SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ARTISOFT, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1) or 14a-6(j)(2).
/_/ $500 per each party to the controversy pursuant to
Exchange Act Rule 14a-6(i)(3).
/_/ 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 Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ 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 No. ______________________________________
3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
___________
*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
Artisoft
2202 North Forbes Boulevard
Tucson, Arizona 85745
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 22, 1996
The annual meeting of the shareholders of Artisoft, Inc., a Delaware
corporation, will be held at The Westin La Paloma Hotel, 3800 East Sunrise
Drive, Tucson, Arizona 85718, on Tuesday, October 22, 1996, at 10:00 a.m. M.S.T.
for the following purposes:
1. To elect two Directors for the term set forth in the
accompanying Proxy Statement;
2. To consider and act upon a proposal to ratify the
selection of KPMG Peat Marwick LLP as the Company's
independent public accountants for the fiscal year
ending June 30, 1997; and
3. To transact such other business as may properly come
before the meeting.
Only holders of record of Artisoft Common Stock at the close of business on
September 5, 1996 will be entitled to vote at the meeting.
A copy of the Company's 1996 Annual Report to Shareholders, which includes
certified financial statements, is enclosed. Management and the Board of
Directors cordially invite you to attend the annual meeting.
Your vote is very important. Whether or not you plan to attend the annual
meeting, we urge you to sign, date and return the enclosed proxy card promptly.
/s/ Ernest E. East
------------------------------------
Ernest E. East
Vice President, General Counsel
and Secretary
Tucson, Arizona
September 12, 1996
<PAGE>
Artisoft, Inc.
2202 North Forbes Boulevard
Tucson, Arizona 85745
PROXY STATEMENT
The Board of Directors of Artisoft, Inc. (the "Company") solicits your proxy in
the form enclosed to use at the annual meeting of shareholders to be held on
Tuesday, October 22, 1996, at 10:00 a.m. M.S.T. (the "1996 Annual Meeting") or
any adjournment or postponement thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement and
the accompanying form of proxy are being mailed to shareholders on September 12,
1996.
VOTING RIGHTS
Only shareholders of record at the close of business on September 5, 1996, may
vote at the 1996 Annual Meeting or any adjournment or postponement thereof,
notwithstanding any transfer on the books of the Company thereafter. As of that
date, there were 14,527,682 outstanding shares of $.01 par value Common Stock of
the Company, and no outstanding shares of $1.00 par value Preferred Stock of the
Company. Each shareholder of record is entitled to one vote for each share of
Common Stock registered in his or her name. Cumulative voting is not permitted.
A majority of all the shares of stock entitled to vote, whether present in
person or represented by proxy, shall constitute a quorum for the transaction of
business at the 1996 Annual Meeting. Abstentions and broker non-votes will also
be included in the determination of the number of shares represented for a
quorum. The Company may reimburse brokers, banks and others holding shares in
their names for others for the cost of forwarding materials and obtaining
proxies from their principals. The Company has also retained Morrow & Co., Inc.
to assist in the solicitation of proxies at an estimated cost of $3,500 plus
reasonable out-of-pocket expenses.
All valid proxies received before the 1996 Annual Meeting and not revoked will
be exercised. All shares represented by proxy will be voted, and where a
shareholder specifies by means of his or her proxy a choice with respect to any
matter to be acted upon, the shares will be voted in accordance with the
specifications so made. If no choice is indicated on the proxy, the shares will
be voted in accordance with the recommendations of the Board of Directors as to
such matters. Proxies may be revoked at any time prior to the time they are
voted by: (a) delivering to the Secretary of the Company a written instrument of
revocation bearing a date later than the date of the proxy; or (b) duly
executing and delivering to the Secretary a subsequent proxy relating to the
same shares; or (c) attending the 1996 Annual Meeting and voting in person
(attendance at the 1996 Annual Meeting will not in and of itself constitute
revocation of a proxy).
1
<PAGE>
Item No. 1
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes with one class of directors
elected annually for a term of three years. Each director serves until a
successor has been elected and qualified. The class of directors whose term
expires in 1996 is comprised of two directors, Kathryn A. Braun and Gary E.
Liebl, each of whom has been nominated for election at the 1996 Annual Meeting
to hold office until the 1999 Annual Meeting of Shareholders and until her or
his successor is elected and qualified.
The Board of Directors of the Company recommends a vote for Kathryn A. Braun and
Gary E. Liebl as Directors. Should either of these nominees become unable to
serve for any reason, the Nominating Committee of the Board of Directors may
designate substitute nominees, in which event the persons named in the enclosed
proxy will vote for the election of such substitute nominee.
Nominees for Election to Term Expiring 1999
Kathryn A. Braun, age 45, has served on the Board of Directors of the Company
since August 4, 1994. Ms. Braun is Executive Vice President and General Manager,
Personal Storage Group of Western Digital Corporation, a manufacturer of
computer disk drives, where she has served in various capacities since 1978. She
is also a member of the board of directors of PacifiCorp, a publicly traded
electricity and telephone utility company.
Gary E. Liebl, age 54, has served on the Board of Directors of the Company since
June 19, 1991. Mr. Liebl is a private investor and business consultant to chief
executive officers and boards of directors. Mr. Liebl is Chairman of the Board
and a director of QLogic Corporation, a supplier of high-performance SCSI
semiconductor products. He is also a director of Emulex Corporation, a supplier
of software and hardware based network access products, and Smartflex Systems,
Inc., a supplier of flexible interconnect assemblies for high performance
electronic products. From 1985 through 1990, Mr. Liebl was employed by Cipher
Data Products, Inc., a manufacturer of removable data storage products, serving
as its Chairman, President and Chief Executive Officer when it was acquired by
Archive Corporation, a computer peripherals manufacturer, in April 1990.
Incumbent Directors - Term Expiring 1997
William C. Keiper, age 45, has served on the Board of Directors of the Company
since January 28, 1993. Mr. Keiper joined the Company in January 1993 as
President and Chief Operating Officer. In June 1993, he became Chief Executive
Officer, and was appointed Chairman of the Board in October 1995. From 1986
through January 1993, Mr. Keiper held various positions at MicroAge, Inc., and
was serving as President and Chief Operating Officer until he joined the
Company. MicroAge, Inc. is a company that distributes, markets and supports
personal computer hardware and software.
2
<PAGE>
Joel J. Kocher, age 40, has served on the Board of Directors of the Company
since October 26, 1995. Mr. Kocher joined the Company in October 1994, as
Executive Vice President and Chief Operating Officer and was promoted to
President and Chief Operating Officer in October 1995. Prior to his employment
with the Company, Mr. Kocher was Senior Vice President of Dell Computer
Corporation as well as President of its Worldwide Sales, Marketing & Services
division. He served Dell Computer Corporation in various capacities from April
1990 to September 1994.
Incumbent Director - Term Expiring 1998
Jock Patton, age 50, has served on the Board of Directors of the Company since
August 4, 1994. Mr. Patton is President of StockVal, Inc., which provides
securities analysis software and a proprietary database to mutual funds, major
money managers and brokerage firms. Mr. Patton is also a member of the boards of
directors of eight different mutual funds within the Pilgrim America Group
family of funds. From 1976 to 1993, Mr. Patton was a partner with the Phoenix
law firm of Streich Lang.
Item No. 2
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected KPMG Peat Marwick LLP as independent public accountants to audit the
consolidated financial statements of the Company for the fiscal year ending June
30, 1997, and to perform other accounting services as requested by the Company.
KPMG Peat Marwick LLP has acted as independent auditors of the Company since its
appointment in 1990.
Representatives of KPMG Peat Marwick LLP are expected to be present at the 1996
Annual Meeting, will be available to respond to appropriate questions, and will
have the opportunity to make a statement if they desire to do so.
Although it is not required to do so, the Board of Directors has submitted the
selection of KPMG Peat Marwick LLP to the shareholders for ratification. Unless
a contrary choice is specified, proxies will be voted for ratification of the
selection of KPMG Peat Marwick LLP. The Board of Directors unanimously
recommends the ratification of its selection of KPMG Peat Marwick LLP as the
Company's independent public accountants for the fiscal year ending June 30,
1997.
3
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1996, the Board of Directors met nine times. Each director
attended at least 75% of the meetings held during fiscal 1996, including
meetings of Committees of which each is a member. The Board of Directors has
Audit, Compensation, and Nominating Committees.
The Audit Committee, which currently is comprised of Jock Patton (Chair), Gary
E. Liebl, and Kathryn A. Braun, is responsible for: reviewing and recommending
to the directors the independent auditors to be nominated or reappointed to
audit the financial statements of the Company; confirming and assuring the
independence of the independent auditors; reviewing with the independent
auditors and management of the Company the scope of and plan for the annual
audit, and at the conclusion thereof, reviewing the results of such audit;
reviewing with the independent auditors and with management, the adequacy and
effectiveness of the accounting and financial controls of the Company; reviewing
with management and the independent auditors the financial statements, financial
statement footnotes and information contained in the annual report and interim
reports to shareholders and in filings with the Securities and Exchange
Commission; reviewing with management and the independent auditors the
significant accounting and other policies and practices of the Company;
inquiring of management and the independent auditors about significant risks or
exposures and assessing the steps taken by management to minimize such risks;
reviewing with management the major relationships with financial service
providers to the Company; and investigating any matter brought to its attention
within the scope of its duties. The Audit Committee held four meetings in fiscal
1996.
The Compensation Committee, which currently is comprised of Gary E. Liebl
(Chair) and Kathryn A. Braun, is responsible for: approving and administering
executive compensation plans, executive bonus plans and stock option plans;
approving stock option grants; and reviewing and approving salary increase
guidelines, general compensation policies and procedures, employee loans and
Company relocation policies. The Compensation Committee held three meetings in
fiscal 1996.
The Nominating Committee, which currently is comprised of Kathryn A. Braun
(Chair) and Gary E. Liebl, is responsible for: considering and making
recommendations to the Board of Directors as to the appropriate size of the
Board and the criteria for selection of candidates to serve on the Board;
evaluating all proposed candidates, including those recommended by management,
the Board of Directors and the shareholders; recommending to the Board nominees
to fill vacancies existing on the Board from time to time; recommending to the
Board a slate of nominees for election by the shareholders; making
recommendations to the Board with respect to the Chair position; and making
recommendations to the Board as to the appropriate size and composition of the
committees of the Board. The Nominating Committee will consider as nominees for
director persons recommended by the shareholders. Such recommendations should be
sent to the Secretary of the Company not later than 90 days preceding the next
annual meeting of shareholders at which directors are to be elected and should
include the address of the person, a brief description of his or her
qualifications and a consent to serve on the Board of Directors. The Nominating
Committee held one meeting in fiscal 1996.
4
<PAGE>
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a $10,000 annual
retainer, with the exception of Mr. Liebl who, as Vice Chairman of the Board of
Directors, is paid an annual retainer of $25,000. All Directors receive an
additional $2,000 annual retainer for each Committee on which they serve as a
Chairman, plus $1,000 per Board meeting attended and $700 per Committee meeting
attended ($400 for telephonic Board or Committee meetings).
Directors who are not employees of the Company receive an option to purchase
15,000 shares of Common Stock upon their initial election to the Board of
Directors pursuant to the Artisoft, Inc. 1994 Stock Incentive Plan. In addition,
on the date of each annual meeting of shareholders, each Director who is not an
employee of the Company receives a nonqualified option to purchase an additional
5,000 shares of Common Stock pursuant to the Artisoft, Inc.1994 Stock Incentive
Plan. Options granted pursuant to the Artisoft, Inc. 1994 Stock Incentive Plan
vest one-third per year over three years, beginning one year after the date of
grant. The option exercise price is equal to the fair market value of the Common
Stock on the grant date.
All Directors are reimbursed for their reasonable, out-of-pocket expenses
incurred in connection with attendance at Board and Committee meetings.
Directors who are employees of the Company do not receive compensation for
service on the Board or Committees of the Board other than their compensation as
employees.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table shows for the three fiscal years ended June 30, 1996, the
compensation paid to the Company's Chief Executive Officer, and to the three
most highly paid executive officers serving at the end of the fiscal year whose
aggregate salary and bonus compensation exceeded $100,000 and the Senior Vice
President, Business Development and Technology, who served in that capacity
until January 31, 1996 (collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------------------------------- ---------------
Other
Annual All Other
Current Executive Officers Year Salary ($) Bonus ($)(1) Compensation ($)(2) Options # Compensation ($)(3)
- --------------------------- -------------- ---------------- ------------ ------------------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
William C. Keiper(4) 1996 $350,000 $ 93,030 $ 4,784 200,000 $2,250
Chairman and 1995 348,269 0 4,818 0 4,532
Chief Executive Officer 1994 285,000 140,785 37,543 200,000 6,716
Joel J. Kocher(5) 1996 300,000 166,450 18,556 140,000 0
President and 1995 211,154 0 30,989 360,000 0
Chief Operating Officer 1994 N/A N/A N/A N/A N/A
William T. Peterson, III 1996 167,789 30,704 43,653 0 3,447
Vice President, 1995 51,923 10,000 0 165,000 0
Corporate Marketing 1994 N/A N/A N/A N/A N/A
Justin Priestley 1996 93,150 16,480 7,939 0 0
Vice President, 1995 29,231 25,271 0 50,000 0
Worldwide Sales 1994 N/A N/A N/A N/A N/A
Operations
Former Executive Officer
- ------------------------
Sunil Padiyar(6) 1996 226,731 0 827 0 1,554
Senior Vice President, 1995 143,789 0 2,375 25,000 5,207
Business Development and 1994 110,000 32,603 17,567 20,000 1,663
Technology
</TABLE>
- --------------------------------------
1 Unless otherwise noted, includes amounts paid or payable under the
executive bonus plans for fiscal 1996, 1995 or 1994, respectively. Does
not include bonus payments paid in fiscal 1996, 1995 or 1994 for
bonuses accrued and included in the prior fiscal year. All bonus
payments made for fiscal 1996 were for the second half of such year
except for Mr. Kocher who also received a bonus of $100,000 on October
26, 1995.
2 Includes relocation expenses imputed into income, cash payments for
estimated income-tax effect of imputed relocation expenses, and
Company-paid life insurance and income tax preparation services.
3 Includes 401(k) plan Company matching funds.
4 For fiscal 1996, Other Annual Compensation included $2,000 for
executive income tax preparation services and $2,818 for Company-paid
life insurance. For fiscal 1994, Other Annual Compensation included
$26,181 for relocation expenses imputed into income, $8,036 for
estimated income-tax effect of imputed relocation expenses, $2,240 for
executive income tax preparation services and $1,086 for Company-paid
life insurance.
5 Mr. Kocher was hired on October 5, 1994, as Executive Vice President
and Chief Operating Officer of the Company. For fiscal 1995, Other
Annual Compensation included $18,781 for relocation expenses imputed
into income, $9,729 for estimated income-tax effect of imputed
relocation expenses, $1,675 for executive income tax preparation
services and $804 for Company-paid life insurance.
6 Includes $161,539 salary paid to Mr. Padiyar as an officer of the
Company and $65,192 in severance payments after his resignation.
6
<PAGE>
The following table sets forth information with respect to the grants of stock
options to the Named Officers during the fiscal year ended June 30, 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
% of Total Assumed Annual Rates of Stock Price
Options Appreciation for Option Term(1)
Options Granted to Exercise or -----------------------------
Granted Employees in Base Price Expiration
Name (#)(2) Fiscal Year ($/sh)(3) Date 5% ($) 10% ($)
- ---- --------- ----------- --------- ---- ------ -------
<S> <C> <C> <C> <C> <C> <C>
William C. Keiper 200,000 14.1 $9.375 10/26/2005 $1,179,180 $2,988,260
Joel J. Kocher 140,000 9.8 9.375 10/26/2005 $825,426 $2,091,782
William T. Peterson, III 0 0 0 N/A 0 0
Justin Priestley 0 0 0 N/A 0 0
Sunil Padiyar 0 0 0 N/A 0 0
</TABLE>
- --------------------------------
1 Reflects the value of the stock option on the date of grant assuming
(i) for the 5% column, a five percent annual rate of appreciation in
the Company's Common Stock over the 10-year term of the option and (ii)
for the 10% column, a 10% annual rate of appreciation in the Company's
Common Stock over the 10-year term of the option, in each case without
any discounting to net present value and before any income taxes
associated with the exercise. Actual gains, if any, on stock option
exercises depend on the future performance of the Company's Common
Stock and the continued employment of the Named Officer through the
vesting period and exercise period. These amounts represent assumed
rates of appreciation only, based on Securities and Exchange Commission
Rules, and may not necessarily be indicative of actual results
obtained.
2 Options were granted under the Artisoft, Inc. 1994 Stock Incentive Plan
("1994 Plan"). The 1994 Plan authorizes the issuance of up to 2 million
shares of the Company's Common Stock plus additional shares equivalent
to 1.5% of the number of shares of Common Stock issued and outstanding
as of January 1 of each year commencing on January 1, 1995. The Plan is
administered by the Compensation Committee of the Board of Directors,
the members of which are required to be "disinterested" within the
meaning of Rule 16b-3 promulgated pursuant to the Exchange Act. The
Plan provides for adjustments to reflect any future stock dividends,
stock splits or other relevant capitalization changes. Options to be
granted under the Plan may be either "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or nonqualified options, and will be exercisable within 10
years after the date of the grant (five years for incentive stock
options granted to holders of more than 10% of the outstanding Common
Stock). The option price is 100% of the fair market value of the shares
on the date the option was granted (or 110% of fair market value in the
case of incentive stock options granted to holders of more than 10% of
the outstanding Common Stock). The options granted under the Plans
generally become 25% vested after the first anniversary of the date of
grant, and thereafter the options vest monthly over the remaining
three-year period. The options are not exercisable later than 10 years
after the date they are granted. Unvested options generally terminate
upon the death or termination of employment of the optionee.
3 All options were granted at the fair market value on the date of grant.
7
<PAGE>
The following table sets forth information with respect to the exercise of stock
options by the Named Officers during the fiscal year ended June 30, 1996, and
the number and value of unexercised options held by the Named Officers at the
fiscal year end:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Options at Value of Unexercised In-the-Money
Fiscal Year End (#)(1),(2) Options at Fiscal Year End ($)(3)
Shares -------------------------------- ---------------------------------
Acquired on Value
Name Exercise(#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William C. Keiper 0 $ 0 486,553 363,447 $ 0 $ 0
Joel J. Kocher 0 0 138,120 361,880 32,768 61,732
William T. 0 0 47,566 117,434 29,729 73,396
Peterson, III
Justin Priestley 2,917 3,282 10,416 36,667 6,614 22,917
Sunil Padiyar 0 0 84,861 0 20,061 0
</TABLE>
- -------------------------
1 All options for Common Stock were granted pursuant to the Artisoft,
Inc. Amended 1990 Stock Incentive Plan or the Artisoft, Inc. 1994 Stock
Incentive Plan.
2 Options for Common Stock granted under the Amended 1990 Stock Incentive
Plan and the 1994 Stock Incentive Plan generally vest over a four-year
period from the date of grant, with 25% of the shares vesting on the
first anniversary of the date of grant and the remaining shares vesting
monthly over the remaining three-year period.
3 Represents the difference between the closing price ($8.75) of the
Company's Common Stock as of June 30, 1996 as reported by the Nasdaq
National Market, and the exercise price of the options.
8
<PAGE>
EMPLOYMENT AGREEMENTS AND TERMINATION OF EMPLOYMENT AND
CHANGE IN CONTROL ARRANGEMENTS
The Company has entered into employment agreements with Messrs. Keiper and
Kocher which provide for annual base salaries of $350,000 and $300,000
respectively, which may be increased at the discretion of the Board of Directors
or decreased in connection with across-the-board salary reductions similarly
affecting all senior executives of the Company. The agreements also provide for
payment of discretionary bonuses, including bonuses payable under bonus plans
available to other executives, and for participation in employee benefit plans
and fringe benefits generally available to the Company's senior executives. Mr.
Keiper's agreement became effective on October 23, 1995 and Mr. Kocher's
agreement became effective October 26, 1995. Mr. Keiper's agreement is for an
initial term of two years and Mr. Kocher's agreement is for an initial term of
three years. Thereafter, each agreement is automatically extended for successive
one-year periods unless otherwise terminated as provided therein.
Except for salary and initial term, as noted above, the agreements for Messrs.
Keiper and Kocher are similar and provide as follows. If either executive's
employment is terminated by reason of his death or "Disability" (as defined in
the agreement), by the Company for "Cause" (as defined in the agreement) or by
either executive for any reason (other than for "Good Reason") (as defined in
the agreement), then they will be entitled to their compensation through the
date of termination. If either executive's employment is terminated upon the
expiration of any term of the agreement, then the Company will (i) continue
their base salary then in effect for a period of one year in the case of Mr.
Keiper, and six months in the case of Mr. Kocher, following the date of
termination, (ii) pay to either executive a lump sum payment equal to the
average of their annual bonuses paid for the three fiscal years immediately
preceding the fiscal year in which the termination of employment occurs, and
(iii) provide for the continued vesting of all unvested stock options held by
either executive that would otherwise have vested within one year following the
date of termination. If either executive's employment is terminated by the
Company without Cause or by them for Good Reason prior to a "Change of Control"
(as defined in the agreement), then the Company will (i) continue their base
salary then in effect until the earlier of the employment of either executive in
a senior executive position, or two years in the case of Mr. Keiper or one year
in the case of Mr. Kocher, following the date of termination of employment (with
a minimum salary continuation period of one year for Mr. Keiper and six months
for Mr. Kocher), (ii) pay to either executive a lump sum payment equal to the
average of the annual bonuses paid to them for the three fiscal years
immediately preceding the fiscal year in which the termination of employment
occurs, (iii) maintain the employee benefits available to them immediately prior
to the termination of employment until the earlier of his attainment of
comparable benefits upon alternative employment or one year following the
termination date, and (iv) provide for the immediate vesting of all unvested
stock options previously granted them.
Messrs. Keiper and Kocher have also entered into Change in Control Agreements,
each dated October 26, 1995, providing that if their employment is terminated by
the Company without cause or by the executive for "Good Reason" following a
change in control, then the Company will pay a lump sum payment to such
executive. For Mr. Keiper the payments would include (i) 2.99 times his base
salary, (ii) a pro rata portion of the target bonus for the year in which the
termination occurred, (iii) one times his highest target bonus for the past
three years or the year in which the termination occurred, regardless of whether
the target bonus was actually paid, (iv) a continuation of employee benefits for
the earlier to occur of three years or benefit coverage under a subsequent
employer with substantially equivalent benefits, and (v) the vesting of all
unvested stock options. In the case of Mr. Kocher, the payment would include (i)
two times his base salary, (ii) a pro rata portion of the target bonus for the
year in which the termination occurred, (iii) one times his highest target bonus
9
<PAGE>
for the past three years or the year in which the termination occurred
regardless of whether the target bonus was actually paid, (iv) a continuation of
employee benefits for the earlier to occur of two years or benefit coverage
under a subsequent employer with substantially equivalent benefits, and (v) the
vesting of all unvested stock options.
In addition, if it is determined that any payment provided for above would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue Code,
then Mr. Keiper or Mr. Kocher would be entitled to an additional gross-up
payment that would place them in the same after-tax economic position that they
would have enjoyed if the excise tax had not applied to the payment.
In addition, the Company has entered into change-in-control agreements with
certain of its executive officers. These agreements provide that (i) in the
event of a change in control, and (ii) in the event of a subsequent reduction in
duties and responsibilities of the executive officer, then the executive
officer's unvested stock options that would otherwise vest over the two-year
period following the date of reduction of duties and responsibilities, will
vest, and the Company will continue to pay to such executive officer the base
salary, proportionate bonus and other employee benefits that the executive
officer would otherwise have received for a one-year period after the date of
reduction of duties and responsibilities.
With respect to options granted under the Artisoft, Inc. Amended 1990 Stock
Incentive Plan, in the event of a change of control of the Company, the
Compensation Committee of the Board of Directors, in its discretion, may elect
to do either or both of the following: (a) declare any option theretofore
granted to be immediately exercisable and fully vested; and (b) cash out the
value of all outstanding stock options at the price per share at which the
change in control occurs. Under the Artisoft, Inc. 1994 Stock Incentive Plan (
"Stock Incentive Plan" ), the Compensation Committee may, in its discretion for
all Participants (as defined in the Stock Incentive Plan) other than nonemployee
directors, accelerate vesting under any award under the Stock Incentive Plan in
the event of a Corporate Transaction or Change of Control (as defined in the
Stock Incentive Plan). For nonemployee directors who receive awards under the
Automatic Option Grant Program (as defined in the Stock Incentive Plan), in the
event of a Corporate Transaction or Change of Control, all unvested options will
vest automatically. Under the Artisoft, Inc. Employee Stock Purchase Plan
("Stock Purchase Plan"), if a Change in Ownership (as defined in the Stock
Purchase Plan) occurs, then all outstanding purchase rights will vest and Common
Stock will be purchased for the accounts of the Participants (as defined in the
Stock Purchase Plan).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Gary E. Liebl (Chairman) and
Kathryn A. Braun. No member of the Compensation Committee was at any time during
fiscal 1996, or formerly, an officer or employee of the Company or any
subsidiary of the Company, nor has any member of the Compensation Committee had
any relationship with the Company requiring disclosure under Item 404 of
Regulation S-K of the Exchange Act. No executive officer of the Company has
served as a director or member of the Compensation Committee (or other committee
serving an equivalent function) of any other entity, one of whose executive
officers served as a director of or member of the Compensation Committee of the
Company.
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since the beginning of the Company's last fiscal year, the Company has not had
any, and there are no currently proposed, transactions with any director,
executive officer, five percent stockholder or any family members or affiliates
of the foregoing persons that are required to be disclosed herein.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee (the "Committee") of the Board of Directors makes
this report on executive compensation pursuant to Item 402 of Regulation S-K.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act, that might incorporate future filings, including this Proxy Statement, in
whole or in part, this report of the Compensation Committee and the graph which
follows this report shall not be incorporated by reference into any such
filings, and such information shall be entitled to the benefits provided in Item
402(a)(9).
The Committee recommends the compensation of the Chief Executive Officer to the
Board and reviews and approves the design, administration and effectiveness of
compensation programs for other key executive officers, including salary, cash
bonus levels, other perquisites and option grants under the Amended 1990 Stock
Incentive Plan and the 1994 Stock Incentive Plan (the "Plans"). The Committee is
composed entirely of independent outside members of the Company's Board of
Directors.
Compensation Philosophy
The objectives of the Company's executive compensation policies are to attract,
retain and reward executive officers who contribute to the Company's success, to
align the financial interests of executive officers with the performance of the
Company, to strengthen the relationship between executive pay and shareholder
value, to motivate executive officers to achieve the Company's business
objectives and to reward individual performance. During fiscal 1996, the Company
used base salary, executive officer cash bonuses and stock options under the
Plans to achieve these objectives. In carrying out these objectives, the
Committee considers the following:
(1) The level of compensation paid to executive officers in positions of
companies similarly situated in size and products. To ensure that pay
is competitive, the Committee, from time to time, compares the
Company's executive compensation packages with those offered by other
companies in the same or similar industries or with other similar
attributes. Compensation surveys used by the Company typically include
the companies comprising the Nasdaq Computer and Data Processing Stocks
used for the comparative graph following this report, as well as other
public and private companies comparable in size, products or industry
with the Company.
(2) The individual performance of each executive officer. Individual
performance includes meeting individual performance objectives,
demonstration of job knowledge, skills, teamwork and acceptance of the
Company's core values.
11
<PAGE>
(3) Corporate performance. Corporate performance is evaluated by factors
such as performance relative to competitors, performance relative to
business conditions and progress in meeting the Company's objectives
and goals.
(4) The responsibility and authority of each position relative to other
positions within the Company. The Committee does not quantitatively
weight these factors but considers all of these factors as a whole in
establishing executive compensation. The application given each of
these factors in establishing the components of executive compensation
follows.
Base Salary
Base salaries are established for each executive officer at levels that are
intended to be competitive with salaries for comparable positions at other
software and computer industry companies of similar size or products. The
Company seeks to pay salaries to executive officers that are commensurate with
their qualifications, duties and responsibilities and that are competitive in
the marketplace. In conducting annual salary reviews, the Committee considers
each individual executive officer's achievements during the prior fiscal year in
meeting Company financial and business objectives, as well as the executive
officer's performance of individual responsibilities and the Company's financial
position and overall performance. While the Committee considers the low,
midpoint and upper ranges of base salaries published by compensation surveys in
establishing base salaries of each executive officer, the Committee does not
have a policy or target of how each executive officer's base salary, or salaries
of executive officers as a group, compare with the low, midpoint or upper ranges
of compensation surveys.
Performance Bonus
In addition, executives are eligible to receive a performance bonus payable in
cash. Performance bonuses are used to provide executive officers with financial
incentives to meet six month performance targets of the Company and individual
performance objectives. At the beginning of each fiscal year and at mid-year,
the Committee establishes a targeted bonus for each executive and establishes
the individual performance objectives for the executive to achieve the bonus.
For fiscal 1996 the performance bonuses paid under the executive bonus plan were
based on results for the second half of such year and were based 35% on
attainment of net sales goals, 35% on attainment of operating income goals and
30% on the attainment of individual performance objectives for each of the
executives. Executive bonuses were targeted at between 20% and 60% of the
executive officers' base salaries, for the applicable period, if the
predetermined goals were achieved, with the more senior executive officers
having a higher percentage of total compensation from annual cash bonuses.
Before any bonus became payable under the executive bonus plan, 80% of both the
established net sales and operating income goals for the Company had to be
achieved. The bonus attributed to the net sales and operating income components
would be fully earned at 100% of both the established goals, and up to 150% of
the bonus attributable to each of these components of the bonus could be
achieved upon attainment of 133% or more of the goal, provided that the
percentage of attainment for the other financial portion of the goal was at
least 80%. The individual performance objectives for executives other than the
Chief Executive Officer were proposed by management and reviewed and approved by
the Committee. Individual performance objectives for the Chief Executive Officer
were determined by the Committee and reviewed and approved by the Board of
Directors.
12
<PAGE>
Option Grants
The Committee believes that equity ownership by executive officers provides
incentives to build shareholder value and aligns the interests of executive
officers with the shareholders. The Committee typically awards a stock option
grant under the Plans upon hiring executive officers, subject to a four-year
vesting schedule. After the initial stock option grant, the Committee considers
awarding additional grants, usually on an annual basis, under the Plans. Options
are granted at the current market price for the Company's Common Stock and,
consequently, have value only if the price of the Company's Common Stock
increases over the exercise price for the period during which the options vest.
The size of the initial grant is usually determined with reference to the
seniority of the executive officer, the contribution that the executive officer
is expected to make to the Company and comparable equity compensation offered by
other software and computer industry companies. In determining the size of the
periodic grants the Compensation Committee considers prior option grants to the
executive officer, independent of whether the options have been exercised, the
executive's performance during the current fiscal year and his or her expected
contributions during the succeeding fiscal year. The Committee believes that
these periodic grants provide incentives for executive officers to remain with
the Company.
Chief Executive Officer Compensation
In fiscal 1996, the Chief Executive Officer received a salary of $350,000. The
amount of such salary was determined by the Compensation Committee based on Mr.
Keiper's performance in the effective disposition of the assets of Eagle
Technology, the development of an aggressive product plan, the development of a
new business strategy for the Company and the recognition by the Committee and
the Board of Directors in the importance of his leadership in the future success
of the Company. See "Employment Agreements and Change in Control Agreements."
Mr. Keiper was also awarded a performance bonus for the second half of fiscal
1996 (30% of his base salary for the period). The amount of such bonus was
determined by the Compensation Committee taking into account the operational
results of the Company for the second half of fiscal 1996, the Chief Executive
Officer's contribution to the Company and the achievement of his individual
performance objectives including development of a technology and product
strategy for the Company and the evaluation of a range of acquisition
opportunities to provide productive synergies for timely and profitable growth.
Respectfully submitted,
Compensation Committee
Gary E. Liebl
Kathryn Braun
13
<PAGE>
COMPARISON OF STOCK PERFORMANCE
The following graph compares the cumulative total returns for the Company's
Common Stock ("ASFT"), the Standard & Poor's 500 ("S&P 500") and the Nasdaq
Computer and Data Processing Stocks ("NCDPS") for the period commencing
September 20, 1991, and ending June 30, 1996.(1)
<TABLE>
<CAPTION>
9/91 12/91 3/92 6/92 9/92 12/92 3/93 6/93 9/93 12/93 3/94 6/94 12/94 9/94 3/95 6/95 6/95 12/95 3/96 6/96
---- ----- ---- ---- ---- ----- ---- ---- ---- ----- ---- ---- ----- ---- ---- ---- ---- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASFT $100 $156 $138 $126 $66 $84 $45 $36 $51 $77 $101 $77 $54 $41 $46 $43 $55 $33 $41 $45
S&P 500 $100 $108 $106 $108 $111 $117 $122 $122 $125 $128 $123 $124 $130 $130 $143 $156 $169 $177 $188 $197
NCDPS $100 $124 $125 $110 $118 $134 $140 $140 $141 $141 $143 $140 $156 $172 $193 $229 $250 $261 $274 $304
</TABLE>
- -----------------------------------------------------
1 The Company's initial public offering was on September 20, 1991. The
Company's last fiscal year ended on June 30, 1996. The graph assumes
that $100 was invested on September 20, 1991, at the relevant closing
prices on that date, and that any dividends were reinvested.
14
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes, as of June 30, 1996, information regarding the
beneficial ownership of the Company's Common Stock by (i) all persons known by
the Company to be the beneficial owners of more than 5% of the outstanding
Common Stock of the Company, (ii) each director and director-nominee of the
Company, (iii) the Chief Executive Officer and the other three highest
compensated executive officers of the Company, and (iv) all executive officers
and directors of the Company as a group:
Percent of Artisoft
Amount and Nature Common Stock
Name of Beneficial Owner(1) of Beneficial Ownership(1) Outstanding
- --------------------------- ------------------------ -----------
Gerald R. Forsythe(2) 1,401,200 9.7%
1075 Noel Avenue
Wheeling, IL 60090
William C. Keiper(3) 536,408 3.7%
193,379 1.3%
Joel J. Kocher(4)
William T. Peterson, III(5) 53,107 *
Justin Priestly(6) 12,262 *
Gary E. Liebl(7) 26,300 *
1082 Country Hills Drive
Santa Ana, CA 92705
Jock Patton(8) 8,100 *
100 West Clarendon
Phoenix, AZ 85013
Kathryn A. Braun(8) 8,100 *
8105 Irvine Center Drive
Irvine, CA 92718
All executive officers and directors 888,327 6.1%
as a group (10 persons)(9)
* Less than 1%.
- -----------------------------------------------------
1 Unless otherwise noted, the persons listed in the table above have sole
voting and investment power with respect to all shares of Common Stock
shown as beneficially owned by them, subject to community property laws
where applicable. Unless otherwise noted, the business address of each
of the beneficial owners is 2202 North Forbes Boulevard, Tucson,
Arizona 85745.
2 According to Amendment No. 1, dated June 25, 1996, to the Schedule 13D
filed by Mr. Gerald R. Forsythe, Indeck Power Equipment Company, and
Indeck Energy Services, Inc. the shares of Common Stock are owned
separately by each of the reporting persons. Mr. Forsythe is Chairman &
CEO of Indeck Power Equipment Company and Chairman & CEO of Indeck
Energy Services, Inc.
3 Includes 510,803 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1996.
4 Includes 153,214 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1996.
5 Includes 52,807 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1996.
6 Includes 12,262 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1996.
7 Includes 19,200 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1996.
8 Includes 7,100 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1996.
9 Includes 807,234 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1996.
15
<PAGE>
SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 1997 annual
shareholders' meeting must be received by the Company no later than June 24,
1997, to be evaluated by the Board for inclusion in the proxy statement for that
meeting.
DISCRETIONARY AUTHORITY
While the Notice of Annual Meeting of Shareholders calls for the transaction of
such other business as may properly come before the meeting, the Board of
Directors has no knowledge of any matters to be presented for action by the
shareholders at the meeting other than as set forth above. The enclosed Proxy
gives discretionary authority, however, in the event that any additional matters
should be presented.
1996 ANNUAL REPORT ON FORM 10-K
Copies of the Company's annual report on Form 10-K for the fiscal year ended
June 30, 1996, as filed with the Securities and Exchange Commission, may be
obtained without charge by any shareholder to whom this proxy statement is
delivered upon written request to the Secretary, Artisoft, Inc., 2202 North
Forbes Boulevard, Tucson, Arizona 85745.
By the Board of Directors,
/s/ Ernest E. East
--------------------------------
Ernest E. East
Vice President, General Counsel
and Secretary
<PAGE>
Notice
of Annual
Meeting of
Shareholders
and Proxy
Statement
Artosoft
All shareholders are requested
to date, sign and return promptly
the enclosed proxy
<PAGE>
- --------------------------------------------------------------------------------
PROXY PROXY
ARTISOFT, INC.
2202 NORTH FORBES BLVD., TUCSON, ARIZONA 85745
This Proxy is Solicited on Behalf of the Board of Directors.
The undersigned appoints William C. Keiper, Joel J. Kocher and Ernest E.
East, and each of them, as proxies, each with the power to appoint his
substitute, and authorizes them to represent and vote, as designated on the
reverse side hereof, all shares of common stock of Artisoft, Inc. held by the
undersigned on September 5, 1996, at the annual shareholders' meeting to be held
on October 22, 1996, and at any adjournment or postponement of the meeting. In
their discretion, the proxies are authorized to vote such shares upon such other
business as may properly come before the meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be SIGNED on the reverse side)
- --------------------------------------------------------------------------------
<PAGE>
ARTISOFT, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
[ ]
The Board of Directors recommends a vote FOR each of the proposals listed below.
1. Election of Directors--
Nominees: Kathryn A. Braun, Gary E. Liebl
FOR WITHHOLD FOR ALL (Except Nominee(s) written below)
[ ] [ ] [ ] ________________________________________
2. Ratification of the appointment of KPMG Peat Marwick
LLP as independent auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
This proxy, when properly executed, will be voted in the manner directed by the
undersigned shareholder(s). If no direction is made, this proxy will be voted
FOR each of the listed proposals and, with respect to any other business as may
properly come before the meeting, in accordance with the discretion of the
proxies.
Dated:__________________________, 1996
Signature(s)_____________________________
_________________________________________
Please sign exactly as name appears at
left. When shares are held by joint
tenants, both should sign. When signing
as attorney, executor, administrator,
trustee or guardian, please 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 authorized person.
