<PAGE>
3201 Temple Avenue
Pomona, California 91768
_______________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 17, 1998
_______________
To the shareholders of
Auto-Graphics, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Auto-Graphics, Inc., a California corporation (the "Company"), will be held
at the Company's corporate offices located at 3201 Temple Avenue, Pomona,
California on Tuesday, November 17, 1998, at 2:00 PM PST, for the following
purposes:
1. To elect three directors to serve during the ensuing year and until their
respective successors shall have been duly elected and qualified; and
2. To transact such other business as may properly come before the meeting or
any adjournment(s) thereof.
In accordance with the Company's Bylaws, September 19, 1998 has been
fixed as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting and at any adjournment thereof.
All shareholders are cordially invited to attend the Annual Meeting
in person. Shareholders who do not expect to be able to attend the meeting
are urged to complete, sign and date the enclosed Proxy and mail it in the
envelope provided. If a shareholder receives more than one Proxy because
such person owns shares registered in different names or addresses, each
Proxy should be completed and returned. Your Proxy will not be used if you
are present at the meeting and desire to personally vote your shares.
By Order of the Board of Directors
ss/Daniel E. Luebben
Daniel E. Luebben
Secretary
Pomona, California
October 23, 1998
3201 Temple Avenue
Pomona, California 91768
_______________
PROXY STATEMENT
_______________
INTRODUCTION
This Proxy Statement is furnished to shareholders in connection with the
Annual Meeting of Shareholders of Auto-Graphics, Inc., a California corporation
(the "Company"), to be held at 2:00 PM PST on Tuesday, November 17, 1998 at
the Company's corporate offices located at 3201 Temple Avenue, Pomona,
California, and at any adjournments thereof (the "Annual Meeting"). The
accompanying Proxy is solicited on behalf of the Board of Directors of the
Company for use at such Annual Meeting. The Proxy should be completed,
signed, dated and returned in the enclosed envelope as soon as possible.
All properly executed proxies will be voted at the meeting in accordance with
the shareholder's instructions as 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 Proxy Statement and the accompanying Proxy together with the Company's
Annual Report for the fiscal year ended December 31, 1997 were mailed to all
shareholders on or about September 30, 1998.
The Company intends to solicit proxies principally by use of the mails. The
Company 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
proxies will be borne by the Company, including the 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 Board of
Directors has fixed September 19, 1998 as the record date for the
determination of shareholders entitled to notice of and to vote at the
Annual Meeting of Shareholders. All voting rights are vested exclusively
in the holders of the Company's Common Stock, $.10 par value. As of the
close of business on the record date, there were 1,064,478 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 Annual 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
shareholder's shares are entitled, or to distribute the shareholder's 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 Annual Meeting of such
person's 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 the Board of Directors of
the Company vests in the proxies cumulative voting rights.
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 not be less than three members nor
more than five members as determined by the Board of Directors from time to
time. The number of persons constituting and comprising the Company's Board
of Directors is currently three. Accordingly, the Board of Directors is
recommending only three nominees for election to the Company's Board for the
ensuing year. 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 three nominees proposed by the Board of Directors.
Should any of the three proposed nominees subsequently become unavailable for
election, then the Board of Directors 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 the Board of Directors 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 the Board of Directors 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
the Board of Directors did not designate a nominee in the event that any such
additional new nominee is proposed for election at the Annual 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.
Shares of the
Company's
Common
Name and Principal Year First Stock Owned Percent
Occupation or Employment Became Beneficially as of
Relationship of Nominees Age a Director of Record Date Class
Robert S. Cope 63 1960 721,675 68%
CEO, President
and Treasurer
Auto-Graphics, Inc.
Douglas K. Bisch 76 1970 98,256 9%
Retired Officer of
and Consultant to
Auto-Graphics, Inc.
Robert H. Bretz 55 1988 2,000 --
520 Washington Boulevard
Suite 428
Marina del Rey, CA 90292
Attorney
Robert S. Cope has been employed by the Company in the capacities
indicated above for more than the past five years.
On December 31, 1994, Douglas K. Bisch resigned and retired from day to
day operations as an officer of the Company. Mr. Bisch continues to
serve as a Director of and a consultant to the Company. As indicated
herein under "Certain Relationships and Related Transactions", the
Company has entered into an agreement to purchase substantially all of
the Company's stock owned by Mr. Bisch.
Robert H. Bretz is an attorney who has acted as the Company's outside
legal counsel for more than the past five years and who also serves as
the Assistant Secretary of the Company.
Robert S. Cope, who is the President and Chief Executive Officer of the
Company and Chairman of the Company's Board of Directors, is the
beneficial owner of 721,675 shares or 68% of the Company's total
outstanding shares of Common Stock. As a result of his positions with
and ownership of shares in the Company, Robert S. Cope may be deemed to
be in a control relationship with the Company. Mr. Cope's beneficial
ownership includes 523,391 (49%) shares of Common Stock owned by him
personally and 198,284 shares (19%) owned by members of his family,
including Paul R. Cope who is employed by the Company and owns 125,534
shares (12%). No other single family member owns more than 5% of the
Company's Common Stock. Robert S. Cope has sole investment and voting
power over the shares of Common Stock owned by him personally, and is
presumed to share investment and voting power over the shares owned by
members of his family.
Other Business
So far as the Company is aware, there are no other matters to be brought before
the Annual Meeting. In the event that any other matter properly comes before
the Annual 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 1997 the Company's Board of Directors held two formal meetings, and
also authorized and approved certain actions by unanimous written consent as
authorized by the California Corporations Code and the Company's Bylaws.
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, with the exception of Robert H. Bretz, who receives customary fees
and expenses for services provided to the Company.
</PAGE>
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The following table summarizes 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, 1997 for services rendered in all capacities
exceeded $100,000 and cash compensation received by each named executive
officer for the Company's two previous fiscal years:
Summary Compensation Table
Long-Term
Annual Compensation Compensation
Name Principal Position Year Salary($) Number of
Securities
Underlying
Options
Robert S. Cope CEO, President 1997 $165,000 None
and Treasurer 1996 140,000
1995 130,000
William J. Kliss Chief Operating Officer 1997 $150,000 20,000
1996 138,000
1995 133,000
Daniel E. Luebben Chief Financial Officer 1997 $109,000 10,000
and Secretary 1996 99,000
1995 98,000
There have been no restricted stock awards and there are no restricted stock
holdings as of the fiscal year ended December 31, 1997.
1997 Non-Qualified Stock Option Plan
The Company adopted and implemented a 1997 Non-Qualified Stock Option Plan
effective December 31, 1997. The Plan is a non-qualified Plan covering only
senior executives and related persons. The Plan consists of 100,000 shares
of the Company's authorized but unissued Common Stock. At the inception of
the Plan, the Company granted options to four persons whereby they may
purchase up to a total of 47,500 shares over the next five years at a price
per share of $1.65. The recipient's right to exercise such options and
acquire the stock is conditioned upon further employment with the Company
and on the market trading price of the Company's stock rising to a minimum
of $6.50 per share. Shares actually sold and issued pursuant to the Plan
will be restricted stock requiring that such stock be held by the recipients
for a minimum period of one year following purchase before they are eligible
to sell such stock in the public market. Following such initial option grant,
52,500 shares remain eligible for future grants under the Plan. Under certain
circumstances, in the event of a change in control as defined in the Plan,
recipients of options under the Plan are entitled to require the Company to
liquidate their outstanding options at a price deemed equivalent to the then
current fair market value of the underlying shares. The Plan was filed as
an exhibit (10.25) to the Company's Annual Report to the SEC on Form 10-K
for the year ended December 31, 1997, and is incorporated herein by reference.
The following table summarizes information concerning stock option grants to
named executive officers during the fiscal year ended December 31, 1997. All
options were granted under the 1997 Non-Qualified Stock Option Plan and have
five year terms. Under SEC Regulation S-K, the Company is required to
disclose the hypothetical gains which the named executive officers would
realize at the end of the option term. The gain assumes a compound annual
stock price appreciation of 5% and 10% from the date the option was originally
granted to the end of the option term. These rates of stock price appreciation
are not necessarily the Company's estimate nor do they represent any projection
of the future price of the Company's stock.
<TABLE>
Option Grants in Last Fiscal Year
<CAPTION>
Individual Grants Potential Realizable
Number of Pct. of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Exercise Price Appreciation Grant Date
Options Employees in Price Expiration For Option Term Present
Name Granted Fiscal Year ($/Share) Date 5%($) 10%($) Value($)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert S. Cope None -- N/A N/A 0 0 N/A
William J. Kliss 20,000 42.1% $1.65 12/31/02 0 0 $0.56
Daniel E. Luebben 10,000 21.1% $1.65 12/31/02 0 0 $0.56
</TABLE>
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 $3.00 as of December 31, 1997. The
Potential Realizable Value at Assumed Annual Rates of Stock Price
Appreciation for the Option Term of 5% and 10% is zero because the fair
market value of the underlying stock must rise above $6.50 per share before
the corresponding options may be exercised. Under the terms of the Plan,
the underlying stock price must therefore rise a minimum of 31.5% per annum
over the five year term for the option to be exercisable by the recipients.
At 5% and 10% assumed annual rates of stock price appreciation for the option
term, the equivalent fair market value of the underlying stock would be $3.83
and $4.83, respectively, at the end of the five year term. The Grant Date
Present Value was established using the Black-Scholes option pricing model
based on a current market price of $3.00 per share on the grant date and
applying a discount of 45% due to the restricted nature of the stock yielding
an exercise price of $1.65, a five year expected term, an estimated volatility
factor of 25%, no dividends and a risk-free interest rate of 5.7%.
The following table summarizes information concerning the value received on
options exercised during the fiscal year ended December 31, 1997 and the
value as of December 31, 1997:
Aggregated Option Exercises in the Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Number of Options Options
Securities at Fiscal at Fiscal
Underlying Year-End Year-End
Options Value($) Exercisable/ Exercisable/
Name Exercised Realized Unexercisable Unexercisable
Robert S. Cope None None None/None None/None
William J. Kliss None None 0/20,000 None/None
Daniel E. Luebben None None 0/10,000 None/None
All stock options granted under the 1997 Non-Qualified Stock Option Plan are
currently not exercisable as of December 31, 1997, because the fair market
value of the underlying Common Stock must rise from a current market price of
approximately $3.00 per share as of December 31, 1997 to a minimum of $6.50
per share for the stock option to be exercisable by the recipients.
The following table summarizes information on the stock price-based option
plan awards made during the fiscal year ended December 31, 1997:
Long-Term Incentive Plans
Awards in Last Fiscal Year
Performance
or Other
Period Until
Number of Maturation
Name Shares or Payout
Robert S. Cope None None
William J. Kliss 20,000 5 Years
Daniel E. Luebben 10,000 5 Years
</PAGE>
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The table below reflects information pertaining to certain beneficial owners
of the Company's Common Stock known to own more than 5% of the Company's
securities and all officers and directors of the Company as a group as of
September 19, 1998:
Shares of the
Company's
Common
Stock Owned Percent
Beneficially as of
Name of Beneficial Owner of Record Date Class
Robert S. Cope 721,675 68%
CEO, President
and Treasurer
Auto-Graphics, Inc.
Douglas K. Bisch 98,256 9%
Retired Officer of
and Consultant to
Auto-Graphics, Inc.
Robert L. Lovett, Trustee 62,500 6%
Robert L. Lovett Trust
All Officers and Directors 824,431 77%
as a group (5 persons).
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. Based on information provided to the
Company by such persons, the Company is not aware of any delinquencies in
the filing of such reports.
</PAGE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS
The Company occupies approximately 29,000 sq. ft. of office and production
space in an office building owned by a partnership comprised of Robert S.
Cope and Douglas K. Bisch. The facility is currently leased to the Company
through June 2001 under the second of two five-year renewal options. The
original five-year lease, which was entered into in June of 1986, was
approved and authorized by the independent members of the Company's Board of
Directors. Rental payments paid in 1997 by the Company under the lease
totaled approximately $448,000.
Robert H. Bretz is a director of the Company and also serves as the Company's
outside legal counsel. In 1997, Mr. Bretz firm's billings to the Company
for legal services and expenses totaled approximately $242,000.
The Company previously entered into an agreement to purchase substantially
all of the shares of the Company's Common Stock owned by Douglas K. Bisch.
Mr. Bisch retired from day to day operations as an officer of the Company on
December 31, 1994. Mr. Bisch had previously served as the Company's
Executive Vice President for Sales and Marketing and Secretary for the last
25 years. In accordance with the agreement, the Company will purchase and
retire a total of 156,000 shares of the Company's Common Stock over a seven
year period ending 2001. The total transaction cost will be $825,000
including stock, non-competition and consulting fees. In January of 1995,
1996, and 1997, the Company purchased and retired 15,600 shares each year and
in January 1998, the Company purchased and retired 26,000 shares of the
Company's Common Stock in accordance with the agreement. In addition, the
Company has also received an option to purchase Mr. Bisch's one-third
interest in the partnership which owns the building and land which the
Company leases as its corporate office facility in Pomona, California for a
purchase price based on a formula requiring a minimum payment of $100,000 and
a maximum payment of $150,000. The agreement was unanimously approved by the
Company's Board of Directors with Mr. Bisch abstaining. A copy of the
agreement, the terms of which are summarized herein, was filed as an exhibit
(10.9) to the Company's Annual Report to the SEC on Form 10-K as of
December 31, 1994.
AUDITORS
The Board of Directors selected Ernst & Young LLP to audit and report on the
Company's financial statements as of December 31, 1997 and 1996, and for each
of the three years in the period ending December 31, 1997. Following the
issuance of such financial statements and Ernst & Young's report (an
unqualified opinion) thereon, Ernst & Young notified the Company that it was
resigning so as not to stand for re-election as the Company's independent
accountant effective August 6, 1998. Ernst & Young's decision was not the
result of any disagreement with the Company over any matter of accounting
principles, or practices, financial statement disclosure or auditing scope
or procedure which (if not resolved to the satisfaction of Ernst & Young)
would have caused Ernst & Young to make reference to the subject matter of
the disagreement in connection with its report. The Company is currently
interviewing to retain a successor independent accountant to audit and report
on the Company's financial statements for the year ending December 31, 1998.
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, as amended, which contains certain additional
information about the Company which is not included in either this Proxy
Statement or the Company's accompanying Annual Report to Shareholders. All
such requests should be directed to the Chief Financial Officer at the above
corporate headquarters' address.
SHAREHOLDER PROPOSALS
Any shareholder of the Company desiring to have a proposal considered for
inclusion in the Company's 1999 proxy solicitation material must, in addition
to other applicable requirements, set forth such proposal in writing and file
it with the Secretary of the Company on or before January 1, 1999. The Board
of Directors of the Company will review any such proposals from shareholders
received by that date and will determine whether any such proposals are to be
included in the Company's 1999 proxy solicitation materials.
ss/Daniel E. Luebben
Daniel E. Luebben
Secretary
October 23, 1998
PLEASE SIGN, DATE AND MAIL YOUR PROXY NOW
THANK YOU
</PAGE>
<PAGE>
PROXY
AUTO-GRAPHICS, INC.
ANNUAL MEETING OF SHAREHOLDERS November 17, 1998
The undersigned shareholder of Auto-Graphics, Inc. (the
"Company") acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement each dated October 28, 1998 together
with the Company's 1997 Annual Report to Shareholders and the
undersigned revokes all prior proxies and appoints Robert S. Cope and
Douglas K. Bisch or each of them as proxies for the undersigned to
represent the undersigned and vote all the shares of Common Stock of
the Company which the undersigned would be entitled to vote at the
Annual Meeting of Shareholders to be held at 3201 Temple Avenue,
Pomona, California on Tuesday, November 17, 1998 at 2:00 P.M. PDT, and any
adjournment(s) thereof, and instructs said proxies to vote as follows:
____ FOR the election of the following three nominees to the Company's
Board of Directors: Robert S. Cope, Douglas K. Bisch, and Robert H. Bretz;
or
___ WITHHOLD authority to vote for all of the foregoing nominees. To
withhold authority to vote for any individual nominee(s), enter the
name of any such nominee(s) in the space provided below.
In their discretion to transact such other business as may properly come
before the meeting.
PLEASE DATE AND SIGN ON REVERSE SIDE AND RETURN PROMPTLY
</PAGE>
<PAGE>
THE PROXY IS BEING SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
Dated this____ of_________, 1998
Signature of Shareholder
Signature of Shareholder
This Proxy should be dated, signed by the shareholder(s) exactly as the
name is printed at the left, and returned promptly in the enclosed envelope.
A person signing as a fiduciary or on behalf of a corporation should so
indicate.
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. UNLESS OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES PROPOSED BY THE
BOARD OF DIRECTORS.
</PAGE>
