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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-21198
ZONAGEN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0233274
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2408 TIMBERLOCH PLACE, SUITE B-4 77380
THE WOODLANDS, TEXAS (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(281) 367-5892
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
------------------- ----------------------------
Common Stock, $.001 par value Pacific Exchange, Inc.
Rights to purchase Series One Junior Pacific Exchange, Inc.
Participating Preferred Stock
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NAME OF EACH
TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED
Common Stock, $.001 par value Nasdaq National Market
Rights to purchase Series One Junior Nasdaq National Market
Participating Preferred Stock
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 v No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulations 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant was approximately $48,679,000 as of March 14, 2002, based on the
closing sales price of the registrant's common stock on the Nasdaq National
Market on such date of $4.67 per share. For purposes of the preceding sentence
only, all directors, executive officers and beneficial owners of ten percent or
more of the shares of the registrant's common stock are assumed to be
affiliates. As of March 14, 2002, 11,381,481 shares of the registrant's common
stock were outstanding.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The names of the Company's directors, and certain additional
information with respect to each of them, are set forth below.
YEAR FIRST
BECAME
NAME AGE POSITION WITH THE COMPANY DIRECTOR
---- --- ------------------------- --------
Martin P. Sutter............ 46 Chairman of the Board 1987
President and Chief Executive Officer
Joseph S. Podolski.......... 54 and Director 1992
Lloyd M. Bentsen, III....... 57 Director 2000
Steven Blasnik.............. 44 Director 1990
Timothy McInerney........... 41 Director 1996
Martin P. Sutter. Mr. Sutter, a co-founder of the Company, has served
as Chairman of the Board of Directors since December 1987. Since July 1988, Mr.
Sutter has been the Managing General Partner of The Woodlands Venture Partners,
L.P., a venture capital firm based in The Woodlands, Texas, and the General
Partner of The Woodlands Venture Fund, L.P. Since June 1998, Mr. Sutter has been
managing director of Essex Woodlands Health Ventures, L.L.C. He has a B.S.
degree from Louisiana State University and an M.B.A. from the University of
Houston.
Joseph S. Podolski. Mr. Podolski joined the Company in 1989 as Vice
President of Operations and has served as President and Chief Executive Officer
of the Company and as a director since 1992. Prior to joining the Company, Mr.
Podolski spent twelve years in various engineering, product development and
manufacturing positions at G.D. Searle, a subsidiary of Monsanto Company. Before
joining Monsanto, Mr. Podolski held positions in manufacturing, engineering,
quality control and development of fine chemicals, antibiotics, pharmaceuticals
and hospital products with Abbott Laboratories, Dearborn Chemical Company and
Baxter Pharmaceuticals. Mr. Podolski holds a M.S. in chemical engineering from
the Illinois Institute of Technology.
Lloyd M. Bentsen, III. Mr. Bentsen has been a Director of the Company
since June 2000. Mr. Bentsen is a general partner and co-founder of Triad
Ventures and the AM Fund, a group of venture capital funds that invest in
Texas-based emerging growth companies. Prior to founding his venture capital
firm in 1979, Mr. Bentsen spent ten years with Rotan Mosle, Inc., a regional
investment banking firm, as a member of the corporate finance department. Mr.
Bentsen is also on the board of directors of Stewart Information Services
Corporation, one of the largest title insurance companies in the United States
and traded on the New York Stock Exchange. Mr. Bentsen is a graduate of
Princeton University with an M.B.A. from Stanford University.
Steven Blasnik. Mr. Blasnik has served as a Director of the Company
since April 1990. Since 1987, Mr. Blasnik has been employed by the Perot Group
and is currently President of Perot Investments, Inc., an investment firm owned
by Ross Perot. He is also a director of Perot Systems Corporation. From 1983 to
1987, Mr. Blasnik was an attorney at Hughes & Luce in Dallas, Texas. Mr. Blasnik
has a B.S.E. from Princeton University and a J.D. from Harvard Law School.
Timothy McInerney. Mr. McInerney has served as a Director of the
Company since December 1996. Since 1992, Mr. McInerney has been a Managing
Director of Paramount Capital, Inc. where he oversees the overall distribution
of Paramount's private equity product. Prior to 1992, Mr. McInerney was a
research analyst focusing on the biotechnology industry at Ladenburg, Thalman &
Co. Prior to that, Mr. McInerney held equity sales positions at Bear, Stearns &
Co. and Shearson Lehman Brothers, Inc. Mr. McInerney also has worked in sales
and marketing for Bristol-Myers Squibb. He received his B.S. in pharmacy from
St. John's University at New York. He also completed a post-graduate residency
at the New York University Medical Center in drug information systems.
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive
officers of the Company, including the business experience of each during the
past five years.
NAME AGE POSITION
Joseph S. Podolski............. 54 President, Chief Executive Officer, and Director
Chief Financial Officer, Vice President, Business
Louis Ploth, Jr................ 47 Development and Secretary
Information pertaining to Mr. Podolski, who is both a director and an
executive officer of the Company, may be found in "Item 10. Directors and
Executive Officers of the Registrant - Directors."
Louis Ploth, Jr. Mr. Ploth has over sixteen years experience in the
biotechnology industry. Since January 2001, Mr. Ploth has served as Chief
Financial Officer, Vice President, Business Development and Secretary. He served
as Vice President, Finance from March 1999 to January 2001. He had previously
served as Chief Financial Officer and Vice President, Business Development from
1993 to 1998 and as Chief Financial Officer from 1998 to March 1999. Previously
Mr. Ploth was employed by Unisyn Technologies where he served concurrently as
Chief Financial Officer and as Vice President of Finance and Administration. Mr.
Ploth was also Corporate Controller of Synbiotics Corporation. Mr. Ploth has a
B.S. degree from Montclair State College.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers, and persons who own more than 10%
of the Common Stock, to file initial reports of ownership and reports of changes
in ownership (Forms 3, 4, and 5) of Common Stock with the Securities and
Exchange Commission (the "SEC"). Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all such forms that they file.
To the Company's knowledge, based solely on the Company's review of the
copies of such reports received by the Company and on written representations by
certain reporting persons that no reports on Form 5 were required, the Company
believes that during the fiscal year ended December 31, 2001, all Section 16(a)
filing requirements applicable to its officers, directors and 10% stockholders
were complied with in a timely manner.
ITEM 11. EXECUTIVE COMPENSATION
DIRECTORS' MEETINGS AND COMPENSATION
The Company's operations are managed under the broad supervision of the
Board of Directors, that has ultimate responsibility for the establishment and
implementation of the Company's general operating philosophy, objectives, goals
and policies. During 2001, the Board of Directors convened on six regularly
scheduled occasions and took certain additional actions by unanimous written
consent in lieu of meetings. All directors attended at least 75% of the meetings
held by the Board and any committee of the Board on which he served during his
tenure in 2001.
Employee directors do not receive additional compensation for service
on the Board of Directors or its committees. The Company reimburses each
non-employee director for travel expenses incurred in connection with attendance
at Board meetings. For board meetings attended in person non-employee directors
receive $1,000.00 per meeting in cash, stock awards, or options. Employee
directors are eligible to participate in the Company's 1994 Employee and
Consultant Stock Option Plan and the Amended and Restated 1993 Employee and
Consultant Stock Option Plan (the "Incentive Plans"). Non-employee directors are
entitled to participate in the Company's 2000 Non-employee Directors' Stock
Option Plan (the "2000 Director Plan").
The Board terminated the 1996 Non-employee Directors' Stock Option Plan
(although all options previously granted will remain outstanding pursuant to
their original terms) in connection with the approval of the 2000 Director Plan.
Under the 2000 Director Plan, (i) each non-employee director who is
first elected to the Board is entitled to receive an option to purchase 40,000
shares of Common Stock on the date on which he first becomes a non-employee
director, and (ii) each non-employee director in office on the date of the
Company's annual meeting of stockholders will receive an option to purchase
5,000 shares of Common Stock effective on such date. Additionally under the 2000
Director Plan, the chairman of the board who is first elected to the Board is
entitled to receive an option to purchase 10,000 shares of Common Stock on the
date on which he first becomes chairman, and the chairman in office on the date
of each of the Company's annual meeting of stockholders will receive an option
to purchase 10,000 shares of Common Stock effective on such date. In 2001, the
Company granted options to acquire an aggregate of
30,000 shares of Common Stock to non-employee directors under the 2000 Director
Plan. During 2001, the Company paid $5,000 to one director, issued stock awards
totaling 2,690 shares of Common Stock to two directors, and granted options to
purchase an aggregate of 1,852 shares of Common Stock to one director, for the
attendance of board meetings in person.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid or accrued during the last three years to the Company's
President and Chief Executive Officer and to the Company's only officer who had
compensation in excess of $100,000 during the last fiscal year (the "Named
Executive Officers"):
ANNUAL COMPENSATION LONG-TERM COMPENSATION
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS($) OPTIONS(#) COMPENSATION(1)
--------------------------- ------ ----------- ----------- ----------- -----------------------------
Joseph S. Podolski.................. 2001 $235,000 -- -- 25,000 $6,000(4)
President and Chief Executive 2000 $232,500 $75,000(2) -- -- $6,000(4)
Officer 1999 $225,000 $13,680(3) -- 35,000 $6,000(4)
Louis Ploth, Jr.....................
Chief Financial Officer, Vice 2001 $139,133 -- -- 30,000 --
President, Business Development 2000 $129,600 $57,500(2) -- 20,000 --
and Secretary 1999 $121,500 $28,500 -- 30,000 --
------------------------
(1) During the periods indicated, perquisites for each individual named in the
Summary Compensation Table aggregated less than 10% of the total annual
salary and bonus reported for such individual in the Summary Compensation
Table. Accordingly, no such amounts are included in the Summary
Compensation Table.
(2) Stay bonus granted on October 18, 1999 and paid during 2000.
(3) Performance bonus paid in 2000 but earned in 1999.
(4) Represents car allowance.
Option Grants in 2001
The following table provides certain information with respect to
options granted to the President and Chief Executive Officer and to each of the
Named Executive Officers during the fiscal year ended December 31, 2001 under
the Company's Incentive Plans:
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM(1)
-------------------------------------------------------------- ------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS MARKET
UNDERLYING GRANTED TO PRICE ON
OPTIONS EMPLOYEES IN EXERCISE DATE OF EXPIRATION
NAME GRANTED(#) FISCAL YEAR PRICE GRANT DATE 0% 5% 10%
---- ---------- ------------ -------- -------- ---------- ---- ------ --------
Joseph S. Podolski.. 25,000 18.1% $3.15 $3.15 9/20/2011 -- $49,525 $125,507
Louis Ploth, Jr..... 20,000 14.4% $2.72 $2.72 5/23/2011 -- $34,212 $ 86,700
Louis Ploth, Jr..... 10,000 7.2% $3.15 $3.15 9/20/2011 -- $19,810 $ 50,203
(1) The Securities and Exchange Commission (the "SEC") requires disclosure of
the potential realizable value or present value of each grant. The
disclosure assumes the options will be held for the full ten-year term
prior to exercise. Such options may be exercised prior to the end of such
ten-year term. The actual value, if any, an executive officer may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised. There can be no assurance that the stock
price will appreciate at the rates shown in the table.
Option Exercises and Holdings
The following table sets forth information concerning option exercises
and the value of unexercised options held by the President and Chief Executive
Officer and each of the Named Executive Officers of the Company named in the
Summary Compensation Table as of the end of the last fiscal year:
AGGREGATED OPTION EXERCISES IN 2001
AND OPTION VALUES AT DECEMBER 31, 2001
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
SHARES DECEMBER 31, 2001 DECEMBER 31, 2001(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ----------- ----------- ------------- ----------- -------------
Joseph S. Podolski ...... -- -- 251,360 46,000 $ 314,578 $ 181,552
Louis Ploth, Jr. ........ -- -- 97,700 54,000 $ 157,216 $ 172,844
----------------------
(1) Computed based on the difference between aggregate fair market value and
aggregate exercise price. The fair market value of the Company's Common
Stock on December 31, 2001 was $7.00, based on the closing sales price on
the Nasdaq Stock Market on December 31, 2001.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Podolski and Ploth
which provide for current annual salaries of $280,000 and $150,000,
respectively. The agreements provide that the Company will pay Messrs. Podolski
and Ploth an annual incentive bonus as may be approved by the Board of Directors
and that they are entitled to participate in all employee benefit plans
sponsored by the Company. Mr. Podolski's employment agreement provides for a
renewal term expiring in January 2003, with automatic annual renewals unless
terminated by either party. If terminated for reasons other than cause, Mr.
Podolski is entitled to receive his annual base salary and certain employment
benefits for one year following termination. Mr. Podolski's employment agreement
provides that in the event that he terminates his employment for Good Reason
(defined as a change in duties or pay or the like) or is terminated by the
Company without Cause, within 12 months of a Change of Control, that he will
receive, in lieu of any other severance payments payable to him under such
agreement, a lump sum bonus payment of $666,045, as consideration for past
services and services rendered in connection with the change of control. Such
payment will be deposited in the Joseph Podolski Rabbi Trust, and paid to him in
installments over the six years following the event. Mr. Ploth's employment
agreement expires in October 2002
with automatic annual renewals unless otherwise terminated by either party. If
terminated for reasons other than cause, Mr. Ploth is entitled to salary and
certain employment benefits for six months following termination.
Mr. Ploth's agreement provides for the following additional benefits
for Mr. Ploth if he remains employed by the Company at the date of a change of
control:
o a lump sum cash bonus payable upon the earlier of (i) a change in
control (as defined therein) or (ii) the Board's termination of
further action to facilitate a change in control;
o upon a change in control, all outstanding options he holds shall
accelerate in full and shall remain exercisable for two years
following the change in control;
o upon a change in control, the Company shall pay him a lump sum
cash payment equal to one-half of his then current annual salary;
and
o for a period of six months following a change in control, the
Company shall continue to provide his fringe benefits, such as
health and dental insurance.
PERFORMANCE GRAPH
The following performance graph compares the performance of the
Company's Common Stock to the Nasdaq Combined Composite Index and to the Nasdaq
Index of Pharmaceutical Companies. The graph covers the fiscal years ending
December 31, 1996 to December 31, 2001. The graph assumes that the value of the
investment in the Company's Common Stock and each index was $100 at December 31,
1996 and that all dividends were reinvested.
COMPARISON OF CUMULATIVE RETURN
AMONG ZONAGEN, INC.,
NASDAQ COMBINED MARKET INDEX AND
NASDAQ PHARMACEUTICAL COMPANIES INDEX
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1996 1997 1998 1999 2000 2001
ZONAGEN INC. 100.00 194.00 204.00 46.67 28.00 74.67
NASDAQ PHARMACEUTICALS 100.00 103.06 130.06 246.55 307.50 261.22
NASDAQ COMBINED INDEX 100.00 122.07 169.07 315.20 190.34 151.73
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The foregoing stock price performance comparisons shall not be deemed
incorporated by reference into this Form 10-K or any filing under the Securities
Act of 1933, as amended, or under the Securities Exchange Act of 1934, as
amended, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
COMPENSATION AND OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Option Committee currently consists of Messrs.
Blasnik and McInerney. During fiscal 2001, no executive officer of the Company
served as (i) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served on the Compensation Committee of the Board of Directors, (ii) a
director of another entity, one of whose executive officers served on the
Compensation Committee of the Board of Directors of the Company or (iii) a
member of the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive officers served
as a director of the Company.
REPORT OF THE COMPENSATION AND OPTION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation and Option Committee (the "Committee") of the Board of
Directors of the Company currently consists of Steven Blasnik and Timothy
McInerney, neither of whom is an officer or employee of the Company. The
Committee is responsible for evaluating the performance of management and
determining the compensation for executive officers of the Company and for
administering the Company's Incentive Plans under which grants may be made to
employees of the Company. The Committee has furnished the following report on
executive compensation for 2001:
Under the supervision of the Committee, the Company has developed a
compensation policy which is designated to attract and retain key executives
responsible for the success of the Company and motivate management to enhance
long-term stockholder value. The annual compensation package for executive
officers primarily consists of (i) a cash salary which reflects the
responsibilities relating to the position and individual performance, (ii)
variable performance awards payable in cash or stock and tied to the achievement
of certain personal and corporate goals or milestones and (iii) long-term
stock-based incentive awards which strengthen the mutuality of interests between
the executive officers and the Company's stockholders.
In determining the level and composition of compensation of each of the
Company's executive officers, the Committee takes into account various
qualitative and quantitative indicators of corporate and individual performance.
Although no specific target has been established, the Committee generally seeks
to set salaries comparable to those of peer group companies. In setting such
salaries, the Committee considers its peer group to be certain companies in the
biotechnology industries with market capitalizations similar to that of the
Company. Such competitive group does not necessarily include the companies
comprising the indexes reflected in the performance graph in this Proxy
Statement. Because the Company is still in the development stage, the use of
certain traditional performance standards (e.g., profitability and return on
equity) is not currently appropriate in evaluating the performance of the
Company's executive officers. Consequently, in evaluating the performance of
management, the Committee takes into consideration such factors as the Company's
achieving specified milestones or goals in its clinical development programs and
the general progress of the Company's clinical trials. In addition, the
Committee recognizes performance and achievements that are more difficult to
quantify, such as the successful supervision of major corporate projects and
demonstrated leadership ability.
Base compensation is established through negotiation between the
Company and the executive officer at the time the executive is hired, and then
subsequently adjusted when such officer's base compensation is subject to review
or reconsideration. While the Company has entered into employment agreements
with certain of its executive officers, such agreements provide that base
salaries after the initial year will be determined by the Committee after
review. When establishing or reviewing base compensation levels for each
executive officer, the Committee, in accordance with its general compensation
policy, considers numerous factors, including the responsibilities relating to
the position, the qualifications of the executive and the relevant experience
the individual brings to the Company, strategic goals for which the executive
has responsibility, and compensation levels of companies at a comparable stage
of development who compete with the Company for business, scientific and
executive talents. As stated above, such comparable companies are generally
those with similar market capitalizations and are not necessarily among the
companies comprising the industry or broad market indexes reflected in the
performance graph in this Proxy Statement. No pre-determined weights are given
to any one of such factors. The base salaries for the executive officers
generally, and the Chief Executive Officer specifically, for fiscal 2001 were
comparable to the Company's peer group companies.
In addition to each executive officer's base compensation, the
Committee may award cash bonuses and the Committee may grant awards under the
Company's Incentive Plans to chosen executive officers depending on the extent
to which certain defined personal and corporate performance goals are achieved.
Such corporate performance goals are the same as discussed above.
All employees of the Company, including its executive officers, are
eligible to receive long-term stock-based incentive awards under the Company's
Incentive Plans as a means of providing such individuals with a continuing
proprietary interest in the Company. Such grants further the mutuality of
interest between the Company's employees and its stockholders by providing
significant incentives for such employees to achieve and maintain high levels of
performance. The Company's Incentive Plans enhance the Company's ability to
attract and retain the services of qualified individuals. Factors considered in
determining whether such awards are granted to an executive officer of the
Company include the executive's position in the Company, his or her
performance and responsibilities, the amount of stock options, if any, currently
held by the officer, the vesting schedules of any such options and the executive
officer's other compensation. While the Committee does not adhere to any firmly
established formulas or schedules for the issuance of awards such as options or
restricted stock, the Committee will generally tailor the terms of any such
grant to achieve its goal as a long-term incentive award by providing for a
vesting schedule encompassing several years or tying the vesting dates to
particular corporate or personal milestones.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), added by the Revenue Reconciliation Act of 1993, places a $1.0 million
cap on the deductible compensation that can be paid to certain executives of
publicly-traded corporations. Amounts that qualify as "performance based"
compensation under Section 162(m)(4)(c) of the Code are exempt from the cap and
do not count toward the $1.0 million limit. Generally, stock options will
qualify as performance based compensation. The Committee has discussed and
considered and will continue to evaluate the potential impact of Section 162(m)
on the Company in making compensation determinations, but has not established a
set policy with respect to future compensation determinations.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The annual base salary of Joseph S. Podolski, the Company's President
and Chief Executive Officer, was increased to $280,000 for 2002. In increasing
Mr. Podolski's annual base salary for 2002, the Committee evaluated a number of
factors, including Mr. Podolski's responsibilities, his general background and
qualifications, his achievement of various corporate and personal milestones set
by the Committee from time to time, and compensation levels for executives in
Mr. Podolski's position and with his background at peer group companies. The
Committee has not attached any particular relative weighting to the foregoing
factors (or any other factors which the Committee may also consider in reaching
compensation decisions for the Company's executive officers).
The Committee did not grant a bonus to Mr. Podolski for 2001. In March
2002, the Committee approved a bonus plan for Mr. Podolski under which he will
receive year end bonuses that will equal two percent (2%) of the amount of
milestone payments received by the Company during such year. Such plan
terminates after December 31, 2003, unless prior thereto there is either a
change of control or a termination of Mr. Podolski's employment. If either such
event occurs prior to such date, the bonus plan will terminate upon the
occurrence of such event. The Committee retains discretion to determine the
amount of any future incentive bonus awards to be paid to Mr. Podolski under its
general plan of incentive bonus awards for the Company's executive officers. The
Committee expects that it will evaluate a number of factors in reaching this
decision, including the Company's strategic goals for which Mr. Podolski has
responsibility, his other responsibilities, his initiatives and contributions to
the Company's achievement of various corporate and strategic goals and his own
achievement of certain personal milestones as determined by the Committee from
time to time.
Mr. Podolski was granted options to purchase an aggregate of 25,000
shares under the Company's Incentive Plans during 2001. In March 2002, the
Committee approved the grant of an option to Mr. Podolski to purchase 50,000
shares of Common Stock with an exercise price equal to the fair market value of
the Common Stock on the date of grant and usual time-based vesting provisions
and an additional performance option to purchase 225,000 shares of Common Stock
with an identical exercise price, all of which vest on the tenth anniversary of
the date of grant but with accelerated vesting of certain portions of such
option on certain milestone events related to the approval of Vasomax(TM) in
Europe and the United States. Mr. Podolski participates in the Company's
Incentive Plans on the same general terms as other participants in the Plan,
although the amount of shares underlying option grants to Mr. Podolski has
historically been larger than for other employees as a result of his position.
The foregoing report is given by the following members of the
Committee:
Timothy McInerney, Chairman
Steven Blasnik
The report of the Committee shall not be deemed incorporated by
reference into this Form 10-K or any filing under the Securities Act of 1933, as
amended, or under the Securities Exchange Act of 1934, as amended, except to the
extent that the Company specifically incorporates this information by reference,
and shall not otherwise be deemed filed under such Acts.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding the
beneficial ownership of the Company's Common Stock as of March 31, 2002 by (i)
each person who is known by the Company to own beneficially more than five
percent of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) the Company's chief executive officer and each of the other Named
Executive Officers and (iv) all directors and executive officers as a group.
Except as described below, each of the persons listed in the table has sole
voting and investment power with respect to the shares listed.
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENTAGE
NAME OF BENEFICIAL OWNER COMMON STOCK(1) OF CLASS(2)
------------------------ --------------- -----------
Joseph Edelman.............................................. 905,300(3) 8.0%
c/o First New York Securities L.L.C.
850 Third Avenue, 17th Floor
New York, New York 10022
Petrus Fund, L.P. .......................................... 755,793(4) 6.6%
12377 Merit Dr., Suite 1700
Dallas, Texas 75251
Lloyd M. Bentsen, III....................................... 13,000(5) *
Steven Blasnik.............................................. 825,508(6) 7.2%
Joseph S. Podolski.......................................... 291,481(7) 2.5%
Martin P. Sutter ........................................... 247,899(8) 2.2%
Timothy McInerney........................................... 213,698(9) 1.9%
Louis Ploth................................................. 108,497(10) *
All directors and executive officers
as a group (6 persons)................................. 1,700,083(5)-(10) 14.3%
-----------------------
* Does not exceed one percent.
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by such persons.
(2) In accordance with the rules of the Securities and Exchange Commission,
each beneficial owner's percentage ownership assumes the exercise or
conversion of all options, warrants and other convertible securities held
by such person and that are exercisable or convertible within 60 days
after March 31, 2002.
(3) Based on information contained in a Schedule 13G filed on behalf of Mr.
Edelman on January 23, 2002 and a Schedule 13G filed on behalf of First
New York Securities L.L.C. on April 5, 2002. Pursuant to information
contained in both filings, 788,900 of such shares are held by Perceptive
Life Sciences Master Fund Ltd., the investment manager of which is
Perceptive Advisors LLC, of which Mr. Edelman is managing member.
(4) Based on information provided to the Company by Petrus Fund, L.P.
(5) Includes 13,000 shares issuable upon exercise of options.
(6) Includes (i) 755,793 shares of Common Stock which may be deemed to be
beneficially owned by Mr. Blasnik by virtue of his affiliation with Petrus
Fund, L.P. and (ii) 69,715 shares of Common Stock issuable upon the
exercise of options. Mr. Blasnik disclaims beneficial ownership of the
shares owned by Petrus Fund, L.P.
(7) Includes (i) 300 shares of Common Stock which are held by certain of Mr.
Podolski's family members and (ii) 224,000 shares of Common Stock issuable
upon the exercise of options. Mr. Podolski disclaims beneficial ownership
of the shares owned by his family members.
(8) Includes (i) 115,029 shares of Common Stock which may be deemed to be
beneficially owned by Mr. Sutter by virtue of his affiliation with
Essex/Woodlands Health Ventures, L.P., (ii) 80,000 shares of Common Stock
issuable upon the exercise of options and (iii) 524 shares of Common Stock
which are held by certain of Mr. Sutter's family members. Mr. Sutter
disclaims beneficial ownership of the shares owned by Essex/Woodlands
Health Ventures, L.P. and by his family members.
(9) Includes (i) 51,194 shares of Common Stock issuable upon the exercise of
warrants, (ii) 53,500 shares of Common Stock issuable upon the exercise of
options, and (iii) 3,131 shares of Common Stock which are held by certain
of Mr. McInerney's family members. Mr. McInerney disclaims beneficial
ownership of the shares owned by his family members.
(10) Includes 103,700 shares of Common Stock issuable upon the exercise of
options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ZONAGEN, INC.
By: /s/ Joseph S. Podolski
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Joseph S. Podolski
President and Chief Executive Officer
Dated: April 29, 2002