SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (date of earliest event reported): October 31, 1996
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PRAB, INC.
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(Exact name of registrant as specified in its charter)
Michigan 0-10187 38-1654849
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(State or other jurisdiction) (Commission (IRS Employer
or incorporation) File Number) Identification No.)
5944 E. Kilgore Road, Kalamazoo, Michigan 49003
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (616) 382-8200
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Item 1. Changes in Control of Registrant.
Management of the Company believes the events described below
constitute a change in control of the Company. It is unclear to management
which person or persons acquired control of the Company as a result of such
events.
On October 31, 1996, the Company purchased from the State of Michigan
Retirement Systems ("SMRS") the following shares of the Company's stock:
600,000 shares of non-convertible preferred stock for a purchase price of
$300,000, plus accrued unpaid dividends; 1,633,333 shares of convertible
preferred stock at a price of $1.35 per share; and 1,013,770 shares of common
stock at a price of $1.35 per share (collectively the "Repurchased Shares").
The aggregate purchase price of $3,897,589.05 (including accrued dividends)
for the Repurchased Shares was paid in cash by the Company on October 31,
1996. The purchase prices for the Repurchased Shares were determined by
negotiations between the Company and SMRS.
Prior to the Company's purchase of the Repurchased Shares, SMRS
beneficially owned 66% of the common stock of the Company. After sale of the
Repurchased Shares, SMRS beneficially owned 17% of the common stock of the
Company.
To finance the purchase of the Repurchased Shares, the Company
borrowed: (i) $2,704,000 from FMB-Arcadia Bank pursuant to a $1,800,000 term
note bearing interest at the Bank's prime rate plus 1/2% per annum and payable
in 20 quarter annual installments of $90,000 each plus interest and a
revolving line of credit in the maximum amount of $1,670,000 bearing interest
at the Bank's prime rate plus 1/2% per annum and payable in monthly
installments of interest only with all principal due on March 31, 1997; and
(ii) $680,000 from certain management personnel and other persons pursuant to
Subordinated Capital Notes (the "Subordinated Capital Notes"). The Company
used cash on hand of $513,589.05 to pay the balance of the purchase prices for
the Repurchased Shares.
The Subordinated Capital Notes in the aggregate principal amount of
$680,000 provide for interest at the rate of 12% per annum payable in quarter
annual installments commencing January 31, 1997 and for payment of all
principal on October 31, 2001. Payment of the Subordinated Capital Notes has
been subordinated to payment of: (i) the Company's debt to FMB-Arcadia Bank
pursuant to certain Subordination Agreements executed by the payees of the
Subordinated Capital Notes in favor of such bank; and (ii) all indebtedness
and obligations of the Company pursuant to the terms of the Subordinated
Capital Notes. In consideration of the loans evidenced by the Subordinated
Capital Notes, the payees of such Notes were issued warrants by the Company to
purchase an aggregate of 123,249 shares of the common stock of the Company for
nominal value. All of such warrants were exercised on October 31, 1996. The
following chart sets forth the names of the lenders holding the Subordinated
Capital Notes, the principal amount borrowed by the Company from each such
lender, and the number of shares of common stock issued
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to each such lender pursuant to his exercise of the warrants issued in
connection with the Subordinated Capital Notes:
Name Amount Loaned Number of Shares
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Gary Herder $ 77,500 14,047
Robert Meyer 40,000 7,250
Robert Klinge 25,000 4,531
Joseph Durlach 15,000 2,719
Eric Brown, Jr. 53,250 9,651
William Blunt 117,000 21,206
David Blunt 117,000 21,206
John Garside 118,250 21,433
Richard Leet 117,000 21,206
As a result of the Company's purchase of the Repurchased Shares: the
Company's long-term debt increased from $ 0 to $2,342,000; total stockholders'
equity decreased by approximately $4,008,000; the number of outstanding shares
of common stock decreased from 2,647,860 shares to 1,757,339 shares; cash
decreased by $720,000 (including the payment of certain expenses arising from
the purchase of the Repurchased Shares); the Company anticipates that its
annual interest expense will increase by approximately $360,000; and during
fiscal year 1997, the Company intends to repay approximately $1,000,000 of the
indebtedness borrowed from FMB-Arcadia Bank to purchase the Repurchased Shares
(which $1,000,000 will include the $360,000 of scheduled principal payments on
the Company's long-term debt to FMB-Arcadia Bank), assuming that sufficient
cash flow is available to the Company.
In connection with the purchase of the Repurchased Shares: the
Company's Profit Sharing Plan purchased 52,897 shares of the Company's common
stock from SMRS at a price of $1.35 per share; John J. Wallace, Chairman of
the Board of the Company and the beneficial owner of 356,424 shares of the
outstanding common stock of the Company entered into a Standstill Agreement
with SMRS pursuant to which Mr. Wallace agreed not to sell any of the
Company's common stock for a period of three (3) years; and Gary A. Herder,
President of the Company and certain other senior management personnel entered
into Standstill Agreements with SMRS providing for such persons to refrain
from exercising any stock options granted to them by the Company for a period
of three (3) years.
Item 7. Financial Statements and Exhibits.
(a) Financial statements - none
(b) Proforma financial information - none
(c) Exhibits
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Exhibit No. Description of Exhibit
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4a $77,500 Subordinated Capital Note dated
October 31, 1996 from the Company to Gary
A. Herder (except for varying principal
amounts, the terms of Mr. Herder's
Subordinated Capital Note are identical to the
terms of all other Subordinated Capital Notes
issued by the Company in the aggregate
principal amount of $680,000 on October 31,
1996).
4b $1,800,000 Commercial Term Note
dated October 31, 1996 from the
Company to FMB-Arcadia Bank.
4c Security Agreement with Addendum dated
October 31, 1996 from the Company to
FMB-Arcadia Bank.
4d Future Advance Mortgage dated
October 30, 1992 from the Company
to FMB-Arcadia Bank (formerly
known as Arcadia Bank), together
with Amendment to Mortgage dated
October 31, 1996.
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 hereunto duly authorized.
Date: November 14, 1996 PRAB, INC.
By: /s/ Gary A. Herder
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Gary A. Herder
Its: President
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
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4a $77,500 Subordinated Capital Note dated
October 31, 1996 from the Company to Gary
A. Herder (except for varying principal
amounts, the terms of Mr. Herder's
Subordinated Capital Note are identical to the
terms of all other Subordinated Capital Notes
issued by the Company in the aggregate
principal amount of $680,000 on October 31,
1996).
4b $1,800,000 Commercial Term Note
dated October 31, 1996 from the
Company to FMB-Arcadia Bank.
4c Security Agreement with Addendum dated
October 31, 1996 from the Company to
FMB-Arcadia Bank.
4d Future Advance Mortgage dated
October 30, 1992 from the Company
to FMB-Arcadia Bank (formerly
known as Arcadia Bank), together
with Amendment to Mortgage dated
October 31, 1996.
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