Schedule 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
---
Filed by a Party other than the Registrant
---
Check the appropriate box:
Preliminary proxy statement --- Confidential, for use of the
- --- Commission only (as permitted
X Definitive proxy statement by Rule 14a-6(e)(2))
- ---
Definitive additional materials
- ---
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
- ---
Lunar Corporation
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
X No fee required.
- ---
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:
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(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Lunar Corporation
313 West Beltline Highway
Madison, Wisconsin 53713
(608) 274-2663
-----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS:
To the Holders of the Common Stock of Lunar Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting (the "Meeting") of
Shareholders of Lunar Corporation (the "Company") will be held at Lunar
Corporation, 313 West Beltline Highway, Madison, Wisconsin, on Thursday,
November 21, 1996, at 3:30 p.m., local time, for the following purposes:
(1) To elect two (2) directors to serve until the 1999 Annual Meeting of
Shareholders, and until their successors are duly elected and qualified.
(2) To ratify the selection of KPMG Peat Marwick LLP as auditors for the
Company for the fiscal year ending June 30, 1997.
(3) To transact any other business as may properly come before the Meeting
or any adjournments thereof.
Only shareholders of record at the close of business on October 11, 1996, the
record date for the Meeting, shall be entitled to notice of and to vote at the
Meeting or any adjournments thereof.
IMPORTANT
To ensure your representation at the Meeting, please sign and date the
enclosed proxy, and return it immediately in the enclosed stamped envelope.
Sending in your proxy will not prevent you from personally voting your shares at
the Meeting, since you may revoke your proxy by attending the Meeting and voting
in person or by advising the Secretary of the Company in writing (by later-dated
proxy which is voted at the Meeting or otherwise) of such revocation at any time
before it is voted.
By Order of the Board of Directors,
Richard B. Mazess, Ph.D.
President
Madison, Wisconsin
October 28, 1996
Lunar Corporation
313 West Beltline Highway
Madison, Wisconsin 53713
(608) 274-2663
--------------------------------------
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of the
accompanying Proxy by the Board of Directors of Lunar Corporation (the
"Company") for use at the Annual Meeting (the "Meeting") of Shareholders to be
held at Lunar Corporation, 313 West Beltline Highway, Madison, Wisconsin,
Thursday, November 21, 1996, at 3:30 p.m., local time, and at any adjournments
thereof.
At the Meeting, shareholders will consider (1) the election of two (2)
directors to serve until the 1999 Annual Meeting of Shareholders (and until
their successors are duly elected and qualified), and (2) the ratification of
the selection of KPMG Peat Marwick LLP as auditors for the Company for the
fiscal year ending June 30, 1997. The Board of Directors does not know of any
other matters to be brought before the Meeting; however, if other matters should
properly come before the Meeting, it is intended that the persons named in the
accompanying Proxy will vote on such matters at their discretion.
Shareholders who execute proxies retain the right to revoke them at any time
prior to the voting thereof by attending the Meeting and voting in person or by
advising the Secretary of the Company of such revocation in writing (by
later-dated proxy which is voted at the Meeting or otherwise).
PROXY SOLICITATION
Proxies will be solicited by mail. In addition to solicitation by mail,
certain officers and employees of the Company may solicit by telephone,
telegraph, and personally. The cost of the solicitation will be borne by the
Company. The Notice of the Meeting, this Proxy Statement, the accompanying form
of Proxy and the Annual Report to Shareholders, including financial statements
for the fiscal year ended June 30, 1996, were first mailed to shareholders on or
about October 28, 1996.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of the shares of Common Stock, $0.01 par value, of the
Company at the close of business on October 11, 1996, the record date for the
Meeting, are entitled to notice of and to vote at the Meeting and at any
adjournments thereof. Shareholders will be entitled to one vote for each full
share held. On October 11, 1996, there were outstanding 8,536,665 shares of
Common Stock of the Company.
VOTING INFORMATION
A shareholder may, with respect to the election of directors, (i) vote for
the election of both nominees named below to serve until the 1999 Annual Meeting
of Shareholders, (ii) withhold authority to vote for both nominees, or (iii)
vote for the election of one nominee and withhold authority to vote for the
other nominee by striking a line through such other nominee's name on the Proxy.
A shareholder may, with respect to the proposal to ratify the selection of KPMG
Peat Marwick LLP as the Company's auditors, (i) vote "FOR" ratification, (ii)
vote "AGAINST" ratification, or (iii) "ABSTAIN" from voting on the proposal.
Proxies in the accompanying form, properly executed and received by the
Company prior to the Meeting and not revoked, will be voted as directed therein
on all matters presented at the Meeting. In the absence of a specific direction
from the shareholder as to a proposal, the shareholder's Proxy will be voted as
to such proposal "FOR" the election of the two director nominees named in this
Proxy Statement and "FOR" ratification of the selection of KPMG Peat Marwick LLP
as the Company's auditors. If a Proxy is marked to indicate that all or a
portion of the shares represented by such Proxy are not being voted with respect
to a particular matter, such non-voted shares will not be considered present and
entitled to vote on such matter, although such shares may be considered present
and entitled to vote on other matters and will count for purposes of determining
the presence of a quorum.
The affirmative vote of a plurality of the votes cast by the shares present
in person or by proxy at the Meeting and entitled to vote in the election of
directors is required to elect directors. Thus, if a quorum is present, the two
persons receiving the greatest number of votes will be elected to serve as
directors. Accordingly, non-voted shares with respect to the election of
directors will not affect the outcome of the election of directors. In addition,
withholding authority to vote for a director nominee will not prevent such
nominee from being elected. If a quorum is present, in order to ratify the
selection of KPMG Peat Marwick LLP as the Company's auditors, the number of
votes cast favoring ratification must exceed the number of votes cast opposing
ratification. Accordingly, non-voted shares and abstentions with respect to the
proposal to ratify the selection of KPMG Peat Marwick LLP as the Company's
auditors will not affect the determination of whether such matter has been
ratified.
PURPOSES OF THE MEETING
Item 1 - Election of Directors
- ------------------------------
The Company's By-Laws authorize the Board of Directors to fix the number of
directors, provided that such number shall be not less than six nor more than
twelve. Currently, the number is fixed at six. 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 1996 Annual Meeting,
two directors, John W. Brown and Reed Coleman, are nominees for election to the
Board of Directors.
The table below sets forth certain information with respect to the nominees
for election as directors of the Company to serve until the 1999 Annual Meeting
of Shareholders. Unless otherwise specified, the shares of Common Stock
represented by the proxies solicited hereby will be voted "FOR" the election as
directors of the persons named below as nominees, both of whom have been
nominated by the Board of Directors. If, at or prior to their election, any one
or more of the nominees shall be unwilling or unable to serve, it is presently
intended that the proxies solicited hereby will be voted for a substitute
nominee designated by the Board of Directors. The Board of Directors has no
reason to believe either of the nominees will be unwilling or unable to serve.
Positions Principal Occupations
Name and Age Held During Past 5 Years
- --------------------------------------------------------------------------------
TO SERVE UNTIL THE 1999 ANNUAL MEETING OF SHAREHOLDERS:
John W. Brown Director Director since 1988; Chairman of the Board,
Age 62 Chief Executive Officer, and President of
Stryker Corporation (medical devices) since
1977; Director of First of America since 1992.
Reed Coleman Director Director since 1985; Chairman of Madison-Kipp
Age 63 Corporation (precision engineered components)
since 1964; President and owner of The Reed
Company since 1985; Director of Regal-Beloit
Corporation since 1975, and several privately
held companies.
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THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR EACH OF THE NOMINEES NAMED
ABOVE TO SERVE ON THE BOARD OF DIRECTORS OF THE COMPANY.
The following table sets forth certain information about the directors of the
Company whose terms of office will continue after the 1996 Annual Meeting.
Positions Principal Occupations
Name and Age Held During Past 5 Years
- --------------------------------------------------------------------------------
TERMS EXPIRING AT THE 1997 ANNUAL MEETING OF SHAREHOLDERS:
Malcolm R. Powell, M.D. Director Director since 1984; President
Age 65 of Nuclear Medicine
Consultants (nuclear medicine
practice).
John J. McDonough Director Director since May 1996;
Age 60 President and Chief Executive
Officer of McDonough Capital
Company LLC (an investment
management company) since
April 1995. Vice Chairman and
a Director of Dentsply
International, Inc. from 1983
through October 1995 and Chief
Executive Officer from April
1983 through February 1995
. Director of AMRESCO, Inc.,
Applied Power, Inc., Newell
Corporation, Plexus
Corporation and SoftNet
Systems, Inc.
TERMS EXPIRING AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS:
Samuel E. Bradt Director Director since 1984; President
Age 58 of Merganser Corporation (a
business consulting and
venture capital company)since
1980; Director of several
privately held companies.
Richard B. Mazess, Ph.D. Chairman of the Founder of the Company;
Age 57 Board, President President and Director since
and Chief Executive 1974; Chairman of the Board
Officer and Director of Bone Care
International, Inc. since
1986; Professor Emeritus of
Medical Physics at the
University of Wisconsin-
Madison since 1985.
- --------------------------------------------------------------------------------
Directors do not receive cash compensation for their services to the Company.
After each Annual Meeting of Shareholders and pursuant to the Lunar Corporation
Amended and Restated Stock Option Plan (the "Plan"), directors who are not
employees of the Company are granted nonqualified options to purchase 4,500
shares of Common Stock at the fair market value on the grant date. These options
expire ten years after their grant date and vest in one-third increments on the
first three anniversaries of the grant date.
During the year ended June 30, 1996, a total of 6 meetings of the Board of
Directors were held. All of the directors attended 75% or more of such meetings.
The Board of Directors has an Audit Committee. The Audit Committee, composed of
non-employee directors, oversees the audit of the corporate accounts through
independent public accountants whom it recommends for selection by the Board of
Directors. The Committee reviews the scope of the audit with such accountants
and their related fees. The Audit Committee did not hold any meetings during the
fiscal year ended June 30, 1996. Its members are Mr. Bradt and Mr. Coleman. The
Company does not have a nominating or compensation committee of the Board of
Directors. However, the Plan is administrated by a committee comprised of two
members of the Board of Directors. Its members are Dr. Mazess and Mr. Brown.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Directors and officers of the Company are required by Section 16 of the
Securities Exchange Act of 1934 to report to the Securities and Exchange
Commission their transactions in, and beneficial ownership of, the Company's
Common Stock, including options to purchase Common Stock. Reports received by
the Company indicate that for the period from July 1, 1995, to June 30, 1996,
all reports were filed on a timely basis, except that Mr. Bradt reported one
transaction after the due date for such report.
Item 2 - Ratification of Selection of Auditors
- ----------------------------------------------
The Board of Directors has selected KPMG Peat Marwick LLP, Chicago, Illinois,
as independent certified public accountants to act as auditors for the Company
for the fiscal year ending June 30, 1997. KPMG Peat Marwick LLP has examined the
accounts of the Company since March 1990, and in the opinion of management, the
firm should continue as auditors of the Company. Unless otherwise specified, the
shares of Common Stock represented by the proxies solicited hereby will be voted
"FOR" the proposal to ratify the selection of KPMG Peat Marwick LLP as the
Company's auditors.
Representatives of KPMG Peat Marwick LLP are expected to be present at the
meeting, will have an opportunity to make a statement if they wish to do so, and
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS YOU VOTE FOR THE SELECTION OF KPMG PEAT
MARWICK LLP AS AUDITORS OF THE COMPANY FOR THE FISCAL YEAR ENDING JUNE 30, 1997.
SECURITIES BENEFICIALLY OWNED BY PRINCIPAL SHAREHOLDERS,
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the Common Stock of the Company, by (i) each director of
the Company, (ii) each executive officer of the Company who is named in the
summary compensation table included in this Proxy Statement, (iii) all directors
and executive officers of the Company as a group, and (iv) each person known by
the Company to be the beneficial owner of more than 5% of the Common Stock of
the Company.
Amount and Nature of Percent
Name Beneficial Ownership of Class (1)
- --------------------------------------------------------------------------------
Samuel E. Bradt 6,250 (2) *
John W. Brown 114,000 (3) 1.3%
Reed Coleman 180,750 (4) 2.1
Richard B. Mazess, Ph.D. 2,923,345 (5) 34.2
John J. McDonough 13,550 (6) *
Malcolm R. Powell, M.D. 85,925 (7) 1.0
Robert A. Beckman 76,937 (8) *
James A. Hanson, Ph.D. 172,837 (9) 2.0
Gregory M. Johnson 57,837 (10) *
Carl E. Gulbrandsen 14,550 (11) *
All Directors and
Executive Officers as a
Group (12 persons) 3,645,981 (12) 40.7
- -----------------------------
* Less than 1 percent (1%)
(1) Except as indicated below, (i) represents shares of Common Stock held of
record and beneficially as of the October 11, 1996 record date and (ii) all
shares of Common Stock are held with sole voting and investment power.
Percentage amounts are based upon an aggregate of 8,536,665 shares issued
and outstanding, and shares of Common Stock issuable within 60 days of
October 11, 1996 upon exercise of stock options.
(2) Includes 3,750 shares of Common Stock issuable within 60 days upon exercise
of stock options.
(3) Includes 69,000 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(4) Includes 156,750 shares of Common Stock held by The Reed Company, of which
Mr. Coleman is sole owner, and 24,000 shares of Common Stock issuable
within 60 days upon exercise of stock options.
(5) Includes 1,417,835 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. Dr. Mazess' address is 313 West Beltline
Highway, Madison, Wisconsin, 53713.
(6) Includes 1,550 shares of Common Stock held by Mr. McDonough's daughter.
(7) Includes 64,650 shares of Common Stock held by Dr. Powell's wife, 4,200
shares of Common Stock held by his daughters, and 3,750 shares of Common
Stock issuable within 60 days upon exercise of stock options.
(8) Includes 76,900 shares of Common Stock issuable within 60 days upon
exercise of stock options, and 37 shares of Common Stock held by Mr.
Beckman as custodian for his children.
(9) Includes 172,500 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(10) Includes 57,800 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(11) Includes 14,000 shares of Common Stock issuable within 60 days upon
exercise of stock options.
(12) Includes 421,700 shares of Common Stock issuable within 60 days upon
exercise of stock options.
- ----------------------------------
EXECUTIVE COMPENSATION
Board of Directors Report on Executive Compensation
- ---------------------------------------------------
The following is a report submitted by the Board of Directors addressing the
Company's compensation policy as it related to the Company's executive officers
for fiscal year 1996.
This report by the Board of Directors and the Performance Table contained in
this Proxy Statement shall not be deemed to be incorporated by reference by any
general statement which incorporates by reference this Proxy Statement into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
and they shall not otherwise be deemed filed under such Acts.
COMPENSATION POLICY. Due to the Chief Executive Officer's significant
holdings of Common Stock, the Chief Executive Officer receives a base salary
which is lower than the salary he would otherwise receive given his duties and
responsibilities and the comparative base salaries of the chief executive
officer of companies of similar size. In July 1995, the Chief Executive Officer
requested that the Company reduce his salary and eliminate his bonus and future
commissions. In October 1996, the Chief Executive Officer resumed his salary at
an annual rate of $130,000. Currently, no bonus or commissions will be paid. In
accordance with past practice, the Chief Executive Officer is not granted any
options to purchase Common Stock due to his already significant holdings of
Common Stock.
With respect to all executive officers other than the Chief Executive
Officer, the goal of the Company's executive compensation policy is to ensure
that an appropriate relationship exists between executive pay and the creation
of shareholder value, while at the same time motivating and retaining key
employees. To achieve this goal, the Company's executive compensation policy
integrates annual base salary with cash bonuses, commissions, and stock options
based upon corporate performance and individual initiatives and performance.
Measurement of corporate performance is primarily based on Company goals and
industry performance levels. Accordingly, in years in which performance goals
and industry levels are achieved or exceeded, executive compensation would be
higher than in years in which performance is below expectations. Companies used
in comparative analyses for the purpose of determining each executive officer's
compensation are selected by the Board of Directors and include some of the
companies in the Standard & Poor's Medical Products and Supplies Index included
in the Performance Table set forth in this Proxy Statement. The selection of
such companies is based on various factors, including industry classification
and market capitalization.
Annual base salary is designed to attract and retain qualified executives. In
addition, executive officers are eligible to be granted stock options under the
Amended and Restated Stock Option Plan (the "Plan"). The Board of Directors
believes that stock options ensure that executives have a continuing stake in
the long-term success of the Company and are an effective incentive for
executives to create value for shareholders since the value of a stock option
bears a direct relationship to the Company's stock price. The Plan was
administered in fiscal year 1996 by Dr. Mazess and Mr. Brown.
PERFORMANCE MEASURES. In evaluating annual executive compensation, the Board
of Directors considers both long- and short-term objectives. Specific measures
of short-term goals include earnings per share, sales growth, market share, and
overall profitability in comparison to other companies in competition with the
Company. Longer-term objectives include strategic planning and alliances which
may not immediately impact sales and earnings growth. The Board of Directors
does not assign any specific weights to the foregoing performance measures and
does not use a fixed formula for determining base salary, bonuses, or long-term
compensation.
FISCAL YEAR 1996 COMPENSATION. For fiscal year 1996, the Company's executive
compensation program consisted of base salary, adjusted from the prior year, and
a cash bonus based upon the performance measurements described above. In
addition, four executive officers included in the Summary Compensation Table
received commissions, one executive officer included in the Summary Compensation
Table was granted an option to purchase 15,000 shares of Common Stock of the
Company and two executive officers were granted options to purchase shares of
common stock of Bone Care International, Inc. ("Bone Care"). Commissions are
paid to more directly compensate executive officers for changes in the Company's
performance. Stock options are granted from time to time to members of
management, based primarily on such person's potential contribution to the
Company's growth and profitability.
Prior to May 8, 1996, Bone Care was a 97.3% owned subsidiary of the Company.
In connection with the distribution by the Company to its shareholders of the
common stock of Bone Care, the Board of Directors granted options to purchase
shares of common stock of Bone Care to two executive officers of the Company who
would be providing services to Bone Care pursuant to a Transition Agreement
between the Company and Bone Care.
The Chief Executive Officer's compensation for fiscal year 1996 consisted of
a base salary of $29,808 and commissions of $6,548. As described above, in July
1995 the Chief Executive Officer requested that the Company reduce his salary
and eliminate his bonus and future commissions. In accordance with past
practice, the Chief Executive Officer was not granted stock options under the
Plan during fiscal year 1996 due to his already significant holdings of Common
Stock.
The Board of Directors believes that linking executive compensation to
corporate performance results in a better alignment of compensation with
corporate goals and shareholder interest. As performance goals are met or
exceeded, resulting in increased value to shareholders, executives are rewarded
commensurately. The Board of Directors believes that compensation levels during
fiscal year 1996 adequately reflect the Company's compensation goals and
policies.
Respectfully submitted,
Samuel E. Bradt
John W. Brown
Reed Coleman
Richard B. Mazess, Ph.D.
John J. McDonough
Malcolm R. Powell, M.D.
Summary Compensation Table
- --------------------------
The table below sets forth the compensation of the Company's Chief Executive
Officer and the four other most highly compensated executive officers of the
Company as of the end of fiscal year 1996.
Annual Long-Term
Compensation Compensation
----------------- Securities All Other
Name and Principal Fiscal Salary Bonus Underlying Compensation
Position Year ($) ($) Options (#) ($)(5)
- --------------------------- ------ ------- ------- ------------ ------------
Richard B. Mazess, Ph.D.(1) 1996 $ 36,356 $ - - $1,578
Chairman of the Board, 1995 164,346 3,000 - 2,250
President, and Chief 1994 139,392 3,000 - 1,883
Executive Officer
- --------------------------------------------------------------------------------
Robert A. Beckman(2) 1996 $166,853 $ 2,250 47,000 (6) 2,250
Vice President of 1995 161,639 23,000 13,500 2,250
Finance 1994 143,462 3,000 22,500 2,399
- --------------------------------------------------------------------------------
James A. Hanson, Ph.D.(3) 1996 $178,217 2,250 - 2,250
Vice President of 1995 155,885 3,000 - 2,234
Marketing 1994 135,931 3,000 7,500 1,883
- --------------------------------------------------------------------------------
Gregory M. Johnson(4) 1996 $214,767 2,250 - 2,250
Former Vice President 1995 210,906 3,000 4,500 2,250
of Sales 1994 189,313 3,000 15,000 2,649
- --------------------------------------------------------------------------------
Carl E. Gulbrandsen 1996 $173,847 2,250 4,000 (7) 2,250
Corporate General 1995 170,002 3,000 7,500 809
Counsel and Secretary 1994 153,462 3,000 15,000 473
- --------------------------------------------------------------------------------
(1) Dr. Mazess' salary includes sales-based commissions of $6,548, $34,539 and
$27,469 for fiscal years 1996, 1995 and 1994, respectively.
(2) Mr. Beckman's salary includes sales-based commissions of $33,006 and
$12,639 for fiscal years 1996 and 1995, respectively.
(3) Dr. Hanson's salary includes sales-based commissions of $55,411, $34,539
and $27,469 for fiscal years 1996, 1995 and 1994, respectively.
(4) Mr. Johnson's salary includes sales-based commissions of $89,767, $87,060,
and $74,313 for fiscal years 1996, 1995 and 1994, respectively. Mr. Johnson
became a consultant to the Company on July 20, 1996.
(5) Amounts shown for each person consist of Company contributions to a defined
contribution plan.
(6) Represents stock options for 15,000 shares of Lunar Corporation and stock
options for 32,000 shares of Bone Care International, Inc., which was a
subsidiary of Lunar Corporation until May 8, 1996. See "Certain
Transactions" below.
(7) Represents stock options for 4,000 shares of Bone Care International, Inc.,
which was a subsidiary of Lunar Corporation until May 8, 1996. See "Certain
Transactions" below.
AGGREGATED STOCK OPTION EXERCISES IN FISCAL YEAR 1996
AND FISCAL YEAR END STOCK OPTION VALUES
The following table sets forth information on stock options exercised in
fiscal year 1996 by the Company's executive officers named in the Summary
Compensation Table and the value of such officers' unexercised stock options as
of June 30, 1996.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Stock
Shares Stock Options at Options at Fiscal
Acquired Fiscal Year End (#) Year End($)(2)
on Value ---------------------- --------------------
Exercise Realized Unexer- Unexer-
Name (#) ($)(1) Exercisable cisable Exercisable cisable
- --------------------------- -------- ----------- ------- ----------- -------
Richard B. Mazess 6,750 $226,868 -- -- -- --
Robert A. Beckman 50,000 1,515,250 59,200 54,300 1,676,080 $1,292,295
James A. Hanson 43,500 1,395,285 201,000 4,500 6,862,830 122,265
Gregory M. Johnson 40,000 1,242,525 68,900 9,900 2,111,200 268,830
Carl E. Gulbrandsen 11,500 251,670 6,500 27,000 173,850 742,110
- --------------------------------------------------------------------------------
(1) Fair market value of underlying securities at exercise minus the exercise
price (i.e., value before income taxes payable as a result of the
exercise). The annualized value realized was $23,388, $221,618, $170,656,
$152,348 and $84,342 for Dr. Mazess, Mr. Beckman, Dr. Hanson, Mr. Johnson
and Dr. Gulbrandsen, respectively.
(2) Based upon the closing price of the Company's Common Stock of $34.50 on
June 28, 1996, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") minus the exercise price.
STOCK OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth information with respect to individual stock
option grants during fiscal 1996 to the Company's executive officers named in
the Summary Compensation Table.
Potential Realizable
% of Value at Assumed
Number of Total Annual Rates of Stock
Securities Options Price Appreciation
Underlying Granted for Option Term (3,4)
Options During Exercise ---------------------
Granted(1) Fiscal Price(2) Expiration 0% 5% 10%
Name (#) Year 1996 ($/Share) Date ($) ($) ($)
- --------------------------- --------- --------- ---------- --- ------- --------
Richard B. Mazess -- -- -- -- -- -- --
Robert A. Beckman 15,000 7.4% $20.58 10/13/05 0 $194,100 $492,000
32,000(5) 19.7(6) 4.22 02/01/06 0 84,800 215,360
James A. Hanson -- -- -- -- -- -- --
Gregory M. Johnson -- -- -- -- -- -- --
Carl E. Gulbrandsen -- -- -- -- -- -- --
4,000(5) 2.5(6) 4.22 02/01/06 0 10,600 26,920
- --------------------------------------------------------------------------------
(1) All stock options were granted under the Company's Amended and Restated
Stock Option Plan. These options are nonqualified and vest 20% each year on
the first five anniversaries of the grant date.
(2) All grants were made at 100% of fair market value as of the grant date.
(3) The dollar amounts under these columns are the result of calculations at
the 5% and 10% assumed annual growth rates mandated by the Securities and
Exchange Commission and, therefore, are not intended to forecast possible
future appreciation, if any, in the Company's Common Stock price. The
calculations were based on the exercise prices and the 10-year term of the
options. No gain to the optionees is possible without an increase in stock
price, which will benefit all shareholders proportionately.
(4) The "Potential Realizable Value" to all shareholders of the Company as a
group which would result from the application of the same assumptions to
the 8,486,250 shares of Common Stock outstanding at June 30, 1996, at the
closing price of $34.50 per share of Common Stock on June 28, 1996, as
reported by NASDAQ is an incremental gain of $0, $184,151,625, and
$466,574,025 for 0%, 5%, and 10%, respectively.
(5) Stock options to purchase shares of Bone Care International, Inc.
(6) Percent of Bone Care International, Inc. total stock option grants for
fiscal year 1996.
PERFORMANCE TABLE
The following table compares the cumulative total shareholder return on the
Company's Common Stock for the five-year period ended June 30, 1996, with the
cumulative total shareholder return of Standard & Poor's 500 Stock Index (the
"S&P 500") and Standard and Poor's Medical Products and Supplies Index (the "S&P
Med Products").
06/30/91 06/30/92 06/30/93 06/30/94 06/30/95 06/30/96
- ----------------- -------- -------- -------- -------- -------- --------
S&P 500 $100 $113 $129 $131 $165 $208
S&P Med Products 100 114 94 90 139 182
Lunar Corporation 100 97 64 72 154 302
- ----------------- -------- -------- -------- -------- -------- --------
The Performance Table assumes $100 invested on June 30, 1991 in each of the
Company's Common Stock, the S&P 500 Index and the S&P Med Products Index. The
table also assumes the reinvestment of dividends.
CERTAIN TRANSACTIONS
Distribution of Common Stock of Bone Care
- -----------------------------------------
On May 8, 1996, the Company, which then held 97.3% of the issued and
outstanding shares of the common stock of Bone Care International, Inc. ("Bone
Care"), distributed to its shareholders of record as of April 24, 1996, all of
the shares of Bone Care common stock then owned by the Company in a transaction
intended to qualify as a tax-free distribution (the "Distribution"). As a result
of the Distribution, Bone Care became a separate publicly owned company.
Dr. Mazess, the Chairman of the Board, President and Chief Executive Officer
of the Company, is also the Chairman of the Board of Bone Care and is the
beneficial owner of approximately 34% of the outstanding capital stock of Bone
Care. Mr. Beckman, Vice President of Finance of the Company, is also the Vice
President of Finance and a director of Bone Care. Dr. Gulbrandsen, Corporate
General Counsel and Secretary of the Company, is also Corporate General Counsel
and Secretary of Bone Care.
Distribution Agreement
- ----------------------
In connection with the Distribution, the Company and Bone Care entered into a
distribution agreement (the "Distribution Agreement") providing for, among other
things, the principal corporate transactions required to effect the
Distribution, the conditions to the Distribution, the allocation between the
Company and Bone Care of certain liabilities and certain other agreements
governing the relationship between the Company and Bone Care with respect to or
in connection with the Distribution.
Pursuant to the Distribution Agreement and prior to the Distribution, the
Company made a capital contribution of $10,000,000 to Bone Care in exchange for
1,698,674 shares of Bone Care common stock.
Tax Disaffiliation Agreement
- ----------------------------
In connection with the Distribution, the Company and Bone Care entered into a
tax disaffiliation agreement which provides, among other things, for (i) a
contribution of $725,000 by the Company to Bone Care completed prior to the
Distribution to reflect federal income tax savings previously realized by the
Company that were attributable to losses incurred by Bone Care prior to the
Distribution and (ii) cross indemnification by each party for certain tax
liabilities.
Purchase of Equipment
- ---------------------
A limited liability partnership owned 50% by Mr. Beckman purchased an
Artoscan magnetic resonance imager for $317,155 from the Company. The price paid
was comparable to purchases by unaffiliated third parties. The amount due was
paid in full on October 20, 1995.
SHAREHOLDER PROPOSALS
In order to be considered for inclusion in the Company's proxy materials for
the 1997 Annual Meeting of Shareholders, any shareholder proposals must be
received at the executive offices of the Company on or before June 30, 1997.
FINANCIAL STATEMENTS
A copy of the Annual Report to Shareholders of the Company, containing
audited consolidated financial statements for the fiscal year ended June 30,
1996, is enclosed herewith.
By Order of the Board of Directors,
Richard B. Mazess, Ph.D.
President
Madison, Wisconsin
October 28, 1996
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 1996, (OTHER THAN EXHIBITS NOT
SPECIFICALLY INCORPORATED BY REFERENCE THEREIN) WILL BE PROVIDED WITHOUT CHARGE
TO EACH RECORD OR BENEFICIAL OWNER OF THE COMPANY'S COMMON STOCK AS OF OCTOBER
11, 1996, ON THE WRITTEN or oral REQUEST OF SUCH PERSON DIRECTED TO: LUNAR
CORPORATION, 313 WEST BELTLINE HIGHWAY, MADISON, WISCONSIN 53713, at (608)
274-2663, ATTENTION: ROBERT A. BECKMAN.
(Label Here)
Proxy for
Lunar Corporation
Annual Meeting of Shareholders
November 21, 1996
The undersigned hereby appoints Carl E. Gulbrandsen and ROBERT
A. BECKMAN, and each of them, proxies, with full power of
substitution, to vote for the undersigned all shares of the
Common Stock of LUNAR CORPORATION (the "Company"), which the
undersigned would be entitled to vote if personally present at
the Annual Meeting of Shareholders to be held at Lunar
Corporation, 313 West Beltline Highway, Madison, Wisconsin, on
Thursday, November 21, 1996, at 3:30 p.m., local time, and at any
adjournments thereof.
THIS PROXY IS BEING SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY.
(1) ELECTION OF DIRECTORS
For nominees listed WITHHOLD AUTHORITY
(except as marked to to vote for nominees
contrary below) Listed below
----- -----
INSTRUCTIONS: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name in the list
below.
John W. Brown Reed Coleman
(2) Ratify selection of KPMG Peat Marwick LLP as auditors of the
Company for the fiscal year ending June 30, 1997.
For Against Abstain
----- ----- -----
(3) In their discretion, upon such other matters as may properly
come before the meeting or any adjournments thereof.
(Over)
This proxy will be voted as specified on the reverse side. IF
NO CONTRARY SPECIFICATION IS MADE, IT WILL BE VOTED FOR ITEMS 1
AND 2 ON THE REVERSE SIDE, AND IN THE DISCRETION OF THE PERSONS
DESIGNATED HEREIN AS PROXIES, UPON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS THEREOF.
Please date this proxy and sign exactly as your name or names
appear therein. Joint owners should each sign personally.
Trustees and others signing in representative capacity should
indicate the capacity in which they sign. The undersigned hereby
revokes all proxies heretofore given to vote at the aforesaid
meeting.
Dated , 1996
-----------------------
- ----------------------------- ------------------------------
Co-Owner Sign Here Shareholder Sign Here