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PROXY STATEMENT
INTRODUCTION
This Proxy Statement is furnished to shareholders in connection with the
Special Meeting of Shareholders of Auto-Graphics, Inc., a California
corporation (the Company), called by the Special Shareholders Committee
(the Shareholders Committee) to be held at 3:00 PM PDT on Tuesday,
September 25, 2001 at the Company's corporate offices located at 3201 Temple
Avenue, Pomona, California, and at any adjournments thereof (the Special
Meeting). The accompanying Proxy is solicited on behalf of Robert S. Cope
for use at such Special Meeting. The Proxy should be completed, signed,
dated and returned in the enclosed envelope as soon as possible. All
shareholder's instructions are set forth on the enclosed Proxy. Your
executed Proxy will not affect your right to vote in person should you
find it convenient to attend the meeting and desire to vote in person.
Any shareholder executing and returning a Proxy as provided for herein
may revoke such Proxy by providing written notice of such revocation to
the Secretary of the Company at any time prior to the commencement of the
Annual Meeting.
The Robert S. Cope intends to solicit proxies principally by use of the
mails. Robert S. Cope will also request banks, brokerage houses and other
custodians, nominees and fiduciaries to forward copies of the Notice,
Proxy Statement, Proxy and Annual Report to persons for whom they hold
shares of the Company and request authority for the execution of proxies.
The cost of soliciting expenses will be borne by Robert S. Cope, including
reimbursement of any expenses incurred by banks, brokerage houses,
custodians, nominees and fiduciaries in connection with such solicitation.
VOTING AT THE MEETING
The presence in person or by Proxy of persons entitled to vote a majority
of the Company's outstanding Common Stock is necessary to constitute a
quorum for the transaction of business at the Annual Meeting. The record
date for the determination of shareholders entitled to notice of and to
vote at the Special Meeting of Shareholders has been fixed as being as of
the close of business on September 5, 2001. All voting rights are vested
exclusively in the holders of the Company's Common Stock. As of the close
of business on the record date, there were 4,997,234 shares of the
Company's Common Stock outstanding.
Each share of Common Stock is entitled to one vote on any matter which may
come before the Special Meeting, including the election of directors;
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 shareholders shares are entitled, or to distribute the
shareholders votes on the same principle among as many candidates as
the shareholder thinks fit.
To be entitled to exercise cumulative voting rights for the election of
directors, a shareholder must give notice at the Special Meeting of such
persons desire to cumulate votes for one or more candidates whose name(s)
have been placed in nomination prior to the commencement of voting for
the election of directors. 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.
The enclosed form of Proxy being solicited on behalf of Robert S. Cope
vests in the proxy's cumulative voting rights. In the event the
Shareholders Committee as expected nominates their slate of directors,
then the persons named in the enclosed Proxy may vote for less than
three (3) directors. In such event it is the intention of Robert S. Cope
to vote proxies for the election of the current Board of Directors,
Mr. Robert S. Cope and Mr. James R. Yarter.
NOMINATION AND ELECTION OF DIRECTORS
Election of Directors
The Company's Articles of Incorporation and Bylaws, as amended, provide
that the authorized number of directors shall be three members. The number
of persons constituting and comprising the Company's Board of Directors is
currently three. Robert S. Cope is proposing three nominees as candidates
for election to the Company's Board of Directors at the Special Meeting of
Shareholders. Proxies received by Robert S. Cope will only be voted for
the three nominees recommended by Robert S. Cope in this Proxy Statement
and within proxy solicitation. Each of the three nominees named below
will be elected to serve until the next annual meeting and/or until their
respective successors shall have been duly elected and qualified. The
persons named in the accompanying Proxy will vote shares covered by
proxies received by them in favor of election of the nominees proposed by
Robert S. Cope. Should any of the three proposed nominees subsequently
become unavailable for election, then Robert S. Cope may propose the
election of a substitute nominee; and the persons named in the Proxy will
vote shares covered by proxies received by them in favor of any such
substitute nominee(s). In the event that any person(s) other than
nominees proposed by Robert S. Cope is nominated for election as a
director, the persons named in the Proxy may vote cumulatively for less
than all of the nominees but, in no event, will such persons vote any
of the proxies received by them for the election of any person to fill a
Board position for which Robert S. Cope has not nominated a person for
election to such Board position. The individuals named in the Proxy,
however, reserve their rights to vote their individual shares for the
election of any person(s) to fill a Board position for which Robert S.
Cope did not designate a nominee in the event that any such additional
new nominee is proposed for election at the Special Meeting.
Nominees for Election as 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.
Mr. Thomas J. Dudley has not consented to his inclusion in Robert S.
Cope's slate of directors even though he has been included in the
Shareholder Committee's slate of directors. Should Mr. Dudley object to
such inclusion, Mr. Robert S. Cope may replace him in Mr. Cope's slate of
directors.
Shares of the
Company's
Common
Name and Principal Year First Stock Owned Percent
Occupation or Employment Became Beneficiary as of
Relationship of Nominee Age a Director of Record Date Class
R. S. Cope 66 1960 2,161,527 43%
Chairman of the Board
Auto-Graphics, Inc.
James R. Yarter 62 2001 -0- -0-%
Director
Auto-Graphics, Inc.
Tom J. Dudley 70 2001 30,000 0.05%
Professor of Business
Pepperdine University
Robert S. Cope has been employed by the Company in the capacities indicated
above for more than the past five (5) years. Prior to May 1, 2000, Mr. Cope
served as Chief Executive Officer, President and Treasurer. The shares
listed above as beneficially owned by Robert S. Cope are owned by him and
his wife as Trustees of the Cope Family Trust (32%) or by certain
members of his immediate family (12%), inclusive of 373,602 shares (7%)
owned by Paul R. Cope. Mr. Yarter is not the beneficial owner of any shares
of the Company=s Common Stock. Mr. Yarter's prior business background and
experience covers a period of 35 years. His experience includes being the
Chief Executive Officer of several companies, including two companies listed
on the NASDAQ Stock Exchange. On June 30, 2001, Mr. Robert S. Cope filed a
Notice of Written Consent of Shareholders to Fill a Vacancy on the Board of
Directors and a Proxy Statement to solicit the necessary shareholder written
consents (Notice). The Notice identified that the record date for voting to
fill the vacancy was June 14, 2001. Mr. Cope obtained the required number of
votes through the use of written consent forms and Mr. James R. Yarter was
elected to the Board of Directors to serve until a successor shall be duly
elected and qualified.
Tom J. Dudley is a first time nominee for election to the Company's Board of
Directors and has also been nominated by the Shareholders Committee. Mr.
Dudley is the Distinguished Professor of Decision and Information Systems at
Pepperdine University in Los Angeles. Mr. Dudley has been associated with
Pepperdine University since 1970. He was a founder and principal instructor
for the Pepperdine Executive Management Program (continuing education for
presidents and key executive officers of corporations and other business
entities). Mr. Dudley is the owner of 30,000 shares of the Company's Common
Stock. Mr. Dudley currently serves as a director for Space Labs Medical,
Inc. (a NASDAQ company) engaged in the medical equipment and instrumentation
business), and has served in such capacity with Space Labs Medical for the
last 10 years.
PROPOSED SHAREHOLDER COMMITTEE
AMENDMENT TO THE COMPANY=S BY-LAWS
The Shareholders Committee has proposed the following amendment to the
Company's By-Laws:RESOLVED, that the Company's By-Laws, Article V, Section 5,
be and is hereby amended by the shareholders of the Company to retain
Section 5 as it currently appears (___) but to add immediately following
existing Section 5 CONTRACTS, ECT. the following new Section 5.1.
RELATED PARTY TRANSACTIONS, CONTRACTS to read as follows (the Amendment):
Section 5.1 RELATED PARTY TRANSACTIONS, CONTRACTS. Any contract or
transaction between the Company and any director of the Company who owns,
directly or indirectly, more than 10% of the Company=s issued and
outstanding Common Stock and/or any company or other entity in which any
such director/stockholder or any member of such director's family holds
interest (herein related party) shall first be submitted for review,
approval and authorization in good faith (following full disclosure of all
relevant facts and circumstances as to such proposed transaction and/or
contract including the director/stockholder's interest therein) by the
shareholders of the Company with the shares owned by the interested
director/stockholder not being entitled to vote thereon, or by a vote of
the board of directors sufficient without counting the vote of the
interested director/stockholder, as being fair and reasonable to and
otherwise in the Company's best interest. In no event shall any
such related party transaction or contract involving a director who owns
more than 10% of the Company=s issued and outstanding Common Stock be
entered into and/or performed by the Company without the prior formal a
pproval of the Company's shareholders or board of directors as provided for
herein. Notwithstanding any contrary provision in these By-Laws, this
section of the By-Laws shall only be amended by a majority vote (excluding
shares owned by the interested director/shareholder) of shares entitled to
vote at any annual meeting of shareholders as provided for in these By-Laws.
The California General Corporation Law provides:
Section 310 of the California General Corporations Law provides, in
pertinent part, as follows:
SECTION 310. TRANSACTIONS BETWEEN CORPORATIONS AND
DIRECTORS OR CORPORATIONS HAVING INTERRELATED DIRECTORS
(a) No contract or other transaction between a corporation and one or
more of its directors, or between a corporation and any corporation, firm
or association in which one or more of its directors has a material
financial interest, is either void or voidable because such director or
directors of such other corporation, firm or association are
parties . . . if,
(1) The material facts as to the transaction and as to such director's
interest are fully disclosed or known to the shareholders and such
contract or transaction is approved by the shareholders (Section 153)
in good faith, with the shares owned by the interested director or
directors not being entitled to vote thereon, or
(2) The material facts as to the transaction and as to such director's
interest are fully disclosed or known to the board or committee, and
the board or committee authorizes, approves or ratifies the contract or
transaction in good faith by a vote sufficient without counting the
vote of the interested director or directors and the contract or
transaction is just and reasonable as to the corporation at the time it is
authorized, approved or ratified, or
(3) As to contracts or transactions not approved as provided in paragraph
(1) or (2) of this subdivision, the person asserting the validity of the
contract or transaction sustains the burden of proving that the contract
or transaction was just and reasonable as to the corporation at the
time it was authorized, approved or ratified.
In May of 1986, commencing July 1, 1986, The 664 Company entered into a
five-year lease with Company for 29,000 square feet (the Lease). The
Lease provided for two options to extend the Lease for a period of five
years each. Prior to its execution, the Lease was approved by the
disinterested Members of the Board of Directors. During the term of the
Lease, The 664 Company agreed, at the request of the Company, to reduce its
space needs by approximately 10,000 square feet. The Company is currently
operating under a 90-day lease extension which expires on September 30,
2001. Management of the Company has requested that The 664 Company enter
a new lease at market rates for approximately 25% less space. The cost of
moving from this space will be a cost to the Company in excess of $150,000,
including out of pocket expenses and lost production due to relocation.
Any new lease will require the approval of the disinterested Members of the
Board of Directors pursuant to California Corporations Code Section 310.
To require shareholder approval of such transaction will be costly and time
consuming. Therefore, Robert S. Cope requests that the shareholders
disapprove such amendment.
OTHER BUSINESS
So far as Robert S. Cope is aware, there are no other matters to be brought
before the Special
Meeting. In the event that any other matter properly comes before the
Special Meeting, the persons named in the accompanying Proxy will vote all
proxies in accordance with their best judgment in such matters.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 2001, the Company's Board of Directors has held numerous formal
meetings and has scheduled monthly Board meetings through the end of the
year.
The Company's Board of Directors does not maintain standing audit,
nominating or compensation committees. These matters are considered and
acted upon by the entire Board of Directors. Directors receive no fees for
serving on the Board of Directors or attending meetings.
EXECUTIVE COMPENSATION
The following table summarized the aggregate annual cash compensation and
long-term incentive compensation of the Company=s Chief Executive Officer
and each of the named executive officers whose total cash compensation for
the fiscal year ended December 31, 2000 for services rendered in all
capacities exceeded $100,000 and cash compensation received by each named
executive officer for the Company=s two previous fiscal years:
Summary Compensation Table
Long-Term Compensation
Principal Annual Compensation Number of Securities
Name Position Year Salary Underlying Options
R. S. Cope CEO 2000 $137,000 None
1999 156,000
1998 133,000
M.K. Skiles President 2000 $102,000 None
C.M. Patick EVP 2000 $145,000 None
D.E. Luebben CFO 2000 $108,000 None
1999 93,000
1998 100,000
W. J. Kliss COO 2000 $ 69,000 None
1999 138,000
1998 138,000
There have been no restricted stock awards for the three years ending
December 31, 2000. Restricted stock holdings (owned personally) as of
the fiscal year ended December 31, 2000 are as follows: R.S. Cope,
1,614,675 shares, C.M. Patick, 91,980 shares, and D.E. Luebben, 15,000
shares, respectively. Mr. Kliss is no longer employed by the Company as
of April 2000. Mr. Patick is no longer employed by the Company as of
January 2001. Mr. Luebben is no longer employed by the Company as of
February 2001. See item 12 Security Ownership of Certain Beneficial
Owners of Management.
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 which shares have been reserved for
possible future issuance under the Plan. The plan is a non-qualified plan
covering only senior executives and related persons. At the inception of
the Plan, the Company granted options to four (4) persons whereby they were
entitled to purchase up to a total of 142,500 shares over the next five
years at a price of .055 per share. In 1999, all options granted were
relinquished by the participants. The Plan was filed as an exhibit (10.25)
to the Company's Annual Report to the SEC on Form 10-K for the year ended
December 31, 1997, and is incorporated herein by reference.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
The table below reflects information pertaining to certain beneficial owners of
the Company's Common Stock known to own more than five percent (5%) of the
Company's Securities and all officers and directors of the Company as a group
as of July 1, 2001:
Shares of the
Company's
Common
Stock Owned Percent
Beneficially as of
Names of Beneficial Owner of Record Date Class
R.S. Cope 2,161,527 43%
Chairman of the Board and Director
Auto-Graphics, Inc.
Paul R. Cope 373,602 7%
Chief Technology Officer
Auto-Graphics, Inc.
Robert H. Bretz 280,500 6%
Director
Auto-Graphics, Inc.
All Officers and Directors 2,111,925 42%
as a group (5 persons)
The shares listed above as beneficially owned by Robert S. Cope are owned by
him and his wife as Trustees of the Cope Family Trust (32%) or by certain
members of his immediate family (12%), inclusive of 373,602 shares (7%)
owned by Paul R. Cope. Section 16(a) of the Securities Exchange Act of 1934
requires the Company's directors, executive officers and ten percent (10%)
shareholder to file forms with the SEC to report their ownership of the
Company's shares and changes in said ownership. Anyone required to file
forms with the SEC must also send copies of the forms to the Company. Based
on information provided to the Company by such persons, the Company is not
aware of any delinquencies in the filing of such reports.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
Warrants
In May 1999, the Company entered into a selling agreement with an
associate
pertaining to the Company's 1999 private placement offering, which raised
$1,251,000 in equity investment and resulted in the sale/issuance of an
additional 1,501,200 shares of the Company's (restricted) Common Stock.
In November 2000, the Company sold and issued 240,000 3-year warrants for
$800 entitling the associate to purchase one share of the Company's
(restricted)
Common Stock for each
warrant for $.033 per share. Subsequently, the associate sold the
warrants
to
an outside director of
the Company for an amount representing a substantial discount for the
(restricted) shares of the
Company's Common Stock underlying such warrants as compared to the
reported
market price for
free trading shares of the Company's Common Stock; and the
purchaser/transferee
then exercised
the warrants and purchased, and the Company caused to be sold and issued, the
240,000 shares of the
Company=s (restricted) Common Stock covered by such warrants for the exercise
(purchase) price
for such shares under the warrants (aggregating $8,000 or $0.033 per share).
There are no warrants
outstanding at December 31, 2000.
Option to Purchase Restricted Stock
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). 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, and was extended several times by the
parties.
By the terms of the most recent extension, Mr. Patick=s option expired on
August
31, 2001,
even though Mr. Patick claims it has not been terminated. Mr. Patick owns
91,980 or 2% of the
shares of the Company's Common Stock (without taking the option shares into
account). Purchase
of the option shares by Mr. Patick would have increased his stock ownership to
1,216,980 shares or
24% of the Company's issued and outstanding stock and would represent a change
of control of the
Company (under applicable securities law definitions).
Director
Robert H. Bretz is a director of the Company and also served as the Company's
outside legal
counsel until May 9, 2001. In 2000, Mr. Bretz' law firm billings to the
Company
for legal services
and expenses totaled approximately $340,000
AUDITORS
The Board of Directors selected BDO Seidman, LLP to audit and report on the
Company's
financial statements as of December 31, 2000, 1999 and 1998 for the years then
ended. The
Company's financial statements as of December 31, 1997 and for the year ended
December 31,
1997 were audited and reported on by Ernst & Young, LLP.
ADDITIONAL INFORMATION
Upon request of any shareholder, the Company will furnish without charge a copy
of the
Company's latest Annual Report to the Securities and Exchange Commission on
Form 10-K, which
contains certain additional information about the Company which is not included
in this Proxy
Statement. All such requests should be directed to the Chief Financial Officer
at the above corporate
headquarters address.
LEGAL PROCEEDINGS
Robert H. Bretz, Esq. - State Court Proceedings
On May 9, 2001 the Company terminated the services of its long-time outside
counsel, Mr.
Robert H. Bretz. Mr. Bretz who was also the only outside Director for the
Company has remained as
a Director of the Company. Following Mr. Bretz' termination he began to file
lawsuits for and on
behalf of the Company that had not been approved by management or the Company's
Board of
Directors. On August 8, 2001 one such case filed by Mr. Bretz, Case No.
BC252517, was dismissed
by the Los Angeles California Superior Court holding that the Action by
Unanimous Written
Consent signed by Mr. Bretz was invalid because it failed to satisfy the
requirements of California
Corporations Code section 307(b).
Mr. Bretz' actions left the Company with no alternative but to file a complaint
against Mr.
Bretz for damages and injunctive relief for breach of fiduciary duty. On June
29, 2001 the Company
filed Case No. BC 253322 in Los Angeles California Superior Court captioned
Auto-Graphics, Inc.
vs. Robert H. Bretz et al., alleging that Mr. Bretz has become disruptive and
harmful to the business
operations of the company and has 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 cross-
complaint was filed on July 16, 2001 in Los Angeles California Superior Court.
Robert S. Cope believes that the derivative cross-complaint filed by Mr. Bretz
does not have
any merit and it will eventually be dismissed. Until the above-cases are
resolved the Company will
be required to expend substantial legal fees and related expenses.
On September 12, 2001, the Company filed a Complaint For Declaratory and
Injunctive
Relief For Violation of California Corporations Code Sections 301, 600(d) and
601(c) naming as
defendants Corey Patick, Marsha Patick and Tom J. Dudley. This suit arose as a
result of the call of
the instant Special Meeting by the Shareholder Committee of which, the enclosed
Proxy is being
solicited. On September 13, 2001, the court denied the temporary restraining
order on the grounds
that it was premature.
_____________________
Robert S. Cope
September 14, 2001
Pomona, California
PLEASE SIGN, DATE AND MAIL YOUR PROXY
THANK YOU
ROBERT S. COPE
3201 TEMPLE AVENUE
POMONA, CALIFORNIA 91768
Name of Shareholder
Address of Shareholder
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES FOR BOARD OF
DIRECTORS AND THE PROPOSAL LISTED BELOW:
Sign, Date, and Return the Proxy card Promptly Using the Enclosed Envelope.
By signing and dating this card, you authorize the proxies to vote each
proposal as marked, or if not marked, to vote "FOR" each
proposal, and to use their discretion to vote for any other matter as may
properly come before the meeting or any adjournment thereof. If
you do not intend to personally attend the meeting, please complete and return
this card at once in the enclosed envelope.
VOTING INSTRUCTIONS:
PLEASE "X" HERE ONLY IF YOU PLAN TO ( )
ATTEND THE MEETING AND VOTE YOUR
SHARES IN PERSON
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS (X)
KEEP THIS PORTION FOR YOUR RECORDS
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED
Vote on Board of Directors
Yes No Abstain
1. 01) Robert S. Cope ( ) ( ) ( )
2. 02) James R. Yarter ( ) ( ) ( )
3. 03) Tom J. Dudley ( ) ( ) ( )
Vote on Proposals
4. To Amend By-laws For Shareholder Approval For
Certain "Related Party" Transactions, Including In Respect Of
The Company's Lease Of Its Corporate Office Building From
664 Company.
To transact such other business as may properly come before the
Meeting or any adjournment thereof.
Please sign exactly as name appears above. When shares are
held by joint tenants, both should sign. When signing as attorney
or as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sing in full corporate name
by president or other authorized officer. If a partnership, please
sign in partnership name by authorized persons.
Signature (PLEASE SIGN WITHIN BOX) Date Signature
(Joint Owners) Da