SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |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
|_| Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Chronimed 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| $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a06(i)(1), or
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A
|_| $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
[LOGO] CHRONIMED INC.
13911 RIDGEDALE DRIVE
MINNETONKA, MINNESOTA 55305
--------------------
To Our Shareholders:
You are cordially invited to attend the 1996 Annual Meeting of Shareholders,
which will be held on Wednesday, November 13, 1996, at 3:30 p.m. Central
Standard Time, at the Minneapolis Athletic Club, 615 Second Avenue South,
Minneapolis, Minnesota.
At the meeting, we will be reporting to you on Chronimed's current operations.
Shareholders will elect directors of the Company and transact such other items
of business as are listed in the Notice of Annual Meeting and more fully
described in the Proxy Statement. The Board of Directors and management hope
that you will be able to attend the meeting in person.
The formal Notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted at the meeting, regardless
of the size of your holdings. Accordingly, please mark, sign, and date the
enclosed proxy and return it promptly in the enclosed envelope to ensure that
your shares will be represented. If you do attend the Annual Meeting, you may,
of course, withdraw your proxy should you wish to vote in person.
Sincerely yours,
/s/ Maurice R. Taylor
Maurice R. Taylor, II
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
October 14, 1996
CHRONIMED INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 13, 1996
TO THE SHAREHOLDERS OF CHRONIMED INC.:
Notice is hereby given to the holders of common shares of Chronimed Inc.
that the Annual Meeting of Shareholders of the Company will be held at the
Minneapolis Athletic Club, 615 Second Avenue South, Minneapolis, Minnesota, on
Wednesday, November 13, 1996, at 3:30 p.m. Central Standard Time, or at any
adjournments thereof, to consider and act upon the following matters:
1. To elect six directors to serve for a term of one year.
2. To approve the Chronimed Inc. 1997 Stock Option Plan.
3. To ratify the appointment of Ernst & Young LLP as independent
auditors for the current fiscal year.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on October 7, 1996,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the meeting or any adjournments thereof.
YOU ARE CORDIALLY INVITED TO ATTEND THE MEETING. EVEN IF YOU PLAN TO
ATTEND THE MEETING, WE URGE YOU TO SIGN, DATE, AND RETURN THE PROXY AT ONCE IN
THE ENCLOSED ENVELOPE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Norman A. Cocke
Norman A. Cocke
SENIOR VICE PRESIDENT, CHIEF FINANCIAL
OFFICER AND SECRETARY
October 14, 1996
CHRONIMED INC.
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 13, 1996
----------------------------
PROXY STATEMENT
----------------------------
GENERAL
The Annual Meeting of Shareholders of Chronimed Inc. ("Company") will
be held on Wednesday, November 13, 1996, at 3:30 p.m., Central Standard Time, at
the Minneapolis Athletic Club, 615 Second Avenue South, Minneapolis, Minnesota,
for the purposes set forth in the Notice of Annual Meeting of Shareholders. This
Proxy Statement, accompanying form of proxy, and Chronimed annual report are
first being mailed to shareholders on or about October 14, 1996.
The only matters the Board of Directors knows will be presented are
those stated in Items 1, 2 and 3 of the notice. THE BOARD OF DIRECTORS
RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF ITEMS 1, 2 AND 3. Should any other
matter properly come before the meeting, it is intended that the persons named
in the enclosed proxy will have authority to vote such proxy in accordance with
their judgment on such matter.
OUTSTANDING SHARES AND VOTING RIGHTS
The enclosed proxy is solicited on behalf of the Board of Directors for
use at the annual meeting. Such solicitation is being made by mail and may also
be made by directors, officers, and regular employees of the Company personally
or by telephone. Any proxy given pursuant to such solicitation may be revoked by
the shareholder at any time prior to the voting thereof by so notifying the
Company in writing or by appearing in person at the meeting. Subject to any such
revocation, all shares represented by properly executed proxies that are
received prior to the meeting will be voted in accordance with the directions on
the proxy. If no direction is made, the proxy will be voted (i) FOR the Board of
Directors' nominees named in this Proxy Statement, (ii) FOR the approval of the
1997 Stock Option Plan, and (iii) FOR ratification of the appointment of Ernst &
Young LLP as the independent auditors of the Company for the current fiscal
year. So far as the management of the Company is aware, no matters other than
those described in this Proxy Statement will be acted upon at the Annual
Meeting.
Each shareholder will be entitled to cast one vote in person or by
proxy for each share of Common Stock held by the shareholder. Only shareholders
of record at the close of business on October 7, 1996, will be entitled to vote
at the meeting. Common Stock, $.01 par value per share, of which there were
12,544,443 shares outstanding on the record date, constitutes the only class of
outstanding voting securities issued by the Company. Each share is entitled to
cast one vote on each proposal before the meeting.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspectors appointed for the meeting and will
determine whether or not a quorum is present. The election inspectors will treat
abstentions as shares that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes of determining
the approval of any particular matter submitted to the shareholders for a vote.
If a broker indicates on the form of proxy that the broker does not have
discretionary authority as to certain shares to vote on a particular matter,
those shares will be considered to be present for the purpose of determining
whether a quorum is present, but will not be considered as present and entitled
to vote with respect to that particular matter.
All of the expenses involved in preparing, assembling, and mailing this
Proxy Statement and the material enclosed herewith will be paid by the Company.
The Company may reimburse banks, brokerage firms, and other custodians,
nominees, and fiduciaries for reasonable expenses incurred by them in sending
proxy material to beneficial owners of stock.
ELECTION OF DIRECTORS
At the meeting, the Board of Directors of the Company is to be elected
to hold office until the 1997 Annual Meeting or until successors are elected and
have qualified. The Bylaws of the Company provide that the number of directors
of the Company shall be fixed from time to time by the shareholders, subject to
increase by the Board of Directors. The Board of Directors has nominated six
persons for election to the Board. Each of the nominees is currently a director
of the Company whose current term expires at the 1996 Annual Meeting. Each
person nominated has agreed to serve if elected, and the Company knows of no
reason why any of the listed nominees would be unavailable to serve.
Shares represented by proxy will be voted, if authority to do so is not
withheld, for the election of the six nominees named below, unless one or more
of such nominees should become unavailable for service by reason of death or
other unexpected occurrence, in which event such shares may be voted for the
election of such substitute nominee as the Board of Directors may propose. The
favorable vote of a majority of the shares of Common Stock present or
represented and entitled to vote at the meeting is necessary to elect each
director nominee. For this purpose, a shareholder (including a broker) who does
not give authority to a proxy to vote, or withholds authority to vote, on the
election of directors shall not be considered present and entitled to vote on
the election of directors.
Set forth below is information regarding the nominees, including
information furnished by them as to their principal occupations for the last
five years, certain other directorships held by them, and their ages as of the
date hereof. The following table also sets forth the Common Stock ownership of
each of the Company's directors. Unless otherwise indicated, all persons have
sole or joint with spouse voting and investment power with respect to all shares
of Common Stock shown as beneficially owned by them. Nominees may be contacted
at the headquarters of the Company.
<TABLE>
<CAPTION>
Number of
Shares of Common
Stock Owned
Name and Beneficially as of Percent
Positions with the Company Age Principal Occupation August 31, 1996(1) of Class
-------------------------- --- -------------------- ------------------ --------
<S> <C> <C> <C> <C>
Maurice R. Taylor, II 50 Mr. Taylor, a co-founder of the Company, 906,184 6.9%
CHAIRMAN OF THE BOARD has served since 1985 as President, Chief
OF DIRECTORS, PRESIDENT Executive Officer and a director of the
AND CHIEF EXECUTIVE Company and since June 1994 as Chairman.
OFFICER Prior to Chronimed, Mr. Taylor held
various management positions in companies
whose principal activities were
manufacturing, distribution and
international trade. Mr. Taylor is a
director of Orphan Medical, Inc., a
pharmaceutical development company and
formerly a subsidiary of the Company. He
is a director of the Whittier/Scripps
Institute, a non-profit organization
dedicated to research, education and
patient care in the field of diabetes. He
is also a director of the Minnesota
Zoological Garden, a public-private
partnership established by the Minnesota
legislature.
Henry F. Blissenbach, 54 Dr. Blissenbach became a director of the 15,000 *
Pharm.D. Company in September 1995. Since 1992,
DIRECTOR he has served as President of
Diversified Pharmaceutical Services,
Inc. (DPS), a subsidiary of SmithKline
Beecham Corp. DPS is a pharmacy benefit
management firm. Prior to 1992, he
served as DPS's Vice President for
Pharmacy Programs for United Health Care
Corporation. Dr. Blissenbach is a
Clinical Assistant Professor at the
College of Pharmacy at the University of
Minnesota. Dr. Blissenbach also serves
as a director of Ligand Pharmaceuticals
Inc., a biomedical development company.
John Howell Bullion 44 Mr. Bullion is a co-founder of the Company 228,125 1.7%
DIRECTOR and has served as a director since 1985.
He has been Chief Executive Officer and a
director of Orphan Medical, Inc. since its
formation in June 1994. Since September
1993, Mr. Bullion has also served as
President of Bluestem Partners, Ltd.,
which invests in and provides management
services to developing businesses. From
March 1992 to July 1993, he was President
of Dahl & Associates, Inc., an
environmental soil and ground water
remediation company. Prior to joining Dahl
& Associates, he served for one year as
President of Concurrent Knowledge Systems,
Inc., a software development company.
Donnell D. Etzwiler, M.D. 69 Dr. Etzwiler has served as a director of 116,350 *
DIRECTOR the Company since its inception in 1985.
He founded in 1967, and currently serves
as the President of, the International
Diabetes Center, which was a co-founding
organization of the Company. The
International Diabetes Center is a
division of the Institute of Research
Education (IRE). IRE is a division of
Health Services Minnesota (HSM). Dr.
Etzwiler is also a director of HSM. Since
1969, he has served as a Clinical
Professor of the Department of Pediatrics
at the University of Minnesota School of
Medicine.
Charles V. Owens, Jr. 69 Mr. Owens has served as a director of 48,950 *
DIRECTOR the Company since December 1991. Since
1988, Mr. Owens has served as a
consultant to several medical device and
diagnostic firms in the United States
and Japan. From 1985 to 1988, he was
Chief Executive Officer of Genesis Labs,
Inc., a diagnostics manufacturing
company. Before his employment with
Genesis Labs, Inc., Mr. Owens was an
executive officer with various medical
device companies, including Miles
Laboratories, Inc. Mr. Owens is a
director of St. Jude Medical, Inc., a
medical device company.
Lawrence C. Weaver, Ph.D., 72 Dr. Weaver has served as a director of 105,150 *
D. Sc. (Hon.) the Company since December 1991. He has
DIRECTOR been Dean and Professor Emeritus at the
University of Minnesota since 1989. From
1966 through 1984, he served as Dean of
the College of Pharmacy at the
University of Minnesota. From 1984
through 1989, he was Vice President of
the Pharmaceutical Manufacturers
Association. Dr. Weaver also currently
serves as a director of Orphan Medical,
Inc.
</TABLE>
- -----------------
*Less than 1%
(1) Includes the following options exercisable within 60 days to acquire
shares of Common Stock: Mr. Taylor, 289,300; Mr. Bullion, 75,000; Dr.
Etzwiler, 45,000; Mr. Owens, 15,000; Dr. Weaver, 45,000; and Dr.
Blissenbach, 15,000. For each of Messrs. Taylor, Bullion and Owens and
Drs. Etzwiler, Weaver and Blissenbach, these options exercisable within
60 days include 15,000 shares under the 1994 Stock Option Plan for
Directors.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Messrs. Blissenbach, Bullion, Owens and Dr. Weaver are the current
members of the Audit Committee of the Board of Directors. During fiscal 1996,
this Committee met five times. The Audit Committee represents the Board in
discharging its responsibilities relating to the accounting, reporting, and
financial control practices of the Company. The Committee has general
responsibility for review with management of the financial controls, accounting,
and audit and reporting activities of the Company. The Committee annually
reviews the qualifications and objectivity of the Company's independent
auditors, makes recommendations to the Board as to their selection, reviews the
scope, fees, and results of their audit, and reviews their management comment
letters.
Mr. Owens and Drs. Etzwiler and Weaver are the current members of the
Compensation Committee, which oversees compensation for directors, officers and
key employees of the Company. During fiscal 1996, the Compensation Committee met
four times.
During fiscal 1996, the Board of Directors met seven times, including
one telephone board meeting. Each director attended 75% or more of the meetings
of the Board of Directors and its committees on which he served during the times
of his appointment. The Board of Directors does not have a standing nominating
committee.
DIRECTOR COMPENSATION
As of November 1995, directors who were not employees of the Company
received an annual retainer of $18,000 plus fees of $800 for each board meeting
attended in person; $400 for each telephone board meeting attended; and $500 for
each committee meeting attended whether in person or by telephone. For the first
four months of fiscal 1996, such directors received fees of $600 for each board
meeting attended in person and $300 for each telephone board meeting and any
committee meeting attended. Committee chairmen received an additional $200
annual stipend. In fiscal 1996, directors were also reimbursed for out-of-pocket
expenses incurred in attending Board of Directors and committee meetings.
Pursuant to the Company's 1994 Stock Option Plan for Directors, each
director automatically receives an option to purchase 30,000 shares on the date
of the director's initial election to the Board of Directors. Each option has an
exercise price equal to the fair market value of the Company's Common Stock on
the date of grant. The option vests on the seventh anniversary of the date of
grant unless vesting is accelerated. The option will vest as to 5,000 shares if
the Company's share price becomes 20 percent greater than the exercise price on
or before the third anniversary of the grant. The option will vest as to an
additional 10,000 shares if the price per share becomes 60 percent greater than
the exercise price on or before the fourth anniversary of the grant. The option
will vest as to the final 15,000 shares if the price per share becomes 100
percent greater than the exercise price on or before the fifth anniversary of
the grant. Acceleration requires the maintenance of share-price benchmarks for
at least five trading days during any consecutive 30-day period. Further, these
options may become immediately exercisable upon certain change-in-control events
as described in the Company's 1994 Stock Option Plan for Directors.
Based on the above-noted terms and the price of the Company's Common
Stock during fiscal 1996, 15,000 shares of the total 30,000 shares have vested
for each of the participating directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors of the Company
consists of three non-employee directors. Mr. Owens is the committee chair, and
Drs. Etzwiler and Weaver are the other members. Mr. Owens and Dr. Weaver also
act as a stock option subcommittee of the Board.
Mr. Taylor, Mr. Bullion, and Dr. Weaver, in addition to being directors
of the Company, are also directors of Orphan Medical, Inc. (OMI). The Company
incorporated OMI in June 1994 to engage in the development of pharmaceutical
products. The Company subsequently declared a dividend of all of the OMI Common
Stock to Company shareholders. Mr. Taylor serves on the Compensation Committee
of the Board of OMI. Mr. Taylor and Mr. Bullion are the Chief Executive Officers
of the Company and OMI, respectively. William B. Adams, Chair of OMI, was Chair
of the Company from 1985 to June 1994, and Bertram A. Spilker, Ph.D., M.D.,
President of OMI, was Vice President of the Company from January 1993 to July
1994. See "Certain Transactions" for a description of continuing business
arrangements between the Company and OMI.
EXECUTIVE COMPENSATION
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
COMPENSATION COMMITTEE CHARTER. The purpose of the Compensation
Committee of the Board of Directors is to oversee compensation of directors,
officers, and key employees of the Company. The Committee's policy is to insure
that compensation programs contribute directly to the success of the Company,
including enhanced share value. The Company's Compensation Committee comprises
three outside directors.
EXECUTIVE COMPENSATION POLICIES AND PROGRAMS. The Company's executive
compensation programs are designed to attract and retain highly qualified
executives and to motivate them to maximize shareholder investment by achieving
strategic Company goals. There are three basic components to the Company's
executive compensation program: base pay, annual incentive bonus, and long-term,
equity-based incentive compensation in the form of stock options. Each component
is established in light of Company and individual performance, compensation
levels at comparable companies, equity among employees, and cost effectiveness.
In addition, employees are eligible to participate in the Company's 401(k) plan
and certain insurance plans. With the exception of Maurice R. Taylor, II,
Chairman of the Board of Directors, President and Chief Executive Officer of the
Company, employees are also eligible to participate in the Company's Employee
Stock Purchase Plan.
BASE PAY. Base pay is designed to be competitive as compared
to salary levels for equivalent positions at comparable companies. An
executive's actual salary within this competitive framework will depend
on the individual's performance, responsibilities, experience,
leadership, and potential future contribution. Base pay is determined
in a way that allows a significant percentage of compensation to be
earned through incentive programs. The more senior the executive, the
larger the percentage of compensation payable through incentive
programs.
ANNUAL INCENTIVE BONUS. In addition to base pay, each
executive is eligible to receive an annual cash bonus based on a mix of
the Company's and the executive's performance. Performance targets are
intended to motivate the Company's executives by providing bonus
payments for the achievement of specific financial goals within the
Company's business plan. Bonuses were paid to all named executive
officers with respect to fiscal 1996 performance.
LONG-TERM, EQUITY-BASED INCENTIVE COMPENSATION. The long-term,
equity-based compensation program is tied directly to shareholder
return. Long-term incentive compensation consists of stock options that
generally do not fully vest until after five years and are exercisable
only if an executive is then an employee of the Company. Stock options
are awarded with an exercise price equal to the fair market value of
the Common Stock on the date of grant. Accordingly, an executive is
rewarded only if Company shareholders receive the benefit of
appreciation in the price of the Common Stock. Because long-term
options vest over time, the Company periodically grants new options to
provide continuing incentives for future performance. The size of
periodic option grants is a function of the breadth of an executive's
scope of accountability, recent performance as determined by the
Committee, and other factors.
SAVINGS AND INVESTMENT PLAN; BENEFITS. The Company maintains a
401(k) Savings Plan ("Savings Plan"), which is funded by elective
salary deferrals by employees. The Savings Plan covers executive
officers and substantially all employees meeting minimum eligibility
requirements. The Savings Plan requires that the Company match up to
40% of the first 5% of an employee's pay and provides for additional
discretionary contributions by the Company. Through June 28, 1996, the
Company had not made any additional discretionary contributions to the
Savings Plan. In addition, the Company provides medical and other
miscellaneous benefits, including a supplemental long-term disability
insurance program, to executive officers. These benefits are generally
available to Company employees with the exception of the supplemental
long-term disability insurance.
ANNUAL REVIEWS. Each year the Committee reviews its executive
compensation policies and programs and determines what changes, if any, are
appropriate for the following year. In addition, the Committee reviews the
performance of the Chief Executive Officer and, with the assistance of the Chief
Executive Officer, the individual performance of the other executive officers.
The Committee makes recommendations to the Board of Directors for final approval
of all material compensation matters.
CHIEF EXECUTIVE OFFICER. Pursuant to the terms of Mr. Taylor's
three-year employment agreement with the Company, dated April 22, 1996, he
received a base salary of $260,000 in fiscal 1996 and is entitled to a base
salary of $290,000 in fiscal 1997. Base salaries were determined at the time of
entering into the employment agreement, when the Committee considered
compensation programs of comparable companies, Mr. Taylor's individual
performance and salary history, and the Company's historical and planned
performance. For fiscal 1996, Mr. Taylor earned a bonus of $200,000 in
recognition of his and Chronimed's performance in excess of criteria established
by the Compensation Committee of the Board of Directors at the beginning of the
year. In fiscal 1996, Mr. Taylor was granted options to purchase up to 84,000
shares of Common Stock at $12.375 per share, all of which were granted under the
Company's 1994 Stock Option Plan. These options are designed to encourage Mr.
Taylor to enhance the future value of the Company and, hence, the price of the
Common Stock and the investment of shareholders. Deferred vesting also creates
an incentive for Mr. Taylor to remain with the Company. The Committee noted that
since fiscal 1992, as reflected on the shareholder return graph in this proxy
statement, the Company Common Stock has significantly outperformed both the
NASDAQ Total Return Index and NASDAQ Health Services Stock Index, which the
Committee believes reflects in large part the contributions of the Chief
Executive Officer on behalf of the Company.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION. Section 162(m) of the
Internal Revenue Code of 1986, as amended, should not affect the deductibility
of compensation paid to the Company's executive officers for the foreseeable
future. The majority of the options available for grant under the Company's
stock option plans will comply with Section 162(m), so that compensation
resulting from these stock options will not be counted toward the $1,000,000
limit on deductible compensation under Section 162(m). The Compensation
Committee has not formulated any policy with respect to qualifying other types
of compensation for deductibility under Section 162(m).
Members of the Compensation Committee: Charles V. Owens, Jr., Chairman
Donnell D. Etzwiler, M.D.
Lawrence C. Weaver, Ph.D., D.Sc. (Hon.)
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for the Company's
fiscal year ended June 28, 1996, and for fiscal 1995 and 1994, to the Company's
Chairman of the Board of Directors, President and Chief Executive Officer and
the four other most highly paid executive officers (collectively, "named
executive officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation Awards
Annual Compensation Securities Other
--------------------- Underlying All Other
Name and Principal Position Fiscal Year Salary ($) Bonus($)(1) Options (#) Compensation(7)
--------------------------- ----------- ---------------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Maurice R. Taylor, II(2) 1996 $260,000 $200,000 84,000 $4,393
CHAIRMAN OF THE BOARD, PRESIDENT AND 1995 210,000 0 250,000 0
CHIEF EXECUTIVE OFFICER. . . . . . . 1994 162,500 34,000 0 0
Dennis C. Burton(3) 1996 135,000 59,500 19,000 2,037
EXECUTIVE VICE PRESIDENT . . . . . . 1995 125,000 7,100 75,000 0
1994 105,000 13,125 0 0
Norman A. Cocke(4) 1996 155,000 90,000 25,000 3,529
SENIOR VICE PRESIDENT, CHIEF 1995 49,900 14,800 110,000 0
FINANCIAL OFFICER AND SECRETARY . .
Steven A. Crees(5) 1996 130,000 100,000 22,000 1,975
SENIOR VICE PRESIDENT . . . . . . . 1995 115,000 7,000 50,000 0
1994 85,000 10,625 0 0
Larry E. Niederkohr(6) 1996 110,000 55,000 17,500 2,123
VICE PRESIDENT . . . . . . . . . . . 1995 95,000 4,800 75,000 0
</TABLE>
- -----------------------------
(1) Bonus amounts were earned for the fiscal year shown but paid in the
next fiscal year.
(2) Mr. Taylor received no additional cash compensation for service as a
director.
(3) Mr. Burton was promoted to Executive Vice President in July 1994.
(4) Mr. Cocke was hired as Senior Vice President in February 1995.
(5) Mr. Crees was promoted to Senior Vice President in July 1994.
(6) Mr. Niederkohr was hired June 1994 and became Vice President in
September 1994.
(7) All other compensation consists of Company 401(k) contribution matches
and long-term disability insurance paid on behalf of the officers.
STOCK OPTIONS
The following tables summarize stock option grants and exercises during
fiscal 1996 to or by the named executive officers and the value of all options
held by the named executive officers at June 28, 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1996
Individual Grants
------------------------------------------------------
Number of
Securities Percent of
Underlying Total Options Exercise Potential Realizable Value at
Options Granted to Price Expiration Assumed Annual Rates of Stock
Name Granted(1) Employees ($/Share) Date Appreciation For Option Term
- ---- ---------- --------- --------- ---------- -----------------------------
5% 10%
----- -----
<S> <C> <C> <C> <C> <C> <C>
Maurice R. Taylor, II. . . . . 84,000 29% $12.375 7/03/02 $423,181 $986,191
Dennis C. Burton . . . . . . . 19,000 7% 12.375 7/03/02 95,719 223,067
Norman A. Cocke . . . . . . . 25,000 9% 12.375 7/03/02 125,947 293,509
Steven A. Crees . . . . . . . 22,000 8% 12.375 7/03/02 110,833 258,288
Larry E. Niederkohr. . . . . . 17,500 6% 12.375 7/03/02 88,163 205,457
</TABLE>
- -----------------------------
(1) All options were granted under the Company's 1994 Stock Option Plan.
These options vested with respect to 20% of such shares on July 2,
1996, and become exercisable with respect to an additional 20% of the
shares on each of July 2, 1997, 1998, 1999, and 2000. The options may
become immediately exercisable upon certain change-in-control events as
described in the Company's 1994 Stock Option Plan.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1996
AND OPTION VALUES AT JUNE 28, 1996
Number of
Securities
Underlying
Unexercised Options Value of Unexercised
at June 28, In-The-Money Options(2)
1996 at June 28, 1996
--------------------- --------------------------
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($)(1) Unexercisable(#) Unexercisable($)
- ---- --------------- -------------- --------------------- --------------------------
<S> <C> <C> <C> <C>
Maurice R. Taylor, II . . . . . . 227,500 3,219,737 272,500/209,000 2,989,901/1,238,375
Dennis C. Burton . . . . . . . . . 24,125 447,309 25,800/86,200 284,175/772,200
Norman A. Cocke . . . . . . . . . 11,209 32,226 26,791/97,000 187,537/654,000
Steven A. Crees . . . . . . . . . 19,500 355,062 20,800/69,200 242,700/492,300
Larry E. Niederkohr. . . . . . . . 3,600 31,050 11,400/77,500 75,725/492,500
</TABLE>
- -----------------------------
(1) The value realized was determined by multiplying the number of shares
exercised by the difference between the exercise price per share and
the closing price on the exercise date.
(2) The value of in-the-money options was determined by multiplying the
number of shares subject to such options by the difference between the
exercise price per share and $18.375, the closing price per share on
June 28, 1996.
EMPLOYMENT AGREEMENT
The Company has an employment agreement with Maurice R. Taylor, II,
under which he received a base salary of $260,000 in fiscal 1996 and is entitled
to receive a base salary of $290,000 in fiscal 1997. Base salary for fiscal 1998
and 1999 will be based on corporation and employee performance prior to each
year. Mr. Taylor's employment agreement expires on June 30, 1999, and includes a
non-competition provision for up to two years following termination of
employment. Upon a termination without cause, Mr. Taylor is entitled to receive
(i) base salary payments for a period of twelve months after such termination at
the rate in effect prior to such termination and (ii) a pro rata share of the
bonus that would have been payable for the bonus period that includes the
termination date and (iii) a pro rata share of other benefits as specified in
the contract.
The Company's stock option plans generally provide that upon the
occurrence of certain "acceleration events", the options will become fully
vested. An acceleration event occurs (i) when a person, or group of persons
acting together, becomes the beneficial owner of 20 percent or more of the
Company's outstanding shares; (ii) when a change in a majority of the Board
occurs without the approval of at least 60% of the prior Board; or (iii) upon
the approval by shareholders of a sale of all or substantially all the assets or
of a liquidation or dissolution of the Company.
SHAREHOLDER RETURN COMPARISON
Shown below is a line graph comparing the yearly dollar change in the
cumulative total shareholder return on the Company's Common Stock as against the
cumulative total return of the NASDAQ Total Return Index (U.S. Companies) and
the NASDAQ Health Services Stock Index for the period March 20, 1992, the date
of the Company's initial public offering, through June 28, 1996. The graph and
table assume the investment of $100 on March 20, 1992, in the Company's Common
Stock, the NASDAQ Total Return Index, and the NASDAQ Health Services Stock
Index.
COMPARISON OF CUMULATIVE RETURN
[PLOT POINT GRAPH]
<TABLE>
<CAPTION>
March 20, June 30, June 30, June 30, June 30 June 28,
1992 1992 1993 1994 1995 1996
--------- ----------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
CHRONIMED(1). . . . . . . . . . . . . . . . 100.0 72.4 106.9 240.5 266.4 395.6
NASDAQ Total Return Index . . . . . . . . . 100.0 90.0 113.2 114.3 152.6 195.9
NASDAQ Health Services Stock Index . . . 100.0 85.2 98.4 111.7 121.7 185.8
</TABLE>
- -----------------------------
(1) Share prices have been adjusted to reflect a three-for-two stock split
in the form of a stock dividend effective as of February 21, 1994.
SHAREHOLDINGS OF MANAGEMENT
The following table shows information concerning each person who to the
knowledge of the Company was the beneficial owner of more than 5% of the
Company's Common Stock and the number of shares of Common Stock beneficially
owned by the Company's named executive officers and directors and executive
officers as a group, as of August 31, 1996. All persons have sole or joint with
spouse voting and investment power with respect to all shares shown as
beneficially owned by them.
<TABLE>
<CAPTION>
Amount and Nature Percent
Name of Beneficial Owner of Beneficial Ownership(1) of Class
------------------------ -------------------------- --------
<S> <C> <C>
Maurice R. Taylor, II . . . . . . . . . . 906,184 6.9%
Dennis C. Burton . . . . . . . . . . . . 64,100 *
Norman A. Cocke . . . . . . . . . . . . . 73,000 *
Steven A. Crees . . . . . . . . . . . . . 61,805 *
Larry E. Niederkohr . . . . . . . . . . . 26,519 *
All directors and executive officers 1,645,183 12.5%
as a group (11 persons) . . . . . . . .
</TABLE>
- -----------------------------
* Less than 1%
(1) Includes the following options exercisable within 60 days to acquire
shares of Common Stock: Mr. Taylor, 289,300; Mr. Burton, 44,600; Mr.
Cocke, 47,791; Mr. Crees, 35,200; Mr. Niederkohr, 26,300; and all
directors and executive officers as a group, 638,191.
SECTION 16(a) REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and certain shareholders to file reports of
ownership and changes in ownership of the Company's Common Stock with the
Securities and Exchange Commission. To the Company's knowledge, based on a
review of the copies of such reports furnished to the Company and written
representations that no other reports were required, during fiscal 1996, all
Section 16(a) filing requirements were met, except for the following: (1) a
report concerning the grant of stock options to Dr. Henry F. Blissenbach, a
director, was filed late because of an administrative oversight; (2) an initial
report for Mr. Patrick L. Taffe, a new officer as of July 8, 1996, was filed
late because of an administrative oversight.
CERTAIN TRANSACTIONS
ORPHAN MEDICAL, INC.
The Company incorporated Orphan Medical, Inc. (OMI) in June 1994 and on
July 2, 1994, declared a dividend of all of the OMI Common Stock to Company
shareholders. Maurice R. Taylor, II, John Howell Bullion, and Dr. Lawrence C.
Weaver, directors of the Company, are also directors of OMI. Mr. Taylor and Mr.
Bullion are the Chief Executive Officers of the Company and OMI, respectively.
The following is a brief summary of the material continuing arrangements between
the Company and OMI. Although the Company believes these arrangements with OMI
are on commercially reasonable terms, they were not the product of arms-length
negotiations.
In June 1994, the Company initially retained the rights to market and
distribute in the United States and its territories those products being
developed by OMI at the time of the spin-off. The products under development are
for "orphan" drug populations where the population in the United States expected
to benefit from the drug is limited. Chronimed has determined that two of the
products for which it had initial rights, Elliotts B(TM) solution and
Antizol-Vet(TM), the first of which has received FDA approval and the second of
which has an application for FDA approval, can be more effectively distributed
by a hospital distribution company and a distributor of veterinary products,
respectively. OMI has, therefore, agreed to pay Chronimed a royalty in
consideration for releasing the Company from the provision in the Marketing and
Distribution Agreement which had granted Chronimed exclusive domestic
distribution rights with respect to these two products. In addition, Chronimed
and OMI are currently discussing Chronimed's distribution rights and obligations
relating to Cystadane(TM), and may further amend the Marketing and Distribution
Agreement with respect to this product in order to provide for its optimal
distribution. Further, Chronimed and OMI will continue to evaluate the
distribution requirements for other products, including remaining products for
which Chronimed has exclusive domestic distribution rights.
Pursuant to the Marketing and Distribution Agreement, a Committee
consisting of four individuals, two appointed by OMI and two appointed by the
Company, has been established to administer the marketing agreement and to
establish the prices at which the Company will purchase the products from OMI.
Each party has the right to terminate the marketing agreement if the other party
fails to perform or observe any material obligation under the agreement and such
failure continues unremedied for a period of 60 days after written notice. In
addition, each party may terminate the marketing agreement if the other party
indicates insolvency. If the Company terminated the agreement because of an
insolvency of OMI, the Company would have the right to purchase OMI's rights to
all of the initial products that the Company is then distributing at their then
fair market value. If the Company makes such a purchase, it can apply against
the purchase price the amount of damages, if any, to which the Company is
entitled under the marketing agreement.
Under the marketing agreement, OMI has the right to designate one
individual to hold a seat on the Company's Board of Directors, or alternatively,
to have a representative present at all Company Board meetings. The Company has
the right to designate two directors on OMI's Board or, alternatively, the right
to have a representative attend all of OMI's Board meetings. So long as he is
elected a director of the respective company, Mr. Taylor and Dr. Weaver will
serve as the Company's designees on the OMI Board, and Mr. Bullion will serve as
OMI's designee on the Chronimed Board.
In order to secure its obligations under the marketing agreement, OMI
has granted to Chronimed a security interest in OMI's rights to the initial
products, including any proprietary rights relating thereto, such as patents,
orphan drug designations and trademarks; OMI's rights under any licensing
agreements relating to the initial products; and OMI's rights under any related
manufacturing agreements. The security interest does not cover OMI's accounts
receivable, inventory, equipment, or other property. Under the security
agreement, the Company has agreed that it will subordinate its security interest
in the initial products to any persons providing financing to OMI, upon such
terms as these persons may require.
DIVERSIFIED PHARMACEUTICAL SERVICES, INC.
The Company currently has a non-exclusive contract with Diversified
Pharmaceutical Services, Inc. (DPS) to provide oral and self-injectable
pharmaceuticals to patients who have had organ transplants or who have certain
other chronic conditions. Henry F. Blissenbach, Pharm.D., a director of the
Company, is President of DPS.
APPROVAL OF THE 1997 STOCK OPTION PLAN
BACKGROUND AND PURPOSE
Because of the limited number of shares remaining under the Company's
current option plans for Company employees and consultants, the Board of
Directors adopted on July 1, 1996, subject to shareholder approval, the 1997
Stock Option Plan ("1997 Plan"). The purpose of the 1997 Plan is to provide a
means to attract and retain competent personnel and to provide to participating
officers, directors, employees and consultants long-term incentive for high
levels of performance and for unusual efforts to improve the financial
performance of the Company and its subsidiaries. The Board believes that it is
in the Company's and its shareholders' best interest to provide to such persons,
through the granting of stock options, an opportunity to participate in the
appreciation and value of the Common Stock of the Company. The 1997 Plan
provides for the grant of either incentive or nonstatutory options. The
following description of the primary features of the 1997 Plan is qualified in
all respects by reference to the full text of the 1997 Plan.
ELIGIBILITY AND ADMINISTRATION
Employees and consultants of the Company and its subsidiaries,
including officers and directors, are eligible to receive options granted under
the 1997 Plan. The 1997 Plan authorizes the granting of options to purchase up
to 1,000,000 shares of Common Stock. The shares subject to the options will
generally be made available from authorized but unissued shares.
The 1997 Plan will be administered by a committee ("Committee") of the
Board of Directors which consists of outside directors within the meaning of
Section 162(m) of the Internal Revenue Code of 1986 ("Code") and non-employee
directors within the meaning of Rule 16b-3 of the Securities Exchange Act of
1934, as amended. The Committee has full authority to award options under the
1997 Plan, to establish the terms of the option agreements, and to take all
other action deemed appropriate for administration of the Plan.
INCENTIVE AND NONSTATUTORY OPTIONS
The 1997 Plan provides both for incentive stock options ("Incentive
Options") specifically tailored to the provisions of the Code and for options
not qualifying as Incentive Options ("Nonstatutory Options"). Options are
designated as Incentive Options or Nonstatutory Options by the Committee when
granted. The use of the term "option" herein shall mean both Incentive Options
and Nonstatutory Options.
To obtain certain tax benefits, the 1997 Plan establishes special rules
for Incentive Options, including the requirement that such Incentive Options may
be granted to an individual only for shares having a maximum aggregate fair
market value not exceeding $100,000 (valued at the time of grant) for any year
in which such shares first become available for purchase through the exercise of
such Incentive Options. The option price per share for Incentive Options must
not be less than the fair market value per share of the Common Stock on the date
of grant.
Some restrictions also apply to Nonstatutory Options granted under the
1997 Plan as a result of the application of tax rules limiting the deductibility
of certain compensation paid to "named executive officers." These rules are
discussed more fully below in the section entitled Federal Income Tax
Consequences. No participant in the Plan may be granted options under the Plan
in any fiscal year to purchase a number of shares of Common Stock in excess of
250,000 shares.
TERMS AND CONDITIONS OF OPTIONS
Except as described above, the 1997 Plan generally does not specify the
terms and conditions of options to be granted under the Plan. Under the
Company's current option plans, options generally become exercisable in five
cumulative annual installments of twenty percent of the total number of shares
covered thereby and are awarded with an exercise price equal to the fair market
value of the Common Stock on the date of grant. Under the 1997 Plan, as under
the current option plans, no option may be exercised later than 10 years from
the date of the grant. Payment for shares purchased upon the exercise of an
option must be made in cash, in shares of the outstanding Common Stock, or in a
combination of cash and shares.
Unless otherwise determined by the Committee, options granted under the
1997 Plan may not be assigned and, during the lifetime of the optionee, may be
exercised only by him or her. If an optionee's employment is terminated for
cause, as defined in the 1997 Plan, any options shall terminate immediately.
Unless otherwise determined by the Committee, if an optionee ceases to be
employed by the Company for any other reason other than death or disability, the
option may be exercised, subject to the expiration date of the option, for three
months after such termination, but only to the extent it was exercisable on the
date of termination. If employment is terminated because of death or disability,
the option may be exercised (subject to the expiration date of the option) for
up to one year after such termination, but only to the extent it was exercisable
on the date of death or disability.
MODIFICATION AND TERMINATION
The 1997 Plan provides for adjustment in the number and class of shares
subject to the 1997 Plan and to the option rights and the exercise prices of
such option rights granted thereunder, in the event of stock dividends, stock
splits, reverse stock splits, recapitalization, reorganization, certain mergers,
consolidation, acquisition, or other changes in the capital structure of the
Company.
The 1997 Plan will terminate on July 1, 2006. In addition, the Board of
Directors may, at any time, terminate the 1997 Plan or amend it except with
respect to certain matters for which shareholder approval is required under the
Code or Securities and Exchange Commission rules applicable to the 1997 Plan.
Under such rules, any amendment that would materially increase the cost of the
1997 Plan to the Company or the benefits to eligible employees would require
shareholder approval. No amendment or termination of the 1997 Plan by the Board
of Directors may adversely affect any option previously granted under the 1997
Plan without the consent of the optionee.
MERGER, CONSOLIDATION AND CHANGE IN CONTROL
The 1997 Plan provides that in the event of a Company dissolution or
liquidation or a merger or consolidation in which the Company is not the
surviving Corporation, the options will terminate. In the event of such a merger
or consolidation, the optionee must be offered either a substitute option with
terms and conditions which will substantially retain the optionee's rights or
the right to fully exercise the option prior to the merger or consolidation. The
1997 Plan further provides that upon the occurrence of certain "acceleration
events" the options will become fully vested. An acceleration event occurs (i)
when a person, or group of persons acting together, becomes the beneficial owner
of 20 percent or more of the Company's outstanding shares; (ii) when a change in
a majority of the Board occurs without the approval of at least 60% of the prior
Board; or (iii) upon the approval by shareholders of a sale of all or
substantially all the assets or of a liquidation or dissolution of the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences under current federal income tax laws relating to awards under the
1997 Plan. This summary is not intended to be exhaustive and, among other
things, does not describe state or local tax consequences.
In general, an optionee will be subject to tax at the time a
Nonstatutory Option is exercised (but not at the time of grant), and he or she
will include in ordinary income in the taxable year in which he or she exercises
a Nonstatutory Option an amount equal to the difference between the exercise
price and the fair market value of the shares acquired on the date of exercise,
and the Company will generally be entitled to deduct such amount for federal
income tax purposes except as such deductions may be limited by the Revenue
Reconciliation Act of 1993 ("1993 Tax Act"), described below. Upon disposition
of shares, the appreciation (or depreciation) after the date of exercise will be
treated by the optionee as either short-term or long-term capital gain or loss
depending on whether the shares have been held for the then-required holding
period.
In general, an optionee will not be subject to tax at the time an
Incentive Option is granted or exercised. Upon disposition of the shares
acquired upon exercise of an Incentive Option, long-term capital gain or loss
will be recognized in an amount equal to the difference between the disposition
price and the exercise price, provided that the optionee has not disposed of the
shares within two years of the date of grant or within one year from the date of
exercise. If the optionee disposes of the shares without satisfying both holding
period requirements (a "Disqualifying Disposition"), the optionee will recognize
ordinary income at the time of such Disqualifying Disposition to the extent of
the difference between the exercise price and the lesser of the fair market
value of the share on the date the Incentive Option was exercised or the date of
sale. Any remaining gain or loss is treated as short-term or long-term capital
gain or loss depending upon how long the shares have been held. The Company is
not entitled to a tax deduction upon either the exercise of an Incentive Option
or upon disposition of the shares acquired pursuant to such exercise, except to
the extent that the optionee recognizes ordinary income in a Disqualifying
Disposition and then only to the extent that such deduction is not limited by
the 1993 Tax Act.
If the optionee pays the exercise price, in full or in part, with
previously acquired shares, the exchange will not affect the tax treatment of
the exercise. However, if such exercise is effected using shares previously
acquired through the exercise of an Incentive Option, the exchange of the
previously acquired shares will be considered a disposition of such shares for
the purpose of determining whether a Disqualifying Disposition has occurred.
Commencing with the Company's 1995 fiscal year, the federal income tax
deduction that the Company may take for otherwise deductible compensation
payable to executive officers who, on the last day of the fiscal year, are
treated as "named executive officers" in the Company's Proxy Statement for such
year will be limited by the 1993 Tax Act to $1,000,000. Under the provisions of
the 1993 Tax Act, the deduction limit on compensation will apply to all
compensation, except compensation deemed under the 1993 Tax Act to be
"performance-based" and certain compensation related to retirement and other
employee benefit plans. The determination of whether compensation related to the
1997 Plan is performance-based for purposes of the 1993 Tax Act will be
dependent upon a number of factors, including shareholder approval of the 1997
Plan, and the exercise price at which options are granted. The 1993 Tax Act also
prescribes certain limitations and procedural requirements in order for
compensation to qualify as performance-based, including rules which require that
in the case of compensation paid in the form of stock options, the option price
be not less than the fair market value of the stock at date of grant and that
the plan under which the options are granted states the maximum number of shares
with respect to which options may be granted during a specified period to any
employee. Although the Company has structured the 1997 Plan to satisfy the
requirements of the 1993 Tax Act with regard to its "performance-based"
criteria, there is no assurance that awards thereunder will so satisfy such
requirements, and accordingly, the Company may be limited in the deductions it
may take with respect to awards under the 1997 Plan.
APPROVAL OF THE 1997 PLAN
Approval of the 1997 Plan requires the favorable vote of a majority of
the shares present or represented and entitled to vote at the Annual Meeting.
Unless otherwise instructed by the shareholder, the shares represented by the
enclosed proxy will be voted for approval of the 1997 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL
OF THE 1997 STOCK OPTION PLAN.
APPOINTMENT OF INDEPENDENT AUDITORS
Based on the recommendation of the Audit Committee, the Board of
Directors has voted to retain Ernst & Young LLP to serve as independent auditors
for the Company for fiscal year 1997 and is submitting its appointment of such
firm to the shareholders for ratification. Ernst & Young LLP has served as the
Company's independent auditors since the Company's inception. If the appointment
is not ratified, the Board of Directors will reconsider its selection. Ernst &
Young LLP will have a representative at the meeting who will have an opportunity
to make a statement if he or she so desires and who will be available to answer
appropriate questions. The favorable vote of a majority of the shares present or
represented and entitled to vote at the Annual Meeting is necessary to ratify
the appointment. Unless otherwise instructed, shares represented by proxy will
be voted for ratification of the appointment of Ernst & Young LLP.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be presented at the 1997
Annual Meeting of Shareholders must be received at the Company's offices no
later than June 17, 1997.
ANNUAL REPORT
The Company's Annual Report to Shareholders for fiscal year 1996 is
being mailed with this Proxy Statement to shareholders entitled to notice of the
Annual Meeting. The Company will furnish without charge to each person whose
proxy is being solicited, upon the written request of any such person, a copy of
the Company's Annual Report on Form 10-K for fiscal year 1996, as filed with the
Securities and Exchange Commission, including financial statements and
schedules. Requests for copies of such Annual Report on Form 10-K should be
directed to Investor Relations at the address below.
OTHER MATTERS
Please vote, sign and return promptly the enclosed proxy in the
envelope provided. The signing of a proxy will not prevent you from attending
the meeting and voting in person.
By Order of the Board of Directors
/s/ Norman A. Cocke
Norman A. Cocke
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY
Chronimed Inc.
13911 Ridgedale Drive
Minnetonka, MN 55305
October 14, 1996
PROXY
[LOGO] CHRONIMED INC.
13911 Ridgedale Drive
Minnetonka, MN 55305
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, having duly received the Notice of Annual Meeting and
the Proxy Statement dated October 14, 1996, hereby appoints the Chairman, Chief
Executive Officer and President, Maurice R. Taylor, II, and the Senior Vice
President, Chief Financial Officer and Secretary, Norman A. Cocke, or either of
them, as proxies (each with the power to act alone and with the power of
substitution and revocation), to represent the undersigned and to vote, as
designated below, all common shares of Chronimed Inc. held of record by the
undersigned on October 7, 1996, at the Annual Meeting of Shareholders to be held
on Wednesday, November 13, 1996, at the Minneapolis Athletic Club, 615 Second
Avenue South, Minneapolis, Minnesota, at 3:30 p.m. Central Standard Time, and at
any adjournment thereof.
1. PROPOSAL TO ELECT SIX DIRECTORS
[] FOR all nominees listed below (Except as marked to the
contrary below)
[] WITHHOLD AUTHORITY to vote for all nominees listed below:
Maurice R. Taylor, II Henry F. Blissenbach, Pharm.D. John
Howell Bullion Donnell D. Etzwiler, M.D. Charles V. Owens, Jr.
Lawrence C. Weaver, Ph.D.
INSTRUCTION: To withhold authority to vote for an individual nominee or
nominees, write the person's name on the line below.
- ------------------------------------------------------------------------
2. PROPOSAL TO APPROVE THE 1997 STOCK OPTION PLAN
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR 1997 FISCAL YEAR.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
(continued on other side)
(continued from other side)
This Proxy, when properly executed, will be voted in the manner
directed on the Proxy by the undersigned shareholder. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR ELECTION OF EACH OF THE NOMINEES TO THE BOARD
LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3, AND 4.
Please sign exactly as the name appears on this card. When shares are
held by joint tenants, both should sign. If signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other authorized
officer. If a partnership, please sign in partnership name by an authorized
person.
________________________________________
(Signature)
________________________________________
(Signature if held jointly)
Dated: ___________________________, 1996
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
BUSINESS REPLY ENVELOPE.
