<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for use of the
Commission only (as permitted by
[_] Definitive Proxy Statement Rule 14C-5(d)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Auto-Trol Technology Corporation
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
Notes:
<PAGE>
Auto-trol Technology Corporation
12500 North Washington Street
Denver, Colorado 80241-2400
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The annual meeting of shareholders of Auto-trol Technology Corporation (the
"Company") will be held on Tuesday, January 30, 1996, at the Company's
headquarters, 12500 North Washington Street, Denver, Colorado, at 10:00 a.m.
Mountain Standard Time. At the meeting, the shareholders will consider and act
upon the following matters:
1. The approval and adoption of a proposal to amend the Company's
Articles of Incorporation and to recapitalize the Company to effect a
one-for-ten reverse stock split.
2. The election of directors to serve until the next annual meeting or
until their successors are duly elected and qualified.
3. The approval and adoption of a proposal to amend the Company's Special
Purpose Stock Option Plan and Incentive Stock Option Plan to
establish the number of shares of New Common Stock available for
grant collectively under the Plans.
4. The approval and adoption of a proposal to amend the Company's
Employee Stock Purchase Plan to establish the number of shares of New
Common Stock that will be available for purchase under the Plan.
5. Such other business as may properly come before the meeting.
Only shareholders of record at the close of business on December 12,
1995, are entitled to notice of, and to vote at, the meeting.
By Order of the Board of Directors
Allyson S. Kissell
Secretary
Denver, Colorado
December 22, 1995
It is important that all shareholders be represented at the meeting. We urge
you to sign and return the enclosed Proxy as promptly as possible, whether or
not you plan to attend the meeting. The Proxy should be returned in the
enclosed postage prepaid envelope. If you do attend the meeting, you may then
withdraw your Proxy. The Proxy may be revoked at any time prior to its
exercise.
<PAGE>
Auto-trol Technology Corporation
12500 North Washington Street
Denver, Colorado 80241-2400
______________________________________________________________________
Proxy Statement
For
Annual Meeting of Shareholders
To Be Held January 30, 1996
This Proxy Statement (the "Proxy Statement") is furnished to shareholders
of Auto-trol Technology Corporation (the "Company") in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders to be held on Tuesday, January 30, 1996, at the
Company's headquarters, 12500 North Washington Street, Denver, Colorado, at
10:00 a.m. Mountain Standard Time, and at any adjournment thereof. The
approximate mailing date of this Proxy Statement and the accompanying proxy is
December 22, 1995. ANY PROXY MAY BE REVOKED IN PERSON AT THE MEETING, EITHER BY
SUBMITTING A PROXY DATED LATER THAN THE PROXY TO BE REVOKED OR BY NOTIFYING THE
SECRETARY OF THE COMPANY IN WRITING AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
In addition to the solicitation of proxies by mail, officers and other
representatives of the Company may solicit the return of proxies by telephone,
telegraph or personal contact. The Company will bear the expense of preparing,
printing, assembling and mailing this Proxy Statement and accompanying material
to its shareholders and will reimburse banks, brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses incurred by them in
forwarding proxy solicitation material to beneficial owners.
All references in this Proxy Statement to the Company's last fiscal year
refer to the period from October 1, 1994 to September 30, 1995.
SHAREHOLDER PROPOSALS
Subject to the rules of the Securities Exchange Act of 1934, any
shareholder who intends to submit a proposal for action at the annual meeting of
shareholders must be a record or beneficial owner of at least 1% or $1,000 in
market value of securities entitled to be voted at the meeting and must have
held such securities for at least one year. Further, the shareholder must
continue to own such securities through the date on which the meeting is held.
Currently, the 1996 annual meeting of shareholders is scheduled to be held on
January 28, 1997. To be considered for inclusion in the proxy material for the
next annual meeting, proposals must be received by the Secretary of the Company
at 12500 North Washington Street, Denver, Colorado 80241-2400 on or before
September 30, 1996.
1
<PAGE>
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The Company's outstanding voting stock consists of Common Stock. Only
holders of Common Stock of record at the close of business on December 12, 1995
(the "Record Date"), will be entitled to notice of, and to vote at, the meeting.
On the Record Date there were shares of Common Stock outstanding.
----------
Each outstanding share of Common Stock is entitled to one vote on each matter to
be acted upon at the meeting.
A majority of the Company's outstanding voting Common Stock, represented
in person or by proxy, is necessary to constitute a quorum to take action at the
meeting. Cumulative voting is not permitted. If a quorum is present at the
meeting, the simple majority vote of shares voting is required for the Amendment
of the Articles of Incorporation and to recapitalize the Company to effect a
one-for-ten reverse stock split; for the election of the directors; to amend the
Company's Special Purpose Stock Option Plan and Incentive Stock Option Plan to
establish the number of shares of New Common Stock available for grant; and to
amend the Employee Stock Purchase Plan to establish the number of shares of New
Common Stock available for purchase under the Plan. Abstaining votes and broker
non-votes will not be voted in favor of the proposals.
The following table sets forth, as of November 30, 1995, information with
respect to beneficial ownership of the Company's Common Stock by each person
beneficially owning more than 5% of the outstanding shares of such Common Stock:
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Title of Class Name and Address Owned Class
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Hillman Trusts 18,439,206(1) xxx%
- ------------------------------------------------------------------------
c/o Howard B. Hillman
Taconic Group
158 Main Street
New Canaan, CT 06840
- ------------------------------------------------------------------------
Common Stock Howard B. Hillman 37,366,482(1)(3) xxx%
- ------------------------------------------------------------------------
Common Stock Venhill Limited Partnership 18,896,276(2) xxx%
- ------------------------------------------------------------------------
</TABLE>
(1) The Hillman Trusts are comprised of thirteen separate trusts holding in
aggregate 18,439,206 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 10,000 shares;
shared voting and investment powers for eleven Trusts which include
9,362,540 shares; and neither voting nor investment powers for one Trust
which includes 9,066,666 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.
(2) Howard B. Hillman is a general partner of Venhill Limited Partnership.
(3) Includes 31,000 shares held directly by Howard B. Hillman, and
18,896,276 shares owned by Venhill Limited Partnership of which Mr.
Hillman is a general partner. Excludes an aggregate of 8,000 shares
owned by Mr. Hillman's adult children, as to which Mr. Hillman disclaims
beneficial ownership.
The following table sets forth, as of November 30, 1995, 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:
<TABLE>
<CAPTION>
Amount and Nature Percent
of of
Title of Class Name Beneficial Ownership Class
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Howard B. Hillman 37,366,482(1) xxx%
- -----------------------------------------------------------------------------------------------------------------------
Major General William R. Usher (Retired) 1,000 *
- -----------------------------------------------------------------------------------------------------------------------
J. Roderick Heller, III 20,000 *
- -----------------------------------------------------------------------------------------------------------------------
Kenneth M. Dedeluk 7,000 *
- -----------------------------------------------------------------------------------------------------------------------
William W. Brett 0 *
- -----------------------------------------------------------------------------------------------------------------------
Dewayn Davis 302 *
- -----------------------------------------------------------------------------------------------------------------------
Common Stock All current directors and officers as a group (10 persons) 37,395,834(2)(3)(4) xxx%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
* Less than 1 percent.
(1) Includes 7,703,323 shares of Common Stock of which Howard B. Hillman is both
a trustee and a beneficiary; 1,669,217 shares of Common Stock of which Mr.
Hillman is a trustee but not a beneficiary and as to which he disclaims
beneficial ownership; 9,066,666 shares of Common Stock of which Mr. Hillman
is a grantor and neither a trustee nor a beneficiary; 31,000 shares of
Common Stock owned directly by Mr. Hillman; 18,896,276 shares held by
Venhill Limited Partnership of which Mr. Hillman is a general partner; and
excludes an aggregate of 8,000 shares held by Mr. Hillman's adult children
of which he disclaims beneficial ownership.
(2) Includes 18,439,206 shares owned by the Hillman Trusts and 18,896,276 shares
owned by Venhill Limited Partnership.
(3) Includes stock options that will have vested by January 29, 1996.
(4) Includes 750 shares held by Karen Niparko, Vice President, and 300 shares
held by Allyson Kissell, Corporate Secretary.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file with
the Commission initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Officers,
directors, and greater than ten percent shareholders are required by Commission
regulation to furnish the Company with copies of all Section 16(a) forms they
file.
To the Company's knowledge, based solely on a review of the copies of
reports furnished to the Company, the Company believes that all filings
applicable to its executive officers, directors, and 10 percent beneficial
owners were complied with during the last fiscal year.
Performance Graph
The following graph compares the Company's, the peer group's and the
Standard & Poor 500's yearly percentage change in cumulative total shareholder
return for the past five years, as measured by dividing the (i) the sum of (A)
the cumulative amount of dividends for the measurement period, assuming dividend
reinvestment, and (B) the difference between the registrant's share price at the
end and the beginning of the measurement period; by (ii) the share price at the
beginning of the measurement period. The peer group was selected from companies
which Auto-trol Technology Corporation considers to be its competitors, such as
Parametric Technology Corporation, Structural Dynamics Research Corporation,
Autodesk Inc., Intergraph Corporation and ComputerVision Corporation. The graph
assumes that $100 was invested on October 1, 1990 and that all dividends were
reinvested.
<TABLE>
<CAPTION>
AUTO-TROL PEER GROUP S&P500
- ------------------------------------------------------------
<S> <C> <C>
100 100 100
100 100 100
1990--100 100 100
1991-- 88 175 130
1992-- 75 258 140
1993-- 17 278 154
1994-- 46 247 155
1995-- 35 576 196
</TABLE>
3
<PAGE>
PROPOSAL 1. AMENDMENT OF THE ARTICLES OF INCORPORATION AND
RECAPITALIZATION OF THE COMPANY TO EFFECT A ONE-FOR-TEN
REVERSE STOCK SPLIT
The shareholders will be asked to approve a proposal to effect a one-
for-ten reverse stock split. The reverse stock split, if approved, would be
effected through an amendment to the Company's Articles of Incorporation
pursuant to a plan of recapitalization, which will result in conversion of each
share of the Company's Common Stock into one-tenth of a share of New Common
Stock. The rights and privileges of the holders of Common Stock will be
substantially unaffected by the stock split. Likewise, each shareholder's
percentage ownership interest in the Company, proportional voting power, and
share in dividends will remain unchanged, except for fractional shares.
However, the effect will be to increase the number of authorized shares
available for issuance by the Board of Directors without shareholder approval,
which could result in a substantial dilution of the current shareholders'
interest. No fractional shares resulting from the reverse stock split will be
issued. Instead, the Company will pay in cash the market price for the
fractional shares, or will make available for sale from its treasury stock
additional shares of Common Stock in an amount sufficient to equal one share of
New Common Stock. Any shareholder whose total shares will be reduced to a
fraction of a share is entitled to dissent and obtain payment of the fair value
of the shareholder's shares. See "Cash Payment or Additional Shares for
Fractional Shares" and "Dissenters' Rights" below.
Amendment of the Articles of Incorporation
The Company's Articles of Incorporation currently identify 40,000,000
shares of Class A Common Stock, par value $.01, as Common Stock. The amendment
of the Articles of Incorporation would change the par value from $.01 par value
(Common Stock) to $.02 par value (New Common Stock). Article Fourth of the
Articles of Incorporation of Auto-trol Technology Corporation will be amended to
read as follows:
FOURTH: A. Authorized Shares. The total number of shares which the
---------------------
corporation is authorized to issue is 40,000,000 consisting of 40,000,000
shares of Class A Common Stock, $.02 par value, hereinafter called Common
Stock.
If approved, the Articles of Amendment to the Articles of Incorporation
will be filed with the Secretary of State of Colorado. The Amendment will
become effective on the date of such filing. It is expected that such filing
will take place on January 31, 1996 or shortly thereafter.
Background
The Company presently is authorized, under its Articles of
Incorporation, to issue 40,000,000 shares of Common Stock. The one-for-ten
reverse stock split would not change the number of authorized shares of Common
Stock. As of the Record Date, the shares of Common Stock represent
approximately % of the Company's authorized Common Stock. If the reverse
---
stock split is approved, the number of shares outstanding or reserved for
issuance would represent approximately % of the authorized shares. The
---
effect of the reverse stock split would be to increase the amount of authorized
shares available for issuance, after giving effect to reserves for employee
plans, from approximately million shares to approximately million
--- ---
shares. As a result, more shares of Common Stock will be available for
issuance, which may allow a substantial dilution of the current shareholders'
interests. The Company intends to continue its listing with the NASDAQ
SmallCap market.
4
<PAGE>
There were shareholders of record of the Company as of December 12,
---
1995. The approval of the reverse stock split is not expected to cause a
significant change in the number of shareholders.
Reasons for the Action
On June 30, 1995, a total of 33,418,477 shares of Common Stock were
outstanding. With the debt-to-equity conversion on September 30, 1995 and the
shares reserved for the employee option and stock purchase plans, the entire
40,000,000 authorized shares are very close to being fully utilized. Therefore,
very few shares of Common Stock are available for purchase, or for any future
debt-to-equity conversions. Consequently, the Board of Directors evaluated two
options. The first option would be to increase the number of authorized shares
and the second option would be to implement a plan of recapitalization to effect
a reverse stock split.
By increasing the number of authorized shares, the Company would incur
additional NASDAQ filing fees and gain no benefits in either enhancing the
current low trading price or earnings per share calculation. The Board of
Directors does not favor an increase in the number of shares authorized.
In addition to recapitalizing the Company, the reverse stock split is
also intended to establish the market price of the New Common Stock in a more
traditional range for companies of equivalent size traded on NASDAQ SmallCap.
The closing sale price of the Common Stock on September 29, 1995, as reported by
NASDAQ SmallCap was $.75 per share. The Board of Directors believes that a
higher market price would make the New Common Stock more attractive to a broader
range of investors. Many institutional investors have guidelines which disfavor
stocks that trade at relatively low prices. Moreover, certain brokerage firms
will not make margin loans or may charge higher transaction costs with respect
to securities with a market price below a certain minimum. The Board of
Directors believes that the reverse stock split will enhance the ability of
investors to trade the Company's Common Stock.
The reverse stock split will result in some shareholders owning "odd
lots" of less than 100 shares of New Common Stock. The costs, including
brokerage commissions, of transactions in odd lots, are generally higher than
the costs of transactions in "round lots" of even multiples of 100 shares.
If the reverse stock split is adopted, shareholders will be required to
exchange their stock certificates for new certificates representing the
equivalent shares of New Common Stock. To differentiate the New Common Stock
from the existing Common Stock, it is recommended that the par value be changed.
There can be no assurance that the market price of the New Common Stock
after the proposed reverse stock split will be ten times the market price before
the proposed reverse stock split.
Impact on Employee Stock Plans
As of September 30, 1995, the Company had a total of 499,812 shares of
Common Stock reserved for issuance under various employee option plans, and
229,788 shares of Common Stock available for employee purchase under the
Employee Stock Purchase Plan. If the reverse stock split is approved, the plans
will be amended to establish the number of shares of New Common Stock available
for grant or purchase under the Plans. Effectively, the amendments would result
in an increase in the number of shares available under the Plans. All options
previously granted and outstanding will be proportionally adjusted with respect
to the number of shares and the exercise prices thereof. See Proposal 3 and
Proposal 4.
5
<PAGE>
Cash Payment or Additional Shares for Fractional Shares
If the reverse stock split is approved, the Company will not issue
fractional shares to shareholders whose holdings are not evenly divisible by
ten. Instead, it will, at the option of each such shareholder, purchase for
cash any shares, or sell from its treasury stock additional shares of Common
Stock for which fractional shares would otherwise have been issued. The
purchase or sale price for such fractional shares will be the average closing
sale price of the Common Stock reported by NASDAQ for the five trading days
immediately preceding the date of exchange multiplied by the number of shares of
Common Stock to be purchased or sold. No brokerage commissions will be payable
by shareholders whose shares are purchased or sold for cash in this manner.
Dissenters' Rights
Shareholders currently owning less than ten (10) shares of Common Stock
will have their shareholdings reduced to a fraction and, if they do not elect to
purchase shares from the Company in order to have a whole share of New Common
Stock, will have their entire interest in the Company purchased for cash. Under
Article 113 of the Colorado Business Corporation Act, such shareholders will be
entitled to dissenters' rights. The following discussion of those rights and
the procedure for perfecting such rights is qualified in its entirety by
reference to Article 113 of the Colorado Business Corporation Act, a copy of
which is included as Exhibit A hereto.
A shareholder wishing to assert his dissenter's rights must notify the
Company in writing of his intention to do so prior to the Annual Meeting and
must not vote his shares in favor of the proposed plan of recaptialization. The
Company will then provide a written dissenter's notice to such shareholder
giving the effective date of the recapitalization and providing instructions for
making demand for payment. The Company will then pay the purchase price as
provided above to the shareholder for the fractional shares. The shareholder
will then have the right to demand a price based on the dissenter's estimate of
fair value, and, if the Company disagrees with such estimate, may require
judicial appraisal of the fair value of the shares. In some instances, the cost
of such appraisal may be assessed in whole or in part against the dissenting
shareholder.
Federal Income Tax Consequences
The following description of federal income tax consequences is based
on the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated thereunder, judicial authority, and current
administrative rulings and practices in effect on the date of this Proxy
Statement. The discussion is for general information only and does not discuss
consequences which may apply to special classes of taxpayers (e.g., non-resident
aliens, broker-dealers, or insurance companies). Shareholders are urged to
consult their own tax advisors to determine the particular consequences to them.
The exchange of shares of Common Stock for shares of New Common Stock
will not result in recognition of gain or loss (except in the case of cash
received for fractional shares as described below). The holding period of the
shares of New Common Stock will include the shareholder's holding period for the
shares of Common Stock exchanged therefor, provided that the shares of Common
Stock were held as a capital asset. The total basis of the shares of New Common
Stock will be the same as the total basis of the shares of Common Stock
exchanged therefor, reduced by the basis allocable to the receipt of cash in
lieu of fractional shares described below.
6
<PAGE>
A shareholder who receives cash in lieu of fractional shares will be
treated as if the Company had issued fractional shares to him and then
immediately redeemed such shares for cash. Such shareholder should recognize
gain or loss, as the case may be, measured by the difference between the amount
of cash received and the basis of his Common Stock allocable to such fractional
shares had they actually been issued. Such gain or loss will be a capital gain
or loss if such shareholder's Common Stock was held as a capital asset, and any
such capital gain or loss will generally be a long-term capital gain or loss to
the extent such shareholder's holding period for his Common Stock exceeds twelve
months.
Exchange of Certificates
If the reverse stock split is adopted, shareholders will be required to
exchange their stock certificates for new stock certificates representing shares
of New Common Stock. The Company will furnish each shareholder of record as of
the Record Date, a transmittal form with instructions for obtaining new stock
certificates. Shareholders will be furnished the necessary materials and
instructions to effect such exchange at the appropriate time by the Company's
transfer agent. Shareholders should not submit any certificates until requested
to do so. In the event any certificate representing shares of Common Stock is
not presented by the shareholder in exchange for the equivalent shares of New
Common Stock, such New Common Stock certificates will be withheld by the Company
until such exchange. Unexchanged shares of Common Stock are subject to
escheatment under applicable abandoned property laws.
Board Recommendation
Based on the foregoing consideration, the Board of Directors approved a
resolution to provide for an amendment to the Company's Articles of
Incorporation and recapitalization of the Company through a one-for-ten reverse
stock split.
The Board of Directors unanimously recommends that the shareholders of
the Company vote FOR the proposal.
Vote Required for Approval of the Proposal to Amend the Articles of
Incorporation and Recapitalization to Effect a One-For-Ten Reverse Stock Split
The shareholders will be asked to approve the proposal to amend the
Articles of Incorporation and to recapitalize the Company to effect a one-for-
ten reverse stock split at the Annual Meeting of Shareholders on January 30,
1996.
The affirmative vote of the majority of the shares entitled to vote,
represented in person or by proxy, will be necessary to approve the proposal.
Approval is assured since the Hillman entities intend to vote in favor of the
proposal.
PROPOSAL 2. ELECTION OF DIRECTORS
The Company's Bylaws provide that the Board of Directors shall consist
of not fewer than three persons. In accordance with the Bylaws, three directors
are to be elected to hold office until the next annual meeting of shareholders
or until their successors are duly elected and qualified. The proxies will be
voted, unless authority to do so is withheld, in favor of the nominees listed
below, all of whom comprise the current Board of Directors of the Company, each
having served in that capacity since the dates indicated. In the event any of
the nominees shall become unavailable, the persons named as proxies may vote for
a substitute nominee or vote for fewer than three directors.
7
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES LISTED.
Nominees For Directors
Set forth in the following table is certain information regarding each
nominee for election as director of the Company:
<TABLE>
<CAPTION>
Business Experience for the Past Five Years;
Position with the Company; Year Became Director and
Name; Age Principal Occupation Other Directorships
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Howard B. Hillman President of the Company, Chief Executive Officer Director of the Company since 1973. President and
Age 61 and Chairman of the Board of Directors. Chief Executive Officer of the Company since 1985.
Private investor, trustee and beneficiary of
certain Hillman Family Trusts. Mr. Hillman is
also a director of Hambrecht & Quist Group.
- ------------------------------------------------------------------------------------------------------------------------------------
Major General William R. Director of the Company; Director of Special Director of the Company since 1988. Since 1992
Usher (Retired) Projects for Martin Marietta Astronautics Group, Director of Special Projects, for Martin Marietta
Age 62 a group involved in the research, development and Astronautics Group.
testing of spacecraft and space launch vehicles.
- ------------------------------------------------------------------------------------------------------------------------------------
J. Roderick Heller III Director of the Company; Chairman and Chief Director of the Company since 1984. Chairman and
Age 58 Executive Officer for National Corporation for Chief Executive Officer of National Corporation
Housing Partnership, a corporation involved in for Housing Partnership, 1985 to present.
the ownership and management of apartments.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
There are no arrangements or understandings between of the above-listed
directors, or any other persons, pursuant to which any of the directors have
been selected as such.
Meetings and Committees of the Board of Directors
During the Company's last fiscal year, the Board of Directors met four
times. Messrs. Hillman, Heller, and Usher were present at all meetings. The
Board of Directors has an Audit Committee and a Compensation Committee, but does
not have a nominating committee.
The Audit Committee advises the Board of Directors with respect to (i)
the selection of independent certified public accountants, who annually audit
the books and records of the Company and its consolidated subsidiaries; (ii) the
scope of such audit; (iii) the adequacy of the financial statements prepared for
publication by management and the adequacy of the audits of such statements; and
(iv) the adequacy of the financial and accounting control procedures and the
financial management of the Company. The current members are Messrs. Hillman
and Heller. The Audit Committee did not meet separately from the Board of
Directors meetings during the twelve months ended September 30, 1995.
The Compensation Committee advises the Board of Directors with respect
to executive compensation, stock options and other forms of compensation. The
current members are Messrs. Usher and Heller. The Compensation Committee met
twice during the twelve months ended September 30, 1995.
Each director who is not also an officer of the Company was paid $500
and granted 5,000 stock options under the Special Purpose Stock Option Plan as
an annual retainer, and received $2,000 for attending each of the scheduled
meetings of the Board of Directors in fiscal year 1995. Directors were
reimbursed for travel expenses for attending the Board Meetings.
8
<PAGE>
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.
William W. Brett - Vice President
Mr. Brett, age 58, joined the Company as a Vice President on January 4,
1993. Prior to his current association with the Company, Mr. Brett served as
Director of Shuttle Data Systems for Lockheed Space Operations at Kennedy Space
Center in Florida beginning September, 1982. Mr. Brett formerly worked with the
Company for three years as Director of the Research and Development Department
before his employment with Lockheed.
Kenneth M. Dedeluk - Vice President of International Operations, and President
of Auto-trol Technology (Canada) Ltd.
Mr. Dedeluk, age 45, joined Auto-trol Technology (Canada) LTD., a
wholly owned subsidiary of Auto-trol Technology Corporation, in 1976. In 1981,
Mr. Dedeluk became Vice President and General Manager of Canadian Operations.
In 1989 he was appointed President of Auto-trol Technology (Canada) LTD., and in
June of 1993 Mr. Dedeluk was appointed Vice President of International
Operations of the Company.
David C. O'Brien - Vice President, Treasurer, and Chief Financial Officer
Mr. O'Brien, age 38, joined the Company in May 1995 as Treasurer and
Chief Financial Officer. On May 15, 1995, Mr. O'Brien was appointed Vice
President. Prior to his employment with the Company, Mr. O'Brien was the Chief
Financial Officer for Array Technology of Boulder, Colorado, from 1992 to 1995,
and for Atalla Corporation of San Jose, California, from 1988 to 1992. Both
companies are wholly owned subsidiaries of Tandem Computers.
Karen L. Niparko - Vice President
Ms. Niparko, age 40, joined the Company in 1988, initially as Director
of the Human Resources Department, and more recently was appointed Director of
Operations of the Company. Ms. Niparko was appointed Vice President of the
Company effective May 16, 1994.
Dewayn Davis - Vice President
Mr. Davis, age 39, joined the Company in 1984, initially as an
Applications Engineer. He entered the Company's sales force in 1987 and was
shortly thereafter promoted to Regional Sales Manager. In January 1993, Mr.
Davis was promoted to Director of Western Area Field Operations, and was
appointed Vice President of the Company effective September 8, 1994.
Allyson S. Kissell - Secretary
Ms. Kissell, age 47, joined the Company in 1984 and has held various
positions with the Legal Department during her employment with the Company,
including her appointment as Assistant Secretary in 1987. Ms. Kissell was
appointed Secretary of the Company effective September 16, 1992.
9
<PAGE>
Melody L. Travis - Assistant Secretary
Ms. Travis, age 39, joined the Company in 1978. She was appointed
Assistant Secretary of the Company effective September 16, 1992.
EXECUTIVE COMPENSATION
Report from the Company's Compensation Committee
The Compensation Committee of the Board of Directors has reviewed
Executive Compensation and concluded that due to the Company's continuing
transition in its business focus, salaries for executive officers should not be
based upon company performance. Salary determination is based on a combination
of factors including evaluation of compensation for executive positions within
the industry, as well as the individual's past performance, education and future
potential with the Company.
For its evaluation of compensation, the Committee did not rely on
specific data from specific companies within the systems integration industry,
but rather, on its broad understanding of competitive salaries for comparable
executive positions. Based on this approach, there is no direct relationship
between other companies and the broad industry "norms" used by the Committee in
their deliberations regarding Company executive compensation.
The objective of the Committee is to determine salaries that are
sufficient to attract, motivate and retain executives of outstanding ability and
potential. The Committee further attempts to establish a relationship between
executive compensation and the creation of shareholder value. These objectives
are achieved by providing a combination of cash compensation and stock option
grants. Options are granted to executives based on subjective performance
evaluation and not the attainment of specific performance goals.
All of the above factors and policies were considered in determining
the compensation of Mr. Hillman, President and Chief Executive Officer of the
Company. However, Mr. Hillman has voluntarily lowered his salary to its present
level. His compensation was not based on the Company's performance.
/s/Major General William R. Usher (Ret.) Director
- ------------------------------------------
Major General William R. Usher (Ret.)
/s/J. Roderick Heller, III Director
- ------------------------------------------
J. Roderick Heller, III
The following Summary Compensation Table sets forth the salary, bonus
and other compensation earned during the last three fiscal years by Howard B.
Hillman, the Company's Chief Executive Officer, and by the other three executive
officers of the Company whose aggregate compensation for that year exceeded
$100,000. No stock appreciation rights were granted to the named executive
officers for the years indicated.
10
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
- -------------------------------------------------------------------------------------- --------------------------------------------
Annual Compensation Awards Payouts
- -------------------------------------------------------------------------------------- --------------------------------------------
All Restricted
Other Annual Stock Options LTIP
Name and Principal Fiscal Salary Bonus Compensation Award(s) Granted Payouts
Position Year ($) ($)(1) ($) ($) (shares) ($)
- -------------------------------------------------------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------- -------------------------------------------
Howard B. Hillman 1995 $100,000 $240 $4,401(2) N/A -- N/A
President and Chief 1994 107,166 240 7,142(2) N/A -- N/A
Executive Officer 1993 100,000 240 8,081(2) N/A -- N/A
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Kenneth M. Dedeluk* 1995 122,724 218 2,887(3) N/A 20,000 N/A
President, Auto-trol 1994 122,222 222 3,000(3) N/A -- N/A
Technology (Canada), Ltd. 1993 119,000 235 3,206(3) N/A 20,000 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
William W. Brett 1995 122,391 240 -- -- N/A
Vice President 1994 122,391 240 -- N/A 10,000 N/A
1993 89,993 40 -- N/A 60,000 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Dewayn Davis 1995 110,242 240 -- N/A 45,000 N/A
Vice President 1994 100,510 240 -- N/A -- N/A
1993 88,080 240 -- N/A 23,350 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Compensation was originally based on Canadian Dollars for Mr. Dedeluk and
then converted to U.S. Dollars.
(1) This column reflects compensation to named executive officers under the
Company's 401(k) Retirement Plan; except as to Mr. Dedeluk, where the amount
represents compensation in the form of contributions from Auto-trol
Technology (Canada) Ltd. through its Registered Retirement Savings Plan.
(2) This total for 1995 includes $3,762 for rent, $268 for telephone, and $371
for utilities. This total for 1994 includes $6,480 for rent, $235 for
telephone, and $427 for utilities. This total for 1993 includes $6,040 for
rent, $1,168 for car allowance, $250 for telephone, and $383 for utilities.
(3) This total is for car allowance.
Compensation Committee Interlocks and Insider Participation
The two members of the Company's Compensation Committee, Mr. Usher and Mr.
Heller, have no interlocking relationships as defined by SEC rules and
regulations.
STOCK OPTIONS AND OTHER PLANS
The Company has an Incentive Stock Option Plan ("ISO Plan"), a Special
Purpose Stock Option Plan ("SPSO Plan") and an Employee Stock Purchase Plan
("ESP Plan"). The Board of Directors may from time to time alter, amend,
suspend or discontinue the ISO Plan, the SPSO Plan and the ESP Plan, except that
the Board may not take action which adversely affects the rights and obligations
with respect to stock options outstanding under the Plans. The Board may not,
without approval of the shareholders: (i) increase the maximum number of shares
of Common Stock that may be made subject to options under any of the Plans; (ii)
materially increase the benefits accruing to participants under any of the
Plans; or (iii) materially modify the requirements as to eligibility for
participation in any of the Plans.
As amended by the shareholders in January 1992, the ISO Plan and the SPSO
Plan options were pooled, making the total number of shares available for grant
under both plans 1,350,000. As of September 30, 1995, options for 499,812
shares of Common Stock remained available for grant under the ISO Plan and the
SPSO Plan. Amendments to the Plans to establish the number of shares available
for issuance or purchase under the Plans are being submitted to shareholders for
approval at the Annual Meeting. See Proposal 3 and Proposal 4.
11
<PAGE>
Any shares of Common Stock which were subject to Stock Options, but for
which such Stock Options have expired, shall again be available for purposes of
granting Stock Options under the Plans.
Incentive Stock Option Plan
Under the ISO Plan, key employees are granted options to purchase Common
Stock of the Company at a per share price equal to the fair market value of a
share of the Common Stock on the date that the option is granted. Almost all of
the Company's approximately 353 employees could qualify as key employees. The
Compensation Committee, comprised of no less than two members of the Board of
Directors, determines the optionees, the number of shares covered by the
options, and the exercise price of options granted under the ISO Plan.
Compensation Committee members are not eligible to receive options under the ISO
Plan.
A copy of the ISO Plan is available upon shareholder request.
Special Purpose Stock Option Plan
The SPSO Plan was adopted in 1981, approved by the shareholders in 1982, and
revised in 1994. Under the SPSO Plan, options are granted at the fair market
value of the shares on the date of grant. The Compensation Committee determines
the optionees, the number of shares covered by the options, and the exercise
price of the options granted under the Plan. The options granted and to be
granted under the SPSO Plan are not "incentive" stock options which meet the
requirements of Section 422A of the Internal Revenue Code of 1986, as amended.
Compensation Committee members are eligible to receive options under the SPSO
Plan.
A copy of the SPSO Plan is available upon shareholder request.
Option Reporting Requirements
The following table discloses options to purchase Common Stock granted from
October 1, 1994, through September 30, 1995, under the ISO Plan and the SPSO
Plan to Messrs. Dedeluk and Davis, the only named executive officers referred to
in the Summary Compensation Table to be granted stock options.
Option Grants Table*
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Price Appreciation for Option Term
- ----------------------------------------------------------------------------------------------------------------------------------
Options Exercise Expiration Date
Name Granted (1) Price (1) 5% (2) 10% (2)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Kenneth M. Dedeluk 20,000 $1.00 12/19/2004 12,578 31,875
- ----------------------------------------------------------------------------------------------------------------------------------
Dewayn Davis 45,000 $1.00 12/19/2004 28,300 71,718
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* SEC regulations require disclosure of stock appreciation rights ("SARs")
issued, however, Auto-trol Technology Corporation has not granted any SARs.
(1) If the one-for-ten reverse stock split is approved by shareholders, the
number of shares underlying these options will be reduced accordingly, to
2,000 and 4,500 respectively, and the exercise price increased accordingly,
to $10.00 per share.
(2) Actual gains on exercise, if any, are dependent upon the future performance
of the Company's Common Stock.
12
<PAGE>
Under either the ISO Plan or the SPSO Plan, options become exercisable in five
cumulative annual installments of 20% per year, and remain exercisable until the
option expires. A change of ownership of the Company may accelerate the vesting
schedule of the options. An unexercised option generally expires on the tenth
anniversary of the date on which it was granted, or thirty days after
termination of the employment, or six months after the death or disability of
the optionee. The exercise price may be paid either in cash or by delivery of
shares of the Company's Common Stock, valued at the market price. The
Compensation Committee may, in its discretion, establish provisions for the
exercise of stock options different from those described in this paragraph. No
named executive officer exercised any stock options in fiscal year 1995.
The following table discloses the options held by the named executive
officers at the end of the last fiscal year.
Aggregated Option Exercises and Fiscal Year End Option Value Table
<TABLE>
<CAPTION>
Number of Securities (1) Value of Unexercised In-the-
Underlying Unexercised Money Options at Fiscal
Options at Fiscal Year End Year End
-------------------------------------------------------------------------
Shares Acquired Value
Name on Exercise Realized Vested Unexercisable Vested Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Howard B. Hillman -- -- -- -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------------------------
Kenneth Dedeluk -- -- 20,000 50,000 7,500 31,250
- ------------------------------------------------------------------------------------------------------------------------------------
William Brett -- -- 26,000 44,000 10,750 20,500
- ------------------------------------------------------------------------------------------------------------------------------------
Dewayn Davis -- -- 10,000 60,000 3,750 50,625
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) If the one-for-ten reverse stock split is approved by shareholders, the
number of shares underlying these options will be reduced accordingly, to
one-tenth the amount currently underlying.
Employee Stock Purchase Plan
The Company's Employee Stock Purchase Plan ("ESP Plan") became
effective in 1980, and is administered by two members of the Board of Directors
("Committee"). Almost all full-time employees who have been with the Company
for at least six months and who work seventeen and one-half hours per week are
entitled to participate in the ESP Plan. The purchase period for the ESP Plan
begins on March 1 and ends October 31, for each calendar year. All employees
who wish to participate in the ESP Plan must re-enroll at the beginning of each
purchase period.
An employee may purchase stock equal to the lesser of 10% of his
annual salary, or the number of shares authorized by the Committee. The ESP
Plan allows employees to purchase Common Stock at the lesser of either full
market price, or at a 5% discount of the fair market price of the stock at the
beginning of the purchase period, or at a 5% discount of the fair market price
when the stock is purchased.
Kenneth Dedeluk, who purchased 250 shares, is the only named executive
officer to purchase shares of Common Stock under the ESP Plan from October 1,
1994, through September 30, 1995.
A copy of the Employee Stock Purchase Plan is available upon
shareholder request.
13
<PAGE>
Retirement Plan
The Company's Retirement Savings Plan (the "Retirement Plan") is a
cash or deferred profit-sharing plan designed to comply with the requirements of
Section 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. All
employees of the Company may participate in the Retirement Plan, provided that
they have six months of service with the Company. The Retirement Plan is
administered by a committee appointed by the Board of Directors.
Funds of the Plan are held, invested and administered by an
independent company. Plan funds may not be invested in Common Stock of the
Company.
Under the Plan, employees may contribute an amount equal to 15% of
their compensation per pay period, subject to statutory limits, to a tax
deferral account. The percentage of compensation that may be contributed by the
highly compensated employees under the Internal Revenue Code depends on the
average percentage of compensation contributed by the non-highly compensated
employees.
The Company will contribute, to the employee's account, an amount
equal to the employee's contribution, up to ten dollars per pay period. The
value of an employee's account is payable to the employee or the employee's
beneficiary upon the employee's retirement, voluntary or involuntary
termination, death, or disability. Prior to such time, withdrawals may only be
made for financial hardships as defined by the Internal Revenue Code and
Regulations.
The Board of Directors may, in its discretion, terminate the
Retirement Plan at any time, in whole or in part. Upon such termination, the
Plan provides for the distribution of the assets of the fund for the benefit of
its participants.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal year 1995 the Company borrowed $10,350,000 from the
Venhill Limited Partnership ("Venhill"), of which Mr. Hillman, President, CEO
and a director of the Company, has voting and investment powers. Debt-to-equity
transactions totaling $12,438,000 were approved by the Board of Directors in
which: 3,218,648 shares of Common Stock were issued for debt of $2,413,986 in
December 1994; 7,432,019 shares of Common Stock were issued for debt of
$5,574,014 in January 1995; and 5,933,333 shares of Common Stock were issued
for debt of $4,450,000 in September 1995. The $.75 price per share for each
such conversion is consistent with the price paid for the debt conversion in
fiscal year 1994, and is the approximated current market bid price. The
Company's related party debt activity for fiscal year ending September 30, 1995
is as follows:
<TABLE>
<CAPTION>
<S> <C>
Note payable balance as of October 1, 1994 $ 5,988,000
Additional amount borrowed 10,350,000
Amount paid to Hillman Trusts (1,000,000)
Amount converted to Common Stock (12,438,000)
------------
Note payable balance as of September 30, 1995 $ 2,900,000
============
</TABLE>
The notes outstanding to Venhill are payable October 1, 1997 and bear
interest at 10%. Interest payable relating to this debt was approximately
$366,900 as of September 30, 1995. During October and November 1995, the
Company borrowed an additional $2,000,000 from Venhill.
14
<PAGE>
PROPOSAL 3. APPROVAL TO AMEND THE COMPANY'S STOCK OPTION PLANS
Amend the Number of Shares Available for Grant under the Company's Stock Option
Plans
The shareholders will be asked to approve a proposal to amend the
Company's Special Purpose Stock Option Plan and Incentive Stock Option Plan
("the Plans") to establish the number of shares of New Common Stock available
for grant under the Plans, which would have the effect of an increase in the
shares collectively available for grant under the Plans. The amendments, if
approved, would provide for a maximum of 400,000 shares of New Common Stock
available for grant collectively under the Plans.
The Company's Special Purpose Stock Option Plan currently states that
a maximum, aggregate number of Common Stock that may be made subject to Stock
Options granted under the Plan shall be one million three hundred and fifty
thousand (1,350,000) under this Plan and the Company's Incentive Stock Option
Plan, as determined from time to time to be appropriate by the Compensation
Committee. In no event shall the total amount of shares for which options are
granted under both Plans exceed 1,350,000. The number of shares collectively
available will be changed from 1,350,000 shares of Common Stock to 400,000
shares of New Common Stock. Section 5.1 of the Company's Special Purpose Stock
Option Plan will be amended to read as follows:
5.1 Maximum Number
-------------------
The maximum, aggregate number of shares of Common Stock that may be made
subject to Stock Options granted under the Plan shall be four hundred
thousand (400,000) under this Plan and the Company's Incentive Stock Option
Plan, as determined from time to time to be appropriate by the Compensation
Committee. In no event shall the total amount of shares for which options
are granted under both Plans exceed 400,000 shares. If any shares of Common
Stock subject to Stock Options are not purchased or otherwise paid for
before such Stock Options expire, such shares may again be made available
for Stock Options grants.
The Company's Incentive Stock Option Plan contains the same section
5.1 which will be amended as follows:
5.1 Maximum Number
-------------------
The maximum, aggregate number of shares of Common Stock that may be made
subject to Stock Options granted under the Plan shall be four hundred
thousand (400,000) under this Plan and the Company's Special Purpose Stock
Option Plan, as determined from time to time to be appropriate by the
Compensation Committee. In no event shall the total amount of shares for
which options are granted under both Plans exceed 400,000 shares. If any
shares of Common Stock subject to Stock Options are not purchased or
otherwise paid for before such Stock Options expire, such shares may again
be made available for Stock Options grants.
The Plans shall be further amended, as required, to incorporate non-
material adjustments required by the proposed reverse stock split.
15
<PAGE>
Outstanding Option Grants
All option grants outstanding will be adjusted proportionately to
reflect a change in number and price as a result of the proposed reverse stock
split.
Background
The Company has created a Special Purpose Stock Option Plan and an
Incentive Stock Option Plan (the "Option Plans"), which provide for the grant of
Stock Options to Key Employees and members of the Board of Directors in order to
advance the interests of the Company and its Participating Subsidiaries through
the motivation, attraction and retention of Board members and Key Employees.
Reasons for the Action
As of September 30, 1995, there were outstanding options for 850,188
shares of Common Stock under the Incentive Stock Option Plan and the Special
Purpose Stock Option Plan collectively. The number of shares remaining
available for grant under the Plans, if adjusted pursuant to the proposed
reverse stock split, is insufficient to meet the goals of the Option Plans.
If the reverse stock split is approved, the number of shares currently
available for option grants would be adjusted to 49,981. The amendment would
increase the number of shares collectively available for grant under the Plans
by 265,000 shares [(400,000 - (1,350,000/10)]. Therefore, the number of shares
remaining for grant, after adjusting for the proposed reverse split, would be
314,982 [400,000 - 850,188/10)].
Board Recommendation
Based on the foregoing consideration, the Board of Directors approved
an amendment to the Company's Special Purpose Stock Option Plan and the
Company's Incentive Stock Option Plan to establish the shares available for
grant collectively under the Company's stock option plans.
The Board of Directors unanimously recommends that the shareholders
of the Company vote FOR the proposal.
Vote Required for Approval of the Proposal to Establish the Number of Shares of
Common Stock Available under the Company's Stock Option Plans
The shareholders will be asked to approve the proposal to amend the
Company's Incentive Stock Option Plan and Special Purpose Stock Option Plan, to
establish the number of shares collectively available for grant under the Plans,
at the Annual Meeting of Shareholders on January 30, 1996.
The affirmative vote of the majority of the shares entitled to vote,
represented in person or by proxy, will be necessary to approve the proposal.
Approval is assured since the Hillman entities intend to vote in favor of the
proposal.
PROPOSAL 4. APPROVAL TO AMEND THE COMPANY'S EMPLOYEE STOCK
PURCHASE PLAN
Amend the Number of Shares Available for purchase under the Company's Employee
Stock Purchase Plan
16
<PAGE>
The shareholders will be asked to approve a proposal to amend the
Company's Employee Stock Purchase Plan to establish the number of shares of New
Common Stock available for purchase under the Plan, which would have the effect
of an increase in the shares available for purchase under the Plan. The
amendment, if approved, would provide for a maximum of 80,000 shares of New
Common Stock available for purchase under the Plan.
The Company's Employee Stock Purchase Plan currently states that the
total number of shares made available for sale to participants shall not exceed
245,000 for the duration of the Plan. Section 4.2 of the Plan will be amended
to read as follows:
4.2 Amount of Stock Available. The number of shares which may be sold
-------------------------
to participants during any single option period shall be established by the
Committee prior to the commencement of each option period; provided,
however, that the total number of shares made available for sale to
participants shall not exceed eighty thousand (80,000) for the duration of
the Plan.
Background
The Company has created an Employee Stock Purchase Plan which provides
a method whereby eligible employees of the Company have an opportunity to
acquire a proprietary interest in the Company through the purchase of shares of
Common Stock of the Company.
Reasons for the Action
As of September 30, 1995, there were 229,788 shares of Common Stock
available for purchase under the Employee Stock Purchase Plan. If this number
is adjusted pursuant to the proposed reverse stock split, the number available
for purchase is insufficient to meet the goals of the Plan.
The amendment would increase the number of shares available for
purchase under the Plan by 50,021 [80,000 - (229,788/10)]. Therefore, the
number of shares available for purchase under the Plan would be established at
80,000 shares of New Common Stock.
Board Recommendation
Based on the foregoing consideration, the Board of Directors approved
a resolution to amend the Employee Stock Purchase Plan to establish the shares
available for purchase under the Plan.
The Board of Directors unanimously recommends that the shareholders
of the Company vote FOR the proposal.
Vote Required for Approval to Amend the Number of Shares Available for purchase
under the Employee Stock Purchase Plan
The shareholders will be asked to approve the proposal to amend the
number of shares available for purchase under the Company's Employee Stock
Purchase Plan at the Annual Meeting of Shareholders on January 30, 1996.
The affirmative vote of the majority of the shares entitled to vote,
represented in person or by proxy, will be necessary to approve the proposal.
Approval is assured since the Hillman entities intend to vote in favor of the
proposal.
OTHER MATTERS
17
<PAGE>
The items discussed above are the only items of business, other than
routine procedural matters, which management intends to present or is informed
that others intend to present, for action as to which proxies received or
presented at the meeting are to be used. However, if other matters are properly
presented at the meeting, proxies named by the Board of Directors will vote the
shares represented by them in accordance with the recommendations of the Board
of Directors of the Company.
RELATIONSHIPS WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Company retained KPMG Peat Marwick as its independent certified
public accountants effective 1990, and they have been selected to continue in
such capacity for the current fiscal year.
Representatives of KPMG Peat Marwick are expected to attend the annual
meeting, will have an opportunity to make a statement if they desire to do so,
and are expected to be available to respond to appropriate questions.
FINANCIAL STATEMENTS
Consolidated financial statements for the Company are included in
Auto-trol Technology Corporation's Annual Report on Form 10-K, which has been
filed with the Securities and Exchange Commission. A copy of this Report may be
obtained without charge upon written request directed to Ms. Allyson S. Kissell,
Secretary, 12500 N. Washington Street, Denver, Colorado 80241-2400.
By Order of the Board of Directors
Allyson S. Kissell
Secretary
Denver, Colorado
December 22, 1995
18
<PAGE>
EXHIBIT A
COLORADO REVISED STATUTES
TITLE 7. CORPORATIONS AND ASSOCIATIONS
CORPORATIONS - CONTINUED
COLORADO BUSINESS CORPORATIONS
ARTICLE 113. DISSENTERS' RIGHTS
PART 1. RIGHT OF DISSENT - PAYMENT FOR SHARES
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.
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 his or her 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).
A-1
<PAGE>
(2) 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) An amendment to the articles of incorporation that materially and
adversely affects rights in respect of the shares because it:
(I) Alters or abolishes a preferential right of the shares; or
(II) Creates, alters, or abolishes a right in respect of redemption of the
shares, including a provision respecting a sinking fund for their redemption or
repurchase; or
(b) An amendment to the articles of incorporation that affects rights in
respect of the shares because it:
(I) Excludes or limits the right of the shares to vote on any matter, or to
cumulate votes, other than a limitation by dilution through issuance of shares
or other securities with similar voting rights; or
(II) 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.
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.
A-2
<PAGE>
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
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) to shareholders not entitled to vote shall not affect any action taken at
the shareholders' meeting for which the notice was to have been given.
(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)
to shareholders not entitled to vote shall not affect any action taken pursuant
to section 7-107-104 for which the notice was to have been given.
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, 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, 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.
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;
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(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.
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.
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.
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.
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(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.
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.
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).
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;
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(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.
PART 3. JUDICIAL APPRAISAL OF SHARES
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 it 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 in this state, it shall commence the proceeding in the county in this
state 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.
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:
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(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 benefited.
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PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AUTO-TROL TECHNOLOGY CORPORATION
FOR MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 30, 1996
The undersigned hereby appoints Howard B. Hillman and Allyson S. Kissell and
each of them, each with full power to act alone and each with full power of
substitution, as proxies to vote all the shares of Common Stock of Auto-trol
Technology Corporation held of record by the undersigned on December 12, 1995,
which the undersigned is entitled to vote at its annual meeting of shareholders
to be held on January 30, 1996, and any adjournment thereof, upon the following
matters as set forth in the Notice of said meeting and Proxy Statement dated
December 22, 1995, copies of which have been received by the undersigned.
The Board of Directors recommends that all shareholders vote on the following:
1. Election of three (3) Directors:
Nominees: J. Roderick Heller, III, Howard B. Hillman,
Major General William R. Usher (Ret.)
[_] FOR [_] AGAINST
FOR, except vote withheld from the following nominee(s)______________________
2. The approval and adoption of a proposal to amend the Articles of
Incorporation and to recapitalize the Company to effect a one-for-ten reverse
stock split.
[_] FOR [_] AGAINST [_] ABSTAIN
(IMPORTANT-CONTINUED ON REVERSE SIDE)
<PAGE>
3. The approval and adoption of a proposal to amend the Company's Special
Purpose Stock Option Plan and Incentive Stock Option Plan to establish the
number of shares of New Common Stock available for grant collectively
under the Plans.
[_] FOR [_] AGAINST [_] ABSTAIN
4. The approval and adoption of a proposal to amend the Company's Employee
Stock Purchase Plan to establish the number of shares of New Common Stock
that will be available for purchase under the Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
5. Such other business as may properly come before the meeting.
IMPORTANT: Please sign exactly as your name appears hereon. Where shares are
held by joint tenants, both should sign. When signing as attorney,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
person.
Dated:______________________________ 1995
_________________________________________
Signature
_________________________________________
Signature if held jointly
Mark here for address change_____________
PLEASE RETURN USING ENCLOSED ENVELOPE
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