<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)(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 1999 Annual Meeting of Stockholders of Martek Biosciences Corporation
will be held at the Corporation's headquarters, 6480 Dobbin Road, Columbia,
Maryland on Thursday, March 11, 1999, at 11:00 a.m. for the following purposes:
1. To elect four members of the Board of Directors for the term expiring at
the 2002 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 15, 1999 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, 1999
<PAGE> 3
MARTEK BIOSCIENCES CORPORATION
6480 DOBBIN ROAD
COLUMBIA, MARYLAND 21045
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MARCH 11, 1999
This Proxy Statement is furnished on or about January 29, 1999 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 11, 1999 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, 1999 to all stockholders of record on January
15, 1999.
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 15, 1999, there were 14,909,954 shares
of the Common Stock of the Corporation outstanding and entitled to vote at the
meeting. Only stockholders of record on January 15, 1999 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, four directors for the term expiring at the
2002 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 four 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 or her 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 2002:
<TABLE>
<S> <C>
Jules Blake, Ph.D. . . . . . . . . . . . . . . Member - Audit Committee.
Age 74 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.
Henry Linsert, Jr. . . . . . . . . . . . . . . Chairman of the Board and Chief Executive Officer of the Corporation
Age 58 since 1988.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Ann L. Johnson, M.D. . . . . . . . . . . . . . Member - Compensation Committee.
Age 62 Dr. Johnson 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.
Sandra Panem, Ph.D. . . . . . . . . . . . . . . Member - Audit Committee.
Age 52 Dr. Panem is 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.
DIRECTORS CONTINUING IN OFFICE:
Douglas J. MacMaster, Jr. . . . . . . . . . . . Member - Compensation Committee.
Age 68 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. Term
expires in 2001.
John H. Mahar . . . . . . . . . . . . . . . . . Member - Compensation Committee.
Age 64 Mr. Mahar has served as 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 2001.
Eugene H. Rotberg . . . . . . . . . . . . . . . Member - Audit Committee.
Age 69 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 2001.
Gordon S. Macklin . . . . . . . . . . . . . . . Since 1992, Mr. Macklin has been an independent corporate financial
Age 70 advisor. He serves as a director for Fund American Enterprise Holdings, Inc., MCI
World Com., Med Immune, Inc., Spacehab, Inc., Real 3-D and director, trustee,
managing general partner, as the case may be, for 49 of the investment companies
in the Franklin Templeton Group of Funds. From 1987-1992, Mr Macklin served as
Chairman of the Hambrecht & Quist Group. He is also the former president of the
National Association of Securities Dealers, Inc. (Nasdaq). Mr. Macklin has been a
director of the Corporation since November, 1998, filling the seat vacated by the
retirement of Bruce E. Elmblad. Term expires in 2000.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
Richard J. Radmer, Ph.D. . . . . . . . . . . . President of the Corporation since its founding in 1985.
Age 56 Term expires in 2000.
William D. Smart . . . . . . . . . . . . . . . Member - Compensation Committee.
Age 72 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.
</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 (collectively the "Option
Plans"). This Committee met five times during fiscal 1998. During the fiscal
year ended October 31, 1998, 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, 1998, the Audit Committee consisted of Dr. Blake, Mr.
Elmblad, Mr. Rotberg and Dr. Panem and met twice. Mr. Elmblad retired as a
director of the Corporation in September, 1998.
ATTENDANCE AT MEETINGS
In addition to Committee meetings, during fiscal 1998, the Board held five
meetings. All directors of the Corporation attended 75% or more of all Board
meetings and Committee meetings on which each director served.
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") or the Company's Option Plans since all shares available for
grant under the Directors' Plan had been granted prior to October 31, 1998.
Currently, each eligible director is entitled each year to options to purchase
5,000 shares of stock on the day 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 or otherwise
has received Board approval for the grant. In addition, each newly elected
director is entitled to options to purchase 10,000 shares of the Corporation's
Common Stock upon joining the Board. (Effective November 4, 1998, the Board
increased the number of options newly elected directors will receive from 7,500
shares to 10,000.) Directors may also be compensated for special assignments
delegated by the Board. In the year ended October 31, 1998 each director
nominee, other than Mr. Linsert and Dr. Radmer, received options to purchase
5,000 shares at $14.44 per share under the Director Plan or the Option Plans.
Mr. Macklin, as a newly elected member of the Board, received options to
purchase 10,000 shares at $8.63 per share under the Option Plans. All option
grants to Directors 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.
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, 1998, all such filing requirements
were met.
3
<PAGE> 6
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of January 15, 1999
(unless otherwise specified) with respect to the beneficial ownership of the
Corporation's Common Stock of each person who is known by the Corporation to
own beneficially more than 5% of the outstanding shares of Common Stock, each
director and nominee, 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 . . . . . . . . . . . . . . . . . . . . . 780,224(2) 5.23%
50 Rowes Wharf
Boston, MA 02110
Bank America Corporation . . . . . . . . . . . . . . 1,505,379(3) 10.10%
100 North Tryon Street
Charlotte, NC 28255
The College Retirement Equities Fund . . . . . . . . 1,283,650 8.61%
730 Third Avenue
New York, NY 10017
Trade Street Investment Association . . . . . . . . 1,316,379 8.83%
Nationsbank Plaza
101 South Tryon Street
Suite 1000
Charlotte, NC 28255
State of Wisconsin Investment Board
121 East Wilson Street
Madison, WI 53702 . . . . . . . . . . . . . . . . . 1,309,000 8.78%
Henry Linsert, Jr. . . . . . . . . . . . . . . . . . 474,590(4) 3.13%
Richard J. Radmer, Ph.D. . . . . . . . . . . . . . . 472,000(5) 3.15%
Steve Dubin . . . . . . . . . . . . . . . . . . . . . 164,800(6) 1.10%
David J. Kyle, Ph.D. . . . . . . . . . . . . . . . . 220,815(7) 1.47%
Thomas C. Fisher . . . . . . . . . . . . . . . . . . 182,505(8) 1.21%
Jerome C. Keller . . . . . . . . . . . . . . . . . . 108,000(9) *
Jules Blake, Ph.D . . . . . . . . . . . . . . . . . . 23,955(10) *
Ann L. Johnson, M.D. . . . . . . . . . . . . . . . . 18,500(11) *
Gordon S. Macklin . . . . . . . . . . . . . . . . . . 51,143 *
Douglas J. MacMaster . . . . . . . . . . . . . . . . 53,500(12) *
John H. Mahar . . . . . . . . . . . . . . . . . . . . 19,350(13) *
Sandra Panem, Ph.D. . . . . . . . . . . . . . . . . . 508,288(14) 3.38%
Eugene H. Rotberg . . . . . . . . . . . . . . . . . . 60,250(15) *
William D. Smart . . . . . . . . . . . . . . . . . . 43,500(16) *
All Executive Officers and Directors
as a group (14 persons) . . . . . . . . . . . . . . . 2,401,196 15.21%
</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 15, 1999 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 339,224 shares owned by H&Q Healthcare Investors
("HQH") and H&Q Life Sciences Investors ("HQL"), respectively.
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
HQHand HQLand therefore may be deemed to have beneficial ownership of
the shares held by them.
(3) Nationsbank Holding Corporation shares voting and dispositive power
with respect to these shares and Nationsbanc Capital Corporation
shares voting power with respect to 972,432 of such shares.
(4) Includes currently exercisable options and options exercisable within
60 days of January 15, 1999, to purchase 260,000 shares.
(5) Includes 175,000 shares owned by Dr. Radmer's wife, 225,000 shares
owned by the Radmer Family L.P., and currently exercisable options
and options exercisable within 60 days of January 15, 1999 to
purchase 72,000 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 15, 1999 to purchase 91,000 shares.
(7) Includes currently exercisable options and options exercisable within
60 days of January 15, 1999 to purchase 93,750 shares.
(8) Includes currently exercisable options and options exercisable within
60 days of January 15, 1999 to purchase 125,000 shares.
(9) Consists of currently exercisable options and options exercisable
within 60 days of January 15, 1999 to purchase 108,000 shares.
(10) Includes currently exercisable options to purchase 21,000 shares.
(11) Includes currently exercisable options to purchase 17,500 shares.
(12) Includes currently exercisable options to purchase 43,500 shares.
(13) Consists of currently exercisable options to purchase 19,350 shares.
(14) Includes 390,352 shares owned and 95,936 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 the shares and
warrants owned by VLSEF. Dr. Panem currently owns 4,500 shares of
Common Stock and holds options to purchase 17,500 shares.
(15) Includes currently exercisable options to purchase 21,000 shares.
(16) Includes currently exercisable options to purchase 21,000 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, 1998, 1997 and 1996 of (i) the Chief Executive Officer and (ii) the
four other most highly compensated executive officers of the Corporation whose
salary and bonus exceeded $100,000 (the "Named Executive Officers"). Mr. Peter
L. Buzy, Chief Financial Officer, joined the Company in March 1998 and receives
an annual salary of $140,000. He would have been included in the table below
had he been with the Company during the entire fiscal year ended October 31,
1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
NAME AND ------------------- ------
PRINCIPAL SECURITIES UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS ($) (1) OPTIONS (#) COMPENSATION ($)
- -------- ---- --------- ------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Henry Linsert, Jr., 1998 230,875 -- 30,000 --
Chief Executive 1997 217,500 -- 50,000 --
Officer 1996 201,990 20,450 40,000 --
Thomas C. Fisher, 1998 149,375 -- 20,000 5,167(2)
Sr. Vice 1997 142,500 -- 40,000 3,900(2)
President, Operations 1996 135,887 13,750 25,000 --
David J. Kyle, 1998 154,375 -- 20,000 --
Sr. Vice President, 1997 145,833 -- 40,000 --
Research and 1996 135,887 20,625 25,000 --
Development
Steve Dubin, 1998 147,250 -- 20,000 --
Sr. Vice President, 1997 130,500 -- 40,000 --
Business Development, 1996 121,205 18,525 25,000 --
General Counsel,
and Secretary
Jerome C. Keller, 1998 140,000 -- 20,000 --
Sr. Vice President, 1997 11,846 -- 150,000 --
Sales and 1996 -- -- -- --
Marketing (3)
</TABLE>
- ------------------
(1) All Named Executive Officers received bonuses based on performance in
fiscal 1996 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) Consists of payments to Mr. Fisher to cover certain commuting expenses.
(3) Mr. Keller joined the Corporation in September, 1997.
6
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
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, 1998.
<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 1998 ($/SH) (2) DATE 5% ($) 10% ($)
- ------------- ---------------------- ---------------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Henry Linsert, Jr. 30,000 8.6 14.437 3/04/08 272,381 690,266
Thomas C. Fisher 20,000 5.7 14.437 3/04/08 181,587 460,177
David J. Kyle 20,000 5.7 14.437 3/04/08 181,587 460,177
Steve Dubin 20,000 5.7 14.437 3/04/08 181,587 460,177
Jerome C. Keller 20,000 5.7 14.437 3/04/08 181,587 460,177
</TABLE>
- ---------------
(1) Options become exercisable ratably beginning six months from the date of
grant through four years from the date of grant.
(2) Options were granted at the market price on the date of grant.
(3) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price increases from the
respective dates of grant in fiscal 1998 to the respective dates of
expiration of such options in 2008 of 5% and 10%. These assumptions are
not intended to forecast future price appreciation of the Corporation's
stock price. The Corporation's stock price may increase or decrease in
value over the time period set forth above.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Shown below is information with respect to the exercise of options to
purchase the Corporation's Common Stock during fiscal 1998 under the Option
Plan and unexercised options held under the Option Plan on October 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
HELD AT OCTOBER 31, 1998(#) AT OCTOBER 31, 1998($)(1)
----------------------------- ---------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry Linsert, Jr. 75,000 $492,188 254,000 76,000 -- --
Thomas C. Fisher -- -- 121,000 54,000 -- --
David J. Kyle 4,000 4,000 89,750 53,000 -- --
Steve Dubin 34,000 261,375 87,000 53,000 -- --
Jerome C. Keller -- -- 104,000 66,000 -- --
</TABLE>
(1) Total value of unexercised options is based on the closing price of the
Corporation's Common Stock of $7.75 per share on October 31, 1998.
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 1998,
the Board of Directors voted to increase Mr. Linsert's base annual salary to
$235,000. 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 1998, the Board voted to increase both Dr.
Kyle's and Dr. Radmer's base annual salary to $157,000. In March 1998, the
Company entered into an employment agreement with Mr. Buzy that provides for an
annual salary of $140,000 and includes a relocation reimbursement of up to
$65,000. The agreement has a three year term, provides for normal periodic
reviews and includes a severance fee of up to eighteen months salary. The
agreement provides for a reduction of the severance fee by one twelfth for each
month that Mr. Buzy's length of employment exceeds twenty four months.
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 1998. 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.
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 1998:
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, Kyle, Keller and other senior executives are
eligible to participate in the Bonus Plan.
For fiscal years 1996 and 1997, payments under the Bonus Plan of $116,706
and $10,000 respectively, were made, representing 10.6% and 0.9% respectively,
of all cash compensation paid to the Corporation's senior management. No
payments were made under the bonus plan in fiscal 1998.
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 1998 had exercise prices ranging from
$8.625 to $15.50 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.
8
<PAGE> 11
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., $10,000 in 1998). 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 five 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 1998 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 405,000 options under the
Option Plan. 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, 1998.
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 59 MONTH CUMULATIVE TOTAL RETURN*
AMONG MARTEK BIOSCIENCES CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
MARTEK BIOSCIENCES HAMBRECHT & QUIST NASDAQ STOCK
CORPORATION BIOTECHNOLOGY MARKET (U.S.)
<S> <C> <C> <C>
11/23/93 100.00 100.00 100.00
10/94 128.57 100.13 100.55
10/95 273.21 139.29 135.44
10/96 307.14 158.52 159.83
10/97 158.93 161.85 210.36
10/98 110.71 186.71 235.89
</TABLE>
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 AUDITORS
The accounting firm of Ernst & Young LLP has acted as the Corporation's
independent auditors for the year ended October 31, 1998 and has been selected
by the Board to act as such for 1999. Representatives of Ernst & Young LLP 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 included in the Corporation's 2000
proxy must be received by the Corporation no later than September 29, 1999 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.
All stockholder proposals intended to be presented at, but not included in
the Corporation's proxy statement for, the 2000 Annual Meeting of the
Corporation must be received by the Corporation no later than December 14,
1999.
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
<TABLE>
<CAPTION>
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE MARTEK BIOSCIENCES CORPORATION
<S> <C>
WITH- FOR ALL
FOR HOLD EXCEPT
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The proxies are instructed
ANNUAL MEETING OF STOCKHOLDERS - MARCH 11, 1999 to vote as follows: [ ] [ ] [ ]
The undersigned holder of the Common Stock of Martek Proposal 1: Election of Class I Directors.
Biosciences Corporation (the "Corporation") acknowledges receipt
of the Proxy Statement and Notice of Annual Meeting of HENRY LINSERT, JR., JULES BLAKE, ANN L. JOHNSON AND SANDRA PANEM
Stockholders, dated January 29, 1999 and hereby constitutes and
appoints Henry Linsert, Jr. and Steve Dubin or each of them
acting singularly in the absence of the other, the true and INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
lawful proxy or proxies for and in the name of the undersigned to INDIVIDUAL NOMINEE, MARK "FOR ALL EXCEPT"AND WRITE THAT
vote the shares of Common Stock that the undersigned is entitled NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
to vote at the Annual Meeting of Stockholders of the Corporation
to be held on Thursday, March 11, 1999 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 name, each
joint holder should sign. When signing as trustee, executor
or other fiduciary, please so indicate.
</TABLE>
-----------------------
Please be sure to sign and date Date
this Proxy in the box below.
- -----------------------------------------------------------------
- --- Stockholder sign above -- Co-holder (if any) sign above -----
+ +
- --------------------------------------------------------------------------------
/ \ 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
- --------------------------------------------------------------------------------
