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. )
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ARTISOFT, INC
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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<PAGE>
ARTISOFT, INC.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 3, 1997
The annual meeting of shareholders of Artisoft, Inc., a Delaware corporation,
will be held at the Artisoft Distribution Center, 2155 North Forbes Boulevard,
Tucson, Arizona 85745, on Monday, November 3, 1997, 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, 1998; 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 12, 1997 will be entitled to vote at the meeting.
A copy of the Company's 1997 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
October 3, 1997
<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
Monday, November 3, 1997, at 10:00 a.m. M.S.T. (the "1997 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 October 3,
1997.
VOTING RIGHTS
Only shareholders of record at the close of business on September 12, 1997, may
vote at the 1997 Annual Meeting or any adjournment or postponement thereof,
notwithstanding any transfer on the books of the Company thereafter. As of that
date, there were 14,528,964 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 1997 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 1997 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 1997 Annual Meeting and voting in person
(attendance at the 1997 Annual Meeting will not in and of itself constitute
revocation of a proxy).
<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 1997 is comprised of two directors, T. Paul Thomas and Jerry E.
Goldress. Mr. Thomas and Mr. Goldress have been nominated for election at the
1997 Annual Meeting to hold office until the year 2000 Annual Meeting of
Shareholders and until their successors are elected and qualified.
The Board of Directors of the Company recommends a vote for T. Paul Thomas and
Jerry E. Goldress as Directors. Should either nominee become unable to serve for
any reason, the Nominating Committee of the Board of Directors may designate a
substitute nominee, in which event the persons named in the enclosed proxy will
vote for the election of such substitute nominee.
Nominee for Election to Term Expiring 2000
T. Paul Thomas, age 37, has served on the Board of Directors of the Company
since September 12, 1997 when he was appointed to fill the vacancy created by
the resignation of William C. Keiper. Mr. Thomas joined Artisoft on June 9, 1997
as a Vice President and President of the Communications Software Group and on
June 27, 1997, was named President and Chief Operating Officer of the Company.
Mr. Thomas was Senior Vice President-Marketing for Sunquest Information, Inc.
from May 1996 until he joined the Company. From October 1994 to April 1996 he
was employed by Apple Computer, Inc. in executive marketing and sales positions,
and from November 1993 to October 1994 by the Company as Vice President of
Worldwide Marketing. From January, 1990 to November, 1993 Mr. Thomas was
employed by Compaq Computer Corp., where he served in various management
positions.
Jerry E. Goldress, age 66, has served on the Board of Directors of the Company
since June 27, 1997 and as Chairman of the Board of Directors since September
12, 1997. Mr. Goldress is Chairman of the Board and Chief Executive Officer of
Grisanti, Galef and Goldress, Inc.("GG&G"), a firm specializing in corporate
turnaround management and performance improvement. Since joining GG&G in 1973
Mr. Goldress has been president of more than 100 manufacturing, distribution and
retail organizations.
Incumbent Director - Term Expiring 1999
Kathryn A. Braun, age 46, has served on the Board of Directors of the Company
since August 4, 1994. Ms. Braun is President and Chief Operating Officer,
Personal Storage Division 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 Pacific Corp., a publicly-traded,
electricity and telephone utility company.
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Incumbent Directors - Term Expiring 1998
Jock Patton, age 50, has served on the Board of Directors of the Company since
August 4, 1994. Mr. Patton is a private investor. From 1993 to June 30, 1997 Mr.
Patton was 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, Arizona law firm of
Streich Lang.
Michael P. Downey, age 49, has served on the Board of Directors since February
19, 1997. Mr. Downey is Executive Vice President and Chief Financial Officer of
Nellcor Puritan Bennett, a medical devices manufacturing company where he has
served in various capacities since 1986. Mr. Downey is also a member of the
Board of Directors of Emulex Corporation a designer and manufacturer of both
software and hardware based network access products. Previously, Mr. Downey was
Vice President of Finance for Shugart Corporation and had seven years experience
in accounting management positions with General Motors Corporation.
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, 1998, 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 1997
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,
1998.
5
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MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During fiscal 1997, the Board of Directors met ten times. Each director attended
at least 75% of the meetings held during fiscal 1997, including meetings of
Committees of which each is a member. The Board of Directors has Audit,
Compensation, and Nominating Committees, each comprised exclusively of outside
directors.
The Audit Committee, which currently is comprised of Michael P. Downey (Chair),
Jerry E. Goldress, and Jock Patton, 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
1997.
The Compensation Committee, which currently is comprised of Jerry E. Goldress
(Chair), Jock Patton 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 1997.
The Nominating Committee, which currently is comprised of Kathryn A. Braun
(Chair) and Michael P. Downey, 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 three meetings in fiscal 1997.
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DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a $10,000 annual
retainer. 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 over a period of three years. 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.
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EXECUTIVE COMPENSATION
The following table shows for the three fiscal years ended June 30, 1997, the
compensation paid to the Company's Chief Executive Officer, and to the most
highly paid executive officers serving at the end of the fiscal year whose
aggregate salary and bonus compensation exceeded $100,000 and the Vice President
of North American Sales who served in that capacity until May 23, 1997
(collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
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Other
Annual All Other
Executive Officers Year Salary ($) Bonus ($)(1) Compensation ($)(2) Options # Compensation ($)(3)
- ------------------ ---- ---------- ------------ ------------------- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William C. Keiper(4) 1997 309,538 0 1,411 0 4,625
Chairman and Chief Executive 1996 350,000 93,030 4,784 200,000 2,250
Officer 1995 348,269 0 4,818 0 4,532
Olivier Zitoun(5) 1997 201,036 0 0 0 0
Vice President of Marketing 1996 186,236 46,096 20,369 30,000 0
and Networking Product Group 1995 156,622 15,566 0 57,500 0
Gary R. Acord(6) 1997 140,000 0 708 0 2,100
Vice President and Chief 1996 23,692 7,770 14,569 100,000 0
Financial Officer 1995 N/A N/A N/A N/A N/A
Ernest E. East(7) 1997 130,000 0 24,942 0 2,850
Vice President, General 1996 55,000 15,629 0 100,000 0
Counsel 1995 N/A N/A N/A N/A N/A
Former Executive Officer
Bryan J. Moynahan 1997 124,423 0 0 30,000 4,359
1996 106,985 22,974 0 25,000 3,293
1995 85,000 43,031 0 30,000 1,928
</TABLE>
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(1) No bonus payments were made for fiscal 1997. Unless otherwise noted,
includes amounts paid or payable under the executive bonus plans for fiscal 1996
or 1995 respectively.
(2) Includes relocation expenses imputed into income, Company-paid life
insurance for 1996 and Company-paid life insurance and income tax preparation
services for 1995.
(3) Includes 401(K) plan Company matching funds.
(4) For fiscal 1997, Other Annual Compensation included $1,411 for Company-paid
life insurance. For fiscal 1996, Other Annual Compensation included $4,784 for
Company-paid life insurance and income tax preparation services. For fiscal
1995, Other Annual Compensation included $2,000 for executive income tax
preparation services and $2,818 for Company-paid life insurance.
(5) For fiscal 1996, Other Annual Compensation included $20,369 for relocation
expenses imputed into income.
(6) For fiscal 1997, Other Annual Compensation included $708 for Company-paid
life insurance. For fiscal 1996, Other Annual Compensation included $14,393 for
relocation expenses imputed into income and $176 for Company-paid life
insurance.
(7) For fiscal 1997, Other Annual Compensation included $23,431 for relocation
expenses imputed into income and $1,511 for Company-paid life insurance.
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<PAGE>
OFFICER SEVERANCE
On June 27, 1997 in connection with a major restructuring of the Company, a
notice of termination pursuant to the Worker Adjustment and Retraining Act
("WARN Act") was delivered to Messrs. Olivier Zitoun, Gary R. Acord and Ernest
E. East. Effective August 28, 1997 Mr. Zitoun's and Mr. Acord's employment
terminated pursuant to such WARN Act notice and they received lump sum severance
payments of six months base salary in the amounts of $87,000 for Mr. Zitoun and
$70,000 for Mr. Acord. Mr. Acord was also granted forgiveness of a promissory
note in the amount of $10,000. Mr. East and the Company have entered into an
agreement whereby, effective September 30, 1997, he will receive a severance
payment of six months salary ($65,000) but will continue to be employed by the
Company on a part time basis.
Effective October 23, 1995, William C. Keiper, Chairman and Chief Executive
Officer of the Company, entered into an Employment Agreement with the Company.
Mr. Keiper's agreement provided that if his employment were terminated by the
Company without cause the Company would (i) continue his base salary then in
effect until the earlier of his employment in a senior executive position, or
two years following the date of termination of employment (with a minimum salary
continuation period of one year), (ii) pay to Mr. Keiper a sum equal to the
average of his annual bonuses paid for the three fiscal years immediately
preceding the fiscal year in which the termination of employment occurred, (iii)
maintain the employee benefits available to him 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 to him.
On June 27, 1997 a notice of termination pursuant to the WARN Act was also
delivered to Mr. Keiper. However, the Board of Directors desired to retain the
services of Mr. Keiper to pursue certain activities on behalf of the Company,
for a period up to January 1, 1998, unless an earlier termination of services
was mutually agreed. As a consequence of Mr. Keiper's agreement to continue in
the employ of the Company following receipt of the WARN Act notice, and to
pursue the activities on behalf of the Company, the Company agreed to pay to Mr.
Keiper on his termination date a lump sum payment equal to two years' Base
Salary (as defined in the Employment Agreement betweent the Company and Mr.
Keiper) plus bonuses in an amount up to an additional $250,000 if certain events
were to occur. All other terms and conditions of the Employment Agreement
continued to apply. On September 10, 1997, Mr. Keiper and the Board of Directors
mutually agreed to accelerate his departure from the Company and reduce the
amounts payable to him as a consequence of such departure. Mr. Keiper resigned
as Chairman of the Board on September 12, 1997, and as Chief Executive Officer
effective September 30, 1997. On September 30, 1997, the Company paid Mr. Keiper
one and one-half years' of Base Salary ($525,000), bonus payments related to the
achievement of agreed upon performance objectives ($125,000) and a bonus
required under his Employment Agreement ($31,000). In addition, Mr. Keiper will
be a participant in employee benefit plans and fringe benefits generally
available to the Company's Senior Executives for a period of the first to occur
of the attainment of comparable benefits upon alternative employment or 12
months following his termination date. Such payments and the continuation of
such benefits satisfies the Company's severance obligations to Mr. Keiper.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The only Named Officer who received a stock option grant during the fiscal year
ended June 30, 1997 was Bryan C. Moynahan, who resigned his position with the
Company effective May 23, 1997. All of Mr. Moynahan's option rights have lapsed
subsequent to his resignation.
There were no exercises of stock options by the Named Officers during the fiscal
year ended June 30, 1997, and none of the Named Officers held "in the money"
options as of such date.
CHANGE IN CONTROL AND SEVERANCE AGREEMENTS
The Company has entered into Change in Control Agreements with all of its
Executive Officers. These agreements provide that in the event of a Change in
Control, as defined, and a termination of employment (i) without cause or (ii)
by the executive for "Good Reason" such as a reduction in duties and
responsibilities, then the Executive's unvested stock options that would
otherwise vest following the termination of employment, will vest and the
Company will pay the Executive a lump sum equal to one years' base salary plus
target bonus. In addition, the Executive will be entitled to other employee
benefits that the Executive Officer would otherwise have received for a one year
period after the termination of employment.
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
automatically vest. 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).
In addition, the Company has entered into Severance Agreements with certain
members of senior management providing that, in the event of their involuntary
termination, they will have the option of receiving a lump sum payment equal to
six months base salary or a salary continuation for the earliest to occur of the
time they obtain other full time employment or nine months from the date of
involuntary termination.
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Jerry E. Goldress (Chairman),
Michael P. Downey and Kathryn A. Braun. No member of the Compensation Committee
was at any time during fiscal 1997, or formerly, an officer or employee of the
Company or any subsidiary of the Company. 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.
On June 19, 1997, the Company entered into an agreement with Grisanti, Galef and
Goldress, Inc. ("GG& G") pursuant to which GG&G was retained by the Company to
provide management and turnaround services. Mr. Goldress is the Chairman and
Chief Executive Officer of GG&G and was the principal consultant assigned to
perform these services. On June 27, 1997, Mr. Goldress was appointed to the
Board of Directors of the Company, and on September 12, 1997, he was appointed
Chairman of the Board of Directors and assumed additional management
responsibilities regarding the Company. Under the terms of the initial
engagement GG&G was paid $40,000 in fiscal 1997, plus expenses incurred by Mr.
Goldress in the amount of $1,297. In connection with the additional
responsibilities assumed by Mr. Goldress on September 12, 1997, the Company has
entered into a new agreement with GG&G pursuant to which GG&G will be
compensated for the services provided by Mr. Goldress to the Company at the rate
of $35,000 per month plus expenses incurred by Mr. Goldress. In addition, GG&G
will be paid a performance bonus of 100,000 shares of the Company's Common Stock
based upon the achievement of objectives established by the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors and executive officers, and persons who own more than 10% of
a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission ("SEC") and the National Association of
Securities Dealers initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Officers,
directors and greater than 10% shareholders are required by SEC regulations to
furnish the Company with copies of all Section 16(a) reports they file. To the
Company's knowledge, based solely upon review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, all Section 16(a) filing requirements applicable to the Company's
officers, directors and greater than 10% beneficial owners were satisfied during
fiscal 1997.
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).
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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. In recognition of the Company's
financial performance during fiscal 1997, the Company did not award executive
officers cash bonuses and stock options under the Plans except in cases of
promotions. However, in general, the Committee considers the following:
(1) The level of compensation paid to executive officers in 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.
(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.
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<PAGE>
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 1997 the Company did not award executive officers the performance
bonuses. If applicable, executive bonuses are targeted between 20% and 60% of
the executive officers' base salaries, for the applicable period, if the
predetermined goals are achieved, with the more senior executive officers having
a higher percentage of total compensation from annual cash bonuses. Before any
bonus could have become payable under the executive bonus plan, 80% of both the
established net sales and operating income goals for the Company must have been
achieved. The bonus attributed to the net sales and operating income components
would have been 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
have been achieved upon attainment of 133% or more of the goal, provided that
the percentage of attainment for the other financial component of the goal was
at least 80%. The individual performance objectives for executives other than
the Chief Executive Officer are proposed by management and reviewed and approved
by the Committee. Individual performance objectives for the Chief Executive
Officer are determined by the Committee and reviewed and approved by the Board
of Directors.
Option Grants
The Committee believes that equity ownership by executive officers provides
incentive 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.
13
<PAGE>
Chief Executive Officer Compensation
In fiscal 1997, the Chief Executive Officer was paid $309,538. Mr. Keiper
voluntarily reduced the Base Salary payable pursuant to his employment contract
by twenty-percent (20%) from October 1, 1996 to December 31, 1996; and by
fourteen-percent (14%) from January 1, 1997 through June 30, 1997. See "Officer
Severance".
Respectfully submitted,
Compensation Committee
Jerry E. Goldress
Michael P. Downey
Kathryn Braun
14
<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 June 30,
1992, and ending June 30, 1997.
6/92 9/92 12/92 3/93 6/93 9/93 12/93 3/94 6/94 9/94 12/94
---- ---- ----- ---- ---- ---- ----- ---- ---- ---- -----
ASFT 126 66 85 46 36 51 78 102 78 54 41
NASDAQ 108 112 130 133 135 147 150 143 137 148 146
NCDPS 110 118 134 140 140 141 141 143 140 156 172
3/95 6/95 9/95 12/95 3/96 6/96 9/96 12/96 3/97 6/97
---- ---- ---- ----- ---- ---- ---- ----- ---- ----
ASFT 46 43 56 33 41 46 30 27 16 12
NASDAQ 160 182 204 207 217 234 243 254 241 285
NCDPS 193 229 250 261 274 304 310 323 300 384
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table includes, as of June 30, 1997, 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 four highest
compensated executive officers of the Company, and (iv) all executive officers
and directors of the Company as a group:
<TABLE>
<CAPTION>
Percent of Artisoft
Amount and Nature Common Stock
Name of Beneficial Owner(1) of Beneficial Ownership(1) Outstanding
- ------------------------- -------------------------- -----------
<S> <C> <C>
Gerald R. Forsythe(2) 1,752,390 12.1%
1075 Noel Avenue
Wheeling, IL 60090
T. Paul Thomas 0 0
William C. Keiper(3) 748,513 5.1%
Olivier Zitoun(4) 44,789 *
Gary R. Acord(5) 32,408 *
Ernest E. East(6) 38,368 *
Bryon J. Moynahan(7) 1,923 *
Jerry E. Goldress 0 0
Michael P. Downey 0 0
Jock Patton(8) 14,317 *
100 West Clarendon
Phoenix, AZ 85013
Kathryn A. Braun(9) 14,317 *
8105 Irvine Center Drive
Irvine, CA 92718
All executive officers and directors
as a group (11 persons)(10) 2,647,025 17.2%
</TABLE>
- -------------------------
* Less than 1%.
16
<PAGE>
(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. 3, dated September 16, 1997, 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 710,408 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1997.
(4) Includes 44,789 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1997.
(5) Includes 32,408 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1997.
(6) Includes 38,368 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1997.
(7) Includes 1,923 shares of Common Stock subject to options exercisable within
60 days of June 30, 1997.
(8) Includes 12,317 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1997.
(9) Includes 12,317 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1997.
(10) Includes 2,647,025 shares of Common Stock subject to options exercisable
within 60 days of June 30, 1997.
17
<PAGE>
SHAREHOLDER PROPOSALS TO BE PRESENTED AT THE NEXT ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 1998 annual
shareholders' meeting must be received by the Company no later than May 18,
1998, 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.
1997 ANNUAL REPORT ON FORM 10-K
Copies of the Company's annual report on Form 10-K for the fiscal year ended
June 30, 1997, 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,
Ernest E. East
Vice President, General Counsel
and Secretary
18
<PAGE>
Notice
of 1997 Annual
Meeting of
Shareholders
and Proxy
Statement
Artisoft
All shareholders are requested
to date, sign and return promtly
the enclosed proxy.
<PAGE>
PROXY ARTISOFT, INC. PROXY
2202 NORTH FORBES BLVD., TUCSON, ARIZONA 85745
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned appoints Kathryn A. Braun, Michael P. Downey and Jock
Patton, and each of them, as proxies, each with the power to appoint a
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 12, 1997, at the annual shareholders' meeting to be
held on November 3, 1997, 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 CARE PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be SIGNED on the reverse side)
<PAGE>
<TABLE>
<CAPTION>
The Board of Directors recommends a vote FOR each of the proposals listed below.
<S> <C> <C>
1. Election of Directors--
Nominees: Jerry E. Goldress, T. Paul Thomas FOR WITHHOLD
ALL ALL FOR ALL (Except Nominee(s) written below)
( ) ( ) ( ) ________________________________________________
2. Ratification of the appointment of KPMG Peat Marwick FOR AGAINST ABSTAIN This proxy, when properly executed, will be
LLP as independent auditors. ( ) ( ) ( ) 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:__________________________, 1997
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.
</TABLE>
