Exhibit 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
     This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made
and entered into this 23rd day of December, 2005 (the “Effective Date”) by and
between ZONAGEN, INC., a Delaware corporation (the “Company”), and LOUIS PLOTH,
JR. (the “Employee”).
WITNESSETH
     WHEREAS, Employee is currently employed by the Company as its Vice
President, Business Development and Chief Financial Officer pursuant to the
terms of that certain Employment Agreement dated as of October 16, 1993, as
amended by the First Amendment to Employment Agreement dated January 31, 2001,
and as further amended by the Second Amendment to Employment Agreement dated
October 29, 2002 (as amended, the “Prior Employment Agreement”); and
     WHEREAS, the Company and Employee desire to amend and restate the Prior
Employment Agreement in its entirety and accept the terms and conditions of this
Agreement in lieu of the terms and conditions under the Prior Employment
Agreement;
     NOW, THEREFORE, in consideration of the mutual covenants, promises and
agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
     1. Amendment and Restatement of Prior Employment Agreement. The Prior
Employment Agreement is hereby amended in its entirety and restated herein. Such
amendment and restatement is effective upon the execution of this Agreement by
the Company and Employee. Upon such execution, all terms, conditions and rights
granted in the Prior Employment Agreement are hereby waived, released and
superseded in their entirety and shall have no further force or effect.
     2. Employment.
     (a) The Company hereby employs the Employee and the Employee hereby accepts
employment as the Vice President, Business Development and Chief Financial
Officer of the Company, subject to the direction of the Board of Directors and
the Company’s officers designated by the Board of Directors, and shall perform
and discharge well and faithfully the duties and responsibilities that are
assigned to him by the Board of Directors. The Employee agrees to devote such of
his time, attention and energy to the business of the Company, and any of its
subsidiaries or affiliates, as may be required to perform the duties and
responsibilities assigned to him by the Board of Directors to the best of his
ability and with requisite diligence. If the Employee is appointed a director or
elected to another executive officer position of the Company or any subsidiary
thereof during the term of this Agreement, the Employee will serve in such
capacity without further compensation.

 

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     (b) The Employee agrees to comply in all material respects, at all times
during the Term (as defined in Section 3 hereof), with all applicable policies,
rules and regulations of the Company.
     3. Term. Subject to the terms hereof, this Agreement shall commence on the
Effective Date hereof and shall terminate on the first anniversary of the
Effective Date (the “Initial Term”); provided, that this Agreement will
automatically renew for successive one-year periods after the Initial Term (each
an “Additional Term”) unless terminated in accordance with Section 7. The
Initial Term together with any Additional Term shall be referred to herein as
the “Term.”
     4. Compensation. For all services rendered under this Agreement, the
Company agrees to pay to Employee during the Initial Term a base monthly salary
of $16,625.00, payable in equal semi-monthly installments or on any other
periodic basis consistent with the Company’s payroll procedures, subject only to
such payroll and withholding deductions as are required by applicable federal
and state laws. The base monthly salary for such Additional Term shall be
reviewed approximately sixty days prior to the end of the then-current period;
provided, however, that there is no assurance that the base monthly salary will
be increased or remain the same for any subsequent Additional Term, such
decision to be within the discretion of the Board of Directors. In addition,
Employee shall be eligible to receive a bonus in addition to his base salary, in
an amount and on such terms as the Board of Directors shall determine.
     5. Fringe Benefits; Expenses.
     (a) So long as the Employee is employed by the Company, the Employee shall
participate in all employee benefit plans sponsored by the Company for its
executive employees, including, but not limited to, vacation policy, health
insurance, dental insurance and pension or profit-sharing plans; provided,
however, that the nature, amount and limitations of such plans shall be
determined from time to time by the Board of Directors of the Company.
     (b) The Company agrees to reimburse the Employee for all reasonable
out-of-pocket expenses incurred by him in the performance of his duties, subject
to the submission of appropriate documentation in accordance with the Company’s
expense reimbursement policy as in existence from time to time.
     6. Confidential Information and Non-Competition. The Employee has executed
and agrees to comply with the Proprietary Information and Inventions and
Non-Competition Agreement, a copy of which is attached as Exhibit A hereto and
incorporated herein by reference.
     7. Termination.
     (a) At any time during the Term, the Company may, at its sole discretion,
discharge the Employee, with or without “Cause”. Such termination shall be
effective on delivery of written notice to the Employee of the Company’s
election to terminate this Agreement under this Section 7. For purposes of this
Agreement, the following events shall constitute “Cause”: (i) the conviction of
the Employee by a court

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of competent jurisdiction of a crime involving moral turpitude; (ii) the
commission, or attempted commission, by the Employee of an act of fraud on the
Company; (iii) the misappropriation, or attempted misappropriation, by the
Employee of any funds or property of the Company; (iv) the continued and
unreasonable failure by the Employee to perform in any material respect his
obligations under the terms of this Agreement; (v) the knowing engagement by the
Employee, without the written approval of the Board of Directors, in any direct,
material conflict of interest with the Company without compliance with the
Company’s conflict of interest policy; (vi) the knowing engagement by the
Employee, without the written approval of the Board of Directors, in any
activity which competes with the business of the Company or which would result
in a material injury to the Company; or (vii) the knowing engagement by the
Employee in any activity that would constitute a material violation of the
provisions of the Company’s Insider Trading Policy or Business Ethics Policy, if
any, then in effect.
If the Company terminates the Employee’s employment under this Agreement for
reasons other than Cause or if Employee terminates his employment for Good
Reason (as defined below), then the Company shall, subject to the terms of this
Section 7, pay to the Employee (or his estate or representative, as appropriate)
an amount equal to twelve (12) months compensation at his then current salary,
payable bi-monthly or in accordance with the Company’s payroll procedures, and
shall continue to provide benefits in the kind and amounts provided up through
the date of termination for the twelve (12) month period, including, without
limitation, continuation of any Company-paid benefits as described in Section 5
of this Agreement for the Employee and his family. In the event that Employee
has not obtained full-time employment with another company at the expiration of
twelve (12) months following his termination of employment from the Company
(except for Cause), Employee shall be entitled to continuation of benefits as
provided herein under Company plans, at his own expense, until the earlier of
the date he becomes a full-time employee of another company or the date of the
last payment to Employee under Section 7(g) hereof. Under no circumstances shall
the Employee be entitled to any compensation or continuation of benefits for any
period of time following his termination if his termination is for Cause. If the
Company terminates the Employee’s employment under this Agreement for reasons
other than Cause, the Employee agrees to accept, in full settlement of any and
all claims, losses, damages and other demands that the Employee may have arising
out of such termination as liquidated damages and not as a penalty, the twelve
(12) month salary payments and continuation of Company-paid benefits as set
forth above. The Employee hereby waives any and all rights that he may have to
bring any cause of action or proceeding, as a result of such termination, except
to enforce the Company’s obligation to pay amounts owing pursuant to this
Section 7.
     (b) This Agreement will terminate automatically on the earliest to occur
of: (i) the death or disability of the Employee; or (ii) the voluntary
retirement of the Employee.
     (c) If at any time during the Term of this Agreement, the Employee is
unable to perform effectively his duties hereunder because of physical or mental
disability, the Company shall continue payment of compensation as provided in
Section 4 hereof during the first six-month period of such disability to the
extent not covered by the

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Company’s disability insurance policies. On the expiration of such six-month
period, the Company, at its sole discretion, may continue payment of the
Employee’s salary for such additional periods as the Company elects or may
terminate this Agreement without any further obligations thereunder. If the
Employee should die during the Term of this Agreement, the Employee’s employment
and the Company’s obligations hereunder shall terminate as of the last day of
the month in which the Employee’s death occurs.
     (d) In the event that Employee terminates his employment for Good Reason or
Employee’s employment is terminated by the Company without Cause within twelve
months following a Change of Control (as defined below), Employee agrees that he
will provide consulting services to the successor or acquiring company on terms
to be mutually agreeable, provided that Employee shall not be obligated to work
more than 10 days per month for the first six months following the Change of
Control, two and a half days per month for the next six months, and six days a
year for the remainder of the period during which Employee receives payments
under Section 7(g) below. Employee shall be permitted to enter into employment
with any other company to perform services to such company or pursue any other
endeavor Employee desires, provided that any such activities shall not interfere
with the above obligation to consult with the successor or acquiring company for
the first six month period following the Change of Control, and under no
circumstances shall Employee violate the terms of the Proprietary Information
and Inventions and Non-Competition Agreement referenced in Section 6 of this
Agreement. As used in this Agreement, “Good Reason” shall mean a material
diminution in the title, powers, duties, responsibilities or functions of the
Employee as described in Section 2 above within one year following the
occurrence of a Change of Control.
     (e) At any time during the Term of this Agreement, the Employee may
terminate this Agreement by giving at least thirty (30) days written notice to
the Company of his intent to terminate this Agreement, with the date of
termination to be specified in such notice.
     (f) If this Agreement is terminated by the Employee pursuant to Section
7(e) hereof, then the Company will have no obligation to pay any amount to the
Employee other than amounts earned or accrued pursuant to Section 4 hereof, but
which have not yet been paid, as of the date of termination.
     (g) In the event that Employee terminates his employment for Good Reason or
Employee’s employment is terminated by the Company without Cause within twelve
months following a Change of Control of the Company, the Employee shall receive
a cash lump sum bonus payment of the amount necessary to provide him with the
present value of the aggregate amount of payments (plus interest as described
below) set forth in the schedule below. For this purpose, such present value
shall be determined as of the closing of the Change of Control (i) assuming that
a termination of Employee’s employment for one of the reasons described in the
immediately preceding sentence will occur upon such closing date and (ii) using
an annual interest rate equal to the prime rate posted by the bank that serves
as the Company’s (or any successor’s) principal banking connection as of the
closing date of the Change of Control. Such bonus payment shall be

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in consideration for (i) past services and services rendered in connection with
the Change of Control and (ii) to the extent reasonable and to the extent
necessary to avoid application of an excise tax under Section 4999 of the
Internal Revenue Code of 1986, as amended, the consulting services required to
be rendered by Employee during the first twelve (12) months after a Change of
Control pursuant to Section 6(d). Employee agrees to defer payment of such lump
sum bonus payment (and any earnings thereon) in accordance with and upon the
following schedule, subject only to such payroll and withholding deductions as
are required by applicable federal and state laws. Such payments shall be in
lieu of any other severance payments payable to Employee under Section 7(a) of
this Agreement, provided however that Employee shall be entitled to continue to
receive the benefits coverage for twelve (12) months following termination of
employment as provided in such Section 7(a). All funds required to be paid to
Employee pursuant to the terms hereof shall be segregated and contributed to the
irrevocable Louis Ploth, Jr. Rabbi Trust, a copy of which is attached hereto as
Exhibit B, by the Company or the successor or acquiring company for the benefit
of the Employee upon closing of the Change of Control, and maintained there
(subject to the terms of such trust regarding insolvency of the Company) until
paid pursuant to the terms hereof in accordance with the following schedule:
     (a) On the closing of the Change of Control, the Employee’s then current
monthly rate of base salary in effect on the date of closing of the Change of
Control multiplied by twelve (12);
     (b) On the first, second, third, and fourth anniversary dates of the Change
of Control, $75,000.00;
     (c) On the fifth anniversary date of the Change of Control, $62,500; and
     (d) On the sixth anniversary date of the Change of Control, $37,500
Such payments shall be made to Employee, or to his heirs or representative in
the event of his death, and shall be credited with interest, from such due date
until paid, at an annual rate equal to the prime rate posted by the bank that
serves as the Employer’s (or any successor’s) principal banking connection as of
the due date of the payment. Employee shall have the status of a general
unsecured creditor of the Company with respect to the bonus payments required to
be paid by the Company under this Section 7(g), and the Company’s obligation to
pay such bonus constitutes a mere promise by the Company to make such payments
in the future. Employee’s rights to receive such bonus payments shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, attachment, or garnishment by creditors of Employee or any
beneficiary of Employee. It is the intention of the parties hereto that this
deferred bonus arrangement be unfunded for tax purposes and for purposes of
Title I of the Employee Retirement Income Security Act of 1974, as amended, to
the extent applicable.

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     (h) As used in this Agreement, a “Change of Control” shall mean:
     (i) the acquisition after the Effective Date by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended) (a “Person”) of beneficial ownership of 30% or
more of either (x) the then outstanding shares of common stock of the Company
(the “Outstanding Common Stock”) or (y) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Voting Securities”), provided that for
purposes of this subsection (i), the following acquisitions shall not constitute
a Change of Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or (D) any acquisition by any corporation pursuant to
a transaction which complies with clauses (A), (B) and (C) of subsection
(ii) hereof; or
     (ii) consummation after the Effective Date of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a “Corporate Transaction”) in each case, unless,
following such Corporate Transaction, (A) (1) all or substantially all of the
persons who were the beneficial owners of the Outstanding Common Stock
immediately prior to such Corporate Transaction beneficially own, directly or
indirectly, more than 30% of the then outstanding shares of common stock of the
corporation resulting from such Corporate Transaction, and (2) all or
substantially all of the persons who were the beneficial owners of the
Outstanding Voting Securities immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 30% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership of the Outstanding Common Stock and the
Outstanding Voting Securities immediately prior to such Corporate Transaction,
as the case may be, (B) no Person (excluding (1) any corporation resulting from
such Corporate Transaction or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Corporate Transaction and
(2) any Person approved by the members of the Board in office immediately prior
to such Corporate Transaction) beneficially owns, directly or indirectly, 30% or
more of the then outstanding shares of common stock of the corporation resulting
from such Corporate Transaction or the combined voting power of the then
outstanding voting securities of such corporation except to the extent that such
ownership existed prior to such Corporate Transaction and

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(C) at least a majority of the members of the board of directors of the
corporation resulting from such Corporate Transaction were members of the Board
at the time of the execution of the initial agreement or of the action of the
Board providing for such Corporate Transaction.
     8. Assignment by Employee. Except as otherwise expressly provided herein,
the Employee agrees for himself, and on behalf of his executors and
administrators, heirs, legatees, distributees and any other person or persons
claiming any benefits under him by virtue of this Agreement, that this Agreement
and the rights, interests and benefits hereunder shall not be assigned,
transferred, pledged or hypothecated in any way by the Employee or any executor,
administrator, heir, legatee, distributee or person claiming under the Employee
by virtue of this Agreement and shall not be subject to execution, attachment or
similar process. Any attempt at assignment, transfer, pledge or hypothecation or
other disposition of this Agreement or of such rights, interests and benefits
contrary to the foregoing provision, or the levy of any attachment or similar
process thereupon, shall be null and void and without effect.
     9. Successors of the Company. This Agreement shall be binding on and inure
to the benefit of any Successor (as hereinafter defined) of the Company and any
such Successor shall be deemed substituted for the Company under the terms of
this Agreement. As used in this Agreement, the term “Successor” shall include
any person, firm, corporation or other business entity which at any time,
whether by merger, purchase or otherwise, acquires all or substantially all of
the assets or businesses of the Company; but no such substitution shall relieve
such companies of their original obligations hereunder. This Agreement may not
otherwise be assigned by the Company without the Employee’s consent to any
person, firm, corporation, limited liability company, trust or other entity.
     10. Notices. All notices or other communications that are required or may
be given under this Agreement shall be in writing and shall be deemed to have
been duly given when delivered in person, transmitted by telecopier or mailed by
registered or certified first class mail, postage prepaid, return receipt
requested, to the parties hereto at the address set forth below (as the same may
be changed from time to time by notice similarly given) or the last known
business or residence address of such other person as may be designated by
either party hereto in writing.
If to the Company:
Zonagen, Inc.
2408 Timberloch Place, Suite B-1
The Woodlands, Texas 77380
Attn: Joseph S. Podolski
If to the Employee:
Louis Ploth, Jr.
11124 Ponderosa Timbers Drive
Conroe, Texas 77385

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     11. Waiver of Breach. A waiver by the Company or the Employee of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any other breach by the other party.
     12. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
     13. Severability. If any provision of this Agreement shall, for any reason,
be held to violate any applicable law, and so much of said Agreement is held to
be unenforceable, then the invalidity of such specific provision herein shall
not be held to invalidate any other provision herein which shall remain in full
force and effect.
     14. Amendment. This Agreement constitutes and contains the entire agreement
of the parties and supersedes any and all prior negotiations, correspondence,
understandings and agreements between the parties respecting the subject matter
hereof including, but not limited to, the Prior Employment Agreement. This
Agreement may be modified only by an agreement in writing executed by all the
parties hereto.
     15. Headings. The section and subsection headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
     16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.
     17. Cumulative Remedies. All rights and remedies hereunder are cumulative
and are in addition to all other rights and remedies provided by law, agreement
or otherwise.
[Remainder of page left blank intentionally.]

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.

            COMPANY:

ZONAGEN, INC.
      By:   /s/ Joseph S. Podolski        Joseph S. Podolski        President
and Chief Executive Officer        EMPLOYEE:
      By:   /s/ Louis Ploth, Jr.        Louis Ploth, Jr.