-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RFIIOskazmxW/93pIegVGD+iHC6vmB249kk1JHwxT/utLj56RGoLtzYqulg+Wf0m cGk8fRqup9oymwjQCXskdA== 0000950124-06-005797.txt : 20061006 0000950124-06-005797.hdr.sgml : 20061006 20061006123442 ACCESSION NUMBER: 0000950124-06-005797 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20061113 FILED AS OF DATE: 20061006 DATE AS OF CHANGE: 20061006 EFFECTIVENESS DATE: 20061006 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERCEPTRON INC/MI CENTRAL INDEX KEY: 0000887226 STANDARD INDUSTRIAL CLASSIFICATION: OPTICAL INSTRUMENTS & LENSES [3827] IRS NUMBER: 382381442 STATE OF INCORPORATION: MI FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20206 FILM NUMBER: 061133064 BUSINESS ADDRESS: STREET 1: 47827 HALYARD DRIVE CITY: PLYMOUTH STATE: MI ZIP: 48170-2461 BUSINESS PHONE: 3134144816 MAIL ADDRESS: STREET 1: 47827 HALYARD DRIVE CITY: PLYMOUTH STATE: MI ZIP: 48170-2461 DEF 14A 1 k08880ddef14a.txt DEFINITIVE PROXY STATEMENT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-12 Perceptron, Inc. - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1) Title of each class of securities to which transaction applies: - -------------------------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: - -------------------------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): - -------------------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: - -------------------------------------------------------------------------------- 5) Total fee paid: - -------------------------------------------------------------------------------- [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: - -------------------------------------------------------------------------------- 2) Form, Schedule or Registration Statement No.: - -------------------------------------------------------------------------------- 3) Filing Party: - -------------------------------------------------------------------------------- 4) Date Filed: - -------------------------------------------------------------------------------- PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB CONTROL NUMBER. SEC 1913 (02-02) (PERCEPTRON LOGO) the focus on process 47827 Halyard Drive Plymouth, Michigan 48170-2461 (734) 414-6100 Facsimile: (734) 414-4700 October 6, 2006 Dear Perceptron Shareholder: You are cordially invited to attend the 2006 Annual Meeting of Shareholders of Perceptron, Inc. ("Company") to be held on Monday, November 13, 2006, at 9:00 a.m., local time, at 47827 Halyard Drive, Plymouth, Michigan 48170. The attached notice of the meeting and Proxy Statement describe the items of business to be transacted: (a) The election of eight directors, and (b) Such other business as may properly come before the meeting or any adjournment thereof. After the formal business session, there will be a report to the shareholders on the progress of the Company along with a discussion period. I look forward to seeing you at the Annual Meeting and hope you will make plans to attend. Whether or not you plan to attend the meeting, I urge you to sign, date and return your proxy in the addressed envelope enclosed for your convenience so that as many shares as possible may be represented at the meeting. No postage is required if the envelope is mailed in the United States. Sincerely, /s/ A. A. Pease - ------------------------------------- Alfred A. Pease Chairman of the Board of Directors, President and Chief Executive Officer (PERCEPTRON LOGO) the focus on process ---------- PERCEPTRON, INC. NOTICE OF THE 2006 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 13, 2006 ---------- The Annual Meeting of Shareholders of Perceptron, Inc., a Michigan corporation, will be held on Monday, November 13, 2006, at 9:00 a.m., local time, at 47827 Halyard Drive, Plymouth, Michigan 48170 for the following purposes: 1. To elect eight directors to serve until the 2007 Annual Meeting of Shareholders and until their successors are elected and qualified. 2. To transact such other business as may properly come before the meeting or any adjournments thereof. The Board of Directors has fixed the close of business on September 22, 2006, as the record date for the determination of shareholders entitled to notice of and to vote at the meeting. A certified list of shareholders entitled to vote at the meeting will be available for examination by any shareholder during the meeting at the corporate offices at 47827 Halyard Drive, Plymouth, Michigan 48170. A copy of the 2006 Annual Report for the fiscal year ended June 30, 2006 and Proxy Statement accompanies this notice. By the Order of the Board of Directors /s/ David W. Geiss ---------------------------------------- David W. Geiss, Secretary 47827 Halyard Drive Plymouth, Michigan 48170 October 6, 2006 THE VOTE OF EVERY SHAREHOLDER IS IMPORTANT, AND YOUR COOPERATION IN PROMPTLY RETURNING YOUR MARKED, DATED AND SIGNED PROXY WILL BE APPRECIATED. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING. YOUR PROXY WILL, HOWEVER, HELP TO ASSURE A QUORUM AND TO AVOID ADDED PROXY SOLICITATION COSTS. ---------- PROXY STATEMENT ---------- PERCEPTRON, INC. 2006 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AT 9:00 A.M. ON NOVEMBER 13, 2006 ---------- INTRODUCTION This Proxy Statement and the accompanying Notice of the 2006 Annual Meeting of Shareholders, 2006 Annual Report and proxy card are furnished in connection with the solicitation of proxies by the Board of Directors ("Board") of Perceptron, Inc., a Michigan corporation ("Company"). The proxies are being solicited for use at the 2006 Annual Meeting of Shareholders ("Annual Meeting") of the Company to be held at the corporate offices of the Company on Monday, November 13, 2006, at 9:00 a.m., local time, and at any adjournment of that meeting. The corporate offices of the Company are located at 47827 Halyard Drive, Plymouth, Michigan 48170, and the Company's telephone number is (734) 414-6100. The Company expects that this Proxy Statement and the accompanying materials will be first sent or given to shareholders on or about October 9, 2006. Only shareholders of record of the Company's Common Stock, $0.01 par value ("Common Stock") at the close of business on September 22, 2006 ("Record Date") will be entitled to notice of and to vote at the Annual Meeting or any adjournments thereof. Shareholders of record on the Record Date are entitled to one vote per share on any matter that may properly come before the Annual Meeting. As of the Record Date, there were 8,308,323 shares of Common Stock outstanding and entitled to vote. The Company has no other class of stock outstanding. The presence, either in person or by properly executed proxy, of the holders of a majority of the outstanding shares of Common Stock is necessary to constitute a quorum at the Annual Meeting. See "Further Information - Share Ownership of Management and Certain Shareholders" for a description of the beneficial ownership of the Common Stock. Directors, officers and other employees of the Company may solicit, without additional compensation, proxies by any appropriate means, including personal interview, mail, telephone, courier service and facsimile transmissions. Arrangements will also be made with brokerage houses and other custodians, nominees and fiduciaries which are record holders of the Company's Common Stock to forward proxy soliciting material to the beneficial owners of such shares and the Company will reimburse such record holders for their reasonable expenses incurred in connection therewith. The cost of soliciting proxies, including the preparation, assembling and mailing of the Notice of the 2006 Annual Meeting of Shareholders, the Proxy Statement, the 2006 Annual Report and the accompanying proxy card, as well as the cost of forwarding such material to the beneficial owners of Common Stock, will be borne by the Company. Only one Proxy Statement and Annual Report will be delivered to multiple shareholders sharing an address unless the Company has received contrary instructions from one or more of the shareholders. Upon written or oral request from a shareholder who shares an address with another shareholder, the Company shall deliver a separate copy of the Proxy Statement and Annual Report. In the future, shareholders can call or write the Company for a separate annual report or proxy statement at (734) 414-6100 or 47827 Halyard Drive, Plymouth, MI 48170-2461. Similarly, those shareholders who share an address and wish to receive only one copy of the annual report or proxy statement when they are receiving multiple copies can also call or write the Company at the number and address given above. Shares represented by a duly executed proxy, unless previously revoked, will be voted at the Annual Meeting in accordance with the instructions of the shareholder thereon if the proxy is received by the Company before the close of business on November 10, 2006. Shares represented by a proxy received after November 10, 2006 will be voted if the proxy is received by the Company in sufficient time to permit the necessary examination and tabulation of the proxy before the vote of shareholders is taken. IF NO INSTRUCTIONS ARE MADE, SUCH SHARES WILL BE VOTED FOR THE ELECTION OF DIRECTORS NAMED IN THIS PROXY STATEMENT. A proxy also gives Messrs. Pease, Garber and Geiss discretionary authority, to the extent permitted by law, to vote all shares of Common Stock represented by the proxy on any other matter that is properly presented for action at the meeting; however, the Board does not intend to present any other matters at the Annual Meeting. Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before it is voted. Proxies may be revoked by (i) filing with the Secretary of the Company, at or before the Annual Meeting, a written notice of revocation bearing a later date than the proxy, (ii) duly executing a subsequent proxy relating to the same shares and delivering it to the Secretary of the Company at the Company's corporate offices at or before the Annual Meeting, or (iii) attending the Annual Meeting and voting in person, if the shareholder is a shareholder of record (although attendance at the Annual Meeting will not in and of itself constitute a revocation of a proxy). Abstentions, and withheld votes with respect to the election of directors, are counted only for purposes of determining whether a quorum is present at the 2006 Annual Meeting. Withheld votes will be excluded entirely from the vote on the election of directors and will therefore have no effect on the election. If a shareholder owns shares through a bank or broker in street name, the shareholder may instruct his or her bank or broker how to vote such shares. "Broker non-votes" occur when a bank, broker or other nominee holder has not received voting instructions with respect to a particular matter and the nominee holder does not have discretionary power to vote on that matter. The election of directors is considered a routine matter, so a bank or broker will have discretionary authority to vote such shares held in street name on that proposal. A broker non-vote may also occur if a broker fails to vote shares for any reason. Directors are elected by a plurality of the votes cast, so that only votes cast "for" directors are counted in determining which directors are elected. 2 MATTERS TO COME BEFORE THE MEETING PROPOSAL 1 -- ELECTION OF DIRECTORS At the Annual Meeting, Shareholders will be asked to elect a Board of eight directors to hold office, in accordance with the Bylaws of the Company, until the 2007 annual meeting and until the election and qualification of their successors, or until their resignation or removal. The following table sets forth information regarding the nominees for election to the Company's Board. The Board recommends a vote FOR each of the nominees for election. The shares represented by properly executed proxies will be voted in accordance with the specifications made therein. PROXIES WILL BE VOTED "FOR" THE ELECTION OF SUCH NOMINEES UNLESS THE SPECIFICATION IS MARKED ON THE PROXY INDICATING THAT AUTHORITY TO DO SO IS WITHHELD. If a nominee is unable to serve or, for good cause, will not serve, the proxy confers discretionary authority to vote with respect to the election of any person to the Board. The nominees receiving a plurality of votes cast at the Annual Meeting will be elected to the Board. Shares may not be voted cumulatively for the election of directors. The nominees named below have been selected by the Board of the Company. Each of the nominees is currently a director of the Company. The following information with regard to business experience has been furnished by the respective nominees for director.
POSITION, PRINCIPAL OCCUPATIONS NAME AND AGE AND OTHER DIRECTORSHIPS ------------ ------------------------------- David J. Beattie, 64.......... Director since 1997. Mr. Beattie was President of McNaughton - McKay Electric Company ("MME") from February 2001 to December 2004. MME is a distributor of industrial automation products and services. Kenneth R. Dabrowski, 63...... Director since 1999. Mr. Dabrowski has been President of the Durant Group, L.L.C., a management consulting firm, since December 2000, and has been a member of the faculty at Massachusetts Institute of Technology since June 1999. Mr. Dabrowski was Vice President, Quality and Process Leadership, Ford Automotive Operations of Ford Motor Company from September 1996 to January 1999. Philip J. DeCocco, 68......... Director since 1996. Mr. DeCocco has been President of Sturges House, Inc., a company founded by Mr. DeCocco, since 1983. Sturges House, Inc. offers executive recruiting and management consulting services in human resources, strategic planning, executive development and organization design and development to various companies. W. Richard Marz, 63........... Director since 2000. Mr. Marz has been a Technical Consultant to LSI Logic Corporation ("LSI") since August 2005, and prior to that time he was Executive Vice President, Worldwide Strategic Marketing (December 2003 to August 2005), Executive Vice President, Communications and ASIC Technology (February 2002 to December 2003), and Executive Vice President, ASIC Technology (July 2001 to February 2002), of LSI. LSI is a semiconductor manufacturer. Robert S. Oswald, 65.......... Director since 1996. Mr. Oswald has been Chairman, Bendix Commercial Vehicle Systems, LLC, a manufacturer of air brakes and other safety systems, since October 2003 and served as Chairman and Chief Executive Officer from March 2002 to September 2003. Mr. Oswald was Chairman, President and Chief Executive Officer of Robert Bosch Corporation, a manufacturer of automotive components and systems, and a member of the Board of Management of Robert Bosch, GmbH from July 1996 to December 2000. Alfred A. Pease, 60........... Director since 1996 and Chairman of the Board since July 1996. Since February 1996, Mr. Pease has been President and Chief Executive Officer of the Company. James A. Ratigan, 58.......... Director since 2003. Since May 2006, Mr. Ratigan has served as Vice President and Chief Financial Officer of Nitric BioTherapeutics, Inc., a privately held specialty pharmaceutical, drug delivery systems and biotechnology company. From August 2003 to April 2006, Mr. Ratigan was an independent consultant providing consultative services to two specialty pharmaceutical companies, a biotechnology company and a private equity firm. From June 1997 to August 2003, Mr. Ratigan was Executive Vice President, Chief Financial Officer and Secretary of Orapharma, Inc., a specialty pharmaceutical company that was acquired by Johnson and Johnson, Inc. Mr. Ratigan was a director of the Company from 1989 to 1996 and served as the Company's Chief Operating Officer from May 1994 to April 1996 and Chief Financial Officer from December 1993 to June 1996. Terryll R. Smith, 56.......... Director since 1996. Mr. Smith has been President and Chief Executive Officer of Novation Environmental Technologies Inc., a water purification company, since January 2000.
3 BOARD OF DIRECTORS AND COMMITTEES The Board is responsible for direction of the overall affairs of the Company. Directors of the Company are elected to serve until their successors are elected. The Board and each committee thereof meet formally from time to time and also take action by consent resolutions. During the fiscal year ended June 30, 2006, the Board met a total of seven times. All of the current directors who are standing for re-election attended at least 75% of the total meetings of the Board, and of any committee on which they served, held during the period in fiscal 2006 in which they served as directors or members of any such committees. The Company's policy is that each director is strongly encouraged to attend the Annual Meeting of Shareholders if reasonably possible. All of the directors, except one, attended the 2005 Annual Meeting of Shareholders. The Board has delegated certain authority to an Audit Committee, a Management Development, Compensation and Stock Option Committee and a Nominating and Corporate Governance Committee to assist it in executing its duties. The Board has adopted charters for each of these Committees. The charters are available on the Company's website at www.perceptron.com. The Board determined that all of the directors, other than Mr. Pease, are "independent directors" as defined in Marketplace Rule 4200(a)(15) of The Nasdaq Stock Market, Inc. ("Nasdaq"). The composition and principal functions of each Committee are as follows: Audit Committee. The Audit Committee is currently comprised of three outside members of the Board: Messrs. Oswald, Ratigan and Smith. The Board determined that all of the members of the Audit Committee are independent as required by the rules of the Securities and Exchange Commission ("SEC") and Nasdaq listing standards for audit committee members. In addition, the Board determined that Mr. Ratigan qualified as an "audit committee financial expert" as defined by applicable SEC rules and that each of the Audit Committee members satisfies all other qualifications for Audit Committee members set forth in the applicable Nasdaq rules. The Audit Committee held seven meetings in fiscal 2006. The Board approved and adopted the Audit Committee's revised charter on February 9, 2004. The charter in its current form was last provided to shareholders as an appendix to the Company's Proxy Statement dated October 25, 2004 and is also available on the Company's website at www.perceptron.com. The Audit Committee's primary responsibilities include the following: (i) oversee the Company's financial reporting process on behalf of the Board; (ii) review, appoint, compensate, retain and oversee the accounting firm to be appointed as the Company's independent registered public accounting firm; (iii) review in advance the nature and extent of all services provided to the Company by its independent registered public accounting firm; (iv) review of the independence of the Company's independent registered public accounting firm; (v) review the scope, purpose and procedures of the audit; (vi) review the Company's annual earnings press release, the audited financial statements and the proposed footnotes to be included in the Company's Annual Report on Form 10-K with management and the auditors and report annually to the Board whether the Audit Committee recommends to the Board that the audited financial statements be included in the Company's Annual Report on Form 10-K for filing with the SEC; (vii) review with such auditors its experience, findings and recommendations upon completion of the audit and receive from the auditors their required communications under generally accepted auditing standards; (viii) review of the Company's quarterly earnings releases and financial statements with management and the auditors; (ix) review of the Company's Quarterly Reports on Form 10-Q for filing with the SEC; (x) review of proxy statement when authority is delegated by the Board; (xi) review the adequacy of the Company's internal accounting procedures and financial controls and management's report on internal control over financial reporting required by applicable SEC rules; (xii) oversee compliance by the Company with legal and regulatory requirements; (xiii) establish procedures for receipt, 4 retention and handling of complaints and concerns regarding financial matters; (xiv) act as the Qualified Legal Compliance Committee; (xv) review and approve any related party transactions; (xvi) monitor the Company's risk management activities; (xvii) review performance of finance and account department; and (xviii) review and reassess annually the adequacy of the Audit Committee's charter and performance. Management Development, Compensation and Stock Option Committee. The Management Development, Compensation and Stock Option Committee ("Management Development Committee") is currently comprised of three outside members of the Board: Messrs. Beattie, DeCocco and Marz. The Management Development Committee's primary responsibilities include the following: (i) review the Company's compensation programs; (ii) establish and administer the compensation programs for the Company's officers; (iii) administer the Company's stock-based compensation plans; (iv) review and recommend compensation for service on the Board; (v) provide a committee report for inclusion in the Company's proxy statement; (vi) monitor the Company's succession planning; and (vii) review and reassess annually the adequacy of the Management Development Committee's charter and performance. The Management Development Committee held six meetings in fiscal 2006. Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee ("Nominating Committee") is currently comprised of three outside members of the Board: Messrs. DeCocco, Dabrowski and Marz. The Board determined that all members of the Nominating Committee are independent as required by the Nasdaq listing standards for nominating committee members. The Nominating Committee's primary responsibilities include the following: (i) establish criteria for the selection of new Board members; (ii) conduct searches and interviews for individuals qualified to become Board members; (iii) make recommendations to the Board regarding director nominees to stand for election as directors at each annual meeting of shareholders or to fill vacancies on the Board; (iv) recommend to the Board the directors to serve on the standing committees of the Board and the structure and functions of such committees; (v) develop policies and procedures for Board consideration of shareholder recommendations of Board nominees and handling of shareholder proposals; (vi) develop a process for shareholders to communicate with the Board; (vii) advise Board on corporate governance matters, including development, review and assessment of corporate governance principles; (viii) oversee the Board and committee self evaluation process; (ix) evaluate independence of each Board member and (x) review and reassess annually the adequacy of the Nominating Committee's charter and performance. The Nominating Committee may use various methods to identify director candidates, including recommendations from existing Board members, management, shareholders, professionals and other sources outside the Company, which could include third party search firms. The Nominating Committee will evaluate and screen the list of potential nominees and narrow the list to individuals they believe best satisfy the needs of the Company, with a strong preference given to the continuation of the current Board members. The Nominating Committee will conduct interviews and gather additional information concerning the individuals. Based on the foregoing, the Nominating Committee will recommend to the Board the number of members of the Board to be elected at the next annual meeting of shareholders of the Company and the persons to be nominated for election to the Board. Director candidates need not possess any specific minimum qualifications. Rather, a candidate's suitability for nomination and election to the Board will be evaluated in light of the portfolio of skills, experience, perspective and background required for the effective functioning of the Board. Among the desired qualities that the Nominating Committee will consider are: (i) high ethical character; (ii) practical intelligence and judgment, an inquiring mind and a good range of problem solving skills; (iii) independence; (iv) ability to work in a collaborative culture; (v) high-level leadership experience and personal achievement; (vi) prior Board experience or experience advising or reporting to Boards preferably of a publicly traded company; (vii) sufficient personal commitment and time to devote to responsibilities as a director; and (viii) capacity and desire to represent the balanced best interests of the shareholders as a whole. The Nominating Committee will consider candidates recommended by shareholders using the same procedures and standards utilized for evaluating candidates recommended by other sources except that the Nominating Committee will not consider a director nominee proposed by a shareholder if (i) the shareholder does not submit the required information timely (see "Shareholder Proposals and Nominees for 2007 Annual Meeting - Shareholder Nominees"); (ii) the shareholder or group of shareholders proposing the director nominee do not beneficially own, in the aggregate, more than 5% of the Company's Common Stock, with the Common Stock used to satisfy this 5 requirement owned for at least one year prior to the date of the recommendation, or (iii) the shareholder proposes as the nominee himself or herself, or an affiliate or affiliated party. See "Shareholder Proposals and Nominees for 2007 Annual Meeting - Shareholder Nominees" for a description of the procedures to be used by shareholders to submit recommendations of possible director nominees to the Nominating Committee. The Nominating Committee held two meetings in fiscal 2006. SHAREHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS Shareholders desiring to communicate with the Board or any individual director may send communications to the Board in writing by mail addressed to the Board of Directors or an individual director, c/o General Counsel, Perceptron, Inc., 47827 Halyard Drive, Plymouth, MI 48170 or by e-mail addressed to boardofdirectors@perceptron.com. CODE OF ETHICS The Company has adopted a Code of Business Conduct and Ethics ("Code of Ethics") that applies to the Company's directors, executive officers and other employees. The Code of Ethics is available on the Company's website at www.perceptron.com. Shareholders may also obtain a written copy of the Code of Ethics, without charge, by sending a written request to the Investor Relations Department, Perceptron, Inc., 47827 Halyard Drive, Plymouth, Michigan 48170. The Company will disclose any amendments to, or waivers from, the provisions of the Code of Ethics applicable to the directors or executive officers on the Company's website. Certain information relating to corporate governance matters can be viewed at www.perceptron.com. There the Company makes available, free of charge, its (i) charters for the Audit Committee, Management Development, Compensation and Stock Option Committee and Nominating and Corporate Governance Committee and (ii) Code of Ethics. The Company intends to post additional information on this website from time to time as the Board adopts or revises policies and procedures. The information found on the Company's website is not part of this or any report the Company files with, or furnishes to, the SEC. AUDIT COMMITTEE REPORT In accordance with its revised charter, which was approved and adopted by the Board on February 9, 2004, the Audit Committee provides assistance to the Board in fulfilling its responsibility to the shareholders, potential shareholders and investment community relating to corporate accounting, reporting practices of the Company and the quality and integrity of the financial reports of the Company. In doing so, it is the responsibility of the Audit Committee to maintain free and open communication between the Board, the Company's independent registered public accounting firm and the financial management of the Company. The Audit Committee received from the independent registered public accounting firm and reviewed a formal written statement describing all relationships between the firm and the Company that might bear on the firm's independence consistent with Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), as may be modified or supplemented, discussed with the auditors any relationships that may impact their objectivity and independence and satisfied itself as to the auditors' independence. The Audit Committee discussed with the independent registered public accounting firm the matters required to be discussed by Statement on Auditing Standards No. 61 (Codification of Statements on Auditing Standards, AU Section 380), as may be amended or supplemented, and, with and without management present, discussed and reviewed the results of the independent registered public accounting firm's examination of the financial statements. The Audit Committee reviewed and discussed with management and the independent registered public accounting firm the audited financial statements of the Company as of and for the fiscal year ended June 30, 2006, including the quality of accounting principles and significant judgments affecting the financial statements. Based on the above-mentioned reviews and discussions with management and the independent registered public accounting firm, the Audit Committee recommended to the Board that the Company's audited financial statements be included in its Annual Report on Form 10-K for the year ended June 30, 2006 for filing with the Securities and Exchange Commission. Further, the Audit Committee approved the engagement of Grant Thornton LLP as the Company's independent registered public accounting firm for the fiscal year ended June 30, 2007. AUDIT COMMITTEE: James A. Ratigan, Chairman Robert S. Oswald Terryll R. Smith 6 FURTHER INFORMATION EXECUTIVE OFFICERS The officers listed below were appointed by the Board and serve in the capacities indicated. Executive officers are normally appointed annually by the Board and serve at the pleasure of the Board.
NAME AND AGE POSITION AND PRINCIPAL OCCUPATIONS ------------ ---------------------------------- Alfred A. Pease, 60........... President and Chief Executive Officer since February 1996. Mr. Pease's business experience is described under "Proposal 1 -- Election of Directors." Wilfred J. Corriveau, 53...... Senior Vice President - Global Automotive Business of the Company since September 2000. John J. Garber, 64............ Vice President - Finance and Chief Financial Officer of the Company since February 1999. Harry T. Rittenour, 60........ Senior Vice President - Product Production and Quality since May 2001.
SHARE OWNERSHIP OF MANAGEMENT AND CERTAIN SHAREHOLDERS PRINCIPAL SHAREHOLDERS The following table sets forth information with respect to beneficial ownership of the Common Stock by each person known by management of the Company to be the beneficial owner of more than five percent of its outstanding Common Stock. The number of shares reported is as of the dates indicated in the footnotes below. The percentage of class is based on 8,308,323 shares of Common Stock outstanding on September 22, 2006. The information as to each person has been furnished by such person and, except as where otherwise indicated, each person has sole voting power and sole investment power with respect to all shares beneficially owned by such person.
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS ------------------- -------------------- -------- Royce & Associates, Inc., 1414 Avenue of the Americas New York, New York 10019........ 764,200(1) 9.20 Dimensional Fund Advisors Inc. 1299 Ocean Avenue, 11th Floor Santa Monica, California 90401.. 744,804(2) 8.96 Alfred A. Pease 47827 Halyard Drive Plymouth, Michigan 48170........ 545,053(3) 6.22 Richard L. Scott 700 11th Street S, Suite 101 Naples, Florida 34102........... 446,880(4) 5.38
- ---------- (1) Based upon its statement on Schedule 13G dated and filed with the SEC on January 31, 2006, Royce & Associates, Inc. ("Royce") has sole power to vote and dispose of 764,200 shares of Common Stock. (2) Based upon its statement on Schedule 13G dated February 1, 2006 and filed with the SEC on February 6, 2006, Dimensional Fund Advisors Inc. has sole power to vote and dispose of 744,804 shares of Common Stock. Further, based upon its statement on Schedule 13G, the shares of Common Stock are beneficially owned by investment companies, trusts and accounts which are advised by Dimensional Fund Advisors Inc. and none of which own more than 5% of the shares of Common Stock. Dimensional Fund Advisors Inc. disclaims beneficial ownership of such shares of Common Stock. (3) Includes options to purchase 452,534 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (4) Based upon his statement on Schedule 13D dated and filed with the SEC on October 20, 2005, Richard L. Scott has sole power to vote and dispose of 446,880 shares of Common Stock. Further, based upon his statement on Schedule 13D, Mr. Scott indicates that the shares of Common Stock were purchased by three different entities controlled by him. 7 BENEFICIAL OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth information with respect to beneficial ownership of the Common Stock by each of the directors and director nominees, the persons named in the Summary Compensation Table and by all directors and executive officers as a group as of September 22, 2006, unless otherwise indicated. The information as to each person has been furnished by such person and, except as where otherwise indicated, each person has sole voting power and sole investment power with respect to all shares beneficially owned by such person.
AMOUNT AND NATURE NAME OF BENEFICIAL OWNER (1) OF BENEFICIAL OWNERSHIP PERCENT OF CLASS ---------------------------- ----------------------- ---------------- David J. Beattie (2)(3)......... 11,600 * Kenneth R. Dabrowski (2)(4)..... 77,608 * Philip J. DeCocco (2)(5)........ 57,337 * W. Richard Marz (2)(6).......... 53,133 * Robert S. Oswald (2)(7)......... 72,083 * Alfred A. Pease (2)(8).......... 545,053 6.22% James A. Ratigan (2)(9)......... 16,000 * Terryll R. Smith (2)(10)........ 7,500 * Wilfred J. Corriveau (11)....... 166,109 1.98% John J. Garber (12)............. 120,417 1.43% Harry T. Rittenour (13)......... 138,700 1.64% Directors and executive officers as a group (11 persons)(14).. 1,265,540 13.74%
- ---------- * Less than 1% of class (1) To the best of the Company's knowledge, based on information reported by such directors and officers or contained in the Company's shareholder records. (2) Serves as a member of the Board of the Company. (3) Includes options to purchase 10,500 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (4) Includes options to purchase 27,000 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (5) Includes options to purchase 23,500 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (6) Includes options to purchase 24,000 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (7) Includes options to purchase 10,500 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (8) Includes options to purchase 452,534 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (9) Represents options to purchase 16,000 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (10) Represents options to purchase 7,500 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (11) Includes options to purchase 97,500 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (12) Includes options to purchase 91,750 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (13) Includes options to purchase 138,500 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. (14) Includes options to purchase 899,284 shares of Common Stock, which are presently exercisable or which are exercisable within 60 days of September 22, 2006. 8 SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Under the securities laws of the United States, the Company's directors, its executive (and certain other) officers, and any persons holding more than ten percent of the Common Stock are required to report their ownership of the Common Stock and any changes in that ownership to the SEC. Directors, officers and greater than ten percent shareholders are required by the SEC to furnish the Company with copies of all Section 16(a) reports they file. Specific due dates for these reports have been established and the Company is required to report in this proxy statement any failure to file by these dates during the Company's last fiscal year. To the Company's knowledge, all of these filing requirements were satisfied during the Company's last fiscal year by the Company's officers, directors and ten percent shareholders, except to the extent previously reported in a Company proxy statement. In making this statement, the Company has relied solely on the written representations of its directors, officers and ten percent shareholders and copies of the reports that have been filed with the SEC. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS DIRECTORS Effective September 1, 2006, all of the members of the Board who are not employed by the Company (the "Eligible Directors") will receive (i) an annual cash retainer of $20,000 for serving on the Board, paid quarterly in the amount of $5,000, (ii) an annual committee retainer of $3,000 for serving on each committee, paid quarterly in the amount of $750, (iii) an annual committee chair retainer (other than Audit Committee) of $5,000, paid in quarterly installments of $1,250 and in lieu of the annual committee retainer, (iv) an annual Audit Committee chair retainer of $8,000, paid quarterly in the amount of $2,000 and in lieu of the annual committee retainer and (v) an annual lead director retainer of $5,000, paid quarterly in the amount of $1,250 and in addition to any other retainer. All Eligible Directors receive $1,250 for each Board meeting attended. In addition, directors are reimbursed for their out-of-pocket expenses incurred in attending Board and committee meetings. Eligible Directors are also eligible to participate in the Company's 2004 Stock Incentive Plan (the "2004 Plan"), which replaced the Directors Stock Option Plan (the "Directors Plan"). The Management Development Committee or, if there is no such committee or similar committee, the Board, administers the 2004 Plan. Unless otherwise specified in the 2004 Plan, the Management Development Committee has the power to select the recipients of awards under the 2004 Plan, including Eligible Directors, and has broad power to determine the terms of awards and to change such terms in various ways subsequent to grant. The 2004 Plan permits grants to Eligible Directors of nonqualified stock options, indexed options, restricted stock, restricted stock units, stock appreciation rights, performance share awards, including cash, and deferred stock units at any time prior to October 22, 2014. The exercise price for a nonqualified stock option, other than an indexed option, will be not less than 100% of the fair market value of Common Stock on the date of grant. Fair market value means for purposes of determining the value of Common Stock on the grant date the average of the closing sales prices of the Common Stock on Nasdaq (or, if there have been no sales on Nasdaq on any such day, the average of the closing high bid and low asked prices on Nasdaq at the end of such day) for the five (5) consecutive trading days on Nasdaq immediately preceding the grant date. No stock grants were made to Eligible Directors in the fiscal year ended June 30, 2006 under the 2004 Plan. On September 1, 2006, each Eligible Director received nonqualified stock options to purchase 8,000 shares, vesting one-fourth on each of the first four anniversaries of the date of grant. The exercisability of such options is accelerated in the event of the occurrence of certain changes in control of the Company. See "Further Information - Compensation of Directors and Executive Officers - Executive Officers - Employment Agreements, Termination of Employment and Change in Control Arrangements". In addition, such options become immediately exercisable in the event that the Eligible Director's service on the Board is terminated by the Company, he is not re-nominated by the Company to serve on the Board or, if re-nominated, is not re-elected, or voluntarily resigns from the Board at the request of the Company. All options granted under the 2004 Plan are exercisable for a period of ten years from the date of grant, unless earlier terminated due to the termination of the Eligible Director's service as a director of the Company. 9 The 2004 Plan also permits Eligible Directors to purchase shares of Common Stock through the 2004 Plan in exchange for all or a portion of the cash fees payable to them for serving as a director of the Company ("Directors Stock Purchase Rights Option"). By December 31 of each year, a director must make his or her election to purchase shares of Common Stock in exchange for all or a portion of a director's fees payable from December 1 of that year to December 1 of the next year. Directors fees are payable in cash on March 1, June 1, September 1 and December 1 of each year. On each of these dates, the Company will determine the number of shares of Common Stock each Director who has elected to participate in the Directors Stock Purchase Rights Option has earned on that date. This determination will be made by dividing all director's fees payable on each of those dates which the Director has elected to exchange for Common Stock, by the fair market value of the Common Stock on that date. Any portion of the director's fees payable on each of those dates which the Director has not elected to receive in Common Stock will be paid to the Director in cash. The fair market value of the Common Stock will be determined by using the average of the closing sales price of the Common Stock on the Nasdaq for the five consecutive trading days immediately preceding the date of determination. The Company will issue share certificates for all shares of Common Stock purchased in a calendar year by December 15th of such year unless a director requests by written notice to the Company to receive his or her share certificate at any time during the year. The Directors Plan was cancelled as to future grants beginning on the day following the 2004 Annual Meeting of Shareholders. Prior to such cancellation, all Eligible Directors who were first elected or appointed after February 9, 1995 received an Option to purchase 15,000 shares of Common Stock on the date of his election or appointment ("Initial Option"). In addition, each Eligible Director who was a director for six months before the date of each Annual Meeting of Shareholders held during the term of the Directors Plan automatically was granted, as of the date of such Annual Meeting, including the 2004 Annual Meeting, an option to purchase an additional 3,000 shares of Common Stock (an "Annual Option"). The exercise price of options granted under the Directors Plan was determined by using the average of the closing sales price of the Common Stock on the Nasdaq for the last five (5) consecutive trading days on the Nasdaq immediately preceding the date of grant. Each option granted under the Directors Plan as an Initial Option became exercisable in full on the first anniversary of the date of grant. Options granted as Annual Options became exercisable in three annual increments of 33 1/3% of the shares subject to the option. The exercisability of such options is accelerated in the event of the occurrence of certain changes in control of the Company and certain terminations of the Eligible Director's services as a member of the Board. All options granted under the Directors Plan are exercisable for a period of ten years from the date of grant, unless earlier terminated due to the termination of the Eligible Director's service as a director of the Company. In addition, prior to the approval of the 2004 Plan, Eligible Directors could purchase shares of Common Stock through the Directors Plan in exchange for all or a portion of the cash fees payable to them for serving as a director of the Company, on terms similar to the Directors Stock Purchase Rights Option. EXECUTIVE OFFICERS SUMMARY COMPENSATION TABLE The following table sets forth certain information as to compensation paid by the Company for services rendered in all capacities to the Company and its subsidiaries during the fiscal years ended June 30, 2006, June 30, 2005 and June 30, 2004 to (i) the Company's Chief Executive Officer and (ii) the Company's executive officers at June 30, 2006 (other than the Chief Executive Officer) whose aggregate annual salary and bonus exceeded $100,000. 10 SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION -------------------------------------------- LONG-TERM OTHER ANNUAL COMPENSATION AWARDS COMPENSATION SECURITIES UNDER- ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) LYING OPTIONS (#)(2) COMPENSATION ($) - --------------------------- ---- ---------- --------- ------------ -------------------- ---------------- Alfred A. Pease, President, 2006 308,700 38,535 0 25,000 15,640(3) Chief Executive Officer and 2005 306,250 21,804 0 100,000 (50,000 of 15,867(4) Chairman of the Board ....... which were cancelled on 11/5/04(2) 2004 292,250 182,493 0 100,000 14,752(5) Wilfred J. Corriveau, 2006 219,000 25,059 0 12,500 12,218(3) Senior Vice President 2005 217,500 14,276 0 50,000(25,000 of 11,718(4) Global Automotive Business .. which were cancelled on 11/5/04(2) 2004 208,500 118,294 0 30,000 9,718(5) John J. Garber, 2006 191,000 21,855 0 0 16,693(3) Vice President Finance and 2005 186,917 12,509 0 30,000(15,000 of 10,693(4) Chief Financial Officer ..... which were cancelled on 11/5/04(2) 2004 179,500 104,553 0 20,000 9,693(5) Harry T. Rittenour, 2006 169,000 19,338 0 12,500 9,883(3) Senior Vice President Product 2005 167,833 11,013 0 50,000(25,000 of 6,883(4) Production and Quality ...... which were cancelled on 11/5/04(2) 2004 161,000 92,007 0 30,000 2,833(5)
- ---------- (1) Perquisites and other personal benefits were provided to all of the persons named in the Summary Compensation Table. In accordance with SEC rules, disclosure of such amounts is not required because such amounts were less than 10% of the total annual salary and bonuses reported for each of the respective individuals for each period presented. (2) Included in the table are 50,000, 25,000, 15,000 and 25,000 options shares granted to Messrs. Pease, Corriveau, Garber and Rittenour, respectively, in fiscal 2005 that, because of a technical issue, they voluntarily cancelled in fiscal 2005 and for which replacement options for 50,000, 25,000, 15,000 and 25,000 were issued to them, respectively, in fiscal 2005 on the same terms. (3) "All Other Compensation" is comprised of (i) contributions made by the Company to the accounts of the named executive officers under the Company's 401(k) Plan with respect to the fiscal year ended June 30, 2006 as follows: Mr. Pease $10,000; Mr. Corriveau $9,500; Mr. Garber $14,500; and Mr. Rittenour $8,700; and (ii) the dollar value of any life insurance premiums paid by the Company in the fiscal year ended June 30, 2006 with respect to term life insurance for the benefit of the named executives as follows: Mr. Pease $5,640; Mr. Corriveau $2,718; Mr. Garber $2,193; and Mr. Rittenour $1,183. (4) "All Other Compensation" is comprised of (i) contributions made by the Company to the accounts of the named executive officers under the Company's 401(k) Plan with respect to the fiscal year ended June 30, 2005 as follows: Mr. Pease $9,000; Mr. Corriveau $9,000; Mr. Garber $8,500; and Mr. Rittenour $5,700; (ii) the dollar value of any life insurance premiums paid by the Company in the fiscal year ended June 30, 2005 with respect to term life insurance for the benefit of the named executives as follows: Mr. Pease $6,867; Mr. Corriveau $2,718; Mr. Garber $2,193; and Mr. Rittenour $1,183. (5) "All Other Compensation" is comprised of (i) contributions made by the Company to the accounts of the named executive officers under the Company's 401(k) Plan with respect to the fiscal year ended June 30, 2004 as follows: Mr. Pease $8,000; Mr. Corriveau $7,000; Mr. Garber $7,500; and Mr. Rittenour $1,650; (ii) the dollar value of any life insurance premiums paid by the Company in the fiscal year ended June 30, 2004 with respect to term life insurance for the benefit of the named executives as follows: Mr. Pease $6,752; Mr. Corriveau $2,718; Mr. Garber $2,193; and Mr. Rittenour $1,183. 11 GRANTS OF OPTIONS The following tables set forth certain information concerning individual grants of stock options to each of the persons named in the Summary Compensation Table made during the fiscal year ended June 30, 2006. All grants described in the following tables were made under the Company's 2004 Plan and become immediately exercisable in the event of a Change in Control. See "Further Information -- Compensation of Directors and Officers -- Executive Officers -- Termination of Employment and Change in Control Arrangements". OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS POTENTIAL REALIZABLE ------------------------------ VALUE AT ASSUMED NUMBER OF ANNUAL RATES OF STOCK SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR UNDERLYING OPTIONS GRANTED EXERCISE OR OPTION TERM (3) OPTION TO EMPLOYEES IN BASE PRICE EXPIRATION ---------------------- NAME GRANTED (#) FISCAL YEAR (1) ($/SH) DATE (2) 5%($) 10%($) ---- ----------- ---------------- ----------- ---------- ------- ------- Alfred A. Pease ....... 25,000(4) 10.26% 6.98 1/1/2016 109,704 277,990 Wilfred J. Corriveau .. 12,500(5) 5.13% 6.98 1/1/2016 54,852 138,995 John J. Garber ........ 0 -- -- -- -- -- Harry T. Rittenour .... 12,500(5) 5.13% 6.98 1/1/2016 54,852 138,995
- ---------- (1) Options to purchase a total of 243,675 shares of Common Stock were granted to team members in the fiscal year ended June 30, 2006. (2) Options expire on the date indicated, or, if earlier, one year after the optionee's death or permanent disability or three months after the optionee's termination of employment. (3) Represents the value of such options at the end of its ten year term (without discounting to present value) assuming the market prices of the Common Stock appreciates from the grant date at an annually compounded rate of 5% or 10%. These amounts represent rates of appreciation only. Actual gains, if any, will be dependent on overall market conditions and on the future performance of the Common Stock. There can be no assurance that the amounts reflected in this table will be achieved. (4) Consists of 25,000 nonqualified stock options that become exercisable in four annual installments of 6,250 shares of Common Stock beginning on January 2, 2007. (5) Consists of 12,500 nonqualified stock options that become exercisable in four annual installments of 3,125 shares of Common Stock beginning on January 2, 2007. EXERCISE AND VALUE OF OPTIONS The following tables set forth certain information concerning exercises of stock options during the fiscal year ended June 30, 2006 by each of the persons named in the Summary Compensation Table and the number of and the value of unexercised stock options held by such persons as of June 30, 2006 on an aggregated basis. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT SHARES VALUE FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1) ACQUIRED ON REALIZED --------------------------- --------------------------- NAME EXERCISE (#) ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ------------ -------- ----------- ------------- ----------- ------------- Alfred A. Pease ....... 0 0 402,534 125,000 1,983,797 239,875 Wilfred J. Corriveau .. 0 0 77,500 52,500 343,113 104,238 John J. Garber ........ 0 0 79,250 25,000 311,520 55,938 Harry T. Rittenour .... 6,000 8,280 124,500 52,500 471,008 104,238
- ---------- (1) Represents the total gain which would have been realized if all such options had been exercised on June 30, 2006. (2) Represents the fair market value of the shares of Common Stock relating to exercised options, as of the date of exercise, less the exercise price of such options. 12 EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS Mr. Pease serves in his present capacity pursuant to the terms of an employment agreement. Mr. Pease's agreement provides for an annual base salary, subject to increase at the discretion of the Management Development Committee, reimbursement of reasonable monthly club dues, benefits comparable to the Company's other executive officers, including life, disability and health insurance and the use of a Company leased automobile, and an annual performance bonus target level of 60% of his base salary. The Company has also entered into severance agreements with Messrs. Pease, Corriveau, Garber and Rittenour. The severance agreement between the Company and Mr. Pease provides for, among other things, the payment of an amount of cash severance equal to one times his current annual base salary, as in effect immediately prior to his termination, a prorated portion of any bonus he would have earned for the year of termination had Mr. Pease been employed by the Company at the end of the applicable bonus period, and continuation of Company-provided health, welfare and automobile benefits for one year. The severance agreements between the Company and Messrs. Corriveau, Garber and Rittenour provide for, among other things, the payment of an amount of severance equal to six months of their current annual base salary, as in effect immediately prior to their termination, a prorated portion of any bonus they would have earned for the year of termination had they been employed by the Company at the end of the applicable bonus period, and continuation of Company-provided health, welfare and automobile benefits for six months. Severance is payable to Messrs. Pease, Corriveau, Garber and Rittenour only if they are terminated by the Company for any reason other than death, disability, or cause (as defined in the severance agreements). If the Company's executive officers are terminated by the Company for any reason other than death, disability or cause, or they resign for "Good Reason", six months prior to or within two years after a "Change in Control" of the Company, in lieu of the severance described in the prior paragraph, Mr. Pease will be entitled to an amount of severance equal to two 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 until Mr. Pease becomes eligible for Medicare benefits and welfare and automobile benefits for two years and continued coverage under director and officer liability insurance policies, and Messrs. Corriveau, Garber and Rittenour will be entitled to an amount of severance equal to one times their current annual base salary, as in effect immediately prior to their termination, a prorated portion of their target bonus for the year of termination, based on the number of days worked in the year of termination, continuation of Company-provided health, welfare and automobile benefits for one year and continued coverage under director and officer liability insurance policies. 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, the Company notifies the executive in writing that it is not extending the term of these provisions. "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: (i) any reassignment of the executive to substantial duties materially inconsistent with the executive's position, duties, responsibilities and status with the Company immediately prior to the Change in Control or a substantial diminution in the executive's position, duties, responsibilities or status with the Company from his position, duties, responsibilities or status with the Company immediately prior to the Change in Control; provided that the fact that the Company is no longer a publicly traded company or the executive no longer has duties and responsibilities associated exclusively with a publicly traded company, such as SEC or stock exchange reporting responsibilities or investor or analyst relations responsibilities, shall not be deemed to be a reassignment of the executive to substantial duties materially inconsistent with the executive's position, duties, responsibilities and status with the Company immediately prior to the Change in Control or a substantial diminution in the executive's position, duties, responsibilities or status with the Company from his position, duties, responsibilities or status with the Company immediately prior to the Change in Control; (ii) any reduction in the executive's base salary or targeted incentive bonus or commissions in effect immediately prior to the Change in Control, or failure by the Company to continue any bonus, stock or other incentive plans in effect immediately prior to the Change in Control (without the implementation of comparable successor plans that provide comparable award opportunities/benefits), or any removal of the executive from participation in such aforementioned plans; (iii) the discontinuance or reduction in benefits to the executive under any qualified or nonqualified retirement or welfare plan maintained by the Company immediately prior to the Change in Control (without the implementation of comparable successor plans that provide comparable benefits), or the discontinuance of any fringe benefits or other perquisites that the Executive received immediately prior to the Change in Control (without the implementation of 13 comparable successor plans that provide comparable benefits); (iv) required relocation of the executive's principal place of employment more than 50 miles from the executive's place of employment prior to the Change in Control; or (v) the Company's breach of any provision in the severance agreements, provided that the Company has not cured such breach within 10 days following written notice by the executive to the Company of such breach. Payments under the severance agreements, when aggregated with any other "golden parachute" amounts (defined under Section 280G of the Internal Revenue Code as compensation that becomes payable or accelerated due to a Change in Control) payable under this Agreement or any other plans, agreements or policies of the Company, shall not exceed the golden parachute cap under Sections 280G and 4999 of the Internal Revenue Code. Agreements relating to stock options granted under the 2004 Plan to each of the executive officers named in the Summary Compensation Table, as well as stock options granted under the 2004 Plan to other officers of the Company beginning in fiscal 2006, provide that such options become immediately exercisable in the event of a Change in Control. Agreements relating to stock options granted under the 1992 Plan to each of the executive officers named in the Summary Compensation Table, as well as stock options granted under the 1992 Plan and stock options granted under the 2004 Plan prior to fiscal 2006 to other officers of the Company, also provide that such options become immediately exercisable in the event that the optionee's employment is terminated without cause, or there is a diminishment of the optionee's responsibilities, following a Change in Control of the Company or, if, in the event of a Change in Control, such options are not assumed by the person surviving the Change in Control or purchasing the assets in the Change in Control. A "Change in Control" for purposes of the severance agreements, the 2004 Plan and the 1992 Plan is generally defined as a merger of the Company in which the Company is not the survivor, certain share exchange transactions, the sale or transfer of all or substantially all of the assets of the Company, or any person or group of persons (as defined by Section 13(d) of the Exchange Act) acquires more than 50% of the Common Stock. MANAGEMENT DEVELOPMENT, COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Management Development, Compensation and Stock Option Committee of the Board ("Management Development Committee") currently consists of Messrs. Beattie, DeCocco and Marz. During fiscal 2006, no member of the Management Development Committee served as an officer or employee of the Company or any of its subsidiaries nor had any member of the Management Development Committee formerly served as an officer of the Company or any of its subsidiaries. See "Proposal 1 - Election of Directors". During fiscal 2006, none of the executive officers of the Company served on the board of directors or on the compensation committee of any other entity, any of whose executive officers served either on the Board or on the Management Development Committee of the Company. 14 REPORT OF THE MANAGEMENT DEVELOPMENT, COMPENSATION AND STOCK OPTION COMMITTEE The Management Development Committee is responsible for the planning, review and administration of the Company's executive compensation program and the Company's stock-based executive compensation programs. During the fiscal year ended June 30, 2006, all members of this Committee were non-employee directors of the Company. The Company's objective is to provide a superior return to its shareholders. To support this objective, the Company believes it must attract, retain and motivate top quality executive talent. The Company's executive compensation program is a critical tool in this process. The Company's executive compensation program has been designed to link executive compensation to Company performance through at-risk compensation opportunities, providing significant reward to executives who contribute to the Company's success. The Company's executive compensation program consists of base salary, annual cash profit sharing incentive opportunities and long-term incentives represented by stock-based incentives. Further the Company believes that stock-based incentives for team members, in addition to providing an incentive for their continued employment, more closely align their interests with those of the Company and its shareholders. The base salary, annual cash profit sharing incentive opportunity, stock-based incentives and other compensation terms for new executive officers are established based upon each executive's qualifications, position and level of responsibility as compared with the Company's other executives. BASE SALARY The Management Development Committee recognizes the importance of a competitive compensation structure in retaining and attracting valuable senior executives. Executive salary levels are reviewed and established annually. The salaries received by the Company's executives generally reflect their levels of responsibility, the profitability of the Company and other factors, such as assessments of individual performance. In fiscal 2006, the Management Development Committee did not increase the base salary of Alfred A. Pease, Chairman of the Board, President and Chief Executive Officer of the Company, or the Company's other executive officers. The Management Development Committee deferred consideration of increases in base salary until it had an opportunity to better evaluate the Company's progress in implementing its long-term business strategy approved earlier in the year. ANNUAL PROFIT SHARING The Company's executive officers are eligible for annual cash profit sharing incentive opportunities. Generally, at the beginning of each fiscal year, the Management Development Committee develops a profit sharing plan applicable to all executives of the Company, including the Chief Executive Officer of the Company. For fiscal 2006, the Management Development Committee adopted the Fiscal Year 2006 Profit Sharing Plan, which applied to all team members of the Company, including Mr. Pease and the other executive officers. The Fiscal Year 2006 Profit Sharing Plan provided that the Company would make a profit sharing payout only if the Company achieved earnings per share ("EPS") in excess of the Fiscal Year 2006 Profit Plan established by the Board (the "EPS Bonus Component"). For performance in excess of that level, subject to a cap, an increasing portion of each dollar of Company pre-tax earnings above progressive earnings share targets would be added to the profit sharing pool. The actual profit sharing pool earned under the Fiscal Year 2006 Profit Sharing Plan was divided among team members in relation to their profit sharing potential for the year. Each team member's profit sharing potential for the year was stated as a percentage of their base salary. The level was 60% for Mr. Pease and 55% for the other executive officers. 15 The executive officers of the Company, including Mr. Pease, were eligible to earn 90% of the profit sharing payout based upon the level of EPS achieved by the Company. The other 10% of their profit sharing payout was earned based upon the percentage increase in the stock price of the Common Stock over a $7.50 stock price threshold, with the entire Stock Price Bonus earned at a $2.50 increase (the "Stock Price Bonus Component"). The Stock Price Bonus is calculated using the average closing price of the Common Stock for the first three trading days of fiscal 2007. During fiscal 2006, the profit sharing pool earned under the EPS Bonus Component was 20.7% of the team members' aggregate potential payout. The Common Stock price increased over the threshold during fiscal 2006. Therefore, each of the executive officer's, including Mr. Pease's, profit sharing potential level increased to 20.8% of their aggregate potential payout as a result of the Stock Price Bonus Component of the plan. Mr. Pease received a profit sharing payment of 12.5% of his base salary level as of June 30, 2006 and the other executive officers received a profit sharing payment of 11.4% of their base salary level as of June 30, 2006. The "Annual Compensation - Bonus" column of the Summary Compensation Table contained under "Compensation of Directors and Executive Officers - Executive Officers - Summary Compensation Table" sets forth the payments to the executive officers under the Company's annual profit sharing plans. No discretionary bonuses were paid to Mr. Pease or the other executive officers in fiscal 2006. STOCK-BASED INCENTIVES The 2004 Stock Incentive Plan ("2004 Plan") permits the Management Development Committee to grant indexed options, stock appreciation rights, restricted stock, restricted stock units, performance share awards and deferred stock units, in addition to incentive and non-qualified stock options. In fiscal 2006, the Management Development Committee reviewed the various stock-based incentive alternatives available to the Company under the 2004 Plan as part of its development of a program to provide appropriate long-term incentives to the executive team and more closely align their interests with the Company and its shareholders. Based upon that review, the Management Development Committee determined to use grants of non-qualified stock options as the Company's long-term stock incentive program for the executive team. The Management Development Committee also determined to continue its past practice of using non-qualified stock options to motivate team members at other levels within the Company. In reaching its decision, the Management Development Committee considered the tax impact of each alternative form of stock grant on the Company and the team members, the accounting treatment of each alternative, particularly under SFAS No. 123R, "Share-Based Payment", the cash impact on the Company of each alternative and the relevant level of incentive each alternative provides team members. The decision to use non-qualified stock options was principally based upon the Committee's determination that options provide greater incentive to team members because of the beneficial tax treatment for team members as compared to other alternatives and because team members are more familiar with this form of stock incentive. The use of non-qualified stock options also will provide the Company with a tax deduction upon exercise of the options not generally available with incentive stock options. The Management Development Committee also believes that the use of non-qualified stock options will allow them to develop an attractive stock incentive program, while minimizing related accounting expense and maximizing the positive impact on the Company's cash. Stock option grants have historically been utilized by the Company as part of its compensation program for all levels of team members, including the Company's executives. The Company's stock option program permits team members to buy a specific number of shares of Common Stock in the future, at the fair market value of such shares on the date the option is granted. Since stock options gain value only if the price of the Common Stock increases above the option exercise price, this use of stock option grants reflects the Company's philosophy of linking compensation to performance. In addition, the Committee believes that stock option grants to team members help to provide an incentive for their continued employment and otherwise more closely align their interests with those of the Company and its shareholders. The Company also utilizes stock options as part of its standard compensation package developed to attract highly qualified candidates to the Company. 16 In fiscal 2006, Mr. Pease was granted options under the 2004 Plan to purchase 25,000 shares of Common Stock. The grant reflected the Management Development Committee's evaluation of Mr. Pease's performance since the beginning of fiscal 2005, including his continued strong leadership of the Company. The Committee also believed that an additional option grant to Mr. Pease was appropriate to continue to more closely align his interests with those of the Company and its shareholders. In light of the changes in accounting for stock options, the Management Development Committee determined to reduce the size of individual stock option grants and to limit the team members to whom they are granted. With that in mind, in fiscal 2006, the Management Development Committee generally reduced the number of shares covered by each stock option grant to the executive team, including Mr. Pease, to one half the number of shares covered by options granted to them in fiscal 2005. In fiscal 2006, the Management Development Committee also granted options to purchase shares of Common Stock under the 2004 Plan to the other executive officers of the Company, except for Mr. Garber. These executive officers received grants of options to purchase 12,500 shares of Common Stock. These option grants were made in recognition of the continued contributions these executives were making to the execution of the Company's business strategy implemented earlier in the year and to provide them continued incentive to execute that strategy and remain with the Company on a long-term basis. The size of the grants was made based on the Committee's desire to limit the number of shares granted under the stock incentive program and its evaluation of the contributions made by each of the executive officers. Options granted to Mr. Pease and the other executive officers in fiscal 2006 become exercisable in four equal annual installments, beginning one year from their date of initial grant, at an exercise price equal to the fair market value of the Common Stock on the date of their initial grant. SEVERANCE AGREEMENTS In fiscal 2005, the Board, upon recommendation of the Management Development Committee, authorized the implementation of formal Severance Agreements for the Company's executive officers. The terms of the Severance Agreements are described under "Compensation of Directors and Executive Officers - - Executive Officers - Employment Agreements, Termination of Employment and Change in Control Arrangements". The Board determined it appropriate to formalize the Company's general severance policies and practices for its executive team and at the same time institute enhanced severance arrangements payable in the event of a termination of the executive's employment following a Change in Control of the Company. The Board and Management Development Committee believe that the enhanced severance arrangements are necessary in order to provide executives with the appropriate incentives to act in the best interests of the Company and its shareholders, without concern for their own personal interests. The Management Development Committee, in developing its recommendations to the Board, consulted with an outside compensation consultant hired by the Committee and the Company's outside legal counsel. Based upon the foregoing, the Management Development Committee believes that the Severance Agreements contain terms and conditions which are comparable to those used by other companies that are similar in size to the Company. DEDUCTIBILITY OF EXECUTIVE COMPENSATION The Management Development Committee has reviewed the provisions of the Internal Revenue Code and related regulations of the Internal Revenue Service which restrict deductibility of executive compensation paid to the chief executive officer and any of the four most highly compensated executive officers at the end of the fiscal year to the extent such compensation exceeds $1,000,000 in any year. The Board of the Company established certain restrictions on the granting of options under the Company's 1992 Stock Option Plan and the 2004 Plan, which replaces the 1992 Stock Option Plan, so that compensation realized in connection with the stock-based grants under both plans would be exempt from the restrictions on deductibility described above. The 1992 Stock Option Plan restricted to 200,000 the number of shares of Common Stock that could be subject to options granted to any salaried employee in any fiscal year. The 2004 Plan restricts stock grants to any participant any fiscal year as follows: (i) up to 200,000 shares of Common Stock may be subject to stock option grants, (ii) up to 200,000 shares of Common Stock may be subject to stock appreciation right grants, (iii) up to 200,000 shares of Common Stock may be subject to restricted stock awards, and (iv) up to 200,000 shares of Common Stock may be subject to performance share awards. It is important to note that while these restrictions 17 allow the Management Development Committee continuing discretion in establishing executive officer compensation, they do limit such discretion by restricting the size of stock awards which the Management Development Committee may grant to any single individual. The permitted size of the stock awards to a single individual was established based on the Committee's determination of the maximum number of shares which would be required to be granted in any fiscal year to retain or attract a chief executive officer of the Company. The Board does not believe that other components of the Company's compensation program are likely to result in payments to any executive officer in any year which would be subject to the restriction on deductibility, and therefore, concluded that no further action with respect to qualifying such compensation for deductibility was necessary at this time. The Board will continue to evaluate the advisability of qualifying future executive compensation programs for deductibility under the Internal Revenue Code. MANAGEMENT DEVELOPMENT, Philip J. DeCocco, Chairman COMPENSATION AND STOCK David J. Beattie OPTION COMMITTEE W. Richard Marz 18 STOCK PRICE PERFORMANCE GRAPH Set forth below is a graph comparing the cumulative total shareholder return on the Common Stock from June 30, 2001 through June 30, 2006 with an index consisting of returns from a peer group of companies, consisting of Cognex Corp., Cyberoptics Corporation, Integral Vision, Inc., and PPT Vision, Inc. (the "Peer Group Index") and The Nasdaq Stock Market (U.S.) Index (the "Nasdaq Composite Index"). Accuity Cimatrix, Inc. (formerly Robotic Vision Systems Inc.) has filed for liquidation under the U.S. bankruptcy code and therefore has been removed from the Peer Group Index. The returns of each company in the Peer Group Index have been weighted according to their respective stock market capitalization. The graph assumes that the value of the investment in the Company's Common Stock, the Peer Group Index and the Nasdaq Composite Index was $100 on June 30, 2001 and that all dividends were reinvested. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* AMONG PERCEPTRON INC., THE NASDAQ STOCK MARKET (U.S.) INDEX AND A PEER GROUP (PERFORMANCE GRAPH) * $100 invested on 6/30/01 in stock or index-including reinvestment of dividends. Fiscal year ending June 30.
CUMULATIVE TOTAL RETURN --------------------------------------------------------- 6/30/01 6/30/02 6/30/03 6/30/04 6/30/05 6/30/06 ------- ------- ------- ------- ------- ------- Perceptron, Inc. 100 115 444 527 503 598 Nasdaq Stock Market (US) 100 70 78 99 99 106 Peer Group 100 60 63 116 76 75
The graph displayed above is presented in accordance with applicable legal requirements. Shareholders are cautioned against drawing any conclusions from the data contained in the graph, as past results are not necessarily indicative of future performance. The graph in no way reflects the Company's forecast of future financial performance. 19 INDEPENDENT ACCOUNTANTS GENERAL The accounting firm of Grant Thornton LLP ("Grant Thornton") has been appointed by the Audit Committee to audit the consolidated financial statements for the Company for the fiscal year ended June 30, 2007. Grant Thornton has served as the Company's independent accountants since March 8, 2002. Representatives of Grant Thornton are expected to be at the Annual Meeting and to be available to respond to appropriate questions. Such representatives will have the opportunity to make a statement at such meeting if they desire to do so. POLICY FOR PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES The Audit Committee has adopted a policy regarding audit and non-audit services that may be provided by the Company's independent accountants. The policy sets forth the procedures and conditions pursuant to which services proposed to be performed by the independent accountants may be pre-approved. The policy provides that the Audit Committee will consider whether services to be performed by the independent accountant are consistent with the SEC's rules on auditor independence. In particular, the policy expressly names all services the independent accountant may not perform and, in the case of other services, requires the Audit Committee to consider whether the independent auditor is the best positioned to provide the most effective and efficient service. The policy provides that the Audit Committee will review and pre-approve annually, and periodically thereafter as required, the services proposed to be provided by the independent accountant in the categories of audit services, audit related services, tax services and all other services. In addition, the Audit Committee is to determine the appropriate ratio of audit, audit related and tax services to all other services. The Audit Committee has delegated to the chairman of the Audit Committee and, if he or she is unavailable, another member of the Audit Committee, authority to pre-approve audit and non-audit services proposed to be performed by the independent registered public accounting firm not previously approved by the Audit Committee. Under the policy, the Audit Committee is to be informed on a timely basis of services actually rendered by the independent accountant, including those pre-approved by a member of the Audit Committee. The chief financial officer of the Company is to immediately report to the Chairman of the Audit Committee any breach of the policy. All of the services described below under audit fees, audit-related fees, tax fees and all other fees arising in the fiscal year ended June 30, 2005 and 2006 were approved by the Audit Committee pursuant to its pre-approval policies and procedures prior to the service being provided. None of the audit-related fees or tax fees described below arising in the fiscal years ended June 30, 2005 and 2006 were approved by the Audit Committee after the initiation of such services pursuant to an exemption from the SEC's requirements relating to approval of these types of services by the Audit Committee prior to the provision of the service under Section 2.01(c)(7)(i)(C) of SEC Regulation S-X. FEES PAID TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AUDIT FEES. The aggregate fees billed by Grant Thornton for professional services rendered for the audit of the Company's annual consolidated financial statements, reviews of the consolidated financial statements included in the Company's Forms 10-Q and other regulatory filings and preparation for a review of the Company's internal controls over financial reporting design effectiveness and procedures were $219,848 during fiscal 2006 and $194,520 during fiscal 2005. AUDIT RELATED FEES. The aggregate fees billed by Grant Thornton for professional services rendered for audit-related fees in fiscal 2005 were $20,036 and related to the audits of the Company's 401(k) Plan and NIST grant and review of a SEC comment letter. Grant Thornton did not render any such services in fiscal year 2006. The Company has engaged another accounting firm to audit the Company's 401(k) Plan for fiscal year 2006. TAX FEES. The aggregate fees billed by Grant Thornton for preparation of federal and state tax returns and miscellaneous tax-related services and advice were $77,009 in fiscal 2006 and $46,070 in fiscal 2005. ALL OTHER FEES. Grant Thornton did not render any such services in fiscal years 2006 and 2005. 20 The Audit Committee of the Board does not consider the provision of the services described above by Grant Thornton to be incompatible with the maintenance of Grant Thornton's independence. SHAREHOLDER PROPOSALS AND NOMINEES FOR 2007 ANNUAL MEETING SHAREHOLDER PROPOSALS Shareholder proposals intended to be presented at the 2007 annual meeting which are eligible for inclusion in the Company's proxy statement for that meeting under Rule 14a-8 promulgated under the Exchange Act, must be received by the Secretary of the Company at 47827 Halyard Drive, Plymouth, MI 48170, no later than June 11, 2007 in order to be considered for inclusion in the Company's Proxy Statement relating to that meeting. In order to curtail controversy as to the date on which a proposal was received by the Company, it is suggested that proposals be submitted by certified mail, return receipt requested. Shareholder proposals intended to be presented at the 2007 annual meeting which are not eligible for inclusion in the Company's proxy statement for that meeting under Rule 14a-8 are considered untimely under Rule 14a-5 promulgated under the Exchange Act unless received by the Secretary of the Company at the Company's offices no later than August 24, 2007 and the Company expects the persons named as proxies for the 2007 annual meeting to use their discretionary voting authority, to the extent permitted by law, with respect to any proposal considered untimely at the 2007 annual meeting. SHAREHOLDER NOMINEES Shareholders desiring to recommend candidates for consideration and evaluation by the Nominating and Corporate Governance Committee for the 2006 Annual Meeting should submit such recommendations in writing to the Nominating and Corporate Governance Committee, c/o General Counsel, Perceptron, Inc., 47827 Halyard Drive, Plymouth, MI 48170 no later than May 11, 2007. The recommendation should be accompanied by the following: (i) the name, address, e-mail address (if any), and telephone number of the shareholder, the number of shares of the Company's Common Stock beneficially owned by the shareholder and proof of the shareholder's beneficial ownership of the Company's Common Stock by one of the means set forth in Item 7(d)(2)(ii)(L) of SEC Schedule 14A; (ii) the name, address, e-mail address (if any) and telephone number of the proposed nominee and the number of shares of the Company's Common Stock beneficially owned by the nominee; (iii) a detailed description of the proposed nominee's business, professional, public, academic, scientific or technological experience and other qualifications for Board membership, including the name and address of other businesses for which the proposed nominee has provided services, or for which he or she has served as a director, in the last five years, a description of the proposed nominee's specific experience in such position and the proposed nominee's academic achievements; (iv) a description of any potential conflicts between the interests of the Company and its shareholders and the proposed nominee; (v) a written agreement by the proposed nominee to serve as a member of the Company's Board if nominated and elected; and (vi) a written representation by the shareholder and the proposed nominee that the proposed nominee is not an affiliate or affiliated party with respect to the shareholder. The General Counsel will forward any recommendations to the Nominating and Corporate Governance Committee. The nominating shareholder and proposed nominee may be requested to provide additional information regarding the shareholder or the proposed nominee and to attend one or more interviews, in each case, as requested by the Board or Nominating and Corporate Governance Committee. See "Proposal 1 - Election of Directors - Board of Directors and Committees" for a description of the standards used by the Nominating and Corporate Governance Committee to evaluate candidates recommended by shareholders of the Company. OTHER MATTERS At the date of this Proxy Statement, the Board is not aware of any matters to be presented for action at the Annual Meeting other than those described above. However, if any other matters requiring a shareholder vote properly come before the meeting, it is the intention of the persons named in the accompanying proxy to vote such proxy in accordance with their best judgment, to the extent permitted by law, on such matters. 21 ANNUAL MEETING OF SHAREHOLDERS OF PERCEPTRON, INC. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PERCEPTRON, INC. The undersigned shareholder hereby appoints ALFRED A. PEASE, JOHN J. GARBER and DAVID W. GEISS, or any one of them, the attorney and proxies of the undersigned, with power of substitution, to vote all shares of common stock of Perceptron, Inc. standing in the name of the undersigned at the close of business on September 22, 2006 at the Annual Meeting of Shareholders of the Company to be held on Monday, November 13, 2006 at 9:00 a.m., local time, and at any and all adjournments thereof, with all the powers the undersigned would possess if then and there present. The shareholder instructs the proxies to vote as specified on this proxy on the matters described in the Proxy Statement dated October 6, 2006. Proxies will be voted as instructed. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE COMPANY'S NOMINEES AS DIRECTORS (INCLUDING THE ELECTION OF ANY PERSON FOR THE BOARD OF DIRECTORS WHERE A NOMINEE NAMED IN THE PROXY STATEMENT IS UNABLE OR, FOR GOOD CAUSE, WILL NOT SERVE). DISCRETIONARY AUTHORITY IS HEREBY CONFERRED AS TO ANY OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE 2006 ANNUAL REPORT, AND THE PROXY STATEMENT AND NOTICE OF SAID MEETING BOTH DATED OCTOBER 6, 2006. ADDRESS CHANGES: _______________________________________________________________ ________________________________________________________________________________ (If you noted any Address Changes above, please mark SEE REVERSE corresponding box on the reverse side.) SIDE (CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE) VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS If you would like to reduce the costs incurred by Perceptron, Inc. in mailing PERCEPTRON, INC. proxy materials, you can consent to 47827 HALYARD DRIVE receiving all future proxy statements, PLYMOUTH, MI 48170 proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access shareholder communications electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Perceptron, Inc., c/o ADP, 51 Mercedes Way, Edgewood, NY 11717. Please date, sign and mail your proxy card in the envelope provided as soon as possible. PAGE 2 OF 2 TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X] PERCP1 KEEP THIS PORTION FOR YOUR RECORDS - ---------------------------------------------------------------------------------------------------- DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. 02 VOTE ON DIRECTORS 1. ELECTION OF DIRECTORS FOR WITHHOLD FOR ALL To withhold authority to Directors recommend a vote ALL ALL EXCEPT vote for any individual for the following nominees nominee, mark "For All to hold office until the Except" and write the Annual Meeting of Shareholders nominee's name on the in 2007. line below. [ ] [ ] [ ] ________________________ NOMINEES: 01. David J. Beattie 02. Kenneth R. Dabrowski 03. Philip J. DeCocco 04. W. Richard Marz 05. Robert S. Oswald 06. Alfred A. Pease 07. James A. Ratigan 08. Terryll R. Smith BROKERS EXECUTING PROXIES SHOULD INDICATE THE NUMBER OF SHARES WITH RESPECT TO WHICH AUTHORITY IS CONFERRED BY THIS PROXY IF LESS THAN ALL SHARES HELD AS NOMINEES ARE TO BE VOTED. PLEASE EXECUTE AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE PROMPTLY. NOTE: Please sign exactly as your name or names appear(s) on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. For address changes, please check this box and write them on the back where indicated. [ ] - -------------------- -------- -------------- ------- Signature [PLEASE DATE Signature DATE SIGN WITHIN BOX] (Joint Owners)
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