<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
SMITH MICRO SOFTWARE, INC.
- --------------------------------------------------------------------------------
(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] Fee not 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> 2
[SMITH MICRO SOFTWARE LOGO]
April 30, 1999
Dear Smith Micro Stockholders:
We are pleased to invite you to our 1999 Annual Meeting which will be held
at the corporate headquarters of the Company, located at 51 Columbia, Aliso
Viejo, California 92656, on Thursday, May 26, 1999, at 10:00 a.m., Pacific
Daylight Savings Time.
The Annual Meeting will begin with a report on the Company's progress,
followed by a discussion and stockholder questions. Voting on election of
directors and other matters is also scheduled. The items to be voted on are
addressed in the enclosed Notice of Annual Meeting of Stockholders and Proxy
Statement.
Your vote is important. Whether or not you plan to attend the Annual
Meeting, please complete and return the enclosed proxy card to ensure that your
shares will be represented. A postage pre-paid envelope has been provided for
your convenience. By returning the proxy card, you can help the Company avoid
the expense of duplicate proxy solicitations and possibly having to reschedule
the Annual Meeting if a quorum of the outstanding shares is not present or
represented by proxy. If you decide to attend the Annual Meeting and wish to
change your proxy vote, you may do so simply by voting in person at the meeting.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ WILLIAM W. SMITH, JR.
William W. Smith, Jr.
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
SMITH MICRO SOFTWARE, INC.
--------------------------------------------
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
MAY 26, 1999
--------------------------------------------
To the Stockholders of Smith Micro Software, Inc.:
Notice is hereby given that the 1999 Annual Meeting of Stockholders (the
"Annual Meeting") of Smith Micro Software, Inc. (the "Company") will be held at
the Company's corporate headquarters, located at 51 Columbia, Aliso Viejo,
California 92656, on Thursday, May 26, 1999, at 10:00 a.m., Pacific Daylight
Savings Time, for the following purposes:
1. To elect two (2) directors to serve on the Company's Board of
Directors until the 2002 Annual Meeting;
2. To ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditor for fiscal year 1999; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
The close of business on April 19, 1999, has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof. Only stockholders of record at
such time will be so entitled to vote. A list of stockholders entitled to vote
at the Annual Meeting will be available for inspection at the executive offices
of the Company.
You are cordially invited to attend the Annual Meeting. Whether or not
you expect to attend the Annual Meeting, PLEASE COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE to ensure your representation at
the Annual Meeting. A self-addressed, postage pre-paid envelope is enclosed for
your convenience. Even if you have given your proxy, you may still vote in
person if you attend the Annual Meeting.
A MAJORITY OF THE OUTSTANDING SHARES OF COMMON STOCK MUST BE REPRESENTED
AT THE ANNUAL MEETING IN ORDER TO CONSTITUTE A QUORUM. PLEASE RETURN YOUR PROXY
CARD IN ORDER TO ENSURE THAT A QUORUM IS OBTAINED.
YOUR VOTE IS IMPORTANT
By Order of the Board of Directors,
RHONDA L. SMITH
Secretary
Aliso Viejo, California
April 30, 1999
<PAGE> 4
SMITH MICRO SOFTWARE, INC.
--------------------------------------------
PROXY STATEMENT
--------------------------------------------
This Proxy Statement and the enclosed proxy card are furnished in
connection with the 1999 Annual Meeting of Stockholders (the "Annual Meeting")
of Smith Micro Software, Inc. ("Smith Micro" or the "Company"), which will be
held at the Company's corporate headquarters located at 51 Columbia, Suite 200,
Aliso Viejo, California 92656, on Thursday, May 26, 1999, at 10:00 a.m., Pacific
Daylight Savings Time. Stockholders of record at the close of business on April
19, 1999, are entitled to notice of and to vote at the Annual Meeting and any
adjournment thereof.
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice and are described in more
detail in this Proxy Statement. On April 19, 1999, there were 14,483,862 shares
of Common Stock outstanding, $.001 par value per share (the "Common Stock").
Each share of Common Stock is entitled to one vote on all matters brought before
the Annual Meeting.
A majority of the outstanding shares of Common Stock entitled to vote at
the Annual Meeting will constitute a quorum. The Company's inspector of
elections for the Annual Meeting will count abstentions and so-called "broker
non-votes" (i.e., shares held by a broker or other nominee having discretionary
power to vote on some matters but not others) for purposes of determining
whether a quorum exists for the transaction of business at the Annual Meeting.
Abstentions are also counted in tabulating the total number of votes cast on
matters voted on by the stockholders at the Annual Meeting. Broker non-votes are
not counted for purposes of determining either the number of votes cast on any
matter voted on by the stockholders or whether such matter has been approved.
Properly executed proxies will be voted in the manner directed by the
stockholders. If no direction is made on proxies, such proxies will be voted FOR
the election of the nominees named under the caption "Election of Directors" as
directors of the Company, and FOR the ratification of the selection of Deloitte
& Touche LLP as independent auditor of the Company for 1999.
The enclosed proxy is being solicited by the Company's Board of
Directors and is revocable at any time prior to its exercise. A proxy may be
revoked by delivery of a written revocation to the Secretary of the Company, by
presentation of a subsequent proxy, properly signed, or by attendance at the
Annual Meeting and voting in person.
This Proxy Statement, the enclosed proxy card and the Company's Annual
Report for the year ended December 31, 1998, are scheduled to be mailed
commencing on or about April 30, 1999 to stockholders of record on April 19,
1999.
The principal executive offices of the Company are located at 51
Columbia, Suite 200, Aliso Viejo, California 92656. The Company's phone number
is (949) 362-5800.
1
<PAGE> 5
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to the Company
as of April 19, 1999, with respect to beneficial ownership of the Company's
Common Stock by (i) each person (or group of affiliated persons) who is known by
the Company to own beneficially more than 5% of the Company's outstanding Common
Stock, (ii) each director and nominee for director, (iii) the Chief Executive
Officer and each other Named Executive Officer of the Company (as such term is
defined below under the caption "Executive Compensation and Related
Information"), and (iv) all current directors and executive officers as a group,
together with the approximate percentages of outstanding Common Stock owned by
each of them. The following table is based upon information supplied by
directors, executive officers, and principal stockholders.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT OF COMMON STOCK PERCENTAGE OF COMMON
BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) STOCK BENEFICIALLY OWNED
- ------------------- --------------------- ------------------------
<S> <C> <C>
Rhonda L. Smith and
William W. Smith, Jr. (3) 9,801,914 67.58%
Robert W. Scheussler (4) 67,771 *
Mark W. Nelson (5) 31,500 *
Thomas G. Campbell (6) 17,500 *
David M. Stastny (7) 10,000 *
All directors and executive
officers as a group (6 persons) (8) 9,938,685 67.91%
</TABLE>
- ----------
* Less than 1%.
(1) Unless otherwise indicated, (i) each named individual's address is 51
Columbia, Aliso Viejo, California 92656 and (ii) the persons 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.
(2) Applicable percentage ownership is based on 14,483,862 shares of Common
Stock outstanding as of April 19, 1999. Shares of common stock subject
to options that are exercisable as of April 19, 1999 or exercisable
within 60 days after such date are deemed to be outstanding for the
purpose of computing the percentage of outstanding Common Stock
beneficially owned by the person holding such options but are not deemed
to be outstanding for the purpose of computing the percentage of Common
Stock beneficially owned by any other person.
(3) Rhonda Smith and William Smith, Jr. are married to one another and own
their shares as community property. The Smiths' beneficial ownership of
the Company's Common Stock includes 11,134 shares and 9,110 shares
issuable upon the exercise of currently exercisable options held by Mr.
Smith and Ms. Smith, respectively.
(4) Mr. Scheussler's beneficial ownership of the Company's Common Stock
consists of 66,771 shares issuable upon the exercise of options
currently exercisable or exercisable within 60 days after April 19,
1999.
(5) Mr. Nelson's beneficial ownership of the Company's Common Stock consists
of 22,500 shares issuable upon the exercise of options currently
exercisable or exercisable within 60 days after April 19, 1999.
(6) Mr. Campbell's beneficial ownership of the Company's Common Stock
consists of 17,500 shares issuable upon the exercise of currently
exercisable options.
(7) Mr. Stastny's beneficial ownership of the Company's Common Stock
includes 10,000 shares issuable upon the exercise of currently
exercisable options.
(8) Includes 137,015 shares of Common Stock subject to stock options
exercisable as of March 30, 1999, or within 60 days after such date.
2
<PAGE> 6
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information regarding all
executive officers of the Company as of April 19, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William W. Smith, Jr. 51 Chairman of the Board,
President and Chief
Executive Officer
Rhonda L. Smith 48 Vice-Chairman of the Board,
Secretary and Treasurer
Robert W. Scheussler 52 Senior Vice President
-Operations, Chief
Technical Officer and
Director
Mark W. Nelson 38 Vice President-Finance and
Chief Financial Officer
</TABLE>
Mr. Smith co-founded the Company and has served as Chairman of the
Board, President and Chief Executive Officer since its inception in 1982. Mr.
Smith was employed by Rockwell International Corporation in a variety of
technical and management positions from 1975 to 1984. Mr. Smith served with
Xerox Data Systems from 1972 to 1975 and RCA Computer Systems Division from 1969
to 1972 in mainframe sales and pre-sale technical roles. Mr. Smith received a
B.A. in Business Administration from Grove City College.
Ms. Smith co-founded the Company and serves as the Vice-Chairman of the
Board, Secretary and Treasurer. She also served as Executive Vice President and
Chief Operating Officer from the Company's inception until August 1998. Ms.
Smith holds an A.A. from Orange Coast College and she attended California State
University Long Beach, majoring in Business Administration.
Mr. Scheussler joined the Company in May 1995 and since that time has
served as Senior Vice President-Engineering and Chief Technical Officer. From
May 1995 to April 1997 he was also Vice President of Operations. From February
1996 to the present, Mr. Scheussler has been a member of the Board of Directors.
Prior to joining the Company, from June 1973 to May 1995, Mr. Scheussler held
positions with Rockwell International Corporation, most recently as the
Director-Architecture and Technology at the company's Information Systems
Center. Mr. Scheussler holds a B.S. in Industrial Engineering from Pennsylvania
State University and an M.S. in Operations Research from Polytechnic University
in New York. He also completed the Executive Program at Stanford University.
Mr. Nelson joined the Company in October 1997 and since that time has
served as Vice President-Finance and Chief Financial Officer. From November 1992
to October 1997, Mr. Nelson was Chief Financial Officer and Director of MIS for
Airdrome Parts Co. From February 1993 to October 1997, he also served as
Airdrome's Secretary, and from January 1996 to May 1997 he was its Director of
Operations. From August 1986 to November 1992, Mr. Nelson held various positions
with Deloitte & Touche LLP, including Audit Manager. Mr. Nelson received a B.S.
and M.Acc. in Financial Accounting and Audit from Brigham Young University.
Officers are elected by, and serve at the discretion of, the Board of
Directors. William Smith and Rhonda Smith are married to each other. There are
no other family relationships among the Company's officers or directors.
3
<PAGE> 7
EXECUTIVE COMPENSATION AND RELATED INFORMATION
The following table sets forth the compensation earned by (i) the
Company's Chief Executive Officer and (ii) each of the three other most highly
compensated executive officers of the Company whose total cash salary and bonus
for the fiscal year ended December 31, 1998 exceeded $100,000 (hereafter, with
the Chief Executive Officer, referred to as the "Named Executive Officers"), for
the three fiscal years ended December 31, 1998, 1997 and 1996, respectively. No
other executive officer's total salary and bonus exceeded $100,000 for the
fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
OTHER
ANNUAL SECURITIES ALL OTHER
NAME AND SALARY BONUS COMPEN- UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) SATION($) OPTIONS(#) ($)
------------------ ---- ------ ----- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
WILLIAM W. SMITH, JR. 1998 275,000 0 0 0 1,417(1)
Chairman of the Board, 1997 275,000 0 0 0 1,900(1)
President and Chief 1996 275,000 95,258(2) 0 11,134 9,057(3)
Executive Officer
RHONDA L. SMITH 1998 177,375 0 0 0 1,417(1)
Executive Vice President, 1997 225,000 0 0 0 1,900(1)
Secretary and Treasurer 1996 225,000 95,258(2) 0 9,110 9,057(3)
ROBERT W. SCHEUSSLER 1998 200,000 0 0 15,000 1,417(1)
Senior Vice 1997 200,000 0 0 40,000 1,900(1)
President-Engineering and 1996 200,000 0 0 7,500 11,595(3)
Chief Technical Officer
MARK W. NELSON 1998 120,000 36,667 0 15,000 1,184(1)
Vice President-Finance 1997 18,231 0 0 60,000 0
and Chief Financial 1996 0 0 0 0 0
Officer
</TABLE>
- -------------------------
(1) These amounts represent contributions made by the Company on behalf of
the Named Executive Officer to the Company's 401(k) Plan.
(2) The Company has a management bonus plan under which the Chief Executive
Officer, the Executive Vice President and other executives of the
Company are eligible to receive bonuses in the event the Company
achieves certain performance targets based upon the Company's pre-tax
profits. See "Compensation Committee Report on Executive Compensation,"
below. For 1996, William Smith, Jr. and Rhonda Smith each received a
bonus of $95,258 under the plan.
(3) These amounts represent contributions made by the Company on behalf of
the Named Executive Officer to the Company's Money Purchase Plan,
Deferred Profit Sharing Plan and/or 401(k) Plan.
4
<PAGE> 8
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information with respect to the stock
option grants made during 1998 to the Named Executive Officers. No stock
appreciation rights were granted during the fiscal year ended December 31, 1998
to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
FOR OPTION
INDIVIDUAL GRANTS TERM(1)
--------------------------------------------------------------------- -----------------
NUMBER OF PERCENT OF
SECURITIES TOTAL
UNDERLYING OPTIONS
STOCK GRANTED TO EXERCISE
OPTIONS GRANT EMPLOYEES PRICE PER EXPIRATION
NAME GRANTED(#)(2) DATE IN 1998(%)(3) SHARE($)(4) DATE 5% 10%
- ---- ------------- ---- ------------- ----------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C> <C>
William W. Smith, Jr. -- -- -- -- -- -- --
Rhonda L. Smith -- -- -- -- -- -- --
Robert W. Scheussler 15,000 9/22/98 2.9 1.440 9/22/08 13,584 34,425
Mark W. Nelson 15,000 9/22/98 2.9 1.440 9/22/08 13,584 34,425
</TABLE>
- ----------------------
(1) There is no assurance provided to any Named Executive Officer or any
other holder of the Company's Common Stock that the actual stock price
appreciation over the applicable 10-year option term will be at the
assumed 5% and 10% annual rates of compounded stock price appreciation
or at any other defined level. Unless the market price of the Common
Stock appreciates over the option term, no value will be realized from
the option grants made to the Named Executive Officers.
(2) Each option was granted under the Company's 1995 Stock Option Plan (the
"1995 Plan"). The shares subject to each option will vest over the
optionee's period of service as follows: 25% of the option shares upon
the optionee's completion of one year of service with the Company
measured from the grant date and the remaining option shares in 36
successive equal monthly installments upon the optionee's completion of
each additional month of service thereafter. The shares subject to each
option will immediately vest in the event the Company is acquired by
merger or asset sale, unless the option is assumed by the acquiring
company. The Compensation Committee, as administrator of the Company's
1995 Plan, has the discretionary authority to provide for the
accelerated vesting of the option shares in the event the optionee's
employment is terminated within a designated period following (i) an
acquisition of the Company in which those options are assumed or (ii) a
hostile take-over of the Company, whether by tender offer for more than
50% of the Company's outstanding voting securities or a change in a
majority of the members of the Board of Directors through one or more
contested elections for membership on the Board of Directors. Each
option has a maximum term of ten years, subject to earlier termination
following the optionee's cessation of service with the Company.
(3) The Company granted options to employees to purchase a total of 510,000
shares of Common Stock for the fiscal year ended December 31, 1998.
(4) The exercise price may be paid in cash or in shares of Common Stock
valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares.
The Company may also finance the option exercise by loaning the optionee
sufficient funds to pay the exercise price for the purchased shares and
the federal and state income tax liability incurred by the optionee in
connection with such exercise.
5
<PAGE> 9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUE
The following table sets forth certain information with respect to the
Named Executive Officers concerning the unexercised options held by them at the
end of the 1998 fiscal year. No Named Executive Officer exercised any options or
stock appreciation rights during 1998, and none of the Named Executive Officers
held any stock appreciation rights at the end of such year.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT YEAR END OPTIONS AT YEAR END
(#) ($)(1)
------------------- --------------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- ------------------- --------------------
<S> <C> <C>
William W. Smith, Jr. 11,134 / 0 0 / 0
Rhonda L. Smith 9,110 / 0 0 / 0
Robert W. Scheussler 57,135 / 50,365 0 / 9,345
Mark W. Nelson 17,500 / 57,500 0 / 9,345
</TABLE>
(1) Calculated based on the market price of $2.06 per share, the closing
sale price per share of the Company's Common Stock on December 31, 1998,
the last trading day in 1998, minus the exercise price of the option,
multiplied by the number of shares subject to the option. Of the
outstanding options held by the Named Executive Officers, only one
option grant was in-the-money at end of the 1998 fiscal year.
MANAGEMENT CONTRACTS AND CHANGE IN CONTROL AGREEMENTS
None of the Named Executive Officers has an employment agreement with the
Company, and the employment of each of the Named Executive Officers may
accordingly be terminated at any time at the discretion of the Board of
Directors. However, the Compensation Committee of the Board of Directors, as
administrator of the 1995 Plan, has the authority to provide for the accelerated
vesting of the shares of Common Stock subject to any outstanding options held by
the Chief Executive Officer or any other executive officer and any unvested
shares actually held by such individual under the 1995 Plan in the event such
officer's employment were to be terminated (whether involuntarily or through a
forced resignation) following (i) an acquisition of the Company by merger or
asset sale in which the vesting of those options and shares does not accelerate
or (ii) a hostile take-over of the Company effected through a successful tender
for more than 50% of the Company's outstanding Common Stock or through a change
in the majority of the members of the Board of Directors as a result of one or
more contested elections for membership on the Board of Directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
It is the responsibility of the Compensation Committee of the Company's Board
of Directors to make recommendations to the Board of Directors with respect to
the base salary and bonuses to be paid to the Company's executive officers each
fiscal year. In addition, the Compensation Committee has the exclusive authority
to administer the 1995 Plan with respect to stock option grants and direct stock
issuances made thereunder to such officers and other key employees. The
following is a summary of the policies of the Compensation Committee that affect
the compensation paid to executive officers, as reflected in the tables and text
set forth elsewhere in this Proxy Statement.
6
<PAGE> 10
GENERAL COMPENSATION POLICY. Under the supervision of the Compensation
Committee, the Company has developed a compensation policy that is designed to
attract and retain qualified key executives critical to the Company's success
and to provide such executives with performance-based incentives tied to the
Company's financial success. One of the Compensation Committee's primary
objectives is to have a substantial portion of each officer's compensation
contingent upon the Company's performance as well as upon the individual's
contribution to that performance. Accordingly, each executive officer's
compensation package is fundamentally comprised of three elements: (i) base
salary that reflects individual performance and expertise and is designed to be
competitive with salary levels in effect at companies of similar size in the
industry; (ii) variable performance awards payable in cash or equity and tied to
the Company's achievement of certain goals; and (iii) long-term stock-based
incentive awards that strengthen the mutuality of interests between the
executive officers and the Company's stockholders.
FACTORS. The principal factors that were considered in establishing the
components of each executive officer's compensation package for the 1998 fiscal
year are summarized below. However, the Compensation Committee may in its
discretion apply different factors, particularly different measures of financial
performance, in setting executive compensation for future years.
o BASE SALARY The base salary levels for the executive officers were
established for the 1998 fiscal year on the basis of the following factors:
personal performance, the estimated salary levels in effect for similar
positions at a select group of companies with which the Company competes for
executive talent, and internal comparability considerations. The Compensation
Committee, however, did not rely upon any specific compensation surveys for
comparative compensation purposes. Instead, the Compensation Committee made its
decisions as to the appropriate market level of base salary for each executive
officer on the basis of its understanding of the salary levels in effect for
similar positions at those companies with which the Company competes for
executive talent. Base salaries will be reviewed on an annual basis, and
adjustments will be made in accordance with the factors indicated above.
o ANNUAL INCENTIVE COMPENSATION. The Company has established a management
bonus plan for the President and Chief Executive Officer and other Company
executive officers. Under this plan, the President and Chief Executive Officer
may earn an annual bonus up to an amount equal to 2.0% of the Company's pre-tax
profits for the year, but in no event may the bonus exceed such individual's
base salary for the year. The Executive Vice President may also earn an annual
bonus up to an amount equal to 2.0% of the Company's pre-tax profit for the
year, but not more than his or her base salary for such year. Such bonus
payments are subject to the further condition that the Company achieve a pre-tax
profit margin of not less than 28.0%, as measured prior to the payment of any
bonus to the President and Chief Executive Officer or the Executive Vice
President. The management bonus plan also provides for a bonus pool for the
remaining employees of the Company in an amount not to exceed 2.0% of the
Company's pre-tax profits for the year. The Compensation Committee will make
recommendations to the Board of Directors as to the actual dollar amount of the
bonus pool for the year and the portion to be allocated to the employees
selected for participation for the year. Because the Company did not achieve a
pre-tax profit margin of at least 28.0% in 1998, no bonuses were awarded under
the plan for the 1998 fiscal year.
o LONG-TERM INCENTIVE COMPENSATION. The Company has also implemented the 1995
Plan as a long-term equity incentive program for the Company's executive
officers and other key employees. Each option grant under the 1995 Plan is
designed to align the interests of the executive officer with those of the
stockholders and provide each individual with a significant incentive to manage
the Company from the perspective of an owner with an equity stake in the
business. The number of shares subject to each option grant is based upon the
officer's tenure, level of responsibility and relative position in the Company.
The Committee has established certain general guidelines in making option grants
to the executive officers in an attempt to target a fixed number of unvested
option shares based upon the individual's position with the Company and his or
her existing holdings of unvested options. However, the Compensation Committee
does not adhere strictly to these guidelines and will vary the size of the
option
7
<PAGE> 11
grant made to each executive officer as it feels the circumstances warrant.
Each option grant will allow the officer to acquire shares of the Company's
Common Stock at a fixed price per share (the market price on the grant date)
over a specified period of time (up to 10 years). The option normally vests in
periodic installments over a four-year period, contingent upon the executive
officer's continued employment with the Company. Accordingly, the option will
provide a return to the executive officer only if he or she remains in the
Company's employ, and then only if the market price of the Company's Common
Stock appreciates over the option term.
o CEO COMPENSATION. In setting the base salary for William Smith, Jr., the
Company's President and Chief Executive Officer, the Compensation Committee
sought to provide him with a level of salary competitive with the salaries paid
to chief executive officers of similarly-sized companies in the industry. There
was no intent on the Compensation Committee's part to have this particular
component of Mr. Smith's compensation affected to any significant degree by
Company's performance factors.
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M). Section 162(m) of the
Internal Revenue Code generally disallows a tax deduction to publicly held
corporations for compensation exceeding $1.0 million paid to certain of the
corporation's executive officers. The limitation applies only to compensation
that is not considered to be performance-based. The non-performance based
compensation to be paid to the Company's executive officers for the 1998 fiscal
year did not exceed the $1.0 million limit per officer, nor is it expected that
the non-performance based compensation to be paid to the Company's executive
officers for 1999 will exceed that limit. The Company's 1995 Plan is structured
so that any compensation deemed paid to an executive officer in connection with
the exercise of option grants made under that plan will qualify as
performance-based compensation which will not be subject to the $1.0 million
limitation. Because it is very unlikely that the cash compensation payable to
any of the Company's executive officers in the foreseeable future will approach
the $1.0 million limit, the Compensation Committee has decided at this time not
to take any other action to limit or restructure the elements of cash
compensation payable to the Company's executive officers. The Compensation
Committee will reconsider this decision should the individual compensation of
any executive officer ever approach the $1.0 million level.
It is the opinion of the Compensation Committee that the executive
compensation policies and plans provide the necessary total remuneration program
to properly align the Company's performance and the interests of the Company's
stockholders through the use of competitive and equitable executive compensation
in a balanced and reasonable manner, for both the short and long-term.
COMPENSATION COMMITTEE
Thomas G. Campbell
David M. Stastny (effective April 19, 1999)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during 1998 were Messrs.
Campbell and Eger. Mr. Eger resigned as a director effective in April 1999 and
Mr. Stastny was appointed as a member of the Company's Board of Directors to
fill that vacancy. Neither of Messrs. Campbell and Eger was an officer or
employee of the Company at any time during the year ended December 31, 1998. No
executive officer of the Company served on the Board of Directors or
compensation committee of any entity that has one or more executive officers
serving as members of the Company's Board of Directors or Compensation
Committee.
8
<PAGE> 12
STOCK PERFORMANCE GRAPH
The following graph and information compares the cumulative total stockholder
return on the Company's Common Stock against the cumulative total return of the
S&P Midcap 400 Index and the S&P Midcap Computer Software & SVC Index for the
same period.
CUMULATIVE TOTAL STOCKHOLDER RETURN*
<TABLE>
<CAPTION>
INDEXED RETURNS
BASE YEARS ENDING
PERIOD ----------------------------------
COMPANY / INDEX 19 SEP 95 DEC 95 DEC 96 DEC 97 DEC 98
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SMITH MICRO SOFTWARE, INC. 100 46.55 33.62 13.79 14.22
S&P MIDCAP 400 (SOFTWARE & SVC) 100 111.97 105.75 119.21 172.71
S&P MIDCAP 400 INDEX 100 103.89 123.83 163.77 187.41
</TABLE>
The graph covers the period from September 19, 1995, the effective date of
the Company's initial public offering to December 31, 1998. The graph assumes
that $100 was invested on the Company's Common Stock on September 19, 1995, and
in each index, and that all dividends were reinvested. No cash dividends have
been declared on the Company's Common Stock. Stockholder returns over the
indicated period should not be considered indicative of future stockholder
returns.
The preceding Stock Performance Graph and the Compensation Committee Report
are not considered proxy solicitation material and are not deemed filed with the
Securities and Exchange Commission (the "SEC"). Notwithstanding anything to the
contrary set forth in any of the Company's previous filings made under the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended (the "1934 Act"), that might incorporate future filings made by the
Company under those statutes, neither the preceding Stock Performance Graph nor
the Compensation Committee Report is to be incorporated by reference into any
such prior filings, nor shall such graph or report be incorporated by reference
into any future filings made by the Company under those statutes.
9
<PAGE> 13
COMPLIANCE WITH SECTION 16(a) OF THE 1934 ACT
Section 16(a) of the 1934 Act requires the Company's officers and directors,
and persons who own more than 10% of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the SEC
and the National Association of Securities Dealers. Officers, directors and
greater than 10% stockholders are required by SEC regulations to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
1998, its officers, directors and greater than 10% beneficial owners complied
with all Section 16(a) filing requirements applicable to such persons, except
that Mr. Smith and Ms. Smith filed a Form 5 on February 11, 1999, relating to a
joint gift of 17,000 shares of the Company' Common Stock.
10
<PAGE> 14
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation and Bylaws provide for the
Company's Board of Directors to be divided into three classes, as nearly equal
in number as is reasonably possible, serving staggered terms that expire in
different years. At each annual meeting of stockholders, the successors to the
class of directors whose term expires at the time are elected to hold office for
a term of three years, so that the term of one class of directors expires at
each annual meeting. The preceding notwithstanding, directors serve until their
successors have been duly elected and qualified or until they resign, become
disqualified or disabled, or are otherwise removed.
The Company has five directors: William W. Smith, Jr., Rhonda L. Smith,
Robert W. Scheussler, Thomas G. Campbell and David M. Stastny. Mr Stastny was
appointed as a director on April 19, 1999 to fill an existing vacancy on the
Board. Messrs. Smith and Stastny comprise the class of directors whose term
expires as of the Annual Meeting. Messrs. Scheussler and Campbell comprise the
class of directors whose term expires in 2000. Ms. Smith comprises the class of
directors whose term expires in 2001.
The enclosed proxy will be voted, unless authority is withheld or the proxy
is revoked, for the election of the nominees for election named below to hold
office until the date of the Company's 2002 Annual Meeting of Stockholders or
until their successors have been duly elected and qualified or until they
resign, become disqualified or disabled, or are otherwise removed. In the
unanticipated event that any such nominee becomes unable or declines to serve at
the time of the Annual Meeting, the proxies will be voted for a substitute
person nominated by the Board of Directors. The nominees for election have
agreed to serve if elected, and management has no reason to believe that either
nominee will be unavailable to serve.
NOMINEE AND DIRECTORS
NOMINEE. The names of and certain information about the nominee for director
are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William W. Smith, Jr. (1) 51 Chairman of the Board,
President and Chief
Executive Officer
David M Stastny (2)(3) 44 Director
</TABLE>
- -------------------------
(1) Member of the Nominating Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
Information regarding Mr. Smith is included under the heading "Executive
Officers of the Company."
Mr. Stastny was appointed as a director of the Company April 19, 1999. He is
currently serving as the Managing Director of Centaur Partners, LLC, a high
technology consulting firm and a Managing Director of Osprey Venture, L.P., a
venture capital firm. From 1996 to November 1998, he served as the Managing
Director of SoundView Venture Partners, LLC. From 1993 to 1996 Mr. Stastny held
the position of Managing Director of Investment Banking for Oppenheimer &
Company. From 1991 to 1993 he served as Vice President of Investment Banking for
Robertson, Stephens, & Company. From 1989 to 1990, he was the Vice President of
Sales for Netwise, Inc. Mr. Stastny holds a B.S. in Business
11
<PAGE> 15
Administration from the University of Colorado.
CONTINUING DIRECTORS. The name of and certain information about the directors
comprising the class of directors whose term expires in 2000 are set forth
below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert W. Scheussler 51 Senior Vice
President-Engineering, Chief
Technical Officer and
Director
Thomas G. Campbell(1)(2) 47 Director
</TABLE>
- -------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Information regarding Mr. Scheussler is included under the heading "Executive
Officers of the Company."
Mr. Campbell became a director of the Company in July 1995. From March 1999
to the present, he has served as the President of King Printing, Inc. From July
1996 to the March 1999 he was the Vice President of Operations of Complete
Concepts, Ltd., a manufacturer and distributor of women's accessories. From
November 1995 to July 1996, Mr. Campbell was an independent management
consultant specializing in corporate turnarounds. From February 1995 to November
1995, he served as the Chief Operating Officer of Laser Atlanta Optics, Inc.
From 1990 to February 1995, he served in several senior management positions at
Hayes, including Vice President of Operations and Business Development and as
Chief Operating Officer and a member of the Board of Directors of Practical
Peripherals, a Hayes subsidiary. Prior to 1989, Mr. Campbell was employed by
Digital Equipment Corporation. Mr. Campbell attended Boston University.
The name of and certain information about the director comprising the class
of directors whose term expires in 2001 are set forth below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Rhonda L. Smith (1) 48 Vice Chairman of the Board,
Secretary and Treasurer
</TABLE>
- -------------------------
(1) Member of the Nominating Committee.
Information regarding Ms. Smith is included under the heading "Executive
Officers of the Company."
BOARD MEETINGS AND COMMITTEES
During 1998, the Board of Directors held four meetings and took one action by
unanimous written consent in lieu of meetings. Each director of the Company
attended at least 75% of the meetings and participated in at least 75% of the
actions by written consent of the Board of Directors during 1998 and the
committees of the Board of Directors of which such person is a member, to the
extent he or she was a director at the time. The action by unanimous written
consent addressed the acquisition of assets from Mitek Systems, Inc.
12
<PAGE> 16
The Board has three committees: a Compensation Committee, an Audit Committee
and a Nominating Committee. The Compensation Committee administers the Company's
executive compensation programs and makes recommendations to the Board of
Directors concerning officer and director compensation. The Compensation
Committee also has the exclusive authority to administer the 1995 Plan and to
award stock options and direct stock issuances under that plan to the Company's
officers. The Compensation Committee, whose members were Messrs. Campbell and
Eger during 1998, held no meetings during 1998 but took five actions by written
consent in lieu of meetings in such year. Four of the actions by unanimous
written consent addressed stock option grants and one action by unanimous
written consent addressed amendments to the 1995 Plan.
The Audit Committee supervises and makes recommendations and decisions with
respect to the periodic audits of the Company's financial results. The Audit
Committee, whose members were Messrs. Campbell and Eger during 1998, held one
meeting and took no actions by written consent in lieu of meetings during 1998.
The Nominating Committee's members are Mr. Smith and Ms. Smith. The
Nominating Committee receives proposed nominations to the Board of Directors,
reviews the eligibility of each proposed nominee, and nominates, with the
approval of the Board of Directors, new members of the Board of Directors to be
submitted to the stockholders for election at the annual meetings. The
Nominating Committee held one meeting to nominate and appoint Mr. Stastny as a
member of the Board of Directors and took no actions by written consent in lieu
of meetings during 1999.
COMPENSATION OF DIRECTORS
The directors do not receive compensation for services on the Board of
Directors or any committee thereof but are reimbursed for their out-of-pocket
expenses in serving on the Board of Directors. Non-employee members of the Board
of Directors are eligible to receive periodic option grants pursuant to the
Automatic Option Grant Program in effect under the 1995 Plan and will be
eligible to receive discretionary awards under the 1995 Plan's Discretionary
Option Grant and Stock Issuance Programs.
Each non-employee director will receive an option grant for 10,000 shares in
connection with his or her initial appointment to the Board of Directors. Each
such option will have an exercise price per share equal to the closing sale
price per share of Common Stock on the grant date and a maximum term of 10 years
measured from the grant date. Each option will be immediately exercisable for
all the option shares, but any shares purchased under the option will be subject
to repurchase by the Company, at the option exercise price paid per share, in
the event the optionee ceases to serve as a member of the Board of Directors
prior to vesting in the option shares. The option shares will vest in a series
of four successive equal annual installments over the optionee's period of
service on the Board of Directors, with the first installment to vest upon his
or her completion of one year of serving as a member of the Board of Directors
measured from the grant date. The option shares will immediately vest in full
upon certain changes in control or ownership of the Company or upon the
optionee's death or disability while still serving as a member of the Board of
Directors.
At each Annual Meeting of Stockholders, each individual who will continue to
serve as a non-employee member of the Board of Directors will receive an
additional option grant for 2,500 shares, provided such individual has served on
the Board of Directors for at least six months. Each option will have an
exercise price per share equal to the closing sale price per share of Common
Stock on the date of the Annual Stockholders Meeting and a maximum term of 10
years measured from such date, subject to earlier termination upon the
optionee's cessation of service on the Board of Directors. The option will be
immediately exercisable for all the option shares, but any shares purchased
under the option will be subject to repurchase by the Company, at the option
exercise paid per share, should the optionee stop serving as a member of the
Board of Directors prior to the completion of one year of service measured from
the grant date. On May 22, 1998, in connection with their continuing service on
the Board of Directors, Messrs. Campbell and Eger each received an option grant
of 2,500 shares at an exercise price of $3.06 per share,
13
<PAGE> 17
the fair market value per share of Common Stock, on the date of grant. On April
19, 1999, in connection with his appointment to the Board of Directors, Mr.
Stastny received an option grant of 10,000 shares at an exercise price of $2.00
per share, the fair market value per share of Common Stock, on the date of
grant.
STOCKHOLDER APPROVAL
The affirmative vote of the holders of a plurality of the outstanding shares
of Common Stock present or represented at the Annual Meeting is required for
approval of the election of the nominees as members of the Board of Directors of
the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES NAMED ABOVE OR
THEIR SUBSTITUTE AS SET FORTH HEREIN.
14
<PAGE> 18
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
The accounting firm of Deloitte & Touche LLP served as the independent
auditor for the Company for the fiscal year ended December 31, 1998. The Board
of Directors has selected Deloitte & Touche LLP as the Company's independent
auditor for the fiscal year ending December 31, 1999 and has further directed
that the selection of the auditor be submitted for ratification by the
stockholders at the Annual Meeting. Neither Deloitte & Touche LLP nor any of its
members has any relationship with the Company or any of its affiliates except in
the firm's capacity as the Company's independent auditor. Representatives of
Deloitte & Touche LLP are expected to be present at the Annual Meeting. They
will have an opportunity to make statements and will be available to respond to
appropriate questions from stockholders.
Stockholder ratification of the selection of Deloitte & Touche LLP as the
Company's independent auditor is not required by the Company's Bylaws or
otherwise. However, the Board of Directors is submitting the selection of
Deloitte & Touche LLP to the stockholders for ratification as a matter of good
corporate practice. If the stockholders fail to ratify the selection by an
affirmative vote of the holders of a majority of the Common Stock present or
represented at the meeting and entitled to vote thereat, the Audit Committee and
the Board of Directors will reconsider whether to retain that firm. Even if the
selection is ratified, the Audit Committee and the Board of Directors in their
discretion may direct the appointment of a different independent accounting firm
at any time during the year if they determine that such a change would be in the
best interests of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
15
<PAGE> 19
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
A stockholder who intends to present a proposal at the Company's 2000 Annual
Meeting of Stockholders must have submitted such proposal to the Company for
inclusion in the Company's 2000 Proxy Statement and proxy card relating to such
meeting not later than December 31, 1999. Stockholder proposals must be mailed
to the attention of the Company's Secretary at the Company's corporate
headquarters located at 51 Columbia, Suite 200, Aliso Viejo, California 92656.
In addition, the proxy solicited by the Board of Directors for next year's
Annual Meeting of Shareholders will confer discretionary authority to move on
any shareholder proposal presented at that meeting, unless the Company receives
notice of such proposal, on or before March 16, 2000.
OTHER MATTERS
Management does not know of any other matters to be brought before the Annual
Meeting. If any other matter is properly presented for consideration at the
Annual Meeting, it is intended that the proxies will be voted by the persons
named therein in accordance with their judgment on such matters. The Annual
Report is not incorporated into this Proxy Statement and is not considered proxy
solicitation material.
The Company's Annual Report for the fiscal year ended December 31, 1998,
including audited financial statements, is being sent with this Proxy Statement
to all stockholders of record as of April 19, 1999.
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1998, AS FILED WITH THE SEC, WILL BE PROVIDED TO STOCKHOLDERS
WITHOUT CHARGE UPON WRITTEN REQUEST TO MARK W. NELSON, CHIEF FINANCIAL OFFICER,
SMITH MICRO SOFTWARE, INC., 51 COLUMBIA, ALISO VIEJO, CALIFORNIA 92656.
COSTS OF SOLICITATION
Proxies will be solicited by mail. The Company will request banks, brokerage
houses and other institutions to forward the soliciting material to persons for
whom they hold shares and to obtain authorization for the execution of proxies.
The Company will reimburse banks, brokerage houses and other institutions for
their reasonable expenses in forwarding the Company's proxy materials to
beneficial owners of the Common Stock. All costs associated with the
solicitation of proxies will be borne by the Company. Proxies in the
accompanying form which are properly executed, duly returned to the Company's
management and not subsequently revoked will be voted as specified thereon.
By Order of the Board of Directors,
RHONDA L. SMITH
Secretary
Aliso Viejo, California
April 30, 1999
16
<PAGE> 20
PROXY
SMITH MICRO SOFTWARE, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints William W. Smith, Jr. and Rhonda L. Smith, and each of them, as
proxyholder, with full power of substitution, to represent, vote and act with
respect to all shares of Common Stock, $.001 par value per share, of Smith
Micro Software, Inc. (the "Company") which the undersigned would be entitled to
vote at the Annual Meeting of Stockholders, to be held on May 26, 1999 at 10:00
a.m., Pacific Daylight Savings Time, at the Company's corporate headquarters
located at 51 Columbia, Aliso Viejo, California 92656, or at any adjournment
thereof, with all the powers the undersigned would possess if personally
present as follows:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE BY NOTIFYING THE SECRETARY OF THE COMPANY IN WRITING OF
REVOCATION OF THE PROXY, BY FILING A DULY EXECUTED PROXY BEARING A LATER DATE
OR BY ATTENDING THE ANNUAL MEETING AND VOTING IN PERSON.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 21
PLEASE MARK [X]
YOUR VOTE AS
INDICATED IN
THIS SAMPLE
<TABLE>
<S> <C> <C>
1. Election of two (2) persons FOR ALL NOMINEES
to be directors: William W. Smith, Jr. LISTED BELOW
David M. Stastny (EXCEPT AS MARKED TO WITHOUT
THE CONTRARY BELOW) AUTHORITY
[ ] [ ]
Instruction: To without authority to vote for any
individual nominee, write that nominee's name on the
space below:
___________________________________________________
</TABLE>
2. Ratification of the appointment of Deloitte & FOR AGAINST ABSTAIN
Touche LLP as the Company's independent auditor [ ] [ ] [ ]
for the fiscal year ending December 31, 1999.
3. Transaction of such other business as may properly come before this meeting
and any adjournment thereof.
I DO DO NOT
[ ] [ ] EXPECT TO ATTEND THE MEETING
PLEASE SIGN AND DATE BELOW.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE MATTERS LISTED
ABOVE. This Proxy confers authority to vote and shall be voted in accordance
with such recommendation unless a contrary instruction is indicated, in which
case, the shares represented by this Proxy will be voted in accordance with
such instruction. IF NO INSTRUCTION IS SPECIFIED WITH RESPECT TO A MATTER TO BE
ACTED UPON, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE BOARD. IF ANY OTHER BUSINESS IS REPRESENTED AT
THE MEETING, THIS PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE BOARD.
Signature(s)_________________________________________ Date______________________
Please date this Proxy and sign exactly as it appears on your stock
certificate(s). Executors, administrators, trustees, etc., should give their
full title. If a corporation, please sign full corporate name by the president
or other authorized officer. If a partnership, please sign in partnership name
by an authorized person. All joint owners should sign.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
