<PAGE>
LIFECORE BIOMEDICAL, INC.
3515 LYMAN BOULEVARD
CHASKA, MN 55318
(612) 368-4300
--------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 18, 1999
--------------------------
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 18, 1999 at 3:30 p.m., local time, for
the following purposes:
1. To elect three (3) 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, 2000.
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
27, 1999 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, CEO AND SECRETARY
Minneapolis, Minnesota
October 5, 1999
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 18, 1999, 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, facsimile or in person. The Company
may also request banks and brokers to solicit their customers who have a
beneficial interest in the Company's common stock registered in the names of
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, 1999.
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. If no direction is made, the proxy will be voted for the election
of the nominees for director and for the other proposal set forth in this
Proxy Statement.
The total number of shares of stock outstanding and entitled to vote
at the meeting as of September 27, 1999 consisted of 12,418,479 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 27, 1999 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.
PROPOSALS FOR NEXT ANNUAL MEETING
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 2000 Annual Meeting are expected
to be mailed on or about October 5, 2000. Therefore, notice of shareholder
proposals to be included in the proxy statement for the Company's Annual
Meeting for fiscal year ending June 30, 2000 must be received by the Company
before June 6, 2000. Any such proposal must be in the form required under the
rules and regulations promulgated by the Securities and Exchange Commission.
1
<PAGE>
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
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, 2000 is expected to be held on or about November 16,
2000. 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 20, 2000.
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 18,
1999 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.................................... 1,117,350 (2) 9.0%
Putnam Investments
One Post Office Square
Boston, MA 02109..................................... 804,335 (3) 6.5%
Johnson & Johnson
One Johnson & Johnson Plaza
New Brunswick, NJ 08933.............................. 752,524 (4) 6.1%
The Vertical Group
18 Bank Street
Summitt, NJ 07901.................................... 716,200 (5) 5.8%
US Bancorp
601 Second Avenue South
Minneapolis, MN 55402-4302........................... 691,591 (6) 5.6%
Dennis J. Allingham.................................. 40,600 (7) *
James W. Bracke, Ph.D................................ 482,129 (8) 3.8%
Orwin L. Carter, Ph.D................................ 47,000 (9) *
Joan L. Gardner...................................... 40,834 (10) *
Thomas H. Garrett.................................... 20,000 (11) *
John C. Heinmiller................................... 25,334 (12) *
Brian J. Kane........................................ 58,370 (13) *
Donald W. Larson..................................... 43,000 (14) *
Colleen M. Olson..................................... 69,163 (15) *
Richard W. Perkins................................... 89,000 (16) *
Directors/Officers as a group (10 persons)........... 915,430 (17) 7.0%
- ------------------------------------
* Less than 1%
</TABLE>
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 February 10, 1999
pursuant to Section 13(g) of the Securities Exchange Act of 1934.
(3) Based upon the content of a statement filed as of February 18, 1999
pursuant to Section 13(g) of the Securities Exchange Act of 1934.
(4) Based upon the content of a statement filed as of September 11, 1998
pursuant to Section 13(g) of the Securities Exchange Act of 1934.
(5) Based upon the content of a statement filed as of August 5, 1999 pursuant
to Section 13(d) of the Securities Exchange Act of 1934.
(6) Based upon the content of a statement filed as of December 31, 1998
pursuant to Section 13(d) of the Securities Exchange Act of 1934.
(7) Includes 40,500 shares which Mr. Allingham has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 18, 1999.
(8) Includes 100,629 shares held jointly by Dr. Bracke and his wife, 3,500
shares held by one of Dr. Bracke's children and 378,000 shares which Dr.
Bracke has the right to purchase pursuant to stock options which are or
will become exercisable within sixty days of August 18, 1999.
(9) Includes 46,000 shares which Dr. Carter has the right to purchase pursuant
to stock options which are or will become exercisable within sixty days of
August 18, 1999.
(10) Includes 3,500 shares owned by Ms. Gardner, 5,000 shares held by a
partnership in which Ms. Gardner is a partner and 32,334 shares which Ms.
Gardner has the right to purchase pursuant to stock options which are or
will become exercisable within sixty days of August 18, 1999.
(11) Includes 20,000 shares which Mr. Garrett has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 18, 1999.
(12) Includes 23,334 shares which Mr. Heinmiller has the right to purchase
pursuant to stock options which are or will become exercisable within
sixty days of August 18, 1999.
(13) Includes 57,500 shares which Mr. Kane has the right to purchase pursuant
to stock options which are or will become exercisable within sixty days of
August 18, 1999.
(14) Includes 43,000 shares which Mr. Larson has the right to purchase pursuant
to stock options which are or will become exercisable within sixty days of
August 18, 1999.
(15) Includes 50,000 shares which Ms. Olson has the right to purchase pursuant
to stock options which are or will become exercisable within sixty days of
August 18, 1999.
(16) Includes 53,000 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
30,000 shares which Mr. Perkins has the right to purchase pursuant to
stock options which are or will become exercisable within sixty days of
August 18, 1999. 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.
(17) Includes 720,668 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 18, 1999.
3
<PAGE>
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. 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 three
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:
James W. Bracke, Ph.D. (52) President, CEO and Secretary of the Company 1983
Joan L. Gardner (54) Community Volunteer 1992
Thomas H. Garrett (54) Business Consultant 1996
THE DIRECTORS WHOSE TERM OF OFFICE WILL EXPIRE IN 2000:
Donald W. Larson (70) Publisher, Business Newsletter 1983
Orwin L. Carter, Ph.D. (57) Business Consultant 1989
THE DIRECTORS WHOSE TERM OF OFFICE WILL EXPIRE IN 2001:
Richard W. Perkins (68) President and CEO, Perkins Capital
Management, Inc. 1983
John C. Heinmiller (45) Vice President, Finance and CFO, 1994
St. Jude Medical, Inc.
</TABLE>
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.
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 and currently serves on the Audit
and Compensation Committees.
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 is also a
director of St. Jude Medical, Inc. and Check Technology Corporation. He has
been a director of the Company since July 1996 and currently serves on the
Compensation Committee.
4
<PAGE>
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 and currently serves on the Compensation
and Nominating Committees.
Dr. Carter is a self-employed business consultant. From April 1996
to May 1999, he was 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. Dr. Carter is a director of Theragenics Corporation. He has been a
director of the Company since 1989 and currently serves as Chairman of the
Nominating Committee and serves on the Audit Committee.
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 and currently is the Chairman of the Compensation
Committee.
Mr. Heinmiller is currently Vice President, 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. Mr. Heinmiller is also a director of Arctic
Cat Inc. He has been a director of the Company since November 1994 and
currently serves as Chairman of the Audit Committee and serves on the
Nominating Committee.
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 1999. 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 1999. 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 1999.
MEETINGS. During fiscal 1999 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 and $500 for each meeting attended.
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. Heinmiller and Perkins were each granted an option to
purchase 30,000 shares, vesting over a three year period. The options were
granted on November 12, 1998 at a purchase price of $9.44 per share.
5
<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 and bonus
earned during fiscal 1999.
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 1999 $280,077 $ - 60,000
President and Chief 1998 268,558 - 20,000
Executive Officer 1997 237,308 - 500,000
Dennis J. Allingham 1999 $178,231 - 40,000
Executive Vice President, Chief 1998 165,980 - 20,000
Financial Officer and General 1997 134,928 - 30,000
Manager of the Hyaluronate
and Oral Restorative Divisions
Brian J. Kane 1999 $142,584 - 25,000
Vice President of Marketing 1998 134,847 - 20,000
and New Business Development 1997 114,618 - 30,000
Colleen M. Olson 1999 $128,326 - 25,000
Vice President of Corporate 1998 124,454 - 20,000
Administrative Operations 1997 114,618 - 30,000
</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
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
$281,875 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 $845,625.
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 $179,375.
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 $179,375.
6
<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 $143,500 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 $143,500.
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 $129,150 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 $129,150.
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 60,000 18.1% $8.625 Nov. 4, 2008 $325,453 $824,762
Dennis J. Allingham 40,000 12.0% $8.625 Nov. 4, 2008 216,969 549,841
Brian J. Kane 25,000 7.5% $8.625 Nov. 4, 2008 135,605 343,651
Colleen M. Olson 25,000 7.5% $8.625 Nov. 4, 2008 135,605 343,651
</TABLE>
- ------------------------
(1) Exercisable in cumulative installments of 25% per year commencing one
year from date of grant (November 4, 1998), 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 the 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.
7
<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 20,800 $1,075 378,000 286,000 $24,000 $175,500
Dennis J. Allingham - - 40,500 79,500 -- 115,000
Brian J. Kane - - 57,500 59,000 209,313 72,875
Colleen M. Olson - - 50,000 59,000 142,750 72,875
</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, 1999 was
$11.50. Value is calculated on the basis of the difference between the
option exercise price and $11.50 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 1999 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
1999 (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."
8
<PAGE>
STOCK OPTIONS. During fiscal 1999, the Company granted stock
options to all of its executive officers, including Dr. Bracke. These
options, which were granted in November 1998, allow Dr. Bracke, Mr.
Allingham, Mr. Kane and Ms. Olson to purchase 60,000, 40,000, 25,000
and 25,000 shares, respectively, of the Company's common stock, at
$8.625 per share, the fair market value of the shares on the date of
grant, exercisable in cumulative annual installments of 25% commencing
one year from the date of grant, with full vesting occurring on the
fourth anniversary date. 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 vesting requirements for the stock
options granted during fiscal 1999 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 $275,000 to $281,875 in fiscal 1999. 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 60,000 shares of the Company's common stock in fiscal 1999. The
shares granted in fiscal 1999 were higher than the previous year as a
reflection of the positive financial results posted by the Company in fiscal
1998. The exercise price of $8.625 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 25% commencing one year from the date of grant, with
full vesting occurring on the fourth anniversary date. Dr. Bracke's option
grants in fiscal 1998 and 1997 covered 24,000 and 500,000 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
9
<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, 1999 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, 1994 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
[GRAPIC OMITTED]
<TABLE>
<CAPTION>
6/30/94 6/30/95 6/30/96 6/30/97 6/30/98 6/30/99
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Lifecore $100.00 $131.91 $361.70 $234.04 $280.85 $195.74
Nasdaq U.S. Companies 100.00 117.28 147.64 177.85 235.75 330.37
SIC Code Index 100.00 150.69 198.61 228.28 281.61 327.48
</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.
10
<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, 1999, 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, CEO AND SECRETARY
October 5, 1999
11
<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 18, 1999
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 18, 1999 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.)
James W. Bracke, Ph.D., Joan L. Gardner, Thomas H. Garrett
--------------------------------------------------------------------------------------------------------------------------
(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, 2000.
/ / 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: _________________________, 1999
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.
