<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 2000 Annual Meeting of Stockholders of Martek Biosciences Corporation
will be held at the Corporation's headquarters, 6480 Dobbin Road, Columbia,
Maryland on Thursday, March 16, 2000, 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 2003 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 27, 2000
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 7, 2000
<PAGE> 3
MARTEK BIOSCIENCES CORPORATION
6480 DOBBIN ROAD
COLUMBIA, MARYLAND 21045
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MARCH 16, 2000
This Proxy Statement is furnished on or about February 7, 2000 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 16, 2000 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 7, 2000 to all stockholders of record on January 27,
2000.
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 telecopy 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, 2000, there were 16,517,364 shares
of the Common Stock of the Corporation outstanding and entitled to vote at the
meeting. Only stockholders of record on January 27, 2000 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
2003 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 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 2003:
<TABLE>
<S> <C>
Gordon S. Macklin.................. Member - Audit Committee.
Age 71 Mr. Macklin serves as a director for White Mountains Insurance Group, LTD, MCI
WorldCom., MedImmune, Inc. (biotechnology), Spacehab, Inc. (aerospace technology)
and director, trustee, managing general partner, as the case may be, for 47 of
the investment companies in the Franklin Templeton Group of Funds; formerly
Chairman, White River Corporation (financial services)(until 1998), Chairman,
Hambrecht and Quist Group (financial services)(until 1992), and President,
National Association of Securities Dealers, Inc. (until 1987). Mr. Macklin has
been a director of the Corporation since November, 1998.
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Richard J. Radmer, Ph.D............ Dr. Radmer, a founder of Martek, has served since 1985 as a director and
Age 57 as President and Chief Scientific Officer of the Company. Prior to 1985, he
worked for 17 years at Martin Marietta Corp. where he headed the Biosciences
Department which performed research to develop new products from microalgae,
among other activities. He has served as an Adjunct associate Professor and
Associate Member of the Graduate Faculty at the University of Maryland. Dr.
Radmer received a Ph.D. in biology, an M.S. in botany and a B.S. in biochemistry
from the University of Chicago. He completed his Ph.D. studies while in residence
at Harvard University.
William D. Smart................... Member - Compensation Committee.
Age 73 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 75 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 2002.
Henry Linsert, Jr.................. Term expires in 2002.
Age 59 Mr. Linsert joined Martek as Chairman of the Board in 1988 and became Chief
Executive Officer in 1989. From 1987 to 1988 he was primarily engaged as
President of American Technology Investments Corp. ("ATI"), a consulting company
specializing in the development and financing of early stage companies in the
Mid-Atlantic area. He was President and Chief Executive Officer of Suburban
Capital Corporation, a venture capital subsidiary of Sovran Financial Corporation
(now Bank of America), from 1983 to 1987. Prior to 1983, Mr. Linsert was Vice
President of Inverness Capital Corporation, a small business investment company,
and Vice President of First Virginia Bank. He also served as a Captain in the
U.S. Marine Corps and as an artillery officer in Vietnam. He received an M.A. in
economics from George Washington University and a B.A. from Duke University.
Ann L. Johnson, M.D................ Member - Compensation Committee.
Age 63 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. Term expires in 2002.
</TABLE>
2
<PAGE> 5
<TABLE>
<S> <C>
Sandra Panem, Ph.D................. Member - Audit Committee.
Age 53 Dr. Panem is the former President of Vector Fund Management, L.P. ("VFM") and was
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. which 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 StressGen Technologies, Inc. and Synaptic Pharmaceutical
Corporation. Term expires in 2002.
Douglas J. MacMaster, Jr........... Member - Compensation Committee.
Age 69 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., Neose Technologies, Inc. and
Stratton Mutual Funds. Mr. MacMaster has been a director of the Corporation since
1993. Term expires in 2001.
John H. Mahar...................... Member - Compensation Committee.
Age 65 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 70 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.
</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 Plan").
This Committee met five times during fiscal 1999. During the fiscal year ended
October 31, 1999, the Compensation Committee consisted of Messrs. MacMaster,
Mahar, and 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, 1999, the Audit Committee consisted of Dr. Blake, Mr.
Macklin, Mr. Rotberg and Dr. Panem and met twice.
3
<PAGE> 6
ATTENDANCE AT MEETINGS
In addition to Committee meetings, during fiscal 1999, the Board held six
meetings. All directors of the Corporation, except Mr. Macklin, attended 75% or
more of all Board meetings and Committee meetings on which each director served.
Mr. Macklin attended 83% of the Board meetings and did not attend either of the
audit committee meetings held in fiscal 1999.
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 Company's Option Plan. Currently, each eligible director
receives each year options to purchase 10,000 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 receives options to purchase 10,000 shares
of the Corporation's Common Stock upon joining the Board. Directors may also be
compensated for special assignments delegated by the Board. In the year ended
October 31, 1999 each director, other than Mr. Linsert and Dr. Radmer, received
options resulting from their service as a Director to purchase 10,000 shares at
$6.25 per share under the Option Plan. All option grants to Directors are
granted at the closing price for the Corporation's Common Stock as reported on
the NASDAQ Stock 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, 1999, all such filing requirements were
met.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of January 20, 2000
(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>
State of Wisconsin Investment Board
121 East Wilson Street
Madison, WI 53707............................................... 2,227,612 (2) 13.38%
Bank America Corporation
100 North Tryon Street
Charlotte, NC 28255............................................. 1,531,879 (3) 9.27%
The College Retirement Equities Fund
730 Third Avenue
New York, NY 10017.............................................. 1,283,650 7.77%
Eastbourne Capital Management, L.L.C.
1101 Fifth Avenue, Suite 160
San Rafael, California 94901.................................... 1,199,861 (4) 7.21%
George W. Haywood
642 Second Street
Brooklyn, New York 11215........................................ 1,107,584 (5) 6.67%
Henry Linsert, Jr................................................. 467,290 (6) 2.79%
Richard J. Radmer, Ph.D........................................... 520,000 (7) 3.13%
Steve Dubin....................................................... 198,500 (8) 1.19%
David J. Kyle, Ph.D............................................... 253,165 (9) 1.52%
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
NAME AND ADDRESS OF SHARES BENEFICIALLY
BENEFICIAL OWNERS OWNED (1) PERCENTAGE OF CLASS
- ------------------- ------------------- -------------------
<S> <C> <C>
Thomas C. Fisher.................................................. 203,505 (10) 1.19%
Jerome C. Keller.................................................. 181,000 (11) 1.22%
Peter L. Buzy..................................................... 46,000 (12) *
Jules Blake, Ph.D................................................. 31,455 (13) *
Ann L. Johnson, M.D............................................... 28,500 (14) *
Gordon S. Macklin................................................. 71,143 (15) *
Douglas J. MacMaster.............................................. 38,500 (16) *
John H. Mahar..................................................... 29,350 (17) *
Sandra Panem, Ph.D................................................ 33,000 (18) *
Eugene H. Rotberg................................................. 70,250 (19) *
William D. Smart.................................................. 67,000 (20) *
All Executive Officers and Directors
as a group (15 persons)........................................... 2,238,658 12.64%
</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 20, 2000 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 currently exercisable warrants to purchase 132,903 shares.
(3) Bank America Corporation shares voting and dispositive power with respect
to these shares and Nationsbanc Capital Corporation shares voting and
dispositive power with respect to 972,432 of such shares.
(4) Includes currently exercisable warrants to purchase 116,289 shares.
(5) Includes currently exercisable warrants to purchase 99,677 shares.
(6) Includes currently exercisable options and options exercisable within 60
days of January 20, 2000, to purchase 242,000 shares.
(7) 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 20, 2000 to purchase 120,000 shares.
Excludes 59,300 shares owned by other members of Dr. Radmer's family, and
Dr. Radmer disclaims beneficial ownership of those shares.
(8) Includes currently exercisable options and options exercisable within 60
days of January 20, 2000 to purchase 125,000 shares.
(9) Includes currently exercisable options and options exercisable within 60
days of January 20, 2000 to purchase 126,100 shares.
(10) Includes currently exercisable options and options exercisable within 60
days of January 20, 2000 to purchase 145,000 shares.
(11) Includes currently exercisable options and options exercisable within 60
days of January 20, 2000 to purchase 178,000 shares.
(12) Consists of currently exercisable options and options exercisable within
60 days of January 20, 2000 to purchase 46,000 shares.
(13) Includes currently exercisable options to purchase 28,500 shares.
(14) Includes currently exercisable options to purchase 27,500 shares.
(15) Includes currently exercisable options to purchase 20,000 shares.
(16) Includes currently exercisable options to purchase 28,500 shares.
(17) Consists of currently exercisable options to purchase 29,350 shares.
(18) Includes currently exercisable options to purchase 27,500 shares.
(19) Includes currently exercisable options to purchase 28,500 shares.
(20) 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, 1999, 1998 and 1997 of (i) the Chief Executive Officer and (ii) the five
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., 1999 235,000 32,900 210,000 --
Chief Executive 1998 230,875 -- 30,000 --
Officer 1997 217,500 -- 50,000 --
David J. Kyle, 1999 157,000 21,980 67,750 --
Sr. Vice President, 1998 154,375 -- 20,000 --
Research and 1997 145,833 -- 40,000 --
Development
Thomas C. Fisher, 1999 152,000 21,280 90,000 3,198 (2)
Sr. Vice 1998 149,375 -- 20,000 5,167 (2)
President, Operations 1997 142,500 -- 40,000 3,900 (2)
Steve Dubin, 1999 152,000 21,280 65,000 --
Sr. Vice President, 1998 147,250 -- 20,000 --
Business Development, 1997 130,500 -- 40,000 --
General Counsel,
and Secretary
Jerome C. Keller, 1999 152,000 21,280 40,000 --
Sr. Vice President, 1998 140,000 -- 20,000 --
Sales and 1997 11,846 -- 150,000 --
Marketing (3)
Peter L. Buzy, 1999 147,500 21,280 40,000 --
Chief Financial 1998 96,833 -- 50,000 55,348 (5)
Officer (4)
</TABLE>
- ------------------
(1) All Named Executive Officers received bonuses based on performance in
fiscal 1999 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.
(4) Mr. Buzy joined the Corporation in March, 1998.
(5) Consists of payments to Mr. Buzy to cover certain moving expenses.
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, 1999.
<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 1999 ($/SH) (2) DATE 5% ($) 10% ($)
- ------------------ ---------------------- ---------------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Henry Linsert, Jr. 210,000 24.4 6.25 3/11/09 825,424 2,091,787
Thomas C. Fisher 90,000 10.5 6.25 3/11/09 353,753 896,480
David J. Kyle 67,750 7.9 6.25 3/11/09 266,298 674,850
Steve Dubin 65,000 7.6 6.25 3/11/09 255,488 674,458
Jerome C. Keller 40,000 4.7 6.25 3/11/09 157,224 398,436
Peter L. Buzy 40,000 4.7 6.25 3/11/09 157,224 398,436
</TABLE>
- ----------------
(1) Options become exercisable ratably beginning six months from the date of
grant through four years from the date of grant.
(2) Options were granted at the market price on the date of grant.
(3) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price increases from the
respective dates of grant in fiscal 1999 to the respective dates of
expiration of such options in 2009 of 5% and 10%. These assumptions are
not intended to forecast future price appreciation of the Corporation's
stock price. The Corporation's stock price may increase or decrease in
value over the time period set forth above.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Shown below is information with respect to the exercise of options to
purchase the Corporation's Common Stock during fiscal 1999 under the Option Plan
and unexercised options held under the Option Plan on October 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
HELD AT OCTOBER 31, 1999(#) AT OCTOBER 31, 1999($)(1)
-------------------------------- -------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry Linsert, Jr. -- -- 176,000 214,000 78,750 315,000
Thomas C. Fisher -- -- 110,000 105,000 33,750 135,000
David J. Kyle 25,000 17,188 95,550 87,200 25,406 101,625
Steve Dubin -- -- 95,000 85,000 24,375 97,500
Jerome C. Keller -- -- 166,000 44,000 15,000 60,000
Peter L. Buzy -- -- 28,000 62,000 15,000 60,000
</TABLE>
- --------------------
(1) Total value of unexercised options is based on the closing price of the
Corporation's Common Stock of $8.125 per share on October 31, 1999.
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. In March, 1999, the Board voted
to increase Mr. Buzy's salary to $152,000.
7
<PAGE> 10
COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
During 1999, Ann L. Johnson, M.D., Douglas J. MacMaster, Jr., John H.
Mahar and William D. Smart served as members of the Compensation Committee. No
director or executive officer of the Company is a director or executive officer
of any other corporation that has a director or executive officer who is also a
director or a board committee member of the Company.
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 AnnL. Johnson served as members of the
Compensation Committee for the entire fiscal year 1999. 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.
COMPENSATION DEDUCTIBILITY POLICY. Under Section 162 (m) of the Code, and
applicable Treasury regulations, no tax deduction is allowed for annual
compensation in excess of $1 million paid to the five most highly compensated
executive officers. Performance-based compensation that has been approved by
stockholders, however, is excluded from the $1 million limit if, among other
requirements, the compensation is payable only upon attainment of
pre-established, objective performance goals and the board committee that
establishes such goals consists only of "outside directors" as defined for
purposes of Section 162 (m). All of the members of the Compensation Committee
qualify as "outside directors." The Compensation Committee intends to maximize
the extent of tax deductibility of executive compensation under the provisions
of Section 162 (m) so long as doing so is compatible with its determinations as
to the most appropriate methods and approaches for the design and delivery of
compensation to executive officers of the Corporation.
The following describes in more specific terms the three elements of
compensation that implement the Committee's compensation policies reported for
fiscal 1999:
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, Buzy and other senior executives
are eligible to participate in the Bonus Plan.
8
<PAGE> 11
For fiscal year 1997, $10,000 was paid under the Bonus Plan to key
management personnel other than a named executive officer, representing 0.9% of
all cash compensation paid to the Corporation's senior management. No payments
were made under the bonus plan in fiscal 1998. In fiscal 1999, $201,898 was paid
under the Plan, representing 12% 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 Option Plan 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 1999 had
exercise prices ranging from $6.25 to $9.625 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., $10,000 in 1999). 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 1999 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-linkedcompensation. To date, he has received 615,000 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 up to one-third of his total compensation 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
9
<PAGE> 12
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 October 31, 1994 and ending
October 31, 1999. 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 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG MARTEK BIOSCIENCES CORPORATION,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE HAMBRECHT & QUIST BIOTECHNOLOGY INDEX
<TABLE>
<CAPTION>
10/94 10/95 10/96 10/97 10/98 10/99
<S> <C> <C> <C> <C> <C> <C>
MARTEK 100 213 239 124 86 62
H&Q 100 139 158 162 192 344
NASDAQ 100 135 159 209 234 364
</TABLE>
* $100 INVESTED ON 10/31/94 IN STOCK OR INDEX.
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING OCTOBER 31.
10
<PAGE> 13
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, 1999 and has been selected
by the Board to act as such for 2000. 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
2001 proxy must be received by the Corporation no later than October 11, 2000
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 2001 Annual Meeting of the
Corporation must be received by the Corporation no later than December 26, 2000.
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
11
<PAGE> 14
REVOCABLE PROXY
MARTEK BIOSCIENCES CORPORATION
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS - MARCH 16, 2000
The undersigned holder of the Common Stock of Martek Biosciences
Corporation (the "Corporation") acknowledges receipt of the Proxy Statement and
Notice of Annual Meeting of Stockholders, dated February 7, 2000 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 lawful proxy or
proxies for 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 Thursday, March 16, 2000 and at
any adjournment or adjournments thereof.
------------------
Please be sure to sign and date this Proxy in the box below. Date
- --------------------------------------------------------------------------------
- -------Stockholder sign above---------------Co-holder (if any) sign above-------
WITH- FOR ALL
FOR HOLD EXCEPT
The proxies are instructed to vote as follows: [ ] [ ] [ ]
Proposal 1: Election of Class I Directors.
GORDON S. MACKLIN, RICHARD J. RADMER, PH. D. AND WILLIAM D. SMART
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, MARK "FOR
ALL EXCEPT" AND WRITE THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
- --------------------------------------------------------------------------------
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.
- - 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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