<PAGE>
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 THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
STM WIRELESS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(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)(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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
STM WIRELESS, INC.
One Mauchly
Irvine, California 92618
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
September 16, 1999
TO THE STOCKHOLDERS OF STM WIRELESS, INC.:
The 1999 Annual Meeting of Stockholders of STM Wireless, Inc. (the
"Company") will be held at the Irvine Marriot Hotel, 18000 Von Karman, Irvine,
California, on September 16, 1999, at 10:00 A.M., for the following purposes as
more fully described in the accompanying Proxy Statement:
(1) To elect the following five (5) nominees to serve as directors until
the next annual meeting of stockholders or until their successors are
elected and have qualified:
Emil Youssefzadeh Frank T. Connors Lawrence D. Lenihan, Jr.
Claude Burgio Dr. Ernest U. Gambaro
(2) To ratify the appointment of KPMG LLP as independent auditors of the
Company for the fiscal year ending December 31, 1999; and
(3) To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only stockholders of record at the close of business on August 1, 1999 will
be entitled to vote at the meeting or any adjournment or postponement thereof.
By Order of the Board of Directors
Emil Youssefzadeh
Chief Executive Officer and Chairman of the Board
August 16, 1999
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. Any
stockholder present at the meeting may withdraw his or her proxy and vote
personally on each matter brought before the meeting. Stockholders attending
the meeting whose shares are held in the name of a broker or other nominee who
desire to vote their shares at the meeting should bring with them a proxy or
letter from that firm confirming their ownership of shares.
<PAGE>
STM WIRELESS, INC.
One Mauchly
Irvine, California 92618
_______________
PROXY STATEMENT
_______________
INTRODUCTION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of STM Wireless, Inc., a Delaware
corporation (the "Company"), for use at its 1999 Annual Meeting of Stockholders
(Annual Meeting) to be held on September 16, 1999, at 10:00 A.M., at the
Irvine Marriot Hotel, 18000 Von Karman, Irvine, California. This Proxy
Statement and the accompanying proxy are being mailed to stockholders on or
about August 16, 1999. The Company has retained the services of U.S. Stock
Transfer Corporation to assist in soliciting proxies from brokers and nominees
for the Annual Meeting. The estimated costs for these services is $5,000 and
will be borne by the Company. It is contemplated that this solicitation of
proxies will be made primarily by mail; however, if it should appear desirable
to do so in order to ensure adequate representation at the meeting, directors,
officers and employees of the Company may communicate with stockholders,
brokerage houses and others by telephone, telegraph or in person to request that
proxies be furnished and may reimburse banks, brokerage houses, custodians,
nominees and fiduciaries for their reasonable expenses in forwarding proxy
materials to the beneficial owners of the shares held by them. All expenses
incurred in connection with this solicitation shall be borne by the Company.
Holders of shares of Common Stock of the Company (stockholders) who
execute proxies retain the right to revoke them at any time before they are
voted. Any proxy given by a stockholder may be revoked or superseded by
executing a later dated proxy, by giving notice of revocation to the Secretary,
STM Wireless, Inc., One Mauchly, Irvine, California 92618 in writing prior to or
at the meeting or by attending the meeting and voting in person. A proxy, when
executed and not so revoked, will be voted in accordance with the instructions
given in the proxy. If a choice is not specified in the proxy, the proxy will
be voted "FOR" the nominees for election of directors named in this Proxy
Statement and "FOR" the ratification of KPMG Peat Marwick LLP as the Company's
independent auditors.
VOTING SECURITIES
The shares of Common Stock, $.001 par value, constitute the only
outstanding class of voting securities of the Company. Only the stockholders of
the Company of record as of the close of business on August 1, 1999 (the Record
Date) will be entitled to vote at the meeting or any adjournment or
postponement thereof. As of the Record Date, there were 7,042,204 shares of
Common Stock outstanding and entitled to vote. No shares of the Company's
preferred stock, $0.001 par value, were outstanding. A majority of shares
entitled to vote represented in person or by proxy will constitute a quorum at
the meeting. Each stockholder is entitled to one vote for each share of Common
Stock held as of the Record Date. Abstentions and broker non-votes are each
included in the determination of the number of shares present and voting for the
purpose of determining whether a quorum is present. Abstentions will be treated
as shares present and entitled to vote for purposes of any matter requiring the
affirmative vote of a majority or other proportion of the shares present and
entitled to vote. With respect to shares relating to any proxy as to which a
broker non-vote is indicated on a proposal, those shares will not be considered
present and entitled to vote with respect to any such proposal. Abstentions or
broker non-votes or other failures to vote will have no effect in the election
of directors, who will be elected by a plurality of the affirmative votes cast.
With respect to any matter brought before the Annual Meeting requiring the
affirmative vote of a majority or other proportion of the outstanding shares, an
abstention or broker non-vote will have the same effect as a vote against the
matter being voted upon.
<PAGE>
All stockholders entitled to vote at the Annual Meeting may cumulate the
votes in the election of directors. With cumulative voting, each stockholder is
entitled to a number of votes as shall equal the number of votes which the
stockholder would be entitled to cast for the election of directors with respect
to the stockholder's shares of stock multiplied by the number of directors to be
elected by the stockholders, and each stockholder may cast all of such votes for
a single director or may distribute them among the number to be voted for, or
for any two or more of them as the stockholder may see fit. In order to
cumulate votes, stockholders must attend the meeting and vote in person or make
arrangements with their own proxies. Otherwise, the proxies solicited by the
Board of Directors confer discretionary authority in the proxy holders to
cumulate votes so as to elect the maximum number of nominees.
PROPOSAL ONE
ELECTION OF DIRECTORS
Currently, there are five (5) members of the Board of Directors. Directors
are elected at each annual stockholders' meeting to hold office until the next
annual meeting or until their successors are elected and have qualified. Unless
otherwise instructed, the proxy holders named in the enclosed proxy will vote
the proxies received by them for the five (5) nominees named below. Emil
Youssefzadeh, Frank T. Connors, Dr. Ernest U. Gambaro, Lawrence D. Lenihan, Jr.
and Guy Numann are presently directors of the Company. Guy Numann is not
standing for reelection to the Board of Directors and is resigning from the
Board of Directors as of September 16, 1999.
If any nominee becomes unavailable for any reason before the election, the
enclosed proxy will be voted for the election of such substitute nominee or
nominees, if any, as shall be designated by the Board of Directors. The Board
of Directors has no reason to believe that any of the nominees will be
unavailable to serve.
Under Delaware law, the five (5) nominees receiving the highest number of
votes will be elected as directors at the annual meeting. As a result, proxies
voted to "Withhold Authority," which will be counted, and broker non-votes,
which will not be counted, will have no practical effect.
The names and certain information concerning the five (5) nominees for
election as directors are set forth below. THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>
Emil Youssefzadeh 46 Chief Executive Officer and Chairman of the Board
Frank T. Connors 65 Acting President and Vice Chairman of the Board
Dr. Ernest U. Gambaro 60 Director
Lawrence D. Lenihan, Jr. 34 Director
Claude Burgio 54 Director Nominee
</TABLE>
Emil Youssefzadeh, 46, is the founder of the Company. He has been director
of the Company and served as its President from January 1982 to September 1998,
and has served as Chief Executive Officer from January 1982 to June 1988 and
since January 1991. From January 1979 until founding the Company, Mr.
Youssefzadeh was a satellite research engineer with Hughes Aircraft Company
where his projects included design of satellite communications systems and
satellite earth stations. He also was a member of the team responsible for
communications system engineering for the Intelsat-VI spacecraft.
Frank T. Connors, 65, has been a director of the Company since June 1988,
and served as its Chairman of the Board of Directors from June 1988 to September
1993, and as its Chief Executive Officer from June 1988 to January 1991. Since
October 1, 1994 Mr. Connors has been Vice Chairman of the board of directors of
the Company. From October of 1994 to January 1998, Mr. Connors was Executive
Vice President of the Company.
2
<PAGE>
Mr. Connors has been serving as the acting President of the Company since May
1999. From January 1998 to January 1999, Mr. Connors served as President of
Direc-To-Phone International, Inc., the Company's former fixed telephony service
subsidiary. From December 1982 to January 1988, Mr. Connors was the Chief
Executive Officer of Doelz Networks, a manufacturer of packet switching
equipment. From 1979 to 1981, Mr. Connors was Group Vice President of Northern
Telecom's Computer Systems Group. Mr. Connors is currently a director of DISC,
Inc. (NASDAQ NMS: DCSC; DCSCW), an optical computer storage manufacturing
Company located in northern California.
Dr. Ernest U. Gambaro, 60, has been a director of the Company since March
1997. In 1988, Dr. Gambaro directed the formation of Infonet Services
Corporation and has since served as its Vice President, General Counsel and
Secretary. Infonet Services Corporation operates the world's largest value
added international data communication network with offices in 58 countries.
Prior to 1988, Dr. Gambaro was Assistant General Counsel for Computer Sciences
Corporation focusing on the Company's international, acquisition and divestiture
activities. Between 1962 and 1975, Dr. Gambaro directed programs at The
Aerospace Corporation relating to the conceptual, definition and implementation
of advanced technology systems for space.
Lawrence D. Lenihan, Jr., 33, has been a director of the Company since
September 1998. He is a principal at Pequot Capital Management, Inc. and has
been a managing member of the general partner of Pequot Private Equity Fund,
L.P. since February 1997. From August 1993 to October 1996, Mr. Lenihan was a
principal at Broadview Associates, LLC. He currently serves as a director of
Direc-To-Phone International, Inc., Digital Generation Systems, Inc. and
Sanctuary Woods Multimedia Corporation.
Claude Burgio, 54, has been Chairman and Chief Executive Officer of Direc-
To-Phone International, Inc. since June 1999. From October 1997 to June 1999,
Mr. Burgio was president of Lockheed Martin Telecommunications and President of
the Global Transport Services and Operations unit of Lockheed Martin Global
Telecommunications (LMGT). From September 1995 to October 1997 Mr. Burgio was
Vice President, Engineering for the International Telecommunications Satellite
Organization (INTELSAT), responsible for all aspects of the INTELSAT system,
including new service development in areas such as broadband access and Internet
via satellite, wireless local loop and direct-to-home interactive services.
From April 1984 to August 1995, Mr. Burgio was Director of the
Telecommunications and Systems Division of Aerospatiale. Mr. Burgio
significantly expanded the commercial scope of the telecommunications activities
of Aerospatiale, providing a worldwide network of customers with satellite based
telecommunications systems and services.
Other Executive Officers
Joseph J. Wallace, 39, has been Vice President-Finance and Chief Financial
Officer of the Company since March 1997 and Corporate Secretary of the Company
since September 1998. From April 1994 to March 1997, Mr. Wallace was Corporate
Controller of MAI Systems Corporation, a publicly held worldwide provider of
total information system solutions for the hospitality and manufacturing
industries. From 1990 to 1993, Mr. Wallace was Controller and Chief Financial
Officer of Simmons Magee, PLC, a British based value added reseller of computer
products and services.
Certain Relationships and Related Transactions
In June 1994, the Company sold 693,188 shares of newly issued common stock
at a price of $10.00 per share to Berjaya Cayman, a wholly-owned subsidiary of
Berjaya Group Berhad. In addition, Berjaya Cayman purchased an additional
528,106 shares of common stock from the open market and from certain former
shareholders of the Company, COM.NET S.p.A. ("COMNET") and IMI Capital Markets
USA Corporation. A major shareholder and the Chairman of the Board of Directors
of Berjaya Group Berhad is also a major shareholder and a director of Mutiara
Telecommunications SDN ("Mutiara"), a customer of the Company. The Company
believes that the terms and conditions of sales to Mutiara were negotiated at
arm's length and are no less favorable than those that could be entered into
with independent parties. Mr. Kien Sing Chan, Group Executive Director of
Berjaya Group Berhad, was a director of the Company until his resignation in
January of 1999.
3
<PAGE>
In 1997 and 1996, the Company contracted with Gulf Communications
International, Inc. ("GCI") in the normal course of business to provide
installation services. Until June 1998, Jack Acker, the president of the
Company's Network Systems Division from January 1998 to March 1999 and a member
of the Company's Board of Directors from September 1998 to March 1999, served as
the Chairman of the Board of GCI and was a 50% owner of GCI. Mr. Acker continues
to have a financial interest in GCI, although not as a shareholder. Total
purchases by the Company from GCI were approximately $921,000, $720,000 and
$469,000 in 1998, 1997 and 1996, respectively.
In December 1997, the Company entered into an Agreement and Plan of Merger
with Telecom International, Inc. ("TI") pursuant to which TI merged with and
into a wholly-owned subsidiary of the Company. Under the terms of the
acquisition, the Company issued 480,000 shares of its Common Stock to TI's
former stockholders, including Jack Acker, who received 260,458 shares of the
Company's Common Stock as a result of the acquisition.
In March 1998, the Company completed a $10 million equity offering of
shares of the Company and Direc-To-Phone International, Inc. ("DTPI"), the
Company's former subsidiary, to Pequot Private Equity Fund L.P. ("Pequot"), the
private investment vehicle of Pequot Capital Management, Inc. In connection
with the transaction, the Company entered into a product supply agreement with
DTPI pursuant to which the Company is required to offer DTPI certain product at
the lowest price available to the Company's other customers. Through the
transaction, Pequot acquired 571,429 shares in the Company and an interest in
DTPI. Pequot Capital Management, Inc. is the beneficial owner of these shares.
Coinciding with the equity offering, two officers of Pequot, including Lawrence
D. Lenihan, Jr., a director of the Company, were appointed to DTPI's board of
directors. In addition, Pequot Capital Management, Inc. provides consulting
services to DTPI in consideration for an annual fee of $100,000. Claude Burgio,
a nominee to the Company's Board of Directors, is DTPI's chief executive officer
and chairman of the board.
In June 1999, the Company completed a financing of approximately $14.6
million to REMEC, Inc., a major supplier to the Company, and Pequot.
Specifically, REMEC made a $5 million cash investment in DTPI and purchased
existing DTPI shares from the Company for an additional $4.6 million.
Additionally, Pequot made a $2.5 million cash investment in DTPI and purchased
existing DTPI shares from the Company for an additional $2.5 million. As a
result of the investments by REMEC and Pequot in DTPI, the Company's ownership
in DTPI has been decreased from 75% to approximately 44%, which will result in
the Company deconsolidating the results of DTPI.
Board Meetings and Attendance
The Board of Directors of the Company held five (5) meetings during the
fiscal year ended December 31, 1998. Each incumbent Director attended at least
seventy-five percent (75%) of the aggregate of the number of meetings of the
Board and the number of meetings held by all committees of the Board on which he
served. There are no family relationships among any of the directors or
executive officers of the Company.
Committees of the Board of Directors
The Board of Directors has an Audit Committee and a Compensation and Stock
Option Committee. The Audit Committee is presently comprised of three (3)
directors selected by the Board of Directors of the Company. The members of the
Audit Committee are Dr. Gambaro, Mr. Lenihan and Mr. Numann. The Audit
Committee is authorized to handle all matters which it deems appropriate
regarding the Company's independent accountants and to otherwise communicate and
act upon matters relating to the review and audit of the Company's books and
records, including the scope of the annual audit and the accounting methods and
systems to be utilized by the Company. In addition, the Audit Committee also
makes recommendations to the Board of Directors with respect to the selection of
the Company's independent accountants. The Audit Committee held four (4)
meetings during the fiscal year ended December 31, 1998.
4
<PAGE>
The Compensation and Stock Option Committee is presently comprised of three
(3) directors selected by the Board of Directors of the Company. The members of
the Compensation and Stock Option Committee are Dr. Gambaro, Mr. Lenihan and Mr.
Numann. The functions of the Compensation and Stock Option Committee include
advising the Board of Directors on officer and employee compensation and
administering the Company's stock option plans. The Board of Directors, based
on input from the Compensation and Stock Option Committee, establishes the
annual compensation rates for the Company's executive officers. The
Compensation and Stock Option Committee held three (3) meetings during the
fiscal year ended December 31, 1998.
The Board of Directors does not have a nominating committee. Instead, the
Board of Directors, as a whole, identifies and screens candidates for membership
on the Company's Board of Directors.
Compensation of Executive Officers
The following table sets forth compensation received for the three years
ended December 31, 1998, by the Company's Chief Executive Officer, and the four
other most highly compensated executive officers of the Company serving at
December 31, 1998 (collectively, the "Named Executive Officers"):
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------
Name and Principle Position Year Salary ($) Bonus ($) Other ($)(5) Awards Options (#)
- --------------------------- -------- ----------- ----------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
Emil Youssefzadeh.................... 1998 310,547 0 33,020 0
Chief Executive Officer & 1997 239,698 0 33,020 10,000(6)
Chairman of the Board 1996 219,448 0 33,020 10,000(7)
Jack Acker (1)....................... 1998 214,783 0 0 100,000
President, STM
Network Systems & Director
Mohammad H. Farzin (1)............... 1998 205,492 500,000(4) 0 100,000
Executive Vice President 1997 176,049 0 0 0
1996 126,402 0 0 0
Frank Connors (2).................... 1998 206,092 0 0 0(8)
Executive Vice President 1997 165,577 0 0 15,000(9)
Vice Chairman & President, DTPI 1996 150,000 0 0 10,000(7)
Michael Lindsay (1).................. 1998 179,981 0 0 0(8)
Corporate Officer & 1997 160,169 0 0 0
Chief Operating Officer, DTPI 1996 148,440 0 0 0
Joseph Wallace(3).................... 1998 149,811 30,000(4) 0 0
Vice President, Finance & 1997 95,673 0 0 25,000
Chief Financial Officer
</TABLE>
- -----------------
(1) Mr. Acker commenced employment with the Company in December 1997. Mr. Acker
resigned as an officer of the Company and from the board of directors of the
Company in March of 1999. Mr. Farzin and Mr. Lindsay are presently officers
of DTPI and are not employees of the Company.
(2) Mr. Connors retired as an officer of the Company in January of 1999. In May
1999, Mr. Connors was
5
<PAGE>
appointed acting President by the Company's Board of Directors.
(3) Mr. Wallace commenced employment with the Company in March 1997.
(4) The bonus was paid in connection with the sale of substantially all of the
assets of Telecom Multimedia Systems, Inc., the Company's subsidiary, to
Inter-Tel, Incorporated in June of 1998.
(5) During 1998, 1997 and 1996 amounts represent $33,020, $33,020 and $33,020,
respectively, of automobile allowance and expenses paid by the Company for
the benefit of the Chief Executive Officer.
(6) Includes regrant of 10,000 options on March 20, 1997 in connection with the
Company's option cancellation/regrant program.
(7) These options were cancelled on March 20, 1997 in connection with the
Company's option cancellation/regrant program.
(8) During 1998, Mr. Connors and Mr. Lindsay were not granted any options to
purchase shares of the Company's common stock. However, Mr. Connors and Mr.
Lindsay were granted options to purchase common stock of Direc-To-Phone
International, Inc. ("DTPI"), the Company's majority owned subsidiary. Mr.
Connors and Mr. Lindsay were granted options to purchase 50,000 shares and
120,000 shares, respectively, of DTPI common stock.
(9) Includes regrant of 15,000 options on March 20, 1997 in connection with the
Company's option cancellation/regrant program.
Option Grants in Last Fiscal Year
The following table sets forth information concerning individual grants of
STM Wireless, Inc. stock options made during the fiscal year ended December 31,
1998, to each of the Named Executive Officers:
<TABLE>
<CAPTION>
Potential Realizable
% Total Value at Assumed
Options Annual Rates of
Options Granted to Exercise Stock Price
Granted Employees Price Expiration Appreciation for
Name (No.) In Fiscal Yr.(1) ($/share) Date (2) Option Term (3)
- ---- ----------- ---------------- ------------ ------------ ----------------------
<S> <C> <C> <C> <C> <C>
5% ($) 10% ($)
----- ------
Jack Acker........................ 100,000 18.9% $9.00 6/8/08(4) $566,005 $1,434,368
Mohammad H. Farzin................ 100,000 18.9% $9.00 6/8/08 $566,005 $1,434,368
</TABLE>
- ----------
(1) Options to purchase an aggregate of 528,000 shares of Common Stock were
granted to employees, including the named Executive Officers, during the
year ended December 31, 1998.
(2) Options granted have a term of ten years, subject to earlier termination on
certain events related to termination of employment or service to the
Company.
(3) The potential realizable value is calculated based on the term of the option
at its time of grant (10 years). It is calculated by assuming that the stock
price appreciates at the indicated annual rate compounded annually for the
entire term of the option and that the option is exercised and sold on the
last day of its term for the appreciated stock price. No gain to the option
holder is possible unless the stock price increases over the option term.
6
<PAGE>
(4) Mr. Acker resigned as an employee of the Company and from the Board of
Directors of the Company in March 1998. Under the terms of Mr. Acker's
option grant, all options terminated on the date of his resignation and he,
therefore, will not be entitled to exercise such options.
The following table sets forth information concerning exercises of stock
options during the fiscal year ended December 31, 1998, by each of the named
executive officers and the year-end value of unexercised options:
<TABLE>
<CAPTION>
Values of
Number of Unexercised
Unexercised In-the-Money
Options at Fiscal Options at
Yearend (No.) Fiscal End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (No.) Realized Unxercisable Unexercisable(1)
- ------ ----------------- ------------ ----------------- ------------------
($)
---
<S> <C> <C> <C> <C>
Emil Youssefzadeh.................... 0 0 6,667/ 3,333 $0/$0
Jack Acker........................... 0 0 0/100,000 $0/$0
Mohammad H. Farzin................... 0 0 78,667/123,333 $0/$0
Frank Connors........................ 0 0 11,667/ 3,333 $0/$0
Michael Lindsay...................... 0 0 80,000/ 20,000 $0/$0
Joseph Wallace....................... 0 0 6,250/ 17,750 $0/$0
</TABLE>
- ---------
(1) Value is based on fair market value of Common Stock as of December 31, 1998
stock market close minus the exercise price or base price of "in-the-money"
options. The closing sales price for the Company's Common Stock as of
December 31, 1998 on the NASDAQ Stock Market was $4.75
Directors' Fees
The Chairman of the Board of Directors (if an outside director) receives an
annual retainer at the rate of $48,000, and each of the outside directors
receives an annual retainer at the rate of $15,000 for services rendered in his
or her capacity as a director of the Company. Accordingly, during 1998, Mr.
Dennis Elliott received $36,000 (as he was Chairman of the Board of Directors
until the annual meeting of stockholders in September of 1998, at which time he
did not stand for reelection); Ms. Diane Walker received $11,250 (as she was an
outside director until the annual meeting of stockholders in September of 1998,
at which time she did not stand for reelection); Mr. Chan Kien Sing received
$7,500 (as he served on the Board from March of 1998 until his resignation in
January of 1999); Mr. K.P. Tan received $3,750 (as he served on the Board until
his death in January of 1998); Mr. Gambaro received $15,000; and Mr. Numann
received $3,250 (as he joined the Company's Board in September of 1998) for
their services as outside directors of the Company. The Company's outside
directors also receive options to purchase 20,000 shares of the Company's common
stock upon joining the Company's board, with an exercise price equal to the fair
market value of the common stock at the time of grant. The Company's outside
directors were also reimbursed for expenses incurred for meetings of the Board
of Directors which they attended.
Consulting Agreements
In November of 1998, the Company entered into a Consulting Agreement with
Mr. Numann, pursuant to which, Mr. Numann provides the Company with up to 40
hours of consulting services per month related to identifying and facilitating
introductions with potential customers, strategic partners and financing
institutions, and working on strategic transactions on behalf of the Company.
The consulting agreement is terminable by either party upon 30 days notice. In
consideration for his consulting services, Mr. Numann received options to
purchase 40,000 shares of the Company's common stock. Such options vest ratably
over four years (provided that no options shall vest upon termination of the
consulting agreement) and have an exercise price equal to the fair market value
of the Company's common stock at the time of grant, which was $5.6875.
7
<PAGE>
In March 1998, the Company completed a $10 million equity offering of
shares of STM and Direc-To-Phone International, Inc. ("DTPI"), the Company's
subsidiary, to Pequot Private Equity Fund L.P. ("Pequot"), the private
investment vehicle of Pequot Capital Management, Inc. Through the transaction,
Pequot acquired 571,429 shares in the Company. Pequot Capital Management, Inc.
is the beneficial owner of these shares. Coinciding with the equity offering,
two officers of Pequot, including Mr. Lenihan, were appointed to DTPI's Board of
Directors. In connection with the offering, Pequot Capital Management, Inc.
entered into a consulting agreement with DTPI, pursuant to which Pequot Capital
Management, Inc. provides consulting services to DTPI in consideration for an
annual fee of $100,000. The consulting services consisted of (a) arranging
introductions to investment banking firms, financial institutions and assisting
in identification of potential investors; (b) assisting DTPI in the recruitment
of senior management; and (c) performing analyses of potential strategic
partners and partnering relationships.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Based solely upon its review of the copies of reporting forms furnished to
the Registrant, or written representations that no annual Form 5 reports were
required, the Company believes that all filing requirements under Section 16(a)
of the Exchange Act applicable to its directors, executive officers and any
persons holding 10% or more of the Registrant's common stock with respect to the
Registrant's year ended December 31, 1998, were satisfied, except as follows:
Guy Numann filed a late Form 4 with respect to the grant to him by the Company
of options to purchase 40,000 shares of the Company's common stock on November
5, 1998; Jack Acker filed a late form 3 with respect to becoming an officer of
the Company on January 21, 1998; Mohammad Farzin filed a late form 3 with
respect to becoming an officer of the Company on January 21, 1998; and Diane
Walker filed a late form 4 with respect to the sale of 6,000 shares of the
Company's common stock on May 26, 1998.
8
<PAGE>
Security Ownership of Management and Certain Beneficial Owners
Set forth below is certain information as of the Record Date regarding the
beneficial ownership of the Company's Common Stock by (i) any person who was
known by the Company to own more than five percent (5%) of the voting securities
of the Company, (ii) all directors and nominees, (iii) each of the individuals
identified in the Summary Compensation Table, and (iv) all current directors and
executive officers as a group.
<TABLE>
<CAPTION>
Five Percent Shareholders, Directors,
Named Executive Officers and Amount and Nature of
Directors and Executive Officers as a Group Beneficial Ownership Percent of Class
-------------------------------------------- ------------------------ ------------------
<S> <C> <C>
Emil Youssefzadeh (1) 1,336,755 18.3%
STM Wireless, Inc.
One Mauchly
Irvine, California 92618
Berjaya Group (Cayman), Ltd. (2) 1,221,294 16.7%
Level 17, Shahzan Prudential Tower
30 Jalan Sultan Ismail
50250 Kuala Lumpur, Malaysia
Pequot Capital Management, Inc. (3) 778,929 10.6%
c/o David J. Malat
500 Nyala Farm Road, Westport, CT 06880
Lawrence D. Lenihan, Jr. (3) 778,929 10.6%
Guy W. Numann.................................................. 0 *
Claude Burgio.................................................. 0 *
Jack F. Acker.................................................. 264,458 3.6%
Frank T. Connors (4)........................................... 193,080 2.6%
Dr. Ernest U. Gambaro (5)...................................... 10,000 *
Mohammad H. Farzin (6)......................................... 127,215 1.7%
Michael Lindsay (7)............................................ 100,000 1.3%
Joseph Wallace (8)............................................. 12,500 *
All Directors and Executive Officers
as a group (9 persons) (1)(3)(4)(5)(6)(7)(8)................. 2,822,937 38.6%
</TABLE>
- ---------
* Less than 1%
(1) Includes 249,000 and 244,020 shares held by Kamil Youssefzadeh and Shafigh
Youssefzadeh, respectively, who are brothers of Emil Youssefzadeh, for which
Emil Youssefzadeh has voting rights. Accordingly, Emil Youssefzadeh is
deemed to share beneficial ownership of these shares. Further, includes
10,000 shares issuable upon exercise of stock options exercisable within 60
days of August 1, 1999.
9
<PAGE>
(2) According to a report filed with the Securities and Exchange Commission,
Berjaya Group (Cayman), Ltd. ("Berjaya Cayman") is a wholly-owned subsidiary
of, and is controlled by, Berjaya Group Berhad ("Berjaya"), a Malaysian
corporation, whose principal offices are located at Level 17, Shahzan
Prudential Tower, 30 Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia.
Accordingly, Berjaya may be deemed to beneficially own such shares. However,
Berjaya disclaims such beneficial ownership pursuant to Rule 13d-4 under the
Securities Exchange Act of 1934, as amended.
(3) At August 1, 1999, Pequot Capital Management, Inc. beneficially owned
778,929 shares in the Company. 571,429 shares were acquired through its
Pequot Private Equity Fund L.P. in an equity offering of shares. (See Item
13.)
(4) Inclusive of 15,000 shares issuable upon exercise of stock options
exercisable within 60 days of August 1, 1999.
(5) Inclusive of 10,000 shares issuable upon exercise of stock options
exercisable within 60 days of August 1, 1999.
(6) Inclusive of 102,000 shares issuable upon exercise of stock options
exercisable within 60 days of August 1, 1999.
(7) Consists of 80,000 shares issuable upon exercise of stock options
exercisable within 60 days of August 1, 1999.
(8) Consists of 12,500 shares issuable upon exercise of stock options
exercisable within 60 days of August 1, 1999.
Report of the Compensation and Stock Option Committee
The following report is submitted by the Compensation and Stock Option
Committee of the Board of Directors with respect to the executive compensation
policies established by the Compensation and Stock Option Committee and
recommended to the Board of Directors and compensation paid or awarded to
executive officers for the fiscal year ended December 31, 1998.
The Compensation and Stock Option Committee determines the annual salary,
bonus and other benefits, including incentive compensation awards, of the
Company's senior management and recommends new employee benefit plans and
changes to existing plans to the Company's Board of Directors. The Compensation
Committee of the Company's Board of Directors consists of three members. During
the year ended December 31, 1998, Mr. Elliot, Ms. Walker and Mr. Gambaro were
members of the Compensation Committee until the annual meeting of the
stockholders of the Company in September of 1998, at which time Mr. Elliot and
Ms. Walker did not stand for reelection to the Company's board of directors.
Following the annual meeting of the stockholders of the Company, the
Compensation Committee was comprised of Mr. Lenihan, Mr. Numann and Mr. Gambaro.
Compensation Policies and Objectives
- ------------------------------------
In establishing and evaluating the effectiveness of compensation programs
for executive officers and other employees of the Company, the Compensation and
Stock Option Committee is guided by three basic principles:
. The Company must offer competitive salaries to be able to attract and
retain highly-qualified and experienced executives and other management
personnel.
. Annual executive compensation in excess of base salaries should be tied to
individual and Company performance.
10
<PAGE>
. The financial interests of the Company's executive officers should be
aligned with the financial interest of the stockholders, primarily through
stock option grants which reward executives for improvements in the market
performance of the Company's Common Stock.
Salaries and Employee Benefit Programs. In order to retain executives and
other key employees, and to be able to attract additional well-qualified
executives when the need arises, the Company strives to offer salaries, and
health care and other employee benefit programs, to its executives and other key
employees that are comparable to those offered to persons with similar skills
and responsibilities by competing businesses in the local geographic area.
In recommending salaries for executive officers, the Compensation and Stock
Option Committee (i) reviews the historical performance of the executives and
(ii) informally reviews available information, including information published
in secondary sources, regarding prevailing salaries and compensation programs
offered by competing businesses that are comparable to the Company in terms of
size, revenue, financial performance and industry group. Many, though not all,
of these competing businesses, that have securities which are publicly traded,
are included in the S&P Communication--Equipment Manufacturer Index used in the
Stock Performance Graph below. Another factor which is considered in
recommending salaries of executive officers is the cost of living in Southern
California where the Company is headquartered, as such cost generally is higher
than in other parts of the country.
In order to retain qualified management personnel, the Company has followed
the practice of seeking to promote executives from within the Company whenever
practicable. The Board of Directors believes that this policy enhances employee
morale and provides continuity of management. Typically, modest salary increases
are made in conjunction with such promotions.
Performance-Based Compensation. The Board of Directors believes that the
motivation of executives and key employees increases as the market value of the
Company's Common Stock increases. Nevertheless, the Company provides a merit
bonus in cash or stock options to executives and key employees which is
dependent on the Company's achievements and the direct contributions made by
each executive and other key employees. Accordingly, at the beginning of each
fiscal year, the Company establishes short term and long term plans, and at the
end of the fiscal year, the collective and individual contributions of the
executives to the Company's achievements are evaluated. Cash bonuses are awarded
if the Company achieves or exceeds the earnings goal established for the fiscal
year and are limited, subject to extraordinary exceptions, to amounts ranging
from five percent (5%) to fifty percent (50%) of an executive's base salary.
The earnings goal is established on the basis of the annual operating plan
developed by management and approved by the Board of Directors. The annual
operating plan, which is designed to maximize profitability within the
constraints of economic and competitive conditions, some of which are outside
the control of the Company, is developed on the basis of (i) the Company's
performance for the prior fiscal year; (ii) estimates of sales revenue for the
plan year based upon recent market conditions, trends and competition and other
factors which, based on historical experience, or expected to affect the level
of sales that can be achieved; (iii) historical operating costs and cost savings
that management believes can be realized; (iv) competitive conditions faced by
the Company; and (v) additional expenditures beyond prior fiscal years in
expansion or research and development toward growth of the Company's business in
future fiscal years. By taking all of these factors into account, including
market conditions, the earnings goal in the annual operating plan is determined.
In certain instances, bonuses are awarded not only on the basis of the
Company's overall profitability, but also on the achievement by an executive of
specific objectives within his or her area of responsibility. For example, a
bonus may be awarded for any executive's efforts in achieving greater than
anticipated cost savings, or completing a new product on target.
As a result of this performance-based merit bonus program, executive
compensation, and the proportion of each executive's total cash compensation
that is represented by incentive or bonus income, may increase in those years in
which the Company's profitability increases.
11
<PAGE>
Stock Options and Equity-Based Programs. In order to align the financial
interests of executive officers and other key employees with those of the
stockholders, the Company grants stock options to its executive officers and
other key employees on a periodic basis, taking into account the size and terms
of previous grants of equity-based compensation and stock holdings in
determining awards. Stock option grants, in particular, reward executive
officers and other key employees for performance that results in increases in
the market price of the Company's Common Stock, which directly benefit all
stockholders. Moreover, the Compensation and Stock Option Committee generally
has followed the practice of granting options on terms which provide that the
options become exercisable in cumulative annual installments, generally over a
three to five-year period. The Compensation and Stock Option Committee believes
that this feature of the option grants not only provides an incentive for
executive officers to remain in the employ of the Company, but also makes longer
term growth in share prices important for the executives who receive stock
options.
Fiscal Year 1998 Compensation
- ------------------------------
The salaries of the Named Executive Officers increased over the salaries
paid in fiscal 1997, primarily as a result of the greater competitive
environment in which the Company operates. Since the Company did not meet the
earnings goals established for the year, no bonus payments were made to any of
the Named Executive Officers for the year ended December 31, 1998, with the
following exceptions. Mr. Farzin and Mr. Wallace each received special merit
bonuses in connection with their role in the sale of substantially all of the
assets of Telecom Multimedia Systems, Inc., the Company's subsidiary, to Inter-
Tel Incorporated for approximately $25 million in June of 1998.
The Company is required to disclose its policy regarding qualifying
executive compensation deductibility under Section 162(m) of the Internal
Revenue Code of 1986, as amended, which provides that, for purposes of the
regular income tax and the alternative minimum tax, the otherwise allowable
deduction for compensation paid or accrued with respect to a covered employee of
a public corporation is limited to no more than $1 million per year. It is not
expected that the compensation to be paid to the Company's executive officers
for fiscal 1999 will exceed the $1 million limit per officer. The Company's
Incentive Stock Option, Non-Qualified Stock Option and Restricted Stock Purchase
Plan--1992 is structured so that any compensation deemed paid to an executive
officer when he exercises an outstanding option under the plan, with an exercise
price equal to the fair market value of the option shares on the grant date,
will qualify as performance-based compensation that will not be subject to the
$1 million limitation.
The Compensation Committee of the
Board of Directors
Dr. Ernest U. Gambaro
Lawrence D. Lenihan, Jr.
Guy W. Numann
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company's Board of Directors consists of
three members. During the year ended December 31, 1998, Mr. Elliot, Ms. Walker
and Mr. Gambaro were members of the Compensation Committee until the annual
meeting of the stockholders of the Company in September of 1998, at which time
Mr. Elliot and Ms. Walker did not stand for reelection to the Company's board of
directors. Following the annual meeting of the stockholders of the Company, the
Compensation Committee was comprised of Mr. Lenihan, Mr. Numann and Mr. Gambaro.
12
<PAGE>
Stock Performance Graph
Set forth below is a line graph comparing the cumulative stockholder return
on the Company's Common Stock with the cumulative total return of the S&P
Communications-Equipment/Manufacturer Index and the Nasdaq Stock Market -- US
Index for the period commencing December 31, 1993 and ended on December 31,
1998.
<TABLE>
<CAPTION>
Cumulative Total Return
------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12/93 12/94 12/95 12/96 12/97 12/98
STM WIRELESS, INC. 100 207 270 98 119 67
NASDAQ STOCK MARKET (U.S.) 100 98 138 170 208 294
S & P COMMUNICATIONS EQUIPMENT 100 114 171 200 261 459
</TABLE>
13
<PAGE>
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected KMPG LLP, independent auditors, to
audit the financial statements of the Company for the fiscal year ending
December 31, 1999, and recommends that stockholders vote for ratification of
such appointment. In the event of a negative vote on such ratification, the
Board of Directors will reconsider its selection.
KPMG LLP has audited the Company's financial statements annually since
fiscal year 1991. Its representatives are expected to be present at the meeting
with the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 2000 Annual
Meeting of Stockholders and presentation in the Company's Proxy Statement with
respect to such meeting should arrange for such proposal to be delivered to the
Company at its principal place of business no later than November 30, 1999 in
order to be considered for inclusion in the Company's proxy statement relating
to that meeting. Matters pertaining to such proposals, including the number and
length thereof, eligibility of persons entitled to have such proposals included
and other aspects are regulated by the Securities Exchange Act of 1934, Rules
and Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer.
On May 21, 1998 the Securities and Exchange Commission adopted an amendment
to Rule 14a-4, as promulgated under the Securities and Exchange Act of 1934.
The amendment to Rule 14a-4(c)(1) governs the Company's use of its discretionary
proxy voting authority with respect to a shareholder proposal which the
shareholder has not sought to include in the Company's proxy statement. The new
amendment provides that if a proponent of a proposal fails to notify the company
at least 45 days prior to the month and day of mailing of the prior year's proxy
statement, then the management proxies will be allowed to use their
discretionary voting authority when the proposal is raised at the meeting,
without any discussion of the matter in the proxy statement.
With respect to the Company's 2000 Annual Meeting of Shareholders, if the
Company is not provided notice of a shareholder proposal, which the shareholder
has not previously sought to include in the Company's proxy statement, by
February 15, 2000, the management proxies will be allowed to use their
discretionary authority as outlined above.
OTHER MATTERS
Management is not aware of any other matters to come before the meeting.
If any other matter not mentioned in this Proxy Statement is brought before the
meeting, the proxy holders named in the enclosed Proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
By Order of the Board of Directors
Emil Youssefzadeh
Chief Executive Officer and Chairman of Board
August 16, 1999
14
<PAGE>
The Annual Report to Stockholders of the Company for the fiscal year ended
December 31, 1998 is being mailed concurrently with this Proxy Statement to all
stockholders of record as of August 1, 1999. The Annual Report is not to be
regarded as proxy soliciting material or as a communication by means of which
any solicitation is to be made.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1998 WILL BE
PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO INVESTOR
RELATIONS, STM WIRELESS, INC., ONE MAUCHLY, IRVINE, CALIFORNIA 92618.
15
<PAGE>
STM WIRELESS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING -- SEPTEMBER 16, 1999
The undersigned stockholder of STM Wireless, Inc. (the "Company")
acknowledges receipt of the Notice of the Annual Meeting of Stockholders and
Proxy Statement, each dated August 16, 1999, and the undersigned revokes all
prior proxies and appoints Emil Youssefzadeh, Frank Connors and Joe Wallace,
and each of them, proxies for the undersigned to vote all shares of Common
Stock of the Company which the undersigned would be entitled to vote at the
Annual Meeting of Stockholders to be held at the Irvine Marriot Hotel, 18000
Von Karman, Irvine, California at 10:00 a.m. on September 16, 1999 and any
postponement or adjournment thereof, and instructs said proxies to vote as
follows:
1. ELECTION OF FIVE DIRECTORS:
[_] FOR all nominees [_] WITHHOLD AUTHORITY
listed below to vote for all nominees
(except as marked to the contrary below) listed below
Emil Youssefzadeh, Frank T. Connors, Dr. Ernest U. Gambaro,
Lawrence D. Denihan, Jr. and Claude Burgio.
(Instructions: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below)
- --------------------------------------------------------------------------------
2. Ratification of appointment of KPMG LLP as independent auditors of the
Company for the fiscal year ending December 31, 1999:
[_] FOR ratification [_] AGAINST ratification
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
(continued on reverse side)
================================================================================
<PAGE>
(continued from reverse side)
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE FIVE
NOMINEES FOR DIRECTOR.
Dated this day of , 1999
----------------------------------
Signature of Stockholder
----------------------------------
Signature of Stockholder
Please sign exactly as your name
or names appear hereon. When
signing as attorney, executor,
administrator, trustee or
guardian, please give full title
as such. If shares are held
jointly, each holder should sign.
Please Mark, Sign, Date and Mail
This Proxy Card Promptly Using
the Enclosed Envelope.
