<PAGE>
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 / /
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
ACTIVE VOICE CORPORATION
- --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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>
ACTIVE VOICE CORPORATION
2901 THIRD AVENUE, SUITE 500
SEATTLE, WASHINGTON 98121
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TO THE HOLDERS OF COMMON STOCK
OF ACTIVE VOICE CORPORATION:
The Annual Meeting of Shareholders of Active Voice Corporation, a
Washington corporation (the "Company"), will be held on August 30, 1996, at
2:00 p.m. PDT, at the Seattle Art Museum, 100 University Street, Seattle,
Washington, for the following purposes as more fully described in the
accompanying Proxy Statement:
1. To elect four directors to serve until the 1997 Annual Meeting of
Shareholders or until their earlier retirement, resignation or
removal;
2. To consider and approve the Company's 1996 Employee Stock Purchase
Plan;
3. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Company's fiscal year ending March 31, 1997; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only holders of record of the Company's Common Stock at the close of
business on July 10, 1996, will be entitled to vote at the meeting. A list of
shareholders as of that date will be available at the meeting and for ten days
prior to the meeting at the Company's headquarters, 2901 Third Avenue, Suite
500, Seattle, Washington 98121.
By order of the Board of Directors
ROBERT C. GRECO,
Vice President -- Product Development and
Corporate Secretary
Seattle, Washington
July 17, 1996
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Please mark, sign and date the enclosed proxy card and
mail it promptly in the enclosed return envelope.
- --------------------------------------------------------------------------------
<PAGE>
PROXY STATEMENT
ANNUAL MEETING AND PROXY SOLICITATION INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Active Voice Corporation, a Washington
corporation (the "Company"), for use at the Annual Meeting of Shareholders on
August 30, 1996, and at any adjournments thereof. This Proxy Statement, a proxy
card and the Annual Report of the Company, including financial statements for
its fiscal year ended March 31, 1996, are being sent to all shareholders of
record as of the close of business on July 10, 1996, for delivery beginning on
or about July 17, 1996. Although the Annual Report and this Proxy Statement are
being mailed together, the Annual Report is not part of the Proxy Statement.
At the close of business on July 10, 1996, there were 4,574,278 shares of
Common Stock of the Company outstanding. Only holders of record of the shares
outstanding at such time will be entitled to vote at the meeting. The presence
at the meeting of at least a majority of such shares, either in person or by
proxy, is required for a quorum. Proxies are solicited to give all shareholders
who are entitled to vote on the matters that come before the meeting the
opportunity to do so, whether or not they choose to attend the meeting in
person.
If you are a shareholder of record, you may vote by using the proxy card
enclosed with this Proxy Statement. When your proxy card is returned properly
signed, the shares represented will be voted according to your directions. You
can specify how you want your shares voted on each proposal by marking the
appropriate boxes on the proxy card. The proposals are identified by number and
a general subject title on the proxy card. Please review the voting instructions
on the proxy card and read the text of the proposals and the position of the
Board of Directors in the Proxy Statement prior to marking your vote. If your
proxy card is signed and returned without specifying a vote or an abstention on
any proposal, it will be voted according to the recommendations of the Board of
Directors on that proposal. That recommendation is shown for each proposal on
the proxy card. For the reasons stated in more detail later in the Proxy
Statement, the Board of Directors recommends a vote FOR each of the four
individuals nominated to serve as a director; FOR approval of the Company's 1996
Employee Stock Purchase Plan; and FOR the ratification of the appointment of
Ernst & Young LLP as independent auditors. If you hold shares of Common Stock
through a brokerage firm or other intermediary, you must provide instructions on
voting to your nominee holder.
The Board of Directors knows of no other matters which are to be presented
at the meeting. However, if any other matters are properly presented for action,
the proxies named on the proxy card will be authorized by your proxy to vote on
them in their discretion.
On each matter properly brought before the meeting, shareholders will be
entitled to one vote for each share of Common Stock held. Under Washington law
and the Company's Articles of Incorporation and Bylaws, if a quorum exists at
the meeting: (a) the four nominees for director who receive the greatest number
of votes cast in the election of directors will be elected; (b) the proposal to
approve the Company's 1996 Employee Stock Purchase Plan will be approved if
holders of a majority of the shares represented in person or by proxy at the
meeting vote in favor of the proposal; and (c) the proposal to ratify the
appointment of auditors will be approved if the number of votes cast in favor of
the proposal exceeds the number of votes cast against it.
Shareholders may abstain from voting for one or more of the nominees for
director and may abstain from voting on the proposal to approve the Company's
1996 Employee Stock Purchase Plan or the proposal to ratify the appointment of
auditors. Abstention from voting for a nominee for director may make it less
likely that the nominee will be one of the four nominees for director who
receive the greatest number of votes cast. Abstention from voting on the
proposal to approve the Company's 1996 Employee Stock Purchase Plan will have
the same effect as a vote against the proposal, since holders of a majority of
the shares represented at the meeting must vote in favor of the proposal in
order for it to be approved. Abstention from
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<PAGE>
voting on the proposal to ratify the appointment of auditors will have no
effect, since approval of this proposal is based solely on the number of votes
actually cast.
Brokerage firms and other intermediaries holding shares of Common Stock in
street name for customers are generally required to vote such shares in the
manner directed by their customers. In the absence of timely directions,
brokerage firms and other intermediaries will generally have discretion to vote
their customers' shares in the election of directors, on the proposal to approve
the Company's 1996 Employee Stock Purchase Plan, and on the proposal to ratify
the appointment of auditors. If a brokerage firm or other intermediary votes its
customers' shares on some but not all proposals, the effect of the non-vote will
vary depending on the proposal. A non-vote for a nominee for director will make
it less likely that the nominee will be one of the four nominees for director
who receive the greatest number of votes cast. A non-vote on the proposal to
approve the Company's 1996 Employee Stock Purchase Plan will have the same
effect as a vote against the proposal, since a majority of the shares
represented at the meeting must vote in favor of the proposal in order for it to
be approved. A non-vote on the proposal to ratify the appointment of auditors
will have no effect, since approval of this proposal is based solely on the
number of votes actually cast.
If you execute a proxy, you may revoke it by taking one of the following
three actions: (a) by giving written notice of the revocation to the Secretary
of the Company at its principal executive offices; (b) by executing a proxy with
a later date and delivering it to the Secretary of the Company at its principal
executive offices; or (c) by personally attending and voting at the meeting.
The Company will bear the expense of preparing, printing and distributing
proxy materials to its shareholders. In addition to solicitations by mail, a
number of regular employees of the Company may solicit proxies on behalf of the
Board of Directors in person or by telephone. The Company has also retained
William F. Doring & Co. on behalf of the Board of Directors, to assist in the
solicitation of proxies by mail, telephone, telegraph and personal interview.
The Company will pay a fee of approximately $5,000 for these services. The
Company will also reimburse brokerage firms and other intermediaries for their
expenses in forwarding proxy materials to beneficial owners of the Company's
Common Stock.
BOARD OF DIRECTORS
The business of the Company is managed under the direction of a Board of
Directors consisting of four directors. The following individuals are currently
serving as directors: Tom A. Alberg, Robert C. Greco, Harold H. Kawaguchi and
Robert L. Richmond. The Board of Directors has responsibility for establishing
broad corporate policies and for the overall performance of the Company. It is
not, however, involved in operating details on a day-to-day basis. The Board is
kept advised of the Company's business through regular reports and discussions
with the Company's executive officers.
MEETINGS OF THE BOARD
The Board meets on a regularly scheduled basis during the year to review
significant developments affecting the Company and to act on matters requiring
Board approval. It also holds special meetings when an important matter requires
Board action between regularly scheduled meetings. The full Board of Directors
met five times during the Company's fiscal year ended March 31, 1996. No
incumbent member attended fewer than 75% of the total number of meetings of the
Board of Directors and of any Board committees of which he was a member during
that fiscal year.
COMPENSATION OF DIRECTORS
Each director who is not also an employee of the Company receives a fee of
$2,500 per fiscal quarter, provided that the director attends at least 75% of
the total number of meetings of the Board of Directors and of any Board
committees of which he is a member during the fiscal quarter (attendance must be
in person for at least 50% of the meetings). Each of Messrs. Alberg and
Kawaguchi received a director's fee of $2,500 for each quarter of the fiscal
year ended March 31, 1996.
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<PAGE>
The Company also has established a Directors Stock Option Plan (the
"Director Plan"), under which a grant of a stock option covering 2,500 shares of
Common Stock is automatically made to each outside director on the date of each
annual meeting of shareholders. The exercise price under each option is the fair
market value of the Company's Common Stock on the date of grant. Each option has
a 10-year term and vests one year after it is granted. An option generally
terminates if the director receiving it does not remain on the Board of
Directors for at least 10 months following the date of grant and is further
conditioned upon adequate attendance at meetings of the Board of Directors and
its committees. During the fiscal year ended March 31, 1996, Messrs. Alberg and
Kawaguchi were granted options under the Director Plan, at an exercise price of
$28.50 per share, covering 2,500 shares of Common Stock.
COMMITTEES OF THE BOARD
Committees of the Board consist of an Audit Committee and a Compensation
Committee. The Audit Committee, currently composed of Messrs. Alberg and
Kawaguchi, reviews the Company's internal accounting procedures and consults
with and reviews the services provided by the Company's independent auditors.
The Audit Committee met once during the fiscal year ended March 31, 1996. The
Compensation Committee, also currently composed of Messrs. Alberg and Kawaguchi,
reviews and recommends to the Board the compensation and benefits to be provided
to the Company's officers and reviews general policy matters relating to
employee compensation and benefits. The Compensation Committee met once during
the fiscal year ended March 31, 1996. The Company does not have a Nominating
Committee.
NOMINEES FOR DIRECTOR
The following individuals, each of whom currently serves as a director of
the Company, have been nominated for re-election at the meeting:
TOM A. ALBERG has been a director of the Company since January 1994. Mr.
Alberg has been a principal in the firm of Madrona Investment Group, L.L.C., a
merchant banking firm, since January 1996. From April 1991 to October 1995 he
was the President and a director of LIN Broadcasting Corporation and from July
1990 to October 1995 he was Executive Vice President of McCaw Cellular
Communications, Inc. Both companies were providers of cellular voice and data
services. Prior to 1990, Mr. Alberg was a partner of the law firm Perkins Coie,
where he also served as Chairman of the firm's Executive Committee. Mr. Alberg
is also a director of Visio Corp., Digital Systems International, Teledesic
Corporation and Emeritus Corp. Age 56.
ROBERT C. GRECO, a co-founder of the Company, has been a director and Vice
President--Product Development of the Company since its inception in 1983. From
1977 to 1983, Mr. Greco worked as an independent software consultant for such
firms as The Boeing Company, Scandinavian Airlines System (Denmark) and General
Electric Company. Mr. Greco holds a Bachelor of Arts, Mathematics, from the City
University of New York, and a Masters of Science, General Systems Science, from
the State University of New York. Mr. Greco was a director of the Washington
Software Association from 1992 to 1994. Age 41.
HAROLD H. KAWAGUCHI has been a director of the Company since 1986. Since
1992, Mr. Kawaguchi has been a director and consultant to Stratos Product
Development Group, Inc., a contract developer of products for the computer and
other industries. Since 1988, Mr. Kawaguchi has also been a director and
principal in Manifesto Corp., a lighting products manufacturer. From 1986 to
1988, he was a partner in Trinus, L.P., a seed capital fund for start-up
businesses. From 1965 to 1985, he was employed by Physio-Control, Inc., a
defibrillator manufacturer, as Senior Vice President in charge of product
design, information systems, corporate communications and human resources. Age
58.
ROBERT L. RICHMOND, the other co-founder of the Company, has been Chief
Executive Officer and Chairman of the Board of Directors of the Company since
its inception in 1983. From 1971 to 1980, Mr. Richmond was a consultant, and
from 1980 to 1983 he was a project manager for Intermetrics Incorporated, a
public software company, performing software validation for NASA and The Boeing
Company, and creating new products for the airline industry. Mr. Richmond holds
a Bachelor of Computer Science and Engineering from the Massachusetts Institute
of Technology. Age 45.
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<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
OWNERSHIP INFORMATION
The following table sets forth, as of June 15, 1996, certain information
regarding beneficial ownership of the Company's Common Stock (a) by each person
known to the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (b) by each director and nominee for director, (c) by
the Chief Executive Officer and the other executive officers of the Company
whose total annual salary and bonus, for the fiscal year ended March 31, 1996,
exceeded $100,000, and (d) by all of the Company's executive officers and
directors as a group. Unless otherwise noted, the named beneficial owner has
sole voting and investment power.
NUMBER OF SHARES PERCENT OF
OF COMMON STOCK COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING
Robert L. Richmond (1)(2) 617,485 13.4%
Robert C. Greco (1)(3) 524,806 11.4%
Douglass S. Anderson(4) 10,564 *
Jose S. David (5) 21,917 *
Tom A. Alberg (6) 7,534 *
Harold H. Kawaguchi (7) 96,912 2.1%
All directors and executive 1,279,218 27.4%
officers as a group (6 persons) (8)
_______________________
* Less than 1%.
(1) The business address of Messrs. Richmond and Greco is c/o Active Voice
Corporation, 2901 Third Avenue, Suite 500, Seattle, Washington 98121.
(2) Includes 30,981 shares subject to options exercisable within 60 days of
June 15, 1996. Also includes 34,900 shares held by two private foundations
of which Mr. Richmond serves as a director. Mr. Richmond disclaims
beneficial ownership of the shares held by these foundations.
(3) Includes 28,705 shares subject to options exercisable within 60 days of
June 15, 1996. Also includes 200,000 shares held by a family limited
partnership of which Mr. Greco is the general partner.
(4) Includes 8,000 shares subject to options exercisable within 60 days of June
15, 1996.
(5) Includes 19,167 shares subject to options exercisable within 60 days of
June 15, 1996.
(6) Includes 4,034 shares subject to options exercisable within 60 days of June
15, 1996.
(7) Includes 5,000 shares subject to options exercisable within 60 days of June
15, 1996.
(8) Includes 95,887 shares subject to options exercisable within 60 days of
June 15, 1996.
EXCHANGE ACT COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's officers and directors, and persons
who own more than ten percent of a registered class of the Company's equity
securities, 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.
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<PAGE>
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
its fiscal year ended March 31, 1996, all of the Company's officers and
directors, and all of the persons known to the Company to own more than ten
percent of its Common Stock, complied with all such reporting requirements,
except that Mr. David exercised a previously-reported option on one occasion in
a transaction which was reported on Form 5 but not on a timely basis.
COMPENSATION AND BENEFITS
EXECUTIVE OFFICER COMPENSATION
COMPENSATION SUMMARY. The following table sets forth information regarding
compensation earned during the Company's fiscal year ended March 31, 1996, and
during the two preceding fiscal years, by the Chief Executive Officer and the
other executive officers whose total annual salary and bonus for the fiscal year
ended March 31, 1996, exceeded $100,000 (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES
UNDERLYING
NAME AND FISCAL STOCK ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS (1)($) OPTIONS(#) COMPENSATION(2)($)
- ------------------ ------ ---------- ------------ ---------- ------------------
<S> <C> <C> <C> <C> <C>
Robert L. Richmond 1996 $105,783 $ 58,412 35,000 $27,156
Chief Executive Officer and 1995 110,007 111,334 10,000 27,115
Chairman of the Board 1994 108,181 118,999 0 23,186
Robert C. Greco 1996 108,000 54,000 12,500 18,581
Vice President -- Product 1995 101,907 71,940 10,000 23,635
Development and Director 1994 99,852 68,510 0 21,482
Douglass S. Anderson 1996 82,620 93,872 35,000 18,193
Vice President -- Sales 1995 73,241 89,954 0 20,953
and Marketing 1994 69,333 96,382 0 20,931
Jose S. David 1996 80,000 24,000 4,000 12,095
Chief Financial Officer 1995 75,732 34,000 7,917 15,259
1994 77,183 31,666 5,000 12,909
</TABLE>
_____________________
(1) Amounts shown in this column for Mr. Anderson include both commission and
bonus income.
(2) Amounts shown for fiscal 1996 represent the named executive officers'
proportionate share of Company-wide profit sharing distributions for the
fiscal year, except for $850 for each named executive officer, which
represents matching contributions under the Company's 401(k) Profit-Sharing
Plan.
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<PAGE>
OPTION GRANTS. The following table shows information concerning stock
options granted to the named executive officers during the Company's fiscal year
ended March 31, 1996.
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL YEAR 1996
INDIVIDUAL GRANTS
--------------------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES PERCENT OF TOTAL ANNUAL RATES OF STOCK
UNDERLYING OPTIONS GRANTED EXERCISE PRICE APPRECIATION FOR
OPTIONS TO EMPLOYEES PRICE EXPIRATION OPTION TERM (1)
NAME GRANTED($) IN FISCAL YEAR ($ PER SHARE) DATE 5% 10%
- ---- ---------- -------------- ------------- ---------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Richmond 10,800(2) 3.8 27.25 6/04/00 $ 46,850 $136,189
6,700(3) 2.3 24.75 6/04/05 104,286 264,282
17,500(4) 6.1 27.50 3/25/06 0 63,436
Robert C. Greco 6,500(5) 2.3 27.25 6/04/00 28,197 81,966
6,000(6) 2.1 24.75 6/04/05 93,391 236,671
Douglass S. Anderson 18,000(7) 6.3 27.50 7/02/05 311,303 788,903
17,000(8) 5.9 27.50 7/02/05 294,008 745,075
Jose S. David 4,000(9) 1.4 12.00 3/25/06 30,187 76,500
</TABLE>
______________
(1) Based upon the market price on the date of grant and assumed appreciation
over the term of the options at the respective annual rates of stock
appreciation shown. These amounts are not intended to forecast possible
future appreciation, if any, in the market price of the Company's Common
Stock.
(2) Incentive stock option vesting for 3,600 shares on each of December 5,
1995, 1996 and 1997 pursuant to his fiscal 1995 compensation plan.
(3) Nonqualified stock option vesting for 2,200 shares on each of December 5,
1995 and 1996 and 2,300 shares on December 5, 1997 pursuant to his fiscal
1995 compensation plan.
(4) Nonqualified stock option vesting for 5,500 shares on each of March 26,
1997 and 1998 and 6,500 shares on March 26, 1999.
(5) Incentive stock option vesting for 3,000 shares on each of December 5, 1995
and 1996 and 500 shares on December 5, 1997.
(6) Nonqualified stock option vesting for 3,000 shares on each of December 5,
1995 and 1996.
(7) Incentive stock option vesting 3,600 shares on each of July 5, 1996, 1997,
1998, 1999 and 2000.
(8) Nonqualified stock option vesting 3,400 shares on each of July 5, 1996,
1997, 1998, 1999 and 2000.
(9) Nonqualified stock option vesting for 1,000 shares on each of March 26,
1997 and 1998 and 2,000 shares on March 26, 1999.
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<PAGE>
OPTION EXERCISES. The following table shows information concerning stock
options exercised by the named executive officers during the Company's fiscal
year ended March 31, 1996, including the aggregate value of any gains realized
on such exercise. The table also shows information regarding the number and
value of unexercised in-the-money options held by the named executive officers
at the end of that fiscal year.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1996 AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END(2)($)
ACQUIRED ON VALUE ----------------------------- ------------------------
NAME EXERCISE(#) REALIZED (1)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Richmond 0 $0 30,981 29,200 $115,376 $17,500
Robert C. Greco 0 0 28,705 6,500 96,558 0
Douglass S. Anderson 2,500 55,438 1,000 35,000 5,800 0
Jose S. David 11,250 226,813 17,167 6,000 64,900 15,600
</TABLE>
_________________
(1) Represents the aggregate fair market value on the respective dates of
exercise of the shares of Common Stock received on exercise of the options,
less the aggregate exercise price of the options.
(2) Represents the aggregate fair market value on March 31, 1996, of the shares
of Common Stock subject to outstanding options, less the aggregate exercise
price of the options.
EXECUTIVE CONTRACTS
Each of Messrs. Richmond, Greco, Anderson and David has executed an
agreement containing confidentiality restrictions, as well as certain provisions
regarding noncompetition during his term of employment with the Company and for
six months following termination. The Company provides each of its executive
officers with an annual incentive plan under which they receive a specified
salary plus additional cash and stock-based incentives depending on attainment
of various performance goals.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administration of compensation programs for the executive officers of the
Company. The Committee is composed exclusively of directors who are neither
employees or former employees of the Company nor eligible to participate in
any of the Company's executive compensation programs.
Under the Company's executive compensation programs, there are generally
three components to an executive's compensation: base salary, an annual
incentive payment, and long-term incentives in the form of stock options. The
range of base salaries for a particular executive is determined in the first
instance by a survey of base salary levels at companies of comparable size in
similar industries. Actual base salaries are then targeted to a specific
percentile level of the salaries at the comparable companies, with the
percentile set based on an assessment of the Company's overall performance, in
terms of earnings and revenue growth, and the executive's contribution to that
performance. Annual incentive payments are based on individual incentive plans,
where payments are tied to specific performance goals. Annual bonus payments
under the incentive plans are generally computed as a percentage of the
executive's salary, with the actual percentages being a function of the extent
to which the goals were achieved. Finally, the Company provides long-term
incentives to executives through the grant of stock options. The options
generally have an exercise price equal to the estimated fair market value of the
Company's stock at the time of grant, with the number of options awarded based
on the executive's position as well as the level of the executive's existing
stock holdings. Since fair market value stock options can only produce value to
executives if the price of the Company's stock increases, these option grants
provide a direct link between executive compensation and the Company's
performance.
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<PAGE>
Mr. Richmond's total potential cash compensation for the fiscal year ended
March 31, 1996, was targeted at between the 50th and 75th percentiles of the
compensation paid to chief executive officers at the comparison companies. Less
than one-half of this total was allocated to his base salary, which placed his
salary well below the 25th percentile of the comparison executive positions. The
balance was compensation potentially available under his incentive plan,
reflecting the Committee's view that executive compensation should emphasize
performance to meet stated objectives rather than base salary.
Under his incentive plan for fiscal year 1996, Mr. Richmond was entitled to
a bonus ranging from 50% of base salary, if the Company's annual revenues
increased by 20% over the prior year's results, up to 120% of base salary, if
the Company's revenues increased by more than 35%. The maximum bonus payment was
conditioned on after-tax profits exceeding 9% of revenues (a condition that was
satisfied). If after-tax profits had been less than 7% of revenues, no bonus
would have been earned. For earnings between 7% and 9% of revenues, the bonus
payment would have increased linearly from zero to the maximum bonus amount. In
addition, the Company issued to Mr. Richmond nonqualified stock options to
purchase 17,500 shares of the Company's Common Stock with an exercise price in
excess of the market price of the Company's Common Stock on the date of grant.
In fiscal 1996, the Company also issued to Mr. Richmond, under his incentive
plan for fiscal 1995, nonqualified stock options to purchase 6,700 shares of the
Company's Common Stock with an exercise price equal to the market price of the
Company's Common Stock on the date of grant and an incentive stock option to
purchase 10,800 shares of the Company's Common Stock with an exercise price in
excess of the market price on the date of grant.
Pursuant to the Omnibus Budget Reconciliation Act of 1993 (the "Act"), the
deductibility for federal income tax purposes of compensation in excess of $1
million paid or accrued with respect to any of the Company's five highest paid
executives may be limited. The Company believes that compensation accrued with
respect to options granted under its stock option plans (other than options with
an exercise price less than the fair market value of the Company's Common Stock
at the time of grant), will continue to be deductible, and with regard to base
salaries and the Company's annual incentive programs, the Company does not
expect that, for the foreseeable future, the aggregate level of compensation
payable to executive officers will exceed the $1 million limit.
The Compensation Committee currently consists of Messrs. Alberg and
Kawaguchi.
COMPENSATION COMMITTEE
Tom A. Alberg
Harold H. Kawaguchi
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<PAGE>
COMPARATIVE PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return to
shareholders on the Company's Common Stock with the cumulative total return of
the NASDAQ Composite Index and the NASDAQ Telecommunications Index for the
period beginning on December 14, 1993, the date of the Company's initial public
offering, and ended on March 31, 1996.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG ACTIVE VOICE CORPORATION COMMON STOCK,
THE NASDAQ COMPOSITE INDEX AND
THE NASDAQ TELECOMMUNICATIONS INDEX
[GRAPH]
-------------------------------------------------
12/14/93 3/31/94 3/31/95 3/29/96
- --------------------------------------------------------------------------------
Active Voice Corporation $100 $147 $185 $87
NASDAQ Composite Index $100 $98 $108 $145
NASDAQ Telecommunications Index $100 $88 $90 $121
- --------------------------------------------------------------------------------
The total return on the Company's Common Stock and each index assumes the
value of each investment was $100 on December 14, 1993, and that all dividends
were reinvested. Return information is historical and not necessarily indicative
of future performance.
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<PAGE>
PROPOSAL 1 -- ELECTION OF DIRECTORS
Four directors are to be elected at the annual meeting, to serve until the
1997 Annual Meeting of Shareholders or until their earlier retirement,
resignation or removal. Tom A. Alberg, Robert C. Greco, Harold H. Kawaguchi and
Robert L. Richmond, all of whom are currently directors of the Company, have
been nominated by the Board of Directors for election at the annual meeting. The
accompanying proxy will be voted for these nominees, except where authority to
so vote is withheld. Should any nominee be unable to serve, the proxy will be
voted for such person as is designated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED IN
PROPOSAL 1.
PROPOSAL 2 - APPROVAL OF 1996 EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors has authorized adoption of the Company's 1996
Employee Stock Purchase Plan (the "Plan"), subject to shareholder approval.
SUMMARY OF PLAN
The purpose of the Plan is to provide a method by which eligible Company
employees may be awarded additional remuneration for services rendered and to
encourage such employees to invest in the capital stock of the Company. The Plan
is intended to foster employee loyalty to the Company and increase their
personal interest in the Company's business and success. The Plan is also
intended to facilitate recruiting persons of exceptional ability to become
officers and employees of the Company. A total of 150,000 shares of Common Stock
have been reserved by the Company for purchase by eligible employees under the
Plan.
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"). The Plan is not subject to any provisions of the
Employee Retirement Income Security Act of 1974, as amended, nor is it qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
To be eligible to participate under the Plan, an employee of the Company or
its subsidiaries (including an officer or director who is also an employee) must
have been employed for at least 90 days and must customarily work more than 20
hours per week and more than 5 months in any calendar year. However, an employee
who owns stock with 5% or more of the total combined voting power or value of
all classes of stock of the Company will not be eligible to participate. During
any calendar year, the maximum value of the Common Stock that may be purchased
by an employee under the Plan is $25,000.
The Plan will be administered on quarterly "Payment Periods." The purchase
price for shares of Common Stock purchased under the Plan will be equal to the
lesser of (1) 85% of the market price of the Common Stock on the first business
day of the Payment Period or (2) 85% of the market price for the Common Stock on
the last business day of the Payment Period.
Each eligible employee may elect, at the beginning of a Payment Period, to
have up to 10% of his or her compensation during the Payment Period withheld and
applied toward the purchase of Common Stock at the end of the Payment Period.
Payroll deductions may not be increased or decreased during a Payment Period,
although an employee may elect to withdraw from the Plan during a Payment Period
at any time before the last day of the Payment Period. In the event of a
withdrawal from participation in the Plan during a Payment Period, the
Participant will not be eligible to participate again until the first Payment
Period of the following calendar year.
- 10 -
<PAGE>
The number of shares subject to the Plan and the purchase price of such
shares are subject to adjustment upon the occurrence of certain events,
including but not limited to a stock dividend, stock split, reverse stock split
or other transaction resulting in the subdivision or combination of the
Company's Common Stock.
As a condition of participation in the Plan each participant agrees to
promptly give the Company notice of any disposition of shares that occurs within
2 years after the beginning of the Payment Period in which the shares were
purchased. As a further condition to participation, each participant agrees to
allow the Company to withhold, from any other amounts that may be payable to the
participant at or around the time of such disposition, such federal, state, and
local income, employment and other taxes as the Company may be required to
withhold under applicable law, and to remit such taxes to the Company, in lieu
of such withholding, upon the Company's request.
A participant may resell shares of Common Stock purchased under the Plan at
any time, subject to compliance with all applicable federal and state securities
and other laws. However, a participant's rights under the Plan are the
participant's alone and may not be transferred or assigned to any other person
other than by will or the laws of descent and distribution. A participant's
rights under the Plan are exercisable during his or her lifetime by the
participant alone. A participant's rights under the Plan will terminate if he or
she for any reason ceases to be an employee of the Company. However, if a
participant's employment ceases during a Payment Period, the participant's right
to purchase shares of Common Stock will continue until the end of the Payment
Period, unless the participant or his or her personal representative withdraws
from the Plan for the Payment Period.
The Plan will terminate when all or substantially all of the unissued
shares of Common Stock reserved for the purposes of the Plan have been
purchased. Upon such termination, all payroll deductions not used to purchase
shares of Common Stock will be refunded to the participants entitled thereto.
The Plan may also be terminated at any time by the Board of Directors, but
termination will not affect any purchase rights under the Plan with respect to
the Payment Period in progress at the time of termination. The Board of
Directors or the Committee also has the right to amend the Plan under certain
circumstances.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF PLAN
The following discussion summarizes the material federal income tax
consequences of participation in the Plan. This discussion is general in nature
and does not address issues related to the tax circumstances of any particular
employee. The discussion is based on federal income tax laws in effect on the
date hereof and is, therefore, subject to possible future changes in law. This
discussion does not address state, local or foreign tax consequences.
The Plan is intended to qualify as an "employee stock purchase plan" within
the meaning of Section 423(b) of the Code. A participant will not recognize any
income, gain or loss at the time he or she purchases share of Common Stock under
the Plan.
If a participant disposes of shares of Common Stock purchased under the
Plan, the participant will be subject to income tax in the year of disposition
if a gain is realized on the disposition (that is, if the shares of Common Stock
are then worth more than the participant paid for them). A portion of this gain
will be treated as compensation income, which the participant will be required
to report on his or her federal income tax return for the year in which the
disposition occurs. Under the Code, special rules apply to a disposition of
shares of Common Stock purchased under the Plan. For purposes of these rules, a
disposition generally includes not only a sale of the shares, but also a gift,
an exchange of the shares for other property, and a transfer of the shares at
death. However, a disposition does not include a mere pledge of the shares or a
transfer of the shares into joint tenancy.
The tax consequences to a participant of a disposition of shares of Common
Stock purchased under the Plan will vary depending on how long the participant
has held the shares. If the shares are held until the second anniversary of the
first day of the Payment Period during which the shares were purchased (the
"two-year holding period"), the compensation income will be determined by
subtracting the amount the participant
- 11 -
<PAGE>
paid for the shares from their fair market value on the first day of the Payment
Period during which the shares were purchased, or their fair market value on the
date of disposition, whichever is less. If the shares have not been held for the
two-year holding period, the compensation income will be determined by
subtracting the amount the participant paid for the shares from their fair
market value on the last day of the Payment Period during which the shares were
purchased, or their fair market value on the date of disposition, whichever is
less.
In addition to the compensation income reportable by a participant, if a
disposition is a sale or other taxable transfer, any remaining gain in excess of
the amount reported as compensation income will be capital gain (short-term or
long-term, depending on how long the participant held the shares).
If a disposition of shares is a gift, a transfer by bequest or inheritance,
or another type of transfer that is not generally taxable, the participant will
only be required to report the compensation income described above. An amount
equal to that compensation income will generally be added to the purchase price
of the shares, and the total will be the transferee's adjusted cost of the
shares.
If a participant disposes of shares of Common Stock purchased under the
Plan that have not been held for the two-year holding period, and a gain is
realized on the disposition, the Company or the subsidiary of the Company that
employs the participant may be required to withhold certain amounts on account
of federal income and employment taxes and the Company will generally be
entitled to a compensation deduction in the year of disposition for this portion
of the gain.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE 1996
EMPLOYEE STOCK PURCHASE PLAN.
PROPOSAL 3 -- APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP as
independent auditors for the Company's fiscal year ending March 31, 1997. This
firm has audited the accounts of the Company since 1988. The firm performed
audit services in connection with the examination of the consolidated financial
statements of the Company for its fiscal year ended March 31, 1996. In addition,
the firm has rendered other services, including the review of financial
statements and related information in various registration statements and
filings with the SEC and limited review of financial statements and related
information contained in quarterly reports provided to shareholders and the SEC.
If this proposal does not receive the affirmative approval of a majority of
the votes cast on the proposal, the Board of Directors will reconsider the
appointment. Representatives of Ernst & Young LLP are expected to be present at
the annual meeting, will have the opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
An eligible shareholder who desires to have a qualified proposal considered
for inclusion in the proxy statement prepared in connection with the Company's
1997 Annual Meeting of Shareholders must deliver a copy of the proposal to the
Secretary of the Company, at the Company's principal executive offices, no later
than March 15, 1997. A shareholder must have been a record or beneficial owner
of at least one percent of the Company's outstanding Common Stock, or shares of
Common Stock having a market value of at least $1,000, for a period of at least
one year prior to submitting the proposal, and the shareholder must continue to
hold the shares through the date on which the meeting is held.
- 12 -
<PAGE>
The Company's Bylaws contain minimum notice and other provisions governing
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 C. Greco, Corporate
Secretary, Active Voice Corporation, 2901 Third Avenue, Suite 500, Seattle,
Washington 98121.
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.
ACTIVE VOICE CORPORATION
July 17, 1996
Seattle, Washington
- 13 -
<PAGE>
PROXY
ACTIVE VOICE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Annual Meeting of
Shareholders of Active Voice Corporation (the "Company"), and the related Proxy
Statement dated July 17, 1996, hereby appoints Robert L. Richmond and Jose S.
David, 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 August 31, 1996, 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. The Board of Directors
recommends a vote FOR all of the nominees named below and FOR Proposals 2 and 3.
PROPOSAL 1: ELECTION OF DIRECTORS
/ / FOR: Tom A. Alberg, Robert C. Greco, Harold H. Kawaguchi and Robert L.
Richmond
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
ABOVE).
/ / WITHHOLD authority to vote for all nominees named above
PROPOSAL 2: APPROVAL OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN
/ / FOR / / AGAINST / / ABSTAIN
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, 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, FOR APPROVAL OF THE COMPANY'S
1996 EMPLOYEE STOCK PURCHASE PLAN, AND FOR RATIFICATION OF THE APPOINTMENT OF
ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
__________________________________
Signature
__________________________________
Signature, if held jointly
Dated: _____________________, 1996
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.
PLEASE SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
