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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Zila, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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ZILA, INC.
5227 NORTH 7TH STREET
PHOENIX, ARIZONA 85014-2800
(602) 266-6700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD
December 9, 1999
The 1999 Annual Meeting of Stockholders of Zila, Inc. (the "Company")
will be held at Marriott's Camelback Inn (Scottsdale East Room of the Conference
Center), 5402 East Lincoln Drive, Scottsdale, Arizona 85253 on December 9, 1999,
at 9:00 a.m., local time.
MATTERS TO BE VOTED ON:
1. Election of seven directors to serve for the next year or
until their successors are elected;
2. Ratification of the selection of Deloitte & Touche LLP as the
independent public accounting firm for the Company for the
fiscal year ending July 31, 2000; and
3. Any other matters as may properly come before the Annual
Meeting or any adjournment thereof.
The close of business on October 29, 1999 has been fixed as the Record
Date for the determination of stockholders entitled to receive notice of and to
vote at this meeting or any adjournment of the meeting. The list of stockholders
entitled to vote at this meeting is available at the offices of the Company,
5227 North 7th Street, Phoenix, Arizona 85014, for examination by any
stockholder.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THIS MEETING, PLEASE SIGN,
DATE AND RETURN THE ENCLOSED PROXY, WHICH IS SOLICITED BY AND ON BEHALF OF THE
BOARD OF DIRECTORS. THE GIVING OF SUCH PROXY WILL NOT AFFECT YOUR RIGHT TO
REVOKE SUCH PROXY OR TO VOTE IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE
MEETING.
By Order of the Board of Directors,
/s/ Janice L. Backus
-----------------------------------
Janice L. Backus
Vice President and Secretary
Phoenix, Arizona
November 11, 1999
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PROXY STATEMENT
TABLE OF CONTENTS
GENERAL INFORMATION................................................................................................ 1
Who Can Vote ................................................................................................ 1
Voting by Proxies ................................................................................................ 1
How You May Revoke Your Proxy Instructions........................................................................ 2
How Votes are Counted............................................................................................. 2
Cost of this Proxy Solicitation................................................................................... 2
Attending the Annual Meeting...................................................................................... 2
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?.................................................................... 2
WHO SHOULD I CALL IF I HAVE QUESTIONS?............................................................................. 3
PROPOSALS.......................................................................................................... 3
PROPOSAL NO. 1 - ELECT SEVEN DIRECTORS........................................................................... 3
PROPOSAL NO. 2 - RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS.................................................. 4
ABOUT THE BOARD AND ITS COMMITTEES................................................................................. 8
EXECUTIVE COMPENSATION............................................................................................. 10
STOCK OPTION GRANTS................................................................................................ 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUE AS OF JULY 31, 1999............................................................................. 12
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION............................................................ 13
PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT............................................................. 16
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE............................................................ 17
STOCK PRICE PERFORMANCE GRAPH...................................................................................... 18
PROPOSALS BY STOCKHOLDERS.......................................................................................... 19
OTHER BUSINESS..................................................................................................... 19
ANNUAL REPORT...................................................................................................... 19
-i-
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PROXY STATEMENT
This Proxy Statement is furnished to the Stockholders of Zila, Inc., a
Delaware corporation (the "Company"), in connection with the Company's
solicitation of proxies to be used in voting at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on December 9, 1999. The proxy
materials were mailed on or about November 11, 1999 to stockholders (the
"Stockholders") of record at the close of business on October 29, 1999 (the
"Record Date").
Your vote is very important. For this reason, the Board of Directors is
requesting that you allow your Common Stock to be represented at the Annual
Meeting by the persons who are named on the enclosed Proxy Card (the "Proxies").
"We," "our," "Zila," and the "Company" refer to Zila, Inc.
GENERAL INFORMATION
Who Can Vote You are entitled to vote your Common Stock if our records
show that you held your shares as of October 29, 1999. At
that date, 40,980,448 shares of Common Stock were outstanding
and entitled to vote. Each share of Common Stock is entitled
to one vote on all matters on which Stockholders may vote.
The enclosed Proxy Card shows the number of shares that you
are entitled to vote. Your individual vote is confidential
and will not be disclosed to third parties.
Voting by Proxies If your Common Stock is held by a broker, bank or other
nominee (i.e., in "street name"), you will receive
instructions from them which you must follow in order to have
your shares voted. If you hold your shares in your own name
as a holder of record, you may instruct the Proxies how to
vote your Common Stock by signing, dating and mailing the
Proxy Card in the envelope provided. Of course, you can
always come to the meeting and vote your shares in person. If
you give us a proxy without giving specific voting
instructions, your shares will be voted by the Proxies as
recommended by the Board of Directors.
We are not aware of any other matters to be presented at the
Annual Meeting except those described in this Proxy
Statement. However, if any other matters not described in the
Proxy Statement are properly presented at the meeting, the
Proxies will use their own judgment to determine how to vote
your shares. If the meeting is adjourned, your Common Stock
may be voted by the Proxies on the new meeting date as well,
unless you have revoked your proxy instructions prior to that
time.
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How You May You may revoke you proxy instructions by any of the
Revoke Your following procedures:
Proxy Instructions
1. Send the Company another signed proxy with a later
date;
2. Send a letter to the Company's secretary revoking
your proxy before your Common Stock has been voted
by the Proxies at the meeting; or
3. Attend the Annual Meeting and vote your shares in
person.
How Votes are Inspectors of election will be appointed for the meeting.
Counted The inspectors of election will determine whether or not a
quorum is present and will tabulate votes cast by proxy or
in person at the Annual Meeting. If you have returned valid
proxy instructions or attend the meeting in person, your
Common Stock will be counted for the purpose of determining
whether there is a quorum, even if you wish to abstain from
voting on some or all matters introduced at the meeting. If
a broker indicates on the proxy that it does not have
discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as
present and entitled to vote with respect to that matter.
Cost of this Proxy We will pay the cost of this proxy solicitation, including
Solicitation the charges and expenses of brokerage firms and others who
solicitation forward material to beneficial owners of the Common Stock.
The Company will solicit proxies by mail. Proxies may also
be solicited by personal interview, telephone, or
telegraph. Corporate Investor Communications, Inc. will
serve as the Company's proxy solicitation agent. In such
capacity, Corporate Investor Communications, Inc. will
coordinate the distribution of proxy materials to
beneficial owners of Common Stock and oversee the return of
proxy cards. The fee for these services is estimated to be
$5,500.
Attending the If you are a beneficial owner of Common Stock held by a
Annual Meeting broker or bank, you will need proof of ownership to be
admitted to the meeting. A recent statement or letter from
a broker or bank showing your current ownership and
ownership of the Company's shares on the record date are
examples of proof of ownership. Although you may attend the
meeting, you will not be able to vote your Common Stock
held in street name in person at the meeting and will have
to vote through your broker or bank.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
Proposal 1: The seven nominees for director who receive the most votes
Election of Seven will be elected. There is no cumulative voting in the
Directors election of directors.
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Proposal 2: The affirmative vote of a majority of the voting power of
Ratification of Common Stock present at the Annual Meeting in person or by
Independent proxy will be required to ratify the selection of
Public independent auditors. Therefore, if you "abstain" from
Accountants voting, it has the same effect as if you voted "against"
this proposal.
WHO SHOULD I CALL IF I HAVE QUESTIONS?
If you have questions about the Annual Meeting or voting, please call
Janice L. Backus, our Vice President and Corporate Secretary, at (602) 266-6700.
PROPOSALS
PROPOSAL NO. 1 - ELECT SEVEN DIRECTORS
Number of An entire Board of Directors, consisting of seven
Directors to be directors, is to be elected at the Annual Meeting. Each
Elected Director elected will hold office until the next annual
meeting or until his successor is elected and qualified. If
any director resigns or otherwise is unable to complete his
term of office, the Board will elect another director for
the remainder of the resigning director's term.
Vote Required The seven nominees receiving the highest number of votes
cast at the Annual Meeting will be elected. There is no
cumulative voting in the election of directors.
Nominees of the The Board has nominated the following individuals to serve
the Board on Board of Directors of the Company for the following
year:
Joseph Hines
Carl A. Schroeder
Patrick M. Lonergan
Michael S. Lesser
Curtis M. Rocca III
Christopher D. Johnson
Kevin J. Tourek
All of these nominees are currently serving on the Board.
Each of the nominees has agreed to be named in this Proxy
Statement and to serve if elected. See page 5 for
information regarding each of the nominees listed above.
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We know of no reason why any of the listed nominees would not be able to
serve. However, if any nominee is unavailable for election, the Proxies will
vote your Common Stock to approve the election of any substitute nominee
proposed by the Board.
YOUR DIRECTORS RECOMMEND A VOTE FOR THE ELECTION OF THE SEVEN NOMINEES UNDER
PROPOSAL NO.1.
PROPOSAL NO. 2 - RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The principal independent public accounting firm utilized by the Company
during the fiscal years ended July 31, 1994, 1995, 1996, 1997, 1998 and 1999 was
Deloitte & Touche LLP, independent certified public accountants (the
"Auditors"). The Board of Directors presently contemplates that the Auditors
will be retained as the principal accounting firm to be utilized by the Company
throughout the fiscal year ending July 31, 2000. The Company anticipates that a
representative of the Auditors will attend the Annual Meeting for the purpose of
responding to appropriate questions. At the Annual Meeting, a representative of
the Auditors will be afforded an opportunity to make a statement if the Auditors
so desire.
The Proxies will vote in favor of ratifying the selection of Deloitte &
Touche LLP unless instructions to the contrary are indicated on the accompanying
proxy form.
YOUR DIRECTORS RECOMMEND A VOTE FOR PROPOSAL NO. 2.
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BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Information regarding the names, ages, positions with the Company and the
Board, and business experience of each of the directors and nominees is set
forth in the table below. Each director has served continuously with the Company
since his first election as indicated below.
DIRECTOR
NAME AGE POSITION(S) SINCE
---- --- ---------- --------
Joseph Hines 71 Chairman of the Board, 1983
President and Chief Executive
Officer
Carl A. Schroeder (1) 70 Director 1984
Patrick M. Lonergan (1), (2) 64 Director 1992
Michael S. Lesser (2) 57 Director 1995
Curtis M. Rocca III 37 Director 1997
Christopher D. Johnson (1) 47 Director 1999
Kevin J. Tourek (2) 41 Director 1999
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Joseph Hines Mr. Hines has served as President and Chief Executive Officer of the
Company since 1983. From 1976 until 1983, Mr. Hines owned and
operated Desert Valley Companies, Inc., a management consulting firm
headquartered in Phoenix, Arizona. From 1966 until 1976, Mr. Hines
served as Chief Executive Officer of several subsidiaries of Dart
Industries, formerly Rexall Drug and Chemical Company.
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Carl A. Schroeder Mr. Schroeder is retired. From September 1991 to August 1996, Mr.
Schroeder was the President of Dixon Capital Corp. Between 1982 and
September 1991, Mr. Schroeder was a private business consultant. Mr.
Schroeder was also a principal in certain mining, drilling and farming
operations from 1987 to 1992. From 1977 to 1982, he served as Chief
Financial Officer with a high technology division of the MEAD
Corporation. Mr. Schroeder received an engineering degree from MIT
and an MBA degree from Harvard Business School.
Patrick M. Lonergan Mr. Lonergan is the co-founder of Numark Laboratories, Inc. and has
served as its President since January 1989. From 1973 through
December 1989, Mr. Lonergan was employed in various capacities by
Johnson & Johnson Products Inc., or one of its affiliates. When Mr.
Lonergan left Johnson & Johnson Products Inc. in 1989, he was
employed as Vice President & General Manager.
Michael S. Lesser Mr. Lesser is the president of Dental Concepts LLC. From 1994 to
January 1999, Mr. Lesser was president of T.V. Direct, Inc. Mr. Lesser
also was the founder of Lesser & Roffe Company, a business
development consulting company. Prior to founding Lesser & Roffe
Company, Mr. Lesser served as President of Ogilvy & Mather Co., Inc.
from 1989 to 1990, as Chairman and Chief Executive Officer of Lowe
Marschalk Co., Inc. (a subsidiary of Revlon) from 1980 to 1989, and as
Executive Vice President and General Manager of Norcliff Thayer, Inc.
(a subsidiary of Interpublic) from 1973 to 1979.
Curtis M. Rocca III Mr. Rocca is the Chief Executive Officer and Director of Dental
Partners, Inc., a privately held dental practice consulting and
management company. Prior to joining Dental Partners, Mr. Rocca was
President of the Zila Professional Products Group, having held this
position following Zila's acquisition of Bio-Dental Technologies
Corporation in January 1997. Prior to the firm's acquisition by Zila,
Mr. Rocca served as President, CEO and Chairman of Bio-Dental
Technologies Corporation. Mr. Rocca holds a B.A. in Economics from
the University of California at Davis, where he graduated with honors.
Mr. Rocca currently serves as a director of Pacific Grain Products, Inc.,
located in Woodland, California.
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Christopher D. Since 1995, Mr. Johnson has been a corporate finance partner with
Johnson Squire, Sanders & Dempsey, LLP, a law firm with over 500 attorneys
and offices in nine major U.S. cities, eight European capitals, Taipei and
Hong Kong. Mr. Johnson has served on the firm's five-member
Management Committee since 1997. From 1994 to 1995, he was a
partner with the firm of Meyer, Hendricks, Victor, Osborn & Maledon
and before that he was a partner with the firm of Streich Lang. Mr.
Johnson received a B.A. from Princeton University and a J.D. from the
University of Virginia.
Kevin J. Tourek Mr. Tourek is Senior Vice President of Legal and Human Resources for
National Airlines, Inc., based in Las Vegas, Nevada. From 1987 to
August 1998, Mr. Tourek was a partner with the law firm of Streich
Lang in Phoenix, Arizona where his practice focused mainly on
corporate securities and finance matters. Mr. Tourek received his B.A.
from Michigan State University and a J.D. from the Ohio State
University College of Law.
EXECUTIVE OFFICERS
Information regarding the names, ages, positions with
the Company, and business experience of the Company's
Executive Officers is set forth below.
Bradley C. Anderson Mr. Anderson, age 38, joined the Company as Vice President and
Treasurer in November 1996 and was named Chief Financial Officer in
January 1998. Prior to joining the Company, from 1985 to 1996, Mr.
Anderson was employed by Deloitte & Touche LLP, most recently as an
Audit Senior Manager, in which capacity Mr. Anderson provided
auditing, planning, and other assistance and consulting to numerous
privately and publicly held companies, including the Company. Mr.
Anderson received his B.S. in Accountancy from Brigham Young
University. Mr. Anderson is a Certified Public Accountant.
Janice L. Backus Ms. Backus, age 50, has served as Secretary of the Company since April
1989 and in 1993 was named a Vice President of the Company. From
1983 until April 1989, Ms. Backus served as Assistant Secretary of the
Company. Ms. Backus has also served as the Assistant to the President
since 1983. Prior to joining the Company, Ms. Backus held
administrative and secretarial positions with the American Heart
Association, Arizona Division, BX International and Century Capital
Corporation.
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Rocco Anselmo Mr. Anselmo, age 50. As of May 31, 1999, Mr. Anselmo resigned as
President of Zila Pharmaceuticals and as Vice President of the
Company. Prior to his resignation, Mr. Anselmo joined the Company
in 1993 as the Vice President and General Manager of Zila
Pharmaceuticals, Inc. In January 1997 Mr. Anselmo became President
of Zila Pharmaceuticals and a Vice President of the Company. From
1983 to 1993, Mr. Anselmo held various positions with Oral-B
Laboratories, Inc., most recently as General Manager of Oral-B Labs
International from 1991 to 1993. From 1972 to 1983, Mr. Anselmo
held various sales and marketing positions with S.C. Johnson and
Sterling Drug Company.
ABOUT THE BOARD AND ITS COMMITTEES
The Board The Company is governed by a Board of Directors and various committees
which meet throughout the year. During the fiscal year ended July 31, 1999,
the Board of Directors of the Company met five times. All other actions
taken by the Board of Directors during the fiscal year ended July 31, 1999
were accomplished by means of unanimous written consent. During the
period in which he served as director, each of the directors attended 75% or
more of the meetings of the Board of Directors and of the meetings held by
committees of the Board on which he served.
Board The Board has two principal committees, the Compensation Committee and
Committees the Audit Committee. The function of each of these committees is described
below, along with the current membership and number of
meetings held during the fiscal year ended July 31, 1999.
The Company does not maintain a standing nominating
committee or other committee performing similar functions.
Compensation The Compensation Committee of the Board of Directors, which met twice
Committee during the fiscal year ended July 31, 1999, administers the Company's Stock
Option Award Plan, reviews all aspects of compensation of the Company's
officers and makes recommendations on such matters to the full Board of
Directors. During the fiscal year ended July 31, 1999, there were three
members of the Compensation Committee, Patrick M. Lonergan, Michael S.
Lesser and Thomas B. Simone. Mr. Simone served until his resignation in
September 1999.
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Audit The Audit Committee, which met twice during the fiscal year ended July 31,
Committee 1999, makes recommendations to the Board concerning the selection of
outside auditors, reviews the financial statements of the Company and
considers such other matters in relation to the internal and external audit of
the financial affairs of the Company as may be necessary or appropriate in
order to facilitate accurate and timely financial reporting. During the fiscal
year ended July 31, 1999, there were three members of the Audit Committee,
Clarence J. Baudhuin, Carl A. Schroeder, and Patrick M. Lonergan. Mr.
Baudhuin served until his resignation on December 31, 1998. Mr.
Christopher D. Johnson was appointed a member of the Audit Committee on
June 16, 1999.
Director As of December 11, 1997 non-employee members of the Company's Board
Compensation of Directors receive compensation in the amount of $1,500 per meeting of
the Board of Directors attended by such Director in person,
and $500 per meeting of the Board of Directors attended by
such Director by telephone. In 1989, the Board of Directors
adopted and the stockholders approved the Company's
Non-Employee Directors Stock Option Plan (the "Directors
Plan"). Under the terms of the Directors Plan, immediately
exercisable options to purchase 2,500 shares of Common Stock
are granted to each non-employee member of the Board of
Directors on the third trading day following the day the
Company publicly announces its year-end financial results
for the immediately preceding fiscal year; provided,
however, that options may not be granted to any non-employee
director who, during the fiscal year immediately preceding
the grant date, attended less than 75% of the Board meetings
and committee meetings (if he is a member of such committee)
held while he was a member of the Board of Directors. The
per share price at which the options may be exercised is the
average of the closing bid and asked prices of the Common
Stock on the date of grant. The term of each option granted
under the Directors Plan is five years from the date of
grant. The Board may from time to time amend the Directors
Plan in whole or in part in such respects as the Board may
deem advisable, or may terminate the Directors Plan.
On November 2, 1999, October 7, 1998, November 3, 1997,
November 1, 1996 and November 3, 1995 each non-employee
director then serving on the Board was granted an option to
purchase 2,500 shares of Common Stock at per share exercise
prices of $3.09375, $4.3125, $7.00, $6.59 and $4.00,
respectively. As of October 29, 1999, options to purchase
92,089 shares of Common Stock granted under the Directors
Plan have been exercised.
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EXECUTIVE COMPENSATION
The table below sets forth annual and long-term compensation for
services in all capacities to the Company for the fiscal years ended July 31,
1999, 1998 and 1997, of the persons who were, at July 31, 1999: (i) the Chief
Executive Officer and (ii) the other executive officers of the Company (the
"Named Officers") whose total annual salary and bonus exceeded $100,000.
Annual Long-Term
Compensation Compensation
--------------------- ---------------
Securities
Underlying All Other
Name and Principal Position Year Salary($) Bonus ($) Options/SARs(#) Compensation (1)
- --------------------------- ---- --------- --------- --------------- ----------------
Joseph Hines 1999 $207,826 $20,000 25,000 $3,417
President, Chief Executive 1998 180,833 -- 25,000 2,712
Officer and Director 1997 175,000 -- 25,300 2,625
Bradley C. Anderson 1999 147,008 15,600 25,000 2,439
Vice President and Chief 1998 113,333 -- 75,000 1,700
Financial Officer 1997 (2) 67,500 -- 105,000 -
Rocco Anselmo (3) 1999 185,481 37,125 20,000 3,339
Vice President of Zila, Inc. 1998 161,792 -- 75,000 2,427
and President of Zila 1997 157,300 31,460 17,680 2,682
Pharmaceuticals, Inc.
Janice L. Backus 1999 120,223 12,600 25,000 1,992
Vice President and Corporate 1998 99,050 - 50,000 1,486
Secretary 1997 81,000 11,000 15,500 1,215
(1) Represents Company 401(k) plan matching contributions.
(2) Mr. Anderson joined the Company in November 1996 and his salary reflects
that he was employed for only eight months of fiscal 1997.
(3) Resigned May 31, 1999 as President of Zila Pharmaceutical and as a Vice
President of the Company.
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STOCK OPTION GRANTS
The following Named Officers were granted stock options under the
Company's Stock Option Award Plan during the fiscal year ended July 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable
Individual Grants Value at
---------------------------------------------------------
Assumed Annual
Number of % of Total Rates of
Securities Options Stock Price
Underlying Granted to Exercise or Appreciation for
Option Employees in Base Price Expiration Option Term(3)
----------------------
Name Granted(1)(#) Fiscal Year (per share)(2) Date 5% ($) 10% ($)
- ---- -------------- ------------ -------------- ---------- -------- -------
Joseph Hines 25,000 6.1% $9.875 12/10/08 $155,258 $393,455
Bradley C. Anderson 25,000 6.1 9.875 12/10/08 155,258 393,455
Rocco Anselmo (4) 20,000 4.9 9.875 12/10/08 124,207 314,764
Janice L. Backus 25,000 6.1 9.875 12/10/08 155,258 393,455
(1) All options granted in the fiscal year ended July 31, 1999 are fully
exercisable.
(2) All options were granted at the fair market value (the mean of the final
closing bid and asked prices of the Common Stock on the NASDAQ) on the date
of grant. The exercise price and tax withholding obligations related to
exercise may be paid by delivery of already owned shares or by offset of
the underlying shares, subject to certain conditions.
(3) The potential realizable value is calculated based on the 10-year term of
the option at the time of its grant. It is calculated by assuming that the
stock price on the date of grant appreciates at the indicated annual rate,
compounded annually over the term of the option. These numbers are
calculated based upon rules promulgated by the SEC and do not represent the
Company's estimated or projection of the future value of the Common Stock.
Potential gains are reported net of the option exercise price, but before
taxes associated with the exercise. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Common Stock and
overall stock market conditions, as well as the option holder's continued
employment. The amounts reflected in the table may not necessarily be
achieved.
(4) Resigned May 31, 1999 as President of Zila Pharmaceuticals and as Vice
President of the Company.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
OPTION VALUE AS OF JULY 31, 1999
The following table sets forth information with respect to the exercise
of stock options pursuant to the Company's Stock Option Award Plan during the
fiscal year ended July 31, 1999 by the Named Officers.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Fiscal Year-End (#) Fiscal Year End ($)
----------------------------- -----------------------------------
Shares
Acquired on Value
Name Exercise(#) Realized ($)(1) Exercisable(2) Unexercisable Exercisable(3) Unexercisable(3)
- ---- ----------- --------------- -------------- ------------- -------------- ----------------
Joseph Hines -- -- 437,269 -- $392,380 --
Bradley C.
Anderson -- -- 170,000 35,000 -- --
Rocco
Anselmo -- -- 62,680 50,000 -- --
Janice L.
Backus -- -- 265,852 -- 191,696 --
(1) Represents the market value of the underlying securities on the date of
exercise, minus the exercise price of the options.
(2) Options are considered to be exercisable if they could be exercised on or
before July 31, 1999.
(3) Represents the difference between the bid and asked closing prices ($3.416)
of the Company's Common Stock on July 30, 1999 and the exercise price of
the options.
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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
What is our Decisions on compensation of the Company's executive officers
Compensation are made by the three-member Compensation Committee of the Board
Philosophy? of Directors (the "Committee"). Each member of the Committee is
a non-employee director. The Committee is responsible for
setting and administering the policies that govern both annual
compensation and stock ownership programs. The Committee follows
the belief that compensation should be based upon the following
subjective principles:
- Compensation programs should reflect and promote
the Company's values, and reward individuals for
contributions to the Company's success.
- Compensation should be related to the value
created for stockholders.
- Compensation programs should integrate the
long- and short-term strategies of the Company.
- Compensation programs should be designed to
attract and retain executives critical to the
success of the Company.
- Stock ownership by management and stock-based
compensation plans are beneficial in aligning the
interests of management and the stockholders in the
enhancement of stockholder value.
Total compensation for each member of senior management is set
by the Committee at levels which it believes are competitive in
relation to companies of similar type and size. The Company has
retained an outside consultant to advise it with respect to
compensation matters. Once a report is prepared, it will be
presented to the Compensation Committee for consideration. The
components of executive compensation include salary, equity
participation in the Company in the form of options to purchase
Common Stock, and a cash bonus. Compensation for executive
officers of the Company is usually set by the Committee in
December of each fiscal year. Due to the level of compensation
received by the officers of the Company, the Committee has not
yet deemed it necessary to adopt a policy regarding the one
million-dollar cap on deductibility of certain executive
compensation under Section 162(m) of the Internal Revenue Code.
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Base Salary Salary recommendations are submitted annually to the Committee
by senior management. In evaluating such recommendations, the
Committee takes into account management's efforts to improve net
sales and expand the number of markets into which the Company's
products are distributed and sold. The Committee also takes
into account management's consistent commitment to the long-term
success of the Company through the development of new and
improved products, as well as management's innovative financing
arrangements for the Company's marketing programs. Such efforts
have permitted the Company to initiate marketing programs more
extensive than what might not otherwise be available to a
company of similar size and with similar resources.
Based upon its evaluation of these factors, the Committee
believes that senior management is dedicated to achieving
long-term financial improvements and that the compensation
policies, plans and programs administered by the Committee
contribute to management's commitment. The Committee attempts
to assimilate all of the foregoing factors when it renders its
compensation decisions; however, the Committee recognizes that
its decisions are primarily subjective in nature due to the
subjective nature of the criteria. The Committee does not
assign any specified weight to the criteria it considers.
Base salary recommendations are fixed at levels that the
Committee believes are paid to management with comparable
qualifications, experience and responsibilities at other
corporations of similar size engaged in similar business as the
Company; however, no independent investigation of such levels
has been conducted by the Committee. The Committee's
recommendations are offered to the full Board of Directors. The
Committee's recommendation is ultimately ratified, changed, or
rejected by the full Board of Directors. In the past three
fiscal years, the average annual salary increase for the Chief
Executive Officer has been approximately 7.2%, and the average
annual salary increase for other senior management has been
approximately 16.7%.
Options The Committee administers the Company's Stock Option Award Plan
(the "Award Plan"). All employees of the Company are eligible
to participate in the Award Plan. The exercise price of options
granted under the Award Plan is never less than the fair market
value of the Company's common stock on the day of grant. The
number of options granted by the Committee are based upon the
Committee's evaluation of the same factors described above under
"Base Salary." The Committee also takes into account the
relative scope of accountability and the anticipated performance
requirements and contributions of each employee, as well as each
employee's current equity participation in the Company. In
addition, the Committee seeks the recommendation of
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senior management with respect to options granted to all
employees of the Company, including the Chief Executive Officer
and senior management. During the fiscal year ending July 31,
1999, the Committee granted options representing 407,000 shares
of Common Stock under the Award Plan.
Bonus Senior management bonus compensation is paid under the Company's
Incentive Bonus Plan (the "Plan"). The Plan was adopted by the
Board of Directors and the Committee during fiscal year 1993
and, as of the date of this report, no bonuses have been
awarded. Bonuses awarded under the Plan may not exceed 30% of a
senior manager's annual base salary. The components which are
considered under the terms of the Plan are the Company's net
sales and sales volume and the job performance. Each member of
senior management is eligible for a bonus of up to 15% of the
member's base salary if the Company's annual net profits improve
by 25% over the prior year and a bonus of up to 7.5% of the
senior manager's base salary if the Company's annual sales
volume increases by more than 75% over the prior year.
Performance components of the senior manager's bonus may be as
great as 7.5% of the senior manager's annual base salary and are
based upon subjective criteria.
Chief Mr. Hines has served as President and Chief Executive Officer of
Executive the Company since 1983. As Chief Executive Officer, Mr. Hines
Officer receives a base salary as well as stock options under the Award
Plan and is eligible to participate in the Plan. In February
1997, Mr. Hines' employment agreement ceased to be of any
further effect; however, Mr. Hines will continue as the
President and Chief Executive Officer of the Company. The
Committee's evaluation process of the Chief Executive Officer's
compensation is comprised of the same components that are
utilized in evaluating other members of senior management.
Mr. Hines' current base salary was set at the 1998 Annual
Meeting of the Board of Directors. During the fiscal year ended
July 31, 1999, the Committee granted Mr. Hines options to
purchase a total of 25,000 shares of the Company's Common Stock
under the Award Plan. All the options were granted at fair
market value, were immediately exercisable, and expire ten years
after the date of grant.
Compensation Committee
Patrick M. Lonergan, Chairman
Michael S. Lesser
Thomas B. Simone (Resigned on
September 25, 1999)
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PRINCIPAL STOCKHOLDERS AND STOCKHOLDINGS OF MANAGEMENT
The following table sets forth, as of September 30, 1999, the number and
percentage of outstanding shares of Common Stock beneficially owned by (a) each
person known by the Company to beneficially own more than 5% of such stock, (b)
each director of the Company, (c) each of the Named Officers, and (d) all
directors and executive officers of the Company as a group. The address of each
stockholder listed below is c/o Zila, Inc., 5227 North 7th Street, Phoenix,
Arizona 85014-2800.
NAME AND ADDRESS OF SHARES BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED COMMON STOCK
------------------- ------------------- ------------
Joseph Hines 1,389,271(1) 3.4%
Janice L. Backus 342,110(2) *
Bradley C. Anderson 205,500(3) *
Rocco Anselmo 119,024(4) *
Carl Schroeder 27,500(5) *
Patrick M. Lonergan 24,671(6) *
Michael S. Lesser 12,500(7) *
Curtis M. Rocca III 69,551(8) *
Christopher D. Johnson 0 *
All officers and directors as a group
(9 persons) 2,190,127(9) 5.3%
- -----------------------------------
* Represents less than 1%.
(1) Includes 437,269 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1999 or within sixty days
thereafter.
(2) Includes 265,852 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1999 or within sixty days
thereafter.
(3) Includes 205,500 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1999 or within sixty days
thereafter.
(4) Includes 62,680 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1999 or within sixty days
thereafter, and does not include 50,000 shares of Common Stock which are
subject to unexercised options that become exercisable over a three-year
period on December 11 of 1999 and 2000.
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(5) Includes 12,500 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1999 or within sixty days
thereafter.
(6) Includes 12,500 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1999 or within sixty days
thereafter.
(7) Includes 10,000 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1999 or within sixty days
thereafter.
(8) Includes 2,500 shares of Common Stock which are subject to unexercised
options that were exercisable on September 30, 1999 or within sixty days
thereafter.
(9) Includes the shares of Common Stock subject to the options described above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's officers and directors and persons who beneficially own
more than 10% 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 and the National Association of Securities Dealers Automated
Quotation System. Officers, directors and greater than 10% stockholders are
required by Exchange Act regulations to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms were
required for such persons, the Company believes that during the fiscal year
ended July 31, 1999 its officers, directors, and greater than 10% beneficial
owners have complied with all filing requirements applicable to them.
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STOCK PRICE PERFORMANCE GRAPH
The graph below compares the cumulative total return of the Company's
Common Stock with the NASDAQ stock market index (U.S. companies) and the NASDAQ
pharmaceutical index from July 31, 1994 to July 31, 1999.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
AMONG ZILA, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ PHARMACEUTICAL INDEX
CUMULATIVE TOTAL RETURN
---------------------------------------
7/94 7/95 7/96 7/97 7/98 7/99
---- ---- ---- ---- ---- ----
ZILA, INC. 100 105 200 189 161 88
NASDAQ STOCK MARKET (U.S.) 100 140 153 226 266 379
NASDAQ PHARMACEUTICAL 100 140 170 199 200 309
* $100 INVESTED ON 7/31/94 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING JULY 31.
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PROPOSALS BY STOCKHOLDERS
Any Stockholder proposal that is intended to be presented at the
Company's 1999 Annual Meeting of Stockholders must be received at the Company's
principal executive offices no later than July 12, 2000, if such proposal is to
be considered for inclusion in the Company's proxy statement and form of proxy
relating to such meeting.
OTHER BUSINESS
The Annual Meeting is being held for the purposes set forth in the Notice
that accompanies this Proxy Statement. The Board is not presently aware of any
business to be transacted at the Annual Meeting other than as set forth in the
Notice.
ANNUAL REPORT
The Company's Annual Report with certified financial statements for the
fiscal year ended July 31, 1999 accompanies this Notice and Proxy Statement and
was mailed to all shareholders of record on or about November 11, 1999. Any
exhibit to the Annual Report will be furnished to any requesting person who sets
forth a good faith representation that he or she was a beneficial owner of the
Company's Common Stock on October 29, 1999.
By Order of the Board of Directors,
/s/ Janice L. Backus
-----------------------------------
Janice L. Backus
Vice President and Secretary
Phoenix, Arizona
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PROXY ZILA, INC. PROXY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints JOSEPH HINES, JANICE L. BACKUS
and BRADLEY C. ANDERSON, or any of them acting in the absence of the others,
with full power of substitution, the true and lawful attorneys and proxies of
the undersigned, to attend the Annual Meeting of the Stockholders of ZILA, INC.
(the "Company") to be held at Marriott's Camelback Inn, 5402 East Lincoln Drive,
Scottsdale, Arizona 85253 on December 9, 1999, at 9:00 a.m., local time, and any
adjournments thereof, and to vote the shares of Common Stock of the Company
standing in the name of the undersigned, as directed below, with all the powers
the undersigned would possess if personally present at the meeting.
Proposal No. 1: To elect seven directors to the Company's Board to serve for
the next year or until their successors are elected.
NOMINEES: JOSEPH HINES, CARL A. SCHROEDER, PATRICK M. LONERGAN, MICHAEL S.
LESSER, CURTIS M. ROCCA III, CHRISTOPHER D. JOHNSON and KEVIN J.
TOUREK.
- ---------- VOTE for all nominees except those whose names are written on the
line provided below (if any).
- --------------------------------------------------------------------------------
- ---------- VOTE WITHHELD on all nominees
Proposal No. 2: Ratification of the selection of Deloitte & Touche LLP as the
independent public accounting firm for the Company for the fiscal year ending
July 31, 2000. (Mark only one)
- ---------- VOTE FOR
- ---------- VOTE AGAINST
- ---------- VOTE WITHHELD
PLEASE PROMPTLY DATE, SIGN AND RETURN IN THE ENCLOSED ENVELOPE.
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This proxy will be voted in accordance with the directions indicated herein.
If no specific directions are given, this proxy will be voted for approval of
all nominees listed herein, for approval of the proposals listed herein and,
with respect to any other business as may properly come before the meeting, in
accordance with the discretion of the proxies.
DATED:
- ---------------------------------------------, 1999
----------------------------------
(Signature)
----------------------------------
(Signature)
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administrator, attorney, trustee
or guardian, please give full
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please sign in full corporate name
by president or other authorized
officer. If a partnership, please
sign in partnership name by
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