<PAGE> 1
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 Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ZONAGEN, INC.
------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-----------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which 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:
<PAGE> 2
ZONAGEN, INC.
2408 TIMBERLOCH PLACE, SUITE B-4
THE WOODLANDS, TEXAS 77380
April 18, 2000
To Our Stockholders:
You are cordially invited to attend the 2000 Annual Meeting of Stockholders
of Zonagen, Inc. to be held on Tuesday, May 23, 2000, at 11:00 a.m., Central
Daylight Time, at the Wyndham Greenspoint Hotel, 12400 Greenspoint Drive,
Houston, Texas. A Notice of the Annual Meeting, Proxy Statement and form of
proxy are enclosed with this letter.
We encourage you to read the Notice of the Annual Meeting and Proxy
Statement so that you may be informed about the business to come before the
meeting. Your participation in the Company's business is important, regardless
of the number of shares that you hold. To ensure your representation at the
meeting, please promptly sign and return the accompanying proxy card in the
postage-paid envelope.
We look forward to seeing you on May 23, 2000.
Sincerely,
[/s/ JOSEPH S. PODOLSKI]
Joseph S. Podolski
President and Chief Executive
Officer
<PAGE> 3
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2000
To the Stockholders of Zonagen, Inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of Zonagen, Inc.
(the "Company") will be held on Tuesday, May 23, 2000, at 11:00 a.m., Central
Daylight Time, at the Wyndham Greenspoint Hotel, 12400 Greenspoint Drive,
Houston, Texas, for the following purposes:
1. To elect a board of five directors of the Company, each to serve
until the Company's next Annual Meeting of Stockholders or until their
respective successors have been duly elected and qualified;
2. To approve the Company's 2000 Employee Stock Purchase Plan;
3. To approve the Company's 2000 Non-Employee Directors' Stock Option
Plan;
4. To ratify and approve the appointment of Arthur Andersen LLP as the
Company's independent public accountants for its fiscal year ending
December 31, 2000; and
5. To act on such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Only stockholders of record at the close of business on March 31, 2000 will
be entitled to notice of and to vote at the Annual Meeting.
It is important that your shares be represented at the Annual Meeting
regardless of whether you plan to attend. THEREFORE, PLEASE MARK, SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID ENVELOPE AS
PROMPTLY AS POSSIBLE. If you are present at the Annual Meeting, and wish to do
so, you may revoke the proxy and vote in person.
By Order of the Board of Directors,
[/s/ F. SCOTT REDING]
F. Scott Reding
Secretary
The Woodlands, Texas
April 18, 2000
<PAGE> 4
ZONAGEN, INC.
2408 TIMBERLOCH PLACE, SUITE B-4
THE WOODLANDS, TEXAS 77380
---------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 23, 2000
SOLICITATION AND REVOCABILITY OF PROXIES
The accompanying Proxy is solicited by the Board of Directors of Zonagen,
Inc. (the "Company"), to be voted at the Annual Meeting of Stockholders of the
Company to be held on Tuesday, May 23, 2000 (the "Annual Meeting"), at 11:00
a.m., Central Daylight Time, at the Wyndham Greenspoint Hotel, 12400 Greenspoint
Drive, Houston, Texas, for the purposes set forth in the accompanying Notice of
Annual Meeting of Stockholders, and at any adjournment(s) of the Annual Meeting.
If the accompanying Proxy is properly executed and returned, the shares it
represents will be voted at the Annual Meeting in accordance with the directions
noted thereon or, if no direction is indicated, it will be voted in favor of the
proposals described in this Proxy Statement. In addition, the Proxy confers
discretionary authority to the persons named in the Proxy authorizing those
persons to vote, in their discretion, on any other matters properly presented at
the Annual Meeting. The Board of Directors is not currently aware of any such
other matters.
Each stockholder of the Company has the unconditional right to revoke his
Proxy at any time prior to its exercise, either in person at the Annual Meeting
or by written notice to the Company addressed to Secretary, Zonagen, Inc., 2408
Timberloch Place, Suite B-4, The Woodlands, Texas 77380. No revocation by
written notice will be effective unless such notice has been received by the
Secretary of the Company prior to the day of the Annual Meeting or by the
inspector of election at the Annual Meeting.
The principal executive offices of the Company are located at 2408
Timberloch Place, Suite B-4, The Woodlands, Texas 77380. This Proxy Statement
and the accompanying Notice of Annual Meeting of Stockholders and Proxy are
being mailed to the Company's stockholders on or about April 18, 2000.
In addition to the solicitation of proxies by use of this Proxy Statement,
directors, officers and employees of the Company may solicit the return of
proxies by mail, personal interview, telephone or telegraph. Officers and
employees of the Company will not receive additional compensation for their
solicitation efforts, but they will be reimbursed for any out-of-pocket expenses
incurred. Brokerage houses and other custodians, nominees and fiduciaries will
be requested, in connection with the stock registered in their names, to forward
solicitation materials to the beneficial owners of such stock.
All costs of preparing, printing, assembling and mailing the Notice of
Annual Meeting of Stockholders, this Proxy Statement, the enclosed form of Proxy
and any additional materials, as well as the cost of forwarding solicitation
materials to the beneficial owners of stock and all other costs of solicitation,
will be borne by the Company.
<PAGE> 5
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will be asked to consider
and act on the following matters:
1. The election of a board of five directors of the Company, each to
serve until the Company's next Annual Meeting of Stockholders or until
their respective successors have been duly elected and qualified;
2. A proposal to approve the Company's 2000 Employee Stock Purchase
Plan;
3. A proposal to approve the Company's 2000 Non-Employee Directors'
Stock Option Plan;
4. A proposal to ratify and approve the appointment of Arthur Andersen
LLP as the Company's independent public accountants for its fiscal year
ending December 31, 2000; and
5. Such other business as may properly come before the Annual Meeting
or any adjournments thereof.
QUORUM AND VOTING
The close of business on March 31, 2000 has been fixed as the record date
(the "Record Date") for the determination of stockholders entitled to vote at
the Annual Meeting and any adjournment(s) thereof. As of the Record Date, the
Company had issued and outstanding 11,283,224 shares of the Company's common
stock, par value $.001 share (the "Common Stock").
Each stockholder of record of Common Stock will be entitled to one vote per
share on each matter that is called to vote at the Annual Meeting. Shares of
Common Stock may not be voted cumulatively.
The presence, either in person or by proxy, of holders of shares
representing a majority of the Common Stock entitled to be cast at the Annual
Meeting is necessary to constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes are counted for purposes of determining whether a quorum is
present. A plurality vote is required for the election of directors.
Accordingly, if a quorum is present at the Annual Meeting, the five persons
receiving the greatest number of votes will be elected to serve as directors.
Withholding authority to vote for a director nominee and broker non-votes in the
election of directors will not affect the outcome of the election of directors.
All other matters to be voted on will be decided by the vote of the holders of
shares representing a majority of the votes present or represented at the Annual
Meeting and entitled to vote on such matter. On any such matter, an abstention
will have the same effect as a negative vote but, because shares held by brokers
will not be considered entitled to vote on matters as to which the brokers
withhold authority, a broker non-vote will have no effect on such vote.
All Proxies that are properly completed, signed and returned prior to the
Annual Meeting will be voted. Any Proxy given by a stockholder may be revoked at
any time before it is exercised by the stockholder (i) filing with the Secretary
of the Company an instrument revoking it, (ii) executing and returning a Proxy
bearing a later date or (iii) attending the Annual Meeting and expressing a
desire to vote his shares of Common Stock in person. Votes will be counted by
Harris Trust & Savings Bank, the Company's transfer agent and registrar.
PROPOSAL NUMBER 1:
ELECTION OF DIRECTORS
The Board of Directors has nominated and urges you to vote for the election
of the five nominees identified below, who have been nominated to serve as
directors until the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified. Each of the nominees listed below is
a member of the Company's present Board of Directors. Proxies solicited hereby
will be voted for all nominees unless stockholders specify otherwise in their
Proxies.
If, at the time of or prior to the Annual Meeting, any of the nominees
should be unable or decline to serve, the discretionary authority provided in
the Proxy may be used to vote for a substitute or substitutes
2
<PAGE> 6
designated by the Board of Directors. The Board of Directors has no reason to
believe that any substitute nominee or nominees will be required.
NOMINEES FOR ELECTION AS DIRECTORS
The names of the nominees for election as directors, and certain additional
information with respect to each of them, are set forth below.
<TABLE>
<CAPTION>
YEAR FIRST
BECAME
NAME AGE POSITION WITH THE COMPANY DIRECTOR
- ---- --- ------------------------- ----------
<S> <C> <C> <C>
Martin P. Sutter................. 44 Chairman of the Board 1987
Joseph S. Podolski............... 52 President, Chief Executive
Officer, and Director 1992
Steven Blasnik................... 42 Director 1990
Jeffrey M. Jonas, M.D. .......... 47 Director 1998
Timothy McInerney................ 39 Director 1996
</TABLE>
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 Montgomery, 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. Mr. Sutter is a
director of Aronex Pharmaceuticals, Inc., a biotechnology company based in The
Woodlands, Texas and several private health-care related companies. 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.
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.
Jeffrey M. Jonas, M.D. Dr. Jonas has served as a Director of the Company
since April 1998. Dr. Jonas has served as the President and Chief Executive
Officer of AVAX Technologies, Inc., a biotechnology company based in Kansas
City, Missouri, since June 1996. From 1991 through 1996, Dr. Jonas served in
various capacities with The Upjohn Company, a pharmaceuticals company based in
Kalamazoo, Michigan, serving most recently as Vice President -- Clinical
Development and Chief Medical Officer. Dr. Jonas has a B.A. from Amherst College
and an M.D. from Harvard Medical School.
Timothy McInerney, R.Ph. 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., and he 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.
3
<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE ABOVE-NAMED NOMINEES.
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 1999, the Board of Directors convened on four 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 1999.
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, certain non-employee
directors receive $1,000.00 per meeting. 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 1996 Non-employee Directors' Stock Option Plan (the "1996 Director
Plan").
Under the 1996 Director Plan, (i) each non-employee director who is first
elected to the Board is entitled to receive an option to purchase 25,000 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 2,500 shares
of Common Stock effective on such date. Each non-employee director in office on
the date of the adoption of the 1996 Director Plan was granted an option to
purchase 25,000 shares of Common Stock on such date. In 1999, the Company
granted options to acquire an aggregate of 12,500 shares of Common Stock to
non-employee directors under the 1996 Director Plan. In March 2000, the Board of
Directors approved paying each non-employee director $1,000.00 per meeting
attended in person. In addition, the Board terminated the 1996 Director Plan
(although all options previously granted will remain outstanding pursuant to
their terms) and adopted the 2000 Director Plan (see Proposal No. 3: Approval of
the Company's 2000 Non-Employee Directors' Stock Option Plan), both subject to
stockholder approval.
BOARD COMMITTEES
Pursuant to delegated authority, various Board functions are discharged by
the standing committees of the Board. The Board of Directors has appointed four
principal standing committees: the Executive Committee, the Compensation and
Option Committee, the Audit Committee and the Nominating Committee. The
Executive Committee, currently comprised of Messrs. Sutter and Podolski, is
authorized to exercise, to the extent permitted by law, the power of the full
Board of Directors when a meeting of the full Board is not practicable or
necessary. The Executive Committee convened once in 1999. The Compensation and
Option Committee, currently comprised of Messrs. Blasnik and McInerney, selects
the employees to whom stock options are to be granted, determines the terms and
conditions provided for in each option grant and reviews and recommends to the
Board of Directors the amount of compensation to be paid to officers of the
Company. The Compensation and Option Committee convened on seven occasions in
1999 and took certain additional actions by unanimous written consent in lieu of
meetings. The Audit Committee, currently comprised of Dr. Jonas, Dr. Nelson Levy
(a current director not standing for re-election) and Mr. McInerney, provides
assistance to the Board of Directors in fulfilling its responsibilities relating
to corporate accounting and reporting practices, recommends to the Board of
Directors the engagement by the Company of its independent public accountants,
approves services performed by the Company's independent public accountants,
including fee arrangements and the range of audit and non-audit services,
maintains a direct line of communication between the Board of Directors and the
Company's independent public accountants and performs such other functions as
may be prescribed with respect to audit committees under applicable rules,
regulations and policies of The Nasdaq Stock Market, Inc. The Audit Committee
convened on one occasion in 1999. The Nominating Committee is currently
comprised of Messrs. Sutter and Podolski, and did not meet during 1999.
4
<PAGE> 8
PROPOSAL NUMBER 2:
APPROVAL OF THE COMPANY'S
2000 EMPLOYEE STOCK PURCHASE PLAN
GENERAL
The Board adopted the Company's 2000 Employee Stock Purchase Plan (the
"Purchase Plan") on April 17, 2000. The Purchase Plan provides the Company's
employees with an opportunity to purchase Common Stock through accumulated
payroll deductions. The purpose of the Purchase Plan is to allow all of the
Company's eligible employees to acquire a proprietary interest in the Company
and to, thereby, incentivize such employees to maximize the value of the Company
for the Company's stockholders. The following summary of the Purchase Plan is
qualified in its entirety by reference to the complete text thereof, which is
attached hereto as Appendix A.
A total of 150,000 shares of Common Stock has been reserved for issuance
under the Purchase Plan through December 2000. In addition, the Purchase Plan
provides for annual increases in the number of shares available for issuance
under the Purchase Plan on the first day of each year, beginning January 1,
2001, in an amount equal to 50,000 shares.
SUMMARY OF THE PLAN
The Board or a committee appointed by the Board administers the Purchase
Plan. The Board or its committee has full and exclusive authority to interpret
the terms of the Purchase Plan and determine eligibility.
Employees are eligible to participate if they are employed by the Company
or any participating subsidiary for at least 20 hours per week. However, an
employee may not be granted the right to purchase Common Stock under the
Purchase Plan:
(a) if such an employee, immediately after the grant of such purchase
right, owns stock possessing five percent or more of the total combined
voting power or value of all classes of the Company's capital stock, or
(b) if, and to the extent that, such an employee has rights to
purchase stock under all of the Company's employee stock purchase plans in
excess of $25,000 worth of stock for each calendar year.
The Purchase Plan, which is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), provides for offering
periods of 24 months, including four six-month purchase periods. The offering
periods will generally start on the first trading day on or after January 1 of
every other year, except for the first offering period which commenced on April
17, 2000 (the date the Board adopted this Purchase Plan), subject to stockholder
approval and will end on the last trading day on or before December 31, 2001.
The Purchase Plan permits participants to purchase Common Stock though
payroll deductions of up to 15% of the participant's "compensation," subject to
the aggregate dollar limitation mentioned above. Compensation is defined as the
participant's base straight time gross earnings and commissions but excludes
payments for overtime, shift premium payments, incentive compensation, incentive
payments, bonuses and other compensation.
Amounts deducted and accumulated for the participant's account are used to
purchase shares of Common Stock on the last trading day of each purchase period
at a price of 85% of the lower of the fair market value of the Common Stock at
the beginning of the offering period or the fair market value of the Common
Stock at the end of the applicable purchase period. Participants may reduce
their withholding percentage to zero at any time during an offering period and
may increase their withholding percentage or decrease it, but to more than zero,
on the first day of each purchase period. Participants may end their
participation at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with the Company.
5
<PAGE> 9
A participant may not transfer rights granted under the Purchase Plan other
than by will, the laws of descent and distribution or as otherwise provided
under the Purchase Plan.
The Purchase Plan provides that, if the Company merges with or into another
corporation or enters into the sale of substantially all of the Company's
assets, a successor corporation may assume or substitute for each outstanding
purchase right. If the successor corporation refuses to assume or substitute for
the outstanding purchase rights, the offering period then in progress will be
shortened, and a new exercise date will be set.
The Purchase Plan will terminate in 2010. However, the Board has the
authority to amend or terminate the Purchase Plan at any time and may apply any
action to affect their outstanding rights to purchase stock under the Purchase
Plan.
FEDERAL INCOME TAX INFORMATION
Rights granted under the Purchase Plan are intended to qualify for
favorable federal income tax treatment by qualifying the Purchase Plan under
provisions of Section 423 of the Code.
A participant will be taxed on amounts withheld for the purchase of shares
of Common Stock as if such amounts were actually received. Otherwise, no income
will be taxable to a participant, including the purchase discount received by
participants in the Purchase Plan, until the sale or disposition of the acquired
shares, and the method of taxation will depend upon the holding period of the
acquired shares.
There are no federal income tax consequences to the Company by reason of
the grant or exercise of rights under the Purchase Plan. The Company is entitled
to a deduction to the extent amounts are taxed as ordinary income to a
participant (subject to the requirement of reasonableness and the satisfaction
of tax reporting obligations).
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE COMPANY'S 2000 EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL NUMBER 3:
APPROVAL OF THE COMPANY'S
2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
GENERAL
On April 17, 2000 (the "Adoption Date"), the Board adopted the Company's
2000 Non-Employee Directors' Stock Option Plan (the "2000 Director Plan") to
provide for the automatic grant of options to purchase shares of Common Stock to
the Company's non-employee directors. The purpose of the 2000 Director Plan is
to promote the interests of the Company by providing the Company's directors
with a proprietary interest in the Company. The Board administers the plan,
unless it delegates administration to a committee. Simultaneously with adoption
of the 2000 Director Plan, the Board terminated the 1996 Director Plan; however,
any previously granted options under the terminated 1996 Director Plan shall
continue in force unaffected by such action. The following summary of the 2000
Director Plan is qualified in its entirety by reference to the complete text
thereof, which is attached hereto as Appendix B.
SUMMARY OF THE PLAN
Shares Reserved. The Company has reserved a total of 500,000 shares of
Common Stock for issuance under the 2000 Director Plan. On the day after each
annual meeting of the stockholders, for 9 years, starting in 2001, the total
number of shares reserved for issuance under the Director Plan will be increased
by a number of shares equal to the greater of:
(a) 0.5% of the Company's outstanding shares as of the end of the
previous fiscal year; or
(b) that number of shares that could be issued under options granted
under the 2000 Director Plan during the prior 12 month period.
6
<PAGE> 10
If an optionholder does not purchase the shares under the option before the
option expires or otherwise terminates, the shares that are not purchased again
become available for issuance under the 2000 Director Plan.
Initial Grants. Each person who is either first elected or appointed as a
non-employee director after adoption of the 2000 Director Plan or served as a
director on the Adoption Date will automatically receive an option for 40,000
shares, effective on either the date the director first becomes a member of the
Board or the Adoption Date, whichever is applicable.
Annual Grants. In addition, on the date of each subsequent annual meeting
of stockholders, beginning with the annual meeting in 2001, each non-employee
director will automatically be granted an option to purchase 5,000 shares of
Common Stock.
Chairman Grants. The person who served as Chairman of the Board on the
Adoption Date and any person who is subsequently elected or appointed as
Chairman of the Board for the first time following adoption of the 2000 Director
Plan will automatically be granted an option to purchase 10,000 shares of Common
Stock. In addition, on the date of each subsequent annual meeting of
stockholders, beginning with the annual meeting in 2001, the person who is then
Chairman of the Board will automatically be granted an option to purchase 10,000
shares of Common Stock. These grants to the Chairman of the Board will be in
addition to initial and annual grants that the Chairman of the Board receives
under the 2000 Director Plan in his capacity as a member of the Board.
Vesting and Exercise Terms. Initial option grants under the 2000 Director
Plan will vest and become exercisable as to one-fifth of the shares underlying
such option on each anniversary date following such grant over a period of five
years. Annual option grants, including the annual grant to the Chairman of the
Board, will vest and become exercisable as to all of the shares underlying such
option on the first anniversary date following the grant. All options granted
under the 2000 Director Plan will have an exercise price equal to the fair
market value of the Common Stock on the date of grant. All vested options
granted under the 2000 Director Plan are exercisable for a two year period
following a director's termination of service as a director, but not beyond the
term thereof (ten years).
Effect of a Merger on Options. If the Company dissolves or liquidates,
outstanding options will terminate immediately prior to the event. If the
Company sells, leases or disposes of all or substantially all of its assets, or
is acquired pursuant to a merger or consolidation, all outstanding options held
by such optionholder immediately will vest and become exercisable in full.
Options Issued. The 2000 Director Plan became effective on the Adoption
Date, subject to approval by the stockholders at the Annual Meeting to which
this Proxy Statement relates. Effective as of the Adoption Date, all of the
Company's non-employee directors at that time received an initial grant as set
forth above of an option to purchase 40,000 shares of Common Stock.
Additionally, the Chairman of the Board received, on the Adoption Date, an
option to purchase 10,000 shares of Common Stock. The following chart sets forth
the grants made on the Adoption Date subject to approval by the stockholders,
none of which have currently vested or become exercisable:
<TABLE>
<CAPTION>
AMOUNT OF SHARES
DIRECTOR UNDERLYING OPTIONS GRANTED
- -------- --------------------------
<S> <C>
Martin P. Sutter.............................. 40,000
Steven Blasnik................................ 40,000
Jeffrey M. Jonas.............................. 40,000
Timothy McInerney............................. 40,000
Nelson Levy................................... 40,000
Martin P. Sutter, as Chairman of the Board.... 10,000
-------
Total............................... 210,000
=======
</TABLE>
Dr. Levy is not standing for reelection at the Annual Meeting. None of the
shares underlying the option granted to him under the Director Plan will have
vested or become exercisable at that time. As a result,
7
<PAGE> 11
Dr. Levy will not be able to exercise his option granted under the 2000 Director
Plan and all shares underlying the option granted to him will be returned to the
2000 Director Plan and be available for future option grants.
FEDERAL INCOME TAX CONSEQUENCES OF THE 2000 DIRECTOR PLAN
General. A non-employee director will not recognize any taxable income at
the time an option is granted. Ordinary income will be recognized by a
non-employee director at the time of exercise in an amount equal to the excess
of the fair market value of the shares of Common Stock received over the option
price for such shares. The non-employee director will generally recognize a
capital gain or loss upon a subsequent sale of the shares of Common Stock.
Deductibility. Upon a non-employee director's exercise of an option granted
under the 2000 Director Plan, the Company may claim a deduction for compensation
paid at the same time and in the same amount as ordinary income is recognized by
the non-employee director.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE 2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN.
PROPOSAL NUMBER 4:
RATIFICATION AND APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of Arthur Andersen LLP as the
Company's independent public accountants to make an examination of the accounts
of the Company for the fiscal year ending December 31, 2000, subject to
ratification by the Company's stockholders. Representatives of Arthur Andersen
LLP will be present at the Annual Meeting and will have an opportunity to make a
statement, if they desire to do so. They will also be available to respond to
appropriate questions from stockholders attending the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
AND APPROVAL OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000, AND
PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
8
<PAGE> 12
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 1999:
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. 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 1999 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
9
<PAGE> 13
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 $225,000 for 1999. In increasing Mr.
Podolski's annual base salary for 1999, 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).
Mr. Podolski was granted an incentive bonus of $13,680 for 1999. Of this
amount, $11,250 was related to the standard incentive bonus awards to the
Company's executive officers which are based on the achievement of certain
personal and corporate milestones by Mr. Podolski for 1999 and $2,430 was for
his 1999 incentive award relating to royalties received pursuant to the License
Agreement with Schering-Plough Corporation. In October 1997, the Committee
agreed to award Mr. Podolski an incentive bonus in the years ended December 31,
1997, 1998 and 1999, which bonus will be equal to 1% of the net license fees,
milestone payments and royalties received by the Company pursuant to a License
Agreement with Schering Plough Corporation and its affiliates during that
calendar year. These bonus payments are contingent on Mr. Podolski's continued
employment with the Company at the time of payment. The Committee will retain
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 35,000 shares under the
Company's Incentive Plans during 1999. 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:
Steven Blasnik
Timothy McInerney
10
<PAGE> 14
The report of the Committee shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933, as amended, or under the Exchange
Act, except to the extent that the Company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
EXECUTIVE COMPENSATION
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.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Joseph S. Podolski......... 52 President, Chief Executive Officer and Director
Paul Lammers M.D., M.Sc.... 42 Senior Vice President, Clinical and Regulatory Affairs
F. Scott Reding............ 48 Senior Vice President, Chief Financial Officer and
Secretary
David B. Bowman............ 44 Vice President, Operations
Louis Ploth, Jr. .......... 45 Vice President, Finance
Michael T. Redman.......... 45 Vice President, Business Development
</TABLE>
Information regarding the business experience of Mr. Podolski is set forth
above under the heading "Nominees for Election as Directors."
Paul Lammers, M.D., M.Sc. Dr. Lammers joined the Company as Senior Vice
President, Clinical and Regulatory Affairs in 1998. Previously Dr. Lammers was
with Hoechst Marion Roussel where he managed the Medical Services Group as Head
of Medical Services in International Marketing. Prior to joining Hoechst, Dr.
Lammers was employed for eight years at Organon, Inc., serving most recently as
Medical Director and Director of Medical Services. Dr. Lammers holds M.Sc. and
M.D. degrees from Catholic University, Nijmegen, The Netherlands.
F. Scott Reding. Mr. Reding joined the Company as Senior Vice President and
Chief Financial Officer in March 1999. Previously Mr. Reding was with
Immunotherapy, Inc. where he was Vice President, Chief Financial Officer and
Treasurer from 1996 to 1998. Prior to joining Immunotherapy, Mr. Reding was
employed for eight years at Nomura Securities International, Inc. serving most
recently as Head of U.S. Healthcare Group. Mr. Reding holds an M.B.A. from
Columbia University and an A.B. degree from Brown University.
David B. Bowman. Mr. Bowman joined the Company in 1990 as Laboratory
Manager. In 1996 Mr. Bowman was promoted to Director of Manufacturing and
Preclinical Operations and has served as Vice President, Operations since 1997.
Prior to joining Zonagen, Mr. Bowman was employed by Monsanto Company, where he
focused on product development, technical support and start-up of manufacturing
facilities. Mr. Bowman holds B.S. and M.P.H. degrees from the University of
Michigan.
Louis Ploth, Jr. Mr. Ploth has fourteen years experience in the
biotechnology industry. He joined Zonagen in 1993 and served as Chief Financial
Officer from his hiring until March 1999, as well as Vice President, Business
Development from his hiring until November 1998. Currently Mr. Ploth serves as
Vice President, Finance. 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.
Michael T. Redman. Mr. Redman joined the Company as Vice President,
Business Development in November 1998. Prior to joining Zonagen, Mr. Redman was
Vice President of Business Development at Particle Dynamics, a division of KV
Pharmaceutical, from 1997 to 1998 and Director of Sales and Marketing at Eurand,
a wholly owned subsidiary of American Home Products, from 1994 to 1997. Mr.
Redman was also
11
<PAGE> 15
employed at Biovail Corporation and Corning, Inc. Mr. Redman holds a B.A. degree
in biochemistry from the University of Missouri.
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 each of the four highest paid
executive officers of the Company, determined as of the end of the last fiscal
year, whose annual compensation exceeded $100,000 (the "Named Executive
Officers"):
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
-------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS ($) OPTIONS (#) COMPENSATION(1)
- --------------------------- ---- -------- -------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Podolski......... 1999 $225,000 $ 13,680(2) -- 35,000 $ 6,000(3)
President and Chief 1998 200,000 136,630 -- -- 6,000(3)
Executive Officer 1997 200,000 135,000 -- -- 6,000(3)
Paul Lammers............... 1999 $181,248 -- -- 35,000 --
Senior Vice President, 1998 122,724 -- -- 40,000 $42,029(4)
Clinical and Regulatory 1997 -- -- -- -- --
Affairs
F. Scott Reding............ 1999 $145,833 -- -- 75,000 $ 2,906(4)
Senior Vice President, 1998 -- -- -- -- --
Chief Financial Officer
and 1997 -- -- -- -- --
Secretary
Louis Ploth, Jr. .......... 1999 $121,200 $ 28,500 -- 30,000 --
Vice President, Finance 1998 112,250 -- -- 5,000 --
1997 100,228 35,000 -- 20,000 --
Michael T. Redman.......... 1999 $131,250 -- -- 25,000 $19,470(4)
Vice President, Business 1998 18,750 -- -- 25,000 --
Development 1997 -- -- -- -- --
</TABLE>
- ---------------
(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) Performance bonus paid in 2000 but earned in 1999.
(3) Represents car allowance.
(4) Represents relocation allowance.
12
<PAGE> 16
Option Grants in 1999
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, 1999 under the
Company's Incentive Plans:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL ASSUMED ANNUAL RATES OF STOCK
SECURITIES OPTIONS MARKET PRICE APPRECIATION FOR OPTION
UNDERLYING GRANTED TO PRICE ON TERM(1)
OPTIONS EMPLOYEES IN EXERCISE DATE OF EXPIRATION ------------------------------
NAME GRANTED(#) FISCAL YEAR PRICE GRANT DATE 0% 5% 10%
- ---- ---------- ------------ -------- -------- ---------- ---- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph S. Podolski....... 35,000 8.6% $ 2.94 $ 2.94 10/18/2009 -- $ 64,669 $ 163,885
Paul Lammers............. 35,000 8.6% $ 2.94 $ 2.94 10/18/2009 -- $ 64,669 $ 163,885
F. Scott Reding.......... 40,000 9.8% $26.50 $26.50 02/22/2009 -- $666,628 $1,689,367
35,000 8.6% 2.94 2.94 10/18/2009 -- 64,669 163,885
Louis Ploth, Jr. ........ 10,000 2.4% $29.00 $29.00 03/12/2009 -- $182,379 $ 462,185
20,000 4.9% 2.94 2.94 10/18/2009 -- 36,954 93,648
Michael T. Redman........ 25,000 6.1% $ 2.94 $ 2.94 10/18/2009 -- $ 46,192 $ 117,060
</TABLE>
- ---------------
(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 1999
AND OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph S. Podolski..... 14,021 $48,513 182,549 105,000 $162,110 $50,295
Paul Lammers........... -- -- 8,000 67,000 -- 50,295
F. Scott Reding........ -- -- -- 75,000 -- 50,295
Louis Ploth, Jr. ...... -- -- 48,500 43,200 2,513 29,490
Michael T. Redman...... -- -- 7,000 53,000 -- 35,925
</TABLE>
- ---------------
(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, 1999 was $4.375, based on the closing sales price on
the Nasdaq Stock Market on December 31, 1999.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Podolski,
Lammers, Reding, Bowman, Ploth and Redman which provide for current annual
salaries of $225,000, $183,750, $183,750, $110,000, $129,600 and $140,000,
respectively. The agreements provide that the Company will pay Messrs. Podolski,
Lammers, Reding, Bowman, Ploth and Redman an annual incentive bonus as may be
13
<PAGE> 17
approved by the Board of Directors and that Messrs. Podolski, Lammers, Reding,
Bowman, Ploth and Redman are entitled to participate in all employee benefit
plans sponsored by the Company. Mr. Podolski's employment agreement provides for
a primary term expiring in January 2001, 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. The employment agreements for
Messrs. Lammers, Reding, Bowman, Ploth and Redman expire in April 2001, February
2001, October 2001, October 2000 and November 2000, respectively, with automatic
annual renewals unless otherwise terminated by either party. If terminated for
reasons other than cause, Messrs. Lammers, Reding, Bowman, Ploth and Redman are
entitled to salary and certain employment benefits for six months following
termination.
PERFORMANCE GRAPH
The following performance graph compares the performance of the Company's
Common Stock to the Nasdaq Combined Market Index and to the Nasdaq Index of
Pharmaceutical Companies. The graph covers the fiscal years ending December 31,
1994 to December 31, 1999. The graph assumes that the value of the investment in
the Company's Common Stock and each index was $100 at December 31, 1994 and that
all dividends were reinvested.
COMPARISON OF CUMULATIVE RETURN
AMONG ZONAGEN, INC.,
NASDAQ COMBINED MARKET INDEX AND
NASDAQ PHARMACEUTICAL COMPANIES INDEX
[GRAPH]
<TABLE>
<CAPTION>
NASDAQ COMBINED MARKET NASDAQ PHARMACCUTICAL
ZONAGEN, INC. INDEX COMPANIES INDEX
------------- ---------------------- ---------------------
<S> <C> <C> <C>
12/31/94 100.00 100.00 100.00
12/31/95 150.00 140.19 183.41
12/31/96 129.31 171.63 183.98
12/31/97 250.86 209.59 189.98
12/31/98 263.79 289.77 241.95
12/31/99 60.34 534.02 450.29
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Zonagen, Inc. 100 150.00 129.31 250.86 263.79 60.34
Nasdaq Combined Market Index 100 140.19 171.63 209.59 289.77 534.02
Nasdaq Pharmaceutical Companies
Index 100 183.41 183.98 189.98 241.95 450.29
</TABLE>
14
<PAGE> 18
The foregoing stock price performance comparisons shall not be deemed
incorporated by reference by any general statement incorporating by reference
this Proxy Statement into any filing under the Securities Act of 1933, as
amended, or under the Exchange Act, except to the extent that the Company
specifically incorporates this graph 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 1999, 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.
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 1, 2000 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.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENTAGE
NAME OF BENEFICIAL OWNER COMMON STOCK(1) OF CLASS(2)
- ------------------------ --------------- -------------
<S> <C> <C>
Petrus Fund, L.P. .......................................... 755,793 6.7%
12377 Merit Dr., Suite 1700
Dallas, TX 75251
Samuel G. Rose.............................................. 626,900 5.6%
5301 Wisconsin Avenue NW, Suite 510
Washington, DC 20015
Steven Blasnik.............................................. 790,584(3) 7.0%
Joseph S. Podolski.......................................... 205,170(4) 1.8%
Martin P. Sutter............................................ 200,344(5) 1.8%
Timothy McInerney R.Ph...................................... 101,617(6) *
Jeffery M. Jonas, MD........................................ 14,791(7) *
Nelson Levy, PhD, MD........................................ 12,550(8) *
Louis Ploth, Jr............................................. 52,900(9) *
Paul Lammers, MD, M.Sc...................................... 16,000(10) *
F. Scott Reding............................................. 8,100(11) *
Michael T. Redman........................................... 7,000(12) *
All directors and executive officers
As a group (11 persons)................................... 1,449,356(3)-(12) 12.4%
</TABLE>
- ---------------
* 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 1, 2000.
15
<PAGE> 19
(3) 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) 34,791 shares of Common Stock issuable upon the
exercise of options. Mr. Blasnik disclaims beneficial ownership of the
shares owned by Petrus Fund, L.P.
(4) Includes (i) 300 shares of Common Stock which are held by certain of Mr.
Podolski's family members and (ii) 182,549 shares of Common Stock issuable
upon the exercise of options. Mr. Podolski disclaims beneficial ownership
of the shares owned by his family members.
(5) 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) 34,791 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.
(6) Includes (i) 51,194 shares of Common Stock issuable upon the exercise of
warrants, (ii) 22,291 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.
(7) Represents 14,791 shares of Common Stock issuable upon the exercise of
options.
(8) Dr. Levy is not standing for reelection to the Board but is included in
this table because he will remain a director of the Company until the
Annual Meeting. Includes 12,500 shares of Common Stock issuable upon
exercise of options and 50 shares owned by a family member but as to which
he disclaims beneficial ownership. In connection with his withdrawal from
the Board of Directors, the Board agreed to provide Dr. Levy with a two
year period following his departure from the Board in which to exercise his
vested options.
(9) Includes 50,500 shares of Common Stock issuable upon the exercise of
options.
(10) Represents 16,000 shares of Common Stock issuable upon the exercise of
options.
(11) Includes (i) 100 shares of Common Stock which are held by a certain family
member of Mr. Reding and (ii) 8,000 shares of Common Stock issuable upon
the exercise of options. Mr. Reding disclaims beneficial ownership of the
shares owned by his family member.
(12) Represents 7,000 shares of Common Stock issuable upon the exercise of
options.
COMPLIANCE WITH SECTION 16(a)
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, 1999, all Section 16(a)
filing requirements applicable to its officers, directors and 10% stockholders
were complied with in a timely manner, except for one filing on Form 3 for F.
Scott Reding and two filings on Form 5 for Martin P. Sutter and Timothy
McInerney, all of which were filed late.
16
<PAGE> 20
PROPOSAL OF STOCKHOLDERS
Any proposal of a stockholder intended to be presented at the next annual
meeting must be received at the Company's principal executive offices no later
than December 17, 2000 if the proposal is to be considered for inclusion in the
Company's Proxy Statement relating to such meeting.
FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-K, including any financial
statements and schedules and exhibits thereto, may be obtained without charge by
written request to Secretary, Zonagen, Inc., 2408 Timberloch Place, Suite B-4,
The Woodlands, Texas 77380.
By Order of the Board of Directors
[/s/ F. SCOTT REDING]
F. Scott Reding
Secretary
April 18, 2000
The Woodlands, Texas
17
<PAGE> 21
APPENDIX A
ZONAGEN, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company or any
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the common stock, par value $.001 per share,
of the Company.
(d) "Company" shall mean Zonagen, Inc., a Delaware corporation, and any
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings and
commissions, but exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the Company
for tax purposes whose customary employment with the Company is at least twenty
(20) hours per week and more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be treated as continuing
intact while the individual is on sick leave or other leave of absence approved
by the Company. Where the period of leave exceeds 90 days and the individual's
right to reemployment is not guaranteed either by statute or by contract, the
employment relationship shall be deemed to have terminated on the 91st day of
such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each Purchase
Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
Period.
(j) "Fair Market Value" shall mean, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the date of determination,
as reported in The Wall Street Journal or such other source as the Board
deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market
Value shall be the mean of the closing bid and asked prices for the Common
Stock prior to the date of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable;
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.
A-1
<PAGE> 22
(k) "Offering Periods" shall mean the periods of twenty-four (24) months
during which an option granted pursuant to the Plan may be exercised, commencing
on the first Trading Day on or after January 1 of every other year commencing
January 1, 2002, and terminating on the last Trading Day in the period ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence on April 17, 2000 (the date the Board adopted the
Plan) and end on the last Trading Day on or before December 31, 2001. The
duration and timing of Offering Periods may be changed pursuant to Section 4 of
this Plan.
(l) "Plan" shall mean this 2000 Employee Stock Purchase Plan.
(m) "Purchase Period" shall mean the six month period commencing after one
Exercise Date and ending with the next Exercise Date, except that the first
Purchase Period of any Offering Period shall commence on the Enrollment Date and
end with the next Exercise Date; provided, however, that the first Purchase
Period of the first Offering Period shall begin on April 17, 2000 provided that
the stockholders approve this Plan at the Company's 2000 Annual Meeting. The
Board shall have the power to change the duration of Purchase Periods (including
the commencement dates thereof) with respect to future offerings without
stockholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Purchase Period to be affected thereafter.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a share of
Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower;
provided however, that the Purchase Price may be adjusted by the Board pursuant
to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock covered by
each option under the Plan which have not yet been exercised and the number of
shares of Common Stock which have been authorized for issuance under the Plan
but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of which
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges and
the Nasdaq System are open for trading.
3. Eligibility.
(a) Any Employee who shall be employed by the Company on a given Enrollment
Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan (i) to the extent that, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would own
capital stock of the Company and/or hold outstanding options to purchase such
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of the capital stock of the Company or of any Subsidiary,
or (ii) to the extent that his or her rights to purchase stock under all
employee stock purchase plans of the Company and its subsidiaries accrues at a
rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock
(determined at the fair market value of the shares at the time such option is
granted) for each calendar year in which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive Offering
Periods with a new Offering Period commencing on the first Trading Day on or
after January 1 each year, or on such other date as the Board shall determine,
and continuing thereafter until terminated in accordance with Section 20 hereof;
provided, however, that the first Offering Period under the Plan shall commence
on April 17, 2000 and end on the last Trading Day on or before December 31,
2001. The Board shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings
without stockholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected
thereafter.
A-2
<PAGE> 23
5. Participation.
(a) An eligible Employee may become a participant in the Plan by completing
a subscription agreement authorizing payroll deductions in the form of Exhibit A
to this Plan and filing it with the Company's payroll office prior to the
applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription agreement, he
or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen percent (15%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited to his
or her account under the Plan and shall be withheld in whole percentages only. A
participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as
provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll
deductions may be decreased to zero percent (0%) at any time during a Purchase
Period. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the
time some or all of the Company's Common Stock issued under the Plan is disposed
of, the participant must make adequate provision for the Company's federal,
state, or other tax withholding obligations, if any, which arise upon the
exercise of the option or the disposition of the Common Stock. At any time, the
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
The Board may, for future Offering Periods, increase or decrease, in its
absolute discretion, the maximum number of shares of the Company's Common Stock
an Employee may purchase during each Purchase Period of such Offering Period.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof. The option shall expire
on the last day of the Offering Period.
8. Exercise of Option.
(a) Unless a participant withdraws from the Plan as provided in Section 10
hereof, his or her option for the purchase of shares shall be exercised
automatically on the Exercise Date, and the maximum number of
A-3
<PAGE> 24
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the number of
shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
stockholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on which a
purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have any
effect upon his or her eligibility to participate in any similar plan which may
hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment. Upon a participant's ceasing to be an
Employee, for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option shall be
returned to such participant or, in the case of his or her death, to the person
or persons entitled thereto under Section 15 hereof, and such participant's
option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
A-4
<PAGE> 25
13. Stock.
(a) Subject to adjustment upon changes in capitalization of the Company as
provided in Section 19 hereof, the maximum number of shares of the Company's
Common Stock which shall be made available for sale under the Plan shall be one
hundred fifty thousand (150,000) shares plus an annual increase to be added on
the first day of the Company's fiscal year beginning on January 1, 2001, equal
to 50,000 shares.
(b) The participant shall have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to an Exercise Date on
which the option is exercised but prior to delivery to such participant of such
shares and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under the
Plan in the event of such participant's death prior to exercise of the option.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to receive
shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will, the laws of descent and distribution
or as provided in Section 15 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds from
an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease
A-5
<PAGE> 26
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the "New Exercise Date"), and shall
terminate immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Board. The New Exercise Date shall
be before the date of the Company's proposed dissolution or liquidation. The
Board shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participant's
option has been changed to the New Exercise Date and that the participant's
option shall be exercised automatically on the New Exercise Date, unless prior
to such date the participant has withdrawn from the Offering Period as provided
in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant's rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
A-6
<PAGE> 27
(c) In the event the Board determines that the ongoing operation of the
Plan may result in unfavorable financial accounting consequences, the Board may,
in its discretion and, to the extent necessary or desirable, modify or amend the
Plan to reduce or eliminate such accounting consequence including, but not
limited to:
(i) altering the Purchase Price for any Offering Period including an
Offering Period underway at the time of the change in Purchase Price;
(ii) shortening any Offering Period so that the Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder approval or
the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon its adoption by the
Board of Directors, and shall be approved by the Company's stockholders within
12 months after such adoption. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 20 hereof.
A-7
<PAGE> 28
APPENDIX B
ZONAGEN, INC.
2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. PURPOSES.
(a) Eligible Option Recipients. The persons eligible to receive Options are
the Non-Employee Directors of the Company.
(b) Available Options. The purpose of the Plan is to provide a means by
which Non-Employee Directors may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of Options.
(c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of its Non-Employee Directors, to secure and retain the services of new
Non-Employee Directors and to provide incentives for such persons to exert
maximum efforts for the success of the Company and its affiliates.
2. DEFINITIONS.
(a) "Annual Grant" means an Option granted annually to all Non-Employee
Directors who meet the specified criteria pursuant to Section 6(b) of the Plan.
(b) "Annual Meeting" means the annual meeting of the stockholders of the
Company.
(c) "Board" means the Board of Directors of the Company.
(d) "Chairman's Grant" means an Option granted to the Chairman of the Board
who meets the specified criteria pursuant to Section 6(c) of the Plan.
(e) "Common Stock" means the common stock, par value $.001 per share, of
the Company.
(f) "Company" means Zonagen, Inc., a Delaware corporation.
(g) "Continuous Service" means that the Optionholder's service with the
Company or an affiliate, whether as an employee, director or consultant, is not
interrupted or terminated. The Optionholder's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionholder renders service to the Company or an affiliate as an employee,
consultant or director or a change in the entity for which the Optionholder
renders such service, provided that there is no interruption or termination of
the Optionholder's Continuous Service. For example, a change in status from a
Non-Employee Director of the Company to a consultant of an affiliate or an
employee of the Company will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Company, in that
party's sole discretion, may determine whether Continuous Service shall be
considered interrupted in the case of any leave of absence approved by that
party, including sick leave, military leave or any other personal leave.
(h) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the
Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the
greatest volume of trading in the Common Stock) on the last market trading
day prior to the day of determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
B-1
<PAGE> 29
(i) "Initial Grant" means an Option granted to a Non-Employee Director who
meets the specified criteria pursuant to Section 6(a) of the Plan.
(j) "Non-Employee Director" means a member of the Board who is not an
employee of the Company or a subsidiary or a parent corporation.
(k) "Option" means a nonstatutory stock option granted pursuant to the
Plan.
(l) "Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(m) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(n) "Plan" means this Zonagen, Inc. 2000 Non-Employee Directors' Stock
Option Plan.
(o) "Rule 16b-3" means Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended, or any successor to Rule 16b-3, as in effect from time
to time.
(p) "Securities Act" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) Administration by Board. The Board shall administer the Plan. The Board
may not delegate administration of the Plan to a committee.
(b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine the provisions of each Option to the extent not
specified in the Plan.
(ii) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement,
in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iii) To amend the Plan or an Option as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company that are not in conflict with the provisions of the Plan.
(c) Effect of Board's Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. SHARES SUBJECT TO THE PLAN.
(a) Share Reserve. Subject to the provisions of Section 4(b) below and
Section 11 relating to adjustments upon changes in the Common Stock, the Common
Stock that may be issued pursuant to Options shall not exceed in the aggregate
500,000 shares of Common Stock.
(b) Evergreen Share Reserve Increase.
(i) Notwithstanding Section 4(a) hereof, on the day after each Annual
Meeting (the "Calculation Date") for a period of nine (9) years, commencing
with the Annual Meeting in 2001, the aggregate number of shares of Common
Stock that is available for issuance under the Plan shall automatically be
increased by that number of shares equal to the greater of (1) 0.5 percent
(0.5%) of the outstanding shares at the end of the previous fiscal year or
(2) the number of shares of Common Stock subject to Options granted during
the prior 12-month period; provided, however, that the Board, from time to
time,
B-2
<PAGE> 30
may provide for a lesser increase in the aggregate number of shares of
Common Stock that is available for issuance under the Plan.
(c) Reversion of Shares to the Share Reserve. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the shares of Common Stock not acquired under such Option
shall revert to and again become available for issuance under the Plan.
(d) Source of Shares. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY. The Options as set forth in Section 6 automatically shall be
granted under the Plan to all Non-Employee Directors.
6. NON-DISCRETIONARY GRANTS.
(a) Initial Grants. Without any further action of the Board, each person
(i) who is elected or appointed for the first time to be a Non-Employee
Director, but excluding any person who immediately prior to such election or
appointment is a member of the Board, or (ii) who is a Non-Employee Director at
the time this Plan is adopted by the Board automatically shall, upon either (A)
the date of his or her initial election or appointment to be a Non-Employee
Director or (B) the date of adoption of this Plan by the Board, whichever is
applicable, be granted an Initial Grant to purchase 40,000 shares of Common
Stock on the terms and conditions set forth herein.
(b) Annual Grants. Without any further action of the Board, on the day
following each Annual Meeting, commencing with the Annual Meeting in 2001, each
person who is then a Non-Employee Director, automatically shall be granted an
Annual Grant to purchase 5,000 shares of Common Stock on the terms and
conditions set forth herein.
(c) Chairman's Grants. Without any further action of the Board, (i) the
person who is serving as Chairman of the Board when this Plan is adopted by the
Board automatically shall, upon the date when this Plan is adopted by the Board,
be granted a Chairman's Grant to purchase 10,000 shares of Common Stock on the
terms and conditions set forth herein, (ii) the person who is elected or
appointed for the first time to be Chairman of the Board automatically shall,
upon the date of his or her initial election or appointment to be Chairman of
the Board, be granted a Chairman's Grant to purchase 10,000 shares of Common
Stock on the terms and conditions set forth herein and (iii) on the day
following each Annual Meeting, commencing with the Annual Meeting in 2001, the
person who is then Chairman of the Board automatically shall be granted a
Chairman's Grant to purchase 10,000 shares of Common Stock on the terms and
conditions set forth herein. The Chairman's Grant shall be in addition to the
Initial Grants and Annual Grants provided under Sections 6(a) and (b) above.
7. OPTION PROVISIONS. Each Option shall be in such form and shall contain such
terms and conditions as required by the Plan. Each Option shall contain such
additional terms and conditions, not inconsistent with the Plan, as the Board
shall deem appropriate. Each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance of each
of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of 10 years
from the date it was granted.
(b) Exercise Price. The exercise price of each Option shall be 100% of the
Fair Market Value of the stock subject to the Option on the date the Option is
granted. Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Internal Revenue
Code of 1986, as amended.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option may be paid, to the extent permitted by applicable statutes and
regulations, in any combination of (i) cash or check, (ii) delivery to the
Company of other Common Stock (iii) delivery to the Company of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the option price or (iv) any combination of the above. The
purchase
B-3
<PAGE> 31
price of Common Stock acquired pursuant to an Option that is paid by delivery to
the Company of other Common Stock acquired, directly or indirectly from the
Company, shall be paid only by shares of the Common Stock of the Company that
have been held for more than six months (or such longer or shorter period of
time required to avoid a charge to earnings for financial accounting purposes).
At any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.
(d) Transferability. An Option is not transferable, except (i) by will or
by the laws of descent and distribution, (ii) by instrument to an inter vivos or
testamentary trust, in a form accepted by the Company, in which the Option is to
be passed to beneficiaries upon the death of the trustor (settlor) and (iii) by
gift, in a form satisfactory to the Company, to a member of the "immediate
family" of the Optionholder as that term is defined in 17 C.F.R. 240.16a-1(e).
In addition, Optionholder may, by delivering written notice to the Company, in a
form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(e) Vesting. Options shall vest as follows:
(i) Initial Grants shall provide for vesting of 1/5th of the shares
subject to the Option on each of the first five Annual Meeting dates after
the date of the grant.
(ii) Annual Grants and Chairman's Grants shall provide for vesting of
all of the shares subject to the Option on the first Annual Meeting after
the date of the grant.
(f) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates, the Optionholder may exercise his or her Option
(only to the extent that the Optionholder was entitled to exercise it as of the
date of termination) but only within such period of time ending on the earlier
of (i) the date two years following the termination of the Optionholder's
Continuous Service, or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified in the Option Agreement,
the Option shall terminate. The Option shall no longer vest under Section 7(e)
above following such termination.
8. COVENANTS OF THE COMPANY.
(a) Availability of Shares. During the terms of the Options, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such Options.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable pursuant to any such Option. If, after reasonable
efforts, the Company is unable to obtain from any such regulatory commission or
agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell stock upon exercise of such
Options unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of stock pursuant to
Options shall constitute general funds of the Company.
10. MISCELLANEOUS.
(a) Stockholder Rights. No Optionholder shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.
(b) No Service Rights. Nothing in the Plan or any instrument executed or
Option granted pursuant thereto shall confer upon any Optionholder any right to
continue to serve the Company as a Non-Employee Director or shall affect or
limit the right of the Company or an Affiliate to terminate the employment or
service of the Optionholder.
B-4
<PAGE> 32
(c) Investment Assurances. The Company may require an Optionholder, as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances satisfactory to the Company as to the Optionholder's knowledge and
experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company stating that the Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be inoperative if (A)
the issuance of the shares upon the exercise or acquisition of stock under the
Option has been registered under a then currently effective registration
statement under the Securities Act or (B) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(d) Withholding Obligations. The Optionholder may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under an Option by any of the following means (in addition
to the Company's right to withhold from any compensation paid to the
Optionholder by the Company) or by a combination of such means: (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common Stock otherwise issuable to the Optionholder as a result of the
exercise or acquisition of stock under the Option, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Option, without the receipt of full consideration
by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject both to the Plan pursuant to
Section 4(a) and to the nondiscretionary Options specified in Section 5, and the
outstanding Options will be appropriately adjusted in the class(es) and number
of securities and price per share of stock subject to such outstanding Options.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then all outstanding Options shall accelerate and
subsequently terminate immediately prior to such event.
(c) Asset Sale, Merger, Consolidation or Reverse Merger. In the event of
(i) a sale, lease or other disposition of all or substantially all of the assets
of the Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation or (iii) a reverse merger in which the Company is the
surviving corporation but the shares of Common Stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise (each event, a "CHANGE IN
CONTROL"), then the vesting of such Options shall be accelerated in full upon
the consummation of such event.
12. AMENDMENT OF THE PLAN AND OPTIONS.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall
B-5
<PAGE> 33
be effective unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of Rule 16b-3 or
any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval.
(c) No Impairment of Rights. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Optionholder and (ii) the
Optionholder consents in writing.
(d) Amendment of Options. The Board at any time, and from time to time, may
amend the terms of any one or more Options; provided, however, that the rights
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the Optionholder and (ii) the Optionholder
consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the 10th anniversary of
the date the Plan is adopted by the Board. No Options may be granted under the
Plan while the Plan is suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.
14. EFFECTIVE DATE OF PLAN. The Plan shall become effective when adopted by the
Board, but no Option shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within 12
months after the date the Plan is adopted by the Board.
15. CHOICE OF LAW. All questions concerning the construction, validity and
interpretation of this Plan shall be governed by the law of the State of
Delaware, without regard to such state's conflict of laws rules.
B-6
<PAGE> 34
ZONAGEN, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
[ ]
1. ELECTION OF DIRECTORS--
Nominees: 01-Martin P. Sutter, 02-Joseph S. Podolski, 03-Steven Blasnik,
04-Jeffrey M. Jonas, M.D., and 05-Timothy McInerney, R.Ph.
For Withhold For All
All All Except*
[ ] [ ] [ ]
---------------------------------------------------------------------------
* INSTRUCTION: To withhold authority to vote for any individual nominee,
print that nominee's name on the line provided:
2. To approve the Company's 2000 Employee Stock Purchase Plan.
For Against Abstain
[ ] [ ] [ ]
3. To approve the Company's 2000 Non-Employee Directors' Stock Option Plan.
For Against Abstain
[ ] [ ] [ ]
4. To ratify the election of Arthur Andersen LLP as independent accountants of
the Company for the fiscal year ended December 31, 2000.
For Against Abstain
[ ] [ ] [ ]
5. At their discretion, the proxies are authorized to vote on such other
business as may properly come before the meeting.
Dated: , 2000
-----------------------------
Signature(s)
-----------------------------
-----------------------------------------
Please date, sign as name appears at the
left, and return promptly. If the Shares
are registered in the names of two or
more persons, each should sign. When
signing as Corporate Officer, President,
Executor, Administrator, Trustee or
Guardian, please give full title. Please
note any changes in your address
alongside the address as it appears in
the proxy.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
YOUR VOTE IS IMPORTANT!
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
<PAGE> 35
PROXY PROXY
ZONAGEN, INC.
THE ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Joseph S. Podolski and F. Scott Reding or
their designees as proxies to represent the undersigned at the Annual Meeting of
Stockholders to be held at the Wyndham Greenspoint Hotel, 12400 Greenspoint
Drive, Houston, Texas, May 23, 2000, at 11:00 a.m., Central Daylight Savings
Time, and any adjournments thereof, and to vote the shares of stock the
undersigned would be entitled to vote if personally present, as indicated below.
THE SHARES OF STOCK REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF
NO CONTRARY INSTRUCTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION OF
THE NOMINEES, FOR THE APPROVAL OF THE COMPANY'S 2000 EMPLOYEE STOCK PURCHASE
PLAN, FOR THE APPROVAL OF THE COMPANY'S 2000 NON-EMPLOYEE DIRECTORS' STOCK
OPTION PLAN AND FOR RATIFICATION OF THE SELECTION OF ARTHUR ANDERSEN LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side)
- --------------------------------------------------------------------------------
