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 June 10, 2002 if at all possible.
CONTACT: For information regarding this proxy statement/filing, please
call or write Daniel E. Luebben, Secretary at (909) 595-7204
ext. 499 or 3201 Temple Avenue, Pomona, Ca 91768.
AUTO-GRAPHICS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
July 17, 2002
To the Shareholders:
The annual meeting of the shareholders ("Meeting") of Auto-Graphics, Inc.
will be held at 3201 Temple Avenue, Pomona, California 91768 on Wednesday,
July 17, 2002, at 10:00 a.m. PDT for the following purposes:
1. To elect directors.
2. To amend the Bylaws to change the date for the Annual Meeting of
Shareholders from May 15th to the second Wednesday in June, or, as
established by the Board of Directors, but not later than September 30.
3. To consider one shareholder proposal described in the accompanying
Proxy Statement.
4. To transact any other business as may properly come before the
meeting.
Only shareholders of record at the close of business on May 31, 2002 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 June 7, 2002, 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, 2002.
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
Daniel E. Luebben
Secretary
Pomona, California
June 10, 2002
AUTO-GRAPHICS, INC.
3201 Temple Avenue
Pomona, California 91768
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
To Be Held July 17, 2002
GENERAL INFORMATION
This Proxy Statement, which will be first mailed to shareholders on or about
June 10, 2002, 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 the Shareholders ("Meeting")
of the Company, which will be held at 10:00 a.m. PDT on July 17, 2002 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 May 31, 2002 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 May 31, 2002, there were 4,997,234 shares of Common Stock outstanding.
ANNUAL REPORT
The Annual Report on Form 10-K/A of the Company for the fiscal year ended
December 31, 2001 ("Annual Report") and the Quarterly Report on Form 10-Q
for the quarter ended March 31, 2002 ("Quarterly Report") is being mailed
with the Proxy Statement.
Stockholders are referred to the Annual Report and Quarterly Report for
financial and other information about the activities of the Company. The
Annual Report and Quarterly Report are 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, 66, along with his family, is a 44% 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.
James R. Yarter, 65, is a 2% shareholder of the Company. 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. On June 21, 2001, Mr. Yarter was elected to the Board of Directors by
consent of a majority of the shares outstanding to serve until a successor
shall be duly elected and qualified. Mr. Yarter was re-elected to the Board
of Directors at the Company's 2001 Annual Meeting on February 27, 2002.
Subsequent to his election to the Board of Directors on February 27, 2002
and prior to the organizational meeting of the Board of Directors on May 2,
2002, Robert L. Lovett resigned his position as a director of the Company.
Thomas J. Dudley, Ph.D., 71, is a first time nominee for election to the
Company's Board of Directors. Dr. Dudley is a shareholder of the Company
and owns 0.6% of the Company's Common Stock. 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.
During the Company's year ended December 31, 2001, the Board of Directors
has held five meetings. During the five months ended May 31, 2002, the
Board of Directors has held three meetings.
At its organizational meeting on May 2, 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 May 2, 2002 and
appointed James R. Yarter to the Committee. 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 judgement in carrying out his responsibilities as a member of
the Audit Committee. The entire Board of Directors reviewed and approved
the Company's financial statements for the year ended December 31, 2001 and
the Company's Annual Report on Form 10-K/A as filed on April 30, 2002. 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, 2001 with management. The Audit Committee
has discussed with the Company's independent auditor, BDO Seidman LLP ("BDO"),
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." BDO 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 certified public accountants in light of the
actual and expected audit fees and non-audit related fees in 2002. (See
"Fees Paid To BDO Seidman, LLP" below).
ss/ James R. Yarter
-------------------
James R. Yarter
Member of 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, 2001:
Name Age Position
------------------ ----- ----------------------------------------------
Robert S. Cope 66 Chairman of the Board, Director and President.
Has served in these capacities for more than
ten years.
Robert H. Bretz 58 Director. Attorney who has acted as the
Company's outside general legal counsel and
served as a Director for more than ten years
until May 9, 2001 and February 27, 2002,
respectively (See below).
James R. Yarter 65 Director. Has served as a director for less
than one year. During the past nine 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.
Daniel E. Luebben 53 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
stockholders. All executive officers serve at the discretion of the
Company's Board of Directors.
Beneficial Ownership
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 5/31/02 Class
------------------------------------ --------------------- -------
Robert S. Cope 1,829,725(1) 36.6%
Paul R. Cope 373,602 7.5%
James R. Yarter 120,000 2.4%
Thomas J. Dudley 30,000 0.6%
Daniel E. Luebben 15,000 0.3%
Executive Officers and Directors
as a Group (5 Persons) 2,368,327 47.4%
(1) Includes the following shares held by family members and relatives:
1,641,475 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.
Cash Compensation
The following table discloses compensation received for the three fiscal
years ended December 31, 2001 by the Named Executive Officers.
SUMMARY COMPENSATION TABLE
Annual Compensation
-----------------------------
Name and Other
Principal Position Year Salary Bonus Compensation
--------------------- ---- -------- ----- ------------
Robert S. Cope 2001 $137,500 -0- $45,869
Chairman of the 2000 137,000 -0- 43,391
Board (1) 1999 156,000 -0- 32,708
Daniel E. Luebben 2001 $105,000 -0- -0-
CFO/Secretary 2000 108,000 -0- -0-
1999 93,000 -0- -0-
Michael K. Skiles 2001 $155,000 -0- -0-
Former President (2) 2000 102,000 -0- -0-
Michael F. Ferguson 2001 $111,000 -0- -0-
Former CFO/Sec. (2) 2000 11,000 -0- -0-
(1) The Other Annual Compensation amounts disclosed for Mr. Cope includes
$508 each year for disability insurance premiums; and $7,910, $7,674 and
$7,160 for life insurance premiums; $20,653, $21,706, and $13,339 for
Company vehicle lease payments and operating costs; $16,798, 13,503, and
$11,701 for club dues and costs, for the years 2001, 2000 and 1999,
respectively.
(2) No longer employed by the Company.
Compensation of Directors
Outside directors receive $1,500 per board meeting (plus expenses) attended
personally and $500 per board meeting attended telephonically. In addition,
outside directors will be entitled to receive stock options for 25,000
shares of "restricted" Common Stock for their first year of service and
stock options for 10,000 shares of "restricted" Common Stock 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
There have been no stock option grants for the three years ended December
31, 2001. The Company's 2002 Stock Option Plan (the "Option Plan") was
approved by the Company's shareholders at its 2001 Annual Meeting, which was
held on February 27, 2002. The Plan is a combination qualified (incentive
stock option) and non-qualified stock option plan. Incentive stock options
may be granted only to current employees of the Company or its subsidiaries.
Nonqualified stock options may be granted under the Option plan to
employees, directors, and consultants of the Company, its affiliates and
subsidiaries, as well as to persons to whom offers of employment as
employees have been granted. The Option Plan provides that the aggregate
number of Company common shares underlying all options to be granted is
499,000 shares of common stock. The aggregate number of shares underlying
all incentive stock options that may be granted under the Option plan may
not exceed 350,000 and the aggregate number of shares underlying all
nonqualified stock options that may be granted under the Option plan may not
exceed 149,000. The exercise price for shares under an incentive stock
option and under the nonqualified stock option may not be less than 100% of
the fair market value of the common stock on the date the stock option is
granted. The fair market value price for a share of Company common stock
underlying each option is the arithmetic mean between the "bid" and the
"ask" price at the closing of the market on the grant date as reported on
the Over-the-Counter Bulletin Board. The term of an option will be no more
than 10 years and will vest at the rate of 25% per year of service. The
following qualified and non-qualified stock options were awarded by the
Board of Directors at its organizational meeting on May 2 and May 3 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-
President and
Chairman of the Board
Daniel E. Luebben, 7,500 25,000
CFO and Secretary
James R. Yarter 18,000 60,000
Director
All Current Executive Officers 7,500 25,000
All Current Directors who are
not Executive Officers 18,000 60,000
All Employees who are
not Executive Officers 40,500 135,000
(1) Dollar value is based on $0.30 per share and computed based on the
arithmetic mean between the "bid" and "ask" prices for the Company's Common
Stock at the closing of the market on the Over-the-Counter Bulletin Board on
the grant date of May 3, 2002.
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") under a 15 year lease, which was approved and authorized by the
independent members of the Company's Board of Directors in June 1986. The
Company also has an option to purchase a one-third interest in the
partnership from the Lessor for an amount not to exceed $150,000 subject to
certain conditions. In 2001, the Company leased 19,460 square feet having
an annual base rent of $238,000 (plus expenses). As of March 1, 2002, the
Company has reduced its space occupied by approximately 26% from 19,460
square feet to 14,460 square feet. The reduction in space was completed
following a reduction in staffing levels in the fourth quarter of 2001 and
will result in a decrease in the Company's annualized rent of approximately
$47,000 (plus expenses). The original lease expired in June, 2001 and the
Company has remained in the facility as a hold-over tenant pending
completion of negotiations on a new lease and approval by the independent
members of the Board of Directors. In May 2002, the Company and the Lessor
agreed to continue as a hold-over tenant on a month-to-month basis at the
rate of $1.65 per square foot retroactive to January 1, 2002 and on the
reduced square footage of 14,460 square feet. The new rental rate of $1.65
per square foot for the hold-over is equal to the rental rates paid by two
unaffiliated tenants in the same building. The Company has also surveyed
similar available office properties in the Pomona and surrounding areas and
the lease rental rate is in the bottom quartile of the range of comparable
properties. The Lessor has further agreed to waive any additional rent due
as a hold-over tenant for the period following the expiration of the
original lease on June 30, 2001. The hold-over was approved as an interim
measure by the only current independent director, James R. Yarter, on the
Company's Board of Directors (Robert S. Cope abstained), pending the
election and qualification of a second independent director and a better
assessment of the Company's future space needs. A long-term lease
commitment may then be considered by the two independent directors in
conformance with California Corporations Code Section 310. Management
believes that the reconfigured space will be sufficient for the Company's
current and foreseeable future needs.
In May 1999, Robert S. Cope and the Cope Family Trust granted an option to
Corey M. Patick to purchase 1,125,000 (or 22%) of the Company's Common Stock
for $1.67 per share (adjusted for the 3-for-1 stock split effective February
28, 2000). Mr. Patick subsequently exercised the option in November of 2000
and the closing for the purchase of and payment for the option shares,
originally scheduled for November 2000, was extended several times by the
parties. By the terms of the most recent extension, Mr. Patick's option
expired on August 31, 2001, without the purchase of and payment for the
option shares having been consummated by Mr. Patick.
In November 2000, the Company sold and issued 240,000 3-year warrants for
$800 entitling Corey M. Patick to purchase one share of the Company's
(restricted) Common Stock for each warrant for $.033 per share.
Subsequently, Corey M. Patick sold the warrants to Robert H. Bretz. Robert
H. Bretz then exercised the warrants and purchased the 240,000 shares of the
Company's (restricted) Common Stock covered by these warrants for the
exercise (purchase) price for shares under the warrants (aggregating $8,000
or $.033 per share). There are no warrants outstanding at December 31,
2001. Subsequently Corey M. Patick repurchased 120,000 of those shares from
Robert H. Bretz in November, 2001 and resold those 120,000 shares to James
R. Yarter in December 2001.
Robert H. Bretz was a director of the Company until February 27, 2002 and
also served as the Company's outside legal counsel until May 9, 2001. The
Company paid Mr. Bretz's law firm $168,000, $340,000 and $345,000,
respectively, for 2001, 2000 and 1999 for legal services rendered to the
Company for these years.
Corey M. Patick, a shareholder, provided consulting services related to
corporate development and was paid $64,750 in 2001.
James R. Yarter has been a director of the Company since June 2001 and also
serves as a sales and marketing consultant to the Company and was paid
$7,500 for services rendered to the Company in 2001. In March of 2002, the
Company hired Mr. Yarter as a sales and marketing consultant with a retainer
of $2,500 per month renewable annually and a one-time grant of stock options
for 25,000 shares of "restricted" Common Stock.
In December 2001, Donald A. Scurti, a shareholder, provided financing to the
Company of approximately $31,000 on a one year note to purchase computer
servers.
On May 9, 2001 the Company terminated the services of its long-time outside
counsel, Robert H. Bretz. Mr. Bretz is also a former director of the
Company. Following Mr. Bretz' termination he began to file lawsuits for and
on behalf of the Company that had not been authorized by Company's
management or the Board of Directors. On August 8, 2001 the first of two
cases filed by Mr. Bretz in the name of the Company, Case No. BC252517, was
dismissed by the Los Angeles California Superior Court holding that the
Action by Unanimous Written Consent signed solely by Mr. Bretz in reference
to the filing of the case was invalid because it failed to satisfy the
requirements of California Corporations Code Section 307(b).
On June 29, 2001 the Company filed Case No. BC353322 in Los Angeles
California Superior Court captioned Auto-Graphics, Inc. vs. Robert H Bretz
et al., alleging breach of fiduciary duty by Mr. Bretz and that Mr. Bretz
had become disruptive and harmful to the business operations of the Company
and damaged the Company by his various actions including his excessive
billings to the Company.
As a response to the complaint filed by the Company, Mr. Bretz filed a
derivative cross-complaint against three of the Company's officers, Robert
S. Cope, Michael K. Skiles and Michael F. Ferguson for breach of fiduciary
duty, fraud & deceit, misrepresentation, breach of contract/employment,
removal for cause and other declaratory and injunctive relief. The original
cross-complaint was filed on July 16, 2001 in Los Angeles California
Superior Court under Case No. BC353322. The Company's management believes
that the derivative cross-complaint filed by Mr. Bretz does not have any
merit and that the Company will eventually prevail. The court ruled that
the derivative cross-complaint was unlikely to benefit the Company or its
shareholders and ordered Mr. Bretz to post the maximum ($50,000) bond in
order to continue his lawsuit. The Company has been notified that Mr. Bretz
has posted the bond on March 21, 2001. Mr. Bretz then filed a motion to
exonerate the bond or for reconsideration of the court order to post the
bond and the court issued its ruling which denied the motion by Mr. Bretz at
a hearing on May 23, 2002.
On December 10, 2001, Mr. Bretz filed another complaint in Los Angeles
Superior Court under Case No. BC263256 against the Company, two of the
Company's officers, Robert S. Cope and Daniel E. Luebben, the Company's
general counsel, Craig O. Dobler, and a director, James R. Yarter. The
complaint seeks to enforce a director's inspection and copying rights under
California Corporations Code Section 1602 and seeks injunctive relief,
attorney's fees and costs. The Company has denied access to some documents
by Mr. Bretz until a suitable protective order may be implemented to protect
the Company's interests. The Company and individual defendants filed a
demurrer (a formal objection to the legal sufficiency of the opponent's
pleading). In response, Mr. Bretz amended his complaint and has dismissed
all of the individual defendants. The Company intends to seek dismissal of
the case because Mr. Bretz is no longer a director as of February 27, 2002.
On February 19, 2002, Robert H. Bretz amended a complaint in Federal
District Court under Case No. CV 01-5891 CAS originally filed in June 2001
by Mr. Bretz in the name of the Company seeking a temporary restraining
order and preliminary injunction blocking the 2001 annual shareholder's
meeting scheduled for February 27, 2002, which had been delayed from October
31, 2001. At a hearing on February 26, 2002, the court denied the
application for a temporary restraining order and ruled that the shareholder
meeting could proceed as scheduled, but requested that the results of the
proxy solicitation not be made public or be implemented until after a
further hearing on March 22, 2002. The 2001 annual shareholder's meeting
was conducted on February 27, 2002 and adjourned solely for the purpose of
consideration on March 27, 2002 of a shareholder proposal establishing a
maximum age limit for directors of 67 years sponsored by Mr. Bretz, which
was the subject of a supplemental proxy statement issued on March 4, 2002.
On March 27, 2002, the vote was conducted at the adjourned meeting on the
shareholder proposal. On April 26, 2002 the court issued its ruling, which
denied the request by Mr. Bretz for a preliminary injunction and authorized
the Company to release and implement the results of the vote from its
February 27, 2002 shareholder meeting following completion of the vote on
the above shareholder proposal sponsored by Mr. Bretz. As a result of a
vote by the shareholders of the Company, Mr. Bretz is no longer a director
of the Company.
The Company has filed complaints with the California State Bar alleging
violations of ethics codes by Mr. Bretz and the matters are currently being
investigated by the State Bar.
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. The suit alleges a lack of informed
consent, fraud, deceit, intentional and negligent misrepresentation, lack of
consideration, and breach of contract and seeks to rescind the contract for
the Company's acquisition of the Wings software developed by Pigasus and
seeks 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. for breach of contract, and they seek damages in excess
of $500,000. Both actions were removed to the local Federal District Courts
and the California District Court has transferred the matter to the District
Court in Missouri. The parties have been engaging in mediation, but have
been unable to reach agreement on a settlement.
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. Robert H. Bretz was late in filing Form
4 for the purchase of 240,000 warrants from Corey M. Patick to purchase
240,000 shares and also for the acquisition of the same 240,000 shares. Mr.
Bretz has not provided the Company with a copy of the Form 4 for the sale of
120,000 shares back to Mr. Patick in November of 2001. Mr. Patick has not
provided the Company with a copy of the Form 4 for the sale of 120,000
shares to Mr. Yarter in December of 2001. Robert S. Cope was late in filing
Form 4 for the purchase of 30,000 shares in October of 2000.
2. PROPOSAL FOR APPROVAL TO AMEND THE BYLAWS TO CHANGE THE DATE FOR THE
ANNUAL MEETING.
At the meeting, the shareholders will be requested to approve an amendment
("Amendment") to the Auto-Graphics, Inc. Bylaws ("Bylaws"). The Amendment
to Article II, Section 2. "Annual" of the Bylaws provides that the Annual
Meeting shall be held in June of each and every year, or another time as the
Corporation's Board of Directors shall specify (but not later than nine
months after the close of the Corporation's fiscal year), for election of
directors and for the transaction of other business as may properly come
before the meeting. The board recommends approval of this Amendment to the
Bylaws.
The current provision in Article II, Section 2 of the Bylaws reads as
follows:
Section 2. "The annual meeting of the shareholders shall be held on the
15th day of May, in each year, if not a legal holiday, and if a legal
holiday, then on the next succeeding business day, at the hour of 10:00 a.m.
PDT, at which time the shareholders shall elect by plurality vote a Board of
Directors, consider reports of the affairs of the corporation, and transact
any other business as may properly be brought before the meeting."
Replacing Article II, Section 2 of the Bylaws with the Amendment will read
as follows:
Section 2. "The Annual Meeting shall be held the second Wednesday in June
of each year, or another time as the Corporation's Board of Directors shall
specify but not later than September 30, for election of directors and for
the transaction of other business as may properly come before the meeting."
The date for the Annual Meeting of May 15th was established when the Company
was a private company and was not subject to an annual audit by independent
auditors and financial reporting requirements under The Securities Act of
1933 and The Securities Exchange Act of 1934. The amendment will update the
Bylaws to reflect the Company's current practice, operating and reporting
environments and establish a reasonable period of time when the meeting can
be held.
The positive effect of this amendment for the Company's shareholders will be
to (1) establish some flexibility in setting the meeting date based on
circumstances at the discretion of the Board of Directors, (2) establish a
realistic schedule for the meeting, (3) allow sufficient time for the
preparation and mailing of the proxy statement and financial information,
(4) allow sufficient time for the information packets to reach the
shareholders especially those holding shares in custodial accounts, and (5)
establish a date certain by which the meeting must take place.
The negative effect of this amendment for the Company's shareholders will
be that it delay the date of the meeting by at least four weeks up to and
as much as four and a half months.
Vote Required and Board Recommendation
The affirmative vote of holders of a majority of the shares of common stock
cast in person or by proxy at the meeting is required for approval of the
Amendment to the Bylaws.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THIS
AMENDMENT TO THE BYLAWS.
3. SHAREHOLDER PROPOSAL
Robert H. Bretz, 520 Washington Boulevard, #428, Marina Del Rey, California
90292, phone (310) 578-1957, has notified the Company that he intends to
submit the following (revised) Shareholder Proposal ("Proposal") at the 2002
Annual Meeting.
Mr. Bretz has proposed the following (revised) Amendment To Auto-Graphics,
Inc.'s Bylaws:
RESOLVED, that the Company's Bylaws, Article III, Section 3, be and is
hereby amended by the shareholders of the Company (the "Amendment") to read
in its entirety as follows (so as to add the below new two last sentences to
the language of the section as it previously appears) :
"Section 3. ELECTION, ELIGIBILITY AND TENURE OF OFFICE. The Directors
shall be elected by ballot at the annual meeting of the shareholders, to
serve for one year and until their successors are elected and have been
qualified. Their term of office shall begin immediately after election. No
person past the age of 68 (the date after a person's 68th birthday marking
the commencement of a person's 68th year of living) shall be eligible and/or
actually or continue to serve as a director of the Company; provided,
however, that no person actually elected and serving, or formally nominated
to serve and subsequently elected to serve at any annual meeting of the
Company's shareholders, on the Company's Board of Directors during the
calendar year when a person's 68th birthday (as provided for above) actually
occurs shall be disqualified from so serving and/or continuing to serve
during the term of service for which a person was nominated or elected to
serve (and any a person shall be entitled to serve out the term for which
the person was elected). Notwithstanding any contrary provision contained
in these Bylaws, this section of the Bylaws shall only be amended or
otherwise changed by a two-thirds (2/3) vote of the shares entitled to vote
at any annual meeting of the shareholders of the Company as provided for in
these Bylaws."
Arguments for the Amendment
The Amendment is deemed advisable and is recommended to the shareholders of
the Company for adoption at the next annual meeting of shareholders to
assist in ensuring that the Company's Board of Directors and resulting
management policies and direction are constantly evolving, so as to provide
the Company with an ongoing modern, fresh and vigorous approach to managing
the Company's business and affairs, with the objective that the Company can
and will grow and prosper in an ever changing current and future environment
in the best interest and for the benefit of its shareholders and thereby its
employees, customers and other parties who have an interest in the Company
succeeding.
Arguments against the Amendment
Robert S. Cope and James R. Yarter, directors of the Company and the
Company's management recommend a vote against the Proposal.
The sponsor of the Proposal is Robert H. Bretz, a dissident former director
and the former general counsel of the Company, who was fired on May 9, 2001.
The Proposal is very similar to an earlier proposal submitted by Mr. Bretz
in which the age limit for directors was proposed to be 67 years. That
earlier shareholder proposal was submitted to the shareholders of the
Company as a Supplemental Proxy on March 4, 2002, and voted at an adjourned
meeting of the shareholders on March 27, 2002, and was defeated by the
shareholders of the Company. In the new Proposal, the age limit has been
raised from 67 to 68 years and some additional language has been added to
allow a director who turns 68 during his/her term to complete that term.
Otherwise it is essentially the same proposal. Of course, Mr. Bretz is 58
and would be unaffected by the Proposal (at least for 10 years).
Mr. Cope is currently 66 and, as the oldest current director on the Board,
will likely be the first director affected if the Proposal is implemented.
Mr. Cope (including the Cope Family Trust and the family) owns personally
and beneficially 44% (nearly half) of the Company's outstanding shares of
Common Stock. Mr. Cope personally has a substantial portion of his net
worth at stake in the Company's success. The Company believes that the real
purpose of this Proposal is to force Mr. Cope off the Board of Directors and
deny Mr. Cope representation on the Board despite his substantial ownership
in the Company. The Company questions the motive of Mr. Bretz and believes
that the Proposal may be in "retribution" for the dismissal of Mr. Bretz as
general counsel for the Company and the loss of his substantial income from
the Company of approximately $300,000-400,000 annually.
The Company questions the legality of the Proposal. Discrimination against
persons over 40 years of age is illegal under applicable federal and state
laws. Under both the federal Age Discrimination in Employment Act and the
California state Fair Employment and Housing Act, discrimination against any
employee who is over 40 years of age (with no maximum age) is absolutely
illegal. Directors are compensated members of the senior management of the
Company and therefore may qualify as employees or at least as independent
contractors. The Company also has a written policy incorporated into its
Employee Handbook against discrimination in any form including on the basis
of age as follows:
"It has been a long-established policy of Auto-Graphics, Inc. that all
persons are entitled to equal employment opportunity and that the Company
does not discriminate against its employees or applicants because of race,
color, religion, sex, sexual orientation, pregnancy, marital status,
national origin, citizenship, veteran status, ancestry, 'age (over 40),'
physical or mental disability, or medical condition (cancer related), as
defined by applicable laws" [emphasis added].
The Company is concerned that this Proposal would adversely affect morale
and send a negative message to its employees especially those who are over
40 years, i.e., that although we do not discriminate against employees on
the basis of age, the Company does discriminate against its directors on
the basis of age. Further, as a federal contractor, the Company must make
representations in its contracts that we do not discriminate on the basis
of age and must file regular reports on our employment practices with the
Equal Employment Opportunity Commission. The Company's outside general,
litigation and labor attorneys have advised the Company that they believe
that the proposal may be illegal under applicable federal or state law and
that the Company could be exposed to legal action if the proposal were
implemented. Even if the Proposal is not adjudged to be strictly illegal,
it is most certainly against "public policy."
It is very difficult to attract directors to the Board of our Company
particularly when there are a number of lawsuits against the Company and its
officers primarily brought by Mr. Bretz, the Company has incurred
substantial losses in three of the last five years and is in serious
financial difficulty at the present time. Retired and semi-retired
executives and professionals represent a pool of highly experienced and
established persons with time, talent and wisdom available to help manage
the Company during this difficult period. Because directors are personally
liable for their actions, a director must normally be a sophisticated,
experienced business person and/or a person of substantial means. Approval
of the amendment will further limit the available individuals to serve on
the Company's Board of Directors.
Age is becoming a less important factor as many people are continuing to
work beyond 65 and even 68 years. People are generally living longer and
healthier lives and still have much to contribute at a time when they have
available time to serve. Establishing an age limit of 68 years would deny
the Company, the services of Dr. Thomas J. Dudley, a current nominee for the
Board, who is 71 years old.
SHAREHOLDERS ARE URGED TO VOTE "AGAINST" THE PROPOSED AMENDMENT
PROPOSALS OF SHAREHOLDERS FOR THE 2003 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, 2002.
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, 2002 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, 2002.
Notices of intention to present proposals at the 2003 annual meeting should
be addressed to 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 BDO Seidman, LLP, independent public auditors for the
Company for fiscal 2001 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 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 for the fiscal year
2001.
Audit and Quarterly Review Fees $ 59,608
Financial Information System
Design and Implementation Fees -0-
All Other Fees -0-
---------
Total $ 59,608
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 WHITE 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 send request
to 3201 Temple Avenue, Pomona, California 91768.
DATED: Pomona, California, June 10, 2002.
AUTO-GRAPHICS, INC.
ATTN: CHIEF FINANCIAL OFFICER
3201 TEMPLE AVENUE
POMONA, CALIFORNIA 91768
1-800-776-6939
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), "FOR" PROPOSAL 2 AND "AGAINST"
PROPOSAL 3.
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:
__________________________________________________________
FOR AGAINST ABSTAIN
------- ------- -------
2. Amendment to Bylaws [_] [_] [_]
establishing the date for the
Annual Meeting of Shareholders
(The Board recommends a
vote "FOR" this proposal)
3. Shareholder Proposal [_] [_] [_]
(The Board recommends a
vote "AGAINST" this proposal)
4. In their discretion, the proxies are authorized to vote upon any
other business as may properly come before the meeting.
AUTO-GRAPHICS, INC.
P R O X Y
FOR ANNUAL MEETING OF THE
SHAREHOLDERS OF AUTO-GRAPHICS, INC.
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 July 17, 2002 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.