EXHIBIT 10-Ab
ZILA, INC. FISCAL YEAR 06
EMPLOYEE INCENTIVE BONUS PLAN
PURPOSE
The 2006 Zila Employee Incentive Bonus Plan has been established to attract,
recognize and reward employees whose performance achieved above average success,
resulting in strong business performance.
ELIGIBILITY
To be eligible to participate in this Plan, an employee must be:
- - A full-time (30 hours or more) Zila employee;
- - Active on Zila payroll;
Employees on a sales commission plan are eligible to participate; however
"Eligible Earnings' will only reflect base salary. Employees hired after the
start of the fiscal year will be eligible for a pro-rated portion.
PLAN TERM
The term of this Plan is August 1 through July 31 (the "Plan Year").
FUNDING
The funding for the Incentive Bonus Plan is discretionary and approved annually
by the Senior Leadership Team and Zila's Board of Directors.
PLAN DESIGN
Awards will be calculated and paid after the close of the year on which the
awards are based. The award amount will be based on Eligible Earnings, Target
Award %, and the Business and Personal Performance Results, as follows:
Business Personal
Eligible Earnings x Target Award % x Performance x Performance = BONUS AWARD
Result Result
"Eligible Earnings" is defined below. "Target Award %'s" are listed in
Attachment A. "Business Performance Result" and "Personal Performance Result"
are further described in Attachments B and C.
ADMINISTRATION
- - The Compensation Committee of the Board of Directors will oversee this
Plan, while the Vice President of Human Resources has the authority to
manage, administer, amend and interpret the terms of the Plan.
- - Any claims for payments under the Plan or any other matter relating to the
Plan must be presented in writing to the Vice President of Human Resources
within 60 days after the event that is the subject of the claim. The Vice
President of Human Resources will then provide a response within 60 days,
which response shall be final and binding.
GENERAL PROVISIONS
- - Awards are subject to all applicable taxes and other required deductions.
- - This Plan does not constitute a guarantee of employment nor does it
restrict Zila's rights to terminate employment at any time or for any
reason
- - The Plan and any individual award is offered as a gratuitous award at the
sole discretion of Zila. The Plan does not create vested rights of any
nature nor does it constitute a contract of employment or a contract of
any other kind. The Plan does not create any customary concession or
privilege to which there is any entitlement from year-to-year, except to
the extent required under applicable law. Nothing in the Plan entitles an
employee to any remuneration or benefits not set forth in the Plan nor
does it restrict Zila's rights to increase or decrease the compensation of
any employee, except as otherwise required under applicable law.
- - The awards shall not become a part of any employment condition, regular
salary, remuneration package, contract or agreement, but shall remain
gratuitous in all respects. Awards are not to be taken into account for
determining overtime pay, severance pay, termination pay, pay in lieu of
notice, or any other form of pay or compensation.
- - This Plan is provided at Zila's sole discretion and Zila may modify or
eliminate it at any time, prospectively or retroactively, without notice
or obligation. In addition, there is no obligation to extend or establish
a plan in subsequent years.
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- - Awards for promoted employees will be calculated using the:
- Target Award % prorated for the portion of the year the
participant was in a different classification at the end of
the Plan Year
PRESIDENT'S AWARD
The President may award a special bonus award payout to any employee(s)
including an individual employed by a division(s) that does not qualify for the
incentive bonus payout based on meeting the EBITDA criteria. These awards will
be based on outstanding effort and performance of job responsibilities and/or
for a unique contribution which impacts the company significantly.
EMPLOYEE STOCK OPTION AWARD
Employees whose performance is identified as `Outstanding' and `Exceeds
Expectation' (Attachment B - Performance Score) will be considered the Top 20%
performers (the "Top 20%"). Through this Plan, the Top 20% will be eligible to
receive option grants to purchase shares of Zila's common stock. The President
will recommend to the compensation committee of the board of directors the
employees eligible for option grants under Zila's 1997 Stock Option Award Plan
and the number of options to be granted to each eligible employee. The
Compensation Committee will make the final determination on option grants. In
addition, the compensation committee will make other determinations with respect
to the options granted such as vesting periods, term of options and methods of
exercise.
Options granted will be "incentive stock options" for tax purposes. Any employee
granted an option will receive an option agreement and a prospectus at the time
of such grant which will include an explanation of tax consequences and the
character of the grant.
DISTRIBUTION
Distribution of the incentive awards earned through the plan year will occur
ANNUALLY, following the fiscal year end close. All monies paid through the
incentive plan will be distributed to the employee through regular payroll
processing (less tax deductions) and all stock option grants will be presented
within 100 days of the end of the fiscal year.
NEW DIVISIONS
Employees of newly acquired divisions will be eligible to participate in the
Incentive Bonus Plan beginning August 1st following completion of the
acquisition process and upon the termination of any existing plan. The
eligibility requirements listed above will then be applied.
DEFINITIONS
Eligible Earnings: The Committee will determine Eligible Earnings consistent
with their respective legal and practical requirements. (Eligible earnings
generally represent regular pay and overtime.)
Employee: a person in an employee-employer relationship with the Company whose
base wage or base salary is processed for payment by the Company's Payroll
Department(s) and not by any other department of the Company (or by any other
company). Exclusions include:
- - Any independent contractor, consultant, or individual performing services
for the Company who has entered into an independent contractor or
consultant agreement;
- - Any individual performing services under an independent contractor or
consultant agreement, a purchase order, a supplier agreement or any other
agreement that the Company enters into for services;
- - Any person classified by the Company as a temporary or contract labor
(such as contractors, contract employees, job shoppers) regardless of the
length of service; and
Earnings before Interest, Taxes, Depreciation and Amortization: Measures Zila's
financial performance calculated as revenue minus expenses excluding interest,
tax, depreciation and amortization.
Revenue Growth: Compares year-over-year growth with our target for revenue
growth.
Incentive awards are intended to recognize and reward our outstanding employees
for their performance and contributions. We have structured this plan to be
equitable for both the company and employees. If circumstances occur where
equity is not being served to the company or employees, the company reserves the
right to reconsider and adjust any or all incentive awards accordingly.
Incentive awards are not guaranteed and may be withdrawn or eliminated at the
sole discretion of the company at any time.
Each employee's job entails responsibilities that are not specifically outlined
in the incentive plan, and measurement of overall job performance will include
those additional responsibilities as assigned by management.
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Attachment A
TARGET AWARD BY EMPLOYEE CLASSIFICATION
Employees on payroll will be eligible to participate at the indicated Target
Award %'s, assuming they meet the other eligibility criteria stated in this
Plan:
EMPLOYEE CLASSIFICATION TARGET AWARD %
- ------------------------------------------------ --------------
A CEO, CFO, Division President, General Counsel 50%
B Division General Manager 40%
C Vice President 30%
D Director/Controller 25%
E Manager 22%
F Supervisor/Coordinator 20%
G Staff 15%
Target awards will be reviewed and approved annually by the Chairman & CEO and
Vice President of Human Resources.
Unless otherwise determined, the following weightings will be used for combining
the above performance factors to determine the overall Business Performance
Result for each organization.
EBITDA REVENUE GROWTH
*EMPLOYEE GROUP (ACHIEVEMENT VS PLAN) (ACHIEVEMENT VS PLAN)
- ---------------------------- --------------------- ---------------------
CEO, CFO, Vice President 70% Zila, Inc. 30% Zila, Inc.
Treasurer, Vice President
Corporate Secretary, General
Counsel
Division President, Division 50% Division 25% Division
General Manager 25% Zila, Inc.
Vice Presidents 70% Division 30% Division
Directors/Controllers 70% Division 30% Division
Managers 70% Division 30% Division
Supervisors/Coordinators 70% Division 30% Division
Staff 70% Division 30% Division
*Employee Group - Sales employees reverse the EBITDA and Revenue Growth
percentages.
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Attachment B
BUSINESS PERFORMANCE RESULTS
The Business Performance Results are based on performance of the following:
- - Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
- - Revenue Growth (RG)
The EBITDA component will be earned and calculated on achievement of quarterly
and annual EBITDA goals set in the FY06 profit plan.
The following table illustrates the relationship between EBITDA and Revenue
Growth and the performance result calculated for each.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA)
Actual EBITDA as a EBITDA Performance
% of Target EBITDA * Result **
- -------------------- ------------------
200% or more 2.00x
150% 1.50x
125% 1.25x
115% 1.15x
100% 1.00x
Below 100% .00x
REVENUE GROWTH
Actual Revenue
Growth as a % of Revenue Growth
Target Rev Growth * Performance Result **
- ------------------- ---------------------
125% or more 2.00x
118% 1.50x
115% 1.25x
112% 1.10x
100% 1.00x
Below 100% .00x
Performance between entries on these tables will be interpolated between the
nearest values to assign factors.
Any division that is not budgeted to generate revenue during the fiscal year
will have its bonus eligibility determined by its divisional EBITDA performance.
Unless otherwise determined, the following weightings will be used for combining
the above performance factors to determine the overall Business Performance
Result for each organization.
* The annual EBITDA and Revenue plan must be achieved to establish eligibility
and the payout % is determined by the number of quarters that achieved plan.
** Assumes all four quarters achieve plan
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Attachment C
PERSONAL PERFORMANCE RESULT
The Personal Performance Result is based on the performance of the individual in
contributing to Zila's business performance. Only those employees meeting all
plan criteria and rating at the high end of meets expectations scoring and above
will be eligible for a bonus award. The cut off will be determined and justified
at the end of the year.
Managers will select a Personal Performance Result for each employee from a
performance range of 0x - 1.50x.
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