U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A INFORMATION
INFORMATION
REQUIRED IN PROXY STATEMENT
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 o
Check
the
Appropriate Box:
| x |
Preliminary
Proxy Statement
|
| o |
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
|
| o |
Definitive
Proxy Statement
|
| o |
Definitive
Additional Materials
|
| o |
Soliciting
Material Under Rule 14a-12
|
ZIOPHARM
ONCOLOGY, 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
|
| o |
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
| (1) |
Title
of each class of securities to which transaction
applies:
|
| (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:
|
| o |
Fee
paid previously with preliminary
materials:
|
| o |
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
|
ZIOPHARM
Oncology, Inc.
1180
Avenue of the Americas, 19th
Floor
New
York,
New York 10036
________________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
________________________
To
the
stockholders of ZIOPHARM Oncology, Inc.:
Please
take notice that the Annual Meeting of Stockholders of ZIOPHARM Oncology, Inc.
(the “Company”)
will
be held, pursuant to due call by the Board of Directors of the Company,
at
the NY
Academy of Sciences, 2
East 63
Street, between Madison and 5th Avenues, New York, NY 10021,
on
,
, 2006
at
Eastern Time, or at any adjournment or adjournments thereof, for the purpose
of
considering and taking appropriate action with respect to the following:
|
1.
|
To
elect eight directors;
|
|
2.
|
To
adopt an amended and restated certificate of incorporation for the
Company;
|
|
3.
|
To
approve
an amendment to the Company’s 2003 Stock Option Plan to increase the
number of shares of common stock reserved for issuance thereunder
from
1,252,436
shares
to 2,002,436 shares.
|
|
4.
|
To
ratify the appointment of Vitale, Caturano & Company, Ltd. as the
independent registered public accounting firm of the Company for
fiscal
2006; and
|
|
5.
|
To
transact any other business as may properly come before the meeting
or any
adjournments thereof.
|
Pursuant
to action of the Board of Directors, stockholders of record
on
, 2006 will be entitled to vote at the meeting or any adjournments thereof.
A
proxy
for the annual meeting is enclosed. You are requested to fill in and sign the
proxy, which is solicited by the Board of Directors, and mail it promptly in
the
enclosed envelope. Adoption of each proposal requires the affirmative vote
of
the holders of a majority of the outstanding shares of the Company’s common
stock present and entitled to vote at the annual meeting.
| By Order of the Board of Directors | ||
| ZIOPHARM Oncology, Inc. | ||
| |
|
|
| By: |  |
|
|
Richard
Bagley, President, Chief Operating Officer and
Treasurer
|
||
| , 2006 | ||
Proxy
Statement
of
ZIOPHARM
Oncology, Inc.
1180
Avenue of the Americas, 19th Floor
New
York,
New York 10036
Annual
Meeting of Stockholders
to
be held
,
2006
___________________
VOTING
BY PROXY AND REVOCATION OF PROXIES
This
proxy statement is furnished in connection with the solicitation of proxies
by
the Board of Directors of ZIOPHARM Oncology, Inc. (periodically referred to
in
this proxy statement as the “Company”)
to be
used at the annual meeting of our stockholders to be held on
,
, 2006
at
Eastern Time, at New
York
Academy of Sciences, 2 East 63 Street, between Madison and 5th Avenues, New
York, NY 10021,
or at
any adjournment or adjournments thereof, for the purpose of considering and
taking appropriate action with respect to the following:
|
1.
|
To
elect eight directors;
|
|
2.
|
To
adopt an amended and restated certificate of incorporation for the
Company;
|
|
3.
|
To
approve an amendment to the Company’s 2003 Stock Option Plan to increase
the number of shares of common stock reserved for issuance thereunder
from
1,252,436
shares
to 2,002,436
shares;
|
|
4.
|
To
ratify the appointment of Vitale, Caturano
&
Company, Ltd. as the independent registered public accounting firm
of the
Company for fiscal 2006; and
|
|
5.
|
To
transact any other business as may properly come before the meeting
or any
adjournments thereof.
|
The
approximate date on which this proxy statement and the accompanying proxy were
first sent or given to stockholders
was
, 2006. Each
stockholder who signs and returns a proxy in the form enclosed with this proxy
statement may revoke the proxy at any time prior to its use at the annual
meeting by giving notice of such revocation to the Company in writing, in open
meeting or by executing and delivering a new proxy to the Treasurer of the
Company. Unless so revoked, the shares represented by each proxy will be voted
at the annual meeting and at any adjournments thereof. Presence at the annual
meeting of a stockholder who has signed a proxy does not, alone, revoke that
proxy; revocation must to be announced by the stockholder at the time of the
meeting. All shares which are entitled to vote and are represented at the annual
meeting by properly executed proxies received prior to or at the annual meeting,
and not revoked, will be voted at the annual meeting and any adjournments
thereof.
VOTING
PROCEDURES
Only
holders of record of the Company’s common stock at the close of business
on
, 2006, the “Record Date” for the annual meeting, are entitled to notice of and
to vote at the annual meeting. On the Record Date, there
were
shares of common stock outstanding. Each share of common stock entitles the
holder thereof to one vote upon each matter to be presented at the annual
meeting. A quorum, consisting of a majority of the outstanding shares of the
common stock entitled to vote at the annual meeting, must be present, either
in
person or represented by proxy, for each matter presented at the annual meeting
before action may be taken on that matter.
Each
proxy returned to the Company will be voted in accordance with the instructions
indicated thereon. Adoption of each proposal requires the affirmative vote
of
the holders of a majority of the shares of the Company’s common stock present in
person or represented by proxy at the annual meeting.
Unless
a
contrary choice is specified, all shares represented by proxies will be voted:
FOR
the
election of the director nominees named in this proxy statement; FOR
the
adoption of an amended and restated certificate of incorporation for the
Company; FOR
the
increase in the number of shares of common stock reserved for issuance under
the
Company’s 2003 Stock Option Plan from 1,252,436
shares
to
2,002,436
shares;
and FOR
ratification
of Vitale,
Caturano
&
Company, Ltd.’s appointment
as our independent
registered public accounting firm for
fiscal 2006. If any director nominee should withdraw or otherwise become
unavailable for reasons not presently known, the proxies which would have
otherwise been voted for that director nominee may be voted for a substitute
director nominee selected by the Company’s Board of Directors.
A
stockholder who abstains with respect to any proposal is considered to be
present and entitled to vote on that proposal, and is in effect casting a
negative vote. A stockholder (including a broker) who does not give authority
to
a proxy to vote, or withholds authority to vote, on any proposal shall not
be
considered present and entitled to vote on that proposal.
The
Board of Directors unanimously recommends that you vote “FOR” each of the
proposals set forth above.
While
the
Board of Directors knows of no other matters to be presented at the annual
meeting or any adjournment thereof, all proxies returned to the Company will
be
voted on any such matter in accordance with the judgment of the proxy
holders.
2
ELECTION
OF DIRECTORS
(Proposal
One)
The
Board
of Directors currently consists of eight (8) directors, each of whom has been
nominated for re-election by the Board of Directors. If re-elected, each nominee
has consented to serve as a director of the Company, to hold office until the
next annual meeting of stockholders, or until his successor is elected and
shall
have qualified.
Set
forth
below is information regarding the individuals nominated for election to the
Board of Directors, which includes information furnished by them as to their
principal occupations for the last five years, certain other directorships
held
by them, and their ages as of the date of this proxy statement.
|
Name
and Age of
Director
and Nominee
|
Principal
Occupation, Business Experience
for
the Past Five Years and Directorships in Public
Companies
|
Director
Since
|
||
|
Jonathan
Lewis, M.D., Ph.D.
Age
47
|
Jonathan
Lewis has served as Chief Executive Officer and a director since
the
Company’s September 2005 merger with ZIOPHARM, Inc. Prior to the merger,
Dr. Lewis served as Chief Executive Officer of ZIOPHARM, Inc. since
January 2004. From July 1994 until June 2001, Dr. Lewis served as
Professor of Surgery and Medicine at Memorial Sloan-Kettering Cancer
Center and he served as Chief Medical Officer and Chairman of the
Medical
Board at Antigenics, Inc. from June 2000 until November 2003. He
serves as
a director on the Board of POPPA (the Police Organization Providing
Peer
Assistance) of the New York Police Department (NYPD) and as a member
of
the Medical Advisory Board of the Sarcoma Foundation of
America.
|
2005
|
||
|
Richard
E. Bagley
Age
62
|
Richard
E. Bagley has served as President, Chief Operating Officer and Treasurer
and a director since the Company’s September 2005 merger with ZIOPHARM,
Inc. Prior to the merger, Mr. Bagley served as President and Chief
Operating Officer of ZIOPHARM, Inc. since July 2004 and as Treasurer
of ZIOPHARM, Inc. since March 2005. Mr.
Bagley served as a consultant to ZIOPHARM, Inc. prior to joining
that
company while also serving as a senior advisor to The University
of Texas
M.D. Anderson Cancer Center and Spaulding & Slye Colliers
International in the period from May 2003 to July 2004. Mr. Bagley
initiated a career in pharmaceuticals in 1968 with Smith Kline and
French
Laboratories, leaving in 1985 after serving as President of the consumer
products division. From 1985-1990, Mr. Bagley served in several capacities
at Squibb Corporation, including as President E. R. Squibb & Sons,
U.S. in 1988 and 1989. He served as Director, Chief Executive Officer
and
President of ImmuLogic Pharmaceutical Corporation from 1990 to 1994,
as
Director, Chief Executive Officer and Chairman of ProScript, Inc.
from
1994 to 1998, as Director, President and Chief Executive Officer
of
AltaRex Corp. from 1998 to May 2003.
|
2005
|
3
|
Name
and Age of
Director
and Nominee
|
Principal
Occupation, Business Experience
for
the Past Five Years and Directorships in Public
Companies
|
Director
Since
|
|
Murray
Brennan, M.D.
Age
65
|
Murray
Brennan has served as a director since the Company’s September 2005 merger
with ZIOPHARM, Inc. Prior to the merger, Dr. Brennan served as a
director
of ZIOPHARM, Inc. since December 2004. Dr. Brennan has been Chairman
of
Memorial Sloan-Kettering Cancer Center’s Department of Surgery since 1985,
and is a former Vice President of the American College of Surgeons,
a
position he held from 2004 to 2005. Dr. Brennan is also a member
of the
National Academy of Sciences. He served as director of the American
Board
of Surgery from 1984 to 1990, Chairman of the American College of
Surgeons’ Commission on Cancer from 1992 to 1994, President of the Society
of Surgical Oncology from 1995 to 1996, and President of the American
Surgical Association from 2002 to 2003.
|
2005
|
||
|
James
Cannon
Age
67
|
James
Cannon has served as a director since the Company’s September 2005 merger
with ZIOPHARM, Inc. Prior to the merger, Mr. Cannon served as a director
of ZIOPHARM, Inc. since December 2004. Mr.
Cannon is Vice Chairman, Chief Financial Officer and a member of
the board
of directors of BBDO Worldwide. Mr. Cannon joined BBDO in 1967, was
appointed Chief Financial Officer of the agency in 1984, and was
elected
to its board of directors in 1985. In 1986, Mr. Cannon was appointed
Comptroller and a member of the board of directors of Omnicom, a
company
affiliated with BBDO Worldwide, and served in those capacities through
May
2002. In 1987, Mr. Cannon also served as Director of Financial Operations
of the Omnicom Group from 1987 to 1989, when he rejoined BBDO Worldwide
as
Executive Vice President and Chief Financial Officer. Mr. Cannon
was
appointed Vice Chairman of BBDO Worldwide in 1990.
|
2005
|
||
|
Senator
Wyche Fowler, Jr., J.D.
Age
65
|
Wyche
Fowler, Jr., has served as a director since the Company’s September 2005
merger with ZIOPHARM, Inc. Prior to the merger, Senator Fowler served
as a
director of ZIOPHARM, Inc. since December 2004. Senator Fowler has
been
engaged in an international business and law practice since May 2001,
and
has served as chairman of the board of the Middle East Institute,
a
non-profit foundation in Washington, DC, since September 2001. Senator
Fowler served as U.S. Senator from Georgia from January 1987 to January
1993, and had previously served in the U.S. House of Representatives
from
1977 until his senatorial election. During his time in the U.S. Senate,
Senator Fowler served as a member of the Senate Appropriations, Budget,
Energy and Agriculture Committees. While in the U.S. House of
Representatives, he was a member of the House Ways and Means and
Foreign
Affairs Committees, as well as the Select Committee on Intelligence.
President Clinton appointed Senator Fowler as Ambassador to the Kingdom
of
Saudi Arabia in 1996, where he served through 2001. Senator Fowler
is a
member of the board of directors of Brandywine Realty Trust, a real
estate
investment trust traded on the New York Stock Exchange.
|
2005
|
4
|
Name
and Age of
Director
and Nominee
|
Principal
Occupation, Business Experience
for
the Past Five Years and Directorships in Public
Companies
|
Director
Since
|
|
Gary
S. Fragin
Age
59
|
Gary
S. Fragin has served as a director since the Company’s September 2005
merger with ZIOPHARM, Inc. Prior to the merger, Mr. Fragin served
as a
director of ZIOPHARM, Inc. since December 2004. Mr. Fragin is currently
managing partner of Osborn Partners, LP and managing partner of Fragin
Asset Management, LP. Mr. Fragin was the General Partner and Chief
Administrative/Operating Officer of Steinhardt Organization, prior
to
which he was a partner, Director of Trading and member of the Management
Committee and Executive Committee at Oppenheimer and Co.
|
2005
|
||
|
Timothy
McInerney
Age
45
|
Timothy
McInerney has served as a director since the Company’s September 2005
merger with ZIOPHARM, Inc. Prior to the merger, Mr. McInerney served
as a
director of ZIOPHARM, Inc. since July 2005. Since 1992, Mr. McInerney
has
been a Managing Director of Paramount BioCapital, Inc. where he oversees
the overall distribution of Paramount’s private equity product. Prior to
1992, Mr. McInerney was a research analyst focusing on the biotechnology
industry at Ladenburg, Thalman & Co. Prior to that, Mr. McInerney held
equity sales positions at Bear, Stearns & Co. and Shearson Lehman
Brothers, Inc. Mr. McInerney also has worked in sales and marketing
for
Bristol-Myers Squibb.
|
2005
|
||
|
Michael
Weiser, M.D., Ph.D.
Age
43
|
Michael
Weiser has served as a director since the Company’s September 2005 merger
with ZIOPHARM, Inc. Prior to the merger, Dr. Weiser served as a director
of ZIOPHARM, Inc. since that company’s inception in September 2003. Dr.
Weiser is the Director of Research at Paramount BioCapital, Inc.
In
addition to serving on the boards of directors of several privately-held
companies, Dr. Weiser currently serves on the board of directors
of
Manhattan Pharmaceuticals, Inc., VioQuest Pharmaceuticals, Inc.,
Hana
BioSciences, Inc., Emisphere Technologies, Inc., and Chelsea Therapeutics,
Inc., all publicly-traded biotechnology companies.
|
2005
|
5
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table sets forth the cash and non-cash compensation awarded to or
earned by (i) each individual serving as the Company’s chief executive
officer during the fiscal year ended December 31, 2005; and (ii) each other
individual that served as an executive officer of the Company as of December
31,
2005 and who received in excess of $100,000 in the form of salary and bonus
during such fiscal year (collectively, the “named executives”).
|
Annual
Compensation
|
Long-Term
Compensation Awards
|
|||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Other
Annual Compensation
($)
|
Securities
Underlying Options
(#)
|
|||||||||||
|
Dr.
Jonathan Lewis,
|
2005
|
350,000
|
250,000
|
(2) |
5,657
|
141,950
|
||||||||||
|
Chief
Executive Officer (1)
|
2004 |
344,167
|
500,000 | (3) | 9,099 | 268,653 | ||||||||||
|
Richard
E. Bagley,
|
2005
|
250,000
|
50,000
|
(5) |
660
|
90,614
|
||||||||||
|
President,
Chief Operating
Officer
and Treasurer
(4)
|
2004
|
43,750
|
75,000
|
(6) |
4,057
|
150,668
|
||||||||||
|
Dr.
Robert Peter Gale,
|
2005
|
250,000
|
150,000
|
(8) |
660
|
25,048
|
||||||||||
|
Senior
Vice President Research (7)
|
2004
|
239,583
|
150,000
|
(9) |
2,543
|
25,110
|
||||||||||
|
David
C. Olson
Former
Chief Executive
Officer
(10)
|
2005
2004
2003
|
57,500
0
0
|
—
—
—
|
—
—
—
|
—
—
—
|
|||||||||||
|
(1)
|
Dr.
Lewis became Chief Executive Officer effective upon the Company’s
September 13, 2005 merger with ZIOPHARM, Inc. Prior to the merger,
Dr.
Lewis served as Chief Executive Officer of ZIOPHARM, Inc. since January
8,
2004.
All compensation reported for fiscal year 2004 represents amounts
received
from ZIOPHARM, Inc. Compensation reported for fiscal year 2005 represents
amounts received from ZIOPHARM, Inc. prior to the September 13, 2005
merger and amounts received from the Company from and after the
merger.
|
|
(2)
|
Includes
a guaranteed bonus of $250,000 for work performed in fiscal 2005
that was
paid on January 15, 2006.
|
|
(3)
|
Includes
a signing bonus of $250,000 paid on February 23, 2004 and a guaranteed
bonus of $250,000 for work performed in fiscal 2004 that was paid
on April
22, 2005.
|
|
(4)
|
Mr.
Bagley became President, Chief Operating Officer and Treasurer effective
upon the Company’s
September 13, 2005 merger with ZIOPHARM, Inc. Prior
to the merger, Mr. Bagley served President and Chief Operating Officer
of
ZIOPHARM, Inc. since July 2004 and as Treasurer of ZIOPHARM, Inc.
since
March 2005. All compensation reported for fiscal year 2004 represents
amounts received from ZIOPHARM, Inc. Compensation reported for fiscal
year
2005 represents amounts received from ZIOPHARM, Inc. prior to the
September 13, 2005 merger and amounts received from the Company from
and
after the merger.
|
|
(5)
|
Includes
a year-end bonus of $25,000 received by Mr. Bagley on December 30,
2005;
also includes $25,000, a portion of his 2005 guaranteed bonus, that
Mr.
Bagley was accrued as of December 31, 2005 but which is not payable
until
July 31, 2006.
|
6
|
(6)
|
Includes
a signing bonus of $50,000 received by Mr. Bagley on July 30, 2004,
and
$25,000, a portion of his 2004 guaranteed bonus, that was accrued
as of
December 31, 2004 but was paid in July 15,
2005.
|
|
(7)
|
Dr.
Gale became Senior Vice President Research effective upon the Company’s
September 13, 2005 merger with ZIOPHARM, Inc. Prior
to the merger, Dr. Gale served as Sr. Vice President Research of
ZIOPHARM,
Inc. since January 15, 2004. All compensation reported for fiscal
year
2004 represents amounts received from ZIOPHARM, Inc. Compensation
reported
for fiscal year 2005 represents amounts received from ZIOPHARM, Inc.
prior
to the September 13, 2005 merger and amounts received from the Company
from and after the merger.
|
|
(8)
|
Includes
a guaranteed bonus of $150,000 for work performed in fiscal 2005
that was
paid on January 31, 2006.
|
|
(9)
|
Includes
a guaranteed bonus of $150,000 for work performed in fiscal 2004
that was
paid on April 16, 2005.
|
|
(10)
|
Mr.
Olson resigned as an executive officer effective upon the Company’s
September 13, 2005 merger with ZIOPHARM, Inc. Upon
closing of the merger, the Company paid Mr. Olson a one-time fee
of
$57,500 pursuant to his December 9, 2004 employment agreement. Mr.
Olson
received no other cash compensation from the Company for services
rendered
in his capacity as an executive officer during fiscal years 2003,
2004 and
2005.
|
Option
Grants in Last Fiscal Year
Upon
the
closing of the September 13, 2005 with ZIOPHARM, Inc., the Company assumed
ZIOPHARM, Inc.’s 2003 Stock Option Plan as its Stock Option Plan. Prior to the
merger, the Company had its own Incentive Stock Option Plan that was terminated
effective as of the closing of the merger.
The
following table sets forth the information concerning individual grants of
stock
options made by the Company or ZIOPHARM, Inc. to the named executives during
the
fiscal year ended December 31, 2005. All share numbers and dollar amounts
relating to stock options granted by ZIOPHARM, Inc. prior to the September
13,
2005 merger with that company are set forth on post-merger basis that gives
effect to the conversion of ZIOPHARM, Inc. stock options into stock options
of
the Company.
|
Name
|
Number
of Securities
Underlying
Options
Granted
(#)
|
Percent
of Total
Options
Granted to
Employees
In
Fiscal
Year
|
Exercise
or Base Price
($/share)
|
Expiration
Date(s)
|
||||||||
|
Dr.
Jonathan Lewis (1)
|
87,789
|
19.8
|
%
|
$
|
4.31
|
1/8/14
|
||||||
|
Dr.
Jonathan Lewis (1)
|
54,161
|
12.2
|
%
|
$
|
4.31
|
1/8/14
|
||||||
|
Richard
E. Bagley (2)
|
63,197
|
14.23
|
%
|
$
|
4.31
|
7/1/14
|
||||||
|
Richard
E. Bagley (2)
|
27,417
|
6.17
|
%
|
$
|
4.31
|
7/1/14
|
||||||
|
Dr.
Robert Peter Gale
|
25,048
|
5.6
|
%
|
$
|
4.31
|
6/8/15
|
||||||
|
David
C. Olson
|
0
|
0
|
%
|
--
|
--
|
|
(1)
|
The
number of securities underlying options is subject to an anti-dilution
provision pursuant to which Dr. Lewis is entitled to purchase no
less than
5% of the Company’s common stock until such time as the Company has raised
$25 million in financing.
|
|
(2)
|
The
number of securities underlying options is subject to an anti-dilution
provision pursuant to which Mr. Bagley is entitled to purchase no
less
than 3% of the Company’s common stock until such time as the Company has
raised $25 million in financing.
|
7
Aggregated
Option Exercises and Fiscal Year-End Option Values
The
following table sets forth the total amount of shares acquired by the named
executives upon exercises of stock options during fiscal year 2005, the
aggregate dollar value realized upon such exercise, the total number of
securities underlying unexercised options held at December 31, 2005 (separately
identifying then-exercisable and unexercisable options), and the aggregate
dollar value of in-the-money, unexercised options held at December 31, 2005
(separately identifying then-exercisable and unexercisable options). All share
numbers and dollar amounts relating to stock options granted by ZIOPHARM, Inc.
prior to the September 13, 2005 merger with that company are set forth on
post-merger basis that gives effect to the conversion of ZIOPHARM, Inc. stock
options into stock options of the Company.
|
Number
of Unexercised
Securities
Underlying
Options
at FY-End (#)
|
Value
of Unexercised
In-the-Money
Options at FY-End ($)(1)
|
||||||||||||||||||
|
Name
|
Shares
Acquired
on Exercise
(#)
|
Value
Realized
($)
|
Exercisable |
Unexercisable
|
Exercisable
|
Unexercisable
|
|||||||||||||
|
Dr.
Jonathan Lewis
|
0
|
0
|
136,868
|
273,735
|
$
|
283,892
|
$
|
567,783
|
|||||||||||
|
Richard
Bagley
|
0
|
0
|
80,427
|
160,855
|
$
|
78,011
|
$
|
156,022
|
|||||||||||
|
Dr.
Robert Peter Gale
|
0
|
0
|
8,370
|
41,879
|
$
|
23,528
|
$
|
47,056
|
|||||||||||
|
David
C. Olson
|
0
|
0
|
0
|
0
|
--
|
--
|
|||||||||||||
|
(1)
|
Based
on the difference between the option exercise price and the closing
sale
price of the Company’s common stock on
December 30, 2005 (the last trading day prior to the end of the Company’s
2005 fiscal year), which was $3.25.
|
Employment
and Change-in-Control Agreements
Employment
Agreement with Jonathan Lewis, M.D., Ph.D.
On
January 8, 2004, ZIOPHARM, Inc. entered into a three-year employment agreement
with Dr. Jonathan Lewis, under which we succeeded to ZIOPHARM, Inc.’s rights and
obligations upon our merger with that company. Under the agreement, Dr. Lewis
receives an annual base salary of $350,000 and a guaranteed annual bonus of
$250,000. In addition, Dr. Lewis is eligible to receive an annual discretionary
bonus of up to 100% of his base salary, as determined by our board of directors.
ZIOPHARM, Inc. also paid Dr. Lewis a one-time bonus of $250,000 upon execution
of his employment agreement. Depending upon the events surrounding a possible
termination of Dr. Lewis’ employment, he may continue to receive his base salary
and, in certain circumstances, his guaranteed bonus for one year following
such
termination. In addition, the vesting of Dr. Lewis’ stock options may accelerate
in whole or in part upon such termination. Dr. Lewis has agreed not to compete
with us during the term of the employment agreement and for a one-year period
thereafter, provided that we continue to pay his base salary and guaranteed
bonus for that one-year period.
Pursuant
to the terms of his employment agreement, we have granted Dr. Lewis options
to
purchase up to 410,603 shares of common stock, of which options to purchase
268,653 shares are exercisable at $0.08 per share and options to purchase
141,950 shares are exercisable at $4.31 per share (each as adjusted to give
effect to our merger with ZIOPHARM, Inc.). The options vest in three equal
annual installments, the first of which vested on January 8, 2005, with the
remaining installments vesting on January 8, 2006 and January 8, 2007. The
option is subject to anti-dilution protection from the issuance of equity
securities in financing transactions to the extent that Dr. Lewis will maintain
potential equity ownership of at least 5% of our stock until such time as we
have received $25 million in gross proceeds from such transactions. The options
are governed by our 2003 Stock Option Plan.
8
Employment
Agreement with Richard E. Bagley
On
July
21, 2004, ZIOPHARM, Inc. entered into a three-year employment agreement with
Mr.
Richard E. Bagley, under which we succeeded to ZIOPHARM, Inc.’s rights and
obligations upon our merger with that company. Under the agreement, Mr. Bagley
receives an annual base salary of $250,000 and a guaranteed annual bonus of
$50,000. In addition, Mr. Bagley is eligible to receive an annual discretionary
bonus, as determined by our board of directors. ZIOPHARM, Inc. also paid Mr.
Bagley a one-time bonus of $50,000 upon execution of his employment agreement.
Depending upon the events surrounding a possible termination of Mr. Bagley’s
employment, he may continue to receive his base salary and, in certain
circumstances, his guaranteed bonus for one year following such termination.
In
addition, the vesting of Mr. Bagley’s stock options may accelerate in whole or
in part upon such termination. Mr. Bagley has agreed not to compete with us
during the term of the employment agreement and for a one-year period
thereafter, provided that we continue to pay his base salary for that one-year
period.
Pursuant
to the terms of his employment agreement, we granted Mr. Bagley options to
purchase up to 241,282 shares common stock, of which options to purchase 150,668
shares are exercisable at $1.70 per share and options to purchase 90,614 shares
are exercisable at $4.31 per share (each as adjusted to give effect to our
merger with ZIOPHARM, Inc.). The options vest in three equal annual
installments, the first of which vested on July 1, 2005, with the remaining
installments vesting on July 1, 2006 and July 1, 2007. The option is subject
to
certain anti-dilution protections from the issuance of equity securities in
financing transactions so that Mr. Bagley will maintain potential equity
ownership of at least 3% of our stock until such time as we have received $25
million in gross proceeds from such transactions. The options are governed
by
our 2003 Stock Option Plan.
Employment
Agreement with Robert Peter Gale, M.D, Ph.D.,
D.Sc.
On
January 14, 2004, ZIOPHARM entered into a three-year employment agreement with
Dr. Robert Peter Gale, under which we succeeded to ZIOPHARM’s rights and
obligations upon our merger with that company. Under the agreement, Dr. Gale
receives an annual base salary of $250,000 and a guaranteed annual bonus of
$150,000. In addition, Dr. Gale is eligible to receive an annual discretionary
bonus, as determined by our board of directors. Depending upon the events
surrounding a termination of Dr. Gale’s employment, he may continue to receive
his base salary and, in certain circumstances, his guaranteed bonus for one
year
following such termination. In addition, the vesting of Dr. Gale’s stock options
may accelerate in whole or in part upon such termination. Dr. Gale has agreed
not to compete with us during the term of the employment agreement and for
one-year following the expiration of his employment agreement.
Pursuant
to the terms of his employment agreement, we granted Dr. Gale options to
purchase up to 25,110 shares of common stock at $0.44 per share (adjusted to
give effect to our merger with ZIOPHARM, Inc.). The options vest in three equal
annual installments, the first of which vested on January 15, 2005, with the
remaining installments vesting on January 15, 2006 and January 15, 2007. The
options are governed by our 2003 Stock Option Plan.
Employment
Agreement with David C. Olson
On
December 9, 2004, we entered into an employment agreement with David C. Olson.
Under the terms of the agreement, we agreed to pay Mr. Olson a one-time fee
of
$100,000 if and when we completed a merger, acquisition, or related transaction.
In connection with the September 13, 2005 merger with ZIOPHARM, Inc., Mr. Olson
agreed to reduce this amount to the extent that our unconsolidated liabilities
immediately following the merger exceeded $425,000. In connection with the
merger, we paid Mr. Olson $57,500 and his employment agreement was terminated
in
its entirety.
9
Compensation
of Directors
From
our
September 2005 merger with ZIOPHARM, Inc. through the end of fiscal year 2005,
as compensation for service as a member of the Board of Directors, each
non-employee director of the Company received a $3,000 quarterly cash retainer
paid in arrears. For the fiscal year ended 2006, as compensation for service
as
a member of the Board of Directors, each non-employee director of the Company
receives a $5,000 quarterly cash retainer paid in arrears and in addition,
each
non-employee director serving on the Company’s audit committee, compensation
committee and nominating committee receives a $1,000 cash payment for each
committee meeting attended by such director. Non-employee directors also receive
stock options as granted from time to time and as recommended by the
compensation committee.
EXECUTIVE
OFFICERS OF THE COMPANY
|
Name
and Title
|
Age
|
Principal
Occupation, Business Experience
for
the Past Five Years and Directorships in Public
Companies
|
||
|
Jonathan
Lewis, M.D., Ph.D.
Chief
Executive Officer
|
See
“Election of Directors (Proposal One)” - above.
|
|||
|
Richard
E. Bagley
President
Chief Operating Officer and Treasurer
|
See
“Election of Directors (Proposal One)” - above.
|
|||
|
Robert
Peter Gale, M.D., Ph.D., D.Sc.
Senior
Vice President Research
|
Robert
Peter Gale has served as Senior Vice President Research since the
Company’s September 2005 merger with ZIOPHARM, Inc. Prior to the merger,
Dr. Gale served as Senior Vice President Research of ZIOPHARM, Inc.
since
January 2004. Dr. Gale is also on the medical staff of UCLA School
of
Medicine in the Department of Medicine, Division of Hematology and
Oncology and is Visiting Professor of Hematology at Imperial College
of
Science, Technology and Medicine, Hammersmith Hospital, London. Dr.
Gale
served as Senior Vice President for Medical Affairs at Antigenics,
Inc.
from April 2001 until May 2002 and as a consultant to that company
from
May 2002 through May 2004.
|
10
AMENDMENT
AND RESTATEMENT
OF
CERTIFICATE
OF INCORPORATION
(Proposal
Two)
The
Company’s current Certificate of Incorporation does not contain provisions
authorizing the creation or issuance of preferred stock, nor does it contain
common provisions that limit the personal liability of directors to the Company
or its stockholders for monetary damages for breach of certain fiduciary duties
or require the Company to indemnify its directors and officers. Proposal Two
recommends to the stockholders that the Company’s current Certificate of
Incorporation be amended and restated in its entirety, in the form set forth
in
Appendix A.
If
approved by the stockholders at the annual meeting, the Amended and Restated
Certificate of Incorporation would divide the Company’s 280,000,000 shares of
authorized capital stock into 250,000,000 shares of common stock and 30,000,000
shares of preferred stock and authorize the Board of Directors, subject to
limitations prescribed by law, to issue such shares of preferred stock in one
or
more series without further stockholder approval. The amendment and restatement
would also limit the personal liability of directors to the Company or its
stockholders for monetary damages for breach of certain fiduciary duties and
require the Company to indemnify its directors and officers. Finally, the
amendment and restatement would make non-substantive changes to the Certificate
of Incorporation to conform the number, ordering and content of the sections
of
the Certificate of Incorporation to the changes described above.
The
Board
of Directors has unanimously approved the amendment and restatement contained
in
Proposal Two. The summary description of the proposed Amended and Restated
Certificate of Incorporation contained in this proxy statement is qualified
by
the full text of such proposed Amended and Restated Certificate of Incorporation
attached as Appendix A.
Reasons
For and General Effect of Adoption of Amended and Restated Certificate of
Incorporation
Blank
Check Preferred Stock
If
approved by the stockholders at the annual meeting, the proposed Amended and
Restated Certificate of Incorporation will divide the Company’s 280,000,000
shares of authorized capital stock into 250,000,000 shares of common stock
and
30,000,000 shares of preferred stock, and authorize the Board of Directors,
subject to limitations prescribed by law, to issue up to such 30,000,000 shares
of preferred stock in one or more series without further stockholder approval.
The Board of Directors will have discretion to determine the rights,
preferences, privileges and restrictions of, including, without limitation,
voting rights, dividend rights, conversion rights, redemption privileges and
liquidation preferences of, and to fix the number of shares of, each series
of
preferred stock. Accordingly, the Board of Directors could authorize the
issuance of shares of preferred stock with terms and conditions that could
have
the effect of delaying, deferring or preventing a transaction or a change in
control that might involve a premium price for holders of our common stock
or
otherwise be in their best interest.
“Blank
check preferred stock” provisions are provisions in a company’s charter
documents which authorize that company’s board of directors to fix the number of
shares constituting series of preferred stock and the designation of the series,
the voting powers (if any) of the shares of the series, and the preferences
and
relative, participating, optional and other special rights, any qualifications,
limitations or restrictions, of the shares of such series. The Board of
Directors believes that amending and restating its Certificate of Incorporation
to authorize the issuance of preferred stock and to provide for blank check
preferred stock will provide the Company with increased flexibility in raising
future capital. The creation of blank check preferred stock would permit the
Board to negotiate with potential investors regarding the rights and preferences
of a series of equity securities. In addition, the Board of Directors would
not
be required to seek stockholder approval for the creation of a series a
preferred stock and, therefore, would be able to proceed expeditiously with
a
future plan of financing involving preferred stock. Because the development
of
new drug candidates is a time-consuming and capital intensive process, the
Board
of Directors believes that increased flexibility in capital raising is in the
best interests of the Company and its stockholders, especially from a company
without product revenue to date. Although the Board is recommending that
stockholders vote for the proposed Amended and Restated Certificate of
Incorporation in part to increase flexibility for future financings, the Company
currently has no plans in place to utilize preferred stock in connection
with any future financings.
11
If
adopted, the blank check preferred stock provisions of the proposed Amended
and
Restated Certificate of Incorporation may have an impact upon the rights of
stockholders and may be characterized as an anti-takeover measure which, if
adopted, may tend to insulate management and make the accomplishment of certain
transactions involving a potential change of control of the Company more
difficult. See “Provisions that May Have an Anti-Takeover Effect” below.
However, adoption of the Amended and Restated Certificate of Incorporation
is
not being recommended in response to any specific effort to which the Company
is
aware to accumulate the Company’s stock or to obtain control of the Company or
its Board of Directors. The Board of Directors has considered the potential
adverse effects of creating blank check preferred stock and has concluded that
such adverse effects are outweighed by the benefits that it would afford the
Company and its stockholders.
Limitations
on Directors’ Liability
The
Company’s bylaws currently contain provisions indemnifying the Company’s
directors and officers to the fullest extent permitted by law. If approved
by
the stockholders at the annual meeting, the proposed Amended and Restated
Certificate of Incorporation will contain similar provisions. In addition,
as
permitted by Delaware law, the proposed Amended and Restated Certificate of
Incorporation will provide that no director will be personally liable to the
Company or its stockholders for monetary damages for breach of certain fiduciary
duties as a director. The effect of this provision will be to restrict the
Company’s rights and the rights of its stockholders in derivative suits to
recover monetary damages against a director for breach of certain fiduciary
duties as a director, except that a director will be personally liable for:
|
·
|
any
breach of his or her duty of loyalty to us or our stockholders;
|
|
·
|
acts
or omissions not in good faith which involve intentional misconduct
or a
knowing violation of law;
|
|
·
|
the
payment of dividends or the redemption or purchase of stock in violation
of Delaware law; or
|
|
·
|
any
transaction from which the director derived an improper personal
benefit.
|
This
provision will not affect a director’s liability under the federal securities
laws.
To
the
extent that the Company’s directors, officers and controlling persons are
indemnified under the provisions contained in the Amended and Restated
Certificate of Incorporation, Delaware law or contractual arrangements against
liabilities arising under the Securities Act, the Company has been advised
that
in the opinion of the Securities and Exchange Commission such indemnification
is
against public policy as expressed in the Securities Act of 1933, as amended,
and is therefore unenforceable.
12
The
Board
of Directors believes that the limitations on director liability and the
indemnification of directors and officers that would apply to the Company upon
adoption of the proposed Amended and Restated Certificate of Incorporation
will
heighten the Company’s ability to attract and retain qualified directors and
officers. Because charter provisions limiting director liability and requiring
companies to indemnify their directors and officers are common for public
reporting companies, the Board of Directors believes that the absence of such
provisions in the Company’s Certificate of Incorporation may hinder the
Company’s ability to attract and retain directors and officers who are averse to
the risks associated with lawsuits alleging breach of fiduciary
duties.
Description
of Capital Stock
Common
Stock
The
Company’s authorized capital stock currently consists of 280,000,000 shares of
common stock, par value $.001 per share. As of the Record Date, shares of common
stock were issued and outstanding, and there were holders of common stock,
either beneficially or of record. The Company’s current Certificate of
Incorporation does not authorize the creation or issuance of preferred stock.
Each outstanding share of the Company’s common stock is validly issued, fully
paid and non-assessable.
Voting.
The
holders of our common stock are entitled to one vote for each outstanding share
of common stock owned by that stockholder on every matter properly submitted
to
the stockholders for their vote. Stockholders are not entitled to vote
cumulatively for the election of directors.
Dividend
Rights.
Holders
of the Company’s common stock are entitled to receive ratably dividends and
other distributions of cash or any other right or property as may be declared
by
the Board of Directors out of our assets or funds legally available for such
dividends or distributions. If Proposal Two is approved by the stockholders
at
the annual meeting, the dividend rights of holders of common stock will be
subject to the dividend rights of the holders of any series of preferred stock
that may be issued and outstanding from time to time.
Liquidation
Rights.
In the
event of any voluntary or involuntary liquidation, dissolution or winding up
of
our affairs, holders of our common stock would be entitled to share ratably
in
our assets that are legally available for distribution to stockholders after
payment of liabilities. If Proposal Two is approved by the stockholders at
the
annual meeting and if the Company has any preferred stock outstanding at such
time, the holders of such preferred stock may be entitled to distribution and/or
liquidation preferences that require the Company to pay the applicable
distribution to the holders of our preferred stock before paying distributions
to the holders of common stock.
Conversion,
Redemption and Preemptive Rights.
Holders
of the Company’s common stock have no conversion, redemption, preemptive,
subscription or similar rights.
Preferred
Stock
If
Proposal Two is approved by the stockholders at the annual meeting, the Board
of
Directors will have discretion to determine the rights, preferences, privileges
and restrictions of, including, without limitation, voting rights, dividend
rights, conversion rights, redemption privileges and liquidation preferences
of,
and to fix the number of shares of, each series of our preferred
stock.
13
Provisions
that May Have an Anti-Takeover Effect
Certain
provisions set forth in the proposed Amended and Restated Certificate of
Incorporation, in the Company’s bylaws and in Delaware law, which are summarized
below, are intended to enhance the likelihood of continuity and stability in
the
composition of the Board of Directors and in the policies formulated by the
Board of Directors and to discourage certain types of transactions that may
involve an actual or threatened change of control. In that regard, these
provisions are designed to reduce the Company’s vulnerability to an unsolicited
acquisition proposal. The provisions also are intended to discourage certain
tactics that may be used in proxy fights. However, such provisions could have
the effect of discouraging others from making tender offers for our shares
and,
as a consequence, they also may inhibit fluctuations in the market price of
our
common stock that could result from actual or rumored takeover attempts. Such
provisions also may have the effect of preventing changes in our
management.
Blank
Check Preferred Stock. If
approved by the stockholders at the annual meeting, the proposed Amended and
Restated Certificate of Incorporation would contain provisions that permit
the
Board of Directors to issue, without any further vote or action by the
stockholders, up to 30,000,000 shares of preferred stock in one or more series
and, with respect to each such series, to fix the number of shares constituting
the series and the designation of the series, the voting powers (if any) of
the
shares of the series, and the preferences and relative, participating, optional
and other special rights, if any, and any qualifications, limitations or
restrictions, of the shares of such series.
Special
Meetings of Stockholders.
Our
bylaws provide that special meetings of stockholders may be called only by
the
Board of Directors. Stockholders are not permitted to call a special meeting
of
stockholders or to require that the Board of Directors call such a special
meeting.
Delaware
Takeover Statute
In
general, Section 203 of the Delaware General Corporation Law prohibits a
Delaware corporation that is a public company from engaging in any “business
combination” (as defined below) with any “interested stockholder” (defined
generally as an entity or person beneficially owning 15% or more of the
outstanding voting stock of the corporation and any entity or person affiliated
with such entity or person) for a period of three years following the date
that
such stockholder became an interested stockholder, unless: (1) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (2) on consummation of the transaction that resulted
in
the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced, excluding for purposes of determining the number
of shares outstanding those shares owned (x) by persons who are directors and
also officers and (y) by employee stock plans in which employee participants
do
not have the right to determine confidentially whether shares held subject
to
the plan will be tendered in a tender or exchange offer; or (3) on or subsequent
to such date, the business combination is approved by the board of directors
and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least 662/3%
of the
outstanding voting stock that is not owned by the interested stockholder.
Section
203 of the Delaware General Corporation Law defines “business combination” to
include: (1) any merger or consolidation involving the corporation and the
interested stockholder; (2) any sale, transfer, pledge or other disposition
of
10% or more of the assets of the corporation involving the interested
stockholder; (3) subject to certain exceptions, any transaction that results
in
the issuance or transfer by the corporation of any stock of the corporation
to
the interested stockholder; (4) any transaction involving the corporation that
has the effect of increasing the proportionate share of the stock of any class
or series of the corporation beneficially owned by the interested stockholder;
or (5) the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or through
the corporation.
14
AMENDMENT
TO 2003 STOCK
OPTION PLAN
(Proposal
Three)
Prior
to
the Company’s September 13, 2005 merger with ZIOPHARM, Inc., the Company
maintained an Incentive Stock Option Plan under which 175,000 shares of common
stock were reserved for issuance. Effective upon the merger, this Incentive
Stock Option Plan and all rights thereunder were terminated. Upon the merger,
the Company assumed ZIOPHARM, Inc.’s 2003 Stock Option Plan as its Stock Option
Plan. There are currently 1,252,436 shares of the Company’s common stock
reserved for issuance 2003 Stock Option Plan (the “2003
Plan”).
On
February 22, 2006, the Board of Directors approved an amendment to the 2003
Plan, subject to approval at the annual meeting by the Company’s stockholders,
to increase the number of shares reserved for issuance thereunder to
2,002,436.
Immediately
below is a summary of the existing 2003 Plan and a discussion of the federal
income tax consequences of the issuance and exercise of incentives under the
2003 Plan to recipients and to the Company. This summary of the existing 2003
Plan is qualified entirely by reference to the complete text of the 2003 Plan,
a
copy of which may be obtain by referring to the information that the Company
filed with the Securities and Exchange Commission.
Description
of the Existing 2003 Plan
General
The
purpose of the 2003 Plan is to increase stockholder value and to advance the
interests of the Company by furnishing a variety of economic incentives
(“Incentives”)
designed to attract, retain and motivate employees, certain key consultants
and
directors of the Company. The compensation committee (the “Committee”)
of
Board of Directors administers the 2003 Plan. The Committee may grant Incentives
to employees (including officers) of the Company or its subsidiaries, members
of
the Board of Directors, and consultants or other independent contractors who
provide services to the Company or its subsidiaries, in the following forms,
each of which is discussed below: (a) performance shares; (b) incentive stock
options and non-statutory stock options; (c) stock appreciation rights
(“SARs”);
(d)
stock awards; and (e) restricted stock.
The
maximum number of shares of common stock which may be issued under the 2003
Plan
is 1,252,436 shares, subject to adjustment in the event of a recapitalization
or
other corporate restructuring. This number represents approximately % of the
outstanding shares of the Company’s common stock on the Record Date.
Stockholders
are often interested in the potential for equity dilution resulting from grants
of equity incentives (performance shares, stock options, restricted stock,
etc.)
under a company’s equity compensation plans. The percentage amount by which
current stockholders’ equity interests may be diluted as a result of such grants
is commonly referred to as the “overhang.” The overhang is calculated by
dividing (i) the total number of incentives granted and available for grant
under equity compensation plans, by (ii) the total shares outstanding assuming
the exercise of all outstanding incentives and the grant and exercise of all
available incentives. The current overhang for the 2003 Plan (which is currently
the Company’s only equity compensation plan) is approximately %, based on
amounts as of the Record Date.
15
Description
of Incentives
Performance
Shares. Performance
shares consist of the grant by the Company to an eligible employee of a
contingent right to receive shares of common stock. Performance shares shall
be
paid in shares of common stock to the extent performance objectives set forth
in
the grant are achieved. The number of shares granted and the performance
criteria are determined by the Committee.
Stock
Options. The
Committee may grant non-qualified and incentive stock options to eligible
employees to purchase shares of common stock from the Company. The 2003 Plan
confers on the Committee discretion, with respect to any such stock option,
to
determine the term of each option, the time or times during its term when the
option becomes exercisable and the number and purchase price of the shares
subject to the option.
Stock
Appreciation Rights. A
stock
appreciation right or SAR is a right to receive, without payment to the Company,
a number of shares, cash or any combination thereof, the amount of which is
equal to the aggregate amount of the appreciation in the shares of common stock
as to which the SAR is exercised. For this purpose, the “appreciation” in the
shares consists of the amount by which the fair market value of the shares
of
common stock on the exercise date exceeds (a) in the case of an SAR related
to a
stock option, the purchase price of the shares under the option or (b) in the
case of an SAR granted alone, without reference to a related stock option,
an
amount determined by the Committee at the time of grant. The Committee has
the
discretion to determine the number of shares as to which an SAR will relate
as
well as the duration and exercisability of an SAR.
Stock
Awards. Stock
awards consist of the transfer by the Company to an eligible employee of shares
of common stock, without payment, as additional compensation for services to
the
Company. The number of shares transferred pursuant to any stock award is
determined by the Committee.
Restricted
Stock. Restricted
stock consists of the sale or transfer by the Company to an eligible employee
of
one or more shares of common stock that are subject to restrictions on their
sale or other transfer by the employee which restrictions will lapse after
a
period of time as determined by the Committee. The price at which restricted
stock will be sold will be determined by the Committee, and it may vary from
time to time and among employees and may be less than the fair market value
of
the shares at the date of sale. Subject to these restrictions and the other
requirements of the 2003 Plan, a participant receiving restricted stock shall
have all of the rights of a stockholder as to those shares.
Transferability
of Incentives
Incentives
granted under the 2003 Plan may not be transferred, pledged or assigned by
the
holder thereof except, in the event of the holder’s death, by will or the laws
of descent and distribution to the limited extent provided in the 2003 Plan
or
the Incentive, or pursuant to a qualified domestic relations order as defined
by
the Code or Title I of the Employee Retirement Income Security Act, or the
rules
hereunder. However, stock options may be transferred by the holder thereof
to
the holder’s spouse, children, grandchildren or parents (collectively, the
“Family Members”), to trusts for the benefit of Family Members, to partnerships
or limited liability companies in which Family Members are the only partners
or
stockholders, or to entities exempt from federal income taxation pursuant to
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended.
16
Amendment
of the 2003 Plan
The
Board
of Directors may amend or discontinue the 2003 Plan at any time. However, no
such amendment or discontinuance may adversely change or impair a previously
granted Incentive without the consent of the recipient thereof. Certain 2003
Plan amendments require stockholder approval, including amendments which would
increase the maximum number of shares of Common Stock which may be issued to
all
participants under the 2003 Plan, change or expand the types of Incentives
that
may be granted under the 2003 Plan, change the class of persons eligible to
receive Incentives under the 2003 Plan, or materially increase the benefits
accruing to participants under the 2003 Plan.
Effect
of Sale, Merger, Exchange or Liquidation
Unless
otherwise provided in the agreement for an Incentive, in the event of an
acquisition of the Company through the sale of substantially all of the
Company’s assets or through a merger, exchange, reorganization or liquidation of
the Company or a similar event as determined by the Committee (collectively
a
“transaction”), the Committee shall be authorized, in its sole discretion, to
take any and all action it deems equitable under the circumstances, including
but not limited to:
|
(1)
|
terminating
the 2003 Plan and all Incentives and (i) granting the holders of
outstanding vested options, in lieu of any shares of common stock
they
would be entitled to receive under such options, such stock, securities
or
assets, including cash, as would have been paid to such participants
if
their options had been exercised and such holder had received common
stock
immediately prior to such transaction (with appropriate adjustment
for the
exercise price, if any), (ii) granting the holders of performance
shares
and/or SARs that entitle the participant to receive common stock,
in lieu
of any shares of common stock each participant was entitled to receive
as
of the date of the transaction pursuant to the terms of such Incentive,
if
any, such stock, securities or assets, including cash, as would have
been
paid to such participant if such common stock had been issued to
and held
by the participant immediately prior to such transaction; and (iii)
treating holders of any Incentive which does not entitle the participant
to receive common stock in an equitable manner as determined by the
Committee;
|
| (2) |
providing
that participants holding outstanding vested common stock -based
Incentives shall receive, with respect to each share of common stock
issuable pursuant to such Incentives as of the effective date of
any such
transaction, at the determination of the Committee, cash, securities
or
other property, or any combination thereof, in an amount equal to
the
excess, if any, of the fair market value of such common stock on
a date
within ten days prior to the effective date of such transaction over
the
option price or other amount owed by a participant, if any, and that
such
Incentives shall be cancelled, including the cancellation without
consideration of all options that have an exercise price below the
per
share value of the consideration received by the Company in the
transaction;
|
| (3) |
providing
that the 2003 Plan (or a replacement plan) shall continue with respect
to
Incentives not cancelled or terminated as of the effective date of
such
transaction and provide to participants holding such Incentives the
right
to earn their respective Incentives on a substantially equivalent
basis
(taking into account the transaction and the number of shares or
other
equity issued by such successor entity) with respect to the equity
of the
entity succeeding the Company by reason of such transaction; and
|
17
| (4) |
providing
that all unvested, unearned or restricted Incentives, including but
not
limited to restricted stock for which restrictions have not lapsed
as of
the effective date of such transaction, shall be void and deemed
terminated, or, in the alternative, for the acceleration or waiver
of any
vesting, earning or restrictions on any Incentive.
|
In
addition, the Committee may restrict the rights of participants in the event
of
a transaction to the extent necessary to comply with Section 16(b) of the
Securities Exchange Act of 1934, the Internal Revenue Code or any other
applicable law or regulation.
Federal
Income Tax Consequences
The
following discussion sets forth certain United States income tax considerations
in connection with the ownership of common stock. These tax considerations
are
stated in general terms and are based on the Internal Revenue Code of 1986
in
its current form and current judicial and administrative interpretations
thereof. This discussion does not address state or local tax considerations
with
respect to the ownership of common stock. Moreover, the tax considerations
relevant to ownership of the common stock may vary depending on a holder’s
particular status.
An
employee who receives restricted stock or performance shares subject to
restrictions which create a “substantial risk of forfeiture” (within the meaning
of section 83 of the Code) will normally realize taxable income on the date
the
shares become transferable or are no longer subject to substantial risk of
forfeiture or on the date of their earlier disposition. The amount of such
taxable income will be equal to the amount by which the fair market value of
the
shares of common stock on the date such restrictions lapse (or any earlier
date
on which the shares are disposed of) exceeds their purchase price, if any.
An
employee may elect, however, to include in income in the year of purchase or
grant the excess of the fair market value of the shares of common stock (without
regard to any restrictions) on the date of purchase or grant over its purchase
price. The Company will be entitled to a deduction for compensation paid in
the
same year and in the same amount as income is realized by the employee.
An
employee who receives a stock award under the 2003 Plan consisting of shares
of
common stock will realize ordinary income in the year of the award in an amount
equal to the fair market value of the shares of common stock covered by the
award on the date it is made, and the Company will be entitled to a deduction
equal to the amount the employee is required to treat as ordinary income. An
employee who receives a cash award will realize ordinary income in the year
the
award is paid equal to the amount thereof, and the amount of the cash will
be
deductible by the Company.
When
a
non-qualified stock option granted pursuant to the 2003 Plan is exercised,
the
employee will realize ordinary income measured by the difference between the
aggregate purchase price of the shares of common stock as to which the option
is
exercised and the aggregate fair market value of shares of the common stock
on
the exercise date, and the Company will be entitled to a deduction in the year
the option is exercised equal to the amount the employee is required to treat
as
ordinary income.
Options
that qualify as incentive stock options are entitled to special tax treatment.
Under existing federal income tax law, if shares purchased pursuant to the
exercise of such an option are not disposed of by the optionee within two years
from the date of granting of the option or within one year after the transfer
of
the shares to the optionee, whichever is longer, then (i) no income will be
recognized to the optionee upon the exercise of the option; (ii) any gain or
loss will be recognized to the optionee only upon ultimate disposition of the
shares and, assuming the shares constitute capital assets in the optionee’s
hands, will be treated as long-term capital gain or loss; (iii) the optionee’s
basis in the shares purchased will be equal to the amount of cash paid for
such
shares; and (iv) the Company will not be entitled to a federal income tax
deduction in connection with the exercise of the option. The Company understands
that the difference between the option price and the fair market value of the
shares acquired upon exercise of an incentive stock option will be treated
as an
“item of tax preference” for purposes of the alternative minimum tax. In
addition, incentive stock options exercised more than three months after
retirement are treated as non-qualified options.
18
The
Company further understands that if the optionee disposes of the shares acquired
by exercise of an incentive stock option before the expiration of the holding
period described above, the optionee must treat as ordinary income in the year
of that disposition an amount equal to the difference between the optionee’s
basis in the shares and the lesser of the fair market value of the shares on
the
date of exercise or the selling price. In addition, the Company will be entitled
to a deduction equal to the amount the employee is required to treat as ordinary
income.
If
the
exercise price of an option is paid by surrender of previously owned shares,
the
basis of the shares surrendered is carried over to the shares received in
replacement of the previously owned shares. If the option is a nonstatutory
option, the gain recognized on exercise is added to the basis. If the option
is
an incentive stock option, the optionee will recognize gain if the shares
surrendered were acquired through the exercise of an incentive stock option
and
have not been held for the applicable holding period. This gain will be added
to
the basis of the shares received in replacement of the previously owned shares.
When
a
stock appreciation right granted pursuant to the 2003 Plan is exercised, the
employee will realize ordinary income in the year the right is exercised equal
to the value of the appreciation which the employee is entitled to receive
pursuant to the formula described above, and the Company will be entitled to
a
deduction in the same year and in the same amount.
The
2003
Plan is intended to enable the Company to provide certain forms of
performance-based compensation to executive officers that will meet the
requirements for tax deductibility under Section 162(m) of the Code. Section
162(m) provides that, subject to certain exceptions, the Company may not deduct
compensation paid to any one of certain executive officers in excess of $1
million in any one year. Section 162(m) excludes certain performance-based
compensation from the $1 million limitation.
The
discussion set forth above does not purport to be complete analysis of the
potential tax consequences relevant to recipients of options or to the Company
or to describe tax consequences based on particular circumstances. It is based
on federal income tax and interpretational authorities as of the date of this
proxy statement, which are subject to change at any time.
Proposed
Amendment to 2003 Plan
If
approved by the Company’s stockholders, the proposed amendment to the 2003 Plan
will increase the number of shares of the Company’s common stock that are
reserved for issuance under the 2003 Plan from 1,252,436 shares to 2,002,436
shares, subject to adjustment in the event of a recapitalization or other
corporate restructuring. The
amendment would represent an increase of 750,000 shares reserved for issuance
under the 2003 Plan and, as amended, the shares reserved for issuance under
the
2003 Plan would represent approximately % of the outstanding shares of the
Company’s common stock on the Record Date. The overhang calculation as of the
Record Date assuming the increased number of shares reserved for issuance under
the 2003 Plan would be approximately %.
19
Securities
Authorized for Issuance under Equity Compensation Plans
The
2003
Plan, which is currently the Company’s only equity compensation plan, was
approved by the ZIOPHARM, Inc. stockholders. The following table sets forth
certain information as of December 31, 2005 with respect to the 2003
Plan:
|
Plan
category
|
Number
of Securities to be Issued Upon Exercise of Outstanding
Options
(A)
|
Weighted-Average
Exercise Price of Outstanding Options
(B)
|
Number
of Securities Remaining Available for Future Issuance Under Equity
Compensation Plans (Excluding Securities Reflected in Column
(A)
|
|||||||
|
Equity
compensation plans approved by security holders:
|
||||||||||
|
2003
Stock Option Plan
|
973,639
|
$
|
1.63
|
278,796
|
||||||
|
Total:
|
973,639
|
$
|
1.63
|
278,796
|
||||||
|
Equity
compensation plans not approved by stockholders:
|
||||||||||
|
None.
|
—
|
—
|
—
|
|||||||
|
Total
|
—
|
—
|
—
|
|||||||
20
RATIFICATION
OF THE APPOINTMENT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
(Proposal
Four)
Our
Board
of Directors and management are committed to the quality, integrity and
transparency of the financial reports. Independent auditors play an important
part in our system of financial control. In accordance with the duties set
forth
in its written charter
(a copy
of which is attached as Appendix
B
to this
proxy statement),
the
audit committee of our Board of Directors has appointed Vitale, Caturano &
Company, Ltd. as our independent registered public accounting firm for the
fiscal year ending December 31, 2006. A representative of Vitale, Caturano
&
Company, Ltd. is expected to attend this year’s annual meeting, be available to
respond to appropriate questions from stockholders, and have the opportunity
to
make a statement if he or she desires to do so.
If
the
stockholders do not ratify the appointment of Vitale, Caturano & Company,
Ltd., the audit committee may reconsider its selection, but is not required
to
do so. Notwithstanding the proposed ratification of the appointment of Vitale,
Caturano & Company, Ltd. by the stockholders, the audit committee, in its
discretion, may direct the appointment of a new independent registered public
accounting firm at any time during the year without notice to, or the consent
of, the stockholders, if the audit committee determines that such a change
would
be in the Company’s best interests and the best interests of its
stockholders.
Fees
billed to Company by Auditors:
Vitale,
Caturano & Company, Ltd. and Cordovano and Honeck, P.C. served as the
Company’s principal independent accounting firm for the fiscal years ended
December 31, 2005 and December 31, 2004, respectively. The following table
presents fees billed by such principal independent accounting firms during
the
fiscal years ended December 31, 2005 and December 31, 2004.
|
Fiscal
Year Ended
December
31, 2005
|
Fiscal
Year Ended
December
31, 2004
|
||||||||||||
|
Vitale,
Caturano
&
Company, Ltd.
|
Cordovano
and
Honeck,
P.C.
|
Vitale,
Caturano
&
Company, Ltd.
|
Cordovano
and
Honeck,
P.C.
|
||||||||||
|
Audit
Fees(1)
|
$
|
43,050
|
$
|
3,100
|
$
|
24,925
|
$
|
6,385
|
|||||
|
Tax
Fees
|
—
|
—
|
5,000
|
(2)
|
—
|
||||||||
|
All
Other Fees(3)
|
8,000
|
—
|
—
|
—
|
|||||||||
|
Total
|
$
|
51,050
|
$
|
3,100
|
$
|
29,925
|
$
|
6,385
|
|||||
_______________
|
(1)
|
Represents
amounts related to the audit of the Company’s annual consolidated
financial statements and the review of the Company’s consolidated
financial statements included in the Company’s quarterly reports on Form
10-QSB.
|
|
(2)
|
Represents
$5,000
related to tax compliance.
|
|
(3)
|
Represents
tax consulting services with respect to the impact of Internal Revenue
Code Section 409A.
|
21
The
audit
committee of the Board of Directors has reviewed the services described in
footnotes (2) and, (3) above provided by Vitale, Caturano & Company, Ltd.,
as well as the amounts billed for such services, and after consideration has
determined that the receipt of these fees by Vitale, Caturano & Company,
Ltd. is compatible with the provision of independent audit services. The audit
committee has discussed these services and fees with Vitale, Caturano &
Company, Ltd. and Company management to determine that they are appropriate
under the rules and regulations concerning auditor independence promulgated
by
the U.S. Securities and Exchange Commission to implement the Sarbanes-Oxley
Act
of 2002, as well as under guidelines of the American Institute of Certified
Public Accountants.
Pre-Approval
Policy
The
audit
committee charter provides that all audit and non-audit accounting services
that
are permitted to be performed by the Company’s principal independent accountant
under applicable rules and regulations must be pre-approved by the audit
committee or by designated independent members of the audit committee, other
than with respect to de minimus exceptions permitted under Section 202 of the
Sarbanes-Oxley Act of 2002. Following adoption of the audit committee
charter,
all
services performed by Vitale, Caturano & Company, Ltd. have been
pre-approved in accordance with the charter.
Prior
to
or as soon as practicable following the beginning of each fiscal year, a
description of audit, audit-related, tax, and other services expected to be
performed by the independent auditor in the following fiscal year is presented
to the audit committee for approval. Following such approval, any requests
for
audit, audit-related, tax, and other services not presented and pre-approved
must be submitted to the audit committee for specific pre-approval and cannot
commence until such approval has been granted. Normally, pre-approval is
provided at regularly scheduled meetings. However, the authority to grant
specific pre-approval between meetings, as necessary, may be delegated to one
or
more members of the audit committee who are independent directors. In the event
such authority is so delegated, the full audit committee must be updated at
the
next regularly scheduled meeting with respect to any services that were granted
specific pre-approval by delegation. During fiscal year 2005
and
following
adoption of the audit committee charter,
the
audit committee has functioned in conformance with these procedures.
Changes
in our Certifying Accountant
On
November 9, 2005, we, upon the recommendation and approval of our audit
committee, dismissed Cordovano and Honeck, P.C., independent registered public
accounting firm, as our principal independent accountant. On the same date,
we
engaged Vitale, Caturano & Company, Ltd., independent registered public
accounting firm, to serve as our principal independent accountant.
Cordovano
and Honeck, P.C.’s reports on our financial statements for the past two years
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 years ended December 31, 2004 and 2003, and subsequently through the date
of
Cordovano and Honeck, P.C.’s dismissal, there were no disagreements with
Cordovano and Honeck, P.C. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to Cordovano and Honeck, P.C.’s satisfaction, would have caused it to
make reference to the subject matter in connection with its report on our
financial statements for such fiscal years.
We
provided Cordovano and Honeck, P.C. with a copy of the foregoing disclosures
and
requested that Cordovano and Honeck, P.C. furnish us with a letter addressed
to
the Securities and Exchange Commission stating whether it agrees with the above
statements and, if not, stating the respects in which it does not agree. A
copy
of such letter was filed as Exhibit 16.1 to our Form 10-QSB for the quarter
ended September 30, 2005, which was filed with the Securities and Exchange
Commission on November 10, 2005.
Vitale,
Caturano & Company, Ltd. served as the accountant for the ZIOPHARM, Inc., a
Delaware corporation that became our wholly-owned subsidiary on September 13,
2005 and merged with and into us on September 14, 2005, since the date of that
corporation’s inception in September 2003. During the years ended December 31,
2004 and 2003, and subsequently through November 9, 2005, neither we nor anyone
acting on our behalf consulted with Vitale, Caturano & Company, Ltd.
regarding any of the matters or events set forth in Items 304(a)(2)(i) and
(ii)
of Regulation S-B.
We
provided Vitale, Caturano & Company, Ltd. with a copy of the foregoing
disclosures and provided Vitale, Caturano & Company, Ltd. the opportunity to
furnish a letter containing any new information, clarification of the above
disclosures, or disagreements with the statements made herein.
22
OTHER
MATTERS
Board
of Directors and Committees
Board
of Directors
The
Board
of Directors held eight meetings during fiscal year 2005 and took action by
written consent on one occasion. The Board of Directors has an audit committee,
a compensation committee and a nominating committee. No director attended fewer
than 75 percent of the aggregate number of meetings of the Board of Directors
and the committees of the Board on which such director(s) served
during the 2005 fiscal year.
Although
the Company has no formal policy regarding directors’ attendance at the
Company’s annual stockholders meetings, the Company encourages such attendance
by all members of the Board of Directors. None of the Company’s current
directors served on the Board of Directors at the time of the Company’s 2005
annual stockholders meeting and, therefore, none of the current directors
attended such meeting.
Audit
Committee of the Board of Directors
Effective
upon the Company’s September 2005 merger with ZIOPHARM, Inc., the Company formed
an audit committee of the board of directors. The current members of the audit
committee are Mr. James Cannon, who serves as the committee’s Chairman, and Mr.
Gary S. Fragin. On February 22, 2006, Mr. Bagley a former member, resigned
from
his position on the audit committee. The audit committee operates under a
written charter adopted by the Board of Directors, a copy of which is attached
as Appendix
B
to this
proxy statement. As set forth in the charter, the primary responsibility of
the
audit committee is to oversee the Company’s financial reporting processes and
internal control system on behalf of the Board of Directors. In that regard,
the
audit committee is, among other things, responsible for the appointment,
compensation, retention and oversight of the work performed by the registered
public accounting firm employed by the Company.
Both
members of the audit committee are independent, as independence is defined
in
Section 121(A) of the AMEX listing standards and Rule 10A-3 under the Securities
Exchange Act of 1934. In addition, the Board of Directors has determined that
each of the audit committee members is able to read and understand fundamental
financial statements, and that at least one member of the audit committee,
Mr.
James Cannon, is an “audit committee financial expert” as that term is defined
in Item 401(e)(2) of Regulation S-B promulgated under the Securities and
Exchange Act of 1934. Mr. Cannon’s relevant experience includes his current
service as the Chief Financial Officer of BBDO Worldwide, a position he has
held
for the past 20 years, and his past service as director of financial operations
of the Omnicom Group.
The
audit
committee held three meetings during fiscal year 2005. In addition, the audit
committee met and held discussions with financial management and representatives
from the independent audit firm prior to the release of earnings information
for
the Company’s completed fiscal periods and certain other information, and prior
to the filing of each quarterly report on Form 10-QSB and annual report on
Form
10-KSB filed with the Securities and Exchange Commission.
23
Compensation
Committee of the Board of Directors
Effective
upon the Company’s September 2005 merger with ZIOPHARM, Inc., the Company formed
a compensation committee of the Board of Directors that was comprised of Dr.
Jonathan Lewis and Dr. Michael Weiser. Effective February 22, 2006, Dr. Lewis
resigned from the compensation committee and Dr. Murray Brennan was appointed
as
a member of that committee. Currently, the compensation
committee consists of Dr. Murray Brennan, who
serves as the committee’s Chairman,
and Dr.
Michael Weiser. All current members of the compensation committee are
independent directors within the meaning of Section
121(A) of the AMEX listing standards and Rule 10A-3 under the Securities
Exchange Act of 1934.
The
compensation committee reviews the Company’s remuneration policies and practices
and makes recommendations to the Board of Directors in connection with all
compensation matters affecting the executive officers of the Company. The Board
of Directors has adopted a written charter for the compensation committee,
a
copy of which is available at the Company’s website at www.ziopharm.com.
Nominating
Committee of the Board of Directors
Effective
upon the Company’s September 2005 merger with ZIOPHARM, Inc., the Company formed
a nominating committee of the board of directors. The current members of the
nominating committee are Senator Wyche Fowler, Jr. and Mr. Timothy McInerney.
The nominating committee operates under a written charter adopted by the Board
of Directors, a
copy of
which is available at the Company’s website at www.ziopharm.com.
As
set
forth in the charter, the primary responsibility of the nominating committee
is
to consider and make recommendations to the Board of Directors concerning the
appropriate size, function and needs of the Board of Directors and its
committees. In that regard, the nominating committee is, among other things,
responsible for establishing criteria for membership on Board of Directors,
recruiting and recommending candidates to fill newly created or vacant positions
on the Board of Directors and reviewing any candidates recommended by
stockholders.
All
members of the nominating committee are independent, as independence is defined
in Section 121(A) of the AMEX listing standards and Rule 10A-3 under the
Securities Exchange Act of 1934.
The
nominating committee (or a subcommittee thereof) recruits and considers director
candidates and presents qualified candidates to the full Board of Directors
for
consideration. Qualified candidates will be considered without regard to race,
color, religion, sex, ancestry, national origin or disability.
The
nominating committee will consider each candidate’s general business and
industry experience, his or her ability to act on behalf of stockholders,
overall Board of Directors diversity, potential concerns regarding independence
or conflicts of interest and other factors relevant in evaluating Board of
Directors nominees. If the nominating committee approves a candidate for further
review following an initial screening, the nominating committee will establish
an interview process for the candidate. Generally, the candidate will meet
with
at least a majority of the members of the nominating committee, along with
the
Company’s Chief Executive Officer. Contemporaneously with the interview process,
the nominating committee will conduct a comprehensive conflicts-of-interest
assessment of the candidate. The nominating committee will consider reports
of
the interviews and the conflicts-of-interest assessment to determine whether
to
recommend the candidate to the full Board of Directors. The nominating committee
will also take into consideration the candidate’s personal attributes,
including, without limitation, personal integrity, loyalty to the Company and
concern for its success and welfare, willingness to apply sound and independent
business judgment, awareness of a director’s vital part in the Company’s good
corporate citizenship and image, time available for meetings and consultation
on
Company matters and willingness to assume broad, fiduciary responsibility.
24
Recommendations
for candidates to be considered for election to the Board of Directors at the
Company’s annual stockholders’ meeting may be submitted to the nominating
committee by the Company’s stockholders. In order to make such a recommendation,
a stockholder must submit the recommendation in writing to the Chairperson
of
the nominating committee, in care of the Company’s Treasurer at the Company’s
headquarters address, at least 120 days prior to the mailing date of the
previous year’s annual meeting proxy statement. To enable the nominating
committee to evaluate the candidate’s qualifications, stockholder
recommendations must include the following information:
|
·
|
The
name and address of the nominating stockholder and of the director
candidate;
|
|
·
|
A
representation that the nominating stockholder is a holder of record
of
the Company entitled to vote at the current year’s annual meeting;
|
|
·
|
A
description of any arrangements or understandings between the nominating
stockholder and the director candidate or candidates being recommended
pursuant to which the nomination or nominations are to be made by
the
stockholder;
|
|
·
|
A
resume detailing the educational, professional and other information
necessary to determine if the nominee is qualified to hold a Board
position;
|
|
·
|
Such
other information regarding each nominee proposed by such stockholder
as
would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission
had
each nominee been nominated by the Board of Directors; and
|
|
·
|
The
consent of each nominee to serve as a director of the Company if
so
elected.
|
Each
of
the individuals nominated for re-lection to the Board of Directors pursuant
to
Proposal One were recommended for such nomination by the nominating committee.
Ability
of Stockholders to Communicate with the Company’s Board of
Directors
The
Company has established means for stockholders and others to communicate with
the Board of Directors. If a stockholder wishes to address a matter regarding
the Company’s financial statements, accounting practices or internal controls,
the matter should be submitted in writing addressed to the Chairperson of the
audit committee in care of the Treasurer at the Company’s headquarters address.
If the matter relates to the Company’s governance practices, business ethics or
corporate conduct, it should be submitted in writing addressed to the
Chairperson of the nominating committee in care of the Treasurer at the
Company’s headquarters address. If a stockholder is unsure where to direct a
communication, the stockholder may direct it in writing to the Chairperson
of
the audit committee, or to any one of the independent directors of the Company,
in care of the Treasurer at the Company’s headquarters address. All of these
stockholder communications will be forwarded by the Treasurer to the
addressee.
25
Report
of the Audit Committee
Prior
to
including audited consolidated financial statements in the Company’s annual
report on Form 10-KSB for the fiscal year ended December 31, 2005 for filing
with the Securities and Exchange Commission, the audit committee
will:
| · |
review
the Company’s audited consolidated financial statements for the last
fiscal year and discuss them
with management and the Company’s independent registered public accounting
firm;
|
| · |
discuss
with its independent registered public accounting firm the matters
required to be discussed by
Statement on Auditing Standards No. 61, Communication
with Audit Committees,
as amended, by
the Auditing Standards Board of the American Institute of Certified
Public
Accountants;
|
| · |
receive
and review the written disclosures and the letter from its independent
registered public accounting
firm required by Independence Standard No. 1, Independence
Discussions with Audit Committees,
as amended, by the Independence Standards Board, and discuss with
the
Company’s independent
registered public accounting firm their independence, including
a
consideration of the compatibility
of non-audit services with such independence;
and
|
| · |
based
on the review and discussions described above with management and
the
Company’s independent
registered public accounting firm, recommend to the Board of Directors
for
adoption a
recommendation that the audited consolidated financial statements
be
included in the Company’s annual
report on Form 10-KSB for the fiscal year ended December 31, 2005
for
filing with the Securities
and Exchange Commission.
|
|
As
reported:
James
Cannon
Gary
S. Fragin
|
Board
Compensation Committee Report on Executive Compensation
Effective
upon the Company’s September 2005 merger with ZIOPHARM, Inc., the Company formed
a compensation committee of the Board of Directors that was comprised of Dr.
Jonathan Lewis and Dr. Michael Weiser. Effective February 22, 2006, Dr. Lewis
resigned from the compensation committee and Dr. Murray Brennan was appointed
as
the Chairman. The current members of the compensation committee are Dr. Murray
Brennan and Dr. Michael Weiser. Prior to the merger with ZIOPHARM, Inc., the
Company was a shell company with a limited number of employees, none of whom
received material amounts of compensation. As such, the Company did not believe
the formation of a compensation committee was necessary. Prior to the merger
with ZIOPHARM, Inc., the Company’s current executive officers all served as
executive officers of ZIOPHARM, Inc. and the Company succeeded to the rights
and
obligations of ZIOPHARM, Inc. under these agreements effective upon the merger.
The negotiation of such agreements and the determination of ZIOPHARM, Inc.
executive compensation was made by the ZIOPHARM, Inc. board of directors or
a
committee thereof.
Pursuant
to rules designed to enhance disclosure of the Company’s policies toward
executive compensation, this report is prepared by the compensation committee
and addresses the Company’s compensation policies for the fiscal year ended
December 31, 2005 as they affected the Company’s executive officers. Because the
Company’s historical operations were those of ZIOPHARM, Inc., this report
addresses the compensation policies of ZIOPHARM, Inc. for the period of time
prior to the merger with such company and the compensation policies of the
Company thereafter.
26
The
compensation committee’s executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with the Company’s annual
objectives and long-term goals, reward above-average Company performance,
recognize individual initiative and achievements, and assist the Company in
attracting and retaining qualified executives. Executive compensation is set
at
levels that the compensation committee believes to be competitive with those
offered by employers of comparable size, growth and profitability in the
Company’s industry and in general industry, as well. All decisions by the
compensation committee relating to the compensation of the Company’s executive
officers are reviewed by the full Board of Directors.
There
are
three elements in the Company’s executive compensation program, each of which is
based on individual and Company performance: base salary compensation, annual
incentive compensation and long-term incentive compensation.
Base
salary compensation is based on the potential impact the individual may have
on
the Company, the skills and experience required by the job, comparisons with
comparable companies and the performance and potential of the incumbent in
the
job.
For
fiscal year 2005, the named executives of the Company, together with other
vice
presidents and regional vice presidents, were eligible to receive annual
incentive compensation at the discretion of the Board of Directors based on
the
Board of Director’s assessment of the adequacy of their compensation as compared
to individuals holding similar positions at comparably-sized companies within
the pharmaceutical development industry.
Long-term
incentive compensation, pursuant to the Company’s 2003 Stock Option Plan, of the
Chief Executive Officer, as well as other executive officers of the Company,
is
designed to achieve the executive compensation objectives outlined above as
well
as to align the long-term interests of management with those of the Company’s
stockholders. The compensation committee administers the 2003 Stock Option
Plan
and makes recommendations to the Board of Directors regarding the granting
of
equity incentive awards thereunder to executives and key personnel. Awards
vest
and options become exercisable based upon criteria established by the Board
of
Directors. To date, all long-term incentive compensation grants have taken
the
form of stock options.
During
fiscal year 2005, Dr. Jonathan Lewis served as Chief Executive Officer of
ZIOPHARM, Inc. prior to the Company’s merger with ZIOPHARM, Inc. and as Chief
Executive Officer of the Company from and after such merger. The compensation
of
Dr. Lewis during fiscal year 2005 was determined by applying a process and
philosophy similar to that of other executive officers.
27
The
annualized base salary of Dr. Lewis during fiscal 2005 was $350,000 and Dr.
Lewis received a guaranteed bonus of $250,000, to which Dr. Lewis was entitled
under his employment agreement. The Company’s employment agreement with Dr.
Lewis also provides Dr. Lewis with anti-dilution protection applicable to his
stock options and requires that the Company grant Dr. Lewis additional stock
options when the Company issues equity securities in financing transactions.
This anti-dilution protection operates maintain to Dr. Lewis’ potential equity
ownership at least 5% of the Company’s stock until such time as the Company has
received $25 million in gross proceeds from financing transactions. In
accordance with the anti-dilution provision, Dr. Lewis was granted stock options
to purchase an aggregate of 141,950 shares of the Company’s common stock during
fiscal year 2005, all of which have an exercise price of $4.31 per share. Of
such stock options, 87,789 were granted upon the May 31, 2005 closing of
ZIOPHARM, Inc.’s private placement of Series A Convertible Preferred Stock and
54,161 were granted upon the closing of the merger with ZIOPHARM, Inc. One-third
of the shares subject to each such stock option was vested on the date of grant,
with the remaining portions vesting in two each annual installments beginning
on
January 8, 2006.
Section
162(m) of the Internal Revenue Code generally limits to $1 million the tax
deductibility of compensation paid by a public company to its chief executive
and four other most highly compensated executive officers. Certain
performance-based compensation is not subject to the limitation. While the
compensation committee considers the deductibility of compensation arrangements
as one factor in executive compensation decisions for executives, deductibility
is not the sole factor used by the compensation committee in ascertaining
appropriate levels or modes of compensation.
As
reported:
Dr.
Murray Brennan
Dr.
Michael Weiser
Code
of Business Conduct and Ethics
Our
Board
of Directors adopted a Code of Business Conduct and Ethics to be applicable
to
all officers, directors and employees. The Code of Business Conduct and Ethics
is intended to be designed to deter wrong-doing and promote honest and ethical
behavior, full, fair, timely, accurate and understandable disclosure, and
compliance with applicable laws. The Board adopted the Code of Business Conduct
and Ethics on February 22, 2006. A copy of the Code of Business Conduct and
Ethics can be obtained and will be provided to any person without charge upon
written request to our Treasurer at the Company’s headquarters address.
28
VOTING
SECURITIES AND PRINCIPAL HOLDERS THEREOF
The
following table summarizes certain information regarding the beneficial
ownership (as such term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934) of our outstanding common stock as of February 24, 2006 by (i)
each
person known by us to be the beneficial owner of more than 5% of our outstanding
common stock, (ii) each of our directors, (iii) each of the named executives,
and (iv) all current executive officers and directors as a group. Except as
indicated in the footnotes below, the persons listed below possess sole voting
and investment power with respect to their shares. Except as otherwise
indicated, the address of the persons listed below is 1180 Avenue of the
Americas, 19th
Floor,
New York, NY 10036.
|
Name
and Address of Beneficial Owner
|
Shares
of
Common
Stock
Beneficially
Owned (#)(1)
|
Percentage
of
Common
Stock
Beneficially
Owned (%)
|
|||||
|
Dr.
Jonathan Lewis
|
273,736
|
(2)
|
3.63
|
%
|
|||
|
Richard
E. Bagley
|
80,428
|
(3)
|
1.09
|
%
|
|||
|
Robert
Peter Gale
|
16,741
|
(4)
|
*
|
||||
|
Murray
Brennan
|
7,515
|
(5)
|
*
|
||||
|
James
Cannon
|
7,515
|
(5)
|
*
|
||||
|
Hon.
Wyche Fowler
|
7,515
|
(5)
|
*
|
||||
|
Gary
S. Fragin
|
7,515
|
(5)
|
*
|
||||
|
Timothy
McInerney
|
79,972
|
(6)
|
1.10
|
%
|
|||
|
Michael
Weiser
|
126,526
|
(7)
|
1.73
|
%
|
|||
|
All
current executive officers and directors
|
607,463
|
(8)
|
7.85
|
%
|
|||
|
as
a group
|
|||||||
|
Mibars,
LLC (9)
365
West End Avenue
New
York, NY 10024
|
1,214,456
|
16.70
|
%
|
||||
|
Lindsay
A. Rosenwald
|
|
|
|
||||
|
787
Seventh Avenue, 48th Floor
|
|||||||
|
New
York, NY 10019
|
1,323,606
|
(10)
|
17.52
|
%
|
|||
|
Atlas
Equity I, Ltd.
181
W. Madison, Suite 3600
Chicago,
IL 60602
|
695,797
|
9.57
|
%
|
||||
|
Lester
E. Lipschutz
|
|
|
|
||||
|
1650
Arch Street, 22nd Floor
|
|||||||
|
Philadelphia,
PA 19103
|
463,864
|
(11)
|
6.38
|
%
|
|||
|
David
C. Olson (10)
|
|
|
|
||||
|
6025
South Quebec Street, Suite 135
|
|||||||
|
Englewood,
CO 80111
|
60,980
|
(12)
|
*
|
||||
*
Less
than 1%
|
(1)
|
Beneficial
ownership is determined in accordance with SEC rules, beneficial
ownership
includes any shares as to which the security or stockholder has sole
or
shared voting power or investment power, and also any shares which
the
security or stockholder has the right to acquire within 60 days of
the
date hereof, whether through the exercise or conversion of any stock
option, convertible security, warrant or other right. The indication
herein that shares are beneficially owned is not an admission on
the part
of the security or stockholder that he, she or it is a direct or
indirect
beneficial owner of those shares.
|
29
|
(2)
|
Includes
273,736 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(3)
|
Includes
80,428 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(4)
|
Includes
16,741 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(5)
|
Includes
7,515 shares issuable upon the exercise of stock options that are
currently exercisable or will become exercisable within the next
60
days.
|
|
(6)
|
Includes
20,767 shares issuable upon the exercise of warrants that are currently
exercisable or will become exercisable within the next 60
days.
|
|
(7)
|
Includes
35,566 shares issuable upon the exercise of warrants and 7,515 shares
issuable upon the exercise of stock options that are currently exercisable
or will become exercisable within the next 60
days.
|
|
(8)
|
Includes
464,813 shares issuable upon the exercise of convertible securities
that
are currently exercisable or will become exercisable within the next
60
days.
|
|
(9)
|
Based
on the most recent Form 3 filed with the Securities and Exchange
Commission on September 23, 2005. Mibars, Inc. is a wholly-owned
subsidiary of Paloma International L.P.; S. Donald Sussman, the
controlling person of Paloma International L.P., may be deemed to
beneficially own the shares of common stock beneficially owned by
Paloma
International L.P.
|
|
(10)
|
Excludes
463,864 shares held by certain trusts for the benefit of Dr. Rosenwald
and
his family for which Dr. Rosenwald disclaims beneficial ownership.
Includes 221,011 shares issuable upon the exercise of warrants granted
to
Dr. Rosenwald and 62,621 shares issuable upon the exercise of warrants
granted to Paramount BioCapital Investments, LLC, of which Dr. Rosenwald
is the managing member, both such warrants are currently exercisable
or
will become exercisable within the next 60 days. Also includes 563,296
shares that Dr. Rosenwald has the right to acquire from existing
stockholders under certain circumstances pursuant to the terms of
pledge
agreements between Dr. Rosenwald and such
stockholders.
|
|
(11)
|
Includes
463,864 shares held by separate trusts for the benefit of Dr. Rosenwald
or
his family with respect to which Mr. Lipschutz is either trustee
or
investment manager and has investment and voting power. Dr. Rosenwald
disclaims beneficial ownership of these
shares.
|
|
(12)
|
Mr.
Olson served as the Company’s Chief Executive Officer for the full fiscal
years indicated until the consummation of the Merger. Share amounts
include 50 shares held by Associate Capital Consulting, Inc. and
17,314
shares held by Summit Financial Relations, Inc., each of which is
wholly-owned by Mr. Olson.
|
30
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Pre-Merger
Company Transactions and Relationships
In
August
and December 2004, the Company’s former Chief Executive Officer, David C. Olson,
loaned the Company a total of $1,300 for working capital. During May 2005,
Mr.
Olson advanced the Company an additional $788. The loans carried no interest
rate and were due on demand. On June 28, 2005, we issued Mr. Olson 69,600 shares
of common stock as full repayment of the amounts stated above. The shares were
valued at $.03 per share, or $2,088, based on contemporaneous common stock
sales
to unrelated third parties.
At
December 31, 2003, the Company owed Summit Financial Relations, Inc. (“Summit”)
$18,111 for professional fees and other administrative expenses it paid on
our
behalf. During the year ended December 31, 2004, Summit paid expenses totaling
$4,187 on the Company’s behalf. On May 13, 2004, the Company issued 400,000
shares of common stock to Summit Financial Relations, Inc. (“Summit”), valued at
$10,000 ($.025 per share), as repayment for expenses paid by Summit on behalf
of
the Company. David Olson, who was then our President, Treasurer and one of
our
directors, is also Summit’s President, director and sole stockholder. As of
December 31, 2004, we owed Summit $12,298. During the six months ended June
30,
2005, Summit paid an additional $1,007 in expenses on our behalf. On February
4,
2005, the Company repaid Summit $7,000 and on June 28, 2005 the Company issued
Summit 209,180 shares of common stock as full repayment of all amounts stated
above. The shares issued to Summit were valued at $.03 per share, or $6,275,
based on contemporaneous common stock sales to unrelated third parties. Summit
has contributed the use of office space and administrative support (including
reception, secretarial and bookkeeping services) to us for the fiscal year
2004
and the potion of fiscal year 2005 preceding the merger with ZIOPHARM, Inc.
The
office space and administrative support contributed by Summit has a fair market
value of approximately $500 and $1,000 per month, respectively. The Company
recognized expenses for rent and administrative support based on fair market
value. Any period in which the amount paid to Summit for office space and
administrative support was below the fair market value, the remaining balance
was considered contributed by Summit and recorded as a credit to additional
paid-in capital in our financial statements. On December 10, 2004, we entered
into a consulting services fee agreement under which Summit provided certain
services to us including, but not limited to, consultation related to mergers
and acquisitions, reorganizations and divestitures. Pursuant to the agreement,
Summit lent us funds and helped us raise funds at no extra cost. Under the
terms
of the agreement, we paid Summit a one-time fee of $106,697.90 in connection
with the closing of the Merger.
ZIOPHARM,
Inc. Transactions and Relationships
In
connection with a private placement of its Series A Convertible Preferred Stock
that terminated in May 2005, ZIOPHARM, Inc. and Paramount BioCapital, Inc.
entered into an introduction agreement in January 2005. Upon the Company’s
September 2005 merger with ZIOPHARM, Inc., the Company succeeded to ZIOPHARM,
Inc.’s rights and obligations under such agreement. Pursuant to the introduction
agreement, ZIOPHARM, Inc. agreed to compensate Paramount BioCapital or its
designees for their services through the payment of (a) cash commissions equal
to 7% of the gross proceeds from the offering, and (b) warrants to acquire
an
aggregate of 837,956 share of ZIOPHARM, Inc.’s Series A Convertible Preferred
Stock at a per share exercise price of $2.38. Upon the merger, this warrant
was
exchanged for a warrant to purchase an aggregate of 419,772 shares of the
Company’s common stock at a per share exercise price of $4.75. Cash commissions
will also be payable by the Company if it sells additional securities, prior
to
May 31, 2006, to investors introduced to ZIOPHARM, Inc. by Paramount BioCapital.
Pursuant to the introduction agreement, Paramount BioCapital has a right of
first refusal to act as the placement agent for the private sale of the
Company’s securities until May 31, 2008.
31
In
connection with an option agreement dated December 22, 2004 between ZIOPHARM,
Inc. and Southern Research Institute, ZIOPHARM, Inc. entered into an Finders
Agreement dated December 23, 2004 with Paramount BioCapital, pursuant to which
ZIOPHARM, Inc. agreed to compensate Paramount BioCapital for services in
connection with the ZIOPHARM, Inc.’s introduction to Southern Research Institute
by paying a $60,000 cash fee and issuing a warrant to purchase 125,000 shares
of
ZIOPHARM, Inc.’s common stock at a price of $2.38 per share. Upon the Company’s
September 2005 merger with ZIOPHARM, Inc., this warrant was exchanged for a
warrant to purchase an aggregate of 62,619 shares of the Company’s common stock
at a per share exercise price of $4.75.
Lindsay
A. Rosenwald, M.D., who may beneficially own approximately 17.52% of our common
stock, is Chairman and Chief Executive Officer of Paramount BioCapital and
its
affiliates. Dr. Michael Weiser and Timothy McInerney, each of whom is a director
of the Company (and served as a director of ZIOPHARM, Inc. prior to The
Company’s September 2005 merger), are also full-time employees of Paramount
BioCapital.
In
the
opinion of the Company’s Board of Directors, the Company’s relationships and
arrangements with Paramount BioCapital do not interfere with the exercise of
the
independent judgment of Dr. Weiser and Mr. McInerney in carrying out their
respective responsibilities as a director.
32
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires the Company’s officers and directors, and
persons who own more than ten percent of a registered class of the Company’s
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Officers, directors and
greater-than-ten-percent stockholders are required by Securities and Exchange
Commission regulations to furnish the Company with copies of all Section 16(a)
forms they file.
Based
solely on review of the copies of the Forms 3,4 and 5 (and amendments thereto)
that we received with respect to transactions during fiscal 2005, we believe
that the Company’s officers, directors and greater-than-ten-percent beneficial
owners complied with all applicable Section 16(a) filing requirements, except
as
listed in the table below.
The
following table shows the transactions for fiscal year 2005 that were not timely
filed in compliance with Section 16(a) filing requirements.
|
Name
of Filer
|
Description
of Transaction
|
Transaction
Date
|
Filing
Date
|
|||
|
Murray
Brennan, M.D.
|
Distribution
pursuant to
Merger
Agreement
|
9/13/05
|
9/16/05
|
|||
|
James
A. Cannon
|
Form
3
|
9/13/05
|
9/28/05
|
|||
|
Distribution
pursuant to
Merger
Agreement
|
9/13/05
|
9/16/05
|
||||
|
Wyche
Fowler
|
Form
3
|
9/13/05
|
9/26/05
|
|||
|
Distribution
pursuant to
Merger
Agreement
|
9/13/05
|
9/26/05
|
||||
|
Gary
S. Fragin
|
Distribution
pursuant to
Merger
Agreement
|
9/13/05
|
11/14/05
|
|||
|
Robert
Peter Gale
|
Distribution
pursuant to
Merger
Agreement
|
9/13/05
|
9/23/05
|
|||
|
Timothy
McInerney
|
Form
3
|
9/13/05
|
9/27/05
|
|||
|
Michael
Weiser
|
Form
3
|
9/13/05
|
9/28/05
|
|||
|
Distribution
pursuant to
Merger
Agreement
|
9/13/05
|
9/16/05
|
33
PROPOSALS
OF STOCKHOLDERS
Any
stockholder who desires to submit a proposal for action by the stockholders
at
the next annual stockholders’ meeting, which is the 2007 annual meeting
following the Company’s 2007 fiscal year,
must
submit that proposal in writing to the Treasurer of the Company at the Company’s
corporate headquarters by , 2007 to have the proposal included in the Company’s
proxy statement for that meeting. Due to the complexity of the respective rights
of the stockholders and the Company in this area, any stockholder desiring
to
propose such an action is advised to consult with his or her legal counsel
with
respect to such rights. The Company suggests that any such proposal be submitted
to the Company by certified mail, return receipt requested.
DISCRETIONARY
PROXY VOTING AUTHORITY /
UNTIMELY
STOCKHOLDER PROPOSALS
Rule
14a-4 promulgated under the Securities and Exchange Act of 1934 governs the
Company’s use of its discretionary proxy voting authority with respect to a
stockholder proposal that the stockholder has not sought to include in the
Company’s proxy statement. Rule 14a-4 provides that if a proponent of a proposal
fails to notify the Company at least 45 days prior to the month and day of
mailing of the prior year’s proxy statement, management proxies will be allowed
to use their discretionary voting authority when the proposal is raised at
the
meeting, without any discussion of the matter.
With
respect to the Company’s next annual stockholders’ meeting, the 2007 annual
meeting, if the Company is not provided notice of a stockholder proposal, which
the stockholder has not previously sought to include in the Company’s proxy
statement, by , 2007, the management proxies will be allowed to use their
discretionary authority as outlined above.
SOLICITATION
The
Company will bear the cost of preparing, assembling and mailing the proxy,
proxy
statement, annual report and other material which may be sent to the
stockholders in connection with this solicitation. Brokerage houses and other
custodians, nominees and fiduciaries may be requested to forward soliciting
material to the beneficial owners of stock, in which case they will be
reimbursed by the Company for their expenses in doing so. Proxies are being
solicited primarily by mail, but, in addition officers and regular employees
of
the Company may solicit proxies personally, by telephone, by special letter,
or
via the Internet.
The
Board
of Directors does not intend to present to the meeting any other matter not
referred to above and does not presently know of any matters that may be
presented to the meeting by others. However, if other matters come before the
meeting, it is the intent of the persons named in the enclosed proxy to vote
the
proxy in accordance with their best judgment.
| By Order of the Board of Directors | ||
| ZIOPHARM Oncology, Inc. | ||
| |
|
|
| By: | |
|
|
Richard Bagley, President, Chief Operating Officer, Treasurer |
||
34
Appendix
A
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
of
ZIOPHARM
ONCOLOGY, INC.
1. Name.
The
name of the corporation is ZIOPHARM Oncology, Inc. (the
“Corporation”).
2. Address;
Registered Office and Agent.
The
address of the Corporation’s registered office is 2711 Centerville Road Suite
400, Wilmington, Delaware 19808. The Corporation may from time to time, in
the
manner provided by law, change the registered agent and the registered office
within the State of Delaware. The Corporation may also maintain offices for
the
conduct of its business, either within or without the State of
Delaware.
3. Purposes.
The
purpose of the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation
Law.
4. Number
of Shares.
The
total number of shares of all classes of stock that the Corporation shall have
authority to issue is Two Hundred Eighty Million (280,000,000) shares consisting
of: Two Hundred Fifty Million (250,000,000) shares of common stock, $.001 par
value per share (“Common Stock”); and Thirty Million (30,000,000) shares of
preferred stock, $.001 par value per share (“Preferred Stock”).
The
Preferred Stock may be divided into, and may be issued from time to time in
one
or more series. The Board of Directors of the Corporation (the “Board”) is
authorized from time to time to establish and designate any such series of
Preferred Stock, to fix and determine the variations in the relative rights,
preferences, privileges and restrictions as between and among such series and
any other class of capital stock of the Corporation and any series thereof,
and
to fix or alter the number of shares comprising any such series and the
designation thereof. The authority of the Board from time to time with respect
to each such series shall include, but not be limited to, determination of
the
following:
a. The
designation of the series;
b. The
number of shares of the series and (except where otherwise provided in the
creation of the series) any subsequent increase or decrease
therein;
c. The
dividends, if any, for shares of the series and the rates, conditions, times
and
relative preferences thereof;
d. The
redemption rights, if any, and price or prices for shares of the
series;
e. The
terms
and amounts of any sinking fund provided for the purchase or redemption of
the
series;
A-1
f. The
relative rights of shares of the series in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation;
g. Whether
the shares of the series shall be convertible into shares of any other class
or
series of shares of the Corporation, and, if so, the specification of such
other
class or series, the conversion prices or rate or rates, any adjustments
thereof, the date or dates as of which such shares shall be convertible and
all
other terms and conditions upon which such conversion may be made;
h. The
voting rights, if any, of the holders of such series; and
i. Such
other designations, powers, preference and relative, participating, optional
or
other special rights and qualifications, limitations or restrictions
thereof.
5. Election
of Directors.
Unless
and except to the extent that the by-laws of the Corporation (the “By-laws”)
shall so require, the election of directors of the Corporation need not be
by
written ballot.
6. Limitation
of Liability.
To the
fullest extent permitted under the General Corporation Law, as amended from
time
to time, no director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Any amendment, repeal or modification of the foregoing
provision shall not adversely affect any right or protection of a director
of
the Corporation hereunder in respect of any act or omission occurring prior
to
the time of such amendment, repeal or modification.
7. Indemnification.
7.1 Right
to Indemnification.
The
Corporation shall indemnify and hold harmless, to the fullest extent permitted
by applicable law as it presently exists or may hereafter be amended, any person
(a “Covered Person”) who was or is made or is threatened to be made a party or
is otherwise involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a “Proceeding”), by reason of the
fact that he or she, or a person for whom he or she is the legal representative,
is or was a director or officer of the Corporation or, while a director or
officer of the Corporation, is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust, enterprise or nonprofit entity (an “Other
Entity”), including service with respect to employee benefit plans, against all
liability and loss suffered and expenses (including attorneys' fees) reasonably
incurred by such Covered Person. Notwithstanding the preceding sentence, except
as otherwise provided in Section 7.3, the Corporation shall be required to
indemnify a Covered Person in connection with a Proceeding (or part thereof)
commenced by such Covered Person only if the commencement of such Proceeding
(or
part thereof) by the Covered Person was authorized by the Board.
7.2 Prepayment
of Expenses.
The
Corporation shall pay the expenses (including attorneys’ fees) incurred by a
Covered Person in defending any Proceeding in advance of its final disposition,
provided, however, that, to the extent required by applicable law, such payment
of expenses in advance of the final disposition of the Proceeding shall be
made
only upon receipt of an undertaking by the Covered Person to repay all amounts
advanced if it should be ultimately determined that the Covered Person is not
entitled to be indemnified under this Article 8 or otherwise.
A-2
7.3 Claims.
If a
claim for indemnification or advancement of expenses under this Article
7 is not
paid in full within 30 days after a written claim therefor by the Covered
Person
has been received by the Corporation, the Covered Person may file suit
to
recover the unpaid amount of such claim and, if successful in whole or
in part,
shall be entitled to be paid the expense of prosecuting such claim. In
any such
action the Corporation shall have the burden of proving that the Covered
Person
is not entitled to the requested indemnification or advancement of expenses
under applicable law.
7.4 Nonexclusivity
of Rights.
The
rights conferred on any Covered Person by this Article 7 shall not be exclusive
of any other rights that such Covered Person may have or hereafter acquire
under
any statute, provision of this Certificate of Incorporation, the By-laws,
agreement, vote of stockholders or disinterested directors or
otherwise.
7.5 Other
Sources.
The
Corporation’s obligation, if any, to indemnify or to advance expenses to any
Covered Person who was or is serving at its request as a director, officer,
employee or agent of an Other Entity shall be reduced by any amount such Covered
Person may collect as indemnification or advancement of expenses from such
Other
Entity.
7.6 Amendment
or Repeal.
Any
repeal or modification of the foregoing provisions of this Article 7 shall
not
adversely affect any right or protection hereunder of any Covered Person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
7.7 Other
Indemnification and Prepayment of Expenses.
This
Article 7 shall not limit the right of the Corporation, to the extent and in
the
manner permitted by applicable law, to indemnify and to advance expenses to
persons other than Covered Persons when and as authorized by appropriate
corporate action.
8. Adoption,
Amendment and/or Repeal of By-Laws.
In
furtherance and not in limitation of the powers conferred by the laws of the
State of Delaware, the Board is expressly authorized to make, alter and repeal
the By-laws, subject to the power of the stockholders of the Corporation to
alter or repeal any By-law whether adopted by them or otherwise.
9. Certificate
Amendments.
The
Corporation reserves the right at any time, and from time to time, to amend,
alter, change or repeal any provision contained in this Amended and Restated
Certificate of Incorporation, and other provisions authorized by the laws of
the
State of Delaware at the time in force may be added or inserted, in the manner
now or hereafter prescribed by applicable law; and all rights, preferences
and
privileges of whatsoever nature conferred upon stockholders, directors or any
other persons whomsoever by and pursuant to this Amended and Restated
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to the rights reserved in this article.
A-3
Appendix
B
Audit
Committee Charter
(as
adopted on February 22, 2006)
Purpose:
The
management of ZIOPHARM Oncology, Inc. (the “Company” or “ZIOPHARM”) is
responsible for the preparation, presentation and integrity of the Company’s
financial statements. This process includes ensuring that the financial
statements are accurate, complete and stated in accordance with Generally
Accepted Accounting Principles (“GAAP”). Although financial reporting is the
responsibility of management, it is overseen by the Board of Directors (the
“Board”). The ZIOPHARM Oncology, Inc. Audit Committee (the “Committee”) acts for
the Board under this charter.
Organization:
This
charter governs the operations of the Committee. The Committee shall obtain
the
approval of the charter and of any substantive amendment by the
Board.
Membership:
The
Committee shall be appointed by the Board and shall be comprised of at least
two
directors. Unless a greater number is required by applicable law, rule or other
regulation (including rules of any applicable stock market or stock exchange),
at least two of the Committee members shall be independent directors (as defined
by all applicable rules and regulations of the Securities and Exchange
Commission (the “SEC”) and any other appropriate body, including any applicable
stock market or stock exchange), and free from any relationship that, in the
opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee. All Committee members shall
be able to read and understand fundamental financial statements, including
the
Company’s balance sheet, income statement and cash flow statement. No Committee
member shall have participated in the preparation of the financial statements
of
the Company at any time during the last three years. The Committee shall
endeavor to have, as one of its members, an individual who qualifies as an
“audit committee financial expert” in compliance with the criteria established
by the SEC and other relevant regulations at the time the regulations require
disclosure of the existence of an audit committee financial expert. The
existence of such audit committee financial expert, including his or her name
and whether or not he or she is independent, or the lack of an audit committee
financial expert, shall be disclosed in the Company’s periodic filings as
required by the SEC.
The
members of the Committee shall be appointed by the Board at the annual
organizational meeting of the Board and shall serve until the next annual
organizational meeting of the Board or until their successors have been duly
appointed. Unless a Chair is elected by the full Board, the members of the
Committee may designate a Chair by majority vote of the full Committee
membership.
Statement
of Policy:
The
Committee shall oversee the accounting and financial reporting processes and
internal control system of the Company and the audits of its financial
statements. The Committee shall also assist the board in fulfilling the board’s
oversight responsibilities relating to the accounting and financial processes
of
the company. In so doing, it is the responsibility of the Committee to maintain
free and open communication between the Committee, independent auditors, the
internal accounting staff and management of the Company. In discharging its
role, the Committee is empowered to investigate any matter brought to its
attention with full access to all books, records, facilities, and personnel
of
the Company. The Committee shall also have the power to retain legal, accounting
and other advisors, as it deems necessary to carry out its duties.
B-1
Responsibilities:
The
Committee will oversee the Company’s financial reporting processes and internal
control system on behalf of the Board of Directors. Management is responsible
for preparing the Company’s financial statements, and the independent auditors,
which will be a registered public accounting firm selected by the Committee,
are
responsible for auditing those financial statements. The Committee shall be
directly responsible for appointment, compensation,
retention
and
oversight of the work of the registered public accounting firm employed by
the
Company (including resolution of disagreements between management and the
auditor regarding financial reporting) for the purpose of preparing or issuing
an audit report or related work, and such firm shall report directly to the
committee.
The
Committee should take the appropriate actions to set the overall corporate
“tone” for quality financial reporting and ethical behavior. The Committee shall
adopt procedures for -
|
(A)
|
the
receipt, retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters;
and
|
|
(B)
|
the
confidential, anonymous submission by employees of the Company of
concerns
regarding questionable accounting or auditing
matters.
|
It
is
expected that the Committee will be the diligent administer of the financial
reporting process and ensure the Company’s adherence to the internal financial
controls. Because of this responsibility it is the Board’s expectation that the
Committee shall meet four (4) times annually with additional meetings taking
place by teleconference if deemed necessary. Additional meetings may be required
throughout the year as Company circumstances dictate.
Recurring
Processes:
The
following shall be the principal recurring processes of the Committee in
carrying out its oversight responsibilities. The Committee, in carrying out
its
responsibilities, believes its policies and procedures should remain flexible
in
order to best react to changing conditions and circumstances. The processes
are
set forth as a guide with the understanding that the Committee may supplement
them as appropriate.
Independent
Auditors.
The
Committee shall have the sole authority and responsibility to engage, terminate
and replace the independent auditors. The Committee shall discuss with the
auditors their independence from management and the Company and the matters
included in the written disclosures required by the Independence Standards
Board. The Committee shall discuss with the independent auditors the overall
scope and plans for its audit, including the adequacy of staffing and
compensation. Annually, the Committee shall advise the board of its selection
of
the Company’s independent auditors. The Committee shall meet separately with the
independent auditors, with and without management present, to discuss the
results of their examination.
Controls.
The
Committee shall discuss with management and the accounting staff the adequacy
and effectiveness of the accounting and financial controls, and the integrity
and reliability of the Company’s financial reporting, including the effectiveness
of internal control systems and information technology. The Committee shall
discuss with management any significant deficiencies in internal controls that
have been identified by the Chief Executive Officer or Chief Financial Officer
which could adversely affect the Company’s ability to record, process, summarize
or report financial data, and shall also review from time to time the issue
whether the Company needs an internal audit function.
B-2
Interim
Statements and Issues.
Following review of the interim financial statements by the independent auditors
prior to the filing of the Company’s Quarterly Report on Form 10-Q or Form
10-QSB, as applicable, or its earnings release for the fourth fiscal quarter,
the Committee shall discuss the results of the quarterly review with and without
management present. The Committee shall be available to discuss any other
matters required to be communicated to the Committee by the independent auditors
under generally accepted auditing standards.
Audited
Statements.
The
Committee shall review with management and the independent auditors the
financial statements to be included in the Company’s Annual Report on Form 10-K
or 10-KSB, as applicable, including their judgment about the quality, not just
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of the disclosures in the financial statements.
Also,
the Committee shall discuss the results of the annual audit and any other
matters required to be communicated to the Committee by the independent auditors
under generally accepted auditing standards. The Committee shall make a
recommendation to the Board regarding inclusion in the Annual Report of the
audited financial statements.
Non-Audit
Related Services.
The
Committee shall approve, in advance, the provision by the independent auditor
of
all services not related to the audit (other than with respect to de minimus
exceptions permitted by the Sarbanes-Oxley Act of 2002). The Committee delegates
to the Chair of the Committee the authority to grant such approvals. Any
services begun by inadvertence without prior approval will be approved as
required by the Sarbanes-Oxley Act of 2002.
Other
Matters.
In
addition, the Committee will all have the following
responsibilities:
| · |
Assure
that the lead audit partner and the reviewing audit partner are rotated
every five years.
|
| · |
Ensure
that the Committee received from the independent auditors all written
disclosures and letters required by the Independence Standards Board
Standard 1, which detail all relations between the independent auditors
and the Company.
|
| · |
Assure
that the Company has or will disclose the charter in an appendix
to the
Company’s proxy statement at least once every three
years.
|
| · |
Prepare
the Committee report as required by the rules of the SEC. This report
will
be included in the Company’s annual proxy
statement.
|
| · |
Receive
a disclosure from the Chief Executive Officer and Chief Financial
Officer
during their certification process for the Quarterly and Annual Reports
regarding (1) any significant deficiency and material weaknesses
in design
or operation of internal controls and (2) any fraud whether or not
material, involving management or other employees who have a significant
role in the Company’s internal
controls.
|
| · |
Responsible
for establishing hiring policies for employees or former employees
of the
independent auditor to ensure independence has not been
compromised.
|
| · |
Review
the adequacy of the Committee charter on an annual basis. All recommended
changes will then be submitted to the Board for consideration.
|
| · |
Evaluate,
on an annual basis, its own performance as a
Committee.
|
| · |
Perform
such other services and functions consistent with this Charter, the
Company’s certificate of incorporation or bylaws, or required by
applicable law, as the Committee or the Board deems necessary or
appropriate.
|
B-3
[
PROXY
CARD ]
ZIOPHARM
Oncology, Inc.
Proxy
for Annual Meeting of Stockholders
The
undersigned, a stockholder of ZIOPHARM Oncology, Inc., hereby appoints
Jonathan
Lewis and Richard Bagley, and each of them, as proxies, with full power of
substitution, to vote on behalf of the undersigned the number of shares which
the undersigned is then entitled to vote, at the annual stockholders’ meeting of
ZIOPHARM Oncology, Inc. to be held at the
NY
Academy of Sciences, on 2 East 63 Street, between Madison and 5th Avenues,
New
York, NY 10021, at Eastern
Time, on
, , 2006, and at any and all adjournments thereof,
with all the powers which the undersigned would possess if personally present,
upon:
| (1) |
Proposal
to elect eight
directors for a term of one
year.
|
|
FOR
all nominees listed below:
(except
as marked to the contrary below)
|
WITHHOLD AUTHORITY
to vote for all nominees listed below:
|
|
|
INSTRUCTION:
|
To
withhold authority to vote for any individual nominee, write
that
nominee's
name on the space provided below:
|
|
|
(2)
|
Proposal
to adopt an amended and restated certificate of incorporation for
the
Company.
|
|
FOR
|
AGAINST
|
ABSTAIN
|
||
|
(3)
|
Proposal
to approve
an amendment to the Company’s 2003 Stock Option Plan to increase the
number of shares of common stock reserved for issuance thereunder
from
1,252,436
shares
to 2,002,436
shares.
|
|
FOR
|
AGAINST
|
ABSTAIN
|
|
(4)
|
Proposal
to ratify
the appointment of Vitale, Caturano & Company, Ltd. as the independent
registered public accounting firm of the Company for fiscal
2006.
|
|
FOR
|
AGAINST
|
ABSTAIN
|
||
(5) Upon
such
other business as may properly come before the meeting or any adjournments
thereof.
The
Board of Directors recommends a vote “FOR” proposals 1 through
4
(Continued,
and TO BE COMPLETED AND SIGNED, on the reverse side)
(Continued
from other side)
The
undersigned hereby revokes all previous proxies relating to the shares covered
hereby and acknowledges receipt of the Notice and Proxy Statement relating
to
the Annual Meeting of Stockholders.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
When
properly executed, this proxy will be voted on the proposals set forth herein
as
directed by the stockholder, but if no direction is made in the space provided,
this proxy will be voted FOR
the
election of all nominees for director, FOR
the
adoption of an amended and restated certificate of incorporation; FOR
the
amendment to the Company’s 2003 Stock Option Plan; and FOR
ratification of Vitale,
Caturano & Company, Ltd.’s appointment
as independent
registered public accounting firm for
fiscal.
|
Dated _______________________,
2006
|
||
| x_______________________________ | ||
| x_______________________________ |
(Stockholder
must sign exactly as the name appears at left. When signed as a corporate
officer, executor, administrator, trustee, guardian, etc., please
give
full
title as such. If shares are held by two or more persons as joint tenants,
all
must sign.)