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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER.
SEC 1913 (11-01)
ZONAGEN, INC.
2408 TIMBERLOCH PLACE, SUITE B-10
THE WOODLANDS, TEXAS 77380
November 21, 2003
TO OUR STOCKHOLDERS:
You are cordially invited to attend the 2003 Annual Meeting of Stockholders
of Zonagen, Inc. to be held on Monday, December 29, 2003, at 1:00 p.m., Central
Standard Time, at La Quinta Inn, 28673 I-45 North, The Woodlands, 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 would also like to remind you that we have mailed, or will mail, to you
at approximately the same time as this Notice and Proxy Statement an Offer to
Purchase and other documents related to our self tender offer. Because the
record date for the Annual Meeting is October 31, 2003, you have the ability to
vote your shares at this Annual Meeting whether or not you tender your shares in
the self tender offer. WE URGE YOU TO VOTE REGARDLESS OF WHETHER YOU INTEND TO
TENDER YOUR SHARES SO THAT WE MAY ENSURE THAT A QUORUM IS PRESENT FOR THE ANNUAL
MEETING. Please refer to the Offer to Purchase and related documents described
above for more information about the tender offer.
We look forward to seeing you on December 29, 2003.
Sincerely,
Joseph S. Podolski
President and Chief
Executive Officer
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
TO BE HELD DECEMBER 29, 2003
To the Stockholders of Zonagen, Inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of Zonagen, Inc.
(the "Company") will be held on Monday, December 29, 2003, at 1:00 p.m., Central
Standard Time, at La Quinta Inn, 28673 I-45 North, The Woodlands, 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 ratify and approve the appointment of PricewaterhouseCoopers
LLP as the Company's independent public accountants for its
fiscal year ending December 31, 2003; and
3. 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 October 31, 2003
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 POSTAGE-PAID 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,
Louis Ploth
Secretary
The Woodlands, Texas
November 21, 2003
ZONAGEN, INC.
2408 TIMBERLOCH PLACE, SUITE B-10
THE WOODLANDS, TEXAS 77380
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PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 29, 2003
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 ("Annual
Meeting") of the Company to be held on Monday, December 29, 2003, at 1:00 p.m.,
Central Standard Time, at La Quinta Inn, 28673 I-45 North, The Woodlands, 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-10, 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-10, 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 November 21, 2003.
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 the Internet. 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.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's stockholders will be asked to consider
and act on the following matters:
1. Electing 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. Ratifying and approving the appointment of PricewaterhouseCoopers
LLP as the Company's independent public accountants for its
fiscal year ending December 31, 2003; and
3. Acting on such other business as may properly come before the
Annual Meeting or any adjournments thereof.
QUORUM AND VOTING
The close of business on October 31, 2003 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 11,479,648 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 by (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 Computershare Investor Services, LLC, the Company's transfer agent
and registrar.
PROPOSAL NUMBER 1:
ELECTION OF DIRECTORS
In connection with the Company's self tender offer, with the exception of
Mr. Podolski, the current members of the Board of Directors, Messrs. Martin P.
Sutter, Lloyd M. Bentsen, Steven Blasnik, and Timothy McInerney, have informed
the Company that they are not standing for reelection. Consequently, the Board
of Directors has nominated and urges you to vote for the election of Mr.
Podolski and the additional four 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. The chart below provides
information regarding each nominee. 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 designated by the
Board of Directors. The Board of Directors has no reason to believe that any
substitute nominee or nominees will be required.
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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.
YEAR FIRST
BECAME
NAME AGE POSITION WITH THE COMPANY DIRECTOR
---- --- ----------------------------------------- ----------
Joseph S. Podolski............................... 56 President and Chief Executive Officer and
Director 1992
Louis Ploth, Jr.................................. 49 Vice President, Business Development and
Chief Financial Officer N/A
Daniel F. Cain................................... 58 N/A N/A
Jean L. Fourcroy, M.D., Ph.D., M.P.H............. 73 N/A N/A
Zsolt Lavotha.................................... 53 N/A N/A
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. Mr. Podolski is seeking reelection as a
director of the Company.
Louis Ploth, Jr. Since January 2001, Mr. Ploth has served as Chief
Financial Officer, Vice President, Business Development and Secretary. He served
as Vice President, Finance from March 1999 to January 2001. He had previously
served as Chief Financial Officer and Vice President, Business Development from
1993 to 1998 and as Chief Financial Officer from 1998 to March 1999 at which
time he also served as General Manager of Fertility Technologies, Inc., a former
subsidiary of the Company. 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 over 21 years of corporate financial
and business development experience, with over 17 years experience in the
biotechnology industry. Mr. Ploth has a B.S. degree from Montclair State
College.
Daniel F. Cain. Since October 1994, Mr. Cain has provided consulting
services for small businesses. Since May 2000, he has also served as acting CEO
of Wireless Medical, Inc., a Colorado-based medical device company, and Enet
Biz, a Colorado-based consulting firm. From 1969 to 1994, Mr. Cain held various
positions with Miles Laboratories, Inc., Hexcel Corporation, Scripps-Miles,
Inc., Synbiotics Corporation and Heska Corporation. Mr. Cain has 35 years of
broad business experience including 26 years with medical companies. Sixteen of
these years were with three different biotech startup companies, one of which he
co-founded. Mr. Cain has held a wide variety of executive level management
positions including CEO/President and CFO. His experience also includes taking
companies through the initial public offering and secondary public offering
stages and from start-up through commercialization. He has prior experience of
being an active board member of a publicly traded company.
Jean L. Fourcroy, M.D., Ph.D., M.P.H. Dr. Fourcroy was engaged as a Medical
Officer with the US Food and Drug Administration from 1988 to 2001. Since
leaving the FDA, Dr. Fourcroy has been a consultant to the industry and a
featured speaker and panel member in numerous meetings and symposia. Dr.
Fourcroy is a member of the Board of Directors of the U.S. Anti-Doping Agency
and is a Past President of the American Medical Women's Association. Dr.
Fourcroy is the recipient of a 1998 American Urological Association Presidential
3
Citation Award, the 1999 Camille Mermod Award from the American Medical Women's
Association, and an Outstanding Service Award from the American Society of
Andrology in April 2000. Dr. Fourcroy received her M.D. from the Medical College
of Pennsylvania and her Ph.D. from the University of California at San
Francisco. Her surgery and urology residencies were completed at George
Washington University Medical Center with Board Certification in Urology in
1981. In 1999, she received her Masters in Public Heath from the Medical College
of Wisconsin.
Zsolt Lavotha. Mr. Lavotha most recently served as President and Chief
Executive Officer of Lavipharm Corp. ("Lavipharm") from December 1998 to April
2003. He has more than 25 years of experience in the pharmaceutical industry.
Before joining Lavipharm, he served as head of Wyeth's Europe/Africa/Middle East
operations. He has also held a variety of positions with Pfizer, Rhone-Poulene
Rorer and Wyeth. Mr. Lavotha earned a degree in science from Uppsala University
(Sweden). He is fluent in English, Swedish and Hungarian and has a working
knowledge of French and German.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION
OF EACH OF THE ABOVE-NAMED NOMINEES, AND PROXIES EXECUTED AND RETURNED WILL BE
SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE INDICATED THEREON.
DIRECTORS' MEETINGS AND COMPENSATION
The Company's operations are managed under the broad supervision of the
Board of Directors, which has ultimate responsibility for the establishment and
implementation of the Company's general operating philosophy, objectives, goals
and policies. During 2002, the Board of Directors convened on three regularly
scheduled occasions and took certain additional actions by unanimous written
consent in lieu of meetings. In addition, the Board of Directors formed a
special committee for the purpose of discussing and negotiating the now
terminated merger agreement with Lavipharm, and this special committee met 10
times. 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 2002, except
that Mr. McInerney did not attend any meetings of the Board of Directors or any
committee at which the merger agreement with Lavipharm was discussed as a result
of his firm's interest in the transaction with Lavipharm.
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 and Committee meetings attended in person or
telephonically, non-employee directors currently receive $1,000.00 per meeting
in cash. Employee directors are eligible to participate in the Company's 1994
Employee and Consultant Stock Option Plan and the Company's Amended and Restated
1993 Employee and Consultant Stock Option Plan (the "Incentive Plans").
Non-employee directors are entitled to participate in the Company's 2000
Non-employee Directors' Stock Option Plan (the "2000 Director Plan").
Under the 2000 Director Plan, (i) each non-employee director who is first
elected to the Board is entitled to receive an option to purchase 40,000 shares
of the Company's Common Stock on the date on which he first becomes a
non-employee director, and (ii) each non-employee director in office immediately
after the Company's annual meeting of stockholders will receive an option to
purchase 5,000 shares of Common Stock effective on such date. Additionally under
the 2000 Director Plan, the Chairman of the Board (if a non-employee) who is
first elected to the Board is entitled to receive an option to purchase 10,000
shares of Common Stock on the date on which he first becomes Chairman, and the
Chairman (if a non-employee) in office immediately after each of the Company's
annual meetings of stockholders will receive an option to purchase 10,000 shares
of Common Stock effective on such date. In 2002, the Company granted options to
acquire an aggregate of 53,360 shares of Common Stock to non-employee directors
under the 2000 Director Plan. During 2002, the Company paid $13,000 to one
director, issued stock awards totaling 11,572 shares of Common Stock to two
directors, and granted options to purchase an aggregate of 23,360 shares of
Common Stock to one director, for their attendance at Board and committee
meetings.
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 Nominating Committee and the Audit Committee.
4
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 did not meet in 2002.
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 once in 2002 and took certain additional actions by unanimous written
consent in lieu of meetings.
The Nominating Committee, currently comprised of Messrs. Sutter and
Podolski, makes recommendations to the Board with respect to qualified
candidates to be nominated for election to the Board. The Nominating Committee
does not typically consider candidates nominated by stockholders. The Nominating
Committee did not meet in 2002.
The Audit Committee, currently comprised of Messrs. Bentsen, Blasnik and
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 also evaluates the Company's system of internal
controls, the internal audit function and other related areas. The Audit
Committee meets quarterly and convened 5 times in 2002 and once per quarter for
the quarters ended March 31, June 30 and September 30, 2003.
As required by Nasdaq Stock Market and Securities and Exchange Commission
(the "Commission") rules regarding audit committees, the Board of Directors has
reviewed the qualifications of its Audit Committee and has determined that none
of the current members of the Audit Committee have a relationship with the
Company that might interfere with the exercise of their independence from the
Company or its management.
AUDIT COMMITTEE REPORT
The Audit Committee includes three directors who are independent, as
defined by the standards of the Nasdaq Stock Market. The Audit Committee assists
the Board in overseeing matters relating to the Company's accounting and
financial reporting practices, the adequacy of its internal controls and the
quality and integrity of its financial statements. On May 23, 2000, the Audit
Committee adopted, and the Board of Directors ratified, a new Audit Committee
Charter.
The Audit Committee met 5 times during the year ended December 31, 2002.
The Audit Committee reviewed with management and the independent auditors the
interim financial information included in the Company's quarterly reports on
Form 10-Q for the fiscal quarters ended March 31, June 30 and September 30, 2002
prior to their being filed with the Commission as well as for the fiscal quarter
and year ended December 31, 2002, as filed with the Company's Form 10-K for the
year ended December 31, 2002.
The independent auditors provided the Audit Committee with a written
statement describing all the relationships between the Company and its auditors
that might bear on the auditors' independence consistent with Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees." The Audit Committee also discussed with the auditors any
relationships that may impact their objectivity and independence and satisfied
itself as to the auditors' independence.
The Audit Committee discussed and reviewed with the independent auditors
all communications required by generally accepted auditing standards, including
those described in Statement of Auditing Standards No. 61, as amended,
"Communication with Audit Committees."
With and without management present, the Audit Committee discussed and
reviewed the results of the independent auditors' examination of the Company's
December 31, 2002 financial statements. The discussion included matters related
to the conduct of the audit, such as the selection of and changes in significant
accounting policies, the methods used to account for significant or unusual
transactions, the effect of significant accounting policies in controversial or
emerging areas, the process used by management in formulating particularly
sensitive
5
accounting estimates and the basis for the auditors' conclusions regarding the
reasonableness of those estimates, significant adjustments arising from the
audit and disagreements, if any, with management over the application of
accounting principles, the basis for management's accounting estimates and the
disclosures in the financial statements.
The Audit Committee reviewed the Company's audited financial statements as
of and for the year ended December 31, 2002, and discussed them with management
and the independent auditors. Based on such review and discussions, the Audit
Committee recommended to the Board that the Company's audited financial
statements be included in its Annual Report on Form 10-K for the fiscal year
ended December 31, 2002 for filing with the Commission.
FEES PAID TO PRINCIPAL ACCOUNTING FIRM
The following table sets forth the aggregate fees billed to the Company by
its principal accounting firm, PricewaterhouseCoopers LLP, for the 2002 audit of
its financial statements for the fiscal year ended December 31, 2002 and
additional services rendered during such fiscal year:
Audit Fees $ 91,675
Financial Information Systems and Design and
Implementation Fees $ 0
All Other Fees $ 72,543
----------
Total Fees $ 164,218
The services provided under the caption, "All Other Fees," relate to
certain services performed in connection with the Company's tax returns and in
connection with the Company's now-terminated transaction with Lavipharm. The
Audit Committee considered whether the provision of the services reflected under
"All Other Fees" above might have affected PricewaterhouseCoopers' independence
with respect to their audit of the Company's financial statements, and the Audit
Committee believes that such services did not affect, and were compatible with,
PricewaterhouseCoopers' independence.
This report of the Audit 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 (the
"Securities Act"), or the Securities Exchange Act of 1934, as amended (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.
Steven Blasnik
Lloyd M. Bentsen, III
Timothy McInerney, Chairman
PROPOSAL NUMBER 2:
RATIFICATION AND APPROVAL OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed the firm of PricewaterhouseCoopers 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, 2003, subject to
ratification by the Company's stockholders. The Company anticipates that
representatives of PricewaterhouseCoopers 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.
As previously reported in Item 4 of its Current Report on Form 8-K dated
June 18, 2002 (the "8-K"), the Company dismissed Arthur Andersen LLP
("Andersen") as the Company's principal accountant and engaged
PricewaterhouseCoopers LLP as the principal accountant for the fiscal year
ending December 31, 2002. The change in principal accountant was approved by the
Audit Committee of the Company's Board of Directors.
Andersen's reports on the Company's financial statements for each of the
years ended December 31, 2001 and 2000 did not contain an adverse opinion or
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. During the fiscal year ended December 31,
2001 and through the interim period between December 31, 2001 and the date of
Andersen's termination, there were no disagreements between the Company and
Andersen on any matter of accounting principles or practices, financial
statement
6
disclosure of auditing scope or procedure which, if not resolved to Andersen's
satisfaction, would have caused them to make reference to the subject matter of
the disagreement in connection with their report for such years; and there were
no reportable events as defined in Item 304(a)(2) of Regulation S-K. The Company
provided Andersen with a copy of the disclosures made in Item 4 of the 8-K and
requested that Andersen furnish it with a letter addressed to the Securities and
Exchange Commission stating whether or not it agreed with the statements made by
the Company in Item 4 of the 8-K and, if not, stating the respects in which it
did not agree. A copy of the letter from Andersen to the Commission agreeing
with the statements made by the Company was attached to the 8-K as Exhibit 16
thereto.
During the fiscal year ended December 31, 2001 and through the date of the
engagement of PricewaterhouseCoopers LLP, the Company did not consult
PricewaterhouseCoopers LLP regarding any of the items described in Item
304(a)(2) of Regulation S-K.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" RATIFICATION
AND APPROVAL OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003, AND
PROXIES EXECUTED AND RETURNED WILL BE SO VOTED UNLESS CONTRARY INSTRUCTIONS ARE
INDICATED THEREON.
COMPENSATION AND OPTION COMMITTEE OF THE BOARD OF DIRECTORS REPORT
The Compensation and Option Committee (the "Committee") of the Board of
Directors of the Company currently consists of Messrs. Blasnik and 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 2002:
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 developing technologies, the use of
certain traditional performance standards (e.g., profitability and return on
equity) is not currently appropriate in evaluating the performance of the
Company's executive officers. Consequently, in evaluating the performance of
management, the Committee takes into consideration such factors as the Company's
achieving specified milestones or goals in its clinical development programs and
the general progress of the Company's clinical trials. In addition, the
Committee recognizes performance and achievements that are more difficult to
quantify, such as the successful supervision of major corporate projects and
demonstrated leadership ability. Finally, as a result of the Company's earlier
decision to indefinitely suspend further development efforts in VASOMAX and the
related decision to seek strategic alternatives, the Committee took into account
the performance of management in fostering the goal of completing a strategic
alternative to the benefit of the Company and its stockholders.
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
7
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 2002 were comparable to the Company's peer group companies.
In addition to each executive officer's base compensation, the Committee
may award cash bonuses and the Committee may grant awards under the Company's
Incentive Plans to chosen executive officers depending on the extent to which
certain defined personal and corporate performance goals are achieved. Such
corporate performance goals are the same as discussed above.
All employees of the Company, including its executive officers, are
eligible to receive long-term stock-based incentive awards under the Company's
Incentive Plans as a means of providing such individuals with a continuing
proprietary interest in the Company. Such grants further the mutuality of
interest between the Company's employees and its stockholders by providing
significant incentives for such employees to achieve and maintain high levels of
performance. The Company's Incentive Plans enhance the Company's ability to
attract and retain the services of qualified individuals. Factors considered in
determining whether such awards are granted to an executive officer of the
Company include the executive's position in the Company, his or her performance
and responsibilities, the amount of stock options, if any, currently held by the
officer, the vesting schedules of any such options and the executive officer's
other compensation. While the Committee does not adhere to any firmly
established formulas or schedules for the issuance of awards such as options or
restricted stock, the Committee will generally tailor the terms of any such
grant to achieve its goal as a long-term incentive award by providing for a
vesting schedule encompassing several years or tying the vesting dates to
particular corporate or personal milestones.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), added by the Revenue Reconciliation Act of 1993, places a $1.0 million
cap on the deductible compensation that can be paid to certain executives of
publicly-traded corporations. Amounts that qualify as "performance based"
compensation under Section 162(m)(4)(c) of the Code are exempt from the cap and
do not count toward the $1.0 million limit. Generally, stock options will
qualify as performance based compensation. The Committee has discussed and
considered and will continue to evaluate the potential impact of Section 162(m)
on the Company in making compensation determinations, but has not established a
set policy with respect to future compensation determinations.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The annual base salary of Joseph S. Podolski, the Company's President and
Chief Executive Officer, was increased to $285,000 for 2002. In increasing Mr.
Podolski's annual base salary for 2002, the Committee evaluated a number of
factors, including Mr. Podolski's responsibilities, his general background and
qualifications, his achievement of various corporate and personal milestones set
by the Committee from time to time, and compensation levels for executives in
Mr. Podolski's position and with his background at peer group companies. The
Committee has not attached any particular relative weighting to the foregoing
factors (or any other factors which the Committee may also consider in reaching
compensation decisions for the Company's executive officers).
In 2002, Mr. Podolski did not receive a cash bonus, but the Committee did
adopt a bonus plan under which he will receive year end bonuses that will equal
2% of the amount of milestone payments received by the Company during such year.
Such plan terminates after December 31, 2003, unless prior thereto there is
either a change of control or a termination of Mr. Podolski's employment. If
either such even occurs prior to such date, the bonus plan will terminate upon
the occurrence of such event. No payments were made for 2002 under the bonus
plan.
The foregoing report is given by the following members of the Committee:
Timothy McInerney, Chairman
Steven Blasnik
The report of the Committee shall not be deemed incorporated by reference
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.
8
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 5 years.
NAME AGE POSITION
---- --- --------
Joseph S. Podolski........................ 56 President, Chief Executive Officer, and Director
Louis Ploth, Jr........................... 49 Chief Financial Officer, Vice President, Business
Development and Secretary
Information pertaining to Messrs. Podolski and Ploth may be found in the
section entitled "Directors."
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table provides certain summary information concerning
compensation paid or accrued during the last three years to the Company's
President and Chief Executive Officer and to the Company's only other officer
who had compensation in excess of $100,000 during the last fiscal year (the
"Named Executive Officer"):
ANNUAL COMPENSATION LONG-TERM COMPENSATION
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS ($) OPTIONS (#) COMPENSATION(1)
--------------------------- ---- -------------- -------------- ------------ ----------- ---------------
Joseph S. Podolski...................... 2002 $ 272,708 -- $ 26,500 275,000 $ 6,000(3)
President and Chief Executive 2001 $ 235,000 -- -- 25,000 $ 6,000(3)
Officer 2000 $ 232,500 $ 75,000(2) -- -- $ 6,000(3)
Louis Ploth, Jr......................... 2002 $ 150,000 -- $ 26,500 -- --
Chief Financial Officer, Vice 2001 $ 139,133 -- -- 30,000 --
President, Business Development 2000 $ 129,600 $ 57,500(2) -- 20,000 --
and Secretary
----------
(1) During the periods indicated, perquisites for each individual named in the
Summary Compensation Table aggregated less than 10% of the total annual
salary and bonus reported for such individual in the Summary Compensation
Table. Accordingly, no such amounts are included in the Summary
Compensation Table.
(2) Stay bonus granted on October 18, 1999 and paid during 2000.
(3) Represents car allowance.
Option Grants in 2002
The following table provides certain information with respect to options
granted to the President and Chief Executive Officer and the other Named
Executive Officer during the fiscal year ended December 31, 2002 under the
Company's Incentive Plans:
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM(1)
---------------------------------------------------------------- -------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS MARKET
UNDERLYING GRANTED TO PRICE ON
OPTIONS EMPLOYEES IN EXERCISE DATE OF EXPIRATION
NAME GRANTED(1) FISCAL YEAR PRICE GRANT DATE 0% 5% 10%
---- ---------- ------------ --------- --------- ----------- ------- ------------ ----------
Joseph S. Podolski........ 275,000 99.3% $ 4.34 $ 4.34 3/20/2012 -- $750,586 $3,016,882
Louis Ploth, Jr........... -- -- -- -- -- -- -- --
9
----------
(1) The Securities and Exchange Commission (the "SEC") requires disclosure of
the potential realizable value or present value of each grant. The
disclosure assumes the options will be held for the full 10-year term prior
to exercise. Such options may be exercised prior to the end of such 10-year
term. The actual value, if any, an executive officer may realize will
depend on the excess of the stock price over the exercise price on the date
the option is exercised. There can be no assurance that the stock price
will appreciate at the rates shown in the table.
Option Exercises and Holdings
The following table sets forth information concerning option exercises and
the value of unexercised options held by the President and Chief Executive
Officer and the other Named Executive Officer of the Company named in the
Summary Compensation Table as of the end of the last fiscal year:
AGGREGATED OPTION EXERCISES IN 2002
AND OPTION VALUES AT DECEMBER 31, 2002
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS HELD AT OPTIONS HELD AT
SHARES DECEMBER 31, 2002 DECEMBER 31, 2002(1)
ACQUIRED ON VALUE ----------------------------- -----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ------------ --------------
Joseph S. Podolski......... 27,360 101,232 236,000 309,000 $ 0 $ 0
Louis Ploth, Jr............ -- -- 114,700 37,000 $ 0 $ 0
----------
(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, 2002 was $0.98, based on the closing sales price on
the Nasdaq Stock Market on December 31, 2002.
Equity Compensation Plan Information
The following table provides information as of December 31, 2002, regarding
compensation plans (including individual compensation arrangements) under which
equity securities are authorized for issuance:
NUMBER OF SECURITIES REMAINING
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE AVAILABLE FOR FUTURE ISSUANCE
BE ISSUED UPON EXERCISE EXERCISE PRICE OF UNDER EQUITY COMPENSATION PLANS
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES SHOWN IN THE
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS FIRST COLUMN)
---------------------------- ----------------------- -------------------- ----------------------------------
Equity compensation plans 1,531,710 $6.76 1,043,304
approved by shareholders(1)
Equity compensation plans
not approved by shareholders -- -- --
---------------------------- ----------------------- -------------------- ----------------------------------
Total 1,531,710 $6.76 1,043,304
(1) Consists of shares of Common Stock issued or remaining available for
issuance under the Incentive Plans and the 1996 Director Plan and 2000
Director Plan. The material terms of the 2000 Director Plan are described
above under "Directors' Meetings and Compensation." The 2000 Director Plan
was originally approved by the Company's stockholders. The Company amended
the 2000 Director Plan without stockholder approval as permitted by the
terms of the 2000 Director Plan on October 24, 2002.
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Messrs. Podolski and Ploth which
provide for current annual salaries of $285,000 and $150,000, respectively. The
agreements provide that the Company will pay Messrs. Podolski and Ploth an
annual incentive bonus as may be approved by the Board of Directors and that
they are entitled to participate in all employee benefit plans sponsored by the
Company.
Mr. Podolski's employment agreement was amended in October 2002 and
provides for a renewal term expiring in January 2004, with automatic annual
renewals unless terminated by either party. The October 2002
10
amendment clarified the provisions described below relating to the lump sum
payment following a change of control but did not change the economics of the
Rabbi Trust. If terminated for reasons other than cause, Mr. Podolski is
entitled to receive his annual base salary and certain employment benefits for 1
year following termination. In addition, he is entitled to the following
severance payments in the event he is terminated without cause or resigns for
good reason within 12 months following a change of control: a cash lump sum
payment equal to the present value of the aggregate amount of payments set forth
below, in which the present value is determined as of the closing date of the
change of control transaction (as if he was terminated or had resigned on such
date). Mr. Podolski has agreed to defer payment of such amount, and in lieu of
such lump sum payment, he will receive the payments listed in the following
table. All of the payments listed below, other than the first payment made at
the closing of a change of control, would be made out of an irrevocable Rabbi
Trust which would be funded by the Company immediately prior to the closing of a
change of control transaction:
AMOUNT OF PAYMENT PAYMENT DUE DATE
------------------- ---------------------------------------------------
Current base salary On the closing of the change of control transaction
$150,000 1st anniversary after closing
$150,000 2nd anniversary after closing
$150,000 3rd anniversary after closing
$150,000 4th anniversary after closing
$125,000 5th anniversary after closing
$75,000 6th anniversary after closing
Finally, Mr. Podolski is entitled to acceleration of all unvested options
and an extension of the period of exercisability of his options for a 2 year
period following the closing of a change of control and is entitled to receive
benefits coverage for a period of 12 months following his termination.
Mr. Ploth, the Company's chief financial officer, is entitled to receive a
lump sum payment upon the closing of a change of control transaction, regardless
of whether he is terminated or continues with the combined company, in an amount
equal to his current base salary at the time of the closing. This was amended in
October 2002 and replaces his previous change of control payment of 1/2 of his
current base salary plus an additional $25,000 cash payment for the consummation
of a change of control transaction. In addition, Mr. Ploth is entitled to
acceleration of all unvested options and an extension of the period of
exercisability of his options for a 2 year period following the closing of a
change of control, and he is entitled to receive benefits coverage for a period
of 12 months following closing. The benefits coverage was increased from the 6
month period in place prior to the October 2002 amendment.
Mr. Ploth's employment agreement expires in October 2004 with automatic
annual renewals unless otherwise terminated by either party. If terminated for
reasons other than cause, Mr. Ploth is entitled to salary and certain employment
benefits for 6 months following termination.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Zsolt Lavotha, who is standing for election to the Company's Board of
Directors for the first time at the Annual Meeting, previously served as
President and Chief Executive Officer and a director of Lavipharm. The Company
entered into a definitive merger agreement with Lavipharm in October 2002. In
addition, immediately following execution of the definitive merger agreement,
the Company loaned $1 million to Lavipharm. The merger agreement terminated in
March 2003, and Lavipharm paid off the loan with interest in its entirety in
April 2003. Mr. Lavotha served in the capacities described above during these
transactions.
11
PERFORMANCE GRAPH
The following performance graph compares the performance of the Common
Stock to the Nasdaq Combined Composite Index and to the Nasdaq Index of
Pharmaceutical Companies. The graph covers the fiscal years ending December 31,
1997 to December 31, 2002. The graph assumes that the value of the investment in
the Company's Common Stock and each index was $100 at December 31, 1997 and that
all dividends were reinvested.
COMPARISON OF CUMULATIVE RETURN
AMONG ZONAGEN, INC.,
NASDAQ COMBINED MARKET INDEX AND
NASDAQ PHARMACEUTICAL COMPANIES INDEX
(BAR GRAPH)
1997 1998 1999 2000 2001 2002
------- ------- ------ ------ ------ ------
ZONAGEN INC. 100.00 105.15 24.06 14.43 38.49 5.39
NASDAQ 100.00 135.75 278.03 344.54 292.68 180.38
PHARMACEUTICALS
NASDAQ COMBINED 100.00 141.04 248.76 156.35 124.64 86.94
INDEX
ASSUMES $100 INVESTED ON JAN. 1, 1998
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DEC. 31, 2002
The foregoing stock price performance comparisons shall not be deemed
incorporated by reference into this Form 10-K or any filing under the Securities
Act, 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.
12
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding the
beneficial ownership of Common Stock as of October 31, 2003 by (i) each person
who is known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director and nominee for director of the
Company, (iii) the Company's Chief Executive Officer and the other Named
Executive Officer, and (iv) all directors and executive officers as a group.
Except as described below, each of the persons listed in the table has sole
voting and investment power with respect to the shares listed.
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP PERCENTAGE OF
NAME OF BENEFICIAL OWNER OF COMMON STOCK(1) Class(2)
------------------------ -------------------- -------------
Petrus Fund, L.P.
12377 Merit Dr., Suite 1700
Dallas, Texas 75251..................................................... 755,793(3) 6.6%
Peter M. Collery and Neil H. Koffler
420 Lexington Avenue, Suite 2601
New York, New York 10170................................................ 583,743(4) 5.1%
Lloyd M. Bentsen, III...................................................... 34,000(5) *
Steven Blasnik............................................................. 869,396(6) 7.5%
Daniel Cain................................................................
Jean L. Fourcroy, M.D., Ph.D., M.P.H.......................................
Zsolt Lavotha..............................................................
Joseph S. Podolski......................................................... 340,181(7) 2.9%
Martin P. Sutter .......................................................... 284,828(8) 2.5%
Timothy McInerney.......................................................... 100,833(9) 1.0%
Louis Ploth................................................................ 130,497(10) 1.1%
All directors and executive officers
as a group (6 persons).................................................. 1,759,735(5)-(10) 14.5%
* Does not exceed 1%.
(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
October 31, 2003.
(3) Based on information provided to the Company by Petrus Fund, L.P.
(4) Based on information contained in a Schedule 13G filed on behalf of SC
Fundamental Value Fund, L.P., SC Fundamental LLC, SC-BVI Partners, PMC-BVI,
Inc., SC Fundamental Value BVI, Inc., SC Fundamental Value BVI, Ltd., Peter
M. Collery and Neil H. Koffler. Pursuant to information contained in the
filing, Messrs. Collery and Koffler share voting and dispositive power with
respect all of the shares listed above as a result of their relationship
with SC Fundamental Value Fund, L.P., which has sole voting and dispositive
power with respect to 261,234 shares and SC Fundamental Value BVI, Ltd.,
which has sole voting and dispositive power with respect to 322,509 shares.
(5) Includes 34,000 shares issuable upon exercise of options.
(6) Includes (i) 755,793 shares of Common Stock which may be deemed to be
beneficially owned by Mr. Blasnik by virtue of his affiliation with Petrus
Fund, L.P. and (ii) 113,603 shares of Common Stock issuable upon the
exercise of options. Mr. Blasnik disclaims beneficial ownership of the
shares owned by Petrus Fund, L.P.
(7) Includes (i) 300 shares of Common Stock which are held by certain of Mr.
Podolski's family members and (ii) 248,000 shares of Common Stock issuable
upon the exercise of options. Mr. Podolski disclaims beneficial ownership
of the shares owned by his family members.
(8) Includes (i) 115,029 shares of Common Stock which may be deemed to be
beneficially owned by Mr. Sutter by virtue of his affiliation with Essex
Woodlands Health Ventures, L.P., (ii) 100,000 shares of Common Stock
issuable upon the exercise of options and (iii) 524 shares of Common Stock
which are held by certain of Mr. Sutter's family members. Mr. Sutter
disclaims beneficial ownership of the shares owned by Essex Woodlands
Health Ventures, L.P. and by his family members.
(9) Includes (i) 66,500 shares of Common Stock issuable upon the exercise of
options and (ii) 3,131 shares of Common Stock which are held by certain of
Mr. McInerney's family members. Mr. McInerney disclaims beneficial
ownership of the shares owned by his family members.
(10) Includes 100,700 shares of Common Stock issuable upon the exercise of
options.
13
COMPENSATION AND OPTION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Option Committee currently consists of Messrs. Blasnik
and McInerney. During fiscal 2002, 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.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of the
Common Stock, to file initial reports of ownership and reports of changes in
ownership (Forms 3, 4, and 5) of Common Stock with the Commission. Officers,
directors and greater than 10% stockholders are required by the Commission
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, 2002, all Section 16(a)
filing requirements applicable to its officers, directors and 10% stockholders
were complied with in a timely manner, except that each of Messrs. Podolski and
Ploth filed a Form 4 late relating to the grant of a stock award and each of
Messrs. Sutter and Blasnik filed a Form 4 two days late relating to the grant of
a stock option.
PROPOSALS 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 February 28, 2004 if the proposal is to be considered for inclusion in the
Company's Proxy Statement relating to such meeting. Such proposal must also
comply with the other requirements of Rule 14a-8 of the Securities Exchange Act
of 1934, as amended, in order to be considered for inclusion in such proxy
statement. Additionally, with respect to proposals not submitted for inclusion
in the proxy statement, if notice of the proposal is not received by March 31,
2004, the notice will be untimely and the proposal will not be considered at the
2004 annual meeting.
FINANCIAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AS AMENDED, 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-10, THE WOODLANDS, TEXAS 77380.
By Order of the Board of Directors
Louis Ploth, Jr.
Secretary
November 21, 2003
The Woodlands, Texas
14
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 Louis Ploth, Jr. or their
designees as proxies to represent the undersigned at the Annual Meeting of
Stockholders to be held at La Quinta Inn, 28673 I-45 North, The Woodlands,
Texas, December 29, 2003, at 1:00 p.m. Central Standard 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 director and FOR ratification of PricewaterhouseCoopers LLP as
independent accountants.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be voted on reverse side.)
ZONAGEN, INC.
[ ] Mark this box with an X if you have made changes to your name or address
details above.
ANNUAL MEETING PROXY CARD
A ELECTION OF DIRECTORS
1. The Board of Directors recommends a vote FOR the listed nominees. FOR WITHHOLD
01 - Joseph S. Podolski [ ] [ ]
02 - Louis Ploth, Jr. [ ] [ ]
03 - Daniel F. Cain [ ] [ ]
04 - Jean L. Fourcroy, M.D., Ph.D., M.P.H. [ ] [ ]
05 - Zsolt Lavotha [ ] [ ]
B ISSUES
2. The Board of Directors recommends a vote FOR the following proposals.
FOR AGAINST ABSTAIN
To ratify the election of PricewaterhouseCoopers LLP as independent [ ] [ ] [ ]
accountants of the company for the fiscal year ended December 31, 2003.
C AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When signing as
attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
/ /
-------------------------------------------------- -------------------------------------------------- -----------------