UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [__}
Check the appropriate box:
[___] Preliminary Proxy Statement
[___] Confidential, for Use of the Commission Only
[ X ] Definitive Proxy Statement
[___] Definitive Additional Materials
[___] Soliciting Material Pursuant to Rule 240.14a-12
AUTO-GRAPHICS, INC.
_________________________
(Name of Registrant)
Not Applicable
_________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
Cover Letter Information
NOTE: It is proposed that definitive proxy materials be mailed on or
before May 7, 2003 if at all possible.
CONTACT: For information regarding this proxy statement/filing, please
call, e-mail or write Daniel E. Luebben, Secretary at
(909) 595-7204 ext. 499, del@auto-graphics.com or
3201 Temple Avenue, Pomona, CA 91768.
AUTO-GRAPHICS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
June 17, 2003
To the Shareholders:
The Annual Meeting of Shareholders ("Meeting") of Auto-Graphics, Inc.
will be held at 3201 Temple Avenue, Pomona, California 91768 on Tuesday,
June 17, 2003, at 10:00 a.m. PDT for the following purposes:
1. To elect directors.
2. To transact any other business as may properly come before the
meeting.
Only shareholders of record at the close of business on April 18, 2003 are
entitled to notice of and to vote at this Meeting. A complete list of the
shareholders entitled to vote at the Meeting will be available and open to
the examination of any shareholder for any purpose germane to the Meeting
during ordinary business hours from and after April 30, 2003, at the
office of the Company. You are cordially invited to attend the Meeting.
If you hold your shares through a broker or other nominee, proof of
ownership will be accepted by the Company only if you bring either a copy of
the voting instruction card provided by your broker or nominee, or a copy of
a brokerage statement showing your share ownership in the Company as of May
31, 2003.
IF YOU HAVE ANY QUESTIONS, OR NEED ASSISTANCE VOTING, PLEASE CONTACT:
DANIEL E. LUEBBEN, THE SECRETARY OF THE COMPANY, AT 800-776-6939.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Daniel E. Luebben
Daniel E. Luebben
Secretary
Pomona, California
May 7, 2003
AUTO-GRAPHICS, INC.
3201 Temple Avenue
Pomona, California 91768
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
To Be Held June 17, 2003
GENERAL INFORMATION
This Proxy Statement, which will be first mailed to shareholders on or about
May 7, 2003, is furnished in connection with the solicitation of proxies by
the Board of Directors of Auto-Graphics, Inc. (the "Company" or "Auto-
Graphics"), to be voted at the Annual Meeting of Shareholders ("Meeting")
of the Company, which will be held at 10:00 a.m. PDT on June 17, 2003 at
3201 Temple Avenue, Pomona, California 91768. The purpose of the Meeting
and the matters expected to be acted upon are set forth in the accompanying
Notice of Annual Meeting of Shareholders.
Shareholders who execute proxies retain the right to revoke them at any time
before the shares are voted by proxy at the meeting. A shareholder may
revoke a proxy by delivering a signed statement to the Secretary of the
Company at or prior to the Meeting or by executing another proxy dated as of
the later date. The Company will pay the cost of solicitation of proxies.
Shareholders of record at the close of business on April 18, 2003 shall be
entitled to vote at the meeting on the basis of one vote for each share
held, however, any shareholder eligible to vote for the election of
directors is entitled to cumulate votes and give one candidate a number of
votes equal to the number of directors to be elected multiplied by the
number of votes to which the shareholder's shares are entitled, or to
distribute the shareholder's votes on the same principle among as many
candidates as the shareholder thinks appropriate.
To be entitled to exercise cumulative voting rights for the election of
directors, a shareholder must give notice at the Meeting prior to the
commencement of voting for the election of directors of that person's desire
to cumulate votes for one or more candidates whose name(s) have been placed
in nomination. If any shareholder exercises the right to cumulate votes for
the election of directors, then all shareholders are entitled to cumulative
voting rights for the election of directors. Cumulative voting applies only
to voting for the election of directors (not for the other proposals before
the meeting).
On April 18, 2003, there were 4,904,234 shares of Common Stock outstanding.
ANNUAL REPORT
The Annual Report on Form 10-K of the Company for the fiscal year ended
December 31, 2002 ("Annual Report") is being mailed with the Proxy Statement.
Stockholders are referred to the Annual Report for financial and other
information about the activities of the Company. The Annual Report is
not incorporated by reference into this Proxy Statement and is not deemed
to be a part of it.
1. ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
The Company's Board of Directors currently consists of three members. Three
directors are to be elected at the Meeting to hold office until the next
Annual Meeting of Shareholders and until their successors are elected and
qualified. It is intended that the accompanying proxy will be voted in
favor of the following persons to serve as directors unless the shareholder
indicates to the contrary on the proxy. The election of the Company's
directors requires a plurality of the votes cast in person or by proxy at
the meeting. The Board of Directors expects that each of the nominees will
be available for election, but if any of them is not a candidate at the time
the election occurs, it is intended that proxies will be voted for the
election of another nominee to be designated by the Board of Directors to
fill any vacancy.
In the event all three of the Board of Directors' nominees cannot be
elected, then the Board of Directors in its discretion may instruct Robert
S. Cope to vote cumulatively for less than three of the Board of Directors'
nominees. In this event, it is the Board of Directors' current intention to
instruct Mr. Cope to vote proxies received by the Board of Directors for the
reelection of Robert S. Cope and James R. Yarter.
Nominees Proposed by the Board of Directors
Set forth below is certain information pertaining to the persons who are
proposed as nominees for election to the Company's Board of Directors.
Robert S. Cope, 67, along with his family, is a 54.6% shareholder of the
Company, a current director of the Company, and holds the officer positions
of President and Chairman of the Board of the Company, will be seeking
reelection to the Board. During the previous five years Mr. Cope has served
the Company as a director, Chairman of the Board, Chief Executive Officer,
President and Treasurer.
Thomas J. Dudley, Ph.D., 71, is a 0.6% shareholder of the Company's Common
Stock and has been a director since July 17, 2002. Dr. Dudley is also
Chairman of the Audit Committee. Dr. Dudley is the Distinguished Professor
of Decision and Information Systems at Pepperdine University in Los Angeles,
CA. and has been associated with Pepperdine since 1968. He was the founder
and principal instructor for the Pepperdine Executive Management Program
(providing continuing education for key executive officers). Dr. Dudley is
also the founder and a principal of Thomas J. Dudley & Associates, a firm
providing management consulting services since 1968. For the past 10 years,
Dr. Dudley has served as a director for Space Labs Medical, Inc. (a NASDAQ
company) engaged in the medical equipment and instrumentation business.
James R. Yarter, 65, is a 6.7% shareholder of the Company's Common Stock
and has been a director since June 21, 2001 and a member of the audit
committee since July 17, 2002. Mr. Yarter's prior business background and
experience covers a period of 35 years. During the past nine years, his
experience includes being President and Chief Executive Officer of the
following companies: Block Medical, a division of Hillenbrand Industries,
Inc., a company listed on the New York Stock Exchange, for the period 1994-
1996; US Medical, a start-up company for the period 1996-1997; and Gish
Biomedical, Inc., a company listed on NASDAQ, for the period 1999-2000.
Besides being on the Company's Board of Directors, Mr. Yarter is currently
on the board of directors of Avant Medical and Group 3 Inc.
During the Company's year ended December 31, 2002, the Board of Directors
has held 12 meetings. During the three months ended March 31, 2003, the
Board of Directors has held three meetings.
At its organizational meetings on July 17, 2002, the Company's Board of
Directors appointed the entire Board of Directors to serve on the
compensation committee. The Board currently does not have a standing
nominating committee.
Audit Committee Report
The Board of Directors formed an Audit Committee on July 17, 2002 and
appointed Thomas J. Dudley as Chairman and James R. Yarter to the Committee.
Mr. Dudley would be considered independent and Mr. Yarter would not be
considered independent, since he is employed by the Company as a part-time
sales and marketing consultant under NASD Rule 4200(a)(14). The Board of
Directors considered the independence of Mr. Yarter and concluded that
his nominal employment by the Company would not interfere with his exercise
of independent judgment in carrying out his responsibilities as a member of
the Audit Committee. The Audit Committee's charter is currently under
development by the Committee. The Audit Committee has discussed the Company's
audited financial statements for the year ended December 31, 2002 with
management. The Audit Committee has discussed with the Company's independent
auditor, Singer Lewak Greenbaum & Goldstein LLP ("SLGG"), the matters
required to be discussed under Statement of Auditing Standards ("SAS") No.
61, "Communications with Audit Committees," as amended by SAS 90, "Audit
Committee Communications." SLGG has also provided written disclosures and
the letter to the Audit Committee required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees." The Audit
Committee has further considered and discussed the independence of the
Company's independent accountants in light of the actual and expected audit
fees and non-audit related fees in 2003. (See "Fees Paid to Singer Lewak
Greenbaum & Goldstein LLP " below).
Based upon the reports and discussions described in this report, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 2002, and be filed with the Securities and Exchange Commission.
/s/ Thomas J. Dudley
--------------------
Thomas J. Dudley
Chairman of the Audit Committee
/s/ James R. Yarter
-------------------
James R. Yarter
Member of the Audit Committee
Directors and Named Executive Officers
The following table sets forth the names and ages of, and the positions and
offices within the Company held by, certain directors and officers of the
Company at December 31, 2002:
Name Age Position
___________________ _____ ____________________________________________
Robert S. Cope 67 Chairman of the Board, Director & President.
Has served in these capacities for more than
ten years.
Thomas J. Dudley 71 Director & Chairman of the Audit Committee.
Dr. Thomas J, Dudley, Ph.D. was elected to
the Board in July, 2002. Dr. Dudley is the
Distinguished Professor of Decision and
Information Systems at Pepperdine University
in Los Angeles, CA. and the founder of the
Pepperdine Executive Management Program.
Also a former director for Space Labs
Medical, Inc. for 10 years. Dr. Dudley is
also the founder and a principal of Thomas J.
Dudley & Associates, a firm providing
management consulting services since 1968.
James R. Yarter 65 Director. Has served as a director for more
than one year. During the past five years, Mr.
Yarter has served as President and CEO of Block
Medical, US Medical, and Gish Biomedical, Inc.
and as a member of the board of director's of
Avant Medical and Group 3 Inc.
Paul R. Cope 47 Chief Technology Officer. Has served in this
and other capacities for more than 10 years.
Albert B. Flores 37 Vice President, Sales and Marketing. Has
served in this and other capacities for more
than 10 years.
Juergen A. Jung 52 Vice President, Operations. Has served in this
and other capacities for more than 10 years.
Daniel E. Luebben 54 Chief Financial Officer and Secretary.
Has served in these and similar capacities for
more than ten years.
Directors serve until their successors are elected at the Annual Meeting of
Shareholders. All executive officers serve at the discretion of the Company's
Board of Directors.
EXECUTIVE COMPENSATION
The following table discloses compensation received for the three fiscal years
ended December 31, 2002 by the Named Executive Officers.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
_______________________________ Securities
Name and Other Underlying
Principal Position Year Salary Bonus Compensation Options
_____________________ ______ ________ _________ ____________ __________
Robert S. Cope 2002 $137,500 $13,750 $45,869 None.
Chairman of the 2001 137,000 -0- 45,869 None.
Board (1) 2000 137,000 -0- 43,391 None.
Paul R. Cope 2002 115,000 11,500 677 25,000
CTO 2001 108,269 7,500 629 None.
Albert B. Flores 2002 91,050 22,582 538 25,000
VP Sales & Marketing 2001 90,983 16,906 561 None.
2000 87,550 14,745 510 None.
Juergen A. Jung 2002 97,300 9,730 639 25,000
VP, Operations (2)
Daniel E. Luebben 2002 117,000 11,700 736 25,000
CFO/Secretary 2001 103,923 -0- 634 None.
2000 107,500 -0- 584 None.
(1) The Other Annual Compensation amounts disclosed for Mr. Cope includes
$560 each year for disability insurance premiums, $7,719, $7,910, and $7,674
for life insurance premiums; $20,769, $20,653, and $21,706 for Company
vehicle lease payments and operating costs; $14,437, $16,798, and 13,503
for club dues and expenses for the years 2002, 2001 and 2000, respectively.
(2) All Other Compensation for Mr. Jung includes a potential payment equal
to one year's compensation in the event of a change in control.
Compensation of Directors
Outside directors receive $1,500 (plus expenses) per board/committee meeting
attended personally, $1,000 per other meeting attended personally and $500
per board or other meeting attended telephonically. In addition, outside
directors are entitled to receive stock options for 25,000 shares of
"restricted" Common Stock for their first year of service and 10,000 shares
annually for each succeeding year of service as a director, subject to the
terms of the 2002 Stock Option Plan (see below).
Compensation pursuant to Stock Options
2002 Stock Option Plan
The Company adopted a qualified and non-qualified stock option plan following
approval by its shareholders at its 2001 annual shareholder's meeting held on
February 27, 2002. The plan consists of 490,000 shares with approximately
350,000 qualified shares reserved for employees and 140,000 non-qualified
shares reserved for directors. On May 3, 2002, the Company's Board of
Directors granted stock options for 220,000 shares of the Company's restricted
Common Stock at a strike price of $0.30, reflecting the market price on the
date of the grant, to an outside director (60,000 non-qualified shares),
officers and technical staff (160,000 qualified shares). On July 17, 2002,
the Company's Board of Directors granted stock options for 35,000 non-
qualified shares of the Company's restricted Common Stock at a strike price of
$0.325, reflecting the market price on the date of the grant, to its outside
directors. As of December 31, 2002, there were 195,000 qualified options and
60,000 non-qualified options outstanding for a total of 255,000 options and
235,000 options available for future grant. Under the plan, the stock option
price per share for options granted is determined by the Board of Directors
and is based on the market price of the Company's common stock on the date of
grant. The stock options vest over four years and no option can be exercised
later than ten years from the date it was granted. The following qualified and
non-qualified stock options were awarded by the Board of Directors at its
organizational meeting on May 3rd and July 17th of 2002:
NEW PLAN BENEFITS TABLE
2002 STOCK OPTION PLAN
Name and Principal Position Dollar Value($)(1) Number of Units (Shares)
___________________________ __________________ ________________________
Robert S. Cope -0- -0-
Chairman of the Board
and President
Thomas J. Dudley 8,125 25,000
Director
James R. Yarter 21,250 70,000
Director
Paul R. Cope 7,500 25,000
CTO
Albert B. Flores 7,500 25,000
VP, Sales and Marketing
Juergen A. Jung 7,500 25,000
VP, Operations
Daniel E. Luebben, 7,500 25,000
CFO and Secretary
All Current Executive Officers 30,000 100,000
All Current Directors who are
not Executive Officers 29,375 95,000
All Employees who are
not Executive Officers 18,000 60,000
(1) Dollar value is based on $0.30 and $0.325 per share, which
was the fair market value on the grant dates of May 3, 2002 and
July 17, 2002, respectively.
The Plan was filed as an exhibit to the Company's Definitive Proxy dated
February 8, 2002 as filed with the Securities and Exchange Commission and
is incorporated herein by reference.
The following table summarizes information concerning stock option grants to
named executive officers during the fiscal year ended December 31, 2002. All
options were granted under the 2002 Stock Option Plan and have ten year terms.
Under SEC Regulation S-K, the Company is required to disclose the hypothetical
gains which the named executive officers would realize at the end of the
option term. The gain assumes a compound annual stock price appreciation of
5% and 10% from the date the option was originally granted to the end of the
option term. These rates of stock price appreciation are not necessarily the
Company's estimate nor do they represent any projection of the future price of
the Company's stock.
Option Grants in Last Fiscal Year
Individual Grants
______________________________
Potential Realizable
Number of Pct. of Total
Value at Assumed
Securities Options
Annual Rates of Stock
Underlying Granted to Exercise
Price Appreciation Grant Date
Options Employees in Price Expiration
For Option Term Present
Name Granted Fiscal Year ($/Share) Date
5%($) 10%($) Value($)
_________________ ___________ _________________ _____________ _______________ _________ _________ ___________
Robert S. Cope None -- -- --
-- -- --
Paul R. Cope 25,000 15.6% $0.30 5/03/2012
$ 4,717 $ 11,953 $ 2,500
Albert B. Flores 25,000 15.6% $0.30 5/03/2012
$ 4,717 $ 11,953 $ 2,500
Juergen A. Jung 25,000 15.6% $0.30 5/03/2012
$ 4,717 $ 11,953 $ 2,500
Daniel E. Luebben 25,000 15.6% $0.30 5/03/2012
$ 4,717 $ 11,953 $ 2,500
The Percent of Total Options Granted to Employees in Fiscal Year does not
total 100% due to options granted to individuals other than named executive
officers. The grant date market value of the Common Stock underlying all of
the above options was approximately $77,375. The Potential Realizable Value
at Assumed Annual Rates of Stock Price Appreciation for the Option Term of
5% and 10% is $48,110 and $198,421, respectively. The Grant Date Present
Value was established using the Black-Scholes option pricing model based on
a current market price of $0.30 per share on the grant date, an exercise
price of $$0.30, a five year expected term, an estimated volatility factor
of 30%, no dividends and a risk-free interest rate of 3.6%.
The following table summarizes information concerning the value received on
options exercised during the fiscal year ended December 31, 2002 and the
value as of December 31, 2002:
Aggregated Option Exercises in the Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Number of Options Options
Securities at Fiscal at Fiscal
Underlying Year-End Year-End
Options Value($) Exercisable/ Exercisable/
Name Exercised Realized Unexercisable Unexercisable
_________________ __________ __________ _______________ _______________
Robert S. Cope None None None/None None/None
Paul R. Cope None None 0/25,000 None/$11,250
Albert B. Flores None None 0/25,000 None/$11,250
Juergen A. Jung None None 0/25,000 None/$11,250
Daniel E. Luebben None None 0/25,000 None/$11,250
The following table summarizes information on the stock price-based option
plan awards made during the fiscal year ended December 31, 2002:
Long-Term Incentive Plans
Awards in Last Fiscal Year
Performance
or Other
Period Until
Number Maturation
Name of Shares or Payout
_____________________ ___________ ______________
Robert S. Cope None None
Paul R. Cope 25,000 4 Years
Albert B. Flores 25,000 4 Years
Juergen A. Jung 25,000 4 Years
Daniel E. Luebben 25,000 4 Years
As permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation", the Company has continued to
account for employee stock options under Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees", and related
interpretations. As a result of this election, the Company does not recognize
compensation expense for its stock option plans since the exercise price of
the options granted equals the fair value of the stock on the date of grant.
The fair value for these options was estimated at the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 2002: expected life of five years, weighted
average risk-free interest rate of 3.6%, expected volatility of 30% and a
dividend yield of 0%. The weighted average fair value of options granted at
the fair market price on the grant date in 2002 was $0.30. All options
granted in 2002 were at the fair market price.
Transactions involving stock options are summarized as follows:
Number of Weighted Average
Shares Exercise Price
_________ ________________
Balance at December 31, 2001 -- $ 0.00
Granted during 2002 255,000 0.30
Balance at December 31, 2002 255,000 0.30
Additional information with respect to the outstanding options as of December
31, 2002 is as follows:
Options Outstanding Options Exercisable
_________________________________ ____________________
Average Weighted
Remaining Average Average
Option Exercise Number of Contractual Exercise Number of Exercise
Price Range Shares Life(Yrs.) Price Shares Price
_______________ _________ ___________ _________ _________ ________
$0.30 to 0.40 255,000 9.4 $ 0.30 None N/A
1997 Non-qualified Stock Option Plan
The Company adopted a 1997 Non-qualified Stock Option Plan effective
December 31, 1997. The Plan consists of 300,000 shares of the Company's
authorized but unissued Common Stock. The plan is a non-qualified plan
covering only senior executives and related persons. As of December 31,
2002, 2001 and 2000, there were no outstanding grants of options under the
Plan and no grants are currently planned.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership
of the Company's common shares by the directors, the Company's Chief Executive
Officer and the four other highest paid executive officers (the "Named
Executive Officers"), and the directors and executive officers as a group:
Amount and Nature of
Beneficial Ownership of Percent
Common Shares as of of
Names April 18, 2003 Class
_____________________________________ _______________________ _______
Robert S. Cope 2,303,809(1) 47.0%
Paul R. Cope 373,602 7.6%
James R. Yarter 327,084(2) 6.7%
Thomas J. Dudley 31,500 0.6%
Daniel E. Luebben 15,000 0.3%
Executive Officers and Directors
as a Group (7 Persons) 3,050,995 62.2%
(1) Includes the following shares held by family members and relatives:
2,079,559 shares held by the Cope Family Trust of which Mr. Cope is the
trustee; 71,625 shares held by Bryan A. Cope; 101,625 shares held by Lizabeth
L. Cope; and 15,000 shares held by William R. McConnell. Excludes warrants
for 310,626 shares, the conversion of which would raise Mr. Cope's ownership
to 2,614,435 shares or 47.3%. (See "Certain Relationships and Related
Transactions" pertaining to warrants below).
(2) Excludes warrants for 310,626 shares, the conversion of which would
raise Mr. Yarter's ownership to 637,710 shares or 11.5%. (See "Certain
Relationships and Related Transactions" pertaining to warrants below).
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and 10% shareholders to file forms with the
SEC to report their ownership of the Company's shares and any changes in said
ownership. Anyone required to file forms with the SEC must also send copies
of the forms to the Company. To the best of the Company's knowledge and
belief, all forms under Section 16(a) have been filed on time.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases its corporate office facility from a limited partnership
owned by a current and a former director/stockholder of the Company
("Lessor"). For the past 18 months, the Company has leased the facility as a
hold-over tenant under a 15 year (five year with two five year renewal
options) lease that expired in June 2001. In January 2002, the Company
reduced its square footage occupied from 19,460 to 14,694 square feet having
an annual base rent of $194,000 (plus expenses). In December 2002, a new five
year lease (with one five year renewal option) was negotiated and approved by
the two independent members of the Company's Board of Directors. The Company
further reduced it's square footage occupied to 12,745 square feet under the
new lease. The rental rate for the lease renewal is equal to or less than
the rental rates paid by three unaffiliated tenants in the same building.
The Company also surveyed available office properties of similar size and
amenities in the Pomona and surrounding areas and the lease rental rate is
in the bottom quartile of the range of comparable properties. The Company
also has an option to purchase a one-third interest in the Lessor from one
of the partners who is also a former director/stockholder of the Company
for an amount not to exceed $150,000 subject to certain conditions.
Management believes that the reconfigured space will be sufficient for
the Company's current and foreseeable future needs.
James R. Yarter, a shareholder, has been a director of the Company since June
2001 and was paid $23,500 and $9,000 in director fees for the Company and its
subsidiaries in 2002 and 2001, respectively. Mr. Yarter also serves as a
sales and marketing consultant to the Company and was paid $30,000 and $7,500
for consulting services rendered to the Company in 2002 and 2001,
respectively.
Thomas J. Dudley, a shareholder, has been a director of the Company since July
2002 and was paid $8,755 in director fees in 2002.
In July, 2002, the Company exercised its right of first refusal and acquired
1,919,400 shares of common stock in each of its majority-owned subsidiaries,
Dataquad, Inc. and LibraryCard, Inc. from a major investor for a payment of
approximately $31,000 bringing the Company's ownership to 6,609,400 (85.8%) in
each subsidiary.
In December 2002, the Company paid approximately $4,000 to acquire most of
the remaining shares in Dataquad, Inc. and LibraryCard, Inc. owned by Corey
M. Patick and Paul Shepherd, both shareholders in the Company, and Paul R.
Cope, an officer and shareholder in the Company.
In January 2003, Donald A. Scurti, a shareholder, provided financing to the
Company of approximately $59,000 on a two year note to purchase computer
servers and, in December 2001, 31,000 on a one year note to purchase
computer servers, which note has since been fully repaid.
On May 9, 2001 the Company terminated the services of its long-time outside
counsel, Robert H. Bretz. Mr. Bretz was also a director and shareholder of
the Company. Following his termination, Mr. Bretz began to file multiple
lawsuits (a total of eight) against the Company, its current and former
officers, directors and counsel:
1. Auto-Graphics, Inc. vs. Cope, Los Angeles County Superior Court, Case No.
BC 252517;
2. Auto-Graphics, Inc. v. Cope, United States District Court, Central
District of California, Case No. CV 01-5891 PA(MCx);
3. Auto-Graphics, Inc. v. Robert H. Bretz, et al, Los Angeles County
Superior Court, Case No. BC 253322;
4. Robert H. Bretz, v. Robert S. Cope, et al., Los Angeles County Superior
Court, Case No. BC 263256;
5. Robert H. Bretz v. Rose, et al., Los Angeles County Superior Court, Case
No. 02K10479;
6. Robert H. Bretz v. Rose, et al., Los Angeles County Superior Court, Case
No. 02K12686;
7. Robert H. Bretz v. Auto-Graphics, Los Angeles County Superior Court, Case
No. BS80223; and
8. Robert H. Bretz v. Robert S. Cope, et al., Los Angeles County Superior
Court, Case No. BC 273691.
Through December 31, 2002, the Company had spent over $1,100,000 in
successfully defending these lawsuits, but anticipated spending another
$500,000 in defending these existing cases through trial and believed that
Mr. Bretz would continue to file similar lawsuits. On January 16, 2003 the
Company settled the existing lawsuits with Mr. Bretz dismissing all of the
lawsuits, including his lawsuit to recover approximately $65,000 for
previously billed services to the Company, in return for a payment of
$15,000. The settlement entailed the purchase of stock owned by Mr. Bretz
at a price in excess of the then current fair market value of the underlying
common stock. Two directors agreed to pay Mr. Bretz $0.85 per share for
414,168 shares or a total of approximately $352,000 even though the market
price was approximately $0.30. Therefore, the two directors paid a premium
of $0.55 per share over the fair market value of $0.30 per share or
approximately $228,000. Since the Company could not legally repurchase the
stock under the California Corporations Code and the settlement was clearly
in the best interests of the Company and would avoid substantial future legal
fees and costs, the Company agreed to reimburse the two directors for the
premium they paid to Mr. Bretz in the form of warrants to purchase additional
shares of the Company's "restricted" common stock. The Company engaged an
independent appraiser to establish a fair market value for the large block
of shares, which fair market value was determined to be $0.30 per share.
Based on the premium paid by the directors of approximately $228,000 and
an exercise price of $0.01 each per warrant and share, the directors would
be entitled to a total of 814,000 warrants/shares. However, the directors
have agreed to accept a total of 621,252 warrants to purchase additional
shares of the Company's "restricted" Common Stock representing a discount
of approximately 24%. As permitted by Statement of Financial Accounting
Standards No. 123 (and No. 148), "Accounting for Stock Based Compensation",
the Company will continue to account for employee stock options (and warrants)
using the "intrinsic method" under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations. The
result has been a non-cash charge to earnings of $215,000 in 2002. The
transaction has been reviewed by the Company's general counsel and approved
by the sole independent director, Thomas J. Dudley.
The Company filed a complaint in Los Angeles, California, Superior Court, Case
No. BC261175 on November 6, 2001 against Pigasus, Inc. and its principals,
Arthur and Candy Zemon, which sought to rescind the contract for the Company's
acquisition of the Wings software developed by Pigasus and sought damages in
excess of $400,000. Subsequently, Pigasus Software, Inc., Arthur Zemon and
Candace Zemon filed suit in the Circuit Court of Saint Charles County, State
of Missouri, Civil Action No. 01CV129525, against Auto-Graphics, Inc. and
sought damages in excess of $500,000. The parties concluded a settlement on
August 21, 2002 following the delivery of a fully functional and compilable
ISO interlibrary loan software system by Pigasus to the Company in July 2002.
The Company currently has no outstanding litigation.
PROPOSALS OF SHAREHOLDERS FOR THE 2004 ANNUAL MEETING
To be considered for inclusion in next year's Proxy Statement, shareholder
proposals must be received in writing at the Company's principal executive
office no later than the close of business on December 31, 2003.
For any proposal that is not submitted for inclusion in next year's proxy
statement (as described in the preceding paragraph) but is instead sought to
be presented directly at next year's Annual Meeting, Securities and Exchange
Commission rules permit management to vote proxies in its discretion if (a)
the Company receives notice of the proposal before the close of business on
December 31, 2003 and advises stockholders in next year's proxy statement
about the nature of the matter and how management intends to vote on the
matter, or (b) does not receive notice of the proposal prior to the close of
business on December 31, 2003.
Notices of intention to present proposals at the 2003 Annual Meeting should
be addressed to Daniel E. Luebben, Secretary, Auto-Graphics, Inc., 3201
Temple Avenue, Pomona, California 91768. The Company reserves the right
to reject, rule out of order, or take other appropriate action with respect
to any proposal that does not comply with these and other applicable
requirements.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers, directors,
and regular supervisory and executive employees of the Company, none of whom
will receive any additional compensation for their services. Solicitations
may be made personally or by mail, facsimile, telephone, messenger, or via
the Internet. The Company will pay persons holding shares of common stock in
their names or in the names of nominees, but not owning the shares
beneficially, such as brokerage houses, banks, and other fiduciaries, for
the expense of forwarding solicitation materials to their principals. All of
the costs of solicitation of proxies will be paid by the Company.
VOTING PROCEDURES
Tabulation of Votes: Votes cast by proxy or in person at the meeting will
be tabulated by persons appointed as inspectors of election for the meeting.
Effect of an Abstention and Broker Non-Votes: A shareholder who abstains
from voting on any or all proposals will be included in the number of
shareholders present at the meeting for the purpose of determining the
presence of a quorum. Abstentions and broker non-votes will not be counted
either in favor of or against the election of the nominees or other
proposals. Brokers holding stock for the accounts of their clients who have
not been given specific voting instructions as to a matter by their clients
will vote their clients' proxies in their own discretion.
INDEPENDENT AUDITORS
Representatives of Singer Lewak Greenbaum and Goldstein, LLP, independent
auditors for the Company for fiscal 2002 and the current fiscal year,
will be present at the Annual Meeting, will have an opportunity to make a
statement, and will be available to respond to appropriate questions.
FEES PAID TO SINGER LEWAK GREENBAUM & GOLDSTEIN, LLP
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by Singer Lewak Greenbaum and Goldstein,
LLP for the fiscal year 2002.
Audit and Quarterly Review Fees $ 37,500
Financial Information System
Design and Implementation Fees -0-
All Other Fees -0-
---------
Total $ 37,500
=========
FEES PAID TO BDO SEIDMAN, LLP
The following table shows the fees paid or accrued by the Company for the
audit and other services provided by BDO Seidman, LLP, the Company's prior
independent certified public accountant for the fiscal year 2002.
Audit and Quarterly Review Fees $ 28,309
Financial Information System
Design and Implementation Fees -0-
All Other Fees 4,380
---------
Total $ 32,689
=========
OTHER MATTERS
The Board of Directors does not intend to bring any other business before
the meeting, and so far as is known to the Board, no matters are to be
brought before the meeting except as specified in the notice of the meeting.
As to any other business that may properly come before the meeting, it is
intended that proxies, in the form enclosed, will be voted in respect
thereof in accordance with the judgment of the persons voting those proxies.
If any of your shares of the Company are held in the name of a brokerage
firm, bank, nominee or other institution, only it can vote your shares and
only upon receipt of your specific instructions. Please remove, sign, date
and promptly mail the proxy card in the envelope provided by your broker.
Remember, your shares cannot be voted unless you return a signed and
executed proxy card to your broker.
This Proxy Statement includes forward looking statements within the meaning
of section 27A of the Securities Act and section 21E of the Exchange Act.
If you have any questions or require any additional information or
assistance or wish a copy of the annual report, please call Daniel E.
Luebben, the Secretary of the Company, at 1-800-776-6939, or e-mail to
"del@auto-graphics.com" or mail request to 3201 Temple Avenue, Pomona,
California 91768.
DATED: Pomona, California, May 7, 2003.
AUTO-GRAPHICS, INC.
ATTN: CHIEF FINANCIAL OFFICER
3201 TEMPLE AVENUE
POMONA, CALIFORNIA 91768
1-800-776-6939
del@auto-graphics.com
This proxy when properly signed will be voted in the manner directed herein
by the undersigned shareholder.
IF NO DIRECTION IS PROVIDED, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1 (THE
ELECTION OF THE THREE NOMINEES FOR DIRECTOR)
..
Please mark you votes as indicated [X]
FOR WITHHOLD
election of vote
all from all
nominees nominees
----------- --------
1. Election of directors:
01 Robert S. Cope, 02 James R. Yarter,
03 Thomas J. Dudley [_] [_]
Except for nominee(s) listed below
from whom vote is withheld:
__________________________________________________________
2. In their discretion, the proxies are authorized to vote upon any
other business as may properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints ROBERT S. COPE with full power of
substitution, as proxies to vote the shares which the undersigned is
entitled to vote at the Annual Meeting of Shareholders of the Company
to be held at 3201 Temple Avenue, Pomona, California 91768 on June 17,
2003 at 10:00 a.m. PDT and at any adjournments thereof.
IMPORTANT - PLEASE SIGN AND RETURN PROMPTLY. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
Signature_____________________________________________ Dated:______________
Signature if held jointly_____________________________ Dated:______________
YOUR VOTE IS IMPORTANT!
VOTE BY PROXY CARD
Mark, sign and date your proxy card and return it promptly in the enclosed
envelope.
THANK YOU FOR VOTING.
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