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
|_| 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>
[RESEARCH, INCORPORATED LOGO]
Notice of Annual Meeting of Shareholders
February 6, 2001
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 Tuesday, February 6, 2001 at 5:00 p.m., local
time, for the following purposes:
1. To elect five directors to hold office until the next Annual
Meeting of Shareholders or until their successors are elected.
2. To ratify and approve the selection of independent public
accountants for the current fiscal year.
3. 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 15,
2000 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
Charles P. Moorse, SECRETARY
Minneapolis, Minnesota
December 29, 2000
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 February 6, 2001. 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
(952) 941-3300. The mailing of this proxy statement to shareholders of the
Company commenced on or about December 29, 2000.
The Company has outstanding only one class of capital stock, $.50 per
share par value Common Stock, of which 1,322,663 shares were issued and
outstanding and entitled to vote at the close of business on December 15, 2000.
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. If the conditions which would allow cumulative voting are
satisfied, the Board of Directors solicits discretionary authority to cumulate
votes and unless authority to vote for a director is withheld on the proxy card,
the proxy holders will cast the votes represented by the Board of Directors'
proxies for the nominees proposed by the Board of Directors and will not vote
for any other nominees. Only shareholders of record at the close of business on
December 15, 2000 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.
1
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table includes information as of December 15, 2000
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 and director nominees of
the Company, (iii) each executive officer named in the Summary Compensation
Table on page 5, and (iv) all directors and officers of the Company as a group.
Unless otherwise indicated, all shares represent sole voting and investment
power.
NAME AND ADDRESS OF AMOUNT OF PERCENT
BENEFICIAL OWNER STOCK OWNERSHIP OF CLASS
---------------------------------- --------------- --------
Kenneth G. Anderson(1) 107,492 8.13%
5209 Doncaster Way
Minneapolis, MN 55436
Dimensional Fund Advisors, Inc.(2) 81,600 6.17%
1299 Ocean Avenue, 11th Fl.
Santa Monica, CA 90401
Claude C. Johnson(3)(4) 67,483 (5) 4.97%
Edward L. Lundstrom(3) 2,186 (5) *
Gerald E. Magnuson(6) 7,498 (5)(7) *
Charles G. Schiefelbein(3) 67,198 (5)(8) 5.07%
John G. Colwell, Jr.(3) 1,561 (5) *
Michael J. Pudil(9) -- *
Bruce E. Bailey(4) 24,247 (5) 1.81%
Norman R. Cox(4) 15,904 (5) 1.20%
Richard L. Grose(4) 11,232 (5) *
Karen M. O'Rourke(4) 14,213 (5) 1.07%
All Directors and Officers 218,376 (5) 15.41%
as a Group (12 persons)
--------------------------
* Less than 1%
2
<PAGE>
(1) Based on Form 13G filed with the Securities and Exchange Commission on
March 23, 2000. Includes 24,392 shares owned directly by Mr. K.G.
Anderson's wife as to which he disclaims beneficial ownership.
(2) Based upon Form 13G filed with the Securities and Exchange Commission
on February 3, 2000.
(3) Serves as a director of the Company and has been nominated for
re-election.
(4) Serves as an executive officer of the Company and appears in the
Summary Compensation Table on page 5.
(5) Includes the following number of shares which may be purchased within
sixty days from the date hereof pursuant to outstanding stock options:
Mr. Johnson, 34,125 shares; Mr. Lundstrom, 1,561 shares; Mr. Magnuson,
2,186 shares; Mr. Schiefelbein, 2,030 shares; Mr. Colwell, 936 shares;
Mr. Bailey, 19,375 shares; Mr. Cox, 12,000 shares; Mr. Grose, 9,000
shares; Ms. O'Rourke, 9,500 shares; and all directors and officers as a
group, 94,713 shares.
(6) Serves as a director of the Company.
(7) Includes 1,250 shares owned directly by Mr. Magnuson's wife as to which
he disclaims beneficial ownership.
(8) Includes 11,250 shares owned directly by the Peace Shalom Foundation,
of which Mr. Schiefelbein is a director. Mr. Schiefelbein disclaims
beneficial ownership of these shares.
(9) Nominated for election to the Board of Directors.
ELECTION OF DIRECTORS
(PROPOSAL 1)
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. Mr. Magnuson is retiring from the Board of Directors. The Board of
Directors has nominated for election the five persons named below. Except Mr.
Pudil, all of the nominees are presently directors of the Company and all were
elected by the shareholders. 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.
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE
------------ ---------------------------------------- --------
John G. Colwell, Jr. (43) Private Investor; From 1996 to 1999, 1997
President, Colwell Industries (graphic
arts company); from 1986 to 1996, Group
President, Banta Corp. (graphic arts
company).
Claude C. Johnson (56) President and Chief Executive Officer of 1992
the Company since July 1992.
Edward L. Lundstrom (50) President, Chief Executive Officer, and 1996
Director of Sheldahl, Inc.
3
<PAGE>
PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE AND OTHER DIRECTORSHIPS SINCE
------------ ---------------------------------------- --------
Michael J. Pudil (52) President, Chief Executive Officer, and --
Director of WSI Industries, Inc.
Charles G. Schiefelbein (62) Since August, 1996, President of Capital 1989
Growth Services (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.
The Board of Directors met five times during fiscal year 2000 All
directors attended 100% of the meetings of the Board of Directors and any
committee on which he served.
The Company has two standing committees, the Compensation Committee and
the Audit Committee. The Compensation Committee, which was formed in fiscal year
2001, is comprised of Messrs. Schiefelbein (Chairman), Lundstrom and Colwell.
During fiscal year 2000, the duties normally reserved for a compensation
committee were 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.
The Audit Committee which met one time during fiscal year 2000, is
currently comprised of Messrs. J.G. Colwell, Jr. (Chairman), C.G. Schiefelbein,
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.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending September 30,
2000, 1999 and 1998, 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 2000 in all
capacities in which they served:
4
<PAGE>
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 2000 173,548 42,203 -0- 12,423
President and Chief 1999 158,941 40,500 27,000 8,226
Executive Officer 1998 154,985 -0- 7,500 5,029
Bruce E. Bailey 2000 116,007 34,772 -0- 10,731
Vice President, 1999 107,065 55,863 16,000 5,758
Drying Division 1998 104,723 -0- 3,500 3,924
Norman R. Cox 2000 98,837 9,386 -0- 8,033
Vice President, 1999 89,937 5938 7,000 5,407
Thermal Solutions 1998 83,212 -0- 3,000 4,475
Division
Richard L. Grose 2000 83,577 31,512 8,000 7,847
Vice President, 1999 67,974 18,250 5,000 4,262
Research International 1998 61,808 -0- 1,000 3,596
Karen O'Rourke 2000 82,758 21,101 -0- 7,370
Vice President, 1999 71,813 19,000 5,000 4,465
Human Resources 1998 68,480 -0- 1,000 3,923
</TABLE>
--------------------
(1) Reflects the number of shares purchasable under option grants, as
adjusted for the Company's December 31, 1997 5-for-4 stock split.
(2) Reflects 401(k) matching and discretionary contributions made by the
Company in fiscal 2000 under the Company's profit sharing retirement
plan of $12,423 for Mr. Johnson, $10,731 for Mr. Bailey, $8,033 for Mr.
Cox, $7,847 for Mr. Grose; $7,370 for Ms. O'Rourke, and the payment
during fiscal 2000 for life insurance premiums of $648 for Mr. Johnson,
Mr. Bailey, Mr. Cox, Mr. Grose and Ms. O'Rourke.
5
<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
NUMBER VALUE AT ASSUMED
OF % OF TOTAL ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE
UNDER- GRANTED TO APPRECIATION
LYING 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 -- -- -- -- -- --
Bruce E. Bailey -- -- -- -- -- --
Norman R. Cox -- -- -- -- -- --
Richard L. Grose 8,000 51.61% 7.094 5-11-2005 15,680 34,648
Karen M. O'Rourke -- -- -- -- -- --
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-THE-
SHARES NUMBER OF UNEXERCISED MONEY OPTIONS AS OF
ACQUIRED OPTIONS AT SEPTEMBER 30, 2000 SEPTEMBER 30, 2000(1)
ON VALUE ----------------------------- -----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Claude C. Johnson 834 7,875 28,000 27,750 $18,277 $38,150
Bruce E. Bailey 595 5,625 16,062 15,938 10,772 22,589
Norman R.Cox -- -- 7,937 8,313 5,723 10,219
Richard L. Grose 500 825 7,187 13,813 4,554 7,548
Karen M. O'Rouke 298 2,813 7,687 5,813 4,832 7,548
</TABLE>
------------------------
(1) Based on the market price of $5.156 per share, the average of the high
and low trading price of the Company's Common Stock on September 29,
2000, the last trading day of fiscal 2000. Value is calculated on the
difference between the option exercise price and $5.156 multiplied by
the number of shares of common stock underlying the options, but before
taxes associated with exercise.
6
<PAGE>
COMPENSATION REPORT OF THE BOARD OF DIRECTORS
In fiscal 2000, decisions on compensation of the Company's executives
were made by the full Board of Directors of the Company consisting of Messrs.
Johnson, Schiefelbein, Lundstrom, Magnuson, and Colwell, with Mr. Johnson, the
only employee of the Company on the Board, excusing himself from deliberations
and votes concerning matters related to his compensation. Pursuant to rules
designed to enhance disclosure of companies' policies toward executive
compensation, set forth below is a report submitted by the Board of Directors
addressing the Company's compensation policies for fiscal year 2000 as they
affected Mr. Johnson, the Company's President and Chief Executive Officer, and
the other executive officers.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS. The Company's
executive compensation policies are designed to provide competitive levels of
compensation that integrate pay with the Company's annual and long-term
performance goals, reward above-average corporate performance, recognize
individual initiative and achievements and assist the Company in attracting and
retaining qualified executives. The Company's executive compensation has
historically consisted of three components: (i) base salaries, (ii) stock
options and (iii) cash bonuses paid out pursuant to annual profitability-based
plans. The Board has historically established the base salaries of each
executive officer utilizing compensation surveys, performance against defined
goals and longevity with the Company. With respect to cash bonuses, the Board
has historically established on an annual basis certain profitability targets
and performance objectives at the beginning of each fiscal year, pursuant to
which cash performance bonuses of up to 50% of an executive officer's base
salary can be paid. The Company has also used stock option grants as a key
ingredient of its executive compensation plans, reflecting the Company's
position that stock ownership by management and stock-based performance
compensation arrangements are beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value. In order to
direct the Company's executives toward steady growth and to retain the
executive's services, the stock options granted are exercisable, and vest over a
five-year period.
RELATIONSHIP OF PERFORMANCE UNDER THE COMPENSATION PLANS. In fiscal
year 2000, $138,974 in bonuses were paid to the Named Executives. In addition,
the Company granted stock options to the Named Executives in order to focus them
on long-term Company performance which results in improvement in shareholder
value and provides earning potential to the executives.
At various times in the past the Company has adopted certain
broad-based employee benefit plans in which the Company's executive officers
have been permitted to participate. Benefits under these plans are not directly
or indirectly tied to Company performance.
CHIEF EXECUTIVE OFFICER COMPENSATION. The compensation package for
Claude C. Johnson, the Company's Chief Executive Officer, was set by the Board
of Directors. The compensation for Mr. Johnson was determined by using a process
and philosophy similar to that used for all executives. In fiscal 2000, Mr.
Johnson received a bonus of $42,203.
SUBMITTED BY THE BOARD OF DIRECTORS:
Claude C. Johnson Edward L. Lundstrom Gerald E. Magnuson
Charles G. Schiefelbein John G. Colwell, Jr.
7
<PAGE>
The preceding report shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 (the "1933 Act") or the Securities
Exchange Act of 1934 (the "1934 Act"), except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under the 1933 Act or the 1934 Act.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Magnuson, a director and the Company's former Secretary, is retired
from the law firm of Lindquist & Vennum P.L.L.P. which was paid for legal
services rendered to the Company during the last fiscal year. Mr. Magnuson
receives no financial benefit on account of amounts paid by the Company to
Lindquist & Vennum P.L.L.P. for such services. In addition, Mr. Magnuson is
retiring from the Company's Board of Directors on February 6, 2001. It is
anticipated that Lindquist & Vennum P.L.L.P. will continue to perform legal
services for the Company during the current fiscal year.
BOARD AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is responsible for
providing independent, objective oversight of the Company's financial reporting
system by overseeing and monitoring management's and the independent auditors'
participation in the financial reporting process. The Audit Committee is
comprised of independent directors, and acts under a written charter first
adopted and approved by the Board of Directors on May 11, 2000, a copy of which
is attached to this Proxy Statement as Appendix A. Each of the members of the
Audit Committee is independent as defined by the Nasdaq listing standards.
The Audit Committee held one meeting during fiscal year 2000. The
meeting was designed to facilitate and encourage private communication between
the Audit Committee and the Company's independent accountants, Arthur Andersen
LLP.
During this meeting, the Audit Committee reviewed and discussed the
audited financial statements with management and Arthur Andersen LLP. Management
represented to the Audit Committee that the Company's consolidated financial
statements were prepared in accordance with generally accepted accounting
principles, and the Audit Committee has reviewed and discussed the consolidated
financial statements with management and the independent accountants. The
discussions with Arthur Andersen LLP also included the matters required by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
Arthur Andersen LLP provided to the Audit Committee the written
disclosures and the letter regarding its independence as required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees). This information was discussed with Arthur Andersen LLP.
Based on the discussions with management and Arthur Andersen LLP., the
Audit Committee's review of the representations of management and the report of
Arthur Andersen LLP., the Audit Committee recommended to the Board that the
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended September 30, 2000 filed with the
Securities and Exchange Commission.
SUBMITTED BY THE AUDIT COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
John G. Colwell, Jr. Charles G. Schiefelbein Edward L. Lundstrom
Gerald E. Magnuson
8
<PAGE>
The preceding report shall not be deemed incorporated by reference by
any general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933 (the "1933 Act") or the Securities
Exchange Act of 1934 (the "1934 Act"), except to the extent the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under the 1933 Act or the 1934 Act.
PERFORMANCE GRAPH
The Securities and Exchange Commission requires that the Company
include in this Proxy Statement a line graph presentation comparing cumulative,
five-year shareholder returns on an indexed basis with a broad market index and
either a nationally-recognized industry standard or an index of peer companies
selected by the Company. The Company has chosen to use the Nasdaq Stock Market
(U.S. Companies) Index as its broad market index and the Nasdaq Non-Financial
Stock Index as its peer group index. The table below compares the cumulative
total return as of the end of each of the Company's last five fiscal years on
$100 invested as of September 30, 1995 in the common stock of the Company, the
Nasdaq Stock Market Index and the Nasdaq Non-Financial Stock Index, assuming the
reinvestment of all dividends.
COMPARISON OF FIVE-YEAR COMULATIVE TOTAL RETURN
[PLOT POINTS CHART]
9/30/95 9/30/96 9/30/97 9/30/98 9/30/99 9/30/00
------- ------- ------- ------- ------- -------
Research, Inc. $100 $72 $107 $45 $113 $95
Nasdaq Stock Market (U.S.) $100 $119 $163 $165 $270 $359
Nasdaq Non-Financial $100 $117 $157 $157 $268 $365
Stocks
9
<PAGE>
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 was paid a retainer of $4,000 for serving as Secretary
to the Company during fiscal 2000. Lindquist & Vennum P.L.L.P., of which Mr.
Magnuson is a retired partner, was paid for legal services rendered to the
Company during fiscal year 2000. 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 625 shares of the Company's Common Stock (adjusted from 500 shares to
reflect the Company's December 31, 1997 5-for-4 stock split) on the date of such
election or re-election. Each director's option is to purchase 625 shares of
Common Stock at a price equal to the fair market value of the Company's Common
Stock on 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.
EMPLOYMENT AND OTHER AGREEMENTS
The Company has entered into employment agreements with certain
employees including all of its executive officers. The employment agreements
provide, among other things, for a lump sum cash payment to such individuals
following a change in control of the Company equal to a number of months
(ranging from six to twelve) divided by twelve and multiplied by the
individual's annual compensation then in effect. In general, a "change of
control" would include a change resulting from a corporate reorganization of the
Company which results in the stockholders of the Company immediately prior to
such reorganization owning less than 50% of the combined voting power of the
capital stock of the surviving company immediately following such
reorganization, sale of all or substantially all of the assets of the company,
sale of substantially all of the assets of a business unit if employee is the
manager or staff member of that business unit immediately prior to such sale, or
the termination of employee's employment with the Company as a result of the
sale of a business unit, whether or not employee is assigned to that business
unit. If a change of control had occurred at the end of fiscal year 2000, the
following individuals would have received the approximate amounts indicated
pursuant to the employment agreements: Mr. Johnson, $170,000; Mr. Bailey
$86,250; Mr. Cox, $73,500; Mr. Grose, $66,000; Ms. O'Rourke, $42,500; and all
current executive officers as a group, $518,250.
10
<PAGE>
The Company has also adopted a Severance Plan covering certain of its
employees including all of its executive officers. The Severance Plan provides
for cash severance payments to such individuals equal to a number of months
(ranging from six to twelve) divided by twelve and multiplied by the
individual's annual compensation then in effect. Participants shall be entitled
to a payment under the Severance Plan only (i) if such employees are terminated
without cause, (ii) voluntarily terminate their employment as a result of a
significant reduction in duties or compensation and are not offered a similar
position, or (iii) are not offered continued employment after a change of
control, as defined above. If any of the above events had occurred at the end of
fiscal year 2000 which would have entitled all participants under the Severance
Plan to receive payments, the following impacted individuals would have received
the approximate amounts indicated pursuant to the Severance Plan: Mr. Johnson,
$170,000; Mr. Bailey $115,000; Mr. Cox, $98,000; Mr. Grose, $88,000; Ms.
O'Rourke, $85,000; and all current executive officers as a group, $716,000.
APPROVAL OF ACCOUNTANTS
(PROPOSAL 2)
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
Any shareholder desiring to submit a proposal for action at the 2002
Annual Meeting of Shareholders and presentation in the Company's proxy statement
with respect to such meeting should arrange for such proposal to be delivered to
the Company's offices, 6425 Flying Cloud Drive, Eden Prairie, Minnesota 55344
addressed to Investor Relations, no later than August 18, 2001 in order to be
considered for inclusion in the Company's proxy statement relating to the
meeting. Matters pertaining to such proposals, including the number and length
thereof, eligibility of persons entitled to have such proposals included and
other aspects are regulated by the Securities Exchange Act of 1934, Rules and
Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer.
On May 21, 1998 the Securities and Exchange Commission adopted an
amendment to Rule 14a-4, as promulgated under the Securities and Exchange Act of
1934, as amended. The amendment to Rule 14a- 4(c)(1) governs the Company's use
of its discretionary proxy voting authority with respect to a stockholder
proposal which is not addressed in the Company's proxy statement. The new
amendment provides that if a proponent of a proposal fails to notify the Company
at least 45 days prior to the month and day of mailing of the prior year's proxy
statement, then the Company will be allowed to use its discretionary voting
authority when the proposal is raised at the meeting, without any discussion of
the matter in the proxy statement.
11
<PAGE>
With respect to the Company's 2002 Annual Meeting of Shareholders, if
the Company is not provided notice of a shareholder proposal, which the
shareholder has not previously sought to include in the Company's proxy
statement, by November 15, 2001, the Company will be allowed to use its voting
authority as described above.
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, 2000, all
Section 16(a) filing requirements applicable to its insiders were complied with.
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 which includes the
Company's Report on Form 10-K for the fiscal year ended September 30, 2000 is
being mailed to shareholders with this Proxy Statement. Shareholders may receive
without charge additional copies 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 (952) 941-3300.
By Order of the Board of Directors
Charles P. Moorse, SECRETARY
12
<PAGE>
Appendix A
RESEARCH, INCORPORATED
AUDIT COMMITTEE CHARTER
Responsibilities and Authority
The Audit Committee reports to the Board of Directors. Its primary focus is
to assist the Board in fulfilling its responsibilities to shareholders related
to financial accounting and reporting, the system of internal controls
established by management and the adequacy of auditing relative to these
activities. The Committee is granted the authority to investigate any activity
of the Company and it is empowered to retain persons having special competence
as necessary to assist the Committee in fulfilling its responsibilities. In
addition, the Committee will perform such other functions as assigned by law,
the Company's Bylaws or the Board of Directors.
Membership
The Committee shall be composed of not less than three members, appointed
annually by the Board. The Committee shall be composed of directors who are
independent of the management of the Company and are free of any relationship
that, in the opinion of the Board of Directors, would interfere with their
exercise of independent judgment as a Committee member.
Meetings
The Committee shall meet at least four times a year. The agenda of each
meeting will generally be prepared by the Chief Financial Officer or equivalent
("Finance Officer"), with input from the Committee Chairman and Committee
members, and circulated to each member of the Committee prior to the meeting
date. The Committee may ask members of management or others to attend meetings
and provide pertinent information as necessary.
Specific Duties
Relationship with Independent Accountant
* The outside auditor is accountable to the Board of Directors. The Audit
Committee shall provide for an open avenue of communications between the
independent accountant and the Board and, at least once annually, meet with the
independent accountants in private session. This session shall be held prior to
the publication of the annual financial statements and related footnotes.
* As shareholder representatives, the Board of Directors shall exercise the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the independent accountant upon the recommendation of the
Audit Committee. In connection with this duty, the Committee shall receive on an
annual basis a written statement from the independent accountant detailing all
relationships between the independent accountant and the Company, consistent
with requirements of the Independence Standards Board. The Committee shall
review services performed by the independent accountants, including the type and
extent of non-audit services performed and the impact that these services may
have on the public accountant's independence.
* Review with the independent accountants (1) the proposed scope of their
examination with emphasis on accounting and financial areas where the Committee,
the accountants or management believe special attention should be directed; (2)
results of their audit, including their opinion on the financial statements and
the independent accountant's judgment on the quality, not just the
acceptability, of the Company's accounting principles as applied in the
financial statements; (3) their evaluation of the adequacy of the system of
internal controls; (4) significant disputes, if any, with management; and (5)
cooperation received from management in the conduct of the audit.
13
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Relationship with the Accounting Department
* The Finance Officer is accountable to the Chairman of the Committee. The
Audit Committee shall provide for an open avenue of communication between the
Accounting Department and the Board and, at least once annually, meet with the
Finance Officer in private session.
* Review and concur in the appointment, replacement, reassignment or
dismissal of the Finance Officer and review his/her independence from
management.
* Review the Accounting Department's mission, objectives and resources and
its annual plan, including its coordination with the independent accountants.
* Review the results of Internal Audit activities and its evaluation of the
system of internal controls and discuss with the Finance Officer any
difficulties encountered in the course of audits, including any restrictions on
the scope of work or access to required information.
Relationship with Management
* Before publication, review the quarterly and annual financial statements
and related footnotes with both management and the independent accountant.
* Review any significant changes in accounting principles.
* Review significant accounting, reporting, regulatory or industry
developments affecting the Company.
Other
* Periodically review, with management and the Finance Officer, programs
established by management and the Board to monitor legal compliance and ethics.
* Discuss with management, the independent accountant and the Finance
Officer any issues regarding significant risks or exposures and assess the steps
management has taken to minimize such risk.
* Review policies and procedures with respect to officers' expense accounts
and perquisites, including their use of corporate assets, and consider the
results of any review of these areas by the independent accountant or Internal
Audit.
14
<PAGE>
[LOGO] RESEARCH, INCORPORATED
RESEARCH, INCORPORATED
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, FEBRUARY 6, 2001
EDEN PRAIRIE, MINNESOTA
RESEARCH, INCORPORATED
6425 FLYING CLOUD DRIVE
EDEN PRAIRIE, MN 55344 PROXY
--------------------------------------------------------------------------------
PROXY SOLICITED BY BOARD OF DIRECTORS
The undersigned hereby appoints Claude C. Johnson and Charles G. Schiefelbein,
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 15, 2000 at the
Annual Meeting of Shareholders to be held in Eden Prairie, Minnesota on February
6, 2001, or at any adjournment or adjournments thereof, hereby revoking all
former proxies.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED BUSINESS REPLY ENVELOPE.
SEE REVERSE FOR VOTING INSTRUCTIONS.
<PAGE>
[ARROW] PLEASE DETACH HERE [ARROW]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
<TABLE>
<S> <C>
1. Election of directors: 01 John G. Colwell, Jr. 04 Michael J. Pudil [ ] FOR all nominees [ ] WITHHOLD
02 Claude C. Johnson 05 Charles G. Schiefelbein (except as marked AUTHORITY to vote
03 Edward L. Lundstrom to the contrary below) for all nominees
_____________________________________________
(INSTRUCTIONS: IF YOU DO NOT WISH TO VOTE FOR ANY INDIVIDUAL NOMINEE, | |
MARK THE "FOR" BOX AND WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE |_____________________________________________|
BOX PROVIDED TO THE RIGHT.)
2. Proposal to ratify appointment of Arthur Andersen LLP as independent public [ ] For [ ] Against [ ] Abstain
accountants.
3. In their discretion upon any other matters coming before the meeting.
THE SHARE(S) REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS 1 AND 2 IN
ACCORDANCE WITH THE SPECIFICATIONS MADE AND WILL BE VOTED "FOR" SUCH PROPOSALS
IF THERE IS NO SPECIFICATION. IF CUMULATIVE VOTING IS IMPLEMENTED AT THE
MEETING, THE ABOVE-NAMED PROXY HOLDERS ARE EMPOWERED TO CUMULATE VOTES AMONG THE
ABOVE NOMINEES AS THEY MAY DETERMINE, IN THEIR SOLE DISCRETION.
Address Change? Mark Box [ ] Indicate changes below: Date __________________________ ____
_____________________________________________
| |
|_____________________________________________|
Signature(s) in Box
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.
</TABLE>
