either
a Floating Rate Loan or a Eurodollar Loan. The Borrower shall pay interest to
the Bank on the outstanding and unpaid principal amount of each Floating Rate
Loan at the Prime Rate and each Eurodollar Loan at the Eurodollar Rate. Interest
shall be calculated on the basis of the actual number of days elapsed in a year
of 360 days. In no event shall the interest rate applicable to any Loan exceed
the maximum rate allowed by law. Any interest payment which would for any reason
be deemed unlawful under applicable law shall be applied to principal.
NOTICE AND MANNER OF BORROWING. The Borrower shall give the Bank written notice
(effective upon receipt ) of any Loan under the Credit Facility no later than
11:00 A.M. Detroit time, one (1) Business Day before each Floating Rate Loan and
three (3) Business Days before each Eurodollar Loan specifying: (A) the date of
the Loan, (B) the amount of the Loan, (C) the type of Loan (Floating Rate Loan
or Eurodollar Loan), and (D) in the case of a Eurodollar Loan, the duration of
the applicable Interest Period. Each Eurodollar Loan shall be in a minimum
amount of $1,000,000.00. All notices under this paragraph are irrevocable. By
the Bank's close of business on the date of the Loan and upon fulfillment of the
conditions set forth in the Credit Agreement, the Bank shall make the Loan
available to the Borrower in immediately available funds by crediting the amount
of the Loan to the Borrower's account with the Bank.
CONVERSION AND RENEWALS. The borrower may elect from time to time to convert one
type of Loan into another or to renew any Loan by giving the Bank written notice
no later than 11:00 A.M. Detroit time one (1) Business Day before conversion
into a Floating Rate Loan and three (3) Business Days before conversion into or
renewal of a Eurodollar Loan, specifying: (A) the renewal or conversion date,
(B) the amount of the Loan to be converted or renewed, (C) in the case of
conversion, the type of Loan to be converted into (Floating Rate Loan or
Eurodollar Loan), and (D) in the case of renewals of or conversion into a
Eurodollar Loan, the applicable Interest Period, provided that (i) the minimum
principal amount of each Eurodollar Loan outstanding after a renewal or
conversion shall be $1,000,000.00 and (ii) a Eurodollar Loan can only be
converted on the last day of the Interest Period for the Loan. All notices given
under this paragraph are irrevocable. If the Borrower fails to give the Bank the
notice specified above for the renewal or conversion of a Eurodollar Loan by
11:00 a.m. Detroit time three (3) Business Days before the end of the Interest
Period for that Loan, the Loan shall automatically be converted to a Floating
Rate Loan on the last day of the Interest Period for the Loan.
INTEREST PAYMENTS. Interest on the Loans shall be paid as follows:
(A) For each Floating Rate Loan, on the 30th day of each month
beginning with the first full month following disbursement of the Loan and at
the maturity or conversion of the Loan;
(B) For each Eurodollar Loan, on the last day of the Interest Period
for the Loan and, if the Interest Period is longer than three months, at
three-month intervals beginning with the day three months from the date the Loan
is disbursed.
OVERDUE AMOUNTS. Any principal amount not paid when due (at maturity, by
acceleration, or otherwise) shall bear interest thereafter until paid in full,
payable on demand, at a per annum rate equal to:
(A) For each Floating Rate Loan a rate equal to the Floating Rate plus
three percent (3%).
(B) For each Eurodollar Loan, a rate equal to the Eurodollar Rate plus
three percent (3%) from the time of default in payment of principal until the
end of the then current Interest Period for the Loan and after that at a rate
equal to the Floating Rate plus three percent (3%).
LATE FEE. If any payment is not received by the Bank within fifteen days after
its due date, the Bank may assess and the Borrower agrees to pay a late fee
equal to lesser of five percent of the past due amount or $350.
PREPAYMENT. The Borrower may prepay all or any part of any Floating Rate Loan at
any time without premium or penalty. The Borrower may prepay any Eurodollar Loan
only at the end of an Interest Period.
FUNDING LOSS INDEMNIFICATION. Upon the Bank's request, the Borrower shall pay
the Bank amounts sufficient (in the Bank's reasonable opinion) to compensate it
for any loss, cost, or expense incurred as a result of:
(A) Any payment of a Eurodollar Loan on a date other than the last day
of the Interest Period for the Loan, including, without limitation, acceleration
of the Loans by the Bank pursuant to this note or the Loan Documents; or
(B) Any failure by the Borrower to borrow or renew a Eurodollar Loan on
the date specified in the relevant notice from the Borrower to the Bank.
ADDITIONAL COSTS. If any applicable domestic or foreign law, treaty, government
rule or regulation now or later in effect (whether or not it now applies to the
Bank) or the interpretation or administration thereof by a governmental
authority charged with such interpretation or administration, or compliance by
the Bank with any guideline, request or directive of such an authority (whether
or not having the force of law), shall (A) affect the basis of taxation of
payments to the Bank of any amounts payable by the Borrower under this note or
the Loan Documents (other than taxes imposed on the overall net income of the
Bank by the jurisdiction or by any political subdivision or taxing authority of
the jurisdiction in which the Bank has its principal office), or (B) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit extended by
the Bank, or (C) impose any other condition with respect to this note or the
Loan Documents and the result of any of the foregoing is to increase the cost to
the Bank of maintaining any Eurodollar Loan or to reduce the amount of any sum
receivable by the Bank on such a Loan, or (D) affect the amount of capital
required or expected to be maintained by the Bank (or any corporation
controlling the Bank) and the Bank determines that the amount of such capital is
increased by or based upon the existence of the Bank's obligations under this
note or the Loan Documents and the increase has the effect of reducing the rate
of return on the Bank's (or its controlling corporation's) capital as a
consequence of the obligations under this note or the Loan Documents to a level
below that which the Bank (or its controlling corporation) could have achieved
but for such circumstances (taking into consideration its policies with respect
to capital adequacy) by an amount deemed by the Bank to be material, then the
Borrower shall pay to the Bank, from time to time, upon request by the Bank,
additional amounts sufficient to compensate the Bank for the increased cost or
reduced sum receivable. Whenever the Bank shall learn of circumstances described
in this section which are likely to result in additional costs to the Borrower,
the Bank shall give prompt written notice to Borrower of the basis for and the
estimated amount of any such anticipated additional costs. A statement as to the
amount of the increased cost or reduced sum receivable, prepared in good faith
and in reasonable detail by the Bank and submitted by the Bank to the Borrower,
shall be conclusive and binding for all purposes absent manifest error in
computation.
ILLEGALITY. If any applicable domestic or foreign law, treaty, rule or
regulation now or later in effect (whether or not it now applies to the Bank) or
the interpretation or administration thereof by a governmental authority charged
with such interpretation or administration, or compliance by the
2
<PAGE> 9
Bank with any guideline, request or directive of such an authority (whether or
not having the force of law), shall make it unlawful or impossible for the Bank
to maintain or fund the Eurodollar Loans, then, upon notice to the Borrower by
the Bank, the outstanding principal amount of the Eurodollar Loans, together
with accrued interest and any other amounts payable to the Bank under this note
or the Loan Documents on account of the Eurodollar Loans shall be repaid (A)
immediately upon the Bank's demand if such change or compliance with such
requests, in the Bank's judgment, requires immediate repayment, or (B) at the
expiration of the last Interest Period to expire before the effective date of
any such change or request provided, however, that subject to the terms and
conditions of this note and the Loan Documents the Borrower shall be entitled to
simultaneously replace the entire outstanding balance of any Eurodollar Loan
repaid in accordance with this section with a Floating Rate Loan in the same
amount.
INABILITY TO DETERMINE INTEREST RATE. If the Bank determines that (A) quotations
of interest rates for the relevant deposits referred to in the definition of
Eurodollar Rate are not being provided in the relevant amounts or for the
relevant maturities for purposes of determining the interest rate on a
Eurodollar Loan as provided in this note, or (B) the relevant interest rates
referred to in the definition of Eurodollar Rate do not accurately cover the
cost to the Bank of making or maintaining Eurodollar Loans, then the Bank shall
forthwith give notice of such circumstances to the Borrower, whereupon (1) the
obligation of the Bank to make Eurodollar Loans shall be suspended until the
Bank notifies the Borrower that the circumstances giving rise to the suspension
no longer exists, and (2) the Borrower shall repay in full the then outstanding
principal amount of each Eurodollar Loan, together with accrued interest, on the
last day of the then current Interest Period applicable to the Loan, provided,
however, that, subject to the terms and conditions of this note and the Loan
Documents, the Borrower shall be entitled to simultaneously replace the entire
outstanding balance of any Eurodollar Loan repaid in accordance with this
section with a Floating Rate Loan in the same amount.
OBLIGATION DUE ON NON-BUSINESS DAY. Whenever any payment under this note becomes
due and payable on a day that is not a Business Day, if no event of acceleration
has occurred and is continuing, the maturity of the payment shall be extended to
the next succeeding Business Day, except, in the case of a Eurodollar Loan, if
the result of the extension would be to extend the payment into another calender
month, the payment must be made on the immediately preceding Business Day.
SECURITY. To secure the payment of this note and any other present or future
liability of the Borrower, whether several, joint, or joint and several, the
Borrower pledges and grants to the Bank a continuing security interest in the
following described property and all of its additions, substitutions,
increments, proceeds and products, whether now owned or later acquired
("Collateral"):
1. All securities and other property of the Borrower in the custody,
possession or control of the Bank (other than property held by the Bank
solely in a fiduciary capacity);
2. All property or securities declared or acknowledged to constitute
security for any past, present or future liability of the Borrower to
the Bank;
3. All balances of deposit accounts of the Borrower with the Bank.
BANK'S RIGHT TO SETOFF. The Bank shall have the right at any time to apply its
own debt or liability to the Borrower or to any other party liable on this note
in whole or partial payment of this note or other present or future liabilities,
without any requirement of mutual maturity.
REPRESENTATIONS BY BORROWER. Each Borrower represents: (a) that the execution
and delivery of this note and the performance of the obligations it imposes do
not violate any law, conflict with any agreement by which it is bound, or
require the consent or approval of any governmental authority or any third
party; (b) that this note is a valid and binding agreement, enforceable
according to its terms; and (c) that all balance sheets, profit and loss
statements, and other financial statements furnished to the Bank are accurate
and fairly reflect the financial condition of the organizations and persons to
which they apply on their effective dates, including contingent liabilities of
every type, which financial condition has not changed materially and adversely
since those dates. Each Borrower, other than a natural person, further
represents: (a) that it is duly organized, existing and in good standing
pursuant to the laws under which it is organized; and (b) that the execution and
delivery of this note and the performance of the obligations it imposes (i) are
within its powers and have been duly authorized by all necessary action of its
governing body; and (ii) do not contravene the terms of its articles of
incorporation or organization, its by laws, or any partnership, operating or
other agreement governing its affairs.
EVENTS OF DEFAULT/ACCELERATION. If any of the following events occurs, this note
shall be due immediately without notice at the Bank's option whether or not the
Bank has made demand.
1. The Borrower or any guarantor of this note ("Guarantor") fails to pay
when due any amount payable under this note or under any agreement or
instrument evidencing debt for borrowed money;
2. The Borrower or any Guarantor (a) fails to observe or perform any other
term of this note; (b) makes any materially incorrect or misleading
representation, warranty, or certificate to the Bank; (c) makes any
materially incorrect or misleading representation in any financial
statement or other information delivered to the Bank; or (d) defaults
under the terms of any agreement or instrument relating to any debt for
borrowed money (other than the debt evidenced by this note) such that
the creditor declares the debt due before its maturity;
3. There is a default under the terms of any loan agreement, mortgage,
security agreement, or any other document executed as part of the loan
evidenced by this note, or any guaranty of the loan evidenced by this
note becomes unenforceable in whole or in part, or any Guarantor fails
to promptly perform under its guaranty;
4. A "reportable event" (as defined in the Employee Retirement Income
Security Act of 1974 as amended) occurs that would permit the Pension
Benefit Guaranty Corporation to terminate any employee benefit plan of
the Borrower or any affiliate of the Borrower;
5. The Borrower or any Guarantor becomes insolvent or unable to pay its
debts as they become due;
6. The Borrower or any Guarantor (a) makes an assignment for the benefit
of creditors; (b) consents to the appointment of a custodian, receiver,
or trustee for itself or for a substantial part of its assets; or (c)
commences any proceeding under any bankruptcy, reorganization,
liquidation, insolvency or similar laws of any jurisdiction;
7. A custodian, receiver, or trustee is appointed for the Borrower or any
Guarantor or for a substantial part of its assets without the consent
of the party against which the appointment is made and is not removed
within 60 days after such appointment;
8. Proceedings are commenced against the Borrower or any guarantor under
any bankruptcy, reorganization, liquidation, or similar laws of any
jurisdiction, and such proceedings remain undismissed for 60 days after
commencement; or the Borrower or Guarantor consents to the commencement
of such proceedings;
9. Any judgment is entered against the Borrower or any Guarantor, or any
attachment, levy, or garnishment is issued against any property of the
Borrower or any Guarantors which is not satisfactorily discharged
within 60 days after such judgment is entered;
10. The Borrower or any Guarantor dies;
11. The Borrower or any Guarantor, without the Bank's written consent: (a)
is dissolved, (b) merges or consolidates with any third party, (c)
leases, sells or otherwise conveys a material part of its assets or
business outside the ordinary course of business, (d) leases, purchases
or otherwise acquires a material part of the assets of any other
corporation or business entity except in the ordinary course of
business; or (e) agrees to do any of the foregoing (notwithstanding the
foregoing, any subsidiary may merge or consolidate with any other
subsidiary, or with the Borrower so long as the Borrower is the
survivor);
12. The loan-to-value ratio of any pledged securities at any time exceeds
N/A%, and such excess continues for five (5) days after notice from the
Bank to the Borrower;
3
<PAGE> 10
13. There is a substantial change in the existing or prospective financial
condition of the Borrower or any Guarantor which the Bank in good faith
determines to be materially adverse;
14. The Bank in good faith deems itself insecure.
REMEDIES. If this note is not paid at maturity, whether by acceleration or
otherwise, the Bank shall have all of the rights and remedies provided by any
law or agreement. Any requirement of reasonable notice shall be met if the Bank
sends the notice to the Borrower at least seven (7) days prior to the date of
sale, disposition or other event giving rise to the required notice. The Bank is
authorized to cause all or any part of the Collateral to be transferred to or
registered in its name or in the name of any other person, firm or corporation,
with or without designation of the capacity of such nominee. The Borrower shall
be liable for any deficiency remaining after disposition of any Collateral. The
Borrower is liable to the Bank for all reasonable costs and expenses of every
kind incurred in the making or collection of this note, including, without
limitation, reasonable attorneys' fees and court costs. These costs and expenses
shall include, without limitation, any costs or expenses incurred by the Bank in
any bankruptcy, reorganization, insolvency or other similar proceeding.
WAIVER. Each endorser and any other party liable on this note severally waives
demand, presentment, notice of dishonor and protest, and consents to any
extension or postponement of time of its payment without limit as to the number
or period, to any substitution, exchange or release of all or part of the
Collateral, to the addition of any party, and to the release or discharge of, or
suspension of any rights and remedies against, any person who may be liable for
the payment of this note. No delay on the part of the Bank in the exercise of
any right or remedy shall operate as a waiver. No single or partial exercise by
the Bank of any right or remedy shall preclude any other future exercise of it
or the exercise of any other right or remedy. No waiver or indulgence by the
Bank of any default shall be effective unless in writing and signed by the Bank,
nor shall a waiver on one occasion be construed as a bar to or waiver of that
right on any future occasion.
MISCELLANEOUS. The Borrower, if more than one, shall be jointly and severally
liable, and the term "Borrower" shall mean any one or more of them. This note
shall be binding on the Borrower and its successors, and shall inure to the
benefit of the Bank, its successors and assigns. Any reference to the Bank shall
include any holder of this note. This note is delivered in the State of Michigan
and governed by Michigan law. Section headings are for convenience of reference
only and shall not affect the interpretation of this note.
WAIVER OF JURY TRIAL. The Bank and the Borrower knowingly and voluntarily waive
any right either of them have to a trial by jury in any proceeding (whether
sounding in contract or tort) which is in any way connected with this or any
related agreement, or the relationship established under them. This provision
may only be modified in a written instrument executed by the Bank and the
Borrower.
Address: Borrower: Perceptron, Inc.
47827 Halyard Drive
Plymouth, Michigan, 48170
T.I.N. 38-2381442
By: /s/ JOHN G. ZIMMERMAN
-----------------------------
John G. Zimmerman, Vice
President
By: /s/ PAUL J. TRIPODI
----------------------------
Paul J. Tripodi, Controller
4
<PAGE> 11
DEMAND NOTE AGREEMENT
(Fixed or Floating Rate, Canadian or U.S. Dollars)
Date: 6/30 , 1998
-------------------
In consideration of First Chicago NBD Bank, Canada (the "Bank") providing the
Borrowers with a demand loan facility (the "Loan Facility") in the principal
amount of up to U.S. 1,000,000.00, ONE MILLION dollars, in lawful currency of
the United States of America (or its equivalent in Canadian funds), the
Borrowers agree (and each of them, if more than one, jointly and severally
agrees) with the Bank as follows:
1. The Borrowers promises to pay to the Bank on demand in accordance with
the terms and conditions required by the Bank from time to time at our
office all amounts outstanding under the Loan Facility, including
principal, which is the aggregate of all advances made, together with
interest thereon at the rate of:
____0___% per annum above the rates announced from time to time
by the Bank as its "Canadian Prime Rate" in the case
of Canadian Dollar advances or its "U.S. Prime Rate"
in the case of U.S. Dollar advances (the "Note Rate")
and at the rate of ____3______% per annum above the
Note Rate after maturity, whether by acceleration or
otherwise, or
such rate or rates as may be agreed to or confirmed
in writing by the Bank from time to time.
Interest shall be calculated monthly in arrears, both before and after
maturity, default and judgement, on the daily balance outstanding based
on the actual number of days elapsed, divided by 365, in the case of a
Canadian Dollar advances, or by 360, in the case of a U.S. Dollar
advances, with interest on overdue interest at the same rate as on the
principal, and shall be payable on the last day of each month.
Any change in the Canadian Prime Rate or U.S. Prime Rate will be
effective on the date such change is established without notice by the
Bank to the Borrower. On the date hereof, Canadian Prime Rate is 6.50%
per annum and U.S. Prime Rate is 8.50% per annum.
2. The Borrower authorizes the Bank, but the Bank is not obliged, from
time to time to debit the account or accounts maintained by the
Borrower with the Bank from time to time (collectively, the "Account")
with the amount of interest accrued and unpaid by the Borrower and any
other fees or charges of any kind.
3. Provided that the Bank has not demanded payment of any amount
outstanding under the Loan Facility, or has not terminated this
agreement, the Borrower may borrow, repay and reborrow up to the amount
available under the Loan Facility at any time and from time to time in
the following manner:
<PAGE> 12
a. The Borrower will advise and direct the Bank as to the
individual amounts the Borrower wishes to borrow, repay or
reborrow under the Loan Facility
OR
b. The Borrower authorizes the Bank, daily or otherwise as and
when determined by the Bank from time to time, to ascertain
the position or net position (as the case may be) between the
Borrower and the Bank in respect of the Account and that
(i) if such position is a credit in favour of the
Borrower, the Bank will apply the amount of such
credit or any part thereof, rounded to the nearest
integral amount established by the Bank from time to
time, as a repayment of the Loan Facility, and the
Bank will debit the Account with the amount of such
repayment, and
(ii) if such position or net position is a debit in favour
of the Bank, the Bank will make an advance under the
Loan Facility of such amount, rounded to the nearest
integral amount established by the Bank from time to
time, as is required to place the Account in such
credit or net credit position as has been agreed
between the Borrower and the Bank from time to time.
provided that at no time shall the balance owing exceed the
amount of the Loan Facility.
4. The Bank shall maintain on the books of its unit of account, accounts
and records evidencing the outstanding principal amount of the loan of
the Bank to the Borrower under the Loan Facility together with an
interest in respect thereof. The Bank shall maintain a record of the
amount of the balance, each advance, and each payment of principal and
interest on account of the loan. The Bank's accounts and records
constitute in the absence of manifest error prima facie evidence of the
indebtedness of the Borrower to the Bank under the Loan Facility.
5. Where a statement of account for the Account is to be rendered by the
Bank, it is agreed that:
a. the Borrower will verify the correctness and completeness of
each statement of account received from the Bank.
b. if a statement of account and relevant vouchers are not
received on or before the 10th day after the end of the cycle
agreed on for their preparation, the Borrower shall notify the
Bank in writing not later than 5 days thereafter.
c. the Borrower shall within 30 days and not thereafter following
the end of the cycle agreed on for the statement of account
preparation, notify the Bank in writing, at the
2
<PAGE> 13
branch of account for the Account, of any alleged omissions
from or inaccurate entries in the Account as so stated.
d. at the end of the said 30 days, the statement of account for
the Account as kept by the Bank shall be conclusive evidence
without any further proof that, provided that this shall not
apply with respect to any credits to the Account made in
error, any alleged errors of which the Bank has been so
notified or any payments made on forged or unauthorized
endorsements, the Account contains all credits that should be
contained therein and no debits that should not be contained
therein and all entries therein are correct and, subject to
the above exception, the Bank shall be free from all claims in
respect of the Account.
6. The Borrower acknowledges that the terms of this agreement are in
addition to and not in substitution for any terms and conditions of any
other agreements between the Borrower and the Bank.
7. This agreement is delivered in Toronto, Ontario and is governed by the
laws of the Province of Ontario.
Address: Borrower:
47827 Halyard Drive Perceptron, Inc.
Plymouth, Michigan 48170
By: /s/ John G. Zimmerman
-----------------------------
(Authorized Signature)
By: /s/ Paul J. Tripodi
-----------------------------
(Authorized Signature)
Perceptron Canada Inc.
By: /s/ John G. Zimmerman
-----------------------------
(Authorized Signature)
3
<PAGE> 14
FIRST CHICAGO
NBD BANK,
CANADA
[LOGO] 611 Woodward Avenue, MS 8094
Detroit, Michigan 48226
Telephone: (313) 225-4161
Fax: (313) 225-1689
R. Ross Mathews
Vice President
June 24, 1998
Mr. John G. Zimmerman
Perceptron Inc.
47827 Halyard Drive
Plymouth, MI 48170
Dear John:
I am pleased to inform you that First Chicago NBD Bank, Canada (the "Bank")
has approved the renewal of the $1,000,000 working capital authorization for
Perceptron Inc. and Perceptron, Canada (the "Borrowers") subject to the Bank's
continuing satisfaction with the Borrowers' managerial and financial status.
Disbursements under the facilities are solely at the Bank's discretion. Any
disbursement on one or more occasion shall not commit the Bank to make any
subsequent disbursement.
The terms and conditions for the facilities are as follows:
BORROWERS: Perceptron Inc. and Perceptron Canada Inc.
FACULTY: $1,000,000 (or Canadian dollar equivalent)
demand, discretionary authorization for working
capital purposes.
EXPIRY: May 31, 1999.
REPAYMENT
OF PRINCIPAL: On Demand.
PRICING: CAD Loans: First Chicago NBD Bank, Canada
Prime, floating. USD Loans: First Chicago NBD
Bank, Canada U.S. Prime Rate, floating.
PRINCIPAL 1. Cross defaulted to all Bank and/or NBD Bank
COVENANTS: debt of the Borrowers.
2. Negative lien on Borrowers' assets.
INFORMATION 1. Within 60 days of Borrowers' fiscal
REQUIREMENTS: quarters, a financial
statement of Borrowers' balance sheet and
income statement.
<PAGE> 15
FIRST CHICAGO
NBD BANK,
CANADA
[LOGO]
2. Within 90 days of Borrowers' fiscal year
end, an audited financial statement of
Borrowers' balance sheet and income
statement, prepared by an independent
CPA.
GENERAL
INDEMNITY: The Borrowers will reimburse the Bank for
any additional costs or reduction of income
arising as a result of the imposition of or
increase in taxes (other than on the net
income of the Bank) on amounts paid by the
Borrowers to the Bank, an imposition of or
increase in reserve requirements, or the
imposition of any other condition affecting
the Credit Facilities by any Government,
Governmental agency or body, tribunal or
regulatory authority.
ENUREMENT: This agreement shall be binding upon and
enure to the benefit of the Bank and the
Borrowers and their respective successors
and permitted assigns.
If the above terms and conditions are acceptable to you, as they are to the
Bank, please sign and return the enclosed acknowledgment copy of this letter as
well as the new note at your earliest convenience.
Sincerely, Acknowledged by:
FIRST CHICAGO NBD BANK, CANADA PERCEPTRON INC.
/s/ R. Ross Mathews By: /s/ John G. Zimmerman
------------------------------- ----------------------------
R. Ross Mathews
Vice President Its: Vice President and Chief
Financial Officer
--------------------------
PERCEPTRON CANADA INC.
By: /s/ John G. Zimmerman
--------------------------
Its: Vice President and Chief
Financial Officer
--------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
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