<PAGE>
LIFECORE BIOMEDICAL, INC.
3515 LYMAN BOULEVARD
CHASKA, MN 55318
(612) 368-4300
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 12, 1998
------------------------
Notice is hereby given that the Annual Meeting of Shareholders of Lifecore
Biomedical, Inc., (the "Company"), will be held in the Auditorium of the
Lutheran Brotherhood Building, 625 Fourth Avenue South, Minneapolis, Minnesota
55402 on Thursday, November 12, 1998 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 appointment of Grant Thornton LLP as
independent certified public accountants of the Company for the
current fiscal year ending June 30, 1999.
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 21,
1998 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 5, 1998
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 at 3:30 p.m. on November 12, 1998, 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 5, 1998.
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 as indicated in such proxy.
The total number of shares of stock outstanding and entitled to vote at the
meeting as of September 21, 1998 consisted of 12,373,422 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 21, 1998 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 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 be used to 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 to include proposals for shareholder action in the Company's proxy
statement if notification of such proposals are received by the Company not less
than 120 days in advance of the calendar date the Company's proxy statement was
mailed to shareholders in connection with the previous year's annual meeting.
The proxy materials for the 1998 Annual Meeting are expected to be mailed on or
about October 5, 1998. Therefore, notice of shareholder proposals to be
included in the proxy statement for the Company's Annual Meeting for fiscal year
ending June 30, 1999 must be received by the Company before June 7, 1999. Any
such proposal must be in the form required under the rules and regulations
promulgated by the Securities and Exchange Commission.
The Company's Bylaws also provide that shareholders may present proposals
for shareholder action, which will not be included in the Company's proxy
statement but may be considered at the annual meeting, by giving notice to the
Secretary of the Company not less than 50 days nor more than 75 days prior to
the annual meeting (or if less than 60 days' notice or prior public disclosure
of the date of the annual meeting is given or made to
<PAGE>
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 annual 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,
1999 is expected to be held on or about November 11, 1999. Therefore, under
normal circumstances, any notice to the Secretary of the Company regarding
proposals for shareholder action must be received by the Company no later than
September 22, 1999.
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 31, 1998 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 in the table on page 9; and (iv) all officers and directors as a
group.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED (1) CLASS
---------------- --------- -----
<S> <C> <C>
Denver Investment Advisors LLC
1225 17th Street, 26th Floor
Denver, CO 80202. . . . . . . . . . . . . . 1,405,100(2) 11.4%
Putnam Investments
One Post Office Square
Boston, MA 02109 . . . . . . . . . . . . . . 1,252,235(3) 10.1%
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933. . . . . . . . . . . 752,524(4) 6.1%
Dennis J. Allingham. . . . . . . . . . . . . 27,100(5) *
James W. Bracke, Ph.D. . . . . . . . . . . . 376,129(6) 3.0%
Orwin L. Carter, Ph.D. . . . . . . . . . . . 37,000(7) *
Joan L. Gardner. . . . . . . . . . . . . . . 28,083(8) *
Thomas H. Garrett. . . . . . . . . . . . . . 6,666(9) *
John C. Heinmiller . . . . . . . . . . . . . 18,667(10) *
Brian J. Kane. . . . . . . . . . . . . . . . 50,370(11) *
Donald W. Larson . . . . . . . . . . . . . . 33,000(12) *
Colleen M. Olson . . . . . . . . . . . . . . 61,163(13) *
Richard W. Perkins . . . . . . . . . . . . . 84,000(14) *
Directors/Officers as a group (10 persons) . 722,178(15) 5.6%
</TABLE>
- ----------------------------
* Less than 1%
2
<PAGE>
(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 April 8, 1998 pursuant
to Section 13(g) of the Securities Exchange Act of 1934.
(3) Based upon the content of a statement filed as of June 3, 1998 pursuant
to Section 13(g) of the Securities Exchange Act of 1934.
(4) Based upon the content of a statement filed as of February 17, 1998
pursuant to Section 13(d) of the Securities Exchange Act of 1934.
(5) Includes 27,000 shares which Mr. Allingham has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 31, 1998.
(6) Includes 83,329 shares held jointly by Dr. Bracke and his wife, 3,500
shares held by one of Dr. Bracke's children and 292,800 shares which Dr.
Bracke has the right to purchase pursuant to stock options which are or
will become exercisable within sixty days of August 31, 1998.
(7) Includes 36,000 shares which Dr. Carter has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 31, 1998.
(8) Includes 4,250 shares held by a partnership in which Ms. Gardner is a
partner and 23,333 shares which Ms. Gardner has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 31, 1998.
(9) Includes 6,666 shares which Mr. Garrett has the right to purchase
pursuant to stock options which are or will become exercisable sixty
days of August 31, 1998.
(10) Includes 16,667 shares which Mr. Heinmiller has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 31, 1998.
(11) Includes 49,500 shares which Mr. Kane has the right to purchase pursuant
to stock options which are or will become exercisable within sixty days
of August 31, 1998.
(12) Includes 33,000 shares which Mr. Larson has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 31, 1998.
(13) Includes 42,000 shares which Ms. Olson has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 31, 1998.
(14) 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 33,000 shares which Mr. Perkins has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 31, 1998. Excludes 596,425 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.
(15) Includes 559,966 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 August 31, 1998.
<PAGE>
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. The election of the nominees requires the approval of the
holders of a majority of the shares present, in person or by proxy, at the
Annual Meeting. 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 the Company 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. The Board of Directors
recommends that the shareholders vote "FOR" the election of the two nominees
listed below, and the enclosed proxy will be so voted unless a contrary vote is
indicated.
<TABLE>
<CAPTION>
DIRECTOR
NAME AND AGE PRINCIPAL OCCUPATION SINCE
- ------------ -------------------- -----
<S> <C> <C>
TO BE NOMINATED FOR ELECTION FOR A THREE-YEAR TERM:
Richard W. Perkins (67) President and CEO, Perkins Capital
Management, Inc. 1983
John C. Heinmiller (44) Vice President of Finance and CFO, 1994
St. Jude Medical, Inc.
THE DIRECTORS WHOSE TERM OF OFFICE WILL EXPIRE IN 1999:
James W. Bracke, Ph.D. (51) President and CEO of the Company 1983
Joan L. Gardner (53) Community Volunteer 1992
Thomas H. Garrett (53) Business Consultant 1996
THE DIRECTORS WHOSE TERM OF OFFICE WILL EXPIRE IN 2000:
Donald W. Larson (69) Publisher, Business Newsletter 1983
Orwin L. Carter, Ph.D. (56) Vice President of Finance
and Administration,
Hamline University 1989
</TABLE>
OTHER INFORMATION REGARDING THE BOARD
Mr. Perkins is President, Chief Executive Officer and a director of Perkins
Capital Management, Inc., an investment firm, 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 Corporation, CNS, Inc.,
Eagle Pacific Industries, Inc., Harmony Holdings, Inc., Nortech Systems, Inc.,
Quantech, Ltd., and Vital Images, Inc. He has been a director of the Company
since 1983.
Mr. Heinmiller is currently Vice President of Finance and Chief Financial
Officer of St. Jude Medical, Inc., a medical products company. From June 1997
to April 1998 he was President of F3 Corporation, an asset management company.
From March 1995 to May 1997 he was Vice President-Administration of Daig
Corporation, a medical products company. 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
<PAGE>
national accounting 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.
Ms. Gardner has had a career in community service. She is currently
serving on the Board of Children's Health Care and serves as Chairperson of 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 and 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 from September 1994
to March 1995. He has been a director of the Company since 1989 and is also a
director of Theragenics 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 1998. 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 met once in
fiscal 1998. 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 did not meet in
fiscal 1998. Any shareholder entitled to vote in the election of directors may
nominate one or more persons for election as directors at a meeting only if
written notice of such shareholder's intent to make such nomination or
nominations has been given to the Secretary of the Corporation within the
required time frame for notices of shareholder actions to be presented to the
Company. Each such notice of nomination shall contain certain information about
the shareholder making such nomination and the nominee as set forth in the
Company's Bylaws.
MEETINGS. During fiscal 1998 the Board of Directors met eight 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. There were no options granted to non-employee directors during the
fiscal year.
<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 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
FISCAL ------------------- STOCK
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (1)
- --------------------------- ---- ------ ----- -----------
<S> <C> <C> <C> <C>
James W. Bracke 1998 $268,558 $ - 20,000
President and Chief 1997 237,308 - 500,000
Executive Officer 1996 199,520 90,000 24,000
Dennis J. Allingham 1998 $165,980 - 20,000
Executive Vice President, Chief 1997 134,928 - 30,000
Financial Officer and General 1996(2) 50,776 - 30,000
Manager of the Hyaluronate
and Oral Restorative Divisions
Brian J. Kane 1998 $134,847 - 20,000
Vice President of Marketing 1997 114,618 - 30,000
and New Business Development 1996 99,750 - 8,000
Colleen M. Olson 1998 $124,454 - 20,000
Vice President of Corporate 1997 114,618 - 30,000
Administrative Operations 1996 97,850 - 8,000
</TABLE>
- -------------------
(1) Number of shares of common stock purchasable under option grants.
(2) Compensation is for the period from February through June.
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. Dr. Bracke's Employment Agreement prohibits him from
competing with the Company for three years after termination of employment and
contains customary confidential disclosure 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 $275,000 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 $825,000.
Dennis J. Allingham, Executive Vice President, Chief Financial Officer and
General Manager of the Hyaluronate and Oral Restorative Divisions, entered into
an agreement with the Company dated February 7, 1996, which contains customary
confidential disclosure and non-compete provisions. The Board of Directors has
authorized the Company to provide for Mr. Allingham, as an executive officer, 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 $175,000. Therefore, 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 $175,000.
<PAGE>
Brian J. Kane, Vice President of Marketing and New Business Development,
entered into an agreement with the Company dated January 24, 1986, which
contains customary confidential disclosure and non-compete provisions. The
Board of Directors has authorized the Company to provide for Mr. Kane, as an
executive officer, 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 $140,000 per year. Therefore, 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.
Colleen M. Olson, Vice President of Corporate Administrative Operations,
entered into an agreement with the Company dated September 11, 1984, which
contains customary confidential disclosure and non-compete provisions. The
Board of Directors has authorized the Company to provide for Ms. Olson, as an
executive officer, 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 $126,000 per year. Therefore, 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 $126,000.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the named
executive officers, 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 OPTION
EMPLOYEES OR BASE TERM (4)
OPTIONS IN LAST PRICE PER EXPIRATION --------------------------
NAME GRANTED(1) YEAR SHARE (2) DATE (3) 5% 10%
---- ---------- ---- --------- -------- -- ---
<S> <C> <C> <C> <C> <C> <C>
James W. Bracke 20,000 6.0% $19.125 Nov. 13, 2007 $240,552 $609,606
Dennis J. Allingham 20,000 6.0% $19.125 Nov. 13, 2007 240,552 609,606
Brian J. Kane 20,000 6.0% $19.125 Nov. 13, 2007 240,552 609,606
Colleen M. Olson 20,000 6.0% $19.125 Nov. 13, 2007 240,552 609,606
</TABLE>
- -----------------------
(1) Exercisable in cumulative installments of 25% based upon the fair market
value of the stock reaching and maintaining certain price levels of
$23.91, $28.69, $33.47 and $38.25 with full vesting occurring October 14,
2007 for any options not yet vested.
(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.
<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>
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 7,210 $106,723 290,300 334,500 $437,663 $97,563
Dennis J. Allingham - - 27,000 53,000 9,375 9,375
Brian J. Kane - - 48,250 43,250 380,031 37,781
Colleen M. Olson - - 40,750 43,250 275,969 37,781
</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, 1998 was
$16.50. Value is calculated on the basis of the difference between the
option exercise price and $16.50 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
1998 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 and Kane and Ms. Olson, the Company's other executive
officers whose cash compensation exceeded $100,000 during fiscal 1998
(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.
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 is discussed below under "Chief Executive Officer
Compensation."
<PAGE>
STOCK OPTIONS. During fiscal 1998, the Company granted stock options
to all of its executive officers, including Dr. Bracke. These options,
which were granted in November 1997, allow Dr. Bracke and each of the other
executive officers to purchase 20,000 shares of the Company's common stock,
at $19.125 per share, the fair market value of the shares on the date of
grant, exercisable in cumulative installments of 25% based upon the fair
market value of the stock reaching and maintaining certain price levels of
$23.91, $28.69, $33.47 and $38.25, with full vesting occurring October 14,
2007 for any options not yet vested. 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 certain vesting requirements for the stock options granted
during fiscal 1998 are designed to direct the Company's executives toward
steady growth and to retain their services on a long term basis.
CASH BONUSES. No cash bonuses have been paid to any of the Company's
executive officers other than the Chief Executive Officer 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. 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. In determining the base salary, the
Compensation Committee has utilized compensation surveys and has considered
performance against defined goals and longevity with the Company. The base
salary also reflects a cost of living increase. Dr. Bracke received a salary
adjustment from $250,000 to $275,000 in fiscal 1998. 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 20,000
shares of the Company's common stock in fiscal 1998 for his services. The
exercise price of $19.125 is equal to the fair market value of the shares on the
date of the grant. The option becomes exercisable in cumulative installments of
25%, based upon the fair market value of the stock reaching and maintaining
certain price levels of $23.91, $28.69, $33.47 and $38.25, with full vesting
occurring on October 14, 2007 for any options not yet vested. Dr. Bracke's
option grants in fiscal 1997 and 1996 covered 500,000 and 24,000 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. The Board of Directors authorized a cash
bonus of $90,000 during fiscal 1996 for Dr. Bracke.
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
<PAGE>
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, 1998 with the cumulative total return on: (i) the Nasdaq Stock
Market Index (U.S. Companies) and (ii) the Media General SIC Code 384 Index -
Medical Instruments and Supplies (the "SIC Code Index"). The comparison assumes
that $100 was invested on June 30, 1993 in the Company's common stock and in
each of the foregoing indices and assumes reinvestment of dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
[GRAPH]
6/30/93 6/30/94 6/30/95 6/30/96 6/30/97 6/30/98
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Lifecore $100.00 $78.33 $103.33 $283.33 $183.33 $220.00
Nasdaq U.S. Companies 100.00 109.66 128.61 161.89 195.02 258.52
SIC Code Index 100.00 92.82 139.86 184.33 211.88 261.39
</TABLE>
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.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The rules of the Securities and Exchange Commission require disclosure of
late Section 16 filings by Company directors and executive officers. Based on
the information provided to the Company, the Company is not aware of any
director or executive officer who failed to timely file any report required to
be filed.
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, 1998, 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 5, 1998
<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 12, 1998
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 12, 1998 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>
<C> <S> <C>
(1) ELECTION OF DIRECTORS:
/ / WITH AUTHORITY to vote for all nominees listed below / / WITHHOLD AUTHORITY 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.)
Richard W. Perkins, John C. Heinmiller
--------------------------------------------------------------------------------------------------------------------------
(2) PROPOSAL TO RATIFY AND APPROVE THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS OF THE
COMPANY FOR THE CURRENT FISCAL YEAR ENDING JUNE 30, 1999.
/ / 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>
(CONTINUED, AND TO BE COMPLETED AND SIGNED, ON THE REVERSE SIDE)
<PAGE>
[LOGO]
(CONTINUED FROM OTHER SIDE)
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: _________________________, 1998
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.
