<PAGE>
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 by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Bone Care International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
-------------------------------------------------------------------------
(4) Date Filed:
-------------------------------------------------------------------------
<PAGE>
BONE CARE INTERNATIONAL, INC.
ONE SCIENCE COURT
MADISON, WISCONSIN 53711
(608) 236-2500
-----------------
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., One Science Court, Madison, Wisconsin, on
Friday, November 13, 1998, at 3:00 p.m., local time, for the following
purposes:
(1) To elect two (2) directors to serve until the 2001 Annual Meeting of
Shareholders.
(2) To ratify the selection of KPMG Peat Marwick LLP as auditors for the
Company for the fiscal year ending June 30, 1999.
(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 2, 1998, 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 Assistant 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,
LOGO
Charles W. Bishop, Ph.D.
President and Chief Executive
Officer
Madison, Wisconsin
October 12, 1998
<PAGE>
BONE CARE INTERNATIONAL, INC
ONE SCIENCE COURT
MADISON, WISCONSIN 53711
(608) 236-2500
-----------------
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., One Science Court, Madison,
Wisconsin, Friday, November 13, 1998, 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 2001 Annual Meeting of Shareholders, and (2)
ratify the selection of KPMG Peat Marwick LLP as auditors for the Company for
the fiscal year ending June 30, 1999. 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 Assistant 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 on Form 10-K filed with the Securities and
Exchange Commission, including financial statements for the fiscal year ended
June 30, 1998, were first mailed to shareholders on or about October 12, 1998.
1
<PAGE>
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of the shares of Common Stock of the Company at the
close of business on October 2, 1998, 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 2, 1998, there were outstanding 10,135,956 shares of Common Stock of
the Company.
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 2001 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 the proposal to ratify the selection
of KPMG Peat Marwick LLP as auditors for the Company, (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 at or 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 "FOR" the election of the director nominees 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 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
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.
2
<PAGE>
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 1998 Annual
Meeting, two directors, Richard B. Mazess, Ph.D. and John Kapoor, 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 2001 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.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND AGE POSITIONS HELD DURING PAST 5 YEAR
------------ --------------------- -------------------------------
<C> <C> <S>
TO SERVE UNTIL THE 2001 ANNUAL MEETING OF SHAREHOLDERS:
Richard B. Mazess, Ph.D. Chairman of the Board Director since 1984; Founder of
Age 59 the Company; Chairman of the
Board since February 1996;
President since inception of
the Company in 1984 through
February, 1996; President and
Director of Lunar Corporation
since 1974; Professor Emeritus
of Medical Physics at the
University of Wisconsin-Madison
since 1985. Lunar develops and
sells x-ray and ultrasound
densitometers for the diagnoses
and monitoring of osteoporosis
and other metabolic bone
diseases.
John Kapoor, Ph.D. Director Director since 1990; President
Age 55 and 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; 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.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE NOMINEES NAMED ABOVE TO
SERVE ON THE BOARD OF DIRECTORS OF THE COMPANY.
3
<PAGE>
The following table sets forth certain information about the directors of the
Company whose terms of office will continue after the 1998 Annual Meeting.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS
NAME AND AGE POSITIONS HELD DURING PAST 5 YEAR
------------ ------------------- ---------------------------------
<C> <C> <S>
TERMS EXPIRING AT THE 2000 ANNUAL MEETING OF SHAREHOLDERS:
Robert A. Beckman Director Director since 1989; Vice
Age 44 President of Finance for the
period May, 1996 through November
14, 1996; Vice President of
Finance for Lunar Corporation
since 1987.
Charles W. Bishop, Ph.D. President and Chief Director since 1989; President
Age 47 Executive Officer and Chief Executive Officer since
February, 1996; Vice President
from March, 1990 to February,
1996.
TERM EXPIRING AT THE 1999 ANNUAL MEETING OF SHAREHOLDERS:
Martin Barkin, M.D. Director Director since 1993; President
Age 62 and Chief Executive Officer of
Draxis Health, Inc. (a
pharmaceutical company) since
1992; Partner and National
Practice Leader for HealthCare at
KPMG Peat Marwick LLP from 1991
to 1992; Deputy Minister of
Health for the Province of
Ontario from 1987 to 1991;
Director of Novopharm Biotech (a
biotech research and development
company).
</TABLE>
Directors do not receive cash compensation for serving as members of the
Board. Subsequent to the 1996 Annual Meeting of Shareholders and pursuant to
the Bone Care International, Inc. 1996 Stock Option Plan (the "Plan"), annual
awards of nonqualified options to purchase 9,000 shares of Common Stock at the
fair market value on the grant date have been granted to non-employee
directors. 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, 1998, six meetings of the Board of Directors
were held. All of the directors attended at least 83% of the meetings 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 formal meetings during the fiscal year ended June 30, 1998. 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 did not
hold any formal meetings during the fiscal year ended June 30,1998. 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.
4
<PAGE>
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 Mr. Beckman inadvertently failed to timely report
during 1998 one disposition and one acquisition of shares of Common Stock.
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, 1999. 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,
1999.
5
<PAGE>
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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
------------------------ -------------------- ----------
<S> <C> <C>
Martin Barkin, M.D....................... 239,842(2) 2.4%
Robert A. Beckman........................ 47,973(3) *
Charles W. Bishop, Ph.D.................. 96,627(4) *
John Kapoor, Ph.D........................ 240,250(5) 2.4
Richard B. Mazess, Ph.D.................. 3,112,710(6) 30.7
All Directors and Executive Officers as a
Group
(7 persons)............................. 3,740,402(7) 36.5
T. Rowe Price Associates................. 954,000(8) 9.4
100 E. Pratt Street Baltimore, MD 21202
RCM Capital Management L.L.C............. 968,500(9) 9.6
4 Embarcadero Center,
Suite 3000
San Francisco, CA 94111
State of Wisconsin Investment Board...... 800,000(10) 7.8
Lake Terrace
121 E. Wilson Street
Madison, WI 53707
</TABLE>
- --------
*Less than 1 percent (1%)
(1) Except as indicated below, the percentage beneficially owned represents
shares of Common Stock held of record and beneficially as of September
23, 1998 and all shares of Common Stock are held with sole voting and
investment power. Percentage amounts are based upon an aggregate of
10,135.956 shares issued and outstanding and shares of Common Stock
issuable within 60 days of September 23, 1998 upon exercise of stock
options.
(2) Includes 3,000 shares of Common Stock issuable within 60 days upon
exercise of stock options and 236,842 shares of Common Stock owned by
Draxis, of which Dr. Barkin is Chief Executive Officer and over which he
may be deemed to have voting and investment power.
(3) Includes 40,446 shares of Common Stock issuable within 60 days upon
exercise of stock options, and 27 shares of Common Stock held by Mr.
Beckman as custodian for his children.
(4) Includes 58,000 shares of Common Stock issuable within 60 days upon
exercise of stock options and 2,800 shares of Common Stock held by the
wife of Dr. Bishop as custodian for his children.
(5) Includes 3,000 shares of Common Stock issuable within 60 days upon
exercise of stock options.
6
<PAGE>
(6) Includes 1,603,950 shares of Common Stock held by Dr. Mazess in joint
tenancy with his wife and 587,500 shares of Common Stock held by Dr.
Mazess as custodian for his daughters.
(7) Includes 104,446 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(8) Based on Amendment No. 1 to Schedule 13G dated February 12, 1998
furnished to the Company, before the completion on July 24, 1998 of the
Company's offering of 1,326,000 shares of Common Stock (the "Offering"),
T. Rowe Price Associates, Inc., an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, had sole voting power
with respect to 68,800 shares of Common Stock and sole dispositive power
with respect to 854,000 shares of Common Stock, and T. Rowe Price Small
Cap Value Fund, Inc., an investment company registered under Section 8 of
the Investment Company Act of 1940, had sole voting power with respect to
650,000 shares of Common Stock and sole dispositive power with respect to
no shares of Common Stock. T. Rowe Price Associates, Inc. may be deemed
to be the beneficial owner of an additional 100,000 shares of Common
Stock purchased in the Offering.
(9) Based on Amendment No. 2 to Schedule 13G dated January 30, 1998 furnished
to the Company, before the completion of the Offering, Dresdner RCM
Global Investors LLC, an investment adviser registered under Section 203
of the Investment Advisers Act of 1940, had sole voting power with
respect to 618,500 shares of Common Stock and sole dispositive power with
respect to 718,500 shares of Common Stock. RCM Limited L.P. is the
managing agent of Dresdner RCM Global Investors LLC and RCM General
Corporation is the general partner of RCM Limited L.P. and may be deemed
to be the beneficial owner of such securities to the extent that Dresdner
RCM Global Investors LLC is deemed to be the beneficial owner of such
securities. Based on Amendment No. 2 to Schedule 13G dated January 30,
1998 furnished by Dresdner Bank AG to the Company, Dresdner RCM Global
Investors LLC is a wholly-owned subsidiary of Dresdner Bank AG and
Dresdner Bank AG may be deemed to be the beneficial owner of such
securities. Dresdner RCM Global Investors LLC may be deemed to be the
beneficial owner of an additional 250,000 shares of Common Stock
purchased in the Offering.
(10) Based upon information provided by the State of Wisconsin Investment
Board to the Company in connection with the preparation of this Proxy
Statement.
7
<PAGE>
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 1998. With respect to other executive
officers of the Company, Richard B. Mazess, Chairman of the Company, received
no direct compensation from the Company. The Company paid Lunar Corporation
("Lunar") fees aggregating $58,200 during fiscal year 1998 pursuant to a
Transition Agreement for substantially all the services that Dr. Mazess and
Lunar provided to the Company.
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 at the time, would be granted
options to purchase Common Stock representing an aggregate 2.3% 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
1998 was $150,000, which represents a 4.3% increase in salary from fiscal year
1997. The cash bonus received by the Chief Executive Officer was $4,225 for
fiscal year 1998.
8
<PAGE>
Stock Options. The Board of Directors believes that stock options ensure
that executives have a continuing stake in the long term success of the
Company and are an effective incentive for executives 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 at the time, were granted stock options representing
an aggregate 2.3% of the Common Stock issued and outstanding plus amounts
issuable under all stock options awarded at the time of the Distribution. In
1998, the Chief Executive Officer was not granted additional stock options to
purchase shares of Common Stock in light of the stock options awarded at the
time of the Distribution. Since joining the Company, the Chief Executive
Officer has been granted options to purchase 173,691 shares of Common Stock.
When considering the number of shares of Common Stock subject to options to be
granted, the committee administering the Plan considers 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 1998 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.
9
<PAGE>
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 1998.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------- ------------
SECURITIES
NAME AND PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION(1) YEAR SALARY BONUS OPTIONS COMPENSATION(1)
------------------ ------ -------- ------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Charles W. Bishop,
Ph.D................... 1998 $150,000 $4,225 -- $2,290
President, and Chief 1997 143,846 2,250 10,000 2,116
Executive Officer 1996 133,847 2,250(2) 140,000 1,966
</TABLE>
- --------
(1)Amounts shown consist of Company contributions to a defined contribution
plan.
(2)Compensation received from Lunar Bonus Program.
AGGREGATED STOCK OPTION EXERCISES IN FISCAL YEAR 1998 AND FISCAL YEAR END
STOCK OPTION VALUES
The following table sets forth information on stock options exercised in
fiscal 1998 and information on unexercised stock options held as of June 30,
1998 by the Company's Chief Executive officer.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
STOCK OPTIONS AT FISCAL THE-MONEY STOCK OPTIONS
YEAR END AT FISCAL YEAR END(2)
SHARES ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles W. Bishop,
Ph.D................... 23,691 $185,441 58,000 92,000 $337,840 $581,760
</TABLE>
- --------
(1) Fair market value of underlying securities at exercise minus the exercise
price (i.e., value before income taxes payable as a result of the
exercise). The annualized value realized was $20,582.
(2) Based upon the closing price of the Common Stock of $8.75 on June 30,
1998, as reported by the Nasdaq Stock Market, minus the exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1998, Dr. Mazess served on the
Compensation Committee of the Board of Directors. Dr. Mazess was President of
the Company since its inception in 1984 through February 1996. In addition,
Dr. Mazess has served as the President and as a director of Lunar since 1980
and is the beneficial owner of approximately 33% of the outstanding common
stock of Lunar. Payments made by the Company to Lunar during fiscal year 1998
aggregated $74,200. In addition, in July 1998, Dr. Mazess purchased 170,000
shares of Common Stock in the Offering at a price of $8.00 per share. See
"Certain Transactions."
During the fiscal year ended June 30, 1998, Dr. Kapoor served on the
Compensation Committee of the Board of Directors. In July 1998, Dr. Kapoor
purchased 100,000 shares of Common Stock in the Offering at a price of $8.00
per share. See "Certain Transactions."
10
<PAGE>
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, 1998, with the cumulative total shareholder return of Standard &
Poor's 500 Stock Index (the "S&P 500") and Standard & Poor's Bio Technology--
Small Cap Index (the "S&P Biotech--Small Cap").
LOGO
<TABLE>
<CAPTION>
05/09/96 06/30/96 06/30/97 06/30/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
S&P 500..................................... $100 $104 $140 $182
S&P Bio Technology--Small Cap............... $100 $ 98 $ 67 $ 58
Bone Care International, Inc................ $100 $111 $221 $298
</TABLE>
The Performance Graph assumes $100 dollars invested on May 9, 1996 in each
of the Company's Common Stock, the S&P 500 Index, and the S&P Biotech--Small
Cap 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.
11
<PAGE>
CERTAIN TRANSACTIONS
RELATIONSHIP WITH LUNAR
On May 8, 1996, Lunar, which then held 97.3% of the issued and outstanding
shares of the Company's 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. As a result of the Distribution, the Company became a separate
publicly owned company.
In connection with the Distribution, the Company and Lunar entered into a
distribution agreement dated as of April 16, 1996 (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.
In addition, the Company and Lunar entered into a tax disaffiliation
agreement dated as of April 16, 1996 which provided for, among other things, 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 cross indemnification by each party for certain tax
liabilities. Prior to the Distribution, Lunar entered into a transition
agreement (the "Transition Agreement") with the Company pursuant to which Dr.
Mazess, Mr. Beckman and other employees of Lunar would perform certain
services and provide certain assistance to the Company. Such services in
fiscal 1998 included legal, treasury, financial, accounting, insurance
administration, employee benefit and other services. As compensation for the
various administrative services provided to the Company pursuant to the
Transition Agreement, the Company paid Lunar fees and reimbursed certain
expenses aggregating $58,200 for the period July 1997 through June 1998. Under
the Transition Agreement, Lunar leased to the Company for a monthly fee of
$2,000 approximately 3,000 square feet in Lunar's principal offices in
Madison, Wisconsin. Lease obligations under the Transition Agreement
terminated upon the Company's relocation to its new facilities during the
first quarter of 1998. Rent payments to Lunar aggregated $16,000 during fiscal
1998. The Transition Agreement runs until May 8, 1999; however, the Company
may terminate the Transition Agreement prior to the completion of the term by
giving Lunar 90 days written notice.
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 33% of the outstanding common stock of
Lunar. Mr. Beckman, a director of the Company, is also Vice President of
Finance of Lunar.
SALE OF COMMON STOCK
On July 24, 1998, the Company completed a directed public offering of
1,326,000 shares of Common Stock at a price of $8.00 per share. The price per
share was approximately 5% below the average trading price of the previous 30
days. The Company sold 170,000, 100,000, 6,000, 100,000 and 250,000 of the
shares in the offering, respectively, to Dr. Mazess and Dr. Kapoor, directors
of the Company, Dr. Bishop, President, Chief Executive Officer and a director
of the Company, T. Rowe Price Associates, Inc. and Dresdner RCM Global
Investors LLC. In addition, the Company sold 600,000 shares in the offering to
the
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State of Wisconsin Investment Board. See "Securities Beneficially Owned By
Principal Shareholders, Directors and Executive Officers."
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy materials for
the 1999 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 One Science Court, Madison, Wisconsin 53711 by June 15,
1999.
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 1998 Annual Meeting may consider shareholder
proposals or nominations brought by a shareholder of record on October 2, 1998,
who is entitled to vote at the annual meeting and who has given the Company's
Assistant 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 1998 Annual Meeting must have been received by the Assistant
Secretary on or after August 15, 1998, and on or prior to September 14, 1998.
The Company did not receive notice of any shareholder proposal or nomination
relating to the 1998 Annual Meeting. The 1999 Annual Meeting is expected to be
held on November 12, 1999. Accordingly, a shareholder proposal or nomination
intended to be brought before the 1999 Annual Meeting must be received by the
Assistant Secretary on or after August 14, 1999, and on or prior to September
13, 1999.
FINANCIAL STATEMENTS
A copy of the Annual Report on Form 10-K of the Company filed with the
Securities and Exchange Commission, containing audited consolidated financial
statements for the fiscal year ended June 30, 1998, is enclosed herewith.
By Order of the Board of
Directors,
LOGO
Charles W. Bishop, Ph.D.
President and Chief Executive
Officer
Madison, Wisconsin
October 12, 1998
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, 1998, (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
2, 1998, ON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON DIRECTED TO: BONE CARE
INTERNATIONAL, INC., ONE SCIENCE COURT, MADISON, WISCONSIN 53711, ATTENTION:
DALE W. GUTMAN AT (608) 236-2590.
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(Label Here)
Proxy for
Bone Care International, Inc.
Annual Meeting of Shareholders
November 13, 1998
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
THE COMPANY.
The undersigned hereby appoints CHARLES W. BISHOP, Ph.D., 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., One Science Court, Madison, Wisconsin, on
Friday, November 13, 1998, 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.
Richard B. Mazess, Ph.D. John Kapoor, Ph.D.
(2) Ratify selection of KPMG Peat Marwick LLP as auditors of the Company for
the fiscal year ending June 30, 1999.
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 ITEM 2 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 , 1998
--------------------
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Co-Owner Sign Here Shareholder Sign Here
