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
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Under Rule 14a-12
BONE CARE INTERNATIONAL, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
BONE CARE INTERNATIONAL, INC.
1600 ASPEN COMMONS
MIDDLETON, WISCONSIN 53562
(608) 662-7800
October 10, 2003
Dear Shareholder:
You are invited to attend the 2003 Annual Meeting of Shareholders of Bone Care
International, Inc. to be held on Wednesday, November 19, 2003 at 10:00 A.M.,
local time, at the Holiday Inn Hotel and Suites, 1109 Fourier Drive, Madison,
Wisconsin 53717.
At this year's meeting you will be asked to: (i) elect two directors; (ii)
approve the 2003 Stock Incentive Plan; and (iii) ratify the selection of the
Company's independent auditors. The accompanying Notice of Meeting and Proxy
Statement describe these matters. We urge you to read this information
carefully.
Your Board of Directors unanimously believes that election of its nominees for
directors, approval of the 2003 Stock Incentive Plan and ratification of its
selection of independent auditors are in the best interests of Bone Care
International and its shareholders, and, accordingly, recommends a vote FOR
election of the nominees for directors, approval of the 2003 Stock Incentive
Plan and ratification of the selection of Deloitte & Touche LLP as independent
auditors.
In addition to the formal business to be transacted, management will make a
presentation on developments of the past year and respond to comments and
questions of general interest to shareholders.
It is important that your shares be represented and voted whether or not you
plan to attend the Annual Meeting in person. You may vote by completing and
mailing the enclosed proxy card. Voting by written proxy will ensure your shares
are represented at the Annual Meeting. Please review the instructions on the
proxy card or the information forwarded by your bank, broker or other holder or
record regarding each of these voting options.
Sincerely,
/s/ Paul L. Berns
Paul L. Berns
President and Chief Executive Officer
BONE CARE INTERNATIONAL, INC.
1600 ASPEN COMMONS
MIDDLETON, WISCONSIN 53562
(608) 662-7800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 19, 2003
The 2003 annual meeting of shareholders of Bone Care International,
Inc., will be held at the Holiday Inn Hotel and Suites, 1109 Fourier Drive,
Madison, Wisconsin 53717 on Wednesday, November 19, 2003, at 10:00 a.m., local
time, for the following purposes:
(1) To elect two directors to serve until the 2006 annual meeting
of shareholders;
(2) To approve the 2003 Stock Incentive Plan;
(3) To ratify the selection of Deloitte & Touche LLP as our
independent auditors for the fiscal year ending June 30, 2004;
and
(4) To transact any other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on October 6,
2003, the record date for the meeting, will be entitled to notice of and to vote
at the meeting or any adjournments thereof.
By Order of the Board of Directors,
/s/ Paul L. Berns
Paul L. Berns
President and Chief Executive Officer
Middleton, Wisconsin
October 10, 2003
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE PAID ENVELOPE.
EVEN IF YOU HAVE VOTED BY PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE
MEETING. ANY PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED BY
FOLLOWING THE INSTRUCTIONS SET FORTH ON PAGE 2 OF THE ACCOMPANYING PROXY
STATEMENT. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A
BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN A PROXY ISSUED IN YOUR NAME FROM THAT RECORD HOLDER.
THE COMPANY'S 2003 ANNUAL REPORT TO SHAREHOLDERS ACCOMPANIES THE PROXY STATEMENT
AND FORM OF PROXY.
BONE CARE INTERNATIONAL, INC.
1600 ASPEN COMMONS
MIDDLETON, WISCONSIN 53562
(608) 662-7800
PROXY STATEMENT
PROXY SOLICITATION
This proxy statement is furnished in connection with the solicitation of
the accompanying proxy by the Board of Directors of Bone Care International,
Inc. (sometimes referred to as the "Company," "Bone Care," "we," "our" or "us")
for use at the 2003 annual meeting of shareholders to be held at the Holiday Inn
Hotel and Suites, 1109 Fourier Drive, Madison, Wisconsin 53717, on Wednesday,
November 19, 2003, at 10:00 a.m., local time, and at any adjournments thereof.
At the meeting, shareholders will consider proposals to: (1) elect two
directors to serve until the 2006 annual meeting of shareholders; (2) approve
the 2003 Stock Incentive Plan; and (3) ratify the selection of Deloitte & Touche
LLP as our independent auditors for the fiscal year ending June 30, 2004. The
Board of Directors does not know of any other matters to be brought before the
meeting; however, if other matters should properly come before the meeting, it
is intended that the persons named in the accompanying proxy will vote on such
matters at their discretion.
Shareholders who execute proxies retain the right to revoke them at any
time prior to the voting thereof by attending the meeting and voting in person
or by advising our secretary of such revocation in writing (by later-dated proxy
which is voted at the meeting or otherwise).
The notice of the annual meeting, this proxy statement, the accompanying
form of proxy, and the annual report on Form 10-K filed with the SEC, including
financial statements for the fiscal year ended June 30, 2003, were first mailed
to shareholders on or about October 20, 2003.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of the shares of our common stock at the close of
business on October 6, 2003, the record date for the annual meeting, are
entitled to notice of and to vote at the annual meeting and at any adjournments
thereof. Shareholders will be entitled to one vote for each full share held. On
October 6, 2003, there were 14,283,130 shares of common stock outstanding and
entitled to vote at the annual meeting. Appearance at the annual meeting in
person or by proxy of the holders of common stock entitled to cast at least
7,141,566 votes is required for a quorum. Shares represented by abstentions or
broker non-votes will be counted as shares that are present and entitled to vote
for purposes of determining the presence of a quorum. A broker non-vote occurs
when a registered broker holding a customer's shares in the name of the broker
has not received voting instructions on the matter from the customer and is
barred by applicable rules from exercising discretionary voting authority in the
matter.
VOTING INFORMATION
With respect to Proposal No. 1, the election of two directors, directors
will be elected by a plurality of the votes cast. This means that the director
nominees with the most affirmative votes are elected. Abstentions and
withholding authority to vote for a nominee will not affect whether a nominee
receives a plurality of votes. Brokers who have not received voting instructions
from beneficial owners by ten days prior to the annual meeting are permitted to
vote the shares of such holders in their discretion, subject to any instructions
subsequently given by such holders prior to the annual meeting.
With respect to Proposal No. 2, the approval of the 2003 Stock Incentive
Plan, action of shareholders will by taken by a majority of the votes cast,
excluding abstentions. Abstentions will be treated as not voted and will not be
counted as votes for or against the proposal. Brokers who have not received
voting instructions from beneficial owners by ten days prior to the annual
meeting are permitted to vote the shares of such holders in their discretion,
subject to any instructions subsequently given by such holders prior to the
annual meeting.
2
With respect to Proposal No. 3, ratification of Deloitte & Touche LLP as
our independent auditors for 2004, action of the shareholders will be taken by a
majority of the votes cast, excluding abstentions. Abstentions will be treated
as not voted and will not be counted as votes for or against the proposal.
Brokers who have not received voting instructions from beneficial owners by ten
days prior to the annual meeting are permitted to vote the shares of such
holders in their discretion, subject to any instructions subsequently given by
such holders prior to the annual meeting.
Proxies in the accompanying form, properly executed and received by us at
or prior to the meeting and not revoked, will be voted as directed therein on
all matters presented at the meeting. In the absence of a specific direction
from the shareholder as to a proposal, the shareholder's proxy will be voted
"FOR" the election of the director nominees named in this proxy statement, "FOR"
the approval of the 2003 Stock Incentive Plan and "FOR" ratification of the
selection of our independent auditors.
If any additional matters should properly come before the annual meeting,
then, except as otherwise provided by law or by the Certificate of Incorporation
or Bylaws of the Company with respect to particular types of matters, action of
the shareholders would be taken by a majority of the votes cast at the annual
meeting, excluding abstentions which would not be counted as votes for or
against.
Your vote is important. Accordingly, you are asked to complete, sign and
return the accompanying proxy card (or voting instruction sheet for your broker
or other nominee), whether or not you plan to attend the annual meeting. If you
plan to attend the annual meeting to vote in person and your shares are
registered with the Company's transfer agent in the name of a broker or other
nominee, you must secure a proxy card from the broker or other nominee assigning
voting rights to you for your shares.
IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS: FUTURE
HOUSEHOLDING OF MAILINGS TO SHAREHOLDERS WHO SHARE THE SAME RESIDENTIAL ADDRESS
AND HOLD THEIR STOCK IN STREET NAME
In December 2000, the SEC enacted rules allowing multiple shareholders
residing at the same address the convenience of receiving a single copy of proxy
and information statements, annual reports and prospectuses if they consent to
do so. This is known as "householding." Individual companies may seek the
consent of their shareholders to householding. Brokers and banks maintaining
accounts for shareholders may also seek consent to householding. The process of
householding allows companies, brokers and banks to reduce the number of copies
of materials which must be printed and mailed; this saves printing and mailing
costs and reduces the mailbox congestion which results from multiple copies of
the same material. Under householding, each shareholder continues to receive a
separate proxy card or, in the case of securities held in street name accounts,
a separate voting instruction form.
Some Bone Care stock is held in street name accounts, i.e., by brokers or
banks or other intermediaries who maintain accounts for their clients. This year
ADP, the agent for most of the brokers and banks who maintain accounts for our
shareholders, is soliciting our shareholder consent to future householding. We
consent to this future householding. It is expected to result in convenience to
shareholders and cost savings to us and the intermediaries.
If you hold your Bone Care stock in street name, and if your broker or
other intermediary uses ADP as its agent, and if you have not previously
consented directly or indirectly that ADP household materials for the companies
whose stock you beneficially own through your street name account, you will
receive with this year's Bone Care proxy statement and annual report a separate
notice explaining householding. The ADP Voting Instruction Form enclosed with
these materials contains a section in which you can indicate your consent to, or
objection to, future householding of our mailings. If you do not indicate
objection to householding by either checking "Against" on the Voting Instruction
Form or calling the number listed on the Voting Instruction Form, you will be
deemed to have given your implied consent to future householding, and
householding for your account will start 60 days after the date of the ADP
mailing of this year's materials to you. Affirmative or implied consent to
householding remains in effect until you revoke it by calling the telephone
number supplied in the householding election section of the Voting Instruction
Form. If you revoke the householding election, you will begin receiving
individual copies within 30 days after the revocation.
If you are in a householding group for your street name account and would
like, nonetheless, to receive a separate copy of our proxy statement and/or
annual report, please write to us at 1600 Aspen Commons, Middleton, WI 53562,
Attention: Investor Relations, or call us at 608-662-7800, and we will send you
a copy. If you are in a householding group for your street name account and, in
the future, would like to stop householding for your street name account -- or
if you initially objected to householding but later decide to consent to
householding -- please call the number provided to you on the ADP Voting
Instruction Form.
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SECURITIES BENEFICIALLY OWNED BY PRINCIPAL SHAREHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists all institutions and individuals known by us to
beneficially own more than five percent of Bone Care's common stock as of
October 6, 2003. The table also summarizes information for our directors and
executive officers, individually and as a group.
Beneficial ownership is determined in accordance with the rules of the SEC.
Beneficial ownership generally includes voting or investment power with respect
to securities. Common stock subject to an option that is exercisable within 60
days of October 6, 2003, is deemed to be beneficially owned by the person
holding the option when computing ownership but is not treated as outstanding
when computing the ownership of any other person. We have determined each
beneficial owner's percentage ownership by assuming that stock options held by
such person which are exercisable within 60 days of October 6, 2003 have been
exercised. Except as indicated by the footnotes to the table below, we believe,
based on information provided to us, that the persons and entities named in the
table below have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them. Applicable percentage of
beneficial ownership is based on 14,283,130 shares of common stock outstanding
as of October 6, 2003.
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER + OWNERSHIP CLASS
-------------------------------------- ---------- -------
Richard B. Mazess, Ph.D. (1)........................................... 2,830,710 19.8%
State of Wisconsin Investment Board (2)................................ 2,810,400 19.7
Lake Terrace
121 E. Wilson Street
Madison, WI 53707
T. Rowe Price Associates, Inc. and
T. Rowe Price Small-Cap Value Fund, Inc. (3)........................... 1,414,900 9.9
100 E. Pratt Street
Baltimore, MD 21202
Wellington Management Company, LLP(4) ................................. 848,300 5.9
75 State Street
Boston, MA 02109
Paul L. Berns (5)...................................................... 198,333 1.4
Robert A. Beckman (6).................................................. 89,200 *
Charles R. Klimkowski, CFA(7).......................................... 124,300 *
James V. Caruso (8) ................................................... 85,833 *
Gary Nei (9)........................................................... 28,333 *
Martin Barkin (10)..................................................... 26,000 *
Andrew Morgan (10)..................................................... 24,445 *
Carmine Durham (10).................................................... 24,167 *
Ed Staiano (11)........................................................ 24,000 *
Michael Casey (12)..................................................... 13,000 *
All Directors and Executive Officers as a Group
(14 persons) (13)................................................... 3,493,266 23.6
* Less than 1 percent.
+ Unless otherwise indicated, the business address of each beneficial owner
is Bone Care International, Inc., 1600 Aspen Commons, Middleton, WI 53567
(1) Includes 1,501,950 shares of common stock held by Dr. Mazess in joint
tenancy with his wife and 587,500 shares of common stock held by Dr. Mazess
as custodian for his daughters.
(2) Based on Amendment No. 5 to Schedule 13G filed with the SEC on February 11,
2003, by the State of Wisconsin Investment Board.
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(3) Based on Amendment No. 6 to Schedule 13G filed with the SEC on January 27,
2003 by T. Rowe Price Associates, Inc., and T. Rowe Price Small-Cap Value
Fund, Inc. Such filing reported that T. Rowe Price Associates, Inc. had
sole voting power with respect to 493,200 shares of common stock and had
sole dispositive power with respect to 1,414,900 shares of common stock,
and T. Rowe Price Small-Cap Value Fund, Inc., had sole voting power with
respect to 843,500 shares of common stock.
(4) Based on Amendment No. 2 to Schedule 13G filed with the SEC on February 12,
2003 by Wellington Management Company, LLP.
(5) Includes 193,333 shares of common stock subject to options exercisable
within 60 days of October 6, 2003.
(6) Includes 31,600 shares of common stock subject to options exercisable
within 60 days of October 6, 2003.
(7) Includes 68,500 shares of common stock subject to options exercisable
within 60 days of October 6, 2003.
(8) Includes 83,333 shares of common stock subject to options exercisable
within 60 days of October 6, 2003.
(9) Includes 23,333 shares of common stock subject to options exercisable
within 60 days of October 6, 2003.
(10) Represents shares of common stock subject to options exercisable within 60
days of October 6, 2003.
(11) Includes 14,000 shares of common stock subject to options exercisable
within 60 days of October 6, 2003.
(12) Includes 10,000 shares of common stock subject to options exercisable
within 60 days of October 6, 2003.
(13) Includes 581,556 shares of common stock subject to options exercisable
within 60 days of October 6, 2003.
5
PROPOSAL 1 - ELECTION OF DIRECTORS
Our by-laws authorize the Board of Directors to fix the number of
directors, provided that the number shall not be less than five nor more than
twelve. Currently, the number is fixed at seven. The by-laws stagger the Board
of Directors by dividing the number of directors into three classes, with one
class being elected each year for a term of three years. For the 2003 annual
meeting, two directors, Paul L. Berns, and Edward Staiano, PhD., are nominees
for election.
The table below sets forth certain information with respect to the nominees
for election as Directors of Bone Care to serve until the 2006 annual meeting of
shareholders. Unless otherwise specified, the shares of common stock represented
by the proxies Bone Care is soliciting will be voted "FOR" the election as a
Director of the persons named below, who have been nominated by the Board of
Directors. If, at or prior to a person's election, either nominee is unwilling
or unable to serve, it is presently intended that the proxies being solicited
will be voted for a substitute nominee designated by the Board of Directors. The
Board of Directors has no reason to believe either nominee will be unwilling or
unable to serve.
NOMINEES FOR ELECTION OF A THREE-YEAR TERM EXPIRING AT THE 2006 ANNUAL MEETING:
PAUL L. BERNS (age 36), Mr. Paul L. Berns has served as a Director of the
Company since June 2002. Mr. Berns has been Director, President and Chief
Executive Officer of the Company since June 2002. From March 2001 to April 2002,
Mr. Berns served as Vice President and General Manager of Abbott Labs
Immunology, Oncology and Pain. From June 2000 to March 2001, he served as Vice
President, Marketing of BASF Pharmaceuticals. From March 1990 to June 2000, Mr.
Berns held various positions of increasing responsibility at Bristol Meyer
Squibb with the last position held being Vice President, Neuroscience Marketing.
EDWARD STAIANO, PH.D. (age 67), Dr. Edward Staiano has served as a Director
of the Company since November 2001. Dr. Staiano is currently Chairman and Chief
Executive Officer of Sorrento Investment Group, a private investment company.
From 1996 to 1999, Dr. Staiano was Chairman and Chief Executive Officer of
Iridium World Communication Limited, a publicly traded company which
subsequently sold all of its assets to Iridium Satellite LLC. From 1973 to 1996,
he held various positions at Motorola, a publicly traded electronics corporation
where Dr. Staiano last served as the President of General Systems Sector.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE NOMINEES NAMED ABOVE TO SERVE
ON THE BOARD OF DIRECTORS OF BONE CARE.
The following sets forth certain information about our directors whose
terms of office will continue after the 2003 annual meeting.
INCUMBENT DIRECTORS - TERMS EXPIRING AT THE 2004 ANNUAL MEETING OF SHAREHOLDERS:
MICHAEL D. CASEY (age 57), Mr. Michael D. Casey has been a Director of the
Company since November 2001. Mr. Casey was the Chairman, President, and Chief
Executive Officer and a Director of Matrix Pharmaceutical, Inc., a publicly
traded cancer therapy company prior to its acquisition by Chiron Corporation in
March 2002. Mr. Casey joined Matrix in October 1997 from Schein Pharmaceutical,
Inc., a generic and ethical pharmaceutical company, where he was Executive Vice
President from November 1995 to December 1996. In 1996 he was appointed
President of the retail and specialty products division of Schein. From June
1993 to November 1995, he served as President and Chief Operating Officer of
Genetic Therapy, Inc., a biopharmaceutical company. Mr. Casey was President of
McNeil Pharmaceutical (a unit of Johnson & Johnson) from 1989 to June 1993 and
Vice President, Sales and Marketing, for the Ortho Pharmaceutical Corp. (a
subsidiary of Johnson & Johnson) from 1985 to 1989. Mr. Casey is a Director of
Allos Therapeutics Inc., Celgene Corporation, Cholestech Corporation and SICOR
Inc.
RICHARD B. MAZESS, PH.D. (age 64), Dr. Richard B. Mazess is Chairman of the
Board of the Company, a capacity he has held since February 1996. He is the
Founder of Bone Care and has been a Director of the Company since 1984. Dr.
Mazess served as Acting President and Chief Executive Officer of the Company
from July 2001 to June 2002. He was also President of the Company from inception
in 1994 through February 1996. Dr. Mazess was President and Director of Lunar
Corporation from 1974 through August 2000. Lunar developed and sold x-ray and
ultrasound densitometers for the diagnosis and monitoring of osteoporosis and
other metabolic bone diseases. Lunar also developed and sold medical
6
imaging equipment used by orthopedists and radiologists for imaging extremities.
In addition, Dr. Mazess has been Professor Emeritus of Medical Physics at the
University of Wisconsin - Madison since 1985.
GARY E. NEI (age 59), Mr. Gary E. Nei has been a Director of the Company
since April 2001. Since August 1994, Mr. Nei has served as Chairman of
Nei-Turner Media (formerly B&B Publishing). Mr. Nei has been a Director of the
Brady Corporation since November 1992. Brady Corporation is an international
manufacturer and marketer of high-performance identification solutions and
specialty coated materials.
INCUMBENT DIRECTORS - TERMS EXPIRING AT THE 2005 ANNUAL MEETING OF SHAREHOLDERS:
MARTIN BARKIN, M.D. (age 67), Dr. Martin Barkin has been a Director of the
Company since 1993. Dr. Barkin is currently President, Chief Executive Officer
and a Director of DRAXIS Health, Inc. (a pharmaceutical company), a position he
has held since 1992. He was a Partner and National Practice Leader for
HealthCare at KPMG Canada from 1991 to 1992 and Deputy Minister of Health for
the Province of Ontario from 1987 to 1991.
CHARLES R. KLIMKOWSKI, CFA (age 68), Mr. Charles R. Klimkowski has been a
Director of the Company since 1999. Prior to his retirement in 1998, Mr.
Klimkowski served as Chief Operating Officer and Chief Investment Officer of ABN
AMRO Asset Management (USA) Inc. Mr. Klimkowski was a Director of Theragenics
Corp. from 1992 to 2000, Chairman of Theragenics from 1994 to 1997, and
Co-chairperson from 1997 to 1998. Theragenics is a publicly traded company
producing and selling implantable radiation devices for the treatment of cancer.
BOARD OF DIRECTORS COMMITTEES AND MEETINGS
The Board of Directors maintains charters for select committees. To view
key committee charters, please visit the Company's website at www.bonecare.com.
The Board of Directors, which held eleven meetings during the year ended
June 30, 2003, has an Audit Committee, a Compensation Committee and a Nominating
and Corporate Governance Committee. The following is a brief description of the
functions performed by these committees.
AUDIT COMMITTEE
The Audit Committee of the Board oversees our corporate accounting and
financial reporting process and assists the board in fulfilling its oversight
responsibility to the shareholders and others relating to:
- The integrity of our financial statements and the financial
reporting process;
- The systems of internal controls regarding finance, accounting,
legal compliance and ethics;
- The performance of the Company's independent auditors;
- The annual independent audit and quarterly reviews of our
financial statements; and
- The independent auditors' qualifications and independence.
In connection with this oversight role, the Audit Committee performs
several functions, including among other things:
- Selecting our independent auditors;
- Monitoring the rotation of partners of the independent auditors
on the Company's engagement team as required by law;
- Discussing with management and the independent auditors the
adequacy and effectiveness of our accounting and financial
controls;
- Reviewing the financial statements to be included in our reports
filed with the SEC on Forms 10-K and 10-Q; and
- Discussing with management and the independent auditors the
results of the annual audit and the results of our quarterly
financial statements.
The Audit Committee operates under a charter adopted by the Board. Under
its charter, the Audit Committee must have at least three members, each of whom
satisfy the independence, financial literacy and experience requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations of
the SEC, Nasdaq, and any other applicable regulatory requirements. The Audit
Committee is currently comprised of Mr. Klimkowski (Chair), Dr. Staiano and Mr.
Nei. The Audit Committee met nine times during the year ended June 30, 2003. The
Board of Directors has determined that Mr. Klimkowski meets the requirements of
a financial expert as defined by the SEC and Nasdaq.
7
COMPENSATION COMMITTEE
The Compensation Committee reviews and approves the compensation for senior
management, as well as compensation strategy and compensation policies for the
Company. In addition, the Compensation Committee performs the following
functions:
- Reviewing and approving our performance objectives relevant to
the compensation of the executive officers;
- Reviewing and approving the compensation and other terms of
employment for the Chief Executive Officer;
- Administering our stock option plans and other similar programs;
and
- Reviewing and determining the officers, employees and consultants
to whom stock options should be granted, the number of options
and the option price.
The Compensation Committee is comprised of Mr. Casey (Chair) and Drs.
Barkin and Staiano. During the year ended June 30, 2003, the Compensation
Committee met six times.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee oversees the
identification, evaluation and recommendation of individuals qualified to be
directors of the Company. The major responsibilities of the Nominating and
Corporate Governance Committee are:
- Recommending to the Board individuals to serve as directors;
- Reviewing the performance of incumbent non-employee directors and
making recommendations for re-election to the Board;
- Making recommendations on the size and composition of the Board
and any committee thereof; and
- Overseeing the corporate governance guidelines.
The Nominating and Corporate Governance Committee operates under a charter
adopted by the Board. Under its charter, the Nominating and Corporate Governance
Committee must have at least three members, each of whom satisfy the
independence requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC, Nasdaq, and any other applicable
regulatory requirements. The Nominating and Corporate Governance Committee is
comprised of Mr. Nei (Chair), and Messrs. Casey and Klimkowski. During the year
ended June 30, 2003, the Nominating and Corporate Governance Committee met two
times. The Nominating and Corporate Governance Committee will consider
individuals recommended by shareholders as nominees for election to the Board,
if those nominations are made in accordance with the procedures contained in our
Bylaws as described under "Other Business".
During the year ended June 30, 2003, all of the directors attended at least
75% of the total number of meetings of the Board of Directors and committees on
which they served.
COMPENSATION OF DIRECTORS
Directors of the Company who are also employees of the company are not
separately compensated for their service as directors. Non-employee directors
are paid a retainer of $8,000 per year plus $2,000 per meeting attended in
person or $1,000 if attended by phone. Committee members are paid $1,000 per
committee meeting attended in person or $500 if attended by phone. The annual
retainer is doubled for the non-employee Chairman of the Board and meeting
attendance fees are doubled for the non-employee Chairman of the Board and
non-employee committee Chairmen. Non-employee directors also receive an annual
stock option grant to purchase 10,000 shares of common stock. Newly elected
directors receive an initial one-time grant of a stock option to purchase 20,000
shares upon election to the Board, plus a one-time matching option to purchase a
number of shares of common stock equal to the number of shares purchased by the
director within 90 days of initial election to the Board, up to a maximum of
30,000 shares, plus a pro-rated portion of the annual 10,000 share grant. The
stock options described in this paragraph expire ten years after their grant
date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the first two quarters of fiscal year ended June 30, 2003, Dr.
Mazess served on the compensation committee of the Board of Directors. Dr.
Mazess was President of Bone Care since its inception in 1984 through February
1996 and served as Acting President in fiscal 2002 prior to the appointment of
Paul Berns as President and Chief Executive Officer.
8
AUDIT COMMITTEE REPORT
The Report of the Audit Committee does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any of our
other filings under the Securities Act of 1933, as amended or under the
Securities Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate this Report by reference therein.
The Audit Committee of the Board oversees our corporate accounting and
financial reporting process and assists the board in fulfilling its oversight
responsibilities to the shareholders. Management of the Company prepares
financial statements in accordance with accounting principles generally accepted
in the United States and establishes the system of internal controls. The
Company's independent auditors are responsible for auditing our financial
statements.
The Audit Committee has reviewed and discussed the audited financial
statements of the Company with management and our auditors, Deloitte & Touche
LLP prior to their issuance. Additionally, the Audit Committee has reviewed and
discussed all interim financial statements reported on Form 10-Q with management
and our auditors prior to their issuance.
The Audit Committee has discussed with our auditors the matters under
Statement on Auditing Standards 61, Communication with Audit Committees and has
received and reviewed the written disclosures and the letter from Deloitte &
Touche LLP required by Independence Standards Board Statement No. 1,
Independence Discussions with Audit Committees, as amended, and has discussed
with Deloitte & Touche LLP their independence, including a review of fees.
The Audit Committee meetings include, whenever appropriate, executive
sessions with Deloitte & Touche LLP with and without the management of the
Company present.
Based on the reviews and discussions referred to above, we recommend to the
Board that the financial statements referred to above be included in the
Company's Annual Report on Form 10-K for the year ended June 30, 2003, for
filing with the SEC.
THE AUDIT COMMITTEE:
Charles Klimkowski, CFA, Chairman
Edward Staiano, Ph.D.
Gary Nei
9
INDEPENDENT AUDITOR
On June 28, 2002, Bone Care dismissed Arthur Andersen LLP ("Arthur
Andersen") as its independent public accountants and appointed Deloitte & Touche
LLP as its new independent accountants. The decision to dismiss Arthur Andersen
and to retain Deloitte & Touche was approved by our board of directors (which
included all members of the audit committee of our board of directors) and was
not separately voted on by the audit committee of our board of directors.
Arthur Andersen's reports on the Company's consolidated financial
statements for the fiscal year ended June 30, 2001 did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
During the Company's fiscal years ended June 30, 2001 and 2000, and the
subsequent interim period through June 28, 2002, there were no disagreements
between the Company and Arthur Andersen on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure,
which disagreements, if not resolved to Arthur Andersen's satisfaction, would
have caused them to make reference to the subject matter of the disagreement in
connection with their reports.
None of the reportable events described in Item 304(a)(1)(v) of Regulation
S-K occurred during the fiscal years ended June 30, 2001 and 2000, and the
subsequent interim period through June 28, 2002.
During the fiscal years ended June 30, 2001 and 2000, and the subsequent
interim period through June 28, 2002, the Company did not consult with Deloitte
& Touche regarding any of the matters or events set forth in Item 304 (a)(2)(i)
or (ii) of Regulation S-K.
The following table presents fees for services rendered by Deloitte &
Touche LLP for the year ended June 30, 2003:
($ in 000's)
------------
Audit and Quarterly Review Fees $ 65
All Other Fees 48
------
Total Fees $ 113
======
The Company did not retain Deloitte & Touche for financial information
system design and implementation during the year ended June 30, 2003. All other
fees consisted of tax consultation and tax compliance services provided by
Deloitte & Touche. The audit committee considered whether, and has determined
that, the provision of non-audit services is compatible with maintaining the
independent auditors' independence.
10
EXECUTIVE OFFICERS
As of October 1, 2003, our executive officers are as follows:
NAME AGE POSITION
---- --- --------
Paul L. Berns.......................... 36 President and CEO
James V. Caruso........................ 44 Vice President-Sales
Carmine J. Durham...................... 38 Vice President-Marketing
Jeffrey J. Freitag..................... 56 Vice President-R&D
Brian J. Hayden........................ 51 Vice President-Finance
R. Andrew Morgan....................... 45 Vice President-Regulatory Affairs, Quality and Compliance
C. Basil Mundy II...................... 57 Vice President-Business Development
PAUL L. BERNS has served as our President and CEO and as a director since
June 2002. Mr. Berns served as Vice President and General Manager of Abbott Labs
Immunology, Oncology and Pain from March 2001 to April 2002. From June 2000 to
March 2001, he served as Vice President, Marketing of BASF Pharmaceuticals. From
March 1990 to June 2000, Mr. Berns held various positions of increasing
responsibility at Bristol Meyer Squibb with the last position held being Vice
President, Neuroscience Marketing.
JAMES V. CARUSO has served as our Vice President- Sales since August 2002.
Mr. Caruso was Vice President of Sales of the Neuroscience Business Unit at
Novartis from June 2001 to August 2002. Mr. Caruso was Vice President of Sales
at BASF Pharmaceuticals from June 2000 to June 2001 and from 1988 to June 2000;
Mr. Caruso held several positions at Bristol Myers Squibb including Director of
Sales- West Coast and Senior Director of Serzone Marketing.
CARMINE J. DURHAM has served as our Senior Director- Marketing since
September 2002 and was promoted to Vice President-Marketing in November 2002.
Mr. Durham was formerly Business Unit Director, Marketing at Abbott Laboratories
from March 2001 to September 2002. In addition, Mr. Durham held several
positions at BASF Pharma from November 1997 to March 2001 including Senior
Manager and Director of Marketing and several positions at Boehringer Mannheim
Corporation Therapeutics from 1992 to 1997 including Manager of Sales Operations
and Marketing Manager of Corporate Accounts.
JEFFREY J. FREITAG, MD, has served as our Vice President-Research and
Development since June 2003. Dr. Freitag held senior Clinical Research positions
at PharmaNet Inc. from 1997 until May 2003, including Senior Vice President,
Medical and Scientific Affairs. His prior appointments include Vice President,
New Clinical Drug Development at The Liposome Company from 1994 to 1997,
Director, Clinical Research at Wallace Laboratories from 1987 to 1994 and
Associate Director, Clinical Research, Cardiovascular Drugs at Wyeth
Laboratories from 1985 to 1987.
BRIAN J. HAYDEN joined Bone Care in August 2003 and was appointed Vice
President - Finance on October 1, 2003. Mr. Hayden was formerly Vice President,
Finance, Chief Financial Officer and Treasurer of Cell Pathways, Inc. from
November 1997 until its acquisition by OSI Pharmaceuticals, Inc. in June 2003.
Since 1985, Mr. Hayden has served as the senior financial executive in five
different life science companies, both public and private. From 1976 to 1985,
Mr. Hayden served in senior financial management positions for Hoffmann-La
Roche, Inc. From 1975 to 1976, he served on the audit staff of Coopers and
Lybrand LLP (now PriceWaterhouseCoopers LLP).
R. ANDREW MORGAN, R.PH., has served as our Vice President- Regulatory
Affairs, Quality and Compliance since April 2002. Mr. Morgan was Director of
Regulatory Affairs for Celltech Pharmaceuticals from November 1997 to March
2002. His prior appointments include Manager of Regulatory Affairs for Medeva,
Inc. from May 1994 to November 1997 and Senior Regulatory Affairs Associate for
Adams Laboratories from June 1991 to May 1994. Mr. Morgan also worked seven
years as a clinical Pharmacist and Manager at All Saints Hospital.
C. BASIL MUNDY II has served as our Vice President- Marketing since January
2002. Mr. Mundy held several senior marketing positions at Celltech
Pharmaceuticals from July 2000 to December 2001. His prior appointments include
Vice President, Marketing at MGI Pharma from December 1997 to March 1999,
Director, INFeD Sales at Schein Pharmaceutical from January 1996 to December
1997, and Marketing Director for the National Kidney Foundation from May 1995 to
January 1996. Mr. Mundy was previously employed by Johnson and Johnson, Ortho
Biotech Inc. for 27 years.
11
EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board Compensation Committee Report does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any of
our other filings under the Securities Act of 1933, as amended, or under the
Securities Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate this Report by reference therein.
COMPENSATION PHILOSOPHY AND POLICIES. Our fundamental executive
compensation philosophy is to enable us to attract and retain key executive
personnel and to motivate those executives to achieve our objectives. The
Company has not yet achieved profitability; therefore, some of the traditional
methods of evaluating executive performance, such as profitability and return on
equity, would be inappropriate. Accordingly, assessment of each executive's
performance is based on attainment of his specific personal objectives in light
of our overall strategic goals. Among other things, we review three specific
areas in formulating the compensation packages of our executive officers. These
areas are as follows:
Our Company's overall performance:
- The extent to which our key sales, research, clinical,
development, manufacturing and financial objectives have been met
during the preceding fiscal year.
- Accessing capital to fund our research, development, operations
and other business activities.
Executive performance:
- An executive's involvement in and responsibility for the
development and implementation of strategic plans and the
attainment of our strategic and operating objectives, along with
achievement of agreed upon personal objectives.
- The involvement of an executive in personnel recruitment,
retention and morale.
- The responsibility of the executive in working within operating
budgets, controlling costs and other aspects of expense
management.
Other factors:
- We consider the necessity of being competitive with companies in
the pharmaceutical and biotechnology industry, taking into
account relative company size, stage of development, performance
and geographic location as well as individual responsibilities
and performance.
- We consider the need to provide reasonable incentives to
management based on performance, independent of market conditions
that may be beyond our control.
Each executive officer's compensation package is reviewed
annually and is comprised of up to three components: base salary, cash
bonuses and stock options. In addition to these components, executive
officers generally are eligible to participate in all employee benefit
programs generally available to all of our employees.
BASE SALARY: In setting the base salary levels for each executive
officer, we review surveys and other available information on the base
salaries of executive officers in comparable positions at other
pharmaceutical and biotechnology companies. Factors considered
include, but are not limited to, company size, stage of development
and geographic location. We also consider the individual experience
level and actual performance of each executive officer in light of our
needs and objectives.
BONUS AWARDS: As part of the review and setting of annual
compensation, cash bonuses tied to the achievement of certain
corporate objectives and certain specific personal objectives have
been awarded to executive officers. For fiscal year 2004, we have
adopted a defined plan whereby certain specific company objectives
must be attained before the executive officers are eligible for
bonuses.
12
STOCK OPTION AWARDS: The Compensation Committee has the authority
to grant both incentive and non-qualified stock options to the
executive officers. Awards generally vest at various times in excess
of one year from their date of grant, and are intended as incentive
and motivation for our executive officers, as well as to align the
interest of those officers more closely with those of our shareholders
in advancing corporate objectives. All of our executive officers have
been granted awards under the stock option plans.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. Since his hire in June 2002
through fiscal year end 2003, Mr. Berns annual base salary was $350,000. Mr.
Berns salary was determined in accordance with the criteria outlined above.
Also, in fiscal year 2003, Mr. Berns received a $600,000 sign-on payment, in
connection with Mr. Berns accepting employment with the Company.
Based on its evaluation of Mr. Berns performance, the Compensation
Committee believes that Mr. Berns compensation level is appropriate and in line
with his peers in the industry.
DEDUCTIBILITY OF COMPENSATION EXPENSES. Current U.S. tax law has a $1
million annual tax deduction limit on compensation we pay to our Chief Executive
Officer and our four other most highly compensated executive officers. The limit
does not apply to "qualified performance-based compensation", as defined under
the United States Tax Code and related regulations and as described under
"Proposal 2 - Approval of the 2003 Stock Incentive Plan - Section 162 (m) of the
Code." Compensation is performance-based if we can pay it only if objective
pre-established performance criteria set by the Compensation Committee are met.
The Compensation Committee may use its discretion to set actual compensation
below the maximum amount calculated by application of our performance criteria.
The Compensation Committee's general policy is to structure compensation
programs that allow us to fully deduct the compensation under the above
described one million dollar limit rules. The Compensation Committee also
believes that we need flexibility to meet our incentive and retention
objectives, even if we may not deduct all compensation.
Respectfully submitted,
THE COMPENSATION COMMITTEE:
Michael D. Casey, Chairman
Martin Barkin, M.D.
Edward Staiano, Ph.D.
13
SUMMARY COMPENSATION TABLE
The following table summarizes information regarding compensation during
the fiscal years ended June 30, 2003, 2002 and 2001 for our President and Chief
Executive Officer and our four other most highly compensated executive officers.
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------- ------------
OTHER SECURITIES
FISCAL ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (1) COMPENSATION ($) OPTIONS (#) COMPENSATION ($)
--------------------------- ------ ---------- ------------- ---------------- ------------ ----------------
Paul L. Berns............................. 2003 350,000 175,000 600,000(7) 360,000 --
President and Chief Executive Officer 2002 20,192(2) -- -- -- 70,000(10)
2001 -- -- -- -- --
James V. Caruso........................... 2003 249,231(3) 135,000 300,000(8) 200,000 2,492(11)
Vice President--Sales 2002 -- -- -- -- --
2001 -- -- -- -- --
Robert A. Beckman......................... 2003 220,000 -- -- 120,000 5,500
Former Vice President--Finance 2002 200,000 -- -- -- 4,773
2001 60,000(4) -- -- 110,000 --
R. Andrew Morgan.......................... 2003 175,000 25,000 -- 60,000 40,000(10)
Vice President--Regulatory Affairs 2002 30,288(5) -- -- -- 10,000(10)
2001 -- -- -- -- --
Carmine J. Durham......................... 2003 135,507(6) 59,500 25,000(9) 65,000 140,000(10)
Vice President--Marketing 2002 -- -- -- -- --
2001 -- -- -- -- --
------------------
(1) A portion of the named executive officer's compensation for each fiscal
year shown was paid in the first quarter of the year following the year
shown and is reported in this table as bonus.
(2) Paul L. Berns began serving as President and Chief Executive Officer in
June 2002.
(3) James V. Caruso began serving as Vice President - Sales in August 2002.
(4) Robert A. Beckman began serving as Vice President - Finance in July 2001.
(5) R. Andrew Morgan began serving as Vice President - Regulatory Affairs in
May 2002.
(6) Carmine J. Durham began serving as Vice President - Marketing in November
2002.
(7) Represents a sign-on payment in connection with Mr. Berns' accepting
employment with the Company.
(8) Represents a sign-on payment in connection with Mr. Caruso accepting
employment with the Company. If Mr. Caruso resigns within the first
eighteen months of his employment, he must reimburse the Company for a pro
rata portion of the payment.
(9) Represents a sign-on payment in connection with Mr. Durham accepting
employment with the Company.
(10) Represent payments for relocation expenses.
(11) Represents the Company's matching contribution to a 401(k) plan.
14
STOCK OPTION GRANTS IN 2003. The following table presents information
concerning stock options granted during the year ended June 30, 2003 to each of
the executive officers named in the Summary Compensation Table. In addition, in
accordance with the rules of the SEC, the table shows the hypothetical gains for
such options based on assumed rates of annual compound stock price appreciation
of 5% and 10% from the date the options were granted over the full option term.
OPTION GRANTS IN 2003
POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
NUMBER OF GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE(1) 5% 10%
---- ---------- ------------- --------- ---------- ------------ -------------
Paul L. Berns....................... 360,000 24.1% $ 3.40 7/24/12 $ 1,993,767 $ 3,174,741
James V. Caruso..................... 200,000 13.4 3.48 8/14/12 1,133,711 1,805,245
Robert A. Beckman................... 120,000 8.0 3.40 7/24/12 664,589 1,058,247
R. Andrew Morgan.................... 40,000 2.7 3.40 7/24/12 221,530 352,749
20,000 1.3 9.83 12/2/12 113,371 509,930
Carmine J. Durham................... 45,000 3.0 5.55 9/19/12 249,221 647,787
20,000 1.3 9.83 12/2/12 110,765 509,930
------------------
(1) Options granted pursuant to the Plan expire ten years after the date of
grant. The options granted in fiscal year 2003, in general, vest over three
years with one-third vesting on the one-year anniversary date and monthly
thereafter. Mr. Berns' options vest over a three-year period at a rate of
160,000 on the one-year anniversary date and the remainder over the
remaining two-year period.
(2) The "potential realizable value" is calculated assuming that the fair
market value of the common stock, on the date of the grant, appreciates at
the indicated annual rate compounded annually for the entire term of the
option. The 5% and 10% rates of appreciation are mandated by the rules of
the SEC and do not represent the Company's estimate or projection of future
increases in the price of common stock.
AGGREGATED OPTION EXERCISES IN 2003 AND 2003 FISCAL YEAR-END OPTION VALUES.
The following table presents the number and value of exercised options and the
number and value of unexercised stock options as of June 30, 2003, held by the
executive officers named in the Summary Compensation Table, distinguishing
between options that are exercisable and those that are not exercisable.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
SHARES NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED VALUE OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ON REALIZED YEAR END (#) (1) AT FISCAL YEAR END ($) (2)
NAME EXERCISE(#) (#) (2) EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE
---- ----------- -------- --------------------------- ---------------------------
Paul L. Berns -- -- -- / 360,000 -- / $ 3,780,000
James V. Caruso -- -- -- / 200,000 -- / 2,084,000
Robert A. Beckman 57,600 324,864 40,000 / 180,000 -- / 1,260,000
R. Andrew Morgan -- -- -- / 60,000 -- / 501,400
Carmine J. Durham -- -- -- / 65,000 -- / 457,150
----------------------
(1) All options have been granted at exercise prices equal to the fair market
value per share of common stock on the date of the grant. The closing price
of the common stock at June 30, 2003 was $13.90 per share.
(2) This value is calculated in accordance with the rules of the SEC and does
not represent value realized by the optionee.
15
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes the number of outstanding options granted to
employees and directors, as well as the number of securities remaining available
for future issuance, under our equity compensation plan as of June 30, 2003.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE FUTURE ISSUANCE, UNDER
BE ISSUED UPON EXERCISE EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
PLAN CATEGORY (a) (b) (c)
------------- ----------------------- -------------------- -------------------------
Equity compensation plans approved
by security holders (1)............. 1,931,233 $ 7.32 658,567
Equity compensation plans not -- -- --
approved by security holders........
--------- ------ -------
Total.................................. 1,931,233 $ 7.32 658,567
========= ====== =======
--------------------
(1) Consists of options outstanding under the Company's 1996 Stock Option Plan
and the 2002 Stock Incentive Plan.
EXECUTIVE SEVERANCE AGREEMENTS
The Company has severance arrangements with certain of its executive
officers. Mr. Berns is entitled to a severance payment equal to twenty-four
months of base compensation in the event that he is dismissed for any reason
other than cause or if his position with the Company is eliminated, downgraded
in scope or requires his relocation. Each of Messrs. Caruso and Durham are
entitled to a severance payment equal to twelve months of base compensation in
the event that he is dismissed for any reason other than cause or if his
position with the Company is eliminated, downgraded in scope or requires his
relocation. Mr. Morgan is entitled to a severance payment equal to six months of
base compensation in the event that he is dismissed for any reason other than
cause and twelve months of base compensation if his position with the Company is
eliminated, downgraded in scope or requires his relocation.
As of September 30, 2003, Robert A. Beckman has resigned his position with
the Company. The Company has agreed to pay Mr. Beckman a one-time payment of
$165,000 and has accelerated the vesting of 25,000 shares of stock options.
CERTAIN TRANSACTIONS
Martin Barkin, M.D. is a board member of Bone Care and is the President and
Chief Executive Officer of Draxis Health, Inc. (a pharmaceutical company). Bone
Care initially granted Draxis Health Inc. a license to use and sell Hectorol in
Canada for secondary hyperparathyroidism, osteoporosis and other metabolic bone
diseases. Bone Care also granted Draxis a license in Canada to all know-how
developed by or on behalf of Bone Care relating to the use of Hectorol for those
indications. Draxis received marketing approval for Hectorol Capsules in Canada
in May 2001. Draxis sold its Canadian pharmaceutical business to Shire
Pharmaceuticals Group in July 2003. In conjunction with that sale, Bone Care
entered into a new manufacturing and supply agreement and patent and trademark
license agreement with Shire that replaced and superceded all previous
agreements with Draxis. The patent and trademark agreement transfers to Shire
the exclusive right to use and sell Hectorol previously granted to Draxis and
requires a royalty for use of the Hectorol trademark. The manufacturing and
supply agreement provides for the sale of Hectorol from Bone Care to Shire for
distribution in Canada only.
In April 2002, Bone Care entered into a manufacturing agreement with Draxis
Pharma Inc., a division of Draxis Health Inc., to produce Hectorol Injection in
Canada. Bone Care began receiving commercial shipments in March 2003 for
customer sales in the U.S. Bone Care purchased approximately $1,994,962 of
Hectorol Injection from Draxis Pharma in the six months ended June 30, 2003.
16
INDEBTEDNESS OF MANAGEMENT
Since July 1, 2002, none of our directors, executive officers, nominees for
election as directors or certain relatives of associates of such persons have
been indebted to us in an aggregate amount in excess of $60,000 except as
follows. In June 2002, we loaned to Paul L. Berns $165,400 in connection with he
accepting employment with the Company and relocation to the greater Madison,
Wisconsin area. The loan was to be repaid over three years with interest at an
annual rate of five percent per annum. On July 1, 2003, Mr. Berns repaid the
loan in full, including interest, to the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our directors, officers and persons who own more than ten percent of a
registered class of our equity securities to file reports of ownership and
changes in ownership with the SEC and to furnish us with copies of these
reports. Based on our review of the copies of those reports which we have
received, and written representations from our directors and officers, we
believe that all filings required to be made by our directors and officers since
July 1, 2002 were made on a timely basis except as noted below. With respect to
Paul L. Berns, James V. Caruso and Carmine J. Durham, Form 3's, each for one
transaction, were not timely filed; Form 3's for each transaction were
subsequently filed. With respect to Robert A. Beckman, two Form 4's were not
timely filed; Form 4's for both transactions were subsequently filed. With
respect to R. Andrew Morgan, a Form 3 and Form 4, each for one transaction, were
not timely filed; a Form 3 and a Form 4 each for one transaction were
subsequently filed.
17
COMMON STOCK PRICE PERFORMANCE GRAPH
The Common Stock Price Performance Graph does not constitute soliciting
material and should not be deemed filed or incorporated by reference into any of
our other filings under the Securities Act of 1933, as amended, or under the
Securities Exchange Act of 1934, as amended, except to the extent that we
specifically incorporate this Report by reference therein.
The graph below compares the cumulative total shareholder return on our
common stock for the five-year period commencing June 1998 and ending June 2003
with the cumulative total shareholder return of Standard & Poor's 500 Stock
Index and Standard & Poor's 600 Biotechnology Index.
[PERFORMANCE GRAPH]
JUNE 98 JUNE 99 JUNE 00 JUNE 01 JUNE 02 JUNE 03
------- ------- ------- ------- ------- -------
Bone Care International, Inc. .... $ 100 $ 113 $ 269 $ 303 $ 67 $ 159
S&P 500 Index..................... $ 100 $ 123 $ 132 $ 112 $ 92 $ 92
S&P 600 BioTechnology Index....... $ 100 $ 96 $ 292 $ 321 $ 190 $ 199
The graph above assumes $100 was invested on June 30, 1998, in each of our
common stock, the S&P 500 Index, and the S&P 600 Biotechnology Index. The graph
also assumes the reinvestment of dividends.
18
PROPOSAL 2 - APPROVAL OF THE 2003 STOCK INCENTIVE PLAN
GENERAL
The Board of Directors of Bone Care adopted the Bone Care International,
Inc. 2003 Stock Incentive Plan (the "2003 Plan") and is proposing the 2003 Plan
for shareholder approval. The purposes of the 2003 Plan are to align the
interests of our shareholders and the recipients of awards under the 2003 Plan
by increasing the proprietary interest of recipients in Bone Care's growth and
success, to advance the interests of Bone Care by attracting and retaining
directors, officers and other employees and to motivate those persons to act in
the long-term best interests of Bone Care and its shareholders. Under the 2003
Plan, officers and other employees of the Company and its subsidiaries may be
granted non-qualified stock options, incentive stock options (within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"))
stock appreciation rights ("SARs"), restricted stock, unrestricted stock and
performance shares. All employees of Bone Care and its subsidiaries (109 persons
as of September 1, 2003) and six non-employee directors will be eligible to
participate in the 2003 Plan.
The following is a summary of the 2003 Plan, which is qualified in its
entirety by reference to the complete text of the 2003 Plan which is attached as
Exhibit A to this proxy statement and incorporated herein by reference.
DESCRIPTION OF THE 2003 PLAN
Administration. The 2003 Plan will be administered by the compensation
committee of the board of directors (the "Committee") consisting of at least two
directors who are "non-employee directors" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934, as amended, and "outside directors"
within the meaning of Section 162(m) of the Code. Subject to the express
provisions of the 2003 Plan, and except for options granted automatically to
non-employee directors, the Committee will have the authority to select eligible
officers and other employees to receive awards under the 2003 Plan and to
determine the terms and conditions of each award. Each award will be evidenced
by a written agreement between Bone Care and the recipient of the award setting
forth the terms and conditions of the award. The Committee also will have
authority to prescribe rules and regulations for administering the 2003 Plan and
to decide questions of interpretation or application of any provision of the
2003 Plan. In addition, the Committee may impose, incidental to the grant of an
award, conditions with respect to the award, such as limiting competitive
employment or other activities, and may accelerate the exercisability or vesting
of outstanding awards. Except with respect to awards to persons whose
compensation is likely to be subject to the $1 million deduction limit under
Section 162(m) of the Code, and persons subject to Section 16 of the Securities
Exchange Act of 1934, as amended, the Committee may delegate some or all of its
power and authority to administer the 2003 Plan to our chief executive officer
or other executive officer.
Except in connection with a change in Bone Care's capital structure or
similar event, the Committee may not, without shareholder approval, reduce the
exercise price of an outstanding option or base price of an outstanding SAR or
cancel outstanding options or SARs and grant substitute awards with lower
exercise or base prices.
Available Shares. Under the 2003 Plan, 300,000 shares of common stock are
available for the grant of awards. As of October 1, 2003, 228,522 and 153,250
shares were available for the future grant of stock options under Bone Care's
existing 1996 Stock Option Plan (the "1996 Plan") and 2002 Stock Incentive Plan
(the "2002 Plan"), respectively. Accordingly, if the 2003 Plan is approved by
shareholders, an aggregate of 681,772 shares will be available for the future
grant of awards under the 2003 Plan, the 1996 Plan, and the 2002 Plan combined.
The number of shares of common stock available for awards under the 2003
Plan and the terms of each outstanding award will be adjusted in the event of a
stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange of shares, liquidation, spin-off or other
similar change in capitalization or event, or any distribution to holders of
common stock other than a regular cash dividend. To the extent that shares of
common stock subject to an outstanding option (except to the extent shares of
common stock are issued or delivered by Bone Care in connection with the
exercise of a tandem SAR), free-standing SAR, unrestricted stock award,
restricted stock award or performance share award are not issued or delivered by
reason of the expiration, termination, cancellation or forfeiture of the award
or by reason of the delivery or withholding of shares of common stock to pay all
or a portion of the exercise price of an award, if any, or to satisfy all or a
portion of the tax withholding obligations relating to an award, then those
shares of common stock again will be available for awards under the 2003 Plan.
19
The maximum number of shares of common stock with respect to which options
or SARs or a combination thereof may be granted under the 2003 Plan during any
calendar year to any participant is 200,000, subject to adjustment as described
above. The maximum number of shares of common stock with respect to which
restricted stock awards subject to performance measures, or with respect to
which performance share awards, may be granted under the 2003 Plan during any
calendar year to any participant is 200,000, subject to adjustment as described
above.
Change in Control. In the event of (i) certain acquisitions of 50% or more
of the then outstanding shares of common stock, (ii) a change in the board of
directors resulting in the incumbent directors ceasing to constitute at least a
majority of the board of directors, (iii) the consummation of a reorganization,
merger or consolidation or sale or disposition of all or substantially all of
the assets of Bone Care (unless, among other conditions, Bone Care's
shareholders receive more than 50% of the stock of the resulting company) or
(iv) the consummation of a liquidation or dissolution of Bone Care, all
outstanding awards will be surrendered to Bone Care in exchange for a cash
payment except that, in the case of a merger or similar transaction in which the
shareholders receive publicly traded common stock, all outstanding options and
SARs immediately will become exercisable in full, all other awards immediately
will vest, all performance measures will be deemed satisfied at the maximum
level and each option, SAR and other award will represent a right to acquire the
appropriate number of shares of common stock received in the merger or similar
transaction.
Effective Date, Termination and Amendment. If approved by shareholders, the
2003 Plan will be effective as of November 19, 2003. The 2003 Plan will
terminate on November 19, 2013, unless terminated earlier by the board of
directors. The board of directors may amend the 2003 Plan at any time, subject
to any requirement of shareholder approval required by applicable law and
provided that no amendment may be made without shareholder approval if the
amendment would (i) increase the number of shares of common stock available
under the 2003 Plan, (ii) effect any change inconsistent with Section 422 of the
Code or (iii) extend the term of the 2003 Plan.
Stock Options and Stock Appreciation Rights--General. Under the 2003 Plan,
the Committee may grant to eligible participants non-qualified stock options and
incentive stock options to purchase shares of common stock. The Committee may
also grant SARs either independently of, or in tandem with, a stock option. The
exercise of an SAR entitles the holder to receive shares of common stock (which
may be restricted stock), cash or a combination thereof with a value equal to
the difference between the fair market value of the common stock on the exercise
date and base price of the SAR. Except for non-qualified stock options
automatically granted to non-employee directors, the Committee will determine
the terms of each option and SAR, including the number and exercise price or
base price of the shares subject to the option or SAR, the term of the option or
SAR and the conditions to the exercisability of the option or SAR, subject to
the limitations set forth below. Upon exercise of an option, the purchase price
must be paid in the manner set forth in the agreement relating to the option.
The agreement may provide for payment in cash, by delivery of certain previously
acquired shares of common stock, by delivery of an irrevocable notice of
exercise to a broker-dealer acceptable to us or by a combination of cash and
delivery of certain previously acquired shares of common stock.
Non-Qualified Stock Options and Stock Appreciation Rights. The exercise
price of a non-qualified stock option and the base price of an SAR will be
determined by the Committee, except that the price per share will not be less
than 100% of the fair market value of a share of common stock on the date of
grant and except that the base price of an SAR granted in tandem with an option
will be the exercise price of the option.
If the holder of a non-qualified stock option or SAR terminates employment
or service by reason of disability or death, unless otherwise specified in the
agreement relating to the option or SAR, the option or SAR will be fully
exercisable and may thereafter be exercised until the earlier of one year after
the date of termination (or any other period set forth in the award agreement)
and the expiration of the option or SAR. If the holder of a non-qualified stock
option or SAR terminates employment or service by reason of retirement on or
after age 60, unless otherwise specified in the agreement relating to the option
or SAR, the option or SAR will be exercisable only to the extent that the option
or SAR is exercisable on the effective date of the termination and may
thereafter be exercised until the earlier of two years after the date of the
termination (or any other period set forth in the award agreement) and the
expiration of the option or SAR. If the employment or service of a holder of a
non-qualified stock option or SAR is terminated by Bone Care for cause, the
option or SAR automatically will be canceled on the date of termination. If the
holder of a non-qualified stock option or SAR terminates employment or service
for any reason other than disability, death, retirement on or after age 60 or
for cause, unless otherwise specified in the award agreement, the option or SAR
will be exercisable only to the extent that it is exercisable on the effective
date of termination and may thereafter be exercised until the earlier of three
months after the date of the termination (or any other period set forth in the
award agreement) and the expiration of the option or SAR.
20
Incentive Stock Options. No incentive stock option will be exercisable
later than ten years after its date of grant, and in the case of a recipient of
an incentive stock option who owns more than 10% of the voting power of all
shares of capital stock of Bone Care (a "ten percent holder"), the option must
be exercised no later than five years after its date of grant. The exercise
price of an incentive stock option will not be less than 100% of the fair market
value of the common stock on the date of grant of the option, except that if the
recipient of an incentive stock option is a ten percent holder, the exercise
price will be not less than the price required by the Code, currently 110% of
the fair market value of the common stock on its date of grant. To the extent
that the aggregate fair market value of common stock with respect to which an
incentive stock option is exercisable for the first time by an individual during
a calendar year exceeds the amount established by the Code, currently $100,000,
the option will be treated as a non-qualified stock option.
If the holder of an incentive stock option terminates employment by reason
of permanent and total disability (as defined in Section 22(e)(3) of the Code),
unless otherwise specified in the option agreement, the option will be fully
exercisable and may thereafter be exercised until the earlier of one year after
the date of termination (or any shorter period set forth in the option
agreement) and the expiration of the option. If the holder of an incentive stock
option terminates employment by reason of death, unless otherwise specified in
the option agreement, the option will be fully exercisable and may thereafter be
exercised until the earlier of one year after the date of death (or any other
period set forth in the option agreement) and the expiration of such option. If
the employment of a holder of an incentive stock option is terminated by Bone
Care for cause, the option automatically will be canceled on the date of the
termination. If the holder of an incentive stock option terminates employment
for any reason other than permanent and total disability, death or for cause,
unless otherwise specified in the option agreement, the option will be
exercisable to the same extent as set forth above with respect to non-qualified
stock options and may thereafter be exercised until the earlier of three months
after the date of termination and the expiration of the option. If the holder of
an incentive stock option dies during the period of exercisability of the option
following termination of employment by reason of permanent and total disability
or for any other reason other than for cause, unless otherwise set forth in the
option agreement, the option will be exercisable only to the extent that it is
exercisable on the date of the holder's death and may thereafter be exercised
until the earlier of one year after the date of the holder's death (or any other
period set forth in the option agreement) and the expiration of the option.
Non-Employee Director Options. Under the 2003 Plan, on the date of each
annual meeting of Bone Care shareholders, each person who is a non-employee
director of Bone Care on that date will be granted a non-qualified stock option
to purchase 10,000 shares of common stock. Each such option will become
exercisable one year following the date of grant. Each non-employee director of
Bone Care who becomes such on a date other than the date of an annual
shareholder meeting will be granted a non-qualified option to purchase a
pro-rated portion of 10,000 shares, which option will become exercisable on the
date of the annual shareholder meeting following the date of grant. Each new
non-employee director of Bone Care will be granted a non-qualified option to
purchase 20,000 shares of common stock and a non-qualified option to purchase a
number of shares of common stock (not to exceed 30,000) equal to the number of
shares purchased by the non-employee director during the first 90 days after the
director first becomes a director. Each such option will become exercisable in
equal annual installments over the non-employee director's initial term. Each
option granted to a non-employee director will have an exercise price equal to
100% of the fair market value of a share of common stock on the date of grant
and will expire 10 years after the date of grant. The number of shares subject
to the options granted to a non-employee director are subject to adjustment in
the event of a change in Bone Care's capital structure or similar event.
If the holder of a non-employee director option ceases to be a director of
Bone Care by reason of disability or death, the non-employee director option
will be fully exercisable and may thereafter be exercised until the earlier of
one year after the date the holder ceased to be a director and the expiration of
the option. If the holder of a non-employee director option ceases to be a
director of Bone Care on or after age 60, the non-employee director option will
be exercisable only to the extent that it is exercisable on the effective date
of the holder's ceasing to be a director and may thereafter be exercised until
the earlier of two years after the date the holder ceased to be a director and
the expiration of the option. If the holder of a non-employee director option
ceases to be a director of Bone Care for any other reason, the non-employee
director option will be exercisable only to the extent that it is exercisable on
the effective date of the holder's ceasing to be a director and may thereafter
be exercised until the earlier of three months after the date the holder ceased
to be a director and the expiration of the option. If the holder of a
non-employee director option dies during any of the periods of exercisabilty
following the holder's ceasing to be a director of Bone Care as described above,
the non-employee director option will be exercisable only to the extent that it
is exercisable on the date of the holder's death and may thereafter be exercised
until the earlier of one year after the date of the holder's death and the
expiration of the option.
Unrestricted Stock and Restricted Stock Awards. Under the 2003 Plan, the
Committee may grant (i) unrestricted stock awards, which are vested upon grant,
and (ii) stock awards which are subject to a restriction period ("restricted
stock"). An award of restricted stock may be conditioned upon, or subject to,
attainment of pre-established performance measures.
21
Shares of restricted stock generally are subject to forfeiture if the holder
does not remain continuously in the employment of or service to Bone Care during
the restriction period or, if the restricted stock is subject to performance
measures, if the performance measures are not attained during the restriction
period, except that in the event of the termination of employment or service of
a holder of a restricted stock award, any cancellation or forfeiture of the
portion of the restricted stock award which is then subject to a restriction
period will be subject to the terms set forth in the agreement relating to the
award. Unless otherwise set forth in an award agreement, the holder of a
restricted stock award will have rights as a shareholder of the Company,
including the right to vote and receive dividends with respect to the shares of
restricted stock.
Performance Share Awards. Under the 2003 Plan, the Committee also may grant
performance share awards. Each performance share represents a right, contingent
upon the attainment of pre-established performance measures within a specified
performance period, to receive one share of common stock, which may be
restricted stock, or the fair market value of one share of common stock in cash.
Prior to the settlement of a performance share award in shares of common stock,
the holder of the award will have no rights as a shareholder of Bone Care with
respect to the shares of common stock subject to the award. Performance shares
generally are subject to forfeiture if the pre-established performance measures
are not attained during the performance period, except that in the event of the
termination of employment or service of a holder of a performance share award,
any cancellation or forfeiture of the portion of the performance share award
which is then subject to a performance period will be subject to the terms set
forth in the agreement relating to such award.
Performance Measures. Under the 2003 Plan, the vesting or payment of
performance share awards and the vesting of certain restricted stock awards will
be subject to the satisfaction of performance measures. The exercisability of
stock options or SARs also may be subject to the satisfaction of performance
measures. Under the 2003 Plan, performance measures may include the following:
common stock value, earnings per share, return to shareholders (including
dividends), return on assets, return on equity, earnings of the Company,
revenues, market share, cash flow, cost reduction goals or any combination of
the foregoing. The performance measures applicable to a particular award will be
determined by the Committee. No performance measures currently have been
designated by the Committee in connection with any award to be granted under the
2003 Plan.
Nontransferability. Unless otherwise specified in the agreement relating to
an award, no award granted under the 2003 Plan will be transferable other than
by will, the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by Bone Care.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the United States federal income tax
consequences of awards made under the 2003 Plan. The following should not be
relied upon as being a complete description of those consequences and does not
address the state, local or other tax consequences of awards made under the 2003
Plan.
Stock Options. A participant will not recognize taxable income at the time
of grant of a stock option. A participant will recognize compensation taxable as
ordinary income upon exercise of a non-qualified stock option equal to the
excess of the fair market value, on the date of exercise, of the shares
purchased over their exercise price, and Bone Care generally will be entitled to
a corresponding deduction. A participant will not recognize taxable income
(except for purposes of the alternative minimum tax) upon exercise of an
incentive stock option. If the shares acquired by exercise of an incentive stock
option are held for the longer of two years from the date the option was granted
and one year from the date the shares were transferred to the participant, any
gain or loss arising from a subsequent disposition of those shares will be taxed
as long-term capital gain or loss, and Bone Care will not be entitled to any
deduction. If, however, the shares are disposed of within the above-described
period, then in the year of the disposition the participant will recognize
compensation taxable as ordinary income equal to the excess of the lesser of the
amount realized upon the disposition and the fair market value of the shares on
the date of exercise over the exercise price, and Bone Care generally will be
entitled to a corresponding deduction.
SARs. A participant will not recognize taxable income at the time of grant
of an SAR. A participant will recognize compensation taxable as ordinary income
upon exercise of an SAR equal to the fair market value of any shares delivered
and the amount of any cash paid by Bone Care upon that exercise, and Bone Care
generally will be entitled to a corresponding deduction.
Restricted Stock. A participant will not recognize taxable income at the
time of grant of shares of restricted stock and Bone Care will not be entitled
to a deduction at that time, unless the participant makes an election to be
taxed at the time the shares of restricted stock are granted. If that election
is not made, the participant will recognize compensation taxable as
22
ordinary income at the time the restrictions lapse in an amount equal to the
excess of the fair market value of the shares at that time over the amount, if
any, paid for the shares. The amount of ordinary income recognized by a
participant by making the above-described election or upon the lapse of the
restrictions is deductible by Bone Care as a compensation expense, except to the
extent the deduction limits of Section 162(m) of the Code apply. In addition, a
participant receiving dividends with respect to restricted stock for which the
above-described election has not been made and prior to the time the
restrictions lapse will recognize compensation taxable as ordinary income,
rather than dividend income, in an amount equal to the dividends paid and Bone
Care will be entitled to a corresponding deduction, except to the extent the
deduction limits of Section 162(m) of the Code apply.
Unrestricted Stock. A participant will recognize compensation taxable as
ordinary income at the time of grant of shares of unrestricted stock in an
amount equal to the then fair market value of the shares, and Bone Care will be
entitled to a corresponding deduction, except to the extent the deduction limits
of Section 162(m) of the Code apply.
Performance Shares. A participant will not recognize taxable income at the
time of grant of performance shares. Upon the settlement of performance shares,
a participant will recognize compensation taxable as ordinary income equal to
the fair market value of any shares delivered and the amount of any cash paid by
Bone Care and Bone Care generally will be entitled to a corresponding deduction.
Tax Withholding. The compensation taxable as ordinary income recognized by
a participant (other than a non-employee director) in connection with an award
under the 2003 Plan will be subject to withholding of tax by Bone Care.
Section 162(m) of the Code. Section 162(m) of the Code generally limits to
$1 million the amount that a publicly held corporation is allowed each year to
deduct for the compensation paid to each of the corporation's chief executive
officer and the corporation's four most highly compensated executive officers
other than the chief executive officer. However, certain types of compensation
paid to those executives are not subject to the $1 million deduction limit. One
type is "qualified performance-based compensation." Qualified performance-based
compensation must satisfy all of the following requirements: (i) the
compensation must be payable solely on account of the attainment of
preestablished objective performance measures, (ii) the performance measures
must be determined by a committee consisting solely of two or more "outside
directors," (iii) the material terms under which the compensation is to be paid,
including the performance measures, must be approved by a majority of the
corporation's shareholders and (iv) the committee administering the plan must
certify that the applicable performance measures were satisfied before payment
of any performance-based compensation is made. The Committee will consist solely
of two or more "outside directors" as defined for purposes of Section 162(m) of
the Code. As a result, and based on regulations published by the United States
Department of the Treasury, certain compensation under the 2003 Plan, such as
that payable with respect to options, SARs, restricted stock with restrictions
based upon the attainment of performance measures and performance awards, is not
expected to be subject to the $1 million deduction limit under Section 162(m) of
the Code, but other compensation under the 2003 Plan, such as that payable with
respect to unrestricted stock and restricted stock with restrictions not based
upon the attainment of performance measures, is expected to be subject to such
limit.
The following table sets forth the aggregate number of shares of common
stock underlying options which would be granted automatically to non-employee
directors on June 30 of each year:
Position Number of Shares
-------- ----------------
All Non-Employee Directors as a Group (6 persons) 60,000
The exercise price per share would be 100% of the fair market value of a
share of common stock on the date of grant. On October 6, 2003, the closing sale
price of common stock on the Nasdaq National Market was $14.50 per share. The
general terms of each option are described above under "Non-Employee Director
Options" in "Proposal 2 - Approval of the 2003 Stock Incentive Plan."
The options to be granted to the persons listed under "Summary
Compensation Table: during the fiscal year ending June 30, 2004 are not
determinable. The options granted to those persons during the fiscal year ended
June 30, 2003 are listed under "Option Grants in 2003".
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE "FOR" APPROVAL OF THE 2003 STOCK
INCENTIVE PLAN.
23
PROPOSAL 3 - RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has selected Deloitte &
Touche LLP to audit our financial statements for the fiscal year ending June 30,
2004. Deloitte & Touche LLP audited our financial statements for the fiscal year
ended June 30, 2003.
It is expected that a representative of Deloitte & Touche LLP will attend
the 2003 annual meeting, with the opportunity to make a statement if they should
desire, and will be available to respond to appropriate questions.
Approval of the ratification of the selection of Deloitte & Touche LLP will
require that the number of votes cast favoring approval exceeds the number of
votes cast opposing the proposal. Unless otherwise specified, the shares of
common stock represented by the proxies being solicited will be voted "FOR" the
proposal.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE "FOR" APPROVAL OF THE RATIFICATION OF
THE SELECTION OF DELOITTE & TOUCHE LLP.
OTHER BUSINESS
The Board knows of no other business which will come before the annual
meeting. If any other matters shall properly come before the annual meeting,
your authorized proxies will vote on such matters in accordance with their best
judgment on such matters.
SHAREHOLDER PROPOSALS
The Bylaws of the Company provide that no business may be conducted at an
annual meeting (including proposed nominations of persons for election to the
Board) unless properly brought before the meeting. For business to be properly
brought before an annual meeting by a shareholder, the shareholder must have
given written notice to the corporate secretary of Bone Care, received at our
principal executive offices, not less than 60 days nor more than 90 days prior
to the meeting or, if less than 70 days' notice of the meeting or prior public
disclosure of the date of the meeting is given or made to shareholders, not
later than the close of business on the tenth day following the day on which the
notice of the meeting was mailed or, if earlier, the day on which the public
disclosure was made. Our by-laws also contain requirements for the information
that must be contained in the shareholder's notice. Copies of the applicable
by-law provisions may be obtained, without charge, upon written request to the
corporate secretary of the company at its principal executive offices. The 2004
annual meeting is expected to be held on November 15, 2004. Accordingly, a
shareholder proposal or nomination intended to be brought before the 2004 annual
meeting must be received by the secretary on or after August 15, 2004 and on or
prior to September 16, 2004.
In order to be considered for inclusion in our proxy materials for the 2004
annual meeting of shareholders, written notice of any shareholder proposal must
be delivered or mailed to and received at our principal executive offices by
June 10, 2004, at 1600 Aspen Commons, Middleton, Wisconsin 53562.
COSTS OF SOLICITATION
We will pay the costs of soliciting proxies, including printing, handling
and mailing of this proxy statement, the proxy and related material furnished to
shareholders. Copies of solicitation materials will be furnished to banks,
brokerage houses, custodians, nominees and fiduciaries holding shares of common
stock in their names which are beneficially owned by others to forward to such
beneficial owners. We may reimburse persons representing beneficial owners for
their costs of forwarding proxy material to the beneficial owners. Certain
officers, directors and regular employees of the Company may solicit proxies by
telephone, telegraph, and facsimile or in person. These persons will receive no
extra compensation for their services.
24
FINANCIAL STATEMENTS
A copy of our annual report on Form 10-K filed with the SEC, containing
audited financial statements for the fiscal year ended June 30, 2003, is
enclosed herewith.
By Order of the Board of Directors,
/s/ Paul L. Berns
Paul L. Berns
President and Chief Executive Officer
Middleton, Wisconsin
October 10, 2003
25
EXHIBIT A
BONE CARE INTERNATIONAL, INC.
2003 STOCK INCENTIVE PLAN
INTRODUCTION
1.1 PURPOSES.
The purposes of the Bone Care International, Inc. 2003 Stock Incentive
Plan (the "Plan") of Bone Care International, Inc., a Wisconsin corporation (the
"Company"), are (i) to align the interests of the Company's stockholders and the
recipients of awards under this Plan by increasing the proprietary interest of
such recipients in the Company's growth and success, (ii) to advance the
interests of the Company by attracting and retaining directors, officers and
other employees and (iii) to motivate such persons to act in the long-term best
interests of the Company and its stockholders.
1.2 CERTAIN DEFINITIONS.
"AGREEMENT" shall mean the written agreement evidencing an award
hereunder between the Company and the recipient of such award.
"BOARD" shall mean the Board of Directors of the Company.
"CAUSE" shall mean (i) the willful failure to perform the duties
assigned by the Company (other than a failure resulting from the holder's
Disability), (ii) the willful engaging in conduct which is demonstrably
injurious to the Company or any Subsidiary, monetarily or otherwise, including
conduct that, in the reasonable judgment of the Company, constitutes gross
negligence or no longer conforms to the standard of the Company's executives or
employees or (iii) any act of fraud, embezzlement, theft or other act of
dishonesty, admission or conviction of a felony or of any crime involving moral
turpitude, fraud, embezzlement, theft or misrepresentation, or the violation of
any statutory or common law duty of loyalty to the Company or any Subsidiary.
"CHANGE IN CONTROL" shall have the meaning set forth in Section 6.8(b).
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMITTEE" shall mean the committee designated by the Board,
consisting of two or more members of the Board, each of whom may be (i) a
"Non-Employee Director" within the meaning of Rule 16b-3 under the Exchange Act
and (ii) an "outside director" within the meaning of Section 162(m) of the Code.
"COMMON STOCK" shall mean the common stock, without par value, of the
Company, together with associated preferred stock purchase rights.
"COMPANY" shall have the meaning set forth in Section 1.1.
"CORPORATE TRANSACTION" shall have the meaning set forth in Section
6.8(b)(3).
"DIRECTOR COMMENCEMENT DATE" shall have the meaning set forth in
Section 3.2.
"DISABILITY" shall mean the inability of the holder of an award to
perform substantially such holder's duties and responsibilities for at least 180
consecutive days as a result of the holder's physical or mental illness, as
determined solely by the Committee.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FAIR MARKET VALUE" shall mean the closing transaction price of a share
of Common Stock as reported in the Nasdaq Stock Market on the date as of which
such value is being determined or, if the Common Stock is not listed on
26
Nasdaq, the closing transaction price of a share of Common Stock on the
principal national stock exchange on which the Common Stock is traded on the
date as of which such value is being determined, or if there shall be no
reported transaction for such date, on the next preceding date for which a
transaction was reported; provided, however, that if Fair Market Value for any
date cannot be so determined, Fair Market Value shall be determined by the
Committee by whatever means or method as the Committee, in the good faith
exercise of its discretion, shall at such time deem appropriate.
"FREE-STANDING SAR" shall mean an SAR which is not granted in tandem
with, or by reference to, an option, which entitles the holder thereof to
receive, upon exercise, shares of Common Stock (which may be Restricted Stock),
cash or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.
"INCENTIVE STOCK OPTION" shall mean an option to purchase shares of
Common Stock that meets the requirements of Section 422 of the Code, or any
successor provision, which is intended by the Committee to constitute an
Incentive Stock Option.
"INCUMBENT BOARD" shall have the meaning set forth in Section
6.8(b)(2).
"MATURE SHARES" shall mean previously-acquired shares of Common Stock
for which the holder thereof has good title, free and clear of all liens and
encumbrances, and which such holder either (i) has held for at least six months
or (ii) has purchased on the open market.
"NON-EMPLOYEE DIRECTOR" shall mean any director of the Company who is
not an officer or employee of the Company or any Subsidiary.
"NON-QUALIFIED STOCK OPTION" shall mean an option to purchase shares of
Common Stock which is not an Incentive Stock Option.
"OUTSTANDING COMMON STOCK" shall have the meaning set forth in Section
6.8(b)(1).
"OUTSTANDING VOTING SECURITIES" shall have the meaning set forth in
Section 6.8(b)(1).
"PERFORMANCE MEASURES" shall mean the criteria and objectives,
established by the Committee, which shall be satisfied or met (i) as a condition
to the grant or exercisability of all or a portion of an option or SAR, (ii) as
a condition to the grant of a Stock Award or (iii) during the applicable
Restriction Period or Performance Period as a condition to the holder's receipt,
in the case of a Restricted Stock Award, of the shares of Common Stock subject
to such award, or, in the case of a Performance Share Award, of the shares of
Common Stock subject to such award and/or of payment with respect to such award.
Such criteria and objectives may include one or more of the following: the
attainment by a share of Common Stock of a specified Fair Market Value for a
specified period of time, earnings per share, return to stockholders (including
dividends), return on assets, return on equity, earnings of the Company,
revenues, market share, cash flow or cost reduction goals, or any combination of
the foregoing.
"PERFORMANCE PERIOD" shall mean any period designated by the Committee
during which the Performance Measures applicable to a Performance Share Award
shall be measured.
"PERFORMANCE SHARE" shall mean a right, contingent upon the attainment
of specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock, or in lieu of
all or a portion thereof, the Fair Market Value of such share of Common Stock in
cash.
"PERFORMANCE SHARE AWARD" shall mean an award of Performance Shares
under this Plan.
"PERMANENT AND TOTAL DISABILITY" shall have the meaning set forth in
Section 22(e)(3) of the Code or any successor thereto.
"PERSON" shall have the meaning set forth in Section 6.8(b)(1).
"PLAN" shall have the meaning set forth in Section 1.1.
27
"POST-TERMINATION EXERCISE PERIOD" shall mean the period specified in
or pursuant to Section 2.3(a), Section 2.3(b), Section 2.3(d) or Section 2.3(e)
following termination of employment with or service to the Company during which
an option or SAR may be exercised.
"RESTRICTED STOCK" shall mean shares of Common Stock which are subject
to a Restriction Period.
"RESTRICTED STOCK AWARD" shall mean an award of Restricted Stock under
this Plan.
"RESTRICTION PERIOD" shall mean any period designated by the Committee
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.
"RETIREMENT" shall mean termination of employment with or service to
the Company by reason of retirement on or after age 60.
"SAR" shall mean a stock appreciation right which may be a
Free-Standing SAR or a Tandem SAR.
"STOCK AWARD" shall mean a Restricted Stock Award or an Unrestricted
Stock Award.
"SUBSIDIARY" and "SUBSIDIARIES" shall have the meanings set forth in
Section 1.4.
"TANDEM SAR" shall mean an SAR which is granted in tandem with, or by
reference to, an option (including a Non-Qualified Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.
"TAX DATE" shall have the meaning set forth in Section 4.5.
"TEN PERCENT HOLDER" shall have the meaning set forth in Section
2.1(a).
"UNRESTRICTED STOCK" shall mean shares of Common Stock which are not
subject to a Restriction Period or Performance Measures.
"UNRESTRICTED STOCK AWARD" shall mean an award of Unrestricted Stock
under this Plan.
1.3 ADMINISTRATION.
This Plan shall be administered by the Committee. Any one or a combination of
the following awards may be made under this Plan to eligible persons: (i)
options to purchase shares of Common Stock in the form of Incentive Stock
Options or Non-Qualified Stock Options, (ii) SARs in the form of Tandem SARs or
Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock or
Unrestricted Stock and (iv) Performance Shares. The Committee shall, subject to
the terms of this Plan, select eligible persons for participation in this Plan
and determine the form, amount and timing of each award to such persons and, if
applicable, the number of shares of Common Stock, the number of SARs and the
number of Performance Shares subject to such an award, the exercise price or
base price associated with the award, the time and conditions of exercise or
settlement of the award and all other terms and conditions of the award,
including, without limitation, the form of the Agreement evidencing the award.
The Committee may, in its sole discretion and for any reason at any time,
subject to the requirements of Section 162(m) of the Code and regulations
thereunder in the case of an award intended to be qualified performance-based
compensation, take action such that (i) any or all outstanding options and SARs
shall become exercisable in part or in full, (ii) all or a portion of the
Restriction Period applicable to any outstanding Restricted Stock Award shall
lapse, (iii) all or a portion of the Performance Period applicable to any
outstanding Performance Share Award shall lapse and (iv) the Performance
Measures applicable to any outstanding award (if any) shall be deemed to be
satisfied at the maximum or any other level. The Committee shall, subject to the
terms of this Plan, interpret this Plan and the application thereof, establish
rules and regulations it deems necessary or desirable for the administration of
this Plan and may impose, incidental to the grant of an award, conditions with
respect to the award, such
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as limiting competitive employment or other activities. All such
interpretations, rules, regulations and conditions shall be final, binding and
conclusive.
The Committee may delegate some or all of its power and authority
hereunder to the Board or the Chief Executive Officer or other executive officer
of the Company as the Committee deems appropriate; provided, however, that (i)
the Committee may not delegate its power and authority to the Board or the Chief
Executive Officer or other executive officer of the Company with regard to the
grant of an award to any person who is a "covered employee" within the meaning
of Section 162(m) of the Code or who, in the Committee's judgment, is likely to
be a covered employee at any time during the period an award hereunder to such
employee would be outstanding and (ii) the Committee may not delegate its power
and authority to the Chief Executive Officer or other executive officer of the
Company with regard to the selection for participation in this Plan of an
officer or other person subject to Section 16 of the Exchange Act or decisions
concerning the timing, pricing or amount of an award to such an officer or other
person.
No member of the Board or Committee, and neither the Chief Executive
Officer nor any other executive officer to whom the Committee delegates any of
its power and authority hereunder, shall be liable for any act, omission,
interpretation, construction or determination made in connection with this Plan
in good faith, and the members of the Board and the Committee and the Chief
Executive Officer or other executive officer shall be entitled to
indemnification and reimbursement by the Company in respect of any claim, loss,
damage or expense (including attorneys' fees) arising therefrom to the full
extent permitted by law, except as otherwise may be provided in the Company's
Articles of Incorporation and/or By-laws, and under any directors' and officers'
liability insurance that may be in effect from time to time.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
1.4 ELIGIBILITY.
Participants in this Plan shall consist of such officers, other
employees and directors (including Non-Employee Directors) and persons expected
to become officers, other employees and directors of the Company and its
subsidiaries from time to time (individually a "Subsidiary" and collectively the
"Subsidiaries") as the Committee in its sole discretion may select from time to
time. For purposes of this Plan, references to employment by the Company shall
also mean employment by a Subsidiary. The Committee's selection of a person to
participate in this Plan at any time shall not require the Committee to select
such person to participate in this Plan at any other time. Non-Employee
Directors shall be eligible to participate in this Plan in accordance with
Article V.
1.5 SHARES AVAILABLE.
Subject to adjustment as provided in Section 6.7, 300,000 shares of
Common Stock shall be available for awards under this Plan, reduced by the sum
of the aggregate number of shares of Common Stock which become subject to
outstanding options, including Non-Qualified Stock Options granted to
Non-Employee Directors pursuant to Article V, outstanding Free-Standing SARs,
outstanding Stock Awards and outstanding Performance Share Awards. To the extent
that shares of Common Stock subject to an outstanding option (except to the
extent shares of Common Stock are issued or delivered by the Company in
connection with the exercise of a Tandem SAR), Free-Standing SAR, Stock Award or
Performance Share Award are not issued or delivered by reason of the expiration,
termination, cancellation or forfeiture of such award or by reason of the
delivery or withholding of shares of Common Stock to pay all or a portion of the
exercise price of an award, if any, or to satisfy all or a portion of the tax
withholding obligations relating to an award, then such shares of Common Stock
shall again be available under this Plan.
Shares of Common Stock shall be made available from authorized and
unissued shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
To the extent necessary for an award to be qualified performance-based
compensation under Section 162(m) of the Code and the regulations thereunder,
(i) the maximum number of shares of Common Stock with respect to which options
or SARs or a combination thereof may be granted during any calendar year to any
person shall be 200,000, subject to adjustment as provided in Section 6.7, (ii)
the maximum number of shares of Common Stock with respect to which Stock Awards
subject to Performance Measures may be granted during any calendar year to any
person shall be 200,000, subject
29
to adjustment as provided in Section 6.7 and (iii) the maximum number of shares
of Common Stock with respect to which Performance Share Awards may be granted
during any calendar year to any person shall be 200,000, subject to adjustment
as provided in Section 6.7.
II. STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
2.1 STOCK OPTIONS.
The Committee may, in its discretion, grant options to purchase shares
of Common Stock to such eligible persons as may be selected by the Committee.
Each option, or portion thereof, that is not an Incentive Stock Option shall be
a Non-Qualified Stock Option. An Incentive Stock Option may not be granted to
any person who is not an employee of the Company or any parent or subsidiary (as
defined in Section 424 of the Code). Each Incentive Stock Option shall be
granted within ten years of the date this Plan is adopted by the Board. To the
extent that the aggregate Fair Market Value (determined as of the date of grant)
of shares of Common Stock with respect to which options designated as Incentive
Stock Options are exercisable for the first time by a participant during any
calendar year (under this Plan or any other plan of the Company, or any parent
or subsidiary as defined in Section 424 of the Code) exceeds the amount
(currently $100,000) established by the Code, such options shall constitute
Non-Qualified Stock Options.
Options shall be subject to the following terms and conditions and
shall be subject to such additional terms and conditions, not inconsistent with
the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock purchasable
upon exercise of an option shall not be less than 100% of the Fair Market Value
of a share of Common Stock on the date of grant of such option; provided
further, that if an Incentive Stock Option shall be granted to any person who,
at the time such option is granted, owns capital stock possessing more than ten
percent of the total combined voting power of all classes of capital stock of
the Company (or of any parent or subsidiary as defined in Section 424 of the
Code) (a "Ten Percent Holder"), the purchase price per share of Common Stock
shall not be less than the price (currently 110% of Fair Market Value) required
by the Code in order for the option to constitute an Incentive Stock Option.
(b) Exercise Period and Exercisability. The period during which an
option may be exercised shall be determined by the Committee; provided, however,
that no Incentive Stock Option shall be exercised later than ten years after its
date of grant; provided further, that if an Incentive Stock Option shall be
granted to a Ten Percent Holder, such option shall not be exercised later than
five years after its date of grant. The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a condition to
the grant of an option or to the exercisability of all or a portion of an
option. The Committee shall determine whether an option shall become exercisable
in cumulative or non-cumulative installments and in part or in full at any time.
An exercisable option, or portion thereof, may be exercised only with respect to
whole shares of Common Stock.
(c) Method of Exercise. An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and by accompanying such notice with payment therefore in
full (or by arranging for such payment to the Company's satisfaction) either (A)
in cash, (B) by delivery (either actual delivery or by attestation procedures
established by the Company) of Mature Shares having an aggregate Fair Market
Value, determined as of the date of exercise, equal to the aggregate purchase
price payable by reason of such exercise, (C) in cash by a broker-dealer
acceptable to the Company to whom the optionee has submitted an irrevocable
notice of exercise or (D) a combination of (A) and (B), in each case to the
extent set forth in the Agreement relating to the option, (ii) if applicable, by
surrendering to the Company any Tandem SARs which are cancelled by reason of the
exercise of the option and (iii) by executing such documents as the Company may
reasonably request. Any fraction of a share of Common Stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the optionee. No certificate representing
Common Stock shall be delivered until the full purchase price therefore and any
withholding taxes thereon, as described in Section 6.5, have been paid (or
arrangement made for such payment to the Company's satisfaction).
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2.2 STOCK APPRECIATION RIGHTS. The Committee may, in its
discretion, grant SARs to such eligible persons as may be selected by the
Committee. The Agreement relating to an SAR shall specify whether the SAR is a
Tandem SAR or a Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
be subject to such additional terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an
award shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted. The base price of a Tandem SAR shall be the purchase
price per share of Common Stock of the related option. The base price of a
Free-Standing SAR shall be determined by the Committee; provided, however, that
such base price shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date of grant of such SAR.
(b) Exercise Period and Exercisability. The Agreement relating to an
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of a SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later than
the expiration, cancellation, forfeiture or other termination of the related
option. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met as a condition to the grant of an SAR or to the
exercisability of all or a portion of an SAR. The Committee shall determine
whether an SAR may be exercised in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable SAR, or portion thereof, may be
exercised, in the case of a Tandem SAR, only with respect to whole shares of
Common Stock and, in the case of a Free-Standing SAR, only with respect to a
whole number of SARs. If an SAR is exercised for shares of Restricted Stock, a
certificate or certificates representing such Restricted Stock shall be issued
in accordance with Section 3.2(c) and the holder of such Restricted Stock shall
have such rights of a stockholder of the Company as determined pursuant to
Section 3.2(d). Prior to the exercise of an SAR for shares of Common Stock,
including Restricted Stock, the holder of such SAR shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject to
such SAR.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
canceled by reason of the exercise of the Tandem SAR and (iii) by executing such
documents as the Company may reasonably request. A Free-Standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number of SARs which are being exercised and (ii) by executing such documents as
the Company may reasonably request.
2.3 TERMINATION OF EMPLOYMENT OR SERVICE.
(a) Disability. Subject to paragraph (e) below and unless otherwise
specified in the Agreement relating to an option or SAR, as the case may be, if
the employment with or service to the Company of the holder of an option or SAR
terminates by reason of Disability, each option and SAR held by such holder
shall be fully exercisable and may thereafter be exercised by such holder (or
such holder's legal representative or similar person) until and including the
earlier to occur of (i) the date which is one year (or such other period as set
forth in the Agreement relating to such option or SAR) after the effective date
of such holder's termination of employment or service and (ii) the expiration
date of the term of such option or SAR.
(b) Retirement. Subject to paragraph (e) below and unless otherwise
specified in the Agreement relating to an option or SAR, as the case may be, if
the employment with or service to the Company of the holder of an option or SAR
terminates by reason of Retirement, each option and SAR held by such holder
shall be exercisable only to the extent that such option or SAR is exercisable
on the effective date of such holder's termination of employment or service and
may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until and including the earlier to occur of
(i) the date which is two years (or such other period as set forth in the
Agreement relating to such option or SAR) after the effective date of such
holder's termination of employment or service and (ii) the expiration date of
the term of such option or SAR.
(c) Death. Subject to paragraph (e) below and unless otherwise
specified in the Agreement relating to an option or SAR, as the case may be, if
the employment with or service to the Company of the holder of an option or SAR
terminates by reason of death, each option and SAR held by such holder shall be
fully exercisable and may thereafter be exercised by such holder's executor,
administrator, legal representative, beneficiary or similar person until and
including
31
the earlier to occur of (i) the date which is one year (or such other period as
set forth in the Agreement relating to such option or SAR) after the date of
death and (ii) the expiration date of the term of such option or SAR.
(d) Other Termination. Subject to paragraph (e) below and unless
otherwise specified in the Agreement relating to an option or SAR, as the case
may be, if the employment with or service to the Company of the holder of an
option or SAR terminates for any reason other than Disability, Retirement or
death or for Cause, each option and SAR held by such holder shall be exercisable
only to the extent that such option or SAR is exercisable on the effective date
of such holder's termination of employment or service and may thereafter be
exercised by such holder (or such holder's legal representative or similar
person) until and including the earlier to occur of (i) the date which is three
months (or such other period as set forth in the Agreement relating to such
option or SAR) after the effective date of such holder's termination of
employment or service and (ii) the expiration date of the term of such option or
SAR.
(e) Termination of Employment or Service - Incentive Stock Options. If
the employment with the Company of a holder of an Incentive Stock Option
terminates by reason of Permanent and Total Disability, each Incentive Stock
Option held by such optionee shall be fully exercisable (unless otherwise
specified in the Agreement relating to the option), and may thereafter be
exercised by such optionee (or such optionee's legal representative or similar
person) until and including the earlier to occur of (i) the date which is one
year (or such shorter period as set forth in the Agreement relating to such
option) after the effective date of such optionee's termination of employment
and (ii) the expiration date of the term of such option.
If the employment with the Company of a holder of an Incentive Stock
Option terminates by reason of death, each Incentive Stock Option held by such
optionee shall be fully exercisable (unless otherwise specified in the Agreement
relating to the option), and may thereafter be exercised by such optionee's
executor, administrator, legal representative, beneficiary or similar person
until and including the earlier to occur of (i) the date which is one year (or
such other period as set forth in the Agreement relating to such option) after
the date of death and (ii) the expiration date of the term of such option.
If the employment with the Company of a holder of an Incentive Stock
Option terminates for any reason other than Permanent and Total Disability or
death or for Cause, each Incentive Stock Option held by such optionee shall be
exercisable to the extent set forth in Section 2.3(a), Section 2.3(b) or 2.3(d),
as applicable (unless otherwise specified in the Agreement relating to the
option), and may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until and including the earlier to occur of
(i) the date which is three months after the effective date of such optionee's
termination of employment and (ii) the expiration date of the term of such
option.
(f) Death Following Termination of Employment or Service. Unless
otherwise specified in the Agreement relating to an option or SAR, as the case
may be, if the holder of an option or SAR dies during the applicable
Post-Termination Exercise Period, each option and SAR held by such holder shall
be exercisable only to the extent that such option or SAR, as the case may be,
is exercisable on the date of such holder's death and may thereafter be
exercised by the holder's executor, administrator, legal representative,
beneficiary or similar person until and including the earlier to occur of (i)
the date which is one year (or such other period as set forth in the Agreement
relating to such option or SAR) after the date of death and (ii) the expiration
date of the term of such option or SAR.
(g) Cause. Notwithstanding anything to the contrary in this Plan or in
any Agreement relating to an option or SAR, as the case may be, if the
employment with or service to the Company of the holder of an option or SAR is
terminated by the Company for Cause, each option and SAR held by such holder
automatically shall be canceled on the effective date of such holder's
termination of employment or service.
III. STOCK AWARDS
3.1 STOCK AWARDS. The Committee may, in its discretion, grant
Stock Awards to such eligible persons as may be selected by the Committee. The
Agreement relating to a Stock Award shall specify whether the Stock Award is a
Restricted Stock Award or an Unrestricted Stock Award.
32
3.2 TERMS OF STOCK AWARDS. Stock Awards shall be subject to the
following terms and conditions and shall be subject to such additional terms and
conditions, not inconsistent with the terms of this Plan, as the Committee shall
deem advisable.
(a) Number of Shares and Other Terms. The number of shares of Common
Stock subject to a Restricted Stock Award or Unrestricted Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee. Unrestricted Stock Awards
shall not be subject to any Performance Measures or Restriction Periods.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment of or service to
the Company during the specified Restriction Period and for the forfeiture of
all or a portion of the shares of Common Stock subject to such award (x) if
specified Performance Measures are not satisfied or met during the specified
Restriction Period or (y) if the holder of such award does not remain
continuously in the employment of or service to the Company during the specified
Restriction Period.
(c) Share Certificates. During the Restriction Period, a certificate or
certificates representing a Restricted Stock Award may be registered in the
holder's name or a nominee name at the discretion of the Company and may bear a
legend, in addition to any legend which may be required pursuant to Section 6.6,
indicating that the ownership of the shares of Common Stock represented by such
certificate is subject to the restrictions, terms and conditions of this Plan
and the Agreement relating to the Restricted Stock Award. All certificates
registered in the holder's name shall be deposited with the Company, together
with stock powers or other instruments of assignment (including a power of
attorney), each endorsed in blank with a guarantee of signature if deemed
necessary or appropriate by the Company, which would permit transfer to the
Company of all or a portion of the shares of Common Stock subject to the
Restricted Stock Award in the event such award is forfeited in whole or in part.
Upon termination of any applicable Restriction Period (and the satisfaction or
attainment of applicable Performance Measures), or upon the grant of an
Unrestricted Stock Award, in each case subject to the Company's right to require
payment of any taxes in accordance with Section 6.5, a certificate or
certificates evidencing ownership of the requisite number of shares of Common
Stock shall be delivered to the holder of such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a stockholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
other than a regular cash dividend, shall be deposited with the Company and
shall be subject to the same restrictions as the shares of Common Stock with
respect to which such distribution was made.
3.3 TERMINATION OF EMPLOYMENT OR SERVICE. All of the terms
relating to the satisfaction of Performance Measures and the termination of the
Restriction Period relating to a Restricted Stock Award, or any forfeiture and
cancellation of such award upon a termination of employment with or service to
the Company of the holder of such award, whether by reason of Disability,
Retirement, death or any other reason, shall be determined by the Committee.
IV. PERFORMANCE SHARE AWARDS
4.1 PERFORMANCE SHARE AWARDS. The Committee may, in its
discretion, grant Performance Share Awards to such eligible persons as may be
selected by the Committee.
4.2 TERMS OF PERFORMANCE SHARE AWARDS. Performance Share Awards
shall be subject to the following terms and conditions and shall be subject to
such additional terms and conditions, not inconsistent with the terms of this
Plan, as the Committee shall deem advisable.
(a) Number of Performance Shares and Performance Measures. The number
of Performance Shares subject to a Performance Share Award and the Performance
Measures and Performance Period applicable to such award shall be determined by
the Committee.
33
(b) Vesting and Forfeiture. The Agreement relating to a Performance
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of all or a portion of such
award, if specified Performance Measures are not satisfied or met during the
specified Performance Period.
(c) Settlement of Vested Performance Share Awards. The Agreement
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on or the deemed
reinvestment of any deferred dividend equivalents, with respect to the number of
shares of Common Stock subject to such award. If a Performance Share Award is
settled in shares of Restricted Stock, a certificate or certificates
representing such Restricted Stock shall be issued in accordance with Section
3.2(c) and the holder of such Restricted Stock shall have such rights of a
stockholder of the Company as determined pursuant to Section 3.2(d). Prior to
the settlement of a Performance Share Award in shares of Common Stock, including
Restricted Stock, the holder of such award shall have no rights as a stockholder
of the Company with respect to the shares of Common Stock subject to such award.
4.3 TERMINATION OF EMPLOYMENT OR SERVICE. All of the terms
relating to the satisfaction of Performance Measures and the termination of the
Performance Period relating to a Performance Share Award, or any forfeiture and
cancellation of such award upon a termination of employment with or service to
the Company of the holder of such award, whether by reason of Disability,
Retirement, death or any other reason, shall be determined by the Committee.
V. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
5.1 ELIGIBILITY.
Each Non-Employee Director shall be granted options to purchase shares
of Common Stock in accordance with this Article V. All options granted under
this Article III shall be Non-Qualified Stock Options.
5.2 AUTOMATIC GRANTS OF STOCK OPTIONS.
Each Non-Employee Director shall be granted Non-Qualified Stock Options
as follows:
(a) Time of Grant. (i) On the date that each person first becomes a
Non-Employee Director (a "Director Commencement Date"), such person shall be
granted an option to purchase 20,000 shares of Common Stock, at a purchase price
per share equal to 100% of the Fair Market Value of a share of Common Stock on
the date of grant of such option.
(ii)On the date that is 90 days after a Non-Employee
Director's Director Commencement Date, such Non-Employee Director shall be
granted an option to purchase a number of shares of Common Stock (not to exceed
30,000) equal to the number of shares of Common Stock purchased by such
Non-Employee Director during the 90 day period beginning on such Director
Commencement Date, at a purchase price per share equal to 100% of the Fair
Market Value of a share of Common Stock on the date of grant of such option.
(iii) On the date of each annual meeting of shareholders of
the Company, each person who is a Non-Employee Director on such date shall be
granted an option to purchase 10,000 shares of Common Stock at a purchase price
per share equal to 100% of the Fair Market Value of a share of Common Stock on
the date of grant of such option.
(iv)If a Non-Employee Director's Director Commencement Date is
not on the date of an annual meeting of shareholders of the Company, then on
such Director Commencement Date, such Non-Employee Director shall be granted an
option to purchase a number of shares of Common Stock equal to 10,000 multiplied
by a fraction, the numerator of which is the number of days from and including
such Director Commencement Date until the date of the next following annual
meeting of shareholders of the Company, at a purchase price per share equal to
100% of the Fair Market Value of a Share of Common Stock on the date of grant of
such option.
(b) Exercise Period and Exercisability. Each option granted under
Section 5.2(a)(i) or Section 5.2 (a)(ii) shall become fully exercisable in equal
annual installments over the initial term as a director of the Non-Employee
Director to whom such option is granted, each option granted under Section
5.2(a)(iii) shall become fully exercisable one year
34
following the date of grant and each option granted under Section 5.2(a)(iv)
shall become fully exercisable on the date of the annual meeting of shareholders
of the Company next following the date of grant. Each option granted under this
Section 5.2 shall expire ten years after its date of grant. An exercisable
option, or portion thereof, may be exercised in whole or in part only with
respect to whole shares of Common Stock. Options granted under this Section 5.2
shall be exercisable in accordance with Section 2.1(c).
5.3 TERMINATION OF DIRECTORSHIP.
(a) Disability. If the holder of an option granted under Section 5.2
ceases to be a director of the Company by reason of Disability, each such option
held by such holder shall be fully exercisable and may thereafter be exercised
by such holder (or such holder's legal representative or similar person) until
and including the earlier to occur of (i) the date which is one year after the
effective date of such holder's ceasing to be a director and (ii) the expiration
date of the term of such option.
(b) Retirement. If the holder of an option granted under Section 5.2
ceases to be a director of the Company on or after age 60, each such option held
by such holder shall be exercisable only to the extent that such option is
exercisable on the effective date of such holder's ceasing to be a director and
may thereafter be exercised by such holder (or such holder's legal
representative or similar person) until and including the earlier to occur of
(i) the date which is two years after the effective date of such holder's
ceasing to be a director and (ii) the expiration date of the term of such
option.
(c) Death. If the holder of an option granted under Section 5.2 ceases
to be a director of the Company by reason of death, each such option held by
such holder shall be fully exercisable and may thereafter be exercised by such
holder's executor, administrator, legal representative, beneficiary or similar
person until and including the earlier to occur of (i) the date which is one
year after the date of death and (ii) the expiration date of the term of such
option.
(d) Other Termination. If the holder of an option granted under Section
5.2 ceases to be a director of the Company for any reason other than Disability,
ceasing to be a director on or after age 60 or death, each such option held by
such holder shall be exercisable only to the extent such option is exercisable
on the effective date of such holder's ceasing to be a director and may
thereafter be exercised by such holder (or such holder's legal representative or
similar person) until and including the earlier to occur of (i) the date which
is three months after the effective date of such holder's ceasing to be a
director and (ii) the expiration date of the term of such option.
(e) Death Following Termination of Directorship. If the holder of an
option granted under Section 5.2 dies during the period set forth in Section
5.3(a) following such holder's ceasing to be a director of the Company by reason
of Disability, during the period set forth in Section 5.3(b) following such
holder's ceasing to be a director of the Company on or after age 60, or during
the period set forth in Section 5.3(d) following such holder's ceasing to be a
director for any reason other than by reason of Disability or ceasing to be a
director on or after age 60, each such option held by such holder shall be
exercisable only to the extent that such option is exercisable on the date of
the holder's death and may thereafter be exercised by such holder's executor,
administrator, legal representative, beneficiary or similar person until and
including the earlier to occur of (i) the date which is one year after the date
of death and (ii) the expiration date of the term of such option.
VI. GENERAL
6.1 EFFECTIVE DATE AND TERM OF PLAN.
This Plan shall be submitted to the stockholders of the Company for
approval at the 2003 annual meeting of stockholders and, if approved by the
affirmative vote of a majority of the shares of Common Stock present in person
or represented by proxy at such meeting, shall become effective on the date of
such approval. This Plan shall terminate ten years after its effective date,
unless terminated earlier by the Board. Termination of this Plan shall not
affect the terms or conditions of any award granted prior to termination. In the
event that this Plan is not approved by the stockholders of the Company, this
Plan and any awards granted hereunder shall be null and void.
6.2 AMENDMENTS.
The Board may amend this Plan as it shall deem advisable, subject to
any requirement of stockholder approval required by applicable law, rule or
regulation, including Section 162(m) and Section 422 of the Code; provided,
however,
35
that no amendment shall be made without stockholder approval if such amendment
would (a) increase the maximum number of shares of Common Stock available under
this Plan (subject to Section 6.7), (b) effect any change inconsistent with
Section 422 of the Code or (c) extend the term of this Plan. No amendment may
impair the rights of a holder of an outstanding award without the consent of
such holder.
6.3 AGREEMENT.
No award shall be valid until an Agreement is executed by the Company
and the recipient of such award and, upon execution by each party and delivery
of the executed Agreement to the Company, such award shall be effective as of
the effective date set forth in the Agreement.
6.4 NON-TRANSFERABILITY OF AWARDS.
Unless otherwise specified in the Agreement relating to an award, no
award shall be transferable other than by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company. Except to the extent permitted by the foregoing sentence or the
Agreement relating to an award, each award may be exercised or settled during
the holder's lifetime only by the holder or the holder's legal representative or
similar person. Except to the extent permitted by the second preceding sentence
or the Agreement relating to an award, no award may be sold, transferred,
assigned, pledged, hypothecated, encumbered or otherwise disposed of (whether by
operation of law or otherwise) or be subject to execution, attachment or similar
process. Upon any attempt to so sell, transfer, assign, pledge, hypothecate,
encumber or otherwise dispose of any such award, such award and all rights
thereunder shall immediately become null and void.
6.5 TAX WITHHOLDING.
The Company shall have the right to require, prior to the issuance or
delivery of any shares of Common Stock or the payment of any cash pursuant to an
award made hereunder, payment by the holder of such award of any Federal, state,
local or other taxes which may be required to be withheld or paid in connection
with such award. An Agreement may provide that (i) the Company shall withhold
whole shares of Common Stock which would otherwise be delivered to a holder,
having an aggregate Fair Market Value determined as of the date the obligation
to withhold or pay taxes arises in connection with an award (the "Tax Date") or
withhold an amount of cash which would otherwise be payable to a holder, in the
amount necessary to satisfy any such obligation or (ii) the holder may satisfy
any such obligation by any of the following means: (A) a cash payment to the
Company, (B) delivery (either actual delivery or by attestation procedures
established by the Company) to the Company of Mature Shares having an aggregate
Fair Market Value, determined as of the Tax Date, equal to the amount necessary
to satisfy any such obligation, (C) authorizing the Company to withhold whole
shares of Common Stock which would otherwise be delivered having an aggregate
Fair Market Value, determined as of the Tax Date, or withhold an amount of cash
which would otherwise be payable to a holder, equal to the amount necessary to
satisfy any such obligation, (D) in the case of the exercise of an option, a
cash payment by a broker-dealer acceptable to the Company to whom the optionee
has submitted an irrevocable notice of exercise or (E) any combination of (A),
(B) and (C), in each case to the extent set forth in the Agreement relating to
the award. Shares of Common Stock to be delivered or withheld may not have an
aggregate Fair Market Value in excess of the amount determined by applying the
minimum statutory withholding rate. Any fraction of a share of Common Stock
which would be required to satisfy such an obligation shall be disregarded and
the remaining amount due shall be paid in cash by the holder.
6.6 RESTRICTIONS ON SHARES.
Each award made hereunder shall be subject to the requirement that if
at any time the Company determines that the listing, registration or
qualification of the shares of Common Stock subject to such award upon any
securities exchange or automated quotation system or under any law, or the
consent or approval of any governmental body, or the taking of any other action
is necessary or desirable as a condition of, or in connection with, the exercise
or settlement of such award or the delivery of shares thereunder, such award
shall not be exercised or settled and such shares shall not be delivered unless
such listing, registration, qualification, consent, approval or other action
shall have been effected or obtained, free of any conditions not acceptable to
the Company. The Company may require that certificates evidencing shares of
Common Stock delivered pursuant to any award made hereunder bear a legend
indicating that the sale, transfer or other disposition thereof by the holder is
prohibited except in compliance with the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
36
6.7 ADJUSTMENT.
In the event of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization or event, or any
distribution to holders of Common Stock other than a regular cash dividend, the
number and class of securities available under this Plan, the maximum number of
securities available for Stock Awards and Performance Share Awards, the number
and class of securities subject to each outstanding option and the purchase
price per security, the number and class of securities subject to each option to
be granted to Non-Employee Directors pursuant to Article V, the maximum number
of securities with respect to which options or SARs or a combination thereof, or
Stock Awards or Performance Share Awards, may be granted during any calendar
year to any person the terms of each outstanding SAR, the number and class of
securities subject to each outstanding Stock Award or Performance Share Award,
and the terms of each outstanding Restricted Stock Award or Performance Share
Award shall be appropriately adjusted by the Committee, such adjustments to be
made in the case of outstanding options and SARs without an increase in the
aggregate purchase price or base price. The decision of the Committee regarding
any such adjustment shall be final, binding and conclusive. If any such
adjustment would result in a fractional security being (a) available under this
Plan, such fractional security shall be disregarded, or (b) subject to an award
under this Plan, the Company shall pay the holder of such award, in connection
with the first vesting, exercise or settlement of such award in whole or in part
occurring after such adjustment, an amount in cash determined by multiplying (i)
the fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the vesting, exercise or
settlement date over (B) the exercise price or base price, if any, of such
award.
6.8 CHANGE IN CONTROL.
(a) (1) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive shares of common stock
that are registered under Section 12 of the Exchange Act, (i) all outstanding
options and SARs shall immediately become exercisable in full, (ii) the
Restriction Period applicable to any outstanding Restricted Stock Award shall
lapse, (iii) the Performance Period applicable to any outstanding Performance
Share shall lapse, (iv) the Performance Measures applicable to any outstanding
award shall be deemed to be satisfied at the maximum level and (v) there shall
be substituted for each share of Common Stock available under this Plan, whether
or not then subject to an outstanding award, the number and class of shares into
which each outstanding share of Common Stock shall be converted pursuant to such
Change in Control. In the event of any such substitution, the purchase price per
share in the case of an option and the base price in the case of an SAR shall be
appropriately adjusted by the Committee (whose determination shall be final,
binding and conclusive), such adjustments to be made in the case of outstanding
options and SARs without an increase in the aggregate purchase price or base
price.
(2) Notwithstanding any provision in this Plan or any Agreement,
in the event of a Change in Control pursuant to Section (b)(1) or (2) below, or
in the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which the holders of Common Stock receive consideration other
than shares of common stock that are registered under Section 12 of the Exchange
Act, each outstanding award shall be surrendered to the Company by the holder
thereof, and each such award shall immediately be canceled by the Company, and
the holder shall receive, within ten days of the occurrence of a Change in
Control, a cash payment from the Company in an amount equal to (i) in the case
of an option, the number of shares of Common Stock then subject to such option,
multiplied by the excess, if any, of the greater of (A) the highest per share
price offered to stockholders of the Company in any transaction whereby the
Change in Control takes place or (B) the Fair Market Value of a share of Common
Stock on the date of occurrence of the Change in Control, over the purchase
price per share of Common Stock subject to the option, (ii) in the case of a
Free-Standing SAR, the number of shares of Common Stock then subject to such
SAR, multiplied by the excess, if any, of the greater of (A) the highest per
share price offered to stockholders of the Company in any transaction whereby
the Change in Control takes place or (B) the Fair Market Value of a share of
Common Stock on the date of occurrence of the Change in Control, over the base
price of the SAR, (iii) in the case of a Restricted Stock Award or Performance
Share Award, the number of shares of Common Stock or the number of Performance
Shares, as the case may be, then subject to such award, multiplied by the
greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control. In the event of a Change in Control, each Tandem SAR shall be
surrendered by the holder thereof and shall be canceled simultaneously with the
cancellation of the related option.
(b) "Change in Control" shall mean:
37
(1) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act, of
50% or more of either (i) the then outstanding shares of common stock
of the Company (the "Outstanding Common Stock") or (ii) the combined
voting power of the then outstanding securities of the Company entitled
to vote generally in the election of directors (the "Outstanding Voting
Securities"); excluding, however, the following: (A) any acquisition
directly from the Company (excluding any acquisition resulting from the
exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired
directly from the Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company
or (D) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3) of
this Section 6.8(b); provided further, that for purposes of clause (B),
if any Person (other than the Company or any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company) shall become the beneficial
owner of 50% or more of the Outstanding Common Stock or 50% or more of
the Outstanding Voting Securities by reason of an acquisition by the
Company, and such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional shares of the Outstanding
Common Stock or any additional Outstanding Voting Securities and such
beneficial ownership is publicly announced, such additional beneficial
ownership shall constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of such Board; provided that any individual who
becomes a director of the Company subsequent to the date hereof whose
election, or nomination for election by the Company's stockholders, was
approved by the vote of at least a majority of the directors then
comprising the Incumbent Board shall be deemed a member of the
Incumbent Board; and provided further, that any individual who was
initially elected as a director of the Company as a result of an actual
or threatened solicitation by a Person other than the Board for the
purpose of opposing a solicitation by any other Person with respect to
the election or removal of directors, or any other actual or threatened
solicitation of proxies or consents by or on behalf of any Person other
than the Board shall not be deemed a member of the Incumbent Board;
(3) the consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction"); excluding,
however, a Corporate Transaction pursuant to which (i) all or
substantially all of the individuals or entities who are the beneficial
owners, respectively, of the Outstanding Common Stock and the
Outstanding Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than
50% of, respectively, the outstanding shares of common stock, and the
combined voting power of the outstanding securities entitled to vote
generally in the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction (including,
without limitation, a corporation which as a result of such transaction
owns the Company or all or substantially all of the Company's assets
either directly or indirectly) in substantially the same proportions
relative to each other as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Common Stock and the
Outstanding Voting Securities, as the case may be, (ii) no Person
(other than: the Company; any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by
the Company; the corporation resulting from such Corporate Transaction;
and any Person which beneficially owned, immediately prior to such
Corporate Transaction, directly or indirectly, 50% or more of the
Outstanding Common Stock or the Outstanding Voting Securities, as the
case may be) will beneficially own, directly or indirectly, 50% or more
of, respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the combined
voting power of the outstanding securities of such corporation entitled
to vote generally in the election of directors and (iii) individuals
who were members of the Incumbent Board will constitute at least a
majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction; or
(4) the consummation of a plan of complete liquidation or
dissolution of the Company.
6.9 NO RIGHT OF PARTICIPATION OR EMPLOYMENT.
Except as provided in Article V, no person shall have any right to
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by the Company, any
Subsidiary or any affiliate of the Company or affect in any manner the right of
the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
38
6.10 RIGHTS AS STOCKHOLDER.
No person shall have any right as a stockholder of the Company with
respect to any shares of Common Stock or other equity security of the Company
which is subject to an award hereunder unless and until such person becomes a
stockholder of record with respect to such shares of Common Stock or equity
security.
6.11 DESIGNATION OF BENEFICIARY.
If permitted by the Company, a holder of an award may file with the
Committee a written designation of one or more persons as such holder's
beneficiary or beneficiaries (both primary and contingent) in the event of the
holder's death. To the extent an outstanding option or SAR granted hereunder is
exercisable, such beneficiary or beneficiaries shall be entitled to exercise
such option or SAR.
Each beneficiary designation shall become effective only when filed in
writing with the Committee during the holder's lifetime on a form prescribed by
the Committee. The spouse of a married holder domiciled in a community property
jurisdiction shall join in any designation of a beneficiary other than such
spouse. The filing with the Committee of a new beneficiary designation shall
cancel all previously filed beneficiary designations.
If a holder fails to designate a beneficiary, or if all designated
beneficiaries of a holder predecease the holder, then each outstanding option
and SAR hereunder held by such holder, to the extent exercisable, may be
exercised by such holder's executor, administrator, legal representative or
similar person.
6.12 GOVERNING LAW.
This Plan, each award hereunder and the related Agreement, and all
determinations made and actions taken pursuant thereto, to the extent not
otherwise governed by the Code or the laws of the United States, shall be
governed by the laws of the State of Wisconsin and construed in accordance
therewith without giving effect to principles of conflicts of laws.
6.13 FOREIGN EMPLOYEES.
Without amending this Plan, the Committee may grant awards to eligible
persons who are subject to the laws of foreign countries or jurisdictions on
such terms and conditions different from those specified in this Plan as may in
the judgment of the Committee be necessary or desirable to foster and promote
achievement of the purposes of this Plan and, in furtherance of such purposes
the Committee may make such modifications, amendments, procedures, subplans and
the like as may be necessary or advisable to comply with provisions of laws of
other countries or jurisdictions in which the Company or its Subsidiaries
operate or have employees.
6.14 NO REPRICING OF AWARDS.
Notwithstanding anything in this Plan to the contrary and subject to
Section 6.7, the exercise price or base price, as the case may be, of any award
granted hereunder shall not be reduced after the date of grant of such award,
and no award granted hereunder shall be canceled for the purpose of regranting a
new award at a lower exercise price or base price, as the case may be, without
the affirmative vote of a majority of the voting power of the shares of capital
stock of the Company represented at a meeting in which the reduction of such
exercise price or base price, or the cancellation and regranting of an award, as
the case may be, is considered for approval.
39
BONE CARE INTERNATIONAL, INC.
ANNUAL MEETING OF SHAREHOLDERS
1600 ASPEN COMMONS
MIDDLETON, WISCONSIN
WEDNESDAY, NOVEMBER 19, 2003
10:00 A.M.
Bone Care International, Inc.
1600 Aspen Commons
Middleton, Wisconsin 53562 PROXY
The undersigned shareholder of Bone Care International, Inc. (the "Company"),
hereby acknowledges receipt of the Notice of the 2003 Annual Meeting of
Shareholders and Proxy Statement of the Company, and hereby appoints Paul L.
Berns and Brian J. Hayden, and each of them as proxies, with full power of
substitution, to vote on behalf of the undersigned the number of shares which
the undersigned is then entitled to vote, at the Annual Meeting of the
Shareholders of Bone Care International, Inc., to be held at the Holiday Inn
Hotel and Suites, 1109 Fourier Drive, Madison, Wisconsin, on Wednesday, November
19, 2003 at 10:00 A.M., local time, and any adjournments or postponements
thereof, upon the matters set forth on the reverse side, with all the powers
which the undersigned would possess if personally present.
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. It will be voted on
the matters set forth on the reverse side of this form as directed by the
shareholder, but if no direction is made in the space provided, it will be voted
FOR proposals 1, 2 and 3.
See reverse for voting instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to Bone Care International, Inc., c/o Shareowner Services,
P.O. Box 64873, St. Paul, MN 55164-0873.
Please detach here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3.
Proposal 1. Election of directors: [ ] Vote FOR [ ] Vote WITHHELD [ ] Vote FOR All
all nominees from all nominees Nominees Except
01 Paul L. Berns
02 Edward Staiano, Ph.D.
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDICATED NOMINEE, MARK "FOR ALL NOMINEES EXCEPT" AND
WRITE THE NOMINEE'S NAME IN THE BOX PROVIDED TO THE RIGHT.) [ ]
Proposal 2. Approval of the 2003 Stock Incentive Plan. [ ] For [ ] Against [ ] Abstain
Proposal 3. Ratify the selection of Deloitte & Touche LLP as
our independent auditors for the fiscal year ending June 30, 2004. [ ] For [ ] Against [ ] Abstain
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL
Address Change? Mark Box [ ] Date ___________________
Indicate changes below:
[ ]
Signature(s) in Box
Stockholder must sign exactly as the name
appears at left. When signed as a corporate
officer, executor, administrator, trustee,
guardian, etc., please give full title as
such. Both joint tenants must sign.