<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-11(c) or Rule 14a-12
MARTEK BIOSCIENCES CORPORATION
- --------------------------------------------------------------------------------
(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)(4) 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> 2
MARTEK BIOSCIENCES CORPORATION
6480 DOBBIN ROAD
COLUMBIA, MARYLAND 21045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 Annual Meeting of Stockholders of Martek Biosciences Corporation
will be held at the Corporation's headquarters, 6480 Dobbin Road, Columbia,
Maryland on Friday, March 14, 1997, at 11:00 a.m. for the following purposes:
1. To elect three members of the Board of Directors for the term
expiring at the 2000 Annual Meeting of Stockholders;
2. To consider and act upon the Martek Biosciences Corporation 1997
Stock Option Plan.
3. To consider and act upon such other business as may properly come
before the meeting.
Only stockholders of record at the close of business on January 27, 1997
are entitled to notice of and to vote at the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, YOU ARE REQUESTED TO
SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED STAMPED ENVELOPE. THE PERSON EXECUTING THE PROXY MAY REVOKE IT AT ANY
TIME BEFORE IT IS EXERCISED.
ALL STOCKHOLDERS ARE EXTENDED A CORDIAL INVITATION TO ATTEND THE MEETING.
By Order of the Board of Directors
/s/ STEVE DUBIN
----------------------
STEVE DUBIN
Secretary
Columbia, Maryland
February 6, 1997
<PAGE> 3
MARTEK BIOSCIENCES CORPORATION
6480 DOBBIN ROAD
COLUMBIA, MARYLAND 21045
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MARCH 14, 1997
This Proxy Statement is furnished on or about February 6, 1997 to
stockholders of Martek Biosciences Corporation (the "Corporation"), 6480 Dobbin
Road, Columbia, Maryland 21045, in connection with the solicitation by the
Board of Directors of the Corporation (the "Board") of proxies to be voted at
the Annual Meeting of Stockholders (the "Annual Meeting"). The Annual Meeting
will be held on Friday, March 14, 1997 beginning at 11:00 A.M. local time at
the Corporation's headquarters, 6480 Dobbin Road, Columbia, Maryland. The
stockholder giving the proxy has the power to revoke the proxy at any time
before it is exercised. Such right of revocation is not limited by or subject
to compliance with any formal procedure. The proxy solicitation materials were
mailed on or about February 6, 1997 to all stockholders of record on January
27, 1997.
The cost of soliciting proxies will be borne by the Corporation.
Copies of solicitation material may be furnished to brokers, custodians,
nominees and other fiduciaries for forwarding to beneficial owners of shares of
the Corporation's Common Stock, and normal handling charges may be paid for
such forwarding service. Solicitation of proxies may be made by the Corporation
by mail or by personal interview, telephone and telegraph by officers and other
management employees of the Corporation, who will receive no additional
compensation for their services.
At the close of business on January 27, 1997, there were 13,531,390
shares of the Common Stock of the Corporation outstanding and entitled to vote
at the meeting. Only stockholders of record on January 27, 1997 will be
entitled to vote at the meeting, and each share will have one vote.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board is divided into three classes of directors. At each Annual
Meeting, members of one of the classes, on a rotating basis, are elected for a
three-year term. At this meeting, three directors for the term expiring at the
2000 Annual Meeting of Stockholders are to be elected hereby. Proxies cannot be
voted for a greater number of persons than the number of nominees named.
Proxies representing shares held on the record date which are returned duly
executed will be voted, unless otherwise specified, in favor of the three
nominees for the Board named below. All such nominees are currently directors
of the Corporation. There is no nominating committee of the Board.
Each of the nominees has consented to be named herein and to serve on
the Board if elected. It is not anticipated that any nominee will become unable
or unwilling to accept nomination or election, but, if that should occur, the
persons named in the proxy intend to vote for the election in his stead of such
other person as the Board may recommend.
The following table presents information concerning persons nominated
for election as directors of the Corporation and for those directors whose term
of offices will continue after the meeting, including their current membership
on committees of the Board of Directors, principal occupations or affiliations
during the last five years and certain other directorships held. For additional
information concerning the nominees for director, including stock ownership and
compensation see "Beneficial Ownership of Common Stock" and "Compensation."
Nominees For Election as a Director For Terms Expiring in 2000:
<TABLE>
<S> <C>
Bruce E. Elmblad . . . . . . . . . . . . . . . . . . . . Member - Audit Committee.
Age 68 President of Venture Investment Advisors,
a venture management consulting firm,
since 1994. Mr. Elmblad was President of
SED Management Co., Inc., an international
venture capital management company from
1991 to 1994. From 1985 to 1991, Mr.
Elmblad was a private investor and a
consultant to various high-technology
companies. Mr. Elmblad was a founder of
Inforex, Inc. and Prime Computer, Inc. and
serves as a director of PCD Incorporated
and Antex Incorporated. Mr. Elmblad has
been a director of the Corporation since
1992.
Richard J. Radmer, Ph.D. . . . . . . . . . . . . . . . . President of the Corporation since its
Age 54 founding in 1985.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
William D. Smart . . . . . . . . . . . . . . . . . . . . Member - Compensation Committee.
Age 70 From 1955 until his retirement in 1987,
Mr. Smart served in a variety of
capacities for Abbott Laboratories, a
pharmaceutical and healthcare company,
most recently as President of Ross
Laboratories, the nutritional products
division of Abbott Laboratories, and
Corporate Vice President of Abbott
Laboratories. Mr. Smart has been a
director of the Corporation since 1991.
DIRECTORS CONTINUING IN OFFICE:
Jules Blake, Ph.D. . . . . . . . . . . . . . . . . . . . Member - Audit Committee.
Age 72 Mr. Blake served as Vice President of
Research and Development, and later Vice
President, Corporate Scientific Affairs,
for Colgate-Palmolive from 1973 until
1989. Following his retirement in 1989,
Dr. Blake accepted an appointment as
Industrial Research Institute Fellow at
the Office of Science and Technology
Policy, Executive Office of the President,
where he served until 1991. Dr. Blake also
serves as a director for Procyte
Corporation. Dr. Blake has been a director
of the Corporation since 1990. Term
expires in 1999.
Ann L. Johnson, M.D. . . . . . . . . . . . . . . . . . . Member - Compensation Committee.
Age 60 Has served as a physician on the
neonatology staff of Mills Peninsula
Hospital since 1992. Dr. Johnson has been
a director of the Company since March
1995. Term expires in 1999.
Henry Linsert, Jr. . . . . . . . . . . . . . . . . . . . Chairman of the Board and Chief Executive
Age 56 Officer of the Corporation
since 1988. Term expires in 1999.
Douglas J. MacMaster, Jr. . . . . . . . . . . . . . . . . Member - Compensation Committee.
Age 66 Mr. MacMaster served in various management
positions at Merck & Co., Inc. from 1961
to 1988, at which time he was appointed
Senior Vice President responsible for ten
divisions, including Manufacturing and
Technology, and Pharmaceutical
Manufacturing. Mr. MacMaster retired from
Merck in 1991 and currently serves as a
director for Oravax, Inc., Neose
Technologies, Inc., Flamel Technologies,
SA, American Precision Industries, Inc.
and U.S. Biosciences, Inc. Mr. MacMaster
has been a director of the Corporation
since 1993. Term expires in 1998.
John H. Mahar . . . . . . . . . . . . . . . . . . . . . . Member - Compensation Committee.
Age 62 President of Hillside Management, a
consulting firm, since 1992. From 1991 to
1992, Mr. Mahar was a Vice President at
Salomon Brothers Inc serving as a
principal for the Venture Capital Fund.
From 1985 to 1991, Mr. Mahar was Executive
Vice President and Chief Operating Officer
of Elf Technologies, Inc., a venture
capital firm. Mr. Mahar was reelected as a
director of the Corporation in February
1993. Prior to that time he served as a
director of the Corporation from 1988
until 1991. Term expires in 1998.
Sandra Panem, Ph.D. . . . . . . . . . . . . . . . . . . . Member - Audit Committee.
Age 50 President of Vector Fund Management, L.P.
("VFM") and is responsible for running the
day-to-day operations for the Vector
Later-Stage Equity Fund, L.P., a fund
focused on later-stage companies. Prior to
joining VFM, she served as Vice President
and Portfolio Manager for the Oppenheimer
Global BioTech Fund, a $200 million mutual
fund that invested in public and private
biotechnology companies. Prior to joining
Oppenheimer, Dr. Panem was a Vice
President at Salomon Brothers Venture
Capital, a $40 million fund focused on
early and later-stage life sciences and
technology investments. Dr. Panem has been
a director of the Company since May 1995.
Prior to that time, she served as a
director from June 1990 until February
1993. Dr. Panem also serves as a director
for IBAH, Inc. and Synaptic Pharmaceutical
Corporation. Term expires in 1999.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
Eugene H. Rotberg . . . . . . . . . . . . Member - Audit Committee.
Age 67 Since 1990, Mr. Rotberg has been an
independent advisor to international
development and financial institutions.
From 1987 to 1990, Mr. Rotberg was
Executive Vice President and a member of
the Executive Committee at Merrill Lynch &
Co., Inc. From 1969 to 1987, Mr. Rotberg
was Vice President and Treasurer of the
World Bank. Mr. Rotberg has been a
director of the Corporation since 1992.
Term expires in 1998.
</TABLE>
BOARD COMMITTEES
The Board has established a Compensation Committee and an Audit
Committee.
The Compensation Committee of the Board has the authority and performs
all the duties related to the compensation of management of the Corporation,
including determining policies and practices, changes in compensation and
benefits for management, determination of employee benefits and all other
matters relating to employee compensation. The Compensation Committee also
administers the Company's 1986 Stock Option Plan, as amended and restated in
1992 (the "Option Plan"). This Committee met five times during fiscal 1996.
During the fiscal year ended October 31, 1996 the Compensation Committee
consisted of Messrs. MacMaster, Mahar, Smart and Dr. Johnson.
The Audit Committee reviews the internal accounting and internal
control procedures of the Corporation, consults with the Corporation's
independent accountants and reviews the plan and scope of their audits as well
as their findings and recommendations upon completion of the audit. During the
fiscal year ended October 31, 1996, the Audit Committee consisted of Dr. Blake,
Mr. Elmblad, Mr. Rotberg and Dr. Panem and met twice.
ATTENDANCE AT MEETINGS
In addition to Committee meetings, during fiscal 1996, the Board held
five meetings. All directors of the Corporation attended 75% or more of all
Board meetings and Committee meetings.
DIRECTORS' FEES
Each director who is not an employee of the Corporation receives an
annual retainer of $10,000, plus expenses. These directors are also eligible to
receive options under the Corporation's 1994 Directors' Stock Option Plan
("Director Plan"). Under the current Director Plan, each eligible director is
entitled each year to an option to purchase 5,000 shares of stock on the first
trading day of the stock following the date of the Corporation's Annual Meeting
of Stockholders, provided he or she has served as a Director of the Corporation
for at least one year as of such Annual Meeting of Stockholders. In addition,
each newly elected director is entitled to options to purchase 7,500 shares of
the Corporation's Common Stock under the Director Plan upon joining the Board.
Directors may also be compensated for special assignments delegated by the
Board. In the year ended October 31, 1996, each director nominee, other than
Mr. Linsert, Dr. Radmer, Dr. Panem and Dr. Johnson received options to purchase
3,500 shares at $32.875 per share under the Director Plan. All option grants
under the Director Plan are granted at the closing price for the Corporation's
Common Stock as reported on the NASDAQ Stock Market's National Market on the
day prior to the date of grant.
OTHER INFORMATION
The Securities Exchange Act of 1934 requires the Corporation's
directors, executive officers and 10% stockholders to file reports of ownership
of equity securities of the Corporation and to furnish copies of such reports
to the Corporation. Based on a review of such reports, the Corporation believes
that, during the fiscal year ended October 31, 1996, all such filing
requirements were met.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of January 17,
1997 (unless otherwise specified) with respect to the beneficial ownership of
the Corporation's Common Stock of each person who is known to own beneficially
more than 5% of the outstanding shares of Common Stock, each director, each
Named Executive Officer (as defined below), and all directors and executive
officers as a group:
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY
BENEFICIAL OWNERS OWNED (1) PERCENTAGE OF CLASS
- ------------------ ------------------- -------------------
<S> <C> <C>
H&Q Healthcare Investors
and H&Q Life Sciences
Investors . . . . . . . . . . . . . . . . . . . . . 780,112(2) 5.76%
50 Rowes Wharf
Boston, MA 02110
The College Retirement Equities Fund . . . . . . . . . . 1,023,650(3) 7.43%
730 Third Avenue
New York, NY10017
NationsBanc Capital Corporation . . . . . . . . . . . . 972,432 7.19%
901 Main Street, 66th Floor
Dallas, TX 75202
Putnam Investments, Inc.
One Post Office Square
Boston, MA 02109 . . . . . . . . . . . . . . . . . 1,422,888(4) 10.52%
Henry Linsert, Jr. . . . . . . . . . . . . . . . . . . . 424,690(5) 3.08%
Richard J. Radmer, Ph.D. . . . . . . . . . . . . . . . . 436,000(6) 3.22%
Steve Dubin . . . . . . . . . . . . . . . . . . . . . . . 144,700(7) 1.06%
David J. Kyle, Ph.D. . . . . . . . . . . . . . . . . . . 198,695(8) 1.46%
Thomas C. Fisher . . . . . . . . . . . . . . . . . . . . 130,505(9) *
Jules Blake, Ph.D . . . . . . . . . . . . . . . . . . . . 14,455(10) *
Bruce E. Elmblad . . . . . . . . . . . . . . . . . . . . 3,500(11) *
Ann L. Johnson, M.D. . . . . . . . . . . . . . . . . . . 7,500(12) *
Douglas J. MacMaster . . . . . . . . . . . . . . . . . . 33,500(13) *
John H. Mahar . . . . . . . . . . . . . . . . . . . . . . 9,350(14) *
Sandra Panem, Ph.D. . . . . . . . . . . . . . . . . . . . 82,565(15) *
Eugene H. Rotberg . . . . . . . . . . . . . . . . . . . . 50,250(16) *
William D. Smart . . . . . . . . . . . . . . . . . . . . 23,500(17) *
All Executive Officers and Directors
as a group (13 persons) . . . . . . . . . . . . . . . . . (5 through 17) 10.89%
</TABLE>
- -------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock
subject to options or warrants currently exercisable or exercisable
within 60 days of January 17, 1997 are deemed outstanding for purposes
of computing the percentage ownership of the person holding such option
or warrant but are not deemed outstanding for purposes of computing the
percentage ownership of any other person. Except where indicated
otherwise, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned
by them.
(2) Includes 441,000 and 305,000 shares owned by H&Q Healthcare Investors
("HQH") and H&Q Life Sciences Investors ("HQL"), respectively. Also
includes 34,112 shares issuable to HQL upon exercise of outstanding
warrants. Hambrecht & Quist Capital Management Incorporated, a
wholly-owned subsidiary of Hambrecht & Quist Group Incorporated, which
itself wholly owns Hambrecht & Quist LLC, is the investment advisor to
both HQH and HQL and therefore may be deemed to have beneficial ownership
of the shares held by them.
(3) Includes 249,650 shares issuable upon exercise of outstanding warrants.
(4) Includes 1,346,688 and 76,200 shares deemed to be beneficially owned by
investment advisors, Putnam Investment Management, Inc. ("PIM") and the
Putnam Advisory Company, Inc. ("PAC"). "PIM" and "PAC" do not have the
power to buy or sell these securities under their advisory services.
Putnam Investments Inc. wholly owns "PIM" and "PIC" and therefore may be
deemed to have beneficial ownership of the shares held by these
entities.
4
<PAGE> 7
(5) Includes 141,690 shares owned by Mr. Linsert and currently exercisable
options and options exercisable within 60 days of January 17, 1997, to
purchase 283,000 shares.
(6) Includes 75,000 shares owned by Dr. Radmer's wife, 200,000 shares owned
by the Radmer Family L.P., and currently exercisable options and options
exercisable within 60 days of January 17, 1997 to purchase 36,000
shares. Excludes 59,300 shares owned by other members of Dr. Radmer's
family, and Dr. Radmer disclaims beneficial ownership of those shares.
(7) Includes currently exercisable options and options exercisable within 60
days of January 17, 1997 to purchase 86,000 shares.
(8) Includes currently exercisable options and options exercisable within 60
days of January 17, 1997 to purchase 95,284 shares.
(9) Includes currently exercisable options and options exercisable within 60
days of January 17, 1997 to purchase 98,350 shares.
(10) Includes currently exercisable options and options exercisable within 60
days of January 17, 1997 to purchase 11,000 shares.
(11) Consists of exercisable options to purchase 3,500 shares.
(12) Consists of currently exercisable options to purchase 7,500 shares.
(13) Consists of currently exercisable options to purchase 33,500 shares.
(14) Consists of currently exercisable options to purchase 9,350 shares.
(15) Includes 70,565 shares issuable upon exercise of outstanding warrants
held by Vector Later-Stage Equity Fund, L.P., ("VLSEF"). Sandra Panem, a
director of the Corporation, is (i) the President of Vector Fund
Management L.P. ("VFM"), the general partner of VLSEF, and (ii) a Senior
Vice President of Vector Asset Management, Inc., the general partner of
VFM, and thus Dr. Panem may be deemed to have beneficial ownership of
these warrants owned by VLSEF. Prior to her association with VLSEF, Dr.
Panem served as a director of the Corporation from June 1990 until
February 1993. Dr. Panem currently owns 4,500 shares of Common Stock and
holds options to purchase 7,500 shares.
(16) Includes currently exercisable options to purchase 36,000 shares.
(17) Consists of currently exercisable options to purchase 23,500 shares.
COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation for
services in all capacities to the Corporation for the fiscal years ended
October 31, 1996, 1995 and 1994 of (i) the Chief Executive Officer and (ii) the
other most highly compensated executive officers of the Corporation whose
salary and bonus exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- -----------------------
NAME AND
PRINCIPAL SECURITIES UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) (1) OPTIONS (#) COMPENSATION ($)
- -------- ---- ---------- ------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Henry Linsert, Jr., 1996 201,990 20,450 40,000 --
Chief Executive 1995 187,424 38,100 30,000 --
Officer 1994 176,917 24,750 30,000 --
Richard J. Radmer, 1996 103,928 10,073 20,000 --
President (3) 1995 124,856 26,900 20,000 --
1994 126,237 18,000 20,000 --
Thomas C. Fisher, 1996 135,887 13,750 25,000 --
Senior Vice 1995 126,280 25,600 20,000 2,106 (2)
President 1994 119,322 16,000 20,000 14,727 (2)
David J. Kyle, 1996 135,887 20,625 25,000 --
Sr. Vice President, 1995 113,082 22,977 15,000 --
Research and 1994 98,865 15,500 15,000 --
Development
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
NAME AND ------------------- ----------------------
PRINCIPAL SECURITIES UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) (1) OPTIONS (#) COMPENSATION ($)
- -------- ---- ---------- ------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
Steve Dubin, 1996 121,205 18,525 25,000 --
Chief Financial Officer, 1995 110,994 22,500 15,000 --
General Counsel, 1994 100,985 15,500 15,000 --
Treasurer and
Secretary
</TABLE>
- --------------
(1) All Named Executive Officers received bonuses based on performance in
fiscal 1994, fiscal 1995 and fiscal 1996 pursuant to the Corporation's
Management Cash Bonus Incentive Plan. See the Report on Executive
Compensation below for a description of the Bonus Plan.
(2) Consists of payments to Mr. Fisher to cover certain commuting expenses.
(3) In 1996, Dr.Radmer elected to reduce his work schedule.
OPTION GRANTS
Shown below is information on grants to the Corporation's Chief
Executive Officer and the Named Executive Officers of stock options pursuant to
the Option Plan during the year ended October 31, 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (3)
-------------------------------------------------------------------------------------------------------
PERCENTAGE OF
NUMBER OF TOTAL OPTIONS
SECURITIES GRANTED TO EXERCISE OR
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION
NAME AND POSITION OPTIONS GRANTED(#)(1) FISCAL YEAR 1996 ($/SH) (2) DATE 5% ($) 10% ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Henry Linsert, Jr. 40,000 14.3 32.875 3/06 826,996 2,095,771
Richard J. Radmer 20,000 7.1 32.875 3/06 413,498 1,047,886
Thomas C. Fisher 25,000 8.9 32.875 3/06 516,873 1,309,857
David J. Kyle 25,000 8.9 32.875 3/06 516,873 1,309,857
Steve Dubin 25,000 8.9 32.875 3/06 516,873 1,309,857
</TABLE>
- ----------------
(1) Options become exercisable ratably beginning from six months from the
date of grant through four years from the date of grant.
(2) Options were granted at the market price on the date of grant.
(3) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price increases from the
respective dates of grant in fiscal 1996 to the respective dates of
expiration of such options in 2006 of 5% and 10%. These assumptions are
not intended to forecast future price appreciation of the Corporation's
stock price. The Corporation's stock price may increase or decrease in
value over the time period set forth above.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Shown below is information with respect to the exercise of options to
purchase the Corporation's Common Stock during fiscal 1996 under the Option
Plan and unexercised options held under the Option Plan on October 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
HELD AT OCTOBER 31, 1996 AT OCTOBER 31, 1996(1)
- -------------------------------------------------------------------------------------- ----------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Henry Linsert, Jr.(2) 147,500 $3,796,313 330,500 62,000 $5,142,750 $343,500
Richard J. Radmer -- -- 24,000 36,000 226,000 229,000
Thomas C. Fisher 19,650 608,138 110,350 60,000 1,710,325 499,000
David J. Kyle 32,351 885,769 82,404 49,350 1,201,818 428,535
Steve Dubin(2) 147,500 3,796,313 139,000 55,000 2,400,000 501,750
</TABLE>
6
<PAGE> 9
- -------------
(1) Total value of unexercised options is based on the closing price of the
Corporation's Common Stock of $21.50 per share on October 31, 1996.
(2) Includes the exercise of options to purchase 147,500 shares during
fiscal 1996 and options to purchase 67,500 shares held on October 31,
1996 by a company wholly owned by Mr. Linsert and Mr. Dubin and through
which Mr. Linsert and Mr. Dubin provided consulting services to the
Corporation prior to accepting full-time positions with the Corporation.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with Mr. Linsert, Dr.
Radmer and Dr. Kyle in May 1990. The agreement with Mr. Linsert provides for
an annual salary of $120,000, which is subject to normal periodic review. In
1996, the Board of Directors voted to increase Mr. Linsert's base annual salary
to $204,500. This agreement does not have a fixed term but can be terminated
with six months written notice by either Mr. Linsert or the Company. This
agreement also prohibits Mr. Linsert from engaging in activities competitive
with those of the Company during the period of Mr. Linsert's employment and for
one year after leaving the employ of the Company. The agreements with Drs.
Radmer and Kyle provide for an annual salary of $86,000 and $55,000,
respectively, subject to normal yearly adjustments. These agreements provide
for a two-year initial term with respect to Dr. Radmer and a one-year initial
term for Dr. Kyle which are extended automatically for successive one year
periods and can be terminated upon six months written notice given prior to the
end of such successive one year periods by either the Corporation or Drs.
Radmer and Kyle, respectively. In 1996, the Board voted to increase Dr.
Radmer's base annual salary to $144,500 and that of Dr. Kyle to $137,500.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board has furnished the following
report on its policies with respect to the compensation of executive officers.
The report is not deemed to be "soliciting material" or to be "filed" with the
Securities and Exchange Commission (the "SEC") or subject to the SEC's proxy
rules or to the liabilities of Section 18 of the Securities Exchange Act of
1934, as amended, (the "1934 Act"), and the report shall not be deemed to be
incorporated by reference into any prior or subsequent filing by the
Corporation under the Securities Act of 1993, as amended, or the 1934 Act.
Decisions on compensation of the Corporation's executives officers
generally are made by the Compensation Committee of the Board. No member of the
Compensation Committee is an employee of the Corporation. Douglas J. MacMaster,
John H. Mahar, William D. Smart and Ann L. Johnson served as members of the
Compensation Committee for the entire fiscal year 1996. All decisions by the
Compensation Committee relating to the compensation of the Corporation's
executive officers are reviewed by its full Board, except for decisions
concerning grants under the Option Plan, which must be made solely by the
Committee in order for the grants to satisfy certain requirements under the 1934
Act.
COMPENSATION POLICIES TOWARD EXECUTIVE OFFICERS
The Corporation's executive compensation policies are intended to
provide competitive levels of compensation that reflect the Corporation's
annual and long-term performance goals, reward superior corporate performance,
and assist the Corporation in attracting and retaining qualified executives.
Total compensation for each of the Named Executive Officers as well as the
other senior executives is comprised of three principal components: base
salary, annual incentive compensation and grants of options to purchase the
Corporation's Common Stock. The base salaries are fixed at levels which the
Compensation Committee believes are comparable to those of executives of
similar status in the biosciences industry. In addition to base salary, each
executive officer is eligible to receive an annual bonus tied to the
Corporation's success in achieving certain annual performance measures, as well
as individual performance. The Board and the Compensation Committee also
believe that longer-term incentives are appropriate to motivate and retain key
personnel and that stock ownership by management is beneficial in aligning
management's and stockholders' interests in the enhancement of stockholder
value. Accordingly, the Compensation Committee has a policy of considering
annual grants of stock options to executive officers under the Option Plan.
The following describes in more specific terms the three elements of
compensation that implement the Committee's compensation policies reported for
fiscal 1996:
BASE SALARY. Each year the Chief Executive Officer recommends to the
Compensation Committee a base salary level for each of the Named Executive
Officers and other senior executives. In formulating such recommendations, the
Chief Executive Officer considers industry, peer group and national surveys and
performance judgments as to the past and expected future contributions of the
individual senior executives. The Compensation Committee then reviews the
recommendations and fixes the base salaries of each of the executive officers
and of the Chief Executive Officer based on available competitive compensation
data and the Compensation Committee's assessment of each officer's past
performance and its expectation as to future contributions.
7
<PAGE> 10
MANAGEMENT CASH BONUS INCENTIVE PLAN. The Compensation Committee
administers the Management Cash Bonus Incentive Plan (the "Bonus Plan"), which
was instituted in 1993 and is designed to compensate key management personnel
for reaching certain performance milestones and to aid the Corporation in
attracting, retaining and motivating personnel required for the Corporation's
continued growth. The size of the pool of funds available to be paid to
eligible participants under the Bonus Plan is set by the Compensation
Committee, subject to approval by the Board, as a percentage of the combined
annual salaries of eligible participants. The size of the pool is based on a
review of the Company's performance for the previous year as it relates to the
corporate performance objectives set at the beginning of that year. Bonuses
will be paid to eligible participants during the first quarter of the following
fiscal year based upon the results of individual performance measured against
individual objectives set at the beginning of the year. Currently, Messrs.
Linsert, Radmer, Fisher, Dubin and Kyle, and other senior executives are
eligible to participate in the Bonus Plan.
For fiscal years 1994, 1995 and 1996, payments under the Bonus Plan of
$123,250, $187,765 and $116,706, respectively, were made, representing 12.9%,
17.0% and 10.6%, respectively, of all cash compensation paid to the
Corporation's senior management.
LONG TERM COMPENSATION THROUGH STOCK OPTIONS. Prior to fiscal 1996, the
Corporation had made grants under its 1986 Stock Option Plan, as amended and
restated in 1992 (the "Option Plan"), to provide long-term incentives tied to
increases in equity value. This practice continued in fiscal 1996. The Plan is
administered by the Compensation Committee. Options granted in fiscal 1996 had
exercise prices ranging from $18.00 to $34.25 per share representing the fair
market value of the Corporation's Common Stock at the time of the grants.
Options granted under the Option Plan vest over varying terms as determined by
the Committee at the time of grant. Individual option grants were made by the
Compensation Committee based upon recommendations of the Chief Executive
Officer and the Compensation Committee's own deliberations as to the
individual's contribution to the Corporation, overall level of compensation and
seniority.
OTHER COMPENSATION PLANS. The Company maintains a defined contribution
plan (the "401(k) Plan") which is intended to satisfy the tax qualification
requirements of Sections 401(a), 401(k) and 401(m) of the Internal Revenue Code
of 1986, as amended (the "Code"). The Corporation's senior executives are
eligible to participate in the 401(k) Plan and are permitted to contribute up
to the maximum percentage allowable without exceeding the limits of Code
Sections 401(k), 404 and 415 (i.e., $9,500 in 1996). All amounts deferred under
the 401(k) Plan's salary reduction feature by a participant vest immediately in
the participant's account while contributions made by the Company vest over a
seven year period in the participant's account. While the Company may make
"matching contributions" equal to a discretionary percentage, to be determined
by the Company, of a participant's salary reductions, the Company has never
made such contributions and has not yet determined whether to make such
matching contributions in the future.
MR. LINSERT'S 1996 COMPENSATION
Mr. Linsert generally participates in the same executive compensation
plans and arrangements available to the other senior executives. Accordingly,
his compensation also consists of annual base salary, annual bonus and
long-term equity-linked compensation. To date, he has received 325,000 options
under the Option Plan. In addition, between 1988 and 1991, the Corporation
granted 110,000 options under the Option Plan and 275,000 options outside of
the Option Plan to American Technology Investments Corp., a company of which
Mr. Linsert owns 60% and through which Mr. Linsert provided consulting services
to the Corporation prior to the Corporation's 1991 fiscal year. The Committee's
general approach in setting Mr. Linsert's compensation is not only to be
competitive with other companies in the industry, but also to have a portion of
his salary based upon the Corporation's performance.
Submitted by the
Members of the Compensation Committee
Ann L. Johnson, M.D.
Douglas J. MacMaster, Jr.
John H. Mahar
William D. Smart
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<PAGE> 11
PERFORMANCE GRAPH
The following graph sets forth the Corporation's total cumulative
stockholder return as compared to the NASDAQ Composite Index and the Hambrecht &
Quist Biotechnology Index for the period beginning November 23, 1993 (the date
of the Corporation's initial public offering) and ending October 31, 1996.
Total stockholder return assumes $100.00 invested at the beginning of the
period in the Common Stock of the Corporation, the stocks represented in the
NASDAQ Composite Index and the Hambrecht & Quist Biotechnology Index,
respectively. Total return assumes reinvestment of dividends; the Corporation
has paid no dividends on its Common Stock. Historical price performance should
not be relied upon as indicative of future stock performance.
COMPARISON OF 35 MONTH CUMULATIVE TOTAL RETURN*
AMONG MARTEK BIOSCIENCES CORP., THE NASDAQ STOCK MARKET-US INDEX
AND THE HAMBRECHT & QUIST BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
HAMBRECHT & QUIST
YEAR MARTEK BIOSCIENCES CORP. NASDAQ STOCK MARKET-US BIOTECHNOLOGY
<S> <C> <C> <C>
11/23/93 100 100 100
10/94 129 101 100
10/95 273 135 138
10/96 307 160 158
</TABLE>
9
<PAGE> 12
PROPOSAL 2
ADOPTION OF MARTEK BIOSCIENCES CORPORATION
1997 STOCK OPTION PLAN
GENERAL
The Board of Directors has approved and is proposing for stockholder
approval the Martek Biosciences Corporation 1997 Stock Option Plan (the "1997
Plan"). The purpose of the 1997 Plan is to enable eligible employees of the
Corporation or any of its subsidiaries and other individuals whose
participation in the 1997 Plan is determined to be in the best interests of the
Corporation by the Compensation Committee, to purchase shares of the
Corporation's Common Stock and thus to encourage stock ownership by employees
and officers of the Corporation and other individuals and to encourage the
continued provision of services by employees, officers and other individuals.
The 1997 Plan replaces the previous Option Plan, which served the same purpose
as the 1997 Plan and expired on December 31, 1996.
The affirmative vote of a majority of the shares present, in person or
by proxy, and entitled to vote at the Annual Meeting is required to approve the
1997 Plan. Unless otherwise indicated, properly executed proxies will be voted
in favor of Proposal 2 to adopt the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 2.
1997 STOCK OPTION PLAN
The Board of Directors has voted, subject to stockholder approval at the
Annual Meeting, to adopt the 1997 Plan and to reserve 750,000 shares of Common
Stock reserved for issuance under the 1997 Plan. (Of the 750,000 shares
reserved for issuance, non-qualified stock options covering 32,650 shares have
already been granted and are not subject to shareholder approval.) The number
of shares reserved for issuance is subject to adjustment upon the occurrence of
certain events as described below. See "Description of the Plan."
The 1997 Plan is proposed as a replacement for the Option Plan which
expired by its own terms on December 31, 1996. The Corporation currently has no
other plan through which to grant stock options to employees and other
individuals. The Board of Directors of the Corporation believes that stock
options are important to attract and to encourage the continued employment and
service of officers, other key employees and other individuals by facilitating
their purchase of a stock interest in the Corporation. In the judgment of the
Board of Directors, an initial or increased option will be a valuable incentive
and will serve to the ultimate benefit of stockholders.
The following summary of the 1997 Plan does not purport to be complete,
and is subject to and qualified in its entirety by reference to the complete
text of the 1997 Plan, which is attached hereto as Exhibit A and is
incorporated herein by reference.
DESCRIPTION OF THE PLAN
The 1997 Plan provides for the grant of options that are intended to
qualify as "incentive stock options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code") to full time employees as well as the
grant of non-qualifying options to directors and employees of the Corporation
and its subsidiaries and other individuals.
The 1997 Plan is administered by the Compensation Committee, which
currently consists of four outside directors appointed by the Board of
Directors. The Compensation Committee makes all determinations concerning the
employees of the Corporation and its subsidiaries and other individuals to whom
incentive and non-qualifying options will be granted.
The option exercise price for incentive stock options granted under the
1997 Plan may not be less than 100% of the fair market value of the Common
Stock on the date of grant of the option (or 110% in the case of an incentive
stock option granted to an optionee beneficially owning more than 10% of the
outstanding Common Stock). The option exercise price for non-incentive stock
options granted under the 1997 Plan is set by the Compensation Committee. The
maximum option term is 10 years (or five years in the case of an incentive
stock option granted to an optionee beneficially owning more than 10% of the
outstanding Common Stock). Options may be exercised at any time after grant,
except as otherwise provided in the particular option agreement. Options
covering no more than 250,000 shares may be granted to any officer or other
individual during the term of the Plan. There is also a $100,000 limit on the
value of stock (determined at the time of grant) covered by incentive stock
options that first become exercisable by an optionee in any calendar year. No
option may be granted more than 10 years after the effective date of this Plan.
Options are transferable to immediate family members of the optionee to whom an
option has been granted, a trust for the benefit of immediate family members of
the optionee or a partnership, all of the interests in which are owned by
immediate family members of the optionee.
10
<PAGE> 13
Payment for shares purchased under the 1997 Plan may be made either in
cash or, if permitted by the particular option agreement, by exchanging shares
of Common Stock of the Corporation with a fair market value equal to the total
option exercise price or cash for any difference. Options may, if permitted by
the particular option agreement, be exercised by directing that certificates
for the shares purchased be delivered to a licensed broker as agent for the
optionee, provided that the broker tenders to the Corporation cash or cash
equivalents equal to the option exercise price plus the amount of any taxes
that the Corporation may be required to withhold in connection with the
exercise of the option.
If an employee's or other individual's service with the Corporation or
its subsidiaries terminates by reason of death, or an employee's service with
the Corporation terminates by reason of permanent and total disability, his or
her options, to the extent then exercisable, may be exercised within one year
after such death or disability unless a later date is otherwise provided in the
particular option agreement (but not later than the date the option would
otherwise expire). If an employee's service terminates for any reason other
than death or disability, options held by such optionee terminate 30 days after
the date of such termination unless a later date is otherwise provided in the
particular option agreement (but not later than the date the option would
otherwise expire).
If the outstanding shares of Common Stock are increased or decreased or
changed into or exchanged for a different number or kind of shares or
securities of the Corporation, by reason of merger, consolidation,
reorganization, recapitalization, reclassification, stock split-up, combination
of shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increase or decrease in such shares without receipt of
consideration by the Corporation, an appropriate and proportionate adjustment
will be made in the number and kinds of shares subject to the 1997 Plan, and in
the number, kinds, and per share exercise price of shares subject to the
unexercised portion of options granted prior to any such change. Any such
adjustment in an outstanding option, however, will be made without a change in
the total price applicable to the unexercised portion of the option but with a
corresponding adjustment in the per share option price.
Upon any dissolution or liquidation of the Corporation, or upon a
reorganization, merger or consolidation in which the Corporation is not the
surviving corporation, or upon the sale of all or substantially all of the
assets of the Corporation to another corporation, or upon any transaction
approved by the Board of Directors which results in any person or entity owning
80% or more of the total combined voting power of all classes of stock of the
Corporation, the 1997 Plan and the options issued thereunder will terminate,
unless provision is made in connection with such transaction for the
continuation of this Plan and/or the assumption of the options or for the
substitution for such options of new options covering the stock of a successor
corporation or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kinds of shares and the per share exercise price. In the
event of such termination, all outstanding options will be exercisable in full
during such period immediately prior to the occurrence of such termination as
the Board of Directors in its discretion will determine.
The Board of Directors may amend the 1997 Plan with respect to shares
of the Common Stock as to which options have not been granted.
The Board of Directors at any time may terminate or suspend the 1997
Plan. Unless previously terminated, this Plan will terminate automatically on
January 16, 2007, the tenth anniversary of the date of adoption of this Plan by
the Board of Directors. No termination, suspension or amendment of this Plan
may, without the consent of the optionee to whom an option has been granted,
adversely affect the rights of the holder of the option. The Federal income tax
consequences of the 1997 Plan are discussed below. See "Federal Income Tax
Consequences of Stock Option Plan."
FEDERAL INCOME TAX CONSEQUENCES OF THE STOCK OPTION PLAN
The grant of an option is not a taxable event for the optionee or the
Corporation. With respect to "incentive stock options," an optionee will not
recognize taxable income upon grant or exercise of an incentive option, and any
gain realized upon a disposition of shares received pursuant to the exercise of
an incentive option will be taxed as long-term capital gain if the optionee
holds the shares for at least two years after the date of grant and for one
year after the date of exercise. However, the excess of the fair market value
of the shares subject to an incentive option on the exercise date over the
option exercise price will be included in the optionee's alternative minimum
taxable income in the year of exercise (except that, if the optionee is subject
to certain securities law restrictions, the determination of the amount
included in alternative minimum taxable income may be delayed, unless the
optionee elects within 30 days following exercise to have income determined
without regard to such restrictions) for purposes of the alternative minimum
tax. This excess increases the optionee's basis in the shares for purposes of
the alternative minimum tax but not for purposes of the regular income tax. An
optionee may be entitled to a credit against regular tax liability in future
years for minimum taxes paid with respect to the exercise of incentive options
(e.g., for a year in which the shares are sold at a gain). The Corporation and
its subsidiaries will not be entitled to any business expense deduction with
respect to the grant or exercise of an incentive option, except as discussed
below.
For the exercise of an incentive option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of the Corporation or a
subsidiary from the date the option is granted through a date within three
months before the date of exercise. In the case of an optionee who is disabled,
this three-month period is extended to one year. In the case of an employee
who dies, the three-month period and the holding period for shares received
pursuant to the exercise of the option are waived.
11
<PAGE> 14
If all of the requirements for incentive option treatment are met except
for the special holding period rules set forth above, the optionee will
recognize the ordinary income upon the disposition of the shares in an amount
equal to the excess of the fair market value of the shares at the time the
option was exercised over the option exercise price. However, if the optionee
was subject to certain restrictions under the securities laws at the time the
option was exercised, the measurement date may be delayed, unless the optionee
has made a special tax election within 30 days after the date of exercise to
have taxable income determined without regard to such restrictions. The balance
of the realized gain, if any, will be long- or short-term capital gain,
depending upon whether or not the shares were sold more than one year after the
option was exercised. If the optionee sells the shares prior to the
satisfaction of the holding period rules but at a price below the fair market
value of the shares at the time the option was exercised (or other applicable
measurement date), the amount of ordinary income (and the amount included in
alternative minimum taxable income, if the sale occurs during the same year as
the option was exercised) will be limited to the excess of the amount realized
on the sale over the option exercise price. If the Corporation complies with
applicable reporting (if any) and other requirements, it will be allowed a
business expense deduction to the extent the optionee recognizes ordinary
income.
If, pursuant to an option agreement, an optionee exercises an incentive
option by tendering shares of Common Stock with a fair market value equal to
part or all of the option exercise price, the exchange of shares will be
treated as a nontaxable exchange (except that this treatment would not apply if
the optionee had acquired the shares being transferred pursuant to the exercise
of an incentive option and had not satisfied the special holding period
requirements summarized above). If the exercise is treated as a tax free
exchange, the optionee would have no taxable income from the exchange and
exercise (other than minimum taxable income as discussed above) and the tax
basis of the shares exchanged would be treated as the substituted basis for the
shares received. These rules would not apply if the optionee used shares
received pursuant to the exercise of an incentive option (or another statutory
option) as to which the optionee had not satisfied the applicable holding
period requirement. In that case, the exchange would be treated as a taxable
disqualifying disposition of the exchanged shares, with the result that the
excess of the fair market value of the shares tendered over the optionee's
basis in the shares would be taxable.
Upon exercising a non-qualifying (i.e. non-incentive) option, an
optionee will recognize ordinary income in an amount equal to the difference
between the exercise price and the fair market value of the Common Stock on the
date of exercise (except that, if the optionee is subject to certain
restrictions imposed by the securities laws, the measurement date may be
delayed, unless the optionee makes a special tax election within 30 days after
exercise to have income determined without regard to the restrictions). If the
Corporation complies with applicable reporting requirements, it will be
entitled to a business expense deduction in the same amount. Upon a subsequent
sale or exchange of shares acquired pursuant to the exercise of a non-incentive
option, the optionee will have taxable gain or loss, measured by the difference
between the amount realized on the disposition and the tax basis of the shares
(generally, the amount paid for the shares plus the amount treated as ordinary
income at the time the option was exercised).
If, pursuant to an option agreement, the optionee surrenders shares of
Common Stock in payment of part or all of the exercise price for non-qualifying
options, no gain or loss will be recognized with respect to the shares
surrendered (regardless of whether the shares were acquired pursuant to the
exercise of an incentive option) and the optionee will be treated as receiving
an equivalent number of shares pursuant to the exercise of the option in a
nontaxable exchange. The basis of the shares surrendered will be treated as the
substituted tax basis for an equivalent number of option shares received and
the new shares will be treated as having been held for the same holding period
as had expired with respect to the transferred shares. However; the fair market
value of any shares received in excess of the number of shares surrendered
(i.e., the difference between the aggregate option exercise price and the
aggregate fair market value of the shares received pursuant to the exercise of
the option) will be taxed as ordinary income. Under current federal income tax
law, for 1993 and subsequent years, the highest tax rate on ordinary income is
39.6% and long-term capital gains are subject to a maximum tax rate of 28%.
Gain on a sale of stock acquired as a consequence of the exercise of an option
should qualify as long-term if the stock has been held for more than one year
(after exercise). Because of certain provisions in the law relating to the
"phase out" of personal exemptions and certain limitations on itemized
deductions, the federal income tax consequences to a particular taxpayer of
receiving additional amounts of ordinary income or capital gain may be greater
than would be indicated by application of the foregoing tax rates to the
additional amount of income or gain.
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<PAGE> 15
VOTING PROCEDURES
Shares can be voted only if the stockholder is present in person or by
proxy. Whether or not you plan to attend in person, you are encouraged to sign
and return the enclosed proxy card. Any proxy given pursuant to this
solicitation may be revoked by the person giving it at any time before its use
by delivering to the Secretary of the Corporation at the above address a
written notice of revocation or a duly executed proxy bearing a later date, or
by attending the meeting and voting in person. The representation in person or
by proxy of at least a majority of the outstanding shares entitled to vote is
necessary to provide a quorum at the meeting. Directors are elected by a
plurality of the affirmative votes cast.
Abstentions and "non-votes" are counted as present in determining
whether the quorum requirement is satisfied. Abstentions and "non-votes" are
treated as votes against proposals presented to stockholders other than
elections of directors. A "non-vote" occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Ernst & Young L.L.P. has acted as the
Corporation's independent public accountants for the year ended October 31,
1996 and has been selected by the Board to act as such for 1997.
Representatives of Ernst & Young L.L.P. are expected to be present at the
stockholders meeting and will have an opportunity to make a statement if they
desire and to respond to appropriate questions.
STOCKHOLDER PROPOSALS
All stockholder proposals intended to be presented at the 1998 Annual
Meeting of the Corporation must be received by the Corporation no later than
October 15, 1997 and must otherwise comply with the rules of the Securities and
Exchange Commission for inclusion in the Corporation's proxy statement and form
of proxy relating to that meeting.
OTHER MATTERS
Management knows of no matters to be presented for action at the meeting
other than those mentioned above. However, if any other matters properly come
before the meeting, it is intended that the persons named in the accompanying
form of proxy will vote on such other matters in accordance with their judgment
of the best interests of the Corporation.
By Order of the Board of Directors
/s/ STEVE DUBIN
----------------
Steve Dubin
Secretary
13
<PAGE> 16
EXHIBIT A
MARTEK BIOSCIENCES CORPORATION
1997 EMPLOYEE STOCK OPTION PLAN
MARTEK BIOSCIENCES CORPORATION, a Delaware corporation (the
"Corporation"), sets forth herein the terms of the Martek Biosciences
Corporation 1997 Stock Option Plan (the "Plan") as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Corporation by
providing eligible individuals (as designated pursuant to Section 5 hereof) an
opportunity to acquire or increase a proprietary interest in the Corporation,
which thereby will create a stronger incentive to expend maximum effort for the
growth and success of the Corporation and its subsidiaries and will encourage
such eligible individuals to continue to service the Corporation. Each stock
option granted under the Plan is intended to be an Incentive Stock Option
within the meaning of Section 422 of the Code, except (a) to the extent that
any such Option would exceed the limitations set forth in Section 8 hereof and
(b) for Options specifically designated at the time of grant as not being
Incentive Stock Options.
2. DEFINITIONS
For purposes of interpreting the Plan and related documents (including
Option Agreements), the following definitions shall apply:
2.1 "Affiliate" means Martek Biosciences Corporation and any company
or other trade or business that is controlled by or under
common control with the Corporation, (determined in accordance
with the principles of Section 414(b) and 414(c) of the Code
and the regulations thereunder) or is an affiliate of the
Corporation within the meaning of Rule 405 of Regulation C
under the 1933 Act.
2.2 "Board" means the Board of Directors of the Corporation.
2.3 "Cause" means, unless otherwise defined in an Option Agreement,
(i) gross negligence or willful misconduct in connection with the
performance of duties; (ii) conviction of a criminal offense
(other than minor traffic offenses); or (iii) material breach of
any term of any employment, consulting or other services,
confidentiality, intellectual property or non-competition
agreements, if any, between Optionee and the Corporation or any
of its Subsidiaries or Affiliates.
2.4 "Code" means the Internal Revenue Code of 1986, as now in effect
or as hereafter amended.
2.5 "Committee" means the Compensation Committee of the Board which
must consist of no fewer than two members of the Board and shall
be appointed by the Board.
2.6 "Corporation" means Martek Biosciences Corporation.
2.7 "Effective Date" means the date of adoption of the Plan by the
Board.
2.8 "Employer" means Martek Biosciences Corporation or other
Affiliate which employs the designated recipient of an Option.
2.9 "Exchange Act" means the Securities Exchange Act of 1934, as now
in effect or as hereafter amended.
2.10 "Fair Market Value" means the value of each share of Stock
subject to the Plan determined as follows: if on the Grant Date
or other determination date the shares of Stock are listed on an
established national or regional stock exchange, are admitted to
quotation on the National Association of Securities Dealers
Automated Quotation System, or are publicly traded on an
established securities market, the Fair Market Value of the
shares of Stock shall be the closing price of the shares of Stock
on such exchange or in such market (the highest such closing
price if there is more than one such exchange or market) on the
trading day immediately preceding the Grant Date or such other
determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the
highest bid and lowest asked prices or between the high and low
sale prices on such trading day) or, if no sale of the shares of
Stock is reported for such trading day, on the next preceding day
on which any sale shall have been reported. If the shares of
Stock are not listed on such an exchange, quoted on such System
or traded on such a market, Fair Market Value shall be determined
by the Board in good faith.
2.11 "Grant Date" means the later of (i)the date as of which the
Committee approves the grant and (ii)the date as of which the
Optionee and the Corporation or Affiliate enter the relationship
resulting in the Optionee being eligible for grants.
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<PAGE> 17
2.12 "Immediate Family Members" means the spouse, children and
grandchildren of the Optionee.
2.13 "Incentive Stock Option" means an "incentive stock option" within
the meaning of section 422 of the Code.
2.14 "Option" means an option to purchase one or more shares of Stock
pursuant to the Plan.
2.15 "Option Agreement" means the written agreement evidencing the
grant of an Option hereunder.
2.16 "Optionee" means a person who holds an Option under the Plan.
2.17 "Option Period" means the period during which Options may be
exercised as defined in Section 11.
2.18 "Option Price" means the purchase price for each share of Stock
subject to an Option.
2.19 "Plan" means the Martek Biosciences Corporation 1997 Stock Option
Plan.
2.20 "1933 Act" means the Securities Act of 1933, as now in effect or
as hereafter amended.
2.21 "Stock" means the shares of common stock, par value $.01 per
share, of the Corporation.
2.22 "Subsidiary" means any "subsidiary corporation" of the
Corporation within the meaning of Section 425(f) of the Code.
3. ADMINISTRATION
3.1. COMMITTEE
The Plan shall be administered by the Committee appointed by the Board,
which shall have the full power and authority to take all actions and to make
all determinations required or provided for under the Plan or any Option
granted or Option Agreement entered into hereunder and all such other actions
and determinations not inconsistent with the specific terms and provisions of
the Plan deemed by the Committee to be necessary or appropriate to the
administration of the Plan or any Option granted or Option Agreement entered
into hereunder. The interpretation and construction by the Committee of any
provision of the Plan or of any Option granted or Option Agreement entered into
hereunder shall be final and conclusive.
3.2. NO LIABILITY
No member of the Board or of the Committee shall be liable for any
action or determination made, or any failure to take or make an action or
determination, in good faith with respect to the Plan or any Option granted or
Option Agreement entered into hereunder.
4. STOCK
The stock that may be issued pursuant to Options granted under the Plan
shall be Stock, which shares may be treasury shares or authorized but unissued
shares. The number of shares of Stock that may be issued pursuant to Options
granted under the Plan shall not exceed in the aggregate 750,000 shares of
Stock, which number of shares is subject to adjustment as provided in Section
19 hereof. If any Option expires, terminates or is terminated for any reason
prior to exercise in full, the shares of Stock that were subject to the
unexercised portion of such Option shall be available for future Options
granted under the Plan.
5. ELIGIBILITY
Options may be granted under the Plan to (i) any officer or key employee
of the Corporation, any Subsidiary or any Affiliate (including any such officer
or key employee who is also a director of the Corporation, any Subsidiary or
any Affiliate) or (ii) any other individual whose participation in the Plan is
determined to be in the best interests of the Corporation by the Committee. An
individual may hold more than one Option, subject to such restrictions as are
provided herein.
6. EFFECTIVE DATE AND TERM
6.1. EFFECTIVE DATE
The Plan shall become effective as of the date of adoption by the Board,
subject to stockholders' approval of the Plan within one year of such effective
date by a majority of the votes cast at a duly held meeting of the stockholders
of the Corporation at which a quorum representing a majority of all outstanding
stock is present, either in person or by proxy, and voting on the matter, or by
written consent in accordance with applicable state law and the Certificate of
Incorporation and By-Laws of the Corporation; provided, however, that upon
approval of the Plan by the stockholders of the Corporation, all Options
granted under the Plan on or after the effective date shall be fully effective
as if the stockholders of the Corporation
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had approved the Plan on the effective date; and provided, further, that
Options to purchase up to 35,000 shares granted during January, 1997 shall not
be subject to stockholder approval. If the stockholders fail to approve the
Plan within one year of such effective date, any Options granted hereunder,
other than the Options to purchase up to 35,000 shares described in the
previous sentence, shall be null, void and of no effect.
6.2. TERM
The Plan shall terminate on the date 10 years after the effective date.
7. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Committee may, at
any time and from time to time prior to the date of termination of the Plan,
grant to such eligible individuals as the Committee may determine Options to
purchase such number of shares of Stock on such terms and conditions as the
Committee may determine, including any terms or conditions which may be
necessary to qualify such Options as Incentive Stock Options. Without limiting
the foregoing, the Committee may at any time, with the consent of the Optionee,
amend the terms of outstanding Options or issue new Options in exchange for the
surrender and cancellation of outstanding Options. The date on which the
Committee approves the grant of an Option (or such later date as is specified
by the Committee) shall be considered the date on which such Option is granted.
The maximum number of shares of Stock subject to Options that can be awarded
under the Plan to any person is 250,000 shares.
8. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option (other than an Option described in Section 1 hereof) shall
constitute an Incentive Stock Option only to the extent that the aggregate fair
market value (determined at the time the Option is granted) of the Stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionee during any calendar year (under the Plan and all other plans of
the Optionee's employer corporation and its parent and subsidiary corporations
within the meaning of Section 422(d) of the Code) does not exceed $100,000.
This limitation shall be applied by taking Options into account in the order in
which such Options were granted.
9. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by written
agreements to be executed by the Corporation and the Optionee, in such form or
forms as the Committee shall from time to time determine. Option Agreements
covering Options granted from time to time or at the same time need not contain
similar provisions; provided, however, that all such Option Agreements shall
comply with all terms of the Plan.
10. OPTION PRICE
The purchase price of each share of Stock subject to an Option shall be
fixed by the Committee and stated in each Option Agreement. In the case of an
Option that is intended to constitute an Incentive Stock Option, the Option
Price shall be not less than the greater of par value or 100 percent of the
fair market value of a share of the Stock covered by the Option on the date the
Option is granted (as determined in good faith by the Committee); provided,
however, that in the event the Optionee would otherwise be ineligible to
receive an Incentive Stock Option by reason of the provisions of Sections
422(b)(6) and 424(d) of the Code (relating to stock ownership of more than 10
percent), the Option Price of an Option which is intended to be an Incentive
Stock Option shall be not less than the greater of par value or 110 percent of
the fair market value of a share of the Stock covered by the Option at the time
such Option is granted. In the case of an Option not intended to constitute an
Incentive Stock Option, the Option Price shall be not less than the par value
of a share of the Stock covered by the Option on the date the Option is granted
(as determined in good faith by the Committee).
11. TERM AND EXERCISE OF OPTIONS
11.1. TERM
Each Option granted under the Plan shall terminate and all rights to
purchase shares thereunder shall cease upon the expiration of 10 years from the
date such Option is granted, or on such date prior thereto as may be fixed by
the Committee and stated in the Option Agreement relating to such Option;
provided, however, that in the event the Optionee would otherwise be ineligible
to receive an Incentive Stock Option by reason of the provisions of Sections
422(b)(6) and 424(d) of the Code (relating to stock ownership of more than 10
percent), an Option granted to such Optionee which is intended to be an
Incentive Stock Option shall in no event be exercisable after the expiration of
five years from the date it is granted.
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11.2. EXERCISE BY OPTIONEE
Only the Optionee receiving an Option or a transferee of an Option
pursuant to Section 12 (or, in the event of the Optionee's legal incapacity or
incompetency, the Optionee's guardian or legal representative, and in the case
of the Optionee's death, the Optionee's estate) may exercise the Option.
11.3. OPTION PERIOD AND LIMITATIONS ON EXERCISE
Each Option granted under the Plan shall be exercisable in whole or in
part at any time and from time to time over a period commencing on or after the
date of grant of the Option and ending upon the expiration or termination of
the Option, as the Committee shall determine and set forth in the Option
Agreement relating to such Option. Without limitation of the foregoing, the
Committee, subject to the terms and conditions of the Plan, may in its sole
discretion provide that an Option may not be exercised in whole or in part for
any period or periods of time during which such Option is outstanding as the
Committee shall determine and set forth in the Option Agreement relating to
such Option. Any such limitation on the exercise of an Option contained in any
Option Agreement may be rescinded, modified or waived by the Committee, in its
sole discretion, at any time and from time to time after the date of grant of
such Option. Notwithstanding any other provisions of the Plan except Section
6.1, no Option, except an Option granted in January 1997, shall be exercisable
in whole or in part prior to the date the Plan is approved by the stockholders
of the Corporation as provided in Section 6.1 hereof.
11.4. METHOD OF EXERCISE
An Option that is exercisable hereunder may be exercised by delivery to
the Corporation on any business day, at its principal office addressed to the
attention of the Committee, of written notice of exercise, which notice shall
specify the number of shares for which the Option is being exercised, and shall
be accompanied by payment in full of the Option Price of the shares for which
the Option is being exercised. Payment of the Option Price for the shares of
Stock purchased pursuant to the exercise of an Option shall be made, as
determined by the Committee and set forth in the Option Agreement pertaining to
an Option, (a) in cash or by certified check payable to the order of the
Corporation; (b) through the tender to the Corporation of shares of Stock,
which shares shall be valued, for purposes of determining the extent to which
the Option Price has been paid thereby, at their Fair Market Value on the date
of exercise; or (c) by a combination of the methods described in Sections
11.4(a) and 11.4(b) hereof; provided, however, that the Committee may in its
discretion impose and set forth in the Option Agreement pertaining to an Option
such limitations or prohibitions on the use of shares of Stock to exercise
Options as it deems appropriate. Payment in full of the Option Price need not
accompany the written notice of exercise provided the notice directs that the
Stock certificate or certificates for the shares for which the Option is
exercised be delivered to a licensed broker acceptable to the Corporation as
the agent for the individual exercising the Option and, at the time such Stock
certificate or certificates are delivered, the broker tenders to the
Corporation cash (or cash equivalents acceptable to the Corporation) equal to
the Option Price plus the amount (if any) of federal and/or other taxes which
the Corporation may, in its judgment, be required to withhold with respect to
the exercise of the Option. An attempt to exercise any Option granted hereunder
other than as set forth above shall be invalid and of no force and effect.
Promptly after the exercise of an Option and the payment in full of the Option
Price of the shares of Stock covered thereby, the individual exercising the
Option shall be entitled to the issuance of a Stock certificate or certificates
evidencing such individual's ownership of such shares. A separate Stock
certificate or certificates shall be issued for any shares purchased pursuant
to the exercise of an Option which is an Incentive Stock Option, which
certificate or certificates shall not include any shares which were purchased
pursuant to the exercise of an Option which is not an Incentive Stock Option.
An individual holding or exercising an Option shall have none of the rights of
a stockholder until the shares of Stock covered thereby are fully paid and
issued to such individual and, except as provided in Section 19 hereof, no
adjustment shall be made for dividends or other rights for which the record
date is prior to the date of such issuance.
11.5. PARACHUTE LIMITATIONS
Notwithstanding any other provision of this Plan or of any other
agreement, contract, or understanding heretofore or hereafter entered into by
the Optionee with the Corporation or any Subsidiary, except an agreement,
contract, or understanding hereafter entered into that expressly modifies or
excludes application of this paragraph (an "Other Agreement"), and
notwithstanding any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Corporation (or any such Subsidiary) for the direct or
indirect provision of compensation to the Optionee (including groups or classes
of participants or beneficiaries of which the Optionee is a member), whether or
not such compensation is deferred, is in cash, or is in the form of a benefit
to or for the Optionee (a "Benefit Arrangement"), if the Optionee is a
"disqualified individual," as defined in Section 280G(c) of the Code, any
Option held by that Optionee and any right to receive any payment or other
benefit under this Plan shall not become exercisable or vested (i) to the
extent that such right to exercise, vesting, payment, or benefit, taking into
account all other rights, payments, or benefits to or for the Optionee under
this Plan, all Other Agreements, and all Benefit Arrangements, would cause any
payment or benefit to the Optionee under this Plan to be considered a
"parachute payment" within the meaning of Section 280G(b)(2) of the Code as
then in effect (a "Parachute Payment") and (ii)if, as a result of
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<PAGE> 20
receiving a Parachute Payment, the aggregate after-tax amounts received by
the Optionee from the Corporation under this Plan, all Other Agreements, and
all Benefit Arrangements would be less than the maximum after-tax amount that
could be received by Optionee without causing any such payment or benefit to be
considered a Parachute Payment. In the event that the receipt of any such right
to exercise, vesting, payment, or benefit under this Plan, in conjunction with
all other rights, payments, or benefits to or for the Optionee under any Other
Agreement or any Benefit Arrangement would cause the Optionee to be considered
to have received a Parachute Payment under this Plan that would have the effect
of decreasing the after-tax amount received by the Optionee as described in
clause (ii) of the preceding sentence, then the Optionee shall have the right,
in the Optionee's sole discretion, to designate those rights, payments, or
benefits under this Plan, any Other Agreements, and any Benefit Arrangements
that should be reduced or eliminated so as to avoid having the payment or
benefit to the Optionee under this Plan be deemed to be a Parachute Payment.
12. TRANSFERABILITY OF OPTIONS
12.1. TRANSFERABILITY OF OPTIONS
Except as provided in Section 12.2, during the lifetime of an Optionee,
only the Optionee (or, in the event of legal incapacity or incompetency, the
Optionee's guardian or legal representative) may exercise an Option. Except as
provided in Section 12.2, no Option shall be assignable or transferable by the
Optionee to whom it is granted, other than by will or the laws of descent and
distribution.
12.2. FAMILY TRANSFERS
An Optionee may transfer all or part of an Option to (i) any Immediate
Family Member, (ii) a trust or trusts for the exclusive benefit of any
Immediate Family Member, or (iii) a partnership in which Immediate Family
Members are the only partners, provided that (x) there may be no consideration
for any such transfer, and (y) subsequent transfers of transferred Options are
prohibited except those in accordance with this Section 12.2 or by will or the
laws of descent and distribution. Following transfer, any such Option shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Section 12.2
hereof the term "Optionee" shall be deemed to refer the transferee. The events
of termination of employment of Sections 13 and 14 hereof shall continue to be
applied with respect to the original Optionee, following which the Option shall
be exercisable by the transferee only to the extent, and for the periods
specified in Section 11.3.
13. TERMINATION OF EMPLOYMENT
Upon the termination of employment of an Optionee with the Corporation,
a Subsidiary or an Affiliate, other than by reason of the death or "permanent
and total disability" (within the meaning of Section 22(e)(3) of the Code) of
such Optionee or for Cause, any Option granted to an Optionee pursuant to the
Plan shall continue to be exercisable only to the extent that it was
exercisable immediately before such termination; provided, however, such Option
shall terminate 30 days after the date of such termination of employment,
unless earlier terminated pursuant to Section 11.1 hereof, and such Optionee
shall have no further right to purchase shares of Stock pursuant to such
Option; and provided further, that the Committee may provide, by inclusion of
appropriate language in any Option Agreement, that an Optionee may (subject to
the general limitations on exercise set forth in Section 11.3 hereof), in the
event of termination of employment of the Optionee with the Corporation, a
Subsidiary or an Affiliate, exercise an Option, in whole or in part, at any
time subsequent to such termination of employment and prior to termination of
the Option pursuant to Section 11.1 hereof, either subject to or without regard
to any installment limitation on exercise imposed pursuant to Section 11.3
hereof, as the Committee, in its sole and absolute discretion, shall determine
and set forth in the Option Agreement. Upon the termination of employment of an
Optionee with the Corporation, a Subsidiary or an Affiliate for Cause, any
Option granted to an Optionee pursuant to the Plan shall terminate and such
Optionee shall have no further right to purchase shares of Stock pursuant to
such Option; and provided however, that the Committee may provide, by inclusion
of appropriate language in any Option Agreement, that an Optionee may (subject
to the general limitations on exercise set forth in Section 11.3 hereof), in
the event of termination of employment of the Optionee with the Corporation, a
Subsidiary or an Affiliate for Cause, exercise an Option, in whole or in part,
at any time subsequent to such termination of employment and prior to
termination of the Option pursuant to Section 11.1 hereof, either subject to or
without regard to any installment limitation on exercise imposed pursuant to
Section 11.3 hereof, as the Committee, in its sole and absolute discretion,
shall determine and set forth in the Option Agreement. Whether a leave of
absence or leave on military or government service shall constitute a
termination of employment for purposes of the Plan shall be determined by the
Committee, which determination shall be final and conclusive. For purposes of
the Plan, including without limitation this Section 13 and Section 14, unless
otherwise provided in an Option Agreement, a termination of employment with the
Corporation, a Subsidiary or an Affiliate shall not be deemed to occur if the
Optionee immediately thereafter is employed with the Corporation, any other
Subsidiary or any other Affiliate.
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14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
14.1. DEATH
If an Optionee dies within the period during which the Option is
exercisable, the executors, administrators, legatees or distributees of such
Optionee's estate shall have the right (subject to the general limitations on
exercise set forth in Section 11.3 hereof), at any time within one year after
the date of such Optionee's death and prior to termination of the Option
pursuant to Section 11.1 hereof, to exercise, in whole or in part, any Option
held by such Optionee at the date of such Optionee's death, to the extent such
Option was exercisable immediately prior to such Optionee's death; provided,
however, that the Committee may provide by inclusion of appropriate language in
any Option Agreement that, in the event of the death of an Optionee, the
executors, administrators, legatees or distributees of such Optionee's estate
may exercise an Option (subject to the general limitations on exercise set
forth in Section 11.3 hereof), in whole or in part, at any time subsequent to
such Optionee's death and prior to termination of the Option pursuant to
Section 11.1 hereof, either subject to or without regard to any installment
limitation on exercise imposed pursuant to Section 11.3 hereof, as the
Committee, in its sole and absolute discretion, shall determine and set forth
in the Option Agreement.
14.2. DISABILITY
If an Optionee terminates employment with the Corporation, a Subsidiary
or an Affiliate by reason of the "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code) of such Optionee, then such Optionee
shall have the right (subject to the general limitations on exercise set forth
in Section 11.3 hereof), at any time within one year after such termination of
employment and prior to termination of the Option pursuant to Section 11.1
hereof, to exercise, in whole or in part, any Option held by such Optionee at
the date of such termination of employment, to the extent such Option was
exercisable immediately prior to such termination of employment; provided,
however, that the Committee may provide, by inclusion of appropriate language
in any Option Agreement, that an Optionee may (subject to the general
limitations on exercise set forth in Section 11.3 hereof), in the event of the
termination of employment of the Optionee with the Corporation or a Subsidiary
by reason of the "permanent and total disability" (within the meaning of
Section 22(e)(3) of the Code) of such Optionee, exercise an Option, in whole or
in part, at any time subsequent to such termination of employment and prior to
termination of the Option pursuant to Section 11.1 hereof, either subject to or
without regard to any installment limitation on exercise imposed pursuant to
Section 11.3 hereof, as the Committee, in its sole and absolute discretion,
shall determine and set forth in the Option Agreement. Whether a termination of
employment is to be considered by reason of "permanent and total disability"
for purposes of the Plan shall be determined by the Committee, which
determination shall be final and conclusive.
15. USE OF PROCEEDS
The proceeds received by the Corporation from the sale of Stock pursuant
to Options granted under the Plan shall constitute general funds of the
Corporation.
16. SECURITIES LAWS
The Corporation shall not be required to sell or issue any shares of
Stock under any Option if the sale or issuance of such shares would constitute
a violation by the individual exercising the Option or by the Corporation of
any provisions of any law or regulation of any governmental authority,
including, without limitation, any federal or state securities laws or
regulations. If at any time the Corporation shall determine, in its discretion,
that the listing, registration or qualification of any shares subject to the
Option upon any securities exchange or under any state or federal law, or the
consent of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the issuance or purchase of shares, the
Option may not be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Corporation, and any
delay caused thereby shall in no way affect the date of termination of the
Option. Specifically in connection with the Securities Act, upon exercise of
any Option, unless a registration statement under the Securities Act is in
effect with respect to the shares of Stock covered by such Option, the
Corporation shall not be required to sell or issue such shares unless the
Corporation has received evidence satisfactory to the Corporation that the
Optionee may acquire such shares pursuant to an exemption from registration
under the Securities Act. Any determination in this connection by the
Corporation shall be final and conclusive. The Corporation may, but shall in no
event be obligated to, register any securities covered hereby pursuant to the
Securities Act. The Corporation shall not be obligated to take any affirmative
action in order to cause the exercise of an Option or the issuance of shares
pursuant thereto to comply with any law or regulation of any governmental
authority. As to any jurisdiction that expressly imposes the requirement that
an Option shall not be exercisable unless and until the shares of Stock covered
by such Option are registered or are subject to an available exemption from
registration, the exercise of such Option (under circumstances in which the
laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
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17. EXCHANGE ACT: RULE 16B-3
17.1. GENERAL
The Plan is intended to comply with Rule 16b-3 ("Rule 16b-3") (and any
successor thereto) under the Exchange Act. Any provision inconsistent with Rule
16b-3 shall, to the extent permitted by law and determined to be advisable by
the Committee (constituted in accordance with Section 17.2 hereof), be
inoperative and void.
17.2. COMPENSATION COMMITTEE
The Committee appointed in accordance with Section 3.1 hereof shall
consist of not fewer than two members of the Board each of whom shall qualify
(at the time of appointment to the Committee and during all periods of service
on the Committee) in all respects as a "non-employee director" as defined in
Rule 16b-3.
17.3. RESTRICTION ON TRANSFER OF STOCK
No director, officer or other "insider" of the Corporation subject to
Section 16 of the Exchange Act shall be permitted to sell Stock (which such
"insider" had received upon exercise of an Option) during the six months
immediately following the grant of such Option.
18. AMENDMENT AND TERMINATION
The Board may, at any time and from time to time, amend, suspend or
terminate the Plan as to any shares of Stock as to which Options have not been
granted. The Corporation also may retain the right in an Option Agreement to
cause a forfeiture of the shares or gain realized by an Optionee on account of
the Optionee taking actions in "competition with the Corporation," as defined
in the applicable Option Agreement. Furthermore, the Corporation may, in the
Option Agreement, retain the right to annul the grant of an Option if the
holder of such grant was employed by the Corporation, a Subsidiary, or an
Affiliate and is terminated "for cause," as defined in the applicable Option
Agreement. Except as permitted under Section 19 hereof, no amendment,
suspension or termination of the Plan shall, without the consent of the
Optionee, alter or impair rights or obligations under any Option theretofore
granted under the Plan.
19. EFFECT OF CHANGES IN CAPITALIZATION
19.1. CHANGES IN STOCK
If the number of outstanding shares of Stock is increased or decreased
or changed into or exchanged for a different number or kind of shares or other
securities of the Corporation by reason of any recapitalization,
reclassification, stock split-up, combination of shares, exchange of shares,
stock dividend or other distribution payable in capital stock, or other
increase or decrease in such shares effected without receipt of consideration
by the Corporation, occurring after the effective date of the Plan, a
proportionate and appropriate adjustment shall be made by the Corporation in
the number and kind of shares for which Options are outstanding, so that the
proportionate interest of the Optionee immediately following such event shall,
to the extent practicable, be the same as immediately prior to such event. Any
such adjustment in outstanding Options shall not change the aggregate Option
Price payable with respect to shares subject to the unexercised portion of the
Option outstanding but shall include a corresponding proportionate adjustment
in the Option Price per share.
19.2. REORGANIZATION WITH CORPORATION SURVIVING
Subject to Section 19.3 hereof, if the Corporation shall be the
surviving entity in any reorganization, merger or consolidation of the
Corporation with one or more other entities, any Option theretofore granted
pursuant to the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to such Option would have been
entitled immediately following such reorganization, merger or consolidation,
with a corresponding proportionate adjustment of the Option Price per share so
that the aggregate Option Price thereafter shall be the same as the aggregate
Option Price of the shares remaining subject to the Option immediately prior to
such reorganization, merger or consolidation.
19.3. OTHER REORGANIZATIONS; SALE OF ASSETS OR STOCK
Upon the dissolution or liquidation of the Corporation, or upon a
merger, consolidation or reorganization of the Corporation with one or more
other entities in which the Corporation is not the surviving entity, or upon a
sale of substantially all of the assets of the Corporation to another person or
entity, or upon any transaction (including, without limitation, a merger or
reorganization in which the Corporation is the surviving entity) approved by
the Board that results in any person or entity (other than persons who are
holders of stock of the Corporation at the time the Plan is approved by the
Stockholders and other than an Affiliate) owning 80 percent or more of the
combined voting power of all classes of stock of the Corporation, the Plan
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and all Options outstanding hereunder shall terminate, except to the extent
provision is made in connection with such transaction for the continuation of
the Plan and/or the assumption of the Options theretofore granted, or for the
substitution for such Options of new options covering the stock of a successor
entity, or a parent or subsidiary thereof, with appropriate adjustments as to
the number and kinds of shares and exercise prices, in which event the Plan and
Options theretofore granted shall continue in the manner and under the terms so
provided. In the event of any such termination of the Plan, each Optionee shall
have the right (subject to the general limitations on exercise set forth in
Section 11.3 hereof and except as otherwise specifically provided in the Option
Agreement relating to such Option), immediately prior to the occurrence of such
termination and during such period occurring prior to such termination as the
Committee in its sole discretion shall designate, to exercise such Option in
whole or in part, whether or not such Option was otherwise exercisable at the
time such termination occurs, but subject to any additional provisions that the
Committee may, in its sole discretion, include in any Option Agreement. The
Committee shall send written notice of an event that will result in such a
termination to all Optionees not later than the time at which the Corporation
gives notice thereof to its stockholders.
19.4. ADJUSTMENTS
Adjustments under this Section 19 relating to stock or securities of the
Corporation shall be made by the Committee, whose determination in that respect
shall be final and conclusive. No fractional shares of Stock or units of other
securities shall be issued pursuant to any such adjustment, and any fractions
resulting from any such adjustment shall be eliminated in each case by rounding
downward to the nearest whole share or unit.
19.5. NO LIMITATIONS ON CORPORATION
The grant of an Option pursuant to the Plan shall not affect or limit in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
20. WITHHOLDING
The Corporation or a Subsidiary may be obligated to withhold federal and
local income taxes and Social Security taxes to the extent that an Optionee
realizes ordinary income in connection with the exercise of an Option. The
Corporation or a Subsidiary may withhold amounts needed to cover such taxes
from payments otherwise due and owing to an Optionee, and upon demand the
Optionee will promptly pay to the Corporation or a Subsidiary having such
obligation any additional amounts as may be necessary to satisfy such
withholding tax obligation. Such payment shall be made in cash or cash
equivalents.
21. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option granted or Option Agreement
entered into pursuant to the Plan shall be construed to confer upon any
individual the right to remain in the employ of the Corporation, any Subsidiary
or any Affiliate, or to interfere in any way with the right and authority of
the Corporation, any Subsidiary or any Affiliate either to increase or decrease
the compensation of any individual at any time, or to terminate any employment
or other relationship between any individual and the Corporation, any
Subsidiary or any Affiliate. The obligation of the Corporation to pay any
benefits pursuant to the Plan shall be interpreted as a contractual obligation
to pay only those amounts described herein, in the manner and under the
conditions prescribed herein. The Plan shall in no way be interpreted to
require the Corporation to transfer any amounts to a third party trustee or
otherwise hold any amounts in trust or escrow for payment to any participant or
beneficiary under the terms of the Plan.
22. NONEXCLUSIVITY
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Corporation for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable
either generally to a class or classes of individuals or specifically to a
particular individual or individuals) as the Board in its discretion determines
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan.
23. GOVERNING LAW.
This Plan and all Options to be granted hereunder shall be governed by
the laws of the State of Delaware (but not including the choice of law rules
thereof).
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MARTEK BIOSCIENCES CORPORATION
ANNUAL MEETING OF STOCKHOLDERS - MARCH 14, 1997
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
<TABLE>
<S> <C>
WITH- FOR ALL
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The proxies are instructed to FOR HOLD EXCEPT
votes as follows: / / / / / /
The undersigned holder of the Common Stock of
Martek Biosciences Corporation (the "Corporation") Proposal 1: Election of Class II Directors.
acknowledges receipt of the Proxy Statement and
Notice of Annual Meeting of Stockholders, dated Bruce E. Elmblad, Richard J. Radmer and William D. Smart
February 6, 1997 and hereby constitutes and
appoints Henry Linsert, Jr. and Steve Dubin or (INSTRUCTION: To withhold authority to vote for any individual
each of them acting singly in the absence of the nominee, check "For All Except" and write that nominee's name in
other, the true and lawful proxy or proxies for the space provided below.)
and in the name of the undersigned to vote the
shares of Common Stock that the undersigned is
entitled to vote at the Annual Meeting of ---------------------------------------------------------------------
Stockholders of the Corporation to be held on
Friday, March 14, 1997 and at any adjournment or Proposal 2: Adoption of Martek FOR AGAINST ABSTAIN
adjournments thereof. Biosciences Corporation 1997 / / / / / /
Stock Option Plan.
Shares represented by all properly executed proxies will be
voted in accordance with the instructions appearing on this proxy. In
the absence of specific instructions, proxies will be voted FOR the
election of Directors and FOR approval of the Martek Biosciences
Corporation 1997 Stock Option Plan, and in the best discretion of the
proxy holders as to any other matters.
Execute proxy exactly as your name appears on this form. If
stock is registered in more than one name, each joint holder should
sign. When signing as trustee, executor or other fiduciary, please so
indicate.
Please be sure to sign and dated
this Proxy in the box below -----------------------
Date
- ---------------------------------------------------------
- --Stockholder sign above----Co-holder (if any) sign above
</TABLE>
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- DETACH ABOVE CARD, SIGN, DATE AND MAIL IN POSTAGE PAID ENVELOPE PROVIDED -
MARTEK BIOSCIENCES CORPORATION
- -------------------------------------------------------------------------------
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
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