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:
X Preliminary proxy statement --- Confidential, for use of the
- - - --- Commission only (as permitted
Definitive proxy statement by Rule 14a-6(e)(2))
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Definitive additional materials
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Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
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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.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(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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(Label Here)
Proxy for
Bone Care International, Inc.
Annual Meeting of Shareholders
November 19, 1997
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY.
The undersigned hereby appoints CHARLES v. SWEENEY and DALE W. GUTMAN, and each
of them, as 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, as designated below, 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 Wednesday, November 19, 1997, at 3:00 p.m., local time, and at
any adjournments thereof as follows:
(1) Elect Directors
GRANT AUTHORITY WITHHOLD AUTHORITY
to vote for nominees to vote for nominees
listed below listed below
/ / / /
Instructions: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below.
Robert A. Beckman Charles W. Bishop, Ph.D.
(2) Approve an amendment to the Company's Restated Articles of Incorporation
to increase the number of authorized shares of Common Stock from 14,000,000 to
28,000,000 and to increase the number of authorized shares of Preferred Stock
from 1,000,000 to 2,000,000.
For / / Against / / Abstain / /
(3) Approve the Company's 1996 Stock Option Plan.
For / / Against / / Abstain / /
(4) Ratify selection of KPMG Peat Marwick LLP as auditors of the Company for
the fiscal year ending June 30, 1998.
For / / Against / / Abstain / /
(5) In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournments thereof.
This proxy will be voted as specified. IF NO CONTRARY SPECIFICATION IS MADE, IT
WILL BE VOTED FOR THE ELECTION OF THE DIRECTOR NOMINEES NAMED ON THE REVERSE
SIDE AND FOR ITEMS 2, 3 AND 4 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.
If shares are held jointly, one or more joint owners should sign.
Administrators, executors, 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 , 1997
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Co-Owner Sign Here Shareholder Sign Here
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
Wednesday, November 19, 1997, at 3:00 p.m., local time, for the following
purposes:
(1) To elect two (2) directors to serve until the 2000 Annual Meeting of
Shareholders.
(2) To consider and vote upon the approval of an amendment to the Company's
Restated Articles of Incorporation to increase the authorized number of shares
of Common Stock from 14,000,000 to 28,000,000 and to increase the authorized
number of shares of Preferred Stock from 1,000,000 to 2,000,000.
(3) To consider and vote upon the approval of the Company's 1996 Stock Option
Plan.
(4) To ratify the selection of KPMG Peat Marwick LLP as auditors for the
Company for the fiscal year ending June 30, 1998.
(5) 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 10, 1997, 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,
/s/Charles W. Bishop
Charles W. Bishop, Ph.D.
President
Madison, Wisconsin
October 27, 1997
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, Wednesday, November 19, 1997, at 3:00 p.m., local time, and at any
adjournments thereof.
At the Meeting, shareholders will consider proposals to (1) elect two (2)
directors to serve until the 2000 Annual Meeting of Shareholders, (2) approve
an Amendment to the Restated Articles of Incorporation of the Company to
increase the number of authorized shares of Common Stock from 14,000,000 to
28,000,000 and to increase the number of authorized shares of Preferred Stock
from 1,000,000 to 2,000,000 (the "Proposed Amendment"), (3) approve the
Company's 1996 Stock Option Plan, and (4) ratify the selection of KPMG Peat
Marwick LLP as auditors for the Company for the fiscal year ending June 30,
1998. 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, 1997, were first mailed to shareholders on or about
October 27, 1997.
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 10, 1997, 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 10, 1997, there were outstanding 4,361,191 shares of
Common Stock of the Company, which does not take into consideration the 2-for-1
split in the form of a stock dividend declared by the Board of Directors on
October 10, 1997 and described under Item 2 below.
VOTING INFORMATION
A shareholder may, with respect to the election of directors, (i) vote for the
election of both nominees named below to serve until the 2000 Annual Meeting of
Shareholders, (ii) withhold authority to vote for both nominees, or (iii) vote
for the election of one nominee and withhold authority to vote for the other
nominee by striking a line through such other nominee's name on the Proxy. A
shareholder may, with respect to each other proposal, (i) vote "FOR", (ii) vote
"AGAINST", or (iii) "ABSTAIN" from voting on such 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 nominees named in this Proxy
Statement, "FOR" the approval of the Proposed Amendment, "FOR" the approval of
the 1996 Stock Option Plan, 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 proposal, such non-voted shares will not be
considered present and entitled to vote on such proposal, 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 two
persons receiving the greatest number of votes will be elected to serve as
directors. Accordingly, non-voted shares with respect to the election of
directors will not affect the outcome of the election of directors. In
addition, withholding authority to vote for a director nominee will not prevent
such nominee from being elected. Similarly, if a quorum is present, in order to
approve the 1996 Stock Option Plan or to ratify the selection of KPMG Peat
Marwick LLP as the Company's auditors, the number of votes cast favoring
approval or ratification must exceed the number of votes cast opposing approval
or ratification. Accordingly, non-voted shares and abstentions with respect to
the proposal to approve the 1996 Stock Option plan or 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. The affirmative vote of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Meeting is required to approve the Proposed Amendment. Accordingly,
non-voted shares and abstentions with respect to the proposal to approve the
Proposed Amendment will have the effect of a vote against approval of the
Proposed Amendment.
PURPOSES OF THE MEETING
Item 1 - Election of Directors
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 1997 Annual
Meeting, two directors, Robert A. Beckman and Charles W. Bishop, Ph.D., are
nominees for election to the Board of Directors.
The table below sets forth certain information with respect to the nominees for
election as directors of the Company to serve until the 2000 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 persons named below, who have been nominated by the Board of
Directors. If, at or prior to such person's election, either 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 either 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 2000 Annual Meeting of Shareholders:
Robert A. Beckman Director Director since 1989; Vice President of
Finance for the period May, 1996
Age 43 through November 14, 1996;
Vice President of Finance for Lunar
Corporation since 1987.
Charles W. Bishop, President Director since 1989; President since
Ph.D. And Chief February, 1996; Vice President from
Executive March, 1990 to February, 1996.
Age 45 Officer
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The Board of Directors recommends you vote FOR the nominees 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 1997 Annual Meeting.
Positions Principal Occupations
Name and Age Held During Past 5 Years
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Terms expiring at the 1998 Annual Meeting of Shareholders:
Richard B. Mazess, Chairman of Director since 1986; Founder of the
Ph.D. the Board Company; Chairman of the Board since
February 1996; President since
Age 58 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
owner of EJ Financial Enterprises
Age 54 (a private financial and investment
firm) since April 1990; Director of
Unimed Pharmaceuticals, Inc. since
1991, Option Care, Inc. since 1991;
NeoPharm, Inc. since 1990, and
Integrated Surgical Systems, Inc.
since December, 1995; Director of
Akorn, Inc. since 1991, and acting
Chief Executive Officer since June,
1996.
Term expiring at the 1999 Annual Meeting of Shareholders:
Martin Barkin, M.D. Director Director since 1993; President and
Chief Executive Officer of Draxis
Age 61 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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Directors do not receive cash compensation for their services to the Company.
After the 1996 Annual Meeting of Shareholders and pursuant to the Bone Care
International, Inc. 1996 Stock Option Plan (the "Plan"), non-employee directors
were 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, 1997, 4 meetings of the Board of Directors were
held. All of the directors attended each meeting in person or by telephone. 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, 1997. Its members are Dr. Kapoor and Mr.
Beckman. The compensation committee, composed of non-employee directors,
determines the compensation and benefits for officers (other than stock options
granted under the Plan), 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
Compensation Committee held one meeting during the fiscal year ended June 30,
1997. 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
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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 in February, 1997, Dr. Kapoor inadvertently failed to
report one acquisition of shares of Common Stock.
Item 2 - Approval of Proposed Amendment to the Company's Restated Articles of
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Incorporation
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The Board of Directors has approved an amendment to the Company's Restated
Articles of Incorporation (the "Proposed Amendment") to increase the number of
authorized shares of Common Stock to 28,000,000 and to increase the number of
authorized shares of Preferred Stock to 2,000,000. The Proposed Amendment is
set forth in Annex A to this Proxy Statement and the description of the
Proposed Amendment contained herein is qualified in its entirety by reference
to the full text of such Annex A.
Purposes and Effect of the Proposed Amendment.
The Restated Articles of Incorporation of the Company currently provides that
the total number of shares of Common Stock which the Company is authorized to
issue is 14 million and that the total number of shares of Preferred Stock
which the Company is authorized to issue is 1 million.
On October 10, 1997, the Board of Directors of the Company declared a
two-for-one stock split in the form of a stock dividend (the "Stock Split"). As
a result of the Stock Split, the number of authorized but unissued shares of
Common Stock will be significantly reduced following November 14, 1997, the
distribution date for the Stock Split (the "Distribution Date"). Based on the
number of shares issued and outstanding on October 10, 1997, following the
Distribution Date, 8,722,382 shares of Common Stock will be issued and
outstanding, and, based on the number of shares reserved for issuance at June
30, 1997, 619,700 shares of Common Stock will be reserved for issuance upon
exercise of employee stock options. On October 10, 1997, no shares of Preferred
Stock were issued and outstanding and 140,000 shares of Preferred Stock have
been designated as Series A Junior Participating Preferred Stock. Accordingly,
following the Distribution Date but prior to approval of the Proposed
Amendment, the Company shall have available for issuance an aggregate of
4,657,918 shares of Common Stock and 860,000 shares of Preferred Stock.
The Proposed Amendment provides that the authorized capital stock of the
Company shall consist of a total of 30 million shares, consisting of (i) 28
million shares of Common Stock and (ii) 2 million shares of Preferred Stock.
Approval of the Proposed Amendment is not a condition to consummation of the
Stock Split.
The purpose of the proposed increase in the number of authorized shares of
Common Stock and Preferred Stock of the Company is to ensure that additional
shares will be available, if and when needed, for issuance from time to time
for any proper purpose approved by the Board of Directors. The Board of
Directors believes that the availability of the additional authorized shares
for issuance upon approval of the Board without the necessity for, or the delay
inherent in, a meeting of the shareholders of the Company will be beneficial to
the Company and its shareholders by providing the Company with the flexibility
required to promptly consider and respond to future business opportunities and
needs as they arise. The additional authorized shares will be available for
general corporate needs, such as any future stock splits, stock dividends,
issuance under the Company's employee benefit plans and other appropriate
purposes. The additional shares could also be used for such purposes as raising
additional capital for the operations of the Company or in connection with
acquisitions. The terms of any future issuance of Common Stock will be
dependent largely on market and financial conditions and other factors existing
at the time of issuance and sale.
If the Proposed Amendment is approved by the holders of Common Stock, the Board
of Directors does not presently intend to seek further shareholder approval
with respect to any particular issuance of shares, unless required by
applicable law, by regulatory authorities, or by the policies, rules and
regulations of The SmallCap Market of The Nasdaq Stock Market or any national
securities exchange on which the securities of the Company may then be listed.
Shareholders of the Company do not have any preemptive or similar rights to
subscribe for or purchase any additional shares that may be issued in the
future and, therefore, future issuances, depending upon the circumstances, may
have a dilutive effect on the earnings per share, book value per share, voting
power and other interests of the existing shareholders.
The proposed increase in the authorized number of shares could have an
anti-takeover effect, although that is not its purpose. For example, if the
Company were the subject of a hostile takeover attempt, it could try to impede
the takeover by issuing shares of Common Stock, thereby diluting the voting
power of the other outstanding shares of Common Stock and increasing the
potential cost of the takeover. The availability of this defensive strategy
could discourage unsolicited takeover attempts, thereby limiting the
opportunity for the shareholders to realize a higher price for their shares
than might otherwise be available in the public markets. The Board of Directors
is not aware of any attempt, or contemplated attempt, to acquire control of the
Company, and this proposal is not being presented for the purpose of creating
an anti-takeover device.
Vote Required for Approval.
Approval of the Proposed Amendment requires the affirmative vote of the holders
of a majority of the outstanding shares of Common Stock entitled to vote at the
Meeting. Consequently, shares of Common Stock which are voted to abstain from
voting on the proposal to approve the Proposed Amendment and shares which are
not voted with respect to such approval will have the effect of a vote against
the Proposed Amendment. Unless otherwise specified, the shares of Common Stock
represented by the proxies solicited hereby will be voted "FOR" the proposal to
approve the Proposed Amendment.
The Board of Directors unanimously recommends a vote "FOR" approval of the
Proposed Amendment.
Item 3 - Approval of Bone Care International, Inc. 1996 Stock Option Plan
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At the Meeting, a proposal will be presented to approve the Bone Care
International, Inc. 1996 Stock Option Plan, as amended (the "Plan"). The Plan
was originally approved prior to the Distribution (see Certain Transactions -
Relationship Prior to the Distribution) by Lunar Corporation, the Company's
sole shareholder at the time, and has been in effect since February 1, 1996.
The Company is not seeking to amend the Plan, but has submitted the Plan for
approval of the shareholders at the Meeting for the purpose of complying with
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Section 162(m) of the Code generally limits to $1,000,000 the amount that a
publicly held corporation is allowed each year to deduct for the compensation
paid to each of the corporation's chief executive officer and its four most
highly compensated officers. However, certain types of compensation paid to
such executives are not subject to the $1,000,000 deduction limit. Based on
regulations published by the Internal Revenue Service, if the shareholders
approve the Plan, compensation under the Plan attributable to options granted
thereunder would not be expected to be subject to the $1,000,000 deduction
limit under Section 162(m) of the Code. A copy of the Plan is attached as Annex
B to this Proxy Statement.
The purpose of the Plan is to provide incentives to officers, key employees and
consultants of the Company and its subsidiaries and members of the Board of
Directors to contribute to the success and prosperity of the Company by
granting nonqualified stock options to such persons on the terms and conditions
set forth in the Plan.
Eligibility.
Officers, key employees and consultants of the Company and its subsidiaries and
members of the Board of Directors who are not employees of the Company
("non-employee directors") are eligible, upon selection by the Committee, to
receive stock options. Approximately 23 officers, key employees and
non-employee directors as well as consultants are currently eligible to receive
stock options under the Plan.
Shares Issuable.
Except for adjustments to reflect certain changes in the Company's
capitalization, the maximum number of shares of Common Stock available under
the Plan is 500,000. As of June 30, 1997, the number of shares of Common Stock
available under the Plan which were not subject to outstanding stock options
was 309,850. On October 10, 1997, the Company's Board of Directors declared a
two-for-one stock split in the form of a stock dividend payable on November 14,
1997 to holders of record as of October 27, 1997. On and after the Distribution
Date, the number of shares of Common Stock available under the Plan will be
1,000,000. Based upon the stock options outstanding at June 30, 1997, the
numbers of shares of Common Stock available under the Plan which would not be
subject to stock options after the Distribution Date would be 619,700.
The maximum number of shares of Common Stock with respect to which options may
be granted during any calendar year to any person is 100,000.
Administration.
The committee administering the Plan (the "Committee") consists of two or more
members of the Board of Directors each of whom is a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and
an "outside director" within the meaning of Section 162(m) of the Code.
The Committee has the authority, subject to the terms of the Plan, to establish
eligibility guidelines, select officers, key employees, consultants, and
non-employee directors for participation in the Plan and determine the number
of shares of Common Stock subject to a stock option granted thereunder, the
exercise price of such shares of Common Stock, the time and conditions of
vesting or exercise, and all other terms and conditions of the stock option.
Stock Options.
Only nonqualified stock options may be granted under the Plan. The option price
per share of Common Stock purchasable upon exercise of an option is 100% of the
fair market value of a share of Common Stock on the date of grant of such stock
option. The Committee determines the period of exercise of a stock option and
whether a stock option is exercisable in cumulative or non-cumulative
installments or in full at any time.
Upon exercise, the option price may be paid in cash, in certain previously
owned shares of Common Stock having a fair market value on the date of exercise
equal to the option price, or in a combination thereof. An option may be
exercised during an optionee's continued employment with the Company or one of
its subsidiaries, or service on the Board of Directors, as the case may be,
and, except in the event of such optionee's death, within a period of 30 days
following termination of such employment of service, but only to the extent
exercisable and within the terms of such option at the time of the termination
of such employment or service; provided, however, that if employment of the
optionee by the Company or one of its subsidiaries or service on the Board of
Directors terminates by reason of retirement after age 60, then the option may
be exercised within a period not in excess of one year following such
termination of employment or service on the Board of Directors, but only to the
extent exercisable and within the terms of such option at the time of such
termination of employment or service.
No option will be transferable except that in the event of death of an optionee
(i) during employment or service on the Board of Directors, as the case may be,
(ii) within a period of one year after termination of employment or service on
the Board of Directors, as the case may be, by reason of retirement after age
60 at a time when the option is otherwise exercisable, or (iii) within 30 days
after termination of employment or service on the Board of Directors, as the
case may be, for any other reason, outstanding stock options may be exercised,
but only to the extent exercisable and within the term of such option by the
executor, administrator or personal representative of such deceased optionee
within one year of the death of such optionee in the case of clauses (i) and
(ii) or within 90 days of the death of such optionee in the case of clause
(iii).
Amendments and Termination.
The Plan may be amended by the Board of Directors in any respect, except that
no amendment may be made without shareholder approval if such amendment would
increase the maximum number of shares of Common Stock available for issuance
under the Plan (other than certain adjustments for changes in the Company's
capitalization) or would otherwise require shareholder approval. The Plan will
terminate on January 31, 2006, unless sooner terminated by the Board of
Directors.
Change in Control.
In the event of a change in control of the Company, any stock option not
previously exercisable in full will become fully exercisable. As more fully set
forth in the Plan, a change in control generally is the acquisition, subject to
certain exceptions, by any person of beneficial ownership of 50% or more of the
Common Stock, a change in the majority of the Board of Directors or approval by
the shareholders of a reorganization, merger, consolidation, or sale of all or
substantially all of the assets of the Company unless certain conditions are
satisfied. This provision could raise the cost to a potential acquirer of
engaging in a transaction that would constitute such a change in control and,
therefore, could affect the willingness of an acquirer to propose such a
transaction or the terms thereof.
Tax Consequences.
For federal income tax purposes, an optionee will not realize income upon the
grant of a stock option under the Plan. Upon exercise of an option,
compensation taxable as ordinary income will be realized by the optionee in an
amount equal to the excess, if any, of the fair market value on the date of
exercise over the option price, and the Company will be entitled to a
corresponding deduction in the same amount at the same time.
The following table sets forth the number of shares of Common Stock which were
subject to stock options granted to the indicated persons or groups under the
Plan during the fiscal year ended June 30, 1997 (without giving effect to the
2-for-1 Stock Split). All of the stock options were granted at 100% of fair
market value of the Common Stock on the date of grant.
Bone Care International, Inc. 1996 Stock Option Plan
Name and Position Number of Shares
Charles W. Bishop, Ph.D.
President and Chief Executive Officer 5,000
All executive officers as a group 10,000
All non-employee directors as a group -
All employees as a group
(other than executive officers) 17,350
The closing market price of the Common Stock as reported on The SmallCap Market
of The Nasdaq Stock Market on October 10, 1997 was $23.00 per share.
Approval of the 1996 Bone Care International Inc. Stock Option Plan will
require that the number of votes cast favoring approval exceeds the number of
votes cast opposing approval. Unless otherwise specified, the shares of Common
Stock represented by the proxies solicited hereby will be voted "FOR" the
proposal to approve the Plan.
The Board of Directors of the Company recommends you vote FOR approval of the
1996 Bone Care International Stock Option Plan.
Item 4 - 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, 1998. 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,
1998.
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.
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership Class(subscript1)
- - - -------------------------------------------------------------------------------
Martin Barkin, M.D. 118,4212(superscript 2) 2.7%
Robert A. Beckman 18,2643(superscript 3) *
Charles W. Bishop, Ph.D. 30,2644(superscript 4) *
John Kapoor, Ph.D. 61,6251 1.4
Richard B. Mazess, Ph.D. 1,466,3555(superscript 5) 33.3
All Directors and
Executive Officers as a
Group (7 persons) 1,696,4546(superscript 6) 38.5
T. Rowe Price Associates
100 E. Pratt Street
Baltimore, MD 21202 452,9007(superscript 7) 10.3
RCM Capital Management L.L.C.
4 Embarcadero Center, Suite 3000
San Francisco, CA 94111 438,0008(superscript 8) 10.0
Mellon Bank Corporation
One Mellon Bank Center
Pittsburgh, PA 15258 233,0009(superscript 9) 5.3
- - - --------------------------
* Less than 1 percent (1%)
Superscript 1: Except as indicated below, (i) represents shares of Common
Stock held of record and beneficially as of the October 10, 1997 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 4,361,191 shares
issued and outstanding, and shares of Common Stock issuable within 60 days of
October 10, 1997 upon exercise of stock options.
Superscript 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.
Superscript 3: Includes 18,246 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.
Superscript 4: Includes 25,846 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.
Superscript 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.
Superscript 6: Includes 44,892 shares of Common Stock issuable within 60 days
upon exercise of stock options.
Superscript 7: Based on a Schedule 13G dated January 10, 1997 furnished to the
Company, T. Rowe Price Associates, an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, had sole voting power with
respect to 20,400 shares of Common Stock and sole dispositive power with
respect to 452,900 shares of Common Stock. T. Rowe Price Small Cap Value Fund
Inc., an investment company registered under Section 8 of the Investment
Company Act of 1940, has sole voting power with respect to 325,000 shares of
Common Stock and sole dispositive power with respect to no shares of Common
Stock.
Superscript 8: Based on a Schedule 13G dated January 30, 1997 furnished to the
Company, RCM Capital Management L.L.C. ("RCM Capital") had sole voting power
with respect to 373,000 shares of Common Stock and sole dispositive power with
respect to 438,000 shares of Common Stock. RCM Limited L.P. is the managing
agent of RCM Capital and RCM General Corporation is the general partner of RCM
Limited L.P. Based on a Schedule 13G dated February 7, 1997 furnished by
Dresdner Bank AG to the Company, RCM Capital is a wholly owned subsidiary of
Dresdner Bank AG.
Superscript 9: Based on a Schedule 13G dated January 24, 1997 furnished to the
Company, Mellon Bank Corporation had sole voting power with respect to 233,000
shares of Common Stock and sole dispositive power with respect to 28,000 shares
of Common Stock. Such shares are beneficially owned by Mellon Bank, N.A. and
The Dreyfus Corporation, each a direct or indirect subsidiary of Mellon Bank
Corporation.
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 1997. With respect to other executive
officers of the Company, Richard B. Mazess, Chairman of the Company, Robert A.
Beckman, (during the period which he was Vice President of Finance), and Carl
E. Gulbrandsen, Corporate General Counsel and Secretary through September 30,
1997, received no direct compensation from the Company. 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. The Company's executive compensation program integrates
annual base salary with cash bonuses and stock options based upon corporate
performance and individual initiatives and performance. Accordingly, in years
in which performance goals are achieved or exceeded, executive compensation
would be higher than in years in which performance is below expectations.
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 was 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 percent of the Common Stock issued and
outstanding plus amounts issuable under all stock options awarded at the time
of the Distribution.
Salary and Bonus.
Annual base salary is designed to attract and retain qualified executives. The
Chief Executive Officer's salary for fiscal year 1997 was $143,846, which
represents a 7.5% increase in salary from fiscal year 1996. The cash bonus
received by the Chief Executive Officer was $2,250 for fiscal year 1997.
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 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,
in 1996 the Chief Executive Officer and other executive officers of the Company
were granted stock options representing an aggregate 2.3 percent of the Common
Stock issued and outstanding plus amounts issuable under all stock options
awarded at the time of the Distribution. In 1997, the Chief Executive Officer
was granted stock options to purchase 5,000 shares of Common Stock. The Chief
Executive Officer has been granted options to purchase 86,846 shares of Common
Stock representing 1.9% of the Common Stock issued and outstanding plus amounts
issuable under all stock options awarded at the time of the Distribution. When
considering the number of shares of Common Stock subject to options to be
granted after the Distribution, the committee administering
the Company's 1996 Stock Option Plan (the "Plan") considered the number of
shares subject to already outstanding options.
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 1997 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. No other executive officer earned more than $100,000 in salary and
bonus during fiscal year 1997.
Annual Long-Term
Compensation Compensation
------------ ------------
Securities
Underlying All Other
Options Compensation
Name and Principal Fiscal Salary Bonus (No.'s) (superscript5)
Position(superscript1) Year (Dollars) (Dollars)(superscript2) (Dollars)
- - - -------------------------------------------------------------------------------
Charles W. Bishop, Ph.D. 1997 143,846 2,250 5,000 2,116
President, and Chief 1996 133,847 2,250 70,000 1,966
Executive Officer (superscript3)
1995 128,563 3,000 7,500 1,828
(superscript3)(superscript4)
- - - -----------------------
Superscript 1: Richard B. Mazess, Chairman of the Company, Robert A. Beckman,
Vice President of Finance through November 14, 1996, and Carl E. Gulbrandsen,
Corporate General Counsel and Secretary through September 30, 1997, received 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, in fiscal 1996. 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.
Superscript 2: Without giving effect for the 2-for-1 Stock Split.
Superscript 3: Compensation received from Lunar Corporation Bonus Program.
Superscript 4: 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.
Superscript 5: 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 as of June 30, 1997. The
Chief Executive Officer did not exercise any stock options during the fiscal
year ended June 30, 1997.
Number of Securities Value of Unexercised In-the-
Underlying Unexercised Money Stock Options at
Stock Options at Fiscal Fiscal Year End (Dollars)
Year End (No.'s)(superscript1)(superscript1)(superscript2)
--------------------------- ----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- - - -------------------------------------------------------------------------------
Charles W. Bishop, 25,846 61,000 226,928 499,180
Ph.D.
- - - ------------------
Superscript 1: Without giving effect to the 2-for-1 Stock Split.
Superscript 2: Based upon the closing price of the Company's Common Stock of
$13.00 on June 30, 1997, as reported by The SmallCap Market of The Nasdaq Stock
Market minus the exercise price.
STOCK OPTION GRANTS IN FISCAL YEAR
The following table sets forth information with respect to individual stock
option grants during the fiscal year ended June 30, 1997 to the Company's Chief
Executive Officer.
Potential Realizable Value
at Assumed Annual Rates
Number of Percent of Stock Price Apprec.
Securities of Total Exercise for Option Term
Underlying Options Price (superscript4)
Options Granted (superscript2) (superscript5)
(superscript1) During (superscript3) -------------------
(superscript2)Fiscal Year (Dollars Expir. 5% 10%
Name (No.'s) 1997 /Share) Date (Dollars)(Dollars)
- - - -------------------------------------------------------------------------------
Charles W. Bishop, 5,000 18.3 11.50 6/17/02 36,150 91,650
Ph.D.
Superscript 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.
Superscript 2: Without giving effect to the 2-for-1 Stock Split.
Superscript 3: All grants were made at 100% of fair market value as of the
grant date.
Superscript 4: 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.
Superscript 5: The "Potential Realizable Value" to all shareholders as a group
which would result from the application of the same assumptions to the
4,361,191 shares of Common Stock outstanding at June 30, 1997, at the closing
price of $13.00 per share of Common Stock on June 30, 1997, as reported by The
SmallCap Market of The Nasdaq Stock Market is an incremental gain of
$35,674,542, and $90,363,878 for 5% and 10%, respectively.
PERFORMANCE GRAPH
The following line graph compares the cumulative total shareholder return on
the Company's Common Stock for the period commencing May 9, 1996 and ending
June 30, 1997, with the cumulative total shareholder return of Standard and
Poor's 500 Stock Index (the "S and P 500") and Standard and Poor's Health Care
- - - - Drugs Index (the "S and P Health Care - Drugs").
(All in Dollars)
05/09/96 06/30/96 06/30/97
--------------------------------------
S&P 500 $100 $105 $141
S&P Health Care - Drugs $100 $113 $177
Bone Care International, Inc. $100 $111 $221
The Performance Graph assumes $100 dollars invested on May 9, 1996 in each of
the Company's Common Stock, the S and P 500 Index, and the S and P Health Care
- - - - Drugs Index. The graph also assumes the reinvestment of dividends. The
Company's Common Stock was distributed by Lunar Corporation to its shareholders
on May 8, 1996. The first trading day for the Company's Common Stock was May 9,
1996.
CERTAIN TRANSACTIONS
Relationship Prior to the Distribution
- - - --------------------------------------
On May 8, 1996, Lunar Corporation ("Lunar"), which then held 97.3 percent 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.
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.
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 32 percent of the outstanding capital stock of Lunar.
Mr. Beckman, a director of the Company who also served as Vice President of
Finance from May 1996 through November 14, 1996, is also Vice President of
Finance of Lunar. Prior to October 1, 1997, Dr. Gulbrandsen served as Corporate
General Counsel and Secretary of the Company and as Corporate General Counsel
and Secretary of Lunar.
Development Agreement
- - - ---------------------
In November, 1996, the Company entered into an agreement (the "Development
Agreement") with Taylor Pharmaceuticals, Inc. ("Taylor"), whereby Taylor will
assist in the formulation and manufacture of the IV formulation of the
Company's leading drug, 1-alpha D-2. Taylor is a wholly-owned subsidiary of
Akorn, Inc. Dr. Kapoor, a director of the Company, is a director and acting
Chief Executive Officer of Akorn, Inc. Dr. Kapoor currently has a beneficial
ownership interest of 24% of Akorn, Inc. The Development Agreement calls for
payments of approximately $500,000 to formulate the product into a safe, stable
liquid presentation and to provide the Company with specified quantities. The
agreement was negotiated at arm's length and included the obtaining of
competitive bids. Payments during the fiscal year ended June 30, 1997
aggregated $244,167.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy materials for
the 1998 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 25, 1998.
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 1997 annual meeting may consider shareholder
proposals or nominations brought by a shareholder of record on October 10,
1997, 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 1997 annual meeting must have been received by the Secretary
on or after August 15, 1997, and on or prior to September 20, 1997. The 1998
annual meeting is expected to be held on November 13, 1998. Accordingly, a
shareholder proposal or nomination intended to be brought before the 1998
annual meeting must be received by the Secretary on or after August 15, 1998,
and on or prior to September 14, 1998.
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, 1997, is
enclosed herewith.
By Order of the Board of Directors,
/s/Charles W. Bishop
Charles W. Bishop, Ph.D.
President
Madison, Wisconsin
October 27, 1997
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, 1997, (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
10, 1997, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON DIRECTED TO: BONE CARE
INTERNATIONAL, INC., 313 WEST BELTLINE HIGHWAY, MADISON, WISCONSIN 53713,
ATTENTION: DALE W. GUTMAN AT (608) 288-6211.
ANNEX A
The Restated Articles of Incorporation of the Corporation is hereby amended by
deleting the first sentence of Article III of the Restated Articles of
Incorporation in its present form and substituting in lieu thereof the
following:
The number of shares of capital stock which the corporation shall be authorized
to issue is Thirty Million (30,000,000), divided into Twenty-Eight Million
(28,000,000) shares of Common Stock, no par value per share, and Two Million
(2,000,000) shares of Preferred Stock, $.001 dollar par value per share.
ANNEX B
Bone Care International, Inc.
1996 Stock Option Plan
1. Plan.
- - - ---------
To provide incentives to officers, key employees and consultants of Bone Care
International, Inc. (the "Company") and its subsidiaries from time to time, and
members of the Board of Directors of the Company (the "Board") to contribute to
the success and prosperity of the Company, based upon the ownership of the
common stock, no par value, of the Company ("Common Stock"), the Committee
hereinafter designated, may grant nonqualified stock options to officers, key
employees, consultants and eligible members of the Board on the terms and
subject to the conditions stated in this Plan.
2. Eligibility.
- - - ----------------
Officers, key employees and consultants of the Company and its subsidiaries and
members of the Board who are not employees of the Company ("non-employee
directors") shall be eligible, upon selection by the Committee, to receive
stock options as the Committee, in its discretion, shall determine.
3. Shares Issuable.
- - - --------------------
The maximum number of shares of Common Stock to be available under this Plan
pursuant to all grants of stock options hereunder shall be 500,000, subject to
adjustment in accordance with Section 5. Shares of Common Stock subject to a
stock option granted hereunder, which are not issued by reason of the
expiration, cancellation or other termination of such stock option, shall again
be available for future grants of stock options under this Plan.
Shares of Common Stock to be issued may be authorized and unissued shares of
Common Stock, treasury stock, or a combination thereof.
To the extent required by Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"), and the rules and regulations thereunder, the maximum
number of shares of Common Stock with respect to which options may be granted
during any calendar year to any person shall be 100,000, subject to adjustment
as provided in Section 5.
4. Administration of the Plan.
- - - -------------------------------
This Plan shall be administered by a committee designated by the Board (the
"Committee") consisting of two or more members of the Board, each of whom shall
be a "Non-Employee Director," within the meaning of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and an
"outside director" within the meaning of Section 162(m) under the Code.
The Committee shall, subject to the terms of this Plan, establish eligibility
guidelines, select officers, key employees, consultants and non-employee
directors for participation in this Plan and determine the number of shares of
Common Stock subject to a stock option granted hereunder, the exercise price
for such shares of Common Stock, the time and conditions of vesting or exercise
and all other terms and conditions of the stock option, including, without
limitation, the form of the option agreement. The Committee may establish rules
and regulations for the administration of the Plan, interpret the Plan and
impose, incidental to the grant of a stock option, conditions with respect to
the grant or award of stock options or competitive employment or other
activities not inconsistent with or conflicting with this Plan. All such rules,
regulations and interpretations relating to this Plan adopted by the Committee
shall be conclusive and binding on all parties. All grants of stock options
under this Plan shall be evidenced by written agreements between the Company
and the optionees, and no such grant shall be valid until so evidenced.
5. Changes in Capitalization.
- - - ------------------------------
Appropriate adjustments shall be made by the Committee in the maximum number of
shares to be issued under the Plan and the maximum number of shares which are
subject to any stock option granted hereunder, and the exercise price therefor,
to give effect to any stock splits, stock dividends and other relevant changes
in the capitalization of the Company occurring after the effective date of this
Plan (which shall not include the sale by the Company of shares of Common Stock
or securities convertible into shares of Common Stock).
6. Effective Date and Term of Plan.
- - - ------------------------------------
This Plan shall be submitted to the shareholders of the Company for approval
and, if approved, shall become effective on the date thereof; provided,
however, that this Plan and any options granted hereunder shall be null and
void in the event the Company's registration statement under Section 12 of the
Exchange Act does not become effective on or prior to December 31, 1996. This
Plan shall terminate ten years after it becomes effective unless terminated
prior thereto by action of the Board. No further grants shall be made under
this Plan after termination, but termination shall not affect the rights of any
optionee under any grants made prior to termination.
7. Amendments.
- - - ---------------
This Plan may be amended by the Board in any respect, except that no amendment
may be made without shareholder approval if such amendment would (a) increase
the maximum number of shares of Common Stock available for issuance under this
Plan (other than as provided in Section 5) or (b) otherwise require shareholder
approval.
8. Grants of Stock Options.
- - - ----------------------------
Options to purchase shares of Common Stock may be granted hereunder to such
eligible officers, key employees, consultants, and non-employee directors as
may be selected by the Committee.
9. Option Price.
- - - -----------------
The option price per share of Common Stock purchasable upon exercise of an
option granted hereunder shall be determined by the Committee; provided,
however, that the option price per share of Common Stock purchasable upon
exercise of an option grant under this Plan shall be 100% of the fair market
value of a share of Common Stock on the date of grant of such option. For
purposes hereof, "fair market value" shall be determined by the Committee.
10. Stock Option Period.
- - - -------------------------
Each stock option granted hereunder may be granted at any time on or after the
effective date, and prior to the termination, of this Plan. The Committee shall
determine whether such stock option shall become exercisable in cumulative or
non-cumulative installments or in full at any time. An exercisable stock option
may be exercised in whole or in part with respect to whole shares of Common
Stock only. The period for the exercise of each stock option shall be
determined by the Committee.
11. Exercise of Stock Options.
- - - -------------------------------
(a) Upon exercise, the option price may be paid in cash, in previously owned
shares of Common Stock (which the optionee has held for at least six months or
acquired on the open market and which the optionee owns free and clear from all
encumbrances) having a fair market value on the date of exercise equal to the
option price, or in a combination thereof. The Company may arrange or approve
of a cashless option exercise procedure which complies with the provisions of
Section 16 of the Exchange Act and the rules and regulations thereunder.
(b) An option may be exercised during an optionee's continued employment with
the Company or one of its subsidiaries, or service on the Board, as the case
may be, and, except in the event of such optionee's death, within a period of
30 days following termination of such employment or service, but only to the
extent exercisable and within the term of such option at the time of the
termination of such employment or service; provided, however, that if
employment of the optionee by the Company or one of its subsidiaries or service
on the Board shall have terminated by reason of retirement after age 60, then
the option may be exercised within a period not in excess of one year following
such termination of employment or service on the Board, but only to the extent
exercisable and within the term of such option at the time of such termination
of employment or service.
(c) No option shall be transferable except that in the event of the death of an
optionee (i) during employment or service on the Board, as the case may be,
(ii) within a period of one year after termination of employment or service on
the Board, as the case may be, by reason of retirement after age 60 at a time
when the option is otherwise exercisable or (iii) within 30 days after
termination of employment or service on the Board, as the case may be, for any
other reason, outstanding stock options may be exercised, but only to the
extent exercisable and within the term of such option prior to the application
of the Section 11, by the executor, administrator or personal representative of
such deceased optionee within one year of the death of such optionee in the
case of clauses (i) and (ii) or within 90 days of the death of such optionee in
the case of clause (iii).
12. Acceleration of Options upon a Change in Control.
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The following provisions shall apply in the event of a "Change in Control":
(a) In the event of a Change in Control, any stock options not previously
exercisable in full shall become fully exercisable.
(b) For purposes hereof, "Change in Control" means:
(1) The acquisition by any individual, entity or group (a "Person"), including
any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act, of beneficial ownership within the meaning of Rule 13d-3 promulgated under
the Exchange Act, of 50 percent or more of the then outstanding shares of
Common Stock (the "Outstanding Common Stock"); provided, however, that the
following acquisitions shall not constitute a Change in Control: (A) any
acquisition by the Company, (B) any acquisition by an employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, (C) any acquisition by an underwriter or
underwriters as part of a bona fide public distribution of securities of the
Company or (D) any acquisition by any Person which beneficially owned as of the
effective date of this Plan, 30 percent or more of the outstanding Common
Stock; and provided further that, for purposes of clause (A), if any Person
(other than the Company or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company) shall become the beneficial owner of 50 percent or more of the
outstanding Common Stock by reason of an acquisition by the Company and such
Person shall, after such acquisition by the Company, become the beneficial
owner of any additional shares of the Outstanding Common Stock and such
beneficial ownership is publicly announced, such additional beneficial
ownership shall constitute a Change in Control;
(2) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
such Board; provided, however, that any individual who becomes a director of
the Company subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by the vote of at least a
majority of the directors then comprising the Incumbent Board shall be deemed
to have been a member of the Incumbent Board; and provided further, that no
individual who was initially elected as a director of the Company as a result
of an actual or threatened election contest, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, or any other
actual or threatened solicitation of proxies or consents by or on behalf of any
Person other than the Board shall be deemed to have been a member of the
Incumbent Board;
(3) Approval by the shareholders of the Company of a reorganization, merger or
consolidation unless, in any such case, immediately after such reorganization,
merger or consolidation, (i) more than 50 percent of the then outstanding
shares of common stock of the corporation resulting from such reorganization,
merger or consolidation and more than 50 percent of the combined voting power
of the then outstanding securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals or entities who were
the beneficial owners, respectively, of the Outstanding Common Stock
immediately prior to such reorganization, merger or consolidation and in
substantially the same proportions relative to each other as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Common Stock, (ii) no Person (other than the Company, any employee
plan (or related trust) sponsored or maintained by the Company or the
corporation resulting from such reorganization, merger or consolidation (or any
corporation controlled by the Company) and any Person which beneficially owned,
immediately prior to such reorganization, merger or consolidation, directly or
indirectly, 30 percent or more of the Outstanding Common Stock) beneficially
owns, directly or indirectly, 50 percent or more of the then outstanding shares
of common stock of such corporation or 50 percent or more of the combined
voting power of the then outstanding securities of such corporation entitled to
vote generally in the election of directors and (iii) at least a majority of
the members of the board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the Incumbent Board at
the time of the execution of the initial agreement or action of the Board
providing for such reorganization, merger or consolidation; or
(4) Approval by the shareholders of the Company of (i) a plan of complete
liquidation or dissolution of the Company or (ii) the sale or other disposition
of all or substantially all of the assets of the Company other than to a
corporation with respect to which, immediately after such sale or other
disposition, (A) more than 50 percent of the then outstanding shares of common
stock thereof and more than 50 percent of the combined voting power of the then
outstanding securities thereof entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock immediately prior to such
sale or other disposition and in substantially the same proportions relative to
each other as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Common Stock, (B) no Person (other than the
Company, any employee benefit plan (or related trust) sponsored or maintained
by the Company or such corporation (or any corporation controlled by the
Company) and any Person which beneficially owned, immediately prior to such
sale or other disposition, directly or indirectly, 30 percent or more of the
Outstanding Common Stock) beneficially owns, directly or indirectly, 50 percent
or more of the then outstanding shares of common stock thereof or 50 percent or
more of the combined voting power of the then outstanding securities thereof
entitled to vote generally in the election of directors and (C) at least a
majority of the members of the board of directors thereof were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition.
