<PAGE>
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:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
APPLIED VOICE TECHNOLOGY, INC.
-----------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange ActRule 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:
Notes:
<PAGE>
[LOGO OF APPLIED VOICE TECHNOLOGY]
----------------
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 6, 1998
----------------
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 Wednesday, May 6, 1998 (the "Annual Meeting")
for the following purposes:
(1) To elect two directors of the Company.
(2) To approve amendments to the Applied Voice Technology, Inc. 1989
Restated Stock Option Plan to increase the number of shares issuable
under the plan.
(3) 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 3, 1998 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, 1998
<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 Wednesday, May 6, 1998 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, 1998.
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 3, 1998 are entitled to notice of and to vote
at the Annual Meeting. On that date there were 5,939,344 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. 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 nominees for election as director who receive the greatest number of
votes, present in person or by Proxy at the Annual Meeting, will be elected
directors. Abstention from voting on the election of the directors will have
no impact on the outcome of this proposal since no vote has been cast in favor
of any nominee. There can be no broker nonvotes on this matter since brokers
who hold shares for the accounts of their clients have discretionary authority
to vote such shares with respect to the election of directors. The amendments
to the 1989 Restated Stock Option Plan will be approved if the votes cast in
favor of this proposal exceed the number the votes cast against the proposal.
Abstentions from voting and broker nonvotes on this proposal will have no
impact on the outcome of the proposal since no vote has been cast for or
against it.
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
<PAGE>
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 DIRECTORS
At the Annual Meeting, two directors are to be elected to hold office for a
term of three years until the Company's annual meeting of shareholders in
2001, and until their successors shall be elected and shall qualify. The Board
of Directors has no reason to believe that the nominees named below will be
unable to serve as directors. If, however, a 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 nominees listed
below.
NOMINEES
Robert F. Gilb (age 52) was appointed a director of the Company in March
1998. Mr. Gilb has been President of Robert F. Gilb Strategic & Business
Consulting, L.L.C. since May 1997. From 1992 to 1997 Mr. Gilb held several
positions at Microsoft Corporation, including: General Manager, Financial
Analysis; General Manager, Finance; and General Manager, Worldwide Business
Operations. From 1979 to 1992 Mr. Gilb was a partner with Arthur Andersen in
Seattle, Washington. In his capacity as a partner at Arthur Andersen & Co.,
Mr. Gilb assisted clients in the computer software, biotech, retail, and
distribution industries; provided services in international mergers and
acquisitions, and business process reengineering, among other financial and
consulting services. Mr. Gilb serves on the board of Hatch & Kirk, Inc.; is an
Associate Trustee to the Pacific Science Center in Seattle; and is a member of
the Seattle University Accounting Board of Advisors. Mr. Gilb has a B.S.
degree in, accounting, from California State University, Long Beach.
William L. True (age 43) 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES.
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 61) 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 Executive Vice
President of Travel
2
<PAGE>
Automation Systems Corporation, a Company providing software to the travel
industry. In addition, Mr. Lovely currently serves as a director of Westar
Financial Services, 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 a M.B.A. degree from Pacific Lutheran
University.
CONTINUING DIRECTOR--TERM EXPIRES 2000
James S. Campbell (age 71) has served as a director of the Company since
1991. He is President of Management Partners International, a management
consulting firm. Previously, Mr. Campbell served as Chairman, President and
Chief Executive Officer of Fortune Systems Corporation (now Connectivity
Technology, Inc.), President of Shugart Corp., Founder and President of Xerox
Computer Services and a Corporate Vice President of Xerox. 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 at Wisconsin.
COMPENSATION OF DIRECTORS
Currently, the Company pays nonemployee directors other than Mr. True and
Mr. Lovely an attendance fee of $1,000 for attending each meeting of the Board
of Directors, in addition to reimbursing them 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 five meetings in 1997.
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, which consists of William
L. True and James S. Campbell, two of the Company's four Directors, regularly
performs these reviews in conjunction with scheduled Board of Directors
meetings. There were no separate Audit Committee meetings in 1997.
During 1997, there were nine 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.
3
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 3, 1998 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.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED
-----------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ --------- -------
<S> <C> <C>
Gull Industries, Inc.(1)...................................... 1,095,226 18.4%
3404 4th Avenue South
Seattle, WA 98124
William L. True(1)............................................ 1,102,976 18.6%
3404 4th Avenue South
Seattle, WA 98124
Kopp Investment Advisors, Inc.(2)............................. 690,200 11.6%
7701 France Avenue South, Suite 500
Edina, MN 55435
AIM Management Group(3)....................................... 470,300 7.9%
11 Devonshire Square
London EC2M 4Y2
ENGLAND
The TCW Group, Inc.(4)........................................ 299,600 5.0%
865 South Figueroa Street
Los Angeles, CA 90017
Richard J. LaPorte(5)......................................... 314,408 5.0%
Roger A. Fukai(6)............................................. 81,525 1.4%
Timothy A. Wudi(7)............................................ 47,715 *
Robert Lovely(8).............................................. 32,750 *
Greg R. Blanpied(9)........................................... 30,673 *
Michael C. Freebairn(10)...................................... 25,409 *
James S. Campbell(11)......................................... 6,000 *
Robert F. Gilb(12)............................................ -0- *
All directors and executive officers as a
group (10 persons) (13)...................................... 1,663,350 25.6%
</TABLE>
- --------
* Less than 1%
(1) Includes 1,095,226 shares owned by Gull. Mr. True is Chairman of the
Board of Gull, and shares voting power and the ability to control the
dispositions of such shares. Shares beneficially owned by Mr. True
include 7,750 share issuable upon exercise of stock options that are
currently exercisable or that are exercisable within 60 days.
(2) Based on Schedule 13G dated February 6, 1998, Kopp Investment Advisors,
Inc. beneficially owns 690,200 shares, and voting and dispositive power
as to those shares is shared with Kopp Holding Company and LeRoy C.
Kopp.
(3) Based on Schedule 13G dated February 9, 1998, AIM Management Group, Inc.
beneficially owns 470,300 shares, and voting and dispositive power as to
those shares is shared with certain of its affiliates.
(4) Based on Schedule 13G dated February 12, 1998, The TCW Group, Inc.,
beneficially owns 299,600 shares.
4
<PAGE>
(5) Includes 311,708 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(6) Includes 81,500 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(7) Includes 44,214 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(8) Includes 19,250 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(9) Represents shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(10) Includes 25,009 shares issuable upon exercise of stock options that are
currently exercisable or are exercisable within 60 days.
(11) Includes 4,000 shares issuable upon exercise of stock options that are
currently exerciseable or are exercisable within 60 days.
(12) Mr. Gilb was nominated to the Board of Directors on March 24, 1998.
(13) Includes 545,773 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, 1998
are as follows:
<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITION SINCE
---- --- -------- -------
<S> <C> <C> <C>
Richard J. LaPorte.......... 52 Chairman of the Board, President and 1990
Chief Executive Officer
Greg R. Blanpied............ 50 Executive Vice President & Chief 1991
Technology Officer
Roger A. Fukai.............. 45 Executive Vice President of Finance & 1991
Administration and Chief Financial
Officer
Michael (Corey) Freebairn... 34 Senior Vice President of International 1996
Joseph A. Staples........... 38 Senior Vice President of Worldwide 1996
Marketing
Timothy A. Wudi............. 48 Senior Vice President of North 1996
American Dealer Sales
</TABLE>
For Mr. LaPorte's biographical summary, see "Election of Directors."
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
5
<PAGE>
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.
6
<PAGE>
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 for services rendered in all capacities for the Company during
the fiscal years ended December 31, 1997, 1996 and 1995 (the "named executive
officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION
---------------------------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION($)(2) OPTIONS(#) ($)(3)
------------------ ---- --------- ----------- ------------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. LaPorte...... 1997 $227,240 $110,484 -- -- $2,850
President & Chief 1996 210,025 90,714 -- -- 2,747
Executive Officer 1995 201,800 93,654 -- 240,000 1,373
Greg R. Blanpied........ 1997 135,917 39,506 -- -- $2,850
Executive Vice 1996 123,600 29,169 -- -- 2,850
President & Chief 1995 118,725 25,401 -- 50,000 1,350
Technology Officer
Roger A. Fukai.......... 1997 137,000 39,506 -- -- $2,850
Executive Vice 1996 102,500 26,752 -- 50,000 2,850
President of Finance 1995 96,400 22,834 -- 70,000 1,164
and Administration &
Chief Financial Officer
Timothy A. Wudi......... 1997 110,167 13,838 40,830 10,000 $2,850
Senior Vice President 1996 88,916 -- 45,438 25,000 2,850
of North American 1995 77,000 -- 56,660 25,000 --
Dealer Sales
Michael (Corey)
Freebairn.............. 1997 110,000 13,838 48,093 5,000 $ 437
Senior Vice President 1996 91,667 -- 30,004 35,000 21,327
of International
</TABLE>
- --------
(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) For 1997 consists of matching contributions to the Company's 401 (k) plan.
OPTION GRANTS IN 1997
The following table provides information on grants of stock options in 1997
to the named executive officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
FOR OPTION
INDIVIDUAL GRANTS) TERM($)(3)
------------------------------------------------ --------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED(#)(1) FISCAL YEAR(2) PRICE($) DATE 5% 10%
- ---- ------------- -------------- -------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Timothy A. Wudi......... 10,000 4.14% 13.75 1/27/2007 86,473 219,140
Michael (Corey)
Freebairn.............. 5,000 2.07% 13.75 1/27/2007 43,237 109,570
</TABLE>
STOCK OPTION GRANTS IN 1997
- --------
(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 84,700 stock options to employees in 1997.
(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.
7
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information regarding option
exercises in 1997 and options held as of December 31, 1997 by each of the
named executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
VALUE DECEMBER 31, 1997(#) DECEMBER 31, 1997($)(1)
SHARES ACQUIRED REALIZED ------------------------- -------------------------
NAME ON EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard J. LaPorte...... 50,000 $726,875 401,708 120,000 $9,678,914 $1,904,400
Greg R. Blanpied........ 20,000 380,000 80,673 25,000 1,909,921 396,750
Roger A. Fukai.......... 8,000 124,000 98,400 68,600 2,137,350 1,135,050
Timothy A. Wudi......... 3,500 66,812 36,386 32,614 729,376 567,624
Michael (Corey)
Freebairn.............. 0 0 20,300 19,700 390,775 364,225
</TABLE>
- --------
(1) Calculated based on the difference between the option exercise price and
the fair market value of the Common Stock on December 31, 1997.
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 awards. 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 following this report.
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
8
<PAGE>
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 1997, the
Company achieved 94% of its operating income goal. Total executive officer
cash bonuses in 1997 (including individual performance awards and commissions)
averaged 42% of base salary in 1997.
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 1997 the Committee granted 25,000
options to executive officers at an exercise price equal to fair market value
on the date of grant. As discussed below, no additional options were granted
to the Company's Chief Execuitive Officer or other senior executives in 1997
as certain grants with performance vesting provisions made to these
individuals in 1995 were intended to be the only grants to these individuals
for approximately 3 years.
In 1995, the Committee granted options to purchase 240,000 shares to Mr.
LaPorte and options to purchase an aggregate of 145,000 shares to the other
current named executive officers. In 1996 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. On October 13, 1997 the Committee determined that the stock
price performance requirement under the amended vesting schedule was
substantially met and 50% of these options vested. The remaining 50% of these
options will vest 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 goal is 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 1997, the largest portion of his annual cash bonus related to the
Company's achievement of 94% of operating income target as described above.
Mr. LaPorte's total annual cash bonus for 1997 represented 47% 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 foreseeable future.
Compensation Committee
James S. Campbell
Robert L. Lovely
William L. True
9
<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, 1997, the end of the Company's last fiscal year.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
APPLIED VOICE TECHNOLOGY, INC.
NASDAQ US STOCK MARKET AND
HAMBRECHT & QUIST COMMUNICATIONS SECTOR INDEX
PERFORMANCE GRAPH APPEARS HERE
<TABLE>
<CAPTION>
APPLIED NASDAQ H&Q
Measurement Period VOICE STOCK COMMUNICATIONS
(Fiscal Year Covered) TECHNOLOGY MARKET-U.S. SECTOR
- --------------------- ---------- ----------- --------------
<S> <C> <C> <C>
Measurement Pt-12/08/1994 $100.00 $100.00 $100.00
FYE 12/31/1994 $128.85 $104.56 $118.52
FYE 12/31/1995 $105.77 $147.87 $188.87
FYE 12/31/1996 $ 94.23 $181.88 $216.69
FYE 12/31/1997 $217.31 $223.19 $205.15
</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 1997 fiscal
year all filing requirements applicable to its officers, directors and greater
than 10% beneficial owners were complied with by such persons, except for late
filings by Gull Industries and a former Director relating to sales of
securities in January 1997, and late filings for option grants issued to Roger
A. Fukai in December of 1996 and Timothy A. Wudi, Joseph A. Staples and
Michael C. Freebairn in January 1997.
10
<PAGE>
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. The Employment Agreement
provided for an initial option grant to Mr. LaPorte and established Mr.
LaPortes initial base salary, which has subsequently been increased by the
Compensation Committee based upon Company and individual performance, and
provided for 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.
PROPOSAL TO AMEND THE APPLIED VOICE TECHNOLOGY, INC.
1989 RESTATED STOCK OPTION PLAN
General. In December 1988, the Company adopted the 1989 Restated Stock
Option Plan (the "1989 Plan"), which, as amended on August 4, 1995 and
February 1, 1996, provides for the grant of options to purchase up to
1,850,000 shares of Common Stock to selected employees, directors, officers,
agents, consultants and independent contractors. The Company believes that
such options are necessary to attract and retain the services of such persons
and to provide added incentive to them by encouraging stock ownership in the
Company.
Proposed Amendments. The Board of Directors approved proposed amendments to
the 1989 Plan on January 20, 1998. The 1989 Plan, as proposed to be amended,
is attached hereto as Appendix A and incorporated herein by reference. The
Company's shareholders will be asked at the Annual Meeting to consider and
approve these amendments to the 1989 Plan, which are described below.
The amendments would reserve an additional 1,000,000 shares of Common Stock
for issuance pursuant to options granted under the 1989 Plan, bringing the
total number of shares that could be issued under the 1989 Plan to 2,850,000.
In addition, the Board amended the 1989 Plan to eliminate the fixed
termination date provision of the 1989 Plan and to allow for the grant of
Incentive Stock Options up to 10 years after the adoption of any amendment to
the 1989 Plan by the Board of Directors and the shareholders of the Company.
The Board of Directors believes that the additional options and the extended
duration of the 1989 Plan would promote the interests of the Company and its
shareholders by assisting the Company in attracting, retaining and stimulating
the performance of officers and key employees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THIS PROPOSAL.
Description of the 1989 Plan. Options may be granted as incentive stock
options ("ISOs") or nonqualified stock options ("NSOs") to any selected
employee, director, officer, agent, consultant or independent contractor of
the Company. Directors who are not also employees of the Company are not
eligible to receive options under the 1989 Plan but are eligible to receive
options under the Director Plan. As of December 31, 1997, options to purchase
an aggregate of 1,135,922 shares of Common Stock were outstanding under the
1989 Plan (net of forfeitures by such employees who subsequently terminated
their employment with the Company) at exercise prices ranging from $3.00 to
$30.88 per share, with a weighted average exercise price of $14.06 per share.
These
11
<PAGE>
options were held by employees of the Company. As of December 31, 1997,
options with respect to 315,492 shares of Common Stock remained available for
grant under the 1989 Plan (options with respect to 1,315,492 shares will be
available if the 1989 Plan is amended as proposed above).
Administration. The 1989 Plan is currently administered by the Compensation
Committee of the Board of Directors (the "Plan Administrator"), which
determines the persons to whom options are granted, the number of shares
subject to each option, the exercise price per share, the vesting schedule and
the option term. The Plan Administrator has full authority to construe and
interpret the 1989 Plan, to administer the 1989 Plan, and to make all
determinations in connection with the 1989 Plan and options granted thereunder
as it may deem necessary or advisable.
Term of 1989 Plan. The 1989 Plan was effective as of December 29, 1988.
Under the 1989 Plan in its current form, grants may be made from time to time
until December 29, 1998, at which time the Plan terminates automatically. If
amended as proposed, however, the 1989 Plan will continue indefinitely until
otherwise terminated by the Board of Directors. In addition, the 1989 Plan as
proposed to be amended will allow for the grant of ISOs up to ten years after
the adoption of any amendment to the 1989 Plan by the Board of Directors and
the shareholders of the Company.
Vesting, Form and Maturity of Options. With respect to all ISOs granted
under the 1989 Plan exercisable for the first time by a participant during any
calendar year that exceed $100,000, such options shall be treated as NSOs.
Options generally vest over a four-year period from the date of grant. In
addition, outstanding options vest upon the occurrence of certain events,
including certain mergers and business combinations and other changes in
control of the Company. Options are nontransferable except by will or the laws
of descent and distribution. Options granted under the 1989 Plan are typically
exercisable until ten years after the date of grant (five years in the case of
employees who hold more than 10% of the voting power of the Common Stock).
Options generally terminate within twelve months of the optionee's termination
of employment with the Company for death or disability and within three months
of the optionee's termination of employment with the Company for any other
reason.
Exercise of Options. The exercise prices of ISOs must be equal to or greater
than the fair market value of the Common Stock on the date of grant (110% of
the fair market value in the case of employees who hold 10% or more of the
voting power of the Common Stock). The exercise prices of NSOs may be less
than the fair market value of the Common Stock on the date of grant. The
exercise price may be paid to the Company in cash or, at the discretion of the
Compensation Committee, by delivery of Common Stock already owned by the
optionee for a period of at least six months (valued at its fair market value
at the time of exercise) a full recourse promissory note, or an exercise
notice accompanied by irrevocable instructions to a broker to deliver sale or
loan proceeds to the Company.
Federal Income Tax Consequences. The following discussion summarizes the
material federal income tax consequences of participation in the 1989 Plan.
The discussion is general in nature and does not address issues related to the
income tax circumstances of any individual 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. The discussion does not address the
consequences of state, local or foreign tax laws.
There are no tax consequences to the Company or the optionee upon the grant
of an NSO under the 1989 Plan. Upon exercise of an NSO, an optionee recognizes
ordinary income equal to the difference between the exercise price for the
shares and the fair market value of the shares on the date of exercise. The
Company is entitled to a corresponding tax deduction equal to the amount of
ordinary income recognized by the optionee at the time of exercise, provided
that the deduction is not otherwise subject to any limitation under the
Internal Revenue Code, including the limitation on deductibility of certain
compensation payments in excess of $1 million.
12
<PAGE>
An optionee does not recognize income upon grant or exercise of an ISO,
except that the excess of the fair market value of the shares at the time of
exercise over the option price will be income for purposes of calculating the
optionee's alternative minimum tax, if any. An option loses its status as an
ISO and becomes an NSO if the optionee exercises the ISO (i) more than three
months after the optionee terminates employment or retires for reasons other
than death or disability or (ii) more than one year after the optionee
terminates employment because of disability. If an optionee does not make a
"disqualifying disposition" (defined below) of an ISO, the gain, if any, upon
a subsequent sale (i.e., the excess of the proceeds received over the option
price) will be "mid-term" capital gain if the shares are sold more than twelve
months but not more than eighteen months after exercise, and "long-term
capital gain" if the shares are sold more than eighteen months after exercise.
For shares acquired through exercise of an ISO, a "disqualifying
disposition" is a transfer of the shares (i) within two years after the grant
of the ISO or (ii) within one year after the transfer of the shares to the
optionee pursuant to the ISO's exercise. If the optionee makes a disqualifying
disposition, the optionee generally will recognize income in the year of the
disqualifying disposition equal to the excess of the amount received for the
shares over the option price. Of that income, the portion equal to the excess
of the fair market value of the shares at the time the ISO was exercised over
the option price will be ordinary income and the balance, if any, will be
long-term, mid-term or short-term capital gain, depending on whether the
shares were sold more than one year after the ISO was exercised.
The Company is entitled to a deduction with respect to an ISO only in the
taxable year of the Company in which a disqualifying disposition occurs. In
that event, the deduction would be equal to the ordinary income, if any,
recognized by the optionee upon disposition of the shares, provided that the
deduction is not otherwise subject to any limitation under the Code.
Amendment of the 1989 Plan. Except as described in the next paragraph, the
Board of Directors may from time to time amend the 1989 Plan as it deems
proper and in the best interests of the Company without further approval of
the shareholders.
The Board of Directors may not amend certain features of the 1989 Plan
without the approval of the Company's shareholders to the extent such approval
is required for compliance with Section 422 of the Code with respect to ISOs
and with Section 162(m) of the Code. Such amendments would include (i)
materially increasing the maximum number of shares of Common Stock that may be
issued under the Plan, (ii) materially modifying the requirements as to
eligibility for participation in the 1989 Plan, or (iii) otherwise materially
increasing the benefits accruing to participants in the 1989 Plan.
As of March 3, 1998, the last reported sale price per share of Common Stock
on the Nasdaq National Market was $32.13.
NEW PLAN BENEFITS
Since awards under the 1989 Plan are discretionary, total awards that may be
granted for the current fiscal year are not determinable until completion of
the year. During 1997, options to purchase an aggregate of 25,000 shares of
Common Stock were granted under the 1989 Plan to all executive officers of the
Company as a group at an average exercise price of $13.75, and options to
purchase an aggregate of 84,700 shares were granted to all other employees of
the Company as a group (including officers who are not executive officers) at
an average exercise price of $16.17. Options granted during 1997 to the named
executive officers are set forth in the table under "Option Grants in 1997" on
page 9. No options were granted under the 1989 Plan during 1997 to directors
or nominees who are not also executive officers of the Company.
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, 1998. Arthur Andersen LLP has been the Company's auditor
since November 1990.
13
<PAGE>
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 1999 Annual Meeting of Shareholders must be received by the Company
not later than December 8, 1998.
Such proposals should be directed to the Corporate Secretary, Applied Voice
Technology, Inc., 11410 N.E. 122nd Way, Kirkland, Washington 98034.
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of the Company's 1997 Annual Report to Shareholders, which includes
the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997, accompanies this Proxy Statement.
By Order of the Board of Directors
/s/ Roger A. Fukai
Roger A. Fukai
Senior Vice President of Finance and
Administration, Chief Financial
Officer and Secretary
Kirkland, Washington
April 7, 1998
14
<PAGE>
APPENDIX A
APPLIED VOICE TECHNOLOGY, INC.
1989 RESTATED STOCK OPTION PLAN
AS RESTATED ON MARCH 24, 1998
SECTION 1. PURPOSE
The purpose of the Applied Voice Technology, Inc. 1989 Restated Stock Option
Plan (this "Plan") is to provide a means whereby selected employees,
directors, officers, agents, consultants, advisors and independent contractors
of Applied Voice Technology, Inc. (the "Company"), or of any parent or
subsidiary (as defined in subsection 5.8 and referred to hereinafter as
"related corporations") thereof, may be granted incentive stock options and/or
nonqualified stock options to purchase the Common Stock (as defined in Section
3) of the Company, in order to attract and retain the services or advice of
such employees, directors, officers, agents, consultants, advisors and
independent contractors and to provide added incentive to such persons by
encouraging stock ownership in the Company.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or, in the event the Board shall appoint and/or authorize a
committee to administer this Plan, by such committee. The administrator of
this Plan shall hereinafter be referred to as the "Plan Administrator." If and
so long as the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Board shall consider in selecting the Plan Administrator and
the membership of any committee acting as Plan Administrator of the Plan with
respect to any persons subject or likely to become subject to Section 16 under
the Exchange Act the provisions regarding (a) "outside directors" as
contemplated by Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), and (b) "nonemployee directors" as contemplated by Rule
16b-3 under the Exchange Act.
In the event a member of the Plan Administrator may be eligible, subject to
the restrictions set forth in Section 4, to participate in this Plan, no
member of the Plan Administrator shall vote with respect to the granting of an
option hereunder to himself or herself, as the case may be, and, if state
corporate law does not permit a committee to grant options to directors, then
any option granted under this Plan to a director for his or her services as
such shall be approved by the full Board.
The members of any committee serving as Plan Administrator shall be
appointed by the Board for such term as the Board may determine. The Board may
from time to time remove members from, or add members to, the committee.
Vacancies on the committee, however caused, shall be filled by the Board.
2.1 PROCEDURES
The Board shall designate one of the members of the Plan Administrator as
chairman. The Plan Administrator may hold meetings at such times and places as
it shall determine. The acts of a majority of the members of the Plan
Administrator present at meetings at which a quorum exists, or acts reduced to
or approved in writing by all Plan Administrator members, shall be valid acts
of the Plan Administrator.
2.2 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan, the
Plan Administrator shall have the authority, in its discretion, to determine
all matters relating to the options to be granted under this Plan, including
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<PAGE>
selection of the individuals to be granted options, the number of shares to be
subject to each option, the exercise price, and all other terms and conditions
of the options. Grants under this Plan need not be identical in any respect,
even when made simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), the regulations thereunder and any amendments
thereto.
2.3 BIFURCATION OF PLAN
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the application of any provision of this Plan to participants who
are subject to Section 16 of the Exchange Act without so restricting, limiting
or conditioning this Plan with respect to other participants.
SECTION 3. SHARES SUBJECT TO THIS PLAN
The shares subject to this Plan shall be the Company's Common Stock (the
"Common Stock"), currently authorized but unissued or subsequently acquired by
the Company. Subject to adjustment as provided in Section 7, the aggregate
amount of Common Stock to be delivered upon the exercise of all options
granted under this Plan shall not exceed 2,850,000. If any option granted
under this Plan shall expire or be surrendered, exchanged for another option,
canceled or terminated for any reason without having been exercised in full,
the unpurchased shares subject thereto shall thereupon again be available for
purposes of this Plan, including for replacement options which may be granted
in exchange for such expired, surrendered, exchanged canceled or terminated
options.
SECTION 4. ELIGIBILITY
An incentive stock option may be granted only to an individual who, at the
time the option is granted, is an employee of the Company or a related
corporation. A nonqualified stock option may be granted to any employee,
director, officer, agent, consultant, advisor or independent contractor of the
Company or any related corporation, whether an individual or an entity. Any
party to whom an option is granted under this Plan shall be referred to
hereinafter as an "Optionee."
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements which
shall contain such terms, conditions, limitations and restrictions as the Plan
Administrator shall deem advisable and which are not inconsistent with this
Plan. Notwithstanding the foregoing, options shall include or incorporate by
reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the exercise
of each option and the price per share at which such option is exercisable
(the "exercise price") shall be as established by the Plan Administrator;
provided, however, that the maximum number of shares with respect to which an
option or options may be granted to any Optionee in any one fiscal year of the
Company shall not exceed 240,000 shares (the "Maximum Annual Optionee Grant");
and provided, further, that the Plan Administrator shall act in good faith to
establish an exercise price which shall be not less than the fair market value
per share of the Common Stock at the time the option is granted with respect
to incentive stock options and also provided that, with respect to incentive
stock options granted to greater than 10% shareholders, the exercise price
shall be as required by subsection 6.1.
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<PAGE>
5.2 TERM AND MATURITY
Subject to the restrictions contained in Section 6 with respect to granting
incentive stock options to greater than 10% shareholders, the term of each
incentive stock option shall be as established by the Plan Administrator and,
if not so established, shall be 10 years from the date it is granted but in no
event shall it exceed 10 years. The term of each nonqualified stock option
shall be as established by the Plan Administrator and, if not so established,
shall be 10 years. To ensure that the Company or a related corporation will
achieve the purpose and receive the benefits contemplated by this Plan, any
option granted to any Optionee hereunder shall, unless the condition of this
sentence is waived or modified in the agreement evidencing the option or by
resolution adopted at any time by the Plan Administrator, be exercisable
according to the following schedule:
<TABLE>
<CAPTION>
PERIOD OF OPTIONEE'S CONTINUOUS
RELATIONSHIP
WITH THE COMPANY OR RELATED CORPORATION PORTION OF TOTAL OPTION WHICH IS
FROM THE DATE THE OPTION IS GRANTED EXERCISABLE
--------------------------------------- --------------------------------
<S> <C>
after one year 25%
Each month of service completed thereafter An additional 2.0833%
after four years 100%
</TABLE>
5.3 EXERCISE
Subject to the vesting schedule described in subsection 5.2, each option may
be exercised in whole or in part at any time and from time to time; provided,
however, that no fewer than 100 shares (or the remaining shares then
purchasable under the option, if less than 100 shares) may be purchased upon
any exercise of option hereunder and that only whole shares will be issued
pursuant to the exercise of any option. An Option shall be exercised by
delivery to the Company of notice of the number of shares with respect to
which the option is exercised, together with payment of the exercise price.
5.4 PAYMENT OF EXERCISE PRICE
Payment of the option exercise price shall be made in full at the time the
notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check, or personal check (unless at the time
of exercise the Plan Administrator in a particular case determines not to
accept a personal check) for the shares being purchased.
The Plan Administrator can determine at any time before exercise that
additional forms of payment will be permitted. Unless the Plan Administrator
determines otherwise, an option may be exercised by:
(a) delivery of shares of Common Stock of the Company held by an Optionee
having a fair market value equal to the exercise price, such fair market
value to be determined in good faith by the Plan Administrator; provided,
however, that payment in stock held by an Optionee shall not be made unless
the stock shall have been owned by the Optionee for a period of at least
six months;
(b) delivery of a full-recourse promissory note executed by the Optionee;
provided that (i) such note delivered in connection with an incentive stock
option shall, and such note delivered in connection with a nonqualified
stock option may, in the sole discretion of the Plan Administrator, bear
interest at a rate specified by the Plan Administrator but in no case less
than the rate required to avoid imputation of interest (taking into account
any exceptions to the imputed interest rules) for federal income tax
purposes, (ii) the Plan Administrator in its sole discretion shall specify
the term and other provisions of such note at the time an incentive stock
option is granted or at any time prior to exercise of a nonqualified stock
option, (iii) the Plan Administrator may require that the Optionee pledge
to the Company for the purpose of securing the payment of such note the
shares of Common Stock to be issued to the Optionee upon exercise of the
option and may require that the certificate representing such shares be
held in escrow in order to perfect the Company's security interest, and
(iv) the Plan Administrator in its sole discretion may at any time restrict
or rescind this right upon notification to the Optionee; or
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<PAGE>
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the
regulations of the Federal Reserve Board, to promptly deliver to the
Company the amount of sale or loan proceeds to pay the exercise price and
any federal, state or local withholding tax obligations that may arise in
connection with the exercise.
5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation may require an Optionee to pay the
Company the amount of taxes required by any government to be withheld or
otherwise deducted and paid with respect to such payment. Subject to the Plan
and applicable law and unless the Plan Administrator determines otherwise, the
Optionee may satisfy withholding obligations, in whole or in part, by paying
cash, by electing to have the Company withhold shares of Common Stock or by
transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the fair market value of the withholding obligation. The Company
shall have the right to withhold from any shares of Common Stock issuable
pursuant to the exercise of an option or from any cash amounts otherwise due
or to become due from the Company to the Optionee an amount equal to such
taxes. The Company or any related corporation shall have the right to retain
and withhold from any payment of cash or shares of Common Stock under this
Plan the amount of taxes required by any government to be withheld or
otherwise deducted and paid with respect to such payment
5.6 HOLDING PERIODS
5.6.1 SECURITIES AND EXCHANGE ACT SECTION 16
If an individual subject to Section 16 of the Exchange Act sells shares of
Common Stock obtained upon the exercise of a stock option within six months
after the date the option was granted, such sale may result in short-swing
profit recovery under Section 16(b) of the Exchange Act.
5.6.2 TAXATION OF STOCK OPTIONS
In order to obtain certain tax benefits afforded to incentive stock options
under Section 422 of the Code, an Optionee must hold the shares issued upon
the exercise of an incentive stock option for two years after the date of
grant of the option and one year from the date of exercise. An Optionee may be
subject to the alternative minimum tax at the time of exercise of an incentive
stock option.
The Plan Administrator may require an Optionee to give the Company prompt
notice of any disposition of shares acquired by the exercise of an incentive
stock option prior to the expiration of such holding periods.
Tax advice should be obtained by an Optionee when exercising any option and
prior to the disposition of the shares issued upon the exercise of any option.
5.7 TRANSFERABILITY OF OPTIONS
Options granted under this Plan and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by the
applicable laws of descent and distribution and shall not be subject to
execution, attachment or similar process. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are exercisable
solely by such Optionee. Any attempt to transfer, assign, pledge, hypothecate
or otherwise dispose of any option under this Plan or of any right or
privilege conferred hereby, contrary to the Code or to the provisions of this
Plan, or the sale or levy or any attachment or similar process upon the rights
and privileges conferred hereby shall be null and void. Notwithstanding the
foregoing, to the extent permitted by Section 422 of the Code and other
applicable law and regulation, the Plan Administrator may permit an Optionee
to (i) during the Optionee's lifetime, designate a person who may exercise the
option after the Optionee's death by giving written notice of such designation
to the Company (such designation may be changed from time to time by the
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Optionee by giving written notice to the Company revoking any earlier
designation and making a new designation) or (ii) with respect to nonqualified
stock options, transfer the option and the rights and privileges conferred
hereby.
5.8 TERMINATION OF RELATIONSHIP
If the Optionee's relationship with the Company or any related corporation
ceases for any reason other than termination for cause, death or total
disability, and unless by its terms the option sooner terminates or expires,
then the Optionee may exercise, for a three-month period, that portion of the
Optionee's option which is exercisable at the time of such cessation, but the
Optionee's option shall terminate at the end of such period following such
cessation as to all shares for which it has not theretofore been exercised,
unless such provision is waived in the agreement evidencing the option. If, in
the case of an incentive stock option, an Optionee's relationship with the
Company or any related corporation changes (i.e., from employee to
nonemployee, such as a consultant), such change shall constitute a termination
of an Optionee's employment with the Company or any related corporation and
the Optionee's incentive stock option shall terminate in accordance with this
subsection 5.8. Upon the expiration of the three-month period following
cessation of employment in the case of an incentive stock option, or at any
time prior to the expiration of the option in the case of a nonqualified stock
option, the Plan Administrator shall have sole discretion in a particular
circumstance to extend the exercise period following such cessation to any
date up to the termination or expiration of the option. If, however, in the
case of an incentive stock option, the Optionee does not exercise the
Optionee's option within three months after cessation of employment, the
option will no longer qualify as an incentive stock option under the Code.
If an Optionee is terminated for cause, each option granted hereunder shall
automatically terminate as of the first discovery by the Company of any reason
for termination for cause, and such Optionee shall thereupon have no right to
purchase any shares pursuant to such option. "Termination for cause" shall
mean dismissal for dishonesty, conviction or confession of a crime (except
minor violations), fraud, misconduct or disclosure of confidential
information. If an Optionee's relationship with the Company or any related
corporation is suspended pending an investigation of whether or not the
Optionee shall be terminated for cause, the Optionee's rights under each
option granted hereunder likewise shall be suspended during the period of
investigation.
If an Optionee's relationship with the Company or any related corporation
ceases because of a total disability, the Optionee's option shall not
terminate or, in the case of an incentive stock option, cease to be treated as
an incentive stock option until the end of the 12-month period following such
cessation (unless by its terms it sooner terminates or expires). As used in
this Plan, the term "total disability" refers to a mental or physical
impairment of the Optionee which is expected to result in death or which has
lasted or is expected to last for a continuous period of 12 months or more and
which causes the Optionee to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful activity. Total disability shall be deemed
to have occurred on the first day after the Company and the two independent
physicians have furnished their opinion of total disability to the Plan
Administrator.
Options granted under the Plan shall not be affected by any change of
relationship with the Company so long as the Optionee continues to be an
employee, director, officer, agent, consultant, advisor or independent
contractor of the Company or of a related corporation; however, a change in an
Optionee's status from an employee to a nonemployee (e.g., consultant or
independent contractor) shall result in the termination of an outstanding
incentive stock option held by such Optionee. The Plan Administrator, in its
absolute discretion, may determine all questions of whether particular leaves
of absence constitute a termination of services; provided, however, that with
respect to incentive stock options, such determination shall be subject to any
requirements contained in the Code. The foregoing notwithstanding, with
respect to incentive stock options, employment shall not be deemed to continue
beyond the first 90 days of such leave, unless the Optionee's reemployment
rights are guaranteed by statute or by contract.
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As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company)
in, at the time of the granting of the option, an unbroken chain of
corporations ending with the Company, if stock possessing 50% or more of the
total combined voting power of all classes of stock of each of the
corporations other than the Company is owned by one of the other corporations
in such chain. When referring to a parent corporation, the term "related
corporation" shall mean any corporation in an unbroken chain of corporations
ending with the Company if, at the time of the granting of the option, each of
the corporations other than the Company owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
5.9 DEATH OF OPTIONEE
If an Optionee dies while he or she has a relationship with the Company or
any related corporation or within the three-month period (or 12-month period
in the case of totally disabled Optionees) following cessation of such
relationship, any option held by such Optionee to the extent that the Optionee
would have been entitled to exercise such option, may be exercised within one
year after his or her death by the personal representative of his or her
estate or by the person or persons to whom the Optionee's rights under the
option shall pass (i) by will or by the applicable laws of descent and
distribution or (ii) by a designation or transfer pursuant to Section 5.7.
5.10 NO STATUS AS SHAREHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a shareholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.11 CONTINUATION OF RELATIONSHIP
Nothing in this Plan or in any option shall confer upon any Optionee any
right to continue in the employ or other relationship of the Company or of a
related corporation, or to interfere in any way with the right of the Company
or of any such related corporation to terminate his or her employment or other
relationship with the Company at any time.
5.12 MODIFICATION AND AMENDMENT OF OPTION
Subject to the requirements of Code Section 422 with respect to incentive
stock options and to the terms and conditions and within the limitations of
this Plan, the Plan Administrator may modify or amend any outstanding option
granted under this Plan. The modification or amendment of an outstanding
option shall not, without the consent of the Optionee, impair or diminish any
of his or her rights or any of the obligations of the Company under such
option. Except as otherwise provided in this Plan, no outstanding option shall
be terminated without the consent of the Optionee.
5.13 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan, to
the extent that the aggregate fair market value of the shares (determined at
the time the incentive stock option is granted) with respect to which
incentive stock options are exercisable for the first time by the Optionee
during any calendar year (under this Plan and all other incentive stock option
plans of the Company, a related corporation or a predecessor corporation)
exceeds $100,000, such options shall be treated as nonqualified stock options.
The previous sentence shall not apply if the Internal Revenue Service issues a
public rule, issues a private ruling to the Company, any Optionee or any
legatee, personal representative or distributee of an Optionee or issues
regulations changing or eliminating such annual limit.
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SECTION 6. GREATER THAN 10% SHAREHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If an incentive stock option is granted under this Plan to any employee who
owns more than 10% of the total combined voting power of all classes of stock
of the Company or any related corporation, the term of such incentive stock
options shall not exceed five years and the exercise price shall be not less
than 110% of the fair market value of the shares at the time the incentive
stock option is granted. This provision shall control notwithstanding any
contrary terms contained in an option agreement or any other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an employee
shall be deemed to own the shares owned, directly or indirectly, by or for his
or her brothers, sisters, spouse, ancestors and lineal descendants. Shares
owned, directly or indirectly, by or for a corporation, partnership, estate or
trust shall be deemed to be owned proportionately by or for its shareholders,
partners or beneficiaries. If an employee or a person related to the employee
owns an unexercised option or warrant to purchase shares of the Company, the
shares subject to that portion of the option or warrant which is unexercised
shall not be counted in determining stock ownership. For purposes of this
Section 6, shares owned by an employee shall include all shares actually
issued and outstanding immediately before the grant of the incentive stock
option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be granted
under this Plan, the Maximum Annual Optionee Grant set forth in Section 5.1,
the number and class of shares covered by each outstanding option and the
exercise price per share thereof (but not the total price), shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
7.1 EFFECT OF LIQUIDATION OR REORGANIZATION
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, upon a merger (other than a merger
of the Company in which the holders of shares of Common Stock immediately
prior to the merger have the same proportionate ownership of shares of Common
Stock in the surviving corporation immediately after the merger),
consolidation, acquisition of property or stock, separation, reorganization
(other than a mere reincorporation or the creation of a holding company) or
liquidation of the Company, as a result of which the shareholders of the
Company receive cash, stock or other property in exchange for or in connection
with their shares of Common Stock, any option granted hereunder shall
terminate, but the Optionee shall have the right immediately prior to any such
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation to exercise such Optionee's option in whole or
in part whether or not the vesting requirements set forth in the option
agreement have been satisfied; provided that such acceleration will not occur
if, in the opinion of the Company's outside accountants, such acceleration
would render unavailable "pooling of interests" accounting treatment for any
reorganization, merger or consolidation of the Company for which pooling of
interests accounting treatment is sought by the Company.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock in
any transaction involving a merger (other than a merger of the Company in
which the holders of Common Stock immediately prior to the merger have the
same proportionate ownership of Common Stock in the surviving corporation
immediately after the merger), consolidation, acquisition of property or
stock, separation or reorganization (other than a mere reincorporation or the
creation
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of a holding company), all options granted hereunder shall be converted into
options to purchase shares of Exchange Stock unless the Company and the
corporation issuing the Exchange Stock, in their sole discretion, determine
that any or all such options granted hereunder shall not be converted into
options to purchase shares of Exchange Stock but instead shall terminate in
accordance with the provisions of subsection 7.1.1. The amount and price of
converted options shall be determined by adjusting the amount and price of the
options granted hereunder in the same proportion as used for determining the
number of shares of Exchange Stock the holders of the shares of Common Stock
receive in such merger, consolidation, acquisition of property or stock,
separation or reorganization. The converted options shall be fully vested
whether or not the vesting requirements set forth in the option agreement have
been satisfied; provided that such acceleration will not occur if, in the
opinion of the Company's outside accountants, such acceleration would render
unavailable "pooling of interests" accounting treatment for any
reorganization, merger or consolidation of the Company for which pooling of
interests accounting treatment is sought by the Company.
7.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments shall be made by the Board, and its determination
as to what adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive. Unless an Optionee agrees otherwise, any change or
adjustment to an incentive stock option shall be made in such a manner so as
not to constitute a "modification" as defined in Code Section 425(h) and so as
not to cause his or her incentive stock option issued hereunder to fail to
continue to qualify as an incentive stock option as defined in Code Section
422(b).
SECTION 8. SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under this Plan
unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance, including
the availability, if applicable, of an exemption from registration for the
issuance and sale of any shares hereunder. Inability of the Company to obtain,
from any regulatory body having jurisdiction, the authority deemed by the
Company's counsel to be necessary for the lawful issuance and sale of any
shares hereunder or the unavailability of an exemption from registration for
the issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the nonissuance or sale of such shares as to which
such requisite authority shall not have been obtained.
As a condition to the exercise of an option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present
intention to sell or distribute such shares if, in the opinion of counsel for
the Company, such a representation is required by any relevant provision of
the aforementioned laws. At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on
stock certificates in order to assure exemption from registration. The Plan
Administrator may also require such other action or agreement by the Optionees
as may from time to time be necessary to comply with the federal and state
securities laws. THIS PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE
REGISTRATION OF THE OPTIONS OR STOCK HEREUNDER.
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Should any of the Company's capital stock of the same class as the stock
subject to options granted hereunder be listed on a national securities
exchange, all stock issued hereunder if not previously listed on such exchange
shall be authorized by that exchange for listing thereon prior to the issuance
thereof.
SECTION 9. AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may at any time suspend, amend or terminate this Plan, provided
that, to the extent required for compliance with Section 422 of the Code or by
any applicable law or regulation, the Company's shareholders must approve any
amendment which will:
(a) increase the number of shares that may be issued under this Plan;
(b) modify the requirements as to eligibility for participation in this
Plan; or
(c) otherwise require shareholder approval under any applicable law or
regulation.
Such shareholder approval must be obtained within 12 months of the adoption
by the Board of such amendment.
Any amendment made to this Plan which would constitute a "modification" to
incentive stock options outstanding on the date of such amendment, shall not
be applicable to such outstanding incentive stock options, but shall have
prospective effect only, unless the Optionee agrees otherwise.
9.2 TERMINATION OF PLAN
This Plan shall remain in effect unless terminated by the Board or the
shareholders and incentive stock options may be granted for up to ten years
from the date of any amendment adopted by the Board and the shareholders of
the Company, which, for tax purposes, is deemed to be the adoption of a new
plan. No option may be granted after termination or during any suspension of
this Plan. The amendment or termination of this Plan shall not, without the
consent of the option holder, impair or diminish any rights or obligations
under any option theretofore granted under this Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board so long as it is
approved by the Company's shareholders at any time within 12 months of such
adoption of this Plan or, if earlier, and to the extent required for
compliance with Rule 16b-3 under the Exchange Act, at the next annual meeting
of shareholders after adoption by the Board.
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APPLIED VOICE TECHNOLOGY, INC.
PROXY FOR THE 1998 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 6, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoint(s) Richard J. LaPorte and Roger A. Fukai,
and each of them, as Proxies with full power of substitution and hereby
authorizes them to represent and to vote as designated below all the shares of
Common Stock of Applied Voice Technology, Inc. held of record by the undersigned
on March 3, 1998 at the 1998 Annual Meeting of Shareholders to be held at the
Bellevue Club, 11200 Southeast 6th Street, Bellevue, Washington, at 11:00 a.m.
on Wednesday, May 6, 1998, with authority to vote upon the following matters and
with discretionary authority as to any other matters that may properly come
before the meeting or any adjournment or postponement thereof.
In their discretion, the Proxies are authorized to vote upon such other
business as may properly be brought before the meeting or any adjournment or
postponement thereof. This Proxy, when properly executed, will be voted in the
manner directed herein by the undersigned. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR ALL NOMINEES" IN ITEM 1 AND "FOR" ITEM 2.
The undersigned acknowledges receipt from the Company prior to the
execution of this Proxy of a Notice of Annual Meeting of Shareholders and a
Proxy Statement dated April 7, 1998.
IMPORTANT-Please Date and Sign on the Other Side
. FOLD AND DETACH HERE .
<PAGE>
Please mark
your votes [X]
as indicated
1. ELECTION OF DIRECTORS
FOR WITHHOLD AUTHORITY
all to vote for all nominees
nominees listed below
[_] [_]
Election of the following two nominees to serve as directors for three-year
term or until their successors are elected and qualified:
William L. True Robert Gilb
Unless otherwise directed, all votes will be apportioned equally among those
persons for whose authority is given to vote.
Write name(s) of nominee(s) for whom vote is withheld below.
2. APPROVAL OF AMENDMENTS TO THE APPLIED VOICE TECHNOLOGY, INC. 1989 RESTATED
STOCK OPTION PLAN TO INCREASE THE NUMBER OF SHARES ISSUABLE UNDER THE PLAN
AND TO ELIMINATE THE FIXED TERMINATION DATE PROVISION OF THE PLAN AND TO
ALLOW THE GRANT OF INCENTIVE STOCK OPTIONS UP TO TEN YEARS AFTER THE ADOPTION
OF ANY AMENDMENT TO THE PLAN BY THE BOARD OR THE SHAREHOLDERS OF THE COMPANY.
FOR AGAINST ABSTAIN
[_] [_] [_]
I plan to attend the Annual Meeting [_]
Please sign below exactly as your name appears
on your stock certificate. When shares are
held jointly, each person must sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as
such. An authorized person should sign on
behalf of corporations, partnerships and
associations and give his or her title.
Dated: , 1998
---------------------------------
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Signature
----------------------------------------------
Signature if held jointly
YOUR VOTE IS IMPORTANT. PROMPT RETURN OF THIS PROXY CARD WILL HELD SAVE THE
EXPENSE OF ADDITIONAL SOLICITATION EFFORTS
. FOLD AND DETACH HERE .
