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
(as permitted by Rule 14a-6(e)(2))
[_X_] Definitive Proxy Statement
[___] Definitive Additional Materials
[___] Soliciting Material Pursuant to Rule 240.14a-12
AUTO-GRAPHICS, INC.
------------------------------------------------
(Name of Registrant as Specified in its Charter)
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 April 13, 2004 if at all possible.
CONTACT: For information regarding this proxy statement/filing, please
call or write Daniel E. Luebben, Secretary at (909) 569-1504
3201 Temple Avenue, Pomona, Ca 91768.
AUTO-GRAPHICS, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
May 20, 2004
To the Shareholders:
The Annual Meeting of Shareholders (the "Meeting") of Auto-Graphics, Inc. will
be held at 3201 Temple Avenue, Pomona, California 91768 on Thursday, May 20,
2004, 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 March 31, 2004 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 13, 2004, 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 March 31, 2004.
IF YOU HAVE ANY QUESTIONS, OR NEED ASSISTANCE VOTING, PLEASE CONTACT: DANIEL
E. LUEBBEN, THE SECRETARY OF THE COMPANY, AT 800-776-6939 extension 1504.
BY ORDER OF THE BOARD OF DIRECTORS
/s/Daniel E. Luebben
--------------------
Daniel E. Luebben
Secretary
Pomona, California
April 13, 2004
AUTO-GRAPHICS, INC.
3201 Temple Avenue
Pomona, California 91768
PROXY STATEMENT FOR ANNUAL MEETING
OF SHAREHOLDERS
To Be Held May 20, 2004
GENERAL INFORMATION
This Proxy Statement, which will be first mailed to shareholders on or about
April 13, 2004, 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 (the "Meeting")
of the Company, which will be held at 10:00 a.m. PDT on May 20, 2004 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 March 31, 2004 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 March 31, 2004, there were 5,525,586 shares of Common Stock outstanding.
ANNUAL REPORT
The Annual Report on Form 10-KSB of the Company for the fiscal year ended
December 31, 2003 (the "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, 68, along with his family, is a 54.2% 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., 72, 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. Dr. Dudley previously
served for ten years as a director and Chairman of the Audit Committee for
Space Labs Medical, Inc. (a NASDAQ company) engaged in the medical equipment
and instrumentation business.
James R. Yarter, 66, is a 11.5% 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 ten 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. Mr. Yarter also
serves as a director on the board of Avant Medical and Group 3 Inc.
During the Company's year ended December 31, 2003, the Board of Directors has
held 12 meetings. During the three months ended March 31, 2004, the Board of
Directors has held three meetings.
At its organizational meeting on June 17, 2003, 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 has been approved by the
Board of Directors and is attached as Exhibit 1. The Audit Committee has
discussed and approved a written Code of Ethical Conduct for the CEO and CFO,
which is attached as Exhibit 2. The Audit Committee has discussed the
Company's audited financial statements for the year ended December 31, 2003
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 considered and discussed the independence of the Company's
independent auditors in light of the actual and expected audit fees and non-
audit related fees in 2004. (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-KSB for the year ended
December 31, 2003, 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, 2003:
Name Age Position
------------------- --- ------------------------------------------------
Robert S. Cope 68 Chairman of the Board, Director and President.
Has served in these capacities for more than ten
years.
Thomas J. Dudley 72 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 66 Director. Has served as a director for more
than two years. During the past ten 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 directors of
Avant Medical and Group 3 Inc.
Paul R. Cope 48 Chief Technology Officer. Has served in this
and other capacities for more than ten years.
Albert A. Flores 38 Vice President, Library Sales and Marketing.
Has served in this and other capacities for
more than ten years.
Juergen A. Jung 53 Vice President, Operations. Has served in this
capacity for more than ten years.
Daniel E. Luebben 55 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.
EXECUTIVE COMPENSATION
The following table discloses compensation received for the three fiscal
years ended December 31, 2003 by the Named Executive Officers:
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Securities
Name and Other Underlying
Principal Position Year Salary Bonus Compensation Options
---------------------- ---- -------- ------- ------------ -----------
Robert S. Cope 2003 $137,500 $ -0- $42,229 None.
Chairman of the 2002 137,500 13,750 43,485 None.
Board (1) 2001 137,000 -0- 45,921 None.
Paul R. Cope 2003 115,000 -0- 677 10,000
CTO 2002 115,000 11,500 677 25,000
2001 108,269 7,500 629 None.
Albert B. Flores 2003 91,050 9,841 538 10,000
VP Sales & Marketing 2002 91,050 22,582 538 25,000
2001 90,983 16,906 561 None.
Juergen A. Jung 2003 97,300 -0- 645 10,000
VP, Operations (2) 2002 97,300 9,730 639 25,000
Daniel E. Luebben 2003 117,000 -0- 745 10,000
CFO/Secretary 2002 117,000 11,700 736 25,000
2001 103,923 -0- 634 None.
(1) The Other Annual Compensation amounts disclosed for Mr. Cope includes
$560 each year for disability insurance premiums, $9,368, $7,719 and $7,910
for life insurance premiums; $18,901, $20,769 and $20,653 for Company vehicle
lease payments and operating costs; $13,400, $14,437 and $16,798 for club
dues and expenses for the years 2003, 2002 and 2001, respectively.
(2) All Other Compensation for Mr. Jung includes an agreement to provide a
potential payment equal to one year's compensation in the event of a change
in control, which agreement expires October 22, 2004.
Compensation of Directors
Outside directors receive $1,500 (plus expenses) for board/committee meetings
attended in person, $1,000 for any other meeting attended in person and $500
for board or any 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 Qualified and Non-qualified 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 an exercise price of $0.30, reflecting the market
price on the date of the grant, to an outside director (non-qualified stock
options for 60,000 shares) and employees (qualified options for 160,000
shares). On July 17, 2002, the Company's Board of Directors granted non-
qualified stock options for 35,000 shares of the Company's restricted Common
Stock at an exercise price of $0.325, reflecting the market price on the date
of the grant, to its outside directors. On June 17, 2003, the Board of
Directors granted stock options for 125,000 shares of the Company's
restricted Common Stock at an exercise price of $0.40, reflecting the market
price on the date of the grant, to its outside directors (non-qualified stock
options for 30,000 shares) and employees (qualified options for 95,000
shares). As of December 31, 2003, there were 125,000 non-qualified options
and 230,000 qualified options outstanding for a total of 355,000 options and
15,000 non-qualified options and 120,000 qualified options for a total of
135,000 options available for future grant. The Board of Directors intends
to reallocate the remaining 135,000 options available for future grant to
105,000 qualified options and 30,000 non-qualified options at its next
meeting scheduled for April 22, 2004. The Board of Directors also intends to
seek approval from the shareholders to increase the number of shares
available for grant in the option plan by an as yet undetermined amount.
Under the plan, the stock option price per share for options granted is
determined by the Board of Directors and is based on the market price of the
Company's common stock on the date of grant. The stock options vest over
four years and no option can be exercised later than ten years from the date
it was granted. The following qualified and non-qualified stock options were
awarded by the Board of Directors at its organizational meeting on June 17,
2003:
NEW PLAN BENEFITS TABLE
2002 STOCK OPTION PLAN
Name and Principal Position Dollar Value($)(1) Number of Units (Shares)
--------------------------- ------------------ ------------------------
Robert S. Cope -0- -0-
Chairman of the Board
and President
Thomas J. Dudley 4,000 10,000
Director
James R. Yarter 8,000 20,000
Director
Paul R. Cope 4,000 10,000
CTO
NEW PLAN BENEFITS TABLE
2002 STOCK OPTION PLAN
Name and Principal Position Dollar Value($)(1) Number of Units (Shares)
--------------------------- ------------------ ------------------------
Albert B. Flores 4,000 10,000
VP, Sales and Marketing
Juergen A. Jung 4,000 10,000
VP, Operations
Daniel E. Luebben, 4,000 10,000
CFO and Secretary
All Current Executive Officers 16,000 40,000
All Current Directors who are
not Executive Officers 12,000 30,000
All Employees who are
not Executive Officers 22,000 55,000
(1) Dollar value is based on $0.40 per share, which was the fair market
value on the grant date of June 17, 2003.
The Plan was filed as an exhibit to the Company's Definitive Proxy dated
February 8, 2002 as filed with the Securities and Exchange Commission and
is incorporated herein by reference.
The following table summarizes information concerning stock option grants to
named executive officers during the fiscal year ended December 31, 2003. All
options were granted under the 2002 Stock Option Plan and have ten year
terms.
Option Grants in Last Fiscal Year
Individual Grants
Number of Pct. of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted Fiscal Year ($/Share) Date
----------------- ------------ -------------- ------------ -----------
Robert S. Cope None -- -- --
Paul R. Cope 10,000 8.0% $ 0.40 6/17/2013
Albert B. Flores 10,000 8.0% 0.40 6/17/2013
Juergen A. Jung 10,000 8.0% 0.40 6/17/2013
Daniel E. Luebben 10,000 8.0% 0.40 6/17/2013
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 $118,000.
The following table summarizes information concerning the value received on
options exercised during the fiscal year ended December 31, 2003 and the
value as of December 31, 2003:
Aggregated Option Exercises in the Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Number of Options Options
Securities at Fiscal at Fiscal
Underlying Year-End Year-End
Options Value($) Exercisable/ Exercisable/
Name Exercised Realized Unexercisable Unexercisable
----------------- ---------- -------- --------------- --------------
Robert S. Cope None None None/None None/None
Paul R. Cope None None 6,250/28,750 $63/$288
Albert B. Flores None None 6,250/28,750 63/$288
Juergen A. Jung None None 6,250/28,750 63/$288
Daniel E. Luebben None None 6,250/28,750 63/$288
The following table summarizes information on the stock price-based option
plan awards made during the fiscal year ended December 31, 2003:
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 10,000 4 Years
Albert B. Flores 10,000 4 Years
Juergen A. Jung 10,000 4 Years
Daniel E. Luebben 10,000 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 2003 and 2002:
2003 2002
----------------------------------------------------------------------
Expected life Five Years Five Years
Risk-free interest rate 1.6% 3.6%
Expected volatility 30% 30%
Dividend yield 0% 0%
Fair value of options
granted at fair market price $0.12 $0.10
All options granted in 2003 and 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
Granted during 2003 125,000 0.40
Exercised during 2003 ( 100) 0.30
Forfeited during 2003 ( 25,000) 0.37
---------------------------------------- --------- ----------------
Balance at December 31, 2003 354,900 $ 0.34
Additional information with respect to the outstanding options as of
December 31, 2003 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 0.399 244,900 8.49 $ 0.30 76,250 $ 0.30
$0.40 to 0.499 110,000 9.51 0.40 -- --
--------- ------
354,900 8.81 0.34 76,250 0.30
========= ======
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, 2003, 2002 and
2001, 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
Name March 31, 2004 Class
-------------------------------------- ----------------------- --------
Robert S. Cope 2,517,943(1) 45.6%
James R. Yarter 637,710 11.5%
Paul R. Cope 477,144 8.6%
Thomas J. Dudley 31,500 0.6%
Daniel E. Luebben 15,000 0.3%
Executive Officers and Directors
as a Group (7 Persons) 3,679,297 66.6%
(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; 36,000 shares held personally by Mr. Cope; 182,217 shares held by
Bryan A. Cope; 205,167 shares held by Lizabeth L. Cope; and 15,000 shares
held by William R. McConnell.
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, 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. 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 its square footage occupied to
12,745 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.
Management believes that the reconfigured space will be sufficient for the
Company's current and foreseeable future needs. The Company also has an
annual lease on a small sales and support office in Toronto, Canada for its
wholly-owned subsidiary, A-G Canada, Ltd.
James R. Yarter, a shareholder, has been a director of the Company since June
2001 and was paid $15,000 and $23,500 in director fees for the Company and
its subsidiaries in 2003 and 2002, respectively. Mr. Yarter also serves as a
sales and marketing consultant to the Company and was paid $30,000 annually
for consulting services rendered to the Company in 2003 and 2002,
respectively.
Thomas J. Dudley, a shareholder, has been a director of the Company since
July 2002 and was paid $17,510 and $8,755 in director fees in 2003 and 2002,
respectively.
In December 2003, Donald A. Scurti, a shareholder, provided financing to the
Company of approximately $51,000 on a 21 month note to purchase computer
equipment.
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. Through December 31, 2002, the Company had
spent over $1,100,000 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 paid 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 reimbursed 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 were entitled to a total
of 814,000 warrants/shares. However, the directors accepted a total of
621,252 warrants to purchase an equal number of additional shares of the
Company's "restricted" Common Stock representing a discount of approximately
24%. All of the 621,252 warrants were exercised and 621,252 shares were
issued in 2003. 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 was 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.
PROPOSALS OF SHAREHOLDERS FOR THE 2005 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, 2004.
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, 2004 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, 2004.
Notices of intention to present proposals at the 2005 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 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.
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 2003 and 2002:
2003 2002
-------------------------------------------- ----------- -----------
Audit and Review Fees $ 58,275 $ 37,500
Audit-Related Fees - Consulting Services 2,387 --
Tax Fees -- --
All Other Fees -- --
----------- ------------
Total $ 60,662 $ 37,500
=========== ============
The Company's Audit Committee has considered the amount of Audit-Related Fees
for consulting on accounting matters to be immaterial.
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 extension 1504, or e-mail to
del@auto-graphics.com or mail request to Attention: Secretary, Auto-Graphics,
Inc., 3201 Temple Avenue, Pomona, California 91768.
DATED: Pomona, California, April 13, 2004.
AUTO-GRAPHICS, INC.
Attention: Secretary
3201 Temple Avenue
Pomona, California 91768
1-800-776-6939, Ext. 1504
del@auto-graphics.com
EXHIBIT 1
REVISION 1
AUDIT COMMITTEE CHARTER
Purpose The purpose of the Audit Committee is to represent and assist the
Board of Directors in its oversight of (1) the integrity of the financial
reporting of the Company, (2) the independence, qualifications and
performance of the Company's external auditor and (3) the Company's
compliance with legal and regulatory requirements. The Audit Committee also
prepares the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
Members The Audit Committee shall consist of at least two (2) members of
the Board, one of which must satisfy the independence requirements under NASD
Rule 4200(a)(14), as such requirements are interpreted by the Board in its
business judgment. The Board shall designate one member as Chairman or
delegate authority to designate a Chairman to the Audit Committee. Each
member of the Audit Committee shall be financially literate.
Outside Advisors The Audit Committee shall have the authority to retain
such outside legal, accounting or other consultants or advisors as it
determines appropriate to assist it in the performance of its functions, or
to advise or inform the Committee. The Committee may also meet with
investment bankers and financial analysts. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee. The Company shall provide for
appropriate funding, as determined by the Audit Committee, for payment of
compensation to the independent auditor and to any advisors retained by the
Audit Committee.
Duties and Responsibilities On behalf of the Board, the Audit Committee
shall, among its duties and responsibilities:
1. Review the annual audited financial statements with management and the
independent auditor, including the Company's disclosures under Management's
Discussion and Analysis of Financial Condition and Results of Operations,
significant issues and judgments regarding accounting and auditing principles
and practices, and the effect of regulatory and accounting initiatives on the
Company's financial statements, and recommend to the Board whether the
financial statements should be included in the Form 10-KSB or annual audited
financial statements. The review of the annual audited financial statements
also includes a review of any transactions as to which management obtained a
letter pursuant to Statement on Auditing Standards No. 50, "Reports on the
Application of Accounting Principles."
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements prior to filing the Form 10-QSB or
quarterly unaudited financial statements, including the results of the
independent auditor's review of them and the Company's disclosures under
Management's Discussion and Analysis of Financial Condition and Results of
Operations, if applicable.
3. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent auditor or
management.
4. Meet periodically with management to review the Company's major
financial and business risk exposures and the steps management has taken to
monitor and control such exposures.
5. The Audit Committee shall be directly responsible, in its capacity as
a committee of the Board, for the appointment, compensation and oversight of
the work of the independent auditor for the purpose of preparing or issuing
an audit report or related work. In this regard, the Audit Committee shall
appoint and retain, compensate, evaluate, and terminate when appropriate, the
independent auditor, which shall report directly to the Audit Committee.
6. Pre-approve all auditing services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Company by its
independent auditor and establish policies and procedures for the engagement
of the independent auditor to provide auditing and permitted non-audit
services.
7. Obtain and review, at least annually, a report by the independent
auditor describing the independent auditor's internal quality-control
procedures, and any material issues raised by the most recent internal
quality-control review, or peer review, or by any inquiry or investigation by
governmental or professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the independent
auditor, and any steps taken to deal with any such issues.
8. Receive at least annually and discuss with the independent auditor the
auditor's report regarding its independence.
9. Meet with the independent auditor prior to the audit to review the
scope and planning of the audit.
10. Review with the independent auditor the results of the annual audit
examination, and any issues the auditor may have encountered in the course of
its audit work and management's response. This review should include, among
other things, any management letter, any restrictions on the scope of
activities or access to required information, and changes required in the
planned scope of the independent audit.
11. Discuss with management the Company's earnings press releases and
corporate policies with respect to earnings releases and financial
information and earnings guidance provided to analysts and rating agencies.
12. Review the adequacy and effectiveness of the Company's internal
controls, including any significant deficiencies in internal controls and
significant changes in such controls reported to the Audit Committee by the
independent auditor or management, and review the adequacy and effectiveness
of the Company's disclosure controls and procedures.
13. Review and approve candidates for the positions of chief financial
officer and/or controller of the Company.
14. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
15. Establish policies for hiring employees and former employees of the
independent auditor.
16. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and regulations and with
the Company's Code of Ethics.
17. Review with the Company's General Counsel and independent auditor (1)
legal matters that may have a material impact on the financial statements,
(2) accounting or compliance policies, and (3) any material reports or
inquiries received from regulators, governmental agencies or employees that
raise material issues regarding the Company's financial statements and
accounting or compliance policies.
18. Review this Charter annually and recommend any changes to the Board
for approval.
19. Review the Audit Committee's own performance annually.
Meetings The Audit Committee shall meet at least four times per year,
either in person or telephonically, and at such times and places as the Audit
Committee shall determine. The Audit Committee shall meet with the chief
financial officer, or the controller and the independent auditor in separate
executive sessions periodically. The Audit Committee shall report its
activities to the Board regularly.
EXHIBIT 2
Auto-Graphics, Inc.
Code of Ethical Conduct
In my role as Chief Executive Officer ("CEO") or Chief Financial Officer
("CFO") of Auto-Graphics, Inc., I recognize that the CEO or CFO hold an
important and elevated role in corporate governance. I am uniquely capable
and empowered to ensure that shareholders' interests are appropriately
balanced, protected and preserved. Accordingly, this Code provides principles
to which the CEO and CFO are expected to adhere and advocate. The Code
embodies rules regarding individual and peer responsibilities, as well as,
responsibilities to the company, the public and shareholders.
I certify to you that I adhere to and advocate the following principles and
responsibilities governing my professional and ethical conduct.
To the best of my knowledge and ability:
1. I act with honesty and integrity avoiding actual or apparent conflicts of
interest in personal and professional relationships.
2. I provide constituents with information that is accurate, complete,
objective, relevant, timely and understandable.
3. I comply with rules and regulations of federal, state, provincial and
local governments, and other appropriate private and public regulatory
agencies.
4. I act in good faith, responsibly, with due care, competence and diligence,
without misrepresenting material facts or allowing my independent judgment to
be subordinated.
5. I respect the confidentiality of information acquired in the course of my
work except when authorized or otherwise legally obligated to disclose.
Confidential information acquired in the course of my work is not used for
personal advantage.
6. I share knowledge and maintain skills important and relevant to my
constituents' needs.
7. I proactively promote ethical behavior as a responsible partner among
peers in my work environment and community.
8. I achieve responsible use of and control over all assets and resources
employed or entrusted to me.
____________________________________________
(Signature)
(Title)
Source: Financial Executives International.
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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 your 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 May 20, 2004 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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