<PAGE> 1
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:
<TABLE>
<S> <C>
/ / 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Multiple Zones International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / 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 transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
707 SOUTH GRADY WAY
RENTON, WASHINGTON 98055-3233
April 1, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of Multiple Zones International, Inc. on Tuesday, April 22, 1997, at 10:30 a.m.,
Pacific Daylight Time. The Annual Meeting will be held on the Sixth Floor of the
Company's corporate headquarters located at 700 South Grady Way, Renton,
Washington 98055. You will find a map showing directions to the meeting on the
inside back cover of this booklet.
At the Annual Meeting, you will be asked to elect eight directors to the
Company's Board of Directors, and consider and vote on other matters. The Notice
of 1997 Annual Meeting of Shareholders and the Proxy Statement on the following
pages describe the matters to be presented at the Annual Meeting.
Your Board of Directors unanimously recommends that you vote "FOR" the
election of the nominated directors and "FOR" each of the proposals presented in
the Proxy Statement.
Whether or not you plan to attend, we hope you will have your stock
represented at the Annual Meeting. In order to do so, please mark, sign, date
and return your proxy card in the enclosed, postage-prepaid envelope as soon as
possible. You may, of course, attend the Annual Meeting and vote in person even
if you have previously returned your proxy card.
Sincerely yours,
JOHN E. DEFEO
Vice Chairman, President and Chief
Executive Officer
<PAGE> 3
MULTIPLE ZONES INTERNATIONAL, INC.
707 SOUTH GRADY WAY
RENTON, WASHINGTON 98055-3233
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 22, 1997
To the Shareholders of Multiple Zones International, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Multiple
Zones International, Inc., a Washington corporation (the "Company"), will be
held on Tuesday, April 22, 1997, at 10:30 a.m., Pacific Daylight Time, at the
Company's corporate headquarters at 707 South Grady Way, Sixth Floor, Renton,
Washington 98055, for the following purposes:
1. To elect eight (8) directors to hold office until the next Annual
Meeting or until their respective successors are elected and
qualified;
2. To consider and vote upon a proposal to ratify a Stock Option
Agreement between the Company and John E. DeFeo, the Company's Vice
Chairman, President and Chief Executive Officer;
3. To consider and vote upon a proposal to ratify the appointment of
Coopers & Lybrand L.L.P. as the Company's independent public
accountants for the year ending December 31, 1997; and
4. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on Friday, February
21, 1997, as the record date for determining shareholders entitled to notice of
and to vote at the Annual Meeting. Accordingly, only shareholders of record on
that date will be entitled to vote at the Annual Meeting and any adjournments
thereof. For ten days prior to the Annual Meeting, a complete list of the
shareholders entitled to vote at the Annual Meeting will be available for
examination by any shareholder for any purpose relating to the Annual Meeting
during ordinary business hours at the Company's principal office.
By Order of the Board of Directors
ROBERT L. HINES, JR.
Secretary
Renton, Washington
April 1, 1997
IT IS IMPORTANT THAT YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING,
WHETHER OR NOT YOU PLAN TO ATTEND. PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED
PROXY AND RETURN IT IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE. PROXIES ARE
REVOCABLE AND YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON AT THE ANNUAL
MEETING.
<PAGE> 4
LOGO
707 SOUTH GRADY WAY
RENTON, WASHINGTON 98055-3233
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 22, 1997
GENERAL
This Proxy Statement and the accompanying form of proxy are furnished in
connection with the solicitation of proxies by the Board of Directors (the
"Board") of Multiple Zones International, Inc. (the "Company"), for use at the
1997 Annual Meeting of Shareholders (the "Annual Meeting"). The Annual Meeting
will be held on Tuesday, April 22, 1997, at 10:30 a.m., Pacific Daylight Time,
at the Company's corporate headquarters, 707 South Grady Way, Sixth Floor,
Renton, Washington 98055. This Proxy Statement and the accompanying form of
proxy are being mailed to the shareholders of the Company on or about April 1,
1997.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only holders of record of the Company's common stock, no par value per
share (the "Common Stock") at the close of business on February 21, 1997 are
entitled to notice of, and to vote at, the Annual Meeting. On that date, the
Company had 12,915,367 shares of Common Stock outstanding. Each share of Common
Stock outstanding on the record date is entitled to one vote. The presence in
person or by proxy of holders of record of a majority of the outstanding shares
of Common Stock is required to constitute a quorum for the transaction of
business at the Annual Meeting. Shares of Common Stock underlying abstentions
and broker non-votes will be considered present for the purpose of calculating a
quorum. Holders of Common Stock are not entitled to cumulate votes in the
election of directors.
Under Washington law and the Company's charter documents, if a quorum is
present, the eight (8) nominees for election to the Board who receive the
greatest number of affirmative votes cast at the Annual Meeting will be elected
directors. The affirmative vote of a majority of shares voted in person or by
proxy at the Annual Meeting is required for approval of any other matters
submitted to a vote of shareholders. Abstention from voting for one or more of
the nominees for director will make it less likely that the nominee will be one
of the eight (8) nominees for director who receive the greatest number of votes
cast. In the case of any other matter, abstention from voting will have no
effect, since the approval of these proposals is based solely on the number of
votes actually cast. Broker non-votes will have no effect on the outcome of any
matters, other than to reduce the number of "FOR" votes necessary to approve
such matters.
<PAGE> 5
PROXY VOTING AND REVOCATION
If the accompanying form of proxy is properly signed, dated and returned,
the shares represented by the proxy will be voted at the Annual Meeting in
accordance with instructions specified on the proxy card. In the absence of
instructions to the contrary, such shares will be voted as follows:
"FOR" the election of the nominees to the Board named in this Proxy
Statement;
"FOR" ratification of the Stock Option Agreement between the Company
and John E. DeFeo; and
"FOR" ratification of the appointment of Coopers & Lybrand L.L.P. as
the Company's independent public accountants for the year ending December
31, 1997.
It is not expected that matters other than those referred to in this Proxy
Statement will be brought before the Annual Meeting. If other matters are
properly presented, however, the persons named as proxies will vote in
accordance with their discretion with respect to such matters.
Any shareholder executing a proxy has the power to revoke it at any time
before it is voted, by (i) delivering written notice of revocation to the
Secretary of the Company, (ii) executing and delivering to the Company another
proxy dated as of a later date, or (iii) voting in person at the Annual Meeting.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER HOLDERS
The following table sets forth the beneficial ownership of the Common Stock
as of February 1, 1997, by (i) each shareholder known by the Company to be the
beneficial owner of more than 5% of the outstanding Common Stock, (ii) each
director (which includes all nominees for director), (iii) each executive
officer named in the Summary Compensation Table in this Proxy Statement, and
(iv) all directors and executive officers as a group.
Each of the named persons and members of the group has sole voting and
investment power with respect to the shares shown, except as noted below.
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF PERCENT OF
COMMON STOCK COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED OUTSTANDING (2)
- ------------------------------------------------------------ ------------------ ---------------
<S> <C> <C>
Sadrudin J. Kabani(3)....................................... 3,761,000 29.1%
Almas S. Kabani
Firoz H. Lalji(4)(5)........................................ 3,753,000 29.0%
Najma Lalji
Steve Sarich, Jr.(5)........................................ 987,500 7.6%
Paul E. Monson(5)(6)........................................ 513,375 4.0%
Teryl L. Monson.............................................
John E. DeFeo(7)............................................ 129,295 1.0%
Victor J. Melfi, Jr.(8)..................................... 102,000 *
Bruce S. Martin(9).......................................... 51,750 *
Peter J. Biere(10).......................................... 45,000 *
John T. Carleton(5)......................................... 51,841 *
Carol L. Miltner(11)........................................ 5,975 *
John H. Bauer(11)........................................... 2,175 *
Judith A. Roseth(12)........................................ 9,417 *
All directors and executive officers as a group (12
persons)(13).............................................. 9,412,328 71.1%
</TABLE>
- ---------------
* Less than 1%
(1) The address for each of these shareholders is 707 South Grady Way, Renton,
Washington 98055-3233.
(2) Shares subject to an option are not deemed outstanding for purposes of
computing the percentage ownership of any person other than the person
holding the option.
(3) Includes 10,000 shares held of record by Mrs. Kabani and 1,000 shares held
of record by a daughter of the Kabanis.
(4) Includes 3,000 shares held in trust for the Laljis' two children.
(5) Excludes 10,000 shares subject to options not exercisable within 60 days
after February 1, 1997
2
<PAGE> 6
(6) Includes 1,500 shares held by Mr. Monson as trustee for three minor
grandchildren.
(7) Includes 128,695 shares subject to options exercisable within 60 days after
February 1, 1997; excludes 525,261 shares subject to options not
exercisable within such period.
(8) Represents shares subject to options exercisable within 60 days after
February 1, 1997; excludes 272,423 shares subject to options not
exercisable within such period.
(9) Includes 33,750 shares subject to options exercisable within 60 days after
February 1, 1997; excludes 210,942 shares subject to options not
exercisable within such period.
(10) Represents shares subject to options exercisable within 60 days after
February 1, 1997; excludes 64,808 shares subject to options not exercisable
within such period.
(11) Includes 1,875 shares subject to options exercisable within 60 days after
February 1, 1997; excludes 8,125 shares subject to options not exercisable
within such period.
(12) Includes 9,000 shares subject to options exercisable within 60 days after
February 1, 1997; excludes 36,000 shares subject to options not exercisable
within such period.
(13) Includes 322,195 shares subject to options exercisable within 60 days after
February 1, 1997.
PROPOSAL NO. 1: ELECTION OF DIRECTORS
In accordance with the Company's Bylaws, the Board has fixed the number of
directors constituting the Board at nine. Directors are elected for one-year
terms. A Board consisting of eight directors will be elected at the Annual
Meeting to hold office until the next annual meeting of shareholders and until
their respective successors are elected and qualified. Accordingly, the Board
will have one vacant seat, which it currently has no specific intention to fill.
The Board has unanimously approved the nominees named below, all of whom
are current members of the Board. Unless otherwise instructed, it is the
intention of the persons named in the accompanying form of proxy to vote shares
represented by properly executed proxies for the eight nominees of the Board
named below. Although the Board anticipates that all of the nominees will be
available to serve as directors, should any one or more of them not accept the
nomination, or otherwise be unwilling or unable to serve, it is intended that
the proxies will be voted for the election of a substitute nominee or nominees
designated by the Board.
THE BOARD RECOMMENDS A VOTE FOR ALL NOMINEES UNDER PROPOSAL NO. 1.
NOMINEES FOR DIRECTOR
Biographical information regarding each of the nominees for director is set
forth below.
Sadrudin J. Kabani, age 52, is the Company's founder and has been Chairman
of the Board since the Company's inception in 1988. From 1988 to March 1996, he
also served as the Company's President and Chief Executive Officer.
John E. DeFeo, age 50, has served as a director since April 1996, and was
appointed Vice Chairman, President and Chief Executive Officer of the Company in
January 1997. From 1994 to 1996, Mr. DeFeo held the position of President and
Chief Executive Officer of U.S. Airwaves Inc., an early stage wireless
telecommunications company founded by him. From 1985 to 1994, Mr. DeFeo was
President and Chief Executive Officer of U.S. West New Vector Group. At U.S.
West New Vector Group, Mr. DeFeo was responsible for development of cellular
services worldwide, which grew during his tenure to a $1 billion business with
over 2,400 employees and 100 strategic partnerships, serving more than 100
markets in the United States and overseas.
John H. Bauer, age 56, has served as a director of the Company since March
1996. Since 1994, Mr. Bauer has been Executive Vice President of Nintendo of
America, Inc., a manufacturer and distributor of video games and products. From
1979 to 1994, he served as Managing Partner of the Northwest Group and the
Seattle office of Coopers & Lybrand L.L.P., a public accounting and consulting
firm.
John T. Carleton, age 52, has served as a director of the Company since
November 1995. Since October 1995, he has held the position of Senior Vice
President of Benaroya Capital Company, L.L.C. ("Benaroya"), a private investment
company. From 1993 to 1995, he served as Senior Vice President of GE Capital
Equity Capital Group, Inc., a private equity investor, and from 1986 to 1993 was
Vice President of Acquisitions of the
3
<PAGE> 7
Dyson-Kissner-Moran Corporation, a private investment company. Mr. Carleton also
serves as a director of Redhook Ale Brewery, Incorporated.
Firoz H. Lalji, age 50, has served as a director of the Company since 1990.
Since 1981, Mr. Lalji has been President and Chief Executive Officer of Kits
Cameras, Inc., which operates over 125 camera specialty stores in eight western
states. In addition, since 1985, he has been President and Chief Executive
Officer of Fana Group of companies, which owns real estate and hotels in the
United States and Canada.
Carol L. Miltner, age 54, has served as a director of the Company since
1995. Since 1991, she has been President of Motivation by Miltner, which
provides management consulting and motivation seminars for many companies in the
microcomputer products industry, including Comp USA and Tech Data. From 1993 to
1995, she was Executive Vice President of Sales and Marketing at AmeriQuest
Technologies, a computer products distributor that is now a U.S. subsidiary of
Computer 2000. From 1989 to 1991, she was Senior Vice President of Sales of
Merisel, Inc. From 1985 to 1989, she was Vice President of Sales and then Senior
Vice President of Sales of Ingram Micro, Inc.
Paul E. Monson, age 51, has served as a director of the Company since 1993.
Since 1991, he has been Chairman of the Board, President and Chief Executive
Officer of Back Technologies, Inc., which manufactures and markets back therapy
equipment. He has also served since 1984 as Chairman of the Board of Pacific
Regency Care Management, an operator of long-term health care facilities.
Steve Sarich, Jr., age 76, has served as a director of the Company since
1993. Mr. Sarich has served as President of several companies, including 321
Investment Co., a venture capital company, Arctic Ventures, Inc., a fishing
company, and C.S.S. Management Co., a management firm. Mr. Sarich is also a
director of Cyclo(3)pss Corporation, a developer of ozone technology for medical
sterilization units and textile washing systems, Wall Data, Incorporated, a
developer of connectivity software, and Omega Environmental, Inc., an
environmental remediation company.
No family relationship exists between any of the Company's officers and
directors.
DIRECTOR COMPENSATION
All directors are reimbursed for out-of-pocket expenses incurred in
connection with attendance at meetings of the Board and its committees.
Directors who are employees of the Company do not receive any fee for their
services as directors. Outside directors receive a fee of $1,000 for each Board
or committee meeting attended. For services as directors in 1996, Ms. Miltner
and Messrs. Bauer and DeFeo received fees of $22,915, $11,500 and $15,123,
respectively. Ms. Miltner also received consulting fees of $44,250 in 1996. In
connection with their joining the Board in 1996, Messrs. Bauer and DeFeo were
each granted a ten-year option to purchase 7,500 shares of Common Stock for
$6.67 and $12.67 per share, respectively, with scheduled vesting of 25% for each
full year of service on the Board. Mr. DeFeo also was granted a ten-year option
to purchase 481 shares for $25.88 per share, with scheduled vesting of 20% for
each full year of service on the Board. The Company has entered into agreements
with all directors to indemnify them against claims and liabilities arising out
of their service as directors and to advance expenses to defend claims subject
to indemnification.
BOARD AND COMMITTEE MEETINGS
The Board met eleven times during 1996.
The Board has a standing Audit Committee and Compensation Committee. Each
of these committees is responsible to the full Board. The functions performed
by, and composition of, these committees are summarized below.
The Audit Committee, currently composed of Ms. Miltner and Messrs. Bauer,
Carleton and Lalji, reviews the Company's internal accounting procedures and
consults with and reviews the services provided by the Company's independent
accountant. The Audit Committee met twice during 1996.
The Compensation Committee, currently composed of Messrs. Carleton, Kabani,
Monson and Sarich, reviews and makes recommendations to the full Board with
respect to the compensation and benefits to be
4
<PAGE> 8
provided to the Company's officers and directors, and general policy matters
relating to employee compensation and benefits. The Compensation Committee met
nine times during 1996.
No director attended fewer than 75% of the meetings of the Board and the
committees of which the director was a member during 1996.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Carleton, Kabani, Monson and Sarich are the current members of the
Compensation Committee of the Board. From January 1996 until April 1996, Ms.
Miltner served on the Compensation Committee. Mr. DeFeo served on the
Compensation Committee from April 1996 until replaced by Mr. Carleton in January
1997 when Mr. DeFeo was named the Company's Vice Chairman, President and Chief
Executive Officer.
Mr. Kabani is the Chairman of the Board and the former President and Chief
Executive Officer of the Company. During 1996, Messrs. Kabani, Lalji, Monson and
Sarich guaranteed a portion of the Company's revolving line of credit with U.S.
Bank of Washington, National Association.
EXECUTIVE COMPENSATION
The following table sets forth information regarding compensation earned
during 1995 and 1996 by each of the Company's executive officers during those
years (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OPTIONS(#) COMPENSATION(2)
- --------------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Victor J. Melfi, Jr.(3).......... 1996 $227,084 $ 93,761 284,423 $17,200
Former President and Chief 1995 120,481 130,000 67,500 --
Executive Officer
Bruce S. Martin(3)............... 1996 216,668 43,156 172,692 200
Former Co-President and Chief 1995 21,269 -- 90,000 --
Operating Officer
Sadrudin J. Kabani............... 1996 285,417 35,863 -- 200
Chairman of the Board and 1995 250,000 -- -- 200
Former President and Chief
Executive Officer
Peter J. Biere................... 1996 124,166 15,609 79,808 200
Senior Vice 1995 93,474 10,000 15,000 200
President -- Finance and Chief
Financial Officer
Judith A. Roseth................. 1996 89,668 11,133 45,000 14,640
Senior Vice President -- Sales 1995 -- -- -- --
</TABLE>
- ---------------
(1) The amounts shown in this column represent awards under the Company's
Management Incentive Plan, in which certain of the Company's officers and
other employees participate.
(2) Amounts shown in this column represent matching contributions under the
Company's 401(k) Plan, except that the amount shown for Mr. Melfi in 1996
includes $17,000 in relocation loans forgiven by the Company, and the amount
shown for Ms. Roseth reflects relocation expenses paid by the Company.
(3) Messrs. Melfi and Martin currently serve as Executive Vice Presidents of
Marketing and Partner Merchandising, respectively.
5
<PAGE> 9
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information concerning stock option grants during
1996 to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE
--------------------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERMS(3)
OPTIONS EMPLOYEES PRICE -----------------------
NAME GRANTED(#)(1) IN 1996 ($/SHARE)(2) EXPIRATION DATE 5%($) 10%($)
- -------------------- ------------- ------------- ------------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Victor J. Melfi,
Jr................ 225,000 29.1% $ 12.67 4/30/06 $1,792,821 $4,543,361
45,000 5.8% 6.67 3/22/06 188,763 478,362
14,423 1.9% 25.88 10/23/06 234,746 594,892
Bruce S. Martin..... 120,000 15.5% 12.67 4/30/06 956,171 2,423,126
45,000 5.8% 6.67 3/22/06 188,763 478,362
7,692 1.0% 25.88 10/23/06 125,193 317,265
Sadrudin J.
Kabani............ -- -- -- -- -- --
Peter J. Biere...... 75,000 9.7% 12.67 4/30/06 597,607 1,534,646
4,808 0.6% 25.88 10/23/06 78,254 198,311
Judith A. Roseth.... 45,000 5.8% 6.67 3/22/06 188,763 478,362
</TABLE>
- ---------------
(1) All options were granted pursuant to the Company's 1993 Stock Incentive
Plan. Each of the options has a ten-year term and vests in equal annual
increments over five years, except that the options held by Messrs. Melfi,
Martin and Biere that are scheduled to expire on April 30, 2006, vested 20%
upon grant and will vest an additional 20% per year over four years.
(2) Prior to the Company's initial public offering in June 1996, the exercise
price of each option was the estimated fair value of the Common Stock on the
date of grant. Thereafter, the exercise price was based on the closing price
of the Common Stock on the date of grant, as reported by the Nasdaq National
Market.
(3) The actual value, if any, that a Named Executive Officer or any other
individual may realize on a stock option will depend on the excess of the
stock price over the exercise price on the date the option is exercised.
These figures are based on the estimated fair value or market price of the
Common Stock on the date of grant and assumed appreciation over the term of
the options at the respective annual rates of stock price appreciation
shown. There can be no assurance that the actual values will approximate the
potential realizable values set forth in the table. These amounts are not
intended to forecast future appreciation, if any, in the market value of the
Common Stock.
6
<PAGE> 10
FISCAL YEAR-END OPTION VALUES
The following table shows information concerning the number and value of
unexercised options held by the Named Executive Officers on December 31, 1996.
No options were exercised by the Named Executive Officers during 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END ($)(1)
------------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C>
Victor J. Melfi, Jr...................... 93,000 281,423 $ 344,610 $ 324,240
Bruce S. Martin.......................... 42,750 219,942 82,875 453,525
Sadrudin J. Kabani....................... -- -- -- --
Peter J. Biere........................... 45,000 64,808 227,550 --
Judith A. Roseth......................... -- 45,000 -- 138,600
</TABLE>
- ---------------
(1) Represents the aggregate fair market value of the shares of Common Stock
subject to outstanding in-the-money options, less the aggregate exercise
price of such options, based on the closing price of the Common Stock
($9.75) as reported by the Nasdaq National Market on December 31, 1996.
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return on the
Common Stock during the period beginning on June 27, 1996 (the date of the
Company's initial public offering) and ending on December 31, 1996 with the
cumulative total return during that period on the Total Return Index for the
Nasdaq Stock Market (U.S. Companies) (the "Nasdaq Composite Index") and the
Nasdaq Retail Trade Index. The comparison assumes $100.00 was invested on June
27, 1996 in the Common Stock and each of these indices and assumes reinvestment
of dividends. The return on the Common Stock shown on the graph is not
necessarily indicative of future performance.
[PERFORMANCE GRAPH]
June 27, 1996 December 31, 1996
------------- -----------------
Multiple Zones International, Inc. $100.00 $ 81.25
Nasdaq Composite Index $100.00 $108.65
Nasdaq Retail Trade Index $100.00 $ 99.22
7
<PAGE> 11
EMPLOYMENT AGREEMENTS
Effective in April 1996, the Company entered into employment agreements
with Messrs. Melfi, Martin and Kabani under which they are entitled to annual
base salaries of $250,000, $240,000 and $300,000, respectively. The term of each
agreement ends on December 31, 1998, unless certain events, such as a change in
control of the Company, occur after July 1, 1997, in which case the termination
date will be 18 months following such event. In addition, if the employment of
one of these executive officers is terminated by the Company without cause prior
to the end of his term, or if the executive officer resigns following a change
of control due to a material reduction in his responsibilities or certain other
reasons amounting to constructive termination by the Company, the executive
officer is entitled to receive his base salary for a period of two years
following the termination. Each executive officer has also agreed not to compete
with the Company for a period of two years following the termination of the
agreement for any reason other than constructive termination by the Company
following a change in control.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Compensation Policy. The Compensation Committee establishes and
administers the Company's compensation programs. The goal of these programs is
to enhance shareholder value by aligning compensation with the Company's
business objectives and performance, and to enable the Company to attract and
retain key management employees who can contribute to the Company's long-term
success. In order to attract outstanding executives, the Company's philosophy
has been and continues to be to provide a total compensation package that is
competitive within the hardware, software and direct marketing industries and
bears a close relationship to individual performance as well as the Company's
financial performance and its long-term business objectives.
The total direct compensation package for the Company's executive officers
is presently made up of three elements: an annual base salary, a short-term
incentive program in the form of performance-based cash bonuses under the
Company's Management Incentive Plan, and stock option grants. The Compensation
Committee believes the Company's compensation programs are appropriate for its
executive officers on the basis of industry standards, competitive practice and
Company performance.
Base Salaries. Individual base salaries reflect primarily historical
practice, internal position and responsibilities, and individual performance and
contribution. No specific weight is assigned to these factors. The Compensation
Committee establishes salaries for all executive officers at the Senior Vice
President level and higher, giving due consideration to the recommendations of
the Chief Executive Officer. The Company believes that the relative salaries of
senior management should reflect individual experience, contribution and
performance, although the Company does not have a targeted range for base
salaries or bonuses for any position. During 1996, the Compensation Committee
increased the salaries of the Chief Executive Officer, Chairman of the Board,
Chief Operating Officer and Chief Financial Officer to bring their salaries into
the middle range of executives with comparable positions in the industry.
Mr. Kabani served as President and Chief Executive Officer through March
1996, during which time he received an annual base salary of $250,000, which
reflected his experience and his status as the Company's founder. Mr. Melfi was
promoted to President and Chief Executive Officer in April 1996, at which time
his annual base salary was increased to $250,000. The Compensation Committee
based Mr. Melfi's salary on past individual performance and experience as well
as survey information gathered from independent sources. The Compensation
Committee believed this salary was competitive with other chief executive
officers in the direct marketing channel with a similar level of experience.
Bonus Compensation. The Company's Management Incentive Plan (the "MIP") is
designed to enable the Company to attract, retain and motivate key management
employees of the highest caliber. The MIP is a cash-based award system under
which executive officers and other key employees of the Company are rewarded for
contributions to the Company's success. The Compensation Committee is
responsible for establishing and communicating to all participants in the MIP
specific goals for financial performance by the Company. In addition, the
Committee may, in its discretion, establish individual performance goals for one
or
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more participants or provide that bonuses under the MIP will vary depending upon
the Committee's evaluation of overall individual performance by those
participants.
For 1996, bonus payments under the MIP for the five highest paid executive
officers were based on overall Company performance rather than individual
performance criteria. The potential bonuses available under the MIP ranged from
15% to 150% of base salaries. Based on the Company's performance in 1996, actual
bonuses under the MIP were paid to the executive officers at the 15% level.
Stock Options. The purpose of the Company's 1993 Stock Incentive Plan is
to provide additional incentives to executive officers and other key employees
to maximize shareholder value. Because these individuals are in a position to
make a substantial contribution to the Company's long-term success, the Company
believes they should have a significant equity stake so they are incentivized to
manage the business as shareholders rather than merely as employees. Options
granted under the Plan have been subject to substantial vesting periods in order
to encourage executive officers and key employees to continue in the employ of
the Company.
The Company has not granted Mr. Kabani options under the Plan, because it
believes he already has adequate equity incentives as one of the Company's two
largest shareholders. At the time of his promotion to President and Chief
Executive Officer, Mr. Melfi was granted a four-year option for 225,000 shares
of Common Stock, which was designed to raise his equity position to a level that
the Compensation Committee believed was appropriate for a person in his
position. The Compensation Committee intends to consider granting additional
stock options on an annual basis to executive officers and other key employees.
The amount of such grants will be based on the employee's position,
responsibility and individual performance during the year.
Tax Deductibility of Executive Compensation. The Committee has considered
the effect of Section 162(m) of the Internal Revenue Code of 1986 on the
Company's executive compensation programs. Section 162(m) disallows a deduction
in the event executive compensation exceeds one million dollars per year unless
certain conditions are satisfied. The Committee has reviewed all of the
Company's current compensation programs and believes that the deductibility of
amounts paid to executive officers under these programs will not be limited by
Section 162(m). The Committee intends to take such further steps as it deems
advisable to allow the Company to deduct future compensation amounts in excess
of one million dollars to the extent it may do so without compromising the
Company's ability to motivate and reward excellent performance. The Board and
the Committee will retain discretion to authorize the payment of compensation
that does not qualify for income tax deductibility under Section 162(m).
From January through April 1996, the Compensation Committee was comprised
of Ms. Miltner, Mr. Monson and Mr. Sarich. For the balance of 1996, the
Committee was comprised of Messrs. DeFeo, Kabani, Monson and Sarich. Upon naming
Mr. DeFeo as Vice Chairman, President and Chief Executive Officer in January
1997, the Board replaced Mr. DeFeo with Mr. Carleton as a member of the
Compensation Committee.
The Compensation Committee
Mr. Monson (Chairman) Mr. Kabani
Mr. Carleton Ms. Miltner
Mr. DeFeo Mr. Sarich
PROPOSAL NO. 2: RATIFICATION OF STOCK OPTION AGREEMENT FOR JOHN E. DEFEO
Proposal No. 2 requests the shareholders to consider and ratify at the
Annual Meeting a stock option granted to John E. DeFeo pursuant to a Stock
Option Agreement dated January 5, 1997 (the "Agreement"), which the Company
entered into with Mr. DeFeo in connection with his appointment as the Company's
Vice Chairman, President and Chief Executive Officer. The Agreement entitles Mr.
DeFeo to purchase up to 643,476 shares of Common Stock at an exercise price of
$10.50. The Agreement will terminate no later than June 30, 2002. The stock
option evidenced by the Agreement was not granted under the Company's 1993
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Stock Incentive Plan, but the Company intends that the Agreement constitute a
separate incentive stock option plan satisfying the requirements of Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). Messrs. Kabani
and Lalji have given Mr. DeFeo irrevocable proxies to vote shares held of record
by them for ratification of the Agreement.
The option vested for 20 percent of the shares subject to the Agreement
immediately on the date of grant, and the option will vest for an additional 20
percent of the shares on the second anniversary of that date. The option will
vest for an additional 20 percent of the shares when the per share market price
of the Common Stock first equals or exceeds $25.00 (if that occurs in 1997) or
$30.00 (if that occurs after 1997); the option will vest for an additional 20
percent of the shares when the per share market price of the Common Stock first
equals or exceeds $65.00; and the option will vest for the remaining 20 percent
of the shares when the per share market price of the Common Stock first equals
or exceeds $100.00. However, the option for shares whose vesting is contingent
on attaining these price targets will vest in all events on December 31, 2001.
If Mr. DeFeo's employment terminates for any reason, the option will not vest
further following such termination, except that vesting may accelerate upon
death or disability, and in the event of a change in control of the Company. The
Board may, at any time before complete termination of the option, elect to
accelerate the time or times at which the option may be exercised, in whole or
in part.
The option will be an incentive stock option under Section 422 of the Code
only with respect to 9,524 shares of Common Stock for which the option vests in
any calendar year. With respect to any additional shares for which the option
vests in any calendar year, the option will be a nonqualified stock option.
With respect to the portion of the option that constitutes an incentive
stock option, the tax consequences to Mr. DeFeo will vary depending on whether
certain holding period requirements are met. In addition, this portion of the
option will cease to be an incentive stock option, and thereafter be taxed as a
nonqualified stock option, if Mr. DeFeo exercises the option more than three
months following termination of employment for any reason other than death or
disability or more than one year following termination of employment on account
of disability.
If Mr. DeFeo acquires stock pursuant to the incentive stock option portion
of the option and does not dispose of the stock until at least one year after
the transfer of the stock to Mr. DeFeo and at least two years from the date of
grant of the option, then, subject to the alternative minimum tax rules
discussed below, there will be no tax consequences to Mr. DeFeo or the Company
when the incentive stock option is granted or when it is exercised. When the
stock is ultimately sold, gain or loss will be determined based on the
difference between the net proceeds of the sale and the aggregate exercise price
paid for the stock, and Mr. DeFeo will be required to report such gain or loss
as long-term capital gain or loss on his federal income tax return for the year
in which the sale occurs.
If stock acquired upon exercise of the incentive stock option portion of
the option is sold by Mr. DeFeo and, at the time of the sale, the holding period
requirements described in the preceding paragraph have not been met, the federal
income tax consequences to Mr. DeFeo will be as follows:
(a) Mr. Defeo will be required to report, on his federal income tax
return for the year in which the sale occurs, additional compensation
income equal to the difference between the fair market value of the stock
at the time of exercise of the option and the exercise price at which the
stock was acquired (the Company will generally be entitled to a
compensation deduction in an equivalent amount.)
(b) For purposes of determining gain or loss upon sale of stock, an
amount equal to this compensation income will be added to the exercise
price at which the stock was acquired, and the total will be Mr. DeFeo's
adjusted cost of the stock. Gain or loss will be determined, based upon the
difference between Mr. DeFeo's adjusted cost of the stock and the net
proceeds of the sale, and he will be required to report such gain or loss
as long-term or short-term (depending on how long he held the stock)
capital gain or loss on his federal income tax return for the year in which
the sale occurs.
When an incentive stock option is exercised, the difference between the
fair market value of the stock on the date of exercise and the exercise price
paid results in an adjustment in computing alternative minimum taxable income
for purposes of Sections 55 et seq. of the Code, which may trigger alternative
minimum tax
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consequences for Mr. DeFeo. Any alternative minimum tax that is payable may
ultimately be credited against future taxes owed.
With respect to the portion of the option that is a nonqualified stock
option, there generally will be no tax consequences to Mr. DeFeo or the Company
as a result of the grant of the option. Upon exercise of the option, Mr. DeFeo
will be required to report, on his federal income tax return for the year in
which the exercise occurs, additional compensation or self-employment income
equal to the difference between the fair market value of the stock at the time
of exercise of the option and the exercise price at which the stock was acquired
(the Company will generally be entitled to a deduction in an equivalent amount).
When the stock is ultimately sold, the transactions will be taxed in the manner
described in subparagraph (b) above for incentive stock options.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE STOCK OPTION AGREEMENT HELD BY MR. DEFEO.
PROPOSAL NO. 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Unless otherwise instructed, it is the intention of the persons named in
the accompanying form of proxy to vote shares represented by properly executed
proxies for the ratification of the appointment of Coopers & Lybrand L.L.P. as
independent accountants for the Company for 1997. Coopers & Lybrand L.L.P. has
audited the accounts of the Company for 1996. Representatives of Coopers &
Lybrand L.L.P. are expected to attend the Annual Meeting and will have an
opportunity to respond to appropriate questions from shareholders.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF
COOPERS & LYBRAND L.L.P. AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR 1997.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes of ownership with the
Securities and Exchange Commission (the "SEC"). Officers, directors and greater
than ten percent shareholders are required by SEC regulation to furnish the
Company with copies of all such reports they file.
Based solely on its review of the copies of such reports received by the
Company, and on written representations by the Company's officers and directors
regarding their compliance with the applicable reporting requirements under
Section 16(a) of the Exchange Act, the Company believes that, with respect to
1996, all filing requirements applicable to its officers and directors, and all
of the persons known to the Company to own more than ten percent of its Common
Stock, were complied with by such persons.
EXPENSES OF SOLICITATION
The expenses of preparing and mailing this Proxy Statement and the
accompanying proxy and the cost of solicitation of proxies on behalf of the
Board will be borne by the Company. Solicitation will be by mail and may be
supplemented by personal interview, telephone and telegram by directors,
officers and other employees of the Company without special compensation.
OTHER MATTERS
The Company knows of no other matters that are likely to be brought before
the Annual Meeting. If, however, other matters that are not now known or
determined come before the Annual Meeting, the persons named in the enclosed
proxy or their substitutes will vote such proxy in accordance with their
judgment.
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REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K filed with the SEC for the year
ended December 31, 1996 will be available to shareholders, without charge, upon
written request to Multiple Zones International, Inc., 707 South Grady Way,
Renton, Washington 98055-3233; Attention: Tim Carroll.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders to be considered for inclusion in the Proxy
Statement and proxy for the Company's 1998 Annual Meeting of Shareholders must
be received by the Secretary of the Company by December 15, 1997.
The Company's Bylaws outline procedures, including minimum notice
provisions, that govern the nomination of directors by shareholders and certain
other matters that a shareholder proposes to bring before the annual meeting. A
copy of the pertinent provisions of the Bylaws is available upon request to
Robert L. Hines, Jr., Multiple Zones International, Inc., 707 South Grady Way,
Renton, Washington 98055-3233.
IT IS IMPORTANT THAT PROXIES ARE RETURNED PROMPTLY AND THAT YOUR SHARES ARE
REPRESENTED. SHAREHOLDERS ARE URGED TO MARK, SIGN AND DATE THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
Renton, Washington
April 1, 1997
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Map
<PAGE> 17
PROXY
MULTIPLE ZONES INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Annual Meeting of
Shareholders of Multiple Zones International, Inc. (the "Company"), and the
related Proxy Statement dated April 1, 1997, hereby appoints John E. DeFeo and
Peter J. Biere, and each of them, proxies for the undersigned, with full power
of substitution, and authorizes them to attend the Annual Meeting of
Shareholders of the Company on April 22, 1997, and any adjournments thereof,
and to vote thereat all shares of Common Stock of the Company that the
undersigned would be entitled to vote if personally present, such proxies being
instructed to vote as specified on the reverse side, or, to the extent not
specified, to vote FOR the election as directors of all nominees named on the
reverse side and FOR Proposals 2 and 3 and to vote in their discretion on any
other matters presented at the meeting or any adjournments thereof.
PLEASE SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE> 18
PLEASE MARK [ ]
YOUR VOTES AS
INDICATED IN
THIS EXAMPLE.
<TABLE>
<S> <C> <C> <C> <C>
WITHHOLD
AUTHORITY TO VOTE
FOR ALL NOMINEES
FOR NAMED BELOW
1. ELECTION OF DIRECTORS [ ] [ ] 2. RATIFICATION OF STOCK FOR AGAINST ABSTAIN
OPTION AGREEMENT FOR [ ] [ ] [ ]
John H. Bauer, John T. Carleton, JOHN E. DEFEO
John E. DeFeo, Sadrudin J. Kabani,
Firoz H. Lalji, Carol L. Miltner, 3. RATIFICATION OF APPOINTMENT FOR AGAINST ABSTAIN
Paul E. Monson and Steve Sarich, Jr. INDEPENDENT ACCOUNTANTS [ ] [ ] [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
TO VOTE FOR ANY INDIVIDUAL NOMINEE, MANNER SPECIFIED BY THE UNDERSIGNED. EXCEPT AS OTHERWISE
STRIKE A LINE THROUGH THE NOMINEE'S SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL
NAME IN THE LIST ABOVE.) NOMINEES NAMED ABOVE, FOR RATIFICATION OF THE STOCK OPTION
AGREEMENT FOR JOHN E. DEFEO, AND FOR RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR ALL OF THE NOMINEES NAMED ABOVE
AND FOR PROPOSALS 2 AND 3.
Signature __________________________________ Signature, if held jointly ________________________________ Dated: ____________,1997
Please sign name exactly as it appears herein. If shares are held by joint tenants, both should sing. When signing as an attorney,
executor, administrator, trustee, or guardian, please give full title as such.
___________________________________________________________________________________________________________________________________
FOR AND DETACH HERE
</TABLE>
