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:
[X] Preliminary proxy statement
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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] No fee required
[ ] 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 transactions 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>
13911 RIDGEDALE DRIVE
MINNETONKA, MINNESOTA 55305
--------------------
To Our Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders,
which will be held on Wednesday, November 12, 1997, 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,
Maurice R. Taylor, II
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
October 10, 1997
<PAGE>
CHRONIMED INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 12, 1997
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 12, 1997, 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 ratify the appointment of Ernst & Young LLP as independent
auditors for the current fiscal year.
3. To approve the amendment of the Corporation's Articles of
Incorporation whereby the authorized shares of capital stock
of the Corporation shall be increased from 25 million to 45
million shares.
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 6,
1997, 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
Norman A. Cocke
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND
SECRETARY
October 10, 1997
<PAGE>
CHRONIMED INC.
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 12, 1997
----------------------------
PROXY STATEMENT
----------------------------
GENERAL
The Annual Meeting of Shareholders of Chronimed Inc. ("Company") will
be held on Wednesday, November 12, 1997, 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 10, 1997.
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 ratification of the
appointment of Ernst & Young LLP as the independent auditors of the Company for
the current fiscal year, and (iii) FOR an increase in the number of authorized
shares of Common and Preferred Stock from 25 million shares to 45 million
shares. 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 6, 1997, will be entitled to vote
at the meeting. Common Stock, $.01 par value per share, of which there were XXX
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
<PAGE>
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 1998 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 1997 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.
<PAGE>
<TABLE>
<CAPTION>
Number of
Shares of Common
Stock Owned
Name and Beneficially as Percent
Positions with the Company Age Principal Occupation of August 29, 1997(1) of Class
- -------------------------- --- -------------------- --------------------- --------
<S> <C> <C> <C> <C>
Maurice R. Taylor, II 51 Mr. Taylor, a co-founder of the 854,082 6.9%
CHAIRMAN OF THE BOARD Company, has served since 1985 as
OF DIRECTORS AND CHIEF Chief Executive Officer and a
EXECUTIVE OFFICER director of the Company and since
June 1994 as Chairman. He served as
President from 1985 through April
1997, upon the hiring of Dr.
Blissenbach. 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 division 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, 55 Dr. Blissenbach has served as 67,000 *
Pharm.D. President and Chief Operating
DIRECTOR, PRESIDENT AND Officer of the Company since May
CHIEF OPERATING OFFICER 1997. He became a director of the
Company in September 1995. From 1992
to 1997, he 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.
<PAGE>
Number of
Shares of Common
Stock Owned
Name and Beneficially as Percent
Positions with the Company Age Principal Occupation of August 29, 1997(1) of Class
- -------------------------- --- -------------------- --------------------- --------
John Howell Bullion 45 Mr. Bullion is a co-founder of the 228,125 1.9%
DIRECTOR Company 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. 70 Dr. Etzwiler has served as a 121,350 1.0%
DIRECTOR director of the Company since its
inception in 1985. He founded in
1967, and until XXXX 1996, served 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.
<PAGE>
Number of
Shares of Common
Stock Owned
Name and Beneficially as Percent
Positions with the Company Age Principal Occupation of August 29, 1997(1) of Class
- -------------------------- --- -------------------- --------------------- --------
Charles V. Owens, Jr. 70 Mr. Owens has served as a director 51,185 *
DIRECTOR of the Company since 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
past director of St. Jude Medical,
Inc., a medical device company, and
is a director of Genesis Labs, Inc.
Lawrence C. Weaver, 73 Dr. Weaver has served as a director 105,150 *
Ph.D., D. Sc. (Hon.) of the Company since December 1991.
DIRECTOR He has 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, 168,400; Dr. Blissenbach, 65,000;
Mr. Bullion, 75,000; Dr. Etzwiler, 45,000; Mr. Owens, 15,000; and Dr.
Weaver, 45,000. For each of Messrs. Taylor, Bullion and Owens and Drs.
Blissenbach, Etzwiler, and Weaver , these options exercisable within 60
days include 15,000 shares under the 1994 Stock Option Plan for
Directors.
<PAGE>
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Messrs. Bullion, Owens and Dr. Weaver are the current members of the
Audit Committee of the Board of Directors. Dr. Blissenbach relinquished his
Audit Committee membership in May, 1997, upon his appointment as President and
Chief Operating Officer of the Company. During fiscal 1997, 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 1997, the Compensation Committee met
four times.
During fiscal 1997, the Board of Directors met eight times, including
three telephone board meetings. 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
For fiscal 1997, 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. Committee
chairmen received an additional $200 per meeting. In fiscal 1997, 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. The options
expire ten years after date of grant.
Based on the above-noted terms and the price of the Company's Common
Stock during fiscal 1997, 15,000 shares of the total 30,000 shares have vested
for each of the participating directors.
<PAGE>
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 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 1997 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
<PAGE>
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 27, 1997, 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 diagnostic services plan that
provides significant coverage for annual physicals. These benefits are
generally available to Company employees with the exception of the
diagnostic services plan.
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, a base salary of $290,000 in
fiscal 1997, and will receive a base salary of $304,500 in fiscal 1998. 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 1997, Mr. Taylor earned a bonus of $50,000
in recognition of his and Chronimed's performance against criteria established
by the Compensation Committee of the Board of Directors at the beginning of the
year. In fiscal 1997, Mr. Taylor was granted options to purchase up to 49,000
shares of Common Stock at $20.00 per share under the Company's 1986 Stock Option
Plan. He was also granted options to purchase up to 174,000 shares of Common
Stock under the Company's 1997 Stock Option Plan, of which 21,000 were at
$14.625 per share and 153,000 were at $7.5625. 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.
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 $1,000,000
limit on deductible compensation under Section 162(m). The Compensation
Committee has not formulated any policy with respect to qualifying other types
of compensation for deductibility under Section 162(m).
Members of the Compensation Committee: Charles V. Owens, Jr., Chairman
Donnell D. Etzwiler, M.D.
Lawrence C. Weaver, Ph.D., D.Sc. (Hon.)
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid for the Company's
fiscal year ended June 27, 1997, and for fiscal 1996 and 1995, to the Company's
Chairman of the Board of Directors and Chief Executive Officer, and the five
other most highly paid executive officers (collectively, "named executive
officers").
<TABLE>
<CAPTION>
Long-Term
Compensation Awards
-------------------
Annual Compensation Securities
------------------- Underlying All Other(8)
Name and Principal Position Fiscal Year Salary($) Bonus($)(1) Options (#) Compensation
--------------------------- ----------- --------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Maurice R. Taylor, II(2) 1997 $290,000 $ 50,000 223,000 $4,100
CHAIRMAN OF THE BOARD, AND 1996 260,000 200,000 84,000 4,400
CHIEF EXECUTIVE OFFICER..................... 1995 210,000 - 250,000 -
Henry F. Blissenbach(3) 1997 33,300 - 129,000 -
PRESIDENT AND CHIEF OPERATING 1996 - - - -
OFFICER..................................... 1995 - - - -
Norman A. Cocke(4) 1997 164,300 32,000 62,700 4,100
SENIOR VICE PRESIDENT, CHIEF FINANCIAL 1996 155,000 90,000 25,000 3,500
OFFICER AND SECRETARY....................... 1995 49,900 14,800 110,000 -
Steven A. Crees(5) 1997 149,000 32,000 56,600 3,500
SENIOR VICE PRESIDENT....................... 1996 130,000 100,000 22,000 2,000
1995 115,000 7,000 50,000 -
Patrick L. Taffe(6) 1997 112,800 20,500 60,000 -
VICE PRESIDENT.............................. 1996 - - - -
1995 - - - -
Perry L. Anderson(7) 1997 110,000 15,000 51,725 2,100
VICE PRESIDENT.............................. 1996 - - - -
1995 - - - -
</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) Dr. Blissenbach was hired as President and Chief Operating Officer in
May 1997. He was not a participant in the fiscal 1997 bonus plan. Prior
to his hire date in May 1997, Dr. Blissenbach received $26,800 for his
services as director in Fiscal 1997. Going forward, Dr. Blissenbach
will receive no additional cash compensation for services as a
director.
(4) Mr. Cocke was hired as Senior Vice President in February 1995.
(5) Mr. Crees was promoted to Senior Vice President in July 1994.
(6) Mr. Taffe was hired as Vice President and Officer in July 1996.
(7) Mr. Anderson was hired July 1996 and was promoted to Vice President in
July 1997.
(8) All other compensation consists of Company 401(k) contribution matches
and long-term disability insurance paid on behalf of the officers
(discontinued in fiscal 1997).
<PAGE>
STOCK OPTIONS
The following tables summarize stock option grants and
exercises during fiscal 1997 to or by the named executive officers and the value
of all options held by the named executive officers at June 27, 1997.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------------
Number of
Securities Percent of
Underlying Total Options Exercise Potential Realizable Value at
Options Granted to Price Expiration Assumed Annual Rates of Stock
Name Granted(1) Employees ($/Share) Date Appreciation For Option Term
- ---- ---------- --------- --------- ---- -----------------------------
5% 10%
-----------------------------
<S> <C> <C> <C> <C> <C> <C>
Maurice R. Taylor, II 49,000 20.000 6/30/03 $398,958 $929,743
21,000 14.625 11/12/03 125,031 291,375
153,000 7.563 6/26/04 471,041 1,097,725
-------- ------- ---------
223,000 23.9% 995,030 2,318,842
Henry F. Blissenbach(2) 50,000 8.250 4/30/04 167,929 391,346
79,000 7.563 6/26/04 243,217 566,799
------ ------- -------
129,000 13.8% 411,146 958,145
Norman A. Cocke 14,000 20.000 6/30/03 113,988 265,641
5,700 14.625 11/12/03 33,937 79,087
43,000 7.563 6/26/04 132,384 308,511
------ ------- -------
62,700 6.7% 280,309 653,239
Steven A. Crees 11,600 20.000 6/30/03 94,447 220,102
5,000 14.625 11/12/03 29,769 69,375
40,000 7.563 6/26/04 123,148 286,987
------ ------- -------
56,600 6.1% 247,364 576,464
Patrick L. Taffe 20,000 18.375 7/7/03 149,609 348,654
40,000 7.563 6/26/04 123,148 286,987
------ ------- -------
60,000 6.4% 272,757 635,640
Perry L. Anderson 15,000 20.000 6/30/03 122,130 284,615
10,725 8.000 4/21/04 34,929 81,400
26,000 7.563 6/26/04 80,046 186,541
------ ------ -------
51,725 5.5% 237,105 552,557
</TABLE>
- -----------------------------
(1) The options were granted under the Company's 1986, 1994 and 1997 Stock
Option Plans. These options vested with respect to 20% of such shares
on the first year anniversary date and become exercisable with respect
to an additional 20% of the shares on each of the next four anniversary
dates. The options may become immediately exercisable upon certain
change-in-control events as described in the Company's 1986, 1994 and
1997 Stock Option Plans.
(2) As part of Dr. Blissenbach's employment agreement, 50,000 options to
purchase Chronimed shares were immediately vested as of the 5/1/97
grant date. Further, if Chronimed's closing stock price does not reach
$12.25 per share or greater by 11/1/97, Dr. Blissenbach will receive a
one-time lump sum payment equal to the difference between $12.25 per
share and the highest stock price during the six-month period times
50,000 options up to a maximum of $200,000. Such contingent payment is
not included in his fiscal 1997 compensation as presented in the
Summary Compensation section of this proxy.
<PAGE>
AGGREGATED OPTION EXERCISES IN FISCAL 1997
AND OPTION VALUES AT JUNE 27, 1997
<TABLE>
<CAPTION>
Number of
Securities
Underlying
Unexercised Value of Unexercised In-
Options at June 27, The-Money Options(2)
1997 at June 27, 1997
----------------------------------------------
Shares Value
Acquired on Realized Exercisable/ Exercisable/
Name Exercise(#) ($)(1) Unexercisable(#) Unexercisable($)
- ---- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maurice R. Taylor, II............. 147,500 1,591,776 141,800/415,200 0/0
Henry F. Blissenbach.............. 0 0 65,000/99,000 0/0
Norman A. Cocke................... 0 0 61,791/124,700 0/0
Steven A. Crees................... 0 0 38,800/107,800 35,700/8,925
Patrick L. Taffe.................. 0 0 0/60,000 0/0
Perry L. Anderson................. 0 0 0/51,725 0/0
</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 unexercised in-the-money options was determined by
multiplying the number of shares subject to such options by the
favorable difference between the exercise price per share and $7.5625,
the closing price per share on June 27, 1997.
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 $290,000 in
fiscal 1997. Base salary for fiscal 1998 and 1999 is based on corporation and
employee performance prior to each year. For fiscal 1998, Mr. Taylor's salary
has been set at $304,500. 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.
<PAGE>
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 June 30, 1992 through June
30, 1997. The graph and table assume the investment of $100 on June 30, 1992, in
the Company's Common Stock, the NASDAQ Total Return Index, and the NASDAQ Health
Services Stock Index. The cumulative return calculations were performed by CRSP.
COMPARISON OF CUMULATIVE RETURN
<TABLE>
<CAPTION>
June 30, June 30, June 30, June 30, June 28 June 30,
1992 1993 1994 1995 1996 1997
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[ ] CHRONIMED(1)............................. 100.0 147.6 332.1 367.9 546.2 250.8
+ NASDAQ Total Return Index................ 100.0 125.8 127.0 169.5 217.6 264.6
* NASDAQ Health Services Stock Index....... 100.0 115.4 131.0 142.8 218.5 200.7
</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.
<PAGE>
OWNERSHIP OF CHRONIMED COMMON STOCK BY CERTAIN BENEFICIAL OWNERS AND
EXECUTIVE OFFICERS
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 29, 1997. 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.................. 854,082 6.9%
Henry F. Blissenbach................... 67,000 *
Norman A. Cocke........................ 94,800 *
Steven A. Crees........................ 82,544 *
Patrick L. Taffe....................... 4,481 *
Perry L. Anderson...................... 4,028 *
All directors and executive officers 1,612,745 13.1%
as a group (10 persons)...............
</TABLE>
- -----------------------------
* Less than 1%
(1) Includes the following options exercisable within 60 days to acquire
shares of Common Stock: Mr. Taylor, 168,400; Mr. Anderson, 3,000; Dr.
Blissenbach, 65,000; Mr. Cocke, 69,591; Mr. Crees, 55,520; Mr. Taffe,
4,000; and all directors and executive officers as a group, 545,511.
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 1997, all
Section 16(a) filing requirements were met.
<PAGE>
CERTAIN TRANSACTIONS
ORPHAN MEDICAL, INC.
The Company incorporated Orphan Medical, Inc. (OMI) in July 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 OMI from the provision in the Marketing and
Distribution Agreement which had granted Chronimed exclusive domestic
distribution rights with respect to these two products. Further, as of June 27,
1997, Chronimed sold its remaining rights to market and distribute orphan drugs
back to OMI (see Related Party Transactions noted below). Thus, the Marketing
and Distribution Agreement between Chronimed and OMI has been terminated
effective June 27, 1997, along with certain other agreements that secured OMI's
obligations under the marketing agreement.
Under the marketing agreement, OMI had 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 had
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. With the
termination of the marketing agreement effective June 27, 1997, these rights no
longer exist. Going forward, Chronimed intends to have Mr. Bullion continue to
serve on its Board.
RELATED PARTY TRANSACTIONS
On April 9, 1997, the Company entered into a guarantee of indebtedness
of Mr. Maurice R. Taylor, II, Chronimed's Chairman and Chief Executive Officer.
Such indebtedness permitted Mr. Taylor to continue to hold large amounts of
Company stock. There was $537,000 of indebtedness under the guarantee as of
August 26, 1997. The Company is charging Mr. Taylor an arm's-length guarantee
fee.
On June 27, 1997, the Company entered into an agreement to sell its
exclusive rights to market and distribute certain Orphan Medical, Inc. products
back to Orphan Medical for cash, royalties, and Orphan Medical stock totaling
$2.5 million. The Company has estimated the net present value of these payments
to be $1.7 million, and as such has recorded $1.7 million as Other Income in its
1997 financial statements. Orphan Medical, Inc. was created in July 1994 as a
spin-off from Chronimed Inc.
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., President and Chief
Operating Officer of the Company, was President of DPS, ending April, 1997.
<PAGE>
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 1998 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.
AMENDMENT OF ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF STOCK
The Board of Directors recommends that the Company's shareholders
approve the proposal to amend the Articles of Incorporation to increase the
number of authorized shares of Stock from 25,000,000 shares to 45,000,000 shares
because it considers such proposal to be in the best long-term and short-term
interests of the Company, its shareholders and its other constituencies.
Although the Company currently has no specific plans to use the additional
authorized shares of Common Stock, the proposed increase will ensure that a
sufficient number of shares will be available, if needed, for issuance in
connection with any possible future transactions approved by the Board of
Directors, including, among others, stock splits, stock dividends, acquisitions,
financings and other corporate purposes. The Board of Directors believes that
the availability of the additional shares of Common Stock for such purposes
without delay or the necessity for a special shareholders' meeting (except as
may be required by applicable law or regulatory authorities or by the rules of
any stock exchange on which the Company's securities may then be listed) will be
beneficial to the Company by providing it with the flexibility required to
consider and respond to future business opportunities and needs as they arise.
The availability of additional authorized shares of Common Stock will also
enable the Company to act promptly when the Board of Directors determines that
the issuance of additional shares of Common Stock is advisable. It is possible
that shares of Common Stock may be issued at a time and under circumstances that
may increase or decrease earnings per share and increase or decrease the book
value per share of shares presently held.
Under the Company's current Articles of Incorporation, the Company has
authority to issue 20,000,000 shares of Common Stock, par value $.01 per share,
of which XXX shares were issued and outstanding as of October 6, 1997, and
5,000,000 shares of Preferred Stock, par value $.01 per share, of which none
were issued and outstanding as of October 6, 1997. Specifically, this proposal
recommends that the Amendment to the Company's Articles of Incorporation
provides for 40,000,000 shares of Common Stock and 5,000,000 shares of Preferred
Stock.
The additional Common Stock to be authorized by adoption of the
Amendment would have rights identical to the currently outstanding Common Stock
of the Company. Adoption of the proposed Amendment and issuance of the Common
Stock would not affect the rights of the holders of currently outstanding Common
Stock of the Company, except for effects incidental to increasing the number of
shares of the Company's Common Stock outstanding. Any future issuance of Common
Stock will be subject to the rights of holders of any outstanding shares of any
Preferred Stock which the Company may issue in the future.
<PAGE>
CORPORATE ACTION REGARDING TAKEOVER ATTEMPTS
The Company has a shareholder rights plan ("Rights Plan") intended to
deter coercive or unfair takeover tactics and to prevent a potential acquirer
from gaining control of the Company without offering a fair price to all of the
Company's shareholders. The Rights Plan provides a strong incentive for anyone
interested in acquiring the Company to negotiate directly with the Board of
Directors. Under the Rights Plan, adopted in 1996, one right ("Right") has
attached to each share of outstanding Common Stock. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
Series A Junior Participating Preferred Stock, par value $.01 (the "Preferred
Shares"), of the Company at a price of $120 per one thousandth of a Preferred
Share (the "Purchase Price"), subject to adjustment.
The Rights will separate from the Common Shares, and a Distribution
Date (as defined below) for the Rights will occur upon the earlier of: (i) the
first date of public announcement that a person or group of affiliated or
associated persons has become an "Acquiring Person" (i.e., has become, subject
to certain exceptions, the beneficial owner of 15% or more of the outstanding
Common Shares) (except pursuant to a Permitted Offer, as defined below) and (ii)
the 10th day following the commencement or public announcement of a tender offer
or exchange offer, the consummation of which would result in a person or group
of affiliated or associated persons becoming, subject to certain exceptions, the
beneficial owner of 15% or more of the outstanding Common Shares (or such later
date as may be determined by the Board of Directors of the Company prior to a
person or group of affiliated or associated persons becoming an Acquiring
Person) (the earlier of such dates being called the "Distribution Date"). Until
the Distribution Date, new Common Share certificates issued after December 31,
1996 upon transfer or new issuance of the Common Shares will contain a notation
incorporating by reference the Rights Plan. The Rights are not exercisable until
the Distribution Date.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $.01 per share but will be entitled to an
aggregate dividend of 1,000 times the dividend declared per Common Share. In the
event of liquidation, the holders of the Preferred Shares will be entitled to a
minimum preferential liquidation payment of $.01 per share but will be entitled
to an aggregate payment of 1,000 times the payment made per Common Share. Each
Preferred Share will have 1,000 votes, voting together with the Common Shares.
Finally, in the event of any merger, consolidation or other transaction in which
Common Shares are exchanged, each Preferred Share will be entitled to receive
1,000 times the amount received per Common Share. These rights are subject to
adjustment in the event of a stock dividend on the Common Shares or a
subdivision, combination or consolidation of the Common Shares.
In the event that the Company is acquired in certain mergers or other
business combination transactions or 50% or more of the assets or earning power
of the Company and its subsidiaries (taken as a whole) are sold after a person
or group becomes an Acquiring Person (except pursuant to a Permitted Offer),
holders of the Rights will thereafter have the Right to receive, upon exercise
thereof at the then current exercise price of the Right, that number of Common
Shares of the acquiring company (or, in certain cases, one of its Affiliates)
having a market value of two times the exercise price of the Right.
A "Permitted Offer" is a tender offer or an exchange offer for all
outstanding Common Shares of the Company at a price and on terms determined by a
majority of the Board of Directors of the Company who are not officers of the
Company and who are not Acquiring Persons or affiliates or associates of an
Acquiring Person and after receiving advice from one or more investment banking
firms, to be (a) fair to shareholders (taking into account all factors which the
Board of Directors deems relevant) and (b) otherwise in the best interests of
the Company and its shareholders, employees, customers, suppliers and creditors
and the communities in which the Company does business, and which the Board of
Directors determines to recommend to the shareholders of the Company.
The Rights will expire on December 18, 2006, unless extended or earlier
redeemed or exchanged by the Company pursuant to the Rights Plan. At any time
before a person has become an Acquiring Person, the
<PAGE>
Continuing Directors (as defined in the Rights Plan) may redeem the Rights in
whole, but not in part, at a price of $.01 per Right, subject to adjustment. The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as such Continuing Directors may, in their sole discretion,
establish. Until a Right is exercised, the holder thereof, as such, will have no
rights as a shareholder of the Company, including without limitation, the right
to vote or to receive dividends.
As a public corporation, the Company is also governed by the provisions
of Sections 302A.671 and 302A.673 of the Minnesota Business Corporations Act.
These anti-takeover provisions may eventually operate to deny shareholders the
receipt of a premium on their Common Stock and may also have a depressive effect
on the market price of the Company's Common Stock. Section 302A.671 basically
provides that the shares of a corporation acquired in a "control share
acquisition" have no voting rights unless voting rights are approved by the
shareholders in a prescribed manner. A "control share acquisition" is generally
defined as an acquisition of beneficial ownership of shares that would, when
added to all other shares beneficially owned by the acquiring person, entitle
the acquiring person to have voting power of 20% or more in the election of
directors. Section 302A.673 prohibits a public corporation from engaging in a
"business combination" with an "interested shareholder" for a period of four
years after the date of the transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions.
An "interested shareholder" is a person who is the beneficial owner of 10% or
more of the corporation's voting stock. Reference is made to the detailed terms
of Sections 302A.671 and 302A.673 of the Minnesota Business Corporation Act.
RESOLUTION AND VOTE REQUIRED
The following resolution will be submitted for approval at the meeting:
"RESOLVED, That ARTICLE III of the Articles of Incorporation
of Chronimed Inc., as heretofore amended, be further amended by
deleting the first sentence thereof in its entirety and substituting
therefore the following:
The total number of shares of all classes of stock that the
corporation shall be authorized to issue is Forty-five Million
(45,000,000) shares, divided into the following: (i) Five Million
(5,000,000) shares of Preferred Stock, of the par value of $.01 per
share; and (ii) Forty Million (40,000,000) shares of Common Stock, of
the par value of $.01 per share.
The affirmative vote of the holders of a majority of the Company's
outstanding shares of Common Stock, present or represented at the meeting and
entitled to vote, is required to approve the Amendment.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARES OF COMMON AND PREFERRED STOCK.
SHAREHOLDER PROPOSALS
Any proposal by a shareholder intended to be presented at the 1998
Annual Meeting of Shareholders must be received at the Company's offices no
later than June 18, 1998.
ANNUAL REPORT
The Company's Annual Report to Shareholders for fiscal year 1997 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
<PAGE>
Company's Annual Report on Form 10-K for fiscal year 1997, 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
Norman A. Cocke
SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER
AND SECRETARY
Chronimed Inc.
13911 Ridgedale Drive
Minnetonka, MN 55305
October 10, 1997
- -----------------------------
<PAGE>
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, 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 6,
1997, at the Annual Meeting of Shareholders to be held on Wednesday, November
12, 1997, 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 [ ] WITHHOLD AUTHORITY
(Except as marked to the contrary to vote for all nominees listed
below) 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 RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT
AUDITORS FOR THE 1998 FISCAL YEAR.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSED TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON AND PREFERRED STOCK FROM 25 MILLION
SHARES TO 45 MILLION SHARES.
[ ] 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)
<PAGE>
(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: ___________________________, 1997
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
BUSINESS REPLY ENVELOPE.
