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Matrixx Initiatives DEF 14A 2006 Table of Contents
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party Other than the Registrant o
Check the appropriate box:
MATRIXX INITIATIVES, INC.
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
Title of each series of securities to which transaction applies:
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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MATRIXX INITIATIVES, INC.
4742 N. 24th Street, Suite 455 Phoenix, Arizona 85016 (602) 385-8888 NOTICE AND PROXY STATEMENT
For Annual Meeting of Stockholders
To Be Held on May 11, 2006
To the Holders of Our Common Stock:
The annual meeting of stockholders of Matrixx Initiatives, Inc. will be held at the Ritz
Carlton, Phoenix, Arizona, on May 11, 2006 at 10:00 a.m. (local time) for the following purposes:
We cordially invite you to attend the annual meeting of stockholders. The board of directors
has fixed the close of business on March 22, 2006 as the record date for the determination of
stockholders entitled to receive notice of and to vote at the annual meeting or any adjournment
thereof. You can vote your shares of our common stock at the annual meeting only if you are
present at the annual meeting in person or by valid proxy. Admission to the annual meeting is
limited to our stockholders and their proxies. If you hold your shares in “street” form through a
broker or similar market intermediary rather than in your own name, you will be admitted to the
annual meeting if you present a written affidavit or statement from the brokerage institution that
is the registered holder of your shares showing that you were the beneficial owner of your shares
as of the March 22, 2006 record date.
Your vote is important to us. Even if you plan to attend the annual meeting, please complete
and sign the enclosed proxy card and mail it to us promptly in the return envelope. A copy of our
2005 Annual Report to Stockholders, which includes our 2005 financial statements, was first mailed
with this Notice and Proxy Statement on or about April 7, 2006 to all stockholders of record as of
the record date.
Your attention is directed to the attached Proxy Statement.
Phoenix, Arizona
April 7, 2006
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MATRIXX INITIATIVES, INC.
4742 North 24th Street, Suite 455
Phoenix, Arizona 85016 (602) 385-8888 PROXY STATEMENT
This Proxy Statement relates to the 2006 annual meeting of stockholders (the “Annual Meeting”)
of Matrixx Initiatives, Inc. (“Matrixx” or the “Company”) to be held at 10:00 a.m. (local time) on
May 11, 2006 at the Ritz Carlton, 2401 East Camelback Rd., Phoenix, Arizona, or at such other time
and place to which the Annual Meeting may be adjourned. The enclosed proxy is solicited by the
board of directors of Matrixx for use at the Annual Meeting. The proxy materials relating to the
Annual Meeting were first mailed on or about April 7, 2006 to record holders of our common stock
entitled to receive notice of and to vote at the Annual Meeting or any adjournment thereof.
You should review the information contained in this Proxy Statement in conjunction with the
financial statements, notes to financial statements, independent auditors’ reports and other
information included in our 2005 Annual Report to Stockholders that was mailed to our stockholders
with this Proxy Statement.
ABOUT THE ANNUAL MEETING
What is the purpose of the Annual Meeting?
At the Annual Meeting, you will be asked to consider and act upon the following matters:
Who is entitled to vote at the Annual Meeting?
Stockholders of record at the close of business on March 22, 2006 (the “Record Date”) are
entitled to receive notice of and to vote at the Annual Meeting or any adjournment thereof. As of
the Record Date, there were 9,816,482 shares of our common stock issued and outstanding. Each
stockholder of record on the Record Date is entitled to one vote per share of common stock held by
such stockholder on each matter of business to be considered at the Annual Meeting.
What constitutes a quorum at the Annual Meeting?
A majority of our issued and outstanding shares of common stock entitled to vote, represented
at the Annual Meeting in person or by proxy, will constitute a quorum for the Annual Meeting. If a
quorum is present for any proposal, we will be permitted to conduct all of the business of the
Annual Meeting. Proxies that we receive but are marked as abstentions (or “vote withheld”) will be
included in our calculation of the number of shares considered to be present at the Annual Meeting.
Under what process may I vote?
You can vote on matters to come before the Annual Meeting in four ways:
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Votes submitted via telephone or the internet must be received by 11:59 p.m. (Eastern Daylight
Time) on May 10, 2006. Submitting your vote via telephone or the internet will not affect your
right to vote in person at the Annual Meeting should you decide to attend the Annual Meeting. If
you hold your shares through a broker or other custodian, please review the voting form used by
that firm to see if it offers telephonic or internet voting. Applicable laws authorize the use of
telephonic transmission and electronic transmission, such as transmission over the internet, to
grant a proxy.
What are the board’s recommendations?
A description of each item to be voted on at the Annual Meeting, including the board’s
recommendations as to voting on such items, is set forth elsewhere in this Proxy Statement. In
summary, the board recommends a vote FOR the election of the director nominees included in this
Proxy Statement as described under Proposal No. 1 and a vote FOR the ratification of the
appointment of Mayer Hoffman McCann P.C. as the independent registered public accounting firm of
Matrixx, as described under Proposal No. 2. If any other matter is properly brought before the
Annual Meeting for a vote, the proxyholders will vote as recommended by the board of directors or,
if no recommendation is given, in the proxyholders’ own discretion.
What if I vote and then change my mind?
If you sign and mail us the enclosed proxy card and then wish to change your vote, you may
revoke your proxy at any time before it is exercised by:
What vote is required to approve each proposal?
For the election of directors, the nominees who receive the highest number of votes will be
elected as directors.
Stockholder ratification of the appointment of Mayer Hoffman McCann P.C. is not required by
our Bylaws or applicable law. However, our Board of Directors determined to submit such
appointment to our stockholders for ratification as a matter of good corporate practice. In the
event of a negative vote on such ratification, the Audit Committee will reconsider its selection.
Abstentions and broker non-votes are counted as present for purposes of establishing a quorum.
Abstentions are counted as voted and broker non-votes are counted as unvoted for determining the
approval of each matter submitted to the stockholders for a vote. A broker non-vote occurs where a
stockholder’s shares are held in “street” form through a broker or similar market intermediary
rather than in the stockholder’s own name. In this situation, the broker may vote the shares on
some “routine” matters, including the election of directors and the ratification of the Company’s
independent auditors, but will be unable to vote the shares on “non-routine” matters if it does not
have the authority from the beneficial stockholder to do so.
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Are proxies being solicited?
We are soliciting proxies for the Annual Meeting. We will bear the cost of solicitation of
proxies, including the charges and expenses of brokerage firms and others who forward proxy
materials to beneficial owners of our stock. Our solicitation will be by mail, telephone, or
electronic means, except for any incidental personal solicitation made by our directors, officers
and employees, who will receive no additional compensation for such solicitations. We also have
made arrangements with brokerage firms, banks, nominees and other fiduciaries to forward proxy
solicitation materials for shares held of record by them to the beneficial owners of such shares.
We will reimburse these record holders for their reasonable out-of-pocket expenses in this effort.
The extent to which our proxy soliciting efforts will be necessary depends upon how promptly
proxies are submitted to us. In this regard, you should send your completed and signed proxy card
without delay.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
General
The board of directors is divided into three classes and, generally, one class is elected each
year for a three-year term. At the Annual Meeting, we will seek the election of four individuals,
John M. Clayton, Samuel C. Cowley, Edward E. Faber, and L. White Matthews, III, as directors. Mr.
Clayton is nominated for a one-year term, to hold office until the 2007 annual meeting of
stockholders or until his successor is elected. Mr. Cowley, Mr. Faber, and Mr. Matthews are
nominated for a three-year term, to hold office until the 2009 annual meeting of stockholders or
until their successors are elected and qualified. All nominees are presently members of our board
of directors. The nominees have consented to be named in this Proxy Statement and to serve on the
board of directors if elected. We do not anticipate that any nominee will become unable or
unwilling to accept nomination or election. If that should occur, however, the proxy holders named
in the proxy intend to vote in his or her stead for the election of such person as our board of
directors may recommend. Cumulative voting is not permitted for the election of directors.
For information regarding the nominees proposed for election at the Annual Meeting, see
“Information Concerning Directors” in the following section.
Vote Required
The nominees who receive the highest number of votes cast at the Annual Meeting or any
adjournment thereof will be elected to the board of directors.
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF JOHN M. CLAYTON, SAMUEL C.
COWLEY, EDWARD E. FABER, AND L. WHITE MATTHEWS, III.
INFORMATION CONCERNING DIRECTORS
Biographical Information
The following sets forth certain biographical information with respect to the nominees for
election as directors at the Annual Meeting and our continuing directors.
Nominees for Director with Terms Expiring in 2007 OR 2009
*Consistent with the Company’s Corporate Governance Principles, Mr. Faber has advised the Company
that he will resign from the Board immediately before the 2008 annual meeting of stockholders, at
which time he will be 75 years old.
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John M. Clayton, Ph.D. was elected to the board of directors in October 2005. Retired from
active management, Mr. Clayton recently served as the Senior Vice President of Scientific and
Regulatory Affairs for Schering-Plough HealthCare Products, a position he was appointed to in
September 1984. In that position, Mr. Clayton was responsible for research and development of drugs
and devices as well as regulatory affairs, clinical research, and prescription-to-over-the-counter
drug switch programs. Prior to joining Schering-Plough in April 1974, Mr. Clayton held several
research and teaching positions, which include serving as Associate Professor at the University of
Tennessee as well as a Research Biologist at the Food and Drug Administration’s National Center for
Toxicological Research. Mr. Clayton received a Ph.D. in Pharmaceutical Sciences from the University
of Tennessee Health Sciences Center and a Bachelors of Science in Science-Pharmacy from Tennessee
Technological University.
Samuel C. Cowley was elected to the board of directors in July 2005. Mr. Cowley currently
serves as Executive Vice President and General Counsel for Swift Transportation Co., Inc. and is a
member of Swift’s board of directors. Prior to joining Swift in March 2005, Mr. Cowley was a
practicing attorney in the law firm of Snell & Wilmer L.L.P., Phoenix, Arizona since March 1990.
Mr. Cowley’s practice was concentrated in mergers and acquisitions, securities regulation,
including Sarbanes-Oxley Act compliance, and corporate finance. Previously he was associated with
Reid & Priest, New York, New York. Mr. Cowley is a graduate of Cornell Law School, Ithaca, New York
and of Brigham Young University, Provo, Utah with a Bachelors of Arts in Economics. Mr. Cowley is
admitted to practice law in the States of Arizona and New York.
Edward E. Faber was elected to the board of directors in September 2000 and was named Chairman
of the board in April 2001. Retired from active management, Mr. Faber currently serves on the
board of Pomeroy IT Solutions, Inc., a Nasdaq-listed computer and information technology services
provider. From 1991 to 1992, Mr. Faber was President and Chief Executive Officer of SuperCuts,
Inc., where he was responsible for organizing and executing a successful initial public stock
offering for the company. Mr. Faber has over 30 years of experience building and managing
high-technology growth companies. In 1976, he was the founding President of Computerland
Corporation, where he led the development of the largest computer retailing company in the world.
He retired from the company in 1983 but returned in 1985 to serve as Chairman and Chief Executive
Officer until the company was sold in 1987. Mr. Faber continued to serve as Vice Chairman of the
board of Computerland until 1990. Mr. Faber also previously served as Chairman and Chief Executive
Officer of Dataphaz, Computerland’s largest franchise operator. Mr. Faber graduated from Cornell
University with a Bachelors of Science in Industrial Labor Relations and served as an officer in
the United States Marine Corps.
L. White Matthews, III was elected to the board of directors in March 2003. Retired from
active management, Mr. Matthews currently serves as a director and audit committee member of
Imation Corp., an NYSE-listed data storage provider, a director of Mercantile Funds, Inc., a family
of mutual funds, and a director of Ceridian Corp., an NYSE-listed information services company.
Mr. Matthews brings extensive experience in the accounting, financial and audit fields of corporate
management from having served as Chief Financial Officer of two large public corporations. From
1999 until 2001, Mr. Matthews served as Executive Vice President, Chief Financial Officer and
member of the board of directors for Ecolab, Inc., an NYSE-listed developer and marketer of
cleaning and sanitizing products and services. From 1977 to 1998, he served in various capacities
with Union Pacific Corporation, including Executive Vice President-Finance and Chief Financial
Officer from 1988 to 1998 and as a member of the board of directors from 1994 to 1998. Mr.
Matthews also served as a director and member of the compensation committee and as Chairman of the
audit committee of Lexent, Inc., a Nasdaq-listed infrastructure services company, from 1998 to
January 2003. Mr. Matthews earned a Masters of Business Administration in Finance and General
Business from the University of Virginia’s Darden School of Business Administration and a Bachelors
of Science in Economics from Hampden-Sydney College.
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Continuing Directors with Terms Expiring in 2007
Edward J. Walsh was elected to the board of directors in September 2000. Mr. Walsh is currently the
President of the Sparta Group Ltd., a business consulting firm located in Arizona, and has served
in that role since 1988. Mr. Walsh also serves or has served on a number of corporate boards,
including Nortrust Holding Corporation, the holding company for Northern Trust Bank, Arizona and
Northern Trust Bank, Colorado. Mr. Walsh brings extensive experience in the consumer products
market. He was employed for 27 years by the Dial Corporation and its predecessor, Armour Dial
Corporation, serving as its President and Chief Executive Officer from 1983 to 1987. He also
served as President and Chief Executive Officer of Armour International from 1977 to 1983. Mr.
Walsh holds a Masters of Business Administration degree from New York University and is a graduate
of Iona College. Consistent with the Company’s Corporate Governance Principles, Mr. Walsh will not
be eligible to stand for re-election at the 2007 annual meeting of stockholders because he will be
75 years old at that time.
Michael A. Zeher was elected to the board of directors in September 2000. Presently, Mr.
Zeher serves as the President and CEO of Nutritional Laboratories, International, a privately-held
contract manufacturer, servicing the dietary supplement industry. He has held that office since
February, 2006. From July 2003 until March 2005, Mr. Zeher was President and Chief Operating
Officer of Pharmaceutical Formulations, Inc., a manufacturer of over 100 different types of
solid-dose over-the-counter pharmaceutical products. From 1994 through February 2002, Mr. Zeher
served as President and Chief Executive Officer of Lander Company, Inc., a manufacturer and
marketer of health and beauty care products. In that capacity, he was responsible for the
company’s worldwide operations and custom health care and international divisions. Mr. Zeher
previously served as Vice President, Business Development for Johnson & Johnson, where he was
responsible for the North American Consumer Sector business. Prior to taking that office, he held
various sales and marketing positions with Johnson & Johnson. Mr. Zeher holds a Bachelors of
Science in Business Administration from Old Dominion University.
Continuing Directors with Terms Expiring in 2008
Lori H. Bush was elected to the board of directors in October 2004. Ms. Bush currently serves
as President of Nu Skin, a division of Nu Skin Enterprises, an NYSE-listed direct selling company
that markets premium quality personal care and nutrition products through a global network of over
750,000 sales representatives. She has held this office since May 2001, prior to which she served
as Vice President of Marketing since February 2000. In 2003, Ms. Bush was appointed to the
Executive Committee of Nu Skin Enterprises. Prior to joining Nu Skin, she worked at Johnson &
Johnson Consumer Products Companies as the worldwide executive director over skin care ventures
from May 1998 to February 2000. She also served as vice president of professional marketing at
Neutrogena Corporation. Ms. Bush earned a Masters of Business Administration from Temple
University and a Bachelors of Science from Ohio State University
William C. Egan was elected to the board of directors in August 2001. He currently serves as
the Managing Partner of Huckleberry Partners, LLC, a real estate investment firm. He has held this
office since October 2005. He also currently serves as a director of US Dermatologics, a
manufacturer of first aid products, an Advisory Board Member of the J. L. Kellogg Graduate School
of Management, and a Trustee of the Westminster School. From 1999 to 2001,
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Mr. Egan served as Chairman of the board of directors of the Cosmetic, Toiletry and Fragrance
Association. In 2001, Mr. Egan retired from Johnson & Johnson after 25 years of active management.
From 1995 to 2001, Mr. Egan was a member of Johnson & Johnson’s Consumer Products Operating
Committee where he held a number of important global positions, including Group Franchise Chairman,
Worldwide Consumer and Personal Care Products. Additional positions with Johnson & Johnson
included President of Baby Products, Chairman of Windsor Minerals, Inc. and Group Product Director,
Tylenol Products. Mr. Egan also served as President of Arm & Hammer Consumer Products, a division
of Church & Dwight Co., Inc. Mr. Egan graduated from Trinity College and received a Masters of
Business Administration from the Northwestern University, J. L. Kellogg Graduate School of
Management.
Carl J. Johnson joined Matrixx Initiatives, Inc. in July 2001 as President and Chief Executive
Officer and as a member of the board of directors. Mr. Johnson has over thirty years of
professional experience in the product development, marketing, and sales arenas with several large
pharmaceutical and consumer goods companies. From 1993 to 2001, Mr. Johnson was Vice President,
Commercial Development with Perrigo Company, a public company and leading manufacturer of OTC
pharmaceutical and nutritional products for the store brand market. In that capacity he was
responsible for the procurement of new products and technologies and contract manufacturing
services with emphasis on Abbreviated New Drug Applications (ANDA) products. Mr. Johnson also
worked at Johnson & Johnson from 1973 to 1989, where he held a number of high level marketing and
sales positions, including responsibility for the national launch of the Acuvueâ disposable
contact lens product. Mr. Johnson provided marketing leadership for a special team tasked to
re-engineer Johnson & Johnson’s Consumer Sector sales, administrative and operational functions.
He also held the position of Director of Marketing for Johnson & Johnson Baby Products Company.
Prior to joining Johnson & Johnson he was an Account Executive at Compton Advertising servicing
Procter & Gamble business. Mr. Johnson earned a Masters of Business Administration – Marketing
from the Fairleigh Dickinson University and a Bachelors of Science in Economics from Wagner
College.
Meetings of the Board
During the fiscal year ended December 31, 2005, the board of directors held seven meetings,
either in person (including teleconference) or by written consent resolution. All directors
attended or participated in at least 75% of the meetings of the board of directors and their
respective committee meetings.
Committees of the Board
The board of directors has three standing committees: the Audit Committee, the Compensation
Committee, and the Corporate Governance and Nominating Committee.
Audit Committee
The Audit Committee, established in accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934, is responsible for reviewing the accounting principles, policies, and
practices followed by the Company in accounting for and reporting its financial results of
operations, at least quarterly, and for selecting and meeting with the Company’s independent
accountants. The Committee meets from time to time with members of the Company’s accounting staff
and also, among other things, reviews the financial and risk management policies followed by the
Company in conducting its business activities; the Company’s annual financial statements; the
Company’s internal disclosure controls and procedures and system of internal controls regarding
finance, accounting, legal compliance and ethics; and the performance and compensation of the
Company’s independent accountants. The Audit Committee operates under a written Audit Committee
Charter adopted by the board. A current copy of the Audit Committee charter is available on the
Company’s website (www.matrixxinc.com). The Audit Committee consists of Mr. L. White Matthews, III
(Chairman), Mr. Samuel Cowley, Mr. Edward Faber, Mr. Edward Walsh and Mr. Michael Zeher. The
committee met nine times in 2005. The board has determined that each of the members of the Audit
Committee has met the independence requirements of Rule 4200(a)(15) of the National Association of
Securities Dealers (“NASD”) listing standards and the Securities and Exchange Commission (“SEC”).
Mr. Matthews serves as the Audit Committee financial expert, as defined by SEC regulations and is
considered independent under the NASD listing standards. The report of the Audit Committee is set
forth below under the heading “Audit Committee Report.”
Compensation Committee
The Compensation Committee is responsible for reviewing the performance of the Company’s
executive management in achieving corporate goals and objectives, for seeking to ensure that
executive management members are
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compensated appropriately in a manner consistent with the Company’s business strategies,
competitive practices, and the requirements of applicable regulatory authorities, and for
administering all of the Company’s stock option plans. The Committee operates under a written
Compensation Committee Charter adopted by the board and available on the Company’s website
(www.matrixxinc.com). The Compensation Committee consists of Mr. Michael Zeher (Chairman), Ms.
Lori Bush, Mr. John Clayton, Mr. William Egan, Mr. L. White Matthews, III, and Mr. Edward Walsh.
The committee met five times in 2005. The report of the Compensation Committee is set forth below
under the heading “Report of the Compensation Committee.”
Corporate Governance and Nominating Committee
The Corporate Governance and Nominating Committee is responsible for identifying qualified
individuals to become members of the board, recommending board nominees for each of the board’s
committees, recommending to the board corporate governance principals and practices, and leading
the board in an annual review of its performance. The Committee operates under a written Corporate
Governance and Nominating Committee Charter adopted by the board and available on the Company’s
website (www.matrixxinc.com). The Corporate Governance and Nominating Committee consists of Mr.
William Egan (Chairman), Ms. Lori Bush, Mr. John Clayton, Mr. Samuel Cowley, and Mr. Edward Faber.
The committee met five times in 2005. The board has determined that each of the members of the
Corporate Governance and Nominating Committee has met the independence requirements of the NASD and
SEC.
The Corporate Governance and Nominating Committee will consider director nominee
recommendations by stockholders, provided the names of such nominees, accompanied by relevant
biographical and other information, are properly submitted in writing to the Secretary of the
Company in accordance with the manner described for stockholder nominations below under the heading
“Proposals by Stockholders.” To be considered by the Committee, each nominee, whether submitted by
a stockholder or this committee, must have a strong professional or other background with a
reputation for integrity and responsibility. Each nominee must have experience relevant to the
Company’s business in such areas (among others) as medicine, science, product research and
development, finance and accounting, or product marketing. The nominee must be able to commit
sufficient time to appropriately prepare for, attend, and participate in all board and applicable
board committee meetings, as well as the annual meeting of stockholders, and must not have any
conflicts of interest with the Company. The Corporate Governance and Nominating Committee also
requires a certain number of director nominees to be independent as defined under the NASD listing
standards and SEC regulations, and that at least one member of the Audit Committee be a financial
expert. The Committee will seek recommendations from outside legal, accounting, and other advisors
in order to locate qualified nominees. All nominees, whether submitted by a stockholder or the
Committee, will be evaluated in the same manner by the Committee, based upon their qualifications,
experience, interpersonal, and other relevant skills. Mr. John Clayton and Mr. Samuel Cowley, who
are seeking election by the stockholders for the first time at the 2006 Annual Meeting, were
originally proposed for consideration as members of the board by the Chairman of the Corporate
Governance and Nominating Committee.
Director Compensation
Non-employee directors receive a fee of $5,000 per quarter for service on the board and the
Chairman of the board receives $7,500 per quarter. In addition, the Audit Committee Chairman
receives $2,000 per quarter, a committee chairman (other than Audit) receives $1,250 per quarter
and a committee member receives $1,000 per quarter per committee assignment. Compensation is paid
on a quarterly basis.
In addition, each board member is granted 3,500 shares of restricted stock annually. The
exercise price for each such grant of options and restricted stock is set as the closing price of
the Company’s common stock on the date of grant.
In June 2002, as part of the Company’s 2001 Long-Term Incentive Plan, a Restricted Stock
Program was offered to our board of directors (the “Program”). A director who participates in the
Program, may elect to receive, in lieu of cash, all or any portion of the fees payable by Matrixx
to the director for service on the board of directors or any committee in the form of shares of our
common stock. Conditions to participation include a three year restriction on the sale or
disposition of any shares received under the Program. The purchase price for the shares is equal
to 80% of the closing price of our common stock on the Nasdaq National Market on the designated day
of purchase. During 2005 none of the directors participated in the program.
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Stockholder Communications with the Board
Stockholders and other parties interested in communicating with the Board of Directors may do
so by writing to Board of Directors, Matrixx Initiatives, Inc., 4742 N. 24th Street, Suite 455,
Phoenix, Arizona 85016.
Board Attendance at Annual Meeting
Board members are expected to attend the annual meeting of stockholders meetings,
circumstances permitting. All of the directors attended the 2005 annual meeting except Mr. Faber,
who was unable to attend for medical reasons.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and
other persons who own more than 10% of our equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. These officers, directors and
stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms
that they file. Based solely on our review of the copies of such forms received by us, or on
written representations that we have received from certain reporting persons that no forms were
required for such persons, we believe that during the fiscal year ended December 31, 2005, all
filing requirements applicable to our officers, directors and greater than 10% beneficial owners
were complied with.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Audit Committee of our board of directors has appointed Mayer Hoffman McCann P.C.,
independent registered public accounting firm, to audit the consolidated financial statements of
Matrixx for the fiscal year ending December 31, 2006. Mayer Hoffman McCann P.C. has audited our
financial statements since the fiscal year ended December 31, 2002 and has served as our
independent registered public accounting firm since November 12, 2002.
We anticipate that a representative of Mayer Hoffman McCann P.C. will be present at the annual
meeting, will have the opportunity to make a statement if he desires, and will be available to
respond to appropriate questions. Stockholder ratification of the appointment of Mayer Hoffman
McCann P.C. is not required by our Bylaws or applicable law. However, our Board of Directors
determined to submit such appointment to our stockholders for ratification. In the event of a
negative vote on such ratification, the Audit Committee will reconsider its selection.
UPON THE RECOMMENDATION OF OUR AUDIT COMMITTEE, THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE “FOR” RATIFICATION OF SUCH APPOINTMENT
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EXECUTIVE COMPENSATION
The following table discloses, for the years ended December 31, 2005, 2004 and 2003,
compensation paid to our named executive officers, including the President and Chief Executive
Officer and the other four most highly compensated executive officers during 2005.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants during the year ended December 31,
2005 to the named executive officers:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES The following table provides information on the value realized by the exercise of options by
our named executive officers during 2005 and the value of our named executive officers’ unexercised
options at December 31, 2005.
PERFORMANCE SHARE AWARDS
The following table sets forth information with respect to long-term incentive awards granted
to the Company’s named executive officers in February 2006. The Compensation Committee granted
these awards to the named executive officers as part of the named
executive officers’ 2005
performance bonuses (see “Report of the Compensation Committee” below).
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The performance share awards in the preceding table are payable in early 2009 only if
2008 performance objectives, to be established by the Compensation Committee, are met.
REPORT OF THE COMPENSATION COMMITTEE
The following Report of the Compensation Committee does not constitute soliciting material and
should not be deemed filed or incorporated by reference into any other filing under the Securities
Act of 1933 or the Securities Exchange Act of 1934 that we make, except to the extent we
specifically incorporate this Report.
The Compensation Committee annually reviews the performance and compensation of the President
and the Company’s other executive officers. Additionally, the Compensation Committee reviews
compensation of outside directors for service on the board and for service on committees of the
board, and administers the Company’s stock option plans.
Compensation Program Objectives
We believe that Matrixx’s compensation programs for its executive officers should reflect the
Company’s performance and the value created for its stockholders. In addition, we believe the
compensation programs should support the goals and values of the Company and should reward
individual contributions to the Company’s success. Specifically, Matrixx’s executive compensation
program is intended to:
Factors Considered in Determining Compensation
The Compensation Committee makes executive compensation decisions on the basis of total
compensation, rather than on separate freestanding components. We attempt to create an integrated
total compensation program structured to balance both short and long-term financial and strategic
goals. Our compensation should be competitive enough to attract and retain highly skilled
individuals. In this regard, each executive officers’ compensation package has three main parts:
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The Compensation Committee annually reviews each executive officer’s base salary and makes
appropriate recommendations to Matrixx’s board of directors. Annual salaries are based on the
following factors:
Performance bonuses and equity compensation are awarded based upon the recommendation of the
Compensation Committee. Restricted stock is generally granted annually under the Plan and is
priced at 100% of the closing price of Matrixx common stock on the date of grant. These grants are
made with a view to linking executives’ compensation to the long-term financial success of Matrixx.
In 2005, the Compensation Committee retained a consultant to assist it in establishing
executive compensation levels tailored to the Company and its objectives. The consultant’s
recommendations addressed the factors on which the Compensation Committee asked it to focus. The
Compensation Committee’s goal was to set executive compensation at a level between the median and
the 75th percentile of comparable companies, assuming performance objectives are met.
Chief Executive Officer Compensation
As President and Chief Executive Officer of the Company, Carl Johnson’s compensation is based
on his employment agreement with Matrixx which provides for a minimum base salary, the minimum
benefits to which he is entitled under the compensation plans available to the Company’s senior
executive officers and payments or other benefits he is entitled to receive upon termination of his
employment. The Compensation Committee reviews the base salary of Mr. Johnson annually pursuant to
the same policies the Committee uses to evaluate the base salaries of its other executive officers.
For 2005, his annual base salary was $425,000. In addition, Mr. Johnson received a performance
bonus of $425,000 and an award of 33,961 restricted shares. One-half of the restricted shares vest
in three years and the other half of the restricted shares vest in early 2009 only if 2008
performance objectives to be established by the Compensation Committee are met (see the Executive
Compensation table on page 10 and the Performance Share Awards table on page 11). These grants and
awards were based on Matrixx’s outstanding performance in 2005, the achievement of the revenue and
earnings goals previously established, and his leadership of the Company. The performance bonus
was paid in February 2006 but relates to performance in the 2005 fiscal year.
The Compensation Committee determined the amount of Mr. Johnson’s base salary and the number
of restricted stock shares to be awarded to him after considering the competitive levels of
compensation for chief executive officers managing companies of similar size, complexity and
performance level, and following a review of Mr.
Johnson’s contributions to Matrixx’s business success in 2005 and the conclusion that Mr.
Johnson has the vision and executive capabilities to continue to lead the growth of the Company.
Deductibility of Executive Compensation Under Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code limits the deductibility of executive compensation
paid by publicly held corporations to $1 million for each executive officer named in this Proxy
Statement. The $1 million limitation generally does not apply to compensation that is considered
performance-based. Non-performance-based compensation paid to Matrixx’s executive officers for the
2005 fiscal year did not exceed the $1 million limit for any employee. We believe that Matrixx’s
compensation policy satisfies Section 162(m) of the Internal Revenue Code. As a result, we believe
that the compensation paid under this policy is not subject to limits of deductibility. However,
there can be no assurance that the Internal Revenue Service would reach the same conclusion.
Moreover, Matrixx will not be entitled to a deduction with respect to payments that are contingent
upon a change of control if such payments are deemed to constitute “excess parachute payments”
pursuant to Section 280G of the Code and do not qualify as reasonable compensation pursuant to that
Section. Such payments will subject the recipients to a 20% excise tax.
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COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION No member of the Compensation Committee was an officer or employee of Matrixx or its
subsidiary, Zicam, LLC, in the fiscal year ended December 31, 2005, or was formerly such an officer
or employee or had any other relationship requiring disclosure hereunder.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information, as of March 10, 2006, with respect to the number
of shares of our common stock beneficially owned by the named executive officers, by individual
directors, by all directors and officers as a group, and by persons known by Matrixx to
beneficially own more than 5% of our outstanding common stock. The address of all persons (unless
otherwise noted in the footnotes below) is Matrixx Initiatives, Inc. at 4742 North 24th
Street, Suite 455, Phoenix, Arizona 85016. The indicated percentages are based upon the number of
shares of our common stock outstanding as of March 10, 2006, plus, where applicable, the number of
shares that the indicated person or group had a right to acquire within 60 days of that date.
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AGREEMENTS WITH CERTAIN OFFICERS
We have entered into an employment agreement with Carl J. Johnson, our President and Chief
Executive Officer, which became effective in July 2001 when Mr. Johnson first joined Matrixx and
which was amended in 2002. Mr. Johnson’s employment agreement provides for an initial three-year
term, with an automatic annual renewal of the agreement following the expiration of such initial
term unless and until the board or Mr. Johnson elects not to renew the agreement.
Mr. Johnson’s employment agreement specifies certain financial arrangements that we will
provide in the event that Mr. Johnson’s employment is terminated without cause, as well as upon
certain events involving a change in control of Matrixx. If we terminate Mr. Johnson without cause
or if he voluntarily resigns for certain specified “good reasons”, he will be entitled to receive,
over a subsequent period equal to one year or the remaining term of the agreement, whichever is
longer, semi-monthly payments which, when annualized, would be equal to his annual base salary in
effect at the time of his termination, plus an amount equal to the average of the annual incentive
bonus payments paid to Mr. Johnson in the two fiscal years preceding the fiscal year in which he
was terminated. Mr. Johnson will also be entitled to exercise all unexercised stock options
related to his original grant of 75,000 options, whether or not such options have vested at the
time of his termination. In the event that Mr. Johnson’s employment is terminated in connection
with a change in control of Matrixx, Mr. Johnson will be entitled to the same benefits described
above, except that in lieu of an amount equal to his base salary plus his average annual incentive
bonus paid over a 12-month or possibly longer term, Mr. Johnson would be entitled to receive a lump
sum payment equal to two times his base salary in effect in the fiscal year immediately prior to
the fiscal year in which the change of control occurs, plus an amount equal to the average of the
annual incentive bonus payments paid to him in the two fiscal years preceding the fiscal year in
which the change of control occurs.
The agreement contains provisions that restrict Mr. Johnson, during the term of his employment
and for a period of one year following his voluntary or involuntary termination, from directly or
indirectly competing with Matrixx or soliciting Matrixx’s employees or customers.
Additionally, in March of 2006, we entered into change of control agreements with each of the
Company’s executive officers, including William J. Hemelt, Timothy L. Clarot, Michael Voevodsky,
and James A. Marini. Each executive’s agreement continues in effect as long as he or she remains
employed by the Company.
Each agreement provides that if, within one year following a change of control of the Company,
the executive’s employment is terminated by the Company (or any successor) other than for cause and
other than based on the executive’s death or disability, or is terminated by the executive for good
reason (as the terms “change of control,” “cause,” “disability” and “good reason” are defined in
the agreement), the Company (or its successor) will pay the executive an amount equal to the sum of
(a) the executive’s base salary and (b) the average of the annual cash incentive bonuses paid to
the executive for the prior two fiscal years. Each agreement also entitles the executive to
continued participation in the Company’s group health plan coverage under COBRA for a period of 18
months after a qualifying termination of employment, during which time the Company will pay the
portion of the employer’s share of the cost of the executive’s premium.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No director or executive officer of the Company or stockholder owning greater than 5% of the
Company’s common stock had any relationship with the Company requiring additional disclosure
hereunder.
PERFORMANCE GRAPH
The line graph below and the following performance table each compare the cumulative total
stockholder return on our common stock, based on its market price, with the cumulative total
stockholder return of the Nasdaq Stock Market Index and the Russell 2000 Growth Index. The
comparisons utilize an investment of $100 on December 29, 2000.
PERFORMANCE TABLE
The Nasdaq Stock Market Index comprises all domestic shares traded on the Nasdaq National
Market and the Nasdaq SmallCap Market, excluding preferreds, rights and warrants. The Russell 2000
Growth Index is a growth industry index that measures the performance of the 2,000 smallest
companies in the Russell 3000 Index with the highest, proportionately weighted, growth
characteristics including higher price-to-book ratios and forecasted growth values.
REPORT OF THE AUDIT COMMITTEE
The following report concerns the Audit Committee’s activities regarding oversight of our
financial reporting and auditing process and does not constitute soliciting material and should not
be deemed filed or incorporated by reference into any other filing that we make under the
Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically
incorporate this Report.
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The Audit Committee of the board of directors has furnished the following report for the
twelve-month period ended December 31, 2005.
The Audit Committee has reviewed Matrixx’s audited financial statements for the year ended
December 31, 2005 and has met with both management and Mayer Hoffman McCann P.C., Matrixx’s
independent auditors, to discuss the financial statements. Management has represented to us that
the financial statements were prepared in accordance with generally accepted accounting principles.
We have received from and discussed with Mayer Hoffman McCann the written disclosure and matters
required to be discussed by Independence Standards Board Standard No. 1 (Independence Discussion
with Audit Committees). These items relate to that firm’s independence from Matrixx. We have also
discussed with Mayer Hoffman McCann the matters required to be discussed by Statement on Auditing
Standards No. 61 (Communication with Audit Committees), as amended by Statement on Auditing
Standards No. 89 and No. 90.
Based upon the review and discussions described above, the Audit Committee recommended to the
board of directors that Matrixx’s audited financial statements for the fiscal year ended December
31, 2005 be included in Matrixx’s Annual Report on Form 10-K for the fiscal year ended December 31,
2005 for filing with the SEC.
L. White Matthews, III, Chairman
Samuel Cowley Edward Faber Edward Walsh Michael Zeher RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
We presently contemplate that Mayer Hoffman McCann will be retained as our principal
accounting firm throughout the fiscal year ending December 31, 2006. We anticipate that a
representative of Mayer Hoffman McCann will attend the Annual Meeting for the purpose of responding
to appropriate questions. At the Annual Meeting, a representative of the firm will be afforded an
opportunity to make a statement if the firm so desires. The firm’s representative will also be
available to respond to appropriate questions.
Mayer Hoffman McCann has advised us that no member of that firm has any financial interest,
either direct or indirect, in the Company or our subsidiary, Zicam, LLC and it has no connection
with the Company or our subsidiary in any capacity other than that of our independent public
accountants.
Fees Paid to Mayer Hoffman McCann
The following table shows the fees paid or accrued by Matrixx for the audit and other services
provided by the Company’s accountants for the fiscal years ended December 31, 2005 and 2004:
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All services described above were approved by the Audit Committee.
The Audit Committee has considered and decided that the provisions of the non-audit services
referred to in the “Other Services Fees” portion of the above table (including the footnote
thereto) are compatible with maintaining the independence of the Company’s auditors.
Policy on Audit Committee Pre-Approval
The Audit Committee pre-approves each audit service and non-audit service to be provided by
the Company’s independent public accountants. The Audit Committee has delegated to the Chairman of
the Audit Committee the authority to pre-approve audit and non-audit services to be performed by
the independent public accountants if the services are not expected to cost more than $50,000. The
Chairman must report any pre-approval decisions to the Audit Committee at its next scheduled
meeting. All of the services performed by Mayer Hoffman McCann P.C. for the Company in 2005 were
pre-approved by the Audit Committee or the Chairman of the Audit Committee.
PROPOSALS BY STOCKHOLDERS
Any stockholder desiring to have a proposal included in our proxy statement for our 2007
Annual Meeting of Stockholders, including a director nominee recommendation, must deliver such
proposal (which must comply with the requirements of Rule 14a-8 promulgated under the Securities
Exchange Act of 1934) to our principal executive offices no later than December 8, 2006 and must
otherwise comply with the applicable provisions of Matrixx’s Bylaws. The Secretary will forward
all director nominee recommendations to the Corporate Governance and Nominating Committee for its
review. If a stockholder submits a proposal after the close of business on February 21, 2007, the
Company’s proxy holders will be allowed to use their discretionary voting authority to vote against
the proposal when and if the proposal is raised at the 2007 Annual Meeting.
OTHER MATTERS
Our board of directors is not presently aware of any matter to be presented at the Annual
Meeting other than those described in this Proxy Statement. However, if other matters properly
come before the Annual Meeting, it is the intention of the persons named in the accompanying proxy
card to vote such proxy card on such matters in accordance with their judgment.
ANNUAL REPORT
A copy of our 2005 Annual Report to Stockholders which includes our financial statements for
the fiscal year ended December 31, 2005, was mailed with this Notice and Proxy Statement on or
about April 7, 2006 to all stockholders of record on the Record Date. We will provide our complete
Annual Report on Form 10-K at no charge to any requesting person.
MATRIXX INITIATIVES, INC.
Lynn A. Romero
Vice President, Administration Secretary Phoenix, Arizona
April 07, 2006 17
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MATRIXX INITIATIVES, INC.
ANNUAL MEETING OF STOCKHOLDERS MAY 11, 2006 PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby constitutes and appoints CARL J. JOHNSON and WILLIAM J. HEMELT, and
each of them individually, with full power of substitution, the true and lawful attorney and proxy
of the undersigned, to attend the annual meeting of the stockholders of MATRIXX INITIATIVES, INC.
(the “Company”) to be held at the Ritz Carlton, Phoenix, Arizona, on May 11, 2006 at 10:00 a.m.
(local time), and any adjournment 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 four directors to the Company’s Board of Directors to serve for
their elected term or until their successors are elected.
Proposal No. 2: To ratify the appointment of Mayer Hoffman McCann P.C. as the independent
registered public accounting firm of Matrixx for the fiscal year ending December 31, 2006.
This proxy will be voted in accordance with the directions indicated herein. If no specific
directions are given, this proxy will be voted FOR Proposal No. 1 and Proposal No. 2 and, with
respect to any other business as may properly come before the meeting, in accordance with the
discretion of the proxies.
DATED: , 2006
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