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United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported): July, 1999
AUTO-GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
California 0-4431 95-2105641
State or Other Commission I.R.S. Employer
Jurisdiction File Number Identification
of Incorporation Number
3201 Temple Avenue
Pomona, California 91768-3200
Address of Principal Zip Code
Executive Offices
Registrant's telephone number: (909) 595-7204
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FORM 8-K
ITEM 1. Change in Control of Registrant.
Potential Change in Control of Registrant
At June 30, 1999, Auto-Graphics (the "Company") had a total of 1,043,678
shares of common stock issued and outstanding. Robert S. Cope ("Cope"),
the Company's CEO and principal shareholder, 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, Cope may be deemed to be in a control relationship with the
Company. Cope's beneficial ownership includes 523,391 (50%) shares
of common stock owned by him personally and 198,284 shares (19%) owned
by members of his family. 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.
Mr. Cope has granted an option to Corey M. Patick ("Patick") to purchase
375,000 shares of the Company's common stock owned by him personally for
$5 per share. If the option is exercised by Patick, then Cope has the
option to require Patick to purchase some or all of an additional 148,391
shares of such stock, which he owns personally at $4.75 per share. The term
of the option is 18 months ending on November 14, 2000. Additionally,
Patick has the right to purchase warrants to purchase up to 80,000 shares
of the Company's restricted common stock.
Patick has joined the Company as Vice President, Corporate Development and
is assisting the Company in raising a minimum of $500,000 in a Private
Placement Offering ("Offering") through the sale of 200,000 to 450,000
(possibly to be extended to 500,000) shares of the Company's (restricted)
stock. Through the date of the filing of this report, the Company has
accepted subscriptions for 208,000 shares ($520,000) of the Company's
restricted common stock. With the issuance of these shares, the total
shares outstanding will increase to 1,251,678.
The foregoing is qualified in its entirety by the information contained in
the accompanying exhibits. (See Item 7 - Exhibits).
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ITEM 7. Exhibits
Option Agreement dated May 15, 1999 between Robert S. Cope
and Elizabeth Cope and the Cope Family Trust, and Corey M. Patick
(Exhibit 10.30).
Employment Agreement dated May 15, 1999 between Auto-Graphics, Inc.
and Corey M. Patick (Exhibit 10.31).
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
AUTO-GRAPHICS, INC.
(Registrant)
Date: August 9, 1999 By: ss/Robert S. Cope
Robert S. Cope, President,
Treasurer, and Director
Date: August 9, 1999 By: ss/Daniel E. Luebben
Daniel E. Luebben
Vice President, Chief
Financial Officer &
Secretary
</PAGE>
Exhibit 10.30
OPTION AGREEMENT
OPTION AGREEMENT
This OPTION AGREEMENT dated May 15, 1999 (the "Agreement") is
made by and between Robert S. Cope and Elizabeth Cope, husband and wife,
and the Cope Family Trust dated September 12, 1972 (the "Trust") and
Robert S. Cope in his capacity as Trustee of the Trust (herein
individually and collectively "Cope"), on the one hand and Corey M.
Patick, an individual, and/or his designee or assignee (herein
collectively "Patick"), on the other hand.
R E C I T A L S
WHEREAS, Cope is the owner of 523,391 shares of the issued and
outstanding Common Stock of Auto-Graphics, Inc., a California corporation
(the "Company") registered in the name of and owned by the Trust (the
"Stock");
WHEREAS, Cope desires to sell the Stock, and in furtherance
thereof desires to sell and grant Patick the irrevocable right and option
(the "Option") to purchase Three Hundred and Seventy-Five Thousand
(375,000) shares of such Stock (the "Option Stock") for a price of $5 per
share totalling One Million Eight Hundred Seventy-Five Thousand Dollars
($1,875,000) (the "Purchase Price");
WHEREAS, Patick desires to explore the Purchase of the Stock
and, therefore, desires to purchase and acquire from Cope the Option;
WHEREAS, the Company has entered into an Employment Agreement
with Patick of even date herewith whereby Patick has agreed to assist the
Company to offer and sell a minimum of 200,000 shares of the Company's
authorized and unissued Common Stock at a price per share of $2.50 for
aggregate proceeds to the Company of $500,000 to be completed by no later
than September 14, 1999 (herein the "Successful Offering").
WHEREAS, the parties have memorialized their understandings
and agreements regarding the Option and the Stock in this Agreement;
A G R E E M E N T
NOW, THEREFORE, the undersigned parties intending to be
legally bound and obligated thereby, in consideration of the premises and
the covenants contained herein, subject to the conditions set forth
herein, do hereby agree as follows:
1. Recitals. The Recitals set forth above, including the
definitions set forth therein, are hereby incorporated in their entirety
into and made a part of this Agreement.
2. Option. Cope hereby sells, transfers and conveys to
Patick, and Patick hereby purchases and acquires the Option from Cope, for
the purchase price of One Thousand Dollars ($1,000) receipt of which is
hereby acknowledged by Cope.
3. Term of the Option. Subject to the provisions of
paragraph 4 hereof, the Term of the Option, unless extended as provided
for herein, shall be for a period of eighteen (18) months commencing on
the date first above written and ending on November 14, 2001 (the "Initial
Option Term"). If not previously terminated by Cope in accordance with
paragraph 4, the Initial Option Term can and shall be extended, at the
sole discretion and election of Patick, for a period of one (1) year upon
payment to Cope of One Hundred and Twenty-Five Thousand Dollars ($125,000)
for such purpose prior to the expiration of the Initial Option Term (the
"Extended Option Term"). Unless exercised in accordance with the
provisions of paragraph 5 hereof, the Option shall automatically terminate
and expire at the end of the Initial Option Term or, if applicable, the
Extended Option Term (the Initial Option Term and the Extended Option Term
are, together, hereinafter referred to as the "Option Term").
4. Termination of the Option. Notwithstanding anything
herein to the contrary, in the event that the Successful Offering has
not occurred, then Cope shall be entitled in his sole and absolute
discretion and election, but shall not be obligated, to terminate the
Option without further obligation under this Agreement in respect of such
Option ("Cope Right of Termination"). Unless Cope provides Patick with
written notice within ten (10) days following the deadline (September 14,
1999) for the Successful Offering that he is waiving his rights under the
Cope Right of Termination, then the Option shall automatically terminate
and be of no further force or effect ("Option Continuation Notice"). If
Cope provides Patick with the Option Continuation Notice, then the Option
shall continue in full force and effect in accordance with the provisions
of this Agreement notwithstanding the Company's inability to achieve the
Successful Offering.
5. Exercise of the Option. Unless terminated in accordance
with the Cope Right of Termination as provided for in paragraph 4, Patick
may exercise the Option at any time before the expiration of the Option
Term (including the Extended Option Term if applicable) as provided for
herein, by written notice in accordance with paragraph 23 hereof (the
"Option Exercise Notice"), stating that the Option to purchase the Stock
is exercised and indicating the registered purchaser(s) thereof and
stating a date and time for the closing ("Option Closing") of the
transaction whereby Patick will pay for, purchase and acquire, and
physically receive certificates representing, the Stock registered in the
name of the purchaser(s) as indicated in the notice or endorsed for
transfer into the name of the purchaser(s), such Option Closing to take
place any time within forty-five (45) days from the date of the Option
Exercise Notice. Subject to timely exercise of the Option in accordance
with the provisions of this Agreement, and payment therefor, Cope agrees
and promises to sell, transfer and deliver to Patick the shares of Option
Stock which are the subject of the Option at the Option Closing. The
Option Closing shall take place at the corporate offices of the Company in
Pomona, California or at such other place as the parties may mutually
agree upon in writing. At the Option Closing, Patick shall pay for the
Option Stock being purchased in cash or by cashier's or certified check in
the full amount of the Purchase Price for the Option Stock ($1,875,000)
payable to the Trust or its designee ("Option Stock Purchase Price").
6. Cope Put. Within ten (10) days from the date of the
Option Exercise Notice, Cope shall have the irrevocable right, in his sole
and absolute discretion and election (the "Cope Stock Put"), to require
including as a condition to the Option Closing and Patick's right to
purchase the Option Stock at such Closing that Patick purchase and acquire
from Cope at the Option Closing the balance of the Stock owned by Cope
being 148,391 shares of the Company's Common Stock or 25,000 share
increments thereof (the "Put Stock"). Cope shall provide Patick with
written notice in accordance with paragraph 23 hereof that Cope is
exercising the Cope Stock Put, and the number of shares of the Put Stock
to be sold, within ten (10) days following the date of the Option Exercise
Notice by Patick (the "Put Notice"). If Cope does not, for any reason,
timely provide Patick with the Put Notice in accordance with the
provisions of paragraph 23, then the Cope Stock Put shall automatically
terminate and expire and be of no further force and effect including,
notwithstanding any other provision in this Agreement to the contrary, as
a condition to the Option Closing and the purchase of the Option Stock by
Patick. The purchase price for the Put Stock shall be Four Dollars and
Seventy-Five Cents ($4.75) per share for a total of up to Seven Hundred
and Four Thousand Eight Hundred and Fifty-Seven Dollars and Twenty-Five
Cents ($704,857.25) if all of such Put Stock is sold (the exact amount,
being $4.75 times the actual number of shares of the Put Stock which is
the subject of the Put Notice, is referred to herein as the "Put Stock
Purchase Price"), and such Put Stock Purchase Price shall be paid at the
Option Closing one-half (50%) down in cash or cashier's check or certified
check payable to the Trust and the balance in the form of the purchaser's
promissory note payable to the Trust in equal quarterly installments,
together with interest on the unpaid balance at the rate of six percent
(6%) per annum, over a period of three (3) years from the date of the
Option Closing. Upon receipt of the Put Notice, Patick will provide Cope
with the name of the purchaser(s) including herein his designee and/or
assignees who will purchase the Put Stock from Cope at the Option Closing.
At the Option Closing, Cope shall sell, deliver and transfer, and the
purchaser will purchase, acquire and take delivery of, the Put Stock,
including certificates representing such Put Stock registered in the name
of the purchaser or stock powers covering the Put Stock properly endorsed
for transfer to the purchaser, free and clear of all liens, claims and
encumbrances whatsoever, except only for a customary securities legend and
stop transfer instruction indicating that such stock is deemed to be
restricted stock under applicable securities laws, rules and regulations
(the "Purchased Put Stock"). Following the Option Closing, Cope shall
retain no right, title or interest in the Purchased Put Stock. In the
event that payment for the Purchased Put Stock includes the purchaser(s)
promissory note as provide for above, then one half (50%) of the Purchased
Put Stock shall be pledged to Cope to secure payment of such promissory
note (the "Pledged Stock"); however, notwithstanding such pledge, the
purchaser(s) shall retain all incidents of ownership of the Pledged Stock
including without limitation voting rights to such Pledged Stock.
Following installment payments of the promissory note, a portion of the
Pledged Stock shall be released from the pledge in an amount equal to the
amount of the note which has been paid at the time of each of such
installment payments.
7. Escrow/Voting Rights. Within forty-five (45) days
following the date of this Agreement, Cope and Patick will mutually
arrange for an escrow or other similar arrangement ("Escrow") acceptable
to them whereby an escrow holder or other similar party will hold the
Option Stock (together with stock powers separate from certificate
properly endorsed in blank for transfer) pursuant to and in accordance
with the parties' respective rights and obligations under this Agreement
(the "Escrow Holder"). The parties shall share equally (50/50) the cost
of the Escrow. The Escrow Holder shall agree in writing to abide by the
terms and conditions set forth in this Agreement and to hold safe the
Option Stock (and stock powers) and impartially administer, implement and
effectuate the parties' agreement in respect of the subject matter of the
Escrow and the Agreement. The parties hereby agree to enter into an
agreement with the Escrow Holder as may reasonably be required by the
Escrow Holder in respect of the Escrow. Upon the termination or
expiration of the Option Term as provided for and in accordance with the
provisions of this Agreement, the Escrow Holder shall return to Cope the
Option Stock (and stock powers) and the Escrow shall thereby expire and be
of no further force or effect. Notwithstanding the existence of this
Agreement, and the deposit of the Option Stock into the Escrow, pending
the actual purchase of the Option Stock at the Options Closing as herein
provided for, and subject to Patick's right to purchase the Option Stock,
Cope shall retain, and be entitled to exercise in his sole and absolute
discretion and election, full voting and other rights of ownership in and
to the Option Stock. Likewise, pending the actual purchase of the Option
Stock at the Option Closing, Cope shall be entitled to receive and own,
subject to Patick's rights under this Agreement to the Option Stock and
attendaments thereto, any cash or stock dividend or other rights, title or
interest, attributable to or distributed in respect of the Option Stock
(collectively the "Attendaments") which Attendaments shall forthwith be
transferred and deposited by Cope, or delivered directly by the Company,
into the Escrow and all of such Attendaments shall be deemed and treated
for all purposes as part of the Option Stock to be sold by Cope and
purchased by Patick for the Option Stock Purchase Price. (Although not
required to be held in Escrow, the Put Stock will be held by Cope subject
to the provisions of this Agreement and shall be understood to include all
Attendaments as part of the Put Stock Purchase Price and that, pending any
sale of the Put Stock to Patick, Cope retains all voting and other
incidents of ownership of such Put Stock).
8. Cooperation by Cope. During the Option Term, Cope agrees and
promises not to take, cause to be taken or, where within his control,
permit any action to be taken including by the Company intended, or which
would reasonably be understood, to prejudice Patick's rights and
entitlements under the Option and/or in respect of the Option Stock.
9. Future Lease Obligation. Pending termination of the
Option as provided for in paragraph 4 hereof, or the subsequent expiration
of the Option Term, Cope will not cause the Company to enter into a new
lease or other arrangement whereby the Company is obligated to lease or
otherwise occupy the real property and improvements located at and
generally described as 3201 Temple Avenue, Pomona, California 91768 (the
"Real Property") which Real Property is presently leased and occupied by
the Company as its corporate offices facility pursuant to a lease with
that certain Partnership in respect of which Cope is a two-thirds owner
through June 30, 2001 (the "Lease"), beyond the expiration of the current
Lease term plus twelve (12) months (through June 30, 2002) at a rate not
to exceed the Lease rate in effect at the end of the current Lease term.
10. Certain Representations, Covenants and Warranties by
Cope. For purposes of this Agreement, and the transactions contemplated
by and provided for herein, Cope represents, covenants and warrants to
Patick, as follows: (A) the Stock is owned exclusively by the Trust, and
is free and clear of all liens, claims and encumbrances of whatsoever
nature or kind and will remain so during the Term of the Option; (B) the
Company's 1998 year-end audited financial statements are accurate and
complete in all material respects and fairly present the results of
operations, financial condition and changes of cash flows and equity as
presented therein in accordance with generally accepted accounting
principles consistently applied, and the Company's 1999 year-end financial
statements, when and if provided to Patick pursuant to the provisions of
this Agreement will be accurate and complete in all material respects and
fairly present the results of operations, financial condition and changes
of cash flows and equity as presented therein in accordance with generally
accepted accounting principles consistently applied; and (C) Cope has not
received any claim or threat of a claim, or notice of any action or
proceeding in respect of the Company which are not reflected on the
Company's financial statements referenced herein or otherwise identified
and described on a schedule provided to Patick for such purposes by Cope
or the Company.
11. Certain Other Covenants by Cope. Pending termination of
the Option as provided for in paragraph 4 hereof, or the subsequent
expiration of the Option Term, Cope agrees and promises at his sole cost
and expense where applicable (A) to retain ownership of the Option Stock;
(B) not to enter into any agreement or other arrangement regarding the
sale, fractionalization, hypothecation, pledge, assignment, granting of a
voting proxy for, transfer and/or other disposition or possible future
disposition of the Option Stock or any interest therein; (C) to keep the
Option Stock free and clear of any and all liens, claims and encumbrances
of whatsoever nature; (D) not to permit any lien, claim or encumbrance to
be placed or otherwise exit in, on or otherwise in respect of the Option
Stock and to promptly seek to cause to be removed any such lien, claim or
encumbrance that should come into existence following the date of this
Agreement; (E) to promptly notify Patick in the event and when Cope first
becomes aware of any actual or threatened claim, lien or encumbrance in,
on or otherwise affecting the Option Stock; (F) to cause the Company to
prepare and to promptly provide to Patick quarterly and annual
consolidated financial statements for the Company accurately and
completely presenting the results of operations, financial condition and
changes in cash flows and equity and, if Patick timely exercises the
Option to obtain and deliver to Patick prior to the Option Closing written
authorization from the Company's independent certified public accountants,
whose report covers the Company's most recently completed annual audited
consolidated financial statements, written authorization by such
accountants for Patick to rely upon such accountant's audit report thereon
for purposes of purchasing the Option Stock; and (G) Cope will not cause
the Company to increase his salary or other form of compensation and/or
the lease payments the Company pays for the Real Property without the
prior written consent of Patick, or to cause the Company to repurchase any
of the Stock or to otherwise make any distribution to Cope in respect of
such Stock or to repurchase or make any distribution in respect of any
other shares of the Company's Common Stock or to offer, sell or issue, or
commit to offer, sell and/or issue any shares of the Company's Common
Stock or other securities (other than the proposed Public Offering as
contemplated by and described in that certain Employment Agreement
referenced elsewhere herein) without the prior written consent of Patick.
12. Conditions To The Parties' Obligations To Closing.
Notwithstanding anything herein to the contrary, the parties' respective
obligations to close and otherwise consummate the transactions
contemplated and provided for in this Agreement, and each of them, at the
Option Closing, or as otherwise provided for herein, are subject to and
are expressly conditioned upon the following events, occurrences and other
matters:
A. To Cope's Obligations:
(1) the timely and full performance by Patick of his
agreements and promises (covenants) as set forth in this Agreement
including, if applicable, in respect of the Cope Put Option and the Put
Stock; and
(2) compliance with all applicable securities laws,
rules and regulations.
B. To Patick's Obligations:
(1) the truth and accuracy of Cope's representations
and warranties at the date of this Agreement and as at the time of the
Option's Closing;
(2) the timely and full performance by Cope of his
agreements and promises (covenants) as set forth in this Agreement;
(3) the timely and full performance by the Company of
any of its undertakings, agreements and/or promises (covenants) as set
forth in the Agreement;
(4) the timely and full performance of the Company's
obligations to Patick under that certain Employment Agreement between the
Company and Patick of even date herewith;
(5) compliance with all applicable securities laws,
rules and regulations;
(6) confirmation by Patick in his sole and absolute
discretion and election that there has been no adverse change in the
Company, its business, results of operations, financial condition,
prospects and matters pertaining to the Option Stock (including the Put
Stock if applicable) since the date of the last year-end financial
statements of the Company provided to Patick prior to the Option Closing
including pursuant to and in accordance with Patick's right to conduct
"due diligence" as provided for in paragraph 28 and further referenced in
paragraph 29 of this Agreement; and
(7) the obtaining by Patick of such assurances as he
shall determine in his sole and absolute discretion and election to be
satisfactory that the then current officers and directors will continue
to serve in such capacities for a reasonable period of time following the
Options Closing.
Prior to or at the Option Closing, the respective parties are entitled
(but are not required) to waive the occurrence of any one or more of the
conditions to such party's obligations under this Agreement. The waiver
of one or more of such conditions by any party shall not act to constitute
a waiver of any other condition(s). Likewise, the failure of any party to
timely enforce any right, benefit or entitlement in favor of such party as
provided for in this Agreement or otherwise shall not be deemed and shall
not act as a waiver or relinquishment of any such right, benefit or
entitlement or any other right, benefit or entitlement under this
Agreement.
13. Free Assignability. Nothing herein contained is intended
or shall be interpreted to preclude or limit Patick's right, ability and
entitlement to sell, assign or transfer this Agreement in whole or in
part, and Patick's rights and obligations, including without limitation in
respect of and to the Option and the right to purchase the Option Stock
for the Purchase Price, as provided for herein.
14. ESOT/ESOP. In the event that Patick assigns and
transfers, in whole or in part, the Option including Patick's rights,
responsibilities and obligations hereunder including in respect of the
Cope Put, then the purchase price to be paid to and received by Cope for
the Option Stock (and/or the Put Stock if applicable) at the Option
Closing shall be reduced by an amount equal to the capital gains tax
(presently 18%) otherwise applicable and payable by Cope in respect of the
sale of such Stock, provided that Cope shall be entitled to defer payment
of such taxes pursuant to and in accordance with applicable Internal
Revenue Service Code S1042 as confirmed by an interpretative letter from
the IRS and/or a legal opinion from a reputable income tax accountant or
attorney reasonably acceptable to Cope.
15. Cope Consulting Agreement and Covenant Not To Compete. In the
event that Patick exercises the Option and purchases the Option
Stock, at the sole discretion and election of Patick, Cope hereby agrees
and promises (A) to provide part-time (up to 25 hours per week, 40 weeks
per year) consulting services to the Company and, further, (B) agrees and
promises not to compete against the Company, directly or indirectly, or to
assist in any manner any one else to compete against the Company and,
further, (C) to continue serving on the Company's Board of Directors
(absent the occurrence of any actual conflict of interest between the
Company and Cope that should arise following the Option Closing Date), all
[(A) through (C)] for a period of forty-two (42) months following the
Option Closing Date for total aggregate compensation at the rate of Fifty
Thousand Dollars ($50,000) per year, to be allocated by the Company in its
sole discretion and election, and paid by the Company to Cope on a semi-
monthly basis in accordance with the Company's then current payroll
policies and procedures for outside consultants.
16. Indemnity By The Parties. Patick and Cope each agree
and promise to indemnify and hold harmless the other against any claims,
debts, obligations, costs, expenses (including reasonable attorney's and
professional's fees) and/or liabilities of whatsoever kind or nature
which arise or otherwise result from the refusal and/or failure of the
indemnifying party to timely and fully perform such party's agreements and
promises (covenants) as set forth herein and/or as a result of the
inaccuracy of any representation or warranty made herein by the party
against which such indemnification is sought.
17. Deductible Amount. Notwithstanding any provision of this
Agreement to the contrary, none of the parties to this Agreement shall be
required to make any indemnification or related payment under this
Agreement or otherwise with respect to a claim asserted following the
Option Closing alleging any breach of any of such party's representations,
agreements, promises (covenants) and/or warranties under this Agreement,
except to the extent that the cumulative amount of the damages actually
incurred by the party seeking any such indemnification as a direct result
of all such breaches of such representations, agreements, promises
(covenants) and/or warranties actually exceeds, in the aggregate, the
Deductible Amount (as define herein). The "Deductible Amount" shall be
One Hundred Thousand Dollars ($100,000).
18. Knowledge of Breach. Unless specifically provided in
writing at the time of Closing for purposes of this paragraph, none of the
parties to this Agreement shall be deemed to have breached any
representation, agreement, promise (covenant) and/or warranty if the party
seeking indemnification under the Agreement obtained (by means of a
diligent investigation or otherwise), on or prior to the Option Closing
date, any actual and independently demonstrable knowledge of the breach of
such representation, agreement, promise (covenant) and/or warranty by the
party against which any claim of indemnification is being sought.
19. Survival of Representations and Warranties. All of the
parties' representations and/or warranties as set forth in this Agreement
shall survive the Option Closing; however, the rights, claims, benefits
and entitlements of the parties following the Closing attributable to such
representations and warranties shall, notwithstanding any contrary
provision in this Agreement, automatically terminate and expire, and shall
cease to be of any force or effect, and all liability of Cope and Patick
with respect to such representations and/or warranties shall be
extinguished and be of no further legal force or effect, on the first
anniversary date of the Option Closing; provided, however, that if, on or
prior to such first anniversary date, either of the parties shall have
duly delivered a written claim notice to the other party, then the
specific indemnification claim set forth in such claim notice shall
survive such first anniversary (and shall not be extinguished as otherwise
provided for by this provision).
20. Compliance With Securities Laws. The offer, sale and
issuance of the Option and the Stock as provided for herein shall be in
compliance with all applicable securities laws, rules and regulations.
The parties each agree and promise to cooperate and assist in efforts to
satisfy all requirements applicable to the transactions contemplated and
as provided for in this Agreement under Federal and state securities laws,
rules or regulations.
21. Complete Agreement. This Agreement contains all of the
parties' statements, representations, understandings, agreements,
promises, covenants, assurances, warranties, guarantees and other matters
regarding the subject matter of the Agreement. This Agreement may only be
supplemented, modified, amended or otherwise changed by a further writing,
referencing this paragraph, and signed by the party sought to be bound by
any such supplement, modification, amendment. This Agreement has and
shall be deemed for all purposes to have been drafted and otherwise
prepared by both of the parties and, should any ambiguity subsequently be
determined to exist in or in respect of this Agreement including the
language used herein, then neither party shall suffer and prejudice or
disability as a result of any such ambiguity. Each of the parties
acknowledges to the other that they have had the opportunity to have this
Agreement and matters relating thereto reviewed by their own respective
individual
professional advisors including attorneys.
22. Choice Of Law. This Agreement is made and shall be
governed and interpreted for all purposes under the laws of the State of
California (without regard to its conflict of law provisions).
23. Notices. Notices to be given under or in respect of this
Agreement shall be provided in writing and shall be deemed effective upon
receipt if personally delivered or on the third day following mailing in
United States Mail, certified mail - return receipt requested, addressed
as follows:
If To "Cope"
Robert S. Cope
547 Rancho Del Monico
Covina, CA 91724
With a copy to -
Daniel H. Luciano, Esq.
242A West Valley Brook Road
Califon, New Jersey 07830
If To "Patick"
Corey M. Patick
2806 Sheridan Way
Stockton, CA 95207
With a copy to -
Bill D. Ringer, Esq.
1401 N. Hunter Street
San Joaquin, CA 95202
If To The "Company"
Auto-Graphics, Inc.
3201 Temple Avenue
Pomona, CA 91768-3200
With a copy to -
Robert H. Bretz, Esq.
520 Washington Blvd, PMB #428
Marina del Rey, CA 90292
Any party may, from time to time, update or otherwise change its address
for purposes of notice under this Agreement by providing such notice in
accordance with the provisions of this Agreement.
24. Time Is Of The Essence. For purpose of this Agreement,
and the performance of the parties responsibilities and obligations
hereunder and/or the satisfaction of conditions as provided for herein,
time shall be deemed to be of the essence.
25. Severability. If any provision of this Agreement is
hereafter finally determined to be unenforceable for any reason, then such
provision shall be deemed and treated for all purposes as severed from
this Agreement; and the balance of this Agreement shall remain in full
force and effect as between the parties notwithstanding any such
unenforceable and severed provision.
26. Attorney's Fees/Costs. Accept as specifically provided
for in paragraph 7 of this Agreement, the parties to this Agreement shall
each bear their own legal fees and other costs and expenses associated
with the negotiation and preparation of this Agreement and matters
relating thereto and attributable to the Option Closing and the sale,
purchase, transfer and issuance of the Option Stock (and the Put Stock if
applicable). If any party initiates any legal action or proceeding
seeking to enforce such party's rights or otherwise under or in respect of
this Agreement then, in additional to whatever other relief such party may
be entitled to receive as a result of such action/proceeding, such party
(or the other party if determined to be the prevailing party in any such
legal action or proceeding) shall be entitled to recover its reasonable
attorney's and other professional's fees and costs paid or incurred by
such party in connection with such legal action/proceeding including in
respect of an appeal in such action/proceeding.
27. Headings. The headings of the paragraphs (and any
subparagraphs) of this Agreement are included for the convenience of
reference only and are not intended to affect the meaning or
interpretation of this Agreement.
28. Third Party Beneficiaries. The parties do not, by this
Agreement or otherwise, intend to benefit any specific third person or
entity; and no person or entity, who is not a signatory party to this
Agreement, shall have or assert any right under or otherwise in respect of
this Agreement. The Company is not intended and shall not be deemed for
any reason to be a signatory party to this Agreement; and, the Company's
"Acknowledged/Agreed" signature below is intended solely to indicate that
the Company agrees and promises not to act in a manner that is
inconsistent with the parties' agreements and promises (covenants), as
they relate to the Company, where such agreements and promises (covenants)
are not inconsistent with the Company's Articles of Incorporation, By-Laws
or under the laws of the State (California) wherein the Company is
incorporated, and that the Company does hereby agree and promise to allow
Patick, if and when Patick actually exercises the Option to purchase the
Option Stock and prior to the Option Closing, and his representatives to
conduct such "due diligence" as is customary in the case of similar stock
purchase transactions - - and for no other purpose.
29. Documents To Be Delivered By Patick At the Closing. If
the Option is exercised, then Patick is entitled to conduct "due
diligence" as provided for in the foregoing paragraph; and, at the Option
Closing and as a condition thereto, Patick shall provide Cope and the
Company with the following representations, warranties and other
assurances:
A. Patick is acquiring the Option Stock (and the Put Stock if
applicable) for investment purposes and not with a view to resell or
otherwise transfer such Stock;
B. Patick has carefully reviewed the financial condition of
the Company as presented in the latest annual and quarterly financial
statements which were provided to Patick by Cope (or the Company) as
provided for in paragraph 11(F) hereof;
C. Patick has carefully reviewed the Company's periodic
reports filed with the SEC (10-K, 10-Q and 8-K Reports) with the United
States Securities and Exchange Commission (the "SEC") which were provided
to Patick by Cope (or the Company) as provided for in paragraph 11(F)
hereof;
D. Patick has been provided the opportunity to obtain any
other information regarding the Company, its business, results of
operations, financial condition, prospects and/or the Company's Common
Stock;
E. Patick acknowledges his understanding that the offer and
sale by Cope of the Option Stock (and the Put Stock if applicable) has not
been registered and/or qualified under any state or Federal securities
laws, rules and regulations and is, therefore, deemed to be "restricted
securities" under the Securities Exchange Act of 1934, as amended, and
that the certificates representing such Stock when issued to Patick will
be subject to "stop transfer" instructions given to the Company's stock
transfer agent and such certificates will contain the following or a
substantially similar legend to be approved by the Company's legal
counsel:
"The securities represented by this certificate
have not been registered under the United States
Securities Act of 1933, as amended (the "Act") or
any state securities law. These shares have been
acquired for investment and may not be offered for
sale, hypothecated, sold or transferred, nor will
any assignee or transferee thereof be recognized
by the Company as having any interest in such shares,
in the absence of (i) an effective registration
statement with respect to the shares under the Act,
and any other applicable state law, or (ii) an opinion
of counsel satisfactory to the Company that such
shares will be offered for sale, hypothecated, sold or
transferred only in a transaction which is exempt
under or is otherwise in compliance with the
applicable securities laws."
F. Patick has evaluated the risks associated with the
acquisition of the Option Stock (and the Put Stock if applicable) and has
determined that the acquisition of such Stock is a suitable investment and
that Patick can bear the entire risk of loss associated with the purchase
of such Stock; and
G. Patick understands and acknowledges that neither Cope
(including the Trust) nor any of his agents, if any, have made any
representations to Patick regarding the Company, its business future or
business prospects or the future price of the Common Stock of the Company,
except as otherwise provided for in this Agreement and as indicated on any
schedule that Patick shall provide to Cope (and the Company) confirming
any additional representations which have been provided to Patick which,
when approved by Cope (and/or the Company where appropriate), Patick shall
be entitled to rely upon in determining to purchase the Option Stock (and
the Put Stock if applicable) under this Agreement.
30. Successors In Interest. This Agreement, including all
rights and obligations provided for herein, is binding upon the parties
including their heirs, executors, administrators, trustees and successor
trustees, designees, assigns, and other successors in interest.
IN WITNESS WHEREOF, the parties thereunto duly authorized have
executed this Agreement in Pomona, California effective as of the date
first set forth above.
("Cope")
ss/ Robert S. Cope
Robert S. Cope
ss/ Elizabeth Cope
Elizabeth Cope
THE COPE FAMILY TRUST
By ss/ Robert S. Cope
Robert S. Cope, Trustee
("Patick")
ss/ Corey M. Patick
Corey M. Patick
Acknowledged and Agreed
AUTO-GRAPHICS, INC.
(the "Company")
By ss/Robert S. Cope
Robert S, Cope, President
By ss/Daniel E. Luebben
Daniel L. Luebben, Secretary
Exhibit 10.31
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT dated May 15, 1999 (the "Agreement")
is made and entered into by and between Auto-Graphics, Inc., a California
corporation (the "Company") on the one hand and Corey M. Patick, an
individual ("Patick") on the other hand.
R E C I T A L S
WHEREAS, the Company would like to obtain additional equity
capital through the offer and sale of shares of its authorized but
unissued Common Stock in a private and/or public offering of such stock
(collectively the "Securities Offerings");
WHEREAS, the Company would like to offer and sell between
200,000 and 450,000 shares of its authorized but unissued Common Stock in
a private offering (restricted stock) for a price per share of $2.50 (the
"Private Offering");
WHEREAS, if the Private Offering is successful (the Company
raises at least $500,000 in such Offering as more fully defined herein),
then the Company would like to proceed to offer and sell up to an
additional 1,000,000 shares of its authorized and unissued shares of
Common Stock at a minimum price of $5 per share in an SEC registered
offering (the "Public Offering");
WHEREAS, Patick has a background and experience in the finance
and securities areas and desires to assist the Company with the above
referenced Securities Offerings and the Company desires to secure such
services;
WHEREAS, the Company and Patick desire to memorialize in this
Agreement their understandings and agreements regarding Patick's
employment with the Company to provide services to the Company for
purposes of such Securities Offerings;
A G R E E M E N T
NOW, THEREFORE, the undersigned parties intending to be
legally bound and obligated thereby, in consideration of the premises and
the covenants contained in this Agreement, and subject to the conditions
set forth herein, do hereby agree as follow:
1. Employment/Position. During the Term of this Agreement,
and subject to paragraph 7 hereof, the Company agrees to employ and Patick
agrees to be employed by the Company to assist the Company in respect of
the Securities Offerings (the "Services"). Such employment with the
Company shall be on a substantially full-time basis (no less than an
average of 35 hours per week). Patick will be employed in the position of
"Vice-President - Special Projects". Unless and until mutually agreed
upon in writing by the Company and Patick, Patick will not be appointed an
officer or director of the Company.
2. Limitations On Employment. Due to the special nature of
the employment assignment, Patick agrees and promises not to attempt to
and/or actually bind and/or obligate the Company in respect of any matters
or things other than the subject matter of the Securities Offering as
specifically reviewed and approved by the Company's Board of Directors and
set forth in the securities disclosure document(s) submitted to and
approved by the Board or as otherwise authorized by the Company's Board of
Directors in writing.
3. Term. The Term of this Agreement shall commence on May
15, 1999 and continue on a continuous basis, unless earlier terminated
pursuant to paragraph 7 hereof, for a period of nine (9) months ending
February 14, 2000 (herein the "Term").
4. Employment Compensation. During the Term of the
Agreement, in consideration for the Services, the Company shall pay Patick
and Patick will receive from the Company the following salary and other
opportunities:
A. Salary. In consideration for the Services, the
Company will pay Patick a monthly salary of $15,000, payable in the normal
course and manner consistent with the Company's payroll policies and
procedures; and
B. Performance Opportunity/Private Offering. If the
Private Offering is in fact successful, defined as no less than $500,000
actually raised and received by the Company in a Private Offering,
complying in all respects with applicable securities laws, rules and
regulations, within one hundred and twenty (120) days of the date of this
Agreement ("Successful Offering"), then Patick shall have the right
("Performance Opportunity") to purchase from the Company warrants at a
price of $.01 per warrant entitling Patick, for a period of three (3)
years from the date of issuance, to purchase shares of the Company's
authorized and unissued Common Stock at a price equal to the par value
($.10) of such stock in a private offering (restricted stock including a
legend restricting transfer with an appropriate stop transfer instruction
on file with the Company's stock transfer agent). Subject to the above
requirement for a Successful Offering, for each share sold in the Private
Offering Patick shall be entitled to .1875 warrants (each whole warrant
representing the right to purchase one share of stock) rounded to the
nearest whole number of warrants up to a maximum of 80,000 warrants and
underlying shares of the Company's restricted Common Stock (the
"Warrants"). The Warrants shall not be assignable or transferable by
Patick. Such Performance Opportunity shall not be deemed or treated as
compensation to Patick but rather an investment opportunity to Patick
conditioned upon the success of the Private Offering as provided for
herein. If the Company is not able to conduct and complete a Successful
Offering, then the Company shall have the right to terminate this
Agreement as provided for in paragraph 7 hereof.
C. Possible Further Performance Bonus/Public Offering.
The parties agree that they will defer discussion and agreement as to
what, if any, possible further performance bonus opportunity the Company
might make available to and Patick might receive in respect of the
proposed Public Offering and the success of Patick's efforts to assist the
Company to arrange and the Company's actual ability to conduct and
successfully complete such possible offering during the Term of this
Agreement. The parties acknowledge that they may not ultimately reach a
mutually acceptable agreement in respect of this particular further
performance opportunity matter and that, if they do not reach any such
mutual agreement at any time in the future, no rights, benefits,
entitlements, duties, responsibilities, obligations and/or liabilities
shall attach thereto or result therefrom on the part of either party
relating to such performance bonus opportunity as referenced herein.
Patick further acknowledges that the Company's ability to proceed with and
conduct any such Public Offering, or any alternative public offering, is
subject to numerous uncertainties many of which are beyond the Company's
control such as the Company's ability to obtain "effectiveness" of the
registration statement covering such offering with the U.S. Securities and
Exchange Commission and the registration and/or qualification of such
Offering with the various state regulatory agencies who would have
jurisdiction over any such Offering. Accordingly, Patick agrees and
promises not to provide any prospective investor or other person with any
assurances that any such Public Offering or any securities offering by the
Company will be actually undertaken or, if undertaken, will be
successfully completed or otherwise represent any benefit to the Company
and/or investors in the Private Offering.
D. Expenses. Patick will be responsible for his own
travel and related expenses paid or incurred by Patick in performing the
Services, and the Company shall have no obligation to Patick in respect of
any such costs or expenses (and Patick will not obligate the Company in
respect of any such costs/expenses).
5. Certain Covenants By The Company And Patick Re Private
Offering. The Company with the assistance of its outside legal counsel
and independent certified public accountants will cause to be prepared the
Private Offering memorandum, including any necessary or advisable investor
subscription and related documentation, to be used for and in conducting
the Private Offering (collectively the "Offering Materials"); and Patick
agrees and promises to use, exclusively, such Offering Materials to
conduct the Private Offering and, further Patick agrees and promises not
to provide any prospective or actual investor in the Private Offering with
any information, statements, materials, and/or assurances which have not
previously been reviewed and approved in writing by the Company for such
purpose. The Company further agrees and covenants to use its best efforts
to ensure that all of the Offering Materials are accurate and complete in
all material respects and do not contain any false or misleading
statements or omit to make any statements which, based on the statements
that are contained in such Offering Materials, render such statements
false or misleading in any material respect.
6. Indemnity By The Parties. The parties hereby each agree
and promise to indemnify and hold harmless the other against any claims,
debts, judgments, obligations, costs, expenses (including reasonable
attorney's and professional's fees) and/or liabilities of whatsoever kind
or nature which arise or otherwise result from the refusal and/or failure
of the indemnifying party to timely and fully perform such party's
agreements and promises as set forth herein.
7. Termination By The Company. In the event that the Company
is not able for any reason to timely conclude a Successful Offering (as
defined herein in paragraph 4.B.), then either the Company or Patick shall
have the absolute right, in either of such party's sole and absolute
discretion and election to terminate this Agreement and all of such
parties' responsibilities and obligations (including without limitation
the Company's obligation to pay Patick any further compensation and to
sell and issue Patick any Warrants or underlying shares of stock) under
this Agreement, except only that the parties' respective rights and
obligations under paragraphs 10 and 11 hereof shall survive any such
termination.
8. Subsequent Employment. At the end of the Term of this
Agreement, Patick and the Company will negotiate the terms and conditions
of Patick's continued employment with the Company for a minimum period of
one year.
9. Compliance With Securities Laws. The offer, sale and
issuance of the Securities, including the shares of stock in the Private
Offering and the Warrants and underlying shares of stock, shall be in
compliance with all applicable securities laws, rules and regulations.
10. Confidential Information/Covenant Not To Compete. In the
event this Agreement is earlier terminated or expires in accordance with
its terms (including the Term as defined herein), or when Patick's
employment with the Company otherwise ends, Patick hereby agrees and
promises that (A) he will not directly or indirectly take, avail himself
of, use or otherwise seek to take advantage of any confidential, trade
secret or other proprietary materials and/or information of the Company
("Confidential Information"); (B) Patick will use his best efforts to
treat, preserve and protect all Confidential Information provided to or
obtained by him during the period of his employment with the Company and
thereafter; (C) at the time when Patick is no longer employed by the
Company, he will return and/or deliver to the Company all written
documents, writings and things including information provided to him by
the Company or otherwise obtained by him from any source in connection
with his employment with the Company or otherwise, without retaining any
copies or other duplicates including excerpts thereof, and that he will
provide the Company with a certificate under penalty of perjury under
California law confirming his compliance with this subparagraph (C); (D)
Patick will not while he is employed by the Company or for a period of one
(1) year after his employment with the Company ends, solicit, induce or
attempt to induce any employee of the Company to terminate his/her
employment with the Company; and that (E) Patick will not while he is
employed by the Company or for a period of one (1) year after his
employment with the Company ends, solicit, induce or attempt to induce any
person or entity having a business relationship with the Company formed
prior to or during the period of time when Patick was employed by the
Company to terminate such business relationship with the Company or to do
any thing, directly or indirectly, to interfere in a materially adverse
manner with any such relationship between the Company and any such person
or entity. Further, Patick agrees and promises that, at the time that he
is no longer employed by the Company, he will not, directly or indirectly,
including through employment, consulting or other relationship and/or
ownership interest in any company or business venture, compete with the
Company in respect of its business as now or then engaged in by the
Company for a period of one (1) year from the last date of his employment
with the Company.
11. Inventions/Copyright/Patent And Other Rights To The
Company. Any and all inventions, improvements, discoveries, processes,
copyrights, patents and all other creative efforts of Patick conceived,
discovered, undertaken, written, made, developed or otherwise coming into
existence during the period of time that Patick is employed by the
Company, whether during or after regular business hours, shall be owned,
without the payment by the Company of any additional compensation to
Patick, entirely by the Company; and Patick agrees and promises to make
immediate and full disclosure to the Company of any and all such
inventions, improvements, discoveries, processes, copyrights, patents and
other creative efforts and to cooperate and assist the Company in all ways
and manner to perfect and protect its right, title and interest in and to
such intellectual property.
12. Complete Agreement. This Agreement contains all of the
parties' statements, representations, understandings, agreements,
promises, covenants, assurances, warranties, guarantees and other matters
regarding the subject matter of the Agreement. The Recitals which appear
at the outset of this Agreement are incorporated and made a part of this
Agreement. This Agreement may only be supplemented, modified, amended or
otherwise changed by a further writing, referencing this paragraph, and
signed by the party sought to be bound by any such supplement,
modification, amendment. This Agreement has and shall be deemed for all
purposes to have been drafted and otherwise prepared by both of the
parties and, should any ambiguity subsequently be determined to exist in
or in respect of this Agreement including the language used herein or
otherwise, then neither party shall suffer any prejudice or disability as
a result of any such ambiguity. Each of the parties acknowledges to the
other that they have had the opportunity to have this Agreement and
matters relating thereto reviewed by their own respective individual
attorney and/or other professional advisor.
13. Choice Of Law. This Agreement is made and shall be
governed and interpreted for all purposes under the laws of the State of
California without regard to its conflict of law provisions.
14. Notices. Notices to be given under or in respect of this
Agreement shall be provided in writing and shall be deemed effective upon
receipt if personally delivered or on the third (3rd) day following
mailing in the United States Mail by certified mail - return receipt
requested, addressed as follows:
If To The Company
Auto-Graphics, Inc.
3201 Temple Avenue
Pomona, CA 91768-3200
With a copy to -
Robert H. Bretz, Esq.
520 Washington Blvd, PMB #428
Marina del Rey, CA 90292
If To Patick
Corey M. Patick
2806 Sheridan Way
Stockton, CA 95207
With a copy to -
Bill D. Ringer, Esq.
1401 N. Hunter Street
San Joaquin, CA 95202
Any party may, from time to time, update or otherwise change its address
for purposes of notice under this Agreement by providing such notice in
accordance with the provisions of this paragraph.
15. Time Is Of The Essence. For purpose of this Agreement,
including the performance of the parties' responsibilities, duties and
obligations hereunder, time shall be deemed to be of the essence.
16. Assignment and Other Matters. The parties to this
Agreement shall not have the right, absent the other party's prior written
approval and consent, to assign or otherwise transfer this Agreement
including any of their rights, duties, responsibilities and/or obligations
hereunder to any person or entity. Patick acknowledges that the Company
regards the Services to be rendered hereunder by him as personal and
unique to Patick and that the Company would not elect to enter into this
Agreement with any one but Patick.
17. Severability. If any provision of this Agreement is
hereafter finally determined to be unenforceable for any reason, then such
provision shall be deemed and treated for all purposes as severed from
this Agreement; and the balance of this Agreement shall remain in full
force and effect as between the parties notwithstanding any such
unenforceable and severed provision.
18. Attorney's Fees. If either party initiates any legal
action or proceeding seeking to enforce such party's rights or otherwise
under or in respect of this Agreement then, in additional to whatever
other relief such party may be entitled to receive as a result of such
action/proceeding, such party (or the other party if determined to be the
prevailing party in any such legal action or proceeding) shall be entitled
to recover its reasonable attorney's and other professional's fees and
costs paid or incurred by such party in connection with such legal
action/proceeding including in respect of an appeal in such
action/proceeding.
19. Headings. The headings of the paragraphs (and any
subparagraphs) of this Agreement are included for the convenience of
reference only and are not intended to affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties thereunto duly authorized have
executed this Agreement in Pomona, California effective as of the date
first set forth above.
AUTO-GRAPHICS, INC.
(the "Company")
By ss/ Robert S. Cope
Robert S. Cope, President
By ss/Daniel E. Luebben
Daniel E. Luebben, Secretary
("Patick")
ss/ Corey M. Patick
Corey M. Patick
