SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement Confidential, For Use of the Com-
mission only (as permitted by Rule 14a-6(e) 2))
[x] Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-12
Applied Voice Technology, Inc.
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
- - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee
[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 applied:
- - -------------------------------------------------------------------------------
(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:
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<PAGE>
APPLIED VOICE TECHNOLOGY, INC.
------------
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 13, 1997
------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Applied Voice Technology, Inc., a Washington corporation (the "Company"), will
be held at the Bellevue Club Hotel, 11200 Southeast 6th Street, Bellevue,
Washington, at 11:00 a.m., local time, on Tuesday, May 13, 1997 (the "Annual
Meeting") for the following purposes:
(1) To elect one director of the Company.
(2) To transact such other business as may come before the Annual
Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on March 14,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting in
person.
To ensure representation at the Annual Meeting, shareholders are urged
to mark, sign, date and return the enclosed Proxy as promptly as possible, even
if they plan to attend the Annual Meeting. A return envelope, which requires no
postage if mailed in the United States, is enclosed for this purpose. Any
shareholder attending the Annual Meeting may vote in person even if such
shareholder has returned a Proxy if the Proxy is revoked in the manner set forth
in the accompanying Proxy Statement.
By order of the Board of Directors
/s/ Roger A. Fukai
Roger A. Fukai
Executive Vice President of Finance and
Administration,
Chief Financial Officer and Secretary
Kirkland, Washington
April 7, 1997
<PAGE>
APPLIED VOICE TECHNOLOGY, INC.
------------
PROXY STATEMENT
------------
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Applied Voice Technology, Inc. ("AVT" or the
"Company") of proxies for use at the Annual Meeting of Shareholders to be held
at the Bellevue Club Hotel, 11200 Southeast 6th Street, Bellevue, Washington, at
11:00 a.m., local time, on Tuesday, May 13, 1997 or at any adjournment or
postponement thereof (the "Annual Meeting"), for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. The principal executive
offices of the Company are located at 11410 N.E. 122nd Way, Kirkland, Washington
98034. It is expected that this Proxy Statement and accompanying Proxy will be
mailed to shareholders on or about April 7, 1997.
Record Date and Outstanding Shares
Only holders of record of the Company's common stock (the "Common
Stock") at the close of business on March 14, 1997 are entitled to notice of and
to vote at the Annual Meeting. On that date there were 5,644,324 shares of
Common Stock outstanding.
Revocability of Proxies
Shares represented at the Annual Meeting by properly executed proxies
in the accompanying form will be voted at the Annual Meeting and, where the
shareholder giving the Proxy specifies a choice, the Proxy will be voted in
accordance with the specification so made. A Proxy given for use at the Annual
Meeting may be revoked by the shareholder giving the Proxy at any time prior to
the exercise of the powers conferred thereby. A Proxy may be revoked either by
(i) filing with the Secretary of the Company prior to the Annual Meeting, at the
Company's principal executive offices, either a written revocation or a duly
executed Proxy bearing a later date or (ii) attending the Annual Meeting and
voting in person, regardless of whether a Proxy has previously been given.
Presence at the Annual Meeting will not revoke the shareholder's Proxy unless
such shareholder votes in person.
Quorum and Voting
Holders of Common Stock will be entitled to one vote per share of
Common Stock held. Holders of Common Stock are not entitled to cumulative voting
rights in the election of directors. Under Washington law, action may be taken
on a matter submitted to shareholders only if a quorum exists with respect to
such matter. A majority of the outstanding shares of Common Stock entitled to
vote at the Annual Meeting, present in person or represented by Proxy,
constitutes a quorum for the Annual Meeting.
The nominee for election as director who receives the greatest number
of votes, present in person or by Proxy at the Annual Meeting, will be elected
director. Abstention from voting and broker nonvotes on the election of the
director will have no impact on the outcome of this proposal since they have not
been cast in favor of any nominee.
Solicitation of Proxies
The Company has retained W.F. Doring & Company to aid in the
solicitation of proxies. It is estimated that the cost of these services will be
approximately $2,500 plus expenses. The cost of soliciting proxies will be borne
by the Company. Proxies will be solicited by personal interview, mail and
telephone. In addition, the Company may reimburse brokerage firms and other
persons representing beneficial owners of shares of Common Stock for their
expenses in forwarding solicitation materials to such beneficial owners. Proxies
may also be solicited by certain of the Company's directors, officers and
regular employees, without additional compensation, personally or by telephone.
ELECTION OF DIRECTOR
At the Annual Meeting, one director is to be elected to hold office for
a term of three years until the Company's annual meeting of shareholders in
2000, and until his successor shall be elected and shall qualify. The Board of
Directors has no reason to believe that the nominee named below will be unable
to serve as a director. If, however, the nominee becomes unavailable, the
proxies will have discretionary authority to vote for a substitute nominee.
Unless authority to do so is withheld, the persons named as proxies in
the accompanying form of Proxy will vote FOR the election of the nominee listed
below.
Nominee
JAMES S. CAMPBELL (age 70) has served as a director of the Company
since 1991. Since 1987, he has been Managing Director of Management Partners
International Corporation, a management consulting firm. Previously, Mr.
Campbell served as Chairman, President and Chief Executive Officer of Fortune
Systems Corporation (now Tigera Group, Inc.), President of Shugart Corp.,
President of Xerox Computer Services and a Vice President of Xerox Corporation.
Mr. Campbell also serves as a director of Rational Software Corp. He holds a
B.A. degree in business administration from the University of Wisconsin and
attended the Graduate School of Business in Wisconsin.
The Board of Directors recommends a vote FOR the election of the
nominee.
Continuing Director - term expires 1998
WILLIAM L. TRUE (age 42) has served as a director of the Company since
1985, serving as Chairman of the Company's Board from 1990 to 1994. Mr. True has
also been Chairman of the Board of Gull Industries, Inc. ("Gull"), a privately
held full-line petroleum distributor in the Pacific Northwest, since 1990. Prior
to that, Mr. True served as Executive Vice President and a Director of Gull from
1989 to 1990. Presently, Mr. True also serves on the boards of the Seattle Art
Museum and the Pike Place Market Foundation, where he is President. Mr. True
holds a B.A. degree from Duke University.
Continuing Directors - terms expire 1999
RICHARD J. LAPORTE (age 52) joined AVT in 1990 as President, Chief
Executive Officer and a director. He became Chairman of the Company's Board in
1994, and also serves as a director and executive officer of certain AVT wholly
owned subsidiaries. He has over 30 years of experience managing high-technology
data processing, computer software and communications companies. Mr. LaPorte was
President and Chief Executive Officer of Accountants Microsystems Inc. (a
computer software development company) from 1985 to 1990. Prior to that, he
served as President and Chief Executive Officer of Gill Management Services,
Inc., and held various senior management positions at Xerox Computer Services, a
division of Xerox Corporation.
ROBERT L. LOVELY (age 60) has served as a director of the Company since
1983. He has been President of The Lovely Corporation, d/b/a Admiral of the
Fleet Cruise Center, a travel agency system specializing in cruise vacations and
management consulting, since 1984. Mr. Lovely is also a founder, Chairman of the
Board and Chief Executive Officer of Cruise Centers of America, Inc., a
franchiser of specialty travel services. In addition, Mr. Lovely currently
serves as a director of Republic Leasing Inc. Previously, he was President,
Chief Executive Officer and a director of Satellite Information Systems Co., a
publicly owned software development company; founder, manager and director of
Illuminet, Inc., a nationwide company servicing independent telephone companies;
and founder, manager, Chief Executive Officer and director of Allied Data, a
data processing services company. Mr. Lovely holds a B.A. degree in mathematics
from Washington State University and an M.B.A. degree from Pacific Lutheran
University.
Compensation of Directors
Currently, the Company pays Mr. Campbell an attendance fee of $1,000
for attending each meeting of the Board of Directors, in addition to reimbursing
him for reasonable expenses incurred in connection with attending such meetings.
All nonemployee directors are entitled to certain stock option grants pursuant
to the Company's 1994 Nonemployee Directors Stock Option Plan (the "Directors
Plan"). The Directors Plan provides for the automatic grant of an option to
purchase 5,000 shares of Common Stock to each eligible director upon his or her
initial election or appointment to the Board of Directors. In addition, each
eligible director automatically receives the grant of an option to purchase
2,000 shares of Common Stock immediately following each annual meeting of the
Company's shareholders. The exercise price for such options is the fair market
value of the Common Stock on the date of grant. Each option vests one year after
it is granted and expires 10 years from the date of grant or, if earlier, 12
months after the optionee's termination of service with the Company, the
optionee's death or the optionee's total disability. In the event of certain
acquisitions of the Company or upon liquidation of the Company, each outstanding
option will accelerate in full immediately prior to such event and will
terminate upon the occurrence of such event.
Information on Committees of the Board of Directors and Meetings
The Company's Board of Directors has established a Compensation
Committee and an Audit Committee.
The Compensation Committee establishes salaries, incentives and other
forms of compensation for directors, officers and other key employees of the
Company, administers the Restated 1989 Stock Option Plan and recommends policies
relating to benefit plans. The Compensation Committee consists of William L.
True, Robert L. Lovely and James S. Campbell. The Compensation Committee held 12
meetings in 1996.
The Audit Committee reviews the Company's accounting practices,
internal accounting controls and financial results and oversees the engagement
of the Company's independent auditors. The Audit Committee consists of William
L. True and James S. Campbell. The Audit Committee held 2 meetings in 1996.
During 1996, there were 10 meetings of the Board of Directors and all
board members attended at least 75% of the meetings of the Board and of each
Committee of which he was a member.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 1, 1997 certain information
with respect to the beneficial ownership of the Common Stock by (i) each person
known by the Company to beneficially own more than 5% of the Common Stock, (ii)
each director and director nominee of the Company, (iii) each of the Company's
executive officers for whom compensation is reported in this Proxy Statement,
and (iv) all directors and executive officers of the Company as a group. Except
as otherwise noted, the Company believes that the beneficial owners of the
Common Stock listed below, based on information furnished by such owners, have
sole voting and investment power with respect to such shares.
<PAGE>
Name of Shares Beneficially Owned
Beneficial Owner Number Percent
- - ----------------------------------------------------------------------
Gull Industries, Inc.(1)..................... 1,520,551 26.9%
3404 4th Avenue South
Seattle, WA 98124
- - ---------------------------------------------------------------------
William L. True(1)........................... 1,526,301 27.0%
3404 4th Avenue South
Seattle, WA 98124
- - ----------------------------------------------------------------------
Vinik Partners, L.P.(2) ...................... 291,200 5.2%
260 Franklin Street
Boston, MA 02110
- - ----------------------------------------------------------------------
Richard J. LaPorte(3)......................... 231,708 3.9%
- - ----------------------------------------------------------------------
Dennis F. King(4)............................. 199,177 3.5%
- - ----------------------------------------------------------------------
Greg R. Blanpied(3)........................... 65,673 1.2%
- - ----------------------------------------------------------------------
Robert L. Lovely(5)........................... 43,500 *
- - ----------------------------------------------------------------------
Roger A. Fukai(6)............................. 47,025 *
- - ----------------------------------------------------------------------
Michael C.Freebairn(7)........................ 12,685 *
- - ----------------------------------------------------------------------
Timothy A.Wudi(3)............................. 20,370 *
- - ----------------------------------------------------------------------
James S. Campbell(3).......................... 14,000 *
- - ----------------------------------------------------------------------
All directors and current executive officers as a
group (9 persons) (1)..................... 1,974,902 32.4%
- - ------------
* Less than 1%
(1) Includes 1,520,551 shares owned by Gull. Mr. True is Chairman of the
Board of Gull, and shares voting power and the ability to control the
disposition of such shares. Shares beneficially owned by Mr. True
include 5,750 shares issuable upon exercise of stock options that are
currently exercisable or that are exercisable within 60 days.
(2) Based on Schedule 13D dated February 18, 1997, Vinik Partners, L.P.
Beneficially owns 121,000 shares, and voting and dispositive power as to
those shares is shared with VGH Partners L.L.C. The other 170,200 shares
are beneficially owned by Vinik Overseas Fund, Ltd. and a discretionary
account managed by Vinik Asset management, L.P., and voting and
dispositive power as to those shares is shared with Vinik Asset
Management, L.L.C. In addition, Jeffrey Vinik, Mark Hostetter and
Michael Gordon share voting and dispositive power as to all 291,200
shares.
(3) Represents shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(4) Includes 15,000 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(5) Includes 21,500 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(6) Includes 47,000 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(7) Includes 12,460 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
EXECUTIVE OFFICERS
The executive officers of the Company and their ages as of March 14,
1997 are as follows:
Officer
Name Age Position Since
Richard J. LaPorte 52 Chairman of the Board,President 1990
and Chief Executive Officer
Greg R. Blanpied 49 Executive Vice President & 1991
Chief Technology Officer
Roger A. Fukai 44 Executive Vice President of 1991
Finance & Administration and
Chief Financial Officer
Michael (Corey)
Freebairn 33 Senior Vice President of 1996
International
Joseph A. Staples 37 Senior Vice President of 1996
Worldwide Marketing
Timothy A. Wudi 47 Senior Vice President of 1996
North American Dealer Sales
For Mr. LaPorte's biographical summary, see "Election of Director."
Mr. Blanpied serves as AVT's Executive Vice President & Chief
Technology Officer. Mr. Blanpied joined the Company in 1991, and served as the
Company's Senior Vice President of Engineering and Operations until his
appointment to his current position in 1997. Prior to joining AVT, Mr. Blanpied
was Vice President of Engineering at Votan, a division of Moscom Corporation, a
voice processing and voice recognition company, from 1989 to 1991. Prior to
that, he was Vice President of Software Development and Operations for
Compufact, a division of Computer Sciences Corporation; the Managing Partner in
Trillium, a software engineering consulting company; and Vice President of
Technology Planning and Development and Vice President of Systems Programming
for Xerox Computer Services.
Mr. Fukai serves as AVT's Executive Vice President of Finance &
Administration and Chief Financial Officer. Mr. Fukai joined the Company in
1988, as the Company's Director of Finance and served as Senior Vice President
of Finance & Administration and Chief Financial Officer from 1991 until his
appointment to his current position in 1997. Mr. Fukai also serves as a director
and executive officer of certain AVT wholly owned subsidiaries. Prior to joining
AVT, Mr. Fukai was Controller at Advanced Technology Laboratories, Inc., a
manufacturer of diagnostic medical imaging equipment. Mr. Fukai is a C.P.A and
holds a B.A. degree in business administration from Washington State University.
Mr. Freebairn serves as AVT's Senior Vice President of International.
Prior to joining AVT on March 1, 1996, Mr. Freebairn was Director of Worldwide
Sales for Canopy Technologies, Inc., a software sales and marketing corporation.
Mr. Freebairn was Regional Director of International at WordPerfect Corporation,
a division of Novell, Inc., from 1988 through 1994. Mr. Freebairn holds a B.A.
degree in English from Brigham Young University and an M.B.A. degree from the
University of Phoenix.
Mr. Staples serves as AVT's Senior Vice President of Worldwide
Marketing. Prior to joining AVT on February 26, 1996, Mr. Staples was Vice
President of Marketing at Callware Technologies, Inc., a developer of Novell
Network based call processing applications from 1994 to 1996. Prior to that, he
was Senior Product Marketing Manager for Novell, Inc. Mr. Staples holds a B.A.
degree in business administration from the University of Phoenix.
Mr. Wudi serves as AVT's Senior Vice President of North American Dealer
Sales. Mr. Wudi joined the Company in 1991 as Business Development Manager, and
served as Vice President, U.S. Dealer Sales from 1993 until his appointment to
his current position in 1996. Prior to that, Mr. Wudi was employed from 1990 to
1991 at VMX, a subsidiary of Octel Communications Corporation, as National
Accounts Manager. Mr. Wudi is a C.P.A. and holds a B.S. degree in business
administration, accounting and marketing from Central Michigan University.
EXECUTIVE COMPENSATION
Compensation Summary
The following table sets forth certain information as to the Company's
Chief Executive Officer, each of the four other most highly compensated
executive officers and a former executive officer for services rendered in all
capacities for the Company during the fiscal years ended December 31, 1996, 1995
and 1994 (the "named executive officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
Annual Compensation Securities All Other
- - -----------------------------------
Other Annual Underlying Compensation
Name and Principal Position Year Salary($) Bonus($)(1) Compensation($)(2) Options(#) ($)(3)
- - -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. LaPorte 1996 $210,025 $ 90,714 -- -- $ 2,747
President & Chief 1995 201,800 93,654 -- 240,000 1,373
Executive Officer 1994 192,183 93,390 -- -- 1,848
Greg R. Blanpied 1996 123,600 29,169 -- -- 2,850
Executive Vice President & 1995 118,725 25,401 -- 50,000 1,350
Chief Technology Officer 1994 113,054 35,447 -- -- 1,800
Roger A. Fukai 1996 102,500 26,752 -- 50,000 2,850
Executive Vice President of 1995 96,400 22,834 -- 70,000 1,164
Finance and Administration 1994 89,583 34,660 -- -- 1,433
& Chief Financial Officer
Timothy A. Wudi 1996 88,916 -- 45,438 25,000 2,850
Senior Vice President of North 1995 77,000 -- 56,660 25,000 --
American Dealer Sales 1994 73,500 -- 57,436 -- --
Michael (Corey) Freebairn (4) 1996 91,667 -- 30,004 35,000 21,327
Senior Vice President
of International
Dennis F. King (5) 1996 114,876 26,356 -- -- 2,850
Former Executive Vice 1995 113,040 25,413 -- 25,000 1,386
President of Market 1994 107,583 33,241 -- -- 840
Development and Secretary
- - ----------------
<FN>
(1) Represents bonuses paid pursuant to the Company's Management Incentive
Compensation Plan described in the Compensation Committee Report below.
(2) Consists of sales commissions.
(3) Consists of matching contributions to the Company's 401 (k)
plan. The amount shown for Mr. Freebairn represents $21,327 of
taxable relocation expenses.
(4) Mr. Freebairn joined the Company in March, 1996.
(5) Mr. King retired from the Company in January, 1997.
</FN>
</TABLE>
<PAGE>
Option Grants in 1996
The following table provides information on grants of stock options in
1996 to the named executive officers.
<TABLE>
<CAPTION>
Stock Option Grants in 1996
Individual Grants
Number of
Securities Percent of Potential Realizable Value
Underlying Total Options Exercise at Assumed Annual Rates of
Options Granted to or Stock Price Appreciation
Granted Employees in Base Expiration for Option Term($)(3)
Name (#)(1) Fiscal Year(2) Price $) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Roger A. Fukai............. 50,000 12.23% 12.75 12/24/06 400,920 1,016,011
Michael (Corey) Freebairn 35,000 8.56% 10.75 3/1/06 236,622 599,646
Timothy A. Wudi 25,000 6.11% 9.56 2/1/06 150,306 380,904
<FN>
(1) The options vest on a three year schedule, with 32.8% of the options
becoming exercisable one year after the grant date and an additional
2.8% becoming exercisable each month thereafter until the options are
fully vested three years after the grant date. The exercise price of
the options is the fair market value of the Company's stock on the
grant date.
(2) The Company granted 408,900 stock options to employees in 1996.
(3) Assumes all options are exercised at the end of their respective
ten-year terms. Stock price appreciation based on growth rates assumed
for each option individually.
</FN>
</TABLE>
Option Exercises and Year-End Values
The following table sets forth certain information regarding option
exercises in 1996 and options held as of December 31, 1996 by each of the named
executive officers.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Shares Number of Securities
Acquired Underlying Unexercised Value of Unexercised
On Exercise Value Options Held at In-the-Money Options at
Realized December 31, 1996(#) December 31, 1996($)(1)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- - ----
<S> <C> <C> <C> <C> <C> <C>
Richard J. LaPorte......... -0- -0- 281,708 240,000 2,774,197 -0-
Greg R. Blanpied........... 5,000 43,750 75,673 50,000 729,975 -0-
Roger A. Fukai............. -0- -0- 55,000 120,000 538,750 -0-
Timothy A. Wudi......... 8,001 72,130 11,561 50,938 96,793 69,830
Michael (Corey)Freebairn -0- -0- -0- 35,000 -0- 52,500
Dennis F. King............ -0- -0- 15,000 25,000 168,750 -0-
<FN>
(1) Calculated based on the difference between the option exercise price and
the fair market value of the Common Stock on December 31, 1996.
</FN>
</TABLE>
Compensation Committee Report on Executive Compensation
The Compensation Committee (the "Committee") consists of James S.
Campbell, Robert L. Lovely and William L. True, each of whom is a nonemployee
director of the Company. The Committee is responsible for establishing and
administering compensation policies and programs for executive officers of the
Company. This report reflects the Company's compensation philosophy as endorsed
by the Committee.
The Company's executive compensation program has been designed to
ensure that compensation provided to executive officers is closely aligned with
the Company's business objectives and financial performance, and to enable the
Company to attract and retain those officers who contribute to the Company's
long-term success.
Executive compensation generally consists of three components: base
salary, annual cash bonus, and long-term incentive rewards. The Committee
establishes each executive's compensation package by considering: (i) the
salaries of executive officers in similar positions in companies in the same
industry as the Company and in related industries; (ii) the experience and
contribution levels of the individual executive officer; and (iii) the Company's
financial performance. The Committee also relies on the recommendations of the
Chief Executive Officer in matters related to the individual performance of the
other executive officers, because the Committee believes that the Chief
Executive Officer is the most qualified to make this assessment.
Executive Officer Compensation
The Chief Executive Officer annually recommends executive officer
compensation programs to the Committee after the Board of Directors has approved
the annual operating plan. Individual base salaries are based on historical
practice, subjective evaluation of individual performance levels and
contributions to Company business objectives, as well as comparisons to the
salaries of executive officers in similar positions in companies in the same
industry as the Company and in related industries as determined from surveys
obtained from various sources. In general, base salaries paid to the Company's
executive officers are near the median for comparable positions in the surveyed
companies. The Committee does not assign relative weights to the factors it
considers in establishing base salaries. The companies in the surveys reviewed
may include some, but not all, of the companies that comprise the Hambrecht &
Quist Communications Sector Index shown in the performance graph on page 10.
Annual cash bonuses for executive officers (other than those who
receive commissions) are awarded under the Company's Management Incentive
Compensation Plan (which also includes other key employees), and are based on
the Company's annual financial and individual performance goals, as approved in
the annual operating plan. The target total incentive award is established as a
percentage of each executive officer's annual base salary. The largest portion
of this potential award relates to achievement of the Company's operating income
goals. If the Company's operating income is less than 70% of the goal, no
profit-oriented incentive award is paid out. If the 70% threshold is satisfied,
each individual's profit-oriented incentive award is calculated by dividing
actual operating income achieved by the approved goal and multiplying the result
by such individual's target. In 1996, the Company achieved 92% of its operating
income goal. Total executive officer cash bonuses (including individual
performance awards and commissions) averaged 34% of base salary in 1996.
The Committee also grants stock options to executive officers to
provide long-term incentives that are aligned with the creation of increased
shareholder value over time. Such options have typically been granted at fair
market value at the date of grant. In 1996 the Committee granted 145,000 options
to the named executive officers at exercise prices ranging from $9.56 per share
to $12.75 per share (in each case, issued at fair market value at date of
grant).
In 1996, the Committee also amended the vesting provisions of certain
options that had been granted in 1995 to certain of the Company's executive
officers, including 240,000 options that had been granted to Mr. LaPorte and
aggregate of 145,000 options that had been granted to the other current named
executive officers. The Committee amended the vesting provisions of these
options because it determined that the vesting provisions were not competitive
in the current marketplace and therefore the options were not achieving their
objectives of incentivizing and retaining the Company's key employees. Under the
amended vesting schedule, 50% of these options will vest on August 4, 1997 if
the average trading price of the Company's Common Stock for the three months
prior to such date is at least $19.51 per share, and the options will be 100%
vested on August 4, 1998 if the average trading price of the Company's Common
Stock for the three months prior to such date is at least $22.92 per share. If
the stock price goals are not met, the options will vest in full on August 4,
1999.
Compensation of the Chief Executive Officer
Mr. LaPorte's compensation program follows the same general philosophy
and framework as other executive officers, consisting of base salary, annual
cash bonuses and long-term incentive awards. Mr. LaPorte's total compensation
package is near the median for chief executive officers of other companies in
the Company's industry and in related industries. Like all key employees of the
Company, Mr. LaPorte participates in the Management Incentive Compensation Plan.
For 1996, the largest portion of his annual cash bonus potential related to the
Company's achievement of 92% of operating income target as described above. Mr.
LaPorte's total annual cash bonus for 1996 represented 43% of his base salary.
Section 162(m) of the Internal Revenue Code of 1986, as amended,
includes potential limitations on 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. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are
met. The Committee does not anticipate there will be any such nondeductible
compensation in the foreseable future.
Compensation Committee
James S. Campbell
Robert L. Lovely
William L. True
<PAGE>
Performance Graph
The following graph compares the cumulative total return to holders of
the Company's Common Stock with the cumulative total return of the Nasdaq US
Stock Market and the Hambrecht & Quist Communications Sector Index for the
period beginning December 8, 1994, the first day of trading of the Common Stock,
and ending December 31, 1996, the end of the Company's last fiscal year.
<TABLE>
Comparison of Cumulative Total Return Among
Applied Voice Technology, Inc.
Nasdaq US Stock Market and
Hambrecht & Quist Communications Sector Index
<CAPTION>
Measurement Applied Voice NASDAQ Stock H&O Communications
Period Technology Market - US Sector
<S> <C> <C> <C>
Measurement
Pt 12/8/94 $100 $100 $100
FYE 12/31/94 129 105 119
FYE 12/31/95 106 148 189
FYE 12/31/96 94 182 217
</TABLE>
Assumes $100 invested in Applied Voice Technology, Inc. Common Stock,
the Nasdaq US Stock Market, the Hambrecht & Quist Communications Sector Index,
with all dividends reinvested. Stock price shown above for the Common Stock is
historical and not necessarily indicative of future price performance.
Compliance With Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's officers and directors, and persons who own more than 10%
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than 10% shareholders are
required by Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no forms were
required for those persons, the Company believes that during the 1996 fiscal
year all filing requirements applicable to its officers, directors and greater
than 10% beneficial owners were complied with by such persons, except Mr. Fukai
did not report an option grant on his Form 5 for 1996 as originally filed. Such
Form 5 was subsequently amended to include the option grant.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Richard J. LaPorte, Chairman of the Board, President and Chief
Executive Officer of the Company, is party to an Employment Agreement (the
"Employment Agreement") with the Company dated May 1, 1993. Under the Employment
Agreement, Mr. LaPorte received an option to purchase 84,199 shares of Common
Stock at an exercise price of $1.00 per share and is entitled to receive a base
salary of at least $183,750 per year based upon Company and individual
performance and an annual bonus based on the achievement of personal and
financial objectives agreed upon by the Compensation Committee and Mr. LaPorte.
Under the Employment Agreement, Mr. LaPorte is entitled to a bonus of at least
50% of his base salary if all specific objectives are met. Mr. LaPorte is also
entitled to be reimbursed by the Company for reasonable expenses incurred in
performing his duties under the Employment Agreement, and to participate in such
benefit plans as are generally available to the Company's executive officers.
Mr. LaPorte is also entitled, in the event that he is terminated without cause,
to his annual base salary and bonus pro rated through the termination date, in
addition to a severance package consisting of his annual base salary and
benefits for a period of 12 months from the termination date (or until he
commences other full-time employment). The Employment Agreement is automatically
extended on each January 1 for consecutive one-year terms if neither the Company
nor Mr. LaPorte notifies the other party to the contrary by October 1 of the
prior year.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Arthur Andersen LLP, independent
public accountants, to act as independent auditor of the Company for the fiscal
year ending December 31, 1997. Arthur Andersen LLP has been the Company's
auditor since November, 1990.
A representative of Arthur Andersen LLP is expected to be present at
the Annual Meeting, with the opportunity to make a statement, if the
representative so desires, and is expected to be available to respond to
appropriate questions from shareholders.
OTHER BUSINESS
The Board of Directors does not intend to present any business at the
Annual Meeting other than as set forth in the accompanying Notice of Annual
Meeting of Shareholders, and has no present knowledge that any others intend to
present business at the meeting. If, however, other matters requiring the vote
of the shareholders properly come before the Annual Meeting or any adjournment
or postponement thereof, the persons named in the accompanying form of Proxy
will have discretionary authority to vote the proxies held them in accordance
with their judgment as to such matters.
SHAREHOLDER PROPOSALS
Shareholder proposals intended for inclusion in the Proxy materials for
the Company's 1998 Annual Meeting of Shareholders must be received by the
Company not later than December 8, 1997.
Such proposals should be directed to the Corporate Secretary,
Applied Voice Technology, Inc., 11410 N.E. 122nd Way, Kirkland,
Washington 98034.
<PAGE>
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's 1996 Annual Report to Shareholders, which
includes the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, accompanies this Proxy Statement.
By Order of the Board of Directors
Roger A. Fukai
Senior Vice President of Finance and Administration,
Chief Financial Officer and Secretary
Kirkland, Washington
April 7, 1997
