LEGAL RESEARCH CENTER, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 1998
Notice is hereby given that the Annual Meeting of Shareholders of Legal
Research Center, Inc. will be held at the Minneapolis Athletic Club, 615 Second
Avenue South, Minneapolis, Minnesota 55402 on June 22, 1998 at 2:00 p.m.. for
the following purposes:
1. To elect a Board of three directors, each to serve until the next
Annual Meeting of Shareholders or until their successors are elected
and qualified;
2. To consider and act upon a proposal to ratify the selection of Lurie
Besikof Lapidus & Co., LLP as independent auditors of the Company for
the fiscal year ending December 31, 1998; and
3. To transact other business as may properly come before the meeting.
The Board of Directors has fixed the close of business on April 30, 1998 as
the record date for the determination of shareholders entitled to vote at the
meeting and any adjournment thereof.
To assure your representation at the meeting, please sign, date and return
your proxy in the enclosed envelope whether or not you expect to attend in
person. Your cooperation in promptly signing and returning your proxy will help
avoid further solicitation expense. Shareholders who attend the meeting may
revoke their proxies and vote in person if they so desire.
BY ORDER OF THE BOARD OF DIRECTORS
Arun K. Dube, Chairman
Minneapolis, Minnesota
May 13, 1998
1
<PAGE>
PROXY STATEMENT
OF
LEGAL RESEARCH CENTER, INC.
700 Midland Square Building
331 Second Avenue South
Minneapolis, MN 55401
GENERAL MATTERS
Solicitation of Proxies
This Proxy Statement, mailed on or about May 13, 1998, is furnished to the
shareholders of Legal Research Center, Inc. (the "Company") in connection with
the solicitation of proxies by the Board of Directors of the Company to be voted
at the Annual Meeting of the Shareholders to be held on June 22, 1998, or any
adjournment or adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The cost of this
solicitation, which is being made on behalf of the Company and the Board of
Directors, will be borne by the Company. In addition to solicitation by mail,
officers, directors and employees of the Company may solicit proxies by
telephone, special communications or in person. The Company may also request
banks and brokers to solicit their customers who have a beneficial interest in
the Company's Common Stock registered in the names of nominees and will
reimburse such banks and brokers for their reasonable out-of-pocket expenses.
Voting, Execution and Revocation of Proxies
Only stockholders of record at the close of business on April 30, 1998 will
be entitled to vote. As of that date, the Company had 3,327,633 shares of Common
Stock outstanding and entitled to vote. Each share is entitled to one vote.
If a proxy is properly executed and returned on time in the form enclosed,
it will be voted at the meeting as specified. Where specification has not been
made, it will be voted FOR the election of the nominees for director, FOR the
ratification of the appointment by the Board of Lurie Besikof Lapidus & Co., LLP
as the Company's independent auditors for the fiscal year ending December 31,
1998, and will be deemed to grant discretionary authority to vote upon any other
matters properly coming before the meeting. The presence in person or by proxy
of the holders of a majority of the shares of stock entitled to vote at the
Annual Meeting of the Shareholders, or 1,663,817 shares, constitutes a quorum
for the transaction of business.
A list of those shareholders entitled to vote at the Annual Meeting will be
available for a period of ten (10) days prior to the Annual Meeting for
examination by any shareholder at the Company's principal executive offices, 700
Midland Square Building, 331 Second Ave. So., Minneapolis, Minnesota, and at the
Annual Meeting itself.
Any proxy may be revoked at any time before it is voted by written notice
to the Secretary, by receipt of a proxy properly signed and dated subsequent to
an earlier proxy, or by revocation of a written proxy by request at the Annual
Meeting. If not so revoked, the shares represented by such proxy will be voted.
2
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth as of March 12, 1998 the number of shares of
Common Stock beneficially owned by each person known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of the Company's
capital stock, by each director and by all directors and executive officers as a
group. Shares not outstanding but deemed beneficially owned by virtue of the
right of an individual to acquire them within 60 days are treated as outstanding
only when determining the amount and percentage owned by such individual. Except
as otherwise indicated, the persons listed possess all of the voting and
investment power with respect to the shares listed for them.
<TABLE>
<CAPTION>
Number of Percent of
Directors, Executive Officers, and 5% Shareholders Shares Class
- -------------------------------------------------- ------ -----
<S> <C> <C>
Christopher R. Ljungkull (1)(2) 1,095,077 30.8%
James R. Seidl (1)(3) 878,585 24.7%
Arun K. Dube (1)(4) 111,667 3.3%
Robin A. Moles (1) 193,492 5.8%
All executive officers and directors as a group (3 persons, 2-4) 2,073,662 54.1%
</TABLE>
(1) The address of such person is in care of the Company, 700 Midland Square
Building, 331 Second Avenue South, Minneapolis, Minnesota 55401.
(2) Includes 193,492 shares owned by Robin Moles, Mr. Ljungkull's aunt, over
which Mr. Ljungkull exercises voting power, 216,000 shares purchasable upon
exercise of presently exercisable stock options and 7,100 shares
purchasable upon exercise of presently exercisable warrants.
(3) Includes 216,000 shares purchasable upon exercise of presently exercisable
stock options and 7,100 shares purchasable upon exercise of presently
exercisable warrants.
(4) Includes 71,667 shares purchasable upon exercise of presently exercisable
stock options and 10,000 shares purchasable upon exercise of presently
exercisable warrants.
3
<PAGE>
ELECTION OF DIRECTORS
(Proposal #1)
Nominees for Election as Directors
The Board of Directors currently consists of three persons. Each director
will be elected to serve until the Annual Meeting of Shareholders to be held in
1998 or until a successor is elected and qualified. Vacancies and newly-created
directorships resulting from an increase of the number of directors may be
filled by a majority of the directors then in office and the directors so chosen
will hold office until the next election.
The Board of Directors has nominated for election the three individuals
named below. Proxies cannot be voted for a greater number of persons than the
number of nominees named below. The Board recommends a vote FOR all such
nominees, and it is intended that, unless contrary written instructions are
provided, proxies accompanying this Proxy Statement will be voted at the 1998
Annual Meeting FOR the election to the Board of all of the nominees named. The
Board of Directors believes that each nominee will be able to serve, but should
any nominee be unable to serve as a director, the persons named in the proxies
have advised that they will vote for the election of such substitute nominee as
the Board of Directors may propose.
The names, ages and respective positions of the nominees, their occupations
and other information is set forth below, based upon information furnished to
the Company by the nominees.
Christopher R. Ljungkull, age 44, has been Chief Executive Officer of the
Company since rejoining it on a full time basis in 1994. From 1987 to 1994, Mr.
Ljungkull served in various capacities with West Publishing Corporation, most
recently as an editor. Mr. Ljungkull is co-founder of the Company and has been a
director of the Company since its inception.
James R. Seidl, age 44, has been the President of the Company since 1988
and served as its Chief Executive Officer prior to Mr. Ljungkull's return in
1994. Mr. Seidl is a co-founder of the Company and has been a director since its
inception.
Arun K. Dube, age 60, has been a director of the Company since May 1995 and
the Chairman of the Board since January 1996. In July 1996, Mr. Dube was hired
as Chief Executive Officer of The CyberLaw Office, Inc. (CLO) an 85% owned
subsidiary of the Company, which was going to manage all of the Company's
Internet-related activities, including The Law Office, Inc., operations of which
have been discontinued. Mr. Dube is a private investor and has been the Chief
Executive Officer of Strategic Alliance International, Inc. since 1983. Mr. Dube
is also a director of Granton Technology Ltd., a publicly traded company.
4
<PAGE>
Board of Directors and Committees
Meetings. During fiscal 1997, the Board of Directors of the Company held
four meetings and on two occasions took action by written consent. Each director
was present for each meeting held during fiscal 1997. James Seifert resigned
from his position as a Director December 12, 1997.
Board Committees. The Board of Directors has no standing Committees.
The Audit Committee acted as a liaison between the Company's independent
auditing firm and Company management and, in connection therewith, could (i)
recommend to the Board of Directors an annual selection or retention of the
Company's independent auditing firm, (ii) communicate with the Company's
independent auditing firm concerning matters of accounting and auditing policy
which such firm may desire to discuss with other than Company management, and
(iii) review and recommend to Company management improvements in the Company's
accounting and auditing procedures. The members of the Audit Committee in 1997
were Messrs. Dube and Seifert. The Audit Committee held one meeting during the
1997 fiscal year.
The Compensation Committee made recommendations to the Board of Directors
respecting the sufficiency and adequacy of the Company's compensation programs
for management and other key employees, including (i) salary and bonus programs,
(ii) incentive and other stock option programs (including the recommendation of
persons who should receive options and the exercise price and other terms
therefor), and (iii) other perquisites. The members of the Compensation
Committee were Messrs. Dube and Seifert. The Compensation Committee held no
meetings during the 1997 fiscal year.
Remuneration of Directors. Non-employee directors are to be paid $125 per
Board or Committee meeting attended and reimbursed for certain expenses in
connection therewith. The Board has suspended payment for non-employee directors
for fiscal 1997 and thereafter until the Company has achieved sustained
profitability. Non-employee directors are also compensated with annual stock
option grants of 5,000 shares, exercisable at fair market value on the date of
grant and expiring 10 years after issuance (the "Directors' Options").
Directors' Options are granted at the time of election or reelection at the
Annual Shareholders' Meeting unless a director is elected in between annual
meetings in which case the Directors' Options shall be granted on a pro rata
basis. Mr. Dube has been granted Directors' Options to purchase 10,000 shares of
Common Stock at prices ranging from $3.38 to $3.50 a share under the Company's
1995 Stock Option Plan.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
To the knowledge of the Company, based solely upon a review of Forms 3 and
4 furnished to the Company during the fiscal year ended December 31, 1997,
pursuant to Rule 16a-3(e) of the Rules and Regulations promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Forms 5
and amendments thereto furnished to the Company with respect to the year ended
December 31, 1997, no one failed to file on a timely basis such filings for the
Company's 1997 fiscal year..
5
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the cash and non-cash compensation paid to
or earned by Christopher R. Ljungkull, the Company's Chief Executive Officer and
James R. Seidl, the Company's President, the only executive officers of the
Company whose annual compensation exceeded $100,000 during 1997.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-term
Name and Principal Fiscal Year Ended Compensation All Other
Position December 31, Salary Bonus Awards of Options Compensation
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Christopher R. 1997 $99,176 $4,295 36,000(1) $0
Ljungkull, Chief
Executive Officer 1996 $94,708 $13,303 185,000(2) $0
1995 $72,810 $10,400 180,000 $9,504(3)
- ------------------------------------------------------------------------------------------------------------
James R. Seidl, 1997 $109,954 $12,884 36,000(1) $0
President
1996 $94,708 $39,909 185,000(2) $0
1995 $72,842 $10,400 180,000 $9,504(3)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Consists of options granted in lieu of salary under the 1997 Employee Stock
Option Plan.
(2) Consists of options granted in 1996 which were canceled in April 1997 with
the consent of the optionees.
(3) Consists of the balance of a receivable from a partnership owned equally by
Messrs. Ljungkull and Seidl which was relieved in lieu of an additional
bonus.
Stock Options
The following table summarizes option grants made during the fiscal year
ended December 31, 1997 to the executive officers named in the Summary
Compensation table:
Options Grants in 1997 Fiscal Year
<TABLE>
<CAPTION>
Number of Percent of Total
Shares Underlying Granted to
Options Employees in Exercise Price Expiration
Name Granted(1) Fiscal Year Per Share Date
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Christopher R. Ljungkull 36,000 34.3% $1.125 June 2002
James R. Seidl 36,000 34.3% $1.125 June 2002
</TABLE>
(1) Consists of options granted under the 1997 Employee Stock Option Plan.
6
<PAGE>
The following table summarizes the value of the unexercised options held by
the executive officers named in the Summary Compensation table as of December
31, 1997.
Aggregated Option Exercises and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Value of Unexercised
Shares Number of Unexercised in-the-Money Options at
Acquired Value Options at Fiscal Year-End Fiscal Year-End
Name on Exercise Realized Exercisable/Unexercisable Exercisable/Unexercisable(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Christopher R. Ljungkull -- -- 216,000(2)/0 $0/$0
- ----------------------------------------------------------------------------------------------------------------
James R. Seidl -- -- 216,000(2)/0 $0/$0
</TABLE>
(1) Value of unexercised options are calculated by determining the difference
between the fair market value of the shares underlying the options at
December 31, 1997 and the exercise price of the options.
(2) Consists of 36,000 options granted under the 1997 Employee Stock Option
Plan and 180,000 options granted in 1995 under the Company's Existing
Officers' Stock Option Plan.
Employment Agreements
The Company entered into three-year employment agreements with each of
Christopher R. Ljungkull and James R. Seidl effective July 1, 1995. Effective
January 1, 1997, Messrs. Ljungkull and Seidl waived their right to receive
revenue-based incentive compensation due them under their employment agreements.
Effective April 1997, Messrs. Ljungkull and Seidl salaries were increased to
$120,000 per year, although both officers receive $84,000 under a salary
reduction plan effective July 1, 1997, providing for options in lieu of salary.
CERTAIN TRANSACTIONS
Consulting Arrangement with James J. Seifert. The Company engaged James J.
Seifert, formerly one of its directors, as a consultant to assist the Company
with the continued development of its CADRE program pursuant to a letter
agreement dated September 5, 1995 (the "Agreement"). Pursuant to the Agreement,
for a one year period, Mr. Seifert provided various curriculum development,
promotional, and business planning services in consideration of $2,800 per
month. The Agreement was modified by mutual agreement of the parties to provide
for compensation to Mr. Seifert for consulting on revenue-generating CADRE
projects only. Mr. Seifert was paid $22,220 under this Agreement during 1997.
Lease with URSA Companies, Inc. The Company leases its office space
from URSA Companies, Inc. ("URSA"), a corporation which is owned and controlled
by Messrs. Ljungkull and Seidl, pursuant to the exact same terms and conditions
of a lease between URSA and URSA's landlord for such office space. This
arrangement between the Company and URSA is on terms no more favorable to the
Company that that which could be obtained by an unaffiliated third party from
URSA.
7
<PAGE>
SELECTION OF AUDITORS
(Proposal #2)
The Board of Directors has selected Lurie Besikof Lapidus & Co., LLP as
independent auditors to examine the accounts of the Company for the fiscal year
ending December 31, 1998, and to perform other accounting services. Lurie
Besikof Lapidus & Co., LLP has acted as independent auditors of the Company
since February 1998. Representatives of Lurie Besikof Lapidus & Co., LLP are
expected to be present at the 1998 Annual Meeting and will be given an
opportunity to make a statement if so desired and to respond to appropriate
questions.
Effective as of December 17, 1997, the Company's then independent auditors,
McGladrey & Pullen, LLP resigned. McGladrey & Pullen's reports on the financial
statements of the Company for each of the past two years did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to uncertainty, audit scope or accounting principles. There have been no
disagreements between the Company (including the audit committee of the Board of
Directors) and McGladrey & Pullen on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure.
Effective as of February 13, 1998, the Company hired Lurie Besikof, Lapidus &
Co., LLP, which firm audited the Company's 1997 financial statements.
SHAREHOLDER PROPOSALS
The rules of the Securities and Exchange Commission permit shareholders of
a company, after notice to the company, to present proposals for shareholder
action in the Company's proxy statement where such proposals are consistent with
applicable law, pertain to matters appropriate for shareholder action and are
not properly omitted by company action in accordance with the proxy rules. The
Legal Research Center, Inc. 1999 Annual Meeting of Shareholders is expected to
be held in June 1999. In order to be considered for inclusion in the Proxy
Statement for the June 1999 Annual Meeting, shareholder proposals prepared in
accordance with the proxy rules must be received by the Company on or before
January 15, 1999.
GENERAL
The Board of Directors of the Company does not intend to present and knows
of no matters other than the foregoing to be brought before the meeting.
However, the enclosed proxy gives discretionary authority in the event that any
additional matters should be presented.
BY ORDER OF THE BOARD OF DIRECTORS
Arun K. Dube, Chairman
8
<PAGE>
LEGAL RESEARCH CENTER, INC.
PROXY
The undersigned shareholder of Legal Research Center, Inc. (the "Company")
hereby constitutes and appoints Christopher R. Ljungkull or James R. Seidl, or
both of them, his or her proxy, with full power of substitution, to attend the
Annual Meeting of shareholders of the Company to be held at the Minneapolis
Athletic Club, 615 Second Avenue South, Minneapolis, Minnesota 55402 on June 22,
1998 at 2:00 p.m., or at any and all adjournments thereof, upon the following
matters:
1. Election of three directors to serve until the next Annual Meeting of
Shareholders or until their successors are elected and qualified;
Arun K. Dube, Christopher R. Ljungkull, James R. Seidl
|_| FOR all nominees listed above (except as indicated to the contrary
below)
|_| WITHHOLD AUTHORITY to vote for all nominees listed above (INSTRUCTION:
To withhold authority to vote for any individual, write that nominee's name
in the space provided below.)
- --------------------------------------------------------------------------------
2. To consider and act upon a proposal to ratify the selection of Lurie
Besikof Lapidus, LLP as independent auditors of the Company for the fiscal
year ending December 31, 1998; and
3. To transact other business as may properly come before the meeting.
PLEASE FILL IN, SIGN, DATE AND MAIL IN THE ENCLOSED ENVELOPE
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS. THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER SPECIFIED BY THE
UNDERSIGNED SHAREHOLDER. IF NO SPECIFICATION IS MADE, THE PROXY WILL BE VOTED
FOR APPROVAL OF PROPOSALS 1 AND 2 AND GRANT DISCRETIONARY AUTHORITY ON ANY OTHER
MATTER THAT MAY PROPERLY COME BEFORE THE MEETING.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE COMPANY'S NOTICE OF ANNUAL
SHAREHOLDERS MEETING TO BE HELD JUNE 22, 1998 AND PROXY STATEMENT.
Dated: , 1998
----------------------------------
-----------------------------------------------
-----------------------------------------------
IMPORTANT: Signature(s) should correspond with
the name appearing on the books of the Company.
When signing in a fiduciary capacity, give full
title as such. When more than one owner, each
should sign.
