<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Lifecore Biomedical, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
LIFECORE BIOMEDICAL, INC.
3515 LYMAN BOULEVARD
CHASKA, MN 55318
(612) 368-4300
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 13, 1997
------------------------------
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 13, 1997 at 3:30 p.m., local time, for the following purposes:
1. To elect two (2) directors to hold three-year terms.
2. To ratify and approve the selection of independent certified public
accountants for the Company for the current fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on September 22,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting.
By Order of the Board of Directors,
/s/ James W. Bracke
James W. Bracke, PRESIDENT
Minneapolis, Minnesota
October 6, 1997
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 13, 1997, 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 6, 1997.
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 22, 1997 consisted of 12,228,972 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 22, 1997 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 by a majority of the voting power of the minimum
number of shares that would constitute such a
1
<PAGE>
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,
1998 is expected to be held on or about November 12, 1998, and proxy materials
in connection with that meeting are expected to be mailed on or about October 5,
1998.
2
<PAGE>
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 August 15, 1997 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 9; and (iv) all officers and directors as a
group.
NAME AND ADDRESS OF AMOUNT BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED (1) CLASS
---------------- --------- -----
First Union National Bank of North Carolina
One First Union Center
Charlotte, NC 28288-0137. . . . . . . . . . 1,146,280(2) 9.4%
Putnam Investments
One Post Office Square
Boston, MA 02109. . . . . . . . . . . . . . 1,098,365(3) 9.0%
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933 . . . . . . . . . . 962,524(4) 7.9%
Perkins Capital Management, Inc.
730 East Lake Street
Wayzata, MN 55391 . . . . . . . . . . . . . 759,835(5) 6.2%
Dennis J. Allingham . . . . . . . . . . . . 13,500(6) *
James Bracke, Ph.D. . . . . . . . . . . . . 281,548(7) 2.3%
Orwin L. Carter Ph.D. . . . . . . . . . . . 27,000(8) *
Joan L. Gardner . . . . . . . . . . . . . . 18,083(9) *
John C. Heinmiller. . . . . . . . . . . . . 8,666(10) *
Thomas H. Garrett . . . . . . . . . . . . . 3,333(11) *
Brian J. Kane . . . . . . . . . . . . . . . 39,870(12) *
Donald W. Larson. . . . . . . . . . . . . . 23,000(13) *
3
<PAGE>
Mark J. McKoskey. . . . . . . . . . . . . . 39,432(14) *
Colleen M. Olson. . . . . . . . . . . . . . 50,395(15) *
Richard W. Perkins. . . . . . . . . . . . . 74,000(16) *
Directors/Officers as a group
(11 persons). . . . . . . . . . . . . . . . 578,827(17) 4.6%
- ---------------------------
* 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 February 3, 1997 pursuant
to Section 13(g) of the Securities Exchange Act of 1934.
(3) 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.
(4) 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.
(5) Based upon the content of a statement filed as of February 4, 1997 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.
(6) Includes 13,500 shares which Mr. Allingham has the right to purchase
pursuant to stock options which are or will become exercisable within sixty
days of the date hereof.
(7) Includes 60,763 shares held by Dr. Bracke's wife, 28,275 shares held
jointly by Dr. Bracke and his wife, 3,500 shares held by one of Dr.
Bracke's children and 189,010 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.
(8) Includes 26,000 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.
(9) Includes 4,250 shares held by a partnership in which Ms. Gardner is a
partner and 13,333 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.
4
<PAGE>
(10) Includes 6,666 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.
(11) Includes 3,333 shares which Mr. Garrett has the right to purchase pursuant
to stock options which are or will become exercisable sixty days of the
date hereof.
(12) Includes 39,000 shares which Mr. Kane has the right to purchase pursuant to
stock options which are or will become exercisable within sixty days of the
date hereof.
(13) Includes 23,000 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.
(14) Includes 32,500 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.
(15) Includes 31,500 shares which Ms. Olson has the right to purchase pursuant
to stock options which are or will become exercisable within sixty days of
the date hereof.
(16) 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
23,000 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 759,835 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.
(17) Includes 400,842 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.
ELECTION OF DIRECTORS
Two 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
5
<PAGE>
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:
Donald W. Larson (68) Publisher, Business Newsletter 1983
Orwin L. Carter, Ph.D. (55) Vice President of Finance
and Administration,
Hamline University 1989
THE DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE ANNUAL MEETING AND
WHOSE TERMS WILL EXPIRE IN 1998:
Richard W. Perkins (66) President and CEO, Perkins Capital
Management, Inc. 1983
John C. Heinmiller (43) President of F3 Corporation 1994
THE DIRECTORS WHOSE TERM OF OFFICE WILL CONTINUE AFTER THE ANNUAL MEETING AND
WHOSE TERMS WILL EXPIRE IN 1999:
James W. Bracke, Ph.D. (50) President and CEO of the Company 1983
Joan L. Gardner (52) Community Volunteer 1992
Thomas H. Garrett (52) Business Consultant 1996
OTHER INFORMATION REGARDING THE BOARD
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
6
<PAGE>
Corporation, CNS, Inc., Eagle Pacific Industries, Inc., Nortech Systems, Inc.,
Quantech, Ltd., and Vital Images, Inc. He has been a director of the Company
since 1983.
Mr. Heinmiller is currently President of F3 Corporation, an asset
management company. From March 1995 to May 1997 he was Vice
President-Administration of Daig Corporation. 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.
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 November 14, 2000. 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.
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 1997. 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, Mr. Garrett 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 1997. 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 1997.
7
<PAGE>
MEETINGS. During fiscal 1997 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") provides for the automatic granting
of options to non-employee directors upon election or re-election by the Board
or shareholders (provided that the Board may adjust the option granted to any
person who has received a stock option from the Company in the preceding three
years.) Each option covers 30,000 shares, vesting over a three-year period.
Non-employee directors are also eligible for additional option grants under the
1996 Plan. Pursuant to the automatic grant feature of the 1996 Plan, Messrs.
Carter, Larson and Perkins were each granted an option to purchase 30,000
shares, vesting over a three year period. Mr. Garrett, Ms. Gardner and Mr.
Heinmiller were granted options to purchase 20,000 shares, 13,333 shares and
13,333 shares, respectively, each vesting over a three year period. The options
granted to these individuals were adjusted based on stock options received
within the last three years. All options were granted on November 14, 1996 at a
purchase price of $16.88 per share.
8
<PAGE>
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 1997.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
------------
FISCAL ANNUAL COMPENSATION STOCK
-------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (1)
- --------------------------- ---- ------ ----- ----------
James W. Bracke 1997 $237,308 - 500,000
President and Chief 1996 199,520 $90,000 24,000
Executive Officer 1995 189,073 - 10,000
Dennis J. Allingham 1997 $134,928 - 30,000
Vice President, Chief 1996(2) 50,776 - 30,000
Financial Officer and
General Manager of the
Hyaluronate Division
Brian J. Kane 1997 $114,618 - 30,000
Vice President of New 1996 99,750 - 8,000
Business Development 1995 96,827 - 5,000
Mark J. McKoskey 1997 $124,923 - 30,000
Vice President and General 1996 108,366 - 12,000
Manager of the Oral 1995 96,827 - 5,000
Restorative Division
Colleen M. Olson 1997 $114,618 - 30,000
Vice President of Corporate 1996 97,850 - 8,000
Administrative Operations 1995 98,654 - 5,000
- -----------------------------
(1) Number of shares of common stock purchasable under option grants.
(2) Compensation is for the period from February through June.
9
<PAGE>
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 most recently
amended on November 14, 1996, which provides for a term of employment through
November 14, 2000 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 $250,000 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 $750,000.
Dennis J. Allingham, Vice President, Chief Financial Officer and General
Manager of the Hyaluronate Division, entered into an Employee Agreement with the
Company dated February 7, 1996, which contains customary confidential disclosure
and non-compete provisions. As an executive officer, the Company will provide
for Mr. Allingham 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. Allingham's base salary is currently $140,000 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 $140,000.
Brian J. Kane, Vice President of New Business Development, entered into an
Employee Agreement with the Company dated January 24, 1986, which contains
customary confidential disclosure and non-compete provisions. As an executive
officer, the Company will provide for Mr. Kane 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. Kane's base salary is currently $120,000 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 $120,000.
Mark J. McKoskey, Vice President and General Manager of the Oral
Restorative Division, entered into an Employee Agreement with the Company dated
June 3, 1985, which contains customary confidential disclosure and non-compete
provisions. As an executive officer, the Company 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 of acquisition of
the Company or as a result of a change in control of the Company. Mr.
McKoskey's base salary is currently $130,000 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 $130,000.
Colleen M. Olson, Vice President of Corporate Administrative Operations,
entered into an Employee Agreement with the Company dated September 11, 1984,
which contains customary confidential disclosure and non-compete provisions. As
an executive officer, the Company will
10
<PAGE>
provide for Ms. Olson a severance payment equal to 100% of her 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.
Ms. Olson's base salary is currently $120,000 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 her
approximately $120,000.
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
OPTIONS POTENTIAL REALIZABLE VALUE
GRANTED AT ASSUMED ANNUAL RATES
TO EXERCISE OF STOCK PRICE
EMPLOYEES OR BASE APPRECIATION FOR OPTION
OPTIONS IN LAST PRICE PER EXPIRATION TERM (4)
--------------------------
NAME GRANTED(1) YEAR SHARE (2) DATE (3) 5% 10%
---- --------- ---- -------- ------- -- ---
<S> <C> <C> <C> <C> <C> <C>
James W. Bracke 500,000 57.1% $16.875 Nov. 14, 2006 $5,306,298 $13,447,202
Dennis J. Allingham 30,000 3.4% $16.875 Nov. 14, 2006 318,378 806,832
Brian J. Kane 30,000 3.4% $16.875 Nov. 14, 2006 318,378 806,832
Mark J. McKoskey 30,000 3.4% $16.875 Nov. 14, 2006 318,378 806,832
Colleen M. Olson 30,000 3.4% $16.875 Nov. 14, 2006 318,378 806,832
</TABLE>
- --------------------
(1) Exercisable in cumulative installments of 20% per year with the first
installment vesting on the date of grant (November 14, 1996), 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.
11
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
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>
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
ON VALUE OPTIONS AT YEAR-END YEAR-END (2)
------------------- -----------
NAME EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James W. Bracke 7,257 $113,013 184,010 428,000 $192,080 $135,125
Dennis J. Allingham - - 13,500 46,500 - -
Brian J. Kane 7,500 122,813 27,750 36,250 152,813 67,438
Mark J. McKoskey - - 28,750 39,250 155,563 75,688
Colleen M. Olson - - 27,750 36,250 152,813 67,438
</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, 1997 was
$13.75. Value is calculated on the basis of the difference between the
option exercise price and $13.75 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, Mr. Garrett 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, Mr.
Garrett and Mr. Larson in their capacity as the Board's Compensation Committee
(the "Committee"), addressing the Company's compensation policies for fiscal
1997 as they affected the Company's executive officers generally, and
specifically as they affected Dr. Bracke, the Company's Chief Executive Officer,
and Messrs. Allingham, Kane and McKoskey and Ms. Olson, the Company's other
executive officers whose cash compensation exceeded $100,000 during fiscal 1997
(collectively with Dr. Bracke, the "Named Executives").
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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.
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 reflect cost of living
increases and adjustments based on increased responsibilities. The
increase for Dr. Bracke pursuant to an extension of his employment contract
is discussed below under "Chief Executive Officer Compensation."
STOCK OPTIONS. During fiscal 1997, the Company granted stock options
to all of its officers, including Dr. Bracke. These options, which were
granted in November 1996, allow Dr. Bracke to purchase 500,000 shares of
the Company's common stock and each of the other executive officers to
purchase 30,000 shares of the Company's common stock, at $16.88 per share,
the fair market value of the shares on the date of grant, exercisable in
cumulative installments of 20% per year, with the first installment vesting
on 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 to build shareholder value and
provide a significant earnings potential for the recipients. The
multi-year vesting requirements for the incentive stock options granted
during fiscal 1997 are designed to direct the Company's executives toward
steady growth and to retain their services on a long term basis.
CASH BONUSES. The Board of Directors authorized a cash bonus of
$90,000 during fiscal 1996. 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.
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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. The 1996 Stock 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 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 $200,000 to $250,000 in fiscal 1997 in connection with an amendment to his
employment agreement to extend the term of the agreement through November 14,
2000. The Committee believes this level is more competitive with other salaries
of chief executive officers in the industry. Dr. Bracke also received a stock
option to purchase 500,000 shares of the Company's common stock in fiscal 1997
in connection with the extension of the agreement. The exercise price is equal
to the fair market value of the shares on the date of the grant. The option
becomes exercisable in cumulative annual installments of 20%, with the first
installment vesting on the date of grant, and expires ten years after the date
of grant. Dr. Bracke's option grants in fiscal 1996 and 1995 covered 24,000 and
10,000 shares, respectively. The Committee approved the larger grant to Dr.
Bracke in fiscal 1997 in order to provide him a greater equity stake in the
Company and to provide him with a strong, direct motivation to maximize
shareholder value. The Committee also believes this grant is comparable to
opportunities that would be available elsewhere in the industry.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
Richard W. Perkins, Chairman Joan L. Gardner
Thomas H. Garrett Donald W. Larson
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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, 1997 with the cumulative total return on: (i) the Nasdaq Stock
Market Index (U.S. Companies), (ii) the Media General SIC Code 384 Index -
Medical Instruments and Supplies (the "SIC Code Index"), and (iii) a
Company-selected peer group. Beginning in 1997, the cumulative total
shareholder return on the Company's Common Stock will be compared against the
SIC Code Index, and the use of the Company-selected peer group made up of
competitors in the medical products field will be discontinued. Management
believes that the SIC Code Index will be more meaningful than the previous
comparison to the peer group of competitors in the medical products field due to
changes in the competitors' businesses. The comparison assumes that $100 was
invested on June 30, 1992 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 Company-selected peer group includes the following companies: Anika
Research Inc.; BioTechnology General Corp.; Biomatrix Inc.; Genzyme Corp.;
Gliatech, Inc.; 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.
[ LINE GRAPH ]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
6/30/92 6/30/93 6/30/94 6/30/95 6/30/96 6/30/97
------- ------- ------- ------- ------- -------
Lifecore $100.00 $53.57 $41.96 $55.36 $151.79 $98.21
Nasdaq U.S. Companies 100.00 122.76 134.61 157.88 198.73 239.40
SIC Code Index 100.00 84.97 78.87 118.84 156.62 180.04
Company-Selected
Peer Group 100.00 86.94 57.41 79.78 125.29 131.00
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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, 1997, 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,
/s/ James W. Bracke
James W. Bracke, PRESIDENT
October 6, 1997
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LIFECORE BIOMEDICAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 13, 1997
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 13, 1997 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.
<TABLE>
<S> <C> <C> <C> <C> <C>
(1) ELECTION OF DIRECTORS: / / WITH AUTHORITY to vote / / WITHHOLD AUTHORITY
for all nominees listed below to vote for the nominees
(except as marked to the
contrary)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH NOMINEE'S NAME IN THE LIST
BELOW.)
Donald W. Larson, Orwin L. Carter, Ph.D.
(2) PROPOSAL TO APPROVE THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF THE
CORPORATION.
/ / FOR / / AGAINST / / ABSTAIN
(3) In their discretion, the proxies are authorized to vote upon such other business as may properly come before the
meeting.
</TABLE>
<PAGE>
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON PROPOSALS (1) AND (2)
IN ACCORDANCE WITH THE SPECIFICATIONS MADE AND "FOR" SUCH PROPOSALS IF THERE IS
NO SPECIFICATION.
Dated: __________________ , 1997
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.
