PRCP Perceptron Inc

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Filed by a Party other than the Registrant  ☐

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November 5, 2020

47827 Halyard Drive

Plymouth, Michigan 48170-2461

(734) 414-6100

Facsimile: (734) 414-4700

Dear Perceptron Shareholder:

You are cordially invited to attend the 2020 Annual Meeting of Shareholders of Perceptron, Inc. (which we refer to herein and in the accompanying proxy statement as “Perceptron” or the “Company”) to be held on Tuesday, December 8, 2020 at 9:30 a.m. Eastern Time. Due to health concerns related to COVID-19, and to support the health and well-being of our shareholders, employees, and partners, the 2020 Annual Meeting of Shareholders will be a completely “virtual meeting,” conducted via live audio webcast on the Internet. You will be able to attend the 2020 Annual Meeting of Shareholders as well as vote and submit your questions during the live audio webcast of the meeting by visiting www.virtualshareholdermeeting.com/PRCP2020 and entering the 16-digit control number included in our notice of internet availability of the proxy materials, on your proxy card or in the instructions that accompanied your proxy materials.

As the Company previously announced, on September 27, 2020, the Company, Atlas Copco North America LLC (which we refer to herein and in the accompanying proxy statement as “Parent”) and Odyssey Acquisition Corp., a direct wholly owned subsidiary of Parent (which we refer to herein and in the accompanying proxy statement as “Merger Subsidiary”), entered into an Agreement and Plan of Merger that provides for the acquisition of the Company by Parent (such agreement, as it may be amended from time to time, is referred to herein and in the accompanying proxy statement as the “merger agreement”). Upon the terms and subject to the conditions of the merger agreement, Merger Subsidiary will merge with and into the Company (which we refer to herein and in the accompanying proxy statement as the “merger”), with the Company surviving the merger as a direct wholly owned subsidiary of Parent. If the merger agreement is adopted and the merger is completed, each share of our common stock (other than certain shares specified in the merger agreement) will be converted into the right to receive $7.00 per share in cash (which we refer to herein and in the accompanying proxy statement as the “merger consideration”), without interest and subject to required withholding taxes, representing a premium of approximately 66% to the 30-day average closing share price of $4.22 as of September 25, 2020.

The board of directors of the Company (which we refer to herein and in the accompanying proxy statement as the “Company’s board of directors”, “Perceptron’s board of directors”, the “board of directors”, the “board”, or “our board”) monitored the negotiation of, and carefully reviewed and considered the terms and conditions of, the merger agreement and the transactions contemplated by the merger agreement. Our board has unanimously determined that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, are fair to and in the best interests of the Company and its shareholders and declared it advisable and in the best interests of the Company and its shareholders to enter into the merger agreement and approved the execution, delivery and performance of the merger agreement.

At the Annual Meeting, you will be asked to adopt the merger agreement, to vote on the election of the Company’s directors and to vote on other merger-related and annual-meeting matters. The board unanimously recommends that the Company’s shareholders vote “FOR” the adoption of the merger agreement and “FOR” each of the other proposals described in the accompanying proxy statement.

In connection with the merger agreement, on September 27, 2020, Harbert Discovery Fund, LP, Harbert Discovery Fund GP, LLC, Harbert Fund Advisors, Inc., Harbert Management Corporation, Jack Bryant, Kenan Lucas and Raymond Harbert (collectively the “Harbert Shareholders”), entered into a Voting and Support Agreement with Parent (which we refer to herein and in the accompanying proxy statement as the “voting agreement”) pursuant to which the Harbert Shareholders agreed, among other things, to vote their shares of Company common stock in favor of the proposal to approve the merger agreement. The terms of the voting agreement are described in more detail under the section entitled “Proposal 1: The Merger—The Voting Agreement” beginning on page 58 of the accompanying proxy statement.

In considering the recommendation of the board with regard to the merger proposal, you should be aware that certain directors and executive officers of the Company have interests in the merger that may be different from, or in addition to, the interests of the Company’s shareholders generally. See the section entitled “Proposal 1: The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” of the accompanying proxy statement.

Your vote is very important. The merger cannot be completed without the adoption of the merger agreement by the affirmative vote of the holders of a majority of the shares of Company common stock outstanding and entitled to vote at the annual meeting. If you do not vote, that will have the effect of a vote against the merger agreement. It is important that your shares of Company common stock be represented and voted regardless of the size of your holdings. Whether or not you plan to attend the annual meeting via the live audio webcast, the Company urges you to submit a proxy in advance of the annual meeting to have your shares voted by using one of the methods described in the accompanying proxy statement.

More information about the annual meeting, the merger and the other proposals for consideration at the annual meeting is contained in the accompanying proxy statement.

If you have any questions or need assistance in voting your shares, please contact our proxy solicitor, Okapi Partners LLC, toll free at (877) 279-2311.

On behalf of the Company’s board of directors, thank you for your continued support.

Sincerely,

 

Jay W. Freeland

Interim President and Chief Executive Officer

Neither the U.S. Securities and Exchange Commission, nor any state securities regulatory agency has approved or disapproved the merger, passed upon the merits or fairness of the merger, the merger agreement or the other transactions contemplated thereby, or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated November 5, 2020 and is first being mailed to shareholders on or about November 5, 2020.

 

If your shares of Perceptron common stock are held by a broker, bank or other nominee on your behalf in “street name,” your broker, bank or other nominee will send you instructions as to how to provide voting instructions for your shares. Many brokerage firms and banks have a process for their customers to provide voting instructions by telephone or via the Internet, in addition to providing voting instructions by a voting instruction form.

The board has unanimously determined that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, are fair to and in the best interests of the Company and its shareholders and declared it advisable and in the best interests of the Company and its shareholders to enter into the merger agreement and approved the execution, delivery and performance of the merger agreement. The board unanimously recommends that the Company’s shareholders vote “FOR” Proposal 1 to adopt the merger agreement. The board also unanimously recommends that the Company’s shareholders vote “FOR” each of the following: Proposal 2 to approve the adjournment of the annual meeting, if necessary or appropriate, including to solicit additional proxies or in the absence of a quorum; Proposal 3 to approve on an advisory (non-binding) basis, the compensation that will or may be paid by the Company to certain named executive officers in connection with the merger contemplated by the merger agreement; Proposal 4 to elect each of the six director nominees for terms that expire at the 2021 Annual Meeting of shareholders; Proposal 5 to approve on an advisory (non-binding) basis, the compensation of our named executive officers disclosed in the accompanying proxy statement; and Proposal 6 to ratify the appointment of BDO USA, as the Company’s independent registered public accounting firm for the current fiscal year.

In connection with the merger agreement, on September 27, 2020, Harbert Discovery Fund, LP, Harbert Discovery Fund GP, LLC, Harbert Fund Advisors, Inc., Harbert Management Corporation, Jack Bryant, Kenan Lucas and Raymond Harbert (collectively the “Harbert Shareholders”), entered into a Voting and Support Agreement with Parent (which we refer to herein and in the accompanying proxy statement as the “voting agreement”) pursuant to which the Harbert Shareholders agreed, among other things, to vote their shares of Company common stock in favor of the proposal to approve the merger agreement. The terms of the voting agreement are described in more detail under the section entitled “Proposal 1: The Merger—The Voting Agreement” beginning on page 58 of the accompanying proxy statement.

In considering the recommendation of the board with regards to Proposal 1, you should be aware that certain directors and executive officers of the Company have interests in the merger that may be different from, or in addition to, the interests of the Company’s shareholders generally. See the section entitled “Proposal 1: The Merger—Interests of the Company’s Directors and Executive Officers in the Merger” of the accompanying proxy statement.

Your vote is important, regardless of the number of shares of Company common stock you own. We cannot complete the merger unless the Company’s shareholders adopt the merger agreement by the affirmative vote of the holders of a majority of the shares of Company common stock outstanding and entitled to vote at the annual meeting. Your failure to vote online at the virtual annual meeting or by proxy, or to instruct your broker, bank or other nominee on how to vote, would have the same effect as a vote “AGAINST” Proposal 1. However, such failure to vote would not impact the approval of any of the other proposals listed in this proxy statement.

Pursuant to the Michigan Business Corporation Act (referred to herein and in the accompanying proxy statement as the “MBCA”) Section 762, dissenters’ rights are not applicable to the merger agreement or the transactions contemplated thereby, including the merger. See the section entitled “Proposal 1: The Merger—No Dissenters’ Rights” of the accompanying proxy statement

You may revoke your proxy at any time before the vote at the annual meeting by following the procedures outlined in the accompanying proxy statement.

Only holders of record of Company common stock as of the close of business on October 27, 2020, the record date for the annual meeting, are entitled to receive notice of and to vote at the annual meeting.

Before voting your shares, we urge you to, and you should, read the entire proxy statement carefully, including its annexes and the documents incorporated by reference in the proxy statement.

WHETHER OR NOT YOU PLAN TO ATTEND THE VIRTUAL ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN, AS PROMPTLY AS POSSIBLE, THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PREPAID REPLY ENVELOPE, OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET. IF YOU ATTEND THE VIRTUAL ANNUAL MEETING AND VOTE ONLINE, YOUR VOTE BY BALLOT WILL REVOKE ANY PROXY PREVIOUSLY SUBMITTED.

By the Order of the Board of Directors

 

The following questions and answers address briefly some questions you may have regarding the annual meeting and the proposals to be voted on at the annual meeting. These questions and answers may not address all of the questions that may be important to you as a shareholder of the Company. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully and in their entirety. You may obtain the documents incorporated by reference into this proxy statement without charge by following the instructions under the section of this proxy statement entitled “Where You Can Find Additional Information.”

The merger cannot be completed without the adoption of the merger agreement by the affirmative vote of the holders of a majority of the shares of Company common stock outstanding and entitled to vote at the annual meeting. Your failure to submit a proxy or vote online at the virtual annual meeting, or your abstaining from voting or you fail to provide your bank, brokerage firm or other nominee with instructions, as applicable, will

have the same effect as a vote “AGAINST” the adoption of the merger agreement. The board unanimously recommends that shareholders vote “FOR” the adoption of the merger agreement. This proxy statement includes important information about the merger and the merger agreement, a copy of which is attached as Annex A to this proxy statement. The Company’s shareholders should read this proxy statement carefully and in its entirety.

stock certificates for the merger consideration (without interest and subject to required withholding taxes). After the merger is completed, if you are a record holder of book-entry shares, the paying agent will send you transmittal materials providing that delivery of your shares will be effected upon receipt of an “agent’s message” by the paying agent and other instructions for exchanging your book-entry shares for the merger consideration (without interest and subject to required withholding taxes). If your shares of Company common stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to effect the surrender of your “street name” shares in exchange for the merger consideration (without interest and subject to required withholding taxes). If you hold book-entry shares you will receive a check or wire transfer for the merger consideration with respect to such shares upon receipt of an “agent’s message” by the paying agent.

For a discussion of the factors that the board considered in determining to recommend in favor of the adoption of the merger agreement, see the section of this proxy statement entitled “Proposal 1: The Merger—Reasons for the Merger.” In addition, in considering the recommendation of the board with respect to the merger agreement,

you should be aware that certain directors and executive officers of the Company have interests in the merger that may be different from, or in addition to, the interests of the Company’s shareholders generally. For a discussion of these interests, see the section of this proxy statement entitled “Proposal 1: The Merger—Interests of the Company’s Directors and Executive Officers in the Merger.”

The virtual meeting will be fully supported across browsers (Internet Explorer, Firefox, Chrome, Microsoft Edge, and Safari) and devices (desktops, laptops, tablets, and other mobile devices) running the most updated version of applicable software and plugins. We strongly recommend that you ensure that you have a strong Wi-Fi or cell phone connection wherever you intend to participate in the virtual annual meeting.

You may log in 30 minutes before the start of the annual meeting. Shareholders are encouraged to log into the webcast 15 minutes prior to the start of the meeting to provide time to register, test their internet or cell phone connectivity, and download the required software, if needed. We encourage you to access the meeting prior to the start time.

In addition, approval of any other proposal to be voted upon at the annual meeting requires the affirmative vote of the holders of a majority of the shares of Company common stock present at the annual meeting via live audio webcast or represented by proxy at the annual meeting and entitled to vote on such matter at the annual meeting.

Shareholder of record will be able to vote online at the annual meeting by logging into the virtual platform at www.virtualshareholdermeeting.com/PRCP2020 as a shareholder and following the voting link. You will need your 16-digit control number found on your proxy card or notice document to do so.

It is not necessary to attend the annual meeting to vote your shares of Company common stock. To ensure that your shares of Company common stock are voted at the annual meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the annual meeting via the live audio webcast.

Attending the annual meeting via the live audio webcast does not itself constitute a vote on any proposal.

You can ensure that your shares Company common are voted at the annual meeting by submitting your proxy via:

The telephone and Internet voting facilities for shareholders of record will close at 11:59 p.m. on December 7, 2020.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” the merger proposal and all of the other proposals to be voted on at the annual meeting as listed in this proxy statement.

We encourage you to vote by proxy even if you plan on attending the annual meeting via the live audio webcast. An abstention or failure to vote will have the following effect:

If you hold your shares of Company common stock in “street name” through a broker, bank or other nominee, you should follow the directions provided by your broker, bank or other nominee regarding how to instruct your broker, bank or other nominee to vote your shares. Without those instructions, your shares will not be voted, subject to the discretion of brokers as to routine matters (see the answer to the question in this section of this proxy statement entitled “How are broker non-votes and abstentions counted?”).

If you hold your shares of Company common stock in “street name” and you have instructed a broker, bank or other nominee to vote your shares, you should instead follow the instructions received from your broker, bank or other nominee to revoke your prior voting instructions. If you hold your shares in “street name,” you may also revoke a prior proxy by voting at the annual meeting via the live audio webcast if you obtain a legal proxy executed in your favor from your broker, bank or other nominee to be able to vote online at the annual meeting.

Broker non-votes and abstentions by shareholder from voting (including brokers holding their clients’ shares of record who cause abstentions to be recorded) will be counted towards determining whether or not a quorum is present. Broker non-votes will have no effect on the approval of any of the proposals, except in connection with the merger proposal (with respect to which a failure to vote will have the same effect as a vote “AGAINST” such proposal).

of Company common stock because they are held in a different form of record ownership. Shares of Company common stock held by a corporation or business entity must be voted by an authorized officer of the entity. Please indicate title or authority when completing and signing the proxy card.

Okapi Partners

1212 Avenue of the Americas, 24^th Floor

New York, NY 10036

Banks and Brokers Call Collect: (212) 297-0720

All Others Call Toll Free: (877) 279-2311

Email: info@okapipartners.com

 

or

Perceptron, Inc.

Attn: Secretary

47827 Halyard Drive,

Plymouth, MI 48170-2461

(734) 414-6100

Our common stock trades under the symbol “PRCP” on NASDAQ. On September 25, 2020 there were approximately ninety-nine holders of record of our common stock. The closing price of our common stock on September 25, 2020, the last trading day prior to the execution of the merger agreement, was $4.09 per share. On November 4, 2020, the most recent practicable date before the filing of this proxy statement, the closing price for our common stock was $6.91 per share. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of Company common stock. The merger consideration represents a premium of approximately 66% to the 30-day average closing share price of $4.22 as of September 25, 2020.

This proxy statement and the other documents referenced herein may be “forward-looking statements” within the meaning of the Securities Exchange Act of 1934, including statements relating to the merger. We may also make forward-looking statements in our press releases or other public or shareholder communications. Whenever possible, we have identified these forward-looking statements by words such as “target,” “will,” “should,” “could,” “believes,” “expects,” “anticipates,” “estimates,” “prospects,” “outlook,” “guidance” or similar expressions. We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all of our forward-looking statements.

While we believe that our forward-looking statements are reasonable, you should not place undue reliance on any such forward-looking statements, which speak only as of the date made. Because these forward-looking statements are based on estimates and assumptions that are subject to significant business, economic and competitive uncertainties, many of which are beyond our control or are subject to change, actual results could be materially different. Factors that might cause such a difference include, without limitation, the following:

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this proxy statement. For additional information concerning factors that could cause actual results and events to differ materially from those projected herein, please refer to the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 and subsequent Current Reports on Form 8-K and Quarterly Reports on Form 10-Q filed with the SEC. Except as required by applicable law, we do not undertake, and expressly disclaim, any obligation to publicly update or alter our statements whether as a result of new information, events or circumstances occurring after the date of this report or otherwise.

The Company (NASDAQ: PRCP) is a Michigan corporation and develops, produces and sells a comprehensive range of automated industrial metrology products and solutions to manufacturing organizations for dimensional gauging, dimensional inspection and 3D scanning. Products include 3D machine vision solutions, robot guidance, coordinate measuring machines, laser scanning and advanced analysis software. Global automotive and other manufacturing companies rely on the Company’s metrology solutions to assist in managing their complex manufacturing processes to improve quality, shorten product launch times and reduce costs.

The Company’s principal executive offices are located at 47827 Halyard Drive, Plymouth, MI 48170-2461 and its telephone number is (734) 414-6100.

A detailed description of the Company’s business is contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020, filed with the SEC on September 28, 2020, which is incorporated by reference into this proxy statement. See the section of this proxy statement entitled “Where You Can Find Additional Information.”

Atlas Copco North America LLC (referred to in this proxy statement as “Parent”) is a Delaware limited liability company. Parent is an indirect wholly owned subsidiary of Atlas Copco AB, a Swedish listed global industrial company that manufactures industrial tools and equipment.

Parent’s principal executive offices are located at 6 Century Drive, Suite 310, Parsippany NJ 07054 and its telephone number is (973) 397-3400.

Odyssey Acquisition Corp. is a Michigan corporation and a direct wholly owned subsidiary of Parent that will function as the merger subsidiary in the merger. Merger Subsidiary was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement. Merger Subsidiary has not carried on any activities on or prior to the date of this proxy statement, except for activities incidental to its formation and activities undertaken in connection with Parent’s acquisition of the Company. Upon the completion of the merger, Merger Subsidiary will merge with and into the Company and Merger Subsidiary will cease to exist.

Merger Subsidiary’s principal executive offices are located at 6 Century Drive, Suite 310, Parsippany NJ 07054 and its telephone number is (973) 397-3400.

This proxy statement is being furnished to our shareholders as part of the solicitation of proxies by the board for use at the annual meeting to be held, on Tuesday, December 8, 2020, at 9:30 a.m. Eastern Time, or at any adjournment or postponement thereof. The meeting will take place via a live audio webcast that is available at www.virtualshareholdermeeting.com/PRCP2020. There will be no physical meeting location and the meeting will only be conducted via the live audio webcast. To participate in the meeting you must have your 16-digit control number that is shown on your proxy card.

For information regarding attending the annual meeting, see “Voting; Proxies; Revocation—Attendance” below.

At the annual meeting, the Company’s shareholders will be asked to consider and vote on the following proposals, and may be asked to vote on any other business that may properly come before the annual meeting and any adjournment or postponement thereof:

Our shareholders must adopt the merger agreement for the merger to occur. If our shareholders fail to approve Proposal 1 to adopt the merger agreement, the merger will not occur. The approval of Proposals 2-6 is not a condition to the completion of the merger.

We do not expect that any matters other than the proposals set forth above will be brought before the annual meeting. If, however, such a matter is properly presented at the annual meeting or any adjournment or postponement thereof, the persons appointed as proxies will have discretionary authority to vote the shares represented by duly executed proxies.

This proxy statement and the enclosed form of proxy are first being mailed to our shareholders on or about November 5, 2020.

The holders of record of shares of Company common stock as of the close of business on October 27, 2020, the record date for the annual meeting, are entitled to receive notice of and to vote at the annual meeting. At the close of business on the record date, 9,779,547 shares of Company common stock were outstanding and entitled to vote at the annual meeting.

The presence at the annual meeting via live audio webcast or by proxy of the holders of record of a majority of the shares of Company common stock entitled to vote at the annual meeting is necessary to constitute a quorum for the transaction of business at the annual meeting. A quorum is necessary to transact business at the annual meeting. Once a share is represented at the annual meeting, it will be counted for purposes of determining whether a quorum is present at the annual meeting. If a quorum is not present at the annual meeting, we expect that the annual meeting will be adjourned to a later date. If a new record date is set for an adjourned annual meeting, a new quorum will have to be established. Abstentions and broker “non-votes” are counted as present and entitled to vote for the purpose of establishing a quorum.

The votes required for each proposal are as follows:

In addition, approval of any other proposal to be voted upon at the annual meeting requires the affirmative vote of the holders of a majority of the shares of Company common stock present at the annual meeting via live audio webcast or represented by proxy at the annual meeting and entitled to vote on such matter at the annual meeting.

Each share of common stock outstanding at the close of business on the record date is entitled to one vote on each of the proposals to be considered at the annual meeting.

An abstention or failure to vote will have the following effect:

Pursuant to the voting agreement, the Harbert Shareholders agreed, among other things, to vote their shares of Company common stock in favor of the proposal to approve the merger agreement. As of the date of the merger agreement, the Harbert Shareholders beneficially owned approximately 10.5% of the Company’s outstanding common stock. The other Company directors and executive officers have informed us that they intend to vote their shares of Company common stock in favor of the merger proposal and the other proposals to be considered at the annual meeting, although they have no obligation to do so. As of the record date, our directors and executive officers, owned and were entitled to vote, in the aggregate, approximately 1,148,702 shares of Company common stock, or approximately 11.7% of the outstanding shares of Company common stock entitled to vote at the annual meeting.

All holders of shares of Company common stock as of the close of business on October 27, 2020, the record date, including shareholders of record and beneficial owners of common stock registered in the “street name” of a broker, bank or other nominee, are invited to attend the annual meeting via the live audio webcast.

The meeting will take place via a live audio webcast that is available at www.virtualshareholdermeeting.com/PRCP2020. There will be no physical meeting location and the meeting will only be conducted via the live audio webcast. To participate in the meeting you must have your 16-digit control number that is shown on your proxy card.

Shareholder of record will be able to vote online at the annual meeting by logging into the virtual platform at www.virtualshareholdermeeting.com/PRCP2020 as a shareholder and following the voting link. You will need your 16-digit control number found on your proxy card or notice document to do so.

It is not necessary to attend the annual meeting to vote your shares. To ensure that your shares of Company common stock are voted at the annual meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the annual meeting via the live audio webcast.

Attending the annual meeting via the live audio webcast does not itself constitute a vote on any proposal.

To ensure that your shares of Company common stock are voted at the annual meeting, we recommend that you provide voting instructions promptly by proxy, even if you plan to attend the annual meeting via the live audio webcast.

If you are a shareholder of record, you may provide voting instructions by proxy using one of the methods described below.

Submit a Proxy by Telephone or via the Internet.  This proxy statement is accompanied by a proxy card with instructions for submitting voting instructions. You may vote by telephone by calling 1-800-690-6903 or via the Internet by accessing www.proxyvote.com. Your shares of Company common stock will be voted as you direct in the same manner as if you had completed, signed, dated and returned your proxy card, as described below.

Submit a Proxy Card.  If you complete, sign, date and return the enclosed proxy card by mail so that it is received in time for the annual meeting, your shares of Company common stock will be voted in the manner directed by you on your proxy card.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted in favor of the merger proposal and all of the other proposals to be voted on at the annual meeting as listed in this proxy statement.

Your failure to vote at the annual meeting via live audio webcast or by proxy, or to instruct your broker, bank or other nominee on how to vote, would have the same effect as a vote “AGAINST” the merger proposal. However, such failure to vote would not impact the approval of any of the other proposals listed in this proxy statement.

If your shares of Company common stock are held by a broker, bank or other nominee on your behalf in “street name,” your broker, bank or other nominee will send you instructions as to how to provide voting instructions for your shares. Many brokerage firms and banks have a process for their customers to provide voting instructions by telephone or via the Internet, in addition to providing voting instructions by a voting instruction form.

If you are a non-record owner and do not provide your bank, brokerage firm or other nominee instructions on how to vote your shares of Company common stock with respect to a “non-routine” matter, a broker “non-vote” occurs with respect to those matters. Under applicable stock exchange rules, the organization that holds your shares of Company common stock (i.e., your bank, brokerage firm or other nominee) may generally vote on routine matters at its discretion but cannot vote on “non-routine” matters. If you are a non-record owner and the organization that holds your shares of Company common stock does not receive instructions from you on how to vote your shares of Company common stock on a non-routine matter, the organization that holds your shares of Company’s common stock will inform the inspector of elections that it does not have the authority to vote your shares on such matters. The ratification of appointment of the Company’s independent registered public accountant (Proposal 6) is the only matter the Company believes will be designated “routine.” The other proposals listed in this proxy statement will be considered “non-routine.” Accordingly, if you are a non-record owner and do not provide your bank, brokerage firm or other nominee instructions on how to vote your shares of Company’s common stock, your bank, brokerage firm or other nominee generally will not be permitted to vote your shares on any of the proposals other than the ratification of appointment of the Company’s independent registered public accountant. Broker non-votes (including brokers

holding their clients’ shares of record who cause the abstentions to be recorded) will be counted towards determining whether or not a quorum is present. Broker non-votes will have no effect on the approval of the proposals except in connection with the merger proposal (with respect to which a failure to vote will have the same effect as a vote “AGAINST” such proposal). The Company strongly encourages you to provide voting instructions to your bank, brokerage firm or other nominee so that your vote will be counted on all matters.

Any person giving a proxy pursuant to this solicitation has the power to revoke and change it before it is voted. If you are a shareholder of record, you may revoke your proxy before the vote is taken at the annual meeting by:

Please note, however, that only your last-dated proxy will count. Attending the annual meeting without taking one of the actions described above will not in itself revoke your proxy. Please note that if you want to revoke your proxy by mailing a new proxy card to the Company or by sending a written notice of revocation to the Company, you should ensure that you send your new proxy card or written notice of revocation in sufficient time for it to be received by the Company before the annual meeting.

If you hold your shares in “street name” through a broker, bank or other nominee, you will need to follow the instructions provided to you by your broker, bank or other nominee to revoke your proxy or submit new voting instructions. If you hold your shares in “street name,” you may also revoke a prior proxy by voting online at the annual meeting if you obtain a legal proxy executed in your favor from your broker, bank or other nominee to be able to vote online at the annual meeting.

An abstention occurs when a shareholder attends the annual meeting, either via the live audio webcast or represented by proxy, but abstains from voting. Abstentions will be included in the calculation of the number of shares of Company common stock present or represented at the annual meeting for purposes of determining whether a quorum has been achieved.

An abstention with respect to the merger proposal (Proposal 1), or a failure to vote your shares of Company common stock (including a failure to instruct your broker, bank or other nominee to vote shares held on your behalf) with respect to the merger proposal (Proposal 1), will have the same effect as a vote “AGAINST” such proposal.

An abstention with respect to any of the other proposals listed in this proxy statement (Proposals 2-6), or failure to return your proxy card or otherwise vote your shares of Company common stock (including a failure of your broker, bank or other nominee to vote shares held on your behalf), will not be counted as shares voted on these matters, assuming a quorum is present.

The board is soliciting your proxy, and we will bear the cost of soliciting proxies. This includes the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of our outstanding common stock. The Company has retained Okapi, a proxy solicitation firm, to assist the board in the solicitation of proxies for the annual meeting, and we expect to pay Okapi approximately $8,500, plus reimbursement of out-of-pocket expenses. Proxies may be solicited by mail, personal interview, email, telephone, or via the Internet by Okapi or, without additional compensation, by certain of the Company’s directors, officers and employees.

Although it is not currently expected, the annual meeting may be adjourned or postponed if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the annual meeting to approve the merger proposal or in the absence of a quorum.

A special committee of the board, consisting of Messrs. Bryant, W. Richard Marz, then the Chairman of the Board of the Company, Neely and Ratigan, was formed on November 10, 2016 to assist the Company in selecting an investment banking firm. The special committee interviewed a number of investment banking firms, including XMS Capital Partners, LLC (“XMS”), and recommended to the board that XMS be engaged by the board.

As a result, on February 14, 2017, the board met with XMS and, following that meeting, determined to retain XMS as its financial advisor to conduct a review of the Company’s strategic alternatives, including a possible sale of the Company. The Company chose XMS as its financial advisor based on, among other factors, XMS’ overall reputation, and its extensive experience in mergers and acquisitions, financing and capital markets matters.

On May 15, 2017, XMS presented a Strategic Alternatives Assessment to the board. At that meeting, XMS recommended a sale of the Company. After consideration, the board authorized XMS to prepare a confidential information memorandum describing the Company for presentation to potentially interested parties. During the entire process described herein, the board conducted all activities related to strategic alternatives or a potential sale of the Company in executive sessions of the board held in person or telephonically. Unless described otherwise, all references to board meetings in this “Background of the Merger” section will be to board meetings held in executive session. During the entire period covered in this “Background of the Merger” section, a majority of the board consisted of independent directors and the board determined that there were no actual, apparent or inherent conflicts of interest that existed or were foreseeable in the case of any of the Company’s independent directors with respect to a possible strategic transaction, including a sale of the Company.

Between May 15, 2017 and August 25, 2017, XMS, in consultation with management and the board, prepared a confidential information memorandum (“CIM”) and a list of possible financial and strategic buyers of the Company.

On August 25, 2017, the board held a meeting at which representatives of Dykema Gossett, PLLC (“Dykema”) and XMS were present. Dykema reviewed with the board the fiduciary duties owed by directors of a Michigan corporation to its shareholders in connection with a review of strategic alternatives available to the Company, including a possible sale of the Company. Prior to the meeting, the board received from Dykema a memorandum outlining the fiduciary duties of a director of a Michigan corporation. XMS reviewed a list of interested parties with the board.

On August 30, 2017, the board met and reviewed a list of 53 strategic and 59 financial potential buyers of the Company provided previously by XMS. The board suggested that the Company make contact with certain parties on the list with whom the Company had held strategic discussion in the preceding 24 months, and XMS would contact the other parties on the list.

During the remainder of 2017, XMS made contact with approximately 112 parties, 68 of whom entered into confidentiality agreements with the Company and 66 of whom received a CIM.

Among the parties that David L. Watza, then President, Chief Executive Officer and Chief Financial Officer of the Company, reached out to was a representative of ISRA Vision AG (“ISRA”), a potential strategic buyer engaged in the machine vision business, who the Company had previously spoken to about entering into a transaction with the Company. On October 20, 2017, ISRA and the Company executed a confidentiality agreement. On October 29, 2017, Mr. Watza and the Chief Executive Officer (“CEO”) of ISRA met to discuss a possible transaction.

On October 31, 2017, XMS distributed a first round process letter to potential buyers requesting indications of interest by November 17, 2017.

On November 17, 2017, “Party A”, a strategic buyer engaged in the international metrology business, submitted an indication of interest and executed a confidentiality agreement shortly thereafter. Party A was the only party to provide an indication of interest in this initial round.

On December 1, 2017, “Party B”, a strategic buyer also engaged in the international metrology business, had a discussion with XMS about its interest in a transaction with the Company and a representative from Party B indicated that it was “highly interested” in a transaction with the Company. On December 11, 2017, Party B executed a confidentiality agreement and began receiving information about the Company.

On December 15, 2017, Mr. Watza and a representative of Party B discussed possible interest by Party B in a transaction with the Company but the representative of Party B stated that he believed there was too much overlap and not enough synergies between Party B and the Company.

On January 12, 2018, representatives of XMS and the Company met with representatives of Party A and Party A expressed continued interest in a transaction with the Company. The Company opened a data site and Party A began due diligence.

On January 15, 2018, Party B indicated to representatives of XMS that it was no longer interested in pursuing a transaction with the Company.

On January 26, 2018, Dykema circulated to the board a bid draft of the merger agreement and a memorandum discussing the principal terms of the merger agreement for the board’s review and comment. Dykema also circulated a memorandum regarding the process for obtaining a fairness opinion for any sale transaction involving the Company.

On February 1, 2018, ISRA submitted a non-binding indicative proposal to Mr. Watza expressing an interest in an all cash transaction at a range of between $11.60 and $12.80 per share pending due diligence. This represented a premium of between approximately 11% and 22% over the Company’s closing price share price of $10.44 per share on February 1, 2018. ISRA was given access to the data site and began due diligence

Between February 2, 2018 and March 1, 2018, ISRA conducted due diligence. Parent signed a confidentiality agreement on February 13, 2018 and was provided the CIM, but did not pursue further discussions with the Company during this period. Party A continued its due diligence, conducted site visits, and met with management of the Company.

Between March 16, 2018 and July 12, 2018, ISRA continued its due diligence. XMS and Mr. Watza continued to hold discussions with ISRA and Party A and the board was regularly updated regarding the progress on the strategic process.

On March 16, 2018, Party A informed the Company that it was is no longer interested in acquiring the Company. However, Party A made various joint venture proposals to the Company. The board determined that Party A’s joint venture proposals did not fit with the Company’s strategic objectives at that time, but that the Company should keep the dialogue open with Party A.

On July 12, 2018, representatives from the Company and XMS met with ISRA’s CEO and head of strategic operations to discuss a possible transaction.

Between July 12, 2018 and July 23, 2018, Mr. Watza had several conversations with ISRA’s CEO that included discussion of the value of the Company, the benefits to both parties of a combination and ISRA’s vision for the combined companies.

Between July 26, 2018 and August 23, 2018, Mr. Marz and the CEO of ISRA had extensive negotiations that resulted in a series of proposals and counterproposals culminating in the execution on August 24, 2018 of a non-binding letter of intent (“ISRA LOI”). The ISRA LOI set forth a non-binding offer price of $13.15 per share and an exclusivity period expiring the earlier of the date that was 60 days after the date of the ISRA LOI or the date of the execution of a definitive merger agreement. This non-binding offer represented a premium of approximately 31% over the Company’s closing share price of $10.05 per share on August 24, 2018.

Between August 23, 2018 and November 12, 2018, ISRA conducted additional due diligence activities, including Company site visits and meetings with Company management.

During this period, the ISRA CEO indicated that there were a number of due diligence issues remaining unresolved that could have an impact on the price per share proposed in the ISRA LOI. On October 22, 2018, the ISRA LOI, including the 60 day exclusivity period, expired.

On November 8, 2018, the board held a meeting with representatives of XMS present. Mr. Marz updated the board on a telephone call he had that day with the CEO of ISRA who told Mr. Marz that ISRA was having difficulty justifying the initial price negotiated by the parties based on its due diligence review. The ISRA CEO indicated that this resulted in a need to renegotiate the price included in the ISRA LOI.

On November 12, 2018, Mr. Marz had a call with the CEO of ISRA who stated that, based on the results of its due diligence, ISRA’s revised non-binding bid price was between $10.65 and $10.70 per share, which was not confirmed in writing. At that time, this offer represented a premium of approximately 34% over the Company’s closing share

price of $7.95 per share on November 12, 2018. The board held a meeting with representatives of XMS present. The board and XMS discussed ISRA’s revised proposal and determined to have Mr. Marz call the CEO of ISRA to indicate that, at ISRA’s current proposed price, the Company was not prepared to move forward with a transaction.

Between November 12, 2018 and December 31, 2018, the Company and ISRA continued to negotiate with no firm price or transaction timeline being established.

2019 – Termination of Negotiations with ISRA and Others

During January 2019, the parties agreed upon a timeline for a transaction and continued negotiations and the board determined to allow ISRA the ability to conduct limited additional due diligence, required ISRA to provide detailed information regarding its financing plans and required ISRA to provide comments on and negotiate the bid draft of the merger agreement.

Between January 10, 2019 and January 21, 2019, Dykema and attorneys for ISRA engaged in negotiations regarding a draft merger agreement.

On February 6, 2019, ISRA provided verbally a revised non-binding bid price of $11.35 per share, which was not confirmed in writing. At this time, this offer represented a premium of approximately 50% over the Company’s closing share price of $7.53 per share on February 6, 2019.

Between February 6, 2019 and April 15, 2019, the parties continued to negotiate the merger agreement terms.

During February 2019, XMS had conversations with “Party C”, a strategic buyer, regarding the possibility of a transaction with the Company, but their indications of price were below the levels discussed with ISRA and so Party C decided not to submit a proposal.

On April 13, 2019, the CEO of ISRA advised Mr. Marz that the Company’s third quarter of fiscal 2019 preliminary financial results had been a significant negative development and that he needed to discuss these preliminary financial results with his board.

Between April 13 and May 6, 2019, Mr. Marz and the CEO of ISRA had many conversations regarding timing and pricing of a possible transaction. The board met several times and established several transaction announcement deadlines for the parties to meet. ISRA continued to insist that it needed to conduct additional due diligence before it could provide an updated downward per share price offer.

On May 6, 2019, the board met with representatives of XMS present, and determined to terminate discussions with ISRA regarding a potential transaction because the Company was not able to obtain a revised binding price proposal from ISRA in advance of the announcement of its third quarter earnings and an expectation that a revised proposal following the announcement would be at a lower level.

On May 7, 2019, Mr. Marz informed the CEO of ISRA that the board had determined to terminate discussions with ISRA regarding a potential transaction.

On May 21, 2019, Mr. Marz announced his retirement as Chairman of the Board and Jay W. Freeland was appointed as Chairman of the Board of the Company.

On May 24, 2019, the Company terminated its engagement with XMS as its financial advisor.

The board determined to refocus the Company on operating as an independent company and continuing to refine and execute its strategic plan. As a result, between May 24, 2019 and January 2020, there were no significant activities relating to a potential sale of the Company.

Messrs. Freeland and Watza met with representatives of Party C on October 10, 2019 to meet the new CEO of the business unit of Party C that had previously expressed an interest in potentially acquiring the Company and to keep channels of communication open between the parties. Messrs. Freeland and Watza remained in general contact with Party C during the rest of 2019 and early 2020 regarding the strategic fit of the two companies.

Effective November 12, 2019, Mr. Freeland was appointed Interim President and Chief Executive Officer of the Company, replacing Mr. Watza who resigned as of November 12, 2019. Mr. Freeland had agreed to serve in this interim role during a transition period to assist the Company to stabilize its operations and conduct a search for a permanent chief executive officer. Mr. Freeland continued to serve as Chairman of the Board of the Company.

On January 7, 2020, Mr. William Roeschlein was appointed Interim Vice President, Finance, and Chief Financial Officer. Mr. Roeschlein was expected to serve in that capacity during the transition period prior to the hiring of a permanent chief executive officer of the Company.

In January 2020, Mr. Freeland had preliminary discussions with a representative of “Party D”, a strategic buyer, regarding a potential strategic fit between Party D and the Company, although the discussions did not progress to the point where Party D and the Company needed to enter into a confidentiality agreement.

On February 10, 2020, Mr. Freeland had a call with a representative of Party C who indicated that Party C remained interested in the strategic fit that the Company would have with Party C. The parties continued discussions thereafter, with Mr. Freeland indicating that, if Party C was interested in having the board consider a transaction, they should make a proposal in the near term.

On February 10, 2020, Parent announced the acquisition of ISRA.

On February 20, 2020, Mr. Freeland met with a representative of Party C, who advised Mr. Freeland that he had been in discussions with his executive board regarding a potential transaction and had been authorized to proceed with discussions, but did not provide any price information.

On February 24-25, 2020, the board held a meeting at which Mr. Freeland updated the board on his discussions with Party C regarding a potential transaction between the parties. He indicated that he was deferring the extension of the existing Party C confidentiality agreement at this time because of the preliminary nature of the discussions.

During March 2020, Messrs. Freeland and Roeschlein had continuing discussions with representatives of Party C exploring a potential transaction. On March 19, 2020, a representative of Party C reported to Mr. Freeland that his board had met and was interested in continuing discussions with the Company if the Company’s board was open to receiving a preliminary proposal and provided a valuation at which the Company’s board would be willing to continue the parties’ discussion.

On March 20, 2020, Pierre Brorsson, the ISRA Integration Manager for Parent, reached out to Mr. Freeland to establish contact and ask if Mr. Freeland was available for an introductory call. Mr. Freeland did not follow up on the contact because of the general nature of the contact at the start of the shutdowns relating to COVID-19.

On March 31, 2020, the board met with representatives of XMS. XMS consulted periodically with the Company without a formal engagement until August 24, 2020, when XMS was formally reengaged. Mr. Freeland updated the board on his discussions with a representative of Party C regarding Party C’s interest in exploring a potential offer for the Company. The board directed Mr. Freeland to continue discussions with Party C, but to indicate that the board was not willing to provide an initial price to them. Mr. Freeland reported that he had provided Party C with an amendment to the existing confidentiality agreement to extend its term, which was later executed on April 16, 2020.

Following the execution of the extension of the confidentiality agreement, during April 2020, the Company shared confidential financial information with Party C. During April and May 2020, Messrs. Freeland and Roeschlein had ongoing discussions with representatives of Party C regarding the information provided.

On April 20, 2020, the board held a meeting at which Mr. Freeland updated the board regarding ongoing discussions with Party C.

On May 1, 2020, the board held a meeting at which Mr. Freeland updated the board on his continuing discussions with representatives of Party C regarding Party C’s interest in exploring a potential offer for the Company. Mr. Freeland stated that the representatives of Party C had indicated that they would get back to the Company with a preliminary indication of a range of value for the board to consider in a few weeks, as they were currently focused on other matters.

On May 12, 2020, a representative of an investment banking firm who had a prior business relationship with Mr. Freeland, called Mr. Freeland to inform him that Parent may be interested in a transaction with the Company.

On May 15, 2020, Henrik Elmin, Senior Executive Vice President and Business Area President of the Industrial Technique business of Parent, contacted Mr. Freeland via email and confirmed a meeting to have a discussion about both businesses and potential synergies.

On May 20, 2020, Mr. Elmin and Mr. Freeland had a discussion surrounding business visions, strategies, potential synergies and interest in exploring deeper discussions surrounding a potential combination of the companies. Mr. Freeland sent Mr. Elmin the Company’s standard confidentiality agreement via email later that afternoon, which was later executed on May 28, 2020.

On May 28, 2020, Mr. Freeland sent to Mr. Elmin confidential financial information to assist Parent in determining if it was interested in providing a preliminary indication of value as a precursor to continuing discussions. The board met later that day and Mr. Freeland advised the board that Party C was still working on its preliminary indication of value proposal and updated them on discussions with Parent. The board discussed the development of a strategic plan for the Company to continue to operate as an independent company, while continuing to explore a potential sale with one of the parties that had expressed preliminary interest.

On June 3, 2020, Party C presented verbally a preliminary indication of value of €40 million and indicated that they would struggle getting to a value of €50 million.

On June 3, 2020, the board held a meeting at which Mr. Freeland updated the board on his discussions with representatives of Party C. The board directed Mr. Freeland to advise the representatives of Party C that its valuation proposal needed to be (i) in excess of $75 million for the board to consider continuing discussions and (ii) received by June 19, 2020, which Mr. Freeland did on June 4, 2020.

On June 8, 2020, Mr. Elmin sent Mr. Freeland questions related to the financial information provided by the Company.

From June 10, 2020 to June 20, 2020, Mr. Elmin and Kurt Vandingenen, Vice President Business Control of the Business Area Industrial Technique business of Parent, had telephone conversations with Messrs. Freeland and Roeschlein to discuss the financial information provided by the Company.

On June 19, 2020, the board held a meeting at which Mr. Freeland updated the board on his discussions with Parent and representatives of Party C. He noted that both parties had indicated that they would respond back to the Company the following week with preliminary proposals.

On June 23, 2020, Mr. Elmin and Mr. Freeland had a telephone call during which Mr. Elmin informed Mr. Freeland that Parent believed there is a strategic fit between Parent and the Company, but Parent still needed another week to finalize their valuation. Mr. Elmin requested additional information to complete its analysis, which was provided on June 24, 2020.

On June 24, 2020, the representatives of Party C indicated to Mr. Freeland that it did not believe it could increase its indication of value to a sufficient level to meet the board’s valuation expectations.

On June 29, 2020, the board held a meeting at which the directors agreed that the Company should continue the dialogue with Parent but should not provide them with any price guidance. The board agreed that the price target should be in the high $7.00 range for potentially engaging with Parent, but that the price target should not be shared prior to Parent making a first indicative offer. Mr. Freeland also updated the board on his discussions with representatives of Party C. The board determined that Mr. Freeland should not pursue further discussions with Party C at that time.

On July 1, 2020, Mr. Elmin asked Mr. Freeland via email if Mr. Freeland would share the Company’s estimated bookings for the fourth quarter of 2020. Mr. Freeland responded to Mr. Elmin via email that same day with the requested information.

On July 6, 2020, Mr. Elmin and Mr. Freeland had a follow-up call during which Mr. Elmin informed Mr. Freeland that Parent’s indicative offer was $5.50 per share. Mr. Freeland advised Mr. Elmin that he did not believe $5.50 per share was enough to interest the board.

On July 8, 2020, after consultation with XMS, Mr. Freeland had a telephone discussion with Mr. Elmin in which he advised Mr. Elmin that, based upon prior board guidance, Parent needed to be at a higher price to continue discussions with the Company. Mr. Elmin indicated that he would consider the matter.

Between July 8, 2020 and July 15, 2020. Parent asked questions of the Company regarding financial and operations matters. Messrs. Freeland and Roeschlein responded to these questions.

On July 16, 2020, Mr. Elmin and Mr. Freeland had a telephone call to discuss the Company’s recent upward share price movement and a potential timeline for a transaction.

On July 22, 2020, Mr. Elmin and Mr. Freeland had a telephone call in which Mr. Elmin advised Mr. Freeland that it was unlikely that Parent would pay $6.50 per share. Mr. Freeland advised Mr. Elmin that he did not think $6.50 per share was high enough to interest the board, but agreed to get the board’s feedback.

On July 23, 2020, the board held a meeting at which representatives of XMS were present. Mr. Freeland provided an update on discussions with Parent regarding their indication of value. The board and XMS discussed Parent’s indication of value. Based on that discussion, the board directed Mr. Freeland to inform Parent that Parent’s preliminary indication of value needs to be at least $7.00 per share for the Company to continue further discussions.

On July 24, 2020, Mr. Elmin and Mr. Freeland had a follow-up telephone call, during which Mr. Freeland told Mr. Elmin that Parent’s preliminary indication of value needed to be at $7.50 per share. Mr. Elmin indicated that he did not believe the Parent CEO or board would go higher than $6.50 per share.

On July 28, 2020, Mr. Elmin and Mr. Freeland had a telephone call during which Mr. Elmin told Mr. Freeland that he had discussed the Company’s counter offer with his CEO as well as three Parent board members. Mr. Elmin told Mr. Freeland that $6.50 per share was the best price that Parent could offer. Mr. Freeland told Mr. Elmin that $7.50 per share was the lowest price the board would accept and that the Company planned to move forward independently, but that dialogue could always be reopened between the parties at a later time.

On July 31, 2020, Mr. Elmin advised Mr. Freeland that Parent’s CEO and board had agreed to offer $7.00 per share. The board held a meeting at which Mr. Freeland informed the board of Parent’s latest offer of $7.00. The board discussed the offer price based on its prior discussions with XMS. The board determined that a transaction at such an offer price would be in the best interests of the shareholders, subject to matters such as agreement upon acceptable terms and conditions in definitive documents and receipt of an opinion as to the fairness, from a financial point of view, of the consideration to be received by the shareholders of the Company. The board directed management to prepare for due diligence and negotiation of a definitive merger agreement. The board also directed Mr. Freeland to reach out to other potentially interested parties directly or through XMS on behalf of the Company.

On August 1, 2020, Mr. Freeland informed Mr. Elmin that the board had accepted Parent’s price of $7.00 and that the Company was prepared to move forward with due diligence and negotiations of a merger agreement. Mr. Freeland also advised Mr. Elmin that the two companies must work towards the timeline of announcing a signed transaction prior to the Company’s fourth quarter earnings release. They also discussed due diligence logistics.

On August 3, 2020, Mr. Freeland spoke with a representative of Party C to determine if Party C was interested in revisiting its prior indication of value for the Company. The representative indicated he would consider and get back to Mr. Freeland.

On August 7, 2020, Dykema had an initial discussion with Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), counsel to Parent, about, among other items, timing and structure of a possible transaction and regulatory and due diligence matters involved in a possible transaction.

Between August 7, 2020 and August 24, 2020, Parent continued to conduct due diligence and held due diligence meetings with the Company’s management team and Dykema. Messrs. Freeland, Roeschlein, Elmin and Vandingenen held periodic calls during this period regarding the due diligence process. Parent confirmed that it did not need to obtain financing to close the merger and did not require a financing condition in the merger agreement. The parties’ legal counsel discussed potential regulatory filings relating the transaction.

On August 9, 2020, a representative of Party C advised Mr. Freeland that he did not expect to get authority to move forward with discussions regarding the purchase of the Company at the values envisioned.

Representatives of Parent conducted a site visit at the Company’s headquarters in Plymouth, Michigan on August 19, 2020.

On August 24, 2020, the board met and Mr. Freeland updated the board on the due diligence activities of Parent. The Company formally reengaged XMS to be its financial advisor and to provide a fairness opinion regarding the merger with Parent. A representative from Dykema discussed the public company sale process.

On August 26, 2020, a representative of XMS spoke to an advisor to Party C who reiterated that Party C was not interested in pursuing a transaction at the values envisioned.

On August 26, 2020, a representative of XMS also spoke with Party B to see if it had any interest in revisiting a transaction with the Company.

Representatives of Parent conducted a site visit at the Company’s offices in Munich, Germany on August 26, 2020.

On August 27, 2020, a representative of XMS again asked Party A if there was interest in revisiting a transaction with the Company.

During August and early September, 2020, Mr. Freeland tried to contact Party D on several occasions to check if Party D had strategic interest in pursuing a discussion with the Company.

On September 1, 2020, Messrs. Elmin and Vandingenen of Parent had a telephone conversation with the senior leadership of the Company to outline aspects of Parent’s plan for the future, including making the Company a part of Parent’s machine vision business.

On September 2, 2020, Party B affirmed in a telephone call with a representative of XMS that it had strategic interest in considering a transaction with the Company. A representative of XMS advised Party B to provide its potential value perspectives based on publicly available information.

On September 2, 2020, Dykema circulated to Pillsbury the first draft of the merger agreement.

On September 4, 2020, XMS had a conversation with BNP Paribas SA (“BNP”), the financial advisor for Parent, to discuss the current status of the process.

On September 6, 2020, Party A, after reviewing publicly available information regarding the Company, informed a representative of XMS that it had no strategic interest in the Company and did not have an interest in pursuing a discussion with the Company.

On September 7, 2020, Party B verbally proposed to a representative of XMS per share values ranging from the current share price at the time to $6.00 per share.

On September 8, 2020, Mr. Freeland had a call with Mr. Elmin to discuss the status of Parent’s due diligence process, which Mr. Elmin reported was progressing. Mr. Freeland confirmed with Mr. Elmin whether there were major issues on price. Mr. Elmin confirmed the previously agreed price, but indicated that the price could be impacted by the outcome of the remaining due diligence being conducted by Parent. Mr. Freeland and Mr. Elmin discussed the timeline for announcing a merger and agreed that they would pursue signing a merger agreement before September 28, 2020 so it could be announced prior to the announcement of the Company’s earnings for fiscal 2020.

Later that same day, the board held a meeting, with representatives of management, XMS and Dykema present, at which Mr. Freeland updated the board on discussions regarding a potential sale transaction. A representative from Dykema presented the board with an updated Board Fiduciary Duty Memorandum which had been previously circulated to the board. Dykema also presented a summary of the draft merger agreement that was provided to Pillsbury on September 2, 2020, as well as a redline of that merger agreement against the version that had been negotiated with ISRA in the spring of 2019. Dykema also presented a memorandum regarding termination fees, which had been distributed to the board in advance of the meeting. The memorandum summarized mean and median termination fees in studies conducted by various financial and legal sources.

On September 9, 2020, a representative of XMS contacted Party B and encouraged Party B to execute a confidentiality agreement.

On September 10, 2020, Mr. Freeland spoke with a representative of Party D, who indicated that Party D would be interested in a discussion with the Company.

On September 15, 2020, Party B executed a confidentiality agreement and was provided incremental non-public financial information regarding the Company.

Representatives of Parent conducted a site visit at the Company’s offices in Shanghai, China on September 16, 2020.

On September 16, 2020, Messrs. Freeland and Roeschlein met with Party D and provided a brief introductory overview of the Company using the Company’s standard public investor deck. Party D, who had never previously executed a confidentiality agreement, did not pursue further discussions with Mr. Freeland regarding the purchase of the Company

On September 17, 2020, Mr. Elmin sent Mr. Freeland an email wherein Mr. Elmin indicated that, as a result of Parent’s due diligence, there were several deviations to their valuation. Dykema received comments from Pillsbury with the responses of Parent to the Company’s September 2, 2020 merger agreement draft. The revised draft of the merger agreement included, among other things, a provision requiring payment by the Company of Parent’s transaction expenses in the event shareholder approval was not obtained at the shareholders meeting, the deletion of the reverse termination fee provision proposed by the Company and revisions to the best efforts obligations of the parties.

On September 18, 2020, Mr. Freeland and Mr. Elmin had a telephone call during which Mr. Elmin discussed reducing Parent’s offer to $6.50 per share citing various valuation related matters. Mr. Freeland told Mr. Elmin that the board was not willing to agree to a reduction of the offer below $7.00 per share.

On September 21, 2020, Mr. Elmin and Mr. Freeland had a telephone call and discussed communication and integration plans. Mr. Elmin also discussed a possible reduction to the offer to $6.50 per share, which Mr. Freeland rejected. Dykema sent comments on the merger agreement to Pillsbury reflecting the responses of the Company to Parent’s September 17, 2020 draft including (i) rejecting the provision requiring payment by the Company of Parent’s transaction expenses in the event shareholder approval is not obtained, (ii) reinserting the reverse termination fee provision and (iii) strengthening the best efforts obligations of the parties. Later that day, the board held a meeting at which representatives from XMS and Dykema were present. Mr. Freeland updated the board on recent telephone conversations and negotiations he had had with Mr. Elmin, including the telephone calls on September 18, 2020 and September 21, 2020. Dykema provided an update on the principal open issues on the merger agreement outlined above.

Between September 21, 2020 and September 27, 2020, the parties negotiated the final terms of the merger agreement. Dykema and Pillsbury sent several markups of the merger agreement between one another.

On September 22, 2020, Party B verbally reiterated to a representative of XMS its initial per share value ranging from the current share price to $6.00 per share and that they could not foresee a situation where they would be able to increase their bid above $6.00 per share.

On September 23, 2020, the board met, with representatives of management, XMS and Dykema present, and Mr. Freeland updated the board on the status of negotiations with Parent. The board discussed the key open issues in the merger agreement. Mr. Freeland reported that Parent had requested a termination fee of $3 million. The board discussed the regulatory approvals with legal counsel.

On September 24, 2020, in a call attended by Messrs. Freeland, Roeschlein, Elmin and Vandingenen, the parties reached agreement on the key open issues in the merger agreement, including (i) the amount of the termination fee, (ii) elimination of the reverse termination fee, (iii) elimination of the requirement that the Company pay Parent’s transaction expenses in the event shareholder approval is not obtained, and (iv) compromise language on the best efforts obligations of the parties. The amount of the termination fee was later calculated to be $2,100,000 by BNP, which was concurred upon by XMS.

On September 25, 2020, in Mr. Freeland and Mr. Elmin’s daily update call, Mr. Elmin sought to reduce the offer price to $6.75 per share. Mr. Freeland reaffirmed the $7.00 per share price previously agreed upon between the parties.

On September 25, 2020, the board met, with representatives of management, XMS and Dykema present. Mr. Freeland updated the board on his call with Mr. Elmin earlier in the day. A representative from Dykema reported that he believed all major issues on the merger agreement had been resolved between the parties and that Dykema was waiting for a mark-up of the merger agreement from Pillsbury, which was received later that night. Later that evening, Dykema circulated to the board a redlined copy of the merger agreement and a redlined summary of the draft merger agreement, in both cases reflecting changes from the versions presented at the September 8, 2020 board meeting.

On September 26, 2020, Dykema circulated to the board a Transaction Summary, an updated Board Fiduciary Duty Memorandum, including a form of board of directors resolutions, and a financial analysis prepared by XMS. The financial analysis prepared by XMS included discounted cash flow, comparable public company, precedent transaction, premiums paid and Company trading history analyses.

On September 27, 2020, the board held a meeting attended by representatives of management, XMS and Dykema. Prior to the board meeting, the members of the board had been provided with materials relating to the proposed merger agreement as discussed above. A representative of Dykema presented a summary of the material terms of the

proposed transactions with Parent, including the voting agreement that the Harbert Shareholders proposed to enter into with Parent in support of the transactions. Representatives from XMS reviewed its financial analyses with the board. XMS then rendered to the board an oral opinion that, as of September 27, 2020, and based upon and subject to assumptions, procedures, considerations and limitations upon the review undertaken in preparing its opinion, the proposed consideration of $7.00 per share for all of the outstanding shares of the Company’s common stock to be paid to the public shareholders of the Company in the proposed transaction with Parent was fair, from a financial point of view, to such shareholders. The oral opinion of XMS was subsequently confirmed and updated by the delivery after the meeting of a written fairness opinion, dated September 27, 2020. Additional information pertaining to the fairness opinion of XMS is set forth in this section of the proxy statement under the caption “—Opinion of XMS Capital Partners, LLC.” A representative of Dykema reviewed with the board a summary of the material terms of the proposed merger agreements, its fiduciary duties in connection with evaluating the proposed transaction with Parent and preliminary drafts of resolutions to be considered by the board prior to entry into a definitive merger agreement.

Among other things, the board then, taking into account all of the foregoing and its previous meetings and presentations, unanimously, among other matters, (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, fair and in the best interests of, the Company and its shareholders; (ii) declared it advisable to enter into the merger agreement and consummate the merger upon the terms and subject to the conditions set forth therein; (iii) approved the execution, delivery and performance by the Company of the merger agreement and the consummation of the transactions contemplated thereby, including the merger, upon the terms and subject to the conditions set forth therein; (iv) agreed that the merger, upon the terms, and subject to the conditions, contained in the merger agreement, is authorized and approved in accordance with the requirements of the MBCA; (v) resolved to recommend that the shareholders of the Company approve the merger agreement in accordance with the MBCA; and (vi) approved the voting agreement.

After the board meeting and on September 27, 2020, the Company, Parent and Merger Sub executed and delivered the merger agreement. In addition, each of the Harbert Shareholders executed the voting agreement.

Prior to the commencement of trading on NASDAQ on September 28, 2020, the Company issued a press release announcing the execution of the merger agreement.

Recommendation of the Company’s Board of Directors

After careful consideration, the board has unanimously determined that the terms of the merger agreement and the transactions contemplated by the merger agreement, including the merger, are fair to and in the best interests of the Company and its shareholders, declared it advisable and in the best interests of the Company and its shareholders to enter into the merger agreement and approved the execution, delivery and performance of the merger agreement, resolved that the merger agreement be submitted for approval by the shareholders of the Company at the annual meeting of shareholders and recommended that the shareholders of the Company vote in favor of the approval of the merger agreement and the merger, in each case on the terms and subject to the conditions set forth in the merger agreement.

The board unanimously recommends that you vote (1) “FOR” the proposal to adopt the merger agreement; (2) “FOR” approval of the proposal to adjourn the annual meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes at the time of the annual meeting to approve the merger proposal or the absence of a quorum and (3) “FOR” approval, by non-binding advisory vote, of the compensation that will or may be paid by the Company to certain named executive officers in connection with the merger contemplated by the merger agreement.

Reasons for the Merger

The board of Perceptron, a majority of which is comprised of independent directors, monitored the negotiation of, and carefully reviewed and considered the terms and conditions of, the merger agreement and the transactions contemplated by the merger agreement. The board has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable, and fair to, and in the best interest of Perceptron and its shareholders and recommended that its shareholders adopt the merger agreement.

The board made its unanimous determination that the merger, the terms of the merger agreement and the other transactions contemplated by the merger agreement are advisable, fair to, and in the best interests of Perceptron and its shareholders and adopted and declared advisable the merger agreement, the merger and the other transactions

contemplated by the merger agreement based, in part, after consultation with independent legal and financial advisors and the Company’s management. In recommending that shareholders vote in favor of approval of the merger agreement, the board considered a number of factors, including the following (which factors are not intended to be exhaustive and are not necessarily presented in order of relative importance):

Attractive Value. The board considered that the per share merger consideration of $7.00 per share provides the Company’s shareholders with attractive value for their shares of common stock.

The board evaluated the current and historical trading prices of the Company’s common stock, including the market performance of the Company’s common stock relative to other participants in the Company’s industry and general market indices, and the historical volatility of the Company’s common stock, as compared to the per share merger consideration, including the fact that the per share merger consideration of $7.00 represents a premium of approximately 71% over the closing price per share of the Company’s common stock as reported on NASDAQ on September 25, 2020, the last trading day before the public announcement of the signing of the merger agreement, and a premium of approximately 66% to the 30-day average closing share price of $4.22 as of September 25, 2020.

The board also considered the merger consideration of $7.00 in cash in relation to the various financial analyses prepared by XMS with respect to the value of the Company as an independent entity, taking into account the Company’s financial projections, as well as the operational risks and challenges associated with the attainment of such projections.

Best Alternative for Maximizing Shareholder Value. The board believed that the per share merger consideration was more favorable to the Company’s shareholders than the likely value that would result from other strategic alternatives reasonably available to the Company, including, but not limited to, remaining an independent public company and pursuing the Company’s stand-alone, strategic long-term plan. This belief was based on, among other things, the board of directors’ assessment of:

Process to Evaluate Strategic Alternatives. The board reviewed and considered the sale process undertaken by the Company, including:

Certainty of Consideration. The board considered the fact that the per share merger consideration consists solely of cash, providing the Company’s shareholders with certainty of value and liquidity upon the completion of the merger, at a significant premium to the trading price of the Company’s common stock immediately prior to the public announcement of the merger agreement, particularly when viewed in light of the Company’s future prospects, its ability to execute on its long-range business plan as a stand-alone entity, and the market, economic and other risks and uncertainties inherent in owning an equity interest in a public company (many of which are beyond the Company’s control).

Receipt of Fairness Opinion from XMS. The board considered that in connection with the merger, XMS rendered its oral opinion, subsequently confirmed in writing, to the effect that, as of September 27, 2020, and based upon and subject to the various factors, assumptions, qualifications, limitations and other matters set forth therein, the per share merger consideration of $7.00 per share in cash to be paid to the public shareholders of the Company was fair, from a financial point of view, to such shareholders, as more fully described below in the section captioned “—Opinion of XMS Capital Partners, LLC.” and which written opinion is attached in its entirety as Annex B to this proxy statement. The summary of the opinion of XMS herein is qualified in its entirety by reference to the full text of the opinion. We encourage you to read XMS’ opinion and the summary of XMS’ opinion below carefully and in their entirety.

Speed; Likelihood of Completion; Certainty of Payment. The board considered its belief that, absent a superior proposal, the merger represents a transaction that would likely be consummated based upon, among other factors:

Opportunity for the Company’s Shareholders to Vote. The board considered the fact that the merger would be subject to the approval of the Company’s shareholders, and that the shareholders would be free to evaluate the merger and vote for or against the adoption of the merger agreement at the annual meeting.

Support of the Company’s Largest Shareholder. The board considered the fact that its largest shareholder, the investment group consisting of Harbert Discovery Fund, LP, Harbert Discovery Fund GP, LLC, Harbert Fund Advisors, Inc., Harbert Management Corporation, Jack Bryant, Kenan Lucas and Raymond Harbert (collectively, the “Harbert Shareholder”, and individually, the “Harbert Shareholders”) agreed to support the merger pursuant to a voting and support agreement the Harbert Shareholders entered into with Parent. The Harbert Shareholders own collectively approximately 10.5% of the Company’s outstanding common stock. A description of the voting and support agreement is provided below in the Section captioned “Proposal 1: The Merger—The Voting And Support Agreement”.

Opportunity to Receive Alternative Proposals, Change Board Recommendation and Terminate the Transaction in Order to Accept a Superior Proposal. The board considered the terms of the merger agreement permitting the Company to receive unsolicited alternative proposals, and the other terms and conditions of the merger agreement including:

Voting and Support Agreement. The board of directors considered the terms of the voting and support agreement, which will terminate upon certain circumstances, including (i) upon termination of the merger agreement by the mutual written consent of Parent and each of the Harbert Shareholders, (ii) the termination of the merger agreement in accordance with its terms or (iii) the consummation of the merger.

Other Considerations. In its deliberations concerning the merger and the other transactions contemplated by the merger agreement, the board also considered and balanced against the factors potentially weighing in favor of the merger a number of uncertainties, risks, restrictions and other factors potentially weighing against the merger, including the following (which are not necessarily presented in order of relative importance):

After taking into account all of the factors set forth above, as well as others, the board concluded that the risks, uncertainties, restrictions and potentially negative factors associated with the merger were outweighed by the potential benefits of the merger to our shareholders.

The above discussion of the information and factors considered by the board is not intended to be exhaustive, but indicates the material matters considered. In reaching its determination and recommendation, the board based its recommendation on the totality of information presented and did not quantify, rank or assign any relative or specific weight to any of the foregoing factors, and individual members of the board may have considered various factors differently. The board did not undertake to make any specific determination as to whether any specific factor, or any particular aspect of any factor, supported or did not support its ultimate recommendation. Moreover, in considering the information and factors described above, individual members of the board each applied his own personal business judgment to the process and may have given differing weights to differing factors. The board based its unanimous recommendation on the totality of the information presented. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement entitled “Cautionary Statement Concerning Forward-Looking Statements.”

The Company does not, as a matter of general practice, publicly disclose financial projections due to the difficulty of predicting the Company’s results. The Company is especially wary of making such projections for extended periods into the future due to, among other reasons, the unpredictability of the underlying assumptions and estimates. However, in connection with the Company’s review of strategic alternatives, including a potential sale of the Company, the Company provided the board and XMS with certain non-public, unaudited prospective financial information prepared by Company management for the fiscal years ending June 30, 2021 through 2025. This prospective financial information was provided by Company management and was relied upon and used as the basis for the financial analyses conducted by XMS and summarized below in “Opinion of XMS Capital Partners, LLC.”

A summary of this financial information (collectively, the “Company Projections”) is provided below only to provide shareholders of the Company with access to certain prospective financial information concerning the Company that was made available to the board and XMS, as described herein. The Company Projections were not prepared with a view for public disclosure, but rather solely for internal use of the Company. The Company Projections are not included in this proxy statement in order to influence any shareholder of the Company to make any decision regarding the proposals relating to the transactions contemplated by the merger agreement or for any other purpose, and readers of this proxy statement are cautioned not to place any reliance on the Company Projections included herein.

The Company Projections included in this proxy statement are the responsibility of the Company’s management. The Company Projections represent the Company’s reasonable estimates and good faith judgments as to the future growth and financial performance of the Company, including forecasts of revenues and Adjusted EBITDA, that the Company believed were reasonable at the time the Company Projections were prepared, taking into account relevant information available at the time. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. Although a summary of the Company Projections is presented with numerical specificity, it reflects numerous assumptions and estimates made by the Company’s management, including assumptions and estimates with respect to future industry performance, general business, economic, regulatory, litigation, market and financial conditions, and matters specific to the Company’s business, all of which are difficult to predict and many of which are beyond the Company’s control. The Company Projections reflect the subjective judgment of the Company’s management in many respects and, thus, are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. As such, the Company Projections constitute forward-looking statements and are subject to risks and uncertainties that could cause actual results to differ materially from the results forecasted in such prospective information, including the factors described under “Cautionary Statement Concerning Forward-Looking Statements,” the Company’s performance, industry performance, general business and economic conditions, customer requirements, competition, adverse changes in applicable laws, regulations or rules, and the various risks set forth in the reports filed by the Company with the SEC. The Company Projections cover multiple years and such information by its nature becomes less reliable with each successive year. In addition, the Company Projections will be affected by the Company’s ability to achieve strategic goals, objectives and targets over the applicable periods. The Company Projections also reflect assumptions of the Company’s management as to certain business decisions that are subject to change. In addition, the Company Projections do not take into account any circumstances or events occurring after the date that they were prepared and do not give effect to the merger. As a result of each of the foregoing, the Company cannot assure you that the estimates and assumptions made in preparing the Company Projections were or are accurate, that the projected results will be realized or that actual results will not be significantly higher or lower than projected results. Such prospective financial information cannot, therefore, be considered a guaranty of future operating results, and this information should not be relied on as such.

The Company Projections include certain non-GAAP measures (including Adjusted EBITDA) because the Company believed such measures would be useful to the board and XMS in evaluating the prospects of the Company. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with GAAP, including net income from continuing operations. The Company’s calculations of these non-GAAP measures may differ from others in its industry and are not necessarily comparable with information presented under similar sounding captions used by other companies.

The Company Projections were not prepared with a view toward complying with GAAP, the published guidelines of the SEC regarding projections and the use of non-GAAP financial measures, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. In addition, the Company Projections are unaudited and neither the Company’s independent registered public accounting firm, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the Company Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and they assume no responsibility for, and disclaim any association with, the Company Projections.

The inclusion of the Company Projections should not be regarded as an admission, representation or indication that any of the board, the independent directors, the Company, the Company’s management, XMS, any of their respective legal and financial advisors or any other person considered, or now considers, the forecasts to be material or a reliable prediction of future results, and the Company Projections should not be relied upon as such. In fact, the board and the Company’s management view the Company Projections as non-material because of the inherent risks and uncertainties associated with such long range forecasts.

No representation or warranty was made in the merger agreement concerning prospective financial information, including the Company Projections. The Company Projections should only be evaluated in conjunction with the historical financial statements and other information regarding the Company contained in its public filings with the SEC.

The Company does not intend to update or otherwise revise the Company Projections to reflect any condition, circumstance or event existing after the date they were prepared or to reflect the occurrence of any future event (including any failure of the transactions contemplated by the merger agreement to occur), even in the event that any or all of the assumptions underlying the Company Projections are in error or are no longer appropriate. In light of the foregoing factors and uncertainties inherent in the Company Projections, readers of this proxy statement are cautioned not to place any reliance on the portions of the Company Projections set forth below.

Certain of the measures included in the Company Projections may be considered non-GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies. These non-GAAP measures are included in this proxy statement because such information was made available to the board and XMS and used in the process leading to the execution of the merger agreement, as described elsewhere in this proxy statement. Reconciliations of certain of these measures are provided below. The figures included in the reconciliation are part of the Company Projections, and are subject to and should be read together with the disclosures above.

Adjusted EBITDA. Adjusted EBITDA, for the periods presented, represents net (loss) income before interest expense, net; income tax (benefit) expense; and depreciation and amortization expense.

A reconciliation of the Non-GAAP financial measures is provided below:

XMS was retained to act as financial advisor to the board in connection with the possible sale of the Company. As part of its engagement, the board requested that XMS render an opinion to the board as to whether the merger consideration to be received by holders of shares of the Company common stock (other than Excluded Holders) was fair, from a financial point of view, to such holders. On September 27, 2020, XMS delivered its oral opinion to the board (subsequently confirmed in writing on September 27, 2020) that, as of September 27, 2020 and based upon and subject to the assumptions, qualifications and limitations stated therein, the $7.00 per share in cash to be received by holders of shares of Company common stock (other than Excluded Holders) was fair, from a financial point of view, to such holders.

THE FULL TEXT OF XMS’ WRITTEN OPINION, DATED SEPTEMBER 27, 2020, IS ATTACHED AS ANNEX B TO THIS PROXY STATEMENT AND INCORPORATED INTO THIS PROXY STATEMENT BY REFERENCE. YOU ARE URGED TO READ THE ENTIRE OPINION CAREFULLY AND IN ITS ENTIRETY TO LEARN ABOUT THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY XMS IN RENDERING ITS OPINION. THE ANALYSIS PERFORMED BY XMS SHOULD BE VIEWED IN ITS ENTIRETY; NONE OF THE METHODS OF ANALYSIS SHOULD BE VIEWED IN ISOLATION. XMS’ FAIRNESS OPINION WAS DIRECTED TO THE BOARD FOR ITS USE AND BENEFIT IN EVALUATING THE FAIRNESS OF THE MERGER CONSIDERATION TO BE RECEIVED BY HOLDERS OF COMMON STOCK (OTHER THAN EXCLUDED HOLDERS) IN THE MERGER. XMS’ FAIRNESS OPINION DOES NOT ADDRESS ANY OTHER ASPECTS OF THE MERGER OR ANY RELATED TRANSACTION, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF COMMON STOCK AS TO HOW SUCH HOLDER SHOULD VOTE WITH RESPECT TO THE MERGER OR ACT ON ANY MATTERS RELATING TO THE PROPOSED MERGER. XMS DID NOT ADDRESS THE MERITS OF THE UNDERLYING DECISION BY THE COMPANY TO ENGAGE IN THE MERGER. THE FOLLOWING SUMMARY OF XMS’ FAIRNESS OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF ITS FAIRNESS OPINION ATTACHED TO THIS PROXY STATEMENT AS ANNEX B.

In arriving at its opinion, XMS:

In connection with the opinion, XMS also took into account the accepted financial and investment banking procedures and considerations that it deemed relevant. In connection with XMS’ engagement, XMS was requested to approach, and held discussions with, third parties to solicit indications of interest in a possible acquisition of the Company.

In rendering its opinion, XMS assumed and relied without independent verification and with the Company’s consent, the accuracy and completeness of all financial and other information provided to XMS by the Company or otherwise reviewed by or discussed with XMS. XMS was not asked to and did not undertake an independent verification of any of such information and it does not assume any responsibility or liability for the accuracy or completeness thereof. With respect to financial forecasts relating to the Company provided to XMS by management of the Company or otherwise reviewed by or discussed with XMS, XMS was advised by management of the Company that such forecasts were reasonably prepared on bases reflecting the best currently available estimates and judgments of management of the Company and XMS assumed, with the Company’s consent, that the financial results reflected in such forecasts and other information and data would be realized in the amounts and at the times projected. All such financial forecasts are based on numerous variables and assumptions that are inherently uncertain, including, without limitation, factors related to general economic and competitive conditions. Accordingly, actual results could vary significantly from those set forth in such financial forecasts. XMS was not asked to and did not undertake an independent verification of any of such financial forecasts and XMS does not assume any responsibility or liability for the accuracy or completeness thereof.

XMS assumed, without independent verification and with the Company’s consent, that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of the Company since the date of the last financial statements of the Company provided to XMS by the Company. XMS did not make any independent evaluation or appraisal of the Company’s assets or liabilities (contingent or otherwise), the collateral securing such assets or liabilities, or the collectability of any such assets, nor was XMS furnished with such evaluations or appraisals, and it does not assume any responsibility or liability for the accuracy or completeness thereof. XMS did not evaluate the solvency or fair value of the Company or Parent under any state, federal or other laws relating to bankruptcy, insolvency or similar matters.

Representatives of the Company advised XMS, and XMS further has assumed, with the Company’s consent, that the final terms of the merger agreement would not vary materially from those set forth in the draft reviewed by XMS. In addition, XMS assumed, with the Company’s consent, that the merger would be consummated in accordance with the terms set forth in the merger agreement, without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents and releases for the merger, no delay, limitation, restriction or condition will be imposed that would have an adverse

effect on the Company or the merger. XMS further assumed that the Company relied upon the advice of its counsel, independent accountants and other advisors (other than XMS) as to all legal, financial reporting, tax, accounting and regulatory matters with respect to the Company, the merger and the merger agreement.

XMS’ opinion is limited to whether the per share merger consideration to be paid to the holders of shares of Company common stock is fair to such holders (other than Excluded Holders), from a financial point of view, and does not address any other terms, aspects or implications of the merger including, without limitation, the form or structure of the merger, or any terms, aspects or implications of any voting, support, shareholder or other agreements, arrangements or understandings contemplated or entered into in connection with the merger or otherwise. XMS’ opinion also does not consider, address or include: (i) the relative merits of the merger as compared to any alternative business strategies that might exist for the Company or the effect of any other transaction in which the Company might engage; (ii) the legal, tax, accounting or regulatory consequences of the merger on the Company or the holders of common stock; or (iii) the fairness of the amount or nature of any compensation to any of the Company’s officers, directors or employees, or class of such persons, relative to the compensation to the holders of common stock. Furthermore, XMS does not express any opinion as to the prices, trading range or volume at which the Company’s securities will trade following public announcement or consummation of the merger. XMS’ opinion is necessarily based upon information available to XMS, and financial, economic, regulatory, market and other conditions and circumstances existing, as of September 27, 2020. Events occurring after September 27, 2020 could materially affect the opinion. XMS has not undertaken to update, revise, reaffirm or withdraw its opinion or otherwise comment upon events occurring after the date thereof.

In preparing its opinion, XMS performed a variety of financial and comparative analyses. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant quantitative and qualitative methods of financial analysis and the applications of those methods to the particular circumstances and, therefore, is not necessarily susceptible to partial analysis or summary description. XMS believes that its analyses must be considered as a whole. Considering any portion of XMS’ analyses or the factors considered by XMS, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying the conclusion expressed in XMS’ opinion. In addition, XMS may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described below should not be taken to be XMS’ view of the Company’s actual value. Accordingly, the conclusions reached by XMS are based on all analyses and factors taken as a whole and also on the application of XMS’ own experience and judgment.

In performing its analyses, XMS made numerous assumptions with respect to industry performance, general business, economic, monetary, regulatory, market and other conditions and other matters, many of which are beyond the Company’s and XMS’ control. The analyses performed by XMS are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. In addition, analyses relating to the per share value do not purport to be appraisals or to reflect the prices at which the shares of Company common stock may actually be sold. The analyses performed were prepared solely as part of XMS’ analysis of the fairness, from a financial point of view, of the merger consideration to be received by holders of the common stock (other than Excluded Holders) to such holders and were provided to the board in connection with the delivery of XMS’ opinion.

The following is a summary of the material financial and comparative analyses performed by XMS in connection with XMS’ delivery of its opinion and that were presented to the board at its meeting on September 27, 2020. The financial analyses summarized below include information presented in tabular format. In order to fully understand XMS’ financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data described below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of XMS’ financial analyses. The following summary does not purport to be a complete description of the financial analyses performed by XMS. The following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before September 27, 2020 and is not necessarily indicative of current or future market conditions.

XMS reviewed and compared certain financial information relating to the Company to corresponding publicly available information to the following diverse range of 12 U.S. or international publicly traded industrial technology companies that XMS deemed relevant:

For the selected comparable company analysis, XMS calculated enterprise value (which is defined, as applicable, as fully diluted equity value, calculated using the treasury stock method and based on closing prices per share on September 25, 2020, plus total debt, preferred equity and non-controlling interests less total cash and cash equivalents, investments in associates or equity method investments) as a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”) expected for calendar year 2021. Financial data of the selected comparable companies were based on publicly available research analysts’ estimates, public filings, and other publicly available information. Financial data of the Company was based on publicly available information and the financial forecasts (including Adjusted EBITDA) provided to XMS by Company management. Based on a qualitative and quantitative review of the underlying business characteristics of the comparable companies and on XMS’ experience and expertise, XMS exercised its professional judgment to apply an illustrative range of EV/CY 2021E EBITDA multiples of 8.0x to 10.0x to the Company’s forecasted CY 2021E results, which represented (i) a premium to the low multiple of the selected comparable companies and (ii) a discount to the average multiple of the selected comparable companies.

The results of this analysis are summarized as follows:

No company utilized in the selected comparable company analysis is identical to the Company. In evaluating the selected companies, XMS made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions, and other matters.

Although XMS compared the trading multiples of the selected public companies to those implied for the Company, none of the selected public companies is directly comparable to the Company. Accordingly, any analysis of the selected public companies involves considerations and judgments concerning the differences in financial and operating characteristics and other factors that would affect the analysis of trading multiples of the selected public companies.

XMS reviewed 15 precedent transactions involving target companies in the industrial automation and metrology industries that were announced subsequent to January 1, 2009 with enterprise value of between $90 million and $1.3 billion that XMS deemed relevant. XMS’ analysis was based solely on publicly available information regarding such transactions. XMS did not take into account any announced or consummated transaction whereby relevant financial information was not publicly disclosed and available. The selected transactions were not intended to be representative of the entire range of possible transactions in the respective industries. The transactions examined were:

XMS reviewed the consideration paid in the selected transactions in terms of the enterprise value of such transactions as a multiple of EBITDA for the last twelve months (“LTM”) and expected EBITDA for the fiscal year in which the applicable transaction was announced. Financial data of the selected transactions was based on publicly available research analysts’ estimates, public filings, and other publicly available information. Financial data of the Company was based on publicly available information and the financial forecasts provided to XMS by Company management. Based on a qualitative and quantitative review of the underlying business characteristics of the comparable companies and on XMS’ experience and expertise, XMS exercised its professional judgment, to apply an illustrative range of forward EBITDA multiples of 9.0x to 11.0x to the Company’s forecasted CY 2021E Adjusted EBITDA, which represented (i) a premium to the low multiple of the selected transactions and (ii) the average multiple of the selected transactions.

The results of this analysis are summarized as follows:

Although XMS analyzed the multiples implied by the selected transactions and compared them to the implied transaction multiple of the Company, none of these transactions or associated companies is identical to the Company or the Merger. Accordingly, any analysis of the selected transactions necessarily involved complex considerations and judgments concerning the differences in financial and operating characteristics, parties involved and terms of their transactions and other factors that would necessarily affect the implied value of the Company versus the values of the companies in the selected transactions.

XMS reviewed data from 144 acquisitions of non-financial and non-real estate companies primarily listed on NASDAQ or the NYSE with market capitalization between $50 million and $150 million announced from January 1, 2010 through September 25, 2020 in which 100% of the target’s equity was acquired for cash consideration. Specifically, XMS analyzed the acquisition price per share in these transactions relative to the target companies’ (i) stock price one day prior to announcement and (ii) the 20-day VWAP prior to announcement. The 25^th percentile to 75^th percentile acquisition premia observed for these transactions were 19% to 61% (with a median of 39%) for one-day prior to announcement and 24% to 66% (with a median of 36%) for the 20-day VWAP prior to announcement. This analysis indicated the following implied equity value per share reference ranges for the Company, as compared to the per share merger consideration:

Although XMS analyzed the offer price premia for the selected transactions, none of these transactions or associated companies is identical to the Company or the Merger.

XMS performed a discounted cash flow analysis of the Company by calculating the estimated present value (as of June 30, 2020) of the stand-alone unlevered, after-tax free cash flows that the Company was forecasted to generate during the fiscal years ending June 30, 2021 through June 30, 2025 based on Company management forecasts, plus a terminal value at fiscal year 2025 based upon EBITDA exit multiples, discounted back to June 30, 2020. The terminal values of the Company were calculated by applying the Company’s fiscal year 2025 Adjusted EBITDA to a selected range of EBITDA exit multiples of 8.0x to 10.0x, with a mid-point of 9.0x. XMS performed discounted cash flow analyses by calculating the range of net present values for each period from fiscal year 2021 to fiscal year 2025 based on a discount rate of 14.0% to 16.0%, with a mid-point of 15.0%, reflecting estimates of the Company’s weighted average cost of capital, calculated utilizing the Capital Asset Pricing Model and inclusive of certain Company-specific inputs, including an equity risk premium and cost of equity. This analysis indicated the following implied equity value per share reference ranges for the Company, as compared to the per share merger consideration:

In addition, XMS performed a discounted cash flow analysis of the Company by calculating the estimated present value (as of June 30, 2020) of the stand-alone unlevered, after-tax free cash flows that the Company was forecasted to generate during the fiscal years ending June 30, 2021 through June 30, 2030 based on Company management forecasts for the fiscal years ending June 30, 2021 through June 30, 2025 and an extrapolation prepared by XMS and reviewed by Company management for the fiscal years ending June 30, 2026 through June 30, 2030, plus a terminal value at fiscal year 2030 based upon EBITDA exit multiples, discounted back to June 30, 2020. The terminal values of the Company were calculated by applying the Company’s fiscal year 2030 Adjusted EBITDA to a selected range of EBITDA exit multiples of 8.0x to 10.0x, with a mid-point of 9.0x. XMS performed discounted cash flow analyses by calculating the range of net present values for each period from fiscal year 2021 to fiscal year 2030 based on a discount rate of 14.0% to 16.0%, with a mid-point of 15.0%, reflecting estimates of the Company’s weighted average cost of capital, calculated utilizing the Capital Asset Pricing Model and inclusive of certain Company-specific inputs, including an equity risk premium and cost of equity. This analysis indicated the following implied equity value per share reference ranges for the Company, as compared to the per share merger consideration:

XMS acted as financial advisor to the Company in connection with the proposed Merger and will receive a fee for such services, currently estimated to be $1.25 million, from the Company upon the closing of the Merger, against

which XMS will provide the Company a total credit of $50,000. For XMS’ services in connection with the delivery of the opinion to the board, the Company has paid XMS a fee of $200,000. The opinion fee was not contingent upon the consummation of the Merger or the conclusions reached in XMS’ opinion. The Company also has agreed to indemnify XMS against certain liabilities arising out of its engagement and reimburse certain of its expenses. In the prior two-year period, XMS did not receive any fees from the Company other than those related to its engagement relating to the merger.

We anticipate that the total amount of funds necessary to complete the merger and the other transactions contemplated by the merger agreement will be approximately $72 million. This amount includes the funds needed to: (i) make the payment of all amounts payable our shareholders under the merger agreement; (ii) repay, prepay or discharge (after giving effect to the merger) the principal amount of and interest on all outstanding indebtedness of the Company required to be repaid at the effective time of the merger under the merger agreement; and (iii) pay all fees and expenses required to be paid at the closing by Parent or Merger Subsidiary under the merger agreement.

We anticipate that the customary fees and expenses to be incurred by the Company in connection with the transactions contemplated by the merger agreement will be approximately $3.3 million.

In considering the recommendations of the board with respect to the merger, the Company’s shareholders should be aware that the Company’s directors and executive officers have certain interests, including financial interests, in the merger that may be different from, or in addition to, the interests of the Company’s shareholders generally. The board was aware of these interests and considered them, among other matters, in approving the merger agreement, and in making its recommendation that the Company’s shareholders approve the merger. See the sections in this proxy statement entitled “Proposal 1: The Merger—Background of the Merger” and “Proposal 1: The Merger—Reasons for the Merger;” above. These interests are described in more detail below, and certain of them are quantified in the narrative and the table below.

Company Options. Immediately prior to the effective time, each outstanding and unexercised option to purchase shares of Company common stock granted under the Perceptron stock plan shall, automatically and without any required action on the part of the holder thereof, become immediately vested and be cancelled and will only entitle the holder of such award to receive (without interest) an amount in cash equal to the product of (x) the total number of shares of Company common stock subject to the stock option immediately prior to the effective time multiplied by (y) the excess, if any, of the merger consideration per share over the exercise price per share of such stock option.

Company Restricted Stock Units. Immediately prior to the effective time, each outstanding award of restricted stock units under the Perceptron stock plan shall automatically and without any required action on the part of the holder thereof, become immediately vested and be cancelled and will only entitle the holder of such award to receive (without interest) an amount in cash equal to the product of (x) the total number of shares subject to such award immediately prior to the effective time multiplied by (y) the merger consideration per share.

Company Performance Share Units. Immediately prior to the effective time, each outstanding award of performance share units granted under the Perceptron stock plan shall, automatically and without any required action on the part of the holder thereof, become immediately vested at the target level of performance and be cancelled and will only entitle the holder of such award to receive (without interest) an amount in cash equal to the product of (x) the target number of shares subject to such award immediately prior to the effective time multiplied by (y) the merger consideration per share.

Company Purchase Rights. The offering period under the Perceptron stock purchase plan that is in effect at the time of the consummation of the merger will be the last offering period under the Perceptron stock purchase plan. After the date of the merger agreement, participants in the Perceptron stock purchase plan will not be permitted to increase the rate of payroll contributions to the plan. Any shares of Company common stock purchased through the Perceptron stock purchase plan will be cancelled at the effective time and receive the same $7.00 per share in cash in the merger as all other shares of Company common stock.

Company Equity Plan and Employee Stock Purchase Plan. The Perceptron stock plan and the Perceptron stock purchase plan will terminate immediately following the effective time, contingent upon the occurrence of the effective time.

Quantification of Payments. For an estimate of the amounts that would be payable to each of the Company’s named executive officers for their Company equity awards, see “Quantification of Payments and Benefits to the Company’s Named Executive Officers” below. The estimated aggregate amount that would be payable to the Company’s three executive officers for their equity-based awards if the effective time occurred and they experienced a qualifying termination of employment on December 31, 2020 is $125,687. We estimate that the aggregate amount that would be payable to the Company’s five non-employee directors for their Company equity awards received for board service if the effective time occurred on December 31, 2020 is $31,840. As of December 31, 2020, the five non-employee members of the board of directors hold stock options that would entitle them to receive the amounts set forth in the table below and did not hold any restricted stock units or performance share units. The following table does not include shares of Company common stock that the directors are entitled to receive pursuant to the Directors Stock Purchase Rights Option described under “Proposal 4: Election of Directors – Standard Director Compensation Arrangements” since such shares are not equity awards that will be cancelled in connection with the merger.

We have entered into severance agreements with Messrs. Roeschlein and Van Valkenburg. Under the terms of Mr. Roeschlein’s severance agreement, we are required to provide Mr. Roeschlein with six months’ notice prior to an involuntary termination of his employment. If we provide Mr. Roeschlein with less than six months’ notice, Mr. Roeschlein will receive a cash severance benefit equal to the portion of his then current annual base salary, as in effect at the time of the termination of Mr. Roeschlein’s employment, to cover the applicable period that is less than the full six month notice period (“Continuation Period”), subject to Mr. Roeschlein’s execution of a general release and Mr. Roeschlein’s continued employment with the Company up to the first day of the Continuation Period. Mr. Roeschlein is not entitled to receive the cash severance benefit if the involuntary termination of his employment is due to death, “Disability” or “Cause” (each as defined in his severance agreement).

Mr. Van Valkenburg’s severance agreement provides that, if his employment is terminated for any reason other than death, disability or Cause (provided such termination constitutes a “separation from service” under Code Section 409A), or he resigns for “Good Reason,” six months prior to or within two years after a “Change in Control” (as such terms are defined in his severance agreement), then he will be entitled to an amount of severance equal to one times his current annual base salary, as in effect immediately prior to his termination, a prorated portion of his target bonus for the year of termination, based on the number of days worked in the year of termination, continuation of Company-provided health benefits for one year or, if earlier, his date of death, automobile benefits for one year or, if earlier, his date of death, other welfare benefits for one year and continued coverage under director and officer liability insurance policies for six years. Base salary and bonus severance payments and other benefits will be provided over the period during which we are required to provide the benefit. To the extent that any severance payments would not be exempt from Code Section 409A and the executive is determined to be a “specified employee” as defined under Code Section 409A, then such payments will be suspended for six months from the date of the executive’s termination of employment. Suspended payments will be paid in a lump-sum, plus interest at the prime rate, plus two percent, at the end of the suspension period. The special severance expires three years from the date of the severance agreement, except that such expiration date shall be extended for consecutive one year periods, unless, at least 180 days prior to the expiration date, we notify Mr. Van Valkenburg in writing that we are not extending the term of these provisions.

Mr. Roeschlein and Mr. Van Valkenburg have each entered into our standard executive agreement not to compete, restricting his right to compete with us for the longer of twelve months or the period in which we are required to make payments to the executive, and standard employee proprietary information and inventions agreement, containing

confidentiality provisions and a two-year restriction on soliciting our employees. We have the right to cease all further payments under the executive officer’s severance agreement in the event that the executive officer violates the executive non-competition agreement. The executive officer must sign a standard release to receive payments under the severance agreements, including standard non-disparagement provisions.

Payments under Mr. Van Valkenburg’s severance agreement, when aggregated with any other “golden parachute” amounts (defined under Code Section 280G as compensation that becomes payable or accelerated due to a change in ownership or effective control of the Company as described in Code Section 280G) payable under this agreement or any of our other plans, agreements or policies, shall not exceed the golden parachute cap under Code Sections 280G and 4999.

“Change in Control” for purposes of the severance agreements and the Perceptron stock plan is generally defined as:

To the extent the agreement or award under the Perceptron stock plan is subject to Code Section 409A, the event shall not be considered a Change in Control unless it is also a change in ownership, effective control or in the ownership of a substantial portion of assets of the Company, within the meaning of Code Section 409A.

“Cause” is generally defined as the executive’s:

“Good Reason” is generally defined as the occurrence of any of the following events without the executive’s written consent, if the executive terminates employment within one year following the occurrence of such event:

There are no post-closing arrangements or agreements, including employment agreements, with executive officers of the Company contemplated in the merger agreement.

Pursuant to the merger agreement, from and after the effective time, the surviving corporation will indemnify certain persons, including the Company’s directors and executive officers, for certain matters. In addition, for a period of not less than six years from the effective time, the surviving corporation will maintain a directors and officers’ liability insurance policy for the benefit of certain persons, including the Company’s directors and executive officers.

In accordance with Item 402(t) of Regulation S-K, the table below sets forth the amount of payments and benefits that each of the Company’s named executive officers would receive in connection with the merger. For purposes of calculating such amounts, we have assumed (i) a closing date of December 31, 2020 and (ii) a termination of each named executive officer’s employment under circumstances entitling the executive to severance payments and benefits immediately following the merger. These assumptions may or may not actually occur or be accurate on the relevant date. As a result of the foregoing assumptions, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below.

As of November 4, 2020, the Company is aware of four lawsuits that were filed in federal court by purported shareholders of the Company, each challenging the completeness and accuracy of the disclosures in this proxy statement and seeking to compel additional disclosures prior to a shareholders meeting and/or closing of the merger. On October 26, 2020, Shiva Stein filed a complaint in the United States District Court for the District of Delaware against the Company and the Company’s board of directors, captioned Stein v. Perceptron, Inc., et al., Case No. 1:20-cv-01444 (D. Del), referred to as the “Stein Complaint”. On October 27, 2020, Stephan Baroni filed a complaint in the United States District Court for the District of Delaware against the Company, the Company’s board of

directors, Parent and Merger Subsidiary, captioned Baroni v. Perceptron, Inc., et al., Case No. 1:20-cv-01452 (D. Del.), referred to as the “Baroni Complaint”. On October 27, 2020, Amir Rauf filed a complaint in the United States District Court for the Southern District of New York against the Company and the Company’s board of directors, captioned Rauf v. Perceptron, Inc., et al., Case No. 1:20-cv-08980 (S.D.N.Y.), referred to as the “Rauf Complaint.” On November 2, 2020, Guy Coffman filed a complaint in the United States District Court for the Eastern District of New York against the Company and the Company’s board of directors, captioned Coffman v. Perceptron, Inc., et al., Case No. 1 1:20-cv-05283 (E.D.N.Y.), referred to as the “Coffman Complaint” and together with the Stein Complaint, the Baroni Complaint and the Rauf Complaint, referred to as the “Complaints.”

The Complaints assert claims against the Company and the Company’s board of directors under Section 14(a) of the Exchange Act for allegedly false and misleading statements in this proxy statement and against the Company’s board of directors under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such allegedly false and misleading statements. The Rauf Complaint also alleges that the Company’s board of directors breached its fiduciary duty of candor and disclosure. The Baroni Complaint also asserts claims against Parent and Merger Subsidiary under Section 20(a) of the Exchange Act for alleged “control person” liability with respect to such allegedly false and misleading statements. The Complaints seek, among other relief, an order enjoining the transaction, as well as damages, costs and attorneys’ fees and, in the case of the Baroni Complaint and the Coffman Complaint, in the event the merger is consummated, rescission of the transaction. The defendants believe the allegations in the Complaints are without merit.

Shareholders of the Company may file additional lawsuits challenging the merger, which may name the Company, the Company’s board of directors, Parent, Merger Subsidiary, or others as defendants. Litigation is inherently uncertain, and there can be no assurance regarding the likelihood that the Company’s defense of these lawsuits (or any other lawsuits related to the merger that may be filed in the future) will be successful, nor can the Company predict the amount of time and expense that will be required to resolve the lawsuits.

The following is a general discussion of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of common stock whose shares are exchanged for cash pursuant to the merger. This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders. This discussion is based on the provisions of the Internal Revenue Code of 1986, as amended (referred to in this proxy statement as the “Code”), applicable U.S. Treasury Regulations promulgated thereunder, judicial opinions and administrative rulings and published positions of the Internal Revenue Service (referred to in this proxy statement as the “IRS”), each as in effect as of the date hereof. These authorities are subject to change or differing interpretations, possibly on a retroactive basis, and any such change or interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion is for general information purposes only and does not purport to be a complete analysis of all potential tax consequences. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010 or the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations promulgated thereunder and intergovernmental agreements entered into pursuant thereto or in connection therewith), nor does it address any tax considerations under state, local or foreign tax laws or U.S. federal tax laws other than those pertaining to the U.S. federal income tax. This discussion is not binding on the IRS or the courts and, therefore, could be subject to challenge, which could be sustained. No ruling is intended to be sought from the IRS with respect to the merger.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of common stock that is for U.S. federal income tax purposes:

This discussion applies only to U.S. holders of shares of common stock who hold such shares as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of its particular circumstances, or that may apply to U.S. holders subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, dealers or brokers in securities or foreign currencies, traders in securities who elect to apply the mark-to-market method of accounting, holders subject to the alternative minimum tax, U.S. holders that have a functional currency other than the U.S. dollar, tax-exempt organizations, tax-qualified retirement plans, banks and other financial institutions, mutual funds, certain former citizens or former long-term residents of the United States, partnerships (or other entities or arrangements treated as partnerships for U.S. federal income tax purposes), S corporations or other pass-through entities or investors in such partnerships, S corporations or other pass-through entities, real estate investment trusts, regulated investment companies, U.S. holders who hold shares of common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction, a holder required to accelerate the recognition of any item of gross income with respect to our common stock as a result of such income being recognized on an applicable financial statement, and U.S. holders who acquired their shares of common stock through the exercise of employee stock options or other compensation arrangements).

If a partnership (including for this purpose any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partners and the activities of the partnership. If you are, for U.S. federal income tax purposes, a partner in a partnership holding shares of common stock, you should consult your tax advisor.

This discussion of material U.S. federal tax consequences is for general information purposes only and is not tax advice. Holders of common stock are urged to consult their own tax advisors to determine the particular tax consequences to them of the merger, including the applicability and effect of the alternative minimum tax, the unearned income Medicare contribution tax and any other U.S. federal, or state, local, foreign or other tax laws.

The receipt of cash by U.S. holders in exchange for shares of common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of common stock pursuant to the merger will recognize gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received and (2) the U.S. holder’s adjusted tax basis in its shares of common stock. A U.S. holder’s adjusted tax basis in its shares of common stock is generally the amount paid for such shares of common stock (less the amount of any distribution received by such holder treated as a tax-free return of capital).

Any such gain or loss will be long-term capital gain or loss if a U.S. holder’s holding period in the shares of common stock surrendered in the merger is greater than one year as of the date of the merger. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of common stock at different times or different prices, such U.S. holder must determine its adjusted tax basis and holding period separately with respect to each block of common stock.

Payments made in exchange for shares of common stock pursuant to the merger may be subject, under certain circumstances, to information reporting and backup withholding (currently at a rate of 24%). To avoid backup withholding, a U.S. holder that does not otherwise establish an exemption should complete and return to the applicable withholding agent a properly completed and executed IRS Form W-9, certifying under penalties of perjury that such U.S. holder is a “United States person” (within the meaning of the Code), that the taxpayer identification number provided is correct and that such U.S. holder is not subject to backup withholding.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the IRS in a timely manner.

Under the merger agreement, the merger cannot be completed until (1) the applicable waiting period under the Act against Restrains of Competition has expired or the FCO in Germany has granted clearance; and (2) the applicable waiting period under the Cartel Act has expired or the FCA in Austria has granted clearance.

The Act against Restraints of Competition requires the Company and Parent to file a notification with the FCO and provides that the merger shall not occur until a one month waiting period, or in case of an in-depth investigation, a waiting period of four months, from submission of a complete notification to the FCO has expired or the FCO grants an earlier clearance decision. The Company and Parent filed a notification with the FCO in connection with the merger.

Under the Cartel Act, the merger may not be completed until the expiration of a four-week waiting period following the filing of a notification with the FCA, unless the waiting period has expired or the FCA grants an earlier clearance decision. Under the Cartel Act, the required four-week waiting period will expire if neither the FCA nor the Federal Cartel Prosecutor has lodged an appeal for “Phase II” proceedings within such four-week period. If a Phase II proceeding is undertaken, the waiting period with respect to the merger would be extended for an addition period of up to five months. The Company and Parent filed a notification with the FCA in connection with the merger.

The merger is conditioned on clearance from CFIUS, which requires that the Company and Parent: (i) have received written notice from CFIUS advising that review of the merger under Section 721 of the U.S. Defense Production Act of 1950 (the “DPA”) has been concluded, and CFIUS has determined that there are no unresolved national security concerns with respect to the merger and advised that action under Section 721 of the DPA, and any investigation related thereto, has been concluded with respect to the merger; (ii) have received written confirmation that the merger is not a “covered transaction”, “covered investment”, or “covered real estate transaction” as those terms are defined by the DPA’s implementing regulations, and therefore is not subject to review by CFIUS; or (iii) CFIUS has sent a report to the President of the United States requesting the President’s decision on the CFIUS notice submitted by the Company and Parent and either (A) the period under the DPA during which the President may announce his decision to take action to suspend or prohibit the transactions contemplated by the merger agreement has expired without any such action being threatened, announced or taken or (B) the President has announced a decision not to take any action to suspend or prohibit the transactions contemplated by the merger agreement. The Company and Parent submitted a joint voluntary notice to CFIUS.

If CFIUS identifies a national security concern that the Company or Parent determines cannot be resolved through further review by and discussions with CFIUS, the Company or Parent may notify the other party in writing of the determination and upon mutual agreement of the Company and Parent, the Company and Parent shall cooperate to withdraw and abandon the transactions contemplated by the merger agreement. Following an investigation by CFIUS, if CFIUS requires a mitigation plan that is not acceptable to Parent, Parent may notify the Company in writing that it would like to abandon the transactions contemplated by the merger agreement, in which case, the Company and Parent shall cooperate to abandon the transactions.

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by shareholders and the completion of the merger.

Company, Parent and Merger Subsidiary are required to use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by the merger agreement. including, but not limited to, obtaining of all necessary permits, waivers, approvals, consents and actions from governmental entities. For additional information regarding the efforts required to obtain regulatory approvals, see the section of this proxy statement entitled “The Merger Agreement — Efforts to Complete the Merger.”

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained or obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the merger, including the requirement to divest assets, create or modify contractual rights or obligations or enter into supply or services agreements. These conditions could result in the conditions to the merger not being satisfied.

If the merger is completed, the shares of Company common stock will be delisted from NASDAQ and deregistered under the Exchange Act.

In general, dissenters’ rights are statutory rights that, if applicable, under law, enable shareholders to dissent from an extraordinary transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the extraordinary transaction.

Section 762 of the MBCA provides that shareholders of a Michigan corporation such as the Company have the right, in some circumstances, to dissent from certain corporate action and to instead demand payment of the fair value of their shares. However, shareholders who are receiving only cash for their shares of stock do not have dissenters’ rights with respect to shares of any class of stock listed on a national securities exchange as of the record date.

The Company’s shareholders are only receiving cash for their shares of Company common stock in the merger and shares of Company common stock are listed, as of the record date, on NASDAQ, a national securities exchange. Therefore, holders of Company common stock will not be entitled to dissenters’ rights in the merger with respect to their shares of Company common stock.

This section describes the material terms of the voting agreement. The description of the voting agreement in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the voting agreement. The voting agreement is attached as Annex C to this proxy statement and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the voting agreement that is important to you. We encourage you to read the voting agreement carefully and in its entirety.

Concurrently with and as a condition to Parent’s execution of the merger agreement, on September 27, 2020, the Harbert Shareholders entered into a voting agreement with Parent pursuant to which each of the Harbert Shareholders agreed, among other things, to vote all of their respective shares (i) in favor of the adoption of the merger agreement and the approval of the transactions, including the merger and any matter that would reasonably be expected to facilitate the merger (including any adjournment of any meeting of the shareholders of the Company in order to solicit additional proxies in favor of the adoption of the merger agreement), and (ii) against any acquisition proposal, any action that could reasonably be expected to cause the Company to breach any covenant, representation, warranty or other obligations of the Company set forth in the merger agreement or, among other items, any other agreement or any other action (or failure to act), to the extent such agreement, or other action or failure to act is intended or would reasonably be expected to prevent, interfere with, impair or delay the consummation of the merger or the transactions. The voting agreement also contains certain standstill, non-solicitation and support provisions and restricts the Harbert Shareholders from, among other activities in respect to acquisition proposals, soliciting any acquisition proposals or engaging in negotiations with any person in respect to an acquisition proposal. The obligations and rights under the voting agreement terminate upon the earliest of (i) the termination of the voting agreement by mutual written consent of Parent and each of the Harbert Shareholders, (ii) the termination of the merger agreement in accordance with its terms, or (iii) the consummation of the merger. The Harbert Shareholders owned, at the date of the merger agreement, approximately 10.5% of the total shares of outstanding the Company common stock.

The summary of the material provisions of the merger agreement below and elsewhere in this proxy statement is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A. This summary may not contain all of the information about the merger agreement that is important to you and this summary and the merger agreement attached to this proxy statement as Annex A are not intended to provide factual information about the parties to the merger agreement or any of their respective subsidiaries or affiliates. We urge you to read carefully the merger agreement in its entirety as it is the legal document governing the merger. The merger agreement contains representations and warranties that the parties have made to each other as of specific dates. The assertions embodied in the representations and warranties in the merger agreement were made solely for purposes of the merger agreement and the transactions and agreements contemplated thereby among the parties thereto and may be subject to important qualifications and limitations agreed to by the parties thereto in connection with negotiating the terms thereof. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to shareholders and reports and documents filed with the SEC, and the assertions embodied in the representations and warranties contained in the merger agreement (and summarized below) are qualified by information in disclosure schedules in connection with the signing of the merger agreement and by certain information contained in certain of Perceptron’s filings with the SEC. These disclosure schedules and SEC filings contain information that modifies, qualifies and creates exceptions to the representations and warranties set forth in the merger agreement. In addition, information concerning the subject matter of the representations and warranties may have changed or may change after September 27, 2020. You are not a third-party beneficiary to the merger agreement, and in reviewing the representations, warranties and covenants contained in the merger agreement or any descriptions thereof in this summary, it is important to bear in mind that such representations, warranties and covenants or any descriptions thereof were not intended by the parties to the merger agreement to be characterizations of the actual state of facts or condition of Perceptron, Parent or Merger Subsidiary or any of their respective subsidiaries or affiliates.

In addition, the representations and warranties in the merger agreement and the description of them in this proxy statement should not be read alone, but instead should be read in conjunction with the other information contained in the reports, statements and filings Perceptron publicly files with the SEC. Such information can be found elsewhere in this proxy statement and in the public filings Perceptron makes with the SEC, as described in the section entitled “Where You Can Find Additional Information” beginning on page 113 of this proxy statement.

The Merger

The merger agreement provides that, upon the terms and subject to the conditions of the merger agreement, at the effective time, Merger Subsidiary shall be merged with and into Perceptron and the separate corporate existence of Merger Subsidiary shall thereupon cease. Perceptron shall be the surviving corporation in the Merger (sometimes referred to as the “surviving corporation” in this proxy statement) and a subsidiary of Parent.

The closing of the merger will occur, as soon as practicable, but in no event later than two business days following the day on which the closing conditions set forth in the merger agreement (other than those conditions that by their nature are to be satisfied at the closing, but subject to the fulfillment or (to the extent permitted by applicable law) waiver of those conditions at closing) have been satisfied or (to the extent permitted by applicable law) waived in accordance with the merger agreement or at such other time as Perceptron and Parent may agree in writing. See “Conditions That Must Be Satisfied or Waived for the Merger to Occur” below. The merger will become effective at the time when the certificate of merger is filed with the Michigan Department of Licensing and Regulatory Affairs of the State of Michigan or such later time as is agreed upon in writing by the parties and specified in the certificate of merger in accordance with the MBCA.

Conversion of Shares of Perceptron Common Stock

At the effective time, each share of Perceptron common stock issued and outstanding immediately prior to the effective time, together with the rights attached thereto, shall be converted into the right to receive $7.00 in cash without interest (which we refer to as the “merger consideration” in this proxy statement), and shall be canceled and cease to exist, and the holders of any shares of Perceptron common stock will cease to have any rights with respect to such shares, except the right to receive the merger consideration.

At the effective time, each share of Perceptron common stock owned by Parent, Perceptron (as treasury stock or otherwise), or any of their respective direct or indirect wholly owned subsidiaries as of immediately prior to the effective time shall be automatically canceled and retired and will cease to exist, and no payment shall be made with respect thereto.

Each share of common stock of Merger Subsidiary outstanding immediately prior to the effective time shall be converted into one share of common stock of the surviving corporation with the same rights, powers and privileges as the shares so converted and together shall constitute the only outstanding shares of capital stock of the surviving corporation.

Surrender and Payment

At the effective time, Parent shall, or shall cause Merger Subsidiary to, deposit with the paying agent the merger consideration to be paid in respect of the shares of Perceptron common stock.

Promptly after the effective time, the Parent will, or will cause the paying agent to, send to each holder of record of shares of Perceptron common stock whose shares were converted into the right to receive merger consideration, a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the stock certificates or transfer of the uncertificated shares to the Paying Agent) for use in such exchange.

Each holder of shares of Perceptron common stock that have been converted into the right to receive the merger consideration shall be entitled to receive, upon (i) surrender to the paying agent of a stock certificate, together with a properly completed letter of transmittal, or (ii) receipt of an “agent’s message” by the paying agent (or other such evidence, if any, of transfer that the paying agent may reasonably request) in the case of a book-entry transfer of uncertificated shares, the merger consideration. No interest shall be paid or accrued on the cash payable upon the surrender or transfer of any stock certificate or uncertificated share.

If any portion of the merger consideration is to be paid to a person other than the person in whose name the surrendered certificate or the transferred uncertificated share is registered, it shall be a condition to receive payment of the merger consideration that (i) either the surrendered certificate be properly endorsed or otherwise be in proper form for transfer or such uncertificated share be properly transferred and (ii) that the person requesting such payment of the merger consideration will pay to the paying agent any transfer or other taxes required as a result of such payment to a person other than the registered holder of such certificate or uncertificated share, or establish to the satisfaction of the paying agent that such tax has been paid or is not payable.

The merger consideration paid upon the surrender of stock certificates or transfer of uncertificated shares in accordance with the terms thereof shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Perceptron common stock formerly represented by such stock certificate or uncertificated share, and from and after the effective time, there shall be no further registration of transfers of shares of Perceptron common stock.

If any of the merger consideration remains unclaimed by Perceptron shareholders for twelve months after the effective time, such cash shall be returned to the surviving corporation. Any holder of shares of Perceptron common stock who has not previously complied with the exchange procedures in the merger agreement will thereafter be entitled to look to the surviving corporation for the merger consideration in respect of such shares, without any interest thereon. Any amount of the merger consideration that remains unclaimed by Perceptron shareholders two years after the effective time shall become, to the extent permitted by applicable law, the property of the surviving corporation free and clear of any claims or interest of any person previously entitled thereto.

If, during the period between the date of the merger agreement and the effective time, any change in the outstanding shares of Perceptron common stock shall occur, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of the shares of Perceptron common stock, or stock dividend thereon with a record date during such period, the merger consideration and any other amounts payable pursuant to the merger agreement shall be appropriately adjusted to reflect such change; provided, however, that this is not to be construed to permit Perceptron to take any action with respect to its securities that is otherwise prohibited by the terms of the merger agreement.

The Parent, the Merger Subsidiary, Perceptron and the surviving corporation shall be entitled to deduct and withhold from the consideration otherwise payable to any holder of shares of Perceptron common stock or any other recipient of payments under the merger agreement, such amounts as it is required to deduct and withhold by applicable law.

If any certificate has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such certificate to be lost, stolen or destroyed and, if required by the surviving corporation, the posting by such person of a bond as indemnity against any claim that may be made against it with respect to such certificate, the paying agent will pay, in exchange for such lost, stolen or destroyed certificate, the merger consideration to be paid in respect of the shares represented by such certificate, as contemplated in the merger agreement.

Treatment of Perceptron Stock Options; Restricted Stock Units and Performance Share Units

Immediately prior to the effective time, each outstanding and unexercised option to purchase shares granted under the Perceptron stock plan shall, automatically and without any required action on the part of the holder thereof, become immediately vested and be cancelled and will only entitle the holder thereof to receive (without interest) an amount in cash equal to the product of (x) the total number of shares subject to the stock option immediately prior to the effective time multiplied by (y) the excess, if any, of the merger consideration per share over the exercise price per share of such stock option.

Immediately prior to the effective time, each outstanding award of restricted stock units granted under the Perceptron stock plan shall automatically and without any required action on the part of the holder thereof, become immediately vested and be cancelled and will only entitle the holder of such restricted stock units to receive (without interest) an amount in cash equal to the product of (x) the total number of shares subject to such award immediately prior to the effective time multiplied by (y) the merger consideration per share.

Immediately prior to the effective time, each outstanding award of performance share units granted under the Perceptron stock plan shall, automatically and without any required action on the part of the holder thereof, become immediately vested at the target level of performance and be cancelled and will only entitle the holder of such performance share units to receive (without interest) an amount in cash equal to the product of (x) the target number of shares subject to such award immediately prior to the effective time multiplied by (y) the merger consideration per share.

In accordance with the terms of the Perceptron stock purchase plan, following the date of the merger agreement, Perceptron’s board of directors (or the appropriate committee thereof) will take all actions to (i) determine the date on which the then-current offering period, if any, will terminate; (ii) cause the accumulated payroll deductions of each participant under such stock purchase plan to be used to purchase the applicable number of shares on the purchase date determined pursuant to clause (i) above; (iii) prohibit participants in such stock purchase plan from increasing their payroll deductions from those in effect on the date of the merger agreement; and (iv) terminate such stock purchase plan immediately prior to the effective time.

Prior to the effective time, Perceptron, Perceptron’s board of directors and the compensation committee of Perceptron’s board of directors, as applicable, will terminate the Perceptron stock plan and ensure that, following the effective time, no person will have any rights to acquire shares of Perceptron or other benefits pursuant to or in settlement of awards under the Perceptron’s stock plan, the Perceptron stock purchase plan or any other such rights with respect to shares of Perceptron common stock.

The Surviving Corporation

At the effective time, the articles of incorporation of Perceptron will be amended and restated in their entirety and, as so amended, will be the articles of incorporation of the surviving corporation until thereafter amended as provided therein or in accordance with applicable law.

At the effective time, (without any further action on the part of Perceptron and the Merger Subsidiary), the bylaws of the Merger Subsidiary in effect immediately prior to the effective time will be the bylaws of the surviving corporation, except that all referenced to the Merger Subsidiary therein will be automatically amended and will become references to the surviving corporation and, as so amended, will be the bylaws of the surviving corporation until thereafter amended as provided therein or in accordance with applicable law.

From and after the effective time, until successors are duly elected or appointed and qualified in accordance with applicable law, (i) the directors of the Merger Subsidiary immediately before the effective time shall be the directors of the surviving corporation and (ii) the officers of the Merger Subsidiary immediately before the effective time shall be the officers of the surviving corporation.

In the merger agreement, Perceptron has made customary representations and warranties regarding Perceptron, including:

In the merger agreement, Parent has made customary representations and warranties regarding Parent and Merger Subsidiary, including:

Certain of the representations and warranties in the merger agreement are subject to exceptions or qualifications, including, in certain cases, knowledge qualifications and materiality or material adverse effect qualifications.

Certain of the representations and warranties in the merger agreement are subject to materiality or material adverse effect qualifications.

Under the merger agreement a material adverse effect with respect to Perceptron is generally defined as any change, result, effect, event, fact, condition, development or occurrence that (a) has, or would reasonably be expected to have, in each case, a materially adverse effect on the business, condition (financial or otherwise), assets, liabilities or results of operations of Perceptron and its subsidiaries, taken as a whole, or (b) prevents, or would reasonably be expected to prevent, consummation of the transactions contemplated by the merger agreement. The definition excludes any of the following, whether alone or in combination, in determining whether there has been, or would reasonably be expected to be, a material adverse effect with respect to Perceptron:

With respect to bullets one, two, three, four and five above, any change, result, effect, event, fact, condition, development or occurrence referred to therein may be taken into account in determining whether there has been, or would reasonably be expected to be, a material adverse effect in relation to Perceptron, to the extent that such change, result, effect, event, fact, condition, development or occurrence has a disproportionately adverse effect on Perceptron and its subsidiaries, taken as a whole, as compared to other participants in the industry in which Perceptron and its subsidiaries operate, but only such incremental disproportionate impact shall be taken into account in such determination; it being agreed and Perceptron represents, for the purposes of the merger agreement, COVID-19 (including measures issued by any governmental entity to address COVID-19) have not, as of the date of the merger agreement, disproportionately affected Perceptron and its subsidiaries, taken as a whole, compared to other participants in the industry in which Perceptron and its subsidiaries operate.

The representations and warranties and agreements contained in the merger agreement and in any certificate or other writing delivered pursuant the merger agreement shall not survive the effective time, except for agreements in the merger agreement that by their terms expressly apply or are to be performed in whole or in part after the effective time.

Covenants of Perceptron

Conduct of Perceptron

Except as expressly contemplated by the merger agreement, as set forth in Perceptron’s disclosure schedules to the merger agreement, as expressly required by applicable law, or with the prior written consent of Parent (such consent not to be unreasonably withheld, delayed or conditioned), from the date of the merger agreement until the earlier of the effective time or the termination of the merger agreement with certain exceptions, Perceptron has agreed to, and to cause each of its subsidiaries:

In addition, without limiting the foregoing, Perceptron has generally agreed not to, and to cause each of its subsidiaries not to, whether directly or indirectly, do, or agree to do, any of the following:

From the date of the merger agreement and until the earlier of the effective time or the termination of the merger agreement (and subject to applicable law and the Confidentiality Agreement dated May 21, 2020 between Perceptron and the Parent), Perceptron shall, and shall cause each subsidiary and their respective representatives to: (i) upon reasonable notice, provide to Parent or its representative reasonable access during normal business hours of Perceptron to the employees, offices, properties, books and records of Perceptron and its subsidiaries; and (ii) promptly furnish to Parent or its representatives such financial, operating and personnel data, contracts, due diligence information and other information as the Parent or its representatives may reasonably request.

Perceptron has agreed not to, and to cause its subsidiaries and its and its subsidiaries’ respective directors, officers and employees not to, and will direct and use reasonable best efforts to cause the representatives of Perceptron and its subsidiaries not to directly or indirectly:

Notwithstanding bullet point four above, if Perceptron’s board of directors determines in good faith, after consultation with its legal outside counsel, that any failure to do so would be inconsistent with its fiduciary duties under applicable law, Perceptron shall be permitted on a confidential basis, upon written request by a relevant party to a standstill,

confidentiality agreement or similar contract to release or waive any standstill obligations solely to the extent necessary to permit the party referred to therein to submit an acquisition proposal to Perceptron’s board of directors on a confidential basis. Perceptron will provide prior written notice to Parent of any waiver or release of any standstill by Perceptron, including disclosure of the parties and circumstances relating thereto.

Perceptron shall, and shall cause its subsidiaries to, and shall direct their respective representatives to:

Perceptron shall promptly (and in no case later than thirty-six (36) hours) (i) notify Parent of (A) any acquisition proposal, (B) any offer, proposal, inquiry or indication of interest that could reasonably be expected to lead to an acquisition proposal (C) any request for nonpublic information relating to Perceptron or any of its subsidiaries or for access to the business, properties, assets, books or records of Perceptron or any of its subsidiaries; (ii) provide Parent with the identity of the person making such acquisition proposal, offer, proposal, inquiry or indication of interest or request; (iii) provide Parent with a copy of any written acquisition proposal, offer, proposal, inquiry or indication of interest or, if not in writing, a written description of the material terms thereof; (iv) keep Parent reasonably informed of the status of any discussions or negotiations with such a third party and any material changes to the terms and conditions of any such acquisition proposal, offer, proposal, offer or indication of interest; and (v) deliver to Parent a copy of any information delivered to such person that has not previously been delivered by Perceptron to Parent.

Except as otherwise permitted by the merger agreement, neither Perceptron’s board of directors nor any committee thereof shall:

Any action described in the foregoing bullet points is referred to in this proxy statement as an “adverse recommendation change.”

Notwithstanding the foregoing bullet points, Perceptron’s board of directors may, at any time prior to receipt of the vote required to approve the merger and in response to a bona fide written superior proposal received by the Perceptron board of directors after the date of the merger agreement that did not arise from a breach of the obligations under the merger agreement, make an adverse recommendation change or terminate the merger agreement to enter into an alternative acquisition agreement, but only if prior to taking such action:

Notwithstanding the foregoing bullet points describing the restrictions on Perceptron’s board of directors making an adverse recommendation change, if Perceptron’s board of directors determines that an intervening event has occurred, Perceptron’s board of directors may, at any time prior to receipt of the requisite shareholder vote to approve the transactions contemplated by the merger agreement, make an adverse recommendation, but only if, prior to taking such action:

The merger agreement does not prohibit Perceptron or its board of directors from complying with Rules 14a-9, 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act, or from issuing a “stop, look and listen” statement pursuant to Rule 14d-9(f) pending disclosure of its position thereunder or making any required disclosure to Perceptron’s shareholders if, in the good faith judgment of Perceptron’s board of directors after consultation with its outside legal counsel, the failure to do so would be inconsistent with its fiduciary duties under applicable law.

For purposes of the merger agreement, “acquisition proposal” means any offer, proposal, inquiry or indication of interest from any person or group (other than Parent and its subsidiaries) relating to, in a single transaction or series of related transaction, directly or indirectly, (i) the sale, lease, exchange, mortgage, transfer or other disposition of 20% or more of the consolidated assets of Perceptron and its subsidiaries, including through the acquisition of one or

more subsidiaries of Perceptron owning such assets; (ii) the acquisition or purchase of an equity interest or equity securities in Perceptron representing in excess of 20% of the power to vote for the election of the directors of Perceptron, any issuance of securities representing more than 20% of the outstanding shares of any class of voting securities of Perceptron, or any tender offer or exchange offer for equity securities of Perceptron as a result of which any person or group would beneficially own 20% or more of the shares of Perceptron; (iii) any merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving Perceptron, or any of its subsidiaries, pursuant to which such person or group (or the shareholders of any person) would acquire, directly or indirectly, 20% of the consolidated assets of Perceptron and its subsidiaries or 20% or more of the aggregate voting power of Perceptron or the surviving entity in a merger, consolidation, share exchange or other business combination involving Perceptron or any subsidiary of Perceptron, or the resulting direct or indirect parent of Perceptron or such surviving entity; (iv) a plan of liquidation or extraordinary dividend relating to more than 20% of the consolidated assets of Perceptron and its subsidiaries; (v) the repurchase by Perceptron or its subsidiary of more than 20% of the outstanding shares of Perceptron; or (vi) any combination of the foregoing, in each case other than the transactions under the merger agreement.

For purposes of the merger agreement, “intervening event” means a material positive event, occurrence or development that occurs or arises after the date of the merger agreement with respect to Perceptron and its subsidiaries, taken as a whole, that (a) was not known or reasonably foreseeable (or, if known or reasonably foreseeable, the consequences of which were not known or reasonably foreseeable) to Perceptron’s board of directors as of the date of the merger agreement and (b) does not relate to (i) any acquisition proposal or any offer, proposal, inquiry or indication of interest that could reasonably be expected to lead to an acquisition proposal; (ii) any event, occurrence or development relating to Parent, Merger Subsidiary or any of their affiliates, including the announcement or pendency of the merger agreement or the transactions contemplated thereby; (iii) clearance of the transactions contemplated under the merger agreement under any antitrust laws; (iv) the fact Perceptron meets or exceeds (or fails to meet or exceed) any internal or published projections, forecasts, estimates or predictions of revenue, earnings or other financial or operating metrics for any period ending on or after the date of the merger agreement or (v) changes after the date of the merger agreement in the market price or trading volume of the shares or the credit rating of Perceptron (it being understood that matters underlying the changes described in clauses (iv) and (v) may be deemed to constitute, or be taken into account, in determining whether there has been an intervening event).

For purposes of the merger agreement, “superior proposal” means an unsolicited bona fide written acquisition proposal (substituting “50%” for “20%”) that has not been withdrawn and did not result from a breach of the merger agreement, and that, after consultation with Perceptron’s financial advisor or other financial advisor selected by Perceptron’s board of directors and outside legal counsel, Perceptron’s board of directors in good faith determines (a) would, if consummated, result in a transaction that is more favorable from a financial point of view to the shareholders of Perceptron than the transactions contemplated by the merger agreement, taking into account any amendment or modification proposed to the merger agreement and the merger by Parent; (b) is reasonably capable of being completed on the terms proposed in a timely manner, taking into account all legal, regulatory, financial, timing, financing and other aspects of such proposal and of the merger agreement; and (c) is not subject to a financing condition.

Proxy Material; Shareholder Meeting

The merger agreement requires Perceptron to, as promptly as practical after the date of the merger agreement, prepare and file a preliminary proxy statement with the SEC. Perceptron will notify Parent of all comments of the SEC with respect to the preliminary proxy statement and of any request by the SEC for any amendment or supplement hereto. Promptly following the resolution of any comments on the preliminary proxy statement from the SEC and as promptly as reasonably practicable after the definitive proxy statement is mailed to Perceptron’s shareholders, Perceptron will take all action necessary to duly call, give notice of, convene and hold a shareholders’ meeting for the purpose of approving and adopting the merger agreement and the transactions contemplated thereby. Perceptron shall not, without the prior written consent of Parent, postpone, recess or adjourn such shareholder meeting; provided that Perceptron may postpone or recess or adjourn such meeting without the prior written consent of Parent (i) to the extent necessary to ensure that any supplement or amendment to this proxy statement required to be sent by applicable law or at the request of the SEC or its staff is provided to Perceptron’s shareholders at least five (5) business days in advance of a vote on the adoption of the merger agreement; (ii) to allow reasonable additional time to solicit additional proxies to the extent Perceptron reasonably believes necessary in order to obtain

the approval of Perceptron’s shareholders of the merger agreement, or (iii) if as of the time for which the annual meeting is originally scheduled (as set for this this proxy statement), there is an insufficient number of shares of Perceptron common stock represented (either at the annual meeting via live audio webcast or by proxy) and voting to constitute a quorum necessary to conduct the business of the shareholder meeting. Unless the board of directors has made an adverse recommendation change, Perceptron, acting through its board of directors (or a committee thereof), shall use commercially reasonable efforts to obtain the approval of the merger agreement by shareholders of Perceptron representing a majority of the outstanding shares of Perceptron, including to actively solicit proxies necessary to obtain such approval.

Perceptron will and will cause its applicable subsidiaries to (i) arrange for customary payoff letters in a form reasonably acceptable to Parent at least one (1) business day prior to the anticipated closing date, which will set forth the total amount required to be paid at the effective time to satisfy in full the repayment of certain indebtedness outstanding and certain other matters, and (ii) deliver prepayment and termination notices in accordance with the terms of such indebtedness to the holders of the indebtedness in order to cause the release of all liens and other security securing such indebtedness.

As soon as practicable, Perceptron will file with its lender under the Payroll Protection Program of the U.S. Small Business Administration (the “PPP lender”) a loan forgiveness application and use all reasonable efforts to cause the PPP lender to, as soon as practicable, submit such application with the U.S. Small Business Administration. Additionally, from the date of the merger agreement until the earlier of the termination of the merger agreement or the effective time, Perceptron will not use any portion of its loan under the Paycheck Protection Program of the U.S. Small Business Administration (the “PPP loan”) for any purpose or take any action that would render any portion of the PPP loan ineligible for forgiveness under the Paycheck Protection Program under the CARES Act.

Perceptron will use reasonable best efforts to obtain the consent of its PPP lender as required under its PPP loan in connection with the transactions contemplated by the merger agreement. At any time prior to effective time, with the Parent’s prior written consent, Perceptron may pay and satisfy any and all amounts due and outstanding under the PPP loan and terminate and/or withdraw its loan forgiveness application. In contemplation of but at or reasonably prior to Closing, Parent may require Perceptron to pay and satisfy any and all amounts due and outstanding under the PPP loan and terminate and/or withdraw the loan forgiveness application.

From and after the effective time, the Parent will cause the surviving corporation, and the surviving corporation will, (i) indemnify and hold harmless, for six (6) years after the effective time, each present and former officer and director of Perceptron and of any subsidiary of Perceptron with respect to any acts or omissions occurring at or prior to the effective time to the same extent such individuals are indemnified as of the date of the merger agreement by Perceptron pursuant to applicable law and as provided under Perceptron’s articles of incorporation and bylaws in effect on the date of the merger agreement, and (ii) provide a fully paid officers’ and directors’ liability insurance “tail” policy from Perceptron’s existing insurance carrier in respect of acts or omissions occurring prior to the effective time covering each present and former officer and director of Perceptron and of any subsidiary of Perceptron currently covered by Perceptron’s officers’ and directors’ liability insurance policy on terms with respect to coverage and amount that are no less favorable than those of such policy in effect on the date of the merger agreement and for a period extending six (6) years from the effective time.

For twelve (12) months after the effective time, Parent will cause the surviving corporation to provide the employees of Perceptron and its subsidiaries that are located in the United States and who continue to be employed immediately after the effective time (“continuing employees”) with compensation and employee benefits (other than equity or equity-based compensation, defined benefit plan benefits, retention or change in control awards and spot bonuses) comparable, in the aggregate, to the compensation and benefits provided by Perceptron and its subsidiaries to such employees immediately prior to the effective time.

Parent shall or shall cause the surviving corporation to, to the extent permitted by the applicable employee benefit plan or applicable law, give each continuing employee full credit in respect of his or her employment with Perceptron or its subsidiaries prior to the effective time for purposes of eligibility, vesting and level of benefits and service under any new employee benefit plans adopted by the surviving corporation after the merger, or any benefit plan maintained by Parent in which the continuing employee is permitted to participate (to the extent that the corresponding benefit plan provided to the employee immediately prior to the effective time gave such credit), except with respect to equity-based compensation, any defined benefit plans or where credit would result in duplication of benefits.

Parent shall use reasonable best efforts to or shall cause the surviving corporation to (i) waive any preexisting condition exclusions and waiting periods for participation and coverage requirements applicable to each continuing employee under any of the Parent’s health plans and (ii) provide the continuing employees with credit for any co-payments and deductibles paid by each such employee in the calendar year in which the effective time occurs for purposes of annual co-payment and deductible limits under the Parent’s health plans.

Efforts to Complete the Merger

Subject to the terms and conditions of the merger agreement, Perceptron, Parent and Merger Subsidiary will use all reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the transactions contemplated by the merger agreement, including but not limited to:

In addition to the above, Perceptron and Parent agreed:

Notwithstanding the foregoing, in no event will Parent or Perceptron or their respective affiliates be obligated, and neither the “reasonable best efforts” standard nor any other provision set forth in the merger agreement shall be deemed or construed to require, Parent or Perceptron or their respective affiliates, (i) to propose, negotiate, commit to, effect and agree to, any sale, divestiture, license, hold separate, and other disposition of the businesses, assets,

products or equity interests of Perceptron or any of Parent’s or Parent’s affiliate’s other businesses, assets, products or equity interests now owned or hereafter acquired; (ii) to create, terminate or amend any relationships, ventures, contractual rights or obligations of Parent, Perceptron or their respective subsidiaries or affiliates; (iii) otherwise to take or commit to take any action that would limit Parent’s or its affiliate’s freedom of action with respect to the operation of, or its ability to retain or hold, directly or indirectly, any businesses, assets, products or equity interests of Parent or Perceptron (including any of their respective subsidiaries or affiliates); (iv) defend, litigate, commence or prosecute any action initiated against or by any (A) government entity or (B) person seeking to enforce relevant competition or antitrust laws; or (v) take any other action to prevent, effect the dissolution of, vacate, or lift any decree, order, judgment, injunction, temporary restraining order, or other order in any suit or proceeding initiated against or by any (A) government entity or (B) person seeking to enforce relevant competition or antitrust laws.

Parent and Perceptron have made certain other covenants to and agreements with each other regarding various other matters including:

The respective obligations of Parent, Merger Subsidiary and Perceptron to consummate the merger are subject to the satisfaction or mutual waiver of the following mutual conditions:

The obligations of Parent and Merger Subsidiary to consummate the merger are subject to the satisfaction or waiver by Parent of further conditions, including:

The obligation of Perceptron to consummate the merger is subject to the satisfaction or waiver by Perceptron of further conditions, including:

The merger agreement may be terminated and the merger may be abandoned at any time prior to the effective time, under the following circumstances: