SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box: |_| Confidential, for Use of the
|_| Preliminary Proxy Statement Commission Only (as permitted
|X| Definitive Proxy Statement by Rule 14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to |_| Rule 240.14a-11(c)
or |_| Rule 240.14a-12
Research, Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| $125 per Exchange Act Rule o-11(c)(1)(ii), 14a-6(i)(1) or Item 22(a)(2) of
Schedule 14A
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[GRAPHIC OMITTED-LOGO]
RESEARCH, INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JANUARY 15, 1998
Notice is hereby given that the Annual Meeting of Shareholders of
Research, Incorporated will be held at the corporate offices, 6425 Flying Cloud
Drive, Eden Prairie, Minnesota, on Thursday, January 15, 1998 at 5:00 p.m.,
Central Standard Time, for the following purposes:
1. To consider and act upon a proposal to amend the Bylaws of the Company
to fix the number of directors at five.
2. To elect five directors to hold office until the next Annual Meeting of
Shareholders or until their successors are elected.
3. To ratify and approve the Research, Incorporated Employee Stock Purchase
Plan.
4. To ratify and approve an amendment to the Research, Incorporated 1991
Stock Plan to increase the number of shares of Common Stock available
under the plan by 100,000 shares.
5. To ratify and approve the selection of independent public accountants
for the current fiscal year.
6. To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 1, 1997
as the record date for the determination of shareholders entitled to notice of
and to vote at the meeting.
By Order of the Board of Directors
Gerald E. Magnuson, SECRETARY
Minneapolis, Minnesota
December 11, 1997
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. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE
IN PERSON IF THEY SO DESIRE. THIS PROXY IS BEING SOLICITED ON BEHALF OF THE
COMPANY.
<PAGE>
RESEARCH, INCORPORATED
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Research,
Incorporated (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
Shareholders to be held on January 15, 1998. The cost of this solicitation will
be borne by the Company. In addition to solicitation by mail, officers,
directors and employees of the Company may solicit proxies by telephone,
facsimile 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.
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 in person at
the Annual Meeting; but if not so revoked, the shares represented by such proxy
will be voted. The Company's corporate offices are located at 6425 Flying Cloud
Drive, Eden Prairie, Minnesota 55344 and its telephone number is (612)
941-3300. The mailing of this proxy statement to shareholders of the Company
commenced on or about December 11, 1997.
The Company has outstanding only one class of capital stock, $.50 per
share par value Common Stock, of which 986,674 shares were issued and
outstanding and entitled to vote at the close of business on December 1, 1997.
Each share of Common Stock is entitled to one vote. Shareholders have
cumulative voting rights in connection with the election of directors by giving
written notice of intent to cumulate votes to any officer of the Company before
the meeting or to the presiding officer at the meeting. A shareholder may
cumulate votes for the election of directors by multiplying the number of votes
to which the shareholder may be entitled by five (the number of directors to be
elected) and casting all such votes for one nominee or distributing them among
any two or more nominees. Mere execution of a proxy will not provide a
shareholder with cumulative voting. Only shareholders of record at the close of
business on December 1, 1997 will be entitled to vote at 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 Shareholders constitutes a
quorum for the transaction of business.
Under Minnesota law, each item of business properly presented at a meeting
of shareholders generally must be approved by the affirmative vote of the
holders of a majority of the voting power of the shares present, in person or
by proxy, and entitled to vote on that item of business. However, if the shares
present and entitled to vote on that item of business would not constitute a
quorum for the transaction of business at the meeting, then the item must be
approved by a majority of the voting power of the minimum number of shares that
would constitute such a quorum. Votes cast by proxy or in person at the Annual
Meeting of Shareholders will be tabulated by the election inspectors appointed
for the meeting and will determine whether or not a quorum is present. The
election inspectors will treat abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum but as
unvoted for purposes of determining the approval of the matter submitted to the
shareholders for a vote. If a broker indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a particular
matter, those shares will not be considered as present and entitled to vote
with respect to that matter.
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table includes information as of December 1, 1997 concerning
the beneficial ownership of the Common Stock of the Company by (i) all persons
who are known by the Company to hold five percent or more of the Common Stock
of the Company, (ii) each of the directors of the Company, (iii) each executive
officer named in the Summary Compensation Table on page 6, and (iv) all
directors and officers of the Company as a group. Unless otherwise indicated,
all shares represent sole voting and investment power. All shares indicated in
this table and throughout this Proxy Statement are stated without giving effect
to the December 1997 5-for-4 stock split, unless otherwise indicated.
AMOUNT OF
NAME AND ADDRESS OF STOCK PERCENT
BENEFICIAL OWNER OWNERSHIP OF CLASS
--------------------------------------- ------------- --------
Kenneth G. Anderson .................. 100,034 (1) 10.14%
5209 Doncaster Way
Minneapolis, MN 55436
Dimensional Fund Advisors, Inc. ...... 73,200 (2) 7.42%
1299 Ocean Avenue, 11th Fl.
Santa Monica, CA 90401
James R. Anderson (3) ............... 44,456 (4)(5) 4.50%
Claude C. Johnson (3)(6) ............ 30,174 (4) 3.03%
Edward L. Lundstrom (3) ............ 625 (4) *
Gerald E. Magnuson (3) ............... 5,500 (4)(7) *
Charles G. Schiefelbein (3) ......... 52,385 (4)(8) 5.32%
John G. Colwell, Jr. (3) ............ 500 *
Bruce E. Bailey (6) .................. 10,147 (4) 1.02%
David G. Brady (6) .................. 10,645 (4) 1.07%
Gordon W. Sangster (6) ............... 26,864 (4)(9) 2.72%
All Directors and Officers
as a Group (11 persons) ............ 188,890 (4) 18.58%
- ------------------
* Less than 1%
(1) Includes 24,114 shares owned directly by Mr. K.G. Anderson's wife as to
which he disclaims beneficial ownership.
(2) Information with respect to Dimensional Fund Advisors, Inc. is based upon
reports filed with the Securities and Exchange Commission.
(3) Serves as a director of the Company and has been nominated for re-election,
except for Mr. James R. Anderson who will not stand for re-election.
(4) Includes the following number of shares which may be purchased within sixty
days from the date hereof pursuant to outstanding stock options: Mr. J.R.
Anderson, 1,750 shares; Mr. Johnson, 8,125 shares; Mr. Lundstrom, 125
shares; Mr. Magnuson, 1,750 shares; Mr. Schiefelbein, 500 shares; Mr.
Bailey, 5,125 shares; Mr. Brady, 6,125 shares; Mr. Sangster, 2,688 shares;
and all directors and officers as a group, 30,626 shares.
(5) Includes 15,906 shares owned by Mr. J.R. Anderson in joint tenancy with his
wife and 510 shares owned by Mr. Anderson's wife as custodian for their
children.
(6) Serves as an executive officer of the Company and appears in the Summary
Compensation Table on page 6 hereof.
<PAGE>
(7) Includes 1,000 shares owned directly by Mr. Magnuson's wife as to which he
disclaims beneficial ownership.
(8) Includes 40 shares owned directly by Mr. Schiefelbein's wife. Also includes
9,000 shares owned directly by the Peace Shalom Foundation, of which Mr.
Schiefelbein is a director and of which his wife is both a director and
the president. Mr. Schiefelbein disclaims beneficial ownership of these
shares.
(9) Includes 24,176 shares held by the Gordon W. Sangster Revocable Trust of
which Mr. Sangster is trustee.
REDUCTION OF THE NUMBER OF DIRECTORS
(PROPOSAL 1)
The present size of the Board of Directors is fixed at six persons. Mr.
James R. Anderson, a director since 1966, will not stand for re-election.
Consequently, the Board has determined that it would be in the best interests
of the Company to reduce the size of the Board to five persons. Under
provisions of the Bylaws and applicable law, the size of the Board may only be
reduced by a vote of the shareholders.
The following resolution will be presented to the shareholders for
approval:
RESOLVED, That Article II, Section 2 of the Bylaws of this corporation
be amended to read as follows:
"The Board of Directors of this corporation shall consist of five
Directors, and a majority of the Directors then holding office shall
constitute a quorum."
Approval of this resolution requires the affirmative vote of a majority of
the shareholders present in person or by proxy at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ADOPTION OF THIS AMENDMENT
TO THE BYLAWS.
<PAGE>
ELECTION OF DIRECTORS
(PROPOSAL 2)
Five directors will be elected at the Annual Meeting of Shareholders, each
to serve until the next Annual Meeting of Shareholders or until a successor is
elected. The Board of Directors has nominated for election the five persons
named below. All of the nominees are presently directors of the Company and all
were elected by the shareholders, except Mr. Colwell who was appointed to the
Board by the Board of Directors in fiscal 1997. It is intended that proxies
will be voted for the named nominees. The Board of Directors believes that each
nominee named below 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. Unless otherwise indicated, each nominee has held his present
occupation as set forth below, or has been an officer with the organization
indicated, for more than the past five years.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE
- ------------------------------ ----------------------------------------------------------- ---------
<S> <C> <C>
John G. Colwell, Jr. (40) Since 1996, President, Colwell Industries (graphic arts 1997
company); from 1986 to 1996, Group President, Banta
Corp. (graphic arts company).
Claude C. Johnson (53) President and Chief Executive Officer of the Company 1992
since July 1992; formerly, Vice President, Chief Financial
Officer and Assistant Secretary of the Company.
Edward L. Lundstrom (47) President, Sheldahl, Inc. 1996
Gerald E. Magnuson (67) Of Counsel, Lindquist & Vennum P.L.L.P., Minneapolis, 1982
Minnesota (law firm); Partner Lindquist & Vennum
P.L.L.P. until December 1994; Secretary of the Company;
Director of PremiumWear, Inc., Sheldahl, Inc. and
Washington Scientific Industries, Inc.
Charles G. Schiefelbein (59) Since August, 1996, President of Capital Growth Services 1989
(a consulting and investing firm); from 1991 to August,
1996, Chairman of the Board, Computer Petroleum
Corporation, St. Paul, Minnesota (publicly traded company
with a custom delivered database of petroleum
information); Director of Waters Instruments, Inc.
</TABLE>
The Board of Directors met six times during fiscal year 1997. All
directors attended 75% or more of the meetings of the Board of Directors and
any committee on which he served, except for Mr. Colwell who did not join the
Board until August 1997.
The Company has an Audit Committee which met one time during fiscal year
1997 and is currently comprised of Messrs. C.G. Schiefelbein (Chairman), J.G.
Colwell, Jr., J.R. Anderson, E.L. Lundstrom and G.E. Magnuson. The Audit
Committee meets with the Company's independent public accountants and
representatives of management. Among other duties, the Audit Committee reviews
the internal and external financial reporting of the Company, reviews the scope
of the independent auditors' examination, considers comments by the auditors
regarding internal controls and accounting procedures and management's response
to those comments, and approves any material non-audit services to be provided
by the Company's independent public accountants.
<PAGE>
The Company does not have a compensation committee or a nominating
committee. The duties normally reserved for a compensation committee are
undertaken by the full Board of Directors, with Mr. Johnson, the only employee
of the Company on the Board, excusing himself from deliberations and votes
concerning matters related to his compensation.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending September 30, 1997,
1996 and 1995, the cash compensation paid by the Company, as well as certain
other compensation paid or accrued for such years, to Claude C. Johnson, the
Company's President and Chief Executive Officer, and to each other executive
officer of the Company (together with Mr. Johnson, the "Named Executives")
whose total cash compensation exceeded $100,000 during fiscal year 1997 in all
capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
FISCAL YEAR ---------------------- -------------
ENDED STOCK ALL OTHER
NAME AND POSITION SEPTEMBER 30 SALARY BONUS OPTIONS (1) COMPENSATION (2)
- --------------------------- -------------- ---------- --------- ------------- -----------------
<S> <C> <C> <C> <C> <C>
Claude C. Johnson 1997 $150,577 $33,750 12,000 $5,044
President and Chief 1996 145,538 -- 5,000 5,386
Executive Officer 1995 140,500 29,577 3,500 9,020
Bruce E. Bailey 1997 102,496 22,950 7,000 5,066
Vice President, 1996 100,034 -- 3,000 5,455
Drying Division 1995 94,558 17,509 2,500 7,883
David G. Brady 1997 98,269 22,163 7,000 3,901
Vice President, Research 1996 96,039 -- 3,000 5,423
International Division 1995 92,096 21,496 2,500 7,757
Gordon W. Sangster 1997 94,769 21,375 5,000 3,898
Vice President, 1996 92,769 -- 1,000 5,252
Operations 1995 90,654 19,225 1,250 7,631
</TABLE>
- ------------------
(1) Reflects the number of shares purchasable under option grants.
(2) Reflects 401(k) matching and discretionary contributions made by the
Company under the Company's profit sharing retirement plan of $4,396 for
Mr. Johnson, $4,418 for Mr. Bailey, $3,253 for Mr. Brady and $3,282 for
Mr. Sangster, and the payment for life insurance premiums of $648 for Mr.
Johnson, Mr. Bailey and Mr. Brady and $616 for Mr. Sangster.
<PAGE>
STOCK OPTIONS
The following table contains information concerning the grant of stock
options under the Company's stock option plans to the Named Executives during
the last fiscal year:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------- VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION --------------------
NAME GRANTED YEAR PER SHARE DATE 5% 10%
- -------------------------- ------------ ----------- ----------- ------------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Claude C. Johnson ...... 12,000 21.05% $ 5.75 11/05/2001 $19,063 $42,125
Bruce E. Bailey ......... 7,000 12.28% 5.75 11/05/2001 11,120 24,573
David G. Brady ......... 7,000 12.28% 5.75 11/05/2001 11,120 24,573
Gordon Sangster ......... 5,000 8.77% 5.75 11/05/2001 7,943 17,552
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AS OF
SHARES OPTIONS AT SEPTEMBER 30, 1997 SEPTEMBER 30, 1997 (1)
ACQUIRED ON VALUE ----------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ------------- ---------- ------------- --------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Claude C. Johnson ... 15,000 $23,750 5,000 17,500 $17,875 $54,625
Bruce E. Bailey ... 4,000 11,637 6,000 10,500 24,125 32,875
David G. Brady ...... 4,000 11,850 6,000 10,500 24,125 32,875
Gordon W. Sangster 8,000 15,000 875 6,375 2,875 21,125
</TABLE>
- ------------------
(1) Based on the market price of $9.25 per share, the average of the high and
low trading price of the Company's Common Stock on September 30, 1997.
Value is calculated on the difference between the option exercise price
and $9.25 multiplied by the number of shares of common stock underlying
the options, but before taxes associated with exercise.
DIRECTOR COMPENSATION
Directors who are not employees of the Company (currently all directors
except Mr. Johnson) are paid a retainer of $4,000 and a fee of $400 for each
meeting of the Board of Directors or any committee thereof. No additional
compensation for serving as a director was paid to Mr. Johnson during the last
fiscal year. Mr. Magnuson is paid a retainer of $4,000 for serving as Secretary
to the Company. Lindquist & Vennum P.L.L.P., of which Mr. Magnuson is Of
Counsel, was paid for legal services rendered to the Company during fiscal year
1997. Mr. Magnuson receives no financial benefit on account of amounts paid by
the Company to Lindquist & Vennum P.L.L.P. for such legal services. It is
anticipated that Lindquist & Vennum P.L.L.P. will continue to perform legal
services for the Company.
Each non-employee member of the Board of Directors receives at the time of
election or re-election to the Board by the shareholders an option to purchase
500 shares of the Company's Common Stock on the date of such election or
re-election. Each director's option is to purchase 500 shares of Common Stock
at a price equal to the fair market value of the Company's Common Stock on
<PAGE>
the date of grant exercisable over a five-year period. The options vest in
increments of 25% per year beginning one year after the date of grant.
The Company has a retirement program for directors who are not full-time
employees of the Company at the time of retirement which provides for the
payment of an annual benefit equal to the annual retainer paid to directors
during the full fiscal year preceding retirement. The retirement benefit, which
is payable to directors who have served five years or more, will commence at
the later of the time of retirement or when the director becomes 65 years old
and will be subject to proportionate reduction if the director has served the
Company less than ten years. The maximum number of years that the benefit is
payable is ten years. Former directors who receive the retirement benefit will
be available to the Company as reasonably requested for consultation and
advice, including attendance at Board or committee meetings if requested, and
will be reimbursed for out-of-pocket expenses in connection with such meetings.
Former directors receiving retirement benefits will also agree not to engage in
substantial activity competitive with the business of the Company.
ADOPTION OF RESEARCH, INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL 3)
The Board of Directors adopted the Research, Incorporated Employee Stock
Purchase Plan (the "Plan"), subject to approval by the shareholders. The
purpose of the Plan is to facilitate the purchase by employees of shares of
Common Stock in the Company in order to provide a greater community of interest
between the Company and its employees. In general, the Plan permits employees
to purchase shares of Common Stock of the Company at a price equal to the
lesser of 85% of the value of the Common Stock on the commencement date of a
phase (the "Commencement Date") or 85% of the value of a share of Common Stock
on the date of termination of a phase (the "Termination Date"). Each year
during the term of the Plan shall reflect two phases, the first commencing on
August 1 and terminating on January 31 and the second phase commencing on
February 1 and terminating on July 31. The effective date of the Plan is August
1, 1997 and it shall terminate on February 1, 2003.
There are 100,000 shares of the Company's Common Stock, $.50 par value,
reserved for issuance under the Plan and eligible employees will not pay any
consideration to the Company in order to receive the options.
TERM OF THE PLAN. The Plan shall terminate on February 1, 2003. No phase
may run concurrently, but a phase may commence immediately after the
termination of a preceding phase.
ELIGIBILITY. Any employee of the Company who has completed at least one
thousand hours of service on or prior to the Commencement Date of the
applicable phase shall be eligible to participate in the Plan. Notwithstanding
anything to the contrary in the Plan, no employee may be granted an option
under the Plan to purchase shares of Common Stock if such employee, immediately
after the grant of the option, would own stock (including shares subject to the
option) possessing 5% or more of the total combined voting power or value of
all classes of issued and outstanding stock of the Company. In addition, no
Participant may be granted an option to purchase shares of Common Stock that
permit the Participant to purchase shares in any calendar year under the Plan
with an aggregate fair market value in excess of $25,000. By action of the
respective boards of directors, employees of any subsidiary of the Company also
may participate.
PARTICIPATION. Eligible employees elect to participate in the Plan by
completing payroll deduction authorization forms on the Commencement Date of
the applicable phase of the Plan. Payroll deductions
<PAGE>
are limited to 7% of a Participant's base pay for the term of the Plan and the
minimum authorization is 2% of a Participant's pay per pay period.
TERMS AND CONDITIONS OF OPTIONS. As of the Commencement Date of the
applicable phase of the Plan, an eligible employee who elects to participate in
the Plan shall be granted an option for as many full shares as he or she will
be able to purchase pursuant to the payroll deduction procedure. The option
price for employees who participate on a particular Commencement Date shall be
the lesser of: (i) 85% of the fair market value of the shares on the
Commencement Date, or (ii) 85% of the fair market value of the shares on the
Termination Date of the applicable phase of the Plan.
EXERCISE AND WITHDRAWAL. Exercise of the option occurs automatically on a
particular Termination Date, unless a Participant gives written notice prior to
such date as to an election not to exercise. A Participant may, at any time
during the term of the Plan, give notice that he or she does not wish to
continue to participate, and all amounts withheld will be refunded without
interest accrued thereon.
ADMINISTRATION AND AMENDMENT. The Plan shall be administered by a
Committee consisting of not less than two members who shall be appointed by the
Board of Directors. Each member of such Committee shall be either a director,
officer or an employee of the Company. The Board of Directors may at any time
amend the Plan, except that no amendment may make changes in options already
granted which would adversely affect the rights of any Participant.
INCOME TAX CONSEQUENCES AND REGISTRATION WITH SEC. The Company believes
that the Plan is a "qualified" plan under Section 423 of the Internal Revenue
Code of 1986, as amended. Under the Internal Revenue Code, no income will
result to a grantee of an option upon the granting or exercise of an option,
and no deduction will be allowed to the Company. The gain, if any, resulting
from a disposition of the shares received by a Participant will be reported
according to the provisions of Section 423 of the Internal Revenue Code and
will be taxed in part as ordinary income and in part as capital gain.
The Company has filed with the SEC, pursuant to the Securities Act of
1933, as amended, a registration statement covering the offering of shares
under the Plan, and a prospectus has been or will be delivered to each eligible
employee prior to the time when an election to participate must be made.
CERTAIN BENEFITS. The following table states benefits under the Plan in
amounts that would have been received for the last completed fiscal year had
the Plan been in effect for the whole year.
<TABLE>
<CAPTION>
EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
NAME & POSITION DOLLAR VALUE ($) # OF SHARES
- ----------------------------------------------------------------- ------------------ ------------
<S> <C> <C>
Claude C. Johnson, President and Chief Executive Officer $ 4,500 785
Bruce E. Bailey, Vice President, Drying Division -- --
David G. Brady, Vice President, Research International Division -- --
Gordon W. Sangster, Vice President, Operations 6,650 1,160
Executive Group 13,590 2,371
Non-Executive Director Group -- --
Non-Executive Officer Group 96,014 16,757
</TABLE>
SHAREHOLDER APPROVAL. The affirmative vote of the holders of a majority of
the Common Stock of the Company, voting at the meeting in person or by proxy,
is required for the approval of the Employee Stock Purchase Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL AND RATIFICATION
OF THE RESEARCH INCORPORATED EMPLOYEE STOCK PURCHASE PLAN.
<PAGE>
APPROVAL OF AMENDMENT TO 1991 STOCK PLAN
(PROPOSAL 4)
INCREASE OF THE AUTHORIZED SHARES
The 1991 Stock Plan (the "1991 Plan") authorizes the issuance of up to
262,500 shares of Common Stock (as adjusted to reflect the December 1997
5-for-4 stock split). At December 1, 1997, the Company had issued 103,844
shares under the 1991 Plan, had outstanding options to purchase an additional
132,187 shares and had 26,469 shares reserved for future issuance (each as
adjusted for the stock split). In order to reserve sufficient shares for future
options, the Board of Directors proposes that the number of shares reserved
under the 1991 Plan be increased from 262,500 to 362,500 shares. The Board
believes that granting fairly priced stock options to employees is an effective
means to promote the future growth and development of the Company. Such options
increase employees' proprietary interest in the Company's success and enable
the Company to attract and retain qualified personnel.
SUMMARY OF THE 1991 PLAN. A general description of the basic features of
the 1991 Plan, assuming the amendment described above is approved by the
shareholders, is outlined below. This summary is qualified in its entirety by
the terms of the 1991 Plan, a copy of which, in its amended form may be
obtained from the Company.
GENERAL. On November 7, 1991, the Company's Board of Directors adopted and
on January 16, 1992 the shareholders approved the Research, Incorporated 1991
Stock Plan (the "1991 Plan"). In 1994, the 1991 Plan was amended to increase
the shares authorized under the 1991 Plan from 110,000 to 210,000 shares. The
purpose of the 1991 Plan is to enable the Company and its subsidiaries to
retain and attract key employees and non-employee directors who contribute to
the Company's success by their ability, ingenuity and industry and to enable
such key employees and non-employee directors to participate in the long-term
success and growth of the Company by giving them a proprietary interest in the
Company. The 1991 Plan authorizes the granting of stock options and restricted
stock.
SHARES AVAILABLE UNDER 1991 PLAN. The maximum number of shares of common
stock reserved and available under the 1991 Plan for awards is 362,500 (subject
to possible adjustment in the event of stock splits or other similar changes in
the common stock). Shares of common stock covered by expired or terminated
stock options and forfeited shares of restricted stock or deferred stock may be
used for subsequent awards under the 1991 Plan.
ELIGIBILITY AND ADMINISTRATION. Officers and other key employees of the
Company and its subsidiaries who are responsible for or contribute to the
management, growth and/or profitability of the business of the Company and its
subsidiaries, as well as non-employee directors and selected consultants under
contract to the Company, are eligible to be granted awards under the 1991 Plan.
The 1991 Plan shall be administered by the Board, or in its discretion, by a
committee of not less than three "disinterested persons," as defined in the
1991 Plan (the "Committee"), who shall be appointed by the Board of Directors.
The term "Board" as used in this section refers to the Board or, if the Board
has delegated its authority, the Committee. The Board will have the power to
make awards (other than awards to non-employee directors), determine the number
of shares covered by each award and other terms and conditions of such awards,
interpret the 1991 Plan, and adopt rules, regulations and procedures with
respect to the administration of the 1991 Plan. The Board may delegate its
authority to officers of the Company for the purpose of selecting key employees
who are not officers of the Company to be participants in the 1991 Plan.
<PAGE>
AWARDS UNDER 1991 PLAN
STOCK OPTIONS. The Board may grant stock options that either qualify as
"incentive stock options" under the Internal Revenue Code or are "non-qualified
stock options" in such form and upon such terms as the Board may approve from
time to time. Stock options granted under the 1991 Plan may be exercised during
their respective terms as determined by the Board, provided, that no option
shall be exercisable during the six(6) month period commencing on the date of
grant. The purchase price may be paid by tendering cash or, in the Board's
discretion, by tendering promissory notes or common stock. The Committee may,
in its sole discretion, permit optionees to pay the option exercise price by
having the Company withhold upon exercise of the option a number of shares with
a fair market value equal to the aggregate option exercise price. No stock
option shall be transferable by the optionee or exercised by anyone else during
the optionee's lifetime.
Stock options may be exercised during varying periods of time after a
participant's termination of employment, depending upon the reason for the
termination. Following a participant's death, the participant's stock options
may be exercised by the legal representative of the estate or the optionee's
legatee for a period of three years or until the expiration of the stated term
of the option, whichever is less. The same time periods apply if the
participant is terminated by reason of disability or retirement. If the
participant is involuntarily terminated without cause, the option may be
exercised for the lesser of three months or the balance of the option's term.
If the participant's employment is terminated for any other reason, the
participant's stock options immediately terminate. These exercise periods may
be reduced by the Board for particular options.
No incentive stock options shall be granted under the 1991 Plan after
November 6, 2001. The term of an incentive stock option may not exceed 10 years
(or 5 years if issued to a participant who owns or is deemed to own more than
10% of the combined voting power of all classes of stock of the Company, any
subsidiary or affiliate). The aggregate fair market value of the common stock
with respect to which an incentive stock option is exercisable for the first
time by an optionee during any calendar year shall not exceed $100,000. The
exercise price under an incentive stock option may not be less than the fair
market value of the common stock on the date the option is granted (or, in the
event the participant owns more than 10% of the combined voting power of all
classes of stock of the Company, the option price shall not be less than 110%
of the fair market value of the stock on the date the option is granted). The
exercise price for non-qualified options granted under the 1991 Plan may be
less than 100% of the fair market value of the common stock on the date of the
grant.
The 1991 Plan provides for the automatic granting of a defined number of
options to non-employee directors. Such options are granted to each person who
is not an employee of the Company and who, on and after the date the Plan is
approved by shareholders, is elected or reelected as a director (whether by
vote of shareholders or directors) shall, as of the date of such shareholder
approval or election, as the case may be, automatically receive a non-qualified
option to purchase 500 shares of common stock with the option price equal to
the fair market value of the Company's common stock on such date. These options
will have five-year terms and will be exercisable as to all or any part of the
shares subject to the option beginning six months after the date of option
grant. Any vested portion of these options will expire one year after
termination of service as a director.
RESTRICTED STOCK. The Board may grant restricted stock awards that result
in shares of common stock being issued to a participant subject to restrictions
against disposition during a restricted period established by the Board. The
Board may condition the grant of restricted stock upon the attainment of
specified performance goals or service requirements. The provisions of
restricted stock awards need not
<PAGE>
be the same with respect to each recipient. The restricted stock will be held
in custody by the until the restrictions thereon have lapsed. During the period
of the restrictions, a participant has the right to vote the shares of
restricted stock and to receive dividends and distributions unless the Board
requires such dividends and distributions to be held by the Company subject to
the same restrictions as the restricted stock. Notwithstanding the foregoing,
all restrictions with respect to restricted stock lapse 60 days (or less as
determined by the Board) prior to the occurrence of a merger or other
significant corporate change, as provided in the 1991 Plan.
If a participant terminates employment during the period of the
restrictions, all shares still subject to restrictions will be forfeited and
returned to the Company, subject to the right of the Board to waive such
restrictions in the event of a participant's death, total disability,
retirement or under special circumstances approved by the Board.
GENERAL PROVISIONS. The Board may, at the time of any grant under the 1991
Plan, provide that the shares received under the 1991 Plan shall be subject to
repurchase by the Company in the event of termination of employment of the
participant. The repurchase price will be the fair market value of the stock or
in the case of a termination for cause (as defined in the 1991 Plan), the
amount of consideration paid for the stock. The Board may also, at the time of
grant, provide the Company with similar repurchase rights, upon terms and
conditions specified by the Board, with respect to any participant who, at any
time within two years after termination of employment with the Company,
directly or indirectly competes with, or is employed by a competitor of, the
Company.
FEDERAL INCOME TAX CONSEQUENCES
STOCK OPTIONS. An optionee will not realize taxable compensation income
upon the grant of an incentive stock option. In addition, an optionee generally
will not realize taxable compensation income upon the exercise of an incentive
stock option if he or she exercises it as an employee or within three months
after termination of employment (or within one year after termination if the
termination results from a permanent and total disability). The amount by which
the fair market value of the shares purchased exceeds the aggregate option
price at the time of exercise shall be treated as alternative minimum taxable
income for purposes of the alternative minimum tax. If stock acquired pursuant
to an incentive stock option is not disposed of prior to the date two years
from the option grant date or prior to one year from the option exercise date,
any gain or loss realized upon the sale of such shares will be characterized as
capital gain or loss. If the applicable holding periods are not satisfied, then
any gain realized in connection with the disposition of such stock will
generally be taxable as compensation income in the year in which the
disposition occurred, to the extent of the difference between the fair market
value of such stock on the date of exercise and the option exercise price. The
Company is entitled to a tax deduction to the extent, and at the time, that the
participant realized compensation income. The balance of any gain will be
characterized as a capital gain.
An optionee will not realize taxable compensation income upon the grant of
a non-qualified stock option. When an optionee exercises a non-qualified stock
option, he or she will realize taxable compensation income at that time equal
to the difference between the aggregate option price and the fair market value
of the stock on the date of exercise.
Upon the exercise of a non-qualified stock option, the 1991 Plan requires
the optionee to pay to the Company an amount necessary to satisfy applicable
federal, state or local withholding tax requirements. Under the 1991 Plan, the
Board may grant options that permit the optionee to elect to satisfy
withholding tax requirements associated with the exercise of an option by
authorizing the Company to
<PAGE>
retain from the number of shares that would otherwise be deliverable to the
optionee that number of shares having an aggregate fair market value equal to
the tax required to be withheld. The Company would pay the tax liability from
its own funds.
RESTRICTED STOCK. The grant of restricted stock should not result in
immediate income for the participant or in a deduction for the Company for
federal income tax purposes, assuming the shares are nontransferable and
subject to restrictions which would result in a "substantial risk of
forfeiture" as intended by the Company. If the shares are transferable or there
are no such restrictions, the participant would recognize compensation income
upon receipt of the award. Otherwise, a participant will generally realize
taxable compensation income when any such restrictions lapse. The amount of
such income will be the value of the common stock on that date less any amount
paid for the shares. Dividends paid on the common stock and received by the
participant during the restricted period would also be taxable compensation
income to the participant. In any event, the Company will be entitled to a tax
deduction to the extent, and at the time, that the participant realizes
compensation income. A participant may elect, under Section 83(b) of the Code,
to be taxed on the value of the stock at the time of award. If this election is
made, the fair market value of the stock at the time of the election is taxable
to the participant as compensation income, and the Company is entitled to a
corresponding deduction. Dividends on the stock are then taxable to the
participant and are no longer deductible by the Company.
Participants may be required to pay in cash to the Company any taxes
required to be withheld at the date restrictions lapse with respect to
restricted stock. The participant may elect to satisfy withholding, in whole or
in part, by having the Company withhold shares of common stock having an
aggregate fair market value equal to the amount required to be withheld. The
Company would pay the tax liability from its own funds.
REGISTRATION WITH SEC
The Company intends to file a registration statement covering the increase
of shares of common stock authorized under the 1991 Plan with the Securities
and Exchange Commission pursuant to the Securities Act of 1933, as amended.
VOTE REQUIRED
Shareholder approval of the amendment to increase the shares authorized
under the 1991 Plan requires the affirmative vote of the holders of a majority
of the shares of common stock represented at the meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT
TO THE 1991 STOCK PLAN.
<PAGE>
APPROVAL OF ACCOUNTANTS
(PROPOSAL 5)
Arthur Andersen LLP, independent public accountants, have been the
auditors for the Company since 1956. They have been reappointed by the Board of
Directors as the Company's auditors for the current fiscal year and shareholder
approval of the appointment is requested. In the event the appointment of
Arthur Andersen LLP should not be approved by the shareholders, the Board of
Directors will make another appointment to be effective at the earliest
feasible time.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting of Shareholders and will have an opportunity to make a statement
if he or she desires to do so and will be available to respond to appropriate
questions.
The Board of Directors recommends a vote "FOR" the appointment of Arthur
Andersen LLP.
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 Research, Incorporated 1999 Annual Meeting of Shareholders is expected to
be held on or about January 21, 1999 and proxy materials in connection with
that meeting are expected to be mailed on or about December 15, 1998.
Shareholder proposals prepared in accordance with the proxy rules must be
received by the Company on or before August 17, 1998.
GENERAL
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in ownership of common stock and other equity securities of the
Company. These insiders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file, including Forms 3, 4 and 5.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended September 30, 1997, all
Section 16(a) filing requirements applicable to its insiders were complied
with.
<PAGE>
OTHER MATTERS
The Board of Directors of the Company 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.
The Company's Annual Report to Shareholders for the fiscal year ended
September 30, 1997 is being mailed to shareholders with this Proxy Statement.
Shareholders may receive without charge acopy of the Company's Annual Report on
Form 10-K, including financial statements and schedules thereto, as filed with
the Securities and Exchange Commission, by writing to: Research, Incorporated,
6425 Flying Cloud Drive, Eden Prairie, Minnesota 55344, Attention: Investor
Relations, or by calling the Company at (612)941-3300.
By Order of the Board of Directors
Gerald E. Magnuson,
SECRETARY
<PAGE>
RESEARCH, INCORPORATED
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS, JANUARY 15, 1998
The undersigned hereby appoints Gerald E. Magnuson and Claude C. Johnson,
or either of them, proxies with full power of substitution to vote, in their
discretion, all shares of common stock of Research, Incorporated of record in
the name of the undersigned at the close of business on December 1, 1997 at the
Annual Meeting of Shareholders to be held in Eden Prairie, Minnesota on January
15, 1998, or at any adjournment or adjournments thereof, hereby revoking all
former proxies.
1. PROPOSAL TO AMEND THE COMPANY'S BYLAWS TO DECREASE THE NUMBER OF DIRECTORS
FROM SIX TO FIVE.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS. [ ] FOR all nominees [ ] WITHHOLD UTHORITY to
listed below vote for all nominees
(EXCEPT AS MARKED TO listed below
THE CONTRARY BELOW)
(INSTRUCTIONS: IF YOU DO NOT WISH TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK
THE "FOR" BOX AND STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
EDWARD L. LUNDSTROM, CLAUDE C. JOHNSON,
GERALD E. MAGNUSON, CHARLES G. SCHIEFELBEIN, JOHN G. COLWELL, JR.
3. PROPOSAL TO APPROVE THE RESEARCH, INCORPORATED EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ]ABSTAIN
(CONTINUED ON THE BACK)
<PAGE>
(CONTINUED FROM THE FRONT)
4. PROPOSAL TO APPROVE AN AMENDMENT TO THE RESEARCH, INCORPORATED 1991 STOCK
PLAN TO INCREASE THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE UNDER THE
PLAN BY 100,000 SHARES.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. PROPOSAL TO RATIFY APPOINTMENT OF ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. IN THEIR DISCRETION UPON ANY OTHER MATTERS COMING BEFORE THE MEETING.
THE SHARE(S) REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS 1, 2, 3,
4 AND 5 IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND WILL BE VOTED "FOR" SUCH
PROPOSALS IF THERE IS NO SPECIFICATION.
Dated: -------------------, 199-
--------------------------------
--------------------------------
Please sign your name(s) exactly
as shown at left. When signing
as executor, administrator,
trustee, or guardian, give full
title as such; when shares have
been issued in names of two or
more persons, all should sign.
<PAGE>
APPENDIX A
Effective August 1, 1997
RESEARCH INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN
1. ESTABLISHMENT OF PLAN. RESEARCH INCORPORATED (hereinafter referred to as the
"Company") proposes to grant to certain employees of the Company the opportunity
to purchase common stock of the Company. Such common stock shall be purchased
pursuant to the plan herein set forth which shall be known as the "RESEARCH
INCORPORATED EMPLOYEE STOCK PURCHASE PLAN" (hereinafter referred to as the
"Plan"). The Company intends that the Plan shall qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended, and shall be construed in a manner consistent with the requirements of
said Section 423 and the regulations thereunder.
2. PURPOSE. The Plan is intended to encourage stock ownership by employees
of the Company and any of its Subsidiaries to which the Company and such
respective Subsidiaries by action of their Boards of Directors shall make this
Plan applicable. The Plan is further intended as an incentive to them to remain
in employment, improve operations, increase profits, and contribute more
significantly to the Company's success, and to permit the Company to compete
with other corporations offering similar plans in obtaining and retaining the
services of competent employees.
3. ADMINISTRATION.
(a) The Plan shall be administered by a stock purchase committee
(hereinafter referred to as the "Committee"), consisting of two or more
directors or employees of the Company, as designated by the Board of
Directors of the Company (hereinafter referred to as the "Board of
Directors"). The Board of Directors shall fill all vacancies in the
Committee and may remove any member of the Committee at any time, with or
without cause.
(b) Unless the Board of Directors limits the authority delegated to
the Committee in its appointment, the Committee shall be vested with full
authority to make, administer, and interpret such rules and regulations as
it deems necessary to administer the Plan. For all purposes of this Plan
other than this Paragraph 3(b), references to the Committee shall also
refer to the Board of Directors.
(c) The Committee shall select its own chairman and hold its
meetings at such times and places as it may determine. All determinations
of the Committee shall be made by a majority of its members. Any decision
which is made in writing and signed by a majority of the members of the
Committee shall be effective as fully as though made by a majority vote at
a meeting duly called and held.
(d) The determinations of the Committee shall be made in accordance
with its judgment as to the best interests of the Company, its employees
and its shareholders and
<PAGE>
in accordance with the purposes of the Plan; provided, however, that the
provisions of the Plan shall be construed in a manner consistent with the
requirements of Section 423 of the Internal Revenue Code, as amended. Such
determinations shall be binding upon the Company and the participants in
the Plan unless otherwise determined by the Board of Directors.
(e) The Company shall pay all expenses of administering the Plan. No
member of the Board of Directors or the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under it. The Company shall indemnify each member of the
Committee against any and all claims, loss, damages, expenses (including
counsel fees approved by the Committee), and liability (including any
amounts paid in settlement with the Committee's approval) arising from any
loss or damage or depreciation which may result in connection with the
execution of his or her duties or the exercise of his or her discretion,
or from any other action or failure to act hereunder, except when the same
is judicially determined to be due to gross negligence or willful
misconduct of such member.
4. DURATION AND PHASES OF THE PLAN.
(a) The Plan will commence on August 1, 1997 or such later date
specified by the Committee, and will terminate February 1, 2003, except
that any Phase commenced prior to such termination shall, if necessary, be
allowed to continue beyond such termination until completion.
Notwithstanding the foregoing, this Plan shall be considered of no force
or effect and any options granted shall be considered null and void unless
the holders of a majority of all of the issued and outstanding shares of
the common stock of the Company approve the Plan within twelve (12) months
after the date of its adoption by the Board of Directors.
(b) The Plan shall be carried out in one or more Phases, each Phase
being for a period of six months, or such shorter or longer period of time
(not to exceed 27 months) as may be determined by the Committee prior to
the commencement of a Phase. No Phase shall run concurrently with any
other Phase but a Phase may commence immediately after the termination of
the preceding Phase. The existence and date of commencement of a Phase
(the "Commencement Date") shall be determined by the Committee and shall
terminate on a date (the "Termination Date") which is not more than 365
days from a Commencement Date, provided that the commencement of the first
Phase shall be within six months before or twelve months after the date of
approval of the Plan by the shareholders of the Company. In the event all
of the stock reserved for grant of options hereunder is issued pursuant to
the terms hereof prior to the commencement of one or more Phases scheduled
by the Committee or the number of shares remaining is so small, in the
opinion of the Committee, as to render administration of any succeeding
Phase impracticable, such Phase or Phases shall be canceled. Phases shall
be numbered successively as Phase 1, Phase 2, Phase 3, etc.
<PAGE>
(c) The Board of Directors may elect to accelerate the Termination
Date of any Phase effective on the date specified by the Board of
Directors in the event of (i) any consolidation or merger of the Company
in which the Company is not the continuing or surviving corporation or
pursuant to which shares would be converted into cash, securities or other
property, other than a merger of the Company in which shareholders
immediately prior to the merger have the same proportionate ownership of
stock in the surviving corporation immediately after the merger; or (ii)
any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets
of the Company. Subject to any required action by the shareholders, if the
Company shall be involved in any merger or consolidation, in which it is
not the surviving corporation, and if the Board of Directors does not
accelerate the Termination Date of the Phase, each outstanding option
shall pertain to and apply to the securities or other rights to which a
holder of the number of shares subject to the option would have been
entitled.
(d) A dissolution or liquidation of the Company shall cause each
outstanding option to terminate, provided in such event that, immediately
prior to such dissolution or liquidation, each Participant shall be repaid
the payroll deductions credited to his account without interest.
5. ELIGIBILITY. All Employees, as defined in Paragraph 18 hereof who have
completed 1,000 or more hours of service for the Company prior to the
Commencement Date of a Phase shall be eligible to participate in such Phase. Any
Employee who is a member of the Board of Directors of the Company who satisfies
the above requirements shall be eligible to participate in the Plan.
6. PARTICIPATION. Participation in the Plan is voluntary. An eligible
Employee may elect to participate in the Plan, and thereby become a
"Participant" in the Plan, by completing the Enrollment Form provided by the
Company and delivering it to the Company or its designated representative at
least five days prior to an Enrollment Date and five days prior to the
Commencement Date of that Phase. The Enrollment Date shall be established by the
Committee, which shall be no less often than annual and shall coincide with one,
but need not coincide with each, Commencement Date. Payroll deductions for a
Participant shall commence on the first payday after the Commencement Date of
the Phase and shall terminate on the last payday immediately prior to or
coinciding with the Termination Date of that Phase unless sooner terminated by
the Participant as provided in Paragraph 9 hereof. A Participant who ceases to
be an eligible Employee, although still employed by the Company, thereupon shall
be deemed to discontinue his or her participation in the Plan and shall have the
rights provided in Section 9.
7. PAYROLL DEDUCTIONS.
(a) Upon enrollment, a Participant shall elect to make contributions
to the Plan by payroll deductions (in full dollar amounts and in amounts
calculated to be as uniform as practicable throughout the period of the
Phase), in the aggregate amount not in excess of 7% of such Participant's
Pay (as determined in accordance with Paragraph 18
<PAGE>
hereof) for the term of the Phase (or such larger (but not to exceed 10%)
or smaller percentage as may be determined by the Committee prior to the
commencement of a Phase). The minimum authorization shall be 2% of a
Participant's Pay per pay period.
(b) In the event that the Participant's compensation for any pay
period is terminated or reduced from the compensation rate for such a
period as of the Commencement Date of the Phase for any reason so that the
amount actually withheld on behalf of the Participant as of the
Termination Date of the Phase is less than the amount anticipated to be
withheld over the Phase as determined on the Commencement Date of the
Phase, then the extent to which the Participant may exercise his option
shall be based on the amount actually withheld on his behalf. In the event
of a change in the pay period of any Participant, such as from bi-weekly
to monthly, an appropriate adjustment shall be made to the deduction in
each new pay period so as to ensure the deduction of the proper amount
authorized by the Participant.
(c) A Participant may discontinue his participation in the Phase and
terminate his payroll deduction authorized at such times as determined by
the Committee and shall have the rights provided in Section 9. No change
can be made during a Phase of the Plan which would either change the time
or increase or decrease the rate of his payroll deductions.
(d) All payroll deductions made for Participants shall be credited
to their respective accounts under the Plan. A Participant may not make
any separate cash payments into such account.
8. OPTIONS.
(a) GRANT OF OPTION.
(i) A Participant who is employed by the Company as of the
Commencement Date of a Phase shall be granted an option as of such
date to purchase a number of full and fractional shares of Company
common stock to be determined by dividing the total amount to be
credited to that Participant's account under Paragraph 7 hereof by
the option price set forth in Paragraph 8(a)(ii)(A) hereof, subject
to the limitations of Paragraph 10 hereof.
(ii) The option price for such shares of common stock shall be
the lower of:
A. Eighty-five percent (85%) of the Fair Market Value of
such shares of common stock on the Commencement Date of the
Phase; or
B. Eighty-five percent (85%) of the Fair Market Value of
such shares of common stock on the Termination Date of the
Phase.
<PAGE>
(iii) Stock options granted pursuant to the Plan may be
evidenced by agreements in such form as the Committee shall approve,
provided that all Employees shall have the same rights and
privileges and provided further that such options shall comply with
and be subject to the terms and conditions set forth herein. The
Committee may conclude that agreements are not necessary.
(iv) Anything herein to the contrary notwithstanding, no
Employee shall be granted an option hereunder:
A. Which permits his rights to purchase stock under all
employee stock purchase plans of the Company, its Subsidiaries
or its parent, if any, to accrue at a rate which exceeds
Twenty-Five Thousand Dollars ($25,000) of the Fair Market
Value of such stock (determined at the time such option is
granted) for each calendar year in which such option is
outstanding at any time; or
B. If immediately after the grant such Employee would
own and/or hold outstanding options to purchase stock
possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company,
its parent, if any, or of any subsidiary of the Company. For
purposes of determining stock ownership under this Paragraph,
the rules of Section 424(d) of the Internal Revenue Code, as
amended, shall apply.
(v) The grant of an option pursuant to this Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its
business or assets.
(b) EXERCISE OF OPTION.
(i) Unless a Participant gives written notice to the Company
pursuant to Paragraph 9 prior to the Termination Date of a Phase,
his option for the purchase of shares will be exercised
automatically for him as of such Termination Date for the purchase
of the number of full and fractional shares of Company common stock
which the accumulated payroll deductions in his account at that time
will purchase at the applicable option price, but in no event shall
the number of full and fractional shares be greater than the number
of full and fractional shares to which a Participant would have been
eligible to purchase under Section 8(a)(i), and subject to the
limitations set forth in Paragraph 10 hereof.
(ii) The Company shall, in addition, return to the Participant
a cash payment equal to the balance, if any, in his account which
was not used for the
<PAGE>
purchase of common stock, without interest, as promptly as
practicable after the Termination Date of any Phase.
(iii) The Committee may appoint a registered broker dealer to
act as agent for the Company in holding and performing ministerial
duties in connection with the Plan, excluding, but not limited to,
maintaining records of stock ownership by Participants and holding
stock in its own name for the benefit of the Participants. No trust
or escrow arrangement shall be express or implied by the exercise of
such duties by the agent. A Participant may, at any time, request of
the agent that any shares allocated to the Participant be registered
in the name of the Participant or in joint tenancy with the
Participant, in which event the agent shall issue a certificate for
the whole number of shares in the name of the Participant (and his
joint tenant, if any) and shall deliver to the Participant any cash
for fractional shares, based on the then Fair Market Value of the
shares on the date of issuance.
(c) DIVIDEND REINVESTMENT. Unless the Committee designates
otherwise, and except as provided in this section, dividends on a
Participant's shares will automatically be reinvested in additional shares
of stock of the Company. If a Participant desires to receive dividends in
the form of cash, he must request that a certificate for such shares be
issued in the name of the Participant by filing an appropriate form with
the Company. Any shares purchased through the reinvestment of dividends
may be issued from the shares authorized under this Plan or purchased on
the open market, as directed by the Committee. If the shares are purchased
directly from the Company, the purchase price shall be the Fair Market
Value of a share or the date such dividends are paid. Otherwise, the
purchase price may be an average of shares purchased on the open market
with the aggregate amount of dividends.
9. WITHDRAWAL OR TERMINATION OF PARTICIPATION.
(a) A Participant may, at any time prior to the Termination Date of
a Phase, withdraw all payroll deductions then credited to his account by
giving written notice to the Company. Promptly upon receipt of such notice
of withdrawal, all payroll deductions credited to the Participant's
account will be paid to him without interest accrued thereon and no
further payroll deductions will be made during the Phase. In such event,
the option granted the Participant under that Phase of the Plan shall
lapse immediately. Partial withdrawals of payroll deductions hereunder may
not be made.
(b) Notwithstanding the provisions of Section 8(a) above, if a
Participant files reports pursuant to Section 16 of the Securities
Exchange Act of 1934 (at the Commencement Date of a Phase or becomes
obligated to file such reports during a Phase) then such a Participant
shall not have the right to withdraw all or a portion of the accumulated
payroll deductions except in accordance with Sections 8(c) and (d) below.
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(c) In the event of the death of a Participant, the person or
persons specified in Paragraph 14 may give notice to the Company within
sixty (60) days of the death of the Participant electing to purchase the
number of full shares which the accumulated payroll deductions in the
account of such deceased Participant will purchase at the option price
specified in Paragraph 8(a)(ii) and have the balance in the account
distributed in cash without interest accrued thereon to the person or
persons specified in Paragraph 14. If no such notice is received by the
Company within said sixty (60) days, the accumulated payroll deductions
will be distributed in full in cash without interest accrued thereon to
the person or persons specified in Paragraph 14.
(d) Upon termination of Participant's employment for any reason
other than death of the Participant, the payroll deductions credited to
his account, without interest, shall be returned to him.
(e) The Committee shall be entitled to make such rules, regulations
and determination as it deems appropriate under the Plan in respect of any
leave of absence taken by or disability of any Participant. Without
limiting the generality of the foregoing, the Committee shall be entitled
to determine:
(i) whether or not any such leave of absence shall constitute
a termination of employment for purposes of the Plan; and
(ii) the impact, of any, of any such leave of absence on
options under the Plan theretofore granted to any Participant who
takes such leave of absence.
(f) A Participant who discontinues his participation during a Phase
shall not be permitted to recommence participation until the next
Enrollment Date. A Participant's withdrawal will not have any effect upon
his eligibility to participate in any succeeding Phase of the Plan that
commences after the next Enrollment Date or in any similar plan which may
hereafter be adopted by the Company.
10. STOCK RESERVED FOR OPTIONS.
(a) The maximum number of shares of the Company's common stock to be
issued upon the exercise of options to be granted under the Plan shall be
One Hundred Thousand (100,000). Such shares may, at the election of the
Board of Directors, be either treasury shares, shares authorized but not
issued or shares acquired in the open market by the Company. Shares
subject to the unexercised portion of any lapsed or expired option may
again be subject to option under the Plan.
(b) If the total number of shares of the Company common stock for
which options are to be granted for a given Phase as specified in
Paragraph 8 exceeds the number of shares then remaining available under
the Plan (after deduction of all shares for which options have been
exercised or are then outstanding) and if the Committee does not elect to
cancel such Phase pursuant to Paragraph 4, the Committee shall make a pro
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rata allocation of the shares remaining available in as uniform and
equitable a manner as it shall consider practicable. In such event, the
options to be granted and the payroll deductions to be made pursuant to
the Plan which would otherwise be effected may, in the discretion of the
Committee, be reduced accordingly. The Committee shall give written notice
of such reduction to each Participant affected.
(c) The Participant (or a joint tenant named pursuant to Paragraph
10(d) hereof) shall have no rights as a shareholder with respect to any
shares subject to the Participant's option until the date of the issuance
of a stock certificate evidencing such shares. No adjustment shall be made
for dividends (ordinary or extraordinary, whether in cash, securities or
other property), distributions or other rights for which the record date
is prior to the date such stock certificate is actually issued, except as
otherwise provided in Paragraph 12 hereof.
(d) The shares of the Company common stock to be delivered to a
Participant pursuant to the exercise of an option under the Plan will be
registered in the name of the Participant or, if the Participant so
directs by written notice to the Committee prior to the Termination Date
of that Phase of the Plan, in the names of the Participant and one other
person the Participant may designate as his joint tenant with rights of
survivorship, to the extent permitted by law.
11. ACCOUNTING AND USE OF FUNDS. Payroll deductions for each Participant
shall be credited to an account established for him under the Plan. Such account
shall be solely for bookkeeping purposes and no separate fund or trust shall be
established hereunder and the Company shall not be obligated to segregate such
funds. All funds from payroll deductions received or held by the Company under
the Plan may be used, without limitation, for any corporate purpose by the
Company.
12. ADJUSTMENT PROVISION.
(a) Subject to any required action by the shareholders of the
Company, the number of shares covered by each outstanding option, and the
price per share thereof in each such option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of
the Company common stock resulting from a subdivision or consolidation of
shares or the payment of a share dividend (but only on the shares) or any
other increase or decrease in the number of such shares effected without
receipt of consideration by the Company.
(b) In the event of a change in the shares of the Company as
presently constituted, which is limited to a change of all its authorized
shares with par value into the same number of shares with a different par
value or without par value, the shares resulting from any such change
shall be deemed to be the shares within the meaning of this Plan.
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(c) To the extent that the foregoing adjustments relate to shares or
securities of the Company, such adjustments shall be made by the
Committee, and its determination in that respect shall be final, binding
and conclusive, provided that each option granted pursuant to this Plan
shall not be adjusted in a manner that causes the option to fail to
continue to qualify as an option issued pursuant to an "employee stock
purchase plan" within the meaning of Section 423 of the Code.
(d) Except as hereinbefore expressly provided in this Paragraph 12,
the optionee shall have no right by reason of any subdivision or
consolidation of shares of any class or the payment of any stock dividend
or any other increase or decrease in the number of shares of any class or
by reason of any dissolution, liquidation, merger, or consolidation or
spin-off of assets or stock of another corporation, and any issue by the
Company of shares of any class, or securities convertible into shares of
any class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares subject to the option.
13. NON-TRANSFERABILITY OF OPTIONS.
(a) Options granted under any Phase of the Plan shall not be
transferable except under the laws of descent and distribution and shall
be exercisable only by the Participant during his lifetime and after his
death only by his beneficiary of the representative of his estate as
provided in Paragraph 9(b) hereof.
(b) Neither payroll deductions credited to a Participant's account,
nor any rights with regard to the exercise of an option or to receive
common stock under any Phase of the Plan may be assigned, transferred,
pledged or otherwise disposed of in any way by the Participant. Any such
attempted assignment, transfer, pledge or other disposition shall be null
and void and without effect, except that the Company may, at its option,
treat such act as an election to withdraw funds in accordance with
Paragraph 9.
14. DESIGNATION OF BENEFICIARY. A Participant may file a written
designation of a beneficiary who is to receive any cash to the Participant's
credit without interest thereon under any Phase of the Plan in the event of such
Participant's death prior to exercise of his option pursuant to Paragraph 9(b)
hereof, or to exercise his option and become entitled to any stock and/or cash
upon such exercise in the event of the Participant's death prior to exercise of
the option pursuant to Paragraph 9(b) hereof. The beneficiary designation may be
changed by the Participant at any time upon receipt of a written notice by the
Company.
Upon the death of a Participant and upon receipt by the Company of proof
deemed adequate by it of the identity and existence at the Participant's death
of a beneficiary validly designated under the Plan, the Company shall in the
event of the Participant's death under the circumstances described in Paragraph
9(b) hereof, allow such beneficiary to exercise the Participant's option
pursuant to Paragraph 9(b) if such beneficiary is living on the Termination Date
of the Phase and deliver to such beneficiary the appropriate stock and/or cash
after exercise of the option. In the event there is not validly designated
beneficiary under the Plan who is
<PAGE>
living at the time of the Participant's death under the circumstances described
in Paragraph 9(b) or in the event the option lapses, the Company shall deliver
the cash credited to the account of the Participant without interest to the
executor or administrator of the estate of the Participant, or if no such
executor or administrator has been appointed to the knowledge of the Company, it
may, in its discretion, deliver such cash to the spouse (or, if no surviving
spouse, to any one or more children of the Participant), or if no spouse or
child is known to the Company, then to such relatives of the Participant known
to the Company as would be entitled to such amounts, under the laws of intestacy
in the deceased Participant's domicile as though named as the designated
beneficiary hereunder. The Company will not be responsible for or be required to
give effect to the disposition of any cash or stock or the exercise of any
option in accordance with any will or other testamentary disposition made by
such Participant or in accordance with the provision of any law concerning
intestacy, or otherwise. No designated beneficiary shall, prior to the death of
a Participant by whom he has been designated, acquire any interest in any stock
or in any option or in the cash credited to the Participant under any Phase of
the Plan.
15. AMENDMENT AND TERMINATION. The Plan may be terminated at any time by
the Board of Directors provided that, except as permitted in Paragraph 4(c) with
respect to an acceleration of the Termination Date of any Phase, no such
termination will take effect with respect to any options then outstanding. Also,
the Board may, from time to time, amend the Plan as it may deem proper and in
the best interests of the Company or as may be necessary to comply with Section
423 of the Internal Revenue Code of 1986, as amended, or other applicable laws
or regulations; provided, however, that no such amendment shall, without prior
approval of the shareholders of the Company (1) increase the total number of
shares for which options may be granted under the Plan (except as provided in
Paragraph 12 herein), (2) permit aggregate payroll deductions in excess of ten
percent (10%) of a Participant's compensation as of the Commencement Date of a
Phase, or (3) impair any outstanding option.
16. NOTICES. All notices or other communications in connection with the
Plan or any Phase thereof shall be in the form specified by the Committee and
shall be deemed to have been duly given when received by the Participant or his
designated personal representative or beneficiary or by the Company or its
designated representative, as the case may be.
17. PARTICIPATION OF SUBSIDIARIES. The Employees of any Subsidiary of the
Company shall be entitled to participate in the Plan on the same basis as
Employees of the Company, unless the Board of Directors determines otherwise.
Effective as of the date of coverage of any Subsidiary, any references herein to
the "Company" shall be interpreted as referring to such Subsidiary as well as to
RESEARCH INCORPORATED.
In the event that any Subsidiary which is covered under the Plan ceases to
be a Subsidiary of RESEARCH INCORPORATED, the employees of such Subsidiary shall
be considered to have terminated their employment for purposes of Paragraph 9
hereof as of the date such Subsidiary ceases to be such a Subsidiary.
18. DEFINITIONS.
<PAGE>
(a) "Subsidiary" shall include any corporation defined as a
subsidiary of the Company in Section 424(f) of the Internal Revenue Code
of 1986, as amended.
(b) "Employee" shall mean any employee, including an officer, of the
Company who as of the day immediately preceding the Commencement Date of a
Phase is customarily employed by the Company for more than twenty (20)
hours per week and more than five (5) months in a calendar year.
(c) "Fair Market Value" shall mean, if the common stock of the
Company is registered, the Fair Market Value of the shares shall be the
closing price of the stock on the applicable date or the nearest prior
business day on which trading occurred on the NASDAQ National Market. If
the common stock is not registered, the Fair Market Value of shares of
common stock of the Company shall be determined by the Committee for each
valuation date in a manner acceptable under Section 423 of the Internal
Revenue Code of 1986.
(d) "Pay" is, for a salaried employee, the regular pay for
employment for each employee as annualized for a twelve (12) month period,
including salary reduction contributions by the Participant under any plan
of the Employer pursuant to Code ss.ss. 401(k) or 125, but exclusive of
overtime, commissions, bonuses, disability payments, shift differentials,
incentives and other similar payments, determined as of the Commencement
Date of each Phase. Pay is, for an hourly employee, all pay or wages for
employment paid to the employee, including salary reduction contributions
by the Participant under any plan of the Employer pursuant to Code ss.ss.
401(k) or 125, and anticipated overtime, but excluding bonuses,
incentives, special remuneration, or other similar payments, determined
from time to time.
19. MISCELLANEOUS.
(a) No Employment Rights. The Plan shall not, directly or
indirectly, create any right for the benefit of any Employee or class of
Employees to purchase any shares under the Plan, or create in any Employee
or class of Employees any right with respect to continuation of employment
by the Company, and it shall not be deemed to interfere in any way with
the Company's right to terminate, or otherwise modify, an Employee's
employment at any time.
(b) Effect of Plan. The provisions of the Plan shall, in accordance
with its terms, be binding upon, and inure to the benefit of, all
successors of each Employee participating in the Plan, including, without
limitation, such Employee's estate and the executors, administrators or
trustees thereof, heirs and legatees, and any receiver, trustee in
bankruptcy, or representative of creditors of such Employee.
(c) Governing Law. The law of the State of Minnesota will govern all
matters relating to this Plan except to the extent it is superseded by the
laws of the United States.
<PAGE>
(d) Registration and Qualification of Shares. The offering of the
shares hereunder shall be subject to the effecting by the Company of any
registration or qualification of the shares under any federal or state law
or the obtaining of the consent or approval of any governmental regulatory
body which the Company shall determine, in its sole discretion, is
necessary or desirable as a condition to or in connection with, the
offering or the issue or purchase of the shares covered thereby. The
Company shall make every reasonable effort to effect such registration or
qualification or to obtain such consent or approval.
(e) Plan Preconditions. The Plan is expressly made subject to (i)
the approval by shareholders of the Company, and (ii) at its election, the
receipt by the Company from the Internal Revenue Service of a
determination letter or ruling, in scope and content satisfactory to
counsel, respecting the qualification of the Plan within the meaning of
Section 423 of the Code. If the Plan is not so approved by the
shareholders and if, at the election of the Company, the aforesaid
determination letter or ruling from the Internal Revenue Service is not
received on or before one year after this Plan's adoption by the Board of
Directors, this Plan shall not come into effect. In such case, the
accumulated payroll deductions credited to the account of each Participant
shall forthwith be repaid to him without interest.
Approved by Board of Directors: May 1, 1997
Approved by Stockholders:
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