Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
Check the appropriate box:
Preliminary proxy statement --- Confidential, for use of the
- --- Commission only (as permitted
X Definitive proxy statement by Rule 14a-6(e)(2))
- ---
Definitive additional materials
- ---
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
- ---
Bone Care International, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
X No fee required.
- ---
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
- ---
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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- --- Fee paid previously with preliminary materials.
- --- Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Bone Care International, Inc.
313 West Beltline Highway
Madison, Wisconsin 53713
(608) 274-7533
-------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE HOLDERS OF THE COMMON STOCK OF BONE CARE INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Meeting") of Shareholders
of Bone Care International, Inc. (the "Company") will be held at Bone Care
International, Inc. , 313 West Beltline Highway, Madison, Wisconsin, on
Thursday, November 14, 1996, at 3:30 p.m., local time, for the following
purposes:
(1) To elect one (1) director to serve until the 1999 Annual Meeting of
Shareholders, and until his successor is duly elected and qualified.
(2) To ratify the selection of KPMG Peat Marwick LLP as auditors for the
Company for the fiscal year ending June 30, 1997.
(3) To transact any other business as may properly come before the Meeting or
any adjournments thereof.
Only shareholders of record at the close of business on October 15, 1996, the
record date for the Meeting, shall be entitled to notice of and to vote at the
Meeting or any adjournments thereof.
IMPORTANT
To ensure your representation at the Meeting, please sign and date the
enclosed proxy, and return it immediately in the enclosed stamped envelope.
Sending in your proxy will not prevent you from personally voting your shares at
the Meeting, since you may revoke your proxy by attending the meeting and voting
in person or by advising the Secretary of the Company in writing (by later-dated
proxy which is voted at the Meeting or otherwise) of such revocation at any time
before it is voted.
By Order of the Board of Directors,
Charles W. Bishop, Ph.D.
President
Madison, Wisconsin
October 24, 1996
Bone Care International, Inc.
313 West Beltline Highway
Madison, Wisconsin 53713
(608) 274-7533
-------------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of the
accompanying Proxy by the Board of Directors of Bone Care International, Inc.
(the "Company") for use at the Annual Meeting (the "Meeting") of Shareholders to
be held at Bone Care International, Inc., 313 West Beltline Highway, Madison,
Wisconsin, Thursday, November 14, 1996, at 3:30 p.m., local time, and at any
adjournments thereof.
At the Meeting, shareholders will consider (1) the election of one (1)
director to serve until the 1999 Annual Meeting of Shareholders (and until his
successor is duly elected and qualified), and (2) the ratification of the
selection of KPMG Peat Marwick LLP as auditors for the Company for the fiscal
year ending June 30, 1997. The Board of Directors does not know of any other
matters to be brought before the Meeting; however, if other matters should
properly come before the Meeting, it is intended that the persons named in the
accompanying Proxy will vote on such matters at their discretion.
Shareholders who execute proxies retain the right to revoke them at any time
prior to the voting thereof by attending the Meeting and voting in person or by
advising the Secretary of the Company of such revocation in writing (by
later-dated proxy which is voted at the Meeting or otherwise).
PROXY SOLICITATION
Proxies will be solicited by mail. In addition to solicitation by mail,
certain officers and employees of the Company may solicit by telephone,
telegraph, and personally. The cost of the solicitation will be borne by the
Company. The Notice of the Meeting, this Proxy Statement, the accompanying form
of Proxy and the Annual Report to Shareholders, including financial statements
for the fiscal year ended June 30, 1996, were first mailed to shareholders on or
about October 24, 1996.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of the shares of Common Stock, no par value, of the
Company at the close of business on October 15, 1996, the record date for the
Meeting, are entitled to notice of and to vote at the Meeting and at any
adjournments thereof. Shareholders will be entitled to one vote for each full
share held. On October 15, 1996, there were outstanding 4,353,691 shares of
Common Stock of the Company.
VOTING INFORMATION
A shareholder may, with respect to the election of a director, (i) vote for
the election of the nominee named below to serve until the 1999 Annual Meeting
of Shareholders, or (ii) withhold authority to vote for such nominee. A
shareholder may, with respect to the proposal to ratify the selection of KPMG
Peat Marwick LLP as the Company's auditors, (i) vote "FOR" ratification, (ii)
vote "AGAINST" ratification, or (iii) "ABSTAIN" from voting on the proposal.
Proxies in the accompanying form, properly executed and received by the
Company prior to the Meeting and not revoked, will be voted as directed therein
on all matters presented at the Meeting. In the absence of a specific direction
from the shareholder as to a proposal, the shareholder's Proxy will be voted as
to such proposal "FOR" the election of the director nominee named in this Proxy
Statement and "FOR" ratification of the selection of KPMG Peat Marwick LLP as
the Company's auditors. If a Proxy is marked to indicate that all or a portion
of the shares represented by such Proxy are not being voted with respect to a
particular matter, such non-voted shares will not be considered present and
entitled to vote on such matter, although such shares may be considered present
and entitled to vote on other matters and will count for purposes of determining
the presence of a quorum.
The affirmative vote of a plurality of the votes cast by the shares present
in person or by proxy at the Meeting and entitled to vote in the election of
directors is required to elect directors. Thus, if a quorum is present, the
person receiving the greatest number of votes will be elected to serve as a
director. Accordingly, non-voted shares with respect to the election of a
director will not affect the outcome of the election of a director. In addition,
withholding authority to vote for the director nominee will not prevent such
nominee from being elected. If a quorum is present, in order to ratify the
selection of KPMG Peat Marwick LLP as the Company's auditors, the number of
votes cast favoring ratification must exceed the number of votes cast opposing
ratification. Accordingly, non-voted shares and abstentions with respect to the
proposal to ratify the selection of KPMG Peat Marwick LLP as the Company's
auditors will not affect the determination of whether such matter has been
ratified.
PURPOSES OF THE MEETING
Item 1 - Election of Director
- -----------------------------
The Company's By-Laws authorize the Board of Directors to fix the number of
directors, provided that such number shall not be less than five nor more than
twelve. Currently, the number is fixed at five. The By-Laws stagger the Board of
Directors by dividing the number of directors into three classes, with one class
being elected each year for a term of three years. For the 1996 Annual Meeting,
one director, Martin Barkin, M.D., is a nominee for election to the Board of
Directors.
The table below sets forth certain information with respect to the nominee
for election as a director of the Company to serve until the 1999 Annual Meeting
of Shareholders. Unless otherwise specified, the shares of Common Stock
represented by the proxies solicited hereby will be voted "FOR" the election as
a director of the person named below as nominee, who has been nominated by the
Board of Directors. If, at or prior to his election, the nominee shall be
unwilling or unable to serve, it is presently intended that the proxies
solicited hereby will be voted for a substitute nominee designated by the Board
of Directors. The Board of Directors has no reason to believe the nominee will
be unwilling or unable to serve.
Positions Principal Occupations
Name and Age Held During Past 5 Years
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TO SERVE UNTIL THE 1999 ANNUAL MEETING OF SHAREHOLDERS:
Martin Barkin, M.D. Director Director since 1993; President and Chief
Age 60 Executive Officer of Draxis Health, Inc. (a
pharmaceutical company) since 1992; Partner
and National Practice Leader for HealthCare
at KPMG Peat Marwick from 1991 to 1992;
Deputy Minister of Health for the Province of
Ontario from 1987 to 1991; Director of
Deprenyl Animal Health, Inc.and Dynacare,
Inc.
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE NOMINEE NAMED ABOVE TO SERVE
ON THE BOARD OF DIRECTORS OF THE COMPANY.
The following table sets forth certain information about the directors of the
Company whose terms of office will continue after the 1996 Annual Meeting.
Positions Principal Occupations
Name and Age Held During Past 5 Years
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TERMS EXPIRING AT THE 1997 ANNUAL MEETING OF SHAREHOLDERS:
Robert A. Beckman Director and Director since 1989; Vice President
Age 42 Vice President of Finance since May, 1996; Vice
of Finance President of Finance for Lunar
Corporation since 1987.
Charles W. Bishop President and Director since 1989; President since
Age 44 Chief Executive February 1996; Vice President from
Officer March, 1990 to February, 1996.
TERMS EXPIRING AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS:
Richard B. Mazess, Ph.D. Chairman of Director since 1986; Founder of the
Age 57 the Board Company; Chairman of the Board since
February, 1996; President since
inception of the Company in 1986
through February, 1996; President and
Director of Lunar Corporation since
1974; Professor Emeritus of Medical
Physics at the University of
Wisconsin - Madison since 1985.
John Kapoor, Ph.D. Director Director since 1990; President and
Age 53 owner of EJ Financial Enterprises (a
private financial and investment
firm) since April 1990; Director of
Unimed Pharmaceuticals, Inc. since
1991, Option Care, Inc. since 1991,
Akorn, Inc. since 1991, and NeoPharm,
Inc. since 1990.
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Directors do not receive cash compensation for their services to the Company.
After each Annual Meeting of Shareholders and pursuant to the Bone Care
International, Inc. 1996 Stock Option Plan (the "Plan"), non-employee directors
are granted nonqualified options to purchase 4,500 shares of Common Stock at the
fair market value on the grant date. These options expire ten years after their
grant date and vest in one-third increments on the first three anniversaries of
the grant date.
During the year ended June 30, 1996, one meeting of the Board of Directors was
held. All of the directors attended the meeting. The Board of Directors has an
Audit Committee. The Audit Committee, composed of non-employee directors,
oversees the audit of the corporate accounts through independent public
accountants whom it recommends for selection by the Board of Directors. The
Committee reviews the scope of the audit with such accountants and their related
fees. The Audit Committee did not hold any meetings during the fiscal year ended
June 30, 1996. Its members are Dr. Barkin and Dr. Kapoor. The compensation
committee, composed of non-employee directors, determines the compensation and
benefits for officers, and makes recommendations to the Board of Directors
concerning compensation arrangements for the President and Chief Executive
Officer and Board of Directors. Dr. Kapoor and Dr. Mazess are members of the
compensation committee. The Company does not have a nominating committee of the
Board of Directors. However, under the By-Laws of the Company, the Board may
establish additional committees as it deems advisable.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Directors and officers of the Company are required by Section 16 of the
Securities Exchange Act of 1934 to report to the Securities and Exchange
Commission their transactions in, and beneficial ownership of, the Company's
Common Stock, including options to purchase Common Stock. Reports received by
the Company indicate that for the period from April 18, 1996, the date on which
the Company's registration statement under the Securities Act of 1934 became
effective, to June 30, 1996, all reports were filed on a timely basis.
Item 2 - Ratification of Selection of Auditors
- ----------------------------------------------
The Board of Directors has selected KPMG Peat Marwick LLP, Chicago, Illinois,
as independent certified public accountants to act as auditors for the Company
for the fiscal year ending June 30, 1997. KPMG Peat Marwick LLP has examined the
accounts of the Company since March 1990, and in the opinion of management, the
firm should continue as auditors of the Company. Unless otherwise specified, the
shares of Common Stock represented by the proxies solicited hereby will be voted
"FOR" the proposal to ratify the selection of KPMG Peat Marwick LLP as the
Company's auditors.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
meeting, will have an opportunity to make a statement if they wish to do so, and
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE SELECTION OF KPMG PEAT
MARWICK LLP AS AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30,
1997.
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL SHAREHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company, by (i) each director of
the Company, (ii) each executive officer of the Company who is named in the
summary compensation table included in this Proxy Statement, (iii) all directors
and executive officers of the Company as a group, and (iv) each person known by
the Company to be the beneficial owner of more than 5% of the Common Stock of
the Company. Prior to May 8, 1996, the Company was a subsidiary of Lunar
Corporation ("Lunar"), which then held 97.3% of the outstanding shares of the
Company's Common Stock. On May 8, 1996, Lunar distributed to its shareholders of
record as of April 24, 1996, all of the shares of the Company's Common Stock
then owned by Lunar.
Amount and Nature of Percent
Name of Beneficial Owner Beneficial Ownership of Class(1)
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Martin Barkin, M.D. 118,421(2) 2.7%
Robert A. Beckman 11,864(3) *
Charles W. Bishop, Ph.D. 16,264(4) *
John Kapoor, Ph.D. 47,625 1.1
Richard B. Mazess, Ph.D. 1,466,355(5) 33.7
All Directors and
Executive Officers as a
Group (6 persons) 1,661,254(6) 38.0
RCM Capital Management 438,450(7) 10.1
4 Embarcadero Center, Suite 3000
San Francisco, CA 94111
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* Less than 1 percent (1%)
(1) Except as indicated below, (i) represents shares of Common Stock held of
record and beneficially as of the October 15, 1996 record date and (ii) all
shares of Common Stock are held with sole voting and investment power.
Percentage amounts are based upon an aggregate of 4,353,691 shares issued
and outstanding, and shares of Common Stock issuable within 60 days of
October 15, 1996 upon exercise of stock options.
(2) All of the shares of Common Stock are owned by Draxis Health, Inc., of
which Dr. Barkin is Chief Executive Officer and over which he may be deemed
to have voting and investment power.
(3) Includes 11,846 shares of Common Stock issuable within 60 days upon
exercise of stock options, and 18 shares of Common Stock held by Mr.
Beckman as custodian for his children.
(4) Includes 11,846 shares of Common Stock issuable within 60 days upon
exercise of stock options and 1,400 shares of Common Stock held by Dr.
Bishop as custodian for his children.
(5) Includes 716,975 shares of Common Stock held by Dr. Mazess in joint tenancy
with his wife and 293,750 shares of Common Stock held by Dr. Mazess as
custodian for his daughters. Dr. Mazess' address is 313 West Beltline
Highway, Madison, Wisconsin, 53713.
(6) Includes 23,692 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(7) Based on a Schedule 13G dated June 7, 1996 furnished to the Company, RCM
Capital Management had sole voting power with respect to 378,450 shares of
Common Stock and sole dispositive power with respect to 438,450 shares of
Common Stock. Based on a Schedule 13G dated July 11, 1996 furnished by
Dresdner Bank AG to the Company, RCM Capital Management is a wholly owned
subsidiary of Dresdner Bank AG.
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EXECUTIVE COMPENSATION
Board of Directors Report on Executive Compensation
- ---------------------------------------------------
The following is a report submitted by the Board of Directors addressing the
Company's compensation policy as it related to the President and Chief Executive
Officer for fiscal year 1996. Richard B. Mazess, Chairman of the Company, Robert
A. Beckman, Vice President of Finance, and Carl E. Gulbrandsen, Corporate
General Counsel and Secretary, receive no direct compensation from the Company,
except that Mr. Beckman and Dr. Gulbrandsen were granted stock options to
purchase 32,000 and 4,000 shares of Common Stock, respectively. The Company pays
Lunar Corporation a monthly fee of $7,000 pursuant to a Transition Agreement for
substantially all the services that these individuals provide to the Company.
See "Certain Transactions" below.
This report by the Board of Directors and the Performance Graph contained in
this Proxy Statement shall not be deemed to be incorporated by reference by any
general statement which incorporates by reference this Proxy Statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
and they shall not otherwise be deemed filed under such Acts.
COMPENSATION POLICY. The goal of the Company's executive compensation policy
is to ensure that an appropriate relationship exists between executive pay and
the creation of shareholder value, while also motivating and retaining executive
officers and other key employees. For fiscal year 1996, the Company's executive
compensation program consisted of base salary for the Chief Executive Officer
only, a cash bonus received as a result of being a subsidiary of Lunar
Corporation ("Lunar") until May 8, 1996, and stock options to purchase shares of
Common Stock.
On May 8, 1996, Lunar distributed to its shareholders all of the shares of
Common Stock of the Company then owned by Lunar (the "Distribution"). In
considering the appropriate kinds and levels of compensation of the Chief
Executive Officer and other executive officers of the Company after the
Distribution, the Board of Directors determined that the base salary of the
Chief Executive Officer would not be increased as a result of the Company
becoming a publicly traded company through the Distribution. Instead, the Board
determined that the salary of the Chief Executive Officer would be adjusted
consistent with past practice when the Company was a subsidiary of Lunar.
However, in order to reflect the fact that the Company is primarily a research
and development company with nominal revenues, and in order to motivate
executive officers to achieve the Company's performance goals and create
shareholder value, it was determined that the Chief Executive Officer and other
executive officers of the Company would be granted options to purchase Common
Stock representing an aggregate 2.3% of the Common Stock on a fully diluted
basis.
SALARY AND BONUS. Annual base salary is designed to attract and retain
qualified executives. The Chief Executive Officer's base salary for fiscal year
1996 was $133,847, which represents a 4.1% increase in salary from fiscal year
1995, when the Company was a subsidiary of Lunar. As described in the preceding
paragraph, the Chief Executive Officer's base salary was not increased as a
result of the Distribution. The cash bonus received by the Chief Executive
Officer for fiscal year 1996 was $2,250, compared to a cash bonus of $3,000 for
fiscal year 1995.
STOCK OPTIONS. The Board of Directors believes that stock options ensure
that the executive has a continuing stake in the long term success of the
Company and are an effective incentive for the executive to create value for the
shareholders since the value of a stock option bears a direct relationship to
the Company's stock price. Stock options are granted under the Company's 1996
Stock Option Plan (the "Plan") and all executive officers are eligible to be
granted stock options under the Plan. As described above, in order to reflect
the fact that the Company is primarily a research and development company with
nominal revenues, and in order to motivate executive officers to achieve the
Company's goals and create shareholder value, the Chief Executive Officer and
other executive officers of the Company were granted stock options representing
an aggregate 2.3% of the Common Stock on a fully diluted basis. The Chief
Executive Officer was granted options to purchase 70,000 shares of Common Stock
representing 1.5% of the Common Stock on a fully diluted basis.
The Board of Directors believes that linking executive compensation to
corporate performance results in a better alignment of compensation with the
Company's goals and shareholder interest. This is especially true for a research
and development company such as the Company. As performance goals are met or
exceeded, shareholder value should increase through increases in the market
value of the Company's Common Stock and the executive will be commensurately
rewarded. The Board of Directors believes that compensation levels during fiscal
year 1996 adequately reflect the Company's compensation goals and policies.
Respectfully submitted,
Martin Barkin, M.D.
Robert A. Beckman
Charles W. Bishop, Ph.D.
John Kapoor, Ph.D.
Richard B. Mazess, Ph.D.
Summary Compensation Table
- --------------------------
The table below sets forth the compensation of the Company's Chief Executive
Officer of the Company as of the end of fiscal year 1996.
Annual Long-Term
Compensation Compensation
----------------- Securities All Other
Name and Principal Fiscal Salary Bonus Underlying Compensation
Position(1) Year ($) ($)(2) Options (#) ($)(4)
- -------------------------- ------ -------- ------- ------------ ------------
Charles W. Bishop, Ph.D. 1996 $133,847 $ 2,250 70,000 $1,966
President, and Chief 1995 128,563 3,000 7,500(3) 1,828
Executive Officer 1994 113,564 3,000 - 1,632
- -------------------------- ------ -------- ------- ------------ ------------
(1) Richard B. Mazess, Chairman of the Company, Robert A. Beckman, Vice
President of Finance, and Carl E. Gulbrandsen, Corporate General Counsel
and Secretary, receive no direct compensation from the Company, except that
Mr. Beckman and Dr. Gulbrandsen were granted options to purchase 32,000 and
4,000 shares of Common Stock, respectively. The Company pays Lunar
Corporation a monthly fee of $7,000 pursuant to a Transition Agreement for
substantially all the services that these individuals provide to the
Company. See "Certain Transactions" below.
(2) Compensation received from Lunar Corporation Bonus Program. The Company
currently has no formal bonus program.
(3) Represents stock options granted under the Lunar Corporation Amended and
Restated Stock Option Plan. The number of Lunar Corporation stock options
reflects the effect of the 3-for-2 stock split distributed on December 21,
1995.
(4) Amounts shown consist of Company contributions to a defined contribution
plan.
FISCAL YEAR END STOCK OPTION VALUES
The following table sets forth information on the value of unexercised stock
options held by the Company's Chief Executive Officer and the value of such
officer's unexercised stock options as of June 30, 1996. The Chief Executive
Officer did not exercise any stock options during fiscal year 1996.
Number of Securities
Underlying Unexercised Value of Unexercised
Stock Options at In-the-Money Options
Fiscal Year End (#) at Fiscal Year End ($)(1)
-------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------ ----------- ------------- ----------- -------------
Charles W. Bishop 11,846 70,000 27,009 159,600
- ------------------ ----------- ------------- ----------- -------------
(1) Based upon the closing price of the Company's Common Stock of $6.50 on June
28, 1996, as reported by the NASDAQ SmallCap Market minus the exercise
price.
STOCK OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth information with respect to individual stock
option grants during fiscal 1996 to the Company's Chief Executive Officer.
Potential Realizable
% of Value at Assumed
Number of Total Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted for Option Term (3,4)
Options During Exercise ---------------------
Granted(1) Fiscal Price(2) Expiration 0% 5% 10%
Name (#) Year 1996 ($/Share) Date ($) ($) ($)
- --------------------------- --------- --------- ---------- --- ------- -------
Charles W. Bishop 70,000 43.0% 4.22 2/1/06 0 185,500 471,100
- --------------------------- --------- --------- ---------- --- ------- -------
(1) All stock options were granted under the Company's 1996 Stock Option Plan.
These options are nonqualified and vest 20% each year on the first five
anniversaries of the grant date.
(2) All grants were made at 100% of fair market value as of the grant date.
(3) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed annual growth rates mandated by the Securities and
Exchange Commission and, therefore, are not intended to forecast possible
future appreciation, if any, in the Company's Common Stock price. The
calculations were based on the exercise prices and the 10-year term of the
options. No gain to the optionees is possible without an increase in stock
price, which will benefit all shareholders proportionately.
(4) The "Potential Realizable Value" to all shareholders as a group which would
result from the application of the same assumptions to the 4,353,691 shares
of Common Stock outstanding at June 30, 1996, at the closing price of $6.50
per share of Common Stock on June 28, 1996, as reported by NASDAQ SmallCap
Market is an incremental gain of $0, $17,806,596, and $45,104,239 for 0%,
5%, and 10%, respectively.
PERFORMANCE TABLE
The following table compares the cumulative total shareholder return on the
Company's Common Stock for the period commencing May 9, 1996 and ending June 30,
1996, with the cumulative total shareholder return of Standard & Poor's 500
Stock Index (the "S&P 500") and Standard and Poor's Health Care - Drugs Index
(the "S&P Health Care - Drugs").
05/09/96 06/30/96
- ------------------------------ -------- --------
S&P 500 $100 $105
S&P Health Care - Drugs $100 $113
Bone Care International, Inc. $100 $111
- ------------------------------ -------- --------
The Performance Table assumes $100 invested on May 9, 1996 in each of the
Company's Common Stock, the S&P 500 Index, and the S&P Health Care - Drugs
Index. The graph also assumes the reinvestment of dividends. The Company's
Common Stock was distributed by Lunar to its shareholders on May 8, 1996. May 9,
1996 was the first trading day for the Company's Common Stock.
CERTAIN TRANSACTIONS
Relationship Prior to the Distribution
- --------------------------------------
On May 8, 1996, Lunar Corporation ("Lunar"), which then held 97.3% of the
issued and outstanding shares of Company Common Stock, distributed to its
shareholders of record as of April 24, 1996, all of the shares of Company Common
Stock then owned by Lunar in a transaction intended to qualify as a tax-free
distribution (the "Distribution"). As a result of the Distribution, the Company
became a separate publicly owned company. Prior to the Distribution, the Company
had engaged in numerous transactions with Lunar and its subsidiaries. Such
transactions included, among other things, the extension of intercompany loans
and the provision of various other types of financial support by Lunar and its
subsidiaries and the sharing of services and the administrative costs thereof.
Certain transactions were made on terms more favorable to the business of the
Company than may otherwise have been obtainable in transactions with
unaffiliated third parties. Among other things, Lunar had provided certain
services to the Company pursuant to an intercompany agreement (the "Intercompany
Agreement"), pursuant to which the Company paid a monthly fee of $5,000 to Lunar
for accounting, legal and other administrative services. The Intercompany
Agreement was terminated prior to the Distribution.
Technology Transfer and Capital Contributions
- ---------------------------------------------
In October 1995, Lunar, in exchange for an additional 9.4% of the outstanding
shares of Company Common Stock, contributed to the Company its vitamin D
discovery program and all of the outstanding stock of Continental Assays
Corporation and canceled outstanding loans from the Company in the amount of
$634,683. Lunar's vitamin D discovery program had focused on discovering new
vitamin D compounds, including the development of 1,24-D2. Continental Assays
Corporation develops assays for vitamin D metabolites in biological samples. The
contribution of Lunar's vitamin D discovery program created a single vitamin D
compound development effort owned by the Company.
In December 1995, Lunar and Draxis Health Inc. made capital contributions in
proportion to their ownership in the Company in the aggregate amount of
$1,345,291. Mr. Barkin, a director of the Company and the Board of Directors'
nominee for election to the Board of Directors, is the Chief Executive Officer
of Draxis Health Inc. The proceeds of the capital contributions were used to
fund ongoing clinical trials of one-alpha D2 and for general corporate purposes.
Distribution Agreement
- ----------------------
In connection with the Distribution, the Company and Lunar entered into a
distribution agreement (the "Distribution Agreement") providing for, among other
things, the principal corporate transactions required to effect the
Distribution, the conditions to the Distribution, the allocation between the
Company and Lunar of certain liabilities and certain other agreements governing
the relationship between the Company and Lunar with respect to or in connection
with the Distribution.
Pursuant to the Distribution Agreement and prior to the Distribution, Lunar
made a capital contribution of $10,000,000 to the Company in exchange for
1,698,674 shares of Company Common Stock. The Company has used and intends to
continue to use the proceeds of such capital contribution for research and
development activities including clinical trials of one-alpha D2 and for general
corporate purposes.
Tax Disaffiliation Agreement
- ----------------------------
In connection with the Distribution, the Company and Lunar entered into a tax
disaffiliation agreement which provides, among other things, (i) for a
contribution of $725,000 by Lunar to the Company completed prior to the
Distribution to reflect federal income tax savings previously realized by Lunar
that were attributable to losses incurred by the Company prior to the
Distribution and (ii) cross indemnification by each party for certain tax
liabilities.
Transition Agreement
- --------------------
Prior to the Distribution, Lunar entered into a transition agreement (the
"Transition Agreement") with the Company pursuant to which Lunar has agreed that
Dr. Mazess, Mr. Beckman and Dr. Gulbrandsen and other employees of Lunar shall
perform certain services and provide certain assistance to the Company for up to
three years following the date of the Distribution. Such services may include
legal, treasury, financial, accounting, insurance administration, employee
benefit and other services. As compensation for the various services provided to
the Company pursuant to the Transition Agreement, the Company agreed to pay
Lunar a monthly fee of $7,000 in respect of any services provided. The
Transition Agreement also provides for Lunar to lease to the Company
approximately 3,000 square feet in its principal offices in Madison, Wisconsin.
The lease provides for the Company to pay Lunar a monthly fee of $2,000 during
the three year term. The Company may terminate the Transition Agreement upon 90
days notice to Lunar.
Dr. Mazess, the Chairman of the Board of the Company, is also the Chairman of
the Board, President and Chief Executive Officer of Lunar and is the beneficial
owner of approximately 34% of the outstanding capital stock of Lunar. Mr.
Beckman, a director and the Vice President of Finance of the Company, is also
Vice President of Finance of Lunar. Dr. Gulbrandsen, Corporate General Counsel
and Secretary of the Company, is also Corporate General Counsel and Secretary of
Lunar.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy materials for
the 1997 Annual Meeting of Shareholders, written notice of any shareholder
proposal must be delivered or mailed to and received at the Company's principal
executive offices at 313 West Beltline Highway, Madison, Wisconsin 53713 by June
26, 1997.
In addition, the Company's Bylaws establish an advance notice procedure for
shareholder proposals to be brought before any meeting of shareholders,
including proposed nominations of persons for election to the Board of
Directors. Shareholders at the 1996 annual meeting may consider shareholder
proposals or nominations brought by a shareholder of record on October 15, 1996,
who is entitled to vote at the annual meeting and who has given the Company's
Secretary timely written notice, in proper form, of the shareholder's proposal
or nomination. A shareholder proposal or nomination intended to be brought
before the 1996 annual meeting must have been received by the Secretary on or
after August 16, 1996, and on or prior to November 3, 1996. The 1997 annual
meeting is expected to be held on November 13, 1997. Accordingly, a shareholder
proposal or nomination intended to be brought before the 1997 annual meeting
must be received by the Secretary on or after August 15, 1997, and on or prior
to September 14, 1997.
FINANCIAL STATEMENTS
A copy of the Annual Report to Shareholders of the Company, containing audited
consolidated financial statements for the fiscal year ended June 30, 1996, is
enclosed herewith.
By Order of the Board of Directors,
Charles W. Bishop, Ph.D.
President
Madison, Wisconsin
October 24, 1996
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1996, (OTHER THAN EXHIBITS NOT
SPECIFICALLY INCORPORATED BY REFERENCE THEREIN) WILL BE PROVIDED WITHOUT CHARGE
TO EACH RECORD OR BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK AS OF OCTOBER
15, 1996, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON DIRECTED TO: BONE CARE
INTERNATIONAL, INC., 313 WEST BELTLINE HIGHWAY, MADISON, WISCONSIN 53713,
ATTENTION: ROBERT A. BECKMAN AT (608) 274-7533.
(Label Here)
Proxy for
Bone Care International, Inc.
Annual Meeting of Shareholders
November 14, 1996
The undersigned hereby appoints Carl E. Gulbrandsen and ROBERT A. BECKMAN, and
each of them, proxies, with full power of substitution, to vote for the
undersigned all shares of the Common Stock of BONE CARE INTERNATIONAL, INC. (the
"Company"), which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders to be held at Bone Care
International, Inc., 313 West Beltline Highway, Madison, Wisconsin, on Thursday,
November 14, 1996, at 3:30 p.m., local time, and at any adjournments thereof.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY.
(1) ELECTION OF DIRECTOR
For nominee WITHHOLD AUTHORITY
listed below ----- to vote for nominee -----
listed below
Martin Barkin, M.D.
(2) Ratify selection of KPMG Peat Marwick LLP as auditors of the Company for
the fiscal year ending June 30, 1997.
For Against Abstain
----- ----- -----
(3) In their discretion, upon such other matters as may properly come before
the meeting or any adjournments thereof.
(Over)
THIS PROXY WILL BE VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO CONTRARY
SPECIFICATION IS MADE, IT WILL BE VOTED FOR ITEMS 1 AND 2 ON THE REVERSE SIDE,
AND IN THE DISCRETION OF THE PERSONS DESIGNATED HEREIN AS PROXIES, UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS
THEREOF.
Please date this proxy and sign exactly as your name or names appear therein.
Joint owners should each sign personally. Trustees and others signing in
representative capacity should indicate the capacity in which they sign. The
undersigned hereby revokes all proxies heretofore given to vote at the aforesaid
meeting.
Dated , 1996
--------------------------
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Co-Owner Sign Here Shareholder Sign Here
