SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] 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, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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<PAGE>
ARTISOFT
5 CAMBRIDGE CENTER
CAMBRIDGE, MASSACHUSETTS 02142
================================================================================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 2, 2000
The annual meeting of shareholders of Artisoft, Inc., a Delaware corporation,
will be held at University Park Hotel at MIT, Cambridge, Massachusetts 02139 on
Thursday, November 2, 2000, at 10:00 a.m. E.S.T. for the following purposes:
1. To elect one Director for the term set forth in the accompanying Proxy
Statement;
2. To consider and act upon a proposal to ratify the selection of KPMG
LLP as the Company's independent public accountants for the fiscal
year ending June 30, 2001; 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 22, 2000 will be entitled to vote at the meeting.
A copy of the Company's 2000 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.
Kirk D. Mayes
Interim Chief Financial Officer and Secretary
Cambridge, Massachusetts
September 29, 2000
<PAGE>
ARTISOFT, INC.
5 CAMBRIDGE CENTER
CAMBRIDGE, MASSACHUSETTS 02142
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
Thursday, November 2, 2000, at 10:00 a.m. E.S.T. (the "2000 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 or about
September 29, 2000.
VOTING RIGHTS
Only shareholders of record at the close of business on September 22, 2000, may
vote at the 2000 Annual Meeting or any adjournment or postponement thereof,
notwithstanding any transfer on the books of the Company thereafter. As of that
date, there were 15,561,137 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 2000 Annual Meeting. Abstentions and broker non-votes will also
be included in the determination of the number of shares represented for a
quorum. Abstentions are counted in tabulations of the votes cast on proposals
presented to shareholders, whereas broker non-votes are not counted for purposes
of determining whether a proposal has been approved. Proxies will be tabulated
by the Company's transfer agent, Computershare Investor Services. The Company
shall, in advance of the election of directors, appoint one or more Inspectors
of Election to count all votes and ballots at the meeting and make a written
report thereof. 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
$4,000 plus reasonable out-of-pocket expenses.
All valid proxies received before the 2000 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 2000 Annual Meeting and voting in person
(attendance at the 2000 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 2000 is presently comprised of one director, Steven G. Manson. Mr.
Manson has been nominated for election at the 2000 Annual Meeting to hold office
until the year 2003 Annual Meeting of Shareholders and until his successor is
elected and qualified.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR STEVEN G. MANSON AS
DIRECTOR. Should this 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 2003
STEVEN G. MANSON, age 41, is President and Chief Executive Officer of the
Company. He joined the Company in October 1996 as Vice President of Product
Management - Computer Telephony Division. Subsequently, he was named Vice
President and General Manager, and then Senior Vice President and General
Manager, of the Computer Telephony Products Group. Mr. Manson was named
President and Chief Executive Officer of the Company in July 2000. Mr. Manson
joined Artisoft from Gensym Corporation where he was Director of Corporate
Marketing. Earlier in his career Mr. Manson held other senior level marketing
positions at Cadre Technologies, Inc. and Prime Computer Inc.
INCUMBENT DIRECTORS - TERM EXPIRING 2001
MICHAEL P. DOWNEY, age 52, has served on the Board of Directors since February
1997. In addition, Mr. Downey currently is a private investor and executive
consultant. From 1995 until November, 1997, Mr. Downey served as Executive Vice
President and Chief Financial Officer of Nellcor Puritan Bennett ("NPB"), a
medical device company. Mr. Downey served as Vice President and Chief Financial
Officer of NPB from 1989 until 1995, and in other capacities for NPB from 1986
until 1989. He retired from NPB upon its acquisition in November 1997 by
Mallinckrodt. Prior to his employment by NPB, Mr. Downey was Vice President for
Finance for Shugart Corporation, a manufacturer and distributor of computer disk
drives, and had several years experience in accounting management positions with
General Motors Corporation. Mr. Downey is also a member of the board of
directors of Emulex Corporation, a publicly traded company engaged in the design
and manufacture of both software- and hardware-based network access products.
FRANCIS E. GIRARD, age 61, has served on the Board of Directors since October
1998. Mr. Girard currently serves as the Chief Executive Officer of Comverse
Network Systems, a subsidiary of Comverse Technologies, Inc., and as a member of
the board of directors of Comverse Technology, Inc., and Netsilicon, Inc. Prior
to joining Comverse, Mr. Girard was President and Chief Executive Officer of
Boston Technology and Vice President of Sales, Marketing and Support for NEC
Information Systems, Inc.
2
<PAGE>
INCUMBENT DIRECTORS - TERM EXPIRING 2002
ROBERT H. GOON, age 59, has served on the Board of Directors since September
2000. Mr. Goon has been engaged in the practice of law for 35 years. Since
October 1999, he has been a sole practitioner. For more than the previous five
years, Mr. Goon was a partner in the law firm of Jeffer, Mangels, Butler &
Marmaro, LLP. Mr. Goon also serves as a director of Emulex Corporation, a
publicly traded company engaged in the design and manufacture of both software-
and hardware-based network access products, and Coastcast Corporation, the
principal business of which is the manufacturer of golf club heads.
KATHRYN B. LEWIS, age 49, has served on the Board of Directors of the Company
since August 1994. Until August 1998, Ms. Braun served as President and Chief
Operating Officer, Personal Storage Division, of Western Digital Corporation, a
manufacturer of computer disk drives, where she served in other capacities since
1978.
JAMES L. ZUCCO, JR., age 49, has served on the Board of Directors of the Company
since January 1999. Mr. Zucco currently serves as Chief Executive Officer of
Spike Technologies. Mr. Zucco formerly served as President and Chief Executive
Officer of Shiva Corporation. Mr. Zucco joined Shiva in 1997 as President and
Chief Operating Officer. Mr. Zucco has also served as President, Network
Communications Software at Lucent Technologies and Vice President and General
Manager of Lucent North America Carrier Business for Network Systems. Prior to
joining Lucent, Mr. Zucco served as Vice President and General Manager of AT&T
Advanced Network Applications at AT&T Business Communications Services (BCS).
From 1986 to 1993, Zucco served in key technology management positions at MCI.
ITEM NO. 2
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon the recommendation of its Audit Committee, has
selected KPMG LLP as independent auditors to audit the consolidated financial
statements of the Company for the fiscal year ending June 30, 2001, and to
perform other accounting services as requested by the Company. KPMG LLP has
acted as independent auditors of the Company since its appointment in 1990.
Representatives of KPMG LLP are expected to be present at the 2000 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 LLP to the shareholders for ratification. Unless a contrary
choice is specified, proxies will be voted for ratification of the selection of
KPMG LLP. The Board of Directors unanimously recommends the ratification of its
selection of KPMG LLP as the Company's independent auditors for the fiscal year
ending June 30, 2001.
MEETINGS AND COMMITTEES OF THE BOARD
During fiscal 2000, the Board of Directors met eight times. Each director
attended at least 75% of the meetings held during fiscal 2000, including
meetings of Committees of which each is a member. The Board of Directors has
Audit, Compensation, and Nominating Committees. The Audit Committee and
Compensation Committee are comprised exclusively of outside directors, except
that Mr. Downey served as interim President and Chief Executive Officer of the
Company for approximately four months while serving as a member of the Audit
Committee.
3
<PAGE>
AUDIT COMMITTEE
The Audit Committee, which currently is comprised of Kathryn B. Lewis (Chair),
Michael P. Downey and Francis E. Girard, 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; investigating any matter brought to its attention
within the scope of its duties; and any other responsibilities set forth in the
Audit Committee's charter. The Audit Committee held five meetings in fiscal
2000.
AUDIT COMMITTEE CHARTER
In June 2000, the Board of Directors of the Company formally adopted a charter
for the Audit Committee. The Audit Committee Charter is set forth in Annex A to
this Proxy Statement.
INDEPENDENCE OF AUDIT COMMITTEE MEMBERS
The listing rules of the National Association of Securities Dealers ("NASD")
require, among other things, that the Company's Audit Committee have at least
three members, each of whom is "independent" as defined in the NASD's listing
standards. Notwithstanding the foregoing, the NASD's listing rules allow the
Board of Directors, under exceptional and limited circumstances, to appoint one
director to the Audit Committee who is not independent, as so defined, if the
Board of Directors determines such appointment to be in the best interests of
the Company and its shareholders.
Under the NASD's listing standards, "independent director" means a person other
than an officer or employee of a company or its subsidiaries or any other
individual having a relationship which, in the opinion of the company's board of
directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. Under the NASD's listing standards, the
following persons are not considered to be independent:
(a) a director who is employed by the company or any of its affiliates
for the current year or any of the past three years;
(b) a director who accepts any compensation from the company or any of
its affiliates in excess of $60,000 during the previous fiscal year, other
than compensation for board service, benefits under a tax-qualified
retirement plan, or non-discretionary compensation;
(c) a director who is a member of the immediate family of an
individual who is, or has been in any of the past three years, employed by
the company or any of its affiliates as an executive officer. Immediate
4
<PAGE>
family includes a person's spouse, parents, children, siblings,
mother-in-law, father-in-law, brother-in-law, sister-in-law, son-in-law,
daughter-in-law, and anyone who resides in such person's home;
(d) a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the
company made, or from which the company received, payments (other than
those arising solely from investments in the company's securities) that
exceed 5% of the company's or business organization's consolidated gross
revenues for that year, or $200,000, whichever is more, in any of the past
three years; or
(e) a director who is employed as an executive of another entity where
any of the company's executives serve on that entity's compensation
committee.
Two Audit Committee members, Francis E. Girard and Kathryn B. Lewis, are
independent, as defined in the NASD's listing standards. The third member of the
Audit Committee, Michael P. Downey, is not and for the next three years will not
be independent, as so defined, because he served as interim President and Chief
Executive Officer of the Company from March 2000 through June 2000, following
the resignation of T. Paul Thomas as President and Chief Executive Officer and
pending the appointment of Steven G. Manson to such offices in July 2000.
In accordance with the NASD's listing standards, the Board of Directors
determined that, for the exceptional and limited reasons described below, Mr.
Downey's membership on the Audit Committee is required by the best interests of
the Company and its shareholders and, accordingly, that Mr. Downey should remain
as a member of the Audit Committee during the fiscal year ended June 30, 2000
and thereafter. The reasons for the Board of Directors' determination were the
temporary nature of Mr. Downey's appointment and employment as an executive
officer by the Company pending the Company's appointment of a successor
President and Chief Executive Officer, Mr. Downey's critical role in continuing
the implementation of the Company's new business strategies and Mr. Downey's
substantial experience in accounting matters. In addition, the Board of
Directors considered the fact that Mr. Downey had elected not to receive any
bonus compensation.
COMPENSATION COMMITTEE
The Compensation Committee, which currently is comprised of Francis E. Girard
(Chair), Kathryn B. Lewis , and James L. Zucco Jr., 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 five meetings in fiscal 2000.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
No member of the Compensation Committee was at any time during fiscal 2000, 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.
5
<PAGE>
NOMINATING COMMITTEE
The Nominating Committee, which currently is comprised of James L. Zucco, Jr.,
(Chair), Michael P. Downey and Steven G. Manson, 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 five meetings in fiscal 2000.
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). In addition to the director fees, a nonemployee chairman of
the board receives cash compensation of $50,000 per year.
A nonemployee Director who is appointed as Chairman of the Board shall
automatically be granted, at the time of such initial appointment, a
nonqualified option to purchase 15,000 shares of Common Stock pursuant to the
1994 Stock Incentive Plan. A Chairman who is reappointed as Chairman at the
Annual Meeting of the Board shall be automatically granted a nonqualified option
to purchase 15,000 shares of Common Stock pursuant to the 1994 Stock Incentive
Plan, provided he has served as Chairman for at least six months.
Directors who are not employees of the Company receive a nonqualified option to
purchase 20,000 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 10,000 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.
EXECUTIVE COMPENSATION
The following table shows for the three fiscal years ended June 30, 2000, 1999
and 1998, the compensation paid to (i) each person serving as the Company's
chief executive officer during the fiscal year ended June 30, 2000; (ii) each of
the four other most highly paid executive officers serving at the end of the
fiscal year ended June 30, 2000 whose aggregate salary and bonus compensation
exceeded $100,000; and (iii) one former executive officer of the Company
(collectively, the "Named Officers"):
6
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Awards
Annual Compensation ----------
----------------------------------------------------- Securities
Other Annual Underlying All Other
Executive Officers Year Salary($) Bonus($)(1) Compensation($)(2) Options# Compensation($)(3)
------------------ ---- ---------- ----------- ------------------ --------- ------------------
<S> <C> <C> <C> <C> <C> <C>
PERSONS SERVING AS CHIEF EXECUTIVE OFFICER
T. Paul Thomas,(4) 2000 208,788 64,970 763 375,000 4,247
President and Chief Executive 1999 213,230 106,728 63,879 125,000 6,235
Officer 1998 179,481 48,750 544 50,000 1,246
Michael P. Downey(5) 2000 91,666 0 0 25,000 0
Interim President and Chief 1999 NA NA NA NA NA
Executive Officer 1998 NA NA NA NA NA
EXECUTIVE OFFICERS
Steven G. Manson(6) 2000 165,653 50,235 637 25,000 4,416
Senior Vice President and 1999 143,077 47,833 466 70,000 5,053
General Manager 1998 115,039 17,011 5,000 70,000 4,139
Christopher H. Brookins 2000 149,997 34,032 0 25,000 4,284
Vice President-Development; 1999 133,317 24,710 0 40,000 4,437
Chief Technology Officer 1998 NA NA NA NA NA
Julie M. Ronstadt 2000 87,422 10,407 244 0 3,072
Vice President-Operations 1999 84,805 12,886 232 10,000 2,930
1998 68,807 8,200 0 50,000 2,310
Jonathan P. Ross 2000 66,346 56,062 0 70,000 2,140
Vice President-Sales 1999 NA NA NA NA NA
1998 NA NA NA NA NA
FORMER EXECUTIVE OFFICER
Scott S. Moule(7) 2000 142,288 58,699 13,590 0 3,220
Vice President and General 1999 109,923 59,768 329 50,000 4,052
Manager 1998 NA NA NA NA NA
</TABLE>
----------
(1) Includes amounts paid or payable under the executive bonus plans for fiscal
2000, 1999 and 1998 respectively.
(2) Unless otherwise noted, includes Company-paid life insurance.
(3) Includes 401(k) plan Company matching funds
(4) The options granted to Mr. Thomas had terminated without exercise as of
June 30, 2000, following the termination of his employment. For fiscal
1999, Other Annual Compensation consisted $63,257 of relocation expenses
imputed into income, in addition to $622 of Company-paid life insurance.
(5) Mr. Downey served as the Company's interim President and Chief Executive
Officer, commencing in March 2000, following the resignation of T. Paul
Thomas, and until the appointment of Steven G. Manson as President and
Chief Executive Officer effective July, 2000.
(6) Mr. Manson served as the Company's Senior Vice President and General
Manager-Computer Telephony Group, until his appointment as President and
Chief Executive Officer effective July, 2000.
(7) For fiscal 2000, Other Annual Compensation consisted of $11,642 of
relocation expenses imputed into income, in addition to $1,948 of
Company-paid life insurance.
7
<PAGE>
The following table sets forth information with respect to the grants of stock
options to the Named Officers during the fiscal year ended June 30, 2000:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value
% of Total at Assumed Annual Rates
Options of Stock Price Appreciation
Granted to Exercise or for Option Term(3)
Options Employees in Base Price ---------------------------
Name Granted(#)(1) Fiscal Year ($/sh)(2) Expiration Date 5%($) 10%($)
---- ------------- ----------- --------- --------------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
T. Paul Thomas 375,0004 40.36 21.5000 1/14/2010 5,070,462 12,849,548
Michael P. Downey 10,000 1.08 8.8125 11/2/2009 55,421 140,448
5,000 .54 21.5000 1/14/2010 67,606 171,327
10,000 1.08 16.7500 2/15/2010 105,339 266,951
Steven G. Manson 25,000 2.69 16.7500 2/15/2010 263,349 666,379
Christopher H. Brookins 25,000 2.69 16.7500 2/15/2010 263,349 666,379
Jonathan P. Ross 60,000 6.46 21.5000 1/14/2010 811,273 2,055,926
10,000 1.08 16.7500 2/15/2010 105,399 266,951
</TABLE>
----------
(1) 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 generally 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.
(2) All options were granted at the fair market value on the date of grant.
(3) 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.
(4) The 375,000 options granted to Mr. Thomas had terminated without exercise
as of June 30, 2000, following the termination of his employment.
9
<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, 2000, 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>
Value of Unexercised
Number of Unexercised Options In-the-Money Options at
Shares at Fiscal Year End(#)(2,3) Fiscal Year End($)(4)
Acquired on Value ---------------------------- -----------------------------
Name Exercise(1)(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- -------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
T. Paul Thomas 179,001 1,744,501 8,500 0 103,062 0
Michael P. Downey 0 0 30,001 24,999 262,724 404,150
Steven G. Manson 42,743 418,233 75,506 94,490 915,510 1,145,739
Christopher H. Brookins 0 0 61,007 58,993 739,709 715,290
Julie M. Ronstadt 0 0 43,056 16,944 522,054 205,446
Jonathan P. Ross 0 0 0 70,000 0 848,750
Scott S. Moule 0 0 34,389 0 416,966 0
</TABLE>
----------
(1) Represents the difference between the closing price or sales price, as
applicable, of the Company's Common Stock on the date of exercise, and the
exercise price of the options.
(2) All options for Common Stock were granted pursuant to the Artisoft, Inc.
Amended 1990 Stock Incentive Plan or the 1994 Stock Incentive Plan.
(3) 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.
(4) Represents the difference between the closing price of $12.125 of the
Company's Common Stock as of June 30, 2000 as reported by the Nasdaq
National Market, and the exercise price of the options.
9
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February, 2000, the Company extended to T. Paul Thomas a mortgage loan in the
principal amount of $490,133, bearing interest at the rate of 6.56% per annum
and secured by certain residential property owned by Mr. Thomas. The mortgage
loan contained a provision requiring prepayment of the loan if, among other
things, Mr. Thomas' employment with the Company ceased for any reason. As a
result of the termination of Mr. Thomas' employment with the Company, the
mortgage loan was repaid in full as of June 30, 2000.
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 year's base salary (two
years for the CEO) 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 (two years for the CEO) 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
not more than six months base salary or a salary continuation for the earliest
to occur of the time they obtain other full time employment or not more than
nine months from the date of involuntary termination.
SECTION 16(a) BENEFICIAL OWNERSHIP
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), 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.
10
<PAGE>
Officers, directors and greater than 10% shareholders are required by SEC
regulations to furnish 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 2000, except that a statement
of change of beneficial ownership of securities on Form 4 for the month of May
2000 for T. Paul. Thomas, a director of the Company, was filed later than
required.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors makes this report pursuant to Item
306 of Regulation S-K promulgated by the SEC. Notwithstanding anything to the
contrary set forth in any of the Company's previous filings under the Securities
Act of 1933, as amended (the "Securities Act"), or the Exchange Act that might
incorporate future filings, including this Proxy Statement, in whole or in part,
this report of the Audit Committee shall not be incorporated by reference into
any such filings, and such information shall be entitled to the benefits
provided in Item 306(c) and (d) of Regulation S-K and Item 7(e)(3)(v) of
Schedule 14A.
With respect to the Company's audited financial statements for the fiscal year
ended June 30, 2000 (the "2000 Financial Statements"):
(1) the Audit Committee has reviewed and discussed the 2000 Financial
Statements with management;
(2) the Audit Committee has discussed with the Company's independent
auditors the matters required to be discussed by Statement on Auditing Standards
61 (Codification of statements on Auditing Standards, AU ss. 380, as modified
and supplemented;
(3) the Audit Committee has received written disclosures and the letter
from the Company's independent accountants required by the Independence
Standards Board Standard No. 1 (Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees), as modified and supplemented,
and has discussed with the independent accountants the independent accountant's
independence; and
(4) based on the review and discussions referred to in (1) through (3)
above, the Audit Committee has recommended to the Board of Directors that the
2000 Financial Statements be included in the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 2000.
Respectfully submitted,
Audit Committee
Kathryn B. Lewis
Michael P. Downey
Francis E. Girard
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors makes this report on
executive compensation pursuant to Item 402 of Regulation S-K promulgated by the
SEC. Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act 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) of
Regulation S-K.
The Compensation Committee recommends the compensation of the person serving as
the chief executive officer of the Company 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"). During fiscal 2000, T. Paul Thomas and Michael P.
Downey acted as Chief Executive Officers of the Company. The Compensation
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 general, the Compensation
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 Compensation 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 Technology
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 Compensation 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:
12
<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 Compensation 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 Compensation Committee
considers the low, midpoint and upper ranges of base salaries published by
compensation surveys in establishing base salaries of each executive officer,
the Compensation 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 Compensation Committee establishes a targeted bonus for each executive and
establishes the individual performance objectives for the executive to achieve
the bonus. If applicable, executive bonuses are targeted between 20% and 50% 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 became payable under the executive bonus plan, 75% 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 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 component of the goal was at least 75%. The
individual performance objectives for executives other than the Chief Executive
Officer are proposed by management and reviewed and approved by the Compensation
Committee. Individual performance objectives for the Chief Executive Officer are
determined by the Compensation Committee and reviewed and approved by the Board
of Directors (other than the Chief Executive Officer).
OPTION GRANTS
The Compensation 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 Compensation 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 Compensation 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.
13
<PAGE>
The size of the initial grant is usually determined with reference to the level
and responsibility 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 Compensation
Committee believes that these periodic grants provide incentives for executive
officers to remain with the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
In fiscal 2000, the persons serving as Chief Executive Officer were paid
$365,424 in the aggregate salary and bonus consisting of $300,455 of aggregate
salary and $64,970 of aggregate bonus. Of these amounts, T. Paul Thomas was paid
$273,758 of salary and bonus, consisting of $208,788 of salary and $64,970 of
bonus, and Michael P. Downey was paid $91,666 of salary and no bonus.
The amount of Mr. Thomas' salary was determined by the Compensation Committee
based on Mr. Thomas' performance in continuing to implement the Company's
restructuring plan and in developing and implementing new business strategies
for the Company focused on the Company's Computer Telephony Group, as well as
the Compensation Committee's recognition of the importance of Mr. Thomas'
leadership for the future success of the Company. The amount of Mr. Thomas'
bonus was determined by the Compensation Committee taking into account the
operational results of the Company for the first half of fiscal 2000, his
contribution to the Company and the achievement of his individual performance
objectives, including the improvement of the Company's operating results and the
development and implementation of the Company's restructuring plan and new
business strategies.
The amount of Mr. Downey's salary was determined by the Compensation Committee
based on Mr. Downey's willingness and ability to serve as interim President and
Chief Executive Officer following Mr. Thomas' resignation, Mr. Downey's role in
developing and implementing the Company's new business strategies, and the
importance of Mr. Downey's role continuing the Company's new business strategies
and operations during the Company's search for a successor President and Chief
Executive Officer. Mr. Downey elected to forego receiving any bonus payments.
Respectfully submitted,
Compensation Committee
Francis E. Girard
Kathryn B. Lewis
James L. Zucco, Jr.
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,
1995 and ending June 30, 2000.
COMPARISON OF STOCK PERFORMANCE
ASFT NASDAQ NCDPS
---- ------ -----
6/95 100 100 100
9/95 128 112 109
12/95 76 113 114
3/96 95 118 119
6/96 105 128 133
9/96 70 132 135
12/96 62 138 141
3/97 38 131 131
6/97 29 155 168
9/97 36 181 183
12/97 24 169 173
3/98 35 198 229
6/98 33 202 253
9/98 26 180 238
12/98 32 234 309
3/99 33 262 373
6/99 25 287 387
9/99 78 293 402
12/99 217 437 683
3/00 145 491 672
6/00 146 426 550
15
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table includes, as of September 22, 2000, 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) each of the Named Officers, and (iv) all executive officers and
directors of the Company as a group:
<TABLE>
<CAPTION>
Amount and Nature of Percent of Artisoft
Name of Beneficial Owner(1) Beneficial Ownership Common Stock Outstanding
--------------------------- -------------------- ------------------------
<S> <C> <C>
Gerald R. Forsythe(2) 2,432,659 15.7%
1075 Noel Avenue
Wheeling, IL 60090
Steven G. Manson(3) 76,224 *
Michael P. Downey(4) 115,001 *
Francis E. Girard(5) 20,667 *
Kathryn B. Lewis(6) 36,201 *
James L. Zucco, Jr.(7) 6,667 *
T. Paul Thomas 21,000 *
Christopher H. Brookins(8) 78,230 *
All executive officers and
directors as a group (12 persons)(9) 421,328 2.7%
</TABLE>
----------
* 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
were applicable. Unless otherwise noted, the business address of each of
the beneficial owners is 5 Cambridge Center, Cambridge Massachusetts 02142.
(2) According to Amendment No. 6, dated November 6, 1998, to the Schedule 13D
filed by Mr. Gerald 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 46,629 shares of Common Stock subject to options exercisable
within 60 days of September 22, 2000.
(4) Includes 30,001 shares of Common Stock subject to options exercisable
within 60 days of September 22, 2000.
(5) Includes 6,667 shares of Common Stock subject to options exercisable within
60 days of September 22, 2000.
(6) Includes 34,201 shares of Common Stock subject to options exercisable
within 60 days of September 22, 2000.
(7) Includes 6,667 shares of Common Stock subject to options exercisable within
60 days of September 22, 2000.
(8) Includes 68,230 shares of Common Stock subject to options exercisable
within 60 days of September 22, 2000.
(9) Includes 194,166 shares of Common Stock subject to options exercisable
within 60 days of September 22, 2000.
16
<PAGE>
SHAREHOLDER PROPOSALS TO BE PRESENTED
AT THE NEXT ANNUAL MEETING
Any shareholder proposals intended to be presented at the Company's 2001 annual
shareholders' meeting must be received by the Company no later than June 1,
2001, to be evaluated by the Board for inclusion in the proxy statement for that
meeting.
Pursuant to Rule 14a-4 under the Securities Exchange Act of 1934, as amended,
the Company intends to retain discretionary authority to vote proxies with
respect to shareholder proposals for which the proponent does not seek inclusion
of the proposed matter in the Company's proxy statement for the Company's 2001
annual meeting, except in circumstances where (i) the Company receives notice of
the proposed matter no later than August 15, 2001, and (ii) the proponent
complies with the other requirements set forth in Rule 14a-4.
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.
2000 ANNUAL REPORT ON FORM 10-K
Copies of the Company's annual report on Form 10-K for the fiscal year ended
June 30, 2000, 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., 5 Cambridge
Center, Cambridge, Massachusetts 02142.
By the Board of Directors,
Kirk D. Mayes
Interim Chief Financial Officer and Secretary
17
<PAGE>
ANNEX A
Artisoft, Inc.
Charter of the Audit Committee of the Board of Directors
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling its oversight responsibilities. The Audit Committee's
primary duties and responsibilities are to:
Monitor the integrity of the Company's financial reporting process and
systems of internal controls regarding finance, accounting, and legal
compliance.
Monitor the independence and performance of the Company's independent
auditors and internal auditing department.
Provide an avenue of communication among the independent auditors,
management, the internal auditing department, and the Board of Directors.
The Audit Committee has the authority to conduct any investigation
appropriate to fulfilling its responsibilities, and it has direct access to
the independent auditors as well as anyone in the organization. The Audit
Committee has the ability to retain, at the Company's expense, special
legal, accounting, or other consultants or experts it deems necessary in
the performance of its duties.
II. Audit Committee Composition and Meetings
Audit Committee members shall meet the requirements of the National
Association of Securities Dealers. The Audit Committee shall be comprised
of three or more directors as determined by the Board, each of whom shall
be independent nonexecutive directors, free from any relationship that
would interfere with the exercise of his or her independent judgment. All
members of the Committee shall have a basic understanding of finance and
accounting and be able to read and understand fundamental financial
statements, and at least one member of the Committee shall have accounting
or related financial management expertise.
Audit Committee members shall be appointed by the Board on recommendation
of the Nominating Committee. If an audit committee Chair is not designated
or present, the members of the Committee may designate a Chair by majority
vote of the Committee membership.
The Committee shall meet at least four times annually, or more frequently
as circumstances dictate. The Audit Committee Chair shall prepare and/or
approve an agenda in advance of each meeting. The Committee should meet
privately in executive session at least annually with management, the
director of the internal auditing department, the independent auditors, and
as a committee to discuss any matters that the Committee or each of these
groups believe should be discussed.
In addition, the Committee, or at least its Chair, should communicate with
management and the independent auditors quarterly to review the Company's
financial statements and significant findings based upon the auditors
limited review procedures.
18
<PAGE>
III. Audit Committee Responsibilities and Duties
Review Procedures
1. Review and reassess the adequacy of this Charter at least annually.
Submit the charter to the Board of Directors for approval and have the
document published at least every three years in accordance with
regulations of the Securities and Exchange Commission ("SEC").
2. Review the Company's annual audited financial statements prior to
filing or distribution. Review should include discussion with
management and independent auditors of significant issues regarding
accounting principles, practices, and judgments.
3. In consultation with the management, the independent auditors, and the
internal auditors, consider the integrity of the Company's financial
reporting processes and controls. Discuss significant financial risk
exposures and the steps management has taken to monitor, control, and
report such exposures. Review significant findings prepared by the
independent auditors together with management's responses.
4. Review with financial management and the independent auditors the
company's quarterly financial results prior to the release of earnings
and/or the company's quarterly financial statements prior to filing or
distribution. Discuss any significant changes to the Company's
accounting principles and any items required to be communicated by the
independent auditors in accordance with SAS 61 (see item 9) . The
Chair of the Committee may represent the entire Audit Committee for
purposes of this review.
Independent Auditors
5. The independent auditors are ultimately accountable to the Audit
Committee and the Board of Directors. The Audit Committee shall review
the independence and performance of the auditors and annually
recommend to the Board of Directors the appointment of the independent
auditors or approve any discharge of auditors when circumstances
warrant.
6. Approve the fees and other significant compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should review and discuss with the
independent auditors all significant relationships they have with the
Company that could impair the auditors' independence.
8. Review the independent auditors audit plan - discuss scope, staffing,
locations, reliance upon management, and internal audit and general
audit approach.
9. Prior to releasing the year-end earnings, discuss the results of the
audit with the independent auditors. Discuss certain matters required
to be communicated to audit committees in accordance with AICPA SAS
61.
10. Consider the independent auditors' judgments about the quality and
appropriateness of the Company's accounting principles as applied in
its financial reporting.
Audit and Legal Compliance
11. Review the budget, plan, changes in plan, activities, organizational
structure, and qualifications of the internal accounting and audit
personnel and functions, as needed
12. Review the appointment, performance, and replacement of the senior
internal accounting and/or audit executive.
13. Review significant reports prepared by the external accounting and
audit personnel and functions together with management's response and
follow-up to these reports.
14. On at least an annual basis, review with the Company's counsel, any
legal matters that could have a significant impact on the
organization's financial statements, the Company's compliance with
applicable laws and regulations, and inquiries received from
regulators or governmental agencies.
19
<PAGE>
PROXY PROXY
ARTISOFT, INC.
5 CAMBRIDGE CENTER, CAMBRIDGE, MASSACHUSETTS 02142
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned appoints Michael P. Downey, Kathryn B. Lewis and James L. Zucco,
Jr., 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 22, 2000, at the annual shareholders' meeting to be held on November
2, 2000, 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 THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
ARTISOFT, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [X]
The Board of Directors recommends a vote FOR
each of the proposals listed below. FOR WITHHOLD
1. Election of Directors-
NOMINEES: Steve G. Manson [ ] [ ]
FOR AGAINST ABSTAIN
3. Ratification of the appointment of KPMG LLP [ ] [ ] [ ]
as independent certified public accountants.
This proxy, when properly executed, will be voted in the manner directed by the
undersigned shareholder(s). If no direction is made, the 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: ______________________, 2000
Signature: _____________________________________________________________________
________________________________________________________________________________
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.
--------------------------------------------------------------------------------
FOLD AND DETACH HERE
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
