<PAGE>
SCHEDULE 14A (RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[_] Confidential, for Use of the
[_] Preliminary Proxy Statement Commission Only (as Permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SOMERA COMMUNICATIONS, 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] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO OF SOMERA]
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 2, 2000
----------------
TO THE STOCKHOLDERS OF SOMERA COMMUNICATIONS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Somera
Communications, Inc., a Delaware corporation (the "Company"), will be held on
Tuesday, May 2, 2000, at 1:00 p.m., local time, at the Fess Parker Doubletree
Resort, Santa Barbara, California, for the following purposes:
1. To elect one director to serve for the ensuing three years and until
such director's successor is duly elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as
independent accountants for the Company for the 2000 fiscal year.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 23, 2000 are
entitled to notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, please sign and return
the enclosed proxy as promptly as possible in the postage-prepaid envelope
enclosed for that purpose. Any stockholder attending the meeting may vote in
person even if he or she has returned a proxy.
FOR THE BOARD OF DIRECTORS
JEFFREY D. SAPER
Secretary
Santa Barbara, California
April 3, 2000
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE
REQUESTED TO COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED.
<PAGE>
SOMERA COMMUNICATIONS, INC.
5383 Hollister Avenue
Santa Barbara, California 93111
(805) 681-3322
----------------
PROXY STATEMENT FOR 2000
ANNUAL MEETING OF STOCKHOLDERS
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed Proxy is solicited on behalf of the Board of Directors of
Somera Communications, Inc. (the "Company") for use at the Annual Meeting of
Stockholders to be held May 2, 2000 at 1:00 p.m., local time, or at any
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at
the Fess Parker Doubletree Resort, Santa Barbara, California.
These proxy solicitation materials and the Company's Annual Report to
Stockholders for the year ended December 31, 1999, including financial
statements, were mailed on or about April 3, 2000 to all stockholders entitled
to vote at the meeting.
Record Date and Voting Securities
Stockholders of record at the close of business on March 23, 2000 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 47,837,500 shares of the Company's Common Stock, $0.001 par
value, were issued and outstanding.
Revocability Of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
Voting and Solicitation
Proxies properly executed, duly returned to the Company and not revoked,
will be voted in accordance with the specifications made. Where no
specifications are given, such proxies will be voted as the management of the
Company may propose. If any matter not described in this Proxy Statement is
properly presented for action at the meeting, the persons named in the
enclosed form of proxy will have discretionary authority to vote according to
their best judgment.
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the meeting. Stockholders do not have the right to
cumulative voting in the election of directors.
The cost of soliciting proxies will be borne by the Company. The Company
may also reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation materials to
such beneficial owners. Proxies may also be solicited by certain of the
Company's directors, officers, and employees, without additional compensation,
personally or by telephone or telegram.
1
<PAGE>
Quorum; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST," "WITHHELD" or "ABSTAIN" are treated as being present at the meeting
for purposes of establishing a quorum and are also treated as shares entitled
to vote at the Annual Meeting (the "Votes Cast") with respect to such matter.
Although there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of Votes Cast with respect to a proposal (other than the election
of directors). In the absence of controlling precedent to the contrary, the
Company intends to treat abstentions in this manner. Accordingly, abstentions
will have the same effect as a vote against the proposal.
The Delaware Supreme Court has held that, while broker non-votes should be
counted for purposes of determining the presence or absence of a quorum for
the transaction of business, broker non-votes should not be counted for
purposes of determining the number of Votes Cast with respect to the
particular proposal on which the broker has expressly not voted. The Company
intends to treat broker non-votes in a manner consistent with such holding.
Thus, a broker non-vote will not affect the outcome of the voting on a
proposal.
Deadline For Receipt Of Stockholder Proposals
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 2001 Annual Meeting must be received by
the Company no later than December 3, 2000 to be considered for inclusion in
the proxy statement and form of proxy relating to that meeting.
2
<PAGE>
PROPOSAL ONE:
ELECTION OF DIRECTORS
Nominee
The Board of Directors is divided into three classes whose terms expire at
successive annual meetings. This year, we have nominated Mr. Peter Chung, the
sole director whose term expires at the annual meeting, for a three-year term
that will expire at our annual meeting in the year 2003. The terms of Mr.
Barry Phelps and Mr. Gil Varon expire at the annual meeting of stockholders in
2001. The terms of Mr. Dan Firestone and Mr. Walter Kortschak expire at the
annual meeting of stockholders in 2002. Unless otherwise instructed, the proxy
holders will vote the proxies received by them for Mr. Chung. If Mr. Chung is
unable or declines to serve as a director at the time of the Annual Meeting of
Stockholders, the proxies will be voted for the nominee designated by the
present Board of Directors to fill the vacancy. It is not expected that Mr.
Chung will be unable or will decline to serve as a director.
<TABLE>
<CAPTION>
Name Age Principal Occupation
---- --- --------------------
<C> <C> <S>
Dan Firestone........ 38 President and Chief Executive Officer, Somera
Communications, Inc.
Gil Varon............ 38 Vice President, Wireline Division, Somera
Communications, Inc.
Walter G. Kortschak.. 40 Managing Partner of Summit Partners, L.P.
Peter Y. Chung....... 32 General Partner of Summit Partners, L.P.
Barry Phelps......... 52 President, Broadband Division, Spirent
Communications Group
</TABLE>
Except as set forth below, each director has been engaged in his principal
occupation described above during the past five years. There are no family
relationships among any of our directors or executive officers.
Dan Firestone co-founded Somera Communications in July 1995, has served as
our Chief Executive Officer since 1996, has served as our President since
December 1998, and has also served as our Chairman of the Board since our
inception. From 1994 to the present, Mr. Firestone has also operated SDC
Business Consulting, a private business consulting firm. In 1984, Mr.
Firestone co-founded Century Computer Marketing, a distributor of computer
service spare parts and related products, and served as its Chief Executive
Officer until May 1994.
Gil Varon co-founded Somera Communications in July 1995, served as our
President from July 1995 until December 1998, has served as our Vice
President, Wireline Division since January 1999, and has served as one of our
directors since our inception. From 1995 until the present, Mr. Varon has also
served as a Senior Sales Manager. From May 1994 to June 1995, Mr. Varon served
in sales and procurement positions for Aurora Electronics, Inc. From 1985
until May 1994, Mr. Varon served as a Group Sales Manager at Century Computer
Marketing.
Walter G. Kortschak has served as a director of Somera Communications since
July 1998. Mr. Kortschak is a Managing Partner and Managing Member of various
entities affiliated with Summit Partners, L.P., a private equity capital firm
in Palo Alto, California, where he has been employed since June 1989. Summit
Partners, L.P., and its affiliates manage a number of venture capital funds,
including Summit Ventures V, L.P., Summit V Advisors (QP) Fund, L.P., Summit V
Advisors Fund, L.P., and Summit Investors III, L.P. Mr. Kortschak also serves
as a director of E-Tek Dynamics, Inc., an optical components and modules
company. Mr. Kortschak holds a B.S. in engineering from Oregon State
University, an M.S. in engineering from The California Institute of Technology
and an M.B.A. from the University of California, Los Angeles.
Peter Y. Chung has served as a director of Somera Communications since July
1998. Mr. Chung is a General Partner and Member of various entities affiliated
with Summit Partners, L.P., a private equity capital firm in Palo Alto,
California, where he has been employed since August 1994. Summit Partners,
L.P., and its affiliates manage a number of venture capital funds, including
Summit Ventures V, L.P., Summit V Advisors (QP) Fund, L.P., Summit V Advisors
Fund, L.P., and Summit Investors III, L.P. From August 1989 to July 1992,
3
<PAGE>
Mr. Chung worked in the Mergers and Acquisitions Department of Goldman, Sachs
& Co. Mr. Chung also serves as a director of Ditech Communications
Corporation, a developer of echo cancellation and optical networking
equipment, ADVA AG Optical Networking, an optical networking systems company,
and Splash Technology Holdings, Inc., a developer of color server systems. Mr.
Chung holds an A.B. from Harvard University and an M.B.A. from Stanford
University.
Barry Phelps has served as a director of Somera Communications since July
1999. Mr. Phelps has been the President, Broadband Division, Spirent
Communications Group, since January, 2000. Prior to that he was President and
Chief Executive Officer of Netcom Systems, Inc., a network performance
analysis company in Calabasas, California, where he has been employed since
November 1996. Before he became President and Chief Executive Officer in
November 1997, Mr. Phelps served as the Vice President, Finance and Chief
Financial Officer of Netcom Systems. Prior to joining Netcom Systems, from
February 1992 to November 1996, Mr. Phelps served as Chairman and Chief
Executive Officer of MICOM Communications Corporation, a data communications
equipment company which was acquired by Nortel Networks in June 1996. Mr.
Phelps holds a B.S. in mathematics from St. Lawrence University and an M.B.A.
from the University of Rochester.
Board Meetings and Committees
Somera Communications, Inc. was incorporated in August 1999 and the Company
held one (1) meeting during fiscal 1999 in which all directors attended. Prior
to that time, the Company operated as a limited liability company and did not
hold any board meetings.
The Audit Committee, which consists of Messrs. Chung and Phelps, was formed
in October 1999 and had no meetings during fiscal 1999. The Audit Committee
reviews the financial statements and the internal financial reporting system
and controls of the Company with the Company's management and independent
auditors, recommends resolutions for any disputes between the Company's
management and its auditors, and reviews other matters relating to the
relationship of the Company with the auditors, including their engagement and
discharge.
The Compensation Committee, which consists of Messrs. Kortschak and Phelps,
was formed in October 1999 and had no meetings during fiscal 1999. The
Compensation Committee develops and monitors compensation arrangements for the
officers and directors of the Company, including preparation of proper reports
or other disclosure required by the Compensation Committee in accordance with
applicable proxy or other rules of the Securities and Exchange Commission
("SEC") and monitors stock option activity for the Company.
Compensation of Directors
Except for reimbursement of reasonable expenses incurred in connection with
serving as a director and the grant of stock options, our directors are not
compensated for their service as directors. In July 1999, we granted Mr.
Phelps, one of our non-employee directors, an option to purchase 50,000 shares
of common stock at an exercise price of $8.50 per share under our 1999 Unit
Option Plan (when we operated as a limited liability company). These options
vest 25% after one year, and ratably thereafter over a period of three years.
Under our 1999 Director Option Plan, each non-employee director will
automatically be granted an option to purchase 30,000 shares of our common
stock on the date on which he or she becomes a director. In addition to this
first option grant, each outside director will automatically be granted an
option to purchase 7,500 shares on each July 1st, if on the date of such
subsequent grant he or she shall have served on the board for six months from
the date of such grant. Both the initial 30,000 share initial option grant and
subsequent 7,500 share option grant shall vest 25% after one year, and ratably
thereafter over a period of three years. The exercise price for each option
granted under the Director Plan will be the fair market value of our common
stock on the date of grant.
1999 Director Option Plan
Our 1999 Director Option Plan was adopted and approved by our board in
September 1999. Our Director Plan provides for the grant of non-statutory
stock options to non-employee directors. The Director Plan has a
4
<PAGE>
term of ten years unless terminated earlier by the board of directors. A total
of 300,000 shares of common stock, plus an annual increase equal to the number
of shares needed to restore the number of shares of common stock that are
available for grant under the Plan to 300,000 shares, have been reserved for
issuance under the Director Plan. As of the date of this prospectus, no
options have been granted under the Director Plan.
Our Director Plan provides that each new outside director shall
automatically be granted an option to purchase 30,000 shares of our common
stock on the date that outside director first becomes a director. In addition
to this first option grant, each outside director shall automatically be
granted an option to purchase 7,500 shares on each July 1st, if on the date of
the subsequent grant he or she shall have served on the board for six months
from the date of such grant. Options granted under the Director Plan vest at a
rate of 25 percent of the shares subject to the option on each anniversary of
its grant date, provided this director continues to serve as an outside
director on these vesting dates. Options granted under the Director Plan are
exercisable by the outside director only while the individual remains one of
our directors. The exercise price for each first option and subsequent option
grant shall be 100% of the fair market value per share of our common stock on
the date of grant.
In the event of our merger or the sale of substantially all of our assets,
each outstanding option shall be assumed or an equivalent option substituted
by the successor corporation. In the event that the successor corporation
refuses to assume or substitute for the option, or following assumption or
substitution the director is terminated, each option granted to an outside
director under the Director Plan shall become fully vested and exercisable for
a period of thirty days after which period the option shall terminate. Options
granted under the Director Plan must be exercised within three months of the
end of the optionee's tenure as one of our directors, or within 12 months
after the director's termination by death or disability.
Required Vote
The candidate receiving the highest number of "FOR" votes shall be elected
to the Company's Board of Directors. An abstention will have the same effect
as a vote withheld for the election of directors, and, pursuant to Delaware
law, a broker non-vote will not be treated as voting in person or by proxy on
the proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" MR. CHUNG.
5
<PAGE>
PROPOSAL TWO:
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP, independent
accountants, to audit the financial statements of the Company for the 2000
fiscal year. This appointment is being presented to the stockholders for
ratification at the Annual Meeting. If the stockholders reject the
appointment, the Board will reconsider its selection. PricewaterhouseCoopers
LLP has audited the Company's financial statements since the Company's
inception. A representative of PricewaterhouseCoopers LLP is expected to be
present at the meeting, will have the opportunity to make a statement and is
expected to be available to respond to appropriate questions.
Vote Required; Recommendation of Board of Directors
The affirmative vote of a majority of the Votes Cast on the proposal at the
Annual Meeting is required to ratify the Board's appointment. An abstention
will have the same effect as a vote against the appointment of the independent
auditors, and, pursuant to Delaware law, a broker non-vote will not be treated
as voting in person or by proxy on the proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL
YEAR 2000 AND RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THIS PROPOSAL.
6
<PAGE>
Executive Compensation
The following table sets forth certain information with respect to annual
compensation and long-term compensation awarded during fiscal 1999 to the
Company's Chief Executive Officer and the Company's three other most highly
compensated executive officers (collectively, the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation Awards
------------------------------ -----------------------
Securities
Name and Principal Other Annual Underlying All Other
Position Year Salary Bonus Compensation Options Compensation
------------------ ---- -------- -------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Dan Firestone........... 1999 $286,667 $540,000 $ 3,424 375,000 $ --
Chairman of the Board,
President
and Chief Executive
Officer
Gil Varon............... 1999 100,000 -- 760,648 -- --
Director and Vice
President,
Wireline Division
Jeffrey G. Miller....... 1999 136,442 98,333 105,186 660,093 --
Executive Vice
President,
Sales and Marketing
Gary J. Owen............ 1999 87,179 30,625 94,902 405,000 --
Chief Financial Officer
</TABLE>
Option Grants And Exercises
The following tables set forth information regarding stock options granted
to and exercised by the Named Executive Officers during fiscal year 1999, as
well as options held by such officers as of December 31, 1999, the last day of
the Company's 1999 fiscal year. In accordance with the rules of the SEC, also
shown below is the potential realizable value over the term of the option (the
period from the grant date to the expiration date) based on assumed rates of
stock appreciation from the option exercise price of 0%, 5% and 10%,
compounded annually. These amounts are based on certain assumed rates of
appreciation and do not represent the Company's estimate of future stock
price. Actual gains, if any, on stock option exercises will depend on the
future performance of the Common Stock.
Option Grants In Fiscal 1999
<TABLE>
<CAPTION>
Potential Realizable Values
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term(1)
-------------------------------------------- ---------------------------
Percent of
Number of Total
Securities Options Exercise
Underlying Granted to Price Per
Name and Principal Options Employees Share ($) Expiration
Position Granted (#) in 1999 (%) (2)(3) Date(4) 0% ($) 5% ($) 10% ($)
------------------ ----------- ----------- --------- ---------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dan Firestone........... 375,000 12.1 8.50 7/13/09 375,000 2,615,437 6,052,708
Jeffrey G. Miller....... 660,093 21.3 7.57 5/15/09 -- 3,142,526 7,963,778
Gary J. Owen............ 405,000 13.1 8.50 7/13/09 405,000 2,824,672 6,536,924
</TABLE>
- --------
(1) The dollar amounts in these columns are the result of calculations of the
potential realizable value of each grant of options assuming that the
market price of the underlying security appreciates in value from the date
of grant to the end of the option term at the zero percent, five percent
and ten percent rates set by the SEC. These amounts are not intended to
forecast future appreciation of the Company's Common Stock.
(2) Options were granted at an exercise price equal to the deemed fair market
value of the Company's common stock on the date of the grant, as
determined by the board.
7
<PAGE>
(3) Exercise price may be paid (i) in cash, (ii) by check, (iii) by promissory
note, (iv) by delivery of already-owned shares of the Company's common
stock subject to certain conditions, (v) by delivery of a properly
executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale or loan
proceeds required to pay the exercise price or (vi) by any combination of
the foregoing methods of payment under applicable law.
(4) Twenty-five percent (25%) of the shares issuable upon exercise of options
granted under the Company's 1999 Unit Option Plan generally become vested
on the first anniversary of the vesting commencement date and the balance
generally vests at the rate of 1/48th of such shares for each month
thereafter. A portion of each of these options will accelerate upon a
change of control or termination of the optionee's employment. See "--
Employment Agreements" for further descriptions of these employee
benefits.
The following table sets forth information with respect to options
exercised during fiscal 1999 by the Named Executive Officers and the value of
unexercised options at December 31, 1999.
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In- The-Money Options
Options at December 31, 1999 at December 31, 1999(1)
--------------------------------- -------------------------
Shares
Acquired on Value
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dan Firestone........... -- -- -- 375,000 -- $1,476,563
Jeffrey G. Miller....... -- -- -- 660,093 -- $3,213,003
Gary J. Owen............ -- -- -- 405,000 -- $1,594,688
</TABLE>
- --------
(1) The value of unexercised, in-the-money options is the difference between
the exercise price of the options and the fair market value of the
Company's Common Stock at December 31, 1999 ($12.4375).
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Board of Directors currently consists of
Messrs. Kortschak and Phelps. None of the members of the Compensation
Committee was an officer or employee of the Company. No interlocking
relationship exists between any member of the Company's Compensation Committee
and any member of any other company's board of directors or compensation
committee.
Employment Arrangements
Jeffrey G. Miller. Mr. Miller entered into an employment agreement and
commenced his employment with the Company on May 6, 1999. Under the agreement,
we agreed to pay Mr. Miller an annual salary of $225,000 and a bonus of up to
$100,000 base on the achievement of performance milestones. Under this
agreement, Mr. Miller received a signing bonus of $40,000. For the first year
of Mr. Miller's employment, the full performance bonus is guaranteed. In
conjunction with this agreement, we have granted Mr. Miller an option to
purchase 660,093 shares of our common stock at an exercise price of $7.57 per
share with 25% of the shares subject to this option vesting on the first
anniversary of his commencement date, and 1/36th of the remaining shares
vesting monthly thereafter.
As a part of this employment agreement, we have provided Mr. Miller with an
interest-free mortgage loan in the amount of $600,000 for the purpose of Mr.
Miller acquiring a new home. Under the agreement, the loan will be forgiven
over eight years for $50,000 per year for the first four years and $100,000
per year for the final four years. We will retain a mortgage security interest
in the home during the term of the loan. In the event Somera Communications
experiences a change of control and Mr. Miller is terminated without cause or
constructively terminated within twelve months, the outstanding balance of the
loan will be forgiven. In the event Mr. Miller is terminated without cause by
us, the loan will be due and repayable upon one year after he is first able to
sell his shares following this offering. In addition, he would be entitled to
receive severance equal to one
8
<PAGE>
year of his base salary and target bonus and additional vesting of that number
of shares subject to his option that would have become vested had Mr. Miller
remained employed by us for an additional six months. In the event Mr. Miller
leaves our employment voluntarily during the term of the loan, the loan would
be due and repayable within six months of the date of the termination of his
employment.
Gary J. Owen. Mr. Owen entered into an employment agreement with the
Company on July 16, 1999 and commenced his employment with the Company on July
26, 1999. Under the agreement, we have agreed to pay Mr. Owen an annual salary
of $200,000 and a bonus of up to $25,000 based on the achievement of
performance milestones. Under this agreement, Mr. Owen received a signing
bonus of $15,000. For the first year of Mr. Owen's employment, $12,500 of the
performance bonus is guaranteed. In conjunction with this agreement, we have
granted Mr. Owen an option to purchase 405,000 shares of our common stock at
an exercise price of $8.50 per share with 25% of the shares subject to this
option vesting on the first anniversary of his commencement date, and 1/36th
of the remaining shares vesting monthly thereafter.
As a part of his employment agreement, we have provided Mr. Owen with a
six-month interest-free mortgage loan in the amount of approximately $1.4
million for the purpose of Mr. Owen acquiring a new home. We will retain a
mortgage security interest in the home during the term of the loan. As a part
of his employment relationship, $300,000 of the loan was agreed to be forgiven
by our Board of Directors in February, 2000. Under this agreement, the loan
will be forgiven over eight years for $25,000 per year for the first four
years and $50,000 per year for the final four years. In the event Mr. Owen is
terminated without cause by us, he would be entitled to receive severance
payments in an amount up to twelve months of his base salary and target bonus.
In addition, he would be entitled to receive additional vesting of that number
of shares subject to his option that would have become vested had Mr. Owen
remained employed by us for an additional six months. In the event of a change
of control of Somera Communications, 50% of the shares subject to Mr. Owen's
option, together with any subsequent options granted to him, will vest and
become immediately exercisable.
Dan Firestone. Our compensation committee adopted a bonus plan for Mr.
Firestone that provides him with incentive compensation based on performance
milestones. Under this bonus plan, Mr. Firestone is eligible to receive a
bonus, in addition to his base salary of up to 250% of his base salary based
on the company's achievement of performance milestones.
Report of the Compensation Committee of the Board of Directors
The Compensation Committee (the "Committee") consists of Messrs. Kortschak
and Phelps. The Committee recommends, subject to the Board's approval,
compensation for executive officers and evaluates performance of management.
Compensation Philosophy
The Company operates in the competitive and rapidly changing environment of
high technology businesses. The Committee seeks to establish compensation
policies that allow the Company flexibility to respond to changes in its
business environment. The Company's compensation philosophy is based on the
belief that achievement in this environment is enhanced by the coordinated
efforts of all individuals working toward common objectives. The goals of the
Company's compensation program are to align compensation with the Company's
business objectives and performance, to foster teamwork and to enable the
Company to attract, retain and reward employees who contribute to the
Company's long-term success.
Compensation Components
The Company's executive officers are compensated with a salary, and are
eligible for bonus and stock option awards. The Committee assesses the past
performance and anticipated future contribution, and considers the total
compensation (earned or potentially available) of each executive officer in
establishing each element of compensation.
9
<PAGE>
Salary. The salaries of the executive officers, including the Chief
Executive Officer, are determined annually by the Committee with reference to
several surveys of salaries paid to executive with similar responsibilities at
comparable companies, generally in the high technology industry. The peer
group for each executive officer is composed of executives whose
responsibilities are similar in scope and content. The Company seeks to set
executive compensation levels that are competitive with the average levels of
peer group compensation.
Stock Options. Stock options awards are designed to align the interests of
executives with the long-term interests of the stockholders. The Committee
approves option grants subject to vesting periods (usually 48 months) to
retain executives and encourage sustained contributions. The exercise price of
options are not less than the closing market price of the common stock on the
date of grant. These options will acquire value only to the extent that the
price of the Company's Common Stock increases relative to the market price at
the date of grant.
Chief Executive Officer's Compensation
Mr. Firestone's compensation for 1999 was determined by the compensation
committee based on their assessment of the current market and compensation for
an executive of his level of experience and expertise, with consideration for
his past performance and anticipated future contribution.
COMPENSATION COMMITTEE
Walter Kortschak
Barry Phelps
10
<PAGE>
STOCK PERFORMANCE GRAPH
Stockholder Return Comparison
The graph below compares the cumulative total return on the Company's
Common Stock for the period commencing November 12, 1999 and ending December
31, 1999 compared to the Nasdaq Composite Index and NASDAQ Telecommunications
Index. The graph assumes that $100 was invested on the date of the Company's
initial public offering, November 12, 1999. Historic stock price performance
should not be considered indicative of future stock price performance.
Comparison of 2 Month Cumulative Total Return
Among Somera Communications, Inc., The NASDAQ Composite Index, and
NASDAQ Telecommunications Index
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
NASDAQ
Stock
Market--
Measurement Period (Fiscal Year Covered) Somera US Index
---------------------------------------- ------ -------- -----
<S> <C> <C> <C>
11/12/99............................................... 100 100 100
12/31/99............................................... 103 126 122
</TABLE>
11
<PAGE>
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of March
23, 2000 by (i) each beneficial owner of more than 5% of the Company's Common
Stock, (ii) each director and each nominee, (iii) each Named Executive Officer
and (iv) all directors and executive officers as a group. Except as otherwise
indicated, each person has sole voting and investment power with respect to
all shares shown as beneficially owned, subject to community property laws
where applicable.
Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power with
respect to shares. Unless otherwise indicated below, to our knowledge, the
persons and entities named in the table have sole voting and sole investment
power with respect to all shares beneficially owned, subject to community
property laws where applicable. Shares of common stock subject to options that
are currently exercisable or exercisable or exercisable within 60 days of
March 23, 2000 are deemed to be outstanding and to be beneficially owned by
the person holding the options for the purpose of computing the percentage
ownership of that person, but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person. Unless otherwise
indicated, the address for each listed stockholder is c/o Somera
Communications, 5383 Hollister Avenue, Santa Barbara, California 93111.
The applicable percentage of ownership for each stockholder is based on
47,837,500 shares of common stock outstanding as of March 23, 2000, together
with applicable options for that stockholders.
<TABLE>
<CAPTION>
Common Stock
Vested and Percentage
Name of Beneficial Owner Common Stock Options(1) Vested Options of Total
------------------------ ------------ --------- -------------- ----------
<S> <C> <C> <C> <C>
Dan Firestone............... 9,266,786 -- 9,266,786 19.4%
Jeffrey G. Miller........... -- 165,023 165,023 *
Gary J. Owen................ -- -- -- --
Gil Varon................... 9,353,330 -- 9,353,330 19.5%
Walter G. Kortschak (2)..... -- -- -- --
c/o Summit Partners
499 Hamilton Avenue, Suite
200
Palo Alto, CA 94301
Peter Y. Chung (3).......... -- -- -- --
c/o Summit Partners
499 Hamilton Avenue, Suite
200
Palo Alto, CA 94301
Barry Phelps................ -- -- -- --
Summit Funds (4)............ 13,757,333 -- 13,757,333 28.7%
c/o Summit Partners
499 Hamilton Avenue, Suite
200
Palo Alto, CA 94301
All executive officers and
directors as a group
(7 persons)................ 18,620,116 165,023 18,785,139 39.1%
</TABLE>
- --------
* Represents beneficial ownership of less than 1%
(1) Represents shares issuable upon exercise of options to purchase Somera
Common Stock that are exercisable within 60 days of March 23, 2000.
(2) Mr. Kortschak, one of our directors, is a managing member of Summit
Partners, LLC, which is the general partner of Summit Partners, V, which
is the general partner of each of Summit Ventures V, Summit V Advisors
Fund, (QP) and Summit V Advisors Fund. Mr. Kortschak is also a general
partner of Summit Investors III. Summit Partners, LLC, through an
investment committee, has voting and dispositive power with respect to
the shares owned by the Summit funds. Mr. Kortschak does not have voting
or dispositive power with respect to the shares owned by the Summit funds
and disclaims beneficial ownership of these shares.
12
<PAGE>
(3) Mr. Chung, one of our directors, is a member of Summit Partners, LLC,
which is the general partner of Summit Partners V, which is the general
partner of each of Summit Ventures, V, Summit V Advisors Fund, (QP) and
Summit V Advisors Fund. Summit Partners, LLC, through an investment
committee, has voting and dispositive power with respect to the shares
owned by the Summit funds. Mr. Chung does not have voting or dispositive
power with respect to the shares owned by the Summit funds and disclaims
beneficial ownership of these sales.
(4) Consists of 12,618,986 shares of common stock owned by Summit Ventures V,
723,116 shares of common stock owned by Summit V Advisors Fund, (QP),
220,978 shares of common stock owned by Summit V Advisors Fund, and
194,523 shares of common stock owned by Summit Investors III.
13
<PAGE>
CERTAIN TRANSACTIONS
Summit Financing
On July 23, 1998, Summit Ventures V, L.P., Summit V Advisors (QP) Fund,
L.P., Summit V Advisors Fund, L.P., Summit Investors III, L.P., which we refer
to collectively as the Summit funds, and several other investors invested an
aggregate of $51.8 million in Somera Communications, LLC in exchange for
14,070,000 Class B units. These Class B units were exchanged for 14,070,000
shares of common stock upon our initial public offering for a value of $168.8
million. The parties also entered into related agreements which provided for
registration rights, liquidations preferences, transfer restrictions, and
specified other rights.
Distribution Involving Officers, Directors and Five Percent Owners
On August 31, 1999, we entered into a credit agreement, consisting of a
$50.0 term loan facility with a syndicate of financial institutions led by
Fleet National Bank. We used the proceeds from the term loan facility to make
a distribution to our members in the aggregate amount of $48.5 million,
including $11.8 million to Dan Firestone, $11.9 million to Gil Varon, and
$17.5 million to the Summit funds. We used a portion of the net proceeds of
the initial public offering to repay all outstanding amounts under the term
loan facility. Since our inception in July 1995, we have made distributions to
members. For the period beginning January 1, 1998 and through November 12,
1999, and including the Fleet distribution described above, we have
distributed approximately $20.9 million to Mr. Firestone, $21.1 million to Mr.
Varon and $25.4 million to the Summit funds.
Loan From Officers and Related Parties
From July 1996 through November 1998, we borrowed an aggregate of $3.5
million from Dan Firestone, Gil Varon, Robert Firestone, who is Dan
Firestone's father, and Voyage Partners, a partnership whose partners include
Dan Firestone and Gil Varon, under a series of promissory notes that carried
annual interest rates that varied between eight and thirteen percent. These
notes were fully repaid in September 1999.
Miller Loan Agreement
We have provided Jeffrey G. Miller, our executive vice president of sales
and marketing, with a $600,000 interest-free mortgage loan. This loan was made
in conjunction with his employment agreement dated May 6, 1999 to assist with
Mr. Miller's relocation to the Santa Barbara, California area and his purchase
of a home. If Mr. Miller remains employed with us, this loan will be forgiven
over an eight-year period. As of December 31, 1999, approximately $567,000 was
outstanding on this loan.
Owen Loan Agreement
We have provided Gary Owen, our chief financial officer, with a $1.4
million six-month interest-free mortgage loan. This loan was made in
conjunction with his employment agreement dated July 16, 1999 to assist with
Mr. Owen's relocation to the Santa Barbara, California area and his purchase
of a home. As a part of his employment relationship, $300,000 of the loan was
agreed to be forgiven by our Board of Directors in February, 2000. Under the
agreement, the loan will be forgiven over eight years for $25,000 per year for
the first four years and $50,000 per year for the final four years. As of
December 31, 1999 approximately $1,349,000 of the loan was outstanding.
14
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent (10%) of a registered class of the
Company's equity securities to file an initial report of ownership on Form 3
and changes in ownership on Form 4 or 5 with the SEC and the National
Association of Securities Dealers, Inc. Executive officers, directors and
greater than ten percent stockholders are also required by SEC rules 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, the Company believes that,
with respect to fiscal 1999, all filing requirements applicable to its
officers, directors and ten percent stockholders were satisfied.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors of the Company may recommend.
THE BOARD OF DIRECTORS
Santa Barbara, California
April 3, 2000
15
<PAGE>
SOMERA COMMUNICATIONS INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dan Firestone and Gary Owen, jointly and
severally, proxies, with full power of substitution, to vote all shares of
Common Stock of Somera Communications, Inc., a Delaware corporation, which the
undersigned is entitled to vote at the Annual Meeting of Stockholders to be held
at the Fess Parkers Doubletree Resort, Santa Barbara, California, on May 2,
2000, at 1:00 p.m., local time, or any adjournment thereof and to vote all
shares of common stock which the undersigned would be entitled to vote thereat
if then and there personally present, on the matters set forth below:
1. Proposal to Elect the Following Nominee as a Member of Our Board of
Directors:
[_] FOR nominee listed below (except as indicated)
[_] WITHHOLD authority to vote for the nominee listed below
Peter Y. Chung
INSTRUCTION: IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH SUCH NOMINEE'S NAME IN THE LIST ABOVE.
2. Proposal to Ratify the Appointment of PricewaterhouseCoopers LLP Independent
Public Accountants.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
matters(s) which may properly come before the annual meeting, or at any
adjournment(s) or postponement(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED AND, IF NO DIRECTION IS INDICATED, THIS
PROXY WILL BE VOTED FOR THE LISTED NOMINEE FOR ELECTION AS A DIRECTOR, AND TO
RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS FOR OUR FISCAL YEAR ENDING DECEMBER 31, 2000.
Both of the foregoing attorneys-in-fact or their substitutes or, if only one
shall be present and acting at the annual meeting or any adjournment(s) or
postponement(s) thereof, the attorney-in-fact so present, shall have and may
exercise all of the powers of said attorney-in-fact hereunder.
Signature: Dated:
-------------------------------------- ------------------------
Signature: Dated:
-------------------------------------- ------------------------
NOTE: THIS PROXY SHOULD BE MARKED, DATED AND SIGNED BY THE STOCKHOLDER EXACTLY
AS HIS, HER OR ITS NAME APPEARS HEREON. PERSONS SIGNING IN A FIDUCIARY CAPACITY
SHOULD SO INDICATE AND IF SHARES ARE HELD BY JOINT TENANTS OR AS COMMUNITY
PROPERTY, BOTH SHOULD SIGN.
