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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.     )

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 Filed by a Party other than the Registrant   o
 
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 o   Preliminary Proxy Statement
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 þ   Definitive Proxy Statement
 o   Definitive Additional Materials
 o   Soliciting Material Pursuant to §240.14a-12

Lifecore Biomedical, Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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SEC 1913 (02-02)Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number.

(LIFECORE LOGO)(LIFECORE BIOMEDICAL LOGO)
LIFECORE BIOMEDICAL, INC.
3515 Lyman Boulevard
Chaska, Minnesota 55318
Dear Shareholders:
After printing the Proxy Statement for our upcoming Annual Meeting of Shareholders, we discovered that we had misidentified the day of the week on which our meeting will be held. The date, time and place are all correct, but the day of the week will be Wednesday, not Thursday.
Accordingly, we look forward to seeing you at our 2007 Annual Meeting of Shareholders which will be held at Windows On Minnesota operated by the Marquette Hotel, 80 South 8th Street, 50th floor of the IDS Tower, Minneapolis, Minnesota 55402 onWednesday, November 14, 2007 at 3:30 p.m., local time.
Sincerely,
(-s- Dennis J. Allingham)  
Dennis J. Allingham 
President, Chief Executive Officer and Secretary
Dated:October 12, 2007
Minneapolis, Minnesota

(LIFECORE LOGO)
LIFECORE BIOMEDICAL, INC.
3515 Lyman Boulevard
Chaska, Minnesota 55318
 
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
to be held on
November 16, 200614, 2007

 
Notice is hereby given that the Annual Meeting of Shareholders of Lifecore Biomedical, Inc. (the “Company”), will be held at Windows On Minnesota operated by the Marquette Hotel, 80 South 8th Street, 50th floor of the IDS Tower, Minneapolis, Minnesota 55402 on Thursday, November 16, 200614, 2007 at 3:30 p.m., local time, for the following purposes:
 1. To elect sevensix directors for one-year terms.
 
 2. To ratify the appointment of Grant Thornton LLP as theour independent registered public accounting firm of the Company for the current fiscal year ending June 30, 2007.2008.
 
 3. To transact such other business as may properly come before the meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on September 25, 2006October 5, 2007 as the record date for the determination of shareholders entitled to notice of and to vote at the meeting.
By Order of the Board of Directors,
/s/ Dennis J. Allingham
Dennis J. Allingham
President, CEOBy Order of the Board of Directors,
-s- Dennis J. Allingham
Dennis J. Allingham
President, Chief Executive Officer and Secretary
Dated: October 6, 200612, 2007
Minneapolis, Minnesota
To assure your representation at the meeting, please sign, date and return the enclosed proxy card whether or not you expect to attend in person. Shareholders who attend the meeting may revoke their proxies and vote in person if they desire.

 

 

PROXY STATEMENT
TABLE OF CONTENTS
     
  Page
GENERAL INFORMATION ABOUT THE MEETING
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  2 
     
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
  34 
     
PROPOSAL 1 - ELECTION OF DIRECTORS
  45 
     
CORPORATE GOVERNANCE
  56 
Board Independence
  56 
Board Meetings and Committees
  67 
Executive Sessions of the Board
  7
Compensation of Directors
78 
Policy Regarding Attendance at Annual Meetings
  8 
Shareholder Communication with Directors
  8 
Code of Business Conduct and Ethics
  8 
Stock Ownership GuidelinesRelated Person Transaction Policy
  89 
     
EXECUTIVE COMPENSATION
  810 
Report of the Compensation CommitteeNamed Executive Officers
  810
Compensation Discussion and Analysis
10
Compensation Committee Report
21 
Summary Compensation Table
  1122
Grants of Plan - Based Awards
24
Outstanding Equity Awards at Fiscal Year - End
25 
Option Grants In Last Fiscal YearExercises and Stock Vested
  1226 
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year End Option ValuesTermination Payments
  1226 
Estimated Benefits Upon Termination Following a Change in Control and Employment Agreements
  1327 
     
STOCK PRICE PERFORMANCE GRAPHDIRECTOR COMPENSATION
  1328 
     
AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  1430 
Report of the Audit Committee
  1430 
Audit Fees, Audit-RelatedAudit - Related Fees, Tax Fees and All Other Fees
  1431 
Policy on Audit Committee Pre-ApprovalPre - Approval of Audit and Permissible Non-AuditNon - Audit Services Providedby the Company’sour Independent Registered Public Accounting Firm
  1531 
     
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  1532 
     
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
  1632
ANNUAL REPORT AND FORM 10 - K
32 
     
OTHER MATTERS
  1633 

 

(LIFECORE LOGO)(LIFECORE LOGO)
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 16, 200614, 2007
GENERAL INFORMATION ABOUT THE MEETING
     The Board of Directors of Lifecore Biomedical, Inc. (the “Company”) is soliciting proxies to be voted at the Annual Meetingannual meeting of Shareholders (the “Annual Meeting”)shareholders to be held at 3:30 p.m. on November 16, 2006,14, 2007, and at any adjournment thereof. TheWe will pay the cost of this solicitation will be borne by the Company.solicitation. In addition to solicitation by mail, our officers and directors of the Company may solicit proxies by telephone, facsimile or in person. These individuals will receive no additional compensation for their services other than their regular salaries. The CompanyWe may also request banks and brokers to solicit their customers who have a beneficial interest in the Company’sour common stock registered in the names of their nominees and will reimburse such banks and brokers for their reasonable out-of-pocket expenses. The mailing of this Proxy StatementThis proxy statement and the enclosed proxy card are first being mailed or given to shareholders of the Company was commenced on or about October 6, 2006.12, 2007.
     Any proxy may be revoked at any time before it is voted by written notice, mailed or delivered to theour Corporate Secretary, of the Company, or by revocation of a written proxy by request in person at the Annual Meeting.annual meeting. The shares represented by a proxy will be voted as indicated in such proxy, provided such proxy is not revoked. If no direction is made, the proxy will be voted for the election of the nominees for director and for the other proposal set forth in this Proxy Statement.proxy statement.
     The total number of shares of stock outstanding and entitled to vote at the meeting as of September 25, 2006October 5, 2007 consisted of 13,253,95313,482,491 shares of $.01 par value common stock. Each share of common stock is entitled to one vote, and there is no cumulative voting. Only shareholders of record at the close of business on September 25, 2006October 5, 2007 will be entitled to vote at the meeting. The presence in person or by proxy of holders of thirty-three and one-third percent (33-1/3%) of the shares of common stock entitled to vote at the Annual Meetingannual meeting constitutes a quorum for the transaction of business.
     Each item of business, other than the election of directors, properly presented at a meeting of the Company’sour shareholders generally must be approved by the affirmative vote of the holders of a majority of the voting power of the shares present, in person or by proxy, and entitled to vote on that item of business. However, if the shares present and entitled to vote on that item of business would not constitute a quorum for the transaction of business at the meeting, then the item must be approved by a majority of the voting power of the minimum number of shares that would constitute such a quorum. Votes cast by proxy or in person at the Annual Meetingannual meeting will be tabulated by the election inspectors appointed for the meeting and will be used to determine whether or not a quorum is present. The election inspectors will treat abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum and in tabulating votes cast on proposals presented to shareholders for vote, but as unvoted for purposes of determining the approval of the matter from which the shareholder abstains. Consequently, an abstention will have the same effect as a negative vote. If a broker indicates on the proxy that it does not have discretionary authority as to certain shares to vote on a particular matter, those shares will not be considered as present and entitled to vote with respect to that matter.
     In accordance with Minnesota law, the nominees for election as directors at the Annual Meetingannual meeting will be elected by a plurality of the votes cast at the meeting. This means that since shareholders will be electing sevensix directors, the sevensix nominees receiving the highest number of votes will be elected. The number of votes withheld from one or more director nominees will have no effect on the election of any director who is among the sevensix nominees receiving the highest number of votes FORfor his election.

1

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
     The following table presents information provided to the Company as to the beneficial ownershipshows how many shares of the Company’sour common stock were beneficially owned as of September 1, 20067, 2007 by (i) all personseach person who is known by the Companyus to be the beneficial owner ofbeneficially own more than 5% of the Company’sour common stock; (ii) each current director and director nominee; (iii) each of the directors and director nominees of the Company; (iii) each executive officerofficers named in the Summary Compensation Table;Table in this proxy statement; and (iv) all officersof our directors and directorsexecutive officers as a group.
        
 Amount and          
 Nature of   Amount and  
 Beneficial   Nature of  
 Ownership Percent of Beneficial Percent of
Name and Address of Beneficial Owner (1)(2)(3) Class Ownership(1)(2) Class
The Vertical Group, L.P.  1,340,900(4)  10.1%
25 DeForest Avenue   
Summit, NJ 07901   
GAMCO Investors, Inc.  1,473,323 (3)  10.9%
One Corporate Center
Rye, NY 10580		 
 
FMR Corp.  1,473,025 (4)  10.9%
82 Devonshire Street
Boston, MA 02109		 
 
William Blair & Company, L.L.C.  1,291,467 (5)  9.6%
222 W. Adams
Chicago, IL 60606		 
  
Carnegie Investment Bank AB  1,013,051(5)  7.7%  1,062,049 (6)  7.9%
D Carnegie & Co AB   
Västra Trädgårdsgatan 15   
Gustav Adolfs torg 18   
SE-103 38 Stockholm   
D Carnegie & Co AB
Västra Trädgårdsgatan 15
Gustav Adolfs torg 18
SE-103 38 Stockholm		 
 
The Vertical Group, L.P.  895,050 (7)  6.6%
25 DeForest Avenue
Summit, NJ 07901		 
 
Bank of America Corporation  684,800 (8)  5.1%
100 North Tryon Street, Floor 25
Bank of America Corporate Center
Charlotte, NC 28255		 
  
Dennis J. Allingham 345,225  2.6% 316,100  2.3%
Benjamin C. Beckham 12,750 *  — * 
Orwin L. Carter, Ph.D. 109,000 *  89,000 * 
Martin J. Emerson — *  5,625 * 
Joan L. Gardner  116,435(6) * 
Thomas H. Garrett 103,802 *  93,294 * 
Luther T. Griffith 10,000 *  20,000 * 
James G. Hall 5,105 * 
Larry D. Hiebert 80,300 *  84,168 * 
David M. Noel 60,750 *  67,118 * 
Richard W. Perkins  182,500(7)  1.4%  162,500 (9)  1.2%
John E. Runnells 46,800 *  55,550 * 
Kipling Thacker, Ph.D. 76,549 *  73,959 * 
All directors and officers as a group (12 persons)  1,144,111(8)  8.2%  972,419 (10)  6.9%
 
* Less than 1%

2

(1) Unless otherwise indicated, ownership is direct, and the beneficial owner has full voting and investment power.power with respect to the shares, and the shares are not subject to any pledge.
 
(2) Includes the following shares subject to options which are or will become exercisable within 60 days of September 1, 2006:7, 2007: Mr. Allingham, 323,625 shares; Mr. Beckham, 5,750294,500 shares; Dr. Carter, 92,00072,000 shares; Ms. Gardner, 97,034Mr. Emerson, 5,625 shares; Mr. Garrett, 93,00081,750 shares; Mr. Griffith, 10,00020,000 shares; Mr. Hall, 2,750 shares; Mr. Hiebert, 70,30075,550 shares; Mr. Noel, 50,750 shares; Mr. Perkins, 121,00058,500 shares; Mr. Runnells, 45,00053,750 shares and Dr. Thacker, 49,55048,050 shares.
 
(3) Includes the following sharesThe foregoing share amount and percentage are as of restricted stock subjectOctober 2, 2007 and are based on a Schedule 13D jointly filed on October 4, 2007. Gabelli Funds, LLC (“Gabelli Funds”), GAMCO Asset Management Inc. (“GAMCO”), Gabelli Securities, Inc. (“GSI”), MJG Associates, Inc. (“MJG Associates”), Gabelli Advisers, Inc. (“Gabelli Advisers”), GGCP, Inc. (“GGCP”), GAMCO Investors, Inc. (“GBL”) and Mario J. Gabelli. Gabelli Funds has sole voting and sole dispositive power as to future vesting conditions: Mr. Allingham, 6,668 shares; Mr. Beckham, 3,500 shares, Mr. Hiebert, 3,334 shares; Mr. Noel, 3,334330,242 shares. GAMCO has sole voting power as to 912,296 shares and Dr. Thacker, 3,334sole dispositive power as to 942,296 shares. GSI has sole voting power and sole dispositive power as to 67,000 shares. MJG Associates has sole voting power and sole dispositive power as to 9,000 shares. Gabelli Advisers has sole voting power and sole dispositive power as to 30,000 shares. GBL has sole voting power and sole dispositive power as to 94,785 shares. GAMCO and Gabelli Funds, each a registered investment adviser under the Investment Advisers Act of 1940, are wholly owned subsidiaries of GBL, which is a subsidiary of GGCP. Mr. Gabelli is the Chief Executive Officer and majority shareholder of GGCP and is deemed to have beneficial ownership of the securities owned by the foregoing entities. The reporting persons do not admit that they constitute a group. The address of the principal business office is One Corporate Center, Rye, New York 10580.

2

(4) The foregoing share amount and percentage represent the combined holdings of two partnerships and three individualsare as of December 31, 20052006 and are based on a Schedule 13G amendment jointly filed on February 10, 2006. Of such amounts, 866,708 shares (6.59%13, 2007 by Edward C. Johnson 3d and FMR Corp. The family of Edward C. Johnson 3d are the predominant owners of FMR Corp Series B common stock, representing 49% of the total outstanding) are beneficiallyvoting power of FMR Corp. Fidelity Management & Research Company, a wholly owned by Vertical Fund I, L.P., 308,792 shares (2.35%subsidiary of FMR Corp. and an investment adviser registered under Section 203 of the total outstanding) are beneficially owned by Vertical Fund II, L.P., 90,000Investment Advisers Act of 1940, is the beneficial owner of 676,700 shares (.68%or 5.045% of the total outstanding) are beneficiallyshares outstanding. Pyramis Global Advisors Trust Company, a wholly owned by Stephen D. Baksa, 33,700 shares (.26%subsidiary of the total outstanding) are owned by Jack W. Lasersohn,FMR Corp. and 1,800 shares (.01% of the total outstanding) are owned by John E. Runnells. Additionally, Mr. Runnells has options to purchase an aggregate of 50,000 shares. Under the terms of the options, Mr. Runnells currently has the right to purchase 40,000 shares, which shares have been included for purposes of calculating Mr. Runnells’ ownership and the total beneficial ownership set forth above. The partnerships and the individuals filed the Schedule 13G jointly to reflect their combined ownership because the sole general partner of each partnership is The Vertical Group, L.P., a Delaware limited partnership (“Vertical”), and each of the individuals are general partners of Vertical, and the partnerships and the individuals may be deemed to constitute a “group”bank as such term is useddefined in Section 13(d)(3)3(a)(6) of the Securities Exchange Act of 1934.1934, is the beneficial owner of 796,325 shares or 5.936% of the outstanding stock . FMR Corp. has the sole power to vote or direct the vote of 703,847 shares of stock. Each of Mr. Johnson and FMR Corp. has the sole power to dispose or to direct the disposition of 1,473,025 shares of stock.
 
(5)The foregoing share amount and percentage are as of December 31, 2006 and are based on information on a Schedule 13G filed on January 17, 2007.
(6) The foregoing share amount and percentage are as of September 22, 2005 and are based on a Schedule 13G jointly filed on February 21, 2006. Carnegie Fund Management Company S.A. is a wholly owned subsidiary of Banque Carnegie Luxembourg S.A. Banque Carnegie Luxembourg S.A. is a wholly owned subsidiary of Carnegie Investment Bank AB, which in turn is a wholly owned subsidiary of D Carnegie & Co. AB. Carnegie Investment Bank AB is the Investment Manager for Carnegie Fund Management Company S.A. Each of the persons filing declares that the filing of the Schedule 13G shall not be construed as an admission that it is, for purposes of Section 13(d) of the Securities Exchange Act of 1934 or otherwise, the beneficial owner of any of the shares covered by the Schedule 13G, and they thereby disclaim beneficial ownership. Carnegie Fund Management Company S.A. makes independent decisions through its Investment Manager, Carnegie Investment Bank AB.
 
(6)(7) Includes 5,000The foregoing share amount and percentage represent the combined holdings of two partnerships and John E. Runnells as of September 1, 2007 and are based on information from the partnerships. Of such amounts, 687,808 shares heldare beneficially owned by Vertical Fund I, L.P., 151,692 shares are beneficially owned by Vertical Fund II, L.P., Mr. Runnells owns 1,800 shares and has options to purchase an aggregate of 53,750 shares. The Vertical Group, L.P. (“Group), a Delaware limited partnership, in which Ms. Gardner is a partner.the sole general partner of each of Vertical Fund I, L.P. and Vertical Fund II, L.P. (together the “Funds”) and Mr. Runnells is one of the general partners of Group. Mr. Runnells and Group each may be deemed to be the beneficial owners of the shares of Company common stock owned by the Funds, but each such person or entity disclaims beneficial ownership of such shares except to the extent of his or its indirect pecuniary interest therein.

3

 
(7)(8)The foregoing share amount and percentage are as of December 31, 2006 and are based on information on a Schedule 13G filed jointly on February 20, 2007. According to this filing, each of Bank of America Corporation and NB Holdings Corporation have shared voting power with respect to 509,570 shares and shared dispositive power with respect to 684,800 shares; Bank of America, National Association has sole voting power with respect to 400,900 shares, shared voting power with respect to 108,850 shares, sole dispositive power with respect to 131,400 shares and shared dispositive power with respect to 553,400 shares; Columbia Management Group, LLC has shared voting power with respect to 400,900 shares and shared dispositive power with respect to 553,400 shares, and Columbia Management Advisors, LLC has sole voting power with respect to 400,900 shares and shared dispositive power with respect to 553,400 shares.
(9) Includes 55,500156,500 shares held by various trusts of which Mr. Perkins is the sole trustee and 6,000 shares held by a foundation created by Mr. Perkins.
 
(8)(10) Includes 958,009712,475 shares which certain directors and officers have the right to purchase pursuant to stock options which are or will become exercisable within 60 days of September 1, 2006.7, 2007.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
     Section 16(a) of the Securities Exchange Act of 1934 requires the Company’sour directors and executive officers and persons who own more than 10% of the Company’sour securities to file initial reports of ownership of those securities on Form 3 and reports of changes in ownership on Form 4 or Form 5 with the Securities and Exchange Commission. Specific due dates for these reports have been established by the Securities and Exchange Commission, and the Company iswe are required to disclose in this proxy statement any failure to timely file the required reports by these dates. Based solely on the Company’sour review of the copies of these reports received by the Companyus and written representations from the Company’sour directors and executive officers, the Company believeswe believe that itsour executive officers and directors complied with all Section 16(a) filing requirements for the fiscal year ended June 30, 2006, except that Ms. Gardner filed one late Form 4 report disclosing the purchase of Company stock.2007.

34

PROPOSAL 1 — ELECTION OF DIRECTORS
     The Company’sOur Board of Directors currently consists of eightseven directors. JoanOrwin L. GardnerCarter, Ph.D. has decided to not stand for re-election at the Annual Meeting. Sevenannual meeting. Six directors have been nominated for election at the Annual Meetingannual meeting to hold office for a term of one-year and until their successors are duly elected and qualified. The Company believesWe believe that each of the nominees will be able to serve, but should any nominee be unable to serve as a director, the persons named in the proxies have advised the Companyus that they will vote for the election of such substitute nominee as management may propose.
     The Board of Directors recommends that the shareholders vote “FOR” the election of the sevensix nominated directors, and the enclosed proxy will be so voted unless a contrary vote is indicated.
     Information regarding the director nominees is set forth below.
         
Name and Principal Occupation Age Director Since
Dennis J. Allingham
  56   2004 
Mr. Allingham was appointed President, Chief Executive Officer and Secretary and to the Board of Directors in February 2004. Mr. Allingham previously served as Executive Vice President of the Company from November 1997 to February 2004. He served as Chief Financial Officer of the Company from January 1996 to March 2004. Mr. Allingham was also General Manager of the Hyaluronan Division from November 1996 to February 2004 and General Manager of the Oral Restorative Division from November 1997 to February 2004.        
         
Orwin L. Carter, Ph.D.
  64   1989 
Dr. Carter is a self-employed business consultant. From April 1996 to May 1999, he was Vice President of Finance and Administration at Hamline University. Dr. Carter is a director of Theragenics Corporation. He currently serves on the Audit Committee and the Governance and Nominating Committee.        
         
Martin J. Emerson
  42   2006 
Mr. Emerson has served as President and Chief Executive Officer of American Medical Systems, Inc. (“AMS”), a leading provider of medical devices and therapies that restore pelvic health of individuals worldwide, since January 2005. He served as President and Chief Operating Officer of AMS from March 2004 to January 2005. From January 2003 to March 2004, Mr. Emerson served as Executive Vice President, Global Sales and Marketing, and Chief Operating Officer for AMS. From 2000 through 2002, he served as Vice President and General Manager of International at AMS. Mr. Emerson has over 20 years of experience in the medical device industry, including earlier experience with Boston Scientific and Baxter International. Mr. Emerson is a director of AMS.        
     
Name and Principal Occupation Age Director Since
Dennis J. Allingham
 57 2004
Mr. Allingham was appointed President, Chief Executive Officer and Secretary and to the Board of Directors in February 2004. Mr. Allingham previously served as our Executive Vice President from November 1997 to February 2004. He served as our Chief Financial Officer from January 1996 to March 2004. Mr. Allingham was also General Manager of the Hyaluronan Division from November 1996 to February 2004 and General Manager of the Dental Division from November 1997 to February 2004.    
     
Martin J. Emerson
 44 2006
Mr. Emerson has served as President and Chief Executive Officer of American Medical Systems, Inc. (“AMS”), a leading provider of medical devices and therapies that restore pelvic health of individuals worldwide, since January 2005. He served as President and Chief Operating Officer of AMS from March 2004 to January 2005. From January 2003 to March 2004, Mr. Emerson served as Executive Vice President, Global Sales and Marketing, and Chief Operating Officer for AMS. From 2000 through 2002, he served as Vice President and General Manager of International at AMS. Mr. Emerson has over 20 years of experience in the medical device industry, including earlier experience with Boston Scientific and Baxter International. Mr. Emerson also serves on the board of directors of AMS, Wright Medical Technology, Inc. and Incisive Surgical, Inc., a privately held company. He currently serves on the Compensation Committee.    
     
Thomas H. Garrett
 62 1996
Mr. Garrett has been a business consultant since July 1996. Prior to July 1996, Mr. Garrett was a partner at the law firm of Lindquist & Vennum P.L.L.P. of Minneapolis, Minnesota and served as its Managing Partner from 1993 through 1995. Mr. Garrett also serves on the board of directors of St. Jude Medical, Inc. He currently serves as Chairman of the Compensation Committee.    

45

         
Name and Principal Occupation Age Director Since
Thomas H. Garrett
  61   1996 
Mr. Garrett has been a business consultant since July 1996. Prior to July 1996, Mr. Garrett was a partner at the law firm of Lindquist & Vennum P.L.L.P. of Minneapolis, Minnesota and served as its Managing Partner from 1993 through 1995. Mr. Garrett is also a director of St. Jude Medical, Inc. He currently serves as Chairman of the Compensation Committee.        
         
Luther T. Griffith
  53   2004 
Mr. Griffith is President of Griffith Resources, Inc., which provides consulting and capital resources to small businesses in the process of change, since 1994. Mr. Griffith is also an “Angel Investor” in various early stage companies. From 1995 through 2005, Mr. Griffith also served as the Chairman of Care Technologies, Inc., a manufacturer of wireless monitoring and locating systems for the eldercare market. From 1978 through 1994, Mr. Griffith also served in numerous management capacities for Alexander & Alexander Services, Inc. Mr. Griffith is a director of Theragenics Corporation. He currently serves as the Chairman of the Audit Committee and serves on the Governance and Nominating Committee.        
         
Richard W. Perkins
  75   1983 
Mr. Perkins has served as President, Chief Executive Officer and director of Perkins Capital Management, Inc., an investment management firm, since January 1985. Mr. Perkins is a director of the following public companies: Synovis Life Technologies, Inc., CNS, Inc., Nortech Systems, Inc., Teledigital, Inc. and Vital Images, Inc. He currently serves on the Audit Committee and the Compensation Committee.        
         
John E. Runnells
  61   2002 
Mr. Runnells has been a Managing Director of The Vertical Group, Inc., an investment management and venture capital firm focused on the medical device industry, since 1992. Prior to that time, he was a co-founder (in 1984) and Managing Director of Paddington Partners, an investment firm that merged with The Vertical Group, Inc. in 1992. He currently serves on the board of directors of Axya Medical, Inc., Incumed Inc., Dynamic Implants, Inc., Orbital Fixation, Inc., Spondylogix, Inc. and SPMR, Inc., all privately held companies. He currently serves as the Lead Director and Chairman of the Governance and Nominating Committee.        
     
Name and Principal Occupation Age Director Since
Luther T. Griffith
 54 2004
Mr. Griffith is President of Griffith Resources, Inc., which provides consulting and capital resources to small businesses in the process of change, since 1994. Mr. Griffith is also an “Angel Investor” in various early stage companies. From 1995 through 2005, Mr. Griffith also served as the Chairman of Care Technologies, Inc., a manufacturer of wireless monitoring and locating systems for the eldercare market. From 1978 through 1994, Mr. Griffith also served in numerous management capacities for Alexander & Alexander Services, Inc. Mr. Griffith serves on the board of directors of Theragenics Corporation. He currently serves as the Chairman of the Audit Committee and serves on the Governance and Nominating Committee.    
     
Richard W. Perkins
 76 1983
Mr. Perkins has served as President, Chief Executive Officer and director of Perkins Capital Management, Inc., an investment management firm, since January 1985. Mr. Perkins is a director of the following public companies: Synovis Life Technologies, Inc., CNS, Inc., Nortech Systems, Inc., Teledigital, Inc., and Vital Images, Inc. He currently serves on the Audit Committee and the Compensation Committee.    
     
John E. Runnells
 62 2002
Mr. Runnells has been a Managing Director of The Vertical Group, Inc., an investment management and venture capital firm focused on the medical device industry, since 1992. Prior to that time, he was a co-founder (in 1984) and Managing Director of Paddington Partners, an investment firm that merged with The Vertical Group, Inc. in 1992. He serves on the board of directors of Anova, Inc., Dynamic Implants, Inc., Flexuspine, Inc., Incumed, Inc., Orbital Fixation, Inc. and TCT, Inc., all privately held companies. He currently serves as the Lead Director and Chairman of the Governance and Nominating Committee.    
CORPORATE GOVERNANCE
Board Independence
     The Board of Directors has determined that each of the Company’sour directors is independent under the Nasdaq listing standards, except for Dennis J. Allingham, who serves as the Company’sour President, Chief Executive Officer and Secretary. Each of the Company’sour Audit, Compensation and Nominating and Corporate Governance committees is composed only of independent directors. In making the independence determinations, the Board of Directors reviewed all of the directors’ relationships with the CompanyLifecore based primarily on a review of the responses of the directors to questions regarding employment, business, familial, compensation and other relationships with the Companyus and the Company’sour management.

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Board Meetings and Committees
     The Board of Directors conducts its business through meetings of the Board and three standing committees: Audit, Compensation, and Governance and Nominating. Each committee member identified below has served on the indicated committee since the 2005 Annual Meetingannual meeting of Shareholders.shareholders, except for Mr. Emerson, who has served on the Compensation Committee since the 2006 annual meeting of shareholders.
     During fiscal 20062007 the Board of Directors held 5five meetings. Each of the current directors, while a member of the Board, attended 75% or more of the meetings of the Board of Directors and any committee of the Board on which such director served during fiscal 2006.2007.
Audit Committee
Members: Luther T. Griffith,Chairman
Orwin L. Carter, Ph.D.
Martin J. Emerson (effective as of November 14, 2007)
Richard W. Perkins
     Among other duties, the Audit Committee reviews the scope of the independent audit, considers comments by the Company’sour independent registered public accounting firm regarding internal controls and accounting procedures, and considers management’s response to those comments. The Audit Committee is comprised of three directors and operates under a written charter. The Audit Committee charter which was adopted in May 2001 and most recently amended in August 2004 and aNovember 2006. A copy of the Audit Committee charter may be found on the Company’sour web site at www.lifecore.com under “Investor Info – Corporate Governance.” All of the Audit Committee members meet the independence and experience requirements of the Nasdaq listing standards and the Securities and Exchange Commission. The Board of Directors has identified Luther T. Griffith to be an audit committee financial expert under the rules of the Securities and Exchange Commission. The Audit Committee held sixseven meetings during fiscal 2006.2007.
Compensation Committee
Members: Thomas H. Garrett,Chairman
Joan L. Gardner
Martin J. Emerson
Richard W. Perkins
     The Compensation Committee makes recommendations to the Board with respect to director, executive and key employee compensation. The Compensation Committee operates under a written charter, which was adopted in April 2005 and which may be found on the Company’sour web site at www.lifecore.com under “Investor Info – Corporate Governance.” The Compensation Committee is comprised of non-employee directors who meet the independence requirements of the Nasdaq listing standards. The Compensation Committee held one meetingfour meetings during fiscal 2006.2007.
Governance and Nominating Committee
Members: John E. Runnells,Chairman
Orwin L. Carter, Ph.D.
Joan L. Gardner
Thomas H. Garrett (effective as of November 14, 2007)
Luther T. Griffith
     The Governance and Nominating Committee makes recommendations to the Board with respect to nominees to serve on the Board of Directors. The Governance and Nominating Committee operates under a written charter, which was adopted in August 2004 and amended in September 2006 and which may be found on the Company’sour web site at www.lifecore.com under “Investor Info – Corporate Governance.” All of the Governance and Nominating Committee members meet the independence requirements of the Nasdaq listing standards. The Governance and Nominating Committee held one meeting during fiscal 2006.2007.

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     The Governance and Nominating Committee determines the required selection criteria and qualifications of director nominees based upon the Company’sour needs at the time nominees are considered. Directors should possess the highest personal and professional ethics, integrity and values, and be committed to representing the long-term interests of the Company’sour shareholders. In evaluating a candidate for nomination as a director of the Company,Lifecore, the Governance and Nominating Committee will consider criteria including business and financial expertise; geography; experience as a director of a public company; gender and ethnic diversity on the Board; and general criteria such as ethical standards, independent thought, practical wisdom and mature judgment. The Governance and Nominating Committee will consider these criteria for nominees identified by the Governance and Nominating Committee, by shareholders, or through some other source.
     The Governance and Nominating Committee will consider qualified candidates for possible nomination that are submitted by the Company’sour shareholders. Shareholders wishing to make such a submission may do so by sending the following information to the Governance and Nominating Committee c/o John Runnells at 3515 Lyman Boulevard, Chaska, MN 55318: (1) name of the candidate and a brief biographical sketch and resume; (2) contact information for the candidate and a document evidencing the candidate’s willingness to serve as a director if elected; and (3) a signed statement as to the submitting shareholder’s current status as a shareholder and the number of shares currently held.
     The Governance and Nominating Committee conducts a process of making a preliminary assessment of each proposed nominee based upon the resume and biographical information, an indication of the individual’s willingness to serve and other background information, business experience, and leadership skills, all to the extent available and deemed relevant by the Governance and Nominating Committee. This information is evaluated against the criteria set forth above and the Company’sour specific needs at that time. Based upon a preliminary assessment of the candidate(s), those who appear best suited to meet the Company’sour needs may be invited to participate in a series of interviews, which are used as a further means of evaluating potential candidates. On the basis of information learned during this process, the Governance and Nominating Committee determines which nominee(s) to recommend to the Board to submit for election at the next annual meeting. The Governance and Nominating Committee uses the same process for evaluating all nominees, regardless of the original source of the nomination.
     No candidates for director nominations were submitted by any shareholder in connection with the Annual Meeting.annual meeting.
Executive Sessions of the Board
     During each regular Board meeting, the Company’sour non-employee directors, each of whom meets the independence requirements of the Nasdaq listing standards, meet in executive session without the Chief Executive Officer or any other member of management being present. The Lead Director, who is currently Mr. Runnells, presides at such sessions.
Compensation of Directors
     Directors who are not officers of the Company receive a monthly retainer of $1,000, a $1,000 fee for each Board meeting attended, a $500 fee for each telephonic Board meeting attended and a $500 fee for each committee meeting attended. Additionally, the annual committee chairman fees for the Lead Director and Governance and Nominating Committee Chair, Audit Committee Chair and Compensation Committee Chair are $5,000, $4,000 and $2,000, respectively. Directors may elect to receive the annual retainer fee either as 100% cash, 50% cash plus 50% restricted stock, or 100% restricted stock. Restricted stock is valued at the fair market value of the stock on the date of grant. The restriction on the stock lapses on the six-month anniversary of the grant date.
     The 1996 Stock Plan (the “1996 Plan”) provides for the automatic granting of options to non-employee directors upon election or re-election by the Board or shareholders. The 1996 Plan provides that each non-employee director will be automatically granted an option to purchase 10,000 shares of the Company’s common stock upon the director’s initial election to the Company’s Board of Directors. In fiscal 2006, the 1996 Plan also provided that each non-employee director would be automatically granted an option to purchase 10,000 shares of the Company’s common stock upon the directors re-election to the Company’s Board of Directors. Such options vest as to one half of the shares eight months after the date of grant and as to the balance of the shares 20 months after the date of grant. In fiscal 2007, the Company amended the 1996 Plan to reduce the options granted to non-employee directors upon their re-election to the Company’s Board of Directors from options to purchase 10,000 shares of the Company’s common stock to options to purchase 7,500 shares of the Company’s common stock.

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Policy Regarding Attendance at Annual Meetings
     The Company encourages,We encourage, but doesdo not require, its Board membersour directors to attend the annual meeting of shareholders. Last year, seven of the Company’sour directors attended the Annual Meetingannual meeting of Shareholders.shareholders.
Shareholder Communication with Directors
     Shareholders may communicate with the Company’sour Board of Directors by sending a letter addressed to the Board of Directors or specified individual directors to: Lifecore Biomedical, Inc., c/o Secretary 3515 Lyman Boulevard, Chaska, MN 55318. All communications will be compiled by theour Corporate Secretary of the Company and submitted to the Board or the individual directors on a periodic basis.
Code of Business Conduct and Ethics
     The Company hasWe have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) which applies to the Company’sour directors, officers and employees. The Code of Ethics is published on the Company’sour website at www.lifecore.com under “Investor Info – Corporate Governance.” Any amendments to the Code of Ethics and waivers of the Code of Ethics for the Company’sour Chief Executive Officer, Chief Financial Officer or Controller will be published on our website.

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Related Person Transaction Policy
     On April 16, 2007, the Company’s website.Audit Committee of the Board of Directors adopted a written policy regarding transactions with related persons. In accordance with the policy, the Audit Committee is responsible for the review and approval or ratification of all transactions with related persons that are required to be disclosed under the rules of the Securities and Exchange Commission. Under the policy, a “related person” includes any of our directors or executive officers, certain of our shareholders and any of their respective immediate family members. The policy applies to transactions in which Lifecore is a participant, the amount involved exceeds $120,000 and a related person has a direct or indirect material interest. A related person’s material interest in a transaction is to be determined based on the significance of the information to investors in light of all the circumstances. Under the policy, management of Lifecore is responsible for disclosing to the Audit Committee all material information related to any covered transaction prior to entering into the transaction. The Audit Committee may use any process and review any information that it determines is reasonable under the circumstances in order to determine whether the covered transaction is fair and reasonable and on terms no less favorable to Lifecore than could be obtained in a comparable arms-length transaction with an unrelated third party.

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EXECUTIVE COMPENSATION
Named Executive Officers
     This section provides information relating to our executive compensation programs and the compensation paid to or accrued for our named executive officers during fiscal 2007. Our named executive officers are determined in accordance with the rules of the Securities and Exchange Commission. For fiscal 2007, our named executive officers include Dennis J. Allingham, our President and Chief Executive Officer; David M. Noel, our Vice President of Finance and Chief Financial Officer; Larry D. Hiebert, our Vice President and General Manager of the Hyaluronan Division; Kipling Thacker, Ph.D, our Vice President of New Business Development; James G. Hall, our Vice President of Technical Operations; and Benjamin C. Beckham, our former Vice President of Sales and Marketing for the Dental Division (collectively, the “Named Executive Officers”).
Compensation Discussion and Analysis
General Compensation Philosophy
     Our Compensation Committee sets the overall compensation philosophy for executive officers. The objectives of our executive compensation program are to:
•attract, motivate and retain high-performing executive officers by rewarding outstanding performance and offering total compensation that is competitive with that offered by similarly situated companies;
•promote the achievement of strategic objectives that the Board and management believe will lead to long-term growth in shareholder value; and
•align the interests of executive officers with those of Lifecore and our shareholders by making annual cash incentive and long-term incentive compensation largely dependent upon the achievement of specified financial performance goals by Lifecore.
The Compensation Committee believes that the best interests of Lifecore shareholders will be served if the executive officers are focused on the long-term objectives of Lifecore, as well as the current year’s goals.
     The Compensation Committee reviews and evaluates our executive compensation program with the assistance of Riley, Dettmann & Kelsey, LLC, Minnetonka, Minnesota (“Riley”), an independent compensation consulting firm retained by the Compensation Committee. Riley assisted the Compensation Committee in identifying an appropriate compensation peer group. Information regarding our compensation peer group is included under the heading “Benchmarking” below. The Compensation Committee has retained Riley to prepare a comprehensive executive and / or director compensation survey in 2004 and 2007 and Riley has advised the Committee in each of its annual deliberations since 2004.
Elements of Executive Compensation
     Our compensation program for our executive officers consists of the following elements:
•Base Salaries
•Annual Cash Incentive Awards
•Long-Term Equity Incentive Awards
§Restricted Stock
§Stock Options
401(k) Retirement Plan Matching Contributions

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In addition, the Named Executive Officers have entered into change in control agreements with us, and may be entitled to receive change in control payments. The Compensation Committee views base salary and annual cash incentive awards to be the best method to reward and provide incentives for the achievement of current goals. The Compensation Committee views long-term equity awards such as restricted stock and stock options to be the best method to provide incentives to management to focus on achieving long-term objectives.
     The Compensation Committee independently determines, taking into account the recommendation of the Chief Executive Officer for Named Executive Officers other than the Chief Executive Officer, the amount and allocation of each component of the compensation package for each Named Executive Officer. There is no pre-established policy or target for the allocation between either cash or non-cash or short-term and long-term incentive compensation. The Compensation Committee received a comprehensive Executive Compensation report from Riley in June 2004. This report confirmed that the Named Executive Officers base salaries were low compared to other Midwest medical device companies. The Compensation Committee concluded that this was acceptable since management was unproven and working on a three year business plan covering the period from fiscal 2005 – 2007 and designed to meet aggressive revenue and profitability goals presented by a relatively new management team led by our CEO in June 2004.
     The philosophy of the Committee was (1) make modest changes in base salaries over the three year period, (2) adopt a bonus plan that would promote achievement of the new three year plan, and (3) provide long-term equity awards in the form of restricted stock and stock options in amounts deemed appropriate for achievement of the three year business plan. In view of this philosophy, the size of the awards were larger than in prior years and the Committee advised the recipients that it was unlikely that additional awards would be made during the three-year plan period. While the total compensation packages (base-bonus-equity) was known to be competitive with Midwest industrial companies similar in size to Lifecore, the Compensation Committee with advice from Riley understood that its executive compensation packages were below median (defined as the middle number in a given sequence of numbers) levels of those smaller medical device companies in the peer group. The Compensation Committee advised the Board that it considered the philosophy fair to the management team and Company shareholders given the risks of meeting the three year plan profit goals while, at the same time, acknowledging that the compensation levels were low relative to other competitors for executive talent. The Compensation Committee believed that the risk of losing key executive talent was mitigated by the sizable long-term equity awards issued at a time when our company’s stock price was deemed to be undervalued.
Base Salaries
Base salaries provide a fixed amount of compensation for the executive’s regular work. Since 2004, base salary levels for our Named Executive Officers have been determined based upon average compensation increases for public companies of similar size located in the Midwest. Some variation above and below the competitive median is allowed when, in the judgment of management and/or the Compensation Committee, as appropriate, the individual’s experience, role, responsibilities, performance, skills and other factors justify variation. Base salaries of our Named Executive Officers are reviewed by the Compensation Committee annually, as well as at the time of promotion or other change in responsibilities, and any base salary increase for an individual in this group must be approved by the Compensation Committee. Typically, our annual base salary increases, if awarded, are effective in July of each year. Increases in salaries are generally based upon performance appraisals which are conducted annually by the Chief Executive Officer and the Compensation Committee. The following table summarizes the salary increases for the Named Executive Officers:
         
  Annual Base Annual Base
  Salaries For Salaries For
  Fiscal 2006 Fiscal 2007
Name ($) ($)
Dennis J. Allingham  300,000   312,000 
David M. Noel  145,000   155,000 
Larry D. Hiebert  145,000   160,000 
Kipling Thacker, Ph.D.  130,000   140,000 
James G. Hall  —   132,000 
Benjamin C. Beckham  155,000   160,000 

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Annual Cash Incentive Awards
     Annual cash incentive awards are designed to reward short-term performance results. Combined base salary and target annual cash incentive levels are intended to provide a compensation package which approaches being competitive with the peer group base salary and annual cash incentive levels.
     The Compensation Committee adopted the Lifecore Biomedical FY 2007 Bonus Plan (the “2007 Bonus Plan”), effective as of July 1, 2006. The 2007 Bonus Plan provides for the payment of cash bonuses to our officers, director-level employees and certain other senior managers based on the attainment by Lifecore of specified performance objectives and the attainment of individual objectives. The primary objective of the 2007 Bonus Plan is to provide incentives to the executive officers and other key members of management to achieve financial and business objectives. The program is designed to:
•emphasize and improve Lifecore’s performance;
•focus management’s attention on key priorities and goals;
•reward significant contributions to Lifecore’s success;
•be competitive with our compensation peer group; and
•attract and retain results-oriented executives and senior managers.
     Each participant in the 2007 Bonus Plan has a target incentive opportunity equal to a percentage of the participant’s annual base salary. On an annual basis, our Chief Executive Officer recommends the target incentive opportunity for consideration by the Compensation Committee and the Compensation Committee makes the ultimate determination of the target incentive opportunity to be applied. The target incentive opportunity is the amount that will be paid if Lifecore meets all of its performance objectives. The actual payout to participants may be higher, lower or equal to the target incentive opportunity.
     Each year, our Chief Executive Officer recommends, for consideration by the Compensation Committee, financial and individual performance measures that support our business plan for the coming year and appropriate weighting for each performance measure. The Compensation Committee makes the ultimate determination of the performance measures to be applied and the appropriate weighting for each performance measure. Net sales and net income are currently used as financial performance measures each year, although additional performance measures may also be established. A minimum target and maximum performance level for each of the annual performance measures is set each year. Performance below the minimum will result in no payment for that performance measure. Performance exceeding expectations will result in additional payouts up to the allowed maximum. At the target performance level, participants will receive 100% of their target incentive opportunity. Individual performance goals are established annually for each of the Named Executive Officers. Under the 2007 Bonus Plan, achievement of the individual performance goals by a Named Executive Officer results in a bonus payment of up to 5% of annual base salary.
     For fiscal 2007, the performance measures were set as follows: (i) net sales, (ii) net income and (iii) individualized objectives, with each performance measure accounting for 36%, 55% and 9%, respectively, of the target incentive opportunity. The target incentive opportunity for fiscal 2007 was 55% of annual base salary for the Chief Executive Officer and 40% of annual base salary for each of the other Named Executive Officers. Following the year ended June 30, 2007, payouts due under the 2007 Bonus Plan were determined by our management and considered and approved by the Compensation Committee. Actual payouts under the 2007 Bonus Plan were paid in August 2007 and are set forth in the table below:

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          2007 Actual  
  2007 Target     Incentive 2007 Actual
  Incentive 2007 Target Cash Incentive
  Opportunity Incentive Bonus Award Cash
  (as a % of Opportunity (as a % of Bonus Award
Name base salary) ($) base salary) ($)
Dennis J. Allingham  55%  171,600   26%  81,120 
David M. Noel  40%  62,000   17%  26,350 
Larry D. Hiebert  40%  64,000   17%  27,200 
Kipling Thacker, Ph.D.  40%  56,000   17%  23,800 
James G. Hall  40%  52,800   17%  22,440 
Benjamin C. Beckham  40%  64,000   N/A   —(1)
(1)Mr. Beckham’s employment with Lifecore terminated on May 1, 2007, and under the terms of the 2007 Bonus Plan, he was not eligible to receive an annual cash incentive award for fiscal 2007.
Long-Term Equity Incentive Awards
     The Lifecore Biomedical, Inc. 1996 Stock Plan permits Lifecore to grant executive officers stock options, stock appreciation rights, restricted stock and deferred stock awards. The Lifecore Biomedical, Inc. 2003 Stock Incentive Plan permits Lifecore to grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, other stock grants and other stock-based awards. The Compensation Committee views such equity awards as an important long-term incentive vehicle for our executive officers. Stock-based awards provide executives with the opportunity to share in the appreciation of the value of our common stock which the Compensation Committee believes would be due largely to the efforts of such executives.
     The Compensation Committee began taking a different approach with long-term equity incentive awards when Lifecore’s new management team was put into place in fiscal 2004. In fiscal 2004, a new three-year plan aimed at achieving profitability and growth was developed. Under the new plan, the Compensation Committee awarded larger option grants and awarded shares of restricted stock to executive officers with the understanding that it was unlikely that additional equity awards would be made to the executive officers during the three-year plan period. The shares of restricted stock granted under the three-year program vest at the earlier of (1) four years from the date of grant or (2) in installments upon achievement of the fiscal 2005, 2006 and 2007 annual targets on a cumulative basis. The stock options vested at date of grant due in part to the Compensation Committee’s desire to provide immediate incentives, the relatively new responsibilities of the executive officers and the execution of non-competition agreements with each of the executive officers. New executive officers hired since early 2004 have received pro-rata grants of restricted stock depending upon their year of hire and full stock option grants. The long-term equity awards made to the Named Executive Officers under this three-year plan are summarized below:
•During fiscal 2004, Messrs. Allingham, Noel and Hiebert were each awarded 20,000, 10,000 and 10,000 shares of restricted stock, respectively, under the 1996 Stock Plan. Such restricted shares vest at the earlier of four years from the date of grant or in installments upon achievement of certain earnings per share goals for fiscal years 2005, 2006 and 2007.
•During fiscal 2004, Mr. Allingham was awarded options to purchase 100,000 shares of our common stock which were fully vested on the date of grant upon the execution of a non-competition agreement.
•During fiscal 2004, Messrs. Noel and Hiebert were each awarded options to purchase 60,000 shares of our common stock, 30,000 of which were fully vested on the date of grant upon the execution of a non-competition agreement and 30,000 of which vest at the rate of 25% each year commencing one year from the grant date.

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•During fiscal 2005, Dr. Thacker was awarded 10,000 shares of restricted stock and options to purchase 30,000 shares of our common stock. The shares of restricted stock vest at the earlier of four years from the date of grant or upon achievement of certain earnings per share goals for fiscal years 2005, 2006 and 2007. The options granted to Dr. Thacker in fiscal 2005 were fully vested on the date of grant upon the execution of a non-competition agreement.
•During fiscal 2006, Mr. Beckham was awarded 7,000 shares of restricted stock and options to purchase 60,000 shares of our common stock. The shares of restricted stock awarded to Mr. Beckham vest at the earlier of three years from the date of grant or upon achievement of certain earnings per share goals for fiscal years 2006 and 2007. Of the 60,000 options awarded to Mr. Beckham, 30,000 of the options were fully vested on the date of grant upon the execution of a non-competition agreement and 30,000 of the options vest at the rate of 25% each year commencing one year from the grant date.
•During fiscal 2007, Mr. Hall was awarded 3,500 shares of restricted stock and options to purchase 30,000 shares of our common stock. The shares of restricted stock vest at the earlier of two years from the date of grant or upon achievement of certain earnings per share targets for fiscal 2007. The options granted to Mr. Hall have a ten year term and are fully vested one year from the date of grant upon the execution of a non-competition agreement.
No other equity awards were made to the Named Executive Officers during fiscal 2007.
     All of an executive officer’s unvested shares of restricted stock are forfeited upon the termination of the executive officer’s employment prior to the end of the vesting period; provided, however, that if the recipient’s employment is terminated by reason of death, disability, or retirement, the restrictions with respect to such unvested restricted shares lapse and the shares become transferable and non-forfeitable as of the date of such termination. In addition, all restrictions with respect to restricted shares lapse if there is a “Significant Change” in Lifecore (as defined in the restricted stock agreements). Each recipient is entitled to receive any cash dividends or other distributions made with respect to the restricted shares, unless and until such shares are forfeited.
     All options granted have an exercise price equal to the fair market value of our common stock at the time of grant, and therefore any value which ultimately accrues to executive officers directly reflects stock price increases shared by our shareholders.
401(k) Retirement Plan
     We provide our tax-qualified 401(k) retirement plan to substantially all of our U.S. based full-time employees. In fiscal 2007, we made matching contributions to employee 401(k) plan accounts equal to 50% of the employee’s aggregate pre-tax contributions up to 4% of the employee’s compensation for the year. Effective October 1, 2007, we began making contributions to the employee 401(k) accounts equal to 50% of the employee’s aggregate pre-tax contributions up to 6% of the employee’s compensation for the year. Our employees are fully vested in their own contributions and in our matching contributions. IRS rules limit the amounts that an employee may allocate to tax-qualified savings plans and the amount of compensation that can be taken into account in computing benefits under our 401(k) retirement plan. The calendar 2007 maximum before-tax contribution is $15,500 per year or $20,500 per year for certain participants age 50 and over.
Other Benefits
     The Named Executive Officers participate in various medical, dental, life, disability and other benefit programs that are generally made available to all of our employees.
Stock Ownership Guidelines
     The Company has recentlyWe adopted Stock Ownership Guidelines (the “Guidelines”) in September 2006, which apply to the Company’sour directors and executive officers. The Guidelines encourage the Company’sour directors and executive officers to own the Company’sour common stock in order to demonstrate their commitment to the long-term success of the Company.Lifecore. Under the Guidelines, directors are expected to own shares of the Company’sour common stock in an amount having a market value of

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five times the annual retainer paid to the Company’sour directors. Under the Guidelines, executive officers are expected to own shares of the Company’sour common stock in an amount having a market value of a multiple of one or two times the individual’s annual base salary, depending upon the individual’s management level. The Company’sMoreover, our executive officers are expected to retain a portion of Restricted Stock upon vesting in order to achieve compliance with the Guidelines. Our directors and executive officers are also expected to bybe in compliance with the Guidelines within five years of first becoming subject to the Guidelines. The Company’s Compensation Committee monitors compliance with the Guidelines and has the authority to waive compliance with the Guidelines in the event of financial hardship or other good cause. The Guidelines are published on the Company’sour website at www.lifecore.com under “Investor Info —– Corporate Governance.”
EXECUTIVE COMPENSATION
Report of the Compensation CommitteeSection 162(m) Policy
     The Compensation Committee of the Board of Directors is composed entirely of non-employee directors, currently consisting of Mr. Garrett (Chairman), Ms. Gardner and Mr. Perkins. The Compensation Committee is responsible for approving and recommending to the Board of Directors all short and long-term compensation plans for the executive officers of the Company and the Board of Directors and for administering the Company’s stock option plans. All decisions by the Compensation Committee relating to the compensation of the Company’s executive officers are reviewed by the full Board.
     Set forth below is a report submitted by Mr. Garrett, Ms. Gardner and Mr. Perkins in their capacity as the Board’s Compensation Committee (the “Committee”), addressing the Company’s compensation policies for fiscal 2006 as they affected the Company’s executive officers generally, and specifically as they affected Mr. Allingham, the Company’s Chief Executive Officer, and Messrs. Beckham, Hiebert, Noel and Thacker, the Company’s other executive officers whose cash compensation exceeded $100,000 during fiscal 2006.
     The Committee, under the direction of the Board of Directors, had engaged an outside compensation consulting firm to obtain recommendations on executive compensation, executive bonus plans, and executive stock option plans for fiscal 2005 and elected to forego such an extensive engagement in fiscal 2006. The Committee chose to rely on the 2005 data with some minor modifications based upon generally available regional compensation surveys.
     The following report shall not be deemed incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 (the “1933 Act”) or the Securities Exchange Act of 1934 (the “1934 Act”), except to the extent that the Company specifically incorporates this information by reference, and shall not otherwise be deemed filed under the 1933 Act or the 1934 Act.

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Compensation Policies Toward Executive Officers
     The Company’s executive compensation has historically consisted of three components: (i) base salaries, (ii) equity awards and (iii) cash bonuses. In fiscal 2004, Mr. Allingham presented a three year plan covering fiscal 2005 through 2007 aimed at achieving profitability and growth. The Committee determined that achievement of the plan targets would merit a modification of prior compensation practices in the area of equity incentives. Accordingly, the Committee directed the issuance of larger option grants and initiated the grant of restricted stock to executive officers, with the understanding that such grants would not likely be made over the three year plan period. Initially, 50,000 shares of restricted stock and 160,000 stock options were granted to four executives. The vesting period for the restricted stock was set at the earlier of four years or achievement of the three annual targets on a cumulative basis. The stock options vested at date of grant due in part to the Committee’s desire to provide immediate incentives, the relatively new responsibilities of such executives and the execution of a non-competition agreement with each executive. New executives hired since early 2004 have received pro-rata grants of restricted stock depending upon their year of hire and full stock option grants. Accordingly, 7,000 shares of restricted stock and 60,000 stock options have been made to one executive who joined the senior management team through the end of fiscal 2006.
     Cash bonuses have been utilized to provide short term incentives to achieve annual operating plans and to augment base salaries which have generally been set at or below the median ranges for executive responsibilities deemed comparable by the Committee. Bonuses are awarded provided threshold performance parameters are met in net income and net sales targets, as well as certain non-financial targets. Bonuses are determined as a percentage of base salary and in fiscal 2006 the 2006 Bonus Plan percentages ranged from 0% to 65% depending on the range of financial and non-financial performance thresholds. Bonuses earned in fiscal 2006 were based upon achieving the financial targets of the 2006 Operating Plan and ranged from 19% to 35%. Prior to the end of the fiscal year the Committee determined that a shortfall of one and two percent of net sales and net income would be deemed to meet the 2006 Operating Plan thresholds.
  Each of these elements is discussed below:
Base Salaries.In determining the base salaries of each executive officer for fiscal 2006, the Committee has relied on the 2005 report by the compensation consultants and current compensation surveys, and has considered performance against defined goals. Mr. Allingham’s compensation is discussed below under “Chief Executive Officer Compensation.”
Stock Options.During fiscal 2006, the Company granted 60,000 stock options to Ben Beckham as a newly named executive officer.
Restricted Stock. During fiscal 2006, the Company granted 7,000 shares of restricted stock to Mr. Beckham at a price of $15.99. The restricted shares will vest at the earlier of three years from the date of issuance or upon achievement of financial performance criteria for fiscal years 2006 and 2007. The employee forfeits unvested shares upon the termination of employment prior to the end of the vesting period.
     The Company achieved the financial performance criteria in fiscal 2006, and as a result, 21,368 shares vested.
Cash Bonuses.During fiscal 2006, the Company achieved certain financial targets for revenues and profitability, which in turn qualified the Company’s executives for a cash bonus as set forth in the Summary Compensation Table. Bonuses were also paid during 2005 and 2004 based on the achievement of certain financial targets for revenue and other non-financial objectives. No other cash bonuses have been paid to any of the Company’s executive officers during the past five fiscal years.
     In addition to the compensation described above, the Company allows its executives to participate in other broad-based employee benefit plans, such as the Company’s 401(k). The 401(k) plan provides for a Company match of 50% on up to the first four percent contributed by the employee.

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     There is a $1 million limit on the deductibility of certain compensation for federal income tax purposes pursuant toUnder Section 162(m) of the U.S. Internal Revenue Code.Code, we must meet specified requirements related to our performance and shareholder approval of certain compensation arrangements in order for us to fully deduct compensation in excess of $1,000,000 paid to any Named Executive Officer.
     The shareholders approved the 1996 Stock Plan and the 2003 Stock Incentive Plan contain limitations on the number of stock options that may be granted to any person in any fiscal year. These limitations are intended to preserve the Company’s federal tax deduction forPlan. Therefore, compensation expense relatedattributable to stock options, thatstock appreciation rights, restricted stock, performance share awards and certain other awards granted under those plans may be granted to executive officers under these plans. Givenexcluded from the Company’s current levels of cash compensation, the Committee does not believe it will be necessary to take any other action to qualify the Company’s compensation programs$1,000,000 cap under Section 162(m) as well.
     The Compensation Committee intends to continue its practice of paying competitive compensation consistent with our philosophy to attract, retain and motivate executive officers to manage our business in the foreseeable future;best interests of Lifecore and our shareholders. The Compensation Committee, therefore, may choose to provide non-deductible compensation to our executive officers if it deems such compensation to be in the best interests of Lifecore and our shareholders.
Benchmarking
     Starting in 2004, the Compensation Committee has met periodically with an independent compensation consultant selected by the Compensation Committee to review our executive compensation programs and policies. Since fiscal 2004, the Compensation Committee has engaged the services of Riley to advise the Compensation Committee on matters related to our executive compensation programs and policies and matters related to compensation for our Chief Executive Officer. Riley reports directly to the Compensation Committee and does not advise management. During fiscal 2007, Riley did not receive any fees or compensation from us other than fees for advising the Compensation Committee. Management does not engage a separate compensation consultant to provide advice on executive compensation matters.
     During fiscal 2007, Riley assisted the Compensation Committee in updating its compensation peer group, a task that had also been done in 2004. The compensation peer group is a group of publicly-traded companies in competitive industries against which the Compensation Committee believes Lifecore competes for talent and shareholder investment. The companies comprising the compensation peer group are:
•Atrion Corp.
•Cardiac Science Corporation
•CryoLife, Inc.
•DIGI International, Inc.
•Exactech, Inc.
•FSI International, Inc.
•Heska Corporation
•I – Flow Corporation
•Medtox Scientific, Inc.
•OraSure Technologies, Inc.
•Possis Medical, Inc.
•Surmodics, Inc.
•Synovis Life Technologies, Inc.
•Vital Images, Inc.

15

     The compensation peer group is periodically reviewed and updated by the Compensation Committee. Lifecore’s annual revenues were slightly less than the median annual revenues of the companies comprising the compensation peer group based on the most recently reported annual revenues.
     In making compensation decisions for Lifecore’s executive officers, the Compensation Committee compares each element of total compensation against the compensation peer group. The Compensation Committee’s goal is to provide a competitive compensation package consistent with companies of similar size and financial performance. The Compensation Committee has recognized, however, that from fiscal 2004 through 2007 the overall compensation package of our Named Executive Officers was below the median of the compensation peer group. Therefore, the Compensation Committee will continueintends to evaluate whether any future action is appropriate.gradually raise compensation levels beginning in fiscal 2008.
The Role of Management in Determining Executive Compensation
     Our Chief Executive Officer provides recommendations regarding the design of our compensation programs to the Compensation Committee. Upon Compensation Committee approval, management is ultimately accountable for executing against the objectives of the approved compensation program.
     The compensation of Mr. Allingham, the Company’sOur Chief Executive Officer is set byresponsible for bringing to the compensation committee recommended compensation actions involving other executive officers and subject tomembers of senior management; however, he cannot unilaterally implement compensation changes for any of the executive officers. During Compensation Committee meetings at which executive compensation actions are discussed, our Chief Executive Officer participates in these discussions at the discretion of the Compensation Committee. The Compensation Committee’s independent compensation consultant is available as needed at such meetings.
     Under its charter, the Compensation Committee is responsible for establishing our Chief Executive Officer’s compensation. The Compensation Committee reviews its decisions regarding our Chief Executive Officer compensation with approvalthe full Board.
Employment Agreements with the Named Executive Officers
     We currently do not have any employment agreements with the Named Executive Officers. Our change in control agreements with the Named Executive Officers are described below under “Termination Payments-Change in Control Agreements.”
Compensation of the Chief Executive Officer
Annual Performance Evaluation
     Annually, the Board analyzes the performance of Directors. Inour Chief Executive Officer against agreed upon objectives. The annual performance evaluation is conducted by the Compensation Committee which also solicits input from all non-employee directors. The Chair of the Compensation Committee reviews the results of the annual performance evaluation with members of the Compensation Committee and the full Board and such results are orally communicated to the Chief Executive Officer by the Compensation Committee. This performance evaluation is a primary criterion used by the Compensation Committee in determining the base salaryappropriate pay level for our Chief Executive Officer for the upcoming fiscal 2006,year.
Base Salary
     Mr. Allingham was elected to the Committee has utilized the 2005 report by the compensation consultants and current compensation surveys, and has considered performance against defined goals as well as Mr. Allingham’s roleposition of Chief Executive Officer in building and leading the management team responsible for achieving the Company’s financial targets.February 2004. Mr. Allingham’s salary was $300,000$312,000 for fiscal 20062007 (an increase of 5.3%4% over his 20052006 base salary),. The Compensation Committee determined that the base salary adjustment appropriately rewarded Mr. Allingham’s performance and was consistent with salary increases in the Midwest market. Mr. Allingham’s fiscal 2007 base salary was lower than the 50th percentile for chief executive officer positions at companies in our compensation peer group.

16

Annual Cash Incentive Awards
     Mr. Allingham’s fiscal 2007 annual cash incentive award was made pursuant to the 2007 Bonus Plan. At the beginning of fiscal 2007, the Compensation Committee established financial performance metrics for Mr. Alllingham of net sales and net income as well as individual objectives as described under the heading “Annual Cash Incentive Awards” above. Lifecore’s actual net sales ($69.6 million) and net income ($7.7 million) in fiscal 2007 exceeded the threshold levels of the net sales and net income goals set by the Compensation Committee but were lower than the target levels of such performance goals. This resulted in a 21% cash incentive being payable to Mr. Allingham. Mr. Allingham also received a 5% cash incentive based on his achievement of individual performance goals during fiscal 2007. In total, Mr. Allingham’s annual cash incentive award under the 2007 Bonus Plan was $81,120, which was equal to 26% of his annual base pay. The Compensation Committee determined that Mr. Allingham’s annual cash incentive compensation is below the Committee believes is competitive withannual cash incentive compensation received by other salaries of chief executive officers in the industry.compensation peer group.
Long-Term Incentives
     Mr. Allingham’s long-term incentive awards are described above under “Long-Term Equity Incentive Awards.” No long-term incentive awards have been made to Mr. Allingham since fiscal 2004. The Compensation Committee determined that Mr. Allingham’s long-term incentive compensation is in line with the long-term incentive compensation received by other chief executive officers in the compensation peer group.
Compensation of the Other Named Executive Officers
     In determining the fiscal 2007 compensation for each of our other Named Executive Officers, the Compensation Committee reviewed with the Chief Executive Officer the performance of each other Named Executive Officer, which is the primary criterion used by the Compensation Committee in determining the appropriate pay level for our other Named Executive Officers for the upcoming fiscal year.
Mr. Noel’s Compensation
     Mr. Noel has served as our Vice President of Finance and Chief Financial Officer since March 2004. In July 2006, the Compensation Committee increased Mr. Noel’s salary 6.9% to $155,000 for fiscal 2007. The Compensation Committee determined that the base salary adjustment was consistent with salary increases for companies in the Midwest market. Mr. Noel’s fiscal 2007 base salary was lower than the 50th percentile for comparable positions at companies in our compensation peer group.
     Mr. Noel’s financial performance metrics for his fiscal 2007 annual cash incentive award were the same as for the Chief Executive Officer and the other Named Executive Officers. Based on Lifecore’s actual net sales and net income levels described above under “Chief Executive Officer Compensation,” Mr. Noel earned a 12% cash incentive award. Mr. Noel also received a 5% cash bonusincentive award based on his achievement of $105,000 pursuantindividual performance goals during fiscal 2007. In total, Mr. Noel’s annual cash incentive award under the 2007 Bonus Plan was $26,350, which was equal to 17% of his annual base pay. The Compensation Committee determined that Mr. Noel’s annual cash incentive compensation is below the annual cash incentive compensation received by other chief financial officers in the compensation peer group.
     Mr. Noel’s long-term incentive awards are described above under “Long-Term Equity Incentive Awards.” No long-term incentive awards have been made to Mr. Noel since fiscal 2004. The Compensation Committee determined that Mr. Noel’s long-term incentive compensation is in line with the long-term incentive compensation received by other chief financial officers in the compensation peer group.
Mr. Hiebert’s Compensation
     Mr. Hiebert has served as our Vice President since March 2004 and he was promoted to General Manager of the Hyaluronan Division in July 2006. In July 2006, the Compensation Committee increased Mr. Hiebert’s salary 10.3% to $160,000 for fiscal 2007. The Compensation Committee determined that the base salary adjustment appropriately reflected Mr. Hiebert’s promotion and salary increases for companies in the Midwest market. Mr. Hiebert’s fiscal 2007 base salary was lower than the 50th percentile for comparable positions at companies in our compensation peer group.

17

     Mr. Hiebert’s financial performance metrics for his fiscal 2007 annual cash incentive award were the same as for the Chief Executive Officer and the other Named Executive Officers. Based on Lifecore’s actual net sales and net income levels described above under “Chief Executive Officer Compensation,” Mr. Hiebert earned a 12% cash incentive award. Mr. Hiebert also received a 5% cash incentive award based on his achievement of individual performance goals during fiscal 2007. In total, Mr. Hiebert’s annual cash incentive award under the 2007 Bonus Plan was $27,200, which was equal to 17% of his annual base pay. The Compensation Committee determined that Mr. Hiebert’s annual cash incentive compensation is below the annual cash incentive compensation received by officers with similar responsibilities in the compensation peer group.
     Mr. Hiebert’s long-term incentive awards are described above under “Long-Term Equity Incentive Awards.” No long-term incentive awards have been made to Mr. Hiebert since fiscal 2004. The Compensation Committee determined that Mr. Hiebert’s long-term incentive compensation is in line with the long-term incentive compensation received by officers with similar levels of responsibility in the compensation peer group.
Dr. Thacker’s Compensation
     Dr. Thacker has served as our Vice President of New Business Development since November 2004. In July 2006, the Compensation Committee increased Dr. Thacker’s salary 7.7% to $140,000 for fiscal 2007. The Compensation Committee determined that the base salary adjustment was consistent with salary increases for companies in the Midwest market. Dr. Thacker’s fiscal 2007 base salary was lower than the 50th percentile for comparable positions at companies in our compensation peer group.
     Dr. Thacker’s financial performance metrics for his fiscal 2007 annual cash incentive award were the same as for the Chief Executive Officer and the other Named Executive Officers. Based on Lifecore’s actual net sales and net income levels described above under “Chief Executive Officer Compensation,” Dr. Thacker earned a 12% cash incentive award. Dr. Thacker also received a 5% cash incentive award based on his achievement of individual performance goals during fiscal 2007. In total, Dr. Thacker’s annual cash incentive award under the 2007 Bonus Plan was $23,800, which was equal to 17% of his annual base pay. The Compensation Committee determined that Dr. Thacker’s annual cash incentive compensation is below the annual cash incentive compensation received by officers with similar responsibilities in the compensation peer group.
     Dr. Thacker’s long-term incentive awards are described above under “Long-Term Equity Incentive Awards.” No long-term incentive awards have been made to Dr. Thacker since fiscal 2005. The Compensation Committee determined that Dr. Thacker’s long-term incentive compensation is in line with the long-term incentive compensation received by officers with similar levels of responsibility in the compensation peer group.
Mr. Hall’s Compensation
     Mr. Hall was promoted to Vice President of Technical Operations in July 2006 and his base salary was set at $132,000 for fiscal 2007. Mr. Hall’s fiscal 2007 base salary was lower than the 50th percentile for comparable positions at companies in our compensation peer group.
     Mr. Hall’s financial performance metrics for his fiscal 2007 annual cash incentive award were the same as for the Chief Executive Officer and the other Named Executive Officers. Based on Lifecore’s actual net sales and net income levels described above under “Chief Executive Officer Compensation,” Mr. Hall earned a 12% cash incentive award. Mr. Hall also received a 5% cash incentive award based on his achievement of individual performance goals during fiscal 2007. In total, Mr. Hall’s annual cash incentive award under the 2007 Bonus Plan was $22,440, which was equal to 17% of his annual base pay. The Compensation Committee determined that Mr. Hall’s annual cash incentive compensation is below the annual cash incentive compensation received by officers with similar responsibilities in the compensation peer group.
     Mr. Hall’s long-term incentive awards are described above under “Long-Term Equity Incentive Awards.” No long-term incentive awards have been made to Mr. Hall since fiscal 2007. The Compensation Committee determined that Mr. Hall’s long-term incentive compensation is in line with the long-term incentive compensation received by officers with similar levels of responsibility in the compensation peer group.

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Mr. Beckham’s Compensation
     Mr. Beckham served as our Vice President of Sales and Marketing for the Dental Division from January 2006 until the termination of his employment in May 2007. Mr. Beckhman’s base salary was set at $160,000 for fiscal 2007.
     Under the terms of the 2007 Bonus Plan, Mr. Beckham was not eligible to receive an annual cash incentive award for fiscal 2007.
Separation Agreement and Departure of Former Vice President of Sales and Marketing of the Dental Division
     In May 2007, with the approval of the Compensation Committee, we entered into a separation agreement with Benjamin C. Beckham, our former Vice President of Sales and Marketing of the Dental Division. Under the separation agreement, Mr. Beckham is entitled to receive his base salary, less all customary withholding and deductions, for a period of six months beginning on the first pay date after June 4, 2007. In exchange, Mr. Beckham agreed to not compete with Lifecore or to solicit our employees or customers for six months following his termination of employment. The Separation Agreement did not modify the terms of existing stock options and the 5,000 options that were unexercised at the end of the fiscal year expired on July 31, 2007.
Fiscal 2008 Compensation Decisions
Overview
     In January 2007, the Board of Directors discussed with the Compensation Committee the desire to learn from the executive officers their views of the compensation program adopted and implemented for the three fiscal years ending in June 2007. Riley was engaged by the Compensation Committee to interview the Company’s executive officers and report back to the 2006 Bonus Plan. AtCommittee. The Board also expressed the view that our Company was growing to a size where it was beginning to compete for executive talent outside the Midwest and with other medical device companies located in regions beyond the Midwest. Riley was also engaged to prepare a comprehensive report on executive compensation. One of the primary directives from the Compensation Committee was that the report focus on levels of compensation within the U.S. medical device industry in general and the peer group medical device companies in particular.
     The final Riley report delivered to members of the Compensation Committee prior to its June 11, 2007 meeting confirmed the prior understanding that executive officer compensation packages were lower than the median levels determined for the medical device companies within the peer group and the peer group in June 2006,general. Moreover, the Company was recognizing that it would likely need to pay higher levels of compensation if it hired an experienced executive to replace its former Vice President of Sales and Marketing of the Dental Division.
     Based on these findings the Compensation Committee concluded that Mr. Allingham’ssteps needed to be taken to augment our company’s executive officer compensation packages. While recognizing that such a process would be best implemented over a number of years and be subject to annual reassessment based upon factors including our company’s financial performance during the year merited additionaland compensation practices and decidedlevels adopted by peer group companies, your Compensation Committee deemed it imperative to recommendsend a message to the full board a discretionary bonusNamed Executive Officers that they had proven themselves in the amountperiod prior to the end of $30,000.fiscal 2007 and that levels of compensation in the immediate future years would likely rise provided the necessary performance was delivered and shareholder value enhanced. The full Board unanimously approveddiscussion that follows represents the Committee’s recommendationfirst steps deemed necessary and appropriate by the Compensation Committee to attain the Company’s general compensation philosophy as referenced at its June meeting thereby bringing Mr. Allingham’s fiscal 2006the beginning of this Executive Compensation section.

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Base Salaries
     The Compensation Committee recognized that the overall compensation packages for the Named Executive Offices was low relative to the medical devices companies in our compensation peer group and determined that efforts would be made to gradually bring the compensation levels more in line with the medical device marketplace. Effective July 1, 2007, the Compensation Committee effected salary increases for Messrs. Allingham, Noel, Hiebert, Hall and Thacker, based upon executive compensation data received from a survey provided by Riley, to adjust their base salaries based upon merit and to be in line with the competitive marketplace. The following table summarizes the salary increases for the Named Executive Officers:
         
  Annual Base Annual Base
  Salaries For Salaries For
  Fiscal 2007 Fiscal 2008
Name ($) ($)
Dennis J. Allingham  312,000   345,000 
David M. Noel  155,000   185,000 
Larry D. Hiebert  160,000   190,000 
Kipling Thacker, Ph.D.  140,000   150,000 
James G. Hall  132,000   150,000 
Annual Cash Incentive Awards
     The Compensation Committee adopted the Lifecore Biomedical FY 2008 Bonus Plan (the “2008 Bonus Plan”), effective as of July 1, 2007. The 2008 Bonus Plan provides for the payment of cash bonuses to $135,000, or 45%our officers, director-level employees and certain other senior managers based on the attainment by Lifecore of his base salary.specified performance objectives and the attainment of individual objectives. The Compensation Committee believes these are appropriate in lighthas set the following performance measures for fiscal 2008: (i) net sales, (ii) net income and (iii) individualized objectives, with each performance measure accounting for 39%, 46% and 15%, respectively, of the Company’s performance,target incentive opportunity. The target incentive opportunity for fiscal 2008 is 65% of annual base salary for the Chief Executive Officer and 49% of annual base salary for each of the other Named Executive Officers.
Long Term Incentive Awards
     In August 2007, the Compensation Committee approved stock option awards to Messrs. Allingham, Noel, Hiebert, Thacker and Hall. Mr. Allingham received an option to purchase 35,000 shares of our common stock, Messrs. Noel and Hiebert each received an option to purchase 17,500 shares of our common stock, and Messrs. Thacker and Hall each received an option to purchase 15,000 shares of our common stock. The options were granted under the Lifecore Biomedical, Inc. 2003 Stock Plan, have a ten year term and vest at the rate of 25% each year commencing one year from the grant date of the options. In approving these stock option awards, the Compensation Committee reviewed the impact the awards would have on Lifecore’s financial statements and considered Lifecore’s annual option run rate and option overhang. In addition, the Compensation Committee reviewed the stock option award practices of the compensation peer group companies, including the ratio of other CEO’s leading smaller medical device companiesfair value of the options to base salaries. The options were granted with the intent of augmenting the value of the overall compensation packages with a view toward bringing the Named Executive Officer’s total compensation more in line with those of Lifecore’s compensation peer group, retaining their services and providing a long-term incentive to increase shareholder value. The Compensation Committee decided not to award restricted stock to the Named Executive Officers at this time.
Conclusion
     Lifecore and the role Mr. Allingham playedCompensation Committee believe Lifecore’s compensation policies and practices are appropriately designed to meet Lifecore’s stated objectives and fully support our overall compensation philosophy.

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Compensation Committee Report
     The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in directingthis proxy statement and in our Annual Report on Form 10-K for the Company’s recent profitable performance.fiscal year ended June 30, 2007.
SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY’S BOARD OF DIRECTORS:
Thomas H. Garrett,Chairman
Joan L. Gardner
Richard W. Perkins
Thomas H. Garrett, Chairman
Martin J. Emerson
Richard W. Perkins

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Summary Compensation Table
     The following table sets forth certain information regardingshows the cash and non-cash compensation paid during each ofawarded to or earned by the Company’s last three fiscal years to the Company’s ChiefNamed Executive Officer and each of the Company’s four other most highly compensated executive officers, based on salary and bonus earnedOfficers during fiscal 2006.year 2007.
                         
              Long-Term Compensation  
              Awards  
              Restricted Securities All Other
      Annual Compensation Stock Underlying Compen-
  Fiscal Salary Bonus Awards(1) Options sation(2)
Name and Principal Position Year ($) ($) ($) (#) ($)
Dennis J. Allingham  2006   300,000   135,000   —   —   5,050 
President and Chief  2005   289,802   108,300   186,000   —   3,119 
Executive Officer  2004   243,720   41,250   —   105,000   2,095 
                         
David M. Noel  2006   145,000   30,450   —   —   4,047 
Vice President of Finance  2005   136,635   49,950   93,000   —   1,431 
and Chief Financial Officer  2004   113,073   19,500   —   60,000   261 
                         
Larry D. Hiebert
Vice President and General		  2006   145,000   30,450   —   —   4,036 
Manager of the Hyaluronan  2005   136,743   51,300   93,000   —   1,474 
Division  2004   119,421   19,500   —   60,000   1,128 
                         
Kipling Thacker, Ph.D.  2006   130,000   27,300   —   —   2,064 
Vice President of New  2005   119,784   46,800   107,900   30,000   1,346 
Business Development  2004   102,974   21,161   —   2,000   950 
                         
Benjamin C. Beckham(3)
  2006   175,632   29,450   111,930   61,000   4,268 
Vice President of Sales and  2005   136,136   10,000   —   —   1,328 
Marketing — ORD  2004   124,464   —   —   —   1,421 
Summary Compensation Table
                                 
                      Non-Equity    
                      Incentive    
                      Plan All Other  
              Stock Option Compen- Compen-  
Name and     Salary Bonus Awards Awards sation sation Total
Principal Position Year ($)(1) ($)(2) ($)(3) ($)(4) ($)(5) ($)(6)(7) ($)
Dennis J. Allingham  2007   312,000   —   62,000   1,080   81,120   6,440   462,640 
President and Chief
Executive Officer		                                
                                 
David M. Noel  2007   155,000   —   31,000   26,888   26,350   4,972   244,210 
Vice President of Finance
and Chief Financial
Officer		                                
                                 
Larry D. Hiebert  2007   160,000   —   31,000   26,888   27,200   5,442   250,530 
Vice President and
General Manager of the		                                
Hyaluronan Division                                
                                 
Kipling Thacker, Ph.D.  2007   140,000   —   35,967   1,254   23,800   2,879   203,900 
Vice President of New
Business Development		                                
                                 
James G. Hall  2007   132,000   —   55,685(8)  247,109(9)  22,440   2,960   460,194 
Vice President of
Technical Operations		                                
                                 
Benjamin C. Beckham(10)
  2007   160,000   —   —   191,903   —   2,041   353,944 
Former Vice President of Sales and Marketing of DentalDivision                                
 
(1) Includes amounts deferred at the direction of the executive officer pursuant to our 401(k) Plan.
(2)Bonuses for prior years were previously reported in this column. Under current reporting rules, however, only purely discretionary or guaranteed bonuses are disclosed in this column. We award bonuses solely based on our achievement of certain performance targets. Accordingly, bonus amounts are reported in the Non-Equity Incentive Plan Compensation column.
(3)The value of each executive officer’s restricted stock includedamounts in this column is determined by multiplyingare calculated based on FAS 123R and equal the closing market pricefinancial statement compensation cost for restricted stock awards as reported in our 2007 consolidated statements of operations for the fiscal year. Under FAS 123R, a pro-rata portion of the Company’stotal expense at the time the restricted award is granted is recognized over the applicable service period generally corresponding with the vesting schedule of the grant. Except with respect to Mr. Hall, whose restricted stock awards are discussed in footnote 8 to this table, the expenses reported in this column relate to restricted stock grants originally made in March 2004 to Mr. Allingham, Mr. Noel and Mr. Hiebert, in November 2004 to Dr. Thacker and in January 2006 to Mr. Beckham. The original total cost of these awards was based on the number of shares awarded and the fair market value of our common stock on the respective datesdate the grants were made.
(4)The amounts in this column are calculated based on FAS 123R and equal the financial statement compensation cost for stock option awards as reported in our consolidated statements of operations for the fiscal year. Under FAS 123R, a pro-rata portion of the total expense at time of grant is recognized over the applicable service period generally corresponding with the vesting schedule of the grant. The initial expense is based on the fair value of the stock option grants as estimated using the Black-Scholes option-pricing model. The assumptions used to arrive at the Black-Scholes value are disclosed in Note A to our consolidated financial statements included in our 2007 Annual Report on Form 10-K. Except with respect to Mr. Hall, whose stock option awards byare discussed in footnote 9 to this table, the expenses reported in this column relate to stock option awards originally made in March 2004 to Mr. Allingham, Mr. Noel and Mr. Hiebert, in January 2005 to Dr. Thacker and in January 2006 to Mr. Beckham. The original total cost of these awards was based on the number of shares awarded. awarded and the fair market value of our common stock on the date the grants were made.

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(5)The namedamounts in this column relate to awards granted under the 2007 Bonus Plan. That plan and these awards are discussed further in the Compensation Discussion and Analysis section of this proxy statement.
(6)The amounts in this column include the following matching contributions by Lifecore into our 401(k) Plan: $4,320 for Mr. Allingham, $3,736 for Mr. Noel, $3,867 for Mr. Hiebert, $2,879 for Dr. Thacker, $2,960 for Mr. Hall and $2,041 for Mr. Beckham.
(7)The amounts in this column include the following premiums paid for the executive officers heldofficer’s disability insurance policy: $2,120 for Mr. Allingham, $1,236 for Mr. Noel and $1,575 for Mr. Hiebert.
(8)During fiscal 2007, Mr. Hall was awarded 3,500 shares of restricted stock. The restricted stock as of June 30, 2006, with market values as of that date (calculated by multiplying the closing market price of the Company’s common stock on that date by the total number of restricted shares held by each officer) as follows: Mr. Allingham, 20,000 shares valued at $314,000; Mr. Noel, 10,000 shares valued at $157,000; Mr. Hiebert, 10,000 shares valued at $157,000; Mr. Thacker, 10,000 shares valued at $157,000; and Mr. Beckham, 7,000 shares valued at $109,900. Other than the restricted shares grantedawarded to Mr. Beckham, the restricted shares will vestHall vests at the earlier of fourtwo years from the date of issuancegrant or upon achievement of financial performance criteria for fiscal years 2005, 2006year 2007.
(9)During fiscal 2007, Mr. Hall was awarded options to purchase 30,000 shares of our common stock. The options have an exercise price equal to the fair market value of our common stock at the time of grant, and 2007.therefore any value which ultimately accrues to executive officers directly reflects stock price increases shared by our shareholders. The restricted sharesoptions granted to Mr. Beckham willHall vest at the earlierrate of three25% each year commencing one year from the grant date and are exercisable for a period of ten years from the date of issuance or upon achievement of financial performance criteria for fiscal years 2006 andgrant date.
(10)Mr. Beckham’s employment with Lifecore terminated on May 1, 2007. The executive officers have the right to receive dividends on theMr. Beckham’s [3,500] shares of restricted stock held by them.
(2)All amounts in this column consistwere forfeited upon such termination. See Separation Agreement and Departure of matching contributions toFormer Vice President of Sales and Marketing of the Company’s 401(k) Plan, which is generally available to all employees.
(3)Mr. Beckham was named an officerDental Division on January 3, 2006.page 19.

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Option Grants In Last Fiscal Yearof Plan-Based Awards
     The following table summarizes optionthe 2007 grants duringof equity and non-equity plan-based awards to the Named Executive Officers. All of the equity fiscal 2006 to Mr. Beckham. No other executive officers named in the Summary Compensation Tableplan-based awards were granted options during fiscal 2006.under the Lifecore Biomedical, Inc. 1996 Stock Plan, as amended. All of the non-equity incentive plan-based awards were made under the 2007 Bonus Plan.
                         
                  Potential Realizable Value
  Number of % of Total         at Assumed Annual Rates
  Securities Options         of Stock Price
  Underlying Granted to Exercise     Appreciation of Option
  Options Employees Price Expiration Term(5)
Name Granted (#) in Fiscal Year ($/Share)(3) Date(4) 5% ($) 10% ($)
Benjamin C. Beckham  1,000(1)  0.5%  10.750   7/1/2015   6,761   17,133 
Benjamin C. Beckham  60,000(2)  29.8%  15.990   1/3/2016   603,362   1,529,036 
Grants of Plan-Based Awards
                                         
                              All Other    
                              Option    
                              Awards: Exercise Grant Date
                              Number of or Base Fair Value
      Estimated Future Payouts Under Non- Estimated Future Payouts Under Equity Securities Price of of Stock
      Equity Incentive Plan Awards(1) Incentive Plan Awards Under- Option and Option
  Grant Thresh- Target Maximum Threshold Target Maximum lying Awards Awards
Name Date old ($) ($) ($) (#) (#) (#) Options(#) ($/Sh) ($)(2)
Dennis J. Allingham  —   46,800   171,600   265,200   —   —   —   —   —   — 
David M. Noel  —   12,400   62,000   100,750   —   —   —   —   —   — 
Larry D. Hiebert  —   12,800   64,000   104,000   —   —   —   —   —   — 
Kipling Thacker, Ph.D.  —   11,200   56,000   91,000   —   —   —   —   —   — 
James G. Hall  —   10,560   52,800   85,800   —   —   —   —   —   — 
   7/10/06(3)  —   —   —   —   3,500(4)  —   —   —   55,685 
   7/10/06(3)  —   —   —   —   —   —   30,000(5)  15.91   244,064 
Benjamin C. Beckham  —   12,800   64,000   104,000   —   —   —   —   —   — 
 
(1) ExercisableThis represents a bonus opportunity under the 2007 Bonus Plan for fiscal 2007 performance. The actual bonus amounts paid under the 2007 Bonus Plan are reported in cumulative installmentsthe Non-Equity Incentive Plan Compensation column in the Summary Compensation Table and are discussed further in the Compensation Discussion and Analysis section of 25%this proxy statement.
(2)The Black-Scholes option pricing model was used to estimate the grant date fair value of the options in this column. Use of this model should not be construed as an endorsement of the accuracy of this model. All stock option pricing models require predictions about the future movement of the stock price. The assumptions used to develop the grant date valuations were: risk-free rate of return of 4.6%, volatility rate of 55.2%, an average term of 5.3 years and a dividend rate of 0%. The real value of the options in this table will depend on the actual performance of our common stock during the applicable period and the fair market value of our common stock on the date the options are exercised. The value of the restricted stock in this column was computed by multiplying the number of shares of restricted stock by the closing market price of a share of our common stock on the date of vesting.
(3)On June 15, 2006, the Board of Directors approved these awards to Mr. Hall contingent upon, and effective contemporaneously with, Mr. Hall’s execution of a Noncompetition and Nonsolicitation Agreement with Lifecore. Mr. Hall executed a Noncompetition and Nonsolicitation Agreement on July 10, 2006.
(4)On July 10, 2006, we granted 3,500 shares of restricted stock to Mr. Hall. The shares of restricted stock vest at the earlier of two years from the date of grant or upon achievement of a specified earnings per share target for fiscal 2007. Lifecore achieved the earnings per share targets in fiscal 2007 and the restrictions on the shares lapsed. Mr. Hall is entitled to receive any cash dividends or other distributions made with respect to the restricted shares, unless and until such shares are forfeited.
(5)On July 10, 2006, we granted an option to purchase 30,000 shares to Mr. Hall. The option has an exercise price equal to the closing price of a share of our common stock on the date of grant, has a ten year commencingterm and is fully exercisable one year from the date of grant (July 1, 2005), with full vesting occurring on the fourth anniversary date.
(2)Fully vested and exercisable one year from dateupon execution of grant.
(3)All options were granted at the market value of the Company’s common stock based upon the last reported price on the date of grant. The exercise price and tax withholding obligations related to exercise may be paid by delivery of already owned shares or by offset of the underlying shares, subject to certain conditions.
(4)All options have a ten-year term, subject to termination of employment.
(5)Gains are reported net of the option exercise price, but before taxes associated with exercise. These amounts represent certain assumed rates of appreciation only. Actual gains, if any, on stock option exercises are dependent on the future performance of the common stock, overall stock market conditions, as well as the option holder’s continued employment through the vesting period. The amounts reflected in this table may not necessarily be achieved.non-competition agreement.

24

Aggregated Option Exercises In LastOutstanding Equity Awards at Fiscal Year And Fiscal Year-End Option Values
     The following table summarizesshows the unexercised stock option exercises during the last fiscal year and the value of unexercised options held by the executive officers named in the Summary Compensation Table at the end of the 2007 fiscal 2006.year by the Named Executive Officers. None of the Named Executive Officers held any restricted stock at the end of the 2007 fiscal year.
                         
  Shares     Number of Securities  
  Acquired     Underlying Unexercised Value of Unexercised
  on     Options at In-The-Money Options
  Exercise Value Fiscal Year-End (#) at Fiscal Year-End(1) ($)
Name (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
Dennis J. Allingham  —   —   323,625   875   2,072,126   6,834 
David M. Noel  —   —   50,750   15,250   445,244   116,098 
Larry D. Hiebert  —   —   74,300   15,250   520,429   116,098 
Kipling Thacker, Ph.D.  —   —   53,050   3,000   207,900   24,690 
Benjamin C. Beckham  —   —   5,500   61,000   —   4,950 
Outstanding Equity Awards At Fiscal Year-End
                     
      Number of  Number of       
      Securities  Securities       
      Underlying  Underlying       
      Unexercised  Unexercised  Option    
      Options  Options  Exercise    
  Option  (#)  (#)  Price  Option 
Name Grant Date  Exercisable  Unexercisable(1)  ($)  Expiration Date 
Dennis J. Allingham  11/13/1997   20,000   —   19.125   11/13/2007 
   11/4/1998   40,000   —   8.625   11/4/2008 
   11/17/1999   50,000   —   13.938   11/17/2009 
   8/17/2000   51,000   —   7.750   8/17/2010 
   8/21/2001   25,000   —   5.790   8/21/2011 
   12/9/2002   3,500   —   7.890   12/9/2012 
   8/1/2003   5,000   —   6.040   8/1/2013 
   6/23/2004   100,000   —   5.910   6/23/2014 
 
David M. Noel  12/18/2002   5,000   —   9.450   2/18/2012 
   3/3/2003   1,000   —   7.308   3/3/2013 
   3/3/2004   22,500   7,500   8.100   3/3/2014 
   6/23/2004   30,000   —   5.910   6/23/2014 
 
Larry D. Hiebert  8/11/1997   2,500   —   13.125   8/11/2007 
   12/5/1997   10,000   —   19.125   12/5/2007 
   3/22/2000   4,000   —   8.875   3/22/2010 
   8/17/2000   2,050   —   7.750   8/17/2010 
   5/1/2001   5,000   —   5.380   5/1/2011 
   3/27/2002   1,000   —   10.900   3/27/2012 
   3/3/2003   1,000   —   7.308   3/3/2013 
   3/3/2004   22,500   7,500   8.100   3/3/2014 
   6/23/2004   30,000   —   5.910   6/23/2014 
 
Kipling Thacker, Ph.D.  12/5/1997   10,000   —   19.125   12/5/2007 
   5/3/1999   —   2,000(2)  8.375   5/3/2009 
   8/17/2000   5,550   —   7.750   8/17/2010 
   7/1/2003   1,500   500   5.660   7/1/2013 
   1/7/2005   30,000   —   10.790   1/7/2015 
 
James G. Hall  9/24/2002   625   —   7.190   9/24/2012 
   11/13/2003   375   375   6.660   11/12/2013 
   11/4/2004   1,250   2,500   9.630   11/4/2014 
   8/12/2005   500   1,500   10.720   8/12/2015 
   7/10/2006   —   30,000(3)   15.910   7/10/2016 
 
Benjamin C. Beckham  12/12/1997   5,000(4)  —   21.375   12/12/2007 
   7/1/2005   —   1,000   10.750   7/1/2015 
   1/3/2006   —   22,500   15.990   1/3/2016 
 
(1) The closing priceExcept as otherwise provided in footnote 2 to this table, the options listed in this column vest at the rate of 25% each year commencing one year from the grant date of the Company’s common stockoptions.
(2)This option vests in full on June 30, 2006 was $15.70. Value is calculatedApril 3, 2009.
(3)This option vested in full on the basis of the difference between theJuly 10, 2007.
(4)This option exercise price and $15.70 multiplied by the number of shares of common stock underlying the options.expired on July 31, 2007.

1225

Option Exercises and Stock Vested
     The following table summarizes information with respect to stock option awards exercised and restricted stock awards vested during fiscal 2007 for each of the Named Executive Officers.
Option Exercises and Stock Vested
             
  Option Awards Stock Awards
  Number of Shares Value Realized on Number of Shares Value Realized on
  Acquired on Exercise Exercise Acquired on Vesting Vesting
Name (#) ($) (#) ($)(1)
Dennis J. Allingham — —  6,667   84,933 
David M. Noel — —  3,334   42,473 
Larry D. Hiebert — —  3,334   42,473 
Kipling Thacker, Ph.D. — —  3,334   42,473 
James G. Hall — —  3,500   44,590 
Benjamin C. Beckham — —  —   — 
(1)Value determined by multiplying the number of vested shares by the closing market price of a share of our common stock on the vesting date or on the previous business day, in the event the vesting date is not a business day.
Change in ControlTermination Payments
General Severance Plans and Employment AgreementsBenefits
     Each of the Company’s current executive officers named in the Summary Compensation Table isOur Named Executive Officers are not covered under any employment agreements or general severance plans. Any severance benefits payable to our Named Executive Officers for a party totermination for reasons not triggered by a change in control agreementwould be determined by the Compensation Committee at its discretion. The specific post-termination payments made to Mr. Beckham upon his separation from Lifecore were approved by the Compensation Committee and are described under the heading “Separation Agreement and Departure of Former Vice President of Sales and Marketing of the Dental Division” in this proxy statement.
Change in Control Agreements
     We have entered into change in control agreements with the Companyour Named Executive Officers designed to retain the executive officer and provide for continuity of management in the event of an actual or threatened change in control of the CompanyLifecore (as “change in control” is defined in the agreements). TheThese agreements are “double trigger” agreements and provide that, in the event of a change in control, each executive officerNamed Executive Officer would have specific rights and would receive specified benefits if the executive officerNamed Executive Officer is terminated without “cause” (as defined in the agreements) or the executive officerNamed Executive Officer voluntarily terminates his or her employment for “good reason” (as defined in the agreements) within two years after the change in control.control for Mr. Allingham and within 18 months after the change in control for the other Named Executive Officers. In these circumstances, Mr. Allingham will receive a severance payment equal to two times the sum of his annual base salary and most recent annual bonus, and Messrs. Beckham, Hiebert, Noel and Thackerthe other Named Executive Officers will each receive a severance payment equal to the executive officer’ssum of his annual base salary and most recent annual bonus. In addition, the Company will continueall options to provide certain benefits to the executive officers for two years following termination,purchase shares of our common stock and all options andother incentive awards granted to the executive officersNamed Executive Officers under the Company’sour stock option and incentive compensation plans will become immediately exercisable

26

or vested.
     Nonevested, as applicable. In addition, for the 24-month period following the Named Executive Officer’s termination date, we will provide the executive officer with life, disability, accident and health insurance coverage benefits substantially similar to the benefits the executive was receiving under our health and welfare benefit plans in effect immediately prior to the date of the officers namedchange in control. Pursuant to the Summary Compensation Table have employment agreements withwe are also required to pay all of the Company.Named Executive Officer’s outplacement fees and expenses for one year following the date of termination.
STOCK PRICE PERFORMANCE GRAPHEstimated Benefits Upon Termination Following a Change in Control
     This table shows amounts that would have been payable to the Named Executive Officers under existing change in control agreements as of June 29, 2007, the last business day of fiscal 2007.
                     
              Estimated  
      Early Vesting Early Vesting Health and  
  Severance of Stock of Restricted Welfare  
Name Amount Options(1) Stock(2) Benefits(3) Total
Dennis J. Allingham  786,240(4)  —   —   9,842   796,082 
David M. Noel  181,350(5)  58,275   —   1,704   241,329 
Larry D. Hiebert  187,200(6)  58,275   —   7,196   252,671 
Kipling Thacker, Ph.D.  163,800(7)  14,990   —   9,752   188,542 
James G. Hall  154,440(8)  24,204   —   16,540   195,184 
Benjamin C. Beckham(9)
  N/A     N/A   N/A   N/A   N/A 
(1)This amount represents the value of unvested stock options at June 29, 2007, the last day of fiscal 2007, including only those options having an exercise price in excess of the closing price ($15.87) of our common stock on the NASDAQ Global Market on June 29, 2007, the last trading day of our fiscal 2007.
(2)None of the Named Executive Officers had shares of restricted stock outstanding as of June 29, 2007, the last trading day of fiscal 2007. Upon vesting the restricted stock is freely tradable by the holder and is no longer referred to as restricted stock in this proxy statement.
(3)This amount represents the estimated value of 24 months of life, disability, accident and health insurance coverage benefits that are substantially similar to the health and welfare benefits currently provided to the Named Executive Officers.
(4)For Mr. Allingham, the severance amount represents two times fiscal 2007 salary ($624,000) plus two times fiscal 2007 bonus award ($162,240).
(5)For Mr. Noel, the severance amount represents one times fiscal 2007 salary ($155,000) plus one times fiscal 2007 bonus award ($26,350).
(6)For Mr. Hiebert, the severance amount represents one times fiscal 2007 salary ($160,000) plus one times fiscal 2007 bonus award ($27,200).
(7)For Dr. Thacker, the severance amount represents one times fiscal 2007 salary ($140,000) plus one times fiscal 2007 bonus award ($23,800).
(8)For Mr. Hall, the severance amount represents one times fiscal 2007 salary ($132,000) plus one times fiscal 2007 bonus award ($22,440).
(9)Mr. Beckham’s change in control agreement terminated when his employment with Lifecore terminated on May 1, 2007.

27

DIRECTOR COMPENSATION
     In fiscal 2007, our non-employee directors received a monthly retainer of $1,000, a $1,000 fee for each Board meeting attended, a $500 fee for each telephonic Board meeting attended, and a $500 fee for each committee meeting attended. Additionally, the annual committee chairman fees for the Lead Director and Governance and Nominating Committee Chair, Audit Committee Chair and Compensation Committee Chair were $5,000, $4,000 and $2,000, respectively. In fiscal 2008, our non-employee directors will receive an annual retainer of $15,000, a $1,000 fee for each Board meeting attended, a $500 fee for each telephonic Board meeting attended, and a $1,000 fee for each committee meeting attended. Additionally, the annual committee chairman fees for the Lead Director and Governance and Nominating Committee Chair, Audit Committee Chair and Compensation Committee Chair will be $5,000.
     Directors may elect to receive the annual retainer fee either as 100% cash, 50% cash plus 50% restricted stock, or 100% restricted stock. To the extent that a director elects to receive shares of restricted stock, the shares are issued to the director as of the first business day of the month following the month in which they are re-elected to the Board, which is typically December 1st. The number of shares to be issued is determined by dividing the amount of Board fees to be paid in shares by the closing price on the issue date. The restriction on the stock lapses on the six-month anniversary of the grant date. Mr. Garrett is the only director who elected to participate in this program in fiscal 2007.
     The 1996 Stock Plan, as amended to date (the “1996 Plan”), provides for the automatic granting of options to non-employee directors upon election or re-election by the Board or shareholders. The 1996 Plan provides that each non-employee director will be automatically granted an option to purchase 7,500 shares of our common stock upon the director’s election or re-election to our Board of Directors. Such options vest as to one half of the shares eight months after the date of grant and as to the balance of the shares 20 months after the date of grant.
     The following graph comparestable shows the yearly percentage changecompensation of the members of our Board of Directors during fiscal year 2007.
Director Compensation
                 
  Fees Earned or Paid Stock Option  
  in Cash Awards Awards Total
Name(1) ($) ($) ($)(2) ($)
Orwin L. Carter, Ph.D.  20,500   —   39,548   60,048 
Martin J. Emerson  18,000   —   48,720   66,720 
Thomas H. Garrett  9,000(3)  11,991(3)(4)  65,188   86,179 
Luther T. Griffith  24,500   —   44,511   69,011 
Richard W. Perkins  22,000   —   49,909   71,909 
John E. Runnells  22,500   —   65,188   87,688 
(1)Dennis J. Allingham, our President and Chief Executive Officer, is not included in this table because he was an employee of Lifecore during fiscal 2007 and thus received no compensation for his services as a director. The compensation he received as an employee of Lifecore is shown in the Summary Compensation Table.
(2)The amounts in this column are calculated based on FAS 123R and equal the financial statement compensation expense as reported in our 2007 consolidated statement of income for the fiscal year. Under FAS 123R, a pro-rata portion of the total expense at time of grant is recognized over the applicable service period generally corresponding with the vesting schedule of the grant. The initial expense is based on the fair value of the stock option grants as estimated using the Black-Scholes option-pricing model. The assumptions used to arrive at the Black-Scholes value are disclosed in Note A to our consolidated financial statements included in our 2007 Annual Report on Form 10-K.

28

In fiscal 2007, Messrs. Carter, Emerson, Garrett and Runnells were each granted options to purchase 7,500 shares of our common stock. The full grant date FAS 123R value of each such option award was $58,184.
The number of shares underlying stock options that are outstanding for each director at fiscal year end are as follows: Dr. Carter: 79,500; Mr. Emerson: 11,250; Mr. Garrett: 85,500; Mr. Griffith: 30,000; Mr. Perkins: 10,000; and Mr. Runnells: 57,500.
(3)Mr. Garrett elected to receive 100% of his annual retainer fee in the form of restricted stock. That election resulted in the conversion of $12,000 into 742 shares of our common stock. See footnote 4 to this table.
(4)On December 1, 2006, Mr. Garrett was granted 742 restricted shares of our common stock with a FAS 123R full grant value of $11,991. Restricted stock is valued at the fair market value of the stock on the date of grant. The number of shares granted to Mr. Garrett was determined by dividing the amount of Board fees to be paid in shares ($12,000) by the closing price on the grant date ($16.16). The shares of restricted stock vest on the six-month anniversary of the grant date. The amounts in this column are calculated based on FAS 123R and equal the financial statement compensation expense as reported in our 2007 consolidated statement of income for the fiscal year. None of our non-employee directors had shares of restricted stock outstanding at fiscal year end.
     The Compensation Committee periodically reviews Board compensation based on a market analysis provided by the Compensation Committee’s compensation consultant, which was Riley in fiscal 2007. The compensation consultant advises the cumulative total shareholder returnCompensation Committee on the Company’s common stock duringcompetitive position of Board of Directors compensation relative to the five years ended June 30, 2006 withpeer group of companies used for executive compensation and market trends such as mix of cash and equity. In fiscal 2007, the cumulative total return on: (i)Compensation Committee reviewed the Nasdaq Stock Market Index (U.S. Companies)data provided by the compensation consultant and (ii)determined that the Nasdaq Medical Equipment Index. The comparison assumes that $100 was invested on June 30, 2001 in the Company’s common stockannual retainer, meeting fees and in eachcompensation of the foregoing indices and assumes reinvestment of dividends.
(LINE GRAPH)
                         
  6/29/01 6/28/02 6/30/03 6/30/04 6/30/05 6/30/06
Lifecore Biomedical, Inc. $100.00  $226.80  $113.20  $122.80  $218.18  $314.00 
Nasdaq Medical Equipment Index  100.00   91.21   98.30   141.08   141.84   153.52 
Nasdaq Market Index  100.00   67.83   75.43   95.93   95.82   101.99 
Committee Chairpersons should be revised in fiscal 2008, as described further above.

1329

AUDIT COMMITTEE REPORT AND PAYMENT OF FEES TO
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Report of the Audit Committee
     The following is the report of the Audit Committee with respect to the Company’sour audited financial statements for the fiscal year ended June 30, 2006.2007. The Audit Committee has reviewed and discussed the Company’sour audited financial statements with management. The Audit Committee has discussed with Grant Thornton LLP, the Company’sour independent registered public accounting firm, the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committees. The Audit Committee has received the written disclosures and the letter from Grant Thornton LLP required by Independence Standards Board Standard No. 1 relating to the independent registered public accounting firm’s independence from the Company,Lifecore, has discussed with Grant Thornton LLP their independence from the Company,Lifecore, and has considered the compatibility of non-audit services with the firm’s independence.
     The Audit Committee acts pursuant to the Audit Committee Charter. The Audit Committee Charter was amended by the Board of Directors in August 2004 to be in compliance with all provisions of the Sarbanes-Oxley Act of 2002 and Nasdaq requirements. Each of the members of the Audit Committee qualifies as an “independent” director under the current Nasdaq listing standards and the rules of the Securities and Exchange Commission.
     Based on the review and discussions referred to above, the Audit Committee recommended to the Company’sour Board of Directors that the Company’sour audited financial statements be included in the Company’sour Annual Report on Form 10-K for the fiscal year ended June 30, 2006.2007.
SUBMITTED BY THE AUDIT COMMITTEE OF THE COMPANY’S BOARD OF DIRECTORS:
Luther T. Griffith,Chairman
Orwin L. Carter, Ph.D.
Orwin L. Carter, Ph.D.
Richard W. Perkins

30

Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees
     The following table presents fees billed for professional services rendered for the audit of the Company’sour annual financial statements for fiscal years 20062007 and 20052006 and fees billed for other services provided by the Company’sour independent registered public accounting firm in each of the last two fiscal years:
         
  2006 2005
Audit Fees(1)
 $200,000  $221,600 
Tax Fees(2)
  47,400   55,000 
All Other Fees(3)
  32,900   21,600 
         
  2007 2006
Audit Fees(1)
 $226,900  $211,800 
Audit-Related Fees(2)
  21,600   14,600 
Tax Fees(3)
  82,700   48,200 
All Other Fees(4)
  —   5,700 
Total Fees  331,200   280,300 
 
(1) Audit fees consisted of audit work performed in preparation of the Company’sour annual financial statements, review of the quarterly financial statements included in our quarterly reports on Form 10-Q for fiscal years 20062007 and 20052006 and fees related to Sarbanes-Oxley compliance.
 
(2)Audit-related fees consisted of fees related to the audit of our 401(k) Plan and technical accounting consultation related to new accounting rules and accounting treatment of specific transactions.
(3) Tax fees consisted of federal and state income tax return preparation and tax planning and tax advice related to the Company’s stock option plans.advice.
 
(3)(4) Other fees consisted of fees related to the audit of the Company’s 401K Plan and other accounting and reporting consultations.consultations and out-of-pocket expenses.
     The Audit Committee has considered whether the non-audit services provided by Grant Thornton LLP during the last two fiscal years are compatible with maintaining Grant Thornton LLP’s independence and has concluded that they are.

14

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services Provided by the Company’sour Independent Registered Public Accounting Firm
     The Audit Committee is responsible for appointing, setting compensation for and overseeing the work of the independent registered public accounting firm. The Audit Committee has established a policy for pre-approving the services provided by the Company’sour independent registered public accounting firm in accordance with the auditor independence rules of the Securities and Exchange Commission. This policy requires the review and pre-approval by the Audit Committee of all audit and permissible non-audit services provided by the independent registered public accounting firm and an annual review of the financial plan for audit fees.
     To ensure that auditor independence is maintained, the Audit Committee annually pre-approves the audit services to be provided by the independent registered public accounting firm and the related estimated fees for such services, as well as the nature and extent of specific types of audit-related, tax and other non-audit services to be provided by the independent registered public accounting firm during the year.
     As the need arises, other specific permitted services are pre-approved on a case-by-case basis during the year. A request for pre-approval of services on a case-by-case basis must be submitted by the Company’sour Chief Financial Officer, providing information as to the nature of the particular service to be provided, estimated related fees and management’s assessment of the impact of the service on the auditor’s independence. The Audit Committee has delegated to its Chair pre-approval authority between meetings of the Audit Committee. Any pre-approvals made by the Chair must be reported to the Audit Committee. The Audit Committee will not delegate to management the pre-approval of services to be performed by the independent registered public accounting firm.
     All of the services provided by the Company’sour independent registered public accounting firm in fiscal 20062007 and 2005,2006, including services related to the Audit-Related Fees, Tax Fees and All Other Fees described above, were approved by the Audit Committee under its pre-approval policies.

31

PROPOSAL 2 — RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Grant Thornton LLP has been the Company’sour independent registered public accounting firm since 1983. The Board of DirectorsAudit Committee has recommended that the shareholders ratify the reappointment of Grant Thornton LLP as the Company’sour independent registered public accounting firm for the fiscal year ending June 30, 2007.2008.
     While the Company iswe are not required to do so, the Company iswe are submitting the appointment of Grant Thornton LLP to serve as the Company’sour independent registered public accounting firm for the fiscal year ending June 30, 20072008 for ratification in order to ascertain the views of the Company’sour shareholders on this appointment. If the appointment is not ratified, the Audit Committee will reconsider its selection. Even if the appointment is ratified, the Audit Committee, which is solely responsible for appointing and terminating the Company’sour independent registered public accounting firm, may in its discretion, direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the CompanyLifecore and the Company’sour shareholders.
     A representative of Grant Thornton LLP is expected to be present at the Annual Meeting.annual meeting. Such representative will be given the opportunity to make a statement at the Annual Meetingannual meeting and will be available to answer any appropriate questions.
     The Board of Directors recommends that the shareholders vote “FOR” the proposal to ratify the appointment of Grant Thornton LLP as the Company’sour independent registered public accounting firm for the fiscal year ending June 30, 2007,2008, and the enclosed proxy will be so voted unless a contrary vote is indicated.

15

SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
     The proxy rules of the Securities and Exchange Commission permit shareholders to include proposals for shareholder action in the Company’sour proxy statement if notification of such proposals is received by the Companyus not less than 120 days in advance of the calendar date the Company’sour proxy statement was mailed to shareholders in connection with the previous year’s annual meeting. Therefore, notice of shareholder proposals to be included in the proxy statement for the Company’sour annual meeting for fiscal year ending June 30, 20062008 must be received by the Companyus before June 8, 2007.14, 2008. Any such proposal must be in the form required under the rules and regulations promulgated by the Securities and Exchange Commission.
     The Company’sOur Bylaws also provide that shareholders may present proposals for shareholder action, which will not be included in the Company’sour proxy statement but may be considered at the annual meeting, by giving notice to theour Corporate Secretary of the Company not less than 50 days nor more than 75 days prior to the annual meeting (or if less than 60 days’ notice or prior public disclosure of the date of the annual meeting is given or made to shareholders, not later than the 10th day following the day on which the notice of the date of the annual meeting was mailed or such public disclosure was made). Notice relating to the conduct of such business at an annual meeting must contain certain information about such business and the shareholder who proposes to bring such business before the annual meeting, the reasons for conducting such business at the annual meeting, the name and address of such shareholder, and any material interest of such shareholder in the business he or she proposes. The Company’sOur annual meeting for the fiscal year ending June 30, 20072008 is expected to be held on or about November 15, 2007.19, 2008.
OTHER MATTERSANNUAL REPORT AND FORM 10-K
     The management of the Company knows of no matter other than the foregoing to be brought before the meeting. However, the enclosed proxy gives discretionary authority in the event additional matters should be presented.
     TheOur 2007 Annual Report of the Company which includes the Company’sour Annual Report on Form 10-K for the fiscal year ended June 30, 2006,2007, including the consolidated financial statements and schedule thereto, as filed with the Securities and Exchange Commission, is enclosed herewith.

32

OTHER MATTERS
     We do not know of any other matters that may be presented for consideration at the annual meeting. If any other business does properly come before the annual meeting, the persons named as proxies on the enclosed proxy card will vote as they deem in the best interests of Lifecore.
   
  By Order of the Board of Directors,
 /s/ Dennis J. Allingham  
  -s- Dennis J. Allingham
Dennis J. Allingham
  President, CEOChief Executive Officer and Secretary
October 6, 200612, 2007

1633

LIFECORE BIOMEDICAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
Thursday,Wednesday, November 16, 200614, 2007
 
   
Lifecore Biomedical, Inc.
3515 Lyman Boulevard, Chaska, Minnesota 55318
 proxy
 
This proxy is solicited by the Board of Directors for use at the Annual Meeting on November 16, 2006.14, 2007.
The shares of stock you hold in your account or in a dividend reinvestment account will be voted as you specify below.
If no choice is specified, the proxy will be voted FOR Items 1 and 2.
The undersigned hereby appoints Dennis J. Allingham and David M. Noel, and each of them, as proxies, with full power of substitution to vote all shares of common stock which the undersigned would be entitled to vote if personally present at the Annual Meeting of Shareholders of Lifecore Biomedical, Inc., to be held in Minneapolis, MN on November 16, 200614, 2007 or at any adjournments thereof, upon any and all matters which may properly be brought before the meeting or adjournments thereof, hereby revoking all former proxies.
See reverse for voting instructions.

 

ò  Please detach here  ò
 
The Board of Directors Recommends a Vote FOR Items 1 and 2.

       
1.
 Election of directors: 01 Dennis J. Allingham 0504 Luther T. Griffith
    02 Orwin L. Carter, Ph.DMartin J. Emerson 0605 Richard W. Perkins
    03 Martin J. Emerson07 John E. Runnells
04 Thomas H. Garrett 06 John E. Runnells
       
o Vote FOR
all nominees
(except as marked)		 o Vote WITHHELD
from all nominees


   
(Instructions: To withhold authority to vote for any indicated nominee, write the number(s) of the nominee(s) in the box provided to the right.
  
 
               
2.
 Proposal to ratify and approve the appointment of Grant Thornton LLP as independent registered public accounting firm of the company for the current fiscal year ending June 30, 2007.2008. o For o Against o Abstain
               
3. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting.      
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTEDFOR EACH PROPOSAL.
   
Address Change? Mark Box Indicate changes below: o
     
     
Date    
     

 
Signature(s) in Box
Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy, all persons must sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.