<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Graphix Zone, 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>
GRAPHIX ZONE, INC.
42 CORPORATE PARK, SUITE 200
IRVINE, CALIFORNIA 92614
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 12, 1996
To the stockholders of Graphix Zone, Inc. :
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of Graphix Zone, Inc., a Delaware corporation (the "Company"), which will be
held at 10:00 a.m. on December 12, 1996, at the Company's offices located at 38
Corporate Park, Suite 100, Irvine, California ("Annual Meeting"), to consider
and act upon the following matters, all more fully described in the accompanying
Proxy Statement which is incorporated herein by this reference:
1. To elect five directors to serve until the next annual meeting of the
Company's stockholders and until their successors have been elected and
qualified;
2. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent public accountants for the fiscal year beginning July 1,
1996; and
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on November 8, 1996,
as the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting.
YOU ARE URGED TO SIGN, DATE AND OTHERWISE COMPLETE THE ENCLOSED PROXY CARD
AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY REASON,
YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
By Order of the Board of Directors
Gregory B. Leiser
Secretary
Irvine, California
November 15, 1996
<PAGE>
GRAPHIX ZONE, INC.
42 CORPORATE PARK, SUITE 200
IRVINE, CALIFORNIA 92614
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 12, 1996
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Graphix Zone, Inc., a Delaware corporation
(the "Company"), for use at the 1996 Annual Meeting of Stockholders to be held
at 10:00 a.m. on December 12, 1996, at the Company's offices located at 38
Corporate Park, Suite 100, Irvine, California ("Annual Meeting") and at any
adjournments thereof.
The Company was formed in January 1996 for the purpose of acquiring Graphix
Zone, Inc., a California corporation (GZ-CA), and StarPress, Inc. (StarPress) in
reverse triangular mergers pursuant to a "Reorganization Agreement" entered into
by both GZ-CA and StarPress on January 3, 1996 (the "Reorganization"). On June
28, 1996 the Reorganization was consummated and GZ-CA and StarPress became
wholly-owned subsidiaries of the Company. Accordingly, certain information
furnished in this Proxy Statement, as it relates to activities prior to June 28,
1996, includes the activities of GZ-CA and StarPress.
The Company will pay the expenses of soliciting proxies for the Annual
Meeting, including the cost of preparing, assembling, and mailing proxy
solicitation materials. Proxies may be solicited personally, or by mail or by
telephone, by directors, officers and regular employees of the Company who will
not be additionally compensated therefor. It is anticipated that this proxy
statement and accompanying proxy card will be mailed on or about November 15,
1996 to all stockholders entitled to vote at the Annual Meeting.
VOTING
The close of business on November 8, 1996 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. On that date there were 10,629,978 shares of the Company's
Common Stock outstanding. Each share of Common Stock entitles the holder of
record thereof to one vote on any matter coming before the Annual Meeting. In
voting for directors, however, if any stockholder gives notice at the Annual
Meeting, prior to voting, of an intention to cumulate votes, then each
stockholder has the right to cumulate his or her votes in the election of the
Company's directors (i.e., they are entitled to the number of votes determined
by multiplying the number of shares held by them times the number of directors
to be elected) and may cast all of his or her votes so determined for one
person, or spread their votes among two or more persons as they see fit.
Discretionary authority to cumulate votes is hereby solicited by the Board of
Directors.
Proxies duly executed and returned by stockholders and received by the
Company before the Annual Meeting will be voted "FOR" the election of all five
nominee-directors named herein, "FOR" the ratification of the selection of KPMG
Peat Marwick LLP as the Company's independent public accountants for the fiscal
year beginning July 1, 1996, unless a contrary choice is specified in the proxy.
Where a specification is indicated as provided in the proxy, the shares
represented by the proxy will be voted and cast in accordance with the
specification made. Any stockholder giving a proxy has the right to revoke it
at any time by either (a) issuance of a
<PAGE>
subsequent proxy (b) written notice of revocation sent to and received by the
Secretary of the Company prior to the Annual Meeting, or (c) attendance at the
Annual Meeting and voting in person.
Under the Company's bylaws and Delaware law, a majority of the shares
entitled to vote, represented in person or proxy, will constitute a quorum for
the transaction of business at the Annual Meeting. Abstentions and "broker
non-votes" are counted for the purposes of determining the presence or absence
of a quorum for the transaction of business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of November 8, 1996,
with respect to those known by the Company to be beneficial owners of more than
five percent (5%) of the outstanding shares of the Company's Common Stock. On
November 8, 1996, there were 10,629,978 shares of Common Stock outstanding.
Amount and
Nature of
Name and Address Beneficial Percent
Title of Class of Beneficial Owner Ownership (1) of Class
-------------- ------------------- ------------- --------
Common Stock C. Richard Kramlich 976,888 (2) 9.2%
2490 Sand Hill Road
Menlo Park, California 94110
Common Stock GT Interactive Software Corp. 800,000 (3) 7.5
16 East 40th Street
New York, New York 10016
Common Stock Charles R. and 799,400 (4) 7.5
Angela C. Cortright
23 San Mateo Way
Corona del Mar, California
92625
Common Stock Life Investors Insurance Co. 758,001 7.1
of America
4333 Edgewood Road NE
Cedar Rapids, Iowa 52499
Common Stock Ronald S. Posner 687,604 (5) 6.5
32 Lower Crescent Dr.
Sausalito, California 94965
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in this table have
sole voting and investment power with respect to all shares of Common
Stock.
(2) Includes 900,114 shares of Common Stock owned by New Enterprises
Associates, 1119 ST. Paul Street, Baltimore, Maryland 21202 (NEA), which
Mr. Kramlich is deemed beneficial owner of by virtue of his position as the
Managing General Partner of NEA. Also includes 60,607 shares of Common
Stock which NEA has the right to acquire upon exercise of warrants and
16,167 shares of Common Stock which Mr. Kramlich has the right to acquire
upon exercise of options.
(3) Includes 720,000 shares of Common Stock which GT Interactive Software has
the right to acquire upon exercise of warrants
2
<PAGE>
(4) Includes 22,500 shares of Common Stock which Mr. Cortright has the right to
acquire upon exercise of options and 10,000 shares of Common Stock which
Ms. Cortright has the right to acquire upon exercise of options.
(5) Includes 296,873 shares of Common Stock which Mr. Posner has the right to
acquire upon exercise of options.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of the Company's Common
Stock beneficially owned as of November 8, 1996 by each of the present
directors, by each of the executive officers named in the Summary Compensation
Table found elsewhere in this Proxy Statement and by all current directors and
executive officers as a group.
Right to Acquire
Ownership
Under Options
Number of and Warrants
Shares Exercisable Percent of
Beneficial Owner Beneficially Owned Within 60 Days(1) Class (2)
---------------- ------------------ ----------------- ---------
C. Richard Kramlich 900,114 (3) 76,774 (4) 9.2
Charles R. and
Angela C. Cortright 766,900 32,500 7.5
Ronald S. Posner 390,731 296,873 6.5
Thomas C.K. Yuen 223,215 122,500 3.3
Norman H. Block - 243,500 2.3
Doug Glen - 17,932 *
John C. Lukrich - 12,833 *
Douglas D. Cole - 27,133 *
All current directors and 1,514,060 772,079 21.5
executive officers as a
group (6 persons)
(1) Shares which the party or group has the right to acquire within 60 days
after November 8, 1996 upon the exercise of stock options and warrants.
(2) Percent of class is based on the number of shares outstanding on November
8, 1996 plus, with respect to each named person, the number of shares of
Common Stock, if any, which the stockholder has the right to acquire within
60 days of such date. Ownership of less than one percent (1%) is indicated
by an asterisk.
(3) Represents 900,114 shares of Common Stock owned by New Enterprises
Associates, 1119 St Paul Street, Baltimore, Maryland 21202 (NEA), which Mr.
Kramlich is deemed beneficial owner of by virtue of his position as the
Managing General Partner of NEA.
(4) Includes 60,607 shares of Common Stock which NEA has the right to acquire
upon exercise of warrants (see note 3 to this table).
3
<PAGE>
ELECTION OF DIRECTORS
The Company's directors are to be elected at each annual meeting of
stockholders. The Board of Directors is presently authorized to consist of six
directors. At this Annual Meeting, five directors are to be elected to serve
until the next annual meeting of stockholders and until their successors are
elected and qualified, with one Board seat to remain vacant for the time being.
The nominees receiving the five greatest number of votes at the Annual Meeting
will be elected.
The nominees for election as directors at the Annual Meeting set forth in
the table below are all incumbent directors. Each of the nominees has consented
to serve as a director if elected. In the event that any of the nominees for
director should become unable to serve if elected, it is intended that shares
represented by proxies which are executed and returned will be voted for such
substitute nominee(s) as may be recommended by the Company's existing Board of
Directors, unless other directions are given in the proxies. To the best of the
Company's knowledge, all nominees will be available to serve.
The following table sets forth certain information concerning the nominees
for election of directors (all of such nominees being continuing members of the
Company's present Board of Directors):
Nominee Age Principal Occupation Director Since
------- --- -------------------- --------------
Ronald S. Posner 54 Chairman of the Board and 1995 (1)
Chief Executive Officer of
the Company
Norman H. Block 55 President, Chief Operating 1996
Officer and Chief Financial
Officer of the Company
Thomas C.K. Yuen 45 Chairman of the Board of SRS 1994 (2)
Labs and Chairman and President
of NuReality, Inc.
C. Richard Kramlich 61 Managing General Partner of 1995 (1)
New Enterprise Associates (a
venture capital firm)
Doug Glen 49 President Mattel Media; Senior 1995 (1)
Vice President - Strategic
Planning & Business Development,
Mattel Toys
(1) Date from which nominee was a member of the Board of Directors of
StarPress.
(2) Date from which nominee was a member of the Board of Directors of GZ-CA.
BUSINESS EXPERIENCE
RONALD S. POSNER. Mr. Posner served as Chairman of StarPress from June 1995
until the closing of the Reorganization. Prior to that and since incorporated
in 1993, Mr. Posner was the President and Chief Executive Officer of StarPress
Multimedia, which became a wholly owned subsidiary of StarPress as of June 1995.
Prior to joining StarPress Multimedia, Mr. Posner was the Chief Executive
Officer of WordStar Inc., a software company. Prior to joining WordStar, from
1989 to 1990, Mr. Posner served as President and Chief Executive Officer of
Peter Norton Computing, Inc., a PC software company. Mr. Posner holds a
Bachelor of Science in Mathematics from Rensselaer Polytechnic Institute and a
Masters in Business Administration from Harvard Business School.
4
<PAGE>
NORMAN H. BLOCK. Mr. Block joined the Company in February 1996. Prior to
joining the Company, Mr. Block was Managing Director of PLATINUM Technology,
Inc.'s Locus Laboratory, the leading supplier of software products integrating
UNIX systems with desktop operating systems. Prior to joining Locus Laboratory,
from 1993 to 1995, Mr. Block was Chief Executive Officer of Qual/Soft, a
provider of advanced technology for quality information management. Prior to
joining Qual/Soft, from 1987 to 1992, Mr. Block was founder and President of
Evernet Systems, Inc. which was the nation's largest independent network systems
integration firm. From 1983 to 1987, Mr. Block was Executive Vice President of
Ashton-Tate, a leading software development company. Mr. Block holds a Bachelor
of Science degree in accounting from Fairleigh Dickerson University and a
Masters of Business Administration from New York University.
THOMAS C.K. YUEN. Mr. Yuen was one of the co-founders in 1981 and, until July
1992, the Chief Operating Officer of AST Research, a Fortune 500 personal
computer manufacturer. After leaving AST Research, Mr. Yuen formed Atlantis
Computers, a company which holds controlling interests in a number of high
technology companies, including NuReality, MPC technologies and Asia On-line.
Mr. Yuen is Chairman of the Board of Directors of SRS Labs, Inc., a digital
sound processing technology company.
C. RICHARD KRAMLICH. Mr. Kramlich has been the Managing General Partner of
New Enterprise Associates, a venture capital firm which manages six venture
capital investment funds and four affiliated venture capital investment funds.
Mr. Kramlich serves on the Board of Directors of Chalone, Inc., a premium wine
company; Sierra Monitor Corporation, a gas monitoring device company; Silicon
Graphics, Inc., a visual computing systems company; SyQuest Technology Inc., a
removable disk drive manufacturing company; Telebit Corporation, a high-speed
communications company; Macro-media Inc., a software authoring tool company;
Neopath, Inc., a medical screening technology company; and Ascend
Communications, Inc., a telecommunications company.
DOUG GLEN. Mr. Glen is President of Mattel Media and Senior Vice President,
Strategic Planning and Business Development, of Mattel Toys. From 1992 and
prior to joining Mattel in 1994, Mr. Glen was Group Vice President of Sega of
America, where he managed the introduction of Sega's multimedia product line and
the development of the Sega Channel. From 1987 to 1992, Mr. Glen was General
Manager of Lucasfilm Games, the consumer software division of LucasArts
Entertainment. Mr. Glen holds an undergraduate degree from MIT and an MBA from
Somerset University.
COMMITTEES AND MEETINGS
The Board of Directors has established two committees , a Compensation
Committee and a Stock Option Committee. The Compensation Committee consists of
Thomas C.K. Yuen and C. Richard Kramlich, and is responsible for the
establishment and periodic review of executive compensation. The Compensation
Committee was created by the Board of Directors on July 24, 1996, and therefore
did not engage in any deliberations regarding executive compensation during
fiscal 1996. The Stock Option Committee consists of Ronald S. Posner and
Norman H. Block, and is responsible for determining option recipients and the
amount, price and terms of the options.
The Board of Directors does not have a separate audit committee. Rather,
the Board of Directors as a whole will review the results and scope of the audit
and other services provided by the Company's independent public accountants and
management with respect thereto.
The Company does not have a nominating committee of the Board of Directors.
The nominees for election as directors at the Annual Meeting were selected by
the Board of Directors of the Company.
During fiscal 1996, there were an aggregate of 6 meetings of the Boards of
Directors of the Company, GZ-CA and StarPress. While a director, each of the
current Board members attended 75% or more of the aggregate of meetings of the
Board of Directors of which he or she was a member and the meetings of the
committees of the Board on which he or she served during such period. In
addition, there were an aggregate of 14 actions by unanimous written consent of
the Board of Directors of the Company, GZ-CA and StarPress.
5
<PAGE>
DIRECTOR COMPENSATION
All directors of the Company are reimbursed for out-of-pocket expenses in
connection with attendance of Board of Directors' meetings and all directors who
are not executive officers or employees of the Company will receive a director
fee of $1,000 per meeting. In addition, each director who is also a member of
the Stock Option Committee receives an annual nonqualified stock option to
purchase 25,000 shares of the Company's Common Stock at the then current fair
market value. These options are automatically granted on July 1 of each year.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and other highly paid executive officers of the Company and
its subsidiaries for the last three fiscal years.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------- -----------------
Securities
Underlying All Other
Name and Principal Position Year Salary $ Bonus Options/SARs* (#) Compensation
- --------------------------- ------ -------- ----- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Charles R. Cortright, Jr. 1996 131,044 - 10,000 -
President and Chief Executive 1995 98,150 - - -
Officer 1994 65,000 - - 28,788 (1)
Ronald S. Posner 1996 120,000 20,000 109,995 -
Chairman 1995 - - - -
1994 - - - -
Angela C. Cortright 1996 108,769 - 10,000 -
Executive Vice President - 1995 70,000 - - -
Marketing and Secretary 1994 45,000 - - -
Douglas D. Cole 1996 119,294 - - 45,000 (2)
President and Chief 1995 175,000 37,466 23,466 -
Executive Officer of StarPress 1994 173,894 21,812 3,667 -
John C. Lukrich 1996 141,778 20,000 29,332 11,542 (2)
Vice President and Chief 1995 138,500 17,312 - -
Financial Officer of StarPress 1994 121,170 17,312 41,798 -
</TABLE>
* The Company has not granted Stock Appreciation Rights.
(1) Represents payments of $732 per month for Mr. Cortright's automobile and
$1,667 per month for the Cortright's home mortgage, which was paid directly
by the Company.
(2) Represents severance payments made in connection with the separation of the
named StarPress executive officers as a result of the Reorganization.
6
<PAGE>
OPTION/SAR* GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding stock options granted,
during the fiscal year ended June 30, 1996, to the executive officers identified
in the Summary Compensation Table:
OPTION GRANTS TABLE
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
% of Total Annual Rates of
Options Stock Price Appreciation
Granted to for Option Term (3)
Options Employees Exercise Expiration -------------------------
Name Granted (1) in 1996 (2) Price Date 5% 10%
---- ----------- ----------- ------ ------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Cortright, Jr. 10,000 2.1 $5.88 10/13/05 $ 9,268 $ 19,463
Ronald S. Posner 109,995 25.3 $4.91-6.61 (4) 107,923 226,630
Angela C. Cortright 10,000 2.1 $5.88 10/13/05 9,268 19,463
Douglas D. Cole - - - - - -
John C. Lukrich 29,332 6.2 $4.91-6.61 (4) 28,989 60,875
</TABLE>
* The Company has not granted Stock Appreciation Rights.
(1) The exercise price of each option is the market price of the common stock
of the Company on the date of Grant.
(2) The number of shares of GZ-CA common stock or StarPress common stock
(converted pursuant to the Reorganization) covered by the options granted
the named individual during the last completed fiscal year of the Company
as a percentage of the total number of combined shares of GZ-CA and
StarPress common stock covered by all options granted by GZ-CA or StarPress
to their respective employees during fiscal 1996.
(3) These columns present hypothetical future values of the stock obtainable
upon exercise of the options net of the option's exercise price, assuming
that the market price of the Company's common stock appreciates at a 5% and
10% compound annual rate over the term of the respective options. The 5%
and 10% rates of stock price appreciation are presented as examples
pursuant to the Proxy Rules and do not necessarily reflect management's
assessment of the Company's future stock price performance. The potential
realizable values presented are not intended to indicate the value of
options.
(4) The options issued to Mr. Posner and Mr. Lukrich contain various vesting
dates ranging from January 3, 1996 to August 1, 1998. The related number
of shares associated with each vesting date expire three years from the
respective vesting date. Accordingly the expiration dates range from
January 3, 1999 through August 1, 2001.
7
<PAGE>
AGGREGATED OPTION/SAR* EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs In-The-Money Options/SARs
At Fiscal Year End At Fiscal Year End (2)
---------------------------- ------------------------------
Shares
Acquired on Value
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------- --------------- --------------- ------------ --------------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Charles R. Cortright, Jr. - $ - 10,000 - $ 10,000 $ -
Ronald S. Posner 59,382 215,404 20,624 89,371 5,487 23,778
Angela C. Cortright - - 10,000 - 10,000 -
Douglas D. Cole - - 27,133 - 153,803 -
John C. Lukrich 41,798 163,875 5,500 - 1,463 -
</TABLE>
* The Company has not granted Stock Appreciation Rights.
(1) Market value on the date of exercise of shares covered by options
exercised, less option exercise price.
(2) These amounts represent the difference between the exercise price of the
in-the-money options and the market price of the Company's Common Stock
on July 1, 1996. The closing of the Company's Common Stock on that day
on the Nasdaq SmallCap Market listing was $6.88. Options are in-the-money
if the market value of the shares covered thereby is greater than the
option exercise price.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Pursuant to the Reorganization, the Company assumed an employment agreement
entered into by StarPress with Ronald S. Posner effective as of June 23, 1995,
which provided for his employment as Chairman of StarPress for a period of three
years, and a one year notice prior to termination. Mr. Posner is currently
Chairman and Chief Executive Officer of the Company and his base salary is
$120,000 per year.
Pursuant to the Reorganization, on April 18, 1996 the Company entered into
employment agreements with Charles R. Cortright, Jr. and Angela Aber Cortright
as President and Executive Vice President and Secretary, respectively, of the
Company. As provided in the Reorganization agreement, the Company entered into
employment agreements with Mr. Cortright and Ms. Cortright, each on terms no
less favorable or more favorable than the terms contained in the employment
agreement with Mr. Posner. Accordingly, Mr. Cortright's and Mr. Cortright's
base salaries were $120,000 per year. On October 28, 1996, Mr. Cortright's and
Ms. Cortright's employment agreements were amended and restated whereby Mr.
Cortright and Ms. Cortright resigned as President and Executive Vice President
and Secretary, respectively. Additionally, Mr. and Ms. Cortright will remain
employees of the Company to assist management in various ways. The terms of
the amended agreements include, among other things, that the employment
agreements terminate on April 30, 1997, however, the term shall automatically be
extended for successive six month terms unless either party gives written notice
of their desire to terminate the agreement at the end of the term or any
extended term. The amended agreements provide that both Mr. and Ms. Cortright's
base salaries be $30,000 per six month period.
Pursuant to the terms of stock option agreements between the Company and
Norman H. Block, if any material change in ownership or control of the Company
occurs, all 225,000 options granted to him in February 1996 vest immediately.
Mr. Block is currently President, Chief Operating Officer and Chief Financial
Officer of the Company.
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors currently
consists of Mr. Yuen and Mr. Kramlich, neither of whom is now, or was at any
time during the last fiscal year of the Company, an officer or employee of the
Company or its subsidiaries. There are no Compensation Committee interlocks
between the Company and other entities involving the Company's executive
officers and Board members who serve as executive officers or Board members of
such other entities.
The Stock Option Committee of the Company's Board of Directors currently
consists of Mr. Posner and Mr. Block. Mr. Posner is the Chairman of the Board
and Chief Executive Officer of the Company. Mr. Block is a member of the Board,
President, Chief Operating Officer and Chief Financial Officer of the Company.
There are no Stock Option Committee interlocks between the Company and other
entities involving the Company's executive officers and Board members who serve
as executive officers or Board members of such other entities.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEES
The Compensation Committee was created by the Board of Directors on July
24, 1996, and therefore did not engage in any deliberations regarding executive
compensation during fiscal 1996. The Compensation and Stock Option Committees
will review the performance of the executive officers and other key employees of
the Company and make recommendations to the Board of Directors as to their
compensation, including salary, cash bonus levels and stock option awards.
COMPENSATION POLICIES AND PHILOSOPHY. The Company's executive compensation
policies are designed to attract, retain and reward executive officers and other
key employees who contribute to the Company's success, to provide economic
incentives to achieve the Company's business objectives by linking compensation
to the performance of the Company, to align executive officer and key employee
compensation with stockholder interests to create stockholder value and to
reward individual performance. The Company will use a combination of base
salary, cash bonuses and stock option awards to achieve the aforementioned
objectives.
In carrying out these objectives, the Compensation and Stock Option
Committees will consider a number of factors which include the level and types
of compensation paid to executive officers and key employees in similar
positions by comparable companies. In addition the Compensation Committee will
review the individual performance of each executive officer, including a review
of the ability of a given executive officer to meet individual performance
objectives, demonstration of job knowledge and skills, and the ability to work
with others towards the achievement of the Company's success.
COMPONENTS OF COMPENSATION. Executive officers' and other key employees'
salaries will be established in relation to a range of salaries for comparable
positions among similar high technology and computer software companies of
comparable size and complexity. In making its annual salary recommendations,
the Compensation Committee will look at the Company's financial position and
performance, the contribution of individual executive officers and key employees
during the prior fiscal year in helping meet the Company's financial and
business objectives as well as overall performance of their individual
responsibilities.
Executive officers' and key employees' may be paid cash bonuses at the
discretion of the Board of Directors. Cash bonuses may be used to reward prior
individual performance in helping the Company achieve its financial and business
objectives.
The Board of Directors and Stock Option Committee believes that equity
ownership by executive officers and key employees provides incentive to build
stockholder value and align the interests of executive officers and key
employees with the stockholders. The size of stock option awards will usually
be based upon factors such as comparable equity compensation offered by other
high technology and computer software companies, the seniority of the executive
officer or key employee and the contribution that the executive officer or key
employee is expected to make to the Company. In determining the size of
periodic grants the Stock Option Committee will consider prior
9
<PAGE>
grants to the executive officer or key employee, the executive officer's or key
employee's performance during the current fiscal year and his or her expected
contributions during the succeeding fiscal year.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The Compensation Committee
and Stock Option Committee will review the performance of the Chief Executive
Officer of the Company annually. The compensation of the Chief Executive
Officer of the Company during fiscal 1996, Charles R. Cortright, Jr., was
principally based upon an employment agreement entered into by the Company
pursuant to the Reorganization. Mr. Cortright resigned as a director and
officer of the Company effective October 28, 1996. Mr. Posner, the Company's
Chairman has been appointed as the Chief Executive Officer.
Respectfully submitted
Compensation Committee Stock Option Committee
Thomas C.K. Yuen Ronald S. Posner
C. Richard Kramlich Norman H. Block
10
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
GZ-CA's Common Stock with the cumulative total return on the Hambrecht and Quist
Technology Index and the Nasdaq Stock Market - U.S. Index for the period
beginning June 17, 1994 and ended June 28, 1996. The comparison with GZ-CA
Common Stock is presented as there was no trading of the Company's Common Stock
prior to July 1, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURN*
GZ-CA COMMON STOCK, HAMBREQT & QUIST TECHNOLOGY INDEX
AND NASDAQ STOCK MARKET - U.S. INDEX
Nasdaq
Graphix H&Q Stock
DATES Zone Technology Market - U.S.
----- ---- ---------- -----
6/17/94 100 100 100
Jun-94 108 98 97
Sep-94 146 111 105
Dec-94 119 121 104
Mar-95 131 135 113
Jun-95 162 164 129
Sep-95 228 186 145
Dec-95 162 182 147
Mar-96 169 185 154
Jun-96 208 194 166
* Assumes that the value of the investment in GZ-CA Common Stock and each index
was $100 on June 17, 1994
RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The international accounting firm of KPMG Peat Marwick LLP has served the
Company as its independent public accountants at the direction of the Board of
Directors of the Company since its inception. The Board of Directors has again
selected KPMG Peat Marwick LLP to serve as the Company's independent public
accountants for the fiscal year beginning July 1, 1996. This matter is not
required to be submitted for stockholder approval, but the Board of Directors
has elected to seek ratification of its selection of independent public
accountants by the affirmative vote of a majority of the shares represented and
voted at the Annual Meeting.
One of more representative of KPMG Peat Marwick LLP are expected to be
present at the Annual Meeting and will have an opportunity to make a statement
if they so desire and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE SELECTION OF KPMG PEAT MARWICK LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR BEGINNING JULY 1, 1996.
11
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of a registered class of
the Company's equity securities to file various reports with the Securities and
Exchange Commission and the National Association of Securities Dealers
concerning their holdings of, and transactions in, securities of the Company.
Copies of these filings must be furnished to the Company. To the Company's
knowledge, based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required, during
the Company's most recent fiscal year all Section 16(a) filing requirements
applicable to its directors, executive officers and greater than 10% beneficial
owners have been met.
STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals for action at the 1997 Annual
Meeting of Stockholders should submit their proposals in writing to the
Secretary of the Company at the address of the Company set forth on the first
page of this Proxy Statement. Proposals must be received by the Secretary no
less than 60 and no more than 90 days prior to the date of the 1997 Annual
Meeting of Stockholders in order to be included in next year's proxy statement
and proxy card. Such proposals may be included in next year's proxy statement
if they comply with certain rules and regulations promulgated by the Commission.
OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
that are to be presented for action at the Annual Meeting. Should any other
matters come before the Annual Meeting or any adjournments or postponements
thereof, the persons named in the enclosed proxy will have the discretionary
authority to vote all proxies received with respect to such matters in
accordance with their judgments.
ANNUAL REPORTS
The Company's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission (exclusive of Exhibits), has been mailed to the stockholders
concurrently herewith, but such report is not incorporated in the Proxy
Statement and is not deemed to be a part of the proxy solicitation material.
BY ORDER OF THE BOARD OF DIRECTORS
Gregory B. Leiser
Secretary
Irvine, California
November 15, 1996
12
<PAGE>
GRAPHIX ZONE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Graphix Zone, Inc., a Delaware corporation
(the "Company"), hereby constitutes and appoints Gregory B. Leiser with the
power to appoint his substitution, as attorney and proxy, to appear, attend and
vote all of the shares of common stock of the Company standing in the name of
the undersigned on the record date at the 1996 Annual Meeting of Stockholders of
the Company to be held at the Company's offices located at 38 Corporate Park,
Suite 100, Irvine, California 92614, on December 12, 1996, at 10:00 a.m. local
time, and at any adjournment thereof, upon the following:
<TABLE>
<S> <C> <C>
1. To elect five directors as follows:
/ / FOR all nominees listed below except / / WITHHOLD AUTHORITY to vote for
as marked to the contrary below. all nominees listed below.
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list provided below.)
Ronald S. Posner, Thomas C.K. Yuen, C. Richard Kramlich, Doug Glen,
Norman H. Block
<TABLE>
<S> <C> <C>
2. To consider and vote upon a proposal to ratify the appointment of KPMG Peat Marwick LLP as independent
auditors of the Company for the fiscal year beginning July 1, 1996.
</TABLE>
/ / FOR approval / / AGAINST approval / / ABSTAIN
<TABLE>
<S> <C> <C>
3. To vote in his discretion on such other business as may properly come before the meeting, or any
adjournment thereof.
</TABLE>
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSALS INDICATED AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXY
HOLDER ON ANY OTHER BUSINESS. ALL OTHER PROXIES HERETOFORE GIVEN BY THE
UNDERSIGNED IN CONNECTION WITH THE ACTIONS PROPOSED ON THE REVERSE ARE HEREBY
EXPRESSLY REVOKED. THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED BY
WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY, BY ISSUANCE OF A SUBSEQUENT
PROXY OR BY VOTING AT THE ANNUAL MEETING IN PERSON.
Please mark, date, sign and return this proxy promptly in the enclosed
envelope. When shares are held by joint tenants, both should sign. When signing
as attorney, as executor, administrator, trustee or guardian, please give full
title as such. If a corporation, please sign in full corporate name by President
or other authorized officer. If a partnership, please sign in partnership name
by authorized person.
DATED: ___________________________
__________________________________
(Signature of Stockholder(s))
__________________________________
(Print Name(s) Here)
/ /
PLEASE
CHECK
IF
YOU
ARE
PLANNING
TO
ATTEND
THE
ANNUAL
MEETING.
