<PAGE>
LIFECORE BIOMEDICAL, INC.
3515 LYMAN BOULEVARD
CHASKA, MN 55318
(612) 368-4300
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 14, 1996
-------------------------
Notice is hereby given that the Annual Meeting of Shareholders of Lifecore
Biomedical, Inc., will be held in the Auditorium of the Lutheran Brotherhood
Building, 625 Fourth Avenue South, Minneapolis, Minnesota 55402 on Thursday,
November 14, 1996 at 3:30 p.m., local time, for the following purposes:
1. To elect three (3) directors to hold three-year terms.
2. To consider and act upon a proposal to approve an amendment to the
Company's Articles of Incorporation to increase the total number of
authorized shares of Common Stock, par value $.01 per share, from
25,000,000 shares to 50,000,000 shares.
3. To consider and act upon a proposal to ratify and approve the 1996
Stock Plan.
4. To ratify and approve the selection of independent certified public
accountants for the Company for the current fiscal year.
5. 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 September 23,
1996 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,
James W. Bracke, PRESIDENT
Minneapolis, Minnesota
October 7, 1996
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND IN PERSON. SHAREHOLDERS
WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN PERSON IF THEY
DESIRE.
<PAGE>
LIFECORE BIOMEDICAL, INC.
-------------------------
PROXY STATEMENT
-------------------------
This Proxy Statement is furnished to the shareholders of Lifecore
Biomedical, 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
Shareholders to be held on November 14, 1996, and at any adjournment thereof.
The cost of this solicitation will be borne by the Company. In addition to
solicitation by mail, officers and directors of the Company may solicit proxies
by telephone, telegraph 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 their nominees and will
reimburse such banks and brokers for their reasonable out-of-pocket expenses.
The Company's principal offices are located at 3515 Lyman Boulevard, Chaska,
Minnesota 55318. The mailing of this Proxy Statement to shareholders of the
Company was commenced on or about October 7, 1996.
Any proxy may be revoked at any time before it is voted by written notice,
mailed or delivered to the Secretary of the Company, 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 total number of shares of stock outstanding and entitled to vote at the
meeting as of September 23, 1996 consisted of 12,131,996 shares of $.01 par
value common stock. Each share of common stock is entitled to one vote, and
there is no cumulative voting. Only shareholders of record at the close of
business on September 23, 1996 will be entitled to vote at the meeting. The
presence in person or by proxy of holders of thirty-three and one-third percent
(33-1/3%) of the shares of common 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 the Company's shareholders (other than amendments to the Company's Articles
of Incorporation and certain other matters) 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
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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 and in tabulating votes cast on proposals presented to shareholders
for vote, but as unvoted for purposes of determining the approval of the
matter from which the shareholder abstains. Consequently, an abstention will
have the same effect as a negative 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.
The proxy rules of the Securities and Exchange Commission permit
shareholders, after timely notice to issuers, to present proposals for
shareholder action in issuer proxy statements where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action, and are not properly omitted by issuer action in accordance with the
proxy rules. The Company's Bylaws also provide that shareholders may present
proposals for shareholder action by giving notice to the Secretary of the
Company not less than 50 days nor more than 75 days prior to the meeting (or if
less than 60 days' notice or prior public disclosure of the date of the annual
meeting is given or made to shareholders, not later than the 10th day following
the day on which the notice of the date of the annual meeting was mailed or such
public disclosure was made). Notice relating to the conduct of such business at
an annual meeting must contain certain information about such business and the
shareholder who proposes to bring such business before the meeting, the reasons
for conducting such business at the annual meeting, the name and address of such
shareholder, and any material interest of such shareholder in the business he or
she proposes. The Company's Annual Meeting for the fiscal year ending June 30,
1997 is expected to be held on or about November 13, 1997, and proxy materials
in connection with that meeting are expected to be mailed on or about October 6,
1997.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information provided to the Company as to the
beneficial ownership of the Company's common stock as of July 31, 1996 by (i)
all persons known by the Company to be the beneficial owner of more than 5% of
such stock; (ii) each of the directors of the Company; (iii) each executive
officer named on the table on page 8; and (iv) all officers and directors as a
group.
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<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED (1) CLASS
---------------- --------- -----
<S> <C> <C>
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109 . . . . . . . . . . . . . 1,098,365(2) 9.0%
Johnson & Johnson Development Corp.
One Johnson & Johnson Plaza
New Brunswick, NJ 08933 . . . . . . . . . . 962,524(3) 7.9%
Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391 . . . . . . . . . . . . . 816,160(4) 6.7%
First Bank System, Inc.
601 2nd Avenue South
Minneapolis, MN 55402 . . . . . . . . . . . 693,207(5) 5.7%
James W. Bracke, Ph.D . . . . . . . . . . . . 202,635(6) 1.7%
Orwin L. Carter, Ph.D . . . . . . . . . . . . 23,666(7) *
Joan L. Gardner . . . . . . . . . . . . . . . 14,750(8) *
Thomas H. Garrett . . . . . . . . . . . . . . -- --
John C. Heinmiller . . . . . . . . . . . . . 5,333(9) *
Donald W. Larson . . . . . . . . . . . . . . 29,966(10) *
Mark J. McKoskey . . . . . . . . . . . . . . . 34,082(11) *
Richard W. Perkins . . . . . . . . . . . . . . 70,666(12) *
Directors and officers as a group
(12 persons) . . . . . . . . . . . . . . . . . 484,747(13) 3.9%
</TABLE>
______________________
* Less than 1%
(1) Unless otherwise indicated, ownership is direct and the person has full
voting and investment power.
(2) Based upon the content of a statement filed as of August 6, 1996 pursuant
to Section 13(g) of the Securities Exchange Act of 1934.
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(3) Based upon the content of a statement filed as of October 27, 1995 pursuant
to Section 13(g) of the Securities Exchange Act of 1934.
(4) Based upon the content of a statement filed as of January 31, 1996 pursuant
to Section 13(g) of the Securities Exchange Act of 1934. Excludes shares
beneficially owned by Richard W. Perkins, the controlling shareholder of
Perkins Capital Management, Inc. and a director of the Company.
(5) Based upon the content of a statement filed as of February 9, 1996 pursuant
to Section 13(g) of the Securities Exchange Act of 1934.
(6) Includes 60,763 shares held by Dr. Bracke's wife, 50,206 shares held
jointly by Dr. Bracke and his wife, 3,500 shares held by one of Dr.
Bracke's children and 88,166 shares which Dr. Bracke has the right to
purchase pursuant to stock options which are or will become exercisable
within sixty days of the date hereof.
(7) Includes 22,666 shares which Dr. Carter has the right to purchase pursuant
to stock options which are or will become exercisable within sixty days of
the date hereof.
(8) Includes 4,250 shares held by a partnership in which Ms. Gardner is a
partner and 10,000 shares which Ms. Gardner has the right to purchase
pursuant to stock options which are or will become exercisable within sixty
days of the date hereof.
(9) Includes 3,333 shares which Mr. Heinmiller has the right to purchase
pursuant to stock options which are or will become exercisable within sixty
days of the date hereof.
(10) Includes 19,666 shares which Mr. Larson has the right to purchase pursuant
to stock options which are or will become exercisable within sixty days of
the date hereof.
(11) Includes 17,250 shares which Mr. McKoskey has the right to purchase
pursuant to stock options which are or will become exercisable within sixty
days of the date hereof.
(12) Includes 45,000 shares held by various trusts of which Mr. Perkins is the
sole trustee, 6,000 shares held by a foundation created by Mr. Perkins and
19,666 shares which Mr. Perkins has the right to purchase pursuant to stock
options which are or will become exercisable within sixty days of the date
hereof. Excludes 816,160 shares held for the accounts of clients of
Perkins Capital Management, Inc. ("PCM"), a registered investment advisor
of which Mr. Perkins is the controlling shareholder. PCM has the right to
sell the shares but does not have voting power over the shares. Mr.
Perkins and PCM disclaim beneficial interest in the shares held for the
account of PCM clients.
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(13) Includes 248,997 shares which certain directors and officers have the right
to purchase pursuant to stock options which are or will become exercisable
within sixty days of the date hereof.
1. ELECTION OF DIRECTORS
Three directors will be elected to three-year terms at the Annual Meeting.
Pursuant to the Company's Articles of Incorporation, the Board of Directors is
divided into three classes of directors, with each director serving a three-year
term. Each year only one class of directors is subject to a shareholder vote,
and approximately one-third of the directors (presently, two directors in each
of two classes and three directors in one class) belong to each class.
Management has nominated for election the persons named below. The
nominees are currently directors of the Company and have consented to being
named as nominees. It is intended that proxies will be voted for such nominees.
The Company believes that the nominees named below will be able to serve but,
should a 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 management may propose. The names and ages of the directors and
their principal occupations are set forth below, based upon information
furnished to the Company by the directors.
Director
Name and Age Principal Occupation Since
- ------------ -------------------- -----
TO BE NOMINATED FOR ELECTION FOR A THREE-YEAR TERM:
James W. Bracke, Ph.D. (49) President and CEO of the Company 1983
Joan L. Gardner (51) Community Volunteer 1992
Thomas H. Garrett (51) Business Consultant 1996
THE DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE ANNUAL MEETING AND
WHOSE TERMS WILL EXPIRE IN 1997:
Donald W. Larson (67) Publisher, Business Newsletter 1983
Orwin L. Carter, Ph.D. (54) Vice President of Finance
and Administration,
Hamline University 1989
5
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THE DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE ANNUAL MEETING AND
WHOSE TERMS WILL EXPIRE IN 1998:
Richard W. Perkins (65) President and CEO, Perkins Capital
Management, Inc. 1983
John C. Heinmiller (42) Vice President-Administration,
Daig Corporation 1994
OTHER INFORMATION REGARDING THE BOARD
Dr. Bracke was appointed President and Chief Executive Officer and a
director in August 1983 and Secretary in March 1995. He joined the Company in
February 1981 as Senior Research Scientist. The Company has an employment
agreement with Dr. Bracke that extends through June 1998. Dr. Bracke's
employment agreement prohibits him from competing with the Company for three
years after termination of employment. In the event of termination upon a
change in control of the Company, the employment agreement provides that Dr.
Bracke will receive a sum equal to 300% of his base salary.
Ms. Gardner has had a career in community service. She is currently
serving on the Board of Children's Health Care and chairs its Quality Committee.
She formerly chaired the Boards of Trustees of the Biomedical Research Institute
and The Children's Hospital Incorporated and served on the board of the National
Association of Children's Hospitals and Related Institutes and chaired its
Education Council. Ms. Gardner has been a director of the Company since
November 1992.
Mr. Garrett has been a business consultant since July 1996. Prior to July
1996, Mr. Garrett was a partner at the law firm of Lindquist & Vennum P.L.L.P.
of Minneapolis, Minnesota for more than the last five years. He served as its
Managing Partner from 1993 through 1995. Mr. Garrett has been a director of the
Company since July 1996 and is also a director of St. Jude Medical, Inc. and
Check Technology Corporation.
Mr. Larson is a self-employed business publisher and editor. He has been
editor and publisher of BUSINESS NEWSLETTER since 1980. Prior to 1980, he was
editor and publisher of CORPORATE REPORT MINNESOTA. He has been a director of
the Company since 1983.
Dr. Carter is currently Vice President of Finance and Administration at
Hamline University. From December 1989 through September 1994, he served as
President and Chief Executive Officer of INCSTAR Corporation, a medical
diagnostic device manufacturer. He then served as Chairman until March 1995.
He has been a director of the Company since 1989 and is also a director of
Theragenics Corporation.
Mr. Perkins is President, Chief Executive Officer and a director of Perkins
Capital Management, Inc., Wayzata, Minnesota, where he has held those positions
since January 1985. Mr. Perkins is a director of the following public
companies: Bio-Vascular, Inc., Children's Broadcasting
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Corporation, CNS, Inc., Eagle Pacific Industries, Inc., Garment Graphics, Inc.,
Nortech Systems, Inc., Peerless Industrial Group, Inc., and Quantech, Ltd. He
has been a director of the Company since 1983.
Mr. Heinmiller is currently Vice President-Administration of Daig
Corporation, which designs, manufactures and markets medical devices for
cardiovascular applications. He was Vice President of Finance and Chief
Financial Officer of the Company from October 1991 to February 1995. Prior to
October 1991, Mr. Heinmiller was an employee of Grant Thornton LLP, a national
CPA firm and he was a partner of that firm from 1986 to 1991. He has been a
director of the Company since November 1994.
COMMITTEES. Mr. Heinmiller (Chairman), Mr. Carter and Ms. Gardner serve as
members of the Audit Committee of the Board of Directors. The Audit Committee
met two times in fiscal 1996. Among other duties, the Audit Committee reviews
the scope of the independent audit, considers comments by the auditors regarding
internal controls and accounting procedures, and considers management's response
to those comments. Mr. Perkins (Chairman), Ms. Gardner and Mr. Larson serve as
members of the Compensation Committee of the Board of Directors. The
Compensation Committee makes recommendations to the Board with respect to
executive and key employee compensation. The Compensation Committee held one
meeting in fiscal 1996. Dr. Carter (Chairman), Messrs. Larson and Heinmiller
currently serve as members of the Nominating Committee of the Board of
Directors. The Nominating Committee makes recommendations to the Board with
respect to nominees to serve on the Board of Directors. The Nominating
Committee met one time in fiscal 1996.
MEETINGS. During fiscal 1996 the Board of Directors met six times. Each
of the current directors, while a member of the Board, attended 75% or more of
the meetings of the Board of Directors and any committee of the Board on which
such director served.
REMUNERATION OF DIRECTORS. Directors who are not officers of the Company
receive a fee of $500 per month.
The 1996 Stock Plan (the "1996 Plan"), which was adopted by the Board on
September 19, 1996, subject to shareholder approval at the Annual Meeting,
provides for the automatic granting of options to non-employee directors upon
election or re-election by the Board of shareholders (provided they have not
received an automatic grant under the 1990 Plan or the 1996 Plan in the
preceding 35 months). Each option covers 30,000 shares, vesting over a
three-year period. Non-employee directors will also be eligible for
additional option grants under the 1996 Plan. See "Proposal for Approval of
the 1996 Stock Plan." The automatic grant program under the 1996 Plan
replaces a similar formula grant program under the 1990 Stock Plan, under
which each option covered 10,000 shares, vesting over a three-year period.
Pursuant to the automatic grant feature of the 1990 Plan, Ms. Gardner was
granted an option to purchase 10,000 shares at $11.25 per share on November
17, 1995, and Mr. Garrett was granted an option to purchase 10,000 shares at
$16.00 per share on July 24, 1996.
7
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's Chief
Executive Officer and each of the Company's other executive officers whose cash
compensation exceeded $100,000, based on salary earned during fiscal 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
FISCAL STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(1)
- --------------------------- ---- ------ ----- ----------
<S> <C> <C> <C> <C>
James W. Bracke 1996 $199,520 $90,000 24,000
President and Chief 1995 189,073 -- 10,000
Executive Officer 1994 188,171 -- 25,000
Mark J. McKoskey 1996 $108,366 -- 12,000
Vice President and 1995 96,827 -- 5,000
General Manager 1994 96,967 -- 15,000
of the Oral Restorative Division
</TABLE>
_________________
(1) Number of shares of common stock purchasable under option grants.
EMPLOYMENT AND SEVERANCE AGREEMENTS. Dr. James W. Bracke, the President,
Chief Executive Officer, Secretary and a Director of the Company, entered
into an Employment Agreement with the Company dated June 1, 1991, as amended
on August 14, 1995, which provides for a term of employment through June 30,
1998 and contains customary confidential disclosure and noncompete
provisions. The Agreement provides for a severance payment equal to 300% of
Dr. Bracke's base salary paid during the year preceding a termination which
is made as a result of a merger or acquisition of the Company or as a result
of a change in control of the Company. Dr. Bracke's base salary is currently
$200,000 per year and, accordingly, in the event the severance provision of
his Employment Agreement were triggered by a merger, acquisition or change in
control, the Company or its successor would be obligated to pay him
approximately $600,000.
Mark J. McKoskey, Vice President and General Manager of the Oral
Restorative Division, entered into an Employment Agreement with the Company
dated June 3, 1985, which contains customary confidential disclosure and non-
compete provisions. As an executive officer, the Company
8
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will provide for Mr. McKoskey a severance payment equal to 100% of his base
salary paid during the year preceding termination which is made as a result
of a merger or acquisition of the Company or as a result of a change in
control of the Company. Mr. McKoskey's base salary is currently $110,000 per
year and, accordingly, in the event the severance provision were triggered by
a merger, acquisition or change in control, the Company or its successor
would be obligated to pay him approximately $110,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the named
executives, concerning stock options granted to those individuals during the
last fiscal year:
<TABLE>
<CAPTION>
% OF TOTAL POTENTIAL REALIZABLE VALUE
OPTIONS AT ASSUMED ANNUAL RATES
GRANTED OF STOCK PRICE
TO EXERCISE APPRECIATION FOR OPRION
EMPLOYEES OR BASE TERM (4)
OPTIONS IN LAST PRICE PER EXPIRATION ----------------------------
NAME GRANTED YEAR SHARE(2) DATE (3) 5% 10%
- ---- ------- ---- --------- -------- -- ---
<S> <C> <C> <C> <C> <C> <C>
James W. Bracke 24,000(1) 13.2 $11.00 Nov. 3, 2005 $166,028 $420,748
Mark J. McKoskey 12,000(1) 6.6 11.00 Nov. 3, 2005 83,014 210,374
</TABLE>
_______________
(1) Exercisable in cumulative 25% annual installments commencing one year from
date of grant (November 3, 1995), with full vesting occurring on the fourth
anniversary date.
(2) All options were granted at the market value of the Company's common stock
based upon the last reported price on date preceding the date of grant.
The exercise price and tax withholding obligations related to exercise may
be paid by delivery of already owned shares or by offset of the underlying
shares, subject to certain conditions.
(3) All options have a ten year term, subject to termination of employment.
(4) Gains are reported net of the option exercise price, but before taxes
associated with exercise. These amounts represent certain assumed rates of
appreciation only. Actual gains, if any, on stock option exercises are
dependent on the future performance of the common stock, overall stock
market conditions, as well as the option holder's continued employment
through the vesting period. The amounts reflected in this table may not
necessarily be achieved.
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
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The following table sets forth information with respect to the named
executives, concerning the exercise of options during the last fiscal year and
unexercised options held as of the end of the fiscal year:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED OPTIONS AT YEAR-END YEAR-END(2)
ON VALUE ------------------------------- -------------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James W. Bracke 2,400 $ 23,400 75,683 43,584 $728,669 $541,945
Mark J. McKoskey 21,725 145,286 13,500 24,500 199,969 316,281
</TABLE>
______________
(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) The closing price for the Company's common stock on June 30, 1996 was
$21.25. Value is calculated on the basis of the difference between the
option exercise price and $21.25 multiplied by the number of shares of
common stock underlying the options.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed entirely
of nonemployee directors, currently consisting of Mr. Perkins (Chairman), Ms.
Gardner and Mr. Larson. The Compensation Committee is responsible for approving
and recommending to the Board of Directors all short and long term compensation
plans for the executive officers of the Company and the Board of Directors and
for administering the Company's stock option plans. All decisions by the
Compensation Committee relating to the compensation of the Company's executive
officers are reviewed by the full Board.
Set forth below is a report submitted by Mr. Perkins, Ms. Gardner and Mr.
Larson in their capacity as the Board's Compensation Committee (the
"Committee"), addressing the Company's compensation policies for fiscal 1996 as
they affected the Company's executive officers generally, and specifically as
they affected Dr. Bracke, the Company's Chief Executive Officer, and Mr.
McKoskey, the Company's only executive officer other than Dr. Bracke whose cash
compensation exceeded $100,000 during fiscal 1996 (collectively with Dr. Bracke,
the "Named Executives").
The following 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 that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed filed under the 1933 Act or the 1934 Act.
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COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Company's executive compensation has historically consisted of three
components: (i) base salaries, (ii) stock options and (iii) cash bonuses. Each
of these elements is discussed below:
BASE SALARIES. In determining the base salaries of each executive
officer, the Company has utilized compensation surveys and has considered
performance against defined goals and longevity with the Company. The base
salaries of the Company's executive officers have generally remained
constant in recent years, subject only to cost of living increases,
adjustments based on increased responsibilities and the increase for Dr.
Bracke pursuant to an extension of his employment contract as discussed
below under "Chief Executive Officer Compensation."
STOCK OPTIONS. During fiscal 1996, the Company granted stock options
to all of its officers, including Dr. Bracke. These options, which were
granted in November 1995, allow Dr. Bracke to purchase 24,000 shares of the
Company's common stock and each of the other executive officers to purchase
between 8,000 and 12,000 shares of the Company's common stock, at $11.00
per share, the fair market value of the shares on the date of grant,
exercisable in cumulative 25% installments commencing one year from the
date of grant. The Committee selected the recipients of options and the
numbers of shares subject to their options according to the duties of the
recipients and their performance during the preceding fiscal year. Stock
option grants are intended to focus the Company's officers and key
employees on long term Company performance which results in improvement in
shareholder value and provides a significant earning potential for the
recipients. The multi-year vesting requirements for the incentive stock
options granted during fiscal 1996 are designed to direct the Company's
executives toward steady growth and to retain their services.
CASH BONUSES. The Board of Directors authorized a cash bonus of
$90,000 to Dr. Bracke during fiscal 1996, as described below. No other
bonuses have been paid to any of the Company's executive officers during
the past five fiscal years.
In addition to the compensation described above, the Company allows its
executives to participate in other broad-based employee benefit plans, such as
the Company's 401(k) plan and its 1990 Employee Stock Purchase Savings Plan
which allows the Company's employees to purchase shares of the Company's Common
Stock through payroll deductions at a purchase price of the lower of 85% of the
fair market value of the shares on the beginning or ending date of each one-year
phase of the Plan.
There is a $1 million limit on the deductibility of certain compensation
for federal income tax purposes pursuant to Section 162(m) of the Internal
Revenue Code. As described below under "Proposal for Approval of the 1996 Stock
Plan," that proposed plan contains a limitation on the number of stock options
that may be granted to any person in any fiscal year. This limitation is
intended to preserve the Company's federal tax deduction for compensation
expense related to stock
11
<PAGE>
options that may be granted to executive officers under the 1996 Plan. Given
the Company's current levels of cash compensation, the Committee does not
believe it will be necessary to take any other action to qualify the
Company's compensation programs under Section 162(m) in the foreseeable
future; however, the Committee will continue to evaluate whether any future
action is appropriate.
CHIEF EXECUTIVE OFFICER COMPENSATION
The compensation of Dr. Bracke, the Company's Chief Executive Officer, is
set by and subject to the discretion of the Compensation Committee, with
approval of the Board of Directors. Dr. Bracke received a salary adjustment
from $183,000 to $200,000 in fiscal 1996, in connection with an amendment to his
employment agreement to extend the term of the agreement through June 1998. Dr.
Bracke also received a cash bonus of $90,000 for fiscal 1996 in recognition of
his contributions to the Company, in particular his role in raising capital for
the Company and his additional duties as chief financial officer during this
time period.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Richard W. Perkins, Chairman Joan L. Gardner Donald W. Larson
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total shareholder return on the Company's common stock during the
five years ended June 30, 1996 with the cumulative total return on the Nasdaq
Stock Market Index (U.S. Companies), a Company selected peer group, and the
Index of Nasdaq Pharmaceutical Stocks. Beginning in 1996, the cumulative
total shareholder return on the Company's common stock will be compared
against a peer group made up of competitors in the medical products field,
and the use of the Nasdaq Pharmaceutical Stocks index will be discontinued.
Management believes that the comparison to a peer group is more meaningful
than the previous comparison to the Nasdaq Pharmaceutical Stocks index that
has been used in the past. The comparison assumes that $100 was invested on
June 30, 1991 in the Company's common stock and in each of the foregoing
indices and assumes reinvestment of dividends. The returns of each component
issuer of the peer group have been weighted according to the respective
issuer's stock market capitalization.
The peer group selected includes the following companies: Anika Research
Inc.; BioTech General Corp.; Biomatrix Inc.; Genzyme Corp.; Hyal Pharmaceutical
Corp.; Interpore International; Life Medical Sciences Inc.; Ligand
Pharmaceuticals Cl B; and Osteotech Inc. All of these companies are traded on
the Nasdaq National Market with the exception of Anika Research Inc. which is
traded on the Nasdaq SmallCap Market.
12
<PAGE>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[INSERT LINE GRAPH HERE.]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
6/30/91 6/30/92 6/30/93 6/30/94 6/30/95 6/30/96
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lifecore $100.00 $134.94 $72.29 $56.63 $74.70 $204.82
- -------------------------------------------------------------------------------------
Nasdaq U.S. Companies 100.00 120.13 151.08 152.52 203.59 261.37
- -------------------------------------------------------------------------------------
Peer Group 100.00 143.33 124.45 82.79 114.91 180.33
- -------------------------------------------------------------------------------------
Nasdaq Pharmaceutical
Stocks 100.00 124.51 108.23 90.54 120.17 177.12
- -------------------------------------------------------------------------------------
</TABLE>
2. PROPOSAL TO APPROVE AMENDMENT
TO THE COMPANY'S
ARTICLES OF INCORPORATION
The Board of Directors has approved an amendment to Article V of the
Company's Articles of Incorporation which would increase the number of
authorized shares of common stock from 25,000,000 shares to 50,000,000 shares.
The Board believes adoption of this amendment is in the best interests of the
shareholders and recommends that shareholders vote in favor of this proposal.
At September 23, 1996, 12,131,996 shares of common stock were issued and
outstanding. There are 996,169 shares reserved for future issuance in the
aggregate under the Company's 1987 Stock Option Plan, the 1990 Stock Plan and
the Employee Stock Purchase Plan, leaving approximately 11.9 million shares
available for corporate purposes. If the shareholders approve the Lifecore
Biomedical, Inc. 1996 Stock Plan as recommended by the Board of Directors in
Proposal 3 of this Proxy Statement, an additional 3,000,000 shares will be
reserved for future issuance under that plan.
The Company has no present plans, understandings or agreements for the
issuance or use of the proposed additional shares of common stock, except for
the number of shares authorized for issuance under the Company's proposed 1996
Stock Plan, the existing stock plans named above and the Company's shareholder
rights plan. However, the Board of Directors believes the Company needs
additional authorized shares to provide the Company with the flexibility, as the
need arises, to use common stock, or securities convertible into common stock,
without the expense and delay of a special shareholders' meeting, for any future
stock dividends, public offerings, private placements, acquisitions, and for
other purposes. Such activities may require more shares of common stock than
are currently available to the Company.
The newly authorized common stock would be identical to the existing
authorized common stock in all respects. Holders of common stock are entitled
to one vote per share and do not have
13
<PAGE>
the right to cumulate their votes in an election of directors. Holders of
common stock have no conversion rights and no preemptive or other rights to
subscribe for additional securities. Upon liquidation of the Company, the
holders of common stock will be entitled to share ratably in all assets
available for distribution after the payment or provision for payment of all
debts and liabilities and subject to the rights of the holders of preferred
stock which may be outstanding. Each share of common stock is entitled to
such dividends as may from time to time be declared by the Board of Directors
out of funds legally available therefor.
In addition to the common stock, the Company's Articles of Incorporation
currently authorize the issuance of 25,000,000 shares of preferred stock, par
value $1.00 per share, none of which is currently outstanding. The proposed
amendment would not affect the preferred stock in any way. Although the Board
of Directors has no present plan to do so, authorized and unissued common stock
and preferred stock could be issued in one or more transactions with terms,
provisions and rights which would make it more difficult, and less likely, to
take over the Company. Any such issuance of additional shares could have the
effect of diluting the earnings per share and book value per share of existing
shares of common stock, and such additional shares could be used to dilute the
share ownership of persons seeking to obtain control of the Company.
The resolution to be considered and acted upon by the shareholders at the
Annual Meeting is as follows:
RESOLVED, that the first sentence of Article V of the Articles of
Incorporation of the Company be amended to read as follows:
ARTICLE V
"The authorized capital stock of this corporation shall be Fifty
Million (50,000,000) shares of Common Stock of the par value of One
Cent ($.01) per share (the "Common Stock") and Twenty-five Million
(25,000,000) shares of preferred stock of the par value of One Dollar
($1.00) per share (the "Preferred Stock")."
The approval of the amendment to the Articles of Incorporation requires the
affirmative vote of the holders of a majority of the stock entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF AN AMENDMENT
TO THE COMPANY'S ARTICLES OF INCORPORATION.
14
<PAGE>
3. PROPOSAL FOR APPROVAL OF THE 1996 STOCK PLAN
GENERAL INFORMATION
On September 19, 1996, the Company's Board of Directors adopted the
Lifecore Biomedical, Inc. 1996 Stock Plan (the "1996 Plan"), subject to
ratification and approval by the shareholders of the 1996 Plan. The purpose of
the 1996 Plan is to enable the Company and its subsidiaries to retain and
attract key employees, consultants and non-employee directors who contribute to
the Company's success by their ability, ingenuity and industry, and to enable
such key employees, consultants 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 1996 Plan authorizes the granting of awards in any
of the following forms: (i) stock options, (ii) stock appreciation rights, (iii)
restricted stock, and (iv) deferred stock.
The 1996 Plan includes a share authorization of 3,000,000 shares in order
to provide an adequate reserve for the grant of options to key employees in
the future and to provide ongoing automatic grants of stock options to
non-employee directors. The Company's previous plan, the 1990 Stock Plan (the
"1990 Plan"), was originally adopted in 1990 with an authorization of 500,000
shares and was amended in 1993 to increase the authorized shares to
1,000,000. As of September 23, 1996, options to purchase 696,095 shares were
outstanding under the 1990 Plan; 121,438 shares had been purchased through
the exercise of options; and only 182,467 shares remained available for
awards under the 1990 Plan. Further, four of the the company's six
non-employee directors have already received the maximum number of stock
options available under the provision of the 1990 Plan providing for
automatic grants to such persons.
When the Board of Directors approved the 1996 Plan, it considered a
variety of factors, including the increase in the number of full time
employees of the Company from 68 as of August 31, 1990 to 135 as of July 31,
1996; the importance of attracting and retaining technical and management
employees in an increasingly competitive market; the importance of attracting
and retaining qualified non-employee directors; and the increase in the
Company's outstanding shares from 5,204,269 shares as of September 25, 1990
to 12,131,996 shares as of September 23, 1996.
The principal features of the 1996 Plan are summarized below.
SHARES AVAILABLE UNDER 1996 PLAN. The maximum number of shares of common
stock reserved and available under the 1996 Plan for awards is 3,000,000
(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 1996 Plan.
15
<PAGE>
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 consultants and non-employee directors, are eligible to
be granted awards under the 1996 Plan. The 1996 Plan shall be administered by
the Board or, in its discretion, by a committee of not less than two non-
employee directors who are both "outside directors" as defined in the 1996 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 1996 Plan, and adopt rules, regulations and procedures with
respect to the administration of the 1996 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 1996 Plan.
AWARDS UNDER 1996 PLAN
STOCK OPTIONS. The Board may grant stock options that either qualify as
"incentive stock options" under the Internal Revenue Code of 1986, as amended
("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
1996 Plan may be exercised during their respective terms as determined by the
Board. The purchase price may be paid by tendering cash or, in the Board's
discretion, by tendering promissory notes or common stock. The optionee may
elect to pay all or part of 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 for the shares with respect to
which such election is made. 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, dependent upon the reason for the
termination. Following a participant's death, the participant's stock options
may be exercised to the extent they were exercisable at the time of death by the
legal representative of the estate or the optionee's legatee for a period of one
year 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. If the participant retires, the participant's stock options may be
exercised to the extent they were exercisable at the time of retirement or for a
period of three months (or such longer period as determined by the Board at the
time of retirement) from the date of retirement or until the expiration of the
stated term of the option, whichever is less. If the participant is
involuntarily terminated without cause, the participant's options may be
exercised to the extent they were exercisable at the time of termination for the
lesser of three months or the balance of the stated term of the option. If the
participant's employment is terminated for cause, the participant's stock
options immediately terminate. These exercise periods may be reduced by the
Board for particular options. The Board may, in its discretion, accelerate the
exercisability of stock options which would not otherwise be exercisable upon
death, disability or retirement.
16
<PAGE>
No incentive stock options shall be granted under the 1996 Plan after
September 19, 2006. 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 be not 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 1996 Plan may be less
than 100% of the fair market value of the common stock on the date of grant.
Pursuant to a limitation in the 1996 Plan, no eligible person may be
granted any stock options for more than 600,000 shares of common stock in the
aggregate during any fiscal year. This limitation is included pursuant to
Section 162(m) of the Internal Revenue Code, which provides a $1 million
limitation on the compensation of certain executive officers that is
deductible by the Company for federal income tax purposes. The limitation on
stock options granted to an individual during any fiscal year is intended to
preserve the Company's federal tax deduction for compensation expense related
to stock options that may be granted to executive officers under the 1996
Plan.
The 1996 Plan provides for the automatic granting of a defined number of
options to non-employee directors. Such options are granted to each person
who (i) is not an employee of the Company, any paraent corporation or
subsidiary, (ii) is elected or re-elected as a director by vote of the Board
or the shareholders subsequent to September 19, 1996 and (iii) did not
receive an automatic grant of an option under the 1990 Plan or the 1996 Plan
in the preceding 35 months. Each such person automatically receives, as of
the date of each such election or re-election, a non-qualified option to
purchase 30,000 shares of common stock with an option price equal to the fair
market value of the Company's common stock on the date the option is granted.
The options have ten-year terms and are exercisable, as to one-third of the
shares subject to the option, beginning one year after the date of option
grant; as to the second third, beginning two years after the date of option
grant; and as to the last third, beginning three years after the date of
option grant. Any vested portion of these options will not expire upon
termination of service as a director. Non-employee directors are also
eligible to receive additional grants of non-qualified stock options under
the 1996 Plan.
The automatic grant program under the 1996 Plan replaces a similar
formula grant program under the 1990 Plan, with each option granted under the
1990 Plan covering 10,000 shares, vesting over a three-year period. The Board
has amended the 1990 Plan to provide that, subject to shareholder approval of
the 1996 Plan, no further automatic grants to non-employee directors will be
made under the 1990 Plan's formula grant program. At or after the adoption of
the 1996 Plan, under its authority to grant additional options to
non-employee directors, the Compensation Committee may elect to grant
additional options to adjust for the
17
<PAGE>
effects of the staggered terms of Board members and the transition to the
larger number of shares subject to the automatic grants under the new plan.
STOCK APPRECIATION RIGHTS. The Board may grant stock appreciation rights
("SARs") in connection with all or part of any stock option (with the exception
of options granted to non-employee directors), either at the time of the stock
option grant, or, in the case of non-qualified options, later during the term of
the stock option. SARs entitle the participant to receive from the Company the
same economic value that would have been derived from the exercise of an
underlying stock option and the immediate sale of the shares of common stock.
Such value is paid by the Company in cash, shares of common stock or a
combination of both, in the discretion of the Board. SARs are exercisable or
transferable only at such times and to the extent stock options to which they
relate are exercisable or transferable. If an SAR is exercised, the underlying
stock option is terminated as to the number of shares covered by the SAR
exercise.
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 be the same with respect to each recipient.
The restricted stock will be held in custody by the Company 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 1996 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.
DEFERRED STOCK. The Board may grant deferred stock awards that result in
shares of common stock being issued to a participant or group of participants
upon the expiration of a deferral period. The Board may condition the grant of
deferred stock upon the attainment of specified performance goals. The
provisions of deferred stock awards need not be the same with respect to each
recipient.
Upon termination of employment for any reason during the deferral period
for a given award, the deferred stock in question shall be forfeited by the
participant, subject to the Board's ability to waive any remaining deferral
limitations with respect to a participant's deferred stock. During the
deferral period, deferred stock awards may not be sold, assigned, transferred,
pledged or otherwise encumbered and any dividends declared with respect to the
number of shares covered by a deferred stock award will either be immediately
paid to the participant or deferred and deemed to be reinvested
18
<PAGE>
in additional deferred stock, as determined by the Board. The Board may
allow a participant to elect to further defer receipt of a deferred stock
award for a specified period or until a specified event.
19
<PAGE>
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 will be alternative minimum taxable income for purposes
of applying 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 (the
"Applicable Holding Periods"), 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 ordinary 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, the participant realizes compensation income. The
balance of any gain will be characterized as a capital gain. Under current law,
net capital gains are taxed at a maximum federal rate of 28% while compensation
income may be taxed at higher federal rates.
An optionee will not realize taxable compensation income upon the grant of
a non-qualified stock option. As a general matter, 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. The Company is entitled
to a tax deduction to the extent, and at the time, the participant realizes
compensation income.
SARS. The grant of an SAR would not result in income for the participant
or in a deduction for the Company. Upon receipt of shares or cash from exercise
of an SAR, the participant would generally recognize compensation income,
measured by the fair market value of the shares plus any cash received, and the
Company would be entitled to a corresponding deduction.
RESTRICTED STOCK AND DEFERRED STOCK. The grant of restricted stock and
deferred 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 or to a deferral
period which would result in a "substantial risk of forfeiture" as intended
by the Company and as defined in applicable Treasury regulations. If the
shares are transferable or there are no such restrictions or significant
deferral periods, the participant will realize compensation income upon
receipt of the award. Otherwise, a participant generally will realize
taxable compensation when any such restrictions or deferral period lapses.
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 or deferral period
also will be taxable compensation income to the participant. In any event,
the Company will be entitled to a tax
20
<PAGE>
deduction to the extent, and at the time, 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 the
election is made, the fair market value of the stock at the time of the award
is taxable to the participant as compensation income and the Company is
entitled to a corresponding deduction.
WITHHOLDING. The 1996 Plan requires each participant, no later than the
date as of which any part of the value of an award first becomes includible as
compensation in the gross income of the participant, to pay to the Company any
federal, state or local taxes required by law to be withheld with respect to the
award. The Company shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the participant. With
respect to any award under the 1996 Plan, if the terms of the award so permit, a
participant may elect to satisfy part or all of the withholding tax requirements
associated with the award by (i) authorizing the Company to retain from the
number of shares of Company common stock which would otherwise be deliverable to
the participant, or (ii) delivering to the Company from shares of Company common
stock already owned by the participant that number of shares having an aggregate
fair market value equal to part or all of the tax payable by the participant.
In that case, the Company would pay the tax liability from its own funds.
REGISTRATION WITH THE SEC
Upon approval of the 1996 Plan by the shareholders, the Company intends to
file a registration statement covering the offering of the shares of common
stock issuable under the 1996 Plan with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended.
VOTE REQUIRED
Shareholder approval of the 1996 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 1996 STOCK
PLAN.
21
<PAGE>
4. APPROVAL OF ACCOUNTANTS
Grant Thornton LLP, independent certified public accountants, have been
auditors of the Company since 1983. The Board of Directors has recommended that
the shareholders approve the reappointment of Grant Thornton LLP as the
Company's auditors for the current year.
A representative of Grant Thornton LLP is expected to be present at the
Annual Meeting of Shareholders. Such representative will be given the
opportunity to make a statement at the Annual Meeting and will be available to
answer any appropriate questions.
The Board of Directors recommends that the shareholders vote "FOR" the
proposal to approve the appointment of Grant Thornton LLP, and the enclosed
proxy will be so voted unless a contrary vote is indicated. In the event the
appointment of Grant Thornton LLP should not be approved by the shareholders,
the Board of Directors will make another appointment to be effective at the
earliest possible time.
GENERAL
The management of the Company knows of no matter other than the foregoing
to be brought before the meeting. However, the enclosed proxy gives
discretionary authority in the event additional matters should be presented.
The Annual Report of the Company which includes the Company's Annual Report
on Form 10-K for the year ended June 30, 1996, including the consolidated
financial statements and schedule thereto, as filed with the Securities and
Exchange Commission, is enclosed herewith.
By order of the Board of Directors,
James W. Bracke, PRESIDENT
October 7, 1996
22
<PAGE>
LIFECORE BIOMEDICAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 14, 1996
The undersigned hereby appoint James W. Bracke or Colleen M. Olson, or
either of them, as proxies, with full power of substitution to vote all shares
of common stock which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of Lifecore Biomedical, Inc., to
be held in Minneapolis, MN on November 14, 1996 or at any adjournments thereof,
upon any and all matters which may properly be brought before the meeting or
adjournments thereof, hereby revoking all former proxies.
(1) ELECTION OF DIRECTORS: / / WITH AUTHORITY to vote / / WITHHOLD
for all nominees listed AUTHORITY to
below (except as marked vote for the
to the contrary) nominees
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH NOMINEE'S NAME IN THE LIST BELOW.)
James W. Bracke, Joan L. Gardner, Thomas H. Garrett
(2) PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, [PAR] VALUE
$.01 PER SHARE, FROM 25,000,000 TO 50,000,000.
/ / FOR / / AGAINST / / ABSTAIN
(3) PROPOSAL TO RATIFY AND APPROVE THE 1996 STOCK PLAN.
/ / FOR / / AGAINST / / ABSTAIN
(4) PROPOSAL TO APPROVE THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS OF THE CORPORATION.
/ / FOR / / AGAINST / / ABSTAIN
(5) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
23
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1), (2),
(3) AND (4) IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS
IF THERE IS NO SPECIFICATION.
Dated: , 1996
---------------------------------
Signed:
---------------------------------------
(Signature)
---------------------------------------
(Signature)
PLEASE DATE AND SIGN exactly as your
name(s) appears below indicating, where
proper, official position or
representative capacity in which you are
signing. 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.
24
<PAGE>
LIFECORE BIOMEDICAL, INC.
1996 STOCK PLAN
<PAGE>
SECTION CONTENTS PAGE
- ------- -------- ----
1. General Purpose of Plan; Definitions. . . . . . . . . . . . . . . 1
2. Administration. . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. Stock Subject to Plan . . . . . . . . . . . . . . . . . . . . . . 4
4. Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6. Stock Appreciation Rights . . . . . . . . . . . . . . . . . . . . 8
7. Restricted Stock. . . . . . . . . . . . . . . . . . . . . . . . . 10
8. Deferred Stock Awards . . . . . . . . . . . . . . . . . . . . . . 11
9. Transfer, Leave of Absence, etc.. . . . . . . . . . . . . . . . . 12
10. Amendments and Termination. . . . . . . . . . . . . . . . . . . . 13
11. Unfunded Status of Plan . . . . . . . . . . . . . . . . . . . . . 13
12. General Provisions. . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
LIFECORE BIOMEDICAL, INC.
1996 STOCK PLAN
SECTION 1. GENERAL PURPOSE OF PLAN; DEFINITIONS.
The name of this plan is the Lifecore Biomedical, Inc. 1996 Stock Plan
(the "Plan"). The purpose of the Plan is to enable Lifecore Biomedical, Inc.
(the "Company") to retain and attract executives and other key employees, non-
employee directors and consultants who contribute to the Company's success by
their ability, ingenuity and industry, and to enable such individuals to
participate in the long-term success and growth of the Company by giving them a
proprietary interest in the Company.
For purposes of the Plan, the following terms shall be defined as set
forth below:
a. "BOARD" means the Board of Directors of the Company as it may be
comprised from time to time.
b. "CAUSE" means a felony conviction of a participant or the failure
of a participant to contest prosecution for a felony, willful misconduct,
dishonesty or intentional violation of a statute, rule or regulation, any of
which, in the judgment of the Company, is harmful to the business or reputation
of the Company.
c. "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute.
d. "COMMITTEE" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board, unless the Plan
specifically states otherwise.
e. "CONSULTANT" means any person, including an advisor, engaged by
the Company or a Parent of the Subsidiary of the Company to render services and
who is compensated for such services and who is not an employee of the Company
or any Parent Corporation or Subsidiary of the Company. A Non-Employee Director
may serve as a Consultant.
f. "COMPANY" means Lifecore Biomedical, Inc., a corporation organized
under the laws of the State of Minnesota (or any successor corporation).
g. "DEFERRED STOCK" means an award made pursuant to Section 8 below
of the right to receive stock at the end of a specified deferral period.
h. "DISABILITY" means permanent and total disability as determined by
the Committee.
<PAGE>
i. "EARLY RETIREMENT" means retirement, with consent of the Committee
at the time of retirement, from active employment with the Company and any
Subsidiary or Parent Corporation of the Company.
j. "FAIR MARKET VALUE" of Stock on any given date shall be determined
by the Committee as follows: (a) if the Stock is listed for trading on one of
more national securities exchanges, or is traded on the NASDAQ Stock Market, the
last reported sales price on the principal such exchange or the NASDAQ Stock
Market on the date in question, or if such Stock shall not have been traded on
such principal exchange on such date, the last reported sales price on such
principal exchange or the NASDAQ Stock Market on the first day prior thereto on
which such Stock was so traded; or (b) if the Stock is not listed for trading on
a national securities exchange or the NASDAQ Stock Market, but is traded in the
over-the-counter market, including the NASDAQ Small Cap Market, the closing bid
price for such Stock on the date in question, or if there is no such bid price
for such Stock on such date, the closing bid price on the first day prior
thereto on which such price existed; or (c) if neither (a) or (b) is applicable,
by any means fair and reasonable by the Committee, which determination shall be
final and binding on all parties.
k. "INCENTIVE STOCK OPTION" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
l. "NON-EMPLOYEE DIRECTOR" means a "Non-Employee Director" within the
meaning of Rule 16b-3(b)(3) under the Securities Exchange Act of 1934.
m. "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option, and is intended to be and is designated as a "Non-
Qualified Stock Option."
n. "NORMAL RETIREMENT" means retirement from active employment with
the Company and any Subsidiary or Parent Corporation of the Company on or after
age 65.
o. "OUTSIDE DIRECTOR" means a Director who: (a) is not a current
employee of the Company or any member of an affiliated group which includes the
Company; (b) is not a former employee of the Company who receives compensation
for prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year; (c) has not been an officer of the Company; (d) does
not receive remuneration from the Company, either directly or indirectly, in any
capacity other than as a director, except as otherwise permitted under Code
Section 162(m) and regulations thereunder. For this purpose, remuneration
includes any payment in exchange for good or services. This definition shall be
further governed by the provisions of Code Section 162(m) and regulations
promulgated thereunder.
p. "PARENT CORPORATION" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company if each of
the corporations (other than the Company) owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.
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q. "RESTRICTED STOCK" means an award of shares of Stock that are
subject to restrictions under Section 7 below.
r. "RETIREMENT" means Normal Retirement or Early Retirement.
s. "STOCK" means the Common Stock of the Company.
t. "STOCK APPRECIATION RIGHT" means the right pursuant to an award
granted under Section 6 below to surrender to the Company all or a portion of a
Stock Option in exchange for an amount equal to the difference between (i) Fair
Market Value, as of the date such Stock Option or such portion thereof is
surrendered, of the shares of Stock covered by such Stock Option or such portion
thereof, and (ii) the aggregate exercise price of such Stock Option or such
portion thereof.
u. "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5 below.
v. "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations (other than the last corporation in the unbroken chain) owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by the Board of Directors or by a
Committee appointed by the Board of Directors of the Company consisting of at
least two Directors, all of whom shall be Outside Directors and Non-Employee
Directors, who shall serve at the pleasure of the Board.
The Committee shall have the power and authority to grant to eligible
employees or Consultants, pursuant to the terms of the Plan: (i) Stock Options,
(ii) Stock Appreciation Rights, (iii) Restricted Stock, or (iv) Deferred Stock
awards.
In particular, the Committee shall have the authority:
(i) to select the officers and other key employees of the
Company and its Subsidiaries and other eligible persons to whom Stock
Options, Stock Appreciation Rights, Restricted Stock and Deferred Stock
awards may from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights,
Restricted Stock and Deferred Stock awards, or a combination of the
foregoing, are to be granted hereunder;
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(iii) to determine the number of shares to be covered by each
such award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including,
but not limited to, any restriction on any Stock Option or other award
and/or the shares of Stock relating thereto), which authority shall be
exclusively vested in the Committee (and not the Board) for purposes of
establishing performance criteria used with Restricted Stock and Deferred
Stock awards; provided, however, that in the event of a merger or asset
sale, the applicable provisions of Sections 5(c) and 7(c) of the Plan
shall govern the acceleration of the vesting of any Stock Option or
awards;
(v) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election
of the participant.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
and to otherwise supervise the administration of the Plan. The Committee may
delegate to executive officers of the Company the authority to exercise the
powers specified in (i), (ii), (iii), (iv) and (v) above with respect to persons
who are not either the chief executive officer of the Company or the four
highest paid officers of the Company other than the chief executive officer.
All decisions made by the Committee pursuant to the provisions of the
Plan shall be final and binding on all persons, including the Company and Plan
participants.
SECTION 3. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for
distribution under the Plan shall be 3,000,000. Such shares may consist, in
whole or in part, of authorized and unissued shares.
Subject to paragraph (b)(iv) of Section 6 below, if any shares that have
been optioned cease to be subject to Stock Options, or if any shares subject to
any Restricted Stock or Deferred Stock award granted hereunder are forfeited or
such award otherwise terminates without a payment being made to the participant,
such shares shall again be available for distribution in connection with future
awards under the Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, other change in corporate structure affecting
the Stock, or spin-off or other distribution of assets to shareholders, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the number and option price of shares
subject to outstanding options granted under the Plan, and in the number of
shares subject to Restricted Stock or Deferred
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Stock awards granted under the Plan as may be determined to be appropriate by
the Committee, in its sole discretion, provided that the number of shares
subject to any award shall always be a whole number. Such adjusted option price
shall also be used to determine the amount payable by the Company upon the
exercise of any Stock Appreciation Right associated with any Option.
SECTION 4. ELIGIBILITY.
Officers, other key employees of the Company and Subsidiaries, members of
the Board of Directors, and Consultants who are responsible for or contribute to
the management, growth and profitability of the business of the Company and its
Subsidiaries are eligible to be granted Stock Options, Stock Appreciation
Rights, Restricted Stock or Deferred Stock awards under the Plan. The optionees
and participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among those eligible, and the Committee
shall determine, in its sole discretion, the number of shares covered by each
award.
Notwithstanding the foregoing, no person shall receive grants of Stock
Options and Stock Appreciation Rights under this Plan which exceed 600,000
shares during any fiscal year of the Company.
SECTION 5. STOCK OPTIONS.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
The Stock Options granted under the Plan may be of two types: (i)
Incentive Stock Options and (ii) Non-Qualified Stock Options. No Incentive
Stock Options shall be granted under the Plan after September 19, 2006.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options, or both types of options (in each
case with or without Stock Appreciation Rights). To the extent that any option
does not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Anything in the Plan to the contrary notwithstanding, no term of this
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or any Incentive Stock Option
under Section 422 of the Code. The preceding sentence shall not preclude any
modification or amendment to an outstanding Incentive Stock Option, whether or
not such modification or amendment results in disqualification of such Stock
Option as an Incentive Stock Option, provided the optionee consents in writing
to the modification or amendment.
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Options granted under the Plan shall be subject to the following terms
and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(a) OPTION PRICE. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
In no event shall the option price per share of Stock purchasable under an
Incentive Stock Option be less than 100% of Fair Market Value on the date the
option is granted. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any Parent
Corporation or Subsidiary and an Incentive Stock Option is granted to such
employee, the option price shall be no less than 110% of the Fair Market Value
of the Stock on the date the option is granted.
(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after the date the option is granted. If an employee owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or any
Parent Corporation or Subsidiary and an Incentive Stock Option is granted to
such employee, the term of such option shall be no more than five years from the
date of grant.
(c) EXERCISABILITY. Stock Options shall be exercisable at such time
or times as determined by the Committee at or after grant, subject to the
restrictions stated in Section 5(b) above. If the Committee provides, in its
discretion, that any option is exercisable only in installments, the Committee
may waive such installment exercise provisions at any time. Notwithstanding
anything contained in the Plan to the contrary, the Committee may, in its
discretion, extend or vary the term of any Stock Option or any installment
thereof, whether or not the optionee is then employed by the Company, if such
action is deemed to be in the best interests of the Company; provided, however,
that in the event of a merger or sale of assets, the provisions of this Section
5(c) shall govern vesting acceleration. Notwithstanding the foregoing, unless
the Stock Option provides otherwise, any Stock Option granted under this Plan
shall be exercisable in full, without regard to any installment exercise
provisions, for a period specified by the Committee, but not to exceed sixty
(60) days, prior to the occurrence of any of the following events: (i)
dissolution or liquidation of the Company other than in conjunction with a
bankruptcy of the Company or any similar occurrence, (ii) any merger,
consolidation, acquisition, separation, reorganization, or similar occurrence,
where the Company will not be the surviving entity or (iii) the transfer of
substantially all of the assets of the Company or 75% or more of the outstanding
Stock of the Company.
The grant of an option pursuant to the Plan shall not limit 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,
exchange or consolidate or to dissolve, liquidate, sell or transfer all or any
part of its business or assets.
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(d) METHOD OF EXERCISE. Stock Options may be exercised in whole or in
part at any time during the option period by giving written notice of exercise
to the Company specifying the number of shares to be purchased. Such notice
shall be accompanied by payment in full of the purchase price, either by check,
or by any other form of legal consideration deemed sufficient by the Committee
and consistent with the Plan's purpose and applicable law, including promissory
notes or a properly executed exercise notice together with irrevocable
instructions to a broker acceptable to the Company to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price. As
determined by the Committee at the time of grant or exercise, in its sole
discretion, payment in full or in part may also be made in the form of Stock
already owned by the optionee (which in the case of Stock acquired upon exercise
of an option have been owned for more than six months on the date of surrender)
or, in the case of the exercise of a Non-Qualified Stock Option, Restricted
Stock or Deferred Stock subject to an award hereunder (based, in each case, on
the Fair Market Value of the Stock on the date the option is exercised, as
determined by the Committee), provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares may be authorized only at the time the option is granted, and provided
further that in the event payment is made in the form of shares of Restricted
Stock or a Deferred Stock award, the optionee will receive a portion of the
option shares in the form of, and in an amount equal to, the Restricted Stock or
Deferred Stock award tendered as payment by the optionee. If the terms of an
option so permit, an optionee may elect to pay all or part of the option
exercise price by having the Company withhold from the shares of Stock that
would otherwise be issued upon exercise that number of shares of Stock having a
Fair Market Value equal to the aggregate option exercise price for the shares
with respect to which such election is made. No shares of Stock shall be issued
until full payment therefor has been made. An optionee shall generally have the
rights to dividends and other rights of a shareholder with respect to shares
subject to the option when the optionee has given written notice of exercise,
has paid in full for such shares, and, if requested, has given the
representation described in paragraph (a) of Section 12.
(e) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) TERMINATION BY DEATH. If an optionee's employment by the Company
and any Subsidiary or Parent Corporation terminates by reason of death, any
Incentive Stock Option may thereafter be immediately exercised, to the extent
then exercisable, by the legal representative of the estate or by the legatee of
the optionee under the will of the optionee, for a period of twelve months from
the date of such death or until the expiration of the stated term of the option,
whichever period is shorter. In the event of termination of employment by
reason of death, if any Stock Option is exercised after the expiration of the
exercise periods that apply for purposes of Section 422 of the Code, the option
will thereafter be treated as a Non-Qualified Stock Option.
(g) TERMINATION BY REASON OF DISABILITY. If an optionee's employment
by the Company and any Subsidiary or Parent Corporation terminates by reason of
Disability, any Incentive Stock Option held by such optionee may thereafter be
exercised, to the extent it was exercisable at the time
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of termination due to Disability, but may not be exercised after twelve months
from the date of such termination of employment or the expiration of the stated
term of the option, whichever period is the shorter. In the event of
termination of employment by reason of Disability, if any Stock Option is
exercised after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, the option will thereafter be treated as a Non-
Qualified Stock Option.
(h) TERMINATION BY REASON OF RETIREMENT. If an optionee's employment
by the Company and any Subsidiary or Parent Corporation terminates by reason of
Retirement and the terms of the Stock Option so provide, any Incentive Stock
Option held by such optionee may thereafter be exercised to the extent it was
exercisable at the time of such Retirement, but may not be exercised after
twelve months from the date of such termination of employment or the expiration
of the stated term of the option, whichever period is the shorter. In the event
of termination of employment by reason of Retirement, if any Stock Option is
exercised after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, the option will thereafter be treated as a Non-
Qualified Stock Option.
(i) OTHER TERMINATION. If an optionee's continuous status as an
employee or Consultant terminates (other than upon the optionee's death ,
Disability or Retirement), any Incentive Stock Option held by such optionee may
thereafter be exercised to the extent it was exercisable at the time of such
termination, but may not be exercised after 90 days after such termination, or
the expiration of the stated term of the option, whichever period is the
shorter. In the event of termination of employment by reason other than death,
Disability or Retirement and if pursuant to its terms any Stock Option is
exercised after the expiration of the exercise periods that apply for purposes
of Section 422 of the Code, the option will thereafter be treated as a Non-
Qualified Stock Option. In the event an Optionee's employment with the Company
is terminated for Cause, all unexercised Options granted to such Optionee shall
immediately terminate.
(j) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. The aggregate Fair
Market Value (determined as of the time the Stock Option is granted) of the
Common Stock with respect to which an Incentive Stock Option under this Plan or
any other plan of the Company and any Subsidiary or Parent Corporation is
exercisable for the first time by an optionee during any calendar year shall not
exceed $100,000.
(k) DIRECTORS WHO ARE NOT EMPLOYEES. Each person who (i) is not an
employee of the Company, any Parent Corporation or any Subsidiary, (ii) is
elected or re-elected as a Director by the Board of Directors or shareholders
subsequent to September 19, 1996, and (iii) did not receive a grant of an
option pursuant to this Section 5(k) or Section 5(k) of the Company's 1990
Stock Plan in the 35 months preceding such election or re-election, shall
automatically be granted an Option to purchase 30,000 shares of Stock as of
the date of such election or re-election, at an option price per share equal
to 100% of the Fair Market Value of a share of Stock on the date of such
election or re-election. All such Options shall be designated as
Non-Qualified Stock Options and shall be subject to the same terms and
provisions as are then in effect with respect to the grant of Non-Qualified
Stock Options to officers and key employees of the Company, except that (1)
the term of each such Option shall be equal to ten years, which term shall
not expire upon the termination of service as a Director and (2) the Option
shall become exercisable as to one-third of the shares subject to the Option
beginning one year after the date the Option is granted, the second third
beginning two years after the date the Option is granted and the last third
beginning three years after the date the Option is granted. Upon termination
of such Director's service as a Director of the Company, the unvested portion
of an Option held by such Director shall not be exercisable. Subject to the
foregoing, all provisions of this Plan not inconsistent with the foregoing
shall apply to Options granted pursuant to this Section 5(k).
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) GRANT AND EXERCISE. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of the grant of such Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of the option.
A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the
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related Stock Option, except that a Stock Appreciation Right granted with
respect to less than the full number of shares covered by a related Stock Option
shall not be reduced until the exercise or termination of the related Stock
Option exceeds the number of shares not covered by the Stock Appreciation Right.
A Stock Appreciation Right may be exercised by an optionee, in accordance
with paragraph (b) of this Section 6, by surrendering the applicable portion of
the related Stock Option. Upon such exercise and surrender, the optionee shall
be entitled to receive an amount determined in the manner prescribed in
paragraph (b) of this Section 6. Stock Options which have been so surrendered,
in whole or in part, shall no longer be exercisable to the extent the related
Stock Appreciation Rights have been exercised.
(b) TERMS AND CONDITIONS. Stock Appreciation Rights shall be subject
to such terms and conditions, not inconsistent with the provisions of the Plan,
as shall be determined from time to time by the Committee, including the
following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they
relate shall be exercisable in accordance with the provisions of Section
5 and this Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive up to, but not more than, an amount
in cash or shares of Stock equal in value to the excess of the Fair
Market Value of one share of Stock over the option price per share
specified in the related option multiplied by the number of shares in
respect of which the Stock Appreciation Right shall have been exercised,
with the Committee having the right to determine the form of payment.
(iii) Stock Appreciation Rights shall be transferable only when
and to the extent that the underlying Stock Option would be transferable
under Section 5 of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised for the purpose of the limitation
set forth in Sections 3 and 4 of the Plan on the total number of shares
of Stock to be issued under the Plan and the maximum number of shares to
be awarded to any one person in a fiscal year, but only to the extent of
the number of shares issued or issuable under the Stock Appreciation
Right at the time of exercise based on the value of the Stock
Appreciation Right at such time.
(v) A Stock Appreciation Right granted in connection with an
Incentive Stock Option may be exercised only if and when the market price
of the Stock subject to the Incentive Stock Option exceeds the exercise
price of such Option.
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SECTION 7. RESTRICTED STOCK.
(a) ADMINISTRATION. Shares of Restricted Stock may be issued either
alone or in addition to other awards granted under the Plan. The Committee
shall determine the officers, key employees and Consultants of the Company and
Subsidiaries to whom, and the time or times at which, grants of Restricted Stock
will be made, the number of shares to be awarded, the time or times within which
such awards may be subject to forfeiture, and all other conditions of the
awards. The Committee may also condition the grant of Restricted Stock upon the
attainment of specified performance goals. The provisions of Restricted Stock
awards need not be the same with respect to each recipient.
(b) AWARDS AND CERTIFICATES. The prospective recipient of an award of
shares of Restricted Stock shall not have any rights with respect to such award,
unless and until such recipient has executed an agreement evidencing the award
and has delivered a fully executed copy thereof to the Company, and has
otherwise complied with the then applicable terms and conditions.
(i) Each participant shall be issued a stock certificate in
respect of shares of Restricted Stock awarded under the Plan. Such
certificate shall be registered in the name of the participant, and shall
bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such award, substantially in the following
form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the Lifecore Biomedical, Inc. 1996 Stock
Plan and an Agreement entered into between the registered owner
and Lifecore Biomedical, Inc. Copies of such Plan and Agreement
are on file in the offices of Lifecore Biomedical, Inc., 3515
Lyman Boulevard, Chaska, MN 55318."
(ii) The Committee shall require that the stock certificates
evidencing such shares be held in custody by the Company until the
restrictions thereon shall have lapsed, and that, as a condition of any
Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Stock covered by such award.
(c) RESTRICTIONS AND CONDITIONS. The shares of Restricted Stock
awarded pursuant to the Plan shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the date
of such award (the "Restriction Period"), the participant shall not be
permitted to sell, transfer, pledge or assign shares of Restricted Stock
awarded under the Plan. Within these limits, the Committee may provide
for the lapse of such restrictions in installments where deemed
appropriate.
(ii) Except as provided in paragraph (c)(i) of this Section 7,
the participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a shareholder of the Company, including the
right to vote the shares and the right to receive any cash dividends.
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The Committee, in its sole discretion, may permit or require the payment
of cash dividends to be deferred and, if the Committee so determines,
reinvested in additional shares of Restricted Stock (to the extent shares
are available under Section 3 and subject to paragraph (f) of Section
12). Certificates for shares of unrestricted Stock shall be delivered to
the grantee promptly after, and only after, the period of forfeiture
shall have expired without forfeiture in respect of such shares of
Restricted Stock.
(iii) Subject to the provisions of the award agreement and
paragraph (c)(iv) of this Section 7, upon termination of employment for
any reason during the Restriction Period, all shares still subject to
restriction shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause),
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the Committee
may, in its sole discretion, when it finds that a waiver would be in the
best interest of the Company, waive in whole or in part any or all
remaining restrictions with respect to such participant's shares of
Restricted Stock.
(v) Notwithstanding the foregoing, all restrictions with
respect to any participant's shares of Restricted Stock shall lapse, on
the date determined by the Committee, prior to, but in no event more than
sixty (60) days prior to, the occurrence of any of the following events:
(i) dissolution or liquidation of the Company, other than in conjunction
with a bankruptcy of the Company or any similar occurrence, (ii) any
merger, consolidation, acquisition, separation, reorganization, or
similar occurrence, where the Company will not be the surviving entity or
(iii) the transfer of substantially all of the assets of the Company or
75% or more of the outstanding Stock of the Company.
SECTION 8. DEFERRED STOCK AWARDS.
(a) ADMINISTRATION. Deferred Stock may be awarded either alone or in
addition to other awards granted under the Plan. The Committee shall determine
the officers, key employees and Consultants of the Company and Subsidiaries to
whom and the time or times at which Deferred Stock shall be awarded, the number
of Shares of Deferred Stock to be awarded to any participant or group of
participants, the duration of the period (the "Deferral Period") during which,
and the conditions under which, receipt of the Stock will be deferred, and the
terms and conditions of the award in addition to those contained in paragraph
(b) of this Section 8. The Committee may also condition the grant of Deferred
Stock upon the attainment of specified performance goals. The provisions of
Deferred Stock awards need not be the same with respect to each recipient.
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(b) TERMS AND CONDITIONS.
(i) Subject to the provisions of this Plan and the award
agreement, Deferred Stock awards may not be sold, assigned, transferred,
pledged or otherwise encumbered during the Deferral Period. At the
expiration of the Deferral Period (or Elective Deferral Period, where
applicable), share certificates shall be delivered to the participant, or
his legal representative, in a number equal to the shares covered by the
Deferred Stock award.
(ii) Amounts equal to any dividends declared during the Deferral
Period with respect to the number of shares covered by a Deferred Stock
award will be paid to the participant currently or deferred and deemed to
be reinvested in additional Deferred Stock or otherwise reinvested, all
as determined at the time of the award by the Committee, in its sole
discretion.
(iii) Subject to the provisions of the award agreement and
paragraph (b)(iv) of this Section 8, upon termination of employment for
any reason during the Deferral Period for a given award, the Deferred
Stock in question shall be forfeited by the participant.
(iv) In the event of special hardship circumstances of a
participant whose employment is terminated (other than for Cause)
including death, Disability or Retirement, or in the event of an
unforeseeable emergency of a participant still in service, the Committee
may, in its sole discretion, when it finds that a waiver would be in the
best interest of the Company, waive in whole or in part any or all of the
remaining deferral limitations imposed hereunder with respect to any or
all of the participant's Deferred Stock.
(v) A participant may elect to further defer receipt of the
award for a specified period or until a specified event (the "Elective
Deferral Period"), subject in each case to the Committee's approval and
to such terms as are determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the Committee, such
election must generally be made prior to completion of one half of the
Deferral Period for a Deferred Stock award (or for an installment of such
an award).
(vi) Each award shall be confirmed by, and subject to the terms
of, a Deferred Stock agreement executed by the Company and the
participant.
SECTION 9. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer of an employee from the Company to a Parent Corporation
or Subsidiary, or from a Parent Corporation or Subsidiary to the Company, or
from one Subsidiary to another;
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(b) a leave of absence, approved in writing by the Committee, for
military service or sickness, or for any other purpose approved by the Company
if the period of such leave does not exceed ninety (90) days (or such longer
period as the Committee may approve, in its sole discretion); and
(c) a leave of absence in excess of ninety (90) days, approved in
writing by the Committee, but only if the employee's right to reemployment is
guaranteed either by a statute or by contract, and provided that, in the case of
any leave of absence, the employee returns to work within 30 days after the end
of such leave.
SECTION 10. AMENDMENTS AND TERMINATION.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made (i) which would impair the rights
of an optionee or participant under a Stock Option, Restricted Stock or other
Stock-based award theretofore granted, without the optionee's or participant's
consent, or (ii) which without the approval of the stockholders of the Company
would cause the Plan to no longer comply with Rule 16b-3 under the Securities
Exchange Act of 1934, Section 422 of the Code or any other regulatory
requirements.
The Committee may amend the terms of any award or option theretofore
granted, prospectively or retroactively to the extent such amendment is
consistent with the terms of this Plan, but no such amendment shall impair the
rights of any holder without his or her consent except to the extent authorized
under the Plan. The Committee may also substitute new Stock Options for
previously granted options, including previously granted options having higher
option prices.
SECTION 11. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained herein shall give any
such participant or optionee any rights that are greater than those of a general
creditor of the Company. In its sole discretion, the Committee may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Stock or payments in lieu of or with respect to awards
hereunder, provided, however, that the existence of such trusts or other
arrangements is consistent with the unfunded status of the Plan.
SECTION 12. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares pursuant
to a Stock Option under the Plan to represent to and agree with the Company in
writing that the optionee is acquiring the shares without a view to distribution
thereof. The certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
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All certificates for shares of Stock delivered under the Plan pursuant to
any Restricted Stock, Deferred Stock or other Stock-based awards shall be
subject to such stock-transfer orders and other restrictions as the Committee
may deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Stock is
then listed, and any applicable Federal or state securities laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Subject to paragraph (d) below, recipients of Restricted Stock,
Deferred Stock and other Stock-based awards under the Plan (other than Stock
Options) are not required to make any payment or provide consideration other
than the rendering of services.
(c) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional compensation arrangements, subject
to stockholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases. The
adoption of the Plan shall not confer upon any employee of the Company or any
Subsidiary any right to continued employment with the Company or a Subsidiary,
as the case may be, nor shall it interfere in any way with the right of the
Company or a Subsidiary to terminate the employment of any of its employees at
any time.
(d) Each participant shall, no later than the date as of which any
part of the value of an award first becomes includible as compensation in the
gross income of the participant for Federal income tax purposes, pay to the
Company, or make arrangements satisfactory to the Committee regarding payment
of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to the award. The obligations of the Company under the
Plan shall be conditional on such payment or arrangements and the Company and
Subsidiaries shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to the participant. With
respect to any award under the Plan, if the terms of such award so permit, a
participant may elect by written notice to the Company to satisfy part or all of
the withholding tax requirements associated with the award by (i) authorizing
the Company to retain from the number of shares of Stock that would otherwise be
deliverable to the participant, or (ii) delivering to the Company from shares of
Stock already owned by the participant, that number of shares having an
aggregate Fair Market Value equal to part or all of the tax payable by the
participant under this Section 12(d). Any such election shall be in accordance
with, and subject to, applicable tax and securities laws, regulations and
rulings.
(e) At the time of grant, the Committee may provide in connection with
any grant made under this Plan that the shares of Stock received as a result of
such grant shall be subject to a repurchase right in favor of the Company,
pursuant to which the participant shall be required to offer to the Company upon
termination of employment for any reason any shares that the participant
acquired under the Plan, with the price being the then Fair Market Value of the
Stock or, in the case of a termination for Cause, an amount equal to the cash
consideration paid for the Stock, subject to such other terms and conditions as
the Committee may specify at the time of grant. The Committee may, at the time
of the grant of an award under the Plan, provide the Company with the right to
repurchase, or require the forfeiture of, shares of Stock acquired pursuant to
the Plan by any
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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.
(f) The reinvestment of dividends in additional Restricted Stock (or
in Deferred Stock or other types of Plan awards) at the time of any dividend
payment shall only be permissible if the Committee (or the Company's chief
financial officer) certifies in writing that under Section 3 sufficient shares
are available for such reinvestment (taking into account then outstanding Stock
Options and other Plan awards).
(g) The Plan is expressly made subject to the approval by shareholders
of the Company. If the Plan is not so approved by the shareholders on or before
one year after this Plan's adoption by the Board of Directors, this Plan shall
not come into effect. The offering of the shares hereunder shall be also
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.
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