-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DgrTWwUOmLWT8qsd8nnsDEumJCyisqv/LkRtIPA87nEzFooaw+Gmwg3s+1umVFFZ I9YKRADW/6XMYiCtpLmHHg== 0000008598-96-000003.txt : 19960403 0000008598-96-000003.hdr.sgml : 19960403 ACCESSION NUMBER: 0000008598-96-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960402 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AUTO GRAPHICS INC CENTRAL INDEX KEY: 0000008598 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROCESSING & DATA PREPARATION [7374] IRS NUMBER: 952105641 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-04431 FILM NUMBER: 96543570 BUSINESS ADDRESS: STREET 1: 3201 TEMPLE AVE CITY: POMONA STATE: CA ZIP: 91768 BUSINESS PHONE: 9095957204 MAIL ADDRESS: STREET 1: 3201 TEMPLE AVENUE CITY: POMONA STATE: CA ZIP: 91768 10-K 1 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock ($.10 par value) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] The aggregate market value of voting stock held by nonaffiliates of the registrant was $464,000 as of December 31, 1995. The number of shares of the registrant's Common Stock outstanding was 1,130,478 as of December 31, 1995. DOCUMENTS INCORPORATED BY REFERENCE The definitive Proxy Statement to be filed pursuant to Regulation 14A for the fiscal year ended December 31, 1995 is incorporated herein by reference in Part III, Items 11-13 of Form 10-K. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days after the close of the registrant's most recent calendar year. ITEM 1. BUSINESS Auto-Graphics, Inc. provides software products and processing services to information and database publishers. These products and services are used to create, maintain and distribute information databases through printed and/or electronic reference products. Electronic products include Compact Disc (CD- ROM) and Client/Server software systems(Internet/Web). The Company provides state and local government customers with products and outsourced services to maintain, publish and distribute bibliographic databases of library holdings and to manage interlibrary loan systems. Traditional commercial and corporate publishers use the Company's services to produce and distribute print and electronic products such as dictionaries, encyclopedias, Bibles, price catalogs and other reference works. In recent years, Auto-Graphics has made a major investment in the development of online client/server software products and client-shared Internet/Web services. In 1993, the Company launched the development of an umbrella concept called Impact/ONLINE[tm] for Internet distribution services. This capability has been successfully applied to a range of applications including the outsourcing by several statewide library consortia to Auto-Graphics of complete system design, development, management, maintenance and operation of a web site for each customer. During the last eighteen months, the Company has received orders for five statewide and three regional Impact/ONLINE[tm] systems comprising over 1,500 libraries. The Company's Impact/ONLINE[tm] products include: Impact/ONLINE WebPAC[tm] enables patrons, directly from home, school and office to search a database over the Internet using any Web Browser such as Netscape Navigator or Microsoft Explorer. Impact/ONLINE ILL[tm] automates initiation, tracking and management of interlibrary borrowing and lending. Impact/ONLINE CAT[tm] for creating and maintaining the bibliographic database. Impact/NET[tm] for configuring, installing and managing Internet resources. Impact/ACCESS[tm] for patron access to licensed commercial databases. Impact/SLims[tm], a small library information management system, which operates on a personal computer and integrates patron access catalog, circulation control and inventory management. The Company's software products and processing services continue to leverage technology and experience gained over more than 45 years of service to publishers most of whom continue to distribute information via print and CD- ROM media. Auto-Graphics provides standard and custom products and services for database management, electronic composition and CD-ROM search and retrieval. These software products include: SGML Smart Editor System(SES) provides publishers with full editorial capabilities to create and maintain data in SGML format. Impact[tm]/CD-ROM is a system to provide search and retrieval capabilities for CD-ROMs. Impact[tm]/SGML upgrades CD products to Windows and operates on SGML formatted data files. A specialized database service for the wholesale heating, ventilation, air conditioning and refrigeration(HVACR) industry is provided in conjunction with Datacat, Inc., which is 50 percent owned by Auto-Graphics. The Company is a supplier of software and production services to Datacat for HVACR parts catalogs. (See Note 1 of "Notes to Financial Statements.") Company Background The Company was formed in 1950 and incorporated in 1960 in the state of California. No single customer represents more than 10% of net sales. Management believes that the loss of any single customer or vendor would not have a material adverse effect on the business of the Company. Hardware sales are not material to the Company's business, representing less than 10% of sales, and are not considered important to the future of the Company. Backlog cannot be stated in a useful manner, as contracts are normally statements of specifications and unit prices rather than total sales volume. The software and computerized database processing services business is highly competitive. There are no definitive market share statistics available. The Company first introduced computerized database services in 1964, and believes that it has been offering such services longer than any of its existing competitors. Many competitors are smaller and local in character, but some are larger and national with greater financial resources than the Company. Contracts for computerized database publishing services and the purchase/lease of equipment are typically awarded according to the results of market pricing, competitive bidding, technical capability and past performance. Marketing Offices/Employees The Company has marketing representatives and service centers located in California, Connecticut, Illinois, Maryland, Massachusetts, Missouri, and New Jersey. The Company currently employs approximately 120 persons. ITEM 2. PROPERTIES The Company leases its corporate office and production facilities constituting approximately 29,000 square feet located at 3201 Temple Avenue, Pomona, California 91768. The facility has been custom designed for the Company's purposes, is fully utilized and should be adequate for the Company's needs for the foreseeable future. The facility is currently leased to the Company through June 1996 under the first of two five-year renewal options. (See Note 6 of "Notes to Financial Statements" and Item 13. "Certain Relationships and Related Transactions.") ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Stock quotations 1995 1995 1995 1995 1994 1994 1994 1994 Bid Bid Asked Asked Bid Bid Asked Asked Price Range High Low High Low High Low High Low 1st Quarter 1 1/8 1 1 1/4 1 1/8 2 2 2 2 2nd Quarter 1 5/8 1 2 1/8 1 5/8 1 15/16 1 5/8 2 1/4 1 5/8 3rd Quarter 1 15/32 1 5/16 1 5/8 1 15/32 2 1 5/8 2 3/8 1 5/8 4th Quarter 1 7/8 1 3/8 2 3/8 1 7/8 1 7/16 1 1/8 1 3/4 1 1/8
The Company's Common Stock ($.10 par value) is traded in the over-the-counter market under the symbol "AUGR" (Cusip Number 05272510). The quotations as published by the National Quotation Bureau, Inc. represent the highest and lowest bid and asked prices quoted by broker/dealers making a market in the Company's Common Stock. Prices quoted do not include retail markup, markdown or commissions and may not reflect actual transactions in shares of the Company's stock. As of December 31, 1995, the number of holders of record of the Company's Common Stock was 265. The Company has never paid a cash dividend and there are no plans to do so in the near future. (See Note 3 of "Notes to Financial Statements" for information as to the loan restriction on the payment of cash dividends.) ITEM 6. SELECTED FINANCIAL DATA Dollar amounts in thousands except per share data. Years Ended December 31
Operating results: 1995 1994 1993 1992 1991 Net sales $ 9,559 $ 9,165 $ 9,678 $ 9,362 $10,018 Net income 194 158 132 28 8 Net income per share .16 .12 .10 .02 .01 At year-end: Total assets 6,688 6,106 5,841 6,637 7,113 Long-term debt 1,906 1,696 1,592 1,750 1,799
No cash dividends have been declared. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General and Future Business Trends Liquidity and Capital Resources The Company has a revolving credit agreement with a bank, under which borrowings are secured by accounts receivable, whereby the Company may borrow against its eligible accounts receivable up to a maximum of $1,000,000 ($1,000,000 available at December 31, 1995). Management believes that the current line of credit, which is renewed annually in May, will again be renewed in 1996, and is sufficient to handle cyclical working capital needs. (See Note 2 of "Notes to Financial Statements.") The Company also has a capital line of credit agreement with the bank providing for maximum borrowings of $2,250,000 ($4,000 available at December 31, 1995). The capital line of credit may be used for the purchase of equipment and software, and financing of up to $500,000 in internal software development costs. The bank line of credit is renewed annually in May, and management believes that the current line of credit will again be renewed in 1996. Management does not currently believe that increased credit will be required to finance planned capital expenditures in 1996 which are estimated at $1,000,000, to be used to upgrade computers, production equipment and for software development. (See Note 3 of "Notes to Financial Statements.") In 1993, the Company initiated several major new product (software) development programs. Estimated investments in the Company's SGML Smart Editor System and Impact[tm]/SGML CD-ROM may exceed $500,000 and enhance competitiveness of the product with new features. In addition, the Company announced and initiated the development of the next generation of the Impact[tm] product line called Impact/ONLINE[tm]. Impact/ONLINE[tm] has been released and now includes modules for public access catalogs, online cataloging, interlibrary loan, and access via Internet to other databases. The estimated investment in Impact/ONLINE[tm] may total $1,000,000. Funding for these investments is expected to be provided by a combination of internally generated funds, bank financing, and possibly additional outside capital investment. Results of Operations 1995 net sales increased $394,000 to $9,559,000. The increase in sales was due to market acceptance of the Company's new products: SGML Smart Editor System, Impact[tm]/SGML CD-ROM and Impact/ONLINE[tm] products. Sales prices remained flat and in some cases declined due to competitive pressures in some markets. Gross margins continued to improve to 38.2% in 1995, up from 32.3% in 1994 due to the new products, continuing cost reduction measures and productivity gains. The Company's focus on improving marketing and sales resulted in higher selling expenses up $596,000 for additional sales management and sales personnel, promotional and administrative expenses. 1995 net income improved to $194,000 a 23% increase and earnings per share improved 39% to $0.16 due partially to stock repurchases. Working capital declined in 1995 due to higher accounts payable at year-end and higher than average customer deposits. Cash flow from operations improved to $1,623,000 in 1995, up 84% from $881,000 in 1994. Improvements in liquidity and reduced leverage are expected in 1996. 1996 net sales revenues (excluding equipment) are expected to improve due to the Company's new products. The favorable mix of expected product sales, implemented cost reduction measures and productivity improvements should result in higher earnings and improved cash flow from operations in 1996. Impact of Inflation Historical dollar accounting does not reflect changing costs for operations, the future cost for expansion and the changing purchasing power of the dollar. Inflation generally impacts the Company in a negative manner, as prices cannot be adjusted quickly due to the contract nature of the business, while costs of personnel, materials and other purchases tend to escalate more rapidly. However, inflation is not anticipated to have a material effect on the Company's business in the near future. Adopted and Pending Financial Accounting Standards In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, which the Company adopted beginning in 1995. The standard establishes principles of financial accounting and reporting for situations where information indicates that a company might be unable to recover, through future operations or sale, the carrying amount of long-lived assets, identifiable intangibles, and goodwill related to those assets. With the adoption of this Standard, the Company is required to review long-lived assets, identifiable intangibles, and related goodwill to determine whether any indicators of impairment are present and, if present to recognize an impairment loss based on the excess of the carrying amount of the assets over their fair market value. See Note 1 of "Notes to Financial Statements." 1995 as compared to 1994 Liquidity and Capital Resources Working capital decreased $429,000 in 1995. Accounts receivable decreased by $73,000. The average collection period for accounts receivable was unchanged at 70 days in 1995 and 1994. Long-term debt was increased by $210,000. The revolving credit line borrowings were zero in 1995 and 1994. Capital expenditures increased in 1995 to $1,559,000, up from $919,000 in 1994, an increase of 70%. Results of Operations Net Sales increased $394,000 or 4.3%. Cost of Sales decreased $297,000 or 5%. Gross Margin increased from 32.3% in 1994 to 38.2% of net sales in 1995. Sales, General & Administrative Expenses increased $596,000 or 23.6% in 1995 as a result of increased sales and marketing expense for additional sales personnel, new product promotions and a reorganization of the sales and marketing departments. As a percentage of sales, SG&A increased to 32.7% in 1995 from 27.6% in 1994. Other Income reflects interest income, royalties, and cost recovery from tenants for facilities and services provided by the Company. Net Interest Expense increased $30,000 or 16% in 1995 due to higher interest rates on higher average borrowings during the year. Net Income increased $36,000 from $158,000 in 1994 to $194,000 or 23% in 1995 and earnings per share increased to $0.16 per share in 1995 up from $0.12 per share in 1994, a 39% increase. 1994 as compared to 1993 Liquidity and Capital Resources Working capital increased $324,000 in 1994. Accounts receivable increased by $182,000. The average collection period for accounts receivable was unchanged at 70 days in 1994 and 1993. Long-term debt increased by $104,000. The revolving credit line was reduced to zero in 1994 and 1993. Capital expenditures were $919,000 in 1994. Results of Operations Net Sales decreased $513,000 or 5.3%. Cost of Sales decreased $725,000 or 10.5%. Gross Margin increased from 28.4% in 1993 to 32.3% of net sales in 1994. Sales, General & Administrative Expenses increased $139,000 or 5.8% in 1994 as a result of the Company's increased focus on sales and marketing, and new product promotion. As a percentage of sales, SG&A increased to 27.6% in 1994 from 24.7% in 1993. Other Income reflects interest income, royalties, and cost recovery from tenants for facilities and services provided by the Company. Net Interest Expense declined $14,000 or 7% in 1994 due to lower average borrowings. Net Income increased $26,000 from $132,000 in 1993 to $158,000 or 20% in 1994 and earnings per share increased to $0.12 per share in 1994. ITEM 8. FINANCIAL STATEMENTS REPORT OF INDEPENDENT AUDITORS The Board of Directors and Stockholders Auto-Graphics, Inc. We have audited the accompanying balance sheets of Auto-Graphics, Inc. as of December 31, 1995 and 1994, and the related statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Auto-Graphics, Inc. at December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. ERNST & YOUNG LLP Riverside, California March 12, 1996 AUTO-GRAPHICS, INC. BALANCE SHEETS December 31, 1995 and 1994
ASSETS DEC-31-1995 DEC-31-1994 Current assets: Cash $ 106,518 $ 80,852 Accounts receivable 1,979,245 2,051,764 less allowance for doubtful accounts ($38,000 in 1995 and 1994) Unbilled production costs 232,517 217,111 Finished goods 60,946 55,189 Other 168,616 198,040 Total current assets 2,547,842 2,602,956 Equipment and leasehold improvements at cost 7,986,491 6,645,125 Less accumulated depreciation 4,057,170 3,338,152 Net equipment and leasehold improvements 3,929,321 3,306,973 Other assets 210,543 196,187 Total Assets $ 6,687,706 $ 6,106,116 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 524,431 $ 291,166 Deferred Income 490,167 328,413 Accrued expenses 38,585 166,823 Accrued payroll and related liabilities 187,901 135,675 Current portion of long-term debt 505,000 450,000 Total current liabilities 1,746,084 1,372,077 Long-term debt, less current portion 1,905,881 1,695,881 Deferred taxes based on income 593,939 487,432 Total liabilities 4,245,904 3,555,390 Commitments and contingencies (See Note 5 of "Notes to Financial Statements.") Stockholders' equity: Common stock 113,048 128,008 $.10 par value, 4,000,000 shares authorized, 1,130,478 shares issued and outstanding in 1995, and 1,280,078 shares issued and outstanding in 1994 Capital in excess of par value 1,151,092 1,197,717 Retained earnings 1,177,662 1,225,001 Total stockholders' equity 2,441,802 2,550,726 Total Liabilities/Equity $ 6,687,706 $ 6,106,116 See accompanying notes.
AUTO-GRAPHICS, INC. STATEMENTS OF INCOME Years ended December 31, 1995, 1994, 1993
1995 1994 1993 Net sales $ 9,559,107 $ 9,164,849 $ 9,677,932 Costs and expenses Cost of sales 5,908,075 6,205,379 6,930,173 Selling, general and administrative 3,124,978 2,528,682 2,389,591 Interest 221,703 191,532 205,030 Total Expense 9,254,756 8,925,593 9,524,794 Income from operations 304,351 239,256 153,138 Other income 53,819 54,922 81,322 Income before taxes based on income 358,170 294,178 234,460 Provision for taxes based on income 164,000 136,000 102,000 Net income $ 194,170 $ 158,178 $ 132,460 Net income per share $ .16 $ .12 $ .10
STATEMENTS OF STOCKHOLDERS' EQUITY Years ended December 31, 1995, 1994, 1993
Common Common Capital in Stock Stock Excess of Retained Shares Amount Par Value Earnings Balances at January 1, 1993 1,307,166 $ 130,717 $1,247,935 $ 934,363 Net income - - - 132,460 Common stock purchased and retired (2,300) (230) (4,370) - Balances at December 31, 1993 1,304,866 130,487 1,243,565 1,066,823 Net income - - - 158,178 Common stock purchased and retired (24,788) (2,479) (45,848) - Balances at December 31, 1994 1,280,078 128,008 1,197,717 1,225,001 Net income - - - 194,170 Common stock purchased and retired (149,600) (14,960) (46,625) (241,509) Balances at December 31, 1995 1,130,478 $ 113,048 $1,151,092 $1,177,662 See accompanying notes.
AUTO-GRAPHICS, INC. STATEMENTS OF CASH FLOWS Years ended December 31, 1995, 1994, 1993
Cash flows from operating activities: 1995 1994 1993 Net income $ 194,170 $ 158,178 $ 132,460 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,001,821 961,486 975,395 Provision for losses on accounts receivable - - (30,000) (Increase)/decrease in accounts receivable 72,519 (182,083) 254,812 (Increase)/decrease in unbilled production costs (15,406) (60,747) 144,322 (Increase)/decrease in finished goods inventory (5,757) 8,837 (14,847) (Increase)/decrease in other current assets 29,424 (71,743) 83,345 (Increase)/decrease in other assets (79,355) 15,545 (23,032) Increase/(decrease) in accounts payable 233,265 (128,645) 108,429 Increase in deferred income 161,754 77,188 36,815 Increase/(decrease) in accrued expenses (70,262) 80,435 (74) Increase/(decrease) in accrued payroll and related liabilities 52,226 (34,795) 38,965 Increase/(decrease) in interest and income taxes payable (57,976) (14,880) 75,754 Increase in deferred taxes 106,507 72,076 33,625 Net cash provided by operating activities 1,622,930 880,852 1,815,969 Cash flows from investing activities: Capital expenditures (1,559,170) (918,752) (583,681) Net cash used in investing activities (1,559,170) (918,752) (583,681) Cash flows from financing activities: Borrowings under long-term debt 715,000 554,000 292,000 Principal payments under debt agreements ( 450,000) (450,000) (484,086) Net repayments under line-of-credit agreement - - (1,025,000) Repurchase of capital stock (303,094) (48,327) (4,600) Net cash provided by (used in) financing activities (38,094) 55,673 (1,221,686) Net increase in cash 25,666 17,773 10,602 Cash at beginning of year 80,852 63,079 52,477 Cash at end of year $ 106,518 $ 80,852 $ 63,079 Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 221,703 $ 191,532 $ 205,030 Income taxes 100,883 98,804 (13,345) See accompanying notes.
[FN] NOTES TO FINANCIAL STATEMENTS December 31, 1995, 1994, and 1993 1. Summary of significant accounting policies and description of business. Description of Business Auto-Graphics, Inc. provides software products and processing services to information and database publishers. These products and services are used to create, maintain and distribute information databases through printed and/or electronic reference products. Electronic products include Compact Disc (CD- ROM) and Client/Server software systems(Internet/Web). Unbilled Production Costs Costs associated with work in process inventory including labor, materials, supplies, and overhead (excluding selling, general and administrative expenses) are stated at the lower of cost or net realizable value and are removed from inventory on an average unit cost basis. Finished Goods Finished goods inventory consists primarily of computer and CD-ROM equipment held for sale and related spare parts and is stated at the lower of average cost or market. Equipment and Leasehold Improvements Valuation of equipment and leasehold improvements is based on historical cost. Equipment and leasehold improvements at December 31, 1995 and 1994 consist of the following:
1995 1994 Equipment $3,449,380 $3,007,106 Computer software 3,861,623 2,964,629 Furniture and fixtures 429,147 427,049 Leasehold improvements 246,341 246,341 Total equipment and leasehold improvements 7,986,491 6,645,125 Less accumulated depreciation and amortization 4,057,170 3,338,152 Net equipment and leasehold improvements $3,929,321 $3,306,973
Depreciation and Amortization Depreciation commences in the year the asset is placed in and/or available for service or sale based on the half-year convention method. Depreciation is based on the straight-line method over the estimated useful life of the asset or revenue ratio method. Depreciation and amortization was $1,002,000 in 1995 ($961,000 in 1994 and $975,000 in 1993). The following estimated useful lives are generally observed for the respective asset categories: Equipment - 5 to 15 years Computer software - 5 to 7 years (see below) Furniture and fixtures - 5 to 10 years Leasehold improvements - the lesser of 5 to 15 years or the lease term Certain costs incurred related to the development and purchase of computer software are capitalized and amortized in accordance with Statement of Financial Accounting Standards No. 86. Amortization is based on a ratio of current and future revenues (the ratio method). In 1995, $964,000 was capitalized ($517,000 in 1994 and $284,000 in 1993), of which $124,000 was purchased software and $840,000 was the cost of internally developed software. Equipment and leasehold improvements include computer software with an unamortized balance of approximately $2,125,000 at December 31, 1995 and approximately $1,548,000 in 1994. Amortization of computer software was approximately $387,000 in 1995, $337,000 in 1994, and $284,000 in 1993. Other Assets Investment in Datacat, Inc. In 1990, the Company acquired a 50% interest in Datacat, Inc. Datacat was formed to market a new technology developed by the Company for the production of parts catalogs for the wholesale heating, ventilation and air conditioning, and refrigeration (HVACR) industry. The investment has been accounted for using the equity method wherein equity in the losses of Datacat have been offset against investments in and advances to Datacat and the balance reduced to zero. Losses in excess of investments and advances of approximately $125,000 have not been recognized and will be applied to subsequent earnings as they are realized. The Company has not guaranteed the obligations of Datacat, and is not presently obligated to provide any further financial support to Datacat beyond that already provided. Prepaid Database Assets Certain non-recurring incremental and direct production costs are incurred to initially implement new computerized databases for customers. These costs are associated with providing billable repetitive services and/or projects for specific customers over contract periods exceeding one year. The costs are stated at the lower of cost or estimated net realizable value and are charged to cost of sales over the contract period which services will be provided, generally three to six years. Management believes it is probable that these costs will be recovered from related future revenues. The current portion of estimated Prepaid Database Assets ($69,000 in 1995, $69,000 in 1994, and $48,000 in 1993) is included in Unbilled Production Costs. The following is a summary of the long-term portion of the prepaid database costs for the three years ended December 31, 1995:
Balance at Net Beginning Transfers Balance at of Year at Cost End of Year 1995: $104,000 $(15,000) $ 89,000 1994: 165,000 (61,000) 104,000 1993: 213,000 (48,000) 165,000
Long-Lived Assets In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 121, Accounting for the Impairment of Long-Lived Assets, which the Company adopted beginning of 1995. The Standard requires the Company to review the carrying amount of long-lived assets, identifiable intangibles, and related goodwill to determine whether any indicators of impairment are present. At December 31, 1995 the Company's review of it's long-lived assets showed no indications of loss or impairment and, therefore, has not had a material effect on the Company's financial position or results of operations. Income Recognition Revenues are recognized as services are rendered or when finished goods are shipped to customers. Certain future software support costs are accrued in accordance with AICPA Statement of Position (SOP) 91-1. The financial statements are prepared using management estimates and assumptions in conformity with generally accepted accounting principles and AICPA Statement of Position (SOP) 94-6. Net Income Per Share Per share calculations are based on the weighted average number of shares of common stock outstanding during each year. 2. Note Payable to Bank. The Company has a revolving credit agreement under which borrowings are secured by accounts receivable, whereby the Company may borrow against its eligible accounts receivable up to a maximum of $1,000,000 ($1,000,000 available at December 31, 1995) with interest at .5% above the bank prime rate (9.0% at December 31, 1995). The credit facility is renewable annually in May. There was no outstanding balance at December 31, 1995 or December 31, 1994. During the year ended December 31, 1995, the approximate average borrowings outstanding were $241,000 ($386,000 in 1994), the approximate weighted average interest rate was 9.3% (7.9% in 1994, and the maximum amount of month-end borrowings outstanding was $675,000 ($700,000 in 1994). The averages were computed based on the borrowings outstanding and the applicable interest rate at the end of each month. There are no compensating balance requirements, commitment fees or note guarantors. This agreement contains the same loan covenants as the equipment line of credit note payable. At December 31, 1995, the Company was in compliance with its loan covenants. 3. Long-term Debt. Long-term debt at December 31, 1995 and 1994 consists of the following:
1995 1994 Capital line of credit (note payable to bank) due in monthly installments of $37,500 plus interest at prime plus .75% (9.25% at December 31, 1995) through 1999; secured by software, equipment, and leasehold improvements with a net book value of approximately $3,929,000 at December 31, 1995. $2,245,881 $2,145,881 Note Payable to stockholder due in annual installments of $55,000 plus interest at 5.5% per annum 165,000 - Total long-term debt $2,410,881 $2,145,881 Less current portion 505,000 450,000 $1,905,881 $1,695,881 Maturities of Long-Term Debt due after one year are: 1996--$505,000; 1997--$505,000; 1998--$505,000; 1999--$450,000 and 2000--$446,000.
The capital line of credit note payable at December 31, 1995 provides for maximum borrowings of $2,250,000 for the purchase of equipment and software, and financing of up to $500,000 in internal software development costs. The unused portion ($4,000 at December 31, 1995) of the capital line of credit is subject to renewal of the capital line of credit facility annually in May. Among other requirements, the capital line of credit note payable requires the Company to maintain minimum ratios of current assets to current liabilities, debt to equity and cash flow to debt service, minimum working capital and equity amounts, limits capital expenditures and capital lease obligations and prohibits the payment of cash dividends. There are no commitment fees, compensating balance requirements or note guarantors. At December 31, 1995, the Company was in compliance with its loan covenants. In June, 1995, the Company entered into a stock repurchase agreement with a former employee and officer of the Company, whereby the Company agreed to purchase and retire, in 1995, 115,000 of 141,000 shares of Company stock owned by the stockholder. The total transaction cost of $230,000 will be paid in four annual installments beginning in 1995 plus interest of 5.5% per annum ($65,000 paid in June 1995, and $55,000 to be paid in June 1996, 1997 and 1998). 4. Taxes Based on Income. The provision for taxes based on income is composed of:
1995 1994 1993 Current taxes based on income Federal $ 32,000 $ 47,000 $ 51,000 State 38,000 28,000 10,000 Foreign - 8.000 1,000 Total 70,000 83,000 62,000 Deferred taxes based on income Federal 94,000 49,000 26,000 State - 4,000 14,000 Total 94,000 53,000 40,000 $164,000 $136,000 $102,000
A reconciliation of the provision for taxes based on income follows:
1995 1994 1993 Statutory federal income tax $122,000 $100,000 $ 80,000 State tax, net of federal benefit/other 24,400 21,000 11,000 Tax effect of insurance premiums on officers' lives 4,200 500 5,000 Tax effect of exclusion on meals and entertainment (50% in 1995 and 1994, 20% in 1993) 13,400 14,500 6,000 $164,000 $136,000 $102,000
The deferred tax assets and liabilities are composed of:
1995 1994 1993 Deferred tax liabilities: Tax over book depreciation $594,000 $487,000 $415,000 Deferred tax assets - current: Bad debts/accrued vacation/other 66,000 57,000 29,000 Investment tax credit - 14,000 18,000 Net operating loss carryforward - - 7,000 State taxes 10,000 11,000 8,000 Total deferred tax assets - current 76,000 82,000 62,000 Valuation allowance 0 0 0 Net deferred tax assets - current 76,000 82,000 62,000 Net deferred tax liability $518,000 $405,000 $353,000
Investment tax credits are accounted for using the flow-through method. There was no investment tax credit carryforward available for tax purposes at December 31, 1995. Statutory federal income tax rates used are 34% in 1995, 1994 and 1993. In December 1991, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes, which the Company adopted at the beginning of 1993. The Standard requires that the Company use the liability method of accounting for income taxes. Adopting the Standard has not had a material effect on the Company's financial position or results of operations. 5. Commitments and Contingencies. The Company incurred total facilities and equipment lease and rental expense of approximately $486,000 in 1995, $443,000 in 1994, and $449,000 in 1993. The Company is obligated under certain noncancellable operating leases for office facilities and equipment. Approximate minimum lease commitments (in thousands) are as follows: Operating Year Leases 1996 $ 250 1997 26 1998 17 Total minimum lease payments $ 293 6. Related Party Transactions. The Company leases its corporate office and production facility from a limited partnership owned by two principal officer/stockholders of the Company payable at $37,345 per month (plus expenses and applicable increases based on the consumer price index) through June 1996 under the first of two five-year renewal options. The five-year lease with options, which was entered into in June 1986, was approved and authorized by the independent members of the Company's Board of Directors. (See Item 13. "Certain Relationships and Related Transactions.") During 1995, the Company sold processing services of $529,000 to Datacat, Inc. for resale to Datacat's customers. At December 31, 1995, net accounts receivable from and advances to this affiliate totaled $73,000. (See Note 1 of "Notes to Financial Statements.") The Company entered into a stock repurchase agreement with a former employee and officer of the Company, Douglas K. Bisch, whereby the Company agreed to purchase and retire, over a seven year period, 156,000 of 171,000 shares of Company stock owned by Mr. Bisch. The total transaction cost of $825,000 includes stock, non-competition and consulting fees. In January 1995, the Company purchased and retired the first block of 15,600 shares. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth the names and ages of, and the positions and offices within the Company presently held by, all directors and executive officers of the Company: Name Age Position Douglas K. Bisch 74 Director. Has served in management capacities for more than ten years. Robert H. Bretz 52 Director and Assistant Secretary. Attorney who has acted as the Company's outside general legal counsel for more than ten years. Robert S. Cope 60 Director, President and Treasurer. Has served in those capacities for more than ten years. Directors serve until their successors are elected and qualified at the annual meeting of stockholders. All executive officers serve at the discretion of the Company's Board of Directors. ITEM 11. EXECUTIVE COMPENSATION A definitive Proxy Statement will be filed with the Securities and Exchange Commission ("the Commission") pursuant to Regulation 14A within 120 days after the close of the Company's most recent calendar year and, accordingly, Item 11 is incorporated by reference to said definitive Proxy Statement. The Proxy Statement includes information covering this item under the caption "Compensation of Executive Officers." ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT A definitive Proxy Statement will be filed with the Securities and Exchange Commission ("the Commission") pursuant to Regulation 14A within 120 days after the close of the Company's most recent calendar year and, accordingly, Item 12 is incorporated by reference to said definitive Proxy Statement. The Proxy Statement includes information covering this item under the caption "Security Ownership of Certain Beneficial Owners and Management" and "Nominees for Election as Directors." ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS A definitive Proxy Statement will be filed with the Securities and Exchange Commission ("the Commission") pursuant to Regulation 14A within 120 days after the close of the Company's most recent calendar year and, accordingly, Item 13 is incorporated by reference to said definitive Proxy Statement. The Proxy Statement includes information covering this item under the caption "Certain Relationships and Related Transactions." PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial statements and financial statement schedules and exhibits: (1) Financial Statements: See Item 8. "Financial Statements." (2) All schedules are omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the financial statements, including the notes thereto. (3) Exhibits: 3.1 Articles of Incorporation of Auto-Graphics, Inc., as amended (incorporated by reference as filed with the SEC as Exhibit 3.1 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989). 3.2 Bylaws, as amended (incorporated by reference as filed with the SEC as Exhibit 3.2 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1989). 10.1 Second Amended and Restated Revolving Credit Agreement, Accounts and Equipment, between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated August 28, 1992 (incorporated by reference as filed with the SEC as Exhibit 10.1 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992). 10.2 Equipment Revolving Note between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated August 28, 1992 (incorporated by reference as filed with the SEC as Exhibit 10.2 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992). 10.3 Revolving Credit Note between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated June 13, 1994 (incorporated by reference as filed with the SEC as Exhibit 10.3 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994). 10.4 Security Agreement (Accounts) between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated June 13, 1994 (incorporated by reference as filed with the SEC as Exhibit 10.4 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994). 10.5 Amendment to Second Amended and Restated Revolving Credit Agreement, Accounts and Inventory, between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated January 27, 1995. 10.6 Modification to Equipment Revolving Note between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated June 13, 1994 (incorporated by reference as filed with the SEC as Exhibit 10.6 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994). 10.7 Agreement between Gannam/Kubat Publishing, Inc. and Auto-Graphics, Inc. regarding Datacat, Inc. dated June 12, 1990 (incorporated by reference as filed with the SEC as Exhibit 10.6 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990). 10.8 Lease Agreement between 664 Company and Auto-Graphics, Inc. dated May 27, 1986 (incorporated by reference as filed with the SEC as Exhibit 10.7 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1990). 10.9 Agreement by, between and among Auto-Graphics, Inc. and Douglas K. and Ruth T. Bisch executed February 15, 1995 (incorporated by reference as filed with the SEC as Exhibit 10.9 to Item 14(a) in the registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1994). 10.10 Amendment to Second Amended and Restated Revolving Credit Agreement, Accounts and Inventory, between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated June 9, 1995. 10.11 Amendment to Second Amended and Restated Revolving Credit Agreement, Accounts and Inventory, between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated July 3, 1995. 10.12 Amendment to Second Amended and Restated Revolving Credit Agreement, Accounts and Inventory, between THE BANK OF CALIFORNIA, N.A. and AUTO-GRAPHICS, INC. dated September 30, 1995. 10.13 Stock Purchase Agreement by, between and among Auto-Graphics, Inc. and Cary A. and Geri W. Marshall executed June 13, 1995. (b) The Company has not filed any reports on Form 8-K during the last quarter of the period covered by this Report. (c) The following document is filed herewith for information purposes, but is not part of this Annual Report, except as otherwise indicated: None. (d) None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. AUTO-GRAPHICS, INC. (Registrant) Date: 3/25/95 By ss/ Robert S. Cope Robert S. Cope, President, Treasurer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated. Date: 3/25/95 By ss/ Robert S. Cope Robert S. Cope, President, Treasurer and Director Date: 3/25/95 By ss/ Daniel E. Luebben Daniel E. Luebben, Secretary and Chief Financial Officer Date: 3/25/95 By ss/ Robert H. Bretz Robert H. Bretz, Director EX-10.5 2 AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, ACCOUNTS AND INVENTORY, BETWEEN THE BANK OF CALIFORNIA, N.A. AND AUTO-GRAPHICS,INC. DATED JANUARY 27, 1995. THE BANK OF CALIFORNIA AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ACCOUNTS AND EQUIPMENT THIS FOURTH AMENDMENT[ ("Amendment") is made effective as of the 27th day of January, 1995, by and between Auto-Graphics, Inc., a California corporation ("Borrower") and THE BANK OF CALIFORNIA, N. A., a national banking association ("Bank"). RECITALS A. Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Second Amended and Restated Revolving Credit Agreement - Accounts and Equipment dated August 28, 1992, as amended January 5, 1993, June 9, 1993 and June 13,1994 (the "Agreement"); B. Borrower and Bank have agreed to amend the Agreement to reflect certain changes in the terms and conditions set forth therein. NOW, THEREFORE, the parties hereto agree as follows: 1. Section 8.3 of the Agreement is hereby amended by deleting "$50,000.00" and by substituting "$150,000.00 therefor. GENERAL AMENDMENT PROVISIONS A. Except as specifically provided herein, all terms and conditions of the Agreement remain in full force and effect, without waiver or modification. All terms defined in the Agreement shall have the same meaning when used in this Amendment, and this Amendment and the Agreement shall be read together as one document. Where any provisions of the Agreement amended by this Amendment appear in a promissory note tied to the Agreement, the same provisions In said promissory note shall be deemed likewise amended. B. Borrower hereby confirms all representations and warranties contained in the Agreement and reaffirms all covenants set forth therein. Further, Borrower certifies that, as of the date of this Amendment, there exists no Event of Default as defined in the Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to become effective as of the date and year first written above. THE BANK OF CALIFORNIA, N. A. By: ss/John Allred John Allred Title: Vice-President Auto-Graphics, Inc., a California corporation By: ss/ Robert S. Cope Robert S. Cope Title: President EX-10.10 3 AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, ACCOUNTS AND INVENTORY, BETWEEN THE BANK OF CALIFORNIA, N.A. AND AUTO-GRAPHICS,INC. DATED JUNE 9, 1995. THE BANK OF CALIFORNIA AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ACCOUNTS AND EQUIPMENT THIS SIXTH AMENDMENT ("Amendment") is made effective as of the 9th day of June, l995, by and between Auto-Graphics, Inc., a California corporation ("Borrower") and THE BANK OF CALIFORNIA,N. A., a national banking association ("Bank"). RECITALS A. Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Second Amended and Restated Revolving Credit Agreement Accounts and Equipment dated August 28, 1992 as amended January 5, 1993, June 9, 1993, June 13, 1994, January 27, 1995 and June 30, 1994 (the "Agreement"); B. Borrower and Bank have agreed to amend the Agreement to reflect certain changes in the terms and conditions set forth therein. NOW, THEREFORE, the parties hereto agree as follows: The definition of "Termination Date" appearing in Article One of the Agreement is hereby deleted in its entirety, and the following substituted therefor "1.32 'Termination Date' means the earlier of (a) May 30, 1996 for the Revolving Credit and Revolving Equipment/Capitalized Software Development Cost Credit, or (b) the date Bank may terminate making Advances pursuant to the rights of Bank under Article 9." GENERAL AMENDMENT PROVISIONS A. Except as specifically provided herein, all terms and conditions of the Agreement remain in full force and effect, without waiver or modification. All terms defined in the Agreement shall have the same meaning when used in this Amendment, and this Amendment and the Agreement shall be read together as one document. Where any provisions of the Agreement amended by this Amendment appear in a promissory note tied to the Agreement, the same provisions in said promissory note shall be deemed likewise amended. B. Borrower hereby confirms all representations and warranties contained in the Agreement and reaffirms all covenants set forth therein. Further, Borrower certifies that, as of the date of this Amendment, there exists no Event of Default as defined in the Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default. IN WITNESS WHEREOF, the parties hereto have caused the Amendment to become effective as of the date and year first written above. THE BANK OF CALIFORNIA, N. A. By: ss/ John Allred John Allred Title: Vice-President Auto-Graphics, Inc., a California Corporation By: ss/ Robert S. Cope Robert S. Cope Title: President EX-10.11 4 AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, ACCOUNTS AND INVENTORY, BETWEEN THE BANK OF CALIFORNIA, N.A. AND AUTO-GRAPHICS, INC. DATED JULY 3, 1995. THE BANK OF CALIFORNIA AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ACCOUNTS AND EQUIPMENT THIS SEVENTH AMENDMENT ("Amendment") is made effective as of the 3rd day of July, 1995, by and between Auto-Graphics, Inc., a California corporation ("Borrower") and THE BANK OF CALIFORNIA, N. A., a national banking association ("Bank"). RECITALS A. Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Second Amended and Restated Revolving Credit Agreement Accounts and Equipment dated August 28, 1992 as amended January 5, 1993, June 9, 1993, June 13, 1994, June 30, 1994, January Z7, 1995 and June 9, 1995 (the "Agreement"); B. Borrower and Bank have agreed to amend the Agreement to reflect certain changes in the terms and conditions set forth therein. NOW, THEREFORE, the parties hereto agree as follows: 1. The following new Section 8.1(e) is hereby added to the Agreement immediately after the end of Section 8.1(d): "(e) The indebtedness of the Borrower under a three year $165,000.00 note payable to Cary Marshall." 2. Section 8.3 of the Agreement is hereby amended by deleting "150,000.00" and by substituting "$310,000.00 for calendar year 1995 and thereafter $150,000.00" therefor. GENERAL AMENDMENT PROVISIONS A. Except as specifically provided herein, all terms and conditions of the Agreement remain in full force and effect, without waiver or modification. All terms defined in the Agreement shall have the same meaning when used in this Amendment, and this Amendment and the Agreement shall be read together as one document. Where any provisions of the Agreement amended by the Amendment appear in a promissory note tied to the Agreement, the same provisions in said promissory note shall be deemed likewise amended. B. Borrower hereby confirms all representations and warranties contained in the Agreement and reaffirms all covenants set forth therein. Further, Borrower certifies that, as of the date of the Amendment, there exists no Event of Default as defined in the Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to become effective as of the date and year first written above. THE BANK OF CALIFORNIA, N. A. By: ss/ John Allred John Allred Title: Vice-President Auto-Graphics, Inc., a California corporation By: ss/ Robert S. Cope Robert S. Cope Title: President EX-10.12 5 AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, ACCOUNTS AND INVENTORY, BETWEEN THE BANK OF CALIFORNIA, N.A. AND AUTO-GRAPHICS,INC. DATED SEPTEMBER 30, 1995. AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT ACCOUNTS AND EQUIPMENT THIS EIGHTH AMENDMENT ("Amendment") is made effective as of the 30th day of September, 1995, by and between Auto-Graphics, Inc., a California corporation ("Borrower") and THE BANK OF CALIFORNIA, N. A., a national banking association ("Bank"). RECITALS A. Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Second Amended and Restated Revolving Credit Agreement - Accounts and Equipment dated August 28, 1992, as amended January 5, 1993, June 9, 1993, June 13, 1994, June 30, 1994, January 27, 1995, June 9, 199S and July 3, 1995 (the "Agreement"); B. Borrower and Bank have agreed to amend the Agreement to reflect certain changes in the terms and conditions set forth therein. NOW, THEREFORE, the parties hereto agree as follows: 1. Section 7.1 (a) of the Agreement is hereby deleted in its entirety, and the following substituted therefor: " (a) Maintain current assets in an amount at least equal to 1.25 times current liabilities on a quarterly basis. " 2. Section 7.1 (b) of the Agreement is hereby deleted in its entirety, and the following substituted therefor: " (b) Borrower will not permit total indebtedness to exceed 2.00 times Tangible Net Worth on a quarterly basis. " 3. The following new Section 7.1 (d) is hereby added to the Agreement immediately after the end of Section 7.1 (c): " (d) Maintain profitable operations in an amount not less than $50,000.00 on an annual basis. " GENERAL AMENDMENT PROVISIONS A. Except as specifically provided herein, all terms and conditions of the Agreement remain in full force and effect, without waiver or modification. All terms defined in the Agreement shall have the same meaning when used in this Amendment, and this Amendment and the Agreement shall be read together as one document. Where any provisions of the Agreement amended by this Amendment appear in a promissory note tied to the Agreement, the same provisions in said promissory note shall be deemed likewise amended. B. Borrower hereby confirms all representations and warranties contained in the Agreement and reaffirms all covenants, set forth therein. Further, Borrower certifies that, as of the date of the Amendment, there exits no Event of Default as defined in the Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute an Event of Default. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to become effective as of the date and year first written above. THE BANK OF CALIFONRIA, N.A. By: ss/ John Allred John Allred Title: Vice-President Auto-Graphics, Inc., a California corporation By: ss/ Robert S. Cope Robert S. Cope Title: President EX-10.13 6 STOCK PURCHASE AGREEMENT BY, BETWEEN AND AMONG AUTO-GRAPHICS, INC. AND CARY A. AND GERI W. MARSHALL EXECUTED JUNE 13, 1995. This Stock Purchase Agreement (the "Agreement) by, between and among Auto-Graphics, Inc., a California corporation (the "Company"), and Cary A. Marshall and Geri W. Marshall (individually and collectively herein the "Seller") is made and entered into effective June 13, 1995. RECITALS A. WHEREAS, Cary A. Marshall was previously employed as a financial officer of the Company and served on the Company's Board of Directors; B. WHEREAS, in connection with the acquisition by the Company of Fotoset of California in or about 1970, the Seller exchanged certain shares of Fotoset and thereby acquired certain shares of the Company's Common Stock including the shares of Company's stock which are the subject of this Agreement; C. WHEREAS, the Seller currently owns 140,980 shares of the Company's Common Stock free and clear of all claims, liens, encumbrances and restrictions (other than the Company's customary "33 Act Legend" pertaining to the registration statement requirement in respect of the public sale or distribution of such stock under applicable federal law); D. WHEREAS, the Seller desires to sell certain shares of the Company's Common Stock to the Company and the Company desires to purchase such shares of stock from the Seller; E. WHEREAS, Cary A. Marshal, regularly attends the Company's Annual Meeting of Shareholders and the following meeting of the Company's Board of Directors, receives and reviews the Company's Annual Report To Stockholders and periodic reports to the U.S. Securities & Exchange Commission ("SEC"), including on Form 10-K and 1O-Q, and otherwise stays current as to the activities of the Company so as to make an informed judgment, and assist his wife Geri W. Marshall to make an informed judgment, as to the decision to sell the shares of the Company's stock to the Company as provided for in this Agreement; and F. WHEREAS, the Seller and the Company have memorialized their understanding and agreement as to the sale and purchase of stock in this written Agreement; AGREEMENT NOW, THEREFORE, the above referenced and undersigned parties, intending to be legally bound and obligated thereby, in consideration of the premises and the mutual covenants set forth herein do hereby agree, subject to the term and conditions set forth herein, as follows: 3. Sale/Purchase Of Stock. The Company will purchase from the Seller, and the Seller will sell to the Company at the Closing as hereinafter provided for in paragraph 3, a total of one hundred fifteen thousand (115,000) shares of the Company's Common Stock (the "Stock") for a purchase price ("Purchase Price") of $2 per share or total consideration in the amount of Two Hundred And Thirty Thousand Dollars ($230,000). 2. Payment Purchase Price. The Purchase Price to be paid by the Company to the Seller at the Closing for the purchase of such Stock shall be as follows: (i) Cash. At the Closing, the Company will pay to the Seller, and the Seller will receive from the Company, cash in the amount of Sixty-Five Thousand Dollars ($65,000); and (ii) Promissory Note. At the Closing, the Company will execute and deliver to the Seller, and the Seller will receive from the Company, a promissory note of the Company for the $165,000 balance of the Purchase Price in the form attached hereto and incorporated herein by reference ("Promissory Note"). 3. Closing Date. The stock sale and purchase transaction which is the subject of this Agreement, referred to herein as the "Closing", shall take place at the Company's corporate offices at 3201 Temple Avenue, Pomona, California at 11:00 A.M. on Tuesday, June 13, 1995, or such other date, time and/or place as the parties may hereafter mutually agree to and designate in writing. 4. Certain Closing Matters. At the Closing, the Seller shall deliver to the Company four certificates, numbers LU358 (20,750 shares), LU441 (11,050 shares) LU385 (81,340 shares) and LU181 (27,840 shares), representing a total of 140,980 shares of the Company's Common Stock registered in the name of the Seller (the "Certificate") properly endorsed for transfer to the Company (including guarantee of the Seller's signature as it appears on the Certificate by a commercial bank or NASD broker/dealer firm) covering and constituting the Stock to be sold by the Seller and purchased by the Company at the Closing under this Agreement. The Company will thereafter submit the Certificate to the Company's stock transfer agent and registrar with instructions to cancel the Stock purchased by the Company as represented by the Certificate and to reissue a new certificate in the same name as the one being surrendered for delivery to the Seller representing the 25,980 shares of the Company's stock which will continue to be owned by the Seller following the Closing. 5. Seller's Representations/Warranties. As partial consideration for the sale and purchase transaction provided for in this Agreement, the Seller hereby represents and warrants to the Company, the truth and accuracy of which at the date of this Agreement and at the Closing date shall be a condition to the Company's obligation to perform this Agreement and consummate the purchase of the Stock as provided for in this Agreement, as follows: (i) The Sellers are the true and lawful owners of the stock; (ii) The Stock is not the subject of any claim, lien, encumbrance or restriction (except for the "33 Act Legend"); (iii) The Seller has not previously entered into any agreement or other arrangement to sell the Stock to any person or entity other than the Company and is not otherwise obligated to any person/entity in respect of the sale or otherwise respect of the sale or otherwise in respect of such Stock; (iv) Except as may be set forth in the Company's 1994 Annual Report To Stockholders, the Company's 1994 Annual Report to the SEC on Form 10-K and the Company's 10-Q Report to the SEC for the three months ended March 3l, 1995, the Seller is not relying upon any statement, oral or written, by the Company including any of its officers, directors, employers, agents, accountants/auditors, attorneys or other representatives, in determining to enter into and perform this Agreement including the sale of the Stock provided for in this Agreement; and (v) The Seller is not aware of any information pertaining to the Seller and/or the Stock which could reasonably be understood to be important to the Company in determining whether or not to purchase and acquire the Stock from the Seller which has not been disclosed in writing by the Seller to the Company concurrently with the execution of this Agreement. 6. Miscellaneous Provisions. A. Entire Agreement. This Agreement constitutes and comprises the parties' entire understanding and agreement as to the subject matter hereof. This Agreement replaces and otherwise supersedes any and all prior understandings, arrangements and/or agreements, whether written or oral, by, between and/or among the parties to this Agreement regarding the subject matter hereof. The parties hereby acknowledge to, and agree with one another, that in entering into and performing this Agreement none of the parties is relying upon any statement, representation, understanding, covenant, agreement, promise, warranty, guaranty, assurance or other matter not expressly set forth or otherwise referenced in this Agreement. The Seller further acknowledges and agrees that the Seller has been given the opportunity to obtain information from and ask questions about the Company to the extent that such information was not already available to the Seller. The parties acknowledge and agree that this Agreement has been drafted and otherwise prepared by all of the parties hereto; and no party is intended or should be deemed to suffer any prejudice as a result of any ambiguity which may hereinafter be determined to exist in the language constituting and comprising this Agreement. B. Choice of Law. This Agreement is made, and should be governed and interpreted, under the laws of the State of California. C. Headings. Paragraph headings as contained in this Agreement are for the convenience of the parties only and are not intended and should not be deemed to be part of the parties' Agreement. D. Successors. Assigns Heirs and Representatives. This Agreement is intended and shall be deemed for all purposes to be legally binding upon, obligate and be enforceable against the parties, including their respective successors, assigns, heirs and representatives. E. Independent Legal and Other Representation. The parties hereby acknowledge to and agree with one another that they have each had the opportunity to retain and consult with their own independent attorneys, accountants and other professional representatives; and such parties further agree with, and acknowledge to, one another that they have not been provided with, received, obtained or otherwise relied upon any statement, information, representation, opinion or advice, promise, warranty, guaranty and/or assurance of any kind or nature by the legal, accounting or other representative of the other party to this Agreement. F. Recitals. The Recitals set forth at the forepart of this Agreement paragraphs (A through F) are hereby incorporated and made a part of this Agreement as though set forth in full herein. IN WITNESS WHEREOF, the undersigned have affixed their signatures to this Agreement 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/ Cary A. Marshall Cary A. Marshall By: ss/ Geri W. Marshall Geri W. Marshall EX-27 7 ART. 5 FINANCIAL DATA SCHEDULE FOR FYE 12/31/95 AND 12/31/94
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND RELATED STATEMENT OF INCOME OF AUTO-GRAPHICS, INC. AS OF DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR YEAR DEC-31-1995 DEC-31-1994 DEC-31-1995 DEC-31-1994 106518 80852 0 0 2017245 2089764 38000 38000 293463 272300 2547842 2602956 7986491 6645125 4057170 3338152 6687706 6106116 1746084 1372077 0 0 0 0 0 0 113048 128008 2328754 2422718 6687706 6106116 9559107 9164849 9612926 9219771 5908075 6205379 9033053 8734061 0 0 0 0 221703 191532 358170 294178 164000 136000 194170 158178 0 0 0 0 0 0 194170 158178 .16 .12 .16 .12
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