<PAGE> 1
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 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
MULTIPLE ZONES INTERNATIONAL
- --------------------------------------------------------------------------------
(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)(1) 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
March 26, 1998
Dear Shareholder:
You are cordially invited to attend the 1998 Annual Meeting of Shareholders
of Multiple Zones International, Inc. on Thursday, April 30, 1998, at 1:00 p.m.
local time. The Annual Meeting will be held in the Olympic Room (Suite B/C) of
the Bellevue Club located at 11200 S.E. 6th Street, Bellevue, WA 98004.
Directions to the Bellevue Club are as follows: I-405 to S.E.8th Street
exit (Exit 12), keep left onto S.E. 8th Street; turn right onto 114th Avenue,
S.E., turn left onto S.E. 6th Street.
At the Annual Meeting, you will be asked to elect seven (7) directors to
the Company's Board of Directors, and consider and vote on other matters. The
Notice of 1998 Annual Meeting of Shareholders and the Proxy Statement on the
following pages describe the matters to be presented in 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. Your stock will be voted in accordance with the instructions you have
given in your proxy card. 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 30, 1998
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 Thursday, April 30, 1998, at 1:00 p.m. local time, in the Olympic Room
(Suite B/C) of the Bellevue Club located at 11200 S.E. 6th Street, Bellevue, WA
98004, for the following purposes:
(1) To elect seven (7) members of the Board of Directors to hold office
until the next Annual Meeting or until their respective successors
are elected and qualified.
(2) To 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, 1998.
(3) To transact such other business as may properly come before the
Annual Meeting.
Your Board of Directors has fixed the close of business on Thursday,
February 26, 1998, 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 or postponements thereof. For ten (10) days prior to the Annual
Meeting, a complete list of the shareholders entitled to vote at the meeting
will be available for examination by any shareholder for any purpose relating to
the 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
March 26, 1998
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 30, 1998
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
1998 Annual General Meeting of Shareholders (the "Annual Meeting") to be held on
April 30, 1998, or at any adjournments or postponements thereof. The Annual
Meeting will be held at 1:00 p.m. local time in the Olympic Room (Suite B/C) of
the Bellevue Club, located at 11200 S.E. 6th Street, Bellevue, WA 98004, for the
purposes set forth in the accompanying Notice of Annual Meeting.
This Proxy Statement and the accompanying form of proxy are being mailed to
the shareholders of the Company on or about March 26, 1998.
If the accompanying form of proxy is properly signed, dated and returned,
the shares represented by the proxy will be voted in accordance with
instructions specified on the proxy card. In the absence of instructions to the
contrary, such shares will be voted for all the nominees for election to the
Board listed in this Proxy Statement and named in the form of proxy, and for
each proposal described in this Proxy Statement. 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.
OUTSTANDING SECURITIES AND VOTING RIGHTS
Only holders of record of the Company's common stock, $.001 par value per
share ("Common Stock") at the close of business on February 26, 1998 are
entitled to notice of, and to vote at, the Annual Meeting. On that date, the
Company had 13,065,844 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 seven (7) 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 entitled to vote and
present in person or by proxy at the Annual Meeting is required for approval of
any other matters submitted to a vote of shareholders. Abstentions and broker
non-votes will have no effect on the election of directors. In the case of any
other matter, abstention from voting will have the practical effect of voting
against such matter. Broker
<PAGE> 5
non-votes will have no effect on the outcome of any other matter, other than to
reduce the number of "FOR" votes necessary to approve such matter.
PROXY VOTING AND REVOCATION
Shares for which proxies are properly executed and returned will be voted
at the Annual Meeting in accordance with the directions noted on the proxy or,
in the absence of directions to the contrary, such shares will be voted "FOR"
the election of the nominees to the Board and "FOR" approval of the other
proposal set forth in this Proxy Statement. 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 giving a proxy may revoke it at any time before it is voted
by delivering to the Company's Secretary a written notice of revocation or a
duly executed proxy card bearing a later date, or by attending the Annual
Meeting and electing to vote in person.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN OTHER HOLDERS
The following table sets forth the beneficial ownership of the Common Stock
as of March 3, 1998, by (i) each shareholder known by the Company to be the
beneficial owner of more than five (5) percent of the outstanding Common Stock,
(ii) each director (including all nominees for director), (iii) each executive
officer named in the Summary Compensation Table in this Proxy Statement ("Named
Executive Officer"), 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>
NO. OF SHARES PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNED(1)
------------------------------------ ------------------ --------
<S> <C> <C>
Firoz H. Lalji(2)(3)(4)................................... 3,758,500 28.8%
Najma Lalji
Sadrudin J. Kabani(2)(5).................................. 3,748,200 28.7%
Almas S. Kabani
Paul E. Monson(4)(6)...................................... 515,875 4.0%
Teryl L. Monson
Victor J. Melfi, Jr.(7)................................... 137,885 1.0%
John E. DeFeo(8).......................................... 134,842 1.0%
Peter J. Biere(9)......................................... 65,962 *
John T. Carleton(4)....................................... 55,341 *
Carol L. Miltner(10)...................................... 8,475 *
Lorne G. Rubis(11)........................................ 6,000 *
John H. Bauer(4).......................................... 3,800 *
Michael H. Drucker........................................ 0 *
Bruce S. Martin........................................... 0 *
All directors and executive officers as a group (12
persons)(12)............................................ 8,434,880 62.9%
</TABLE>
- ---------------
* Less than 1%
(1) 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.
(2) The address for each of these shareholders is 707 South Grady Way, Renton,
Washington 98055-3233.
(3) Includes 6,000 shares held in trust for the Laljis' two children.
(4) Includes 2,500 shares subject to options that are exercisable within sixty
(60) days after March 3, 1998; excludes 7,500 shares subject to options
that are not exercisable within such period.
2
<PAGE> 6
(5) Includes 10,600 shares held of record by Ms. Kabani, 12,300 shares held of
record by the Kabani's daughter, and 50,000 shares held of record by The
Almas & Sadru Kabani Foundation.
(6) Includes 1,500 shares held by Mr. Monson as trustee for three minor
grandchildren.
(7) Represents 137,885 shares subject to options exercisable within sixty (60)
days after March 3, 1998; all of the foregoing options will terminate if
not exercised by March 31, 1998, in accordance with the terms of the
Company's 1993 Stock Incentive Plan.
(8) Includes 131,292 shares subject to options that are exercisable within
sixty (60) days after March 3, 1998; excludes 522,665 shares subject to
options that are not exercisable within such period.
(9) Includes 60,962 shares subject to options that are exercisable within sixty
(60) days after March 3, 1998; excludes 54,320 shares subject to options
that are not exercisable within such period.
(10) Includes 4,375 shares subject to options that are exercisable within sixty
(60) days after March 3, 1998; excludes 5,625 shares subject to options
that are not exercisable within such period.
(11) Excludes 100,000 shares subject to options that are not exercisable within
sixty (60) days after March 3, 1998.
(12) Includes 344,514 shares subject to options that are not exercisable within
sixty (60) days after March 3, 1998; excludes 612,610 shares subject to
options that are not exercisable within such period.
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 seven (7). Directors are elected for one (1)
year terms; accordingly, a Board consisting of seven (7) directors will be
elected at the Annual Meeting to hold office until the next Annual Meeting of
Shareholders, or until their respective successors are elected and qualified.
The Board has unanimously approved the nominees named below, all of whom
are members of the current 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 seven (7) 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 53, is the Company's founder and has served as
Chairman of the Board since the Company's inception in November 1988. He also
previously served as the Company's President and Chief Executive Officer, from
November 1988 to March 1996.
John E. DeFeo, age 51, has served as a director of the Company since April
1996. In January 1997, Mr. DeFeo was appointed Vice Chairman of the Board, in
addition to assuming the position of President and Chief Executive Officer of
the Company. Prior to joining the Company as an executive, Mr. DeFeo served from
1994 to 1996 as 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, the domestic cellular communications subsidiary of U.S. West,
Inc., where he 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 both in the United
States and overseas.
3
<PAGE> 7
John H. Bauer, age 57, has served as a director of the Company since March
1996. Mr. Bauer is Executive Vice President of Nintendo of America, Inc., a
manufacturer and distributor of video games and products, a position he has held
since 1994. From 1979 to 1994, Mr. Bauer was 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 53, has served as a director of the Company since
November 1995. From October 1995 to the present, he has held the position of
Senior Vice President of Benaroya Capital Company, L.L.C., a private investment
company. Between 1993 and 1995, he served as Senior Vice President of GE
Capital's Equity Capital Group, Inc., a private equity investor. Mr. Carleton
also serves on the Board of Directors of Redhook Ale Brewery, Incorporated.
Firoz H. Lalji, age 51, has served as a director of the Company since March
1990. Mr. Lalji is President and Chief Executive Officer of Fana Group of
Companies, a position he has held since 1985. Fana Group of Companies owns real
estate and hotels in the United States and Canada. From 1981 to 1997, he was
also President and Chief Executive Officer of Kits Cameras, Inc., which operates
over 125 camera specialty stores in eight western states.
Carol L. Miltner, age 55, has served as a director of the Company since
June 1995. Ms. Miltner has been President of Motivation by Miltner, which
provides management consulting and motivation seminars for companies in the
microcomputer products industry, since 1991. 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.
Ms. Miltner served as Senior Vice President of Sales of Merisel, Inc. from 1989
to 1991, and as Vice President of Sales and then Senior Vice President of Sales
of Ingram Micro, Inc. from 1985 to 1989. She currently also serves on the Board
of Directors of Q Logic Corporation.
Paul E. Monson, age 52, has served as a director of the Company since 1993.
Since 1991, Mr. Monson has served as Chairman of the Board of Directors,
President and Chief Executive Officer of Back Technologies, Inc., a company that
manufactures and markets back therapy equipment. He has also served as Chairman
of the Board of Directors of Pacific Regency Care Management, an operator of
long-term health care facilities, since 1984.
No family relationships exist between any of the Company's directors or
executive officers.
DIRECTOR COMPENSATION AND INDEMNIFICATION
All directors are reimbursed for out-of -pocket expenses incurred in
connection with attendance at meetings of the Board. Directors who are employees
of the Company do not receive any fee for their services as directors. Outside
directors receive a quarterly retainer fee of $2,500, in addition to fees of
$1,000 and $500, respectively, for each Board or committee meeting attended.
Each committee chairperson also receives a $250 fee for each committee meeting
that they preside over.
On January 5, 1997, Messrs. Carleton, Lalji and Monson were each granted an
option to purchase 10,000 shares of Common Stock at an exercise price of $10.50
per share, the fair market value of the Common Stock on the date of grant. Ms.
Miltner and Messrs. Bauer and DeFeo were each granted an option to purchase
2,500 shares of Common Stock at the same exercise price. Each of the options has
a ten (10) year term and will vest in equal installments over a four-year
period.
The Company has entered into agreements with all the directors under the
terms of which the Company will indemnify them against claims and liabilities
arising out of their service as directors, in addition to advancing expenses to
defend claims subject to indemnification.
BOARD AND COMMITTEE MEETINGS
The Board met nine (9) times during 1997, and all directors attended at
least 75 percent of all such meetings. The Board has a standing Audit Committee
and Compensation Committee. Each of these
4
<PAGE> 8
committees is responsible to the full Board. The functions performed by, and
composition of, these committees are summarized below.
The Audit Committee, which is comprised 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
accountants. The Audit Committee met three (3) times during 1997, and each of
its members attended all of the meetings.
The Compensation Committee, which is comprised of Messrs. Monson, Carleton
and Kabani, reviews and makes recommendations to the full Board with respect to
the compensation and benefits to be provided to the Company's officers and
directors, in addition to general policy matters relating to employee
compensation and benefits. The Compensation Committee met five (5) times during
1997, and each of the members attended at least 75 percent of all such meetings.
CERTAIN TRANSACTIONS
Ms. Miltner received consulting fees and expenses totaling $64,754 in 1997,
for outside consulting services provided to the Company during the year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Kabani, Chairman of the Board, is a member of the Compensation
Committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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
("SEC"). All such persons who are subject to Section 16(a) reporting are
required by SEC regulation to furnish the Company with copies of all such
reports that they file.
Based solely on the Company's review of the copies of such reports received
by the Company, in addition to written representations by the Company's officers
and directors regarding their compliance with the applicable reporting
requirements under Section 16(a), the Company believes that its officers and
directors, and all of the persons known to it to own more than ten percent (10%)
of the Common Stock, complied with all filing requirements applicable to them
under Section 16(a) during 1997.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The table below sets forth information regarding compensation earned during
1996 and 1997 by the Company's chief executive officer, each of the other four
most highly compensated executive officers, and two former executive officers
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION OTHER SECURITIES
-------------------------- ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION OPTIONS(#) COMPENSATION
--------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John E. DeFeo.................... 1997 $332,952 $16,150 -- 645,976 $27,920(2)
President and Chief Executive 1996 -- -- -- -- --
Officer
Sadrudin J. Kabani............... 1997 299,999 18,538 -- -- 1,292(3)
Chairman of the Board 1996 285,417 35,863 -- -- 200
Victor J. Melfi, Jr.............. 1997 250,002 10,835 -- -- 277,409(3)
Former Executive Vice 1996 227, 084 93,761 -- 284,423 17,200
President-Marketing
Peter J. Biere................... 1997 133,682 7,473 -- 5,474 758(3)
Senior Vice 1996 124,166 15,609 -- 79,808 200
President -- Finance, and Chief
Financial Officer
Michael H. Drucker (4)........... 1997 129,231 7,092 -- 33,158 10,834(5)
Former Sr. Vice 1996 -- -- -- -- --
President -- MIS, and Chief
Information Officer
Lorne G. Rubis................... 1997 95,480 29,005(6) -- 100,000 25,000(7)
Executive Vice 1996 -- -- -- -- --
President -- Sales.............
Bruce S. Martin(4)............... 1997 113,846 10,274 -- -- 125,047(3)
Former Executive Vice 1996 216,668 43,156 -- 172,692 200
President -- Partner
Merchandising
</TABLE>
- ---------------
(1) Amounts disclosed in this column were all bonuses awarded under the
Company's Management Incentive Plan ("MIP"), in which all full-time,
non-commissioned employees participate.
(2) Amount shown represents $1,260 in annual club membership dues paid by the
Company on behalf of Mr. DeFeo, in addition to $26,660 paid to him in 1997
for outside consulting services that he rendered in 1996, prior to his
employment by the Company.
(3) Amounts shown represent matching contributions of $200 per year under the
Company's 401(k) Plan, except that the amounts shown for Messrs. Kabani,
Biere, Melfi and Martin include $1,092, $558, $558 and $47, respectively, in
annual club membership dues paid by the Company on behalf of the Named
Executive Officer. The amount shown for Mr. Melfi also includes $270,000 in
severance payments and $6,651 in automobile lease payments made under the
terms of his severance agreement, which took effect on December 31, 1997 and
the amount shown for Mr. Martin also includes $125,000 in severance payments
under the terms of his severance agreement, which took effect on May 23,
1997.
(4) Mr. Drucker's employment with the Company ended on November 30, 1997, and
Mr. Martin's on May 23, 1997. Accordingly, amounts shown are for a partial
year's employment.
(5) Amount shown represents fees for outside consulting services paid to Mr.
Drucker after his employment ended.
(6) Amount shown includes a $25,000 signing bonus paid to Mr. Rubis upon
commencement of his employment with the Company in July 1997.
(7) Amount shown represents Mr. Rubis's relocation expenses paid for by the
Company.
6
<PAGE> 10
UPDATED INFORMATION ON OPTION GRANTS IN LAST FISCAL YEAR
Please note that this page updates and replaces page 7 of the Proxy
Statement in its entirety. The following table provides information on option
grants in the 1997 fiscal year to the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
------------------------------------------------------------- AT ASSUMED ANNUAL RATES OF
NO. OF SECURITIES PERCENT OF STOCK PRICE APPRECIATION FOR
UNDERLYING TOTAL OPTIONS EXERCISE OPTION TERMS(3)
OPTIONS GRANTED TO PRICE EXPIRATION -----------------------------
NAME GRANTED(#)(1) EMPLOYEES ($/SHARE)(2) DATE 5%($) 10%($)
---- ----------------- ------------- ------------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
John E. DeFeo........ 643,476(4) 45.4% $10.50 1/5/2007 4,249,125 10,768,118
2,500 .1% $10.50 1/5/2007 16,508 41,836
Sadrudin J. Kabani... -- -- -- -- -- --
Victor J. Melfi, Jr.. -- -- -- -- -- --
Peter J. Biere....... 5,474 .3% $ 9.50 4/22/2007 32,704 82,879
Michael H. Drucker... 30,000 2.1% $11.63 3/11/2007 -- --
3,158 .2% $ 9.50 4/22/2007 -- --
Lorne G. Rubis....... 100,000 7.0% $ 5.06 11/21/2007 318,221 806,434
Bruce S. Martin...... -- -- -- -- -- --
</TABLE>
- ---------------
(1) All options were granted under the Company's 1993 Stock Incentive Plan,
except for Mr. DeFeo's, which were granted under a Stock Option Agreement
between him and the Company effective January 5, 1997. Each of the options
has a ten-year term and vests in equal installments over two (2) to five (5)
years, except for the option held by Mr. DeFeo, discussed in footnote 4
below. The exercise price and federal tax withholding may be paid in cash or
with shares of Company stock already owned.
(2) The exercise price of each option was based on the closing price of the
Common Stock on the date of grant, as reported on the Nasdaq Stock Market.
(3) The actual value, if any, that a Named Executive Officer or any other
individual may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised. The figures above are
based on the 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 appreciation shown. There can be no assurance that the actual
values will approximate the potential realizable values set forth in the
table, and these amounts are not intended to forecast future appreciation,
if any, in the market value of the Common Stock. All unvested options held
by Mr. Drucker were cancelled on November 30, 1997, and all vested options
not exercised were cancelled ninety (90) days thereafter.
(4) The option vested as to 20% of the shares subject thereto on the date of
grant, and will vest as to an additional 20% on the second anniversary of
that date. An additional 20% will vest when the per share market price of
the Common Stock first equals or exceeds $30.00; the penultimate 20% will
vest when the per share market price of the Common Stock first equals or
exceeds $65.00, and the remaining 20% when the per share market price of the
Common Stock first equals or exceeds $100.00, provided, however, that the
option will vest in all events on December 31, 2001. The option is intended
to qualify as an incentive stock option under Section 422 of the Internal
Revenue Code only with respect to 9,524 shares for which the option vests in
any calendar year. With respect to any additional shares for which the
option vests in any calendar year, the option will be nonqualified.
7
<PAGE> 11
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information on option exercises in fiscal year
1997 by the Named Executive Officers and the value of such officers' unexercised
options at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)(2)
ACQUIRED ON VALUE ------------------------------ ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE(2) EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. DeFeo............. -- -- 130,667 523,290 -- --
Sadrudin J. Kabani........ -- -- -- -- -- --
Peter J. Biere............ -- -- 60,962 54,320 $58,200
Victor J. Melfi, Jr.(2)... 22,500 $136,013 137,885 -- -- --
Michael H. Drucker(2)..... -- -- 13,965 -- -- --
Lorne G. Rubis............ -- -- -- 100,000 -- --
Bruce S. Martin(2)........ 54,000 $ 56,430 -- -- -- --
</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
($3.88) as reported on the Nasdaq Stock Market on December 31, 1997.
(2) All unvested options held by Mr. Melfi were cancelled on December 31, 1997,
those held by Mr. Drucker were cancelled on November 30, 1997, and those
held by Mr. Martin were cancelled on May 19, 1997. Vested options not
exercised within ninety (90) days of the foregoing respective dates expired
by their own terms.
8
<PAGE> 12
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, 1997, 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 each of the Common Stock and foregoing indices, and also assumes
reinvestment of dividends. The return on the Common Stock shown on the graph is
not necessarily indicative of future stock performance.
<TABLE>
<CAPTION>
Measurement Period 'Multiple Zones Nasdaq Composite Nasdaq Retail
(Fiscal Year Covered) International, Inc.' Index Trade Index
<S> <C> <C> <C>
27-Jun-96 100 100 100
31-Dec-96 32.29 133.32 116.87
</TABLE>
EMPLOYMENT AGREEMENTS
JOHN E. DEFEO. The Company entered into an employment agreement with Mr.
DeFeo, its President and Chief Executive Officer, effective January 5, 1997, for
a term ending on December 31, 2001, unless certain events, such as a change in
control of the Company, occur before December 31, 2001, in which case the
termination date will be eighteen (18) months following such event. Under the
terms of that agreement, he received an annual base salary of $350,000 during
1997 and will receive $400,000 annually thereafter, in addition to being
eligible for bonuses under the MIP. If Mr. DeFeo's employment is terminated by
the Company without "cause," or by him for "good reason," he will be entitled to
severance payments equal to twelve (12) months of his then-current base salary.
The agreement also contains standard Company indemnification, confidentiality
and non-competition provisions.
SADRUDIN J. KABANI. The Company entered into an employment agreement with
Mr. Kabani, effective April 1996, under the terms of which he will be paid an
annual base salary of $300,000. The term the agreement ends on December 31,
1998, unless certain events, such as a change in control of the Company, occur
after July 1997, in which case the termination date will be eighteen (18) months
following such event. In addition, if Mr. Kabani's employment is terminated by
the Company without cause prior to the end of its term, or if Mr. Kabani resigns
following a change in control due to a material reduction in his
responsibilities or certain other reasons amounting to constructive termination
by the Company, he will be entitled to receive his base salary for a period of
two (2) years following the termination. Mr. Kabani has agreed not to compete
with the Company for a period of two (2) years following the termination of the
agreement for any reason other than constructive termination by the Company
following a change in control.
9
<PAGE> 13
LORNE RUBIS. The Company entered into an employment agreement with Mr.
Rubis, its Executive Vice President -- Sales, effective July 14, 1997, under the
terms of which he will receive an annual base salary of $225,000. Mr. Rubis will
also be eligible for bonuses under the MIP, and was paid a $25,000 signing
bonus, which must be fully repaid if he terminates his employment within twelve
(12) months of his start date for any reason other than a change in control. If
his employment is terminated by the Company without "cause," or by Mr. Rubis for
"good reason" within twelve (12) months following a change in control, the
Company will continue to pay his monthly base salary for up to twelve (12)
months following such termination, and Mr. Rubis will receive two years' worth
of accelerated vesting on all options held. The agreement also provides for up
$25,000 in relocation expense reimbursement and contains standard Company
indemnification, confidentiality and non-competition provisions.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
COMPENSATION POLICY
The Compensation Committee ("Committee") establishes and administers the
Company's compensation programs. The goals of these programs are 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 one that
bears a close relationship to individual performance and the long-term business
objectives of the Company.
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 a performance-based cash bonus under the MIP,
and stock option grants. The 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 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 Committee believes that the relative salaries of senior
management should reflect individual experience, contribution and performance,
although it does not have a targeted range for base salaries or bonuses for any
position.
Mr. DeFeo was appointed President and Chief Executive Officer effective
January 5, 1997. During 1997, Mr. DeFeo received an annual base salary of
$350,000 pursuant to an employment agreement negotiated at the time of his
appointment. The Committee believed this salary properly reflected his
experience and responsibilities, and was competitive with other chief executive
officers in the direct marketing channel with a similar level of experience.
Bonus Compensation. The MIP is designed to enable the Company to attract,
retain and motivate employees of the highest caliber. The MIP is a cash-based
award system under which all non-commissioned employees of the Company are
rewarded for the Company's success. The 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, at its
discretion, establish individual performance goals for one or 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 1997,
bonus payments under the MIP for the five highest paid executive officers were
based on overall Company performance combined with individual performance
criteria. The potential bonuses available under the MIP for Senior Vice
Presidents and above ranged from 35 percent to 50 percent of base salary. Based
on the Company's performance in 1997, actual bonuses paid under the MIP to the
executive officers ranged from about 4 percent to 6 percent of base salary.
10
<PAGE> 14
Stock Options. The Company's 1993 Stock Incentive Plan is designed 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.
Pursuant to his employment agreement, Mr. DeFeo received a stock option to
acquire 643,476 shares of Common Stock which the Committee believes was
appropriate for a person in his position and with his experience. In addition,
the Committee granted additional stock options to executive officers and other
key employees and committed to grant annual stock options based on the
employees' position, responsibility and individual performance during the year.
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.
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).
During 1997, the Committee was comprised of Mr. Monson, Mr. Carleton, Mr.
Sarich and Mr. Kabani. Effective October 22, 1997 Mr. Sarich resigned as a
member of the Board.
By the 1997 Compensation Committee
Mr. Paul E. Monson (Chairman)
Mr. John T. Carleton
Mr. Sadrudin J. Kabani
PROPOSAL NO. 2: 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 1998. Coopers & Lybrand L.L.P. has
audited the accounts of the Company for 1997. 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 OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE APPOINTMENT OF COOPERS & LYBRAND L.L.P. AS
INDEPENDENT ACCOUNTANTS FOR THE COMPANY FOR 1998.
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.
11
<PAGE> 15
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.
REPORT ON FORM 10-K
The Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1997 is available to
shareholders, without charge, upon written request to Multiple Zones
International, Inc., 707 South Grady Way, Renton, Washington 98055-3233;
Attention: Tim Carroll, Vice President - Investor Relations.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders to be considered for inclusion in the Proxy
Statement and proxy for the Company's 1999 Annual Meeting of Shareholders must
be received by the Secretary of the Company by December 15, 1998.
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
March 26, 1998
12
<PAGE> 16
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 March 26, 1998, 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 30, 1998, 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 Proposal 2 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> 17
Please mark
your votes as
indicated in X
this example
WITHHOLD
authority to vote
for all nominees
FOR named below FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS 2. RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
John H. Bauer, John T. Carleton,
John E. DeFeo, Sadrudin J. Kabani,
Firoz H. Lalji, Carol L. Miltner
and Paul E. Monson
(INSTRUCTION: TO HOLD AUTHORITY TO
VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S This proxy, when properly executed,
NAME IN THE LIST ABOVE.) will be voted in the manner specified
by the undersigned. Except as otherwise
specified, this proxy will be voted
FOR the election as directors of all
nominees named above, 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
PROPOSAL 2.
Signature____________ Signature, if held jointly_____________Dated:_____, 1998
Please sign name exactly as it appears hereon. If shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee, or guardian, please give full title as such.
- FOLD AND DETACH HERE -
