Exhibit 16(a)
TRANSMITTAL LETTER
Auto-trol Technology Corporation
12500 North Washington Street
Denver, Colorado 80241-2400
_______ __, 2002
Dear Shareholder:
As you may be aware, Auto-trol Technology Corporation ("Auto-trol" or the
"Company") has been informed that ATTC, Inc., a Colorado corporation ("ATTC"),
which will own in excess of ninety percent of the common stock of the Company,
intends to merge ATTC with and into the Company, with the Company surviving. We
expect that the merger will be completed in the spring of 2002.
We have been informed that the board and the shareholders of ATTC will
adopt a plan of merger (the "Plan of Merger"), attached as Exhibit A, pursuant
to which you will be entitled to receive $0.20 in cash, without interest, for
each of your shares of common stock of the Company. ATTC will be controlled by
Venhill Limited Partnership, which is controlled by Howard B. Hillman, Chairman
of the Board of Directors, Chief Executive Officer, and President of the
Company.
The attached going private statement explains the proposed merger. Please
read these materials carefully.
Because this merger will occur pursuant to Section 7-111-104 of the
Colorado Business Corporation Act (the "Act"), neither a recommendation of the
Board of the Company nor a vote of the shareholders of the Company will be
required to effect the merger. Shareholders will be entitled to exercise
dissenters' rights pursuant to Article 7-113 of the Act.
The board of directors reasonably believes that the terms and provisions of
the Plan of Merger and the proposed merger are in the best interests of the
Company and fair to the Company's unaffiliated shareholders, which means the
holders of the Company stock other than ATTC.
Sincerely,
Major General William R. Usher
Director
J. Roderick Heller, III
Director
This transaction has not been approved or disapproved by the Securities and
Exchange Commission or any state securities regulator nor has the Commission or
any state securities regulator passed upon the fairness or merits of the
transaction or upon the accuracy or adequacy of the information contained in
this document. Any representation to the contrary is unlawful.
On ______ __, 200_, this Going Private Statement was mailed to all of the
shareholders of the Company.
GOING PRIVATE STATEMENT
MERGER OF
ATTC, INC.
WITH AND INTO
AUTO-TROL TECHNOLOGY CORPORATION
This Going Private Statement (the "Statement") is being furnished to all of
the shareholders (collectively, the "Shareholders") of common stock of Auto-trol
Technology Corporation, a Colorado corporation ("Auto-trol" or the "Company"),
in connection with the proposed merger of ATTC, Inc., a Colorado corporation
("ATTC") with and into the Company, with the Company as the surviving entity,
pursuant to that proposed plan of merger between the Corporation and ATTC (the
"Plan of Merger"), attached as Exhibit A.
The Plan of Merger does not involve a tender offer or proxy solicitation
within the meaning of the federal securities laws; however, because of the
possibility that the Plan of Merger will result in the deregistration of the
common stock under the Securities Exchange Act of 1934, as amended, the Plan of
Merger constitutes a so-called "going private transaction" within the meaning of
those laws. This Statement is intended to comply with the going private rules of
the Securities and Exchange Commission.
NEITHER THE PLAN OF MERGER NOR THIS STATEMENT HAS BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION.
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF THE PLAN OF MERGER OR THE
ACCURACY OR ADEQUACY OF THIS STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS
OTHER THAN THOSE CONTAINED IN THIS STATEMENT, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY.
TABLE OF CONTENTS
Page
----
SUMMARY TERM SHEET.............................................................1
Questions and Answers About the Merger......................................1
Summary.....................................................................2
THE PARTIES....................................................................5
SPECIAL FACTORS................................................................5
Background of the Merger....................................................5
Fairness of the Transaction.................................................8
Benefits and Detriments of the Merger......................................14
Buyers' Purposes and Reasons for the Merger................................15
Interests of Certain Persons in the Merger; Certain Relationships..........15
Certain Effects of the Merger..............................................16
Plans for Auto-trol After the Merger.......................................16
Conduct of the Business of the Company If the Merger is Not Consummated....17
Accounting Treatment.......................................................17
Financing of the Merger....................................................17
Regulatory Requirements; Third Party Consents..............................17
Material Federal Income Tax Consequences...................................17
Tax Treatment to Buyers....................................................20
Fees and Expenses..........................................................20
THE PLAN OF MERGER............................................................21
The Merger, Merger Consideration...........................................21
Treatment of Certain Shares Held by the Buyers.............................21
The Exchange Fund; Payment for Shares of Auto-trol Common Stock............21
Transfers of Common Stock..................................................22
Treatment of Stock Options.................................................22
Conditions.................................................................22
DISSENTERS' RIGHTS OF APPRAISAL...............................................23
CERTAIN MARKET INFORMATION....................................................26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................27
DIRECTORS AND MANAGEMENT......................................................28
FINANCIAL AND OTHER INFORMATION...............................................29
WHERE YOU CAN FIND MORE INFORMATION...........................................29
SHAREHOLDER MEETINGS AND PROPOSALS............................................30
AVAILABLE INFORMATION.........................................................30
EXHIBIT A: Plan of Merger
EXHIBIT B: Dissenters' Rights Statute
EXHIBIT C: Notice of Dissenters' Rights
EXHIBIT D: Notice of Payment Demand
EXHIBIT E: Transmittal Form
i
SUMMARY TERM SHEET
Questions and Answers About the Merger
Q: What is the proposed transaction?
A: Pursuant to the laws of Colorado governing the merger of a parent and a
subsidiary, ATTC will be merged with and into Auto-trol, with Auto-trol
surviving.
Q: Who is ATTC and Venhill?
A: ATTC was formed in connection with the proposed merger by Howard B.
Hillman, Chairman of the Board of Directors and President of Auto-trol, and
certain of his affiliated entities including Venhill Limited Partnership,
which will in the aggregate contribute 99.7% of Auto-trol's outstanding
common stock. Venhill is owned beneficially by certain Hillman family
trusts. All of ATTC, Venhill and Howard B. Hillman are sometimes referred
to in this statement as the "Buyers." Depending on the context, Howard B.
Hillman is sometimes identified as the natural person designated as
representing the interests of the Buyers.
Q: What will I receive in the merger?
A: Shareholders of Auto-trol, other than the Buyers and shareholders who
dissent and seek appraisal of the fair value of their shares, will be
entitled to receive $0.20 in cash, without interest, for each share of
Auto-trol's common stock that they own. If you own stock options of
Auto-trol, because all of the outstanding options of Auto-trol have
exercise prices that exceed the $0.20 merger consideration, no outstanding
option to acquire common stock will receive any payment under the Plan of
Merger.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as quickly as possible. We expect to
complete the merger in spring 2002 after a 20-day notice period required by
the federal securities laws has expired.
Q: What are the income tax consequences of the merger to me?
A: The cash you receive for your shares generally will be taxable for federal
and state income tax purposes. To review a brief description of the federal
income tax consequences to shareholders, see pages ____ to ____.
Q: What conflicts of interest does the board of directors have in determining
the fairness of the Plan of Merger?
A: One of the three members of the board of directors, Howard B. Hillman, has
a conflict of interest in recommending approval of the Plan of Merger
because he is a controlling person of ATTC. Mr. Hillman abstained from the
fairness determination of the board of directors.
Q: What did the board of directors do to determine that the price per share I
will receive in the proposed merger is fair to me?
A: The board of directors reviewed the material factors, both positive and
negative, of the proposed merger. See "Fairness of the Transaction" on
pages _____ to _____ for more details.
Q: What are the disadvantages to me of the ATTC and Auto-trol merger?
A: Following the merger, you will no longer benefit from any earnings,
expansion, diversification, or growth of Auto-trol.
Q: What vote of Auto-trol shareholders is required to approve the Plan of
Merger?
A: Because the merger is a parent-subsidiary merger under Colorado law, no
vote of the Auto-trol shareholders is required to approve the merger.
Q: What rights do I have if I oppose the merger?
A: Shareholders who oppose the merger may dissent and seek appraisal of the
fair value of their shares (which could be more or less than $0.20 per
share), but only if they comply with all of the procedures under Colorado
law explained on pages ____ to____ and in Exhibit B, Exhibit C, and Exhibit
D to this going private statement.
Q: Can I send in my stock certificates now?
A: You may send in your stock certificates now. Attached as Exhibit E is a
transmittal form and written instructions for exchanging your share
certificates for cash. The exchange agent will hold your certificates in
escrow pending the successful completion of the merger.
Q: Who can help answer my questions?
A: If you have more questions about the merger or would like additional copies
of this going private statement, you should contact Allyson Kissell,
Corporate Secretary of Auto-trol at (303) 452-4919.
Summary
The following summarizes the material aspects of the proposed merger and
highlights selected information contained elsewhere in this going private
statement. This summary may not contain all of the information that is important
to you, and is qualified in its entirety by the more detailed information
contained elsewhere in this going private statement, including the annexes to
it, and in the documents incorporated by reference. To understand the proposed
merger fully and for a more complete description of the terms of the proposed
merger, you should carefully read this entire going private statement, including
the annexes to it, and the documents incorporated by reference.
Principals of the Buyers
ATTC, Inc. is a corporation incorporated by our President, Howard B.
Hillman, ATTC was created to acquire the ownership interests of our unaffiliated
shareholders. Mr. Hillman also controls Venhill Limited Partnership which will
contribute 95.4% of our outstanding common stock to ATTC. Howard B. Hillman
proposed the merger transaction to Auto-trol's board of directors and negotiated
all aspects of the transaction on his own behalf and on behalf of ATTC. For more
information, see "The Parties" below.
Special Factors (see page ____)
There are a number of factors that you should consider in connection with
the proposed merger and your decision whether or not to pursue appraisal rights.
They include:
o the background of the merger;
o the material positive and negative factors considered by the board of
directors;
o the fairness determination by the board of directors;
o the purpose and effect of the merger;
o the interests of certain persons in the merger; and
o the financing of the merger.
The material positive factors considered by the board include:
o the significant premium;
o the advantage of the liquidity opportunity given current public
company limitations;
o the lack of potential buyers;
o the form of merger consideration; and
o the absence of a financing contingency.
The material negative factors considered by the board include:
o the limited ability to entertain proposals from other potential
buyers;
o the taxation of the merger consideration; and
o the loss of the public's equity interest in the Company.
These factors, in addition to several other factors to be considered in
connection with the merger, are described in this going private statement. For a
detailed discussion of each of these factors, see pages _____ to _____.
You should also consider the following factors in connection with the
proposed merger and whether or not to pursue appraisal rights:
o the board did not appoint a special committee to negotiate the terms
of the merger nor did it obtain a third-party report evaluating the
fairness of the transaction;
o the board did not engage an investment banker or a business broker to
assist in a search for alternative transactions;
o the board did not make any counter-proposals to the cash-out merger
price proposed by Mr. Hillman and his affiliates, nor did it attempt
to attain more favorable terms;
o the cash-out merger price proposed by Mr. Hillman and the other
affiliates was determined by the board to be fair to the Company's
unaffiliated shareholders without any review of valuation criteria
typically used in valuing businesses such as discounted cash-flow,
liquidation, comparable company or comparable transaction analyses;
and
o the transaction does not require a vote of unaffiliated shareholders
and will proceed even if a majority of the unaffiliated shareholders
oppose the transaction.
2
The Board considered these factors in reaching its conclusion that the
transaction was fair to the Company's unaffiliated shareholders.
Reasons for Engaging in the Transaction (see page_____)
The principal purpose of the merger is to eliminate the expenses associated
with being a reporting company in light of the limited benefits that Auto-trol
obtains from being a public company. However, as a result of the merger, you
will be provided the opportunity to receive a cash price for your shares at a
significant premium over the market price at which our common stock traded
before the January 22, 2002 announcement of the Buyers' merger proposal.
Determination of our Board of Directors (see page _____)
The board of directors determined that the merger consideration of $0.20
per share is fair to our unaffiliated shareholders.
Auto-trol's Position as to the Fairness of the Merger (see page _____)
We believe the merger and the merger consideration to be fair to our
unaffiliated shareholders. In reaching this determination we considered the
material positive and negative factors discussed above, including the fact that
the merger consideration of $0.20 per share represents a substantial 250%
premium over the $0.08 price of the last trade day prior to our January 22, 2002
announcement of the proposal by the Buyers.
Interests of our Directors and Executive Officers in the Merger (see page _____)
In considering the determination of our board of directors with respect to
the Plan of Merger and the transactions contemplated thereby, you should be
aware that, in addition to the matters discussed above, an executive officer and
member of our board of directors has various interests in the merger that are in
addition to or different from the interests of our shareholders generally and
that such interests create potential conflicts of interest. Specifically, our
Chairman and President, Howard B. Hillman, is the controlling person of ATTC and
Venhill.
Although Mr. Hillman will not receive cash for his shares in the merger,
other of our officers and directors will receive four hundred ninety-eight
dollars ($498.00) for the shares of Auto-trol owned by them. Our executive
officers and directors have options to purchase common stock. Because the per
share proposed merger consideration is less than the per share exercise price
for all of these options, these options will have no value if the merger is
consummated. See "Shares and Stock Options" on page ___ for additional details.
Primary Benefits and Detriments to Unaffiliated Shareholders (see page _____)
Our unaffiliated shareholders will receive a cash payment for their shares
at a premium above the market price of our shares prior to announcement of the
merger proposal. After the merger, our unaffiliated shareholders will no longer
have an interest in Auto-trol or any of its future earnings growth or increase
in value.
The Plan of Merger (see page _____)
If the merger is completed, each unaffiliated shareholder will be entitled
to receive $0.20 per share in cash, without interest, for each share of
Auto-trol common stock they own.
Fees and Expenses (see page _____)
Auto-trol and ATTC will pay the costs and expenses incurred by it in
connection with the merger and the parties will share certain printing costs and
filing fees.
Dissenters' Rights of Appraisal (see page _____)
Any shareholder who does not wish to accept the $0.20 per share cash
consideration in the merger has the right under Colorado law to have his, her or
its shares appraised by a Colorado state district court. This "right of
appraisal" is subject to a number of restrictions and technical requirements.
Exhibit B to this going private statement contains the Colorado statute
relating to your right of appraisal. Failure to follow all of the steps required
by this statute will result in the loss of your right of appraisal.
Exhibit C to this going private statement contains a Notice of Dissenters'
Rights required under Colorado law.
Exhibit D to this going private statement contains a Notice of Payment
Demand required under Colorado law.
Financing of the Merger (see pages _____ to _____)
The Buyers anticipate financing for the merger will be provided by Mr.
Hillman or an affiliate of Mr. Hillman in the form of a loan to ATTC. The loan
is expected not to exceed $40,000.00.
3
Accounting Treatment (see page _____)
Prior to the Merger, Mr. Hillman, Venhill, entities under their control,
and others (the "Controlling Shareholders") will transfer all of their equity
interest in Auto-trol to ATTC in exchange for shares of capital stock of ATTC.
The Controlling Shareholders own 99.7% of Auto-trol's outstanding common stock.
Since the Controlling Shareholders of Auto-trol will also be the controlling
shareholders of ATTC, the Merger will be accounted for as a reverse acquisition
of ATTC by Auto-trol and a recapitalization of Auto-trol. Assets and liabilities
transferred in the Merger will be recognized at their historical carrying
amounts at the date of the Merger.
Tax Treatment (see pages ____ and ____)
The cash you receive for your shares of our common stock generally will
be taxable for federal and state income tax purposes. Any gain or loss will be
measured by the difference between $0.20 per share and your tax basis in the
shares.
Selected Consolidated Financial Data of Auto-trol
The following table sets forth selected consolidated financial data for
Auto-trol and its subsidiaries as of and for each of the five years in the
period ended September 30, 2001. No pro forma data giving effect to the proposed
merger is provided because Auto-trol does not believe such information is
material to shareholders in evaluating the proposed merger since (1) the
proposed merger consideration is all cash and (2) if the proposed merger is
completed, the common stock of Auto-trol would cease to be publicly traded.
The financial information for Auto-trol as of and for each of the five
years in the period ended September 30, 2001 has been derived from the
consolidated financial statements of Auto-trol which have been audited by our
independent certified public accountants. The following financial information
should be read in conjunction with "Management's Discussion and Analysis or Plan
of Operation" and the Consolidated Financial Statements of Auto-trol and the
notes thereto included in Auto-trol's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 2001, and Form 10-QSB for the fiscal quarter
ended December 31, 2001, each of which is enclosed with this going private
statement and incorporated by reference. Also please refer to "Additional
Information."
- ---------------------------------------------------------------------------------
Year Ended September 30,
(in thousands, except per share amounts)
- ---------------------------------------------------------------------------------
2001 2000 1999 1998 1997
- ------------------------------------ -------- -------- -------- -------- --------
Operating Revenue $7,933 $8,730 $11,621 $14,093 $19,739
- ------------------------------------ -------- -------- -------- -------- --------
Net Loss (7,026) (6,933) (7,505) (7,323) (7,786)
- ------------------------------------ -------- -------- -------- -------- --------
Loss per share (.14) (.22) (.41) (.64) (.91)
- ------------------------------------ -------- -------- -------- -------- --------
Weighted average number of shares 52,049 32,179 18,129 11,496 8,554
outstanding
- ------------------------------------ -------- -------- -------- -------- --------
4
THE PARTIES
Auto-trol Technology Corporation
Auto-trol Technology Corporation and its wholly-owned subsidiaries develop,
integrate, market, sell, and support its software products and the software
products of certain third-party vendors for end user markets involved in:
product data management, physical network management, mapping, technical
illustration, and engineering. The business address of Auto-trol is 12500 North
Washington Street, Denver, CO 80241-2400 and the business telephone number is
(303) 452-4919.
For additional information concerning Auto-trol, see "Financial and Other
Information" and "Where You Can Find More Information."
ATTC Inc. and Venhill Limited Partnership
ATTC, Inc. is a Colorado corporation organized by Howard B. Hillman. ATTC
was organized for the purpose of effecting the Merger and will be merged with
and into Auto-trol. Venhill Limited Partnership is a Delaware limited
partnership. Venhill was formed for the purpose of venture capital investment.
Prior to the Merger, Howard B. Hillman, Venhill Limited Partnership,
entities under their control, and others will transfer to ATTC all of their
equity interests in Auto-trol. Venhill owns 56,658,106 shares, or 95.4% of
Auto-trol's outstanding common stock, and these entities collectively own
59,171,591 shares, or 99.7% of Auto-trol's outstanding common stock.
ATTC does not have any material assets, own any shares of Auto-trol, or
conduct any activity except that incident to its formation and in connection
with the Merger and the related transactions described above. The business
address of ATTC is 12500 North Washington Street, Denver, CO 80241-2400 and the
business telephone number is (303) 452-4919. The business address of Venhill is
c/o Howard B. Hillman, Taconic Group, 158 Main Street, New Caanan, CT 06840 and
the business telephone number is (203) 966-7700.
SPECIAL FACTORS
Background of the Merger
Auto-trol became a publicly-traded company in 1979. At the time of the
initial public offering, and for all times subsequent to that offering, Mr.
Hillman and his affiliates have owned more than 50% of the Company's outstanding
common stock. In the recent past, the price of its common stock in the trading
market, the volume of stock trading activity and its institutional and research
following have all been unsatisfactory, in the view of Auto-trol's management
and Board of Directors. Generally, all the broad stock price indices have
outperformed Auto-trol's stock in the aggregate over the last five years. The
$0.20 per share proposed price in the Plan of Merger is a substantial premium
over the last trade day prior to the January 22, 2002 announcement of the
proposal.
Since 1990, the Company has relied on the Hillman Affiliates for financial
support to enable Auto-trol to continue as a going concern. This support has
been in the form of loans to Auto-trol made pursuant to promissory notes. Since
1993, Venhill Limited Partnership has provided financial support to Auto-trol
and Auto-trol has issued promissory notes in return. The promissory notes
contained neither a contractual right for the Company to initiate and consummate
the debt conversion nor a redemption right. Mr. Hillman, however, had made it
known to the other board members that he was willing to allow the Company to
convert his debt into equity, at reasonable conversion prices, to the extent
such conversions would assist the Company in maintaining certain debt ratios and
to improve the overall financial health of the Company.
From time to time, starting in 1993 and continuing through 2000,
significant amounts of this debt have been converted into equity upon motion of
the Board of Directors, with Mr. Hillman abstaining in each instance. In each
case, the conversion price was equally to the price of the last trade completed
prior to such conversion. In each instance where the Board sought such
conversion, Mr. Hillman did not raise any objection to such conversion.
5
At no time during the during the period in which the debt was converted
into common stock did Mr. Hillman intend to engage in a going private
transaction with the Company. In fact, the first step in the Buyers' attempt to
initiate a going private transaction was the letter delivered by the Buyers to
the Board in December 2001.
The tables below contain the details of these conversions and the
percentage beneficial ownership owned by the Buyers at the end of each fiscal
year since 1992. As of February 28, 2002, the aggregate outstanding balance of
such promissory notes was approximately $10,400,000.
Conversions of Promissory Notes to Equity
===========================================================================================
Conversion Amount of Debt Shares Issued
Date Noteholder Converted Upon Conversion
- -------------------------------------------------------------------------------------------
March 1993 Various Hillman Trust(s) $7,000,000 9,333,333(1)
July 1993 Various Hillman Trust(s) $7,000,000 9,333,333(1)
March 1994 Venhill Limited $4,000,000 5,333,333(1)
Partnership
September 1995 Venhill Limited $6,450,000 5,933,334(1)
Partnership
March 1996 Venhill Limited $7,500,000 2,142,857
Partnership
September 1996 Venhill Limited $3,000,000 1,000,000
Partnership
September 1996 Howard B. Hillman $2,000,000 666,667
March 1997 Venhill Limited $4,700,000 1,566,667
Partnership
December 1997 Venhill Limited $2,000,000 1,333,333
Partnership
March 1998 Venhill Limited $2,500,000 2,000,000
Partnership
June 1998 Venhill Limited $500,000 363,637
Partnership
September 1998 Venhill Limited $2,000,000 2,000,000
Partnership
December 1998 Venhill Limited $2,000,000 3,200,000
Partnership
June 1999 Venhill Limited $2,000,000 3,200,000
Partnership
September 1999 Venhill Limited $4,000,000 8,000,000
Partnership
December 1999 Venhill Limited $1,000,000 2,000,000
Partnership
March 2000 Venhill Limited $2,000,000 1,025,641
Partnership
June 2000 Venhill Limited $2,000,000 3,200,000
Partnership
August 2000 Venhill Limited $2,500,000 8,064,517
Partnership
================================================================================
6
1 These share numbers give pro forma effect to the Company's 1996 one-for-ten
reverse stock split.
Percentage of Auto-trol Stock Outstanding Common Stock
Owned by the Hillman Affiliates As of Fiscal Year End
Year Percentage of Shares Held
---- -------------------------
1992 77%
1993 91%
1994 93%
1995 95%
1996 98%
1997 98%
1998 99%
1999 99%
2000 99%
2001 99%
Over the last four years, the Company has attempted to enter into strategic
partnering arrangements with companies that have complementary products or that
have better access to Fortune 500 or federal government accounts, with a view to
increasing revenues and the market share for the Company's products. During this
period, the Company was able to enter into a number of joint R&D and marketing
arrangements with companies of various sizes, but each such effort was either
wholly unsuccessful or failed to create a sustained market for the Company's
products. While the Company has attempted to attract higher quality strategic
partners, it has failed to do so to date in large part because of its relatively
small size and market share as compared to its competitors. The Board has come
to the conclusion that the Company's public company status has significantly
contributed to this competitive disadvantage because the Company's public
disclosures about its finances and operations are used by its competitors to
cast doubt on the Company's ability to support larger contracts.
Until the summer of 2001, the idea of taking the Company private was raised
from time to time at Company Board meetings, but was never seriously considered
by the Company or Mr. Hillman. In the summer of 2001, as it became increasingly
apparent that the Company would not be able to continue without the economic
support of the Hillman Affiliates and that strategic partnering arrangements
that would improve the Company's financial situation were not feasible for so
long as the Company's finances and operations were publicly disclosed, the Board
began to consider whether a going-private transaction would be in the best
interests of the Company and its shareholders. The expense and diversion of
management time associated with the Company's public reporting obligations were
seen by the Board as significant, particularly in light of the limited benefits
that the Company obtained from its public company status. Management has
estimated that the total annual costs of the Company's reporting obligations
were approximately seventy thousand dollars ($75,000), including the cost of
management time spent complying with such reporting requirements. The limited
nature of these benefits were viewed by the Board as relating to the Company's
low trading volume, its lack of institutional sponsorship, its small public
float and market capitalization, and significantly diminishing research
attention from analysts. In preparation for the upcoming August 17, 2001 Board
meeting, the Board instructed management to be prepared to discuss alternative
methods of making Auto-trol a private company.
7
At the August 17, 2001 meeting, the Board discussed a going-private
transaction generally, and considered alternative methods of making Auto-trol a
private company, including a reverse-stock split and seeking to enter into a
parent-subsidiary merger. Because any going-private transaction would be
completely dependent upon Mr. Hillman's approval and financial support, the
Board asked Mr. Hillman to make a proposal to the Board for a going-private
transaction that Mr. Hillman would support both as a stockholder and as a
financial backer. The Board also requested a report from the Company's outside
legal counsel regarding the various methods of accomplishing a going-private
transaction and the actions that would be taken under each method. At the August
17, 2001 meeting, the Board reviewed the trading prices of the Company's common
stock and indicated to Mr. Hillman that it would view a price of $.10 to $.20
per share as a fair price to the Company's unaffiliated shareholders.
Between August 17, 2001 and December 10, 2001, the Company's outside legal
counsel prepared the reports requested by the Board, and the Company circulated
these reports to the Board members. In addition, Mr. Hillman determined the
price that he and his affiliates were willing to pay for the Company's
unaffiliated shares. In making this determination, Mr. Hillman did not rely on a
financial advisor but did reference the historical trading prices of the
Company's common stock.
At a Board meeting held on December 10, 2001, Mr. Hillman presented a
letter to the Board pursuant to which he offered to purchase all Auto-trol
shares not owned by him and his affiliates for $0.20 per share in cash, without
interest. The letter proposed that merger would be effected as a
parent-subsidiary merger with ATTC merging with and into Auto-trol, and
Auto-trol the surviving corporation. See "The Plan of Merger." Mr. Hillman also
provided the Board with a price-volume analyses of the Company's common stock
from December 2000 to December 2001. At this meeting, Mr. Hillman and the other
members of the Board discussed the various other methods of making Auto-trol a
private company, including a reverse stock split, a long-form merger and a
parent subsidiary merger. Mr. Hillman and the other Board members also discussed
why the merger proposed by Mr. Hillman would be preferable to these other
structures. These reasons principally related to the lower cost and reduced time
to completion associated with the proposed merger, which did not need
shareholder approval, as opposed to the alternative structures presented to the
Board, which would have required such approval. The Board did not view the
shareholder approval mechanism as critical to the transaction, since Mr.
Hillman's controlling interest in the Company would make such approval a
foregone conclusion.
At the same meeting, the Board determined that because Mr. Hillman's offer
appeared to be sincere and credible, it was worth pursuing. It further
determined that in view of the possible conflicts of interest attendant to any
buy-out proposal from an affiliate, it was advisable to ask Mr. Hillman to
excuse himself and permit the other members of the Board to discuss the offer.
After considering, among other things, the Board's discussions on August 17,
2001, the financial condition and prospects of the Company, the various methods
of going private, as well as the material positive and negative factors of Mr.
Hillman's offer, the Board determined the merger of ATTC with and into
Auto-trol, with Auto-trol as the surviving corporation, was in the best
interests of Auto-trol and its shareholders and that the $0.20 per share merger
consideration was fair to Auto-trol's unaffiliated shareholders.
Between December 10, 2001 and January 22, 2002, when the Company publicly
announced Mr. Hillman's offer of $0.20 per share, the Company and Mr. Hillman
prepared various merger documents relating to the offer and the disclosure
documents required by the federal securities laws.
Fairness of the Transaction
The Board believes that the Merger is in the best interests of the Company
and its shareholders and fair to its unaffiliated shareholders. The Board also
believes that the processes surrounding the Merger were procedurally fair.
The Board did not retain either an investment bank or other financial
adviser to render a report or opinion with respect to the fairness of the Merger
to the Company or its shareholders. Management estimated that the cost of such
report or opinion would exceed three hundred thousand dollars ($300,000). The
Board determined that this expense was unwarranted since it concluded that the
Board itself could adequately establish the fairness of the Merger, without such
report or opinion, because of its long-standing familiarity with the Company,
its financial condition, and its prospects, and by addressing the factors and
considerations described in this section.
8
The Board did not establish a committee or representative to represent the
unaffiliated shareholders of the Company in determining the terms of the Merger
proposal because the Board concluded that there was sufficient representation in
the decision making at the Board level to protect the interests of unaffiliated
shareholders. This decision was based on the fact that two (2) of the three (3)
Board members are neither controlled by, or under common control with the
Company, nor employees of the Company. In addition, the Board concluded that
such unaffiliated Board members could adequately convey their opinions and
concerns to the entire Board without the need for the establishment of such a
committee.
Generally, a merger requires a recommendation by the board and an
affirmative vote of the shareholders of the acquired company. However, this
transaction is structured as a "short form" parent-subsidiary merger under
Colorado law. Under Colorado law, a parent corporation owning at least ninety
percent of the outstanding shares of each class of a subsidiary corporation may
merge with or into that subsidiary, without obtaining a vote of the shareholders
of the subsidiary corporation and without obtaining the approval of the board of
directors of the subsidiary corporation. The board of the parent corporation
must adopt a plan of merger and in certain circumstances, including this merger,
the shareholders of the parent corporation must also approve that plan. The
parent corporation has to mail a copy of the plan of merger to each shareholder
of the subsidiary corporation, and cannot effect the merger until 10 days after
that mailing.
Like other states, Colorado has enacted a corporate law statute addressing
conflicting interest transactions, including a contract or transaction between a
corporation and a director of the corporation or between the corporation and an
entity in which a director of the corporation is a director or officer or has a
financial interest. This statute states that no conflicting interest transaction
shall be automatically void or voidable solely because the conflicting interest
transaction involves a director of the corporation or involves an entity in
which a director of the corporation is a director or officer or has a financial
interest. Automatic voidness does not apply if, among other alternatives, either
(a) the material facts as to the director's relationship or interest and as to
the conflicting interest transaction are disclosed or are known to the board of
directors or the committee, and the board of directors or committee in good
faith authorizes, approves, or ratifies the conflicting interest transaction by
the affirmative vote of a majority of the disinterested directors, even though
the disinterested directors are less than a quorum; or (b) the conflicting
interest transaction is fair as to the corporation.
The Company believes that the going private transaction satisfies both of
these alternatives. Like other states, satisfying this provision, however, only
assures that the conflicting interest transaction is not void or voidable, but
does not, in and of itself, assure that the transaction is otherwise in
accordance with state law. In the context of short-form mergers under Delaware
law, the Delaware Supreme Court has recently reiterated that, except in cases of
fraud or illegality, appraisal is the sole and exclusive remedy available to
minority stockholders of a subsidiary corporation in connection with a short
form merger. Under this approach, and assuming a Colorado court would adopt the
same approach as Delaware, the actions taken by both the boards of both the
parent and the subsidiary are subject to the "business judgment rule" - that is,
the "presumption that in making a business decision the directors of a
corporation acted on an informed basis, in good faith, and in the honest belief
that the action taken was in the best interests of the company."
On December 10, 2001, the Board met and determined, among other things,
whether the Merger is in the best interests of the Company, and fair to its
unaffiliated shareholders, who will receive the Merger Consideration. The Board
also reviewed the materials supplied by Mr. Hillman to support his offer,
consisting of a five page price-volume analyses of the Company's common stock
from December 2000 to December 2001, and the various memoranda provided to it by
outside counsel regarding fiduciary responsibilities.
The Board considered a number of factors in making that determination. The
material factors, both negative and positive, are summarized below.
The material positive factors include:
Market Price and Premium. The Board considered the fact that
the Merger would provide the Company's unaffiliated
shareholders with a premium for their shares compared to the
market price of the Company's common stock because the $0.20
per share represented a 250% premium to the $0.08 per share
9
closing sales price of the shares of common stock on the
last day the stock traded prior to the proposal. In
addition, the Board considered that although the stock
occasionally traded above $0.20 per share during 2001, the
$0.20 per share transaction price was approximately equal to
the $0.20 per share weighted average price for all public
transactions taking place during the period from May 1, 2001
to December 7, 2001.
Advantage of Liquidity Opportunity Given Current Public
Company Limitations. The Board considered the limitations
the Company suffered and could likely continue to suffer as
a public company, including its limited trading volume, lack
of institutional sponsorship, low public float, small market
capitalization, and diminishing research attention from
analysts, all of which adversely affect the trading market
for and the value of the Company common stock in view of the
liquidity offered by the Merger;
Transaction Value in Excess of Public Company Value. The
Board considered the risks and factors identified above
which are associated with remaining an independent public
company and the Board's belief that the proposed transaction
price of $0.20 per share values the Company's prospects more
highly than would the public markets for the foreseeable
future based on the $0.08 per share closing sales price of
the shares of common stock on the last day the stock traded
prior to the proposal;
Lack of Potential Buyers. The Board believed that there were
no potential buyers other than the Buyers, who have
indicated that they have no interest in selling their equity
securities to a third party. Mr. Hillman has repeatedly
indicated to the Board that the Buyers have no interest in
selling their shares. This information was conveyed to the
Board, both in the context of the discussions prior to the
December 2001 proposal and during the discussion of that
proposal. The Board was aware that the Buyers had invested
in excess of $85 million in the Company over the past 20
years, and that any sale of the Company would require the
Buyers to accept an exceedingly significant discount to that
investment. The Board was also aware that the Buyers have
sizeable assets and have no financial need to liquidate
their investment in the Company. In light of this
information, the Board believed that these statements were
credible and believed that the expenses associated with
hiring a financial advisor or investment bank to pursue
other bids would not maximize shareholder value. Therefore,
the prospects for a transaction between the Company and
potential unaffiliated strategic or financial third party
buyers were severely limited, making the Buyers' offer more
attractive.
Financial Condition and Operating Prospects. The Board
considered its knowledge of the Company's business,
operations, assets, financial condition, operating results
and prospects, in light of the premium offered under the
terms of the Plan of Merger, and determined that the merger
consideration was fair to the unaffiliated shareholders;
Form of Merger Consideration. The Board considered the fact
that the consideration to be received by the Company's
shareholders in the Merger will consist entirely of cash,
providing shareholders with complete liquidity of their
investment;
Absence of a Financing Contingency. The Board considered the
fact that if the Buyers are unable to obtain the financing
necessary to complete the transaction, the Buyers do not
have the right to unilaterally terminate the Plan of Merger;
and
10
Availability of Appraisal Rights. The Board considered the
fact that the unaffiliated shareholder will have the ability
to exercise dissenters' rights.
The material negative factors include:
Limited Ability to Entertain Proposals From Other Potential
Buyers. The Board considered the fact that the Buyers' 99%
equity ownership interest, coupled with their stated
intention of not being willing to sell their shares to third
party, made it difficult, if not impossible, to find a buyer
who might express an interest in presenting a competing
offer;
Taxation of Merger Consideration. The Board considered that
the cash consideration to be received by the Company's
unaffiliated shareholders would be taxable to those
shareholders;
Loss of Equity Interest. The Board considered the fact that
if the Merger is consummated, the Company's unaffiliated
shareholders will not participate in the future growth of
the Company. Because of the risks and uncertainties
associated with the Company's future prospects, the Board
concluded that the Merger was preferable to preserving for
the holders of such stock a speculative potential future
return; and
Interests of Certain Parties. The Board also recognized that
the Buyers would have an opportunity, subject to the risks
of the Company's business, to benefit from any increases in
the value of the Company following the Merger. The Board
recognized that this represented a conflict between the
interests of the Buyers and the Company's unaffiliated
shareholders. The abstention of Mr. Hillman from the
fairness determination was requested in light of the
conflicting interests of the Buyers.
In addition to the material positive and negative factors described above,
the Board considered the following factors in determining that the Merger
Consideration was fair to the Company's unaffiliated shareholders:
No Special Committee or Fairness Opinion. The Board did not
appoint a special committee to negotiate the terms of the
merger nor did it obtain a third-party report evaluating the
fairness of the transaction. The Board believes that Mr.
Hillman's abstention permitted the Board to act solely
through unaffiliated directors, and that the expense of a
fairness opinion was unwarranted given the directors'
long-standing familiarity with the Company, its financial
condition, and its prospects.
No Search for an Alternative Transaction. The Board did not
engage an investment banker or a business broker to assist
in a search for alternative transactions. The Board
determined that such a search would be fruitless both
because of Mr. Hillman's unwillingness to consider a sale of
his interest in the Company given the sizeable investment he
has made in the Company and because of the historical
inability of the Company to attract significant strategic
partners.
No Counterproposals Made. The Board did not make any
counter-proposals to the cash-out merger price proposed by
Mr. Hillman and his affiliates, nor did it attempt to attain
more favorable terms. The unaffiliated members of the Board
recognized that the Merger Consideration was at the high end
of the range they proposed to Mr. Hillman at the August 17,
2002 board meeting as being fair, and believed that the
Merger Consideration is in fact fair to the unaffiliated
shareholders, making further negotiations unnecessary. The
Board also considered that the unaffiliated shareholders
have the right to have their shares appraised.
11
Typical Valuation Methods Were Deemed to be Inapplicable. In
determining that the Merger consideration was fair to the
Company's unaffiliated shareholders, the Board made
reference to the Company's current and historical stock
price and did not give great weight to valuation criteria
typically used in valuing businesses such as discounted
cash-flow, liquidation, comparable company or comparable
transaction analyses. The Board found these valuation
methodologies inapplicable to the Company's current
situation. For instance, the Company does not currently have
positive cash flow upon which a discounted cash flow
analysis could be based. In addition, the Board believed
that a liquidation value of the Company would result in a
lower valuation than that proposed by Mr. Hillman.
Transaction Will Proceed Without a Vote of Unaffiliated
Shareholders. The Merger does not require a vote of
unaffiliated shareholders and will proceed even if a
majority of the unaffiliated shareholders oppose the
transaction.
The foregoing discussion of the information and factors discussed by the
Board is not meant to be exhaustive, but includes all material factors
considered by the Board to support its decision to recommend the approval of the
Plan of Merger and to determine that the transactions contemplated thereby are
in the best interests of the Company and its shareholders and fair to its
unaffiliated shareholders. The Board did not assign relative weights or other
quantifiable values to the above factors; rather, the Board viewed its position
and recommendations as being based on the totality of the information presented
to and considered by the Board members, and that on balance, the positive
factors discussed above outweighed the negative factors discussed above.
After a review of these factors, the Board, with Mr. Hillman abstaining,
determined the fairness of the Merger.
The Board reasonably believes that the merger consideration offered to the
unaffiliated shareholders under the Merger is fair. In reaching this conclusion,
the Board evaluated several price methodologies, as follows:
Current Market Price - The Board believed that the current
market price was a good methodology for determining the
value of the Company common stock. As of the close of
business on December 7, 2001, the low bid for the Company
common stock was $0.08 per share and the high bid was $0.08.
Historical Market Prices - The Board believed that
historical market prices would present some indication of
the market price of the Company stock; however, because of
the infrequent nature of the public transactions in the
Company common stock, the Board did not think this
methodology was dispositive. During the period from May 1,
2001 to December 7, 2001, the stock traded on a total of 11
days, with transaction volumes ranging from 100 shares to
1,400 shares. The total number of shares sold during this
period was 5,100 shares. Also, during this period, the
market sales price ranged from $0.08 to $0.49 per share, and
the weighed average price of the stock sold was $0.21 per
share.
Net Book Value - The Board did not give any weight to this
methodology because it believed that book value is not an
appropriate measure for establishing the fair value for the
merger consideration because net book value is an accounting
methodology based on the historical cost of the Company's
assets, and therefore does not reflect current value.
12
Going Concern Value - The Board did not give any weight to
this methodology because a going concern value could not be
established with reasonable accuracy, due to the changing
nature of the Company's business, including unpredictable
sales opportunities within the Company's traditional
customer base in the manufacturing, automotive and aerospace
industries which have reported significant downsizing and
other expense-reduction activities in the present economic
recession, which would make it too difficult to arrive at a
reasonable forecast of earnings for this purpose. The Board
concluded that these uncertain factors were sufficient to
reject going concern value in determining the fair value for
the merger consideration.
Liquidation Value - The Board did not give any weight to
this methodology because the Company will be a going concern
upon completion of the Merger and the value that could be
obtained through a liquidation of the Company would be
significantly less than the value that could be obtained
through a sale as a going concern.
Relationship Between Merger Consideration and Recent
Acquisitions of Company Stock. The Board did not consider
whether the merger consideration offered to the Company's
unaffiliated shareholders constitutes fair value in relation
to the prices paid by the Company or any of the Buyers in
connection with purchases of the Company's common stock by
any of such persons during the last two full fiscal years of
the Company, because no purchases of such kind were made
during that period, other than the debt to equity
conversions with respect to the Venhill loans. Because the
most recent conversion occurred in August 2000, the Board
believed that the effective purchase price for that debt
conversion (as well as for the other prior debt conversions
in the two full fiscal year period) was not a good indicator
of the fair value of the shares held by the unaffiliated
shareholders as of December 2001.
Based on these methodologies and the recent prior discussions of the Board
concerning the value of the Company in connection with the possibility of taking
the company private, including the discussions during the August 17, 2001 board
meeting, the Board believed that it had obtained sufficient information to make
a determination about the substantive fairness of the proposal. The Board did
not seek a fairness opinion to bolster its own determination because it viewed
the expense (estimated at approximately $300,000) to be unwarranted,
particularly in view of the Board's intimate familiarity with the Company's
finances and prospects. The Board also considered in this regard the
availability of appraisal rights to any unaffiliated shareholder who believes
that the Merger Consideration is substantively unfair.
The Company and its affiliates are not aware of any firm offers to purchase
the Company that have been made during the past two years by any unaffiliated
person. Consequently, the Board did not consider this factor in establishing the
fair value of the stock for the merger consideration.
The Company has not engaged in a merger or consolidation with another
company or in the sale or other transfer of a substantial part of its assets in
the last two years, so the Board did not consider this factor in establishing
the fair value of the stock for the merger consideration.
There have not been any recent purchases of the Company's stock that
enabled the holder to exercise control of the Company. Therefore, the Board did
not consider this factor in establishing the fair value of the stock for the
merger consideration.
The Board also believes the process it followed in approving the Plan of
Merger was procedurally fair because:
13
o the members of the Board who voted on the determination consisted
entirely of directors who are not Company officers or controlling
shareholders or their family members;
o although the Board made the determination shortly after receiving the
proposal, the independent members of the Board had a significant
amount of information based on their long-standing familiarity with
the Company which allowed them to respond promptly to the proposed
transaction, based on a conclusion that there was no benefit to the
shareholders in unnecessarily delaying the Board's response;
o unlike "cash-stock" mergers and other transactions that require
significant valuation analysis, the structure of this proposed
transaction was relatively simple, consisting of a single cash price
to all of the unaffiliated shareholders; and
o the members of the Board who voted on the determination will not
personally benefit from the consummation of the Merger contemplated by
the Plan of Merger, other than in their capacity as holders of Company
common stock and options, which were not considered to be material.
The Board determined that it would not be in the best interest of the
Company or its shareholders to submit any counterproposals to ATTC or Mr.
Hillman, because, in the Board's view, the merger consideration was
substantively fair to the unaffiliated shareholders. . The Board considered this
to be particularly true since it had initially indicated to Mr. Hillman that it
viewed a price of between $.10 and $.20 per share to be fair, and that Mr.
Hillman's initial proposal was $.20 per share. Moreover, the Board determined
that the transaction costs associated with such counterproposals, including the
delay in consummating the transaction, were not in the best interests of the
Company or the shareholders, particularly in view of Mr. Hillman's 99.7%
ownership interest and the resulting lack of negotiating leverage available to
the Company
The Merger does not require a vote of the shareholders of the Company. The
Buyers have stated that they intend to take the votes necessary for ATTC to
effect the Merger. The Board did not believe that a vote of unaffiliated
shareholders would be necessary to ensure the procedural fairness of the Merger
because each of the Company's unaffiliated shareholders would be able to
effectively dissent from the Merger by exercising appraisal rights.
The Buyers each believe that the Merger is fair to the unaffiliated
shareholders and considered the same factors as the Board considered in reaching
that conclusion. All references to considerations and conclusions by the Board
as to fairness and to factors considered by the Board apply as well to the
Buyers. None of the Buyers considered the absence of a requirement that approval
of a majority of Auto-trol's unaffiliated shareholders be obtained in order to
effect the Merger as a factor detracting from the fairness of the Merger because
Auto-trol's Board of Directors implemented the effective procedural fairness
measures discussed above.
Benefits and Detriments of the Merger
To Auto-trol's Unaffiliated Shareholders
Auto-trol and the Buyers believe that the primary benefit of the Merger to
Auto-trol's unaffiliated shareholders is the realization of the value of their
investment in Auto-trol in cash at a price that represents a substantial premium
over current market prices for the Auto-trol common stock. In addition, the
Merger will eliminate the risk to those shareholders of a possible future
decline in the market value of Auto-trol's common stock.
The primary detriment of the Merger to Auto-trol's unaffiliated
shareholders is that they will cease to participate in any future earnings
growth of Auto-trol and to benefit from any increase in Auto-trol's value. In
addition, each of Auto-trol's unaffiliated shareholders will recognize a taxable
gain on consummation of the Merger if and to the extent that the amount of cash
he, she or it receives in the Merger exceeds his, her or its tax basis in his,
her or its Auto-trol common stock.
14
To the Buyers and Auto-trol
The primary benefit to the Buyers of the Merger is that they will
participate in all of any future earnings growth of Auto-trol and will benefit
from all of any increase in Auto-trol's value. The Buyers believe that Auto-trol
will benefit from the Merger by gaining more operating flexibility, because it
will no longer need to focus on the public trading market's quarterly earnings
expectations, and by reducing its operating and administrative costs because of
a reduction in its public reporting obligations arising principally from its
equity securities being privately rather than publicly held after the Merger.
The primary detriments of the Merger to the Buyers and Auto-trol are the
cash outlay and associated debt burden required to pay the merger consideration,
and diminution of Auto-trol's ability to use Auto-trol common stock as currency
for acquisitions, substantial capital-raising efforts and incentive option
purposes.
Buyers' Purposes and Reasons for the Merger
Each Buyer's purpose in undertaking the Merger is to obtain the benefits to
the Buyers and Auto-trol described under "Benefits and Detriments of the Merger
- - To the Buyers and Auto-trol." The Buyers chose the merger structure because it
was the most efficient means to acquire the entire equity interest in Auto-trol
and provide cash to Auto-trol's unaffiliated shareholders.
The Buyers also considered a reverse stock split, a tender offer, and a
more traditional "long-form" merger, but rejected those alternatives in part
because of the difficulties attendant to those transactions and in part because
none of those alternatives would accomplish the purposes of the Merger as
efficiently as a "short form" merger. For example, a tender offer would not give
the Buyers complete ownership of the Company if one or more of the unaffiliated
shareholders decided not to tender the Company shares. Similarly, a reverse
stock split would require a recommendation of the Board of the Company, a vote
of the Company shareholders to amend the Company's charter, and a related proxy
filing or information statement. Finally, a "long form" merger would have also
required a recommendation of the Board of the Company, a vote of the
shareholders approving the merger, and the costs associated with a proxy filing
or information statement. In addition, under Colorado law, both a "long form"
merger and a reverse stock split would entitle the shareholders to dissenters
rights.
The Buyers are proposing the merger at this time because the Buyers believe
that the Company has suffered and is currently suffering as a public company,
including its limited trading volume, lack of institutional sponsorship, low
public float, small market capitalization, and diminishing research attention
from analysts.
Interests of Certain Persons in the Merger; Certain Relationships
In considering the recommendation of the Board with respect to the Merger,
you should be aware that certain members of the Board and of Auto-trol's
management have interests that may present actual or potential conflicts of
interest in connection with the Merger. The Board were aware of these potential
or actual conflicts of interest and considered them along with other matters
described under "Fairness of the Transaction."
Retained Equity Interest
Mr. Hillman, Venhill, and the their affiliates beneficially own an
aggregate of 59,169,091 shares of common stock, representing approximately 99.7%
of the total outstanding shares of our common stock. Upon consummation of the
Merger, they will own directly or indirectly all of the outstanding common stock
of Auto-trol and will therefore participate in all of its future earnings growth
and any increase in value.
Shares and Stock Options
The value of Auto-trol stock and options held directly or indirectly by
members of the Board which will or may be realized upon consummation of the
Merger is as follows:
15
Name Number of Shares Value Number of Stock Options Net Option Value
---- ---------------- ----- ----------------------- ----------------
Howard B. Hillman 58,097,564 n/a (1) 0 0
Major General William R. Usher 200 $40.00 4,000 0
J. Roderick Heller, III 2,000 $400.00 6,000 0
- --------------------------------
(1) Mr. Hillman will not realize any value upon consummation of the Merger.
Directors and Management of the Surviving Corporation
After the Merger, Mr. Hillman, Major General Usher, and Mr. Heller will
comprise the Board of Directors of Auto-trol. Mr. Hillman will continue to serve
as Chairman, Chief Executive Officer, and President. See "Directors and
Management" for additional information.
Other Arrangements with Affiliates
Venhill has made loans to Auto-trol. For a complete description, see "--
Background of the Merger."
Certain Effects of the Merger
If the Merger is consummated, Auto-trol's unaffiliated shareholders will no
longer have any interest in, and will not be shareholders of, Auto-trol and,
therefore, will not benefit from any future earnings growth of Auto-trol or from
any increase in its value and will no longer bear the risk of any decrease in
its value. Instead, each unaffiliated shareholder will have the right to receive
upon consummation of the Merger $0.20 in cash for each share of common stock he,
she or it holds, without interest. The benefit of the transaction to our
unaffiliated shareholders is the payment of a premium, in cash, above the market
value for such stock prior to the announcement of the transaction. This cash
payment assures that all unaffiliated shareholders will receive the same amount
for their shares, rather than taking the risks associated with attempting to
sell their shares in the open market. The detriment to such holders is their
inability to participate as continuing shareholders in the possible future
growth of Auto-trol.
If the Merger is consummated, the Buyers will indirectly hold the entire
equity interest in Auto-trol and will therefore be the sole beneficiaries of any
future earnings growth of Auto-trol and any increases in Auto-trol's value.
However, the Buyers will bear the risk of any decrease in value of Auto-trol and
the risks associated with the significant amount of debt to be incurred by
Buyers in connection with the Merger and the lack of liquidity in the Buyers'
investment in Auto-trol. See "Special Factors--Benefits and Detriments of the
Merger" and "--Material Federal Income Tax Consequences of the Merger."
Auto-trol's common stock is currently registered under the Exchange Act,
and is traded on the OTC Bulletin Board. As a result of the Merger, the
registration of the common stock under the Exchange Act will be terminated, and
the common stock will be delisted from the OTC Bulletin Board. Auto-trol will
thereafter be relieved of its obligation to comply with the proxy rules of
Regulation 14A under Section 14 of the Exchange Act, and its officers, directors
and beneficial owners of more than 10% of the common stock will be relieved of
the reporting requirements and "short swing" trading provisions under Section 16
of the Exchange Act. Further, Auto-trol will no longer be subject to periodic
reporting requirements under Section 13 of the Exchange Act and will cease
filing information with the SEC.
Plans for Auto-trol After the Merger
Each of the Buyers expects that, except as described in this going private
statement, the business and operations of Auto-trol will be continued
substantially as they are currently being conducted by Auto-trol and its
subsidiaries. However, the Buyers expect that they may, from time to time,
evaluate and review Auto-trol's business, operations and properties and make
such changes as it considers appropriate.
Except as described in this going private statement, neither the Buyers nor
Auto-trol has any present plans or proposals involving Auto-trol or its
subsidiaries which relate to or would result in an extraordinary corporate
transaction such as a merger, reorganization, liquidation, sale or transfer of a
material amount of assets, or any material change in the present dividend
policy, indebtedness or capitalization, or any other material change in
16
Auto-trol's corporate structure or business, other than changes in connection
with Mr. Hillman's continued funding of the operating losses of the Company.
After the Merger, the Buyers will review proposals or may propose the
acquisition or disposition of assets or other changes in Auto-trol's business,
corporate structure, capitalization, management or dividend policy which they
consider to be in the best interests of Auto-trol and its shareholders. Neither
the Buyers nor Auto-trol has formulated any specific plans regarding repayment
of the indebtedness incurred in connection with the Merger; however, such
persons anticipate that such indebtedness will be repaid primarily with or by
means of cash flow and dividends from the operations of the business of
Auto-trol, and other Buyer affiliated businesses, with proceeds from new debt or
equity financings, or such other means as they may determine in their sole
discretion.
Conduct of the Business of the Company If the Merger is Not Consummated
If the Merger is not consummated, the Board expects to seek to retain
Auto-trol's current management team and continue business as usual. There are no
plans in such circumstances to operate Auto-trol's business in a manner
substantially different than the manner in which it is presently operated. In
addition, additional dilution of the shares would be foreseeable and outside
third party funding would be difficult to obtain.
Accounting Treatment
Prior to the Merger, Mr. Hillman, Venhill, entities under their control,
and others (the Controlling Shareholders") will transfer all of their equity
interest in Auto-trol to ATTC in exchange for shares of capital stock of ATTC.
The Controlling Shareholders own 99.7% of Auto-trol's outstanding common stock.
Since the Controlling Shareholders of Auto-trol will also be the controlling
shareholders of ATTC, the Merger will be accounted for as a reverse acquisition
of ATTC by Auto-trol and a recapitalization of Auto-trol. Assets and liabilities
transferred in the Merger will be recognized at their historical carrying
amounts at the date of the Merger.
Financing of the Merger
It is estimated that approximately $______ will be required to complete the
Merger and pay related fees and expenses. See "-- Fees and Expenses."
Financing for the Merger is expected to be provided by Mr. Hillman or an
affiliate in the form of a loan to ATTC. The loan is expected not to exceed
$40,000.00.
The Buyers have considered and will continue to consider alternative
financing arrangements if the primary financing plans fall through, but no such
alternative arrangements have been finalized.
Regulatory Requirements; Third Party Consents
Auto-trol does not believe that any material federal or state regulatory
approvals, filings or notices are required by Auto-trol or ATTC in connection
with the Merger. Auto-trol does not believe any other material third party
consents will be required by Auto-trol or ATTC in connection with the Merger.
Material Federal Income Tax Consequences
The following discussion is a summary of the material federal income tax
consequences expected to result to shareholders whose shares of common stock are
converted to cash in the Merger. This summary does not purport to be a complete
analysis of all potential tax effects of the Merger. For example, the summary
does not consider the effect of any applicable state, local or foreign tax laws.
In addition, the summary does not address all aspects of federal income taxation
that may affect particular shareholders in light of their particular
circumstances and is not intended for shareholders (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
shareholders who hold their common stock as part of a hedge, straddle or
conversion transaction, shareholders who acquired their common stock pursuant to
the exercise of an employee stock option or otherwise as compensation, and
shareholders who are not citizens or residents of the United States or that are
foreign corporations, foreign partnerships or foreign estates or trusts as to
the United States) that may be subject to special federal income tax rules not
discussed below. The following summary also does not address tax consequences to
the Buyers. The following summary assumes that shareholders have held their
common stock as "capital assets" (generally, property held for investment) under
the Internal Revenue Code of 1986.
17
This summary is based on the current provisions of the Code, applicable
Treasury Regulations, judicial authority and administrative rulings and
practice. No ruling from the IRS has been or will be sought nor will an opinion
of counsel be obtained with respect to any aspect of the transactions described
herein. Accordingly, there can be no assurance that the IRS will not challenge
the tax consequences expressed in this discussion or that a court would not
sustain this type of challenge. Future legislative, judicial or administrative
changes or interpretations could alter or modify the statements and conclusions
set forth herein, and any such changes or interpretations could be retroactive
and could affect the tax consequences of the Merger to shareholders. We cannot
predict at this time whether any current proposed tax legislation will be
enacted or, if enacted, whether any tax law changes contained therein would
affect the tax consequences of the Merger to shareholders. It is therefore
possible that the federal income tax treatment may differ from that described
below.
State and local tax laws may also impose income or other taxes upon
shareholders whose shares of common stock are converted to cash in the Merger.
State and local income tax laws vary from state to state and this discussion
does not address state or local tax issues.
Sales Treatment for Holders of Common Stock
Except as provided below, the conversion of common stock in the Merger will
be fully taxable to shareholders as a sale or exchange of such stock.
Accordingly, a shareholder who, pursuant to the Merger, converts such holder's
common stock into cash will recognize a gain or loss equal to the difference
between (1) the amount of cash received in the Merger and (2) such shareholder's
tax basis in the common stock. Generally, a shareholder's tax basis in his
common stock will be equal to such shareholder's cost therefor. In the case of a
shareholder who is an individual, such capital gain will be taxable at a maximum
capital gains rate of 20% if the holder held the common stock for more than one
year at the time of consummation of the Merger. If the holder held the common
stock for less than one year at the time of consummation of the Merger, in
general the capital gain would be taxed at ordinary income tax rates. Certain
limitations apply to the deductibility of capital losses by shareholders. Gain
or loss must be determined separately for each block of common stock acquired at
the same cost in a single transaction.
Redemption Treatment for Dissenters and Other Shareholders
For federal income tax purposes, Auto-trol may be deemed to be the source
of a portion of the cash consideration issued in the Merger (particularly if
debt used to fund the Merger is assumed by Auto-trol in the Merger) and
Auto-trol will be deemed to be the source of cash consideration for payments in
satisfaction of dissenters' rights. Therefore, to the extent that cash received
by a shareholder is from Auto-trol or deemed to be from Auto-trol, the receipt
of cash in exchange for such shareholder's common stock in the Merger or in
satisfaction of dissenters' rights will be treated as a redemption of common
stock taxable for federal income tax purposes as determined under section 302 of
the Code.
Section 302(d) of the Code provides that if the receipt of redemption
payments has the effect of a distribution of property, then cash distributed
will be treated as a dividend taxable under section 301 of the Code as ordinary
income to a shareholder receiving such cash payments, generally to the extent of
the shareholder's share of undistributed accumulated or current earnings and
profits of the company. The remainder, if any, will be treated first as a
recovery of basis in a shareholder's common stock, and second as capital gain
arising from the sale or exchange of property. The determination of whether or
not the receipt of cash payments has the effect of a distribution of a dividend
will depend on each shareholder's particular circumstances and is made by
applying the dividend equivalency tests of section 302 of the Code.
Under section 302 of the Code, a shareholder receiving a cash payment as a
redemption will not be treated as having received a dividend equivalent
distribution if the transaction:
o results in a "complete redemption" of the shareholder's equity
interest in the company;
o results in a "substantially disproportionate" redemption with
respect to the shareholder; or
o is "not essentially equivalent to a dividend" with respect to the
shareholder.
18
Each of these section 302 tests is explained more fully below.
Constructive Ownership of Stock and Other Issues
In applying each of the section 302 tests, shareholders must take into
account not only shares that they actually own but also shares they are treated
as owning under the constructive ownership rules of section 318 of the Code.
Pursuant to the constructive ownership rules, a shareholder is treated as owning
any shares that are owned, actually and in some cases constructively, by certain
related individuals and entities as well as shares that the shareholder has the
right to acquire by exercise of an option or by conversion or exchange of a
security. Due to the factual nature of the section 302 tests described below,
shareholders should consult their tax advisors to determine whether the
conversion of their shares and receipt of a payment pursuant to the Merger will
be deemed dividend equivalent in their particular circumstances.
Section 302 Tests
One of the following tests must be satisfied in order for the distribution
not to be treated as the equivalent of a dividend for federal income tax
purposes.
o Complete Termination Test. The distribution will result in a "complete
redemption" of the shareholder's equity interest in the company only
if all of the common stock that is actually owned by the shareholder
is sold pursuant to the Merger and the shares that are constructively
owned by the shareholder are sold or, with respect to shares owned by
certain related individuals, the shareholder effectively waives, in
accordance with section 302(c) of the Code, attribution of shares
which otherwise would be considered as constructively owned by the
shareholder. Certain restrictions apply to the waiver of attribution
of shares. Shareholders wishing to satisfy the "complete redemption"
test through waiver of the constructive ownership rules should consult
their tax advisors.
o Substantially Disproportionate Test. The distribution will result in a
"substantially disproportionate" redemption with respect to the
shareholder if, among other things, the shareholder owns actually and
constructively less than 50% of the total combined voting power of all
classes of stock after the redemption, and the percentage of the then
outstanding voting common stock actually and constructively owned by
the shareholder immediately after the purchase is less than 80% of the
percentage of the previously outstanding voting common stock actually
and constructively owned by the shareholder immediately before the
purchase.
o Not Essentially Equivalent to a Dividend Test. The distribution will
be treated as "not essentially equivalent to a dividend" if the
reduction in the shareholder's proportionate interest actually and
constructively owned constitutes a "meaningful reduction" given the
shareholder's particular circumstances. Whether the receipt of a cash
payment will be "not essentially equivalent to a dividend" will depend
upon the shareholder's particular facts and circumstances.
Shareholders should consult their tax advisors as to the application
of this test in their particular circumstances.
If a shareholder receives only cash payments and satisfies any of the
section 302 tests described above, the shareholder will be treated as if it sold
its common stock and will recognize capital gain or loss as described above.
If a shareholder does not satisfy any of the section 302 tests described
above, the purchase of a shareholder's common stock will not be treated as a
sale or exchange under section 302 of the Code. Instead, the amount received by
a shareholder in the redemption will be treated as a dividend distribution under
section 301 of the Code, taxable at ordinary income tax rates, to the extent,
first, of the shareholder's applicable share of Auto-trol's current or
accumulated earnings and profits, as defined for U.S. federal income tax
purposes. To the extent the amount exceeds the shareholder's applicable share of
current or accumulated earnings and profits, the excess first will be treated as
a tax free return of capital to the extent of the shareholder's basis in its
common stock and any remainder will be treated as capital gain, which may be
long term capital gain as described above. The determination of whether a
corporation has earnings and profits is complex and the legal standards to be
applied are subject to uncertainties and ambiguities. Additionally, the amount
of current earnings and profits can be determined only at the end of the taxable
19
year. Accordingly, it is unclear whether Auto-trol will have sufficient current
and accumulated earnings and profits to cover the amount of any payment made to
shareholders. To the extent that a redemption is treated as the receipt by the
shareholder of a dividend, the shareholder's tax basis in the redeemed shares
will be added to any shares of common stock retained or sold by the shareholder,
and may be lost if the shareholder does not actually retain any stock ownership
in Auto-trol.
Treatment of Holders of Stock Options
Because all of the outstanding options of Auto-trol have exercise prices
that exceed the merger consideration, no outstanding option to acquire common
stock will receive any payment under the Plan of Merger.
Backup Withholding
A shareholder whose common stock is converted to cash pursuant to the
Merger may be subject to backup withholding equal to 31% of the gross proceeds
from the conversion of such common stock unless such shareholder (1) is a
corporation or other exempt recipient and, when required, establishes this
exemption or (2) provides its correct taxpayer identification number, certifies
that it is not currently subject to backup withholding and otherwise complies
with applicable requirements of the backup withholding rules. A shareholder who
does not provide Auto-trol with its correct taxpayer identification number may
be subject to penalties imposed by the IRS. Any amount withheld under these
rules will be credited against the shareholder's federal income tax liability.
Auto-trol will report to shareholders and to the IRS the amount of any
reportable payments, including payments made to shareholders pursuant to the
Merger, and any amount withheld pursuant to the Merger.
Each shareholder or option holder should consult his, her or its own tax
advisor with respect to the particular tax consequences to it of the
transactions described herein, including the applicability and effect of state,
local and foreign tax law.
Tax Treatment to Buyers
Howard B. Hillman, Venhill and entities under their sole control have
transferred to ATTC all of the equity interests in Auto-trol (the "ATTC
Formation Transaction"). It is intended that the ATTC Formation Transaction will
qualify as a transfer to a controlled corporation in which gain or loss is not
recognized under Section 351 of the Code. In addition, no gain or loss will be
recognized in the Merger by ATTC, Venhill, any of their affiliated entities, or
Auto-trol.
Fees and Expenses
Whether or not the Merger is consummated and except as otherwise described
herein, all fees and expenses incurred in connection with the Merger will be
paid by the party incurring such fees and expenses, except that Auto-trol and
ATTC will share costs and expenses relating to the printing and mailing of this
going private statement and certain filing fees.
Estimated fees and expenses (rounded to the nearest thousand) to be
incurred by Auto-trol or ATTC in connection with the Merger, the financing and
related transactions are as follows:
Auto-trol ATTC
Financing fees/(1)/..................................$ $
Legal and accounting fees and expenses...............
Printing and solicitation fees and expenses..........
SEC filing fees......................................
Other expenses.......................................________ ________
Total..........................................$ . $ .
======== ========
- --------------
(1) See "Special Factors--Financing of the Merger."
To the extent not paid by ATTC or Auto-trol prior to consummation of the
Merger, all such fees and expenses will be paid by Auto-trol if the Merger is
consummated. If the Merger is not consummated, each party will bear its
respective fees and expenses.
20
THE PLAN OF MERGER
The following is a summary of the material provisions of the Plan of
Merger, a copy of which is attached as Exhibit A to this going private
statement. This summary is qualified in its entirety by reference to the full
text of the Plan of Merger.
The Merger, Merger Consideration
The Plan of Merger will become effective upon the filing of articles of
merger with the Secretary of State of the State of Colorado or at such other
time as the parties may agree and specify in the certificate of merger (the
"Effective Time"). It is currently anticipated that the Merger will be
consummated in early spring 2002 after a 20-day notice period required by the
federal securities laws has expired; however, there can be no assurance as to
the timing of the consummation of the Merger or that the Merger will be
consummated.
At the Effective Time, ATTC will be merged with and into Auto-trol, the
separate corporate existence of ATTC will cease and Auto-trol will continue as
the surviving corporation. At the Effective Time:
o each share of Auto-trol common stock, issued and
outstanding immediately prior to the Effective Time
(other than common stock held by ATTC or dissenting
shareholders) will, by virtue of the Merger and without
any action on the part of the holder thereof, be
converted into and become the right to receive $0.20
per share, without interest (the "Merger
Consideration");
o each share of Auto-trol common stock issued and
outstanding immediately prior to the Effective Time
that is owned ATTC will automatically be canceled,
retired and cease to exist and no payment will be made
with respect thereto;
o each share of common stock of ATTC issued and
outstanding immediately prior to the Effective Time
will be converted into and become one share of common
stock of Auto-trol as the surviving corporation and
will constitute the only outstanding share of capital
stock of Auto-trol;
o dissenting shareholders who strictly comply with the
provisions of the Colorado Business Corporation Act
regarding statutory appraisal rights have the right to
seek a determination of the fair value of the shares of
common stock and payment in cash therefor in lieu of
the Merger Consideration (see "Dissenters' Rights of
Appraisal"); and
o each certificate representing shares of Auto-trol
common stock that have been converted to cash under the
terms of the Plan of Merger (a "Certificate") will,
after the Effective Time, evidence only the right to
receive, upon the surrender of such Certificate, an
amount of cash per share equal to $0.20, without
interest.
Treatment of Certain Shares Held by the Buyers
Prior to the Effective Time, Mr. Hillman, Venhill, and others will
contribute his or its interests in Auto-trol in exchange for shares of capital
stock of ATTC. The shares of Auto-trol common stock held by ATTC will, pursuant
to the Plan of Merger, be canceled in the Merger and no consideration will be
paid therefor.
The Exchange Fund; Payment for Shares of Auto-trol Common Stock
On or before the closing date of the Merger, Auto-trol will enter into an
agreement with a bank, trust company or other exchange agent selected by
Auto-trol (the "Exchange Agent"). As of the Effective Time, Auto-trol will
deposit or cause to be deposited with the Exchange Agent cash in the amount
equal to the aggregate Merger Consideration (such amount being defined as the
number of shares to be purchased multiplied by $0.20, and hereinafter referred
21
to as the "Exchange Fund") for the benefit of holders of shares of Auto-trol
common stock (other than common stock held by dissenting shareholders and shares
to be canceled without consideration pursuant to the Plan of Merger).
Attached as Exhibit E is a letter of transmittal and instructions for use
in surrendering Certificates in exchange for the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
a letter of transmittal, duly executed, and such other customary documents as
may be required pursuant to the instructions, the holder of such Certificate
will be entitled to receive in exchange therefor the Merger Consideration into
which the number of shares of common stock previously represented by such
Certificate shall have been converted pursuant to the Plan of Merger, without
any interest thereon, and the Certificates so surrendered will be canceled.
If payment of the Merger Consideration is to be made to a person other than
the person in whose name the Certificate surrendered is registered, it will be a
condition of payment that the Certificate so surrendered will be properly
endorsed (together with signature guarantees on such Certificate) or otherwise
be in proper form for transfer and that the person requesting such payment pay
to the Exchange Agent any transfer or other taxes required by reason of the
payment of the Merger Consideration to a person other than the registered holder
thereof or establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable.
In all cases, the Merger Consideration will be paid only in accordance with
the procedures set forth in this going private statement and the letter of
transmittal.
Three hundred and sixty-five days after the Effective Time, the Exchange
Agent will deliver to Auto-trol, or otherwise at the direction of Auto-trol, any
portion of the Exchange Fund that remains undistributed to or unclaimed by the
holders of Certificates (including the proceeds of any investments thereof). Any
holders of Certificates who have not theretofore complied with the
above-described procedures to receive payment of the Merger Consideration may
then look only to Auto-trol for payment of the Merger Consideration to which
they are entitled.
Transfers of Common Stock
After the Effective Time, Auto-trol's stock transfer books will be closed,
and there will be no further transfers of Certificates on the records of
Auto-trol or its transfer agent. If, after the Effective Time, Certificates are
presented to the Exchange Agent or Auto-trol, they will be canceled and
exchanged for the Merger Consideration as provided above and pursuant to the
terms of the Plan of Merger (subject to applicable law in the case of dissenting
shareholders).
Treatment of Stock Options
Because all of the outstanding options of Auto-trol have exercise prices
that exceed the merger considerations, no outstanding option to acquire common
stock will receive any payment under the Plan of Merger. The Company intends to
review its equity incentive compensation structure and may make changes after
the completion of the Merger as it deems necessary or appropriate.
Conditions
There are no conditions to the Plan of Merger that have not been satisfied
or waived by the Buyers.
22
DISSENTERS' RIGHTS OF APPRAISAL
The following is a summary of dissenters' rights available to Auto-trol
shareholders, which summary is not intended to be a materially complete
statement of applicable Colorado law and is qualified in its entirety by
reference to Article 113 of the Colorado Business Corporation Act ("CBCA"),
which is set forth in its entirety as Article B.
Right to Dissent
Auto-trol shareholders are entitled to dissent from the Merger and obtain
payment of the fair value of their shares if and when the Merger is effectuated.
"Fair value," with respect to a dissenter's shares, means the value of the
shares immediately before the Effective Time of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger except to the extent
that exclusion would be inequitable. Under Article 113 of the CBCA, a
shareholder entitled to dissent and obtain payment for his, her or its shares
may not also challenge the corporate action creating the right to dissent unless
the action is unlawful or fraudulent with respect to the shareholder or the
corporation.
Under Section 7-113-103 of the CBCA a record shareholder may assert
dissenters' rights as to fewer than all shares registered in the record
shareholder's name only if the record shareholder dissents with respect to all
shares beneficially owned by any one person and causes the corporation to
receive written notice which states such dissent and the name, address and
federal taxpayer identification number, if any, of each person on whose behalf
the record shareholder asserts dissenters' rights.
Section 7-113-103(2) of the CBCA provides that a beneficial shareholder may
assert dissenters' rights as to the shares held on the beneficial shareholder's
behalf only if (a) the beneficial shareholder causes the corporation to receive
the record shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights and (b) the beneficial
shareholder dissents with respect to all shares beneficially owned by the
beneficial shareholder.
Auto-trol will require that, when a record shareholder dissents with
respect to the shares held by any one or more beneficial shareholders, each such
beneficial shareholder must certify to Auto-trol that the beneficial shareholder
has asserted, or will timely assert, dissenters' rights as to all such shares as
to which there is no limitation on the ability to exercise dissenters' rights.
Dissenters' Notice
If the Merger is consummated, Auto-trol will send written notice to
dissenters who are entitled to demand payment for their shares. The notice
required by Auto-trol will be given no later than 10 days after the Effective
Time and will: (a) state that the Merger was authorized and state the Effective
Time or proposed effective date of the Merger, (b) set forth an address at which
Auto-trol will receive payment demands and the address of a place where
certificates must be deposited, (c) supply a form for demanding payment, which
form shall request a dissenter to state an address to which payment is to be
made, (d) set the date by which Auto-trol must receive the payment demand and
certificates for shares, which date will not be less than 30 days after the date
the notice is given, (e) state that if a record Auto-trol shareholder dissents
with respect to the shares held by any one or more beneficial shareholders each
such beneficial shareholder must certify to Auto-trol that the beneficial
shareholder and the record shareholder or record shareholders of all shares
owned beneficially by the beneficial shareholder have asserted, or will timely
assert, dissenters' rights as to all such shares as to which there is no
limitation of the ability to exercise dissenters' rights, and (f) be accompanied
by a copy of Article 113 of the CBCA.
Procedure to Demand Payment
A shareholder who is given a dissenters' notice to assert dissenters'
rights will, in accordance with the terms of the dissenters' notice, (a) cause
Auto-trol to receive a payment demand (which may be a demand form supplied by
Auto-trol and duly completed or other acceptable writing) and (b) deposit the
shareholder's stock certificates. A shareholder who demands payment in
accordance with the foregoing retains all rights of a shareholder, except the
right to transfer the shares until the Effective Time, and has only the right to
23
receive payment for the shares after the Effective Time. A demand for payment
and deposit of certificates is irrevocable except that if the Effective Time
does not occur within 60 days after the date set by Auto-trol by which it must
receive the payment demand, Auto-trol will return the deposited certificates and
release the transfer restrictions imposed. If the Effective Time occurs more
than 60 days after the date set by Auto-trol by which it must receive the
payment demand, then Auto-trol will send a new dissenters' notice. A Auto-trol
shareholder who does not demand payment and deposit his or her Auto-trol share
certificates as required by the date or dates set forth in the dissenters'
notice will not be entitled to demand payment for his, her or its Auto-trol
shares under Article 113 of the CBCA, in which case, pursuant to the Plan of
Merger, he, she or it will receive cash consideration for each of his, her or
its shares equal to the per share price received by non-dissenting shareholders.
Payment
At the Effective Time or upon receipt of a payment demand, whichever is
later, Auto-trol will pay each dissenter who complied with the notice
requirements referenced in the preceding paragraph, the Auto-trol estimate of
the fair value of the dissenter's shares plus accrued interest. Payment shall be
accompanied by an audited balance sheet as of the end of the most recent fiscal
year of Auto-trol or, an audited income statement for that year, and an audited
statement of changes in shareholders' equity for that year and an audited
statement of cash flow for that year, as well as the latest available financial
statements, if any, for the interim period, which interim financial statements
will be unaudited. Payment will also be accompanied by a statement of the
estimate by Auto-trol of the fair value of the shares and an explanation of how
the interest was calculated, along with a statement of the dissenter's right to
demand payment and a copy of Article 113 of the CBCA. With respect to a
dissenter who acquired beneficial ownership of his, her or its shares after
Auto-trol's first announcement of the terms of the transaction on January 22,
2002, or who does not certify that his, her or its shares were acquired before
that date, Auto-trol may, in lieu of making the payment described above, offer
to make such payment if the dissenter agrees to accept it in full satisfaction
of the demand.
If Dissenter is Dissatisfied with Offer
If a dissenter disagrees with the Auto-trol payment or offer, such
dissenter may give notice to Auto-trol in writing of the dissenter's estimate of
the fair value of the dissenter's shares and of the amount of interest due and
may demand payment of such estimate, less any payment made prior thereto, or
reject the offer of Auto-trol and demand payment of the fair value of the shares
and interest due if: (a) the dissenter believes that the amount paid or offered
is less than the fair value of the shares or that the interest due was
incorrectly calculated, (b) Auto-trol fails to make payment within 60 days after
the date set by Auto-trol by which it must receive the payment demand or (c)
Auto-trol does not return deposited certificates if the Effective Time is 60
days after the date set by Auto-trol by which the payment demand must be
received by the shareholder asserting dissenter's rights. A dissenter waives the
right to demand payment under this paragraph unless he or she causes Auto-trol
to receive the notice referenced in this paragraph within 30 days after
Auto-trol makes or offers payment for the shares of the dissenter, in which
event, such dissenter will receive all cash for his or her Auto-trol shares in
an amount equal to the amount paid or offered by Auto-trol.
Judicial Appraisal of Shares
If a demand for payment made by a dissenter as set forth above is
unresolved, Auto-trol may, within 60 days after receiving the payment demand,
commence a proceeding and petition a court to determine the fair value of the
shares and accrued interest. If Auto-trol does not commence the proceeding
within the 60 day period, it shall pay to each dissenter whose demand remains
unresolved the amount demanded. Auto-trol must commence any proceeding described
above in the District Court of the County of Denver, Colorado. Auto-trol must
make all dissenters whose demands remain unresolved parties to the proceeding as
in an action against their shares, and all parties shall be served with a copy
of the petition. Jurisdiction in which the proceeding is commenced is plenary
and exclusive. One or more persons may be appointed by the court as appraisers
to receive evidence and recommend a decision on the question of fair value. The
appraisers will have the power described in the court order appointing them. The
parties to the proceeding will be entitled to the same discovery rights as
parties in other civil proceedings. Each dissenter made a party to the
proceeding will be entitled to judgment for the amount, if any, by which the
court finds the fair value of the dissenter's shares, plus interest, to exceed
the amount paid by Auto-trol, or for the fair value, plus interest, of a
dissenter's shares for which Auto-trol elected to withhold payment.
24
Court and Counsel Fees
The court in an appraisal proceeding shall determine all costs of the
proceeding, including the reasonable compensation and expenses of appraisers
appointed by the court. The court will assess the costs against Auto-trol;
except that the court may assess costs against all or some of the dissenters, in
the amount the court finds equitable, to the extent the court finds that the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment. The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable: (a) against
Auto-trol and in favor of the dissenters if the court finds that Auto-trol did
not substantially comply with its obligations under the dissenter's rights
statute, or (b) against either Auto-trol or one or more dissenters, in favor of
any other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously or not in good faith with
respect to the rights provided by Article 113 of the CBCA. If the court finds
that the services of counsel for any dissenter were of substantial benefit to
the other dissenters similarly situated, and that the fees for those services
should not be assessed against Auto-trol, the court may award to such counsel
reasonable fees to be paid out of the amount awarded to the dissenters who were
benefited.
Any written notice required to be sent to Auto-trol by a Auto-trol
shareholder electing to exercise his or her dissenter's rights under Article 113
of the CBCA should be sent to Auto-trol Technology Corporation, 12500 N.
Washington Street, Denver, Colorado 80241-2400, Attn: Corporate Secretary.
25
CERTAIN MARKET INFORMATION
Common Stock Market Price Information; Dividend Information
Auto-trol's common stock is traded on the OTC Bulletin Board under the
symbol "ATRC." The following table shows, for the calendar quarters indicated,
the per share high and low closing bid prices of the common stock on the OTC
Bulletin Board based on published financial sources. Auto-trol has not paid any
dividends on its common stock during the past two years.
2000 High Bid Low Bid
---- -------- -------
First Quarter $1.375 $0.375
Second Quarter 2.00 0.75
Third Quarter 1.01 0.25
Fourth Quarter 0.34375 0.26
2001 High Bid Low Bid
---- -------- -------
First Quarter $0.28125 $0.25
Second Quarter 0.4375 0.14
Third Quarter 0.14 0.06
Fourth Quarter 0.09 0.08
On December 18, 2001, the last day Auto-trol's stock traded prior to the
public announcement of the Merger transaction described in this going private
statement, the closing sales price of its common stock on the OTC Bulletin Board
was $0.08. The market price for Auto-trol common stock is subject to fluctuation
and shareholders are urged to obtain current market quotations.
Common Stock Purchase Information
With the exception of one transaction, neither Auto-trol nor any of its
executive officers or directors, or the Buyers or any of their affiliates, has
engaged in any transaction with respect to Auto-trol's common stock within the
past 60 days. In December, 2001, Mr. Hillman, on behalf of a trust for which he
serves as trustee and is a beneficiary, sold 1,000 shares of common stock at a
price of one cent per share ($0.01) in a privately negotiated transaction. This
sale has been reported to a Form 4 filing with the Securities and Exchange
Commission. For the past two years, none of the foregoing persons has purchased
any of Auto-trol's common stock, other than the debt to equity conversions with
respect to Venhill loans.
26
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Auto-trol's common stock as of December 5, 2001 for: (a) each of
its directors and executive officers, (b) all of the directors and executive
officers as a group, and (c) each person known by Auto-trol to be a beneficial
owner of more than 5% of its common stock. All information with respect to
beneficial ownership by our directors, executive officers or beneficial owners
has been furnished by the respective director, officer or beneficial owner, as
the case may be. Unless indicated otherwise, each of the shareholders has sole
voting and investment power with respect to the shares of common stock
beneficially owned.
Shares Percent
Title of Class Name and Address Beneficially Owned of Class
- -------------- ---------------------- ------------------- --------
Common Stock Hillman Trusts(1) 1,676,357 (2) 2.8%
Common Stock Howard B. Hillman(1) 58,097,564 (2)(3) 97.9%
Common Stock Venhill Limited 56,658,106 (4) 95.4%
Partnership(1)
(1) The address is c/o Howard B. Hillman, Taconic Group, 158 Main Street, New
Canaan, CT 06840.
(2) The Hillman Trusts are comprised of twelve separate trusts holding in
aggregate 1,676,357 shares. These shares are also included in the total for
Howard B. Hillman, President, CEO and a director of the Company. Under the terms
and conditions of the Trusts, Mr. Hillman has sole voting and investment powers
for one Trust which includes 1,000 shares; shared voting and investment powers
for ten Trusts which include 768,691 shares; and neither voting nor investment
powers for one Trust which includes 906,666 shares. Additionally, Mr. Hillman is
the beneficiary and Trustee of one of the Trusts; beneficiary of two of the
Trusts; and the Trustee of ten of the Trusts. The other Trustees and
beneficiaries of the Hillman Trusts are neither officers nor directors of the
Company.
(3) Includes 669,767 shares held directly by Howard B. Hillman; 56,658,106
shares owned by Venhill Limited Partnership of which Mr. Hillman is a general
partner; and 769,691 of the 1,676,357 shares held by the Hillman Trusts.
Excludes an aggregate of 800 shares owned by Mr. Hillman's adult children, as to
which shares Mr. Hillman disclaims beneficial ownership.
(4) Howard B. Hillman is a general partner of Venhill Limited Partnership.
The following table sets forth, as of December 5, 2001 information with respect
to beneficial ownership of the Company's Common Stock by each director of the
Company, each of whom is a nominee for election as director, by each named
executive officer, and by the present directors and officers of the Company as a
group:
Amount and Nature
of Percent
Title of Class Name Beneficial Ownership of Class
- -------------- ------------------------ -------------------- --------
Common Stock Howard B. Hillman 58,097,564 (1) 97.9%
Major General William R. 4,200 (2) *
(Usher, USAF (Ret.)
J. Roderick Heller, III 6,000 (2) *
Common Stock All current directors 58,107,764 (1) 97.9%
and officers as a group
(6 persons)
*Less than 1 percent.
(1) Includes 697,833 shares of Common Stock held by the Hillman Trusts of which
Howard B. Hillman is both a Trustee and a beneficiary; 71,861 shares of Common
Stock held of record by the Hillman Trusts of which Mr. Hillman is a Trustee but
not a beneficiary and as to which he disclaims beneficial ownership; 669,767
shares of Common Stock owned directly by Mr. Hillman; 56,658,106 shares owned by
Venhill Limited Partnership of which Mr. Hillman is a general partner; and
excludes an aggregate of 800 shares held by Mr. Hillman's adult children, as to
which shares Mr. Hillman disclaims beneficial ownership and 906,666 shares of
Common Stock of which Mr. Hillman is a grantor and neither a Trustee nor a
beneficiary.
(2) Represents shares underlying options which are exercisable within 60 days.
27
DIRECTORS AND MANAGEMENT
Auto-trol
Set forth below are the name and business address of each director and
executive officer of Auto-trol and his position with Auto-trol. Also set forth
below are the material occupations, positions, offices and employment of each
such person and the name of any corporation or other organization in which any
material occupation, position, office or employment of each such person was held
during the last five years. All directors and officers are citizens of the
United States.
Directors:
The following table sets forth certain information regarding each director of
the Company who will remain in office until the next annual meeting of the
shareholders of the Company:
Business Experience for the Past Five
Position with the Company; Years; Year Became Director and Other
Name; Age Principal Occupation Directorships
- ---------------------------- ------------------------------------- --------------------------------------
Howard B. Hillman President of the Company, Chief Director of the Company since 1973.
Executive Officer and Chairman of President and Chief Executive Officer
Age 67 the Board of Directors of the Company since 1985. Private
investor, Trustee and beneficiary of
certain Hillman Family Trusts. Mr.
Hillman is also a Director of Colorado
Public Broadcasting System (Channel
Six, Denver, Colorado).
Major General William R. Director of the Company Director of the Company since 1988.
Usher, USAF (Ret.) October 1997 to March 1999,
self-employed Consultant. March 1999
Age 68 to August 2001, Chairman and Chief
Executive Officer of Core Software
Technology. September 1994 through
September 1997, Director, Business
Development, Lockheed Martin
Corporation.
J. Roderick Heller, III Director of the Company Director of the Company since 1984.
1997 to Present, Chairman and Chief
Age 64 Executive Officer of Carnton Capital
Associates. 1985 to December 1997,
Chairman and Chief Executive Officer
of NHP Incorporated. Director, City
First Bank, N.A.
28
Officers:
Set forth below is a description of the present executive officers and officers
of the Company except for Mr. Hillman, President, Chief Executive Officer and
Chairman of the Board, who is described above. All officers of the Company hold
office until their successors are appointed by the Board of Directors. There are
no arrangements or understandings between any of the officers listed below, or
any other persons, pursuant to which any of the officers have been selected as
such.
Allyson S. Kissell - Secretary
Ms. Kissell, age 53, joined the Company in 1984, and has various managerial
responsibilities, including management of the Legal Department. Ms. Kissell was
appointed Assistant Secretary in 1987, and was appointed Secretary of the
Company effective September 16, 1992.
Lisa A. Jayne - Assistant Secretary
Ms. Jayne, age 33, joined the Company in 1990, and has held various positions
with the Human Resource Department during her employment with the Company. In
July, 1995 Ms. Jayne was promoted to Human Resource Manager, and was appointed
Assistant Secretary of the Company effective April 14, 1999.
ATTC and Venhill
Howard B. Hillman comprises the Board of Directors of ATTC and serves as
President, Secretary and Treasurer of ATTC. Mr. Hillman is also the sole general
partner of Venhill.
FINANCIAL AND OTHER INFORMATION
See the financial statements for Auto-trol included in its Annual Report on
Form 10-KSB for the year ended September 30, 2001, which is enclosed with this
going private statement.
The firm of Gelfond Hochstadt Pangburn, P.C. has served as Auto-trol's
independent auditors since 1999. The consolidated financial statements of
Auto-trol for each of the years in the two year period ended September 30, 2001
included in Auto-trol's Annual Report on Form 10-KSB for the year ended
September 30, 2001 enclosed with this going private statement, have been audited
by Gelfond Hochstadt Pangburn, P.C. as stated in their report appearing in such
Annual Report. The auditor's report of Gelfond Hochstadt Pangburn, P.C. contains
an explanatory paragraph that describes that Hillman Affiliates have provided
significant financial support to the Company during 2001 and 2000 and in prior
years, that Auto-trol will continue to be economically dependent upon this
financial support until it achieves profitable operations, and that certain
Hillman Affiliates have committed, in writing, to continue providing such
financial support at least through December 31, 2002.
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows Auto-trol to "incorporate by reference" information into
this going private statement, which means that Auto-trol can disclose important
information by referring you to another document filed separately with the SEC.
The following documents previously filed by Auto-trol with the SEC are enclosed
with, and incorporated by reference into, this going private statement and are
deemed to be a part of this statement:
(1) Auto-trol's Annual Report on Form 10-KSB for the year ended September
30, 2001; and
(2) Auto-trol's Form 10-QSB for the quarter ended December 31, 2001.
Any statement contained in a document incorporated by reference shall be
deemed to be modified or superseded for all purposes to the extent that a
statement contained in this going private statement modifies or replaces such
statement.
29
Auto-trol undertakes to provide by first class mail, without charge and
within one business day of receipt of any written or oral request, to any person
to whom a copy of this going private statement has been delivered, a copy of any
or all of the documents referred to above which have been incorporated by
reference in this going private statement, other than exhibits to such documents
(unless such exhibits are specifically incorporated by reference in this going
private statement). Requests for such copies should be directed to Corporate
Secretary, Auto-trol Technology Corporation, 12500 North Washington Street,
Denver, Colorado 80241-2400; telephone number (303) 452-4919.
SHAREHOLDER MEETINGS AND PROPOSALS
Auto-trol has decided not to hold its 2002 annual meeting of shareholders,
which is generally held in the first quarter, because of the merger proposal
described in this going private statement. If the Merger is consummated, there
will no longer be any unaffiliated shareholders of Auto-trol and no public
participation in any future meetings of shareholders. However, if the Merger is
not consummated, Auto-trol's unaffiliated shareholders will continue to be
entitled to attend and participate in Auto-trol's shareholders' meetings. In
such case, its next annual meeting would be held in January 2003. Pursuant to
Rule 14a-8 under the Exchange Act promulgated by the SEC, any shareholder of
Auto-trol who wished to present a proposal at the next Annual Meeting of
Shareholders of Auto-trol (in the event the Merger is not consummated), and who
wished to have such proposal included in Auto-trol's going private statement for
that meeting, must have delivered a copy of such proposal to Auto-trol
Technology Corporation, 12500 North Washington Street, Denver, Colorado
80241-2400, Attention: Corporate Secretary, so that it was received no later
than September 30, 2002. A shareholder proposal submitted outside the Rule 14a-8
process will be considered untimely if not received by Auto-trol within a
reasonable time prior to the mailing of proxy material relating to the annual
meeting.
AVAILABLE INFORMATION
No person is authorized to give any information or to make any
representations, other than as contained in this going private statement, in
connection with the Plan of Merger or the Merger, and, if given or made, such
information or representations may not be relied upon as having been authorized
by Auto-trol, ATTC, or Venhill.. The delivery of this going private statement
shall not, under any circumstances, create any implication that there has been
no change in the information set forth in this statement or in the affairs of
Auto-trol since the date of this statement.
Auto-trol is currently subject to the information requirements of the
Exchange Act and in accordance therewith files periodic reports, proxy
statements and other information with the SEC relating to its business,
financial and other matters. Copies of such reports, proxy statements and other
information, as well as the Schedule 13E-3 and the exhibits thereto, may be
copied (at prescribed rates) at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549.
For further information concerning the SEC's public reference rooms, you
may call the SEC at 1-800-SEC-0330. Some of this information may also be
accessed on the World Wide Web through the SEC's Internet address at
"http://www.sec.gov." Auto-trol's common stock is listed on the OTC Bulletin
Board (ticker symbol: ATRC), and materials may also be inspected at Nasdaq's
offices, 1735 K Street, N.W., Washington, D.C. 20006.
30
EXHIBIT A
---------
PLAN OF MERGER
ATTC, INC.
WITH AND INTO
AUTO-TROL TECHNOLOGY CORPORATION
1. Parties. The parties to the merger are ATTC, Inc., a Colorado corporation
("Merge Co."), and Auto-trol Technology Corporation, a Colorado corporation
("Survive Co.").
2. Surviving Corporation. Merge Co. will be merged with and into Survive Co.
Survive Co. will be the surviving corporation in the merger, pursuant to the
provisions of Section 7-111-104 of the Colorado Business Corporation Act, as
amended (the "Act"). The separate existence of Merge Co. will cease at the
effective time of the merger.
3. Articles and Bylaws. Upon the effective time of the merger, the Articles of
Incorporation and Bylaws of Survive Co. and will thereafter be the Articles of
Incorporation and Bylaws of the surviving corporation and will continue in full
force and effect until thereafter amended in the manner prescribed by the
provisions of the Act and such Articles of Incorporation and Bylaws.
4. Directors and Officers. The directors and officers of Survive Co. at the
effective time of the merger will, from and after such effective time, be the
directors and officers of the surviving corporation, and will hold their
positions until the election or appointment and qualification of their
respective successors or until their tenure is otherwise terminated in
accordance with the Articles of Incorporation and Bylaws of the surviving
corporation, or as otherwise provided by applicable law.
5. Effect of Merger. Upon the effective time of the merger, all property, real,
personal and mixed, and all debts due to either Merge Co. or Survive Co., as
well as all other things and causes of action belonging to each of them, will be
vested in the surviving corporation, and will thereafter be the property of the
surviving corporation as they were of each of the corporations that have been
merged, and all debts, liabilities and duties of each of the corporations that
have been merged will thereafter attach to the surviving corporation and may be
enforced against it to the same extent as if such debts, liabilities and duties
had been incurred or contracted by it.
6. Conversion of Shares. At the effective time of the merger, by virtue of the
merger and without any action on the part of any other person or entity, (i)
each share of Survive Co. common stock issued and outstanding immediately prior
to the effective time, other than shares of common stock owned by Merge Co.,
will automatically be converted into the right to receive twenty cents ($0.20),
and all such shares will be canceled and retired and shall cease to exist, (ii)
each share of Survive Co. common stock issued and outstanding immediately prior
to the effective time, owned by Merge Co., will be canceled and retired and
shall cease to exist, and no payment or consideration will be made with respect
thereto; and (iii) each share of Merge Co. common stock issued and outstanding
immediately prior to the effective time will automatically be converted into one
(1) fully paid and nonassessable share of common stock, par value $.02 per
share, of Survive Co.
EXHIBIT B
DISSENTERS' RIGHTS UNDER THE COLORADO BUSINESS CORPORATION ACT
ss. 7-113-101. Definitions
For purposes of this article:
(1) "Beneficial shareholder" means the beneficial owner of shares held in
a voting trust or by a nominee as the record shareholder.
(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring domestic or
foreign corporation, by merger or share exchange of that issuer.
(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under section 7-113-102 and who exercises that right
at the time and in the manner required by part 2 of this article.
(4) "Fair value", with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action except to the
extent that exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at the
legal rate as specified in section 5-12-101, C.R.S.
(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares that are registered in the name of a nominee to the extent such
owner is recognized by the corporation as the shareholder as provided
in section 7-107-204.
(7) "Shareholder" means either a record shareholder or a beneficial
shareholder.
ss. 7-113-102. Right to dissent
(1) A shareholder, whether or not entitled to vote, is entitled to dissent
and obtain payment of the fair value of the shareholder's shares in
the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party if:
(I) Approval by the shareholders of that corporation is required
for the merger by section 7-111-103 or 7-111-104 or by the
articles of incorporation; or
(II) The corporation is a subsidiary that is merged with its
parent corporation under section 7-111-104;
(b) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired;
(c) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of the corporation for
which a shareholder vote is required under section 7-112-102(1);
and
(d) Consummation of a sale, lease, exchange, or other disposition of
all, or substantially all, of the property of an entity
controlled by the corporation if the shareholders of the
corporation were entitled to vote upon the consent of the
corporation to the disposition pursuant to section 7-112-102(2).
(1.3) A shareholder is not entitled to dissent and obtain payment, under
subsection (1) of this section, of the fair value of the shares of any
class or series of shares which either were listed on a national
securities exchange registered under the federal "Securities Exchange
Act of 1934", as amended, or on the national market system of the
national association of securities dealers automated quotation system,
or were held of record by more than two thousand shareholders, at the
time of:
(a) The record date fixed under section 7-107-107 to determine the
shareholders entitled to receive notice of the shareholders'
meeting at which the corporate action is submitted to a vote;
(b) The record date fixed under section 7-107-104 to determine
shareholders entitled to sign writings consenting to the
corporate action; or
(c) The effective date of the corporate action if the corporate
action is authorized other than by a vote of shareholders.
(1.8) The limitation set forth in subsection (1.3) of this section shall
not apply if the shareholder will receive for the shareholder's
shares, pursuant to the corporate action, anything except:
(a) Shares of the corporation surviving the consummation of the plan
of merger or share exchange;
(b) Shares of any other corporation which at the effective date of
the plan of merger or share exchange either will be listed on a
national securities exchange registered under the federal
"Securities Exchange Act of 1934", as amended, or on the national
market system of the national association of securities dealers
automated quotation system, or will be held of record by more
than two thousand shareholders;
(c) Cash in lieu of fractional shares; or
(d) Any combination of the foregoing described shares or cash in lieu
of fractional shares.
(2) Deleted by Laws 1996, H.B.96-1285,ss.30, eff. June 1, 1996.
(2.5) A shareholder, whether or not entitled to vote, is entitled to
dissent and obtain payment of the fair value of the shareholder's
shares in the event of a reverse split that reduces the number of
shares owned by the shareholder to a fraction of a share or to scrip
if the fractional share or scrip so created is to be acquired for cash
or the scrip is to be voided under section 7-106-104.
(3) A shareholder is entitled to dissent and obtain payment of the fair
value of the shareholder's shares in the event of any corporate action
to the extent provided by the bylaws or a resolution of the board of
directors.
(4) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this article may not challenge the
corporate action creating such entitlement unless the action is
unlawful or fraudulent with respect to the shareholder or the
corporation.
ss.7-113-103. Dissent by nominees and beneficial owners
(1) A record shareholder may assert dissenters' rights as to fewer than
all the shares registered in the record shareholder's name only if the
record shareholder dissents with respect to all shares beneficially
owned by any one person and causes the corporation to receive written
notice which states such dissent and the name, address, and federal
taxpayer identification number, if any, of each person on whose behalf
the record shareholder asserts dissenters' rights. The rights of a
record shareholder under this subsection (1) are determined as if the
shares as to which the record shareholder dissents and the other
shares of the record shareholder were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to the
shares held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder causes the corporation to receive the
record shareholder's written consent to the dissent not later
than the time the beneficial shareholder asserts dissenters'
rights; and
(b) The beneficial shareholder dissents with respect to all shares
beneficially owned by the beneficial shareholder.
(3) The corporation may require that, when a record shareholder dissents
with respect to the shares held by any one or more beneficial
shareholders, each such beneficial shareholder must certify to the
corporation that the beneficial shareholder and the record shareholder
or record shareholders of all shares owned beneficially by the
beneficial shareholder have asserted, or will timely assert,
dissenters' rights as to all such shares as to which there is no
limitation on the ability to exercise dissenters' rights. Any such
requirement shall be stated in the dissenters' notice given pursuant
to section 7-113-203.
ss.7-113-201. Notice of dissenters' rights
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting,
the notice of the meeting shall be given to all shareholders, whether
or not entitled to vote. The notice shall state that shareholders are
or may be entitled to assert dissenters' rights under this article and
shall be accompanied by a copy of this article and the materials, if
any, that, under articles 101 to 117 of this title, are required to be
given to shareholders entitled to vote on the proposed action at the
meeting. Failure to give notice as provided by this subsection (1)
shall not affect any action taken at the shareholders' meeting for
which the notice was to have been given, but any shareholder who was
entitled to dissent but who was not given such notice shall not be
precluded from demanding payment for the shareholder's shares under
this article by reason of the shareholder's failure to comply with the
provisions of section 7- 113-202(1).
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders
pursuant to section 7-107-104, any written or oral solicitation of a
shareholder to execute a writing consenting to such action
contemplated in section 7-107-104 shall be accompanied or preceded by
a written notice stating that shareholders are or may be entitled to
assert dissenters' rights under this article, by a copy of this
article, and by the materials, if any, that, under articles 101 to 117
of this title, would have been required to be given to shareholders
entitled to vote on the proposed action if the proposed action were
submitted to a vote at a shareholders' meeting. Failure to give notice
as provided by this subsection (2) shall not affect any action taken
pursuant to section 7-107-104 for which the notice was to have been
given, but any shareholder who was entitled to dissent but who was not
given such notice shall not be precluded from demanding payment for
the shareholder's shares under this article by reason of the
shareholder's failure to comply with the provisions of section 7-
113-202(2).
ss.7-113-202. Notice of intent to demand payment
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is submitted to a vote at a shareholders' meeting
and if notice of dissenters' rights has been given to such shareholder
in connection with the action pursuant to section 7-113-201(1), a
shareholder who wishes to assert dissenters' rights shall:
(a) Cause the corporation to receive, before the vote is taken,
written notice of the shareholder's intention to demand payment
for the shareholder's shares if the proposed corporate action is
effectuated; and
(b) Not vote the shares in favor of the proposed corporate action.
(2) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized without a meeting of shareholders
pursuant to section 7-107-104 and if notice of dissenters' rights has
been given to such shareholder in connection with the action pursuant
to section 7-113-201(2) a shareholder who wishes to assert dissenters'
rights shall not execute a writing consenting to the proposed
corporate action.
(3) A shareholder who does not satisfy the requirements of subsection (1)
or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
ss. 7-113-203. Dissenters' notice
(1) If a proposed corporate action creating dissenters' rights under
section 7-113-102 is authorized, the corporation shall give a written
dissenters' notice to all shareholders who are entitled to demand
payment for their shares under this article.
(2) The dissenters' notice required by subsection (1) of this section
shall be given no later than ten days after the effective date of the
corporate action creating dissenters' rights under section 7-113-102
and shall:
(a) State that the corporate action was authorized and state the
effective date or proposed effective date of the corporate
action;
(b) State an address at which the corporation will receive payment
demands and the address of a place where certificates for
certificated shares must be deposited;
(c) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is
received;
(d) Supply a form for demanding payment, which form shall request a
dissenter to state an address to which payment is to be made;
(e) Set the date by which the corporation must receive the payment
demand and certificates for certificated shares, which date shall
not be less than thirty days after the date the notice required
by subsection (1) of this section is given;
(f) State the requirement contemplated in section 7-113-103(3), if
such requirement is imposed; and
(g) Be accompanied by a copy of this article.
ss.7-113-204. Procedure to demand payment
(1) A shareholder who is given a dissenters' notice pursuant to section
7-113- 203 and who wishes to assert dissenters' rights shall, in
accordance with the terms of the dissenters' notice:
(a) Cause the corporation to receive a payment demand, which may be
the payment demand form contemplated in section 7-113-203(2)(d),
duly completed, or may be stated in another writing; and
(b) Deposit the shareholder's certificates for certificated shares.
(2) A shareholder who demands payment in accordance with subsection (1) of
this section retains all rights of a shareholder, except the right to
transfer the shares, until the effective date of the proposed
corporate action giving rise to the shareholder's exercise of
dissenters' rights and has only the right to receive payment for the
shares after the effective date of such corporate action.
(3) Except as provided in section 7-113-207 or 7-113-209(1)(b), the demand
for payment and deposit of certificates are irrevocable.
(4) A shareholder who does not demand payment and deposit the
shareholder's share certificates as required by the date or dates set
in the dissenters' notice is not entitled to payment for the shares
under this article.
ss. 7-113-205. Uncertificated shares
(1) Upon receipt of a demand for payment under section 7-113-204 from a
shareholder holding uncertificated shares, and in lieu of the deposit
of certificates representing the shares, the corporation may restrict
the transfer thereof.
(2) In all other respects, the provisions of section 7-113-204 shall be
applicable to shareholders who own uncertificated shares.
ss. 7-113-206. Payment
(1) Except as provided in section 7-113-208, upon the effective date of
the corporate action creating dissenters' rights under section
7-113-102 or upon receipt of a payment demand pursuant to section
7-113-204, whichever is later, the corporation shall pay each
dissenter who complied with section 7-113-204, at the address stated
in the payment demand, or if no such address is stated in the payment
demand, at the address shown on the corporation's current record of
shareholders for the record shareholder holding the dissenter's
shares, the amount the corporation estimates to be the fair value of
the dissenter's shares, plus accrued interest.
(2) The payment made pursuant to subsection (1) of this section shall be
accompanied by:
(a) The corporation's balance sheet as of the end of its most recent
fiscal year or, if that is not available, the corporation's
balance sheet as of the end of a fiscal year ending not more than
sixteen months before the date of payment, an income statement
for that year, and, if the corporation customarily provides such
statements to shareholders, a statement of changes in
shareholders' equity for that year and a statement of cash flow
for that year, which balance sheet and statements shall have been
audited if the corporation customarily provides audited financial
statements to shareholders, as well as the latest available
financial statements, if any, for the interim or full-year
period, which financial statements need not be audited;
(b) A statement of the corporation's estimate of the fair value of
the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under
section 7- 113-209; and
(e) A copy of this article.
ss.7-113-207. Failure to take action
(1) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 does not occur within sixty days after
the date set by the corporation by which the corporation must receive
the payment demand as provided in section 7-113-203, the corporation
shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
(2) If the effective date of the corporate action creating dissenters'
rights under section 7-113-102 occurs more than sixty days after the
date set by the corporation by which the corporation must receive the
payment demand as provided in section 7-113-203, then the corporation
shall send a new dissenters' notice, as provided in section 7-113-203,
and the provisions of sections 7-113-204 to 7-113-209 shall again be
applicable.
ss.7-113-208. Special provisions relating to shares acquired after announcement
of proposed corporate action
(1) The corporation may, in or with the dissenters' notice given pursuant
to section 7-113-203, state the date of the first announcement to news
media or to shareholders of the terms of the proposed corporate action
creating dissenters' rights under section 7-113-102 and state that the
dissenter shall certify in writing, in or with the dissenter's payment
demand under section 7-113-204, whether or not the dissenter (or the
person on whose behalf dissenters' rights are asserted) acquired
beneficial ownership of the shares before that date. With respect to
any dissenter who does not so certify in writing, in or with the
payment demand, that the dissenter or the person on whose behalf the
dissenter asserts dissenters' rights acquired beneficial ownership of
the shares before such date, the corporation may, in lieu of making
the payment provided in section 7-113-206, offer to make such payment
if the dissenter agrees to accept it in full satisfaction of the
demand.
(2) An offer to make payment under subsection (1) of this section shall
include or be accompanied by the information required by section
7-113-206(2).
ss.7-113-209. Procedure if dissenter is dissatisfied with payment or offer
(1) A dissenter may give notice to the corporation in writing of the
dissenter's estimate of the fair value of the dissenter's shares and
of the amount of interest due and may demand payment of such estimate,
less any payment made under section 7-113-206, or reject the
corporation's offer under section 7-113-208 and demand payment of the
fair value of the shares and interest due, if:
(a) The dissenter believes that the amount paid under section
7-113-206 or offered under section 7-113-208 is less than the
fair value of the shares or that the interest due was incorrectly
calculated;
(b) The corporation fails to make payment under section 7-113-206
within sixty days after the date set by the corporation by which
the corporation must receive the payment demand; or
(c) The corporation does not return the deposited certificates or
release the transfer restrictions imposed on uncertificated
shares as required by section 7-113-207(1).
(2) A dissenter waives the right to demand payment under this section
unless the dissenter causes the corporation to receive the notice
required by subsection (1) of this section within thirty days after
the corporation made or offered payment for the dissenter's shares.
ss. 7-113-301. Court action
(1) If a demand for payment under section 7-113-209 remains unresolved,
the corporation may, within sixty days after receiving the payment
demand, commence a proceeding and petition the court to determine the
fair value of the shares and accrued interest. If the corporation does
not commence the proceeding within the sixty-day period, it shall pay
to each dissenter whose demand remains unresolved the amount demanded.
(2) The corporation shall commence the proceeding described in subsection
(1) of this section in the district court of the county in this state
where the corporation's principal office is located or, if the
corporation has no principal office in this state, in the district
court of the county in which its registered office is located. If the
corporation is a foreign corporation without a registered office, it
shall commence the proceeding in the county where the registered
office of the domestic corporation merged into, or whose shares were
acquired by, the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unresolved parties to the proceeding
commenced under subsection (2) of this section as in an action against
their shares, and all parties shall be served with a copy of the
petition. Service on each dissenter shall be by registered or
certified mail, to the address stated in such dissenter's payment
demand, or if no such address is stated in the payment demand, at the
address shown on the corporation's current record of shareholders for
the record shareholder holding the dissenter's shares, or as provided
by law.
(4) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The
appraisers have the powers described in the order appointing them, or
in any amendment to such order. The parties to the proceeding are
entitled to the same discovery rights as parties in other civil
proceedings.
(5) Each dissenter made a party to the proceeding commenced under
subsection (2) of this section is entitled to judgment for the amount,
if any, by which the court finds the fair value of the dissenter's
shares, plus interest, exceeds the amount paid by the corporation, or
for the fair value, plus interest, of the dissenter's shares for which
the corporation elected to withhold payment under section 7-113-208.
ss.7-113-302. Court costs and counsel fees
(1) The court in an appraisal proceeding commenced under section 7-113-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The
court shall assess the costs against the corporation; except that the
court may assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in
demanding payment under section 7-113-209.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any dissenters if the
court finds the corporation did not substantially comply with the
requirements of part 2 of this article; or
(b) Against either the corporation or one or more dissenters, in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by this article.
(3) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and
that the fees for those services should not be assessed against the
corporation, the court may award to said counsel reasonable fees to be
paid out of the amounts awarded to the dissenters who were benefitted.
EXHIBIT C
NOTICE OF DISSENTERS' RIGHTS
Under Section 7-113-203 of the Colorado Business Corporation Act (the
"CBCA") shareholders of the Auto-trol Technology Corporation (the "Company") are
entitled to dissent and obtain payment of the fair value of their shares of
common stock of the Company in connection with the merger of ATTC, Inc., a
Colorado corporation ("ATTC"), with and into the Company (the "Merger"). The
proposed effective date for the merger is ________ __, 2002, on which date ATTC
plans to file a Certificate of Merger with the Colorado Secretary of State.
Attached to the Going Private Statement (of which this Notice is a part) as
Exhibit B is a copy of Article 7-113 of the CBCA, which describes the rights of
shareholders who dissent from the Merger to require the Company to purchase
their "dissenting shares" for cash at a price equal to the fair value of the
shares. Such right to receive the fair value of the dissenting shares is
referred to in this Notice as the "Dissenters' Rights." The procedure that you
must follow if you desire to exercise any Dissenters' Rights you may have with
respect to the Merger is set forth in full in Exhibit B, which should be
reviewed carefully to ensure protection of your Dissenters' Rights. This notice
itself does not purport to be a complete statement of the law and is qualified
in its entirety by reference to Exhibit B.
In order to exercise your Dissenters' Rights with respect to the Merger:
1. You must complete and deliver a formal payment demand in the form
attached hereto as Exhibit D ("Notice of Payment Demand") and your original
Company stock certificate(s) to the Company at 12500 N. Washington Street,
Denver, Colorado 80241-2400. Attn: Allyson Kissell.
2. The Company must receive the Notice of Payment Demand and stock
certificate(s) no later than [a date that is at least thirty days from the
authorization date of the Merger].
3. Holders of uncertificated shares may not transfer such shares, if any,
after the date of receipt by the Company of the Notice of Payment Demand.
EXHIBIT D
NOTICE OF PAYMENT DEMAND
I, ____________________________________, hereby provide notice to Auto-Trol
Technology Corporation, a Colorado corporation, that I am exercising my
dissenters' rights pursuant to Article 7-113 of the Colorado Business
Corporation Act (the "CBCA"). Auto-Trol has provided me with a copy of Article
7-113 of the CBCA, which sets forth the procedures I must follow in order to be
entitled to payment for my shares of stock.
The date of the first announcement to the news media of the terms of the
proposed corporate action was _______ ___, 2002. By signing below I hereby
certify that I acquired beneficial ownership of the shares listed below:
before such date or after such date
Enclosed with this Notice are the following stock certificates representing
the number of shares indicated:
Stock Certificate No.(1) Common Stock No. of Shares
------------------------ ------------ -------------
------------------------ ------------ -------------
------------------------ ------------ -------------
(1) The portion of my shares that are in uncertificated form are as
follows:
---------------------------------------------
---------------------------------------------
Please send payment for the shares of Auto-Trol stock indicated above to
the following address:
Name:
---------------------------------------------
Address:
---------------------------------------------
---------------------------------------------
This Notice of Payment Demand and all stock certificates representing the
relevant shares of stock must be received by Auto-Trol no later than _________
__, 2002.
Send this completed form and all stock certificates to Auto-Trol Technology
Corporation at 12500 N. Washington Street, Denver, Colorado 80241-2400, Attn:
Allyson Kissell.
---------------------------------- ----------------------------------
Signature of Shareholder Signature of Shareholder
---------------------------------- ----------------------------------
Print Name Print Name
EXHIBIT E
LETTER OF TRANSMITTAL
to accompany certificates formerly representing shares of Common Stock,
$0.02 par value,
of
Auto-trol Technology Corporation
This Letter of Transmittal should be completed, signed,
witnessed and submitted, together with the certificates
formerly representing your shares of
Auto-trol Technology Corporation Common Stock, to:
[name of exchange agent]
By hand: By courier: By mail:
------------- -------------- -------------
------------- -------------- -------------
------------- -------------- -------------
Telephone Inquiries: (800) ___-____
Ladies and Gentleman:
In accordance with the terms of the Agreement and Plan of Merger by and
between Auto-trol Technology Corporation, a Colorado corporation ("Auto-trol")
and ATTC, Inc., a Colorado corporation ("ATTC"), effective as of January __,
2002 (the "Agreement") the undersigned hereby surrenders to [name of exchange
agent] any and all securities of Auto-trol that are owned of record by the
undersigned in exchange for the merger consideration payable with regard thereto
under the Agreement.
- --------------------------------------------------------------------------------
DESCRIPTION OF CERTIFICATES SUBMITTED
(If the space provided below is inadequate, the Certificate numbers and number
of Shares should be listed on a separate schedule signed and affixed hereto.)
- --------------------------------------------------------------------------------
Name and Address of Registered Holder Certificate Number of
Number Shares
Represented by
Certificate
- --------------------------------------------------------------------------------
--------------- ---------------
--------------- ---------------
-------------- ---------------
-------------- ---------------
-------------- ---------------
-------------- ---------------
-------------- ---------------
-------------- ---------------
Total Shares
-------------- ---------------
- --------------------------------------------------------------------------------
NOTE: If the name or address indicated on the label above is not correct, please
make any necessary changes therein.
- --------------------------------------------------------------------------------
The undersigned hereby surrenders the Certificates formerly representing
the Shares in exchange for cash in the amount of twenty cents ($0.20), in each
case, for each Share tendered hereby, in connection with the Merger, as
described in the Going Private Statement of Auto-trol and ATTC, dated January
__, 2002. Capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Going Private Statement.
You are hereby authorized and instructed to prepare in the name of and
deliver to the address indicated above (unless otherwise instructed in the
following boxes), a cash payment (payable by check) equal to twenty cents
($0.20) per Share. The check for the cash payment shall be made payable in the
same name and shall be delivered to the name and address of the registered
holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF) AND ALL OTHER
DOCUMENTS AND INSTRUMENTS REQUIRED HEREBY SHOULD BE MAILED OR DELIVERED TO [name
of exchange agent] AT ONE OF THE ADDRESSES SET FORTH ABOVE. UNLESS AND UNTIL THE
CERTIFICATE(S) EVIDENCING SHARES OF AUTO-TROL TECHNOLOGY COMMON STOCK IS
SURRENDERED TO [name of exchange agent], NO DIVIDENDS OR DISTRIBUTIONS OF ANY
KIND PAYABLE TO HOLDERS OF RECORD OF SHARES OF ATTC COMMON STOCK SHALL BE PAID
TO SUCH HOLDER AND NO INTEREST WILL ACCRUE ON SUCH UNPAID DIVIDENDS OR
DISTRIBUTIONS PRIOR TO PAYMENT.
- -------------------------------------- --------------------------------------
SPECIAL REGISTRATION SPECIAL DELIVERY INSTRUCTIONS
AND PAYMENT INSTRUCTIONS
COMPLETE ONLY if the check for the COMPLETE ONLY if delivery of the check
cash payment is to be made payable, in for the cash payment, is to be made
a name OTHER than the name(s) of the OTHER than to the address of the
registered holder(s) appearing under registered holder(s) appearing under
"DESCRIPTION OF CERTIFICATES the "DESCRIPTION OF CERTIFICATES
SUBMITTED" on page 1. SUBMITTED" on page 1 or, if the box
immediately to the left of this box is
filled in, OTHER than to the address
appearing therein.
Issue (check all that apply)
stock certificates,
make check payable, and Mail or deliver (check all that apply)
mail specified items to stock certificates and check to:
(See instruction 2 on the reverse
side):
Name.................................. Name .................................
........................................ ......................................
Address .............................. Address ..............................
........................................ ......................................
(Please Print) (Please Print)
........................................
(Signature)
Signature(s) guaranteed by an Eligible
Guarantor Institution:
(See Instruction B.4)
Authorized Signature .................
Name of Firm .........................
- -------------------------------------- --------------------------------------
2
- --------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER SUBSTITUTE FORM W-9
Please provide your Taxpayer Identification Number (or the ----------------
Taxpayer Identification Number of the person named in the | |
"SPECIAL REGISTRATION AND PAYMENT INSTRUCTIONS" box above) | |
in the space at right and certify (or have the person named | |
in the "SPECIAL REGISTRATION AND PAYMENT INSTRUCTIONS" box | |
above certify) by signing and dating below. For most | |
individual taxpayers, the Taxpayer Identification Number is | |
such person's Social Security Number. ----------------
Under the penalties of perjury, I certify that: (i) the number provided in this
box is my correct Taxpayer Identification Number and (ii) I am not subject to
backup withholding.
Dated: Sign Here:
- --------------------------------- ---------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS INFORMATION WILL RESULT IN BACKUP
WITHHOLDING ON PAYMENTS DUE TO YOU. SEE INSTRUCTIONS B.5 AND C ON REVERSE SIDE.
- --------------------------------------------------------------------------------
The undersigned hereby warrants that the undersigned has full power and
authority to submit, sell, assign and transfer the Shares evidenced by the
Certificates described above, and that the Shares are free and clear of all
liens, charges and encumbrances and not subject to any adverse claim. The
undersigned will, upon request, execute any additional documents necessary or
desirable to complete the transfer of the Shares evidenced by the Certificates.
All authority herein conferred shall survive the death or incapacity of the
undersigned, and all obligations of the undersigned hereunder shall be binding
upon the heirs, representatives, successors and assigns of the undersigned.
- --------------------------------------------------------------------------------
SIGN HERE
Dated ...........................
................................... -> .........................................
City and State where signed
.........................................
Signature(s) of Stockholder(s) or Agent(s)
................................... -> (exactly as reflected on the Certificate)
Telephone number (including area code)
- --------------------------------------------------------------------------------
3
INSTRUCTIONS:
A. DELIVERY OF LETTERS OF TRANSMITTAL AND OLD CERTIFICATES; MAILING OF NEW
CERTIFICATES AND CHECKS.
The method of delivery of this Letter of Transmittal and the Certificate(s) to
[name of exchange agent] is at your option and risk, but, if sent by mail,
registered mail is suggested. A pre-addressed envelope is enclosed for your
convenience.
Checks for the cash payment will be mailed by [name of exchange agent] as soon
as practicable after receipt of a properly executed Letter of Transmittal
together with the Certificate(s).
B. SIGNATURES; CERTIFICATES IN DIFFERENT NAMES.
1. The signature (or signatures, in the case of Certificate(s) owned by two
or more holders) on this Letter of Transmittal should correspond exactly with
the name(s) of the registered holder(s) as written on the face of the
Certificate(s) unless such Certificate(s) has been transferred by the registered
holder(s), in which event this Letter of Transmittal should be signed in exactly
the same form as the name of the last transferee indicated on the transfers
attached to or endorsed on the Certificate(s).
2. The Certificate(s) need not be endorsed or accompanied by any instrument
of assignment or transfer other than this Letter of Transmittal, if registered
in the name of the person(s) signing this Letter of Transmittal as the check for
the cash payment are to be issued to such person(s).
3. If this Letter of Transmittal is signed or if the endorsement on any
Certificate is executed by a trustee, executor, administrator, guardian, officer
of a corporation, attorney-in-fact, or in any other representative or fiduciary
capacity, the person signing this Letter of Transmittal or executing the
endorsement must give such person's full title in such capacity and appropriate
evidence of authority to act in such capacity must be forwarded with any
Certificate(s).
4. If the check for the cash payment is to be made payable, in the name of
a person other than the person(s) in whose name(s) the Auto-trol Technology
Corporation Common Stock is registered, the signature of the person(s) signing
this Letter of Transmittal must be guaranteed in the "Special Payment
Instructions" box by an Eligible Guarantor Institution (as defined by Rule
17Ad-15 under the Securities Exchange Act of 1934 (12 CFR 240.17Ad-15)) in the
space provided.
5. The person in whose name the check for the cash payment are to be issued
must supply his Taxpayer Identification Number and provide the certification
contained in the "TAXPAYER IDENTIFICATION NUMBER" box on the reverse side of
this Letter of Transmittal. Failure to furnish the Taxpayer Identification
Number and the certification will result in backup withholding on payments due
to the holder. See Instruction 3.
6. If you have any questions about the surrender of your Certificate(s) or
completion of this Letter of Transmittal, please contact _____________________
at (800) ___-_____.
C. 30.5% BACKUP WITHHOLDING.
Under Federal income tax law, a payer must generally withhold 30.5% of the gross
proceeds payable to a stockholder if the payee fails to furnish such payer with
the correct Taxpayer Identification Number. Certain penalties may also apply.
For most individual taxpayers, the Taxpayer Identification Number is such
person's Social Security Number. The registered holder (or, if the check for the
cash payment is to be made payable, in the name of another person as provided in
Instruction 2, then such person) should provide the Taxpayer Identification
Number and the certification in the "TAXPAYER IDENTIFICATION NUMBER" box on the
reverse side of this Letter of Transmittal. The payee must cross out the subpart
(ii) of the certification if the Internal Revenue Service has notified the payee
that he or she is subject to backup withholding due to the under reporting of
dividends or interest on the payee's tax returns.
D. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES.
If a Certificate(s) has been mutilated, lost, stolen or destroyed, you should
contact ____________________ at (800) ___-_____ for further instructions as to
obtaining a surety bond that may be required before delivery of the certificates
evidencing the Auto-trol Technology Corporation Common Stock and the check for
the cash payment.