<PAGE>
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 Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TelTone Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
TELTONE CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 30, 1997
TO THE SHAREHOLDERS:
THE ANNUAL MEETING OF THE SHAREHOLDERS OF TELTONE CORPORATION WILL BE HELD AT
THE CORPORATE HEADQUARTERS, 22121 - 20TH AVENUE SE, BOTHELL, WASHINGTON, ON
OCTOBER 30, 1997, AT 2:00 P.M. LOCAL TIME FOR THE FOLLOWING PURPOSES:
1. To elect directors;
2. To ratify the selection of Price Waterhouse LLP as auditors for the
current fiscal year; and
3. To transact such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on September 2, 1997,
are entitled to notice of and to vote at this meeting.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ Peter C. Spratt
----------------------------------
Peter C. Spratt, Secretary
EACH SHAREHOLDER IS URGED TO SIGN AND RETURN PROMPTLY THE ACCOMPANYING PROXY
IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
Bothell, Washington
September 29, 1997
<PAGE>
TELTONE CORPORATION
CORPORATE HEADQUARTERS
22121 - 20TH AVE. S.E.
BOTHELL, WASHINGTON 98021
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 30, 1997
This proxy statement, which was first mailed to shareholders with the
enclosed form of proxy on September 29, 1997, is furnished in connection with
the solicitation of proxies by the Board of Directors of Teltone Corporation
(the "Company") to be voted at the Annual Meeting of Shareholders of the
Company. The meeting will be held at the Corporate Headquarters, 22121 20th
Avenue SE, Bothell, Washington, on October 30, 1997 at 2:00 p.m. local time,
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders. Shareholders who execute proxies retain the right to revoke
them at any time before they are voted by delivering a signed written
statement to the Secretary of the Company at or prior to the Annual Meeting
of Shareholders or by executing another proxy dated as of a later date. The
cost of solicitation of proxies is to be borne by the Company.
Shareholders of record at the close of business on September 2, 1997, will be
entitled to vote at the meeting. On September 2, 1997, there were 5,606,796
shares of common stock and 1,075,641 shares of preferred stock outstanding,
each of which is entitled to one vote. A majority of the outstanding shares
of the corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. Candidates receiving a
majority of the votes present either in person or by proxy, will be elected
as Directors. Shares of Common or Preferred Stock underlying abstentions and
broker non-votes will be considered present at the Annual Meeting for the
purpose of calculating a quorum and will have no effect on the election of
Directors. Proxies and ballots will be received and tabulated by ChaseMellon
Shareholder Services, an independent business entity not affiliated with the
Company.
1. ELECTION OF DIRECTORS
Six directors are to be elected at the Annual Meeting of Shareholders, to
hold office until the next Annual Meeting of Shareholders and until their
successors are elected and qualified. It is intended that the accompanying
proxy will be voted in favor of the following persons to serve as directors
unless the shareholder indicates to the contrary on the proxy. Management
expects that each of the nominees will be available for election, but if any
of them is not a candidate at the time of the election, it is intended that
proxies will be voted for the election of another nominee to be designated by
the Board of Directors of the Company to fill any vacancy.
1
<PAGE>
As a result of a promotion, Mr. Robert L. Bailey informed the Board of
Directors on August 12, 1997, that he would have to resign due to time
constraints. The resignation was effective August 12, 1997. In a
streamlining effort, the Board of Directors decided at the August 12, 1997,
meeting to reduce the size of the Board and not to fill the vacancy at this
time. Thus, the Board currently stands at six positions.
The following table lists the nominees for election as directors of the
Company, information regarding their ownership of the Company's common stock,
and information regarding the ownership of the Company's common stock by the
officers and directors as a group.
<TABLE>
<CAPTION>
NOMINEES' BENEFICIAL OWNERSHIP
OF TELTONE STOCK
------------------------
VOTING
COMMON STOCK PREFERRED STOCK(1)
----------------- ------------------
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL
OWNERSHIP PERCENT OWNERSHIP PERCENT
AS OF OF AS OF OF
NOMINEES 09/02/97(2) CLASS 09/02/97(2) CLASS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles L. Anderson 952,024 (3)(4)(5) 17% 125,704 (3)(4) 12%
Tracy Storer 14,166 (5) .3% 0 0%
Richard W. Soshea 719,026 (6) 12.8% 27,272 2.5%
Charles P. Waite 37,244 (5) .7% 14,401 1.3%
Don Wilson 40,399 (5) .7% 0 0%
Paul M. Wythes 364,609 (5)(7)(8) 6.5% 209,860 (9)(10) 9.5%
All Officers and Directors
as a group (11 persons) 2,398,318 (11) 42.8% 377,237 35%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each share of the Company's no par value voting preferred stock is entitled
to one vote on each matter submitted to shareholders.
(2) Except to the extent that each director's shares are subject to community
property laws or as otherwise indicated, beneficial ownership represents
sole voting and investment power with respect to the Company's no par value
common stock or no par value voting preferred stock.
2
<PAGE>
(3) Includes 45,788 shares of common stock and 9,770 shares of preferred stock
owned by the Teltone Corporation Profit Sharing Trust, over which Mr.
Anderson shares voting and investment power.
(4) Includes 66,400 shares of common stock and 50,000 shares of preferred stock
owned by the Anderson Family Foundation, a charitable foundation,
controlled by Mr. Anderson and members of his family.
(5) Includes stock options of which 14,166 shares are exercisable within 60
days of the record date.
(6) Includes stock options of which 410,000 shares are exercisable within sixty
days of the record date.
(7) 255,305 of these shares are owned of record by Sutter Hill Ventures, of
which Mr. Wythes is a general partner. As such, Mr. Wythes shares voting
and investment power over these shares.
(8) 75,983 of these shares are owned of record by TOW Partners, of which Mr.
Wythes is the sole general partner. As such, Mr. Wythes has sole voting
power over these shares.
(9) 152,893 of these shares are owned of record by Sutter Hill Ventures, of
which Mr. Wythes is a general partner. As such, Mr. Wythes shares voting
and investment power over these shares.
(10) 45,495 of these shares are owned of record by TOW Partners, of which Mr.
Wythes is sole general partner. As such, Mr. Wythes has sole voting power
over these shares.
(11) Includes stock options of which 676,580 shares are exercisable within sixty
days of the record date.
3
<PAGE>
OTHER INFORMATION CONCERNING DIRECTORS
Mr. Anderson, 67, has been a Director of the Company since 1968 and Chairman
since 1981. He was Chief Executive Officer of the Company from June 1984
through December 1987 and from 1968 through 1981. He also was President of
Teltone from 1970 through 1981, and Acting President from June 1984 to April
1985.
Dr. Soshea, 65, assumed the position of Director, President & Chief Executive
Officer for the Company in August 1991. Prior to joining Teltone, Dr. Soshea
was Vice President of the Semiconductor Group at M/A-COM, Inc., Lowell,
Massachusetts since 1988. His background also includes general management
positions with Hewlett Packard and with Harris Corp., where he founded Harris
Microwave Semiconductor, Inc.
Mr. Waite, 67, has served on the Board of Directors of the Company since
1976. He has been a General Partner of Greylock Partnerships since 1966. He
is also a director of Celeritek, Inc. of Santa Clara, California.
Mr. Wilson, 70, joined the Teltone Board of Directors in April 1990. Mr.
Wilson worked for US West Communications for more than 35 years, the last 14
years of which he was Vice President, prior to his retirement in 1990. He is
a past Chairman of the Board of Trustees for Goodwill Industries, serves on
the National Advisory Board for the Salvation Army and is a Director of US
Bank of Washington.
Mr. Wythes, 64, has been a Director since 1976. In 1964 he was a Founding
Partner of Sutter Hill Ventures, a venture capital limited partnership,
headquartered in Palo Alto, California, where he continues to serve as a
General Partner. He also serves as a Director of Interventional
Technologies, Inc., San Diego, California, Sutter Hill Investments Mauritius
Inc. and T. Rowe Price Associates, of Baltimore, Maryland.
Mr. Storer, 63, became a director of the Company in February 1996. He is
President of The Stanbridge Group, a corporation he founded in 1989 to focus
on strategic business development and consulting for clients in the
telecommunications industry.
4
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors has standing Audit and Compensation
Committees. There is no standing nominating committee. The members of each
Committee and the functions performed thereby are outlined below:
Audit Committee - Messrs. Anderson, Wythes, and Wilson. This Committee
reviews the planned scope of independent auditor's services, reviews
financial statements and the auditor's opinion letter, recommends the
independent auditor for the following fiscal year, reviews the auditor's
recommendations relating to accounting, internal control, and other
matters, and reviews internal accounting procedures with corporate
financial staff.
Compensation Committee - Messrs. Storer and Waite. This Committee reviews
current remuneration of the directors and officers of the Company and makes
recommendations to the Board of Directors regarding appropriate periodic
adjustments of those amounts. The Committee also makes recommendations to
the Board regarding the granting of stock options to officers and
employees.
The Compensation Committee met three times and the Audit Committee met once.
The entire Board of Directors met six times during the last fiscal year. All
Directors attended more than 75% of the aggregate number of Board meetings
and meetings of Committees on which they served.
COMPENSATION OF BOARD MEMBERS
Members of the Company's Board of Directors, other than employee-directors,
are entitled to receive $1,200 per quarter, plus $500 for each Board meeting
attended, and $250 for each committee meeting held on a day when a Board of
Directors meeting was not also held. The Chairman receives an additional
$1,750 per quarter. Mr. Anderson received $20,084 in compensation during the
fiscal year ending June 30, 1997. Employee-directors receive no compensation
for their efforts as a director.
5
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of September 2, 1997, with
respect to all shareholders who are known to the Company to be beneficial
owners of more than 5% of either outstanding voting preferred or common stock.
<TABLE>
<CAPTION>
VOTING
COMMON STOCK PREFERRED STOCK(1)
----------------- ------------------
AMOUNT AND NATURE AMOUNT AND NATURE
OF BENEFICIAL OF BENEFICIAL
OWNERSHIP PERCENT OWNERSHIP PERCENT
AS OF OF AS OF OF
SHAREHOLDER 09/02/97(2) CLASS 09/02/97(2) CLASS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Charles L. Anderson 952,024 (3)(4)(5) 17% 125,704 (3)(4) 12%
660 N. Smith Road
Stanwood, WA 98292
Steve Sarich Jr. 571,673 10.2% 98,407 9.1%
505 Madison Street
Suite 230
Seattle, WA 98104
Richard W. Soshea 719,026 (6) 12.8% 27,272 2.5%
15130 - 141st Avenue SE
Snohomish, WA 98290
Sutter Hill Ventures 255,305 4.6% 152,893 14.2%
755 Page Mill Rd.
Suite A-200
Palo Alto, CA 94304
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Each share of the Company's no par value voting preferred stock is
entitled to one vote on each matter submitted to shareholders.
(2) Except to the extent the shares owned by an individual listed above are
subject to community property laws or as otherwise indicated, beneficial
ownership represents sole voting and investment power with respect to the
Company's no par value common stock or no par value voting preferred stock,
as the case may be.
6
<PAGE>
(3) Includes 45,788 shares of common stock and 9,770 shares of preferred stock
owned by the Teltone Corporation Profit Sharing Trust, over which Mr.
Anderson shares voting and investment power.
(4) Includes 66,400 shares of common stock and 50,000 shares of preferred stock
owned by the Anderson Family Foundation, a charitable foundation, which is
controlled by Mr. Anderson and members of his family.
(5) Includes stock options of which 14,166 shares are exercisable within 60
days of the record date.
(6) Includes stock options of which 410,000 shares are exercisable within sixty
days of the record date.
EXECUTIVE OFFICER COMPENSATION
CASH COMPENSATION
-----------------
Cash compensation paid by the Company to its executive officers who earned in
excess of $100,000:
<TABLE>
CASH COMPENSATION TABLE
- --------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
--------------------------- ---------------------
NAME AND PRINCIPAL SECURITIES UNDERLYING
POSITION YEAR SALARY BONUS OPTIONS GRANTED
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Richard W. Soshea 1997 $167,306 40,000
President & CEO
1996 $155,768 $11,269
1995 $149,135
Mark Blazek 1997 $87,600 $14,987 8,000
VP Sales & Marketing
- --------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
COMPENSATION PURSUANT TO PLANS
------------------------------
Described below are the compensation plans that have been established by the
Company that provide for the payment of cash or noncash compensation to the
individuals and group covered by the Cash Compensation table. The amounts
paid to the listed individuals and group are also disclosed.
A. SALARY DEFERRAL
All employees are eligible to participate on the first day of the month
after their date of hire. An employee is able to defer up to 15% of his or
her pre-tax annual salary up to a maximum of $9,500 under the salary
deferral provisions of the Plan. At the discretion of the Board of
Directors, the first $300 of the employee's deferral shall be matched by
the Company dollar for dollar. The Company shall match $.50 for each $1.00
an employee defers between $300 and 6% of the employee's compensation. Any
deferral in excess of 6% of the employee's compensation shall not be
matched. The employee's deferrals and the Company's contributions are
invested, at the employee's direction, in one or more investment funds.
Employees are 100% vested in their salary deferrals, the Company's
contributions, and all earnings thereon. At any time after an employee has
reached age 59 1/2, an employee may withdraw all or a portion of the funds.
In addition, the employee may borrow from the Plan and may receive a
distribution of benefits in the event of financial hardship. Upon
termination of employment, death or disability, the employee or beneficiary
will receive a lump sum payment of benefits. Executive officer
compensation, as related in the Cash Compensation table includes any salary
deferral under the Plan.
During the period ending June 30, 1997, the Company's contributions to the
executive officers named in the Cash Compensation table and all employees
as a group were:
<TABLE>
<S> <C>
Richard W. Soshea $4,650
Mark Blazek $2,317
All Employees as a Group
Excluding Executive Officers $51,200
(55)
</TABLE>
B. STOCK OPTION PLANS
The Company has two active stock option plans: the Nonemployee Directors'
Stock Option Plan and the 1992 Stock Option Plan for key employees. The
Nonemployee Directors' Stock Option Plan provides for the grant of options
to purchase up to 320,000 common shares to outside directors of the
Company. Options are granted at the fair market value of the stock on the
date of grant and vest over a four year period. The maximum term of an
option may not exceed six years.
8
<PAGE>
Under the terms of the 1992 Stock Option Plan, all present and future key
employees who, at the time the options are granted, are regular full-time
employees of the Company, are eligible to participate. The number of
shares that may be granted under the 1992 Option Plan is 800,000, of which
99,250 shares remain available for grant as of September 2, 1997. The
option price and award are determined by the Compensation Committee of the
Board of Directors. Subject to the provisions of the 1992 Option Plan,
the Board of Directors determines the terms and provisions of the option
agreements and the number of shares of common stock subject to each
option.
During fiscal year 1997 the following options to purchase common stock
were granted at fair market value to named executive officers:
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS GRANTED
SECURITIES UNDERLYING TO EMPLOYEES IN EXERCISE PRICE EXPIRATION
NAME OF INDIVIDUAL OPTIONS GRANTED FISCAL YEAR PER SHARE DATE
------------------ --------------------- --------------- -------------- ----------
<S> <C> <C> <C> <C>
Richard W. Soshea 40,000 14% $.50 10/02
Mark Blazek 8,000 3% $.50 10/02
</TABLE>
During the period beginning July 1, 1996, and ending June 30, 1997, 31,000
options were exercised. There were no options exercised by named executive
officers during this period.
C. COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the directors and executive
officers of the Company and persons who own more than ten percent (10%) of
the Company's common stock are required to report their initial ownership
of the Company's common stock and any subsequent changes in that ownership
to the Securities and Exchange Commission (the "SEC"). Specific due dates
for these reports have been established and the Company is required to
disclose in this proxy statement any late filings during fiscal years 1997
and 1996. To the Company's knowledge, based solely on its review of the
copies of such reports required to be furnished to the Company and on
written representations that no other reports were required, all of the
reports were timely filed.
9
<PAGE>
2. RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors will request that the shareholders ratify its
selection of Price Waterhouse LLP, Certified Public Accountants, as
independent public auditors for the Company for the current fiscal year. If
the shareholders do not ratify the selection of Price Waterhouse LLP, another
firm of certified public accountants will be selected by the Board of
Directors.
Representatives of Price Waterhouse LP will be present at the Annual Meeting
of Shareholders, will have an opportunity to make a statement and will be
available to respond to appropriate questions.
3. OTHER MATTERS
The Board of Directors does not intend to bring any other business before the
meeting, and so far as is known to the Board, no matters are to be brought
before the meeting except as specified in the notice of the meeting.
However, the Board of Directors intends that proxies, in the form enclosed,
will be voted in respect of any other business that may properly come before
the meeting in accordance with the judgment of the persons voting such
proxies.
SOLICITATION OF PROXIES
The proxy accompanying this Proxy Statement is solicited by the Board of
Directors of the Company. Proxies may be solicited by officers, directors
and regular supervisory and executive employees of the Company, none of whom
will receive any additional compensation for their services. All of the
costs of solicitation of proxies will be paid by the Company.
PROPOSALS OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the Annual Meeting of
Shareholders, October 29, 1998 must be received by the Company no later than
May 15, 1998 to be included in the Company's proxy statement and form of
proxy relating to that meeting.
Dated: Bothell, Washington
September 29, 1997
10
<PAGE>
A COPY OF THE COMPANY'S FORM 10-KSB REPORT FOR FISCAL YEAR 1997, CONTAINING
INFORMATION ON OPERATIONS, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
IS AVAILABLE WITHOUT CHARGE UPON REQUEST. PLEASE WRITE TO:
JEFFREY B. DECILLIA
TELTONE CORPORATION
22121 - 20TH AVENUE SE
BOTHELL, WASHINGTON 98021-4408
11
<PAGE>
- -------------------------------------------------------------------------------
PROXY
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS OF
TELTONE CORPORATION
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Charles L. Anderson and Richard W. Soshea,
and each of them, with full power of substitution, as Proxies to vote the
shares which the undersigned is entitled to vote at the Annual Meeting of the
Corporation to be held at Teltone Headquarters, 22121 - 20th Ave SE, Bothell,
WA 98021 on October 30, 1997 at 2:00 p.m. and at adjournments thereof.
THIS PROXY WHEN PROPERLY SIGNED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSALS 1 & 2 IN THEIR DISCRETION, THE PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING.
(CONTINUED AND TO BE SIGNED ON THE OTHER SIDE).
- -------------------------------------------------------------------------------
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<PAGE>
- -------------------------------------------------------------------------------
Please mark
your votes as / X /
indicated in
this example
Proposal 1: To elect directors:
C.L. Anderson, R.W. Soshea, C.P. Waite,
D.C. Wilson, P.M. Wythes, T.S. Storer
FOR all nominees listed WITHHOLD AUTHORITY To withhold authority to
(except as marked to to vote for all vote for an nominee(s),
the contrary). nominees listed write name(s) below:
/ / / / _________________________
Proposal 2: TO RATIFY THE APPOINTMENT OF
Price Waterhouse LLP as auditors for the
current fiscal year.
FOR AGAINST ABSTAIN
/ / / / / /
Important - Please sign and return
promptly. When shares are held by
joint tenants, both should sign.
__ __ __ When signing as attorney, executor,
| administrator, trustee or guardian
| should give full title as such. If
| a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership,
please sign in partnership name by
an authorized person.
SIGNATURE(S)_________________________
DATE_______________
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