<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 [ ]
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)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
MARTEK BIOSCIENCES CORPORATION
6480 DOBBIN ROAD
COLUMBIA, MARYLAND 21045
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1998 Annual Meeting of Stockholders of Martek Biosciences Corporation
will be held at the Corporation's headquarters, 6480 Dobbin Road, Columbia,
Maryland on Thursday, March 5, 1998, 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 2001 Annual Meeting of Stockholders;
2. 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 16, 1998
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
January 29, 1998
<PAGE> 3
MARTEK BIOSCIENCES CORPORATION
6480 DOBBIN ROAD
COLUMBIA, MARYLAND 21045
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MARCH 5, 1998
This Proxy Statement is furnished on or about January 29, 1998 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 Thursday, March 5, 1998 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 January 29, 1998 to all stockholders of record on January 16,
1998.
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 or 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 16, 1998, there were 13,790,759 shares
of the Common Stock of the Corporation outstanding and entitled to vote at the
meeting. Only stockholders of record on January 16, 1998 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
2001 Annual Meeting of Stockholders are to be elected. 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."
<TABLE>
<CAPTION>
NOMINEES FOR ELECTION AS A DIRECTOR FOR TERMS EXPIRING IN 2001:
<S> <C>
Douglas J. MacMaster, Jr........ Member - Compensation Committee.
Age 67 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 American Precision Industries, Inc.,
Flamel Technologies, SA, Neose Technologies, Inc., Oravax, Inc., Stratton Mutual Funds and U.S.
Biosciences, Inc. Mr. MacMaster has been a director of the Corporation since 1993.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
John H. Mahar................... Member - Compensation Committee.
Age 63 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.
Eugene H. Rotberg............... Member - Audit Committee.
Age 68 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.
DIRECTORS CONTINUING IN OFFICE:
Bruce E. Elmblad................ Member - Audit Committee.
Age 69 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 Antex Biologics Incorporated and
PCD Incorporated. Mr. Elmblad has been a director of the Corporation since 1992. Term expires in
2000.
Richard J. Radmer, Ph.D......... President of the Corporation since its founding in 1985.
Age 55 Term expires in 2000.
William D. Smart................ Member - Compensation Committee.
Age 71 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.
Term expires in 2000.
Jules Blake, Ph.D............... Member - Audit Committee.
Age 73 Dr. 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 Gene Logic, Inc. and 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 61 Has served as a physician on the neonatology staff of Mills Peninsula Hospital since 1992. Dr.
Johnson has a private practice in psychiatry and psychopharmacology. 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 Officer of the Corporation
Age 57 since 1988. Term expires in 1999.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
Sandra Panem, Ph.D.............. Member - Audit Committee.
Age 51 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. and Vector Later-Stage Equity Fund II,
L.P. funds focused on later-stage companies. Prior to joining VFM, she served as Vice President
and Portfolio Manager for the Oppenheimer Global BioTech Fund, a 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 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>
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 and the Company's 1997 Stock Option Plan. This Committee met five times
during fiscal 1997. During the fiscal year ended October 31, 1997, 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, 1997, 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 1997, the Board held five
meetings. All directors of the Corporation, except for Dr. Blake, attended 75%
or more of all Board meetings and Committee meetings. Dr. Blake attended 70% of
such 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, 1997, each director nominee, other than Mr.
Linsert and Dr. Radmer, received options to purchase 5,000 shares at $19.00 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.
3
<PAGE> 6
SECTION 16 (a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1997, all such filing requirements were
met except that the officers of the Corporation set forth below each
inadvertantly filed late the form set forth opposite their names as follows:
<TABLE>
<CAPTION>
OFFICER FORM
- ------- ----
<S> <C>
Thomas C. Fisher..... 4 - Statement of changes in Beneficial Ownership (twice)
Jerome C. Keller..... 3 - Initial Statement of Beneficial Ownership
Thomas Feeley........ 3 - Initial Statement of Beneficial Ownership
</TABLE>
In addition, Henry Linsert Jr. filed late several small gifts of stock to
family members on an amended Form 5, Annual Statement of Changes in Beneficial
Ownership.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of January 14, 1998
(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:
<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) 5.64%
50 Rowes Wharf
Boston, MA 02110
The College Retirement Equities Fund........... 1,283,650 (3) 9.14%
730 Third Avenue
New York, NY 10017
NationsBanc Capital Corporation ............... 972,432 7.05%
901 Main Street, 66th Floor
Dallas, TX 75202
State of Wisconsin Investment Board
121 East Wilson Street
Madison, WI 53702............................ 1,309,000 9.49%
Henry Linsert, Jr.............................. 456,690 (4) 3.25%
Richard J. Radmer, Ph.D........................ 460,000 (5) 3.32%
Steve Dubin.................................... 147,700 (6) 1.07%
David J. Kyle, Ph.D............................ 215,115 (7) 1.55%
Thomas C. Fisher............................... 159,505 (8) 1.15%
Jules Blake, Ph.D.............................. 18,955 (9) *
Bruce E. Elmblad............................... 8,500 (10) *
Ann L. Johnson, M.D............................ 13,500 (11) *
Douglas J. MacMaster........................... 48,500 (12) *
John H. Mahar.................................. 14,350 (13) *
Sandra Panem, Ph.D............................. 87,565 (14) *
Eugene H. Rotberg.............................. 55,250 (15) *
William D. Smart............................... 38,500 (16) *
All Executive Officers and Directors
as a group (13 persons)........................ 1,724,130 (4 through 16) 12.11%
</TABLE>
- -------------
* Less than one percent.
4
<PAGE> 7
(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 14, 1998 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 216,690 shares owned by Mr. Linsert and currently exercisable
options and options exercisable within 60 days of January 14, 1998, to
purchase 240,000 shares.
(5) Includes 175,000 shares owned by Dr. Radmer's wife, 225,000 shares owned
by the Radmer Family L.P., and options exercisable within 60 days of
January 14, 1998 to purchase 60,000 shares. Excludes 59,300 shares owned
by other members of Dr. Radmer's family, and Dr. Radmer disclaims
beneficial ownership of those shares.
(6) Includes currently exercisable options and options exercisable within 60
days of January 14, 1998 to purchase 73,000 shares.
(7) Includes currently exercisable options and options exercisable within 60
days of January 14, 1998 to purchase 87,050 shares.
(8) Includes currently exercisable options and options exercisable within 60
days of January 14, 1998 to purchase 102,000 shares.
(9) Includes currently exercisable options to purchase 16,000 shares.
(10) Consists of exercisable options to purchase 8,500 shares.
(11) Includes currently exercisable options to purchase 12,500 shares.
(12) Includes currently exercisable options to purchase 38,500 shares.
(13) Consists of currently exercisable options to purchase 14,350 shares.
(14) 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. Dr. Panem currently owns 4,500 shares of
Common Stock and holds options to purchase 12,500 shares.
(15) Includes currently exercisable options to purchase 41,000 shares.
(16) Includes currently exercisable options to purchase 28,500 shares.
5
<PAGE> 8
COMPENSATION
EXECUTIVE COMPENSATION
The table below sets forth the annual and long-term compensation for
services in all capacities to the Corporation for the fiscal years ended October
31, 1997, 1996 and 1995 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"). Mr. Jerome C. Keller,
Senior Vice President of Sales and Marketing, joined the Company in September
1997 and receives an annual salary of $120,000. He would have been included in
the table below had he been with the Company during the entire fiscal year ended
October 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------- ------
NAME AND
PRINCIPAL SECURITIES UNDERLYING ALL OTHER
POSITION YEAR SALARY ($) BONUS ($) (1) OPTIONS (#) COMPENSATION ($)
- -------- ---- ---------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Henry Linsert, Jr., 1997 217,500 -- 50,000 --
Chief Executive 1996 201,990 20,450 40,000 --
Officer 1995 187,424 38,100 30,000 --
Richard J. Radmer, 1997 109,889 -- 40,000 --
President (2) 1996 103,928 10,073 20,000 --
1995 124,856 26,900 20,000 --
Thomas C. Fisher, 1997 142,500 -- 40,000 3,900 (3)
Sr. Vice 1996 135,887 13,750 25,000 --
President, Operations 1995 126,280 25,600 20,000 2,106 (3)
David J. Kyle, 1997 145,833 -- 40,000 --
Sr. Vice President, 1996 135,887 20,625 25,000 --
Research and 1995 113,082 22,977 15,000 --
Development
Steve Dubin, 1997 130,500 -- 40,000 --
Chief Financial Officer, 1996 121,205 18,525 25,000 --
General Counsel, 1995 110,994 22,500 15,000 --
Treasurer and
Secretary
</TABLE>
- ----------
(1) All Named Executive Officers received bonuses based on performance in
fiscal 1996 and fiscal 1995 pursuant to the Corporation's Management Cash
Bonus Incentive Plan (the "Bonus Plan"). See the Report on Executive
Compensation below for a description of the Bonus Plan.
(2) During fiscal 1997 and 1996, Dr.Radmer elected to reduce his work
schedule.
(3) Consists of payments to Mr. Fisher to cover certain commuting expenses.
6
<PAGE> 9
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, 1997.
<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 OPTIONS GRANTED (#)(1) FISCAL YEAR 1997 ($/SH) (2) DATE 5% ($) 10% ($)
- ---- ---------------------- ---------------- ---------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Henry Linsert, Jr. 50,000 8.5 19.00 3/13/07 597,450 1,514,055
Richard J. Radmer 40,000 6.8 19.00 3/13/07 477,960 1,211,244
Thomas C. Fisher 40,000 6.8 19.00 3/13/07 477,960 1,211,244
David J. Kyle 40,000 6.8 19.00 3/13/07 477,960 1,211,244
Steve Dubin 40,000 6.8 19.00 3/13/07 477,960 1,211,244
</TABLE>
- ---------
(1) Options become exercisable ratably beginning 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 1997 to the respective dates of
expiration of such options in 2007 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 1997 under the Option Plan
and unexercised options held under the Option Plan on October 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
HELD AT OCTOBER 31, 1997 AT OCTOBER 31, 1997(1)
----------------------------- -------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry Linsert, Jr.(2) 67,500 $1,354,688 293,000 82,000 $1,192,875 $20,250
Richard J. Radmer -- -- 44,000 56,000 26,500 13,500
Thomas C. Fisher 55,350 902,138 86,000 69,000 151,500 44,750
David J. Kyle 42,154 688,599 71,680 57,920 122,000 16,125
Steve Dubin(2) 80,875 1,562,484 93,000 61,000 392,625 25,750
</TABLE>
- ---------
(1) Total value of unexercised options is based on the closing price of the
Corporation's Common Stock of $11.125 per share on October 31, 1997.
(2) Includes the exercise of options to purchase 67,500 shares during fiscal
1997 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 1997,
the Board of Directors voted to increase Mr. Linsert's base annual salary to
$224,000. 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
initially provided 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 1997, the Board voted to increase both Dr. Kyle's and Dr.
Radmer's base annual salary to $150,000.
7
<PAGE> 10
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 1933, as amended, or the 1934 Act.
Decisions on compensation of the Corporation's executive 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
Jr., John H. Mahar, William D. Smart and Ann L. Johnson served as members of the
Compensation Committee for the entire fiscal year 1997. 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 1997:
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.
MANAGEMENT CASH BONUS INCENTIVE PLAN. The Compensation Committee
administers 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 1995, 1996, and 1997, payments under the Bonus Plan of
$187,765, $116,706, and $10,000 respectively, were made, representing 17.0%,
10.6%, and 0.9% respectively, of all cash compensation paid to the Corporation's
senior management.
LONG TERM COMPENSATION THROUGH STOCK OPTIONS. Prior to fiscal 1997, the
Corporation had made grants under its 1986 Stock Option Plan, as amended and
restated in 1992, to provide long-term incentives tied to increases in equity
value. In fiscal 1997, this practice continued, but options were granted under
the Corporation's 1997 Stock Option Plan. Both plans are referred to herein as
the "Option Plan". The Option Plan is administered by the Compensation
Committee. Options granted in fiscal 1997 had exercise prices ranging from
$12.88 to $25.00 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 1997). 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.
8
<PAGE> 11
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 1997 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 375,000 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
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, 1997. 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 47 MONTH CUMULATIVE TOTAL RETURN*
AMONG MARTEK BIOSCIENCES CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
11/23/93 10/94 10/95 10/96 10/97
<S> <C> <C> <C> <C> <C>
MARTEK BIOSCIENCES
CORPORATION 100 129 273 307 159
NASDAQ STOCK MARKET
(U.S.) INDEX 100 101 135 160 210
HAMBRECHT & QUIST
BIOTECHNOLOGY 100 100 138 158 161
</TABLE>
* $100 INVESTED ON 11/23/93 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING OCTOBER 31.
9
<PAGE> 12
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, 1997 and has been
selected by the Board to act as such for 1998. 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 1999 Annual
Meeting of the Corporation must be received by the Corporation no later than
November 4, 1998 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
10
<PAGE> 13
REVOCABLE PROXY
MARTEK BIOSCIENCES CORPORATION
<TABLE>
<CAPTION>
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
<S> <C>
WITH- FOR ALL
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The proxies are instructed to FOR HELD EXCEPT
ANNUAL MEETING OF STOCKHOLDERS - March 5, 1998 vote as follows: [ ] [ ] [ ]
The undersigned holder of the Common Stock of
Martek Biosciences Corporation (the "Corporation") Proposal 1: Election of Class III Directors.
acknowledges receipt of the Proxy Statement and Notice
of Annual Meeting of Stockholders, dated January 29,
1998 and hereby constitutes and appoints Henry Linsert, DOUGLAS J. MACMASTER, JR., JOHN H. MAHAR AND EUGENE H. ROTBERG
Jr. and Steve Dubin or each of them acting singularly
in the absence of the other, the true and lawful proxy
or proxies for and in the name of the undersigned to INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
vote the shares of Common Stock that the undersigned is INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT"AND WRITE THAT
entitled to vote at the Annual Meeting of Stockholders NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
of the Corporation to be held on Thursday, March 5,
1998 and at any adjournment or adjournments thereof. --------------------------------------------------------------
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 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
Please be sure to sign and date Date name, each joint holder should sign. When signing as
this Proxy in the box below. trustee, executor or other fiduciary, please so
- -------------------------------------------------------- indicate.
- -Stockholder sign above----Co-holder (if any) sign above
</TABLE>
- 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
- --------------------------------------------------------------------------------
