13D Filing: Harbert Discovery Fund, LP and Perceptron Inc (PRCP)

The Reporting Persons purchased the securities of the Issuer reported herein based on their belief that the securities were undervalued and represented an attractive investment opportunity.

As previously disclosed, on August 9, 2016, the Reporting Persons entered into a Standstill Agreement (the “Standstill Agreement”) with the Issuer whereby William C. Taylor, James A. Ratigan and John F. Bryant (collectively, the “New Directors”) were appointed to the Issuer’s Board of Directors. The New Directors filled vacancies left by the resignations of Kenneth R. Dabrowski and Philip J. DeCocco and the expansion of the Issuer’s Board of Directors from six to seven members. The Issuer agreed to nominate, recommend and support the New Directors at the 2016 Annual Meeting of the Shareholders of the Issuer. At the 2016 Annual Meeting of the Shareholders of the Issuer held on November 10, 2016, the New Directors were elected by the Issuer’s shareholders to a one-year term expiring at the 2017 Annual Meeting of the Shareholders of the Issuer.

The Standstill Agreement requires that the Reporting Persons vote all Shares of the Issuer that they beneficially own for each of the Issuer’s nominees for election to the Issuer’s Board of Directors, in favor of the Issuer’s “say-on-pay” proposals, for the ratification of the appointment of independent auditors and, in other matters, in accordance with the recommendation of the Issuer’s Board of Directors. Pursuant to the Standstill agreement, the Reporting Persons have also agreed to certain customary standstill and voting provisions.

The Standstill Agreement was originally set to terminate on the date that is thirty days prior to the deadline for a shareholder to submit nominations at the 2017 Annual Meeting of the Shareholders of the Issuer.

On November 17, 2016, the Issuer entered into the First Amendment to Standstill Agreement (the “First Standstill Agreement Amendment”) with the Reporting Persons which amended the Standstill Agreement. The First Standstill Agreement Amendment provides that, upon the appointment by the Board of Directors of the Company (the “Board”) of a new President and Chief Executive Officer, by June 1, 2017, the new President and Chief Executive Officer will be appointed to the Board to fill a vacancy left by resignation of either Robert S. Oswald or Terryll R. Smith, who will resign from the Board at that time to facilitate the appointment.

On May 31, 2017, the Issuer entered into the Second Amendment to the Standstill Agreement (the “Second Standstill Agreement Amendment”) with the Reporting Persons which further amended the Standstill Agreement.  The Second Standstill Agreement Amendment provides that the Standstill Agreement generally terminates on the date that is thirty days prior to the deadline for a shareholder to submit nominations at the 2018 Annual Meeting of the Shareholders of the Issuer.  The Second Standstill Agreement Amendment provides that, upon the appointment by the Board of a new President and Chief Executive Officer, by December 31, 2017, the new President and Chief Executive Officer will be appointed to the Board to fill a vacancy left by the resignation of either Robert S. Oswald or Terryll R. Smith, who will resign from the Board at that time to facilitate the appointment.

As previously disclosed, on August 9, 2016, Mr. Bryant executed (i) a Non-Disclosure Agreement in the form attached as Exhibit A to the Standstill Agreement (the “Non-Disclosure Agreement”) and (ii) a Joinder Agreement in the form attached as Exhibit A to the Non-Disclosure Agreement pursuant to which Mr. Bryant became a party to the Standstill Agreement.

The foregoing description is qualified in its entirety by reference to (i) the Standstill Agreement, Non-Disclosure Agreement, and the Joinder Agreement, which are incorporated by reference to Exhibits 10.1, 10.5, and 10.8, respectively to the Form 8-K filed by the Issuer with the Securities and Exchange Commission on August 10, 2016, (ii) the First Standstill Agreement Amendment, which is incorporated by reference to Exhibit 10.1 of the 8-K filed by the Issuer with the Securities and Exchange Commission on November 21, 2016 and (iii) the Second Standstill Agreement Amendment, which is incorporated by reference to Exhibit 10.1 of the 8-K filed by the Issuer with the Securities and Exchange Commission on June 6, 2017.

The Reporting Persons have had conversations with the Issuer’s management regarding possible ways to enhance shareholder value. Consistent with the Amended Standstill Agreement, the Reporting Persons intend to have additional conversations with the Issuer’s management and Board of Directors. These conversations have covered and are expected to continue to cover a range of issues, including those relating to the business of the Issuer; board composition; management; operations; capital allocation; asset allocation; capitalization; dividend policy; financial condition; mergers and acquisitions strategy; overall business strategy; executive compensation; and corporate governance. The Reporting Persons have also had similar conversations with other stockholders of the Issuer and other interested parties, such as industry analysts, existing or potential strategic partners or competitors, investment professionals, and other investors. Consistent with the Amended Standstill Agreement, the Reporting Persons may at any time reconsider and change their intentions relating to the foregoing.

No Reporting Person has any present plan or proposal which would relate to or would result in any of the matters set forth in subparagraphs (a)- (j) of Item 4 of Schedule 13D except as set forth herein or such as would occur upon completion of any of the actions discussed herein. The Reporting Persons may in the future take one or more of the actions described in subsections (a) through (j) of Item 4 of Schedule 13D and may discuss such actions with the Issuer’s management and the Board of Directors, other stockholders of the Issuer, and other interested parties, such as those set out above.

The Reporting Persons intend to review their investments in the Issuer on a continuing basis. Depending on various factors, including, without limitation, the Issuer’s financial position and strategic direction, the outcome of the discussions and actions referenced above, actions taken by the Issuer’s Board of Directors, price levels of the Common Stock, other investment opportunities available to the Reporting Persons, conditions in the securities market and general economic and industry conditions, the Reporting Persons may in the future take actions with respect to its investment position in the Issuer as it deems appropriate, including, without limitation, purchasing additional Common Stock or selling some or all of its Common Stock, and/or engaging in hedging or similar transactions with respect to the Common Stock.