LEGAL RESEARCH CENTER, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 24, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Legal
Research Center, Inc. will be held at the Hyatt Regency, 1300 Nicollet Mall,
Minneapolis, Minnesota 55403 on Tuesday June 24, 1997 at 2:00 p.m., for the
following purposes:
1. To elect a Board of four directors, each to serve until the next
Annual Meeting of Shareholders or until their successors are elected
and qualified;
2. To consider and act upon a proposal to adopt the Legal Research
Center, Inc. 1997 Stock Option Plan;
3. To consider and act upon a proposal to ratify the selection of
McGladrey & Pullen, LLP as independent auditors of the Company for the
fiscal year ending December 31, 1997; and
4. To transact other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on May 8, 1997 as
the record date for the determination of shareholders entitled to vote at the
meeting and any adjournment thereof.
To assure your representation at the meeting, please sign, date and return
your proxy in the enclosed envelope whether or not you expect to attend in
person. Your cooperation in promptly signing and returning your proxy will help
avoid further solicitation expense. Shareholders who attend the meeting may
revoke their proxies and vote in person if they so desire.
BY ORDER OF THE BOARD OF DIRECTORS
Arun K. Dube, Chairman
Minneapolis, Minnesota
April 28, 1997
1
PROXY STATEMENT
OF
LEGAL RESEARCH CENTER, INC.
700 Midland Square Building
331 Second Avenue South
Minneapolis, MN 55401
GENERAL MATTERS
Solicitation of Proxies
This Proxy Statement, mailed on or about May 13, 1997, is furnished to the
shareholders of Legal Research Center, Inc. (the "Company") in connection with
the solicitation of proxies by the Board of Directors of the Company to be voted
at the Annual Meeting of the Shareholders to be held on June 24, 1997, or any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The cost of this
solicitation, which is being made on behalf of the Company and the Board of
Directors, will be borne by the Company. In addition to solicitation by mail,
officers, directors and employees of the Company may solicit proxies by
telephone, special communications or in person. The Company may also request
banks and brokers to solicit their customers who have a beneficial interest in
the Company's Common Stock registered in the names of nominees and will
reimburse such banks and brokers for their reasonable out-of-pocket expenses.
Voting, Execution and Revocation of Proxies
Only stockholders of record at the close of business on May 8, 1997 will be
entitled to vote. As of that date, the Company had 3,297,633 shares of Common
Stock outstanding and entitled to vote. Each share is entitled to one vote.
If a proxy is properly executed and returned on time in the form enclosed,
it will be voted at the meeting as specified. Where specification has not been
made, it will be voted FOR the election of the nominees for director, FOR the
ratification of the Legal Research Center, Inc. 1997 Stock Option Plan, FOR the
ratification of the appointment by the Board of Directors of McGladrey & Pullen,
LLP as the Company's independent auditors for the fiscal year ending December
31, 1997, and will be deemed to grant discretionary authority to vote upon any
other matters properly coming before the meeting. The presence in person or by
proxy of the holders of a majority of the shares of stock entitled to vote at
the Annual Meeting of the Shareholders, or 1,648,817 shares, constitutes a
quorum for the transaction of business.
A list of those shareholders entitled to vote at the Annual Meeting will be
available for a period of ten (10) days prior to the Annual Meeting for
examination by any shareholder at the Company's principal executive offices, 700
Midland Square Building, 331 Second Ave. So., Minneapolis, Minnesota, and at the
Annual Meeting itself.
Any proxy may be revoked at any time before it is voted by written notice
to the Secretary, by receipt of a proxy properly signed and dated subsequent to
an earlier proxy, or by revocation of a written proxy by request at the Annual
Meeting. If not so revoked, the shares represented by such proxy will be voted.
2
PRINCIPAL SHAREHOLDERS
The following table sets forth as of April 15, 1997 the number of shares of
Common Stock beneficially owned by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of the Company's
capital stock, by each director and certain executive officers and by all
directors and executive officers as a group. Shares not outstanding but deemed
beneficially owned by virtue of the right of an individual to acquire them
within 60 days are treated as outstanding only when determining the amount and
percentage owned by such individual. Except as otherwise indicated, the persons
listed possess all of the voting and investment power with respect to the shares
listed for them.
Directors, Executive Officers, Number of Percent of
and 5% Shareholders Shares Class
- - ------------------------------ ------ -----
Christopher R. Ljungkull (1)(2) 929,922 27.2%
James R. Seidl (1)(3) 782,585 22.9%
Perkins Capital Management, Inc.(4) 203,500 6.1%
Arun K. Dube (1)(5) 100,000 3.0%
James J. Seifert (1)(6) 70,000 2.1%
All executive officers and directors
as a group (5 persons, 2-3,5-7) 1,893,107 51.7%
(1) The address of such person is in care of the Company, 700 Midland Square
Building, 331 Second Avenue South, Minneapolis, Minnesota 55401.
(2) Includes 142,337 shares owned by Robin Moles, Mr. Ljungkull's aunt, over
which Mr. Ljungkull exercises voting power, 120,000 shares purchasable upon
exercise of presently exercisable stock options and 7,100 shares
purchasable upon exercise of presently exercisable warrants.
(3) Includes 120,000 shares purchasable upon exercise of presently exercisable
stock options and 7,100 shares purchasable upon exercise of presently
exercisable warrants.
(4) The address of Perkins Capital Management, Inc. is 730 East Lake Street,
Wayzata, Minnesota, 55391. Includes 20,000 shares purchasable upon exercise
of presently exercisable warrants.
(5) Includes 60,000 shares purchasable upon exercise of presently exercisable
stock options and 10,000 shares purchasable upon exercise of presently
exercisable warrants.
(6) Includes 10,000 shares purchasable upon exercise of presently exercisable
stock options and 20,000 shares purchasable upon exercise of presently
exercisable warrants.
(7) Includes 10,600 shares purchasable upon exercise of presently exercisable
stock options.
3
ELECTION OF DIRECTORS
(Proposal #1)
Nominees for Election as Directors
The Board of Directors currently consists of four persons. Each director
will be elected to serve until the Annual Meeting of Shareholders to be held in
1998 or until a successor is elected and qualified. Vacancies and newly-created
directorships resulting from an increase of the number of directors may be
filled by a majority of the directors then in office and the directors so chosen
will hold office until the next election.
The Board of Directors has nominated for election the four individuals
named below. Proxies cannot be voted for a greater number of persons than the
number of nominees named below. The Board recommends a vote FOR all such
nominees, and it is intended that, unless contrary written instructions are
provided, proxies accompanying this Proxy Statement will be voted at the 1997
Annual Meeting FOR the election to the Board of all of the nominees named. The
Board of Directors believes that each nominee will be able to serve, but should
any nominee be unable to serve as a director, the persons named in the proxies
have advised that they will vote for the election of such substitute nominee as
the Board of Directors may propose.
The names, ages and respective positions of the nominees, their occupations
and other information is set forth below, based upon information furnished to
the Company by the nominees.
Christopher R. Ljungkull, age 43, has been Chief Executive Officer of the
Company since rejoining it on a full time basis in 1994. From 1987 to 1994, Mr.
Ljungkull served in various capacities with West Publishing Corporation, most
recently as an editor. Mr. Ljungkull is co-founder of the Company and has been a
director of the Company since its inception.
James R. Seidl, age 43, has been the President of the Company since 1988
and served as its Chief Executive Officer prior to Mr. Ljungkull's return in
1994. Mr. Seidl is a co-founder of the Company and has been a director since its
inception.
Arun K. Dube, age 59, has been a director of the Company since May 1995 and
the Chairman of the Board since January 1996. In July 1996, Mr. Dube was hired
as Chief Executive Officer of The CyberLaw Office, Inc. (CLO) an 85% owned
subsidiary of the Company. In August 1996, the Company consolidated management
of all Internet related activities including The Law Office, Inc. a wholly owned
subsidiary of the Company (TLO), under CLO. Mr. Dube is a private investor and
has been the Chief Executive Officer of Strategic Alliance International, Inc.
since 1983. Mr. Dube is also a director of Granton Technology Ltd., a publicly
traded company.
James J. Seifert, age 40, has been a director of the Company since May
1995. Mr. Seifert has served as Assistant General Counsel of The Toro Company
since May 1990, most recently as Associate General Counsel since April 1994.
4
Board of Directors and Committees
Meetings. During fiscal 1996, the Board of Directors of the Company held
eight meetings and on two occasions took action by written consent. Each
director was present for each meeting held during fiscal 1996.
Board Committees. The Board of Directors has both an Audit Committee and a
Compensation Committee.
The Audit Committee acts as a liaison between the Company's independent
auditing firm and Company management and, in connection therewith, may (i)
recommend to the Board of Directors an annual selection or retention of the
Company's independent auditing firm, (ii) communicate with the Company's
independent auditing firm concerning matters of accounting and auditing policy
which such firm may desire to discuss with other than Company management, and
(iii) review and recommend to Company management improvements in the Company's
accounting and auditing procedures. The current members of the Audit Committee
consist of Messrs. Dube and Seifert. The Audit Committee held one meeting during
the 1996 fiscal year.
The Compensation Committee makes recommendations to the Board of Directors
respecting the sufficiency and adequacy of the Company's compensation programs
for management and other key employees, including (i) salary and bonus programs,
(ii) incentive and other stock option programs (including the recommendation of
persons who should receive options and the exercise price and other terms
therefor), and (iii) other perquisites. The current members of the Compensation
Committee consist of Messrs. Dube and Seifert. The Compensation Committee held
one meeting during the 1996 fiscal year.
Remuneration of Directors. Non-employee directors are to be paid $125 per
Board or Committee meeting attended and reimbursed for certain expenses in
connection therewith. The Board has suspended payment for non-employee directors
for fiscal 1997 until the Company has achieved sustained profitability.
Non-employee directors are also compensated with annual stock option grants of
5,000 shares, exercisable at fair market value on the date of grant and expiring
10 years after issuance (the "Directors' Options"). Directors' Options are
granted at the time of election or reelection at the Annual Shareholders'
Meeting unless a director is elected in between annual meetings in which case
the Directors' Options shall be granted on a pro rata basis. Messrs. Dube and
Seifert have each been granted Directors' Options to purchase 10,000 shares of
Common Stock at prices ranging from $2.00 to $3.50 a share under the Company's
1995 Stock Option Plan.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To the knowledge of the Company, based solely upon a review of Forms 3 and
4 furnished to the Company during the fiscal year ended December 31, 1996,
pursuant to Rule 16a-3(e) of the Rules and Regulations promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Forms 5
and amendments thereto furnished to the Company with respect to the year ended
December 31, 1996, each of Messrs. Ljungkull, Seidl and Dube failed to file on a
timely basis, one Form 4 report.
5
EXECUTIVE COMPENSATION
The following table summarizes the cash and non-cash compensation paid to
or earned by Christopher R. Ljungkull, the Company's Chief Executive Officer and
James R. Seidl, the Company's President, the only executive officers of the
Company whose annual compensation exceeded $100,000 during 1996.
Summary Compensation Table
--------------------------
Annual Long-term
Name and Principal Fiscal Year Ended Compensation Compensation All Other
Position December 31, Salary Bonus Awards of Options Compensation
- - --------------------------------------------------------------------------------------------------------------
Christopher R 1996 $ 94,708 $ 13,303 185,000(1) $ 0
Ljungkull, Chief
Executive Officer 1995 $ 72,810 $ 10,400 180,000 $ 9,504(2)
- - --------------------------------------------------------------------------------------------------------------
James R. Seidl, 1996 $ 94,708 $ 39,909 185,000(1) $ 0
President
1995 $ 72,842 $ 10,400 180,000 $ 9,504(2)
- - --------------------------------------------------------------------------------------------------------------
(1) Consists of options granted in 1996 which were canceled in April 1997 with
the consent of the optionees.
(2) Consists of the balance of a receivable from a partnership owned equally by
Messrs. Ljungkull and Seidl which was relieved in lieu of an additional
bonus.
Stock Options
The following table summarizes option grants made during the fiscal year
ended December 31, 1996 to the executive officers named in the Summary
Compensation table:
Options Grants in 1996 Fiscal Year
----------------------------------
Percent of
Total Granted
Options to Employees in Exercise Price Expiration
Name Year Granted Fiscal Year Per Share Date
- - --------------------------------------------------------------------------------------------------------------
Christopher R. Ljungkull 1996 185,000(1) 35% $2.00 May 2001
James R. Seidl 1996 185,000(1) 35% $2.00 May 2001
(1) Consists of options granted in 1996 which were canceled in April of 1997
with the consent of the optionees.
6
The following table summarizes the value of the unexercised options held by
the executive officers named in the Summary Compensation table as of December
31, 1996.
Aggregated Option Exercises and Fiscal Year-End Option Values
-------------------------------------------------------------
Value of Unexercised
Shares Number of Unexercised in-the-Money Options at
Acquired Value Options at Fiscal Year-End Fiscal Year-End
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- - ----------------------------------------------------------------------------------------------------------------
Christopher R. Ljungkull --- --- 120,000/245,000 (2) $0/$0
- - ----------------------------------------------------------------------------------------------------------------
James R. Seidl --- --- 120,000/245,000 (2) $0/$0
(1) Value of unexercised options are calculated by determining the difference
between the fair market value of the shares underlying the options at
December 31, 1996 and the exercise price of the options.
(2) Consists of options granted in 1995 under the Company's Existing Officers'
Stock Option Plan.
Employment Agreements
The Company entered into three-year employment agreements with each of
Christopher R. Ljungkull and James R. Seidl effective July 1, 1995. Effective
January 1, 1997, Messrs. Ljungkull and Seidl waived their right to receive
revenue based incentive compensation due them under their employment agreements.
Effective April 1997, Messrs. Ljungkull and Seidl salaries were increased to
$120,000 per year. The Board of Directors is currently considering entering into
new five year employment agreements with Messrs. Ljungkull and Seidl which
contain customary confidentially clauses, non-compete agreements and provide for
primarily profit-based incentive compensation. No action with respect to these
proposed employment agreements have been taken to date.
CERTAIN TRANSACTIONS
Consulting Arrangement with James J. Seifert. The Company has engaged James
J. Seifert, one of its directors, as a consultant to assist the Company with the
continued development of its CADRE program pursuant to a letter agreement dated
September 5, 1995 (the "Agreement"). Pursuant to the Agreement, for a one year
period, Mr. Seifert will provide various curriculum development, promotional,
and business planning services in consideration of $2,800 per month. The
Agreement is terminable by either party upon 90 days notice and automatically
renews for successive one-year periods. Mr. Seifert was paid $33,600 under this
Agreement during 1996.
Lease with URSA Companies, Inc. The Company leases its office space from
URSA Companies, Inc. ("URSA"), a corporation which is owned and controlled by
Messrs. Ljungkull and Seidl, pursuant to the exact same terms and conditions of
a lease between URSA and URSA's landlord for such office space. This arrangement
between the Company and URSA is on terms no more favorable to the Company that
that which could be obtained by an unaffiliated third party from URSA.
Purchase of Common Stock and Warrants. In June 1995, Messrs. Seidl and
Ljungkull each purchased 13,148 shares of Common Stock at $2.70 per share and
also received a warrant entitling
7
each to purchase 7,100 shares of Common Stock at $2.625 per share. The warrants
expire four years from the date of issuance and become exercisable one year from
the date of issuance. The warrants have identical terms to those warrants issued
to purchasers of notes in the Company's private placement of $500,000 of bridge
loans conducted in May and June of 1995.
Sale of Shares to Officers and Directors. On September 3, 1996 the Company
sold an aggregate of 1,040,000 shares of its common stock to three of its
officers and/or directors, at the closing price for the Company's common stock
on September 4, 1996, or $1.89 per share. The purchases were made through seven
year non-recourse notes, with the shares pledged as collateral. The notes bear a
fixed interest rate of 8.5% and cannot be prepaid anytime before September 2,
2003. The shares are restricted and cannot be sold or otherwise transferred
without repaying the notes.
Sale of CLO Shares to Director. In 1995, the Company created CLO to expand
its on-line activities similar to TLO, into the international market place. In
July 1996, as part of an employment agreement, the Company sold a 15% interest
to Mr. Dube as an inducement to become the new Chief Executive Officer of CLO
for a nominal sum. In August 1996, the Company consolidated management of all
Internet related activities under Mr. Dube. The Company is actively seeking
financing for CLO and intends to consolidate ownership of TLO under CLO when
additional financing is complete.
1997 STOCK OPTION PLAN
(Proposal #2)
The Board of Directors has approved the adoption of Legal Research Center,
Inc. 1997 Stock Option Plan ("1997 Plan"). The 1997 Plan provides for the
granting of options ("Options") to purchase up to an aggregate of 700,000 shares
of the Company's Common Stock to employees, consultants and independent
contractors. Options that are granted under the 1997 Plan may be either options
that qualify as "incentive options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, ("Incentive Options"), or those that
do not qualify as Incentive Options ("Non-statutory Options"). The 1997 Plan is
administered by the Compensation Committee of the Board of Directors. The Board
of Directors recommends a vote FOR this proposal.
Under the 1997 Plan, Options may not be granted at an exercise price less
than the fair market value of the Common Stock on the date of grant (or, for an
Incentive Option granted to a person holding more than 10% of the Company's
voting stock, at less than 110% of fair market value). An optionee who leaves
the Company for reasons other than death, disability or termination for cause
has three months after termination in which to exercise his or her Options.
Options may not be transferred other than by will or laws of descent and
distribution and may be exercised, during the lifetime of an optionee, only by
the optionee. Options which have been granted to employees who terminate
employment due to death or disability may be exercised for a period of one year
after termination by the optionee or the person(s) to whom the rights under such
Option shall have passed, as the case may be. The term of each Option, which is
fixed at the date of grant, may not exceed ten years from the date the Option is
granted (except that an Incentive Option granted to a person holding more than
10% of the Company's voting stock may exercisable only for five years). Options
may be made exercisable in whole or in installments, and the Plan contains a
cashless exercise feature enabling the holder to exercise Options by
surrendering previously owned Common Stock or other vested Options. The exercise
of the Options accelerates if the Company merges or consolidates with another
corporation and is not the surviving corporation or if the Company transfers all
or substantially all of its business or assets to another person or entity. No
Options are currently outstanding under the 1997 Plan.
8
SELECTION OF AUDITORS
(Proposal #3)
The Board of Directors has selected McGladrey & Pullen, LLP as independent
auditors to examine the accounts of the Company for the fiscal year ending
December 31, 1997, and to perform other accounting services. McGladrey & Pullen,
LLP has acted as independent auditors of the Company since May 1995.
Representatives of McGladrey & Pullen, LLP are expected to be present at the
1997 Annual Meeting and will be given an opportunity to make a statement if so
desired and to respond to appropriate questions.
SHAREHOLDER PROPOSALS
The rules of the Securities and Exchange Commission permit shareholders of
a company, after notice to the company, to present proposals for shareholder
action in the Company's proxy statement where such proposals are consistent with
applicable law, pertain to matters appropriate for shareholder action and are
not properly omitted by company action in accordance with the proxy rules. The
Legal Research Center, Inc. 1998 Annual Meeting of Shareholders is expected to
be held in June 1998. In order to be considered for inclusion in the Proxy
Statement for the June 1998 Annual Meeting, shareholder proposals prepared in
accordance with the proxy rules must be received by the Company on or before
January 15, 1998.
GENERAL
The Board of Directors of the Company does not intend to present and knows
of no matters other than the foregoing to be brought before the meeting.
However, the enclosed proxy gives discretionary authority in the event that any
additional matters should be presented.
BY ORDER OF THE BOARD OF DIRECTORS
Arun K. Dube, Chairman
9
LEGAL RESEARCH CENTER, INC.
PROXY
The undersigned shareholder of Legal Research Center, Inc. (the "Company")
hereby constitutes and appoints Christopher R. Ljungkull or James R. Seidl, or
both of them, his or her proxy, with full power of substitution, to attend the
Annual Meeting of shareholders of the Company to be held at the Hyatt Regency,
1300 Nicollet Mall, Minneapolis, Minnesota 55403 on Tuesday June 24, 1997 at
2:00 p.m., or at any and all adjournments thereof, and there to act for and to
vote all stock of the undersigned in the manner specified below, upon the
following matters.
1. Election of four directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected:
Arun K. Dube, Christopher R. Ljungkull, James R. Seidl and James J. Seifert
|_| FOR all nominees listed above (except as indicated to the contrary
below)
|_| WITHHOLD AUTHORITY to vote for all nominees listed above
(INSTRUCTION: To withhold authority to vote for any individual, write that
nominee's name in the space provided below.)
- - --------------------------------------------------------------------------------
2. Adopt the Legal Research Center, Inc. 1997 Stock Option Plan.
|_| FOR |_|AGAINST |_| ABSTAIN
3. Selection of McGladrey & Pullen, LLP as independent auditors of the Company
for the fiscal year ending December 31, 1997.
|_| FOR |_|AGAINST |_| ABSTAIN
4. In their discretion on any other matter that may properly come before the
meeting or any adjournment or adjournments thereof.
PLEASE FILL IN, SIGN, DATE AND MAIL IN THE ENCLOSED ENVELOPE.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS. THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED BY THE
UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED
FOR APPROVAL OF PROPOSALS 1, 2 AND 3 AND GRANT DISCRETIONARY AUTHORITY ON ANY
OTHER MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
10
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE COMPANY'S NOTICE OF ANNUAL
SHAREHOLDERS MEETING TO BE HELD ON JUNE 24, 1997 AND PROXY STATEMENT.
Dated: __________________________ ____, 1997
_______________________________________
_______________________________________
IMPORTANT: Signature(s) should correspond with the name appearing on the books
of the Company. When signing in a fiduciary or representative capacity, give
full title as such. When more than one owner, each should sign.