SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
TEKNOWLEDGE CORPORATION
-----------------------
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (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>
TEKNOWLEDGE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 17, 1999
The 1999 Annual Meeting of the Stockholders of Teknowledge Corporation
(the "Company") will be held on Thursday, June 17, 1999 at 10:00 a.m., local
time, at the executive offices of the Company, located at 1810 Embarcadero Road,
Palo Alto, California 94303 for the following purposes:
1. To elect two Class II Directors of the Company to serve for a
three-year term;
2. To ratify the selection of Arthur Andersen LLP as independent
public accountants for the Company for the fiscal year ending
December 31, 1999; and
3. To transact such other business as may properly come before
the 1999 Annual Meeting and any and all adjournments and
postponements thereof.
The Board of Directors has fixed the close of business on April 23,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the 1999 Annual Meeting and any adjournments thereof. A
complete list of stockholders entitled to vote at the 1999 Annual Meeting is
available for inspection at the Company's executive offices. Stockholders may
examine the list during ordinary business hours in the 10-day period prior to
the meeting. The list will also be available for inspection at the meeting for
any purpose relating to the meeting.
YOU ARE URGED TO COMPLETE AND SIGN THE ACCOMPANYING PROXY CARD AND
RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND
THE MEETING.
THE BOARD OF DIRECTORS
/s/ Dennis A. Bugbee
-------------------------------
By: Dennis A. Bugbee, Secretary
Palo Alto, California
April 28, 1999
<PAGE>
1
TEKNOWLEDGE CORPORATION
1810 Embarcadero Road
Palo Alto, California 94303
ANNUAL MEETING OF STOCKHOLDERS
June 17, 1999
PROXY STATEMENT
This Proxy Statement and the accompanying proxy card are being mailed
on or about May 14, 1999 in connection with the solicitation of proxies by the
Board of Directors of Teknowledge Corporation (the "Company") for use at the
1999 Annual Meeting of Stockholders of the Company to be held on Thursday, June
17, 1999 or any adjournment thereof, for purposes set forth in the accompanying
Notice of Annual Meeting.
The cost of soliciting proxies will be borne by the Company, in
addition to soliciting stockholders by mail through its regular employees. The
Company will request banks, brokers, custodians, nominees and other fiduciaries
to solicit customers who have stock in the Company registered in the names of
such persons and will reimburse them for their recoverable out-of-pocket costs.
The Company may use the services of its officers, directors, and others to
solicit proxies, personally or by telephone, without additional compensation.
Only holders of the Company's Common Stock, par value $.01 per share
("Common Stock"), of record at the close of business on April 23, 1999 will be
entitled to vote at the 1999 Annual Meeting. On that date, there were
outstanding 4,970,651 shares of Common Stock, each of which is entitled to one
vote.
Shares of Common Stock may be voted by stockholders in person or by
proxy. Each holder of shares of Common Stock is entitled to one vote for each
share of stock held on the proposals presented in this Proxy Statement. The
Company's By-Laws provide that a majority of all of the shares of the stock
entitled to vote, whether present in person, or represented by proxy, shall
constitute a quorum for the transaction of business at the meeting. Any person
giving a proxy may revoke it, at any time before it is voted, by giving written
notice to the Secretary of the Company. The presence at the 1999 Annual Meeting
of a stockholder who has signed a proxy will not in itself revoke that proxy.
<PAGE>
2
All shares of Common Stock represented by a properly completed proxy
received prior to the taking of any vote at the 1999 Annual Meeting will be
voted as directed therein. If no direction is made on the proxy, shares
represented by the proxy will be voted "FOR" (i) the election of Neil A.
Jacobstein and William G. Roth each to serve as a Class II director for a
three-year term; and (ii) the ratification of the selection of Arthur Andersen
LLP as independent public accountants for the Company for the fiscal year ended
December 31, 1999. The Board of Directors knows of no other matters, which are
to be brought before the 1999 Annual Meeting. If any other matter properly comes
before the 1999 Annual Meeting, the persons named in the enclosed proxy, or
their duly appointed substitutes acting at the 1999 Annual Meeting, will be
authorized to vote or otherwise act thereon in accordance with their best
judgment.
Your vote is important. We urge you to sign, date and mail your proxy
card promptly to make certain that your shares will be voted at the meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
General
The Board of Directors currently consists of six members: Dr. Frederick
Hayes-Roth, Neil A. Jacobstein, Dr. Larry E. Druffel, General Robert T. Marsh
(Ret.), William G. Roth, and James C. Workman. The Board of Directors comprises
three classes of directors, each class consisting as nearly as possible of
one-third of the Board, with one class of the Board being elected each year. At
each annual meeting thereafter, any director of the class whose term is expiring
would be voted upon, and upon election, such director would serve a three-year
term. At the 1997 Annual Meeting, Dr. Frederick Hayes-Roth and Gen. Robert T.
Marsh (Ret.) were elected as Class III directors to serve a three-year term. At
the 1998 Annual Meeting, Dr. Larry E. Druffel and James C. Workman were elected
as Class I directors to serve a three-year term. At the 1999 Annual Meeting,
Neil A. Jacobstein and William G. Roth, as Class II directors, are to be elected
for a three-year term and until their successors are duly elected and qualified.
- --------------------------------------------------------------------------------
Positions Director
Name Age With the Company Since
Class II Directors nominated for election at the 1999 Annual Meeting
Neil A. Jacobstein 44 President and 1993
Chief Operating Officer
William G. Roth 60 Director 1991
<PAGE>
3
Class III Directors whose terms expire at the 2000 Annual Meeting
Dr. Frederick Hayes-Roth 51 Chairman of the Board and 1993
Chief Executive Officer
Gen. Robert T. Marsh 74 Director 1987
Class I Directors whose terms expire at the 2001 Annual Meeting
Dr. Larry E. Druffel 58 Director 1997
James C. Workman 56 Director 1993
- --------------------------------------------------------------------------------
Class II Nominees for a Term Expiring in 1999
The nominees for election have indicated a willingness to serve, but if
either should decline or be unable to serve as a Class II director, the proxy
holders will vote for the election of another substitute nominee as the Board of
Directors recommends.
Neil A. Jacobstein. Mr. Jacobstein, 44, is President and Chief
Operating Officer of the Company. Mr. Jacobstein was elected to these positions
and became a director of the Company in January 1993. After joining Teknowledge,
Inc. in 1984 as a Knowledge Engineer, Mr. Jacobstein was promoted to Senior
Knowledge Engineer and later to the position of Manager of the Research and
Advanced Development Group in 1985. He was promoted to Vice President and
General Manager of the Research and Advanced Systems Development Group in 1987
and became Vice President and General Manager of the Knowledge Systems Division
in 1989. Mr. Jacobstein also serves as the Chairman of the Board of Directors of
the Institute for Molecular Manufacturing, a nonprofit organization.
William G. Roth. Mr. Roth, 60, was elected as a director of the Company
in January 1991. Mr. Roth retired as Chairman of the Board of Directors of Dravo
Corporation in 1994 after holding that position since 1989. Since his retirement
in 1994 as Chairman of the Board of Dravo Corporation, Mr. Roth has served as a
member of the Board of Directors of Dravo Corporation and the Company. Mr. Roth
is also a director of Amcast Industrial Corporation and Service Experts
Incorporated. Mr. Roth is Chairman of the Company's Human Resources Committee.
Continuing Class III Directors for a Term Expiring in 2000
Dr. Frederick Hayes-Roth. Dr. Hayes-Roth, 51, is Chairman of the Board
and Chief Executive Officer of the Company. Dr. Hayes-Roth was elected Chairman
and Chief Executive Officer of the Company in January 1993. Dr. Hayes-Roth
joined Teknowledge, Inc. in November 1981 as Executive Vice President and served
as Chief Scientist and Vice President of the Research and Advanced Development
Group from April 1985 to June 1986; as Vice President, Research and New Product
Development, from June 1986 to January 1987; as Executive Vice President,
Research and Advanced Systems Development from January 1987 to April 1988; and
as Executive Vice President and Chief Scientist from April 1988 to January 1993.
<PAGE>
4
General Robert T. Marsh. General Marsh (Retired), 74, was elected a
director of American Cimflex Corporation (a predecessor to the Company) in 1987.
He retired as Chairman of the Board of Thiokol Corporation in 1991. Since 1995
he has served as Executive Director of the Air Force Aid Society, a non-profit
charitable organization serving the Air Force community, and he is the former
Chairman of the President's Commission on Critical Infrastructure Protection.
General Marsh joined the Board of SI International in December 1998, and he
retired from the Board of CAE Electronics, Inc. in October 1998. General Marsh
also serves on the Board of Comverse Government Systems, Inc. and is a member of
the Board of Trustees of MITRE Corporation. General Marsh is Chairman of the
Company's Finance and Audit Committee.
Continuing Class I Directors for a Term Expiring in 2001
Dr. Larry E. Druffel. Dr. Druffel, 58, was appointed to the Board of
Directors in April 1997. He is currently President and Director of the South
Carolina Research Authority (SCRA), a public non-profit organization since 1996.
He holds a doctorate degree in computer science from Vanderbilt University and a
master's degree in computer science from the University of London, and was a
director of the Software Engineering Institute at Carnegie-Mellon University
from 1986 to 1996. He is Chairman of the Board of the Advanced Technology
Institute, and a member of the Board of the South Carolina Technology Alliance,
both private non-profit corporations. He has also served as the Director of
Computer Software and Systems, Office of Deputy Undersecretary of Defense for
Research and Advanced Technology, Washington, DC.
James C. Workman. Mr. Workman, 56, was appointed Chairman of the Board,
Chief Executive Officer, and President of the Company on an interim basis
effective October 20, 1992. With the appointment of Dr. Hayes-Roth and Mr.
Jacobstein to executive positions in 1993, Mr. Workman resigned from his interim
executive officer position but retained a seat on the Board. Mr. Workman is
active in several community organizations in Wisconsin. He is a member of the
Executive Council and Board of Trustees of the Diocese of Fond Du Lac, and he is
a director for the Door County Memorial Hospital and Foundation. He is also a
Director of the United Way of Door County. Since leaving American Standard Inc.
in 1989 where he was Senior Vice President, Air Conditioning Products, he has
served as a self-employed attorney/consultant.
Vote Required
If a quorum is present and voting, the two nominees for Class II
Directors receiving the highest number of votes will be elected directors.
Abstentions will have no effect on the vote. It is intended that shares
represented by the enclosed form of proxy will be voted "FOR" the election of
the nominees identified above, unless otherwise directed.
<PAGE>
5
Board Recommendation
The Board of Directors recommends that the Company's stockholders vote
"FOR" the election of Mr. Jacobstein and Mr. Roth.
Committees and Meetings
The Board of Directors of Teknowledge has two standing committees: the
Finance and Audit Committee and the Human Resources Committee. The Board of
Directors has no standing nominating committee.
The primary responsibility of the Finance and Audit Committee is to
oversee the annual audit of the Company and to monitor the Company's internal
accounting controls and procedures. The Finance and Audit Committee also reviews
with the independent public accountants the scope and results of their annual
audit. The current members of the Finance and Audit Committee are Messrs.
Druffel, Marsh, Roth and Workman. The Finance and Audit Committee met once in
1998.
The Human Resources Committee serves as the Compensation Committee and
is responsible for assuring that executive officers and other key personnel of
the Company are effectively compensated in terms of salary, incentive
compensation and benefits. The current members of the Human Resources Committee
are Messrs. Druffel, Marsh, Roth and Workman. The Human Resources Committee held
one meeting in 1998.
The Company's Board of Directors held six meetings during 1998. In
1998, all members of the Board of Directors attended more than 75% of the
meetings of the Board of Directors and the committees on which they served.
Directors' Compensation
Directors' Fees. Each non-employee member of the Board of Directors
receives cash compensation totaling $10,000, which are paid in quarterly
increments of $2,500. In addition to their regular compensation, directors are
entitled to be reimbursed for related travel, lodging, and other expenses in
attending board and committee meetings.
Directors' Option Plan. The Company maintains a stock option plan for
non-employee directors. The Directors' Option Plan, as amended at the 1995
Annual Meeting of Stockholders, provides that each Eligible Director shall be
granted, on the date such director becomes an Eligible Director, an initial
option to purchase 3,000 shares of Common Stock, and on the date of each annual
meeting thereafter, each continuing Eligible Director shall be granted an
additional option to purchase 3,000 shares of Common Stock. Options to purchase
50,000 shares of Common Stock have been granted since the inception of the
Directors' Option Plan and 50,000 shares remain to be granted.
<PAGE>
6
Executive Officers
Following is certain information regarding the Company's other
executive officer who is not a member of the Board of Directors.
Dennis A. Bugbee, 52, is Director of Finance, Treasurer, and Secretary
for the Company. Mr. Bugbee joined the Company in 1990 as the Division
Controller for the Knowledge Systems Division in Palo Alto, California. He was
promoted to Director of Finance March 1, 1993 and shortly thereafter to the
positions of Treasurer and Corporate Secretary. Prior to joining the Company,
Mr. Bugbee held the position of Accounting Manager with TRW's Space and Defense
Sector.
PROPOSAL 2: RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the accounting firm of Arthur
Andersen LLP as independent public accountants to examine and report upon the
Company's consolidated financial statements for the year ended December 31,
1999, and has directed that this selection be submitted to the stockholders for
ratification at the 1999 Annual Meeting. Arthur Andersen LLP has acted in such
capacity since its appointment during fiscal year ending December 31, 1994.
Stockholder ratification of the selection of Arthur Andersen LLP as the
Company's independent public accountants is not required by the By-Laws or
otherwise. If the stockholders do not ratify the selection of Arthur Andersen
LLP, the Board of Directors will reconsider the selection of independent public
accountants for the Company.
Representatives of Arthur Andersen LLP are expected to be present at
the Annual Meeting and will have the opportunity to make a statement if they
desire. The representatives will also be available to respond to appropriate
questions from the stockholders. The affirmative vote of a majority of the votes
cast at the annual meeting of stockholders at which a quorum representing a
majority of all the attending shares of Common Stock of the Company is present
and voting, either in person or by proxy, is required for approval of this
proposal.
<PAGE>
7
Board Recommendation
The Board of Directors recommends that the Company's stockholders vote
"FOR" the ratification of the selection of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31, 1999.
SECURITY OWNERSHIP
The following table sets forth certain information concerning the
beneficial ownership of Common Stock as of April 26, 1999 by persons known to
the Company to own beneficially more than 5% of the Common Stock, by each of the
directors of the Company, by each of the executive officers named in the Summary
Compensation Table, and by all directors and executive officers of the Company
as a group.
- --------------------------------------------------------------------------------
Name and Address of Common Stock Owned
Beneficial Owner Beneficially(i) Percent of Class
- --------------------------------------------------------------------------------
Mark J. Hanna 267,607(2) 5.4%
327 Plaza Real, Suite 319
Boca Raton, FL 33432
Dennis A. Bugbee(1) 48,682(3) *
Larry E. Druffel(1) 6,000(4) *
Frederick Hayes-Roth(1) 626,852(5) 11.9%
Neil A. Jacobstein(1) 680,864(6) 12.7%
Robert T. Marsh(1) 16,000(7) *
William G. Roth(1) 25,000(8) *
James C. Workman(1) 16,000(9) *
All Directors and Executive Officers of the 1,419,102(10) 24.8%
Company as a Group (7 Persons)
- --------------------------------------------------------------------------------
(i)All share numbers have been adjusted to give effect to a one-for-five
reverse stock split on December 22, 1998
* Less than 1%
(1) The address of all directors and executive officers is the Company's
Executive Offices located at 1810 Embarcadero Road, Palo Alto,
California 94303.
(2) The information concerning the Common Stock owned beneficially by
Mark J. Hanna was obtained from a Schedule 13D filed with the
Securities and Exchange Commission on August 29, 1997.
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8
(3) Includes 2,500 shares, which may be purchased upon the exercise of
employee stock options that are currently exercisable or will become
exercisable within 60 days of April 26, 1999.
(4) Includes 6,000 shares, which may be purchased upon the exercise of
director stock options that are currently exercisable or will become
exercisable within 60 days of April 26, 1999.
(5) Includes 306,296 shares, which may be purchased upon the exercise of
employee stock options that are currently exercisable or will become
exercisable within 60 days of April 26, 1999.
(6) Includes 406,576 shares, which may be purchased upon the exercise of
employee stock options that are currently exercisable or will become
exercisable within 60 days of April 26, 1999. Mr. Jacobstein's spouse
owns 18,000 shares; however, Mr. Jacobstein disclaims beneficial
ownership.
(7) Includes 16,000 shares, which may be purchased upon the exercise of
director stock options that are currently exercisable or will become
exercisable within 60 days of April 26, 1999.
(8) Includes 11,000 shares, which may be purchased upon the exercise of
director stock options that are currently exercisable or will become
exercisable within 60 days of April 26, 1999.
(9) Includes 12,000 shares, which may be purchased upon the exercise of
director stock options that are currently exercisable or will become
exercisable within 60 days of April 26, 1999. Mr. Workman's spouse owns
4,000 shares beneficially.
(10) Includes options for 760,372 shares, which are currently exercisable
or will become exercisable within 60 days of April 26, 1999.
Summary Compensation
The following table sets forth the cash compensation paid to the Chief
Executive Officer and to each of the two most highly compensated executive
officers of the Company whose salary and bonus exceeded $100,000 for all
services to the Company in the years ended December 31, 1998, 1997, and 1996
SUMMARY COMPENSATION TABLE
Annual Compensation
- --------------------------------------------------------------------------------
Name and Principal Position Year Salary Bonus
$(1) $(2)
- --------------------------------------------------------------------------------
Frederick Hayes-Roth, Chair, CEO 1998 230,123 148,329
Frederick Hayes-Roth, Chair, CEO 1997 208,084 96,769
Frederick Hayes-Roth, Chair, CEO 1996 196,388 128,639
Neil Jacobstein, Pres, COO 1998 152,784 97,585
Neil Jacobstein, Pres, COO 1997 134,692 63,664
Neil Jacobstein, Pres, COO 1996 128,468 84,330
Dennis Bugbee, Dir. of Finance 1998 109,172 9,000
Dennis Bugbee, Dir. of Finance 1997 98,635 7,500
Dennis Bugbee, Dir. of Finance 1996 93,842 5,000
- --------------------------------------------------------------------------------
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9
(1) Includes 401(k) deferred compensation and 4% Company matching provision.
(2) The bonuses set forth in this column are generally paid after the
conclusion of the annual audit following the year to which they relate.
Stock Option Grants and Exercises
The following tables set forth information regarding the value of
options held by the executive officers named in the Summary Compensation Table
at December 31, 1998. Mr. Bugbee was granted options to purchase 20,000 shares
of Common Stock in 1998 that will vest in equal quarterly increments of 1,250
shares over a four-year period. Dr. Hayes-Roth and Mr. Jacobstein were not
granted options in 1998.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Number of % of Total Options
Securities Granted to Employees
Underlying in Fiscal Year Exercise or
Options Granted (%) Base Price Expiration
Name (#) ($/Sh) Date
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frederick Hayes-Roth, Chair, CEO - - - -
- --------------------------------------------------------------------------------------------------------------------
Neil Jacobstein, Pres, COO - - - -
- --------------------------------------------------------------------------------------------------------------------
Dennis Bugbee, Dir. of Finance 20,000 6 2.15 10/08/08
- --------------------------------------------------------------------------------------------------------------------
(1) Generally, the right to exercise an option under the Company's 1998
Stock Option Plan (the "Option Plan") vests in quarterly increments
over a four-year period commencing on the date of grant. The Option
Plan permits the grant of both incentive stock options within the
meaning of Section 422 of the Internal Revenue Code, as amended, and
nonstatutory stock options. The exercise price of incentive stock
options must at least equal the fair value of the Common Stock of the
Company on the date of grant. The exercise price of nonstatutory stock
options must equal at least 85% of the fair market value of the Common
Stock of the Company on the date of grant. The exercise price of
incentive stock options or nonstatutory stock options granted to any
person who at the time of grant owns stock representing more than 10%
of the voting power of all classes of stock of the Company or any
parent or subsidiary corporations must be at least 110% of the fair
market value of the Common Stock on the date of grant and term of such
options cannot exceed ten years.
</TABLE>
<TABLE>
<CAPTION>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL
YEAR-END OPTION VALUE
- ----------------------------------------------------------------------------------------------------------------------
Value of Unexercised
Number of Securities In-the-Money Options
Underlying at FYE
Shares Unexercised Options (Exercisable/
Acquired Value at FYE Unexercisable)
Name on Exercise Realized (Exercisable/ (3)
(#) (1) Unexercisable) (2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Frederick Hayes-Roth, Chair, CEO 83,000 $199,450 306,296/- $1,857,406/-
- ----------------------------------------------------------------------------------------------------------------------
Neil Jacobstein, Pres, COO 406,576/- $2,473,514/-
- ----------------------------------------------------------------------------------------------------------------------
Dennis Bugbee, Dir. of Finance 6,250 $12,500 2500/17,500 $10,250/$71,750
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
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10
(1) The value realized upon exercise is the difference between the
exercise price and the bid price at the close of business on the date
the stock is exercised.
(2) All share numbers and/or dollar amounts have been adjusted to give
effect for the one-for-five reverse stock split on December 22, 1998.
(3) The value of unexercised in-the-money options is determined by
multiplying the number of shares under the option by the difference
between the December 31, 1998 bid price of $6.25 and the grant price.
Of the options granted to executives since the inception of the ISO
Plan, only the options granted in 1990 or later were in the money for a
total of 715,372 shares.
Employment Arrangements
Frederick Hayes-Roth, Chief Scientist, Chairman of the Board, and Chief
Executive Officer, and Neil Jacobstein, President and Chief Operating Officer,
each has an employment agreement with the Company that provides for annual base
salaries of $233,000 and $153,000, respectively. The 1999 Executive Compensation
Agreement, dated January 14, 1999, includes an incentive compensation plan with
target objectives established in the five strategic categories of cash flow,
profitability, bookings, E-Commerce products and services, and special licensing
fees, which will be determined and assessed by the Board of Directors to a
maximum of 120% of base salary. Each executive is also eligible for severance
benefits equal to their most recent twelve-month salary and bonus; except in the
event of a change of control, defined as any consolidation or merger of the
Company in which the Company is not the continuing or surviving corporation, the
Chief Executive Officer and the President of the Company will be entitled to
severance benefits to include: (i) full accrued salaries and vacation pay, (ii)
accrued incentive compensation awarded or determined to be awarded by the Board
of Directors, (iii) insurance coverage, (iv) retirement benefits and (v) a lump
sum severance payment equal to two times their most recent respective total cash
compensation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors, and persons who beneficially own more
than 10% of the Company's Common Stock to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Such persons are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms, furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's executive
officers, directors, and more than 10% stockholders were complied with; except
that, due to administrative error, the annual statement of beneficial ownership
reporting a stock option grant to Larry Druffel, William Roth, and Robert Marsh
were not timely filed.
<PAGE>
11
ADDITIONAL INFORMATION
Methods and Expenses of Solicitation
The cost of solicitation of the enclosed form of proxy will be borne by
the Company. Solicitation will be made primarily through the use of the mail,
although directors, officers and employees of the Company may, for no additional
compensation, solicit proxies personally, by mail, by telephone, or by
facsimile. Upon request, the Company will reimburse banks, brokers, and other
custodians, nominees and fiduciaries for their reasonable expenses incurred in
sending proxy materials to beneficial owners and obtaining their proxies.
Submission of Stockholder Proposals
The Company must receive proposals for action at the 2000 Annual
Meeting of Stockholders at its offices at 1810 Embarcadero Road, Palo Alto,
California 94303, no later than January 15, 2000. Any such submission must
conform to the regulations of the Securities and Exchange Commission concerning
stockholder proposals.
Annual Report
Accompanying this Proxy Statement is a copy of the Company's Annual
Report for the year ended December 31, 1998. A complete copy of the 10-KSB
(without exhibits) as filed with the Securities and Exchange Commission,
including the financial statements and the financial statement schedules, can be
obtained without charge from the Company upon receipt of a written request from
the security holder addressed to the Secretary. The Company will also furnish a
copy of any exhibit included in the 10-KSB upon payment of a $5.00 fee and
receipt of a written request for such exhibit. The written request should be
directed to Dennis Bugbee, Secretary, Teknowledge Corporation, 1810 Embarcadero
Road, Palo Alto, California 94303.
Other Matters
The Board of Directors knows of no other business that will be
presented in the meeting. If matters other than those described herein should
properly come before the meeting, it is the intention of those named in the
accompanying proxy to vote such proxy in accordance with their judgment on such
matters.
By Order of the Board of Directors,
/s/ Dennis A. Bugbee
---------------------------
Dennis A. Bugbee, Secretary
Palo Alto, California
April 28, 1999
