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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1997 COMMISSION FILE NUMBER 0-22804
ACTIVE VOICE CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1235111
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2901 THIRD AVENUE, SUITE 500 98121-9800
SEATTLE, WASHINGTON (Zip Code)
(Address of principal executive offices)
(206) 441-4700
(Registrant's telephone
number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OCTOBER 31, 1997
Common Stock, No Par Value 4,630,301
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ACTIVE VOICE CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
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<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements (Unaudited) 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE PAGE 16
EXHIBITS 17
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ACTIVE VOICE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 14,523 $ 12,123 $ 26,302 $ 23,236
Cost of goods sold 6,516 5,020 11,337 9,475
---------- ---------- ---------- ----------
Gross profit 8,007 7,103 14,965 13,761
Operating expenses:
Research and development 2,148 1,650 4,414 3,208
Sales and marketing 3,897 3,168 7,171 6,281
General and administrative 1,572 1,130 2,552 2,180
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Total operating expenses 7,617 5,948 14,137 11,669
---------- ---------- ---------- ----------
Operating income 390 1,155 828 2,092
Interest income 161 186 327 383
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Income before income taxes and
minority interest 551 1,341 1,155 2,475
Income tax provision (173) (429) (351) (792)
Minority interest in loss of
consolidated subsidiary 33 62
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Net income $ 411 $ 912 $ 866 $ 1,683
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per common share $ 0.09 $ 0.20 $ 0.19 $ 0.36
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Average number of common and
dilutive common equivalent
shares outstanding 4,682,247 4,619,954 4,660,037 4,624,034
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
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ACTIVE VOICE CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES)
September 30, March 31,
1997 1997
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ASSETS
Current assets:
Cash and cash equivalents $ 1,398 $ 1,542
Marketable securities 3,504 6,223
Accounts receivable, less allowances 10,902 10,410
Inventories 7,408 7,009
Deferred tax asset 1,073 1,008
Prepaid expenses and other assets 2,444 1,258
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Total current assets 26,729 27,450
Marketable securities 8,243 7,531
Furniture and equipment, net 2,937 2,408
Other assets 2,582 1,552
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Total assets $40,491 $38,941
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,941 $ 2,342
Accrued compensation and benefits 1,005 1,682
Other accrued expenses 1,388 933
Income taxes payable 339 4
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Total current liabilities 5,673 4,961
Commitments
Minority interest (166) (104)
Stockholders' equity:
Preferred stock, no par value:
Authorized shares - 2,000,000 - none outstanding
Common stock, no par value:
Authorized shares - 10,000,000
Issued shares, including repurchased shares -
4,976,933 17,110 17,003
Retained earnings 19,720 19,026
Unrealized gain on marketable securities 38 3
Accumulated translation adjustments 2 4
Less 346,632 repurchased shares (358,859 at
March 31, 1997), at cost (1,886) (1,952)
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Total stockholders' equity 34,984 34,084
Total liabilities and stockholders' equity $40,491 $38,941
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------- -------
Note: The balance sheet at March 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. See notes to consolidated financial
statements.
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ACTIVE VOICE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
Six Months Ended September 30,
1997 1996
OPERATING ACTIVITIES
Net income $ 866 $ 1,683
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 549 436
Provisions for accounts receivable 181 320
Deferred income taxes (54) (233)
Loss on disposal of equipment 12 9
Minority interest in loss of consolidated subsidiary (62)
Changes in operating assets and liabilities:
Increase in accounts receivable (673) (2,393)
Increase in inventories (399) (348)
Decrease (increase) in prepaid expenses and
other assets (1,816) 77
Increase (decrease) in accounts payable 599 (506)
Increase (decrease) in other liabilities 176 (372)
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Net cash used in operating activities (621) (1,327)
INVESTING ACTIVITIES
Purchases of marketable securities (1,585) (2,676)
Proceeds from sale and maturity of marketable
securities 3,616 3,959
Acquisition of business (467)
Purchases of furniture and equipment (1,023) (653)
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Net cash provided by investing activitie s 541 630
FINANCING ACTIVITIES
Repurchase of common stock (416)
Proceeds from employee stock option and stock
purchase plans 354 96
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Net cash provided by (used in) financing
activities (62) 96
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Effect of exchange rate changes on cash and
cash equivalents (2)
Decrease in cash and cash equivalents (144) (601)
Cash and cash equivalents at beginning of period 1,542 3,390
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Cash and cash equivalents at end of period $ 1,398 $ 2,789
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------- -------
See notes to consolidated financial statements.
5
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ACTIVE VOICE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
1. INTERIM FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Active Voice
Corporation and subsidiaries (the Company) are unaudited. In the opinion of
the Company's management, the financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary to state fairly
the financial information set forth therein. Results of operations for the
three month and six month periods ended September 30, 1997 are not
necessarily indicative of future financial results.
Certain notes and other information have been condensed or omitted from the
interim financial statements presented in this Quarterly Report on Form 10-Q.
Accordingly, these financial statements should be read in conjunction with
the Company's annual report on Form 10-K for the year ended March 31, 1997.
2. INVENTORIES
Inventories are comprised of the following (in thousands):
September 30, 1997 March 31, 1997
------------------ --------------
Computer equipment $3,174 $3,602
Custom component parts 3,618 2,730
Supplies 616 677
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$7,408 $7,009
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3. NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard (SFAS) No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130") and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS No. 130 establishes standards for
reporting comprehensive income in annual and interim financial statements.
SFAS No. 131 establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
It also establishes standards for related disclosures about products and
services, geographic areas, and major customers. SFAS No. 130 and 131 are
effective for financial statements for fiscal years beginning after December
15, 1997. The adoption of SFAS No. 130 and 131 will have no impact on the
Company's consolidated results of operations, financial position or cash
flows.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Active Voice Corporation (the Company) is a leading manufacturer of PC-based
voice processing systems and computer telephone integration (CTI) products.
The Company's products are sold worldwide through a network of independent
telecommunications dealers, telephone equipment manufacturers and computer
resellers. The Company markets three principal products: Repartee, Replay
Plus and Replay. Repartee, the Company's flagship and most feature-rich
product, offers the largest call handling capacity. In addition, Repartee
serves as the base for TeLANophy, a suite of the Company's CTI modules which
provides complete call management and unified messaging capabilities. Replay
Plus, the Company's mid-priced product, offers most of the voice processing
features found in Repartee with the exception of the CTI functionality. The
Company's Replay product provides basic voice processing features at a price
point attractive to the small business market.
CERTAIN STATEMENTS IN THIS QUARTERLY REPORT (FOR EXAMPLE, STATEMENTS USING
THE EXPRESSIONS, "THE COMPANY BELIEVES" OR "THE COMPANY ANTICIPATES" AND
OTHER SIMILAR STATEMENTS) CONTAIN "FORWARD LOOKING" INFORMATION (AS DEFINED
IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995) INVOLVING RISKS AND
UNCERTAINTIES, INCLUDING WITHOUT LIMITATION, PROJECTIONS FOR SALES AND
EXPENDITURES, TREND PROJECTIONS AND DEVELOPMENT SCHEDULES. ACTUAL FUTURE
RESULTS AND TRENDS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF FACTORS,
INCLUDING, BUT NOT LIMITED TO, THE RISKS DISCUSSED IN DOCUMENTS FILED BY THE
COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. INVESTORS ARE
ENCOURAGED TO CONSIDER THE RISKS DETAILED IN THOSE FILINGS. THE COMPANY
ASSUMES NO OBLIGATION TO RELEASE PUBLICLY ANY CHANGES TO THESE "FORWARD
LOOKING STATEMENTS" THAT MAY ARISE FROM THE DEVELOPMENT OF UNANTICIPATED
EVENTS OR CIRCUMSTANCES THAT OCCUR AFTER THE DATE OF THE ORIGINAL PROJECTION.
(REFER TO THE SECTION ENTITLED "FACTORS AFFECTING FUTURE OPERATING RESULTS"
FOR A FURTHER DISCUSSION ON SOME OF THE INVOLVED RISKS AND UNCERTAINTIES.)
RESULTS OF OPERATIONS
NET SALES
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 Change 1997 1996 Change
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(Dollars in thousands)
Net sales $14,523 $12,123 19.8% $26,302 $23,236 13.2%
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Effective April 1, 1997, the Company rearranged its domestic and
international distribution channels and certain sales personnel who support
them. The Company's Canadian customers, which were previously under the
umbrella of international sales, joined with the U.S. dealer channel to
create the North America dealer channel. The new corporate sales channel
replaces the OEM channel and includes both international strategic partners,
which were previously included in the international sales channel, and
value-added resellers (VARs) which were previously included in the domestic
dealer channel. The Company made this adjustment to better focus its
resources on meeting the unique product and service needs of its diverse
customer base. The following discussion assumes the adjustment had been made
on April 1, 1996.
THREE MONTHS ENDED SEPTEMBER 30, 1997
Net sales to the Company's North America dealer network during the three
months ended September 30, 1997 increased by approximately 7% from the
comparable period in the prior fiscal year. Net sales to the North America
dealers represented 61% of total net sales for the three months ended
September 30, 1997 compared to 68% of total net sales in the three months
ended September 30, 1996. The increase in net sales to the North America
dealer channel is largely attributable to increased unit sales of turnkey
Repartee systems. The Company conducted a successful promotional campaign for
the Repartee product line,
7
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including TeLANophy software, during the quarter. The increase in net sales
attributable to increased unit sales of Repartee was offset by lower average
selling prices of Repartee and Replay Plus systems due to pricing promotion.
The lower average selling prices for Replay Plus systems were not offset by
increased unit sales. The Company continues to experience a shift in product
mix toward Repartee and TeLANophy, the Company's CTI product offerings, from
the Replay Plus and Replay traditional voice processing systems. In addition,
the decrease in sales to the North America dealer channel as a percentage of
total net sales can be credited to the success of the Company's strategic
partner relationships as some dealers now purchase the Company's products
through these corporate sales customers.
Net sales to the corporate sales channel increased by approximately 39% for
the three months ended September 30, 1997 over the comparable period in the
prior fiscal year. Net sales to corporate sales customers represented 25% and
21% of total net sales for the three month periods ended September 30, 1997
and 1996, respectively. The increase in net sales to corporate sales
customers was attributable to increased unit sales of Repartee, Replay Plus
and Replay, all of which were partially offset by lower average selling
prices per unit. The largest corporate customer accounted for approximately
44% of total corporate sales and approximately 11% of total net sales during
the three months ended September 30, 1997.
Net sales to international customers increased by approximately 58% during
the three months ended September 30, 1997, reflecting increased penetration
of international voice mail markets. International sales represented 14% and
11% of total net sales for the three month periods ended September 30, 1997
and 1996, respectively. The increase in international net sales can be
ascribed to higher unit sales of Repartee, Replay Plus and Replay. The
Company's HTML interface for the Replay Plus and Replay product lines has
proven extremely popular in the international marketplace due to the ease
with which it allows products to be localized for foreign customers. The
Company's localization efforts have improved product acceptance and demand in
the international marketplace.
SIX MONTHS ENDED SEPTEMBER 30, 1997
Net sales to the Company's North America dealer network were essentially
unchanged for the six months ended September 30, 1997 over the comparable
period in the prior fiscal year. Net sales to the North America dealers
represented approximately 63% of total net sales for the six months ended
September 30, 1997 compared to approximately 72% of total net sales for the
six months ended September 30, 1996. An increase in revenue from higher unit
sales of Repartee systems and TeLANophy software was offset by reduced unit
sales of Replay Plus and Replay and by sales price promotions on Repartee and
Replay Plus.
Net sales to the Company's corporate sales channel during the six months
ended September 30, 1997 increased by approximately 49% from the comparable
period in the prior fiscal year. Net sales to corporate sales customers
represented 23% and 17% of total net sales for the six month periods ended
September 30, 1997 and 1996, respectively. The increase in net sales to
corporate sales customers was attributable to increased unit sales of
Repartee, Replay Plus and Replay, all of which were partially offset by lower
average revenues per unit. The largest corporate customer accounted for
approximately 42% of total corporate sales and approximately 10% of total net
sales during the six months ended September 30, 1997.
Net sales to international customers increased by approximately 45% during
the six months ended September 30, 1997, reflecting increased penetration of
international voice mail markets. International sales represented 14% and 11%
of total net sales for the six month periods ended September 30, 1997 and
1996, respectively. The increase in international net sales is due to
increased unit sales of all major products, Repartee, Replay Plus and Replay.
Sales to customers in China, South Africa and western Europe all increased by
greater than 50% in the six months ended September 30, 1997 over the
comparable period in the prior fiscal year.
8
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GROSS MARGIN
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 Change 1997 1996 Change
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(Dollars in thousands)
Gross profit $8,007 $7,103 12.7% $14,965 $13,761 8.7%
Percentage of net sales 55.1% 58.6% 56.9% 59.2%
- -----------------------------------------------------------------------------
The Company's gross margin varies in part depending upon the mix of
higher-margin voiceboard-and-software kit sales (offered to all customers)
and software-only sales (available only to strategic partner accounts) as
opposed to turnkey system sales (which include the cost of a PC and other
related hardware). The proportion of sales contributed by each distribution
channel also affects the overall gross margin, as international sales have
historically had higher gross margins than sales in the other distribution
channels.
The decreases in gross margin as a percentage of net sales between the three
month and six month periods ended September 30, 1997 and 1996 were
principally due to lower average selling prices of turnkey Replay Plus
systems in the North America dealer and corporate sales channels. In
addition, the Company increased allowances for surplus and obsolete inventory
during the six months ending September 30, 1997. The increased reserves were
attributable to isolated PC component problems and anticipated product
platform changes. Increased sales of TeLANophy software in all sales channels
partially offset the overall decline in gross margin.
RESEARCH AND DEVELOPMENT
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 Change 1997 1996 Change
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(Dollars in thousands)
Research and development $2,148 $1,650 30.2% $4,414 $3,208 37.6%
Percentage of net sales 14.8% 13.6% 16.8% 13.8%
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The increases in research and development expenses, both in dollar amount and
as a percentage of net sales between the three month and six month periods
ending September 30, 1997 and 1996 were primarily attributable to an increase
in compensation related costs associated with additional engineering and
development personnel and project-based contract development staff and
associated recruiting costs. The increase in engineering personnel is
attributable to the Company's development of new Windows NT-based products as
well as to the addition of the Pronexus, Inc. development staff. In addition,
engineering salaries have increased due to the competitive nature of the
labor market and the Company's effort to attract and retain skilled
employees. The Company continues to allocate significant resources to the
localization of products for international markets and customization of
products for strategic partner accounts.
During September 1997, the Company announced the introduction of a
significant new product, Lingo. Lingo, targeted at the small office market,
offers all basic voice processing features in a single piece of proprietary
hardware. Lingo is an affordable solution for small businesses as it does not
utilize PC hardware and requires minimal dealer effort in its installation.
The Company believes that in order to remain competitive in a rapidly
changing technological environment, it will continue to be necessary to
allocate significant resources to the development of new products. The
Company expects the dollar amount of research and development expenditures to
continue to increase for the foreseeable future, and that these expenses as a
percentage of sales will vary from period to period.
9
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SALES AND MARKETING
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 Change 1997 1996 Change
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(Dollars in thousands)
Sales and marketing $3,897 $3,168 23.0% $7,171 $6,281 14.2%
Percentage of net sales 26.8% 26.1% 27.3% 27.0%
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The increases in sales and marketing expenses during the three month and six
month periods ended September 30, 1997 over the comparable periods in the
prior fiscal year, both in dollar amount and as a percentage of net sales,
were primarily attributable to increased compensation-related expenses
associated with minor growth in sales and marketing personnel and higher
commission expense due to increased sales levels. Increases in sales and
marketing expenses in the six months ended September 30, 1997 were also
related in part to the addition of sales and marketing personnel and
associated costs from Pronexus. Sales and marketing expenses include both
costs that are essentially fixed as well as costs that vary relative to sales
volume and thus can be expected to fluctuate both in dollar amount and as a
percentage of net sales from period to period.
GENERAL AND ADMINISTRATIVE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 Change 1997 1996 Change
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(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
General and administrative $1,572 $1,130 39.1% $2,552 $2,180 17.1%
Percentage of net sales 10.8% 9.3% 9.7% 9.4%
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</TABLE>
The increases in general and administrative expenses, both in dollar amount
and as a percentage of net sales, between comparable periods was primarily
attributable to increased compensation-related and consulting expenses
associated with the Company's investment in its management information
systems infrastructure. The increase in general and administrative expenses
between the three month periods ended September 30, 1997 and 1996 was also
attributable to the timing of certain investor relations expenses,
principally the annual shareholders report. Most of the costs associated with
the 1997 annual report were incurred during the three months ended September
30, 1997, while the comparable costs for the 1996 annual report were incurred
during the three months ended June 30, 1996. The aforementioned increases in
general and administrative expenses were partially offset by a reduction in
the provision for doubtful accounts receivable due to improved collection
statistics. General and administrative expenses, being relatively fixed in
nature, can be expected to fluctuate as a percentage of net sales from period
to period.
INTEREST INCOME
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 Change 1997 1996 Change
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(Dollars in thousands)
Interest income $161 $186 (13.4%) $327 $383 (14.6%)
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The decrease in interest income during the three month and six month periods
ended September 30, 1997 in comparison to the corresponding periods in the
prior fiscal year were primarily attributable to lower average invested cash
and marketable security balances. Average cash and marketable security
balances decreased due to increased inventory holdings, vendor prepayments
and certain business combinations. See "Liquidity and Capital Resources."
10
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INCOME TAX PROVISION
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 Change 1997 1996 Change
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(Dollars in thousands)
Income tax provision $173 $429 (59.7%) $351 $792 (55.7%)
Effective tax rate 31.4% 32.0% 30.4% 32.0%
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Variations in the customary relationship between the income tax provision and
the statutory income tax rate of 34% result from certain nondeductible
expenses, tax exempt investment income, research and development tax credits,
and the benefit provided by the Company's foreign sales corporation. The
Company expects the effective tax rate to fluctuate in the future due to the
impact of changing research and development tax credits, tax exempt interest
income, and foreign sales corporation benefits as a percentage of taxable
income. In addition, the Company anticipates that it may fall under the
jurisdiction of additional taxing authorities as its operations expand into
new geographical areas, which would cause the effective tax rate to increase.
The decreases in the Company's effective tax rate for the three month and six
month periods ended September 30, 1997 over the comparable period in the
prior fiscal year were primarily attributable to increases in the research
and development tax credit and foreign sales corporation benefit as a
percentage of taxable income. The federal research and development tax credit
was not available during the three months ended June 30, 1996, while it was
in effect during the entire six months ended September 30, 1997.
NET INCOME AND NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 Change 1997 1996 Change
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(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income $411 $912 (54.9%) $866 $1,683 (48.5%)
Percentage of net sales 2.8% 7.5% 3.3% 7.2%
Net income per share $0.09 $0.20 (55.0%) $0.19 $0.36 (47.2%)
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</TABLE>
The decreases in net income and net income per share for the three month and
six month periods ended September 30, 1997 in comparison to the corresponding
periods in the prior fiscal year were attributable to a combination of
factors including declining gross margin percentages and increased operating
expenses, as discussed above under the individual income statement captions.
The current market conditions of the Company's industry are extremely
competitive, leading to notable pricing pressures. In addition, the Company
has entered a significant investment period as it prepares for new product
direction and future growth. The Company believes that these conditions will
continue for the next several quarters. The number of common and common
equivalent shares outstanding was comparable in the three month and six month
periods ended September 30, 1997, and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash, cash equivalents, and marketable securities and
investments decreased to $13.1 million or 32% of total assets at September
30, 1997 from $15.3 million or 39% of total assets at March 31, 1997. Cash
flow used in operations totaled $621,000 during the six months ended
September 30, 1997. The Company had net working capital of $21.1 million at
September 30, 1997.
During the six months ended September 30, 1997, the Company repurchased
40,000 shares of its common stock for approximately $416,000 under its
previously announced share repurchase program. During September, 1997, the
Company acquired its European distributor, Active Voice B.V. based in The
Netherlands. The purchase price of $467,000 was paid in cash and the
acquisition was recorded under the purchase method of accounting. In
addition, the Company made a one-time vendor prepayment of approximately
$827,000 to secure future inventory deliveries at a favorable discount price.
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Accounts receivable, net of allowances, increased to $10.9 million at
September 30, 1997 from $10.4 million at March 31, 1997. The increase in
accounts receivable balances was due to higher net sales in the three months
ended September 30, 1997 compared to net sales in the three months ended
March 31, 1997. Days' sales outstanding at September 30, 1997 was essentially
unchanged from March 31, 1997. Inventory levels increased to $7.4 million at
September 30, 1997 from $7.0 million at March 31, 1997. The increase in
inventory levels was primarily attributable to increasing raw materials
requirements needed to meet the Company's growing sales base as well as
initial inventory stocking for the Company's recently announced Lingo product.
The Company made $1,023,000 in capital expenditures during the six months
ended September 30, 1997, compared to $653,000 during the comparable period
of the prior fiscal year. The majority of the capital expenditures during
the six months ended September 30, 1997 consisted of computer hardware and
software used to augment the Company's management information systems
infrastructure. Additional computer equipment was purchased for use in
research and development. The Company currently has no specific commitments
with respect to additional capital expenditures during the remainder of
fiscal 1997, but expects to spend an aggregate of approximately $1.7 million
for the year.
The Company believes that ongoing maturity of securities in its investment
portfolio, together with funds from operations, will provide sufficient
resources to finance operations for the next several years.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Certain statements contained herein are dependent upon numerous factors,
circumstances and contingencies. The following factors, while not all
inclusive, could cause actual results to differ materially from historical
results or those anticipated:
- - Competitive pressure from new entrants to the CTI market, including large
software companies and telephone switch manufacturers with greater
resources, could adversely affect the Company's business. Introduction of
new products by the Company or its competitors and the extent of their
success or failure could produce significant fluctuations in market demand
for the Company's products.
- - Increasing price competition in the Company's marketplace could influence
the amount and timing of changes in the Company's prices to its customers,
and therefore negatively impact the Company's gross margins. Gross margins
may also either increase or decrease as a result of further shifts in
product mix depending upon the percentage of net sales contributed by
software only sales in comparison to turnkey system sales.
- - If the Company experiences delays in shipments (whether it is due to delays
from customers or as a result of the timing of new product introductions by
the Company) in a given quarter, or if new order bookings do not meet
anticipated levels, substantial fluctuations in operating results will
occur. Frequently, these developments may not become apparent to the
Company until near or at the end of the quarter. In addition, changes in
the product and channel mix, and the timing of customer orders, will
continue to affect the variability of quarterly results of operations in
future quarters.
- - Dependence on continued sales to significant customers could have a
significant impact on the Company's operations as there is no assurance
that any particular customer will continue to purchase similar volumes of
the Company's products.
- - Risks associated with the Company's movement into the larger end-user
market, such as product acceptance and demand and failure to attract
sufficient market share, could affect the Company's future performance.
- - The extent and timing of new product development and the need or desire to
modify existing products may cause notable increases in research and
development spending. Increasing international sales may require notable
increases in development spending associated with localization of products
for foreign markets.
12
<PAGE>
- - Growth strategies involving acquisitions and strategic relationships may
encounter legal and/or unforeseeable delays beyond the Company's control.
- - Risks associated with foreign operations such as gains and losses on the
conversion of foreign currencies to U.S. dollars; export-import
regulations; customs matters; foreign collection problems; and military,
political and transportation risks may significantly affect the company's
operating results. In addition, the Company's international sales involve
additional risks associated with governmental regulation, product
adaptation to local languages and switching systems, and uncertainties
arising from local business practices and cultural considerations.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 2(d). CHANGES IN SECURITIES AND USE OF PROCEEDS
At March 14, 1997, the Company had remaining net proceeds from
its December 1993 initial public offering of $6,349,000. During
the period from March 15, 1997 to September 30, 1997, the
Company used $467,000 for the acquisition of a business,
leaving remaining net proceeds of $5,882,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of Active Voice Corporation
was held on August 21, 1997. A total of 4,299,849 shares of
the Company's common stock were represented in person or by
proxy at the meeting, which comprised 93.1% of the total number
of shares of the Company's common stock outstanding on July 8,
1997, the record date for the meeting.
At the meeting, all of the current directors of the Company,
namely, Tom A. Alberg, Robert C. Greco, Harold H. Kawaguchi,
and Robert L. Richmond, were re-elected to serve as directors
of the Company until the 1998 Annual Meeting of Shareholders or
until their earlier retirement, resignation, or removal. The
following table sets forth information regarding the voting in
the election for directors:
Votes Cast Votes
Nominee For Nominee Withheld
Tom A. Alberg 4,275,245 24,604
Robert C. Greco 4,262,712 37,137
Harold H. Kawaguchi 4,275,745 24,104
Robert L. Richmond 4,263,012 36,837
The shareholders approved the proposed 1996 Employee Stock
Option Plan. The following table sets forth information
regarding the voting on the proposal:
Votes Cast Votes Cast Broker
For Proposal Against Proposal Abstentions Non-Votes
3,935,205 336,499 28,145 0
The shareholders ratified the appointment of Ernst & Young LLP
as the Company's auditors for the fiscal year ending March 31,
1998. The following table sets forth information regarding the
voting on the proposal:
Votes Cast Votes Cast Broker
For Proposal Against Proposal Abstentions Non-Votes
4,268,099 20,665 11,085 0
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3. Restated Bylaws of Registrant
10. 1997 Director Stock Option Plan
10.1 Form of Continuing Director Option
10.2 Form of Initial Option
10.3 Form of Annual Option
11. Computation of Earnings Per Share
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended September 30, 1997.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Active Voice Corporation
(Registrant)
Date: November 10, 1997 By: /s/ Jose S. David
---------------------------
Jose S. David
Chief Financial Officer
Signing on behalf of registrant and
as principal financial officer
16
<PAGE>
RESTATED BYLAWS
OF
ACTIVE VOICE CORPORATION
<PAGE>
RESTATED BYLAWS
OF
ACTIVE VOICE CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE I SHAREHOLDERS..................................................................................... 1
1.1 ANNUAL MEETING 1
1.1.1 TIME AND PLACE OF MEETING.............................................................. 1
1.1.2 BUSINESS CONDUCTED AT MEETING.......................................................... 1
1.2 SPECIAL MEETINGS 2
1.3 NOTICE OF MEETING............................................................................ 3
1.3.1 NOTICE OF SPECIAL MEETING.............................................................. 3
1.3.2 PROPOSED ARTICLES OF AMENDMENT, MERGER, EXCHANGE, SALE, LEASE, OR DISPOSITION.......... 4
1.3.3 PROPOSED DISSOLUTION................................................................... 4
1.3.4 DECLARATION OF MAILING................................................................. 4
1.3.5 WAIVER OF NOTICE....................................................................... 4
1.4 QUORUM; VOTE REQUIREMENT................................................................. 4
1.5 ADJOURNED MEETINGS........................................................................... 5
1.6 FIXING RECORD DATE........................................................................... 5
1.7 SHAREHOLDERS' LIST FOR MEETING............................................................... 6
1.8 RATIFICATION................................................................................. 6
1.9 ACTION BY SHAREHOLDERS WITHOUT A MEETING..................................................... 6
1.10 TELEPHONIC MEETINGS.......................................................................... 7
ARTICLE II BOARD OF DIRECTORS.............................................................................. 7
2.1 RESPONSIBILITY OF BOARD OF DIRECTORS......................................................... 7
2.2 NUMBER OF DIRECTORS; QUALIFICATION........................................................... 7
2.3 ELECTION OF DIRECTORS; NOMINATIONS........................................................... 8
2.3.1 ELECTION AND TERM OF OFFICE............................................................ 8
2.3.2 NOMINATIONS FOR DIRECTORS.............................................................. 8
2.4 VACANCIES.................................................................................... 9
2.5 REMOVAL...................................................................................... 10
2.6 RESIGNATION.................................................................................. 10
2.7 ANNUAL MEETING............................................................................... 10
2.8 REGULAR MEETINGS............................................................................. 10
2.9 SPECIAL MEETINGS............................................................................. 10
2.10 NOTICE OF MEETING............................................................................ 10
2.11 QUORUM OF DIRECTORS.......................................................................... 11
2.12 DISSENT BY DIRECTORS......................................................................... 12
2.13 ACTION BY DIRECTORS WITHOUT A MEETING........................................................ 12
2.14 TELEPHONIC MEETINGS.......................................................................... 12
2.15 COMPENSATION................................................................................. 12
2.16 COMMITTEES................................................................................... 13
ARTICLE III OFFICERS....................................................................................... 14
3.1 APPOINTMENT.................................................................................. 14
3.2 QUALIFICATION................................................................................ 14
3.3 OFFICERS ENUMERATED.......................................................................... 14
3.3.1 CHAIRMAN OF THE BOARD.................................................................. 14
3.3.2 PRESIDENT.............................................................................. 14
3.3.3 VICE PRESIDENTS........................................................................ 15
3.3.4 SECRETARY.............................................................................. 15
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
3.3.5 TREASURER.............................................................................. 16
3.4 DELEGATION................................................................................... 16
3.5 RESIGNATION.................................................................................. 16
3.6 REMOVAL...................................................................................... 16
3.7 VACANCIES.................................................................................... 16
3.8 OTHER OFFICERS AND AGENTS.................................................................... 16
3.9 COMPENSATION................................................................................. 17
3.10 GENERAL STANDARDS FOR OFFICERS............................................................... 17
ARTICLE IV CONTRACTS, CHECKS AND DRAFTS.................................................................... 17
4.1 CONTRACTS.................................................................................... 17
4.2 CHECKS, DRAFTS, ETC.......................................................................... 17
4.3 DEPOSITS..................................................................................... 18
ARTICLE V STOCK............................................................................................ 18
5.1 ISSUANCE OF SHARES........................................................................... 18
5.2 CERTIFICATES OF STOCK........................................................................ 18
5.3 STOCK RECORDS................................................................................ 19
5.4 RESTRICTIONS ON TRANSFER..................................................................... 19
5.5 TRANSFERS.................................................................................... 19
ARTICLE VI RECORDS OF CORPORATE MEETINGS................................................................... 20
ARTICLE VII FINANCIAL MATTERS.............................................................................. 20
ARTICLE VIII DISTRIBUTIONS................................................................................. 20
ARTICLE IX CORPORATE SEAL.................................................................................. 21
ARTICLE X INDEMNIFICATION.................................................................................. 21
10.1 DEFINITIONS.................................................................................. 21
10.2 MANDATORY INDEMNIFICATION.................................................................... 21
10.3 INSURANCE.................................................................................... 21
10.4 CHANGES IN LAW............................................................................... 22
10.5 EXCLUSIVITY; NATURE OF RIGHTS; AMENDMENT..................................................... 22
ARTICLE XI MISCELLANY...................................................................................... 22
11.1 COMMUNICATIONS BY FACSIMILE.................................................................. 22
11.2 INSPECTOR OF ELECTIONS....................................................................... 22
11.3 RULES OF ORDER............................................................................... 23
11.4 CONSTRUCTION................................................................................. 23
11.5 SEVERABILITY................................................................................. 23
ARTICLE XII AMENDMENT OF BYLAWS............................................................................ 24
ARTICLE XIII AUTHENTICATION................................................................................ 24
</TABLE>
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RESTATED BYLAWS
OF
ACTIVE VOICE CORPORATION
These Bylaws are promulgated pursuant to the Washington Business
Corporation Act, as set forth in Title 23B of the Revised Code of Washington
(the "Act").
ARTICLE I
SHAREHOLDERS
1.1 ANNUAL MEETING.
1.1.1 TIME AND PLACE OF MEETING. The annual meeting of the share
holders of the corporation for the election of directors and for the trans
action of such other business as may properly come before the meeting shall
be held each year at a place, day, and time to be set by the Board of
Directors.
1.1.2 BUSINESS CONDUCTED AT MEETING.
(a) At an annual meeting of shareholders, an item of business
may be conducted, and a proposal may be considered and acted upon, only if
such item or proposal is brought before the annual meeting (i) by, or at the
direction of, the Board of Directors, or (ii) by any shareholder of the
corporation who is entitled to vote at the meeting and who complies with the
procedures set forth in the remainder of this Section 1.1.2. This Section
1.1.2 shall not apply to matters of procedure that, pursuant to Section
11.3(a) of these Bylaws, are subject to the authority of the chairman of the
meeting.
(b) For an item of business or proposal to be brought before
an annual meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely,
a share holder's notice must be delivered to, or mailed and received at, the
principal office of the corporation not less than seventy (70) days prior to
the date scheduled for the annual meeting (regardless of any postponements,
deferrals or adjournments of that meeting to a later date), or, if notice or
public disclosure of the date scheduled for the annual meeting is not given
or made at least eighty (80) days prior thereto, not more than ten (10) days
following the day on which notice of the date scheduled for the annual
meeting is mailed or the day on which disclosure of that date is made,
whichever is earlier.
(c) A shareholder's notice to the Secretary under
Section 1.1.2(b) shall set forth, as to each item of business or proposal the
shareholder intends to bring before the annual meeting (i) a brief description
of the item of business or proposal and the reasons for bringing it before the
annual meeting, (ii) the name and address, as they appear on the
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corporation's books, of the shareholder and of any other shareholders that
the shareholder knows or anticipates will support the item of business or
proposal, (iii) the number and class of shares of stock of the corporation
that are beneficially owned on the date of such notice by the shareholder and
by any such other share holders, and (iv) any financial interest of the
shareholder or any such other shareholders in such item of business or
proposal.
(d) The Board of Directors, or a designated committee thereof,
may reject a shareholder's notice that is not timely given in accordance with
the terms of Section 1.1.2(b). If the Board of Directors, or a designated
committee thereof, determines that the information provided in a
shareholder's notice does not satisfy the requirements of Section 1.1.2(c) in
any material respect, the Secretary of the corporation shall notify the
shareholder of the deficiency in the notice. The shareholder shall have an
opportunity to cure the deficiency by providing additional information to the
Secretary within such period of time, not to exceed five (5) days from the
date such deficiency notice is given to the shareholder, as the Board of
Directors or such committee shall reasonably determine. If the deficiency is
not cured within such period, or if the Board of Directors or such committee
determines that the additional information provided by the shareholder,
together with information previously provided, does not satisfy the
requirements of Section 1.1.2(c) in any material respect, then the Board of
Directors or such committee may reject the share holder's notice.
(e) Notwithstanding the procedures set forth in Section
1.1.2(d), if a shareholder desires to bring an item of business or proposal
before an annual meeting, and neither the Board of Directors nor any
committee thereof has made a prior determination of whether the shareholder
has complied with the procedures set forth in this Section 1.1.2 in
connection with such item of business or proposal, then the chairman of the
annual meeting shall determine and declare at the annual meeting whether the
shareholder has so complied. If the chairman determines that the shareholder
has so complied, then the chairman shall so state and ballots shall be
provided for use at the meeting with respect to such item of business or
proposal. If the chairman determines that the shareholder has not so
complied, then, unless the chairman, in his sole and absolute discretion,
determines to waive such compliance, the chairman shall state that the
shareholder has not so complied and the item of business or proposal shall
not be brought before the annual meeting.
(f) This Section 1.1.2 shall not prevent the consideration and
approval or disapproval at the annual meeting of reports of officers,
directors and committees of the Board of Directors, but, in connection with
such reports, no item of business may be conducted, and no proposal may be
considered and acted upon, unless there has been compliance with the
procedures set forth in this Section 1.1.2 in connection therewith.
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1.2 SPECIAL MEETINGS. Special meetings of the shareholders for any
purpose or purposes may be called at any time by the Board of Directors or by
the Chairman of the Board (if one be appointed) or by the President or by one
or more shareholders holding shares representing not less than one-tenth
(1/10) of all the votes entitled to be cast on any issue proposed to be
considered at that meeting, to be held at such time and place as the Board or
the Chairman (if one be appointed) or the President may prescribe; provided,
that, at any time when the corporation is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), special meetings of the shareholders for any purpose or
purposes may be called at any time only by the Board of Directors or the
Chairman of the Board (if one be appointed) or the President or one or more
shareholders holding shares representing not less than twenty-five percent
(25%) of all the votes entitled to be cast on any issue proposed to be
considered at that meeting.
If a special meeting is called by any person or persons other than the
Board of Directors or the Chairman of the Board (if one be appointed) or the
President, then a written demand, describing with reasonable clarity the
purpose or purposes for which the meeting is called and specifying the
general nature of the business proposed to be transacted, shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Secretary of the corporation. Upon receipt of such a
demand, the Secretary shall cause notice of such meeting to be given, within
thirty (30) days after the date the demand was delivered to the Secretary, to
the shareholders entitled to vote, in accordance with the provisions of
Section 1.3 of these Bylaws.
1.3 NOTICE OF MEETINGS. Except as otherwise provided below, the
Secretary, Assistant Secretary, or any transfer agent of the corporation
shall give, in any manner permitted by law, not less than ten (10) nor more
than sixty (60) days before the date of any meeting of shareholders, written
notice stating the place, day, and time of the meeting to each shareholder of
record entitled to vote at such meeting. If mailed, notice to a shareholder
with first-class postage prepaid, correctly addressed to the shareholder at
the shareholder's address as it appears on the current record of shareholders
of the corporation, shall be effective when mailed. Otherwise, written
notice shall be effective at the earliest of the following: (a) when
received, (b) five (5) days after its deposit in the United States mail, as
evidenced by the postmark, if mailed with first-class postage prepaid and
correctly addressed, or (c) on the date shown on the return receipt, if sent
by registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee.
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<PAGE>
1.3.1 NOTICE OF SPECIAL MEETING. In the case of a special meeting,
the written notice shall also state with reasonable clarity the purpose or
purposes for which the meeting is called and the general nature of the
business proposed to be transacted at the meeting. No business other than
that within the purpose or purposes specified in the notice may be transacted
at a special meeting.
1.3.2 PROPOSED ARTICLES OF AMENDMENT, MERGER, EXCHANGE, SALE,
LEASE, OR DISPOSITION. If the business to be conducted at any meeting
includes any proposed amendment to the Articles of Incorporation or any
proposed merger or exchange of shares, or any proposed sale, lease, exchange,
or other disposition of all or substantially all of the property and assets
(with or without the goodwill) of the corporation not in the usual or regular
course of its business, then the written notice shall state that the purpose
or one of the purposes is to consider the proposed amendment or plan of
merger, exchange of shares, sale, lease, exchange, or other disposition, as
the case may be, shall describe the proposed action with reasonable clarity,
and shall be accompanied by a copy of the proposed amendment or plan.
Written notice of such meeting shall be given to each shareholder of record,
whether or not entitled to vote at such meeting, not less than twenty (20)
days before such meeting, in the manner provided in Section 1.3 above.
1.3.3 PROPOSED DISSOLUTION. If the business to be conducted at any
meeting includes the proposed voluntary dissolution of the corporation, then
the written notice shall state that the purpose or one of the purposes is to
consider the advisability thereof. Written notice of such meeting shall be
given to each shareholder of record, whether or not entitled to vote at such
meeting, not less than twenty (20) days before such meeting, in the manner
provided in Section 1.3 above.
1.3.4 DECLARATION OF MAILING. A declaration of the mailing or
other means of giving any notice of any shareholders' meeting, executed by
the Secretary, Assistant Secretary, or any transfer or other agent of the
corporation giving notice on its behalf, shall be prima facie evidence of the
giving of such notice.
1.3.5 WAIVER OF NOTICE. A shareholder may waive notice of any
meeting at any time, either before or after such meeting. Except as provided
below, the waiver must be in writing, be signed by the shareholder entitled to
the notice, and be delivered to the corporation for inclusion in the minutes or
filing with the corporate records. A shareholder's attendance at a meeting in
person or by proxy waives objection to lack of notice or defective notice of
the meeting unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting on the ground that
the meeting is not lawfully called or convened. In the case of a special
meeting, or an annual meeting at which fundamental corporate changes are
considered, a shareholder waives objection to consideration of a particular
matter that is not within the purpose or purposes described in the
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<PAGE>
meeting notice unless the shareholder objects to considering the matter when
it is presented.
1.4 QUORUM; VOTE REQUIREMENT. A quorum shall exist at any meeting of
shareholders if a majority of the votes entitled to be cast is represented in
person or by proxy. Once a share is represented for any purpose at a meeting
other than solely to object to holding the meeting or transacting business at
the meeting, it is deemed present for quorum purposes for the remainder of
the meeting and for any adjournment of that meeting unless a new record date
is or must be set for that adjourned meeting. Subject to the foregoing, the
determination of the voting groups entitled to vote (as required by law), and
the quorum and voting requirements applicable thereto, must be made
separately for each matter being considered at a meeting. In the case of any
meeting of shareholders that is adjourned more than once because of the
failure of a quorum to attend, those who attend the third convening of such
meeting, although less than a quorum, shall nevertheless constitute a quorum
for the purpose of electing directors, provided that the percentage of shares
represented at the third convening of such meeting shall not be less than
one-third of the shares entitled to vote.
If a quorum exists, action on a matter (other than the election of
directors) is approved by a voting group if the votes cast within the voting
group favoring the action exceed the votes cast within the voting group
opposing the action unless a greater number of affirmative votes is required
by law or by the Articles of Incorporation.
1.5 ADJOURNED MEETINGS. An adjournment or adjournments of any share
holders' meeting, whether by reason of the failure of a quorum to attend or
otherwise, may be taken to such date, time, and place as the chairman of the
meeting may determine without new notice being given if the date, time, and
place are announced at the meeting at which the adjournment is taken.
However, if the adjournment is for more than one hundred twenty (120) days
from the date set for the original meeting, a new record date for the
adjourned meeting shall be fixed and a new notice of the adjourned meeting
shall be given to each share holder of record entitled to vote at the
adjourned meeting, in accordance with the provisions of Section 1.3 of these
Bylaws. At any adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting. Any meeting at
which directors are to be elected shall be adjourned only from day to day
until such directors are elected.
1.6 FIXING RECORD DATE. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders (or, subject
to Section 1.5 above, any adjournment thereof), the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days
prior to the meeting. If no such record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of
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<PAGE>
shareholders, then the day before the first notice is delivered to
shareholders shall be the record date for such determination of shareholders.
If no notice is given because all shareholders entitled to notice have waived
notice, then the record date for the determination of shareholders entitled
to notice of or to vote at a meeting shall be the date on which the last such
waiver of notice was obtained. When a determination of shareholders entitled
to vote at any meeting of shareholders has been made as provided in this
section, such determination shall apply to any adjournment thereof, except as
provided in Section 1.5 of these Bylaws. If no notice is given because all
shareholders entitled to notice have signed a consent as described in Section
1.9 below, the record date for determining shareholders entitled to take
action without a meeting is the date the first shareholder signs the consent.
1.7 SHAREHOLDERS' LIST FOR MEETING. The corporation shall cause to be
prepared an alphabetical list of the names of all of its shareholders on the
record date who are entitled to notice of a shareholders' meeting or any
adjournment thereof. The list must be arranged by voting group (and within
each voting group by class or series of shares) and show the address of and
the number of shares held by each shareholder. The shareholders' list must
be available for inspection by any shareholder, beginning ten (10) days prior
to the meeting and continuing through the meeting, at the principal office of
the corporation or at a place identified in the meeting notice in the city
where the meeting will be held. Such list shall be produced and kept open at
the time and place of the meeting. During such ten-day period, and during
the whole time of the meeting, the shareholders' list shall be subject to the
inspection of any shareholder, or the shareholder's agent or attorney. In
cases where the record date is fewer than ten (10) days prior to the meeting
because notice has been waived by all shareholders, the Secretary shall keep
such record available for a period from the date the first waiver of notice
was delivered to the date of the meeting. Failure to comply with the
requirements of this section shall not affect the validity of any action
taken at the meeting.
1.8 RATIFICATION. Subject to the requirements of RCW 23B.08.730,
23B.17.020, and 23B.19.040, any contract, transaction, or act of the
corporation or of any director or officer of the corporation that shall be
authorized, approved, or ratified by the affirmative vote of a majority of
shares represented at a meeting at which a quorum is present shall, insofar
as permitted by law, be as valid and as binding as though ratified by every
share holder of the corporation.
1.9 ACTION BY SHAREHOLDERS WITHOUT A MEETING. Any action which may be
or which is required by law to be taken at any meeting of shareholders may be
taken, without a meeting or notice of a meeting, if one or more consents in
writing, setting forth the action so taken, are signed by all of the share
holders entitled to vote or, in the place of any one or more of such share
holders, by a person holding a valid proxy to vote with
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respect to the subject matter thereof, and are delivered to the corporation
for inclusion in the minutes or filing with the corporate records. If notice
of the proposed action to be taken by unanimous consent of the voting
shareholders is required by law to be given to nonvoting shareholders, the
corporation must give its nonvoting shareholders written notice of the
proposed action at least ten (10) days before the action is taken. The
notice must contain or be accompanied by the same material that, by law,
would have been required to be sent to nonvoting shareholders in a notice of
meeting at which the proposed action would have been submitted to such
shareholders for action. Action taken by unanimous written consent is
effective when all consents are in possession of the corporation, unless the
consent specifies a later effective date. Such consent shall have the same
force and effect as a meeting vote of shareholders and may be described as
such in any articles or other document filed with the Secretary of State of
the State of Washington.
1.10 TELEPHONIC MEETINGS. Shareholders may participate in a meeting by
means of a conference telephone or similar communications equipment by means
of which all persons participating in the meeting can hear each other at the
same time, and participation by such means shall constitute presence in
person at a meeting.
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ARTICLE II
BOARD OF DIRECTORS
2.1 RESPONSIBILITY OF BOARD OF DIRECTORS. The business and affairs and
property of the corporation shall be managed under the direction of a Board
of Directors. A director shall discharge the duties of a director, including
duties as a member of a committee, in good faith, with the care an ordinarily
prudent person in a like position would exercise under similar circumstances,
and in a manner the director reasonably believes to be in the best interests
of the corporation. In discharging the duties of a director, a director is
entitled to rely on information, opinions, reports, or statements, including
financial statements and other financial data, if prepared or presented by:
(a) one or more officers or employees of the corporation whom the director
reasonably believes to be reliable and competent in the matters presented;
(b) legal counsel, public accountants, or other persons as to matters the
director reasonably believes are within the person's professional or expert
competence; or (c) a committee of the Board of Directors of which the
director is not a member, if the director reasonably believes the committee
merits confidence. A director is not acting in good faith if the director
has knowledge concerning the matter in question that makes reliance otherwise
permitted above unwarranted. The creation of, delegation of authority to, or
action by a committee does not alone constitute compliance by a director with
the standards of conduct imposed by law upon directors. A director is not
liable for any action taken as a director, or any failure to take any action,
if the director performed the duties of the director's office in compliance
with this section.
2.2 NUMBER OF DIRECTORS; QUALIFICATION. The exact number of directors
of the corporation shall be five (5) until amended in accordance with these
Bylaws. No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office
expires. If a greater or lesser number of directors than is specified in this
section is elected by the shareholders, then election of that number shall
automatically be deemed to constitute an amendment to these Bylaws. No
director need be a shareholder of the corporation or a resident of
Washington. Each director must be at least eighteen (18) years of age.
2.3 ELECTION OF DIRECTORS; NOMINATIONS.
2.3.1 ELECTION AND TERM OF OFFICE. At each annual meeting of share
holders, the shareholders shall elect directors. Each director shall hold
office until the next succeeding annual meeting or, in the case of staggered
terms as permitted by RCW 23B.08.060, for the term for which he is elected,
and in each case until his successor shall have been elected and qualified.
2.3.2 NOMINATIONS FOR DIRECTORS.
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(a) Nominations of candidates for election as directors at an
annual meeting of shareholders may only be made (i) by, or at the direction
of, the Board of Directors, or (ii) by any shareholder of the corporation who
is entitled to vote at the meeting and who complies with the procedures set
forth in the remainder of this Section 2.3.2.
(b) If a shareholder proposes to nominate one or more
candidates for election as directors at an annual meeting, the shareholder
must have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a shareholder's notice must be delivered to, or
mailed and received at, the principal office of the corporation not less than
seventy (70) days prior to the date scheduled for the annual meeting
(regardless of any postponements, deferrals or adjournments of that meeting
to a later date), or, if notice or public disclosure of the date scheduled
for the annual meeting is not given or made at least eighty (80) days prior
thereto, not more than ten (10) days following the day on which notice of the
date scheduled for the annual meeting is mailed or the day on which
disclosure of that date is made, whichever is earlier.
(c) A shareholder's notice to the Secretary under Section
2.3.2(b) shall set forth, as to each person whom the shareholder proposes to
nominate for election as a director (i) the name, age, business address and
residence address of such person, (ii) the principal occupation or employment
of such person, (iii) the number and class of shares of stock of the
corporation that are beneficially owned on the date of such notice by such
person, and (iv) if the corporation at such time has any security registered
pursuant to Section 12 of the Exchange Act, any other information relating to
such person required to be disclosed in solicitations of proxies with respect
to nominees for election as directors pursuant to Regulation 14A under the
Exchange Act, including but not limited to information required to be
disclosed by Schedule 14A of Regulation 14A, and any other information that
the shareholder would be required to file with the Securities and Exchange
Commission in connection with the shareholder's nomination of such person as
a candidate for director or the shareholder's opposition to any candidate for
director nominated by, or at the direction of, the Board of Directors. In
addition to the above information, a shareholder's notice to the Secretary
under Section 2.3.2(b) shall (A) set forth (i) the name and address, as they
appear on the corporation's books, of the shareholder and of any other share
holders that the shareholder knows or anticipates will support any candidate
or candidates nominated by the shareholder, and (ii) the number and class of
shares of stock of the corporation that are beneficially owned on the date of
such notice by the shareholder and by any such other shareholders, and (B) be
accompanied by a written statement, signed and acknowledged by each candidate
nominated by the shareholder, that the candidate agrees to be so nominated
and to serve as a director of the corporation if elected at the annual
meeting.
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(d) The Board of Directors, or a designated committee thereof,
may reject any shareholder's nomination of one or more candidates for
election as directors if the nomination is not made pursuant to a
shareholder's notice timely given in accordance with the terms of Section
2.3.2(b). If the Board of Directors, or a designated committee thereof,
determines that the information provided in a shareholder's notice does not
satisfy the requirements of Section 2.3.2(c) in any material respect, the
Secretary of the corporation shall notify the shareholder of the deficiency
in the notice. The shareholder shall have an opportunity to cure the
deficiency by providing additional information to the Secretary within such
period of time, not to exceed five (5) days from the date such deficiency
notice is given to the shareholder, as the Board of Directors or such
committee shall reasonably determine. If the deficiency is not cured within
such period, or if the Board of Directors or such committee determines that
the additional information provided by the share holder, together with
information previously provided, does not satisfy the requirements of Section
2.3.2(c) in any material respect, then the Board of Directors or such
committee may reject the shareholder's notice.
(e) Notwithstanding the procedures set forth in Section
2.3.2(d), if a shareholder proposes to nominate one or more candidates for
election as directors at an annual meeting, and neither the Board of
Directors nor any committee thereof has made a prior determination of whether
the shareholder has complied with the procedures set forth in this Section
2.3.2 in connection with such nomination, then the chairman of the annual
meeting shall determine and declare at the annual meeting whether the
shareholder has so complied. If the chairman determines that the shareholder
has so complied, then the chairman shall so state and ballots shall be
provided for use at the meeting with respect to such nomination. If the
chairman determines that the shareholder has not so complied, then, unless
the chairman, in his sole and absolute discretion, determines to waive such
compliance, the chairman shall state that the shareholder has not so complied
and the defective nomination shall be disregard.
2.4 VACANCIES. Except as otherwise provided by law, any vacancy
occurring in the Board of Directors (whether caused by resignation, death, or
otherwise) may be filled by the affirmative vote of a majority of the
directors present at a meeting of the Board at which a quorum is present, or,
if the directors in office constitute less than a quorum, by the affirmative
vote of a majority of all of the directors in office. Notice shall be given
to all of the remaining directors that such vacancy will be filled at the
meeting. However, if the vacant office was held by a director elected by a
voting group composed of less than all of the voting shareholders, then the
Board of Directors shall not have the power to fill such vacancy. A director
elected to fill any vacancy shall hold office until the next meeting of
shareholders at which directors are elected, and until his successor shall
have been elected and qualified.
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2.5 REMOVAL. One or more members of the Board of Directors (including
the entire Board) may be removed, with or without cause, at a special meeting
of shareholders called expressly for that purpose. A director (or the entire
Board) may be removed if the number of votes cast in favor of removing such
director (or the entire Board) exceeds the number of votes cast against
removal; provided that, if a director (or the entire Board) has been elected
by one or more voting groups, only those voting groups may participate in the
vote as to removal. However, if the Articles of Incorporation grant
shareholders the right to cumulate their votes in the election of directors,
a director may not be removed if a number of votes sufficient to elect such
director under cumulative voting (computed on the basis of the number of
votes actually cast at the meeting on the question of removal) is cast
against such director's removal.
2.6 RESIGNATION. A director may resign at any time by delivering
written notice to the Board of Directors, its Chairman, the President, or the
Secretary. A resignation is effective when the notice is delivered unless
the notice specifies a later effective date.
2.7 ANNUAL MEETING. The first meeting of each newly elected Board of
Directors shall be known as the annual meeting thereof and shall be held
without notice immediately after the annual shareholders' meeting or any
special shareholders' meeting at which a Board is elected. Such meeting
shall be held at the same place as such shareholders' meeting unless some
other place shall be specified by resolution of the shareholders.
2.8 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
held at such place, day, and time as shall from time to time be fixed by
resolution of the Board without notice other than the delivery of such
resolution as provided in Section 2.10 below.
2.9 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by the President or the Chairman of the Board (if one be appointed) or
any two or more directors, to be held at such place, day, and time as
specified by the person or persons calling the meeting.
2.10 NOTICE OF MEETING. Notice of the place, day, and time of any
meeting of the Board of Directors for which notice is required shall be
given, at least two (2) days preceding the day on which the meeting is to be
held, by the Secretary or an Assistant Secretary, or by the person calling
the meeting, in any manner permitted by law, including orally. Any oral
notice given by personal communication over the telephone or otherwise may be
communicated either to the director or to a person at the office of the
director who, the person giving the notice has reason to believe, will
promptly communicate it to the director. Notice shall be deemed to have been
given on the earliest of (a) the day of actual receipt, (b) five (5) days
after the day on which written notice is deposited in the United States mail,
as
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evidenced by the postmark, with first-class postage prepaid and correctly
addressed, or (c) on the date shown on the return receipt, if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the addressee.
No notice of any regular meeting need be given if the place, day, and
time thereof have been fixed by resolution of the Board of Directors and a
copy of such resolution has been given to each director, either by personally
delivering the copy to the director at least two (2) days, or by depositing
the copy in the United States mail with first-class postage prepaid and
correctly addressed to the director at the director's address as it appears
on the records of the corporation at least five (5) days (as evidenced by the
postmark), prior to the day of the first meeting held in pursuance thereof.
Notice of a meeting of the Board of Directors need not be given to any
director if it is waived by the director in writing, whether before or after
such meeting is held. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting unless required
by law, the Articles of Incorporation, or these Bylaws.
A director's attendance at or participation in a meeting shall constitute
a waiver of notice of such meeting except when a director attends or
participates in a meeting for the express purpose of objecting on legal
grounds prior to or at the beginning of the meeting (or promptly upon the
director's arrival) to the holding of the meeting or the transaction of any
business and does not thereafter vote for or assent to action taken at the
meeting. Any meeting of the Board of Directors shall be a legal meeting
without any notice thereof having been given if all of the directors have
received valid notice thereof, are present without objecting, or waive notice
thereof, or any combination thereof.
2.11 QUORUM OF DIRECTORS. Except in particular situations where a lesser
number is expressly permitted by law, and unless a greater number is required
by the Articles of Incorporation, a majority of the number of directors
specified in or fixed in accordance with these Bylaws shall constitute a
quorum for the transaction of business, and the affirmative vote of a
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If the number of directors in
office at any time is less than the number specified in or fixed in
accordance with these Bylaws, then a quorum shall consist of a majority of
the number of directors in office; provided that in no event shall a quorum
consist of fewer than one-third of the number specified in or fixed in
accordance with these Bylaws.
Directors at a meeting of the Board of Directors at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, provided such withdrawal
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does not reduce the number of directors attending the meeting below the level
of a quorum.
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting of the Board of Directors to another time and
place. If the meeting is adjourned for more than forty-eight (48) hours, then
notice of the time and place of the adjourned meeting shall be given before
the adjourned meeting takes place, in the manner specified in Section 2.10 of
these Bylaws, to the directors who were not present at the time of the
adjournment.
2.12 DISSENT BY DIRECTORS. Any director who is present at any meeting of
the Board of Directors at which action on any corporate matter is taken shall
be presumed to have assented to the action taken unless the director objects
at the beginning of the meeting (or promptly upon the director's arrival) to
the holding of, or the transaction of business at, the meeting; or unless the
director's dissent or abstention shall be entered in the minutes of the
meeting; or unless the director delivers written notice of the director's
dissent or abstention to the presiding officer of the meeting before the
adjournment thereof or to the corporation within a reasonable time after the
adjournment of the meeting. Such right to dissent or abstention shall not be
available to any director who votes in favor of such action.
2.13 ACTION BY DIRECTORS WITHOUT A MEETING. Any action required by law
to be taken or which may be taken at a meeting of the Board of Directors may
be taken without a meeting if one or more consents in writing, setting forth
the action so taken, shall be signed either before or after the action so
taken by all of the directors and delivered to the corporation for inclusion
in the minutes or filing with the corporate records. Such consent shall have
the same effect as a meeting vote. Action taken under this section is
effective when the last director signs the consent, unless the consent
specifies a later effective date.
2.14 TELEPHONIC MEETINGS. Except as may be otherwise restricted by the
Articles of Incorporation, members of the Board of Directors may participate
in a meeting of the Board by any means of communication by which all
directors participating in the meeting may simultaneously hear each other
during the meeting. Participation by such means shall constitute presence in
person at a meeting.
2.15 COMPENSATION. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, and may be paid a fixed sum or
a stated salary as a director, for attendance at each meeting of the Board.
No such payment shall preclude any director from serving the corporation in
any other capacity and receiving compensation therefor.
2.16 COMMITTEES. The Board of Directors, by resolution adopted by the
greater of (a) a majority of all of the directors in office, or (b) the
number of directors required by the Articles
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of Incorporation or these Bylaws to take action may from time to time create,
and appoint individuals to, one or more committees, each of which must have
at least two (2) members. If a committee is formed for the purpose of
exercising functions of the Board, the committee must consist solely of
directors. If the only function of a committee is to study and make
recommendations for action by the full Board, the committee need not consist
of directors. Members of a committee composed solely of directors, in
fulfilling their standard of conduct, may rely upon Section 2.1 above.
Committees of directors may exercise the authority of the Board of Directors
to the extent specified by such resolution or in the Articles of
Incorporation or these Bylaws. However, no committee shall:
(a) authorize or approve a distribution (as defined in RCW
23B.01.400) except according to a general formula or method prescribed by the
Board of Directors;
(b) approve or propose to shareholders action that by law is
required to be approved by shareholders;
(c) fill vacancies on the Board of Directors or on any of its
committees;
(d) amend the Articles of Incorporation;
(e) adopt, amend, or repeal Bylaws;
(f) approve a plan of merger not requiring shareholder approval; or
(g) authorize or approve the issuance or sale or contract for sale
of shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares, except that the Board of
Directors may authorize a committee of directors (or a senior executive
officer of the corporation) to do so within limits specifically prescribed by
the Board of Directors.
Committees shall be governed by the same provisions as govern the
meetings, actions without meetings, notice and waiver of notice, quorum and
voting requirements, and standards of conduct of the Board of Directors. The
Executive Committee (if one be established) shall meet periodically between
meetings of the full Board. All committees shall keep regular minutes of
their meetings and shall cause them to be recorded in books kept for that
purpose at the office of the corporation.
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ARTICLE III
OFFICERS
3.1 APPOINTMENT. The officers of the corporation shall be appointed
annually by the Board of Directors at its annual meeting held after the
annual meeting of the shareholders. If the appointment of officers is not
held at such meeting, such appointment shall be held as soon thereafter as a
Board meeting conveniently may be held. Except in the case of death,
resignation, or removal, each officer shall hold office until the next annual
meeting of the Board and until his successor is appointed and qualified.
3.2 QUALIFICATION. None of the officers of the corporation need be a
director, except as specified below. Any two or more of the corporate
offices may be held by the same person.
3.3 OFFICERS ENUMERATED. Except as otherwise provided by resolution of
the Board of Directors, the officers of the corporation and their respective
powers and duties shall be as follows:
3.3.1 CHAIRMAN OF THE BOARD. The Chairman of the Board (if such an
officer be appointed) shall be a director and shall perform such duties as
shall be assigned to him by the Board of Directors and in any employment
agreement. The Chairman shall preside at all meetings of the shareholders
and at all meetings of the Board at which he is present. The Chairman may
sign deeds, mortgages, bonds, contracts, and other instruments, except when
the signing thereof has been expressly delegated by the Board or by these
Bylaws to some other officer or agent of the corporation or is otherwise
required by law to be signed by some other officer or in some other manner.
If the President dies or becomes unable to act, the Chairman shall perform
the duties of the President, except as may be limited by resolution of the
Board of Directors, with all the powers of and subject to all the
restrictions upon the President.
3.3.2 PRESIDENT. Subject to such supervisory powers as may be
given by the Board of Directors to the Chairman of the Board (if such an
officer be appointed), the President shall be the chief executive officer of
the corporation unless some other officer is so designated by the Board and,
subject to the control of the Board and the Executive Committee (if one be
established), shall supervise and control all of the assets, business, and
affairs of the corporation. If no Chairman of the Board has been appointed,
the President shall be a director. The President may sign certificates for
shares of the corporation, deeds, mortgages, bonds, contracts, and other
instruments, except when the signing thereof has been expressly delegated by
the Board or by these Bylaws to some other officer or agent of the
corporation or is otherwise required by law to be signed by some other
officer or in some other manner. The President shall vote the shares owned
by the corporation in other corporations, domestic or foreign, unless
otherwise prescribed by law or resolution of the Board. In
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general, the President shall perform all duties incident to the office of
President and such other duties as may be prescribed by the Board from time
to time. In the absence of the Chairman of the Board, the President, if a
director, shall preside over all meetings of the share holders and over all
meetings of the Board of Directors. The President shall have the authority
to appoint one or more Assistant Secretaries and Assistant Treasurers, as he
deems necessary.
3.3.3 VICE PRESIDENTS. If no Chairman of the Board has been
appointed, in the absence or disability of the President, the Vice
Presidents, if any, in order of their rank as fixed by the Board of Directors
or, if not ranked, a Vice President designated by the Board shall perform all
the duties of the President and when so acting shall have all the powers of,
and be subject to all the restrictions upon, the President; provided that no
such Vice President shall assume the authority to preside as Chairman of
meetings of the Board unless such Vice President is a member of the Board.
The Vice Presidents shall have such other powers and perform such other
duties as from time to time may be respectively prescribed for them by the
Board, these Bylaws, the President, or the Chairman of the Board (if one be
appointed).
3.3.4 SECRETARY. The Secretary shall:
(a) have responsibility for preparing minutes of meetings of
the shareholders and the Board of Directors and for authenticating
records of the corporation;
(b) see that all notices are duly given in accordance with the
provisions of Sections 1.3, 1.5, 2.8, and 2.10 of these Bylaws and as
required by law;
(c) be custodian of the corporate records and seal of the
corporation, if one be adopted;
(d) keep a register of the post office address of each share
holder and director;
(e) attest certificates for shares of the corporation;
(f) have general charge of the stock transfer books of the
corporation;
(g) when required by law or authorized by resolution of the
Board of Directors, sign with the President, or other officer authorized
by the President or the Board, deeds, mortgages, bonds, contracts, and
other instruments; and
(h) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned by
the President or the Board of Directors.
In the absence of the Secretary, an Assistant Secretary may
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perform the duties of the Secretary.
3.3.5 TREASURER. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such
sum and with such surety or sureties as the Board shall determine. The
Treasurer shall:
(a) have charge and custody of and be responsible for all
funds and securities of the corporation;
(b) receive and give receipts for moneys due and payable to
the corporation from any source whatsoever and deposit all such moneys in
the name of the corporation in banks, trust companies, or other
depositories selected in accordance with the provisions of these Bylaws;
and
(c) in general, perform all of the duties incident to the
office of Treasurer and such other duties as from time to time may be
assigned by the President or the Board of Directors.
In the absence of the Treasurer, an Assistant Treasurer may perform the
duties of the Treasurer.
3.4 DELEGATION. In case of the absence or inability to act of any
officer of the corporation and of each person herein authorized to act in his
place, the Board of Directors may from time to time delegate the powers and
duties of such officer to any other officer or other person whom it may
select.
3.5 RESIGNATION. Any officer may resign at any time by delivering
notice to the corporation. Any such resignation shall take effect at the
time the notice is delivered unless the notice specifies a later effective
date. Unless otherwise specified therein, acceptance of such resignation by
the corporation shall not be necessary to make it effective. Any resignation
shall be without prejudice to the rights, if any, of the corporation under
any contract to which the officer is a party.
3.6 REMOVAL. Any officer or agent may be removed by the Board with or
without cause. An officer empowered to appoint another officer or assistant
officer also has the power to remove any officer he would have the power to
appoint whenever in his judgment the best interests of the corporation would
be served thereby. The removal of an officer or agent shall be without
prejudice to the contract rights, if any, of the corporation or the person so
removed. Appointment of an officer or agent shall not of itself create
contract rights.
3.7 VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification, creation of a new office, or any other cause may
be filled by the Board of Directors for the unexpired portion of the term or
for a new term established by the Board.
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3.8 OTHER OFFICERS AND AGENTS. One or more Vice Presidents and such
other officers and assistant officers as may be deemed necessary or advisable
may be appointed by the Board of Directors or, to the extent provided in
Section 3.3.2 above, by the President. Such other officers and assistant
officers shall hold office for such periods, have such authorities, and
perform such duties as are provided in these Bylaws or as may be provided by
resolution of the Board. Any officer may be assigned by the Board any
additional title that the Board deems appropriate. The Board may delegate to
any officer or agent the power to appoint any such assistant officers or
agents and to prescribe their respective terms of office, authorities, and
duties.
3.9 COMPENSATION. Compensation, if any, for officers and other agents
and employees of the corporation shall be determined by the Board of
Directors, or by the President to the extent such authority may be delegated
to him by the Board. No officer shall be prevented from receiving
compensation in such capacity by reason of the fact that he is also a
director of the corporation.
3.10 GENERAL STANDARDS FOR OFFICERS. Officers with discretionary
authority shall discharge their duties under that authority in accordance
with the same standards of conduct applicable to directors as specified in
Section 2.1 above (except for subsection (c) thereof).
ARTICLE IV
CONTRACTS, CHECKS AND DRAFTS
4.1 CONTRACTS. The Board of Directors may authorize any officer or
officers or agent or agents to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation. Such
authority may be general or confined to specific instances.
Subject to the limitations set forth in RCW 23B.08.700 through
23B.08.730, 23B.17.020, and 23B.19.040, to the extent applicable:
(a) The corporation may enter into contracts and otherwise transact
business as vendor, purchaser, lender, borrower, or otherwise with its
directors and shareholders and with corporations, associations, firms, and
entities in which they are or may be or become interested as directors,
officers, shareholders, members, or otherwise.
(b) Any such contract or transaction shall not be affected or
invalidated or give rise to liability by reason of the director's or share
holder's having an interest in the contract or transaction.
4.2 CHECKS, DRAFTS, ETC. All checks, drafts, and other orders for the
payment of money, notes, and other evidences of indebtedness issued in the name
of the corporation shall be signed by such officer or officers or agent or
agents of the corporation
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and in such manner as may be determined from time to time by resolution of
the Board of Directors.
4.3 DEPOSITS. All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Treasurer, subject to
the direction of the Board of Directors, may select.
ARTICLE V
STOCK
5.1 ISSUANCE OF SHARES. No shares of the corporation shall be issued
unless authorized by the Board of Directors, which authorization shall
include the maximum number of shares to be issued, the consideration to be
received for each share, and, if the consideration is in a form other than
cash, the determination of the value of the consideration.
5.2 CERTIFICATES OF STOCK. All shares of the corporation shall be
represented by certificates in such form, not inconsistent with the Articles
of Incorporation, as the Board of Directors may from time to time prescribe.
Certificates of stock shall be issued in numerical order and shall be signed
by the President or a Vice President, attested to by the Secretary or an
Assistant Secretary, and sealed with the corporate seal, if any. If any
certificate is manually signed by a transfer agent or a transfer clerk and by
a registrar, the signatures of the President, Vice President, Secretary or
Assistant Secretary upon that certificate may be facsimiles that are engraved
or printed. If any person who has signed or whose facsimile signature has
been placed on a certifi cate no longer is an officer when the certificate is
issued, the certificate may nevertheless be issued with the same effect as if
the person were still an officer at the time of its issue. Every certificate
of stock shall state:
(a) The state of incorporation;
(b) The name of the registered holder of the shares represented
thereby;
(c) The number and class of shares, and the designation of the
series, if any, which such certificate represents;
(d) If the corporation is authorized to issue different classes of
shares or different series within a class, either a summary of (on the face
or back of the certificate), or a statement that the corporation will furnish
to any shareholder upon written request and without charge a summary of, the
designations, relative rights, preferences, and limitations applicable to
each class and the variations in rights, preferences and limitations
determined for each series, and the authority of the Board of Directors to
determine variations for future series; and
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(e) If the shares are subject to transfer or other restrictions
under applicable securities laws or contracts with the corporation, either a
complete description of or a reference to the existence and general nature of
such restrictions on the face or back of the certificate.
5.3 STOCK RECORDS. The corporation or its agent shall maintain at the
registered office or principal office of the corporation, or at the office of
the transfer agent or registrar of the corporation, if one be designated by
the Board of Directors, a record of its shareholders, in a form that permits
preparation of a list of the names and addresses of all shareholders in alpha
betical order by class of shares showing the number and class of shares held
by each. The person in whose name shares stand on the books of the
corporation shall be deemed by the corporation to be the owner thereof for
all purposes.
5.4 RESTRICTIONS ON TRANSFER. The Board of Directors shall have the
authority to issue shares of the capital stock of this corporation and the
certificates therefor subject to such transfer restrictions and other
limitations as it may deem necessary to promote compliance with applicable
federal and state securities laws, and to regulate the transfer thereof in
such manner as may be calculated to promote such compliance or to further any
other reasonable purpose. Except to the extent that the corporation has
obtained an opinion of counsel acceptable to the corporation that transfer
restrictions are not required under applicable securities laws, all
certificates representing shares of the corporation shall bear the following
legend (or a legend of substantially the same import) on the face of the
certificate or on the reverse of the certificate if a reference to the legend
is contained on the face:
NOTICE: RESTRICTIONS ON TRANSFER
The securities represented by this certificate have not
been registered under the Securities Act of 1933, or any
state securities laws, and may not be offered, sold,
transferred, encumbered, or otherwise disposed of except upon
satisfaction of certain conditions. Information concerning
these restrictions may be obtained from the corporation or
its legal counsel. Any offer or disposition of these
securities without satisfaction of said conditions will be
wrongful and will not entitle the transferee to register
ownership of the securities with the corporation.
5.5 TRANSFERS. Shares of stock may be transferred by delivery of the
certificates therefor, accompanied by:
(a) an assignment in writing on the back of the certificate, or an
assignment separate from certificate, or a written
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power of attorney to sell, assign, and transfer the same, signed by the
record holder of the certificate; and
(b) such additional documents, instruments, and other items of
evidence as may be reasonably necessary to satisfy the requirements of any
transfer restrictions applicable to such shares, whether arising under
applicable securities or other laws, or by contract, or otherwise.
Except as otherwise specifically provided in these Bylaws, no shares of
stock shall be transferred on the books of the corporation until the
outstanding certificate therefor has been surrendered to the corporation.
All certificates surrendered to the corporation for transfer shall be
canceled, and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and canceled, except
that, in case of a lost, destroyed, or mutilated certificate, a new one may
be issued therefor upon such terms (including indemnity to the corporation)
as the Board of Directors may prescribe.
ARTICLE VI
RECORDS OF CORPORATE MEETINGS
The corporation shall keep, as permanent records, minutes of all meetings
of its shareholders and Board of Directors, a record of all actions taken by
the shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors exercising the
authority of the Board of Directors on behalf of the corporation. The
corporation shall keep at its principal office a copy of the minutes of all
shareholders' meetings that have occurred, and records of all action taken by
shareholders without a meeting, within the past three (3) years. Any person
dealing with the corporation may rely upon a copy of any of the records of
the proceedings, resolutions, or votes of the Board or shareholders when
certified by the President or Secretary.
ARTICLE VII
FINANCIAL MATTERS
The corporation shall maintain appropriate accounting records at its
principal office and shall prepare the annual financial statements required
by RCW 23B.16.200. Except to the extent otherwise expressly determined by
the Board of Directors or otherwise required by law, the accounting records
of the corporation shall be kept and prepared in accordance with generally
accepted accounting principles applied on a consistent basis from period to
period. The fiscal year of the corporation shall be the calendar year unless
otherwise expressly determined by the Board of Directors.
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<PAGE>
ARTICLE VIII
DISTRIBUTIONS
The Board of Directors may from time to time authorize, and the
corporation may make, distributions (as defined in RCW 23B.01.400) to its
shareholders to the extent permitted by RCW 23B.06.400, subject to any
limitation in the Articles of Incorporation. A director who votes for or
assents to a distribution made in violation of RCW 23B.06.400 is personally
liable to the corporation for the amount of the distribution that exceeds
that which could have been distributed without violating RCW 23B.06.400 if it
is established that the director did not perform the director's duties in
compliance with Section 2.1 above.
ARTICLE IX
CORPORATE SEAL
The Board of Directors may, but shall not be required to, adopt a
corporate seal for the corporation in such form and with such inscription as
the Board may determine. If such a corporate seal shall at any time be so
adopted, the application of or the failure to apply such seal to any document
or instrument shall have no effect upon the validity or invalidity of such
document or instru ment under otherwise applicable principles of law.
ARTICLE X
INDEMNIFICATION
As provided by Article IV, Section Fourth, of the Articles of
Incorporation:
10.1 DEFINITIONS. The capitalized terms in this Article X shall have the
meanings set forth in RCW 23B.08.500.
10.2 MANDATORY INDEMNIFICATION. The Corporation shall indemnify and hold
harmless each individual who is or was serving as a Director or officer of the
Corporation or who, while serving as a Director or officer of the Corporation,
is or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic corpo
ration, partnership, joint venture, trust, employee benefit plan, or other
enterprise, against any and all Liability incurred with respect to any
Proceeding to which the individual is or is threatened to be made a Party
because of such service, and shall make advances of reasonable Expenses with
respect to such Proceeding, to the fullest extent permitted by law, without
regard to the limitations in RCW 23B.08.510 through 23B.08.550; provided that
no such indemnity shall indemnify any Director or officer from or on account of
(a) acts or omissions of the Director or officer finally adjudged to be
intentional misconduct or a knowing violation of law; (b) conduct of the
Director or officer finally adjudged to be in violation of RCW 23B.08.310; or
(c) any trans-
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<PAGE>
action with respect to which it was finally adjudged that such Director or
officer personally received a benefit in money, property, or services to
which the Director or officer was not legally entitled.
10.3 INSURANCE. The Corporation may purchase and maintain insurance on
behalf of an individual who is or was a director, officer, employee, or agent
of the Corporation or, who, while a director, officer, employee, or agent of
the Corporation, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit
plan, or other enterprise against Liability asserted against or incurred by
the individual in that capacity or arising from the individual's status as a
director, officer, employee, or agent, whether or not the Corporation would
have power to indemnify the individual against such Liability under RCW
23B.08.510 or 23B.08.520.
10.4 CHANGES IN LAW. If, after the effective date of this Article X, the
Act is amended to authorize further indemnification of Directors or officers,
then Directors and officers of the Corporation shall be indemnified to the
fullest extent permitted by the Act as so amended.
10.5 EXCLUSIVITY; NATURE OF RIGHTS; AMENDMENT. To the extent permitted
by law, the rights to indemnification and advance of reasonable Expenses
conferred in this Article X shall not be exclusive of any other right which
any individual may have or hereafter acquire under any statute, provision of
the Bylaws, agreement, vote of shareholders or disinterested directors, or
otherwise. The right to indemnification conferred in this Article X shall be
a contract right upon which each Director or officer shall be presumed to
have relied in determining to serve or to continue to serve as such. Any
amendment to or repeal of this Article X shall not adversely affect any right
or protection of a Director or officer of the Corporation for or with respect
to any acts or omissions of such Director or officer occurring prior to such
amendment or repeal.
ARTICLE XI
MISCELLANY
11.1 COMMUNICATIONS BY FACSIMILE. Whenever these Bylaws require notice,
consent, or other communication to be delivered for any purpose, transmission
by phone, wire, or wireless equipment which transmits a facsimile of such
communication shall constitute sufficient delivery for such purpose. Such
communication shall be deemed to have been received by or in the possession
of the addressee upon completion of the transmission.
11.2 INSPECTOR OF ELECTIONS. Before any annual meeting of shareholders,
the Board of Directors may appoint an inspector of elections to act at the
meeting and any adjournment thereof. If
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<PAGE>
no inspector of elections is so appointed by the Board, then the chairman of
the meeting may appoint an inspector of elections to act at the meeting. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any shareholder
or a shareholder's proxy shall, appoint a person to fill that vacancy.
Such inspector of elections shall:
(a) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of a
quorum, and, with the advice of legal counsel to the corporation, the
authenticity, validity, and effect of proxies pursuant to RCW 23B.07.220 and
23B.07.240 and any procedure adopted by the Board of Directors pursuant to
RCW 23B.07.230;
(b) receive votes, ballots, or consents;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine the result; and
(f) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
11.3 RULES OF ORDER. The rules contained in the most recent edition of
Robert's Rules of Order, Revised, shall govern all meetings of shareholders
and directors where those rules are not inconsistent with the Articles of
Incorporation or Bylaws, subject to the following:
(a) The chairman of the meeting shall have absolute authority over
matters of procedure, and there shall be no appeal from the ruling of the
chairman. If the chairman in his absolute discretion deems it advisable to
dispense with the rules of parliamentary procedure for any meeting or any
part thereof, the chairman shall so state and shall clearly state the rules
under which the meeting or appropriate part thereof shall be conducted.
(b) If disorder should arise which prevents continuation of the
legitimate business of the meeting, the chairman may quit the chair and
announce the adjournment of the meeting; upon so doing, the meeting shall be
deemed immediately adjourned, subject to being reconvened in accordance with
Section 1.5 or 2.11 of these Bylaws, as the case may be.
(c) The chairman may ask or require that anyone not a bona fide
share holder or proxy leave the meeting of shareholders.
(d) A resolution or motion at a meeting of shareholders shall be
considered for vote only if proposed by a shareholder or
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<PAGE>
duly authorized proxy and seconded by an individual who is a shareholder
or duly authorized proxy other than the individual who proposed the
resolution or motion.
11.4 CONSTRUCTION. Within these Bylaws, words of any gender shall be
construed to include any other gender, and words in the singular or plural
number shall be construed to include the plural or singular, respectively,
unless the context otherwise requires.
11.5 SEVERABILITY. If any provision of these Bylaws or any application
thereof shall be invalid, unenforceable, or contrary to applicable law, the
remainder of these Bylaws, and the application of such provisions to
individuals or circumstances other than those as to which it is held invalid,
unenforceable, or contrary to applicable law, shall not be affected thereby.
ARTICLE XII
AMENDMENT OF BYLAWS
Subject to the requirements of RCW 23B.10.210 relating to supermajority
quorum provisions for the Board of Directors, the Bylaws of the corporation
may be amended or repealed, or new Bylaws may be adopted, by: (a) the share
holders, even though the Bylaws may also be amended or repealed, or new
Bylaws may also be adopted, by the Board of Directors; or (b) subject to the
power of the shareholders of the corporation to change or repeal the Bylaws,
the Board of Directors, unless such power is reserved, by the Articles of
Incorporation or by law, exclusively to the shareholders in whole or in part,
or unless the shareholders, in amending or repealing a particular bylaw,
provide expressly that the Board of Directors may not amend or repeal that
bylaw.
ARTICLE XIII
AUTHENTICATION
The foregoing Restated Bylaws were read, approved, and duly adopted by
the Board of Directors of Active Voice Corporation on the 1st day of
September, 1993, and the President and Secretary of the corporation were
empowered to authenticate such Bylaws by their signatures below.
/s/ Robert L. Richmond
---------------------------------------
Robert L. Richmond, President
ATTEST:
/s/ Robert C. Greco
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Robert C. Greco, Secretary
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<PAGE>
ACTIVE VOICE CORPORATION
1997 DIRECTOR STOCK OPTION PLAN
ACTIVE VOICE CORPORATION, a Washington corporation (the "Company"),
hereby establishes and sets forth the terms of the Active Voice Corporation
1997 Director Stock Option Plan (the "Plan") effective as of September 30,
1997 (the "Effective Date").
1. DEFINITIONS. Capitalized terms used in the Plan have the meanings
given those terms in the attached Appendix A or in the section of the Plan
referenced therein.
2. PURPOSE OF PLAN. The purpose of the Plan is to assist the Company
in attracting and retaining outside directors of the highest caliber to serve
on the Board. The Plan seeks to achieve this purpose by providing for
automatic grants of Options to certain outside directors on each Annual
Meeting Date and at certain other times.
3. ADMINISTRATION OF THE PLAN. The Board shall have full power and
authority, subject only to the provisions of the Plan (a) to administer or
supervise the administration of the Plan; (b) to interpret the provisions of
the Plan and the agreements evidencing Options; (c) to correct any defect,
supply any information and reconcile any inconsistency in such manner and to
such extent as it determines to be necessary or advisable to carry out the
purpose of the Plan; and (d) to take such other actions in connection with
the Plan as it determines to be necessary or advisable. The Board is
authorized to adopt, amend and rescind such rules, regulations and procedures
not inconsistent with the provisions of the Plan as it determines to be
necessary or advisable for the proper administration of the Plan, and each
Option shall be subject to all such rules, regulations and procedures
(whether the Option was granted before or after adoption thereof). Each
action and determination made or taken by the Board, including but not
limited to any interpretation of the Plan and the agreements evidencing
Options, shall be final, conclusive and binding for all purposes and upon all
persons. The Board shall have all powers necessary or appropriate to
accomplish its duties under the Plan.
4. SHARES AVAILABLE FOR OPTIONS. The aggregate number of shares of
Common Stock reserved for issuance upon exercise of Options granted under the
Plan will be thirty-five thousand (35,000) (subject to any adjustment
required or permitted under Section 9 or Section 10), and Options may be
granted under this Plan only with respect to the shares so reserved. If an
Option terminates for any reason without having been exercised in full, the
shares of Common Stock for which the Option has not been exercised shall
again be available for purposes of the Plan.
5. GRANTS OF OPTIONS.
5.1 Effective October 1, 1997, each individual who has been an
Eligible Director for at least six (6) months will receive an Option (a
"Continuing Director Option") to acquire two thousand five hundred (2,500)
shares of Common Stock.
5.2 Effective on the date an individual first takes office as an
Eligible Director on the Board (an "Initial Grant Date"), the individual will
receive an Option (an "Initial Option") to
<PAGE>
acquire either (a) fifteen thousand (15,000) shares of Common Stock, if six
(6) months or less have elapsed since the Annual Meeting Date next preceding
the Initial Grant Date, or (b) ten thousand (10,000) shares of Common Stock,
if more than six (6) months have elapsed since that Annual Meeting Date or if
the individual first takes office as an Eligible Director on an Annual
Meeting Date; PROVIDED, HOWEVER, if there are insufficient Available Shares
for the grant of the Initial Option as provided above, the individual shall
instead receive an Initial Option to acquire the remaining Available Shares.
5.3 On the Annual Meeting Date in 1998 and in each subsequent
year so long as Available Shares remain under this Plan (each such date will
be referred to as an "Annual Grant Date"), each individual who is an Eligible
Director on the Annual Grant Date will receive an Option (an "Annual Option")
to acquire five thousand (5,000) shares of Common Stock; PROVIDED, HOWEVER,
if there are insufficient Available Shares for the grant of the Annual
Options as provided above, each such Eligible Director shall instead receive
an Annual Option to acquire the largest whole number of shares of Common
Stock as can then be granted without exceeding the Available Shares.
5.4 Each grant of an Option shall occur automatically without
further action of the Board other than, to the extent necessary, its
determination of (a) the Fair Market Value on the Grant Date, and (b) any
provisions that are to be included in the agreement evidencing the Option
pursuant to Section 8.1.
6. PURCHASE PRICE. The price at which each share of Common Stock may
be purchased upon exercise of an Option shall be the Fair Market Value of the
Common Stock on the Grant Date. The purchase price shall be paid in full at
the time of exercise (a) in cash, (b) by means of a transfer to the Company
of shares of Common Stock that have been outstanding for at least one (1)
year and that have a Fair Market Value equal to the purchase price to be
paid, or (c) a combination of cash and shares of Common Stock.
7. OTHER TERMS OF OPTIONS
7.1 Each Initial Option granted to an Eligible Director will
become exercisable --
(a) for one-third (_) of the shares of Common Stock covered
thereby (rounded down to the nearest whole number, if necessary to
eliminate a fractional share) on the first (1st) anniversary of
its Grant Date;
(b) for an additional one-third (_) of the shares of Common
Stock covered thereby (rounded down to the nearest whole number,
if necessary to eliminate a fractional share) on the second (2nd)
anniversary of its Grant Date; and
(c) for the remaining shares of Common Stock covered thereby
on the third (3rd) anniversary of its Grant Date;
PROVIDED, HOWEVER, the Option will not become exercisable for shares for
which it is scheduled to become exercisable on a particular anniversary date
under clause (a), (b) or (c) above if (i) more
<PAGE>
than sixty (60) days prior to the date when the Option is scheduled to become
exercisable, the Eligible Director ceases to be a director of the Company for
any reason; or (ii) during the period from its Grant Date to the first (1st)
anniversary thereof (in the case of clause (a)), or from the preceding
anniversary date to that particular anniversary date (in the case of clause
(b) or (c)) (or such portion of that period during which the Eligible
Director is serving as a director of the Company), the Eligible Director does
not attend at least seventy-five percent (75%) of the combined number of
meetings of the full Board and any committee(s) of the Board of which the
Eligible Director is a member, or does not attend at least fifty percent
(50%) of such combined number of meetings in person.
7.2 A Continuing Director Option or an Annual Option granted to
an Eligible Director will become exercisable for all of the shares of Common
Stock covered thereby on the first (1st) anniversary of its Grant Date;
PROVIDED, HOWEVER, the Option will not become exercisable if (a) more than
sixty (60) days prior to that anniversary date, the Eligible Director ceases
to be a director of the Company for any reason other than his or her death;
or (b) during the period from its Grant Date to such anniversary date (or
such portion of that period during which the Eligible Director is serving as
a director of the Company), the Eligible Director does not attend at least
seventy-five percent (75%) of the combined number of meetings of the full
Board and any committee(s) of the Board of which the Eligible Director is a
member, or does not attend at least fifty percent (50%) of such combined
number of meetings in person.
7.3 If an Option does not become exercisable for shares for
which it is scheduled to become exercisable on a particular anniversary of
its Grant Date, the Option shall automatically terminate as to such shares.
After an Option becomes exercisable for any shares of Common Stock, the
Option may be exercised for such shares in whole or in part at any time and
from time to time prior to its termination pursuant to Section 7.5.
7.4 For purposes of Section 7.1 and Section 7.2, if the Board
takes action by unanimous written consent, such consent shall be deemed to be
a meeting of the Board that all directors have attended in person.
7.5 Unless it terminates earlier under other provisions of this
Plan, an Option granted to an Eligible Director will terminate ten (10) years
after its Grant Date or one (1) year after the date of death of the Eligible
Director, whichever occurs first.
8. OPTION AGREEMENT; NONTRANSFERABILITY OF OPTIONS; CERTIFICATES
8.1 Each Option will be evidenced by a written agreement
executed by the Company and the Eligible Director. Such agreement shall
contain the terms of the Option as specified in this Plan, together with such
other provisions not inconsistent with such terms as the Board deems
advisable.
8.2 An Option will not be transferable by an Eligible Director
other than by will or by the laws of descent and distribution, will not be
involuntarily alienable by legal process or otherwise by operation of law,
and will be exercisable during the Eligible Director's lifetime only by the
Eligible Director. If an Eligible Director dies prior to full exercise of an
Option, the Option
<PAGE>
may be exercised, to the extent it does not thereby terminate, by the person
or persons to whom the rights of the Eligible Director under the Option pass
by will or by applicable laws of descent and distribution. The Company may at
any time, by written notice to the Eligible Director or to the then holder of
an Option, release in whole or in part the restrictions under this Section
8.2).
8.3 Each certificate evidencing Common Stock issued upon
exercise of an Option shall bear such legends as the Company, upon advice of
legal counsel, determines to be necessary or appropriate.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. If the outstanding
shares of Common Stock are increased or decreased, or changed into or
exchanged for a different number or kind of shares or securities of the
Company through a reorganization, merger, recapitalization, reclassification,
share exchange or other material alteration in the capital structure of the
Company, an appropriate and proportionate adjustment shall be made to the
number and/or kind of shares or securities as to which Options will
thereafter automatically be granted. A corresponding adjustment shall be made
to the number and/or kind of shares or securities allocated to each Option
outstanding at the time of such event and to the purchase price of such
shares or securities; PROVIDED, HOWEVER, that such adjustment shall be made
without changing the total purchase price applicable to the unexercised
portion of the Option. For purposes of this Section 9, neither (a) the
issuance of additional shares of Common Stock or other securities of the
Company in exchange for adequate consideration (including services), nor (b)
the conversion into Common Stock of any securities of the Company now or
hereafter outstanding, shall be deemed material alterations in the capital
structure of the Company. If the Board determines that the nature of a
material alteration in the capital structure of the Company is such that it
is not feasible or advisable to make adjustments to this Plan or to the
Options granted under the Plan, such event shall be subject to Section 10.
10. OTHER SIGNIFICANT EVENTS. In the event of (a) a reorganization,
merger, recapitalization, reclassification, share exchange or other similar
event affecting the Company and one or more other corporations following
which the Company is not a surviving corporation, (b) the acquisition by any
person, partnership, or corporation of more than twenty-five percent (25%) of
the outstanding shares of Common Stock, (c) a sale of substantially all of
the assets of the Company, (d) the dissolution or liquidation of the Company,
or (e) a material change in the capital structure of the Company that is
subject to this Section 10 in accordance with the last sentence of Section 9,
the Board shall have the power to determine what effect, if any, such event
shall have upon Options outstanding under the Plan, including but not limited
to the power to cause Options to be surrendered and canceled and payments to
be made to the holders in exchange therefor and to cause adjustments to be
made in the number and/or kind of shares or securities with respect to which
such Options may be exercised and/or in the purchase prices and other terms
and conditions thereof. Upon such event, the Plan and all Options outstanding
under the Plan shall terminate, except to the extent the Board, pursuant to
its authority under this Section 10, has made provision for the continuation
of the Plan and outstanding Options or the substitution for outstanding
Options of new options or awards covering the stock or securities of a
successor entity, in which event the Plan and outstanding Options shall be
subject to the terms so provided.
11. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by
holders of shares of Common Stock constituting at least a majority of the
shares of Common Stock represented in person
<PAGE>
or by proxy at the first Annual Meeting following the Effective Date. If such
approval is not obtained, any Options granted under the Plan after the
Effective Date shall be void, and no further Options shall be granted under
the Plan. Failure to obtain such approval shall not affect the Continuing
Director Options and the Initial Option granted on the Effective Date, and
the Plan and such Options shall remain in full force and effect until all of
such Options have been exercised or have terminated.
12. AMENDMENT; TERMINATION
12.1 The Board may from time to time amend the Plan in any
respect whatsoever; PROVIDED, HOWEVER, that no amendment may have any
material adverse effect on the rights of any director or former director with
respect to any Option granted prior to the amendment, unless the director
consents thereto.
12.2 The Board may terminate the Plan at any time. No Options
shall be granted following termination of the Plan, but the provisions of the
Plan shall continue in effect until all Options terminate or are exercised in
full and all rights of all persons with any interest in the Plan expire.
13. GOVERNING LAW. All determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of Washington and construed
accordingly.
<PAGE>
APPENDIX A
DEFINITIONS
"Annual Grant Date" is defined in Section 5.3.
"Annual Option" is defined in Section 5.3.
"Annual Meeting" means an annual meeting of shareholders of the Company.
"Annual Meeting Date" means the date of an Annual Meeting.
"Available Shares" means the number of shares of Common Stock from time
to time available under Section 4 for the grant of Options under this Plan.
"Board" means the Board of Directors of the Company.
"Common Stock" means the Common Stock, no par value, of the Company.
"Company" is defined in the preamble of the Plan.
"Continuing Director Option" is defined in Section 5.1.
"Effective Date" is defined in the preamble of the Plan.
"Eligible Director" means each individual who on a Grant Date meets the
following requirements:
(a) The individual is a member of the Board at the close of
business on the Grant Date; and
(b) At no time during the calendar year in which the Grant Date
falls or during the preceding calendar year has the individual been an
employee of the Company or any of its direct or indirect subsidiaries.
"Fair Market Value" for the Common Stock (or any other security) on any
day means, if the Common Stock (or other security) is publicly traded, the
last sales price (or, if no last sales price is reported, the average of the
high bid and low asked prices) for a share of Common Stock (or unit of the
other security) on that day (or, if that day is not a trading day, on the
next preceding trading day), as reported by the principal exchange on which
the Common Stock (or other security) is listed, or, if the Common Stock (or
other security) is publicly traded but not listed on an exchange, as reported
by The Nasdaq Stock Market, or, if such prices or quotations are not reported
by The Nasdaq Stock Market, as reported by any other available source of
prices or quotations selected by the Committee. If the Common Stock (or other
security) is not publicly traded, or if the Fair Market Value is not
determinable by any of the foregoing means, the Fair Market Value on any day
shall be determined in good faith by the Board on the basis of such
considerations as the Board deems appropriate.
<PAGE>
APPENDIX A
DEFINITIONS
"Grant Date" means October 1, 1997, in the case of a Continuing Director
Option, and any Annual Grant Date or Initial Grant Date, in the case of an
Annual Option or an Initial Option, respectively.
"Initial Grant Date" is defined in Section 5.2.
"Initial Option" is defined in Section 5.2.
"Option" means an Annual Option, a Continuing Director Option or an
Initial Option.
"Plan" is defined in the preamble hereof.
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into, effective
as of October 1, 1997 (the "Grant Date"), by ACTIVE VOICE CORPORATION, a
Washington corporation (the "Company"), and [NAME OF DIRECTOR] (the "Holder").
R E C I T A L S
A. The Company has adopted the Active Voice Corporation 1997 Director
Stock Option Plan (the "Plan"), a copy of which has been delivered to the
Holder prior to signing this Agreement (capitalized terms used but not defined
in this Agreement will have the meanings given them in the Plan).
B. The Holder is entitled to receive a stock option under the Plan.
NOW, THEREFORE, the Company and the Holder covenant and agree as follows:
1. GRANT OF THE OPTION. The Company hereby grants to the Holder a stock
option (the "Option") to acquire from the Company two thousand five hundred
(2,500) shares of Common Stock (the "Shares") at the price of $______ per share
(the "Option Price").
2. VESTING. The Option will become exercisable for all of the Shares on
October 1, 1998, on and after which, but prior to its termination, the Option
may be exercised in whole or in part at any time and from time to time;
PROVIDED, HOWEVER, the Option will not become exercisable if (a) more than
sixty (60) days prior to October 1, 1998, the Holder ceases to be a director of
the Company for any reason other than his or her death; or (b) during the
period from the Grant Date to October 1, 1998 (or such portion of that period
during which the Holder is serving as a director of the Company), the Holder
does not attend at least seventy-five percent (75%) of the combined number of
meetings of the full Board and any committee(s) of the Board of which the
Holder is a member, or does not attend at least fifty percent (50%) of such
combined number of meetings in person.
3. TERM OF THE OPTION. If, pursuant to Section 2, the Option does not
become exercisable for the Shares on October 1, 1998, the Option shall
automatically terminate as to all of the Shares. Unless earlier terminated in
accordance with the provisions of the Plan or the foregoing provisions of this
Section 3, the Option will terminate on October 1, 2007, or one (1) year
following the date of death of the Holder, whichever occurs earlier.
4. OTHER LIMITATIONS ON THE OPTION. The Option is subject to all of the
provisions of the Plan, including but not limited to Section 9 (which permits
adjustments to the Option upon the occurrence of certain events such as a stock
split, share dividend or share combination) and Section 10 (which will apply
upon the occurrence of certain other events).
5. EXERCISE OF THE OPTION. In order to exercise the Option, the Holder
must do the following:
<PAGE>
(a) deliver to the Company a written notice, in the form of the
attached Exhibit A, specifying the number of shares of Common Stock for which
the Option is being exercised;
(b) surrender this Agreement to the Company;
(c) tender payment of the aggregate Option Price for the shares for
which the Option is being exercised, which payment may be made --
(i) in cash; or
(ii) by delivery to the Company of shares of Common Stock
that (A) have a Fair Market Value, as of the date of exercise, equal to
the aggregate Option Price payable, and (B) have been held by the
Holder for at least one (1) year prior to the date of exercise; and
(d) execute and deliver to the Company any other documents required
from time to time by the Company in order to promote compliance with applicable
securities laws or any other applicable laws, rules or regulations.
6. DELIVERY OF SHARE CERTIFICATE. As soon as practicable after the Option
has been duly exercised, the Company will deliver to the Holder a certificate
for the shares of Common Stock for which the Option was exercised. Unless the
Option has terminated or been exercised in full, the Company and the Holder
agree to execute a new Stock Option Agreement, covering the remaining shares of
Common Stock that may be acquired upon exercise of the Option, which will be
identical to this Agreement except as to the number of shares of Common Stock
subject thereto. In lieu of replacing this Agreement in such manner, the
Company may affix to this Agreement an appropriate notation indicating the
number of shares for which the Option was exercised and return this Agreement
to the Holder.
7. NONTRANSFERABILITY. The Option is not transferable other than by will
or the laws of descent and distribution, and the Option may be exercised during
the lifetime of the Holder only by the Holder or his or her court appointed
legal representative.
8. ACCEPTANCE OF OPTIONS. By executing this Agreement, the Holder accepts
the Option, acknowledges receipt of a copy of the Plan and agrees to comply
with all of the provisions of the Plan and this Agreement.
9. RIGHTS AS SHAREHOLDER. The Holder will have no rights as a shareholder
of the Company on account of the Option or on account of shares of Common Stock
which will be acquired upon exercise of the Option (but with respect to which
no certificates have been delivered to the Holder).
10. FURTHER ASSURANCES. The Holder agrees to from time to time execute
such additional documents as the Company may reasonably require in order to
effectuate the purposes of the Plan and this Agreement.
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<PAGE>
11. BINDING EFFECT. This Agreement shall be binding upon the Holder and
his or her heirs, successors and assigns.
12. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement, together with the
Plan, constitute the entire agreement and understanding between the Company and
the Holder regarding the subject matter hereof. No modification of the Option
or this Agreement, or waiver of any provision of the Plan or this Agreement,
shall be valid unless in writing and duly executed by the Company and the
Holder. The failure of any party to enforce any of that party's rights against
the other party for breach of any of the terms of this Agreement shall not be
construed as a waiver of such rights as to any continued or subsequent breach.
13. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Washington.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
"Company" ACTIVE VOICE CORPORATION
By-------------------------------------------
Robert L. Richmond, Chief Executive Officer
"Holder" -------------------------------------------
[NAME OF DIRECTOR]
-3-
<PAGE>
FORM OF EXERCISE OF OPTION
To: ACTIVE VOICE CORPORATION
2901 Third Avenue, Suite 500
Seattle, WA 98121
The undersigned holds Option Number DSO97-00__ (the "Option"), represented
by a Stock Option Agreement dated effective as of October 1, 1997 (the
"Agreement"), granted to the undersigned pursuant to the Active Voice
Corporation 1997 Director Stock Option Plan (the "Plan"). The undersigned
hereby exercises the Option and elects to purchase _______________ shares (the
"Shares") of Common Stock of Active Voice Corporation (the "Company") pursuant
to the Option. This notice is accompanied by full payment of the Option Price
for the Shares, in cash or by check or in another manner permitted by
Section 5(c) of the Agreement.
Date:-----------------------, 199__.
-------------------------------------------
Name of Holder
EXHIBIT A
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into, effective
as of [GRANT DATE] (the "Grant Date"), by ACTIVE VOICE CORPORATION, a
Washington corporation (the "Company"), and [NAME OF DIRECTOR] (the "Holder").
R E C I T A L S
A. The Company has adopted the Active Voice Corporation 1997 Director
Stock Option Plan (the "Plan"), a copy of which has been delivered to the
Holder prior to signing this Agreement (capitalized terms used but not defined
in this Agreement will have the meanings given them in the Plan).
B. The Holder is entitled to receive a stock option under the Plan.
NOW, THEREFORE, the Company and the Holder covenant and agree as follows:
1. GRANT OF THE OPTION. The Company hereby grants to the Holder a stock
option (the "Option") to acquire from the Company fifteen thousand (15,000)
shares of Common Stock at the price of $______ per share (the "Option Price").
2. VESTING. The Option will become exercisable (a) for five thousand
(5,000) shares of Common Stock on the first (1st) anniversary of the Grant
Date, (b) for an additional five thousand (5,000) shares of Common Stock on the
second (2nd) anniversary of the Grant Date, and (c) for the remaining five
thousand (5,000) shares of Common Stock on the third (3rd) anniversary of the
Grant Date, PROVIDED, HOWEVER, the Option will not become exercisable for
shares for which it is scheduled to become exercisable on a particular
anniversary date under clause (a), (b) or (c) above if (i) more than sixty (60)
days prior to the date when the Option is scheduled to become exercisable, the
Holder ceases to be a director of the Company for any reason; or (ii) during
the period from the Grant Date to the first (1st) anniversary thereof (in the
case of clause (a)), or from the preceding anniversary date to that particular
anniversary date (in the case of clause (b) or (c)) (or such portion of that
period during which the Holder is serving as a director of the Company), the
Holder does not attend at least seventy-five percent (75%) of the combined
number of meetings of the full Board and any committee(s) of the Board of which
the Holder is a member, or does not attend at least fifty percent (50%) of such
combined number of meetings in person. To the extent it becomes exercisable
under the foregoing provisions of this Section 2, the Option may be exercised
in whole or in part at any time and from time to time prior to its termination.
3. TERM OF THE OPTION. If, pursuant to Section 2, the Option does not
become exercisable for shares of Common Stock for which it is scheduled to
become exercisable on a particular anniversary of its Grant Date, the Option
shall automatically terminate as to such shares. Unless earlier terminated in
accordance with the provisions of the Plan or the foregoing provisions of this
Section 3, the Option will terminate on TENTH ANNIVERSARY OF GRANT DATE], or
one (1) year following the date of death of the Holder, whichever occurs
earlier.
<PAGE>
4. OTHER LIMITATIONS ON THE OPTION. The Option is subject to all of the
provisions of the Plan, including but not limited to Section 9 (which permits
adjustments to the Option upon the occurrence of certain events such as a stock
split, share dividend or share combination) and Section 10 (which will apply
upon the occurrence of certain other events).
5. EXERCISE OF THE OPTION. In order to exercise the Option, the Holder
must do the following:
(a) deliver to the Company a written notice, in the form of the
attached Exhibit A, specifying the number of shares of Common Stock for which
the Option is being exercised;
(b) surrender this Agreement to the Company;
(c) tender payment of the aggregate Option Price for the shares for
which the Option is being exercised, which payment may be made --
(i) in cash; or
(ii) by delivery to the Company of shares of Common Stock
that (A) have a Fair Market Value, as of the date of exercise, equal to
the aggregate Option Price payable, and (B) have been held by the
Holder for at least one (1) year prior to the date of exercise; and
(d) execute and deliver to the Company any other documents required
from time to time by the Company in order to promote compliance with applicable
securities laws or any other applicable laws, rules or regulations.
6. DELIVERY OF SHARE CERTIFICATE. As soon as practicable after the Option
has been duly exercised, the Company will deliver to the Holder a certificate
for the shares of Common Stock for which the Option was exercised. Unless the
Option has terminated or been exercised in full, the Company and the Holder
agree to execute a new Stock Option Agreement, covering the remaining shares of
Common Stock that may be acquired upon exercise of the Option, which will be
identical to this Agreement except as to the number of shares of Common Stock
subject thereto. In lieu of replacing this Agreement in such manner, the
Company may affix to this Agreement an appropriate notation indicating the
number of shares for which the Option was exercised and return this Agreement
to the Holder.
7. NONTRANSFERABILITY. The Option is not transferable other than by will
or the laws of descent and distribution, and the Option may be exercised during
the lifetime of the Holder only by the Holder or his or her court appointed
legal representative.
8. ACCEPTANCE OF OPTIONS. By executing this Agreement, the Holder accepts
the Option, acknowledges receipt of a copy of the Plan and agrees to comply
with all of the provisions of the Plan and this Agreement.
-2-
<PAGE>
9. RIGHTS AS SHAREHOLDER. The Holder will have no rights as a shareholder
of the Company on account of the Option or on account of shares of Common Stock
which will be acquired upon exercise of the Option (but with respect to which
no certificates have been delivered to the Holder).
10. FURTHER ASSURANCES. The Holder agrees to from time to time execute
such additional documents as the Company may reasonably require in order to
effectuate the purposes of the Plan and this Agreement.
11. BINDING EFFECT. This Agreement shall be binding upon the Holder and
his or her heirs, successors and assigns.
12. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement, together with the
Plan, constitute the entire agreement and understanding between the Company and
the Holder regarding the subject matter hereof. No modification of the Option
or this Agreement, or waiver of any provision of the Plan or this Agreement,
shall be valid unless in writing and duly executed by the Company and the
Holder. The failure of any party to enforce any of that party's rights against
the other party for breach of any of the terms of this Agreement shall not be
construed as a waiver of such rights as to any continued or subsequent breach.
13. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Washington.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
"Company" ACTIVE VOICE CORPORATION
By-------------------------------------------
Robert L. Richmond, Chief Executive Officer
"Holder" -------------------------------------------
[NAME OF DIRECTOR]
-3-
<PAGE>
FORM OF EXERCISE OF OPTION
To: ACTIVE VOICE CORPORATION
2901 Third Avenue, Suite 500
Seattle, WA 98121
The undersigned holds Option Number DSO97-00__ (the "Option"), represented
by a Stock Option Agreement dated effective as of [GRANT DATE] (the
"Agreement"), granted to the undersigned pursuant to the Active Voice
Corporation 1997 Director Stock Option Plan (the "Plan"). The undersigned
hereby exercises the Option and elects to purchase _______________ shares (the
"Shares") of Common Stock of Active Voice Corporation (the "Company") pursuant
to the Option. This notice is accompanied by full payment of the Option Price
for the Shares, in cash or by check or in another manner permitted by
Section 5(c) of the Agreement.
Date:_____________________, 199__.
-------------------------------------------
Name of Holder
EXHIBIT A
<PAGE>
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into, effective
as of [DATE OF ANNUAL MEETING] (the "Grant Date"), by ACTIVE VOICE CORPORATION,
a Washington corporation (the "Company"), and [NAME OF DIRECTOR] (the
"Holder").
R E C I T A L S
A. The Company has adopted the Active Voice Corporation 1997 Director
Stock Option Plan (the "Plan"), a copy of which has been delivered to the
Holder prior to signing this Agreement (capitalized terms used but not defined
in this Agreement will have the meanings given them in the Plan).
B. The Holder is entitled to receive a stock option under the Plan.
NOW, THEREFORE, the Company and the Holder covenant and agree as follows:
1. GRANT OF THE OPTION. The Company hereby grants to the Holder a stock
option (the "Option") to acquire from the Company five thousand (5,000) shares
of Common Stock (the "Shares") at the price of $______ per share (the "Option
Price").
2. VESTING. The Option will become exercisable for all of the Shares on
the first (1st) anniversary of the Grant Date, on and after which, but prior to
its termination, the Option may be exercised in whole or in part at any time
and from time to time; PROVIDED, HOWEVER, the Option will not become
exercisable if (a) more than sixty (60) days prior to that anniversary date,
the Holder ceases to be a director of the Company for any reason other than his
or her death; or (b) during the period from the Grant Date to such anniversary
date (or such portion of that period during which the Holder is serving as a
director of the Company), the Holder does not attend at least seventy-five
percent (75%) of the combined number of meetings of the full Board and any
committee(s) of the Board of which the Holder is a member, or does not attend
at least fifty percent (50%) of such combined number of meetings in person.
3. TERM OF THE OPTION. If, pursuant to Section 2, the Option does not
become exercisable for the Shares on the first (1st) anniversary of the Grant
Date, the Option shall automatically terminate as to all of the Shares. Unless
earlier terminated in accordance with the provisions of the Plan or the
foregoing provisions of this Section 3, the Option will terminate on [TENTH
ANNIVERSARY OF DATE OF ANNUAL MEETING], or one (1) year following the date of
death of the Holder, whichever occurs earlier.
4. OTHER LIMITATIONS ON THE OPTION. The Option is subject to all of the
provisions of the Plan, including but not limited to Section 9 (which permits
adjustments to the Option upon the occurrence of certain events such as a stock
split, share dividend or share combination) and Section 10 (which will apply
upon the occurrence of certain other events).
<PAGE>
5. EXERCISE OF THE OPTION. In order to exercise the Option, the Holder
must do the following:
(a) deliver to the Company a written notice, in the form of the
attached Exhibit A, specifying the number of shares of Common Stock for which
the Option is being exercised;
(b) surrender this Agreement to the Company;
(c) tender payment of the aggregate Option Price for the shares for
which the Option is being exercised, which payment may be made --
(i) in cash; or
(ii) by delivery to the Company of shares of Common Stock
that (A) have a Fair Market Value, as of the date of exercise, equal to
the aggregate Option Price payable, and (B) have been held by the
Holder for at least one (1) year prior to the date of exercise; and
(d) execute and deliver to the Company any other documents required
from time to time by the Company in order to promote compliance with applicable
securities laws or any other applicable laws, rules or regulations.
6. DELIVERY OF SHARE CERTIFICATE. As soon as practicable after the Option
has been duly exercised, the Company will deliver to the Holder a certificate
for the shares of Common Stock for which the Option was exercised. Unless the
Option has terminated or been exercised in full, the Company and the Holder
agree to execute a new Stock Option Agreement, covering the remaining shares of
Common Stock that may be acquired upon exercise of the Option, which will be
identical to this Agreement except as to the number of shares of Common Stock
subject thereto. In lieu of replacing this Agreement in such manner, the
Company may affix to this Agreement an appropriate notation indicating the
number of shares for which the Option was exercised and return this Agreement
to the Holder.
7. NONTRANSFERABILITY. The Option is not transferable other than by will
or the laws of descent and distribution, and the Option may be exercised during
the lifetime of the Holder only by the Holder or his or her court appointed
legal representative.
8. ACCEPTANCE OF OPTIONS. By executing this Agreement, the Holder accepts
the Option, acknowledges receipt of a copy of the Plan and agrees to comply
with all of the provisions of the Plan and this Agreement.
9. RIGHTS AS SHAREHOLDER. The Holder will have no rights as a shareholder
of the Company on account of the Option or on account of shares of Common Stock
which will be acquired upon exercise of the Option (but with respect to which
no certificates have been delivered to the Holder).
-2-
<PAGE>
10. FURTHER ASSURANCES. The Holder agrees to from time to time execute
such additional documents as the Company may reasonably require in order to
effectuate the purposes of the Plan and this Agreement.
11. BINDING EFFECT. This Agreement shall be binding upon the Holder and
his or her heirs, successors and assigns.
12. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement, together with the
Plan, constitute the entire agreement and understanding between the Company and
the Holder regarding the subject matter hereof. No modification of the Option
or this Agreement, or waiver of any provision of the Plan or this Agreement,
shall be valid unless in writing and duly executed by the Company and the
Holder. The failure of any party to enforce any of that party's rights against
the other party for breach of any of the terms of this Agreement shall not be
construed as a waiver of such rights as to any continued or subsequent breach.
13. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Washington.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
"Company" ACTIVE VOICE CORPORATION
By-------------------------------------------
Robert L. Richmond, Chief Executive Officer
"Holder" -------------------------------------------
[NAME OF DIRECTOR]
-3-
<PAGE>
FORM OF EXERCISE OF OPTION
To: ACTIVE VOICE CORPORATION
2901 Third Avenue, Suite 500
Seattle, WA 98121
The undersigned holds Option Number DSO97-00__ (the "Option"), represented
by a Stock Option Agreement dated effective as of ____________, ____ (the
"Agreement"), granted to the undersigned pursuant to the Active Voice
Corporation 1997 Director Stock Option Plan (the "Plan"). The undersigned
hereby exercises the Option and elects to purchase _______________ shares (the
"Shares") of Common Stock of Active Voice Corporation (the "Company") pursuant
to the Option. This notice is accompanied by full payment of the Option Price
for the Shares, in cash or by check or in another manner permitted by
Section 5(c) of the Agreement.
Date:_____________________, 199__.
-------------------------------------------
Name of Holder
EXHIBIT A
<PAGE>
EXHIBIT 11
ACTIVE VOICE CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended Six months ended
September 30, September 30,
----------------------- ------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
PRIMARY
Average shares outstanding 4,621,423 4,575,438 4,615,625 4,569,085
Net effect of dilutive stock options
based on the treasury stock method
using average market price 60,824 44,516 44,412 54,949
--------- --------- --------- ---------
Total 4,682,247 4,619,954 4,660,037 4,624,034
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income $411 $912 $866 $1,683
--------- --------- --------- ---------
--------- --------- --------- ---------
Per share amount $0.09 $0.20 $0.19 $0.36
--------- --------- --------- ---------
--------- --------- --------- ---------
FULLY DILUTED
Average shares outstanding 4,621,423 4,575,438 4,615,625 4,569,085
Net effect of dilutive stock options
based on the treasury stock method
using the period end market price,
if higher than average market price 78,293 44,519 53,576 54,974
--------- --------- --------- ---------
Total 4,699,716 4,619,957 4,669,201 4,624,059
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income $411 $912 $866 $1,683
--------- --------- --------- ---------
--------- --------- --------- ---------
Per share amount $0.09 $0.20 $0.19 $0.36
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,398
<SECURITIES> 3,504
<RECEIVABLES> 12,718
<ALLOWANCES> 1,816
<INVENTORY> 7,408
<CURRENT-ASSETS> 26,729
<PP&E> 6,701
<DEPRECIATION> 3,764
<TOTAL-ASSETS> 40,491
<CURRENT-LIABILITIES> 5,673
<BONDS> 0
0
0
<COMMON> 17,110
<OTHER-SE> 17,874
<TOTAL-LIABILITY-AND-EQUITY> 40,491
<SALES> 26,302
<TOTAL-REVENUES> 26,302
<CGS> 11,337
<TOTAL-COSTS> 11,337
<OTHER-EXPENSES> 14,137
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,217
<INCOME-TAX> (351)
<INCOME-CONTINUING> 866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 866
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
