-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WmeoMjVqGgKemBykiHkisXYhiSwf3lEAYGnh20Sf68L86aKny6KuLu3zuG8N/8Fn xMAhthYqnTRKC3C05GQPVA== 0001047469-97-005761.txt : 19971124 0001047469-97-005761.hdr.sgml : 19971124 ACCESSION NUMBER: 0001047469-97-005761 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19971121 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CORTECH INC CENTRAL INDEX KEY: 0000728478 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 840894091 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 000-20726 FILM NUMBER: 97726164 BUSINESS ADDRESS: STREET 1: 6850 NORTH BROADWAY STREET 2: SUITE G CITY: DENVER STATE: CO ZIP: 80221 BUSINESS PHONE: 3036501200 10-K/A 1 10-K/A AMENDMENT 3 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A AMENDMENT NO. 3 /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-20726 CORTECH, INC. (Exact name of registrant as specified in its charter) DELAWARE 84-0894091 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 6850 N. BROADWAY, SUITE G DENVER, COLORADO 80221 (Address of principal executive offices) (Zip Code) (303) 650-1200 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR VALUE $.002 PER SHARE (TITLE OF CLASS) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ The approximate aggregate market value of the Common Stock held by non-affiliates of the registrant, based upon the closing price of the Common Stock reported on the Nasdaq National Market on November 4, 1997 was $0.66 per share. The number of shares of Common Stock outstanding as of October 31, 1997, was 18,523,918. TABLE OF CONTENTS ITEM PAGE NO. - ---- -------- Item 11 - Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 3 Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2. ITEM 11 - EXECUTIVE COMPENSATION COMPENSATION OF DIRECTORS Each non-employee director receives options to purchase Common Stock of the Company under the 1992 Amended and Restated Non-Employee Directors' Stock Option Plan (the "1992 Directors' Plan") as compensation for his or her services as a director and receives additional options under such plans for service on certain committees of the Board. Options may also be granted to non-employee directors outside of such Plan. Outside directors receive $1,000 per Board meeting attended and $1,000 per committee meeting attended if held on a non-Board meeting occasion and an additional $6,000 annually. Option grants under the 1992 Directors' Plan are automatic and non-discretionary. Each person who was a non-employee director of the Company as of the adoption date of the 1992 Directors' Plan was granted options generally covering 25,000 shares of Common Stock, with adjustments to equalize the directors' overall options in light of options previously granted to them. Such options generally become exercisable ("vest") in year-end installments of 5,000 shares. For services as Chairman, Mr. Fingerhut received an option covering an additional 21,250 shares (the "Chairman Option"), vesting at the rate of 416.67 shares per month, and each member of the Compensation and Audit Committees received options covering an additional 500 shares for each committee on which he served. In addition, (a) each person subsequently elected for the first time as a non-employee director is granted an option on the date of his or her initial election as a director to purchase a pro rata portion of 25,000 shares, depending upon when he or she is elected, which options generally vest in year-end installments of 5,000 shares; (b) each person subsequently elected for the first time to the Audit or Compensation Committee is granted an option to purchase 500 shares if elected before July 1, or a portion thereof, prorated on a quarterly basis, if elected after such date, vesting in full on December 31; (c) each non-employee director receives an annual option to purchase an additional number of shares, determined by multiplying 5,000 by a fraction, the numerator of which is $20 and the denominator of which is the fair market value per share of the Common Stock on the grant date, subject to minimum and maximum limits of 2,500 and 5,000 shares, respectively, vesting quarterly over five years; and (d) each non-employee director who is a member of the Company's Audit or Compensation Committee receives an annual option to purchase 500 shares, vesting in full on December 31. Vesting of all options is subject to continued service as a non-employee director or employee of the Company during the vesting period and, in the case of options granted for service on a committee, to continued service on the applicable committee. As of October 31, 1997, 1,650 options had been exercised under the 1992 Directors' Plan. During the fiscal year ended December 31, 1996, non-employee directors received options pursuant to the 1992 Directors' Plan as follows: Dr. Cohen received options covering 6,250 shares at an exercise price of $1.52 per share; Mr. Fingerhut received options covering 6,000 shares at $2.56 per share; Dr. Misher received options covering 5,500 shares at $2.56 per share; and Dr. Kennedy received options covering 5,500 shares at $2.56 per share. Dr. Cohen also received options covering 18,750 shares at an exercise price of $1.42 per share not pursuant to any plan. All non-employee directors are reimbursed for their expenses incurred in attending Board of Directors meetings. In addition, Dr. Misher and the Company entered into a consulting agreement for the period February 1, 1995 through January 31, 1996 pursuant to which Dr. Misher was paid $25,000. Directors who are employees of the Company do not receive separate compensation for their services as directors. 3. COMPENSATION OF EXECUTIVE OFFICERS The following table shows for the fiscal years ended December 31, 1996, 1995 and 1994, compensation awarded or paid to, or earned by, each person who served as the Company's Chief Executive Officer during 1996, its three other most highly compensated executive officers at December 31, 1996 (the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
Long-Term Annual Compensation Compensation Awards ------------------------------- ------------ Other All Other Annual Securities Compen- Name and Principal Salary Bonus Compensa- Underlying sation Position Year ($) ($) tion($) Options ($)(1) - ------------------------- -------- ---------- -------- --------- -------------- ------------- Kenneth R. Lynn 1996 $265,006 $65,000 ___ 75,000 $ 1,174 President, Chief 1995 230,499 75,000 ___ 275,000 1,099 Executive Officer and 1994 181,744 ___ ___ 100,000 9,602 Chairman of the Board Joseph L. Turner 1996 154,533 25,000 ___ 40,000 2,399 Vice President, Finance 1995 155,349 30,000 ___ 64,000 2,009 and Administration, 1994 147,000 ___ ___ 60,000 1,473 Chief Financial Officer and Secretary Diarmuid Boran(2) 1996 140,046 25,000 ___ 40,000 1,707 Vice President, 1995 112,493 30,000 ___ 64,000 1,386 Corporate Development and Planning Gilbert Carnathan, 1996 129,608 ___ ___ ___ 2,034 Ph.D.(2)(3) 1995 130,286 20,000 ___ 41,000 1,731 Vice President, Preclinical Research - ---------------------
(1) Includes matching payments by the Company under its 401(k) Plan; for 1996, the amounts were $664, $1,529, $1,403 and $1,303 for Messrs. Lynn, Turner, Boran and Carnathan, respectively. Includes premiums paid by the Company for group term life insurance; for 1996, the amounts were $510, $870, $304 and $731 for Messrs. Lynn, Turner, Boran and Carnathan, respectively. (2) Mr. Boran and Dr. Carnathan became executive officers in 1995. (3) Dr. Carnathan resigned as an officer and employee of the Company as of December 31, 1996. At such time, Dr. Carnathan and the Company entered into an agreement pursuant to which Dr. Carnathan served as a consultant and continued to receive his former salary and certain health benefits until September 1997. Stock options held by Mr. Carnathan exercisable as of September 30, 1997 have been modified to allow exercise until the earlier of their expiration or June 30, 1998. 4. STOCK OPTION GRANTS AND EXERCISES The Company grants options to its executive officers under its 1993 Equity Incentive Plan. As of October 31, 1997, options to purchase a total of 1,180,146 shares were outstanding under the 1993 Equity Incentive Plan and options to purchase 519,854 shares remained available for grant thereunder. The following tables show for the fiscal year ended December 31, 1996, certain information regarding options granted to, exercised by, and held at year end by, the Named Executive Officers: OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation Individual Grants for Option Term(2) ----------------------------------------------------------------------- --------------------------- Number of % of Total Securities Options underlying Granted to Exercise or Options Employees in Base Price Expiration Granted Fiscal Year ($/sh) Date 5%($) 10%($) ------- ----------- ----------- ---------- ------- -------- Name ---- Kenneth R. Lynn . . . 75,000 (1) 14.2% 1.52 12/13/06 $ 71,820 $181,260 Joseph L. Turner. . . 40,000 (1) 7.6% 1.52 12/13/06 $ 38,304 $ 96,672 Diarmuid F. Boran . . 40,000 (1) 7.6% 1.52 12/13/06 $ 38,304 $ 96,672 Gilbert Carnathan . . ___ ___ ___ ___ ___ ___
- ---------------------- (1) Vests 25% after one year and 6.25% quarterly thereafter, except that options may vest in full earlier in the event of a change in control of the Company. The Board of Directors has the authority to reprice options. (2) Calculated on the assumption that the market value of the underlying stock increases at the stated values, compounded annually. 5. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR, AND FY-END OPTION VALUES
Number of Securities Value of Underlying Unexercised Unexercised In-the-Money Options at Options at 12/31/96 (#) 12/31/96 ($)(1) Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise (#) Realized ($) Unexercisable Unexercisable - ---- ---------------- ------------ ------------- ------------- Kenneth R. Lynn ---- ---- 167,506 / 282,494 $ 0 / $ 0 Joseph L. Turner ---- ---- 64,488 / 99,512 0 / 0 Diarmuid Boran ---- ---- 44,564 / 101,936 0 / 0 Gilbert Carnathan ---- ---- 46,994 / 41,056 0 / 0
- -------------------------- (1) Closing price of the Company's Common Stock on December 31, 1996 ($1.47) minus the exercise price of the options. SEVERANCE PLAN The Company adopted the Executive Officers' Severance Benefit Plan (the "Severance Plan") on September 18, 1995, which was amended on December 13, 1996, to encourage senior employees to work in the Company's best interests following a change in control. In the event of an involuntary termination of employment within 60 days prior to and 30 months following a change in control, all employees employed at the level of Vice President or above and such other management employees as may be designated by the Chief Executive Officer will receive compensation during the Benefit Period (defined below), a proportional bonus payment if one was received the year preceding the year in which the termination date occurs, and all outstanding unvested stock options will become fully vested on the termination date. The "Benefit Period" for employees other than the Chief Executive Officer is the period commencing on the termination date and (i) continues for 18 months following such date if the date occurs within 60 days prior or 12 months after a change in control, or (ii) continues for the period following the date the employee becomes eligible determined by reducing 30 months by the number of months the eligible employee was employed by the Company following a change in control. With respect to the Chief Executive Officer, the "Benefit Period" is the Chief Executive Officer's termination date and (i) continues for 24 months following such date if the date occurs within 60 days prior or 12 months after a change in control, or (ii) continues for the period following such termination date determined by reducing 36 months by the number of months the Chief Executive Officer was employed by the Company following a change in control. EMPLOYMENT AGREEMENT On October 14, 1997, the Company entered into an employment agreement with Kenneth R. Lynn (the "Employment Agreement") which provides for the payment of the equivalent of 24 months base salary, the payment of health insurance policies for up to 18 months following a Termination Event (defined below), immediate vesting of all stock options not already vested and the payment of a bonus, upon the occurrence of a Termination Event. A Termination Event is defined as the involuntary termination of Mr. Lynn by the Company without cause, or the termination of employment by Mr. Lynn on account of a material change in the business of the Company or the duties of Mr. Lynn as determined in good faith by Mr. Lynn, prior to a change in control of the Company or within 30 months after a change in control of the Company. The Employment Agreement also provides that, with respect to any Termination Event that is also covered by the Severance Plan, Mr. Lynn shall receive compensation and benefits pursuant to the Employment Agreement only, and not pursuant to the Severance Plan. 6. SIGNATURE Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange Act of 1934, the registrant has caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. CORTECH, INC. November 20, 1997 By /s/ Kenneth R. Lynn ------------------------------------- Kenneth R. Lynn President and Chief Executive Officer 7. -----END PRIVACY-ENHANCED MESSAGE-----