Autoscope Technologies (AATC) Risk Analysis

Provisions of our articles of incorporation and bylaws and applicable provisions of Minnesota law may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which shareholders might otherwise receive a premium for their shares or transactions that our shareholders might otherwise deem to be in their best interests. These provisions: -   permit the Autoscope Board of Directors to issue up to 4,950,000 shares of preferred stock with any rights, preferences and privileges as it may designate, including the right to approve an acquisition or other change in our control;   -   provide that the authorized number of directors may be increased by resolution of the Board of Directors;   -   provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; and       -   eliminate cumulative voting rights, therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose. Section 302A.671 of the Minnesota Business Corporation Act ("MBCA") generally limits the voting rights of a shareholder acquiring a substantial percentage of Autoscope's voting shares in an attempted takeover or otherwise becoming a substantial shareholder of our company unless holders of a majority of the voting power of all outstanding shares and the disinterested shares approve full voting rights for the substantial shareholder. Section 302A.673 of the MBCA generally limits Autoscope's ability to engage in any business combination with certain persons who own 10% or more of our outstanding voting stock or any of Autoscope's associates or affiliates who at any time in the past four years have owned 10% or more of Autoscope's outstanding voting stock. These provisions of the MBCA may have the effect of entrenching our management team and may deprive shareholders of the opportunity to sell their shares to potential acquirers at a premium over prevailing market prices. This potential inability to obtain a control premium could reduce the price of Autoscope's common stock. In addition, in June 2013, we adopted a shareholder rights plan and declared a dividend to our shareholders of one preferred share purchase right for each outstanding share of common stock. We adopted amendments to the shareholder rights plan, which were approved by our shareholders, to preserve the value of certain deferred tax benefits to the Company, including those generated by net operating losses, until June 4, 2022.  In July 2021, as a result of the Reorganization, the Autoscope Board of Directors adopted an amended and restated shareholders rights plan. Effective March 1, 2022, the Board of Directors adopted an amendment to the shareholders rights plan to extend terms of the plan to June 4, 2024, which is subject to shareholder approval at the shareholder meeting, scheduled for May 2022. Generally, the shareholder rights plan, as amended, provides that if a person or group acquires 4.99% or more of the outstanding shares of common stock of Autoscope, subject to certain exceptions and under certain circumstances, the rights may be exchanged by Autoscope for common stock or the holders of the rights, other than the acquiring person or group, could acquire additional shares of Autoscope's capital stock at a discount of the then current market price. Such exchanges or exercise of rights could cause substantial dilution to a particular acquirer and discourage the acquirer from pursuing the Company. The mere existence of a shareholder rights plan often delays or makes a merger, tender offer or other acquisition more difficult to complete.