<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
ACTIVE VOICE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
ACTIVE VOICE CORPORATION
2901 THIRD AVENUE, SUITE 500
SEATTLE, WASHINGTON 98121
------------------------
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
---------------------
TO THE HOLDERS OF COMMON STOCK
OF ACTIVE VOICE CORPORATION:
The Annual Meeting of Shareholders of Active Voice Corporation, a Washington
corporation (the "Company"), will be held on August 19, 1999, at 2:00 p.m. PDT,
at the Seattle Art Museum, 100 University Street, Seattle, Washington, for the
following purposes as more fully described in the accompanying Proxy Statement:
1. To elect five directors to serve until the 2000 Annual Meeting of
Shareholders or until their earlier retirement, resignation or removal;
2. To consider and approve an amendment to the Company's 1996 Employee
Stock Purchase Plan to reserve an additional 200,000 shares of Common
Stock for issuance thereunder;
3. To ratify the appointment of Ernst & Young LLP as independent auditors
for the Company's fiscal year ending March 31, 1999; and
4. To transact such other business as may properly come before the meeting
or any adjournments thereof.
Only holders of record of the Company's Common Stock at the close of
business on July 1, 1999 will be entitled to vote at the meeting. A list of
shareholders as of that date will be available at the meeting and for ten days
prior to the meeting at the Company's headquarters, 2901 Third Avenue, Suite
500, Seattle, Washington 98121.
By order of the Board of Directors
/s/ Jose S. David
JOSE S. DAVID
Chief Financial Officer, Treasurer and
Secretary
Seattle, Washington
July 15, 1999
------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT!
Please mark, sign and date the enclosed proxy card and
mail it promptly in the enclosed return envelope.
------------------------------------------------------------------------------
<PAGE>
ACTIVE VOICE CORPORATION
2901 THIRD AVENUE, SUITE 500
SEATTLE, WASHINGTON 98121
------------------------
PROXY STATEMENT
ANNUAL MEETING AND PROXY SOLICITATION INFORMATION
---------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Active Voice Corporation, a Washington
corporation (the "Company"), for use at the Annual Meeting of Shareholders on
August 19, 1999, and at any adjournments thereof. This Proxy Statement, a proxy
card and the Annual Report of the Company, including financial statements for
its fiscal year ended March 31, 1999, are being sent to all shareholders of
record as of the close of business on July 1, 1999, for delivery beginning on or
about July 15, 1999. Although the Annual Report and this Proxy Statement are
being mailed together, the Annual Report is not part of the Proxy Statement.
At the close of business on July 1, 1999 there were 4,610,941 shares of
Common Stock of the Company outstanding. Only holders of record of the shares
outstanding at such time will be entitled to vote at the meeting. The presence
at the meeting of at least a majority of such shares, either in person or by
proxy, is required for a quorum. Proxies are solicited to give all shareholders
who are entitled to vote on the matters that come before the meeting the
opportunity to do so, whether or not they choose to attend the meeting in
person.
If you are a shareholder of record, you may vote by using the proxy card
enclosed with this Proxy Statement. When your proxy card is returned properly
signed, the shares represented will be voted according to your directions. You
can specify how you want your shares voted on each proposal by marking the
appropriate boxes on the proxy card. The proposals are identified by number and
a general subject title on the proxy card. Please review the voting instructions
on the proxy card and read the text of the proposals and the position of the
Board of Directors in the Proxy Statement prior to marking your vote. If your
proxy card is signed and returned without specifying a vote or an abstention on
any proposal, it will be voted according to the recommendations of the Board of
Directors on that proposal. That recommendation is shown for each proposal on
the proxy card. For the reasons stated in more detail later in the Proxy
Statement, the Board of Directors recommends a vote FOR each of the five
individuals nominated to serve as a director; FOR approval of the amendment to
the Company's 1996 Employee Stock Purchase Plan; and FOR ratification of the
appointment of Ernst & Young LLP, independent auditors. If you hold shares of
Common Stock through a brokerage firm or other intermediary, you must provide
instructions on voting to your nominee holder.
The Board of Directors knows of no other matters which are to be presented
at the meeting. However, if any other matters are properly presented for action,
the proxies named on the proxy card will be authorized by your proxy to vote on
them in their discretion to the extent permitted by applicable law.
On each matter properly brought before the meeting, shareholders will be
entitled to one vote for each share of Common Stock held. Under Washington law
and the Company's Articles of Incorporation and Bylaws, if a quorum exists at
the meeting: (a) the five nominees for director who receive the greatest number
of votes cast in the election of directors will be elected; and (b) for each of
the proposals to approve the amendment to the Company's 1996 Employee Stock
Purchase Plan and to ratify the appointment of auditors, the proposal will be
approved if the number of votes cast in favor of the proposal exceeds the number
of votes cast against it.
1
<PAGE>
Shareholders may abstain from voting for one or more of the nominees for
director and may abstain from voting on the proposal to approve the amendment to
the Company's 1996 Employee Stock Purchase Plan or the proposal to ratify the
appointment of auditors. Abstention from voting for a nominee for director may
make it less likely that the nominee will be one of the five nominees for
director who receive the greatest number of votes cast. Abstention from voting
on the other proposals will have no effect, since approval of these proposals is
based solely on the number of votes actually cast.
Brokerage firms and other intermediaries holding shares of Common Stock in
street name for customers are generally required to vote such shares in the
manner directed by their customers. In the absence of timely directions,
brokerage firms and other intermediaries generally will have discretion to vote
their customers' shares in the election of directors, on the proposal to approve
the amendment to the Company's 1996 Employee Stock Purchase Plan, and on the
proposal to ratify the appointment of auditors. If a brokerage firm or other
intermediary votes its customers' shares on some but not all proposals, the
effect of the non-vote will vary depending on the proposal. A non-vote for a
nominee for director will make it less likely that the nominee will be one of
the five nominees for director who receive the greatest number of votes cast. A
non-vote on any of the other proposals will have no effect, since approval of
these proposals is based solely on the number of votes actually cast.
If you execute a proxy, you may revoke it by taking one of the following
three actions: (a) by giving written notice of the revocation to the Secretary
of the Company at its principal executive offices; (b) by executing a proxy with
a later date and delivering it to the Secretary of the Company at its principal
executive offices; or (c) by personally attending and voting at the meeting.
The Company will bear the expense of preparing, printing and distributing
proxy materials to its shareholders. In addition to solicitations by mail, a
number of regular employees of the Company may solicit proxies on behalf of the
Board of Directors in person or by telephone. The Company has also retained
William F. Doring & Co. on behalf of the Board of Directors to assist in the
solicitation of proxies by mail, telephone, telegraph and personal interview.
The Company will pay a fee of approximately $10,000 for these services. The
Company will also reimburse brokerage firms and other intermediaries for their
expenses in forwarding proxy materials to beneficial owners of the Company's
Common Stock.
BOARD OF DIRECTORS
The business of the Company is managed under the direction of a Board of
Directors consisting of five directors. The following individuals are currently
serving as directors: Tom A. Alberg, Douglas P. Beighle, Robert C. Greco, Harold
H. Kawaguchi and Robert L. Richmond. The Board of Directors has responsibility
for establishing broad corporate policies and for the overall performance of the
Company. It is not, however, involved in operating details on a day-to-day
basis. The Board is kept advised of the Company's business through regular
reports and discussions with the Company's executive officers.
MEETINGS OF THE BOARD
The Board meets on a regularly scheduled basis during the year to review
significant developments affecting the Company and to act on matters requiring
Board approval. It also holds special meetings when an important matter requires
Board action between regularly scheduled meetings. The full Board of Directors
met eight times during the Company's fiscal year ended March 31, 1999. No
incumbent member attended fewer than 75% of the total number of meetings of the
Board of Directors and of any Board committees of which he was a member during
that fiscal year.
COMPENSATION OF DIRECTORS
Each director who is not also an employee of the Company receives a fee of
$2,500 per fiscal quarter, provided that the director attends at least 75% of
the total number of meetings of the Board of Directors and of any Board
committees of which he is a member during the year (attendance must be in person
for at
2
<PAGE>
least 50% of the meetings). Mr. Greco also received a fee of $2,000 per fiscal
quarter for serving on the board of directors of the Company's subsidiary,
Pronexus Inc.
The Company maintains a Director Stock Option Plan (the "Director Plan"),
under which a grant of a stock option covering 5,000 shares of Common Stock is
automatically made to each outside director on the date of each annual meeting
of shareholders. The exercise price under each option is the fair market value
of the Company's Common Stock on the date of grant. Each option has a 10-year
term and vests one year after it is granted. An option generally terminates if
the director receiving it does not remain on the Board of Directors for at least
10 months following the date of grant and is further conditioned upon adequate
attendance at meetings of the Board of Directors and its committees. The
exercise price of the options granted under the Director Plan during the fiscal
year ended March 31, 1999 was $8.8125 per share.
COMMITTEES OF THE BOARD
Committees of the Board consist of an Audit Committee and a Compensation
Committee. The Audit Committee, currently composed of Messrs. Alberg and Greco,
reviews the Company's internal accounting procedures and consults with and
reviews the services provided by the Company's independent auditors. The Audit
Committee met once during the fiscal year ended March 31, 1999. The Compensation
Committee, currently composed of Messrs. Beighle and Kawaguchi, reviews and
recommends to the Board the compensation and benefits to be provided to the
Company's officers and reviews general policy matters relating to employee
compensation and benefits. The Compensation Committee met once during the fiscal
year ended March 31, 1999. The Compensation Committee also acted by written
consent five times during the fiscal year. The Company does not have a
Nominating Committee.
NOMINEES FOR DIRECTOR
The following individuals, each of whom currently serves as a director of
the Company, have been nominated for re-election at the meeting:
TOM A. ALBERG has been a director of the Company since 1994. Mr. Alberg has
been a principal in the firm of Madrona Investment Group, L.L.C., a venture
investment firm, since January 1996. From April 1991 to October 1995 he was the
President and a director of LIN Broadcasting Corporation and from July 1990 to
October 1995 he was Executive Vice President of McCaw Cellular Communications,
Inc. Both companies were providers of cellular voice and data services. Prior to
1990, Mr. Alberg was a partner at the Seattle law firm of Perkins Coie, where he
also served as Chairman of the firm's Executive Committee. Mr. Alberg is also a
director of Visio Corp., Mosaix Corporation, Teledesic Corporation, Amazon.com,
Emeritus Corp., and Advanced Digital Information Corporation. Age 59.
DOUGLAS P. BEIGHLE has been a director of the Company since 1997. Mr.
Beighle retired from The Boeing Company, an aerospace manufacturer in May 1997,
where he had served as a Senior Vice President from 1986 until he retired. He
continues to serve as a consultant to Boeing. Mr. Beighle also served as a Vice
President of Boeing from 1980 until 1986. Prior to joining Boeing in 1980, Mr.
Beighle was a partner at the Seattle law firm of Perkins Coie. Mr. Beighle is
also a director of Puget Sound Energy Company, Simpson Investment Co. and
Washington Mutual Inc. Age 67.
ROBERT C. GRECO, a co-founder of the Company, has been a director of the
Company since its inception in 1983. Mr. Greco retired as the Company's Chief
Technology Officer in December 1997, in which capacity he had served since
December 1996. Previously he served as Vice President of Product Development of
the Company from 1983 until December 1996. From 1977 to 1983, Mr. Greco worked
as an independent software consultant for such firms as The Boeing Company,
Scandinavian Airlines System (Denmark) and General Electric Company. Mr. Greco
holds a Bachelor of Arts, Mathematics, from the City University of New York, and
a Masters of Science, General Systems Science, from the State University of New
York. Mr. Greco was a director of the Washington Software Association from 1992
to 1994. Age 44.
3
<PAGE>
HAROLD H. KAWAGUCHI has been a director of the Company since 1986. Since
1992, Mr. Kawaguchi has been a director and consultant to Stratos Product
Development Group, Inc., a contract developer of products for the computer and
other technology industries. Since 1988, Mr. Kawaguchi has also been a director
and principal in Manifesto Corp., a lighting products manufacturer. From 1986 to
1988, he was a partner in Trinus, L.P., a seed capital fund for start-up
businesses. From 1965 to 1985, he was employed by Physio-Control, Inc., a
defibrillator manufacturer, as Senior Vice President in charge of product
design, information systems, corporate communications and human resources. Age
61.
ROBERT L. RICHMOND, the other co-founder of the Company, has been Chairman
of the Board of Directors of the Company since its inception in 1983. From 1983
to June 1, 1999, Mr. Richmond also served as the Chief Executive Officer of the
Company. From 1971 to 1980, Mr. Richmond was a consultant, and from 1980 to 1983
he was a project manager for Intermetrics Incorporated, a public software
company, performing software validation for NASA and The Boeing Company, and
creating new products for the airline industry. Mr. Richmond holds a Bachelor of
Computer Science and Engineering from the Massachusetts Institute of Technology.
Age 48.
4
<PAGE>
VOTING SECURITIES AND PRINCIPAL HOLDERS
OWNERSHIP INFORMATION
The following table sets forth, as of June 15, 1999, certain information
regarding beneficial ownership of the Company's Common Stock (a) by each person
known to the Company to be the beneficial owner of more than five percent of the
outstanding Common Stock, (b) by each director and nominee for director, (c) by
the Chief Executive Officer and the five other executive officers of the Company
whose total annual salary and bonus, for the fiscal year ended March 31, 1999,
exceeded $100,000, and (d) by all of the Company's executive officers and
directors as a group. Unless otherwise noted, the named beneficial owner has
sole voting and investment power.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
OF COMMON STOCK COMMON STOCK
NAME AND ADDRESS BENEFICIALLY OWNED OUTSTANDING
- -------------------------------------------------- ------------------ ------------
<S> <C> <C>
Robert L. Richmond(1)(2).......................... 616,554 13.4%
Robert C. Greco(1)(3)............................. 510,472 11.1%
Tom A. Alberg(4).................................. 28,534 *
Douglas P. Beighle(5)............................. 15,000 *
Harold H. Kawaguchi(6)............................ 104,412 2.3%
Douglass S. Anderson(7)........................... 16,981 *
Kevin L. Chestnut(8).............................. 19,767 *
Frank J. Costa(9)................................. 46,040 1.0%
Jose S. David(10)................................. 36,750 *
Edward F. Masters(11)............................. 15,536 *
All directors and executive officers as a group
(10 persons) (12)............................... 1,410,046 29.6%
</TABLE>
- ------------------------
* Less than 1%.
(1) The business address of Messrs. Richmond and Greco is c/o Active Voice
Corporation, 2901 Third Avenue, Suite 500, Seattle, Washington 98121.
(2) Includes 27,500 shares subject to options exercisable within 60 days of
June 15, 1999. Also includes 34,890 shares held by two private foundations
of which Mr. Richmond serves as a director. Mr. Richmond disclaims
beneficial ownership of the shares held by these foundations.
(3) Includes 1,666 shares subject to options exercisable within 60 days of June
15, 1999. Also includes 300,000 shares held by a family limited partnership
of which Mr. Greco is the general partner.
(4) Includes 14,034 shares subject to options exercisable within 60 days of
June 15, 1999.
(5) Includes 5,000 shares subject to options exercisable within 60 days of June
15, 1999.
(6) Includes 12,500 shares subject to options exercisable within 60 days of
June 15, 1999.
(7) Includes 15,416 shares subject to options exercisable within 60 days of
June 15, 1999.
(8) Includes 16,670 shares subject to options exercisable within 60 days of
June 15, 1999.
(9) Consists of 46,040 shares subject to options exercisable within 60 days of
June 15, 1999.
(10) Includes 27,750 shares subject to options exercisable within 60 days of
June 15, 1999.
(11) Consists of 15,536 shares subject to options exercisable within 60 days of
June 15, 1999.
(12) Includes 182,112 shares subject to options exercisable within 60 days of
June 15, 1999.
5
<PAGE>
COMPENSATION AND BENEFITS
EXECUTIVE OFFICER COMPENSATION
COMPENSATION SUMMARY. The following table sets forth information regarding
compensation earned during the Company's fiscal year ended March 31, 1999, and
during the two preceding fiscal years, by the Chief Executive Officer and the
five other executive officers whose total annual salary and bonus for the fiscal
year ended March 31, 1999 exceeded $100,000 (the "named executive officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -------------------
------------------------------------ SECURITIES
NAME AND FISCAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS(1)($) STOCK OPTIONS(#) COMPENSATION(2)($)
- -------------------------------------- ----------- ---------- ----------- ------------------- ------------------
<S> <C> <C> <C> <C> <C>
Robert L. Richmond(3) ................ 1999 $ 175,000 $ 0 0 $ 15,274
Chairman of the Board 1998 144,099 0 0 20,356
1997 122,750 55,000 0 24,083
Frank J. Costa(4) .................... 1999 175,000 65,000 17,500 421
Chief Executive Officer and 1998 150,000 0 25,000 1,692
President 1997 37,300 20,000 50,000 0
Jose S. David ........................ 1999 130,000 60,000 17,500 2,500
Chief Financial Officer, 1998 101,856 11,500 0 4,607
Treasurer and Secretary 1997 85,600 41,000 10,000 6,809
Douglass S. Anderson ................. 1999 125,000 73,529 35,000 2,619
Vice President--Sales 1998 101,246 42,379 0 5,166
1997 93,790 66,551 12,000 9,658
Edward F. Masters .................... 1999 132,366 60,000 20,000 100
Vice President--Development 1998 107,150 25,000 0 2,605
1997 77,510 15,000 12,500 4,118
Kevin L. Chestnut .................... 1999 120,000 70,000 20,000 2,350
Chief Technology Officer and 1998 94,048 25,000 0 5,124
Vice President--Advanced 1997 68,500 7,000 12,500 3,917
Products & Technologies
</TABLE>
- ------------------------
(1) Amounts shown in this column for Mr. Anderson include both commission and
bonus income.
(2) Amounts shown for fiscal 1999 represent matching contributions under the
Company's 401(k) plan and other taxable benefits, except $12,557 for Mr.
Richmond, which represents the dollar value of life insurance benefits under
the SEC's methodology for valuing such benefits.
(3) Mr. Richmond also served as Chief Executive Officer until June 1, 1999.
(4) Mr. Costa was promoted to Chief Executive Officer and President effective
June 1, 1999. He joined the Company as Chief Operating Officer and President
in December 1996.
6
<PAGE>
OPTION GRANTS. The following table shows information concerning stock
options granted to the named executive officers during the Company's fiscal year
ended March 31, 1999.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF STOCK PRICE
SECURITIES PERCENT OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(1)
OPTIONS TO EMPLOYEES PRICE EXPIRATION --------------------
NAME GRANTED(#) IN FISCAL YEAR ($ PER SHARE) DATE 5% 10%
- ----------------------------------- ----------- ------------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Richmond................. -- -- -- -- -- --
Frank J. Costa..................... 17,500(2) 6.7% $ 12.63 5/14/08 139,001 352,257
Jose S. David...................... 17,500(3) 6.7% 11.75 5/29/08 129,316 327,713
Douglass S. Anderson............... 20,000(4) 7.6% 10.50 7/1/08 132,068 334,686
15,000(5) 5.7% 11.75 5/29/08 110,843 280,897
Edward F. Masters.................. 20,000(6) 7.6% 10.50 7/1/08 132,068 334,686
Kevin L. Chestnut.................. 20,000(6) 7.6% 10.50 7/1/08 132,068 334,686
</TABLE>
- ------------------------
(1) Based upon the market price on the date of grant and assumed appreciation
over the term of the option at the respective annual rates of stock
appreciation shown. These amounts are not intended to forecast possible
future appreciation, if any, in the market price of the Company's Common
Stock.
(2) Nonqualified stock option vesting for 4,375 shares on each of May 14, 1999,
2000, 2001 and 2002.
(3) Nonqualified stock option vesting for 5,000 shares on November 29, 1998 and
4,167 shares on each of May 29, 1999 and 2000 and 4,166 shares on May 29,
2001.
(4) Nonqualified stock option vesting for 6,666 shares on July 1, 1999 and 2000
and 6,668 shares on July 1, 2001.
(5) Nonqualified stock option vesting for 3,750 shares on each of May 29, 1999,
2000, 2001 and 2002.
(6) Nonqualified stock option vesting for 5,000 shares on each of July 1, 1999,
2000, 2001 and 2002.
OPTION EXERCISES. The following table shows information concerning stock
options exercised by the named executive officers during the Company's fiscal
year ended March 31, 1999, including the aggregate value of any gains realized
on such exercise. The table also shows information regarding the number and
value of unexercised in-the-money options held by the named executive officers
at the end of that fiscal year.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(#) AT FISCAL YEAR-END(1)($)
ACQUIRED ON VALUE -------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------------- --------------- ----------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Richmond............ 0 0 27,500 0 $ 0 $ 0
Frank J. Costa................ 0 0 41,665 50,835 0 0
Jose S. David................. 0 0 23,583 15,834 12,125 0
Douglass S. Anderson.......... 0 0 5,000 35,000 2,425 0
Edward F. Masters............. 0 0 10,536 24,500 0 0
Kevin L. Chestnut............. 0 0 11,670 24,500 2,425 0
</TABLE>
- ------------------------
(1) Represents the aggregate fair market value on March 31, 1999, of the shares
of Common Stock subject to outstanding in-the-money options, less the
aggregate exercise price of the options.
7
<PAGE>
EXECUTIVE CONTRACTS
Each of the named executive officers has executed an agreement containing
confidentiality restrictions, as well as certain provisions regarding
noncompetition during his term of employment with the Company and for six months
following termination. The Company provides each of its executive officers with
an annual incentive plan under which they receive a specified salary plus
additional cash and stock-based incentives depending on attainment of various
performance goals.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is responsible for
administration of compensation programs for the executive officers of the
Company. The Committee is composed exclusively of directors who are neither
employees nor former employees of the Company nor eligible to participate in any
of the Company's executive compensation programs.
Under the Company's executive compensation programs, there are generally
three components to an executive's compensation: base salary, an annual or
bi-annual incentive payment, and long-term incentives in the form of stock
options. The range of base salaries for a particular executive is targeted to a
specific percentile level of the base salary levels at companies of comparable
size in similar industries, with the percentile set based on an assessment of
the Company's overall performance, in terms of earnings and revenue growth, and
the executive's contribution to that performance. Incentive payments are based
on individual incentive plans, where payments are tied to specific performance
goals. Bonus payments under the incentive plans are generally computed as a
percentage of the executive's salary, with the actual percentages being a
function of the extent to which the goals were achieved. Finally, the Company
provides long-term incentives to executives through the grant of stock options.
The options generally have an exercise price equal to the estimated fair market
value of the Company's stock at the time of grant, with the number of options
awarded based on the executive's position as well as the level of the
executive's existing stock holdings. Since fair market value stock options can
only produce value to executives if the price of the Company's stock increases,
these option grants provide a direct link between executive compensation and the
Company's performance.
Mr. Richmond's salary and bonus for the fiscal years ended March 31, 1998
and 1999 were weighted more towards the fiscal year ended March 31, 1999 as part
of a two year objective to increase revenue and profitability. The combined
total compensation for the two years was targeted to the average of that paid in
1997 to comparable executives in similar sized companies, with about half
allocated to base salary and half allocated to incentive compensation to be
awarded for achievement of revenue and earnings goals.
Mr. Richmond's actual compensation for both the years ended March 31, 1998
and 1999 included no bonuses since the revenue and earnings goals upon which
they depended were not achieved.
Pursuant to the Omnibus Budget Reconciliation Act of 1993 (the "Act"), the
deductibility for federal income tax purposes of compensation in excess of $1
million paid or accrued with respect to any of the Company's five highest paid
executives may be limited. The Company believes that compensation accrued with
respect to options granted under its stock option plans (other than options with
an exercise price less than the fair market value of the Company's Common Stock
at the time of grant), will continue to be deductible, and with regard to base
salaries and the Company's annual incentive programs, the Company does not
expect that, for the foreseeable future, the aggregate level of compensation
payable to executive officers will exceed the $1 million limit.
The Compensation Committee currently consists of Messrs. Beighle and
Kawaguchi.
COMPENSATION COMMITTEE
Douglas P. Beighle
Harold H. Kawaguchi
8
<PAGE>
COMPARATIVE PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative total return to
shareholders on the Company's Common Stock with the cumulative total return of
the Nasdaq Composite Index and the Nasdaq Telecommunications Index for the
five-year period ended March 31, 1999.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG ACTIVE VOICE CORPORATION COMMON STOCK,
THE NASDAQ COMPOSITE INDEX AND
THE NASDAQ TELECOMMUNICATIONS INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
3/31/94 3/31/95 3/29/96 3/31/97 3/31/98 3/31/99
<S> <C> <C> <C> <C> <C> <C>
Active Voice Corporation $100 $126 $59 $47 $60 $44
NASDAQ Composite Index $100 $110 $148 $164 $247 $331
NASDAQ Telecommunications Index $100 $102 $138 $127 $245 $389
</TABLE>
The total return on the Company's Common Stock and each index assumes the
value of each investment was $100 on March 31, 1999, and that all dividends were
reinvested. Return information is historical and not necessarily indicative of
future performance.
PROPOSAL 1--ELECTION OF DIRECTORS
Five directors are to be elected at the annual meeting, to serve until the
2000 Annual Meeting of Shareholders or until their earlier retirement,
resignation or removal. Tom A. Alberg, Douglas P. Beighle, Robert C. Greco,
Harold H. Kawaguchi and Robert L. Richmond, all of whom are currently directors
of the Company, have been nominated by the Board of Directors for election. The
accompanying proxy will be voted for these nominees, except where authority to
so vote is withheld. Should any nominee be unable to serve, the proxy will be
voted for such person as is designated by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES NAMED IN
PROPOSAL 1.
PROPOSAL 2--APPROVAL OF AN AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN
At the annual meeting, the shareholders of the Company will be asked to
approve an amendment to the Company's 1996 Employee Stock Purchase Plan (the
"Plan") as described below. A copy of the Plan as proposed to be amended is on
file with the Securities and Exchange Commission (the "SEC") and may be
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obtained by written request to the Company's Secretary at the address on the
first page of this proxy statement.
SUMMARY OF THE PLAN
IN GENERAL
The purpose of the Plan is to provide a method by which eligible Company
employees may be awarded additional remuneration for services rendered and to
encourage such employees to invest in the capital stock of the Company. The Plan
is intended to foster employee loyalty to the Company and increase their
personal interest in the Company's business and success. The Plan is also
intended to facilitate recruiting persons of exceptional ability to become
officers and employees of the Company. The Board believes that, unless the Plan
is amended, the number of shares available for issuance will be insufficient to
achieve the purposes of the Plan.
In August 1997, the shareholders approved the Plan, and a total of 150,000
shares of Common Stock were reserved by the Company for purchase by eligible
employees under the Plan. The proposed amendment to the Plan would increase the
number of shares of Common Stock available for purchase by eligible employees
under the Plan by an additional 200,000 shares.
THE PLAN
The Plan is administered by the Compensation Committee of the Board of
Directors (the "Committee"). The Plan is not subject to any provisions of the
Employee Retirement Income Security Act of 1974, as amended, nor is it qualified
under Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
To be eligible to participate under the Plan, an employee of the Company or
its subsidiaries (including an officer or director who is also an employee) must
customarily work more than 10 hours per week and more than 5 months in any
calendar year. However, an employee who owns stock with 5% or more of the total
combined voting power or value of all classes of stock of the Company will not
be eligible to participate. During any calendar year, the maximum value of the
Common Stock that may be purchased by an employee under the Plan is $25,000.
The Plan will be administered on quarterly "Payment Periods." The purchase
price for shares of Common Stock purchased under the Plan will be equal to the
lesser of (1) 85% of the market price of the Common Stock on the first business
day of the Payment Period or (2) 85% of the market price for the Common Stock on
the last business day of the Payment Period.
Each eligible employee may elect, at the beginning of a Payment Period, to
have up to 10% of his or her compensation during the Payment Period withheld and
applied toward the purchase of Common Stock at the end of the Payment Period.
Payroll deductions may not be increased or decreased during a Payment Period,
although an employee may elect to withdraw from the Plan during a Payment Period
at any time before the last day of the Payment Period. In the event of a
withdrawal from participation in the Plan during a Payment Period, the
Participant will not be eligible to participate again until the first Payment
Period of the following calendar year.
The number of shares subject to the Plan and the purchase price of such
shares are subject to adjustment upon the occurrence of certain events,
including but not limited to a stock dividend, stock split, reverse stock split
or other transaction resulting in the subdivision or combination of the
Company's Common Stock.
As a condition of participation in the Plan each participant agrees to
promptly give the Company notice of any disposition of shares that occurs within
2 years after the beginning of the Payment Period in which the shares were
purchased. As a further condition to participation, each participant agrees to
allow
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the Company to withhold, from any other amounts that may be payable to the
participant at or around the time of such disposition, such federal, state, and
local income, employment and other taxes as the Company may be required to
withhold under applicable law, and to remit such taxes to the Company, in lieu
of such withholding, upon the Company's request.
A participant may resell shares of Common Stock purchased under the Plan at
any time, subject to compliance with all applicable federal and state securities
and other laws. However, a participant's rights under the Plan are the
participant's alone and may not be transferred or assigned to any other person
other than by will or the laws of descent and distribution. A participant's
rights under the Plan are exercisable during his or her lifetime by the
participant alone. A participant's rights under the Plan will terminate if he or
she for any reason ceases to be an employee of the Company. However, if a
participant's employment ceases during a Payment Period, the participant's right
to purchase shares of Common Stock will continue until the end of the Payment
Period, unless the participant or his or her personal representative withdraws
from the Plan for the Payment Period.
The Plan will terminate when all or substantially all of the unissued shares
of Common Stock reserved for the purposes of the Plan have been purchased. Upon
such termination, all payroll deductions not used to purchase shares of Common
Stock will be refunded to the participants entitled thereto. The Plan may also
be terminated at any time by the Board of Directors, but termination will not
affect any purchase rights under the Plan with respect to the Payment Period in
progress at the time of termination. The Board of Directors or the Committee
also has the right to amend the Plan under certain circumstances.
SUMMARY OF FEDERAL INCOME TAX CONSEQUENCES OF PLAN
The following discussion summarizes the material federal income tax
consequences of participation in the Plan. This discussion is general in nature
and does not address issues related to the tax circumstances of any particular
employee. The discussion is based on federal income tax laws in effect on the
date hereof and is, therefore, subject to possible future changes in law. This
discussion does not address state, local or foreign tax consequences.
The Plan is intended to qualify as an "employee stock purchase plan" within
the meaning of Section 423(b) of the Code. A participant will not recognize any
income, gain or loss at the time he or she purchases share of Common Stock under
the Plan.
If a participant disposes of shares of Common Stock purchased under the
Plan, the participant will be subject to income tax in the year of disposition
if a gain is realized on the disposition (that is, if the shares of Common Stock
are then worth more than the participant paid for them). A portion of this gain
will be treated as compensation income, which the participant will be required
to report on his or her federal income tax return for the year in which the
disposition occurs. Under the Code, special rules apply to a disposition of
shares of Common Stock purchased under the Plan. For purposes of these rules, a
disposition generally includes not only a sale of the shares, but also a gift,
an exchange of the shares for other property, and a transfer of the shares at
death. However, a disposition does not include a mere pledge of the shares or a
transfer of the shares into joint tenancy.
The tax consequences to a participant of a disposition of shares of Common
Stock purchased under the Plan will vary depending on how long the participant
has held the shares. If the shares are held until the second anniversary of the
first day of the Payment Period during which the shares were purchased (the
"two-year holding period"), the compensation income will be determined by
subtracting the amount the participant paid for the shares from their fair
market value on the first day of the Payment Period during which the shares were
purchased, or their fair market value on the date of disposition, whichever is
less. If the shares have not been held for the two-year holding period, the
compensation income will be determined by subtracting the amount the participant
paid for the shares from their fair market value on the last day of the Payment
Period during which the shares were purchased, or their fair market value on the
date of disposition, whichever is less.
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In addition to the compensation income reportable by a participant, if a
disposition is a sale or other taxable transfer, any remaining gain in excess of
the amount reported as compensation income will be capital gain (short-term or
long-term, depending on how long the participant held the shares).
If a disposition of shares is a gift, a transfer by bequest or inheritance,
or another type of transfer that is not generally taxable, the participant will
only be required to report the compensation income described above. An amount
equal to that compensation income will generally be added to the purchase price
of the shares, and the total will be the transferee's adjusted cost of the
shares.
If a participant disposes of shares of Common Stock purchased under the Plan
that have not been held for the two-year holding period, and a gain is realized
on the disposition, the Company or the subsidiary of the Company that employs
the participant may be required to withhold certain amounts on account of
federal income and employment taxes and the Company will generally be entitled
to a compensation deduction in the year of disposition for this portion of the
gain.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE 1996 EMPLOYEE STOCK PURCHASE PLAN
PROPOSAL 3--APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed the firm of Ernst & Young LLP as
independent auditors for the Company's fiscal year ending March 31, 2000. This
firm has audited the accounts of the Company since 1988. The firm performed
audit services in connection with the examination of the consolidated financial
statements of the Company for its fiscal year ended March 31, 1999. In addition,
the firm has rendered other services, including the review of financial
statements and related information in various registration statements and
filings with the SEC and limited review of financial statements and related
information contained in quarterly reports provided to shareholders and the SEC.
If this proposal does not receive the affirmative approval of a majority of
the votes cast on the proposal, the Board of Directors will reconsider the
appointment. Representatives of Ernst & Young LLP are expected to be present at
the annual meeting, will have the opportunity to make a statement if they desire
to do so, and will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), requires that the Company's officers and directors, and persons
who own more than ten percent of a registered class of the Company's equity
securities, file reports of ownership and changes of ownership with the SEC.
Officers, directors and greater than ten percent shareholders are required by
SEC regulation to furnish the Company with copies of all such reports they file.
Based solely on its review of the copies of such reports received by the
Company, and on written representations by the Company's officers and directors
regarding their compliance with the applicable reporting requirements under
Section 16(a) of the Exchange Act, the Company believes that, with respect to
its fiscal year ended March 31, 1999, all of the Company's officers and
directors, and all of the persons known to the Company to own more than ten
percent of its Common Stock, complied with all such reporting requirements.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
An eligible shareholder who desires to have a qualified proposal considered
for inclusion in the proxy statement prepared in connection with the Company's
2000 Annual Meeting of Shareholders must deliver
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a copy of the proposal to the Secretary of the Company, at the Company's
principal executive offices, no later than March 16, 2000 and satisfy certain
other requirements set forth in Rule 14a-8 under the Exchange Act. A shareholder
must have been a record or beneficial owner of at least one percent of the
Company's outstanding Common Stock, or shares of Common Stock having a market
value of at least $2,000, for a period of at least one year prior to submitting
the proposal, and the shareholder must continue to hold the shares through the
date on which the meeting is held.
A shareholder of record who intends to submit a proposal at the 2000 Annual
Meeting that is not eligible for inclusion in the Company's proxy statement or
who intends to submit one or more nominations for directors at the meeting must
provide prior written notice to the Secretary of the Company, which must be
received by the Company at least 70 days prior to the date scheduled for the
annual meeting. The notice must satisfy certain requirements specified in the
Company's Bylaws. A copy of the pertinent provisions of the Bylaws is available
upon request to Jose S. David, Secretary, Active Voice Corporation, 2901 Third
Avenue, Suite 500, Seattle, Washington 98121.
IT IS IMPORTANT THAT PROXIES ARE RETURNED PROMPTLY AND THAT YOUR SHARES ARE
REPRESENTED. SHAREHOLDERS ARE URGED TO MARK, SIGN AND DATE THE ENCLOSED PROXY
CARD AND MAIL IT PROMPTLY IN THE ENCLOSED RETURN ENVELOPE.
ACTIVE VOICE CORPORATION
July 15, 1999
Seattle, Washington
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PROXY
ACTIVE VOICE CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Annual Meeting of Shareholders
of Active Voice Corporation (the "Company"), and the related Proxy Statement
dated July 15, 1999, hereby appoints Robert L. Richmond and Jose S. David,
and each of them, proxies for the undersigned, with full power of
substitution, and authorizes them to attend the Annual Meeting of
Shareholders of the Company on August 19, 1998, and any adjournments thereof,
and to vote thereat all shares of Common Stock of the Company that the
undersigned would be entitled to vote if personally present, such proxies
being instructed to vote as specified on the reverse side, or, to the extent
not specified, to vote FOR the election as directors of all nominees named on
the reverse side and FOR Proposals 2 and 3, and to vote in their
discretion, to the extent permitted by applicable law, on any other matters
presented at the meeting or any adjournments thereof. The Board of Directors
recommends a vote FOR all of the nominees named below and FOR Proposals 2 and 3.
PLEASE SIGN AND DATE THIS PROXY CARD AND RETURN IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
PLEASE mark your votes as indicated in this example /X/
PROPOSAL 1: ELECTION OF DIRECTORS:
FOR / / WITHHOLD AUTHORITY to vote for all nominees named below / /
Tom A. Alberg, Douglas P. Beighle, Robert C. Greco, Harold H. Kawaguchi and
Robert L. Richmond
(INSTRUCTION: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list above).
PROPOSAL 2: APPROVAL OF THE AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN
FOR / / AGAINST / / ABSTAIN / /
PROPOSAL 3: RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FOR / / AGAINST / / ABSTAIN / /
This proxy, when properly executed, will be voted in the manner specified by
the undersigned. Except as otherwise specified, this proxy will be voted FOR
the election as directors of all nominees named above, FOR approval of the
amendment to the Company's 1996 Employee Stock Purchase Plan, and FOR
ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors.
Signature(s) Dated: , 1999
------------------------------------------ ------------
Please sign name exactly as it appears hereon. If shares are held by joint
tenants, both should sign. When signing as an attorney, executor, administrator,
trustee, or guardian, please give full title as such.
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
ANNUAL MEETING OF SHAREHOLDERS
ACTIVE VOICE CORPORATION
THURSDAY, AUGUST 19, 1999
2:00 - 4:00 P.M.
SEATTLE ART MUSEUM
100 UNIVERSITY STREET
SEATTLE, WA
