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
[ x ] Definitive Proxy Statement the Commission only (as
[ ] Definitive Additional Materials permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
WORLDTALK COMMUNICATIONS CORPORATION
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
[GRAPHIC OMITTED]
Worldtalk Communications Corporation
5155 Old Ironsides Drive
Santa Clara, California 95054
-----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Worldtalk Communications Corporation (the "Company") will be held at the Santa
Clara Marriott, 2700 Mission College Blvd., Santa Clara, California on Friday,
June 11, 1999 at 9:00 a.m. Pacific Daylight Time for the following purposes:
1. To elect two (2) directors of the Company, with each to serve until
his term expires and his successor has been elected and qualified or
until such director's earlier resignation, death or removal.
2. To ratify the selection of KPMG LLP as independent accountants for
the Company for the year ending December 31, 1999.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on April 15, 1999 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. IF THE RECORD HOLDER OF YOUR
SHARES IS A BROKER, BANK OR OTHER NOMINEE, PLEASE FOLLOW THE INSTRUCTIONS FOR
VOTING THAT ARE GIVEN TO YOU BY SUCH PERSON OR ENTITY.
By Order of the Board of Directors
/s/ Bernard Harguindeguy
Bernard Harguindeguy
President and Chief Executive Officer
Santa Clara, California
May 11, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
Information Concerning Shares and Voting............................. 1
Proposal No. 1....................................................... 2
Proposal No. 2....................................................... 4
Security Ownership of Certain Beneficial Owners and Management....... 5
Executive Officers................................................... 7
Executive Compensation............................................... 9
Certain Transactions................................................. 14
Stockholder Proposals................................................ 15
Compliance Under Section 16(a) of the
Securities Exchange Act of 1934................................. 15
Other Business....................................................... 15
<PAGE>
WORLDTALK COMMUNICATIONS CORPORATION
5155 Old Ironsides Drive
Santa Clara, California 95054
-----------
PROXY STATEMENT
-----------
May 11, 1999
The accompanying proxy is solicited on behalf of the Board of Directors
of Worldtalk Communications Corporation, a Delaware corporation (the "Company"
or "Worldtalk"), for use at the Annual Meeting of Stockholders of the Company to
be held at the Santa Clara Marriott, 2700 Mission College Blvd., Santa Clara,
California on Friday, June 11, 1999 at 9:00 a.m. Pacific Daylight Time (the
"Meeting"). This Proxy Statement and the accompanying form of proxy were first
mailed to stockholders on or about May 11, 1999. An annual report for the fiscal
year ended December 31, 1998 is enclosed with this Proxy Statement.
Record Date; Quorum
Only holders of record of the Company's Common Stock at the close of
business on April 15, 1999 (the "Record Date") will be entitled to vote at the
Meeting. A majority of the shares outstanding on the record date will constitute
a quorum for the transaction of business.
Outstanding Shares
At the close of business on the Record Date, the Company had 10,816,682
shares of Common Stock outstanding and entitled to vote which were held by
approximately 99 stockholders (although the Company has been informed that there
are approximately 1500 beneficial owners).
Voting Rights; Required Vote
Holders of the Company's Common Stock are entitled to one vote for each
share held as of the Record Date. In the event that a broker, bank, custodian,
nominee or other record holder of Worldtalk Common Stock indicates on a proxy
that it does not have discretionary authority to vote certain shares on a
particular matter (a "broker non-vote"), then those shares will not be
considered present and entitled to vote with respect to that matter, although
they will be counted in determining whether or not a quorum is present at the
Meeting.
With respect to Proposal No. 1, directors will be elected by a
plurality of the votes of shares of Common Stock present in person or
represented by proxy at the Meeting and entitled to vote on the election of
directors. Proposal No. 2 requires for approval the affirmative vote of a
majority of the shares of Common Stock that are present in person or represented
by proxy at the Meeting and voted for or against such proposal or the holder
thereof abstained and such abstention was not a broker non-vote.
Voting of Proxies
The proxy accompanying this Proxy Statement is solicited on behalf of
the Board of Directors of Worldtalk for use at the Meeting. Stockholders are
requested to complete, date and sign the accompanying proxy and promptly return
it in the enclosed envelope or otherwise mail it to Worldtalk. All executed,
returned proxies that are not revoked will be voted in accordance with the
instructions contained therein. However, returned signed proxies that give no
instructions as to how they should be voted on a particular director nominee or
proposal will be counted as votes in favor of the nominees and the proposals set
forth in the accompanying Notice of Meeting and this Proxy Statement. If the
record holder of your shares is a broker, bank or other nominee, please follow
the instructions for voting that are given to you by such person or entity.
1
<PAGE>
In the event that sufficient votes in favor of the proposals are not
received by the date of the Meeting, the persons named as proxies may propose
one or more adjournments of the Meeting to permit further solicitations of
proxies. Any such adjournment would require the affirmative vote of the majority
of the outstanding shares present in person or represented by proxy at the
Meeting.
The expenses of soliciting proxies to be voted at the Meeting will be
paid by the Company. Following the original mailing of the proxies and other
soliciting materials, the Company and/or its agents may also solicit proxies by
mail, telephone, telegraph or in person. Following the original mailing of the
proxies and other soliciting materials, the Company will request that brokers,
custodians, nominees and other record holders of the Company's Common Stock
forward copies of the proxy and other soliciting materials to persons for whom
they hold shares of Common Stock and request authority for the exercise of
proxies. In such cases, the Company, upon the request of the record holders,
will reimburse such holders for their reasonable expenses.
Revocability of Proxies
Any person signing a proxy in the form sent by the Company with this
Proxy Statement has the power to revoke it prior to the Meeting or at the
Meeting prior to the vote pursuant to the proxy. A proxy may be revoked by any
of the following methods: (1) a written instrument delivered to the Company
stating that the proxy is revoked; (2) a subsequent proxy that is signed by the
person who signed the earlier proxy and is presented at the Meeting; or (3)
attendance at the Meeting and voting in person. Please note, however, that if a
stockholder's shares are held of record by a broker, bank or other nominee and
that stockholder wishes to vote at the Meeting, the stockholder must bring to
the Meeting a letter from the broker, bank or other nominee who is entitled to
vote the stockholder's shares confirming that stockholder's beneficial ownership
of the shares.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board") is divided into
three classes, as nearly equal in number as possible. Each class serves three
years, with the terms of office of the respective classes expiring in successive
years. Directors in Class 2 will stand for election at the Meeting. The terms of
office of directors in Class 3 and Class 1 do not expire until the Annual
Meetings of Stockholders held in 2000 and 2001, respectively. The Board proposes
that each of the Class 2 nominees named below, both of whom are currently
serving as Class 2 directors, be re-elected as Class 2 directors for a
three-year term expiring at the Annual Meeting of Stockholders in 2002 and until
their successors are duly elected and qualified. The Board has no reason to
believe that any of the nominees will not serve if elected, but if any of them
should become unavailable to serve as a director, and if the Board designates a
substitute nominee, the proxy holder will vote for the substitute nominee
designated by the Board.
Directors will be elected by a plurality of the votes of shares of
Common Stock present in person or represented by proxy at the Meeting and
entitled to vote.
Nominees to the Board of Directors
Class 2 -- Term Expires at the 2002 Annual Meeting of Stockholders
Max D. Hopper, age 64, has served as a director of the Company since
September 1995. He has been Principal and Chief Executive Officer of Max D.
Hopper & Associates, a consulting and information management firm since January
1995. From November 1985 to January 1995, Mr. Hopper served AMR Corporation as
Chairman of the SABRE Group and Senior Vice President, Information Systems. Mr.
Hopper also serves as a director of Gartner Group, Inc., Scopus Technology,
Inc., USData Corporation, VTEL Corporation, Metrocall, Inc. and Payless
Cashways, Inc. Mr. Hopper holds a Bachelor of Science in Mathematics from the
University of Houston.
Anthony Sun, age 46, has served as a director of the Company since
March 1995. He has been a general partner of Venrock Associates, a venture
capital firm, since 1979. He is a director of Award Software International,
Inc., a computer systems software company, Cognex Corporation, a computer
systems company, Inference
2
<PAGE>
Corporation, an Internet help desk software company, Komag Inc., a computer
storage component company and 3Dfx Interactive, Inc., a real time 3D
semiconductor company. He is also a director of several private companies. Mr.
Sun holds S.B.E.E., S.M.E.E. and Engineer degrees from the Massachusetts
Institute of Technology and a Master of Business Administration from Harvard
University.
Continuing Directors
Class 1--Term Expires at the 2001 Annual Meeting
David J. Cowan, age 33, has served as a director of the Company since
March 1993. He has been a general partner of Deer III & Co., a venture capital
investment firm that is the general partner of Bessemer Venture Partners III,
L.P., since August 1996. Previously he was an associate with Bessemer Venture
Partners from August 1992 to August 1996. Mr. Cowan is a director of VeriSign,
Inc., an Internet security company and is also a director of several private
companies. Mr. Cowan holds an A.B. degree in Math and Computer Science and a
Master of Business Administration from Harvard University.
Wade Woodson, age 40, has served as a director of the Company since
March 1993. He is a general partner with Sigma Partners, a venture capital
organization, with which he has been affiliated since 1987. Mr. Woodson holds a
Bachelor of Science in Electrical Engineering from Stanford University, a Juris
Doctor from Harvard University and a Master in Business Administration from the
University of California, Berkeley.
Class 3--Term Expires at the 2000 Annual Meeting
Bernard Harguindeguy, age 40, has served as a director of the Company
since July 1997. He has also served as Chief Executive Officer of the Company
since July 1997 and as President of the Company since April 1997. From December
1996 to March 1997, he served as Vice President, Marketing and Business
Development of the Company. From August 1994 to December 1996, he served as Vice
President, Marketing of emotion, Inc., a company focused on the delivery of
digital video and graphics over networks. From February 1989 to August 1994, Mr.
Harguindeguy was Acting General Manager and Vice President of Worldwide
Marketing for the Netware Enterprise Division of Novell, Inc. Mr. Harguindeguy
holds a Bachelor of Science in Electrical Engineering from the University of
California, Irvine and a Master in Engineering Management from Stanford
University.
Board of Directors' Meetings and Committees
The Board met four times, including telephone conference meetings, and
acted by written consent three times during 1998. No director attended fewer
than 75% of the aggregate of the total number of meetings of the Board (held
during the period for which he was a director) and the total number of meetings
held by all committees of the Board on which such director served (during the
period that such director served).
Standing committees of the Board include an Audit Committee and a
Compensation Committee. The Board does not have a nominating committee or a
committee performing similar functions.
Messrs. Cowan and Woodson are the current members of the Audit
Committee. The Audit Committee met four times during 1998. The Audit Committee
meets with the Company's independent accountants to review the adequacy of the
Company's internal control systems and financial reporting procedures; reviews
the general scope of the Company's annual audit and the fees charged by the
independent accountants, reviews and monitors the performance of non-audit
services by the Company's auditors, reviews the fairness of any proposed
transaction between any officer, director or other affiliate of the Company and
the Company, and after such review, makes recommendations to the full Board, and
performs such further functions as may be required by any stock exchange or
over-the-counter market upon which the Company's Common Stock may now or in the
future be listed.
Messrs. Cowan and Sun are the current members of the Compensation
Committee. The Compensation Committee met four times and acted by written
consent five times during 1998. The Compensation Committee reviews and approves
compensation and benefits for the Company's key executive officers, administers
the Company's stock purchase and equity incentive plans and makes
recommendations to the Board of Directors regarding such matters.
3
<PAGE>
Director Compensation.
The Company reimburses the members of the Board for reasonable expenses
associated with their attendance at Board meetings. All members of the Board who
are not also employees or consultants of the Company, or of a parent, subsidiary
or affiliate of the Company, are eligible to receive options under the Company's
1996 Directors Stock Option Plan (the "Directors Plan"). In June 1998, each of
Messrs. Hopper, Cowan, Sun and Woodson received a stock option pursuant to the
Directors Plan to purchase 5,000 shares of the Company's Common Stock at a price
of $5.00 per share. These options vest with respect to 25% of the shares subject
thereto on the fifth day after each annual stockholders meeting of the Company
to be held in each of the four calendar years after the date of grant, so long
as the director continuously remains a member of the Board through the date of
vesting. In December 1998, the Company repriced certain stock options that had
previously been granted to employees and directors. This repricing affected
outstanding options to purchase 15,000 shares granted to each of Messrs. Cowan,
Sun and Woodson in 1996. In connection with the repricing, the exercise price of
these options was reduced from $8.00 per share to $3.50 per share. See
"Executive Compensation-Report on Executive Compensation."
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINATED DIRECTORS
------------------------------
PROPOSAL NO. 2 - RATIFICATION OF SELECTION
OF INDEPENDENT ACCOUNTANTS
The Company has selected KPMG LLP as its independent accountants to
perform the audit of the Company's financial statements for 1999, and the
stockholders are being asked to ratify such selection. Representatives of KPMG
LLP are expected to be present at the Meeting, will have the opportunity to make
a statement at the Meeting if they desire to do so and are expected to be
available to respond to appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE SELECTION OF KPMG LLP
-------------------------------
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information, as of April 15,
1999, known to the Company regarding the beneficial ownership of the Company's
Common Stock by (1) each person known by the Company to be the beneficial owner
of more than 5% of the Company's Common Stock, (2) each director and nominee,
(3) each executive officer named in the Summary Compensation Table below and (4)
all directors and executive officers as a group.
<CAPTION>
Percent of
Amount and Nature of Outstanding
Name of Beneficial Owner Beneficial Ownership(1) Common Stock(1)
------------------------ ----------------------- ---------------
<S> <C> <C> <C>
David J. Cowan (2).......................................... 1,563,977 14.5%
Bessemer Venture Partners III L.P.
1025 Old Country Road, Suite 205
Westbury, NY 11590
Anthony Sun (3)............................................. 1,271,334 11.8
Venrock Associates
30 Rockefeller Plaza, Rm. 5508
New York, NY 10112
Wade Woodson (4)............................................ 752,333 7.0
Sigma Partners
2884 Sand Hill Road, Suite 121
Menlo Park, CA 94025
Deltec Asset Management Corporation (5)..................... 650,634 6.0
535 Madison Avenue, 26th Floor
New York, NY 10022
William L. Musser, Jr. (6).................................. 583,500 5.4
919 Third Avenue
New York, NY 10022
Robert D. Dickinson III (7)................................. 247,574 2.3
Bernard Harguindeguy (8).................................... 178,125 1.6
Simon Khalaf (9)............................................ 126,246 1.2
Joseph Longo (10)........................................... 57,358 *
Max D. Hopper (11).......................................... 55,000 *
John G. Weald (12).......................................... 25,000 *
All officers and directors as a group (11 persons) (13)..... 4,276,692 38.1%
<FN>
- ---------------------
* Less than 1%
(1) Percentage ownership is calculated on the basis of 10,816,682 shares
outstanding as of April 15, 1999. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject
to community property laws where applicable. Shares of Common Stock
subject to options that are currently exercisable or exercisable within
60 days after April 15, 1999 are deemed to be outstanding and to be
beneficially owned by the person holding such options for the purpose of
computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage ownership of any
other person.
(2) Mr. Cowan is a director of the Company and a general partner of Deer III
& Co. L.P. ("Deer"), the general partner of Bessemer Venture Partners
III, L.P. ("BVP III"). The share number includes 1,305 shares held of
record by Mr. Cowan; 7,500 shares subject to options exercisable within
60 days after April 15, 1999; 1,528,929 shares held of record by BVP III;
22,868 shares held of record by the general partners of Deer; and 3,375
shares over which BVP III exercises voting control, held of record by
individuals, each of whom is a present or former employee or consultant
to Bessemer Securities Corporation, the sole owner of the
5
<PAGE>
limited partner of BVP III. Deer is a general partnership whose voting
partners are Robert H. Buescher, David J. Cowan, G. Felda Hardymon and
Christopher F.O. Gabrieli. BVP III disclaims beneficial ownership of
securities held by the general partners of Deer and the general partners
disclaim beneficial ownership of securities held by BVP III, except to the
extent of their individual partnership interest.
(3) Represents 7,500 shares of Common Stock subject to options exercisable
within 60 days of April 15, 1999; 872,599 shares held of record by
Venrock Associates; and 391,235 shares held of record by Venrock
Associates II, L.P. Each fund disclaims beneficial ownership of the
shares held by the other. Mr. Sun is a director of the Company and a
general partner of Venrock Associates and Venrock Associates II, L.P.
(4) Mr. Woodson is a director of the Company and a general partner of Sigma
Partners II, L.P. and Sigma Associates II, L.P. The share number
represents 24,098 shares held by Mr. Woodson; 7,500 shares of Common
Stock subject to options exercisable within 60 days of April 15, 1999;
670,458 shares held by Sigma Partners II, L.P.; and 50,277 shares held by
Sigma Associates II, L.P. Each fund disclaims beneficial ownership of the
shares held by the other.
(5) Information taken from a Schedule 13G filed on February 1, 1999.
(6) Information taken from a Schedule 13G filed on December 21, 1998.
Represents 473,325 shares held by New Frontier Capital, L.P., 71,500
shares held by Westward, Inc., 34,000 shares held directly by Mr. Musser
and 4,675 shares held by Edwin W. Colman Family Trust.
(7) Includes 25,312 shares subject to options exercisable within 60 days
after April 15, 1999. Mr. Dickinson is the Company's Vice President,
Engineering - Bellevue.
(8) Represents shares subject to options exercisable within 60 days after
April 15, 1999. Mr. Harguindeguy is President, Chief Executive Officer
and a director of the Company.
(9) Includes 105,826 shares subject to options exercisable within 60 days
after April 15, 1999. Mr. Khalaf is the Company's Vice President,
Marketing.
(10) Represents shares subject to options exercisable within 60 days after
April 15, 1999. Mr. Longo is the Company's Vice President, Consulting and
Customer Services.
(11) M. Hopper is a director of the Company.
(12) Mr. Weald is the Company's Former Vice President, Engineering-Santa Clara.
(13) Includes 411,308 shares subject to options exercisable within 60 days
after April 15, 1999, including those set forth in footnotes (2) through
(4) and (7) through (11) above.
</FN>
</TABLE>
6
<PAGE>
EXECUTIVE OFFICERS
The executive officers of the Company, and their ages as of April 15,
1999 are as follows:
Name Age Position
Bernard Harguindeguy 40 President and Chief Executive Officer
Robert D. Dickinson III 33 Vice President and Chief Technical Officer
Simon Khalaf 33 Vice President, Marketing
Joseph Longo 45 Vice President, Consulting and Customer Services
Colin Crosby 55 Vice President, Sales
Eric Colard 39 Vice President, Business Development
Jesus Ortiz 38 Vice President, Engineering
For information regarding the positions and offices held by Mr.
Harguindeguy, please refer to the discussion regarding nominees for election as
directors in "Nominees" under Proposal No. 1 above.
Mr. Dickinson has served as Vice President, Engineering - Bellevue for
Worldtalk since December 1997 and as Chief Technical Officer since January 1999,
although his appointment as Chief Technical Officer has not yet been formalized.
From November 1996 to December 1997, he served as Director, Research and
Development for the Deming Internet Security division of the Company. In
December 1995, Mr. Dickinson founded Deming Software, Inc., a developer of
electronic mail security solutions. He served as President, CEO and Chairman of
Deming Software, Inc. from December 1995 until its acquisition by Worldtalk in
November 1996. From June 1991 to November 1995, he served in various executive
positions and was a member of the board of directors of ConnectSoft, Inc., a
communications software development and consulting firm. Mr. Dickinson holds a
Bachelor of Arts in Business Administration from Washington State University
Mr. Khalaf has been the Company's Vice President, Marketing since
November 1996. Mr. Khalaf co-founded Worldtalk, in March 1992 and has held
several marketing and engineering positions within the Company, including
Director of Marketing from January 1996 to October 1996, Product Marketing
Manager from August 1994 to December 1995, Engineering Team Leader from October
1993 to July 1994 and Senior Software Engineer from March 1992 to September
1993. Before joining Worldtalk, Mr. Khalaf was a Senior Engineer at Touch
Communications, Inc., a provider of OSI-based networking software. Mr. Khalaf
holds a a Bachelor of Science in Engineering from the American University of
Beirut and a Master of Science in Computer Engineering from Syracuse University.
Mr. Longo has served as Vice President, Consulting and Customer
Services since September 1997 managing Worldtalk's team of consultants providing
training and custom programming services for Worldtalk products. From April 1997
to September 1997, Mr. Longo was the Company's Vice President, Professional
Services. Previously, he served as the Company's Director of Professional
Services from January 1995 to April 1997. From May 1989 to January 1995, Mr.
Longo held various positions, including his last position as the Director of
Custom Development, at The Santa Cruz Operation, Inc., a supplier of UNIX
operating systems for Intel PCs. Previously, Mr. Longo was Vice President of
Technical Services for Austec Limited, a company that specialized in programming
languages for UNIX systems. Mr. Longo holds a Bachelor of Science in Applied
Science from the R.M.I.T., Melbourne, Australia, and a Post Graduate Diploma in
Digital Communications from the C.I.T., Melbourne, Australia.
Mr. Crosby has served as Vice President, Sales since October 1998. From
April 1997 to March 1998, Mr. Crosby served as Vice President of Sales at Envive
Corp., a service-level management solution software company. Previously, Mr.
Crosby worked for Oracle Corp. from January 1993 to March 1997 as Regional
Manager and Vice President of Sales. Mr. Crosby holds a Bachelor of Arts in
Business Administration from New York University.
7
<PAGE>
Mr. Colard has served as Vice President, Business Development since
July 1997. Prior to his employment with the Company, Mr. Colard founded Soft
Science, Inc., a web site development company in November 1996 and served as a
managing director until November 1998. Previously, Mr. Colard worked for Novell,
Inc. from July 1991 to June 1997 as a Senior Product Manager, Product Line
Manager and Acting Director of Business Development. Mr. Colard holds a Bachelor
of Science in Computer Science from L'Universite, Nancy, France and a Master of
Science in Computer Science and Telecommunications from L'Ecole Nationale
Superieure des Telecommunications (ENST), Paris, France.
Mr. Ortiz has served as Vice President, Engineering since January 1999
although his appointment as an officer has not yet been formalized. From June
1994 to January 1999, Mr. Ortiz was Vice President of Engineering at emotion,
Inc., a company focused on the delivery of digital video and graphics over
networks. Previously, Mr. Ortiz worked for Novell, Inc. from June 1985 to June
1994 as Director of Engineering. Mr. Ortiz holds a Bachelor of Science in
Computer Science from the University of Southern California.
8
<PAGE>
EXECUTIVE COMPENSATION
<TABLE>
The following table sets forth all compensation awarded to or earned or
paid for services rendered in all capacities to the Company during each of 1996,
1997 and 1998 by the Company's Chief Executive Officer and the Company's four
other most highly compensated executive officers who were serving as executive
officers at the end of 1998 (the "Named Executive Officers").
<CAPTION>
Summary Compensation Table
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- ------------
Other Securities
Fiscal Annual Underlying All Other
Name and Principal Position Year Salary Bonus (1) Compensation Options Compensation (2)
- --------------------------- ------- ------ --------- ------------ --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Bernard Harguindeguy 1998 $ 210,000 $80,000 -- 175,000 (3) $ 700
President and Chief 1997 173,103 70,000 -- 475,000 (4) 205
Executive Officer 1996 -- 25,000 -- -- --
Simon Khalaf 1998 140,000 37,500 -- 75,625 (5) 247
Vice President, Marketing 1997 134,792 30,000 -- 76,875 (6) 119
1996 106,674 20,000 -- 27,500 62
Robert D. Dickinson III 1998 135,000 46,666 -- -- 227
Vice President, 1997 114,167 -- -- 45,000 (7) --
Engineering - Bellevue 1996 100,000 -- -- 45,000 --
765
Joseph Longo 1998 130,000 31,000 2,480 75,000 --
Vice President, Consulting 1997 115,000 -- 1,725 40,000 --
and Customer Services 1996 103,276 -- 1,545
John G. Weald 1998 136,962 26,666 -- 25,000 505
Former Vice President, 1997 128,471 19,000 -- 20,000 217
Engineering- Santa Clara 1996 110,000 12,000 -- -- 79
- ---------------------------
(1) Bonuses are paid at the discretion of the Compensation Committee based on
the achievement of certain objectives.
(2) Includes excess group term life insurance premiums.
(3) Includes 75,000 shares subject to previously granted options that were
repriced in December 1998. See "--Report on Executive Compensation."
(4) Includes 175,000 shares subject to previously-granted options that were
repriced in April 1997. See "--Report on Executive Compensation."
(5) Includes 625 shares subject to previously granted options that were
repriced in December 1998. See "--Report on Executive Compensation."
(6) Includes 26,875 shares subject to previously-granted options that were
repriced in April 1997. See "--Report on Executive Compensation."
(7) Represents shares subject to previously-granted options that were
repriced in April 1997. See "--Report on Executive Compensation."
The following table sets forth further information regarding the option
grants pursuant to the Company's 1996 Equity Incentive Plan during 1998 to each
of the Named Executive Officers. In accordance with the rules of the SEC, the
table sets forth the hypothetical gains or "option spreads" that would exist for
the options at the end of their respective ten-year terms. These gains are based
on assumed rates of annual compound stock price appreciation of 5% and 10% from
the date the option was granted to the end of the option term.
9
<PAGE>
Option Grants in 1998
Potential Realizable Value
Percent of at Assumed Annual Rates of
Number of Total Stock Price Appreciation
Securities Options for Option
Underlying Granted to Exercise Term (2)
Options Employees in Price Per Expiration ---------------------------
Name Granted (1) Fiscal 1998 Share Date 5% 10%
------ ---------- ------------ -------- ---------- ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Bernard Harguindeguy ...... 100,000 8.8% $ 3.00 4/17/08 $188,666 $478,121
75,000 6.6 3.50 9/19/07 144,722 356,460
Simon Khalaf .............. 75,000 6.6 3.00 4/17/08 141,500 358,591
625 0.1 3.50 2/7/06 1,044 2,501
Robert D. Dickinson, ...... -- -- -- -- -- --
III
Joseph Longo .............. 60,000 5.3 2.31 10/28/08 99,475 240,548
15,000 1.3 3.00 4/17/08 28,300 71,718
John Weald ................ 25,000 2.2 3.00 3/30/99 3,750 7,500
<FN>
- ---------------------------------
(1) The incentive stock options shown in the table were granted at fair
market value and typically become exercisable with respect to 12.5% of
the shares on the six-month anniversary of the grant and with respect to
an additional 6.25% of the shares every three months that the optionee
renders services to the Company thereafter. The options shown in the
table will expire ten years from the date of grant, subject to earlier
termination upon termination of employment.
(2) The 5% and 10% assumed annual compound rates of stock price appreciation
are mandated by the rules of the Securities and Exchange Commission and
do not represent the Company's estimate or projection of future Common
Stock prices.
(3) Represents the number of shares subject to previously granted options
that were repriced in December 1998. See "-- Report on Executive
Compensation."
</FN>
</TABLE>
<TABLE>
The following table sets forth certain information concerning the
exercise of options by each of the Named Executive Officers during fiscal 1998,
including the aggregate amount of gains on the date of exercise. In addition,
the table includes the number of shares covered by both exercisable and
unexercisable stock options as of December 31, 1998. Also reported are values of
"in-the-money" options that represent the positive spread between the respective
exercise prices of outstanding stock options and $3.8125 per share, which was
the closing price of the Company's Common Stock as reported on the Nasdaq
National Market on December 31, 1998.
Aggregate Option Exercises in Fiscal 1998 and Fiscal Year-End Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at Fiscal Year-End Fiscal Year-End (2)
-------------------------- -----------------------
Shares
Acquired on Value
Name Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
----------- ------------ ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Bernard Harguindeguy .... -- -- 135,937 264,063 $ 23,728 $ 95,016
Simon Khalaf ............ 10,550 $30,858.75 88,081 100,246 130,112 63,742
Robert D. Dickinson, III -- -- 19,687 25,313 1,230 1,682
Joseph Longo ............ 5,000 12,500.00 38,283 106,888 86,420 131,255
John Weald .............. -- -- 56,977 -- 143,702 --
<FN>
- ----------------------------
(1) "Value Realized" represents the fair market value of the shares of Common
Stock underlying the option on the date of exercise less the aggregate
exercise price of the option.
(2) These values, unlike the amounts set forth in the column entitled "Value
Realized," have not been, and may never be, realized and are based on the
positive spread between the respective exercise prices of outstanding
options and the closing price of the Company's Common Stock on December
31, 1998, the last day of trading for the fiscal year.
</FN>
</TABLE>
10
<PAGE>
Employment Agreements
The Company typically enters into Employment Agreements with its
executive officers. These Employment Agreements provide, among other things,
that upon certain corporate transactions, including changes in control, (a) all
shares of stock and options held by each officer will be assumed, converted,
substituted or replaced by the successor company or (b) the successor company
may provide substantially similar consideration to the officers as was provided
to stockholders or optionholders generally with respect to any stock or options
held by such officer. In case of a sale of the Company, the successor company
may not terminate an officer's employment prior to the first anniversary of the
sale of the Company, except for cause, without giving written notice. During the
notice period, which must continue until the first anniversary of the sale of
the Company, the officer will continue to collect twelve months' salary and
bonus at then-current levels regardless of whether the officer's services are
actually required by the Company or its successor. All employee benefits will
continue and each officer's options and shares of stock will continue to vest
during the period of notice, provided that the officer was not terminated for
cause. Upon request of the Company, the officer must also provide certain
consulting services, paid at an hourly rate for services actually performed,
during the twelve months following the first anniversary of the sale of the
Company. During this period, provided the officer's consulting arrangement is
not terminated for cause, the officer's options and shares will continue to
vest.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Messrs. Cowan and Sun. No
interlocking relationships exist between the Company's Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company.
Report on Executive Compensation
The report on executive compensation below is required by the SEC and
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Securities Exchange Act of 1934, as amended, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed soliciting material or filed under
such Acts.
Final decisions regarding executive compensation and stock option
grants to executives are made by the Compensation Committee of the Board of
Directors (the "Committee"). The Committee is composed of two independent
non-employee directors, neither of whom have any interlocking relationships as
defined by the SEC.
General Compensation Policy
The Committee acts on behalf of the Board to establish the general
compensation policy of the Company for all employees of the Company. The
Committee administers the Company's incentive and equity plans, including the
1992 Stock Option Plan (which was terminated in April 1996), the 1996 Equity
Incentive Plan and the 1996 Employee Stock Purchase Plan. The Company no longer
grants options under the 1992 Stock Option Plan.
The Committee's philosophy in compensating the CEO is to relate
compensation directly to corporate performance. Thus, the Company's compensation
policy for the CEO relates a portion of his total compensation to the Company's
financial objectives and individual objectives set forth at the beginning of the
Company's year. Consistent with this policy, a designated portion of the CEO's
compensation is contingent on corporate performance, and is also based on his
performance as measured against objectives established by the Committee in its
discretion. Long-term equity incentives for the CEO are effected through the
granting of stock options under the 1996 Equity Incentive Plan. Stock options
have value for the CEO only if the price of the Company's stock increases above
the fair market value on the grant date and the CEO remains in the Company's
employ for the period required for the shares to vest.
The base salary, incentive compensation and stock option grants of the
CEO are determined in part by the Committee reviewing data on prevailing
compensation practices in technology companies with whom the Company competes
for executive talent and by their evaluating such information in connection with
the Company's corporate goals. To this end, the Committee attempts to compare
the compensation of the Company's CEO with the compensation practices of
comparable companies to determine base salary, target bonuses and target total
cash
11
<PAGE>
compensation. In addition to his base salary, the Company's CEO is eligible to
receive cash bonuses and to participate in the 1996 Equity Incentive Plan.
In preparing the performance graph for this Proxy Statement, the
Company used the CRSP Total Return Index for Nasdaq Computer & Data Processing
Services Stocks (CRSP Index) as its published line of business index as the
Company believes that the CRSP Index is a good indicator of stock price
performance with respect to the Company's industry.
1998 Executive Compensation
Base Compensation. The Board reviewed the recommendations and
performance and market data outlined above and established a base salary level
for the CEO. The Committee set Mr. Harguindeguy's annual salary level at
$210,000.
Incentive Compensation. A cash bonus is awarded to the extent that an
individual achieves predetermined individual objectives and the Company meets
predetermined financial objectives set by the Board at the beginning of the
year. Performance is measured at the end of the year. For 1998, the basis of
incentive compensation was Company revenue, percentage of growth of revenue,
profit after tax and achievement of objectives relating to the successful
transition of the Company's senior mamagement and of the nature of the Company's
business. The targets and actual bonus payments are determined by the Committee,
in its discretion.
Stock Options. In 1998, stock options were granted to certain executive
officers to aid in the retention of executive officers and to align their
interests with those of the stockholders. Stock options typically have been
granted to executive officers when the executive first joins the Company in
connection with a significant change in responsibilities and, occasionally, to
achieve equity within a peer group. The Committee may, however, grant additional
stock options to executives for other reasons. The number of shares subject to
each stock option granted is within the discretion of the Committee and is based
on anticipated future contribution and ability to impact corporate and/or
business unit results, past performance or consistency within the executive's
peer group. In 1998, the Committee considered these factors, as well as the
number of options held by such executive officers as of the date of grant that
remained unvested. In the discretion of the Committee, executive officers may
also be granted stock options to provide greater incentives to continue their
employment with the Company and to strive to increase the value of the Company's
Common Stock. The stock options generally become exercisable over a four-year
period and are granted at a price that is equal to the fair market value of the
Company's Common Stock on the date of grant.
Company Performance and CEO Compensation. As noted above, Mr.
Harguindeguy's base salary was set at $210,000 commencing January 1, 1998. In
addition, as an incentive to Mr. Harguindeguy to achieve Company objectives
established by the Committee, the Board of Directors exercised its discretion
and recommended that Mr. Harguindeguy be granted a stock option to purchase
100,000 shares of the Company's Common Stock. The objectives established by the
Committee included satisfactorily managing the Company's current and future
corporate performance, such as meeting the Company's financial projections and
the Company's sales targets, significantly strengthening the Company's marketing
position and successfully managing the Company through a management change and a
transition in the fundamental nature of the business. In granting the stock
options to Mr. Harguindeguy, the Board of Directors reviewed his prior
outstanding option grants and the number of options that remained unexercisable.
The Committee believes this was appropriate because Mr. Harguindeguy's total
compensation, including compensation derived from incentive compensation, is at
a level it believes is competitive with the average amount paid by other
software companies based on survey data. Based upon the criteria set forth under
the discussion of "Incentive Compensation" above, the Committee awarded Mr.
Harguindeguy incentive compensation of $80,000, $22,500 of which was paid in
1998 and the remainder of which is to be paid in 1999. Mr. Harguindeguy's
incentive compensation was based upon obtaining and surpassing corporate
operating objectives. This figure represents approximately 90% of the target
bonus for Mr. Harguindeguy for 1998. The Committee reviewed the compensation
practices of comparable companies in making these awards.
Stock Option Repricing
In December 1998, the Compensation Committee offered to all employees
the opportunity to amend stock options outstanding with exercise prices in
excess of $5.00, the fair market value of the Company's Common Stock at that
time, to lower the exercise price to $3.50 per share. The option repricing was
an acknowledgment of the importance to the Company of providing equity
incentives to key employees in order to promote long-term retention of key
employees, motivate high levels of performance and recognize employee
contributions to the
12
<PAGE>
success of the Company. The Compensation Committee believed that stock options
that are "out of the money" are not an effective tool to encourage employee
retention or to motivate high levels of performance. The Compensation Committee
decided to include officers in the repricing because of the importance of their
administrative and technical leadership to the success of the Company's
business.
<TABLE>
The following table sets forth information concerning the repricing of
options held by the Named Executive Officers during 1997 and 1998.
Ten-Year Option Repricings
<CAPTION>
Number of Market Price Length of Original
Securities of Stock At Exercise Price New Option Term
Underlying Time of At Time of Exercise Remaining At
Name Date Options Repriced Repricing Repricing Price Date of Repricing
- --------------------- ---- ---------------- --------- --------- ----- -----------------
<S> <C> <C> <C> <C> <C> <C>
Bernard Harguindeguy.. 12/11/98 75,000 $ 3.50 $ 6.625 $ 3.50 8.77 years
04/28/97 175,000 3.75 7.50 3.75 9.75 years
Simon Khalaf.......... 12/11/98 625 3.50 8.00 3.50 7.15 years
04/28/97 1,875 3.75 8.00 3.75 8.83 years
04/28/97 25,000 3.75 10.625 3.75 9.25 years
Robert D. Dickinson III 04/28/97 45,000 3.75 8.00 3.75 9.75 years
</TABLE>
Compliance with Section 162(m) of the Internal Revenue Code of 1986.
For 1999, the Company intends to comply with the requirements of
Section 162(m) of the Internal Revenue Code of 1986. The 1996 Directors Stock
Option Plan is already in compliance with Section 162(m) by limiting stock
awards to named executive officers. The Company does not expect cash
compensation for 1998 to be in excess of $1,000,000 or consequently affected by
the requirements of Section 162(m).
BOARD OF DIRECTORS COMPENSATION COMMITTEE
David J. Cowan Anthony Sun David J. Cowan
Max D. Hopper Wade Woodson Anthony Sun
Bernard Harguindeguy
Company Stock Price Performance
The stock price performance graph below is required by the SEC and
shall not be deemed to be incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any filing under the
Securities Act, or under the Securities Exchange Act of 1934, as amended, except
to the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed soliciting material or filed under
such Acts.
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company from the first day of trading of the Company's
Common Stock upon the Company's initial public offering (April 12, 1996) to
December 31, 1998 with the cumulative total return on the Nasdaq Stock Market
(U.S. Companies) and the CRSP Total Return Index for Nasdaq Computer & Data
Processing Services Stocks for the same period (assuming the investment of $100
in the Company's Common Stock and in each of the indices on the date of the
Company's initial public offering, and reinvestment of all dividends).
13
<PAGE>
Comparison of Cumulative Total Return
[TABLE INSERTED HERE]
<TABLE>
<CAPTION>
Worldtalk Communications Nasdaq Stock Market Nasdaq Computer & Data
Corporation U.S. Index Processing Services
------------------------- ---------------------- ----------------------
Investment Investment Investment
Market Price Value Index Value Index Value
------------ ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
04/12/96.................. $ 8.000 $ 100.00 361.5 $ 100.00 779.3 $ 100.00
12/31/96.................. 7.500 93.75 425.4 117.68 928.1 119.09
12/31/97.................. 3.750 46.88 522.1 144.43 1,140.2 146.31
12/31/98.................. 3.813 47.66 734.3 203.13 2,036.8 261.36
</TABLE>
CERTAIN TRANSACTIONS
Since January 1, 1998, there has not been, nor is there currently
proposed, any transaction or series of similar transactions to which the Company
was or is to be a party in which the amount involved exceeds $60,000 and in
which any director, executive officer, or holder of more than 5% of the
Company's Common Stock had or will have a direct or indirect material interest
other than normal compensation arrangements, which are described under
"Executive Compensation" above.
14
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the Company's
2000 Annual Meeting of Stockholders must be received by the Company at its
principal executive offices no later than December 29, 1999 in order to be
included in the Company's Proxy Statement and form of proxy relating to the
meeting.
COMPLIANCE UNDER SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16 of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and officers, and persons who own more than 10% of the
Company's Common Stock to file initial reports of ownership and reports of
changes in ownership with the SEC and the Nasdaq National Market. Such persons
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms that they file.
Based solely on its review of the copies of such forms furnished to the
Company and written representations from the executive officers and directors,
the Company believes that all Section 16(a) filing requirements for the year
ended December 31, 1998 were met except that Forms 5 for Messrs. Cowan, Hopper,
Sun and Woodson were not timely filed for their option grants under the
Directors Plan.
OTHER BUSINESS
The Board does not presently intend to bring any other business before
the Meeting, and, so far as is known to the Board, no matters are to be brought
before the Meeting except as specified in the Notice of the Meeting. As to any
business that may properly come before the Meeting, however, it is intended that
proxies, in the form enclosed, will be voted in respect thereof in accordance
with the judgment of the persons voting such proxies.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE SO
THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING. IF THE RECORD HOLDER OF YOUR
SHARES IS A BROKER, BANK OR OTHER NOMINEE, PLEASE FOLLOW THE INSTRUCTIONS FOR
VOTING THAT ARE GIVEN TO YOU BY SUCH PERSON OR ENTITY.
15
<PAGE>
WORLDTALK COMMUNICATIONS CORPORATION
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- June 11, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
The undersigned hereby appoints Bernard Harguindeguy and Wade Woodson
or either of them as proxies, each with full power of substitution, and hereby
authorizes them to represent and to vote, as designated below, all shares of
Common Stock, par value $0.01 per share, of Worldtalk Communications Corporation
(the Company), held of record by the undersigned on April 15, 1999, at the
Annual Meeting of Stockholders of the Company to be held at the Santa Clara
Marriott, Santa Clara, California, on Friday, June 11, 1999, at 9:00 a.m.
Pacific Daylight Time, and at any adjournments or postponements thereof.
THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE. WHEN NO
CHOICE IS INDICATED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES
LISTED IN PROPOSAL 1 AND FOR PROPOSAL 2. In their discretion, the proxy holders
are authorized to vote upon such other business as may properly come before the
meeting or any adjournments or postponements thereof to the extent authorized by
Rule 14a-4(c) promulgated under the Securities Exchange Act of 1934, as amended.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY IN THE ENCLOSED RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE REPRESENTED AT THE MEETING.
(Continued and to be signed on reverse side)
<PAGE>
The Board of Directors recommends that you vote FOR the election of the nominees
listed in Proposal 1 and FOR Proposal 2.
1. Election of Directors -
Nominees: Class 2: Max D. Hopper and Anthony Sun
[ ] FOR ALL [ ] WITHHOLD ALL [ ] FOR ALL EXCEPT*
- ----------------------------------------------
*(Except nominee(s) written above
2. Ratification of the selection of KPMG LLP as the Company's independent
accountants for the year ending December 31, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Dated:_______________________, 1999
Signature(s)______________________________________
Please sign exactly as your name(s) appear(s) on your stock certificate. If
shares of stock stand of record in the names of two or more persons or in the
name of husband and wife, whether as joint tenants or otherwise, both or all of
such persons should sign the proxy. If shares of stock are held of record by a
corporation, the proxy should be executed by the president or vice president and
the secretary or assistant secretary. Executors, administrators or other
fiduciaries who execute the above proxy for a deceased stockholder should give
their full title. Please date the proxy.
