SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment
No.
)
Filed by the
Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to § 240.14a-12
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RIVERBED TECHNOLOGY, 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)
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Title of each class of securities to which transaction applies:
Aggregate number of securities to which transaction applies:
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):
Proposed maximum
aggregate value of transaction:
Total fee paid:
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Fee paid previously with preliminary materials.
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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.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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April 20, 2011
Dear Stockholder:
I am pleased to invite you to attend Riverbed Technology,
Inc.’s 2011 Annual Meeting of Stockholders, to be held on Wednesday, June 1, 2011 at The Courtyard by Marriott, 299
2
nd
Street, San Francisco, CA 94105. The meeting will begin promptly at 2:00
p.m. local time. If you wish to attend the meeting and need directions, please contact Renee Lyall of Riverbed Investor Relations at 415-247-6353 or renee.lyall@riverbed.com.
Details regarding the business to be conducted at the Annual Meeting are more fully described in Riverbed’s Notice of Annual Meeting of Stockholders and Proxy Statement. We encourage you to read these
materials carefully.
Riverbed is pleased to take advantage of SEC rules that allow us to furnish proxy materials to our stockholders on
the Internet. These rules enable us to reduce the environmental impact of our Annual Meeting while still providing you with the information that you need.
Your vote is important. Whether or not you expect to attend the Annual Meeting, please vote your shares promptly to ensure that your shares will be represented at the Annual Meeting.
On behalf of the Board of Directors, thank you for your continued support and interest.
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Sincerely,
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Jerry M. Kennelly
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Chairman of the Board of Directors, President and Chief Executive Officer
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199 Fremont Street
San Francisco, CA 94105
T
415.247.8800
F
415.247.8801
www.riverbed.com
YOUR VOTE IS EXTREMELY IMPORTANT
Please vote promptly to ensure that your shares are represented at the Annual Meeting.
Riverbed Technology, Inc.
199 Fremont Street
San Francisco, California 94105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 1, 2011
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of Riverbed Technology, Inc., a Delaware corporation (the
“Company”). The meeting will be held on Wednesday, June 1, 2011, at 2:00 p.m. local time at The Courtyard by Marriott, 299 2
nd
Street, San Francisco, CA 94105 for the following purposes:
1. To elect three (3) members of the Board of Directors to serve until the 2014 annual meeting of stockholders of the Company or until such
persons’ successors have been duly elected and qualified.
2. To ratify the appointment by the Board of Directors of
Ernst & Young LLP as the independent registered public accounting firm of the Company for its fiscal year ending December 31, 2011.
3. To hold an advisory vote on executive compensation.
4. To hold an advisory vote on the frequency
of the advisory vote on executive compensation.
5. To transact any other business properly brought before the meeting or any
adjournment or postponement thereof.
These items of business are more fully described in the Company’s Proxy Statement.
The record date for the 2011 Annual Meeting is April 11, 2011. Only stockholders of record at the close of business on that date
may vote at the meeting or any adjournment thereof.
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By Order of the Board of Directors
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Brett A. Nissenberg
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General Counsel, Senior Vice President of Corporate and Legal Affairs and Secretary
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San Francisco, California
April 20, 2011
You are cordially invited to attend the
meeting in person. Whether or not you expect to attend the meeting, please complete, date, sign and return the enclosed proxy card, if applicable, or vote via telephone or the Internet as instructed in these materials, as promptly as possible. If
you received printed versions of these materials by mail, a return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Even if you have voted by proxy, you may still vote in person if you attend the
meeting. However, if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must provide a valid proxy issued in your name from that record holder.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON JUNE 1, 2011
The Proxy Statement and Annual Report on Form 10-K are available at
http://bnymellon.mobular.net/bnymellon/rvbd.
2011 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
T
ABLE
OF CONTENTS
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Riverbed Technology, Inc.
199 Fremont Street
San Francisco,
California 94105
PROXY STATEMENT
FOR THE 2011 ANNUAL MEETING OF STOCKHOLDERS
June 1, 2011
QUESTIONS AND ANSWERS ABOUT THIS PROXY MATERIAL AND VOTING
Why am I receiving these materials?
We have made these materials
available to you on the Internet or, upon your request, have delivered printed versions of these materials to you by mail in connection with the solicitation by the Board of Directors of Riverbed Technology, Inc. (sometimes referred to as the
“Company” or “Riverbed”) of your proxy to vote at the 2011 Annual Meeting of Stockholders (the “Annual Meeting”). You are invited to attend the Annual Meeting and are requested to vote on the proposals described in this
Proxy Statement. However, you do not need to attend the meeting to vote your shares.
Why did I receive a one-page notice
in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
Pursuant to rules
adopted by the Securities and Exchange Commission (“SEC”), Riverbed has elected to provide access to its proxy materials via the Internet. As a result, Riverbed is sending a Notice of Internet Availability of Proxy Materials (the
“Notice”) to its stockholders of record entitled to vote at the Annual Meeting. All Riverbed stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request to receive a printed set of
the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed set may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or
electronically by email on an ongoing basis. Riverbed encourages its stockholders to access proxy materials over the Internet in order to assist it in reducing the environmental impact of its annual meetings.
What is included in these materials?
These materials include:
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This Proxy Statement for the Annual Meeting; and
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Riverbed’s Annual Report on Form 10-K for the year ended December 31, 2010, as filed with the SEC on February 8, 2011 (the “Annual
Report”).
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If you requested printed versions of these materials by mail, these materials also include the proxy
card or vote instruction form for the Annual Meeting.
How may I obtain electronic access to the proxy materials?
The Notice will provide you with instructions regarding how to:
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View on the Internet Riverbed’s proxy materials for the Annual Meeting; and
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Instruct Riverbed to send future proxy materials to you by email.
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Choosing to receive future proxy materials by email will save Riverbed the cost of printing and mailing documents to you and will reduce the impact of Riverbed’s annual meetings on the environment. If you
choose to receive future proxy materials by email, you will receive an email message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by email will
remain in effect until you terminate it.
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Who can vote at the Annual Meeting?
Only stockholders of record at the close of business on April 11, 2011 (the “Record Date”) will be entitled to vote at the Annual
Meeting. On this record date, there were 153,478,414 shares of Company common stock (“Common Stock”) outstanding. All of these outstanding shares are entitled to vote at the Annual Meeting.
What is the difference between a stockholder of record and a beneficial owner of shares?
Stockholder of Record: Shares Registered in Your Name
If on April 11, 2011 your shares were registered directly in your name with our transfer agent, BNY Mellon Shareowner Services, then you are a stockholder of record, and the Notice or proxy materials were sent
directly to you by Riverbed. If you request printed copies of the proxy materials by mail, you will receive a proxy card.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank
If on April 11, 2011 your shares were held in an account at a
brokerage firm, bank, dealer or similar organization, then you are the beneficial owner of shares held in “street name” and the Notice was forwarded to you by that organization. The organization holding your account is considered the
stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account. Those instructions are contained in a “vote
instruction form.” If you request printed copies of the proxy materials by mail, you will receive a vote instruction form. A number of brokers and banks enable beneficial holders to give voting instructions via telephone or the Internet. Please
refer to the voting instructions provided by your bank or broker. You are also invited to attend the Annual Meeting. However, since you are not the stockholder of record, you may not vote your shares in person at the meeting unless you provide a
valid legal proxy from your broker, bank or other custodian.
What am I voting on?
There are four matters scheduled for a vote:
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Proposal 1: Election of three directors to serve until the 2014 annual meeting of stockholders or until such persons’ successors have been duly elected and
qualified;
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Proposal 2: Ratification of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending
December 31, 2011;
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Proposal 3: An advisory vote on executive compensation; and
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Proposal 4: An advisory vote on the frequency of the advisory vote on executive compensation.
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What are the Board’s voting recommendations?
Riverbed’s Board of Directors recommends that you vote your shares:
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“For”
each of the nominees to the Board (Proposal 1);
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“For”
ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the
fiscal year ending December 31, 2011 (Proposal 2);
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“For”
the proposal regarding an advisory vote on executive compensation (Proposal 3); and
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“3 Years”
for the proposal regarding an advisory vote on the frequency of the advisory vote on executive compensation (Proposal 4).
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How many votes do I have?
On each matter to be voted upon, you have one vote for each share of Common Stock you own as of April 11, 2011.
How do I vote?
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote:
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By Mail.
If you request printed copies of the proxy materials by mail, you may vote by proxy using the proxy card. To vote using
the proxy card, simply complete, sign and date the proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, we will vote your shares as you direct.
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Via the Internet.
You may vote by proxy on the Internet by following the instructions provided in the Notice.
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By Telephone.
If you request printed copies of the proxy materials by mail, you may vote by proxy by calling the number provided on
your proxy card.
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In person.
To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.
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Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If you are the beneficial owner of shares held in “street name”, you may vote:
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By Mail.
If you request printed copies of the proxy materials by mail, you may vote by completing the vote instruction form and
returning it as directed.
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Via the Internet.
You may vote by proxy on the Internet by visiting the website provided in the Notice and entering the control
number.
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By Telephone.
If you request printed copies of the proxy materials by mail, you may vote by proxy by calling the number provided on
the vote instruction form.
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In person.
If you are a beneficial owner of shares held in “street name” and you wish to vote in person at the Annual
Meeting, you must obtain a legal proxy from the organization that holds your shares. Please contact that organization for instructions regarding obtaining a legal proxy.
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We provide Internet proxy
voting to allow you to vote your shares on-line, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as
usage charges from Internet access providers.
How are proxies voted?
All shares represented by valid proxies received prior to the Annual Meeting will be voted. Where a stockholder has specified by means of the proxy
a choice with respect to any matter to be voted upon, the shares will be voted in accordance with the stockholder’s instructions.
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What happens if I do not give specific voting instructions?
Stockholder of Record: Shares Registered in Your Name
If you are a stockholder of record and you:
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Indicate when voting on the Internet, or by telephone, that you wish to vote as recommended by the Board; or
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Sign and return a proxy card without giving specific voting instructions,
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then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the
proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If you are a beneficial owner of shares held in “street name” and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional
securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares
on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on that matter with respect to your shares. This is generally referred to as a “broker
non-vote.”
Which ballot measures are considered “routine” or “non-routine”?
The ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the 2011
fiscal year (Proposal 2) is a matter considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal 2.
The election of directors (Proposal 1), the advisory vote on executive compensation (Proposal 3), and the advisory vote on the frequency of the
advisory vote on executive compensation (Proposal 4) are matters considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters, and therefore there may be broker non-votes on
Proposals 1, 3 and 4.
Who is paying for this proxy solicitation?
Riverbed will pay for the entire cost of soliciting proxies. In addition to soliciting proxies by mail, Riverbed’s directors and employees may
also solicit proxies in person, by telephone, or by other means of communication. Directors and employees will not be paid any additional compensation for soliciting proxies. Riverbed may reimburse brokerage firms, banks and other agents for the
cost of forwarding proxy materials to beneficial owners.
What does it mean if I receive more than one Notice or printed
set of proxy materials?
If you receive more than one Notice or printed set of proxy materials, your shares are registered in more
than one name or are registered in different accounts. Please follow the voting instructions with respect to each Notice and, if applicable, printed set of proxy materials to ensure that all of your shares are voted.
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I share an address with another stockholder, and we received only one paper copy of the
proxy materials. How may I obtain an additional copy of the proxy materials?
Under a procedure called “householding”, a
single copy of the Notice and, if applicable, this Proxy Statement and Annual Report will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. This helps to reduce
the Company’s printing and mailing costs. Stockholders that participate in householding will continue to be able to access and receive separate proxy cards. If you no longer wish to participate in householding and would prefer to receive a
separate Notice and, if applicable, this Proxy Statement and Annual Report, please direct your written request to Riverbed Technology, Inc., 199 Fremont Street, San Francisco, California 94105, Attn: Secretary, or call (415) 247-8800.
A number of brokers with account holders who are Riverbed stockholders will be householding our proxy materials. Stockholders that hold
shares in “street name” may contact their brokerage firm, bank, dealer or similar organization to request information about householding.
Can I change my vote after submitting my proxy?
Yes. You can revoke your proxy at any time before the final vote at the meeting.
You may revoke your proxy in any one of the following ways:
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You may submit another properly completed proxy card or vote instruction form with a later date.
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You may vote again on a later date via the Internet or by telephone.
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You may send a written notice that you are revoking your proxy to the Corporate Secretary of the Company at 199 Fremont Street, San Francisco, California 94105.
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You may attend the Annual Meeting and vote in person. Simply attending the meeting will not, by itself, revoke your proxy.
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How many votes are needed to approve each proposal?
Proposal 1.
A majority vote standard applies to this election of directors. Therefore, election of a nominee requires such nominee to receive more votes cast “for” his
election than “against” his election. See “
How is the majority voting standard applied to the election of directors
” below. Stockholders may not cumulate votes in the election of directors. Abstentions will have no effect
on the outcome of this election of directors. Broker non-votes will not be counted as having been voted on the proposal.
Proposal
2.
Ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2011 requires the affirmative vote of a
majority of the votes cast on this proposal. Abstentions will have the same effect as an “Against” vote. Broker non-votes will not be counted as having been voted on the proposal.
Proposal 3.
The vote on executive compensation is advisory, and therefore no specific approval standard
applies. However, Riverbed’s Board of Directors intends to carefully review the results of this vote.
Proposal
4.
The vote on the frequency of the advisory vote on executive compensation is advisory, and therefore no specific approval standard applies. However, Riverbed’s Board of Directors intends to carefully review the
results of this vote.
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You may vote “FOR”, “WITHHOLD”, or “ABSTAIN” on each of the nominees
for election as director (Proposal 1). You may not vote “For” the election of any persons other than the three named nominees. A “Withhold” vote will be treated as equivalent to an “Against” vote for purposes of
applying the majority voting standard.
You may vote “FOR,” “AGAINST” or “ABSTAIN” on the proposal to
ratify the appointment of Ernst and Young LLP as Riverbed’s independent registered public accounting firm (Proposal 2) and on the advisory vote on executive compensation (Proposal 3).
You may vote “1 YEAR”, “2 YEARS”, “3 YEARS” or “ABSTAIN” on the advisory vote on the frequency of the
advisory vote on executive compensation (Proposal 4).
How is the majority voting standard applied to the election of
directors?
Riverbed’s Amended and Restated Bylaws (“Bylaws”) and Corporate Governance Guidelines provide for a
majority voting standard in uncontested elections of directors. An uncontested election is one in which the number of nominees for director does not exceed the number of directors to be elected. The director election taking place at this Annual
Meeting is uncontested, and therefore the majority voting standard will apply. Under the majority voting standard, in order for a nominee to be elected the votes cast “for” such nominee’s election must exceed the votes cast
“against” such nominee’s election.
Riverbed has adopted a policy pursuant to which an incumbent director nominee that
receives a greater number of votes “against” his or her election than votes “for” such election will tender his or her resignation for consideration by the Nominating/Corporate Governance Committee of Riverbed’s Board of
Directors. The Nominating/Corporate Governance Committee will then recommend to the Board of Directors the action to be taken with respect to such offer of resignation.
What is the quorum requirement?
A quorum of stockholders is
necessary to hold a valid meeting. A quorum will be present if a majority of all outstanding shares is represented by stockholders either present at the meeting or represented by proxy. On the record date, there were 153,478,414 shares of Common
Stock outstanding and entitled to vote. Thus, 76,739,208 shares would constitute a quorum. Abstentions and broker non-votes will be counted as present for the purpose of determining the presence of a quorum.
How can I find out the results of the voting at the Annual Meeting?
Preliminary voting results will be announced at the Annual Meeting. Final voting results will be published in a Current Report on Form 8-K within
four business days following the Annual Meeting. In the event we are unable to obtain the final voting results within four business days, we will file the preliminary voting results in a Current Report on Form 8-K within four business days following
the Annual Meeting, and will file an amended Form 8-K with the final voting results within four business days after the final voting results are known.
How can stockholders submit a proposal for inclusion in the Proxy Statement for the 2012 Annual Meeting?
To be included in our Proxy Statement for the 2012 Annual Meeting, stockholder proposals must comply with the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and be received by our Corporate Secretary at our principal executive offices no
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later than December 22, 2011, or no later than one hundred twenty (120) calendar days before the one-year anniversary of the date on which we first mailed our Notice or proxy materials
to stockholders in connection with this year’s Annual Meeting.
How can stockholders submit proposals to be raised at
the 2012 Annual Meeting that will not be included in the Proxy Statement for the 2012 Annual Meeting?
To be raised at the 2012
Annual Meeting, stockholder proposals must comply with our Bylaws. Under our Bylaws, a stockholder must give advance notice to our Corporate Secretary of any business, including nominations of directors for our Board, that the stockholder wishes to
raise at our Annual Meeting. To be timely, a stockholder’s notice shall be delivered to our Corporate Secretary at our principal executive offices not less than forty-five (45) or more than seventy-five (75) days before the one-year
anniversary of the date on which we first mailed our Notice or proxy materials to stockholders in connection with this year’s Annual Meeting. Since our Notice or proxy materials for our 2011 Annual Meeting were first mailed to stockholders on
April 20, 2011, stockholder proposals must be received by our Corporate Secretary at our principal executive offices no earlier than February 5, 2012 and no later than March 6, 2012, in order to be raised at our 2012 Annual Meeting.
Stockholders may also submit a recommendation (as opposed to a formal nomination) for a candidate for membership on our Board by following the procedures discussed under “Nominating/Corporate Governance Committee.”
What if the date of the 2012 Annual Meeting changes by more than 30 days from the anniversary of this year’s Annual Meeting?
Under Rule 14a-8 of the Exchange Act, if the date of the 2012 Annual Meeting changes by more than 30 days from the anniversary of
this year’s Annual Meeting, to be included in our Proxy Statement, stockholder proposals must be received by us within a reasonable time before our solicitation is made.
Under our Bylaws, if the date of the 2012 Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from
the anniversary of this year’s Annual Meeting, stockholder proposals to be brought before the 2012 Annual Meeting must be received not earlier than the close of business on the 120
th
day prior to such annual meeting and not later than the close of business on the later of (x) the 90th day prior to such
annual meeting or (y)
the 10th day following the day on which public announcement of the date of such meeting is first made.
Does a stockholder
proposal require specific information?
With respect to a stockholder’s nomination of a candidate for our Board, the stockholder
notice to the Corporate Secretary must contain certain information as set forth in our Bylaws about both the nominee and the stockholder making the nomination. With respect to any other business that the stockholder proposes, the stockholder notice
must contain a brief description of such business and the reasons for conducting such business at the meeting, as well as certain other information as set forth in our Bylaws. If you wish to bring a stockholder proposal or nominate a candidate for
director, you are advised to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations. Our Bylaws may be found on our website at www.riverbed.com in the Corporate Governance
section of the Investor Relations page.
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What happens if Riverbed receives a stockholder proposal that is not in compliance with
the timeframes described above?
If we receive notice of a matter to come before the 2012 Annual Meeting that is not in compliance
with the deadlines described above, we will use our discretion in determining whether or not to bring such matter before the Annual Meeting. If such matter is brought before the Annual Meeting, then our proxy card for such meeting will confer upon
our proxy holders discretionary authority to vote on such matter.
Do the figures in this Proxy Statement take into
account the two-for-one split of Riverbed’s Common Stock effected on November 8, 2010?
Yes, all figures included in this
Proxy Statement reflect the stock split, and are expressed on a post-split basis.
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PROPOSAL 1
ELECTION OF DIRECTORS
Our
amended and restated certificate of incorporation (the “Charter”) and Bylaws provide for a classified board of directors. There are three classes of directors, with each class of directors serving three-year terms that end in successive
years. We currently have authorized nine directors. The class of directors standing for election at the Annual Meeting currently consists of three directors. The directors elected at the Annual Meeting will serve until our 2014 annual meeting of
stockholders or until their successors are duly elected and qualified. The directors being nominated for election to the Board of Directors (each, a “Nominee”), their ages as of March 16, 2011, their positions and offices held with
Riverbed and certain biographical information are set forth below. Beneath the biographical details of each Nominee or director listed below, we have also detailed the specific experience, qualifications, attributes or skills of each Nominee or
director that leads the Board of Directors to conclude that each Nominee or director should serve on the Board of Directors.
The proxy
holders intend to vote all proxies received by them
FOR
the Nominees listed below unless otherwise instructed. In the event that any Nominee is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be
voted for any nominee who may be designated by the current Board of Directors to fill the vacancy. As of the date of this Proxy Statement, the Board of Directors is not aware that any Nominee is unable or will decline to serve as a director. Proxies
cannot be voted for more than three individuals. Abstentions will have no effect on the outcome of this election of directors. Broker non-votes will not be counted as having been voted on the proposal.
Riverbed’s Bylaws and Corporate Governance Guidelines provide for a majority voting standard in uncontested elections of directors. An
uncontested election is one in which the number of nominees for director does not exceed the number of directors to be elected. The director election taking place at this Annual Meeting is uncontested, and therefore the majority voting standard will
apply. Under the majority voting standard, in order for a nominee to be elected the votes cast “for” such nominee’s election must exceed the votes cast “against” such Nominee’s election. A “Withhold” vote will
be treated as equivalent to an “Against” vote for purposes of applying the majority voting standard.
Riverbed has adopted a
policy pursuant to which an incumbent director nominee that receives a greater number of votes “against” his or her election than votes “for” such election will tender his or her resignation for consideration by the
Nominating/Corporate Governance Committee of Riverbed’s Board of Directors. The Nominating/Corporate Governance Committee will then recommend to the Board of Directors the action to be taken with respect to such offer of resignation.
Information Regarding the Nominees
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Name
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Age
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Positions and Offices Held With the Company
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Michael R. Kourey
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Director
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Mark S. Lewis
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Director
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Steven McCanne, Ph.D.
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Director and Chief Technology Officer
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Michael R.
Kourey
, age 51, has been a member of the Board of Directors since March 2006 and served as our lead independent director from April 2006 to April 2011. Since January 1999, Mr. Kourey has been a member of the board of directors and served as
senior vice president of Finance and Administration of Polycom, Inc., a unified collaborative communications solution company. Since January 1995, Mr. Kourey has also served as Polycom’s chief financial officer. In the past, he served as
Polycom’s vice president of Finance and Administration (January 1995 to January 1999), vice president of Finance and Operations (July 1991 to January 1995), secretary (June 1993 to May 2003), and treasurer (May 2003 to May 2004). Prior to
joining Polycom, Mr. Kourey was vice president of
9
Operations at Verilink Corporation. Mr. Kourey currently serves as a member of the board of directors of Aruba Networks, Inc., an enterprise mobility solution provider, and serves on the advisory
board of the Graduate School of Management at the University of California, Davis. Mr. Kourey holds a B.S. in Managerial Economics from the University of California, Davis, and an M.B.A. from Santa Clara University.
We believe that Mr. Kourey’s experience and skills make him a qualified and valuable member of our Board of Directors. In particular,
Mr. Kourey possesses a deep understanding of accounting principles and financial reporting rules and regulations, including how internal controls are effectively managed within organizations. In addition, Mr. Kourey possesses extensive
experience as a finance executive at a publicly-traded corporation, as well as significant experience as a Board member at two publicly-traded corporations.
Mark S. Lewis,
age 48, has been a member of the Board of Directors since February 2010. Mr. Lewis has served as Chief Strategy Officer for the Information Infrastructure Products Business of EMC
Corporation, an information infrastructure technology and solutions company, since October 2010. Mr. Lewis’ prior roles at EMC have included President of the Content Management and Archiving Division, Chief Development Officer, Chief
Technology Officer and co-leader of the EMC Software Group. Mr. Lewis joined EMC in July 2002 from Hewlett-Packard/Compaq, where he was Vice President and General Manager of Compaq’s Enterprise Storage Group. From 1998 to 1999,
Mr. Lewis led Compaq’s Enterprise Storage Software Business after serving for two years as Director of Engineering for Multi Vendor Online Storage. Before that, he spent 13 years in storage-related engineering and product development at
Digital Equipment Corporation, a computer manufacturing company. Mr. Lewis holds a B.S. in Mechanical Engineering from University of Colorado, Boulder. He has studied Business Law, Marketing, and Accounting for an MBA at University of Colorado,
Colorado Springs, and he attended the Executive Education Program at the Harvard Business School.
We believe that Mr. Lewis’
experience and skills make him a qualified and valuable member of our Board of Directors. In particular, Mr. Lewis’ extensive operating experience positions him to provide valuable guidance on our corporate vision and technology
innovations. In addition, Mr. Lewis’ industry expertise is especially important as we direct our efforts to both maintaining market and technology leadership with our core competencies as well as expanding our business into adjacent
markets.
Steven McCanne, Ph.D.
, age 42, co-founded our company in May 2002 and has served as our Chief Technology Officer since
September 2002. He has also been a member of the Board of Directors since May 2002. Prior to founding our company, Dr. McCanne served as Chief Technology Officer, Media Division and later as Chief Technology Officer for Inktomi Corporation, an
infrastructure software company, from October 2000 to March 2002. Dr. McCanne joined Inktomi following its acquisition of FastForward Networks, which he co-founded in May 1998. Dr. McCanne has also served on the faculty in Electrical
Engineering and Computer Science at the University of California, Berkeley. Dr. McCanne holds a Bachelor’s degree in Electrical Engineering and Computer Science and a Ph.D. in Computer Science from the University of California, Berkeley.
We believe that Dr. McCanne’s experience and skills make him a qualified and valuable member of our Board of Directors. In
particular, Dr. McCanne, a co-founder of our company and networking technology visionary, possesses strong technical and business insight into the WAN optimization and adjacent markets. In addition, his technology innovations and in-depth
knowledge of our business and products continue to serve as significant contributors to the success of our company.
The Board of
Directors Recommends a Vote “FOR” Each Named Nominee.
10
Information Regarding Other Directors Continuing in Office
Set forth below is information regarding each of the continuing directors of Riverbed, including his age as of March 16, 2011, the period
during which he has served as a director, and certain information as to principal occupations and directorships held by him in corporations whose shares are publicly registered.
Continuing Directors — Term Ending in 2012
Michael Boustridge,
age 47, has been a
member of the Board of Directors since February 2010. Mr. Boustridge previously served as President, BT Global Services Multi-National Corporations, where he had responsibility for all aspects of BT’s operations and performance for the
global Multi-National Corporations worldwide, including BT’s Global Financial Services sector. Since joining BT Global Services in April 2006 Mr. Boustridge held many positions, including President of America and Canada as well as
President Asia Pacific. Prior to joining BT, Mr. Boustridge served as Chief Sales and Chief Marketing Officer at Electronic Data Systems, LLC, which he joined in 1996 from Hitachi Data Systems. Mr. Boustridge previously served on the Board
of Trustees of the X PRIZE Foundation, an educational nonprofit organization.
We believe that Mr. Boustridge’s experience and
skills make him a qualified and valuable member of our Board of Directors. In particular, Mr. Boustridge’s deep knowledge of the information and communications service provider market is an important asset, as leveraging key service
provider relationships has become increasingly important to Riverbed and our customers. In addition, his extensive global experience in the IT services sector, as well as his expertise in delivering successful operational results for global
companies, will enable Mr. Boustridge to provide valuable guidance as we seek to continue growing our business.
Jerry M.
Kennelly
, age 60, co-founded our company in May 2002 and serves as Chairman of the Board of Directors and as our President and Chief Executive Officer. Immediately prior to founding our company, Mr. Kennelly spent six years at Inktomi
Corporation, an infrastructure software company, where he served as Executive Vice President, Chief Financial Officer and Secretary. From June 1990 until joining Inktomi in October 1996, Mr. Kennelly worked for Sybase, Inc., an infrastructure
software company, in a number of senior financial and operational positions, most recently as Vice President of Corporate Finance. From November 1988 until June 1990, Mr. Kennelly worked at Oracle Corporation as finance director for US
Operations. From June 1980 until November 1988, Mr. Kennelly worked at Hewlett-Packard Company as Worldwide Sales and Marketing Controller for the Tandem Computers Division. Mr. Kennelly holds a Bachelor’s degree from Williams College
and a Masters degree from the New York University Graduate School of Business Administration.
We believe that Mr. Kennelly’s
experience and skills make him a qualified and valuable member of our Board of Directors. In particular, Mr. Kennelly, a co-founder of our company, possesses in-depth knowledge of our business and markets, extensive operating experience, and
strong leadership skills, having served as our Chief Executive Officer since shortly after the Company’s inception as well as an executive at technology companies for two decades prior. In addition, his expertise in guiding our long-term
strategic and corporate planning continues to contribute significantly to the success of our company.
Stanley J. Meresman
, age
64, has been a member of the Board of Directors since March 2005. Mr. Meresman was a Venture Partner with Technology Crossover Ventures, a private equity firm, from January through December 2004 and was General Partner and Chief Operating
Officer of Technology Crossover Ventures from November 2001 to December 2003. During the four years prior to joining Technology Crossover Ventures, Mr. Meresman was a private investor and board member and advisor to several technology
companies. From May 1989 to May 1997, Mr. Meresman was the Senior Vice President and Chief Financial Officer of Silicon Graphics, Inc. Prior to Silicon Graphics, he was Vice
11
President of Finance and Administration and Chief Financial Officer of Cypress Semiconductor. Mr. Meresman holds a B.S. in Industrial Engineering and Operations Research from the University
of California, Berkeley and an M.B.A. from the Stanford Graduate School of Business. Mr. Meresman is also a director of Meru Networks, a wireless networking solution provider.
We believe that Mr. Meresman’s experience and skills make him a qualified and valuable member of our Board of Directors. In particular,
Mr. Meresman possesses a deep understanding of accounting principles and financial reporting rules and regulations, including how internal controls are effectively managed within organizations. In addition, Mr. Meresman’s financial
and accounting expertise is strengthened by his extensive experience as a chief financial officer at two publicly-traded corporations.
Continuing
Directors — Term Ending in 2013
Mark A. Floyd
, age 55, has been a member of the Board of Directors since August 2007.
Mr. Floyd has served as the Chief Executive Officer of SafeNet, Inc., an information security company, since July 2009. Mr. Floyd served as President and Chief Executive Officer of Entrisphere, Inc., a telecommunications equipment company,
from August 2001 until its acquisition by Ericsson in February 2007. Prior to that, Mr. Floyd served as President and Chief Executive Officer of Siemens ICN, Inc., a telecommunications equipment company, from April 2000 until January 2001, and
President and Chief Executive Officer of Efficient Networks, Inc., another telecommunications equipment company, from July 1993 to April 2000. Mr. Floyd holds a B.B.A. degree in Finance from the University of Texas. Mr. Floyd has served as a
director of Tekelec, Inc., a network applications company, since October 2004, most recently as chairman. Mr. Floyd has announced that he will not be standing for reelection to the board of directors of Tekelec at their 2011 annual meeting to be
held on May 13, 2011. Mr. Floyd previously served as a director of Carrier Access Corporation, a telecommunications equipment manufacturer, from June 2001 to March 2008.
We believe that Mr. Floyd’s experience and skills make him a qualified and valuable member of our Board of Directors. In particular, Mr. Floyd has extensive experience as an executive in the
technology industry, having served as Chief Executive Officer on four separate occasions. In addition, his service provider industry expertise has been an important asset to Riverbed as we have increasingly viewed service provider engagement as a
key growth lever.
Christopher J. Schaepe
, age 47, has been a member of the Board of Directors since December 2002.
Mr. Schaepe is a founding managing director of Lightspeed Venture Partners, a venture capital firm. Prior to joining Lightspeed in September 2000, he was a general partner at Weiss, Peck & Greer Venture Partners, a venture capital
firm, which he joined in 1991. Mr. Schaepe holds B.S. and M.S. degrees in Computer Science and Electrical Engineering from MIT and an M.B.A. from the Stanford Graduate School of Business. Mr. Schaepe served as a director of eHealth, Inc., an
online health insurance provider, from April 1999 to September 2008.
We believe that Mr. Schaepe’s experience and skills make
him a qualified and valuable member of our Board of Directors. In particular, Mr. Schaepe possesses a broad perspective of the technology industry, having guided numerous companies in his role as a venture capital investor and Board member over
the past two decades, as well as substantive professional experience serving in corporate finance and capital markets roles. In addition, he possesses in-depth knowledge of our business, having advised Riverbed since December 2002.
James R. Swartz
, age 68, has been a member of the Board of Directors since November 2002 and has served as our lead independent director
since April 2011. Mr. Swartz is a founding partner of Accel Partners, a venture capital firm, and has been with Accel Partners since 1983. He holds a B.S. degree from Harvard University with a concentration in Engineering Sciences and Applied
Physics and an M.S. in Industrial Administration from Carnegie Mellon University.
12
We believe that Mr. Swartz’s experience and skills make him a qualified and valuable member
of our Board of Directors. In particular, Mr. Swartz possesses deep expertise in guiding the long-term strategic planning of technology companies, having served as a Board member of more than fifty successful companies over four decades of
venture capital investing. In addition, Mr. Swartz possesses in-depth knowledge of our business, having advised Riverbed since November 2002.
13
CORPORATE GOVERNANCE
Independence of the Board of Directors
The Board of Directors is currently comprised of nine members. Seven of our nine members, Messrs. Boustridge, Floyd, Kourey, Lewis, Meresman, Schaepe and Swartz, qualify as independent directors in accordance with
the published listing requirements of the Nasdaq Stock Market, or Nasdaq. The Nasdaq independence definition includes a series of objective tests. In addition, as further required by the Nasdaq rules, the Board of Directors has made a subjective
determination as to each independent director that no relationships exist which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In making these
determinations, the directors reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities as they may relate to us and our management. The information reviewed included
information relating to any sales of our products and services to, and purchases by us of products and services from, entities (or affiliates of such entities) where any of our directors are employed. See “Review, Approval or Ratification of
Transactions with Related Persons.”
Chairman of the Board
Mr. Kennelly, our President and Chief Executive Officer, also serves as the Chairman of our Board of Directors. It is the opinion of the Board
of Directors that Mr. Kennelly’s service as Chairman best meets the needs of Riverbed and its stockholders.
In his capacity
as Chairman, Mr. Kennelly, with the advice and input of other Board members, is responsible for ensuring that the quality, quantity and timeliness of the information provided by management is sufficient to enable the Board to effectively and
responsibly perform its duties. The Board believes that this responsibility in particular is currently best discharged by the individual serving as the Company’s chief executive.
In the future, selecting an independent director to serve as Chairman may or may not be in the best interests of Riverbed and its stockholders. We
believe that the Board of Directors will be in the best position to make that determination. The Board values its flexibility to select the Chairman that it considers best able to meet the needs of the Company and its stockholders, based on the
qualifications of the directors then serving on the Board.
Lead Independent Director
Mr. Kourey served as our Lead Independent Director in 2010. Mr. Swartz has served as our Lead Independent Director since April 2011. The
Lead Independent Director is responsible for calling special meetings of the independent directors, as and if he deems that such meetings are necessary. The Lead Independent Director is also responsible for chairing all meetings of independent
directors. The independent members of the Board meet regularly in executive session at which only independent directors are present, typically after regularly scheduled Board of Directors meetings.
Board Leadership Structure
The Board of Directors believes that our Board structure, with its strong emphasis on Board independence, is successful in achieving effective independent oversight of management and the Company. Board members have
complete access to management and outside advisors, and the Chairman is not the sole source of information for the Board of Directors. The Chairman does not serve on any of the Board’s three committees, and the Nominating/Corporate Governance
Committee is
14
chaired by our Lead Independent Director. Seven of our nine Board members are independent under Nasdaq rules. In addition, every member of each of the Board’s three committees is
independent. The Board of Directors delegates substantial responsibility to the Board committees, which regularly report their activities and actions to the full Board of Directors. We believe that our independent Board committees are an important
aspect of our Board leadership structure.
Information Regarding the Board of Directors and its Committees
The Board of Directors has an Audit Committee, a Compensation Committee, and a Nominating/Corporate Governance Committee. The Board has determined
that the Chairs and members of each committee are independent under the applicable Nasdaq and Securities and Exchange Commission (“SEC”) rules. The following table provides membership and meeting information for each of the Board
committees during 2010:
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Name
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Audit
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|
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Compensation
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|
|
Nominating/Corporate
Governance
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|
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Michael Boustridge (1)
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|
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|
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X
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|
|
|
|
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Mark A. Floyd
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X
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|
|
|
X
|
|
|
|
|
|
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Jerry M. Kennelly
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|
|
|
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|
|
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|
|
|
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Michael R. Kourey
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|
|
X
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|
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|
|
|
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X
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(2)
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Mark S. Lewis (3)
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|
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|
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X
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Steven McCanne, Ph.D.
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Stanley J. Meresman
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X
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(2)
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|
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X
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Christopher J. Schaepe
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X
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|
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X
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James R. Swartz
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X
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(2)
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Total meetings in fiscal year 2010
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8
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23
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5
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(1)
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Joined the Compensation Committee in February 2010
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(2)
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Committee Chairperson
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(3)
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Joined the Nominating/Corporate Governance Committee in February 2010
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In April 2011, the following changes occurred in Riverbed’s Board Committee membership and chairperson composition:
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•
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Mr. Kourey assumed the chairpersonship of the Audit Committee.
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•
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Mr. Meresman joined the Compensation Committee and no longer serves on the Nominating/Corporate Governance Committee.
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•
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Mr. Schaepe assumed the chairpersonship of the Compensation Committee.
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•
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Mr. Swartz joined the Nominating/Corporate Governance Committee as chairperson and no longer serves on the Compensation Committee.
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Below is a description of each committee of the Board of Directors. Each committee of the Board of Directors has a
written charter approved by the Board of Directors. Copies of each of the committee charters are posted on our website at www.riverbed.com in the Corporate Governance section of the Investor Relations page.
Audit Committee
The Audit Committee of the Board of Directors oversees our accounting practices, system of internal controls, audit processes and financial
reporting processes. Among other things, the Audit Committee is responsible for reviewing our disclosure controls and processes and the adequacy and effectiveness of our internal controls and internal audit functions. It also discusses the scope and
results of the audit and interim reviews with our independent auditors, reviews with our management
15
our interim and year-end operating results and, as appropriate, initiates inquiries into aspects of our financial affairs. The Audit Committee is responsible for establishing procedures for the
receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.
In addition, the Audit Committee has sole and direct responsibility for the appointment, retention, compensation and oversight of the work of our independent auditors, including approving services and fee arrangements. Our Audit Committee has the
principal responsibility for reviewing related person transactions pursuant to written policies and procedures adopted by the Board of Directors, subject to specified exceptions and other than those that involve compensation. A more detailed
description of the Audit Committee’s functions can be found in the Audit Committee charter.
The members of the Audit Committee in
2010 and currently are Messrs. Floyd, Kourey and Meresman. Mr. Meresman chaired the Audit Committee in 2010. Mr. Kourey has chaired the Audit Committee since April 2011.
The Board of Directors has determined that Messrs. Floyd, Kourey and Meresman are each an “Audit Committee financial expert” as defined
in Item 407(d)(5)(ii) of Regulation S-K. The designation does not impose on Messrs. Floyd, Kourey and Meresman any duties, obligations or liability that are greater than are generally imposed on them as members of the Audit Committee and the
Board of Directors.
Compensation Committee
The Compensation Committee of the Board of Directors reviews and approves our overall compensation strategy and policies. Specifically, the Compensation Committee reviews and approves corporate performance goals
and objectives relevant to the compensation of our executive officers and other senior management, reviews and approves the compensation and other terms of employment of our Chief Executive Officer and other executive officers, approves the bonus
programs in effect for the Chief Executive Officer, other executive officers and key employees for each fiscal year, recommends to the Board of Directors the compensation of our directors, recommends to the Board of Directors the adoption or
amendment of equity and cash incentive plans, approves amendments to such plans, grants stock options and other stock-related awards, and administers our stock option plans, stock purchase plan and similar programs. The Compensation Committee may,
to the extent permitted under applicable law and the rules of Nasdaq and the SEC, delegate its authority to subcommittees when appropriate. A more detailed description of the Compensation Committee’s functions can be found in the Compensation
Committee charter.
Our Chief Executive Officer does not participate in the determination of his own compensation or the compensation of
directors. However, he makes recommendations to the Compensation Committee regarding the amount and form of the compensation of the other executive officers and key employees, and he may participate in the Compensation Committee’s deliberations
about their compensation. No other executive officers participate in the determination of the amount or form of the compensation of executive officers or directors.
For certain 2010 compensation matters the Compensation Committee retained Radford, An AonHewitt Company (“Radford”) as its independent compensation consultant. See “Compensation Discussion and
Analysis”.
The members of the Compensation Committee in 2010 were Messrs. Boustridge, Floyd, Schaepe and Swartz, with
Mr. Boustridge joining in February 2010. Mr. Swartz chaired the Compensation Committee in 2010.
16
The current members of the Compensation Committee are Messrs. Boustridge, Floyd, Meresman and
Schaepe. Mr. Schaepe has chaired the Compensation Committee since April 2011.
Compensation Committee Interlocks and
Insider Participation
The Compensation Committee of the Board of Directors currently consists of Messrs. Boustridge, Floyd, Meresman
and Schaepe. In addition, Mr. Swartz served on the Compensation Committee in 2010. None of these individuals was at any time during fiscal year 2010, or at any other time, an officer or employee of the Company. None of our executive officers
has ever served as a member of the Board of Directors or Compensation Committee of any other entity that has or has had one or more executive officers serving as a member of our Board of Directors or the Compensation Committee.
Nominating/Corporate Governance Committee
The Nominating/Corporate Governance Committee of the Board of Directors oversees the nomination of directors, including, among other things, identifying, evaluating and making recommendations of nominees to the
Board of Directors, and evaluates the performance of the Board of Directors and individual directors. The Nominating/Corporate Governance Committee is also responsible for reviewing developments in corporate governance practices, evaluating the
adequacy of our corporate governance practices and making recommendations to the Board of Directors concerning corporate governance matters. A more detailed description of the Nominating/Corporate Governance Committee’s functions can be found
in the Nominating/Corporate Governance Committee charter.
The Nominating/Corporate Governance Committee believes that candidates for
director should have certain minimum qualifications, including having the highest professional and personal ethics and values, broad experience at the policy-making level in business, government, education, technology or public interest, a
commitment to enhancing stockholder value, and sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. The Nominating/Corporate Governance Committee also considers such other factors as various and
relevant career experience, relevant skills, such as an understanding of WAN Optimization, financial expertise, diversity and local and community ties.
Candidates for director nominees are reviewed in the context of the current composition of the Board of Directors, the operating requirements of the Company and the long-term interests of stockholders. In
conducting this assessment, the Nominating/Corporate Governance Committee considers diversity, age, skills, and such other factors as it deems appropriate, given the then-current needs of the Board of Directors and the Company, to maintain a balance
of knowledge, experience and capability. We do not maintain a formal diversity policy with respect to our Board of Directors. As noted above, however, we do consider diversity to be a relevant consideration, among others, in the process of
evaluating and identifying director candidates, and view diversity expansively to include those attributes that we believe will contribute to a Board of Directors that, through a variety of backgrounds, viewpoints, professional experiences, skills,
educational experiences and other such attributes, is best able to guide the Company and its strategic direction.
In the case of
incumbent directors whose terms of office are set to expire, the Nominating/Corporate Governance Committee reviews such directors’ overall performance during their term, including the number of meetings attended, level of participation, quality
of performance, and any relationships or transactions that might impair such directors’ independence.
In connection with a review
of potential candidates for the Board of Directors, the Nominating/Corporate Governance Committee compiles a list of potential candidates using relevant sources, which may include other current members of the Board of Directors, professional search
firms, and stockholders. The Nominating/Corporate Governance Committee then conducts any appropriate and
17
necessary inquiries into the backgrounds and qualifications of possible candidates after considering the function and needs of the Board of Directors. The Nominating/Corporate Governance
Committee then meets to discuss and consider such candidates’ qualifications and then selects a nominee for recommendation to the Board of Directors.
The Nominating/Corporate Governance Committee will consider director candidates recommended by stockholders and evaluate them using the same criteria as candidates identified by the Board of Directors or the
Nominating/Corporate Governance Committee for consideration. If a stockholder of the Company wishes to recommend a director candidate for consideration by the Nominating/Corporate Governance Committee, pursuant to the Company’s Corporate
Governance Guidelines, the stockholder recommendation should be delivered to the General Counsel of the Company at the principal executive offices of the Company, and must include:
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•
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To the extent reasonably available, information relating to such director candidate that would be required to be disclosed in a proxy statement pursuant to
Regulation 14A under the Exchange Act, in which such individual is a nominee for election to the Board of Directors;
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•
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Certain information regarding the stockholder making such nomination and any Stockholder Associated Person (as defined in our Bylaws) and a statement whether
such stockholder or Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of a number of the Company’s voting securities reasonably believed by such stockholder or Stockholder Associated Person to be
necessary to elect such nominee;
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•
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Such other information as required by the Company’s Bylaws;
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•
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The director candidate’s written consent to (A) if selected, be named in the Company’s proxy statement and proxy and (B) if elected, serve on
the Board of Directors;
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•
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Such other information as may reasonably be required by the Company to determine the eligibility of the proposed nominee to serve as an independent director of
the Company or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such nominee; and
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•
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Any other information that such stockholder believes is relevant in considering the director candidate.
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The members of the Nominating/Corporate Governance Committee in 2010 were Messrs. Kourey, Lewis, Meresman and Schaepe, with Mr. Lewis joining
in February 2010. Mr. Kourey chaired the Nominating/Corporate Governance Committee in 2010.
The current members of the
Nominating/Corporate Governance Committee are Messrs. Kourey, Lewis, Schaepe and Swartz. Mr. Swartz has chaired the Nominating/Corporate Governance Committee since April 2011.
Risk Management Oversight
The Board of Directors actively manages
Riverbed’s risk oversight process and receives regular reports from management on areas of material risk to Riverbed, including operational, financial, legal and regulatory risks.
Our Board committees assist the Board of Directors in fulfilling its oversight responsibilities in certain areas of risk:
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•
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The Audit Committee assists the Board of Directors with its oversight of Riverbed’s major financial risk exposures. The Audit Committee regularly reviews
with management Riverbed’s risk assessment and risk management policies. Risk assessment reports are regularly provided by management to the Audit Committee.
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18
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•
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The Compensation Committee assists the Board of Directors with its oversight of risks arising from our compensation policies and programs, as well as with its
oversight of risks associated with succession planning.
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•
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The Nominating/Corporate Governance Committee assists the Board of Directors with its oversight of risks associated with Board organization, Board independence
and corporate governance.
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While each Board committee is responsible for evaluating certain risks and overseeing the
management of such risks, the entire Board of Directors is regularly informed through committee reports about such risks.
Risk
Management Regarding Compensation Policies and Programs.
Our Compensation Committee is responsible for assessing our compensation policies and practices relative to all our employees, including non-executive officers, to
determine if the risks arising from these policies and practices are reasonably likely to have a material adverse effect on our company. In performing its duties, the Compensation Committee meets at least annually with our management and the
Compensation Committee’s independent compensation consultant to review and discuss potential risks relating to our employee compensation plans and programs.
In April 2010 and March 2011, the Compensation Committee reviewed and discussed with our management and the Compensation Committee’s independent compensation consultant a report analyzing the risk in our
compensation programs and practices. This report included an analysis of the mechanisms in our compensation plans and programs intended to reduce the risk of conduct reasonably likely to have a material adverse effect on our company, and an overall
risk assessment of such programs based on this analysis. Among other things, the Compensation Committee considered the risk profile of our base salary programs, our broad-based benefit plans, our sales compensation plans, our management bonus plan,
new hire equity awards, annual equity awards for continuing employees, our long-term incentive plan and the employee stock purchase plan. The Compensation Committee also considered in connection with this review our internal financial reporting and
regulatory compliance procedures.
Board of Directors Meeting Attendance
The Board of Directors met five times during the fiscal year ended December 31, 2010. During 2010, each director then in office attended 75% or
more of the meetings held of the Board of Directors and committees on which he served.
Code of Business Conduct
The Board of Directors has adopted a code of business conduct and a code of ethics. The code of business conduct applies to all of
our employees, officers and directors. The code of ethics is in addition to our code of business conduct and applies to our chief executive officer and senior financial officers, including our principal financial officer and principal accounting
officer. The full texts of our codes of business conduct and ethics are posted on our website at www.riverbed.com in the Corporate Governance section of the Investor Relations page. We intend to disclose future amendments to our codes of business
conduct and ethics, or certain waivers of such provisions, at the same location on our website identified above and also in public filings, to the extent required by Nasdaq.
Compensation of Directors
This section provides information
regarding the compensation policies for non-employee directors in effect, and amounts paid and securities awarded to these directors, in fiscal 2010.
19
We have a policy of reimbursing directors for travel, lodging and other reasonable expenses incurred
in connection with their attendance at board or committee meetings. In addition, during 2010, cash compensation earned by non-employee directors for their services as members of the Board of Directors or any committee of the Board of Directors was
as follows:
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•
|
|
Annual retainer fee of $30,000 for each non-employee director;
|
|
|
•
|
|
Additional annual retainer fee of $5,000 for Mr. Kourey for serving as Lead Independent Director;
|
|
|
•
|
|
Additional annual retainer fee of $5,000 each for Messrs. Kourey, Meresman and Swartz for serving as chair of the Nominating/Corporate Governance Committee,
Audit Committee and Compensation Committee, respectively;
|
|
|
•
|
|
Additional annual retainer fee of $5,000 for Mr. Boustridge for serving as a member of the Compensation Committee;
|
|
|
•
|
|
Additional annual retainer fee of $10,000 for Mr. Floyd for serving as a member of the Audit Committee and Compensation Committee;
|
|
|
•
|
|
Additional annual retainer fee of $10,000 for Mr. Kourey for serving as a member of the Audit Committee and Nominating/Corporate Governance Committee;
|
|
|
•
|
|
Additional annual retainer fee of $5,000 for Mr. Lewis for serving as a member of the Nominating/Corporate Governance Committee;
|
|
|
•
|
|
Additional annual retainer fee of $10,000 for Mr. Meresman for serving as a member of the Audit Committee and Nominating/Corporate Governance Committee;
|
|
|
•
|
|
Additional annual retainer fee of $10,000 for Mr. Schaepe for serving as a member of the Compensation Committee and Nominating/Corporate Governance
Committee; and
|
|
|
•
|
|
Additional annual retainer fee of $5,000 for Mr. Swartz for serving as a member of the Compensation Committee.
|
The above cash compensation earned by Messrs. Boustridge and Lewis was pro-rated to reflect that their service as members of the Board of Directors
and as Board committee members did not begin until February 2010.
Our 2006 Director Option Plan provides for automatic grants of
options to non-employee directors. All options are granted at the fair market value on the date of the award. A non-employee director is entitled to an initial stock option award to purchase 60,000 shares of our common stock upon such
director’s election to the Board of Directors, plus an additional option to purchase 10,000 shares of our common stock if serving on the Audit Committee and an additional option to purchase 10,000 shares of our common stock if serving as
chairman of the Audit Committee. Each initial option will become exercisable for the shares in 48 equal monthly installments and will fully vest if we are acquired while the director is in our service. Each of Messrs. Boustridge and Lewis received
an option to purchase 60,000 shares of our common stock on February 2, 2010, the date of their election to the Board of Directors.
Each year thereafter, pursuant to the 2006 Director Option Plan, each non-employee director will receive an annual stock option award to purchase
20,000 shares of our common stock on the date of our annual stockholders meeting, plus an additional option to purchase 8,000 shares of our common stock if serving on the Audit Committee and an additional option to purchase 4,000 shares of our
common stock if serving as chairman of the Audit Committee, each of which will vest in 48 equal monthly installments and will fully vest if we are acquired while the director is in our service. Annual grants are not made in the same year as the
initial grants. Each member of our Board of Directors that served in 2010, other than Messrs. Boustridge and Lewis, received an annual stock option award in 2010.
20
Directors Compensation
The following table sets forth all of the compensation awarded to, earned by, or paid to our non-employee directors in fiscal year 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
|
Option Awards
($) (1)
|
|
|
Total
($)
|
|
|
Michael Boustridge (2)
|
|
|
23,139
|
|
|
|
636,906
|
(3)
|
|
|
660,045
|
|
|
Mark A. Floyd
|
|
|
40,000
|
|
|
|
345,439
|
(4)
|
|
|
385,439
|
|
|
Michael R. Kourey
|
|
|
50,000
|
|
|
|
345,439
|
(5)
|
|
|
395,439
|
|
|
Mark S. Lewis (6)
|
|
|
23,139
|
|
|
|
636,906
|
(7)
|
|
|
660,045
|
|
|
Stanley J. Meresman
|
|
|
45,000
|
|
|
|
394,787
|
(8)
|
|
|
439,787
|
|
|
Christopher J. Schaepe
|
|
|
40,000
|
|
|
|
246,742
|
(9)
|
|
|
286,742
|
|
|
James R. Swartz
|
|
|
40,000
|
|
|
|
246,742
|
(10)
|
|
|
286,742
|
|
|
(1)
|
The amounts in this column represent the aggregate grant date fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
Topic 718, Stock Compensation (formerly, FASB Statement No. 123R). See Note 12 of the notes to our consolidated financial statements contained in our Annual Report on Form 10-K filed on February 8, 2011 for a discussion of all assumptions
made by the Company in determining the grant date fair value of its equity awards.
|
|
(2)
|
Mr. Boustridge was appointed to the Board of Directors effective February 2, 2010.
|
|
(3)
|
On February 2, 2010, Mr. Boustridge was granted an option to purchase 120,000 shares of our common stock (as adjusted to reflect the Company’s two-for-one stock
split effected on November 8, 2010). As of December 31, 2010, Mr. Boustridge held outstanding options to purchase an aggregate of 120,000 shares of our common stock.
|
|
(4)
|
On May 25, 2010, Mr. Floyd was granted an option to purchase 56,000 shares of our common stock (as adjusted to reflect the Company’s two-for-one stock split
effected on November 8, 2010). As of December 31, 2010, Mr. Floyd held outstanding options to purchase an aggregate of 260,168 shares of our common stock.
|
|
(5)
|
On May 25, 2010, Mr. Kourey was granted an option to purchase 56,000 shares of our common stock (as adjusted to reflect the Company’s two-for-one stock split
effected on November 8, 2010). As of December 31, 2010, Mr. Kourey held outstanding options to purchase an aggregate of 242,000 shares of our common stock.
|
|
(6)
|
Mr. Lewis was appointed to the Board of Directors effective February 2, 2010.
|
|
(7)
|
On February 2, 2010, Mr. Lewis was granted an option to purchase 120,000 shares of our common stock (as adjusted to reflect the Company’s two-for-one stock split
effected on November 8, 2010). As of December 31, 2010, Mr. Lewis held outstanding options to purchase an aggregate of 120,000 shares of our common stock.
|
|
(8)
|
On May 25, 2010, Mr. Meresman was granted an option to purchase 64,000 shares of our common stock (as adjusted to reflect the Company’s two-for-one stock split
effected on November 8, 2010). As of December 31, 2010, Mr. Meresman held outstanding options to purchase an aggregate of 236,022 shares of our common stock.
|
|
(9)
|
On May 25, 2010, Mr. Schaepe was granted an option to purchase 40,000 shares of our common stock (as adjusted to reflect the Company’s two-for-one stock split
effected on November 8, 2010). As of December 31, 2010, Mr. Schaepe held outstanding options to purchase an aggregate of 160,000 shares of our common stock.
|
|
(10)
|
On May 25, 2010, Mr. Swartz was granted an option to purchase 40,000 shares of our common stock (as adjusted to reflect the Company’s two-for-one stock split
effected on November 8, 2010). As of December 31, 2010, Mr. Swartz held outstanding options to purchase an aggregate of 160,000 shares of our common stock.
|
21
Attendance at Annual Stockholders Meetings by the Board of Directors
The Company does not have a formal policy regarding attendance by members of the Board of Directors at the Company’s annual meeting of
stockholders. The Company encourages, but does not require, directors to attend. All of our directors that served in 2010 attended the Company’s 2010 Annual Meeting of Stockholders telephonically or in person.
Contacting the Board of Directors
Stockholders may communicate with our Board of Directors at the following address:
The Board of
Directors
c/o General Counsel
Riverbed Technology, Inc.
199 Fremont Street
San Francisco, CA 94105
Communications are received by the General Counsel of the Company, who then distributes any such communication to the Board of Directors or to any
individual director, as appropriate, depending on the facts and circumstances outlined in the communication. Communications that are unduly hostile, threatening, illegal or similarly unsuitable will be excluded with the provision that any
communication that is filtered out will be made available to any director upon request.
22
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Board of Directors has selected Ernst & Young LLP,
independent registered public accounting firm, as our independent auditors for the fiscal year ending December 31, 2011 and has further directed that management submit the appointment of independent auditors for ratification by our stockholders
at the Annual Meeting. Ernst & Young LLP has audited our financial statements since our 2004 fiscal year. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting. They will have an opportunity to make
a statement if they so desire and will be available to respond to appropriate questions.
Neither our Bylaws nor other governing
documents or law require stockholder ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm. However, the Board of Directors is submitting the appointment of Ernst & Young LLP to
our stockholders for ratification as a matter of good corporate practice. If our stockholders fail to ratify the appointment, the Board of Directors will reconsider whether or not to retain that firm. Even if the appointment is ratified, the Board
of Directors in its discretion may direct the appointment of different independent auditors at any time during the year if it determines that such a change would be in the best interests of the Company and its stockholders.
The affirmative vote of a majority of the votes cast on this proposal will be required to ratify the appointment of Ernst & Young LLP.
Abstentions will be counted toward the tabulation of votes cast on this proposal and will have the same effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this matter
has been approved.
Independent Registered Public Accounting Firm’s Fees
The following table sets forth the aggregate fees for audit and other services provided by Ernst & Young LLP for the fiscal years ended
December 31, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
2010
|
|
|
2009
|
|
|
Audit fees (1)
|
|
$
|
1,932
|
|
|
$
|
1,818
|
|
|
Audit-related fees (2)
|
|
|
72
|
|
|
|
—
|
|
|
Tax fees (3)
|
|
|
285
|
|
|
|
202
|
|
|
All other fees
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fees
|
|
$
|
2,289
|
|
|
$
|
2,020
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Audit Fees consist of fees incurred for professional services rendered by Ernst & Young LLP for (i) the audit of our annual consolidated financial statements,
(ii) the audit of the effectiveness of our internal control over financial reporting, (iii) the review of the quarterly consolidated financial statements and (iv) other services in connection with regulatory filings or engagements.
|
|
(2)
|
Audit-related fees consist of fees for professional services rendered by Ernst & Young LLP in connection with assurance and related services that are reasonably related
to the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.”
|
|
(3)
|
Tax fees consist of fees for professional services rendered by Ernst & Young LLP for tax compliance, tax advice and tax planning.
|
23
Pre-Approval Policies and Procedures
All audit, audit-related and tax services were pre-approved by the Audit Committee. The Audit Committee’s policy is to pre-approve all audit
and permissible non-audit services rendered by Ernst & Young LLP, our independent registered public accounting firm. The Audit Committee can pre-approve specified services in defined categories of audit services, audit-related services and
tax services up to specified amounts, as part of the Audit Committee’s approval of the scope of the engagement of Ernst & Young LLP or on an individual case-by-case basis before Ernst & Young LLP is engaged to provide a
service. The Audit Committee has determined that the rendering of the services other than audit services by Ernst & Young LLP is compatible with maintaining the principal accountant’s independence.
The Board of Directors Recommends a Vote “FOR” the Ratification of the Appointment of
Ernst & Young LLP as Riverbed’s Independent Registered Public Accounting Firm For Its
Fiscal Year Ending December 31, 2011.
24
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors currently consists of the three non-employee directors named below. The Board of Directors annually
reviews the Nasdaq listing standards’ definition of independence for audit committee members and has determined that each member of the Audit Committee meets that standard. The Board of Directors has also determined that each member of the
Audit Committee is an audit committee financial expert as described in applicable rules and regulations of the SEC.
The principal
purpose of the Audit Committee is to assist the Board of Directors in its general oversight of the Company’s accounting practices, system of internal controls, audit processes and financial reporting processes. The Audit Committee is
responsible for appointing and retaining our independent auditor and approving the audit and non-audit services to be provided by the independent auditor. The Audit Committee’s function is more fully described in its Charter, which the Board of
Directors has adopted and which the Audit Committee reviews on an annual basis.
The Company’s management is responsible for
preparing our financial statements and ensuring they are complete and accurate and prepared in accordance with generally accepted accounting principles. Ernst & Young LLP, our independent registered public accounting firm, is responsible
for performing an independent audit of our consolidated financial statements and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles.
The Audit Committee reviewed and discussed with our management the audited financial statements of the Company included in our Annual Report on
Form 10-K for the fiscal year ended December 31, 2010 (“10-K”).
The Audit Committee also reviewed and discussed with
Ernst & Young LLP the audited financial statements in the 10-K. In addition, the Audit Committee discussed with Ernst & Young LLP those matters required to be discussed by the Statement on Auditing Standards No. 61, as
amended. Additionally, Ernst & Young LLP provided to the Audit Committee the written disclosures and the letter required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s
communications with the Audit Committee concerning independence. The Audit Committee also discussed with Ernst & Young LLP its independence from the Company.
Based upon the review and discussions described above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s 10-K for filing with the
United States Securities and Exchange Commission.
Submitted by the members of the Audit Committee, as such committee was constituted in
the Company’s 2010 fiscal year:
|
|
|
Mark A. Floyd
|
|
Michael R. Kourey
|
|
Stanley J. Meresman, Chairman
|
25
PROPOSAL 3
ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Company, in accordance with the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the “Dodd-Frank Act”, is providing its stockholders with the opportunity to cast
an advisory vote on executive compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies, practices and objectives described
in this Proxy Statement. The advisory vote on executive compensation described in this Proposal 3 is referred to as a “say-on-pay vote.”
Riverbed believes that the skill, talent, judgment and dedication of its executive officers are critical factors affecting the long-term value of our company. Therefore, the goal for our executive compensation
program is to fairly compensate our executives, attract and retain qualified executives who are able to contribute to our long-term success, induce performance consistent with clearly defined corporate goals, and align our executives’ long-term
interests with those of our stockholders. The Company believes that its executive compensation program, which emphasizes long-term equity awards, satisfies this goal and is strongly aligned with the long-term interests of our stockholders.
The Compensation Discussion and Analysis in this Proxy Statement describes the Company’s executive compensation program and the
decisions made by the Compensation Committee in 2010 in more detail. The Company annually reviews its executive compensation practices and programs, utilizing peer and survey group data. Highlights of the program include the following:
|
|
•
|
|
Compensation decisions are based upon an assessment of individual performance and potential to enhance long-term stockholder value.
|
|
|
•
|
|
Under the Company’s Long-Term Incentive Plan, the named executive officers receive long-term equity awards in the form of RSUs and the majority of these
shares are at-risk and earned only upon the achievement of specified annual performance goals, with subsequent vesting of any earned shares not occurring until two years after achievement of those goals, for a total of three years. These RSUs
constitute the majority of each officer’s total compensation opportunity. The Company believes these awards ensure that a significant portion of the officers’ compensation is tied to long-term stock price performance, and these awards
provide significant retention value for the Company if the performance goals are met.
|
|
|
•
|
|
The Company’s Management Bonus Plan, under which our executives may earn quarterly cash incentive amounts, is directly tied to the achievement of revenue
targets, the consistency of achievement of revenue targets, and the achievement of pre-tax operating profit targets. These performance metrics were chosen because they most closely correlate with superior operational performance and ensure alignment
with our stockholders’ interests regarding the importance of achieving budgeted profitability.
|
|
|
•
|
|
Each of the named executive officers is employed at-will and is expected to demonstrate exceptional personal performance in order to continue serving as a member
of the executive team.
|
The Company believes the compensation program for the named executive officers is instrumental
in helping the Company achieve its strong financial performance. In 2010:
|
|
•
|
|
The Company’s revenue grew to $552 million, representing an increase of 40% over the prior year.
|
|
|
•
|
|
Net income grew to $34 million, an increase of $27 million over the prior year.
|
|
|
•
|
|
The Company’s strong earnings and operational excellence helped drive a year end cash and investments balance of $501 million, an increase of $175 million
over the prior year end.
|
26
The Company requests stockholder approval of the compensation of the Company’s named
executive officers as disclosed in this Proxy Statement (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative disclosures that accompany the compensation tables).
As an advisory vote, this say-on-pay proposal is not binding upon the Company, our Board of Directors or the Compensation Committee. However, the
Company, our Board of Directors and the Compensation Committee, which is responsible for overseeing, reviewing and administering the Company’s executive compensation programs, value the opinions expressed by our stockholders in their vote on
this proposal and will consider the outcome of the vote when making future compensation decisions for named executive officers.
The
Board of Directors Recommends a Vote “FOR” Proposal 3.
27
PROPOSAL 4
ADVISORY VOTE ON THE FREQUENCY OF THE ADVISORY VOTE ON EXECUTIVE COMPENSATION
As described in Proposal 3 above, the Company’s stockholders are being provided the opportunity to cast an advisory vote on the Company’s
executive compensation program, or a “say-on-pay vote.”
This Proposal 4, in accordance with the Dodd-Frank Act, affords
stockholders the opportunity to cast an advisory vote on how often the Company should include a say-on-pay vote in its proxy materials for future annual stockholder meetings (or special stockholder meetings for which the Company must include
executive compensation information in the proxy statement for that meeting). Under this Proposal 4, stockholders may indicate whether they would prefer an advisory vote on executive compensation every year, every two years or every three years.
After careful consideration of this Proposal, our Board of Directors has determined that an advisory vote on executive compensation
every three years is the most appropriate alternative for the Company, and therefore our Board of Directors recommends that you vote for a three-year interval for the advisory vote on executive compensation.
Our executive compensation programs are designed to promote long-term success and are regularly reviewed to ensure that our programs are optimally
structured to retain our highly experienced executive management team, encourage achievement of corporate objectives and to align our executives’ interests in maximizing long-term stockholder value. In particular, our Long-Term Incentive Plan,
which comprises the majority of each officer’s total compensation opportunity, requires three years of service from an executive before any performance-based shares earned under that plan may be sold.
Because a substantial portion of our officers’ compensation is tied to long-term stock price performance, which itself is influenced by the
Company’s overall long-term performance, the Company believes that the effectiveness of its executive compensation programs can most reliably be judged only by reference to the long-term results effected by the efforts of our executives.
Judging the effectiveness of a long-term compensation program based on one or two years of results would potentially undermine the long-term focus that is central to the Company’s compensation philosophy.
For these reasons, the Company believes that a say-on-pay vote every three years will allow stockholders to best judge our executive
compensation programs in relation to our long-term performance and strikes an appropriate balance between stockholder input and the ability of our Compensation Committee to thoughtfully consider the results of say-on-pay votes and implement
appropriate changes.
As an advisory vote, this proposal is not binding upon the Company, our Board of Directors or the Compensation
Committee. The Board of Directors may determine that it is in the best interests of our stockholders and the Company to hold an advisory vote on executive compensation more or less frequently than the option approved by our stockholders. However,
the Company, our Board of Directors and the Compensation Committee, which is responsible for overseeing, reviewing and administering the Company’s executive compensation programs, value the opinions expressed by our stockholders in their vote
on this proposal and will consider the outcome of the vote when making future decisions regarding the frequency of holding an advisory vote on executive compensation.
The Board of Directors Recommends a Vote of “3 YEARS” on Proposal 4.
28
EXECUTIVE OFFICERS
The names of the executive officers of Riverbed who are not also directors of Riverbed and certain information about each of them as of
March 16, 2011 are set forth below:
Randy S. Gottfried
, age 45, has served as our Chief Financial Officer since joining us
in February 2004 and as our Executive Vice President of Business Services since January 2011. He served as our Senior Vice President of Business Services from May 2006 to January 2011. From November 2003 to February 2004, Mr. Gottfried served
as Chief Financial Officer of Voltage Security, a security software company. From June 1997 to March 2001 and from July 2002 to March 2003, Mr. Gottfried held various senior finance roles, including Senior Vice President and Chief Financial
Officer, with Inktomi Corporation. Mr. Gottfried holds a Masters degree in Business Management from Northwestern University’s Kellogg Graduate School of Management and an undergraduate business degree from the University of Michigan in Ann
Arbor. He became a Certified Public Accountant in 1989.
Eric S. Wolford
, age 44, has served as our Executive Vice President of
Marketing and Business Development since January 2011. He served as our Senior Vice President of Marketing and Business Development from March 2005 to January 2011. He served as our Vice President of Marketing and Business Development from May 2003
to March 2005. From June 2001 to May 2003, Mr. Wolford was the Senior Vice President of Marketing and Business Development for netVmg, a network management company. From August 1999 to June 2001, he served as Vice President of Product Marketing
and Management at Inktomi Corporation and FastForward Networks (which was acquired by Inktomi in October 2000), providers of content delivery management software. From 1988 to 1999, Mr. Wolford served in various sales, marketing and product
management roles at AT&T. Mr. Wolford holds a Bachelor’s degree in Pre-Medicine from Pepperdine University and an M.B.A. from the New York University Stern School of Business.
David M. Peranich
, age 49, has served as our Executive Vice President of Worldwide Sales since January 2011. He served as our Senior Vice
President of Worldwide Sales from July 2006 to January 2011. From June 2004 to November 2005, Mr. Peranich was the Chief Executive Officer and President of Centrata, a provider of IT service delivery management solutions. From May 2001 to June
2004, Mr. Peranich held a number of management positions at Siebel Systems, most recently as Vice President and General Manager of Worldwide Alliances. From November 2000 to February 2001, he served as Vice President of Worldwide Sales at
AdFlight Corporation. From January 1997 to October 2000, Mr. Peranich held a number of sales management positions at Remedy Corporation, most recently as Vice President of Americas Sales. Mr. Peranich holds a Bachelor’s degree in
Mechanical Engineering from Virginia Polytechnic Institute and State University and an M.S. in Systems Management from the University of Southern California.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information known to us regarding beneficial ownership of our common stock as of March 16, 2011 by:
|
|
•
|
|
each person known by us to be the beneficial owner of more than 5% of any class of our voting securities;
|
|
|
•
|
|
our named executive officers;
|
|
|
•
|
|
each of our directors; and
|
|
|
•
|
|
all executive officers and directors as a group.
|
29
The table below is based upon information supplied by officers, directors and principal stockholders
and Schedules 13G filed with the SEC.
Beneficial ownership is determined in accordance with the rules of the SEC, and generally
includes voting power and/or investment power with respect to the securities held. Shares of common stock subject to options currently exercisable or exercisable within 60 days of March 16, 2011 and restricted stock units that will become
vested within 60 days of March 16, 2011 are deemed outstanding and beneficially owned by the person holding such options or restricted stock units for purposes of computing the number of shares and percentage beneficially owned by such person,
but are not deemed outstanding for purposes of computing the percentage beneficially owned by any other person. Except as indicated in the footnotes to this table, and subject to applicable community property laws, to our knowledge the persons or
entities named have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Percentage beneficial ownership is based on 153,454,939 shares of common stock outstanding on March 16,
2011.
Unless otherwise indicated, the principal address of each of the stockholders below is c/o Riverbed Technology, Inc., 199 Fremont
Street, San Francisco, California 94105.
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial Ownership
|
|
|
Name and Address of Beneficial Owner
|
|
Number
|
|
|
Percent
|
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
BlackRock, Inc. (1)
40 East 52
nd
Street
New York, NY 10022
|
|
|
11,055,697
|
|
|
|
7.2
|
%
|
|
FMR LLC (2)
82 Devonshire Street
Boston, MA 02109
|
|
|
21,987,200
|
|
|
|
14.3
|
%
|
|
Wellington Management Company, LLP (3)
280 Congress Street
Boston,
MA 02210
|
|
|
9,242,315
|
|
|
|
6.0
|
%
|
|
|
|
|
|
Directors and Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
Jerry M. Kennelly (4)
|
|
|
6,766,270
|
|
|
|
4.3
|
%
|
|
Steven McCanne, Ph.D. (5)
|
|
|
6,678,399
|
|
|
|
4.3
|
%
|
|
Michael Boustridge (6)
|
|
|
37,500
|
|
|
|
*
|
|
|
Mark A. Floyd (7)
|
|
|
63,917
|
|
|
|
*
|
|
|
Michael R. Kourey (8)
|
|
|
142,511
|
|
|
|
*
|
|
|
Mark S. Lewis (9)
|
|
|
37,500
|
|
|
|
*
|
|
|
Stanley J. Meresman (10)
|
|
|
80,020
|
|
|
|
*
|
|
|
James R. Swartz (11)
|
|
|
1,032,604
|
|
|
|
*
|
|
|
Christopher J. Schaepe (12)
|
|
|
158,856
|
|
|
|
*
|
|
|
Randy S. Gottfried (13)
|
|
|
606,622
|
|
|
|
*
|
|
|
David M. Peranich (14)
|
|
|
220,875
|
|
|
|
*
|
|
|
Eric S. Wolford (15)
|
|
|
465,757
|
|
|
|
*
|
|
|
All current directors and executive officers as a group (12 persons) (16)
|
|
|
16,290,831
|
|
|
|
10.3
|
%
|
|
*
|
Less than 1% of the outstanding shares of common stock.
|
|
(1)
|
This information is based on a Schedule 13G filed with the SEC on February 8, 2011 by BlackRock, Inc. (“BlackRock”) indicating beneficial
ownership as of December 31, 2010. The
|
30
|
|
Schedule 13G contains additional details regarding beneficial ownership of these shares. The Company has no reason to believe that the information in BlackRock’s Schedule 13G was not
complete or accurate or that an amendment should have been filed thereto and was not.
|
|
(2)
|
This information is based on a Schedule 13G filed with the SEC on February 14, 2011 by FMR LLC (“FMR”) indicating beneficial ownership as of December 31,
2010. The Schedule 13G contains additional details regarding beneficial ownership of these shares. The Company has no reason to believe that the information in FMR’s Schedule 13G was not complete or accurate or that an amendment should have
been filed thereto and was not.
|
|
(3)
|
This information is based on a Schedule 13G filed with the SEC on January 10, 2011 by Wellington Management Company, LLP (“Wellington”) indicating beneficial
ownership as of December 31, 2010. The Schedule 13G contains additional details regarding beneficial ownership of these shares. The Company has no reason to believe that the information in Wellington’s Schedule 13G was not complete or
accurate or that an amendment should have been filed thereto and was not. Wellington filed a Schedule 13G with the SEC on April 11, 2011 indicating beneficial ownership of 1,713,352 shares of common stock as of March 31, 2011.
|
|
(4)
|
Represents 138,788 shares of common stock held by Mr. Kennelly, 4,552,483 shares of common stock held by Kennelly Partners, L.P., 2,049,999 shares of common stock issuable
upon exercise of options exercisable within 60 days of March 16, 2011, and 25,000 shares of common stock issuable upon vesting of restricted stock units within 60 days of March 16, 2011. Excludes 216,667 shares subject to options that are
not exercisable, and 1,211,916 shares subject to restricted stock units that are not vested, within 60 days of March 16, 2011.
|
|
(5)
|
Represents 5,148,400 shares of common stock held by Steven McCanne and Tamara R. White, Trustees of the McCanne Family Trust dated July 8, 2002 and successor Trustees
thereunder, 1,509,999 shares of common stock issuable upon exercise of options exercisable within 60 days of March 16, 2011, and 20,000 shares of common stock issuable upon vesting of restricted stock units within 60 days of March 16,
2011. Excludes 226,667 shares subject to options that are not exercisable, and 869,940 shares subject to restricted stock units that are not vested, within 60 days of March 16, 2011.
|
|
(6)
|
Represents 37,500 shares of common stock issuable upon exercise of options exercisable within 60 days of March 16, 2011. Excludes 82,500 shares subject to options that are
not exercisable within 60 days of March 16, 2011.
|
|
(7)
|
Represents 63,917 shares of common stock issuable upon exercise of options exercisable within 60 days of March 16, 2011. Excludes 96,251 shares subject to options that are
not exercisable within 60 days of March 16, 2011.
|
|
(8)
|
Represents 5,012 shares of common stock held by Michael R. Kourey and Michele M. Kourey as Co-Trustees of The Kourey Living Trust dated 1/3/97 and 137,499 shares of common stock
issuable upon exercise of options exercisable within 60 days of March 16, 2011. Excludes 94,501 shares subject to options that are not exercisable within 60 days of March 16, 2011.
|
|
(9)
|
Represents 37,500 shares of common stock issuable upon exercise of options exercisable within 60 days of March 16, 2011. Excludes 82,500 shares subject to options that are
not exercisable within 60 days of March 16, 2011.
|
|
(10)
|
Represents 2,000 shares of common stock held by Stanley J. Meresman and Sharon A. Meresman, Trustees of the Meresman Family Trust U/D/T dated 9/13/89, as amended, and 78,020
shares of common stock issuable upon exercise of options exercisable within 60 days of March 16, 2011. Excludes 108,002 shares subject to options that are not exercisable within 60 days of March 16, 2011.
|
|
(11)
|
Represents 940,106 shares of common stock held by Burn3 LLC and 92,498 shares of common stock issuable upon exercise of options exercisable within 60 days of
March 16, 2011. Mr. Swartz
|
31
|
|
is the manager of Burn3 LLC. Mr. Swartz disclaims beneficial ownership of the shares held by Burn3 LLC except to the extent of his pecuniary interest therein. Excludes 67,502 shares subject
to options that are not exercisable within 60 days of March 16, 2011.
|
|
(12)
|
Represents 66,358 shares of common stock held by Mr. Schaepe and 92,498 shares of common stock issuable upon exercise of options exercisable within 60 days of March 16,
2011. Excludes 67,502 shares subject to options that are not exercisable within 60 days of March 16, 2011.
|
|
(13)
|
Represents 31,622 shares of common stock held by Randy S. Gottfried, Trustee of the Randy S. Gottfried Trust dated January 7, 2005, 565,000 shares of common stock issuable
upon exercise of options exercisable within 60 days of March 16, 2011, and 10,000 shares of common stock issuable upon vesting of restricted stock units within 60 days of March 16, 2011. Excludes 95,000 shares subject to options that are
not exercisable, and 434,969 shares subject to restricted stock units that are not vested, within 60 days of March 16, 2011.
|
|
(14)
|
Represents 23,098 shares of common stock held by Mr. Peranich, 187,777 shares of common stock issuable upon exercise of options exercisable within 60 days of March 16,
2011, and 10,000 shares of common stock issuable upon vesting of restricted stock units within 60 days of March 16, 2011. Excludes 63,334 shares subject to options that are not exercisable, and 434,969 shares subject to restricted stock units
that are not vested, within 60 days of March 16, 2011.
|
|
(15)
|
Represents 13,331 shares of common stock held by Mr. Wolford, 439,926 shares of common stock issuable upon exercise of options exercisable within 60 days of March 16,
2011, and 12,500 shares of common stock issuable upon vesting of restricted stock units within 60 days of March 16, 2011. Excludes 150,000 shares subject to options that are not exercisable, and 439,969 shares subject to restricted stock units
that are not vested, within 60 days of March 16, 2011.
|
|
(16)
|
Includes 5,292,133 shares of common stock issuable upon exercise of options exercisable, and 77,500 shares of common stock issuable upon vesting of restricted stock units, within
60 days of March 16, 2011.
|
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the Board of Directors, our executive officers and persons who hold more than 10% of our outstanding common stock
are subject to the reporting requirements of Section 16(a) of the Exchange Act, which require them to file reports with respect to their ownership of our common stock and their transactions in our common stock. Based upon (i) the copies of
Section 16(a) reports that we received from such persons regarding their fiscal year 2010 transactions in our common stock and their common stock holdings and (ii) the written representations received from one or more of such persons that
no annual Form 5 reports were required to be filed by them for fiscal year 2010, we believe that all reporting requirements under Section 16(a) were met in a timely manner by the persons who were members of the Board of Directors, our executive
officers or greater than 10% stockholders during fiscal year 2010.
32
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Committee Report
The Compensation Committee of the Board of Directors was comprised in 2010 of four non-employee members of the Board of Directors. Each member was determined to be an “outside director” for purposes of
Section 162(m) of the Internal Revenue Code and a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act.
The Compensation Committee’s primary responsibility is to review the performance of Riverbed’s management in achieving corporate goals and objectives and to ensure that Riverbed management is compensated
effectively in a manner consistent with Riverbed’s strategy and competitive practices. Toward that end, the Compensation Committee oversees, reviews and administers all of Riverbed’s compensation, equity and employee benefit plans and
programs applicable to executive officers.
The Compensation Committee has reviewed and discussed the following section titled
“Compensation Discussion and Analysis” with our management. Based on its review and discussions, the committee members that served in 2010 recommended to the Board of Directors that the Compensation Discussion and Analysis be included in
this Proxy Statement.
Michael Boustridge
Mark A. Floyd
Christopher J. Schaepe
James R. Swartz, Chairman
Compensation Discussion and Analysis
This section explains the Company’s executive compensation program as it relates to the following “named executive officers” of the Company:
|
|
|
|
|
Jerry M. Kennelly
|
|
Chief Executive Officer
|
|
Steven McCanne, Ph.D.
|
|
Chief Technology Officer
|
|
Randy S. Gottfried
|
|
Chief Financial Officer, Executive Vice President of Business Services
|
|
Eric S. Wolford
|
|
Executive Vice President of Marketing and Business Development
|
|
David M. Peranich
|
|
Executive Vice President of Worldwide Sales
|
The tables
immediately following this section provide compensation information for the named executive officers.
Executive Summary; Compensation Philosophy
and Objectives
Riverbed believes that the skill, talent, judgment and dedication of its executive officers are critical factors
affecting the long-term value of our company. Therefore, the goal for our executive compensation program is to fairly compensate our executives, attract and retain qualified executives who are able to contribute to our long-term success, induce
performance consistent with clearly defined corporate goals, and align our executives’ long-term interests with those of our stockholders. The Company believes that its executive compensation program, which emphasizes long-term equity awards,
satisfies this goal and is strongly aligned with the long-term interests of its stockholders.
The Company believes the compensation
program for the named executive officers was instrumental in helping the Company achieve its strong financial performance in 2010.
In
2010, the Company’s revenue grew to $552 million, representing an increase of 40% over the prior year. Net income grew to $34 million in 2010, an increase of $27 million over the prior year.
33
The Company’s strong earnings and operational excellence helped drive a cash and investments balance at the end of 2010 of $501 million, an increase of $175 million over the prior year end.
Our executive compensation programs are designed to promote long-term success and are regularly reviewed to ensure that they are
optimally structured to retain our highly experienced executive management team, encourage achievement of corporate objectives, and align our executives’ interests in maximizing long-term stockholder value. In particular, our Long-Term
Incentive Plan, which comprises the majority of each officer’s total compensation opportunity, requires three years of service from an executive before any performance-based shares earned under that plan may be sold.
Our executive compensation programs are also regularly reviewed to ensure that they achieve the best possible balance between providing strong
retention and performance incentives to our executive officers, while accommodating a meaningful and continuing effort to minimize both the Company’s share burn rate and the dilutive effects of the Company’s equity awards on the
Company’s stockholders.
The specific goals that our current executive compensation program rewards are focused on revenue growth,
consistency of revenue growth, operating profits and the value of our stock. At this stage in our development, we believe that growth and revenue-oriented targets continue to be more appropriate to overweight versus targets focused on other
criteria.
Our goal is to provide overall compensation (assuming that targeted levels of performance are achieved) that is above the
median compensation at a peer group of technology companies selected for similarities in business model and other criteria, including whether we may compete with that company for employees generally. The elements of compensation included in the peer
group analysis generally are base salaries, short-term cash incentives, and long-term equity incentives in the form of Restricted Stock Units (“RSUs”), including RSUs tied to the achievement of specific performance goals.
Due to the intensely competitive market for highly qualified employees in our industry, our geographic location and our aggressive performance
goals, we believe that compensation below our targeted levels would, in the long run, jeopardize our ability to retain our current executive officers and recruit new executive officers.
The Compensation Committee believes that our compensation philosophy and programs are designed to foster a performance-oriented culture that aligns
our executive officers’ long-term interests with those of our stockholders. The Compensation Committee also believes that the compensation of our executives is both appropriate and responsive to the goal of improving stockholder value.
Executive Compensation Decision-Making Process
Discretion and Judgment of the Compensation Committee.
The Compensation Committee determines all compensation for the named executive officers. Each year, the Compensation Committee
reviews historical and prospective breakdowns of the total compensation components for each executive officer. The Compensation Committee’s decisions on compensation for our executive officers are based primarily upon its assessment of each
individual’s performance and potential to enhance long-term stockholder value. The Compensation Committee relies upon judgment and not upon rigid guidelines or formulas in determining the amount and mix of compensation elements for each
executive officer. Factors affecting the Compensation Committee’s judgment include performance compared to strategic goals established for the individual and the Company at the beginning of the year, the nature and scope of the executive’s
responsibilities, and effectiveness in leading the Company’s initiatives to achieve corporate goals.
Determining Compensation
for the Chief Executive Officer and Other Named Executive Officers.
The performance of our executive officers is reviewed once per year. Base salaries and performance-based cash incentive compensation for our executive
officers other than Mr. Peranich are
34
typically evaluated and any changes implemented on or around May 1 each year. Mr. Peranich’s salary and performance-based cash incentive compensation is reviewed on a calendar-year
basis due to a large portion of his compensation being based on our achieving our annual sales goals during the year.
Long-term equity
awards for our executive officers, in the form of RSUs under the Company’s Long-Term Incentive Plan, are typically reviewed and determined either in December for the following calendar year, or in January for that calendar year.
Mr. Kennelly, as the manager of the members of the executive team, assesses the other named executive officers’ individual contributions
to their respective departmental goals as well as achievement of their individual goals and makes a recommendation to the Compensation Committee with respect to any merit increase in base salary and target cash bonus for each member of the executive
team, other than himself. In addition, Mr. Kennelly makes a recommendation to the Compensation Committee with respect to annual RSU grants under our Long-Term Incentive Plan for each member of the executive team, other than himself. The
Compensation Committee evaluates, discusses and modifies or approves these recommendations and conducts a similar independent evaluation of Mr. Kennelly’s contributions to corporate goals and achievement of individual goals.
Mr. Kennelly does not participate in the Compensation Committee’s deliberations or decisions with respect to his compensation.
The Role of the Compensation Consultant.
The Compensation Committee has the authority under its charter to engage the
services of outside advisors, experts and others to assist it. In accordance with this authority, the Compensation Committee has selected and directly retains the services of Radford, an independent compensation consultant, which advises the
Compensation Committee on matters related to the compensation of the Company’s executive officers. The Compensation Committee periodically consults with Radford regarding compensation trends, appropriate peer companies and market survey data.
In 2010, the Compensation Committee consulted Radford in connection with reviewing the Company’s executive compensation programs to ensure that these programs are optimally structured to retain our highly experienced executive management team,
to keep management focused on attaining growth objectives even during an expected period of global economic volatility, and to motivate management to maximize long-term stockholder value. In addition, the Compensation Committee consulted with
Radford in connection with its implementation of the Long-Term Incentive Plan. The fees for Radford were paid by the Company.
The
Role of Peer Companies and Benchmarking.
The Compensation Committee reviews compensation practices at peer companies in order to better inform the Committee’s decision-making process regarding the determination of
appropriate and reasonably competitive compensation amounts. In 2010, the Compensation Committee used a peer group of companies to evaluate target executive officer compensation based on median competitive data. Our peer group was selected with the
assistance of Radford, and consisted of technology companies that may compete with the Company for talent or have similarities to the Company in business models, and that generally possessed revenue, revenue growth rate, market capitalization and
profitability characteristics that were comparable to that of Riverbed. The following is the list of peer companies for 2010:
|
|
|
|
|
3Com Corporation
|
|
CommVault Systems, Inc.
|
|
3PAR Inc.
|
|
Emulex Corporation
|
|
ADTRAN, Inc.
|
|
F5 Networks, Inc.
|
|
Akamai Technologies, Inc.
|
|
NETGEAR, Inc.
|
|
Aruba Networks, Inc.
|
|
NetScout Systems, Inc.
|
|
Avocent Corporation
|
|
Polycom, Inc.
|
|
Blue Coat Systems, Inc.
|
|
QLogic Corporation
|
|
Brocade Communications Systems, Inc.
|
|
Sonus Networks, Inc.
|
|
Ciena Corporation
|
|
Starent Networks, Corp.
|
|
Citrix Systems, Inc.
|
|
Synaptics Incorporated
|
35
The Compensation Committee reviews the peer group annually to take into account any changes in our
company, the peer group companies, our industry and other factors.
In connection with the peer company review, Radford also presented,
and the Compensation Committee evaluated, compensation data published in the Radford High Technology Executive Survey.
The Role of
Stockholder Say-on-Pay Votes.
The Company is providing its stockholders with the opportunity to cast an advisory vote on its 2010 executive compensation. See “Proposal 3” in this Proxy Statement. Although the
vote is non-binding, the Compensation Committee will consider the outcome of this vote, and any future stockholder vote regarding executive compensation, when making future compensation decisions for the Company’s named executive officers.
Principal Elements of the Executive Compensation Program and 2010 Compensation
Overview.
The Company’s executive compensation program consists of the following three components:
|
|
•
|
|
Performance-based cash bonuses
under the Management Bonus Plan; and
|
|
|
•
|
|
Long-term equity awards
in the form of RSUs, primarily performance-based, under the Long-Term Incentive Plan.
|
The Compensation Committee’s determination with regard to one component of compensation may not directly affect its determinations with regard
to the other components since each component is designed to achieve different goals. However, the Compensation Committee considers each executive officer’s total compensation mix as a whole.
Base Salaries.
Overview.
The salaries of our Chief Executive Officer and our other executive officers are established based on the
scope of their responsibilities, taking into account competitive market compensation based on compensation surveys and benchmarking salaries paid by the peer group of companies for similar positions.
2010 Base Salaries.
In December 2009, the Compensation Committee reviewed the base salary of Mr. Peranich. After
considering the recommendations of Radford and our Chief Executive Officer, and after considering both company and individual performance as well as market data regarding base salaries for comparable positions at the peer group of companies, the
Compensation Committee approved a 2010 base salary for Mr. Peranich of $300,000.
In May 2010, the Compensation Committee reviewed
the base salaries of our named executive officers, except Mr. Peranich. After considering the recommendations of Radford and our Chief Executive Officer (with regard to the salaries of named executive officers other than himself), and after
considering both company and individual performance as well as market data regarding base salaries for comparable positions at the peer group of companies, the Compensation Committee approved the following base salaries, effective as of May 1,
2010:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Base Salary as of
January 1, 2010
|
|
|
Base Salary,
Effective as of
May 1, 2010
|
|
|
Jerry M. Kennelly
|
|
$
|
440,000
|
|
|
$
|
475,000
|
|
|
Randy S. Gottfried
|
|
|
294,000
|
|
|
|
320,000
|
|
|
Steven McCanne, Ph.D.
|
|
|
282,000
|
|
|
|
300,000
|
|
|
Eric S. Wolford
|
|
|
333,333
|
|
|
|
350,000
|
|
36
Performance-based Cash Bonuses
.
Overview.
Cash incentives for our executive officers, which are paid under our Management Bonus Plan, are designed to
reward performance that furthers our key corporate goals. A target cash incentive amount is set for each executive officer after considering targets for comparable positions at the peer group of companies. These amounts are paid quarterly, based on
our performance against the predetermined goals. The Management Bonus Plan reserves for the Compensation Committee the authority to adjust incentive award amounts for the executive officers resulting from the application of the plan. To date, the
Compensation Committee has declined to do so.
Cash incentives represent a relatively small percentage of the executive officers’
total compensation opportunity because the Company’s executive compensation program emphasizes long-term stockholder value creation over short-term operating results.
2010 Performance-based Cash Bonuses.
In December 2009, the Compensation Committee reviewed the quarterly target bonus amount of Mr. Peranich. After considering the recommendations
of Radford and our Chief Executive Officer, and after considering both company and individual performance as well as market data regarding cash bonuses for comparable positions at the peer group of companies, the Compensation Committee approved a
2010 quarterly target bonus amount for Mr. Peranich of $75,000.
In May 2010, the Compensation Committee reviewed the quarterly
target bonus amounts of our named executive officers, except Mr. Peranich. After considering the recommendations of Radford and our Chief Executive Officer (with regard to the target bonus amounts of named executive officers other than
himself), and after considering both company and individual performance as well as market data regarding cash bonuses for comparable positions at the peer group of companies, the Compensation Committee approved the following quarterly target bonus
amounts, effective beginning with the Company’s second fiscal quarter in 2010:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Quarterly Target
Bonus as of
January 1, 2010
|
|
|
Quarterly
Target Bonus,
Effective as of
Q2 2010
|
|
|
Jerry M. Kennelly
|
|
$
|
110,000
|
|
|
$
|
148,438
|
|
|
Randy S. Gottfried
|
|
|
36,750
|
|
|
|
40,000
|
|
|
Steven McCanne, Ph.D.
|
|
|
35,250
|
|
|
|
37,500
|
|
|
Eric S. Wolford
|
|
|
41,667
|
|
|
|
52,500
|
|
Performance
Criteria.
Under the Management Bonus Plan, the performance metrics against which our executive officers were measured in 2010 were achievement of quarterly revenue targets; consistency of achievement of quarterly revenue
targets; and achievement of quarterly pre-tax operating profit targets. The revenue and operating profit targets were based on objectives set forth in the Company’s Board-approved internal business plan. The quarterly incentive awards earned by
our executive officers were determined on the basis of our achievement of these objectives.
These performance metrics were selected
because the Compensation Committee believes that growth and revenue-oriented targets continue to be a key measure of superior operational performance at this stage of our development. In addition, an operating profit component better aligns the
sharing of profit risks with our stockholders and reinforces the importance of achieving budgeted profitability at a time when the economic environment makes revenue generation more difficult.
37
Payout Structure.
Our Management Bonus Plan operated as
follows for our named executive officers during 2010:
Revenue Achievement.
At achievement of 100% of a
particular quarterly revenue target, our executive officers’ potential quarterly target bonus amount would receive a bonus “multiplier” of 1. For each percent of quarterly revenue achievement that exceeded the target, the bonus
multiplier would increase by 3%. For each percent of quarterly revenue achievement below the target, the bonus multiplier would decrease by 4%.
These awards have a floor set at 85% of achievement of a particular quarterly revenue target, at which point our executive officers would receive 40% of their quarterly target bonus amount before application of the
operating profit component described below. At less than 85% of achievement of a particular quarterly revenue target, our named executive officers would not receive a quarterly bonus.
Consistency of Revenue Achievement.
If the performance for a quarter was at or above 100% of the quarterly revenue
target and the preceding quarter(s) were also at or above 100% of the quarterly revenue target(s), then a consistency award factor would be administered as follows:
|
|
|
|
|
|
|
Sequential Quarters at or above
Target Quarterly Revenue
|
|
Consistency Award
Factor added to
Bonus
Multiplier
|
|
|
1 Sequential Quarter (2nd Quarter at or above target)
|
|
|
10
|
%
|
|
|
|
|
2 Sequential Quarters (3rd Quarter at or above target)
|
|
|
15
|
%
|
|
|
|
|
3 Sequential Quarters (4th Quarter at or above target)
|
|
|
20
|
%
|
|
|
|
|
4 or more Sequential Quarters (5th Quarter or more at or above target)
|
|
|
25
|
%
|
The consistency award factor would be added to
the quarterly bonus multiplier so that, for example, if the Company achieved 102% of the quarterly revenue target and this was the third consecutive quarter at or above target, then the bonus multiplier would be 121% (100% for achievement of the
quarterly revenue target; plus 6% for the 2% overachievement; plus an additional 15% for it being the third consecutive quarter at or above target). If a quarter does not meet the quarterly revenue target, then no consistency award factor is added.
Operating Profit Achievement.
The bonus amount determined by the revenue achievement and revenue
consistency components of the Management Bonus Plan was then multiplied by an operating profit factor. The operating profit factor was 1.0 in the event that the absolute dollars of pre-tax operating profit for a quarter were equal to or greater than
the amount of pre-tax operating profit set forth in the Company’s Board-approved internal business plan for that quarter; and the operating profit factor was 0.8 in the event that the absolute dollars of pre-tax operating profit for a quarter
were less than the amount of pre-tax operating profit set forth in the Company’s Board-approved internal business plan for that quarter. Thus, the operating profit component helped to ensure that revenue growth was not favored at the expense of
achieving profitability goals.
Long-Term Equity Awards
.
Overview.
The Compensation Committee believes that long-term equity awards, primarily in the form of at-risk,
performance-based RSUs, are the best way to align our executive officers’ long-term interests with those of stockholders. The weighting by the Compensation Committee towards the use of performance-based RSUs ensures that our executive officers
are properly focused on the attainment of key corporate goals. Consequently, the Company’s executive compensation program is weighted substantially toward the use of long-term equity awards, in particular performance-based awards.
RSUs.
Because RSUs retain value even in difficult economic environments, the Compensation Committee believes that the
use of RSUs helps to ensure the continued retention of our executive
38
officers over a long period of time. In addition, because the grant date fair value of RSUs is generally higher than an equivalent stock option grant, the Compensation Committee believes that it
is appropriate to grant fewer RSUs than it would grant stock options. As a result, the use of RSUs causes less dilution to our stockholders than making stock option grants that are generally for larger numbers of shares.
Long-Term Incentive Plan.
As part of the Compensation Committee’s focus on retaining our highly experienced
executive management team, keeping management focused on attaining key corporate objectives, and motivating management to maximize long-term stockholder value, in 2009 the Compensation Committee, after extensive consultation with Radford, adopted
the Riverbed Technology, Inc. Long-Term Incentive Plan (“LTIP”), which provides participants with the potential to earn long-term incentive compensation based on our performance. Each of our named executive officers is a participant under
the LTIP.
The Compensation Committee Has Discretion to Determine Appropriate Performance Metrics.
Under
the LTIP each year, the Compensation Committee establishes the performance metrics and performance period, giving participants the opportunity to earn RSUs based on the Company’s performance. The performance metrics and performance periods
established by the Compensation Committee may vary from year to year.
Performance-based RSUs, Which are Subject to Complete
Forfeiture, Comprise a Majority of the Total RSU Grant.
The Compensation Committee believes that achievement of key corporate goals should directly and materially impact the total compensation opportunity for our executive
officers. As a result, while some portion of the RSU grant made under the LTIP vests based on continued service alone, the majority of the total RSU grant under the LTIP is tied to the Company’s performance against the performance metrics
determined by the Compensation Committee. In the event the Company underperforms versus those metrics, the performance-based RSU grants may be subject to complete forfeiture.
Even After Performance-Based Shares are Earned, Vesting Does Not Occur for Two Additional Years.
The Compensation Committee believes that, even after strong company performance has
resulted in the earning of performance-based RSUs by our executive officers, a long-term view of performance requires that the executive officer continue to contribute to the creation of long-term stockholder value before any performance-based RSUs
can vest and be sold. This also contributes to a strong alignment of interests in the Company’s long-term success between our executive officers and our stockholders, and ensures that the RSU grants demonstrate a significant retention
incentive.
2010 Equity Awards.
In January 2010, each executive officer received a performance-based RSU
grant (“Performance-Based Target Award”) and a time-based RSU grant (“Time-Based Award”) under the LTIP. Seventy-five percent of the total RSUs granted were performance-based, with the remaining 25% time-based.
For the 2010 LTIP awards, the Compensation Committee designated the Company’s 2010 annual revenue growth as the performance metric. This
metric was selected because the Compensation Committee believes that, at this stage of our development, revenue growth continues to be a key measure of superior operational performance.
The Performance-Based Target Awards were eligible to be earned in an amount ranging from 0% to 200% of the target amount based on our 2010 annual
revenue growth as determined by measurement to our 2009 revenue. The Performance-Based Target Awards were therefore subject to complete forfeiture in the event that we were unable to meet predetermined revenue growth targets. Subject to continuing
service requirements, the shares earned under the Performance-Based Target Awards will vest in full on December 31, 2012.
39
The Time-Based Award shares vest in three equal annual increments beginning on December 31,
2010, with completion of vesting on December 31, 2012. As a result, assuming that our executive officers had earned 100% of the target amount of the performance-based RSUs, only 8.33% of the total 2010 LTIP grant would vest in each of the first
and second years after the grant was made.
The Performance-Based Target Awards listed below are equivalent to the amounts that would
have been earned at 100% of the target amount:
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Performance-based
RSUs
|
|
|
Time-based RSUs
|
|
|
Jerry M. Kennelly
|
|
|
210,000
|
|
|
|
70,000
|
|
|
Randy S. Gottfried
|
|
|
75,000
|
|
|
|
25,000
|
|
|
Steven McCanne, Ph.D.
|
|
|
150,000
|
|
|
|
50,000
|
|
|
David M. Peranich
|
|
|
75,000
|
|
|
|
25,000
|
|
|
Eric S. Wolford
|
|
|
75,000
|
|
|
|
25,000
|
|
Based on our 2010 year-over-year revenue
growth of 40%, the actual performance-based RSU amounts earned were 200% of the target amount.
2011 Equity
Awards.
The Compensation Committee granted 2011 LTIP awards to our executive officers in December 2010. For the 2011 LTIP awards, the Compensation Committee reduced the on-target performance-based grant amounts to our
executive officers by 33%. Furthermore, the performance-based grants will be eligible to be earned in an amount ranging from 0% to 150% of the target amount, which, in tandem with the lower grant amounts, should contribute to a reduction in the
Company’s 2011 share burn rate versus prior years. In addition, the time-based RSU grants will vest only after three full years of service, as opposed to vesting in equal annual increments over a three-year period.
Consistent with the philosophy described above, the Compensation Committee believes that these changes offer the best possible balance between
providing strong retention and performance incentives to our executive officers, while accommodating a meaningful and continuing effort to minimize both the Company’s share burn rate and the dilutive effects of the Company’s equity awards
on the Company’s stockholders. The 2011 LTIP awards will not vest until December 31, 2013.
See the table entitled “2011
LTIP Awards” for information regarding the 2011 LTIP awards.
Stock Ownership Guidelines
We currently do not require our executive officers to own a particular amount of our stock. The Compensation Committee is satisfied that stock and
other equity holdings among our executive officers are sufficient at this time to provide appropriate motivation and to align this group’s long-term interests with those of our stockholders. However, we may in the future require our executive
officers to own a particular amount of our stock.
Hedging Prohibition
Our executive officers, as well as all other employees, are prohibited from engaging in hedging or similar transactions with respect to our securities where the transaction is designed or intended to decrease the
risks associated with holding our securities. This prohibition includes transactions involving puts, calls, collars or other derivative securities.
Perquisites
Our executive officers
participate in the same group insurance and employee benefit plans as our other full-time U.S. employees. We do not provide special benefits or other perquisites to our executive officers.
40
No Employment Agreements
We have not entered into employment agreements with our executive officers. Each executive officer is employed at will.
Post-Termination Protection
We issued offer letters to Messrs. Gottfried, Peranich and Wolford
when they were recruited for their current positions. Each offer letter provides for accelerated vesting of equity in the event that we are
both
subject to a change in control and the executive officer’s employment terminates thereafter
for specified reasons. These terms were negotiated at arms length at the time we recruited and hired each executive officer and we consider the change of control protection that was granted to these executive officers to be on market terms.
In addition, all equity grants made to our executive officers and non-executive employees under the Company’s 2006 Equity
Incentive Plan provide for 100% acceleration in the event that we are
both
subject to a change in control and the executive officer’s or non-executive employee’s employment terminates thereafter for specified reasons. This
protection is built into the 2006 Equity Incentive Plan and applies to all equity grants made thereunder, including awards made to non-executive employees. The LTIP also provides for 100% acceleration of grants made thereunder in the event that we
are
both
subject to a change in control and the LTIP participant’s employment terminates thereafter for specified reasons.
In May 2008, we entered into change in control severance agreements with Messrs. Gottfried and Kennelly. The Compensation Committee recognizes that
the possibility of an acquisition by another company or other change in control can be a distraction and can cause the consideration of alternative employment opportunities. The Compensation Committee believes that it is in the best interests of the
Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Messrs. Gottfried and Kennelly, notwithstanding the possibility, threat or occurrence of a change in control. The agreements provide that
in the event that we are
both
subject to a change in control and the employment of Mr. Gottfried or Mr. Kennelly terminates for specified reasons on or within 12 months after the change in control, then, subject to the signing of a
release of claims and to compliance with the terms of any confidential information agreement, (i) in the case of Mr. Gottfried, he would receive severance equal to 100% of his deemed effective annual base salary and 100% of his full target
bonus for the fiscal year in effect at the date of the termination of his employment relationship, as well as continuation of certain employee benefits; and (ii) in the case of Mr. Kennelly, he would receive severance equal to 200% of his
deemed effective annual base salary and 200% of his full target bonus for the fiscal year in effect at the date of the termination of his employment relationship, as well as continuation of certain employee benefits.
Financial Restatements
The Compensation
Committee has not adopted a policy with respect to whether we will make retroactive adjustments to any cash or equity-based incentive compensation paid to executive officers (or others) where the payment was predicated upon the achievement of
financial results that were subsequently the subject of a restatement. The Compensation Committee believes that this issue is best addressed when the need actually arises, when all of the facts regarding the restatement are known.
Tax and Accounting Treatment of Compensation
Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount of compensation that we may deduct in any one year with
respect to our Chief Executive Officer and certain other highly paid executive officers. There is an exception to the $1 million limitation for
41
“performance-based compensation” meeting certain requirements. Stock options and stock appreciation rights granted under our 2006 Equity Incentive Plan should generally qualify as
“performance-based compensation” and should therefore not be subject to the $1 million deduction limitation. Full-value awards (such as restricted stock units and restricted stock) with solely service-based vesting are not considered
performance-based under Section 162(m) of the Internal Revenue Code and, therefore, are not deductible to the extent that they, when aggregated with other non-performance-based compensation, result in executive compensation over $1 million.
However, our stockholders have approved the material terms of our 2006 Equity Incentive Plan to enable the full-value awards to qualify for the “performance-based compensation” exemption if vesting is based on stockholder-approved
performance metrics and certain other requirements are satisfied. To maintain flexibility in compensating executive officers in a manner designed to promote varying corporate goals, the Compensation Committee has not adopted a policy requiring all
compensation to be deductible.
We account for equity compensation paid to our employees under the rules of FASB ASC Topic 718, which
requires us to estimate the fair value of a stock award on the grant date and record the expense associated with each award over the service period.
Compensation of Named Executive Officers
As
discussed in “Compensation Discussion and Analysis”, the Compensation Committee granted 2011 LTIP awards to the named executive officers in December 2010. These awards are considered by the Compensation Committee to be the primary
component of the executive officers’ 2011 compensation opportunity, and not part of the executive officers’ 2010 compensation. LTIP awards are typically reviewed and determined by the Compensation Committee either in December for the
following calendar year, or in January for that calendar year.
In order to present the executive officers’ compensation in a
manner that both clarifies the compensation awarded to them for services rendered during 2010 and allows for the application of a consistent year-by-year comparison, the 2011 LTIP awards are excluded from the tables entitled “Summary
Compensation Table — 2010, 2009 and 2008” and “2010 Grants of Plan-Based Awards”, and the Company has instead presented information regarding the 2011 LTIP awards in the table entitled “2011 LTIP Awards”. The 2011 LTIP
awards are included in the table entitled “Outstanding Equity Awards at Fiscal Year End 2010”.
42
Summary Compensation Table — 2010, 2009 and 2008
The following table sets forth all of the compensation awarded to, earned by, or paid to our principal executive officer, principal financial
officer and the three other highest paid executive officers whose total compensation in fiscal year 2010 exceeded $100,000. We refer to these executive officers as our “named executive officers.”
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Stock
Awards
($) (1)
|
|
|
Option
Awards
($) (1)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
All Other
Compensation
($) (2)
|
|
|
Total
($)
|
|
|
Jerry M. Kennelly
|
|
|
2010
|
|
|
|
463,333
|
|
|
|
3,714,200
|
(3)
|
|
|
0
|
|
|
|
1,007,194
|
(4)
|
|
|
456
|
|
|
|
5,185,183
|
|
|
President, Chief
Executive Officer and Chairman of the Board
|
|
|
2009
2008
|
|
|
|
435,000
400,000
|
|
|
|
2,954,000
1,438,000
|
(3)
|
|
|
0
2,776,798
|
|
|
|
486,441
348,823
|
(4)
(4)
|
|
|
210
210
|
|
|
|
3,875,651
4,963,831
|
|
|
|
|
|
|
|
|
|
|
|
Randy S. Gottfried
|
|
|
2010
|
|
|
|
311,333
|
|
|
|
1,326,500
|
(5)
|
|
|
0
|
|
|
|
281,313
|
(6)
|
|
|
307
|
|
|
|
1,919,453
|
|
|
Chief Financial Officer and Executive Vice President of Business Services
|
|
|
2009
2008
|
|
|
|
287,667
266,667
|
|
|
|
1,055,000
575,200
|
(5)
|
|
|
0
1,217,520
|
|
|
|
160,364
112,082
|
(6)
(6)
|
|
|
210
181
|
|
|
|
1,503,241
2,171,650
|
|
|
|
|
|
|
|
|
|
|
|
Steven McCanne, Ph.D.
|
|
|
2010
|
|
|
|
294,000
|
|
|
|
2,653,000
|
(7)
|
|
|
0
|
|
|
|
264,841
|
(8)
|
|
|
288
|
|
|
|
3,212,129
|
|
|
Chief Technology Officer and Director
|
|
|
2009
|
|
|
|
279,667
|
|
|
|
2,110,000
|
(7)
|
|
|
0
|
|
|
|
155,516
|
(8)
|
|
|
210
|
|
|
|
2,545,393
|
|
|
|
|
2008
|
|
|
|
266,667
|
|
|
|
1,150,400
|
|
|
|
2,904,958
|
|
|
|
112,082
|
(8)
|
|
|
193
|
|
|
|
4,434,300
|
|
|
|
|
|
|
|
|
|
|
|
David M. Peranich
|
|
|
2010
|
|
|
|
300,000
|
|
|
|
1,326,500
|
(5)
|
|
|
0
|
|
|
|
535,951
|
(9)
|
|
|
312
|
|
|
|
2,162,763
|
|
|
Executive Vice President of Worldwide Sales
|
|
|
2009
|
|
|
|
300,000
|
|
|
|
1,055,000
|
(5)
|
|
|
0
|
|
|
|
306,914
|
(9)
|
|
|
210
|
|
|
|
1,662,124
|
|
|
|
|
2008
|
|
|
|
275,000
|
|
|
|
575,200
|
|
|
|
811,682
|
|
|
|
209,273
|
(9)
|
|
|
189
|
|
|
|
1,871,344
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Wolford
|
|
|
2010
|
|
|
|
344,444
|
|
|
|
1,326,500
|
(5)
|
|
|
0
|
|
|
|
360,075
|
(10)
|
|
|
336
|
|
|
|
2,031,355
|
|
|
Executive Vice President of Marketing and Business Development
|
|
|
2009
2008
|
|
|
|
328,889
301,667
|
|
|
|
1,055,000
719,000
|
(5)
|
|
|
0
1,922,400
|
|
|
|
183,954
131,621
|
(10)
(10)
|
|
|
210
202
|
|
|
|
1,568,053
3,074,890
|
|
|
(1)
|
The amounts in this column represent the aggregate grant date fair value in accordance with FASB Accounting Standards Codification ASC Topic 718, Stock Compensation (formerly,
FASB Statement 123R). See Note 12 of the notes to our consolidated financial statements contained in our 2010 Annual Report on Form 10-K filed on February 8, 2011, our 2009 Annual Report on Form 10-K filed on February 12, 2010, and our
2008 Annual Report on Form 10-K filed on February 23, 2009 for a discussion of all assumptions made by us in determining the fair values of equity awards for 2010, 2009 and 2008, respectively.
|
|
(2)
|
The amounts in this column represent the dollar amount paid for life insurance premiums on behalf of the named executive officers. In addition, the Company pays a portion of
health insurance and disability premiums for all employees, including the named executive officers. Such amounts are not included in this column.
|
|
(3)
|
For 2010, this amount includes $2,785,650, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the LTIP. The maximum
value that was eligible to be earned under the LTIP for 2010 was 200% of target with a grant date fair value of $5,571,300. The actual amount earned under the LTIP in 2010 was 200% of target with a grant date fair value of $5,571,300. For 2009, this
amount includes $2,215,500, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the LTIP. The maximum value that was eligible to be earned under the LTIP for 2009 was 200% of target with a
grant date fair value of $4,431,000. The actual amount earned under the LTIP in 2009 was 137.8% of target with a grant date fair value of $3,052,031.
|
|
(4)
|
For 2010, this number represents $695,074 that was earned and paid in fiscal year 2010, and $312,120 that was earned in fiscal year 2010 and paid in fiscal year 2011. For 2009,
this number represents $342,989 that was earned and paid in fiscal year 2009, and $143,452 that was earned in fiscal year 2009 and paid in fiscal year 2010. For 2008, this number represents $235,497 that was earned and paid in fiscal year 2008, and
$113,326 that was earned in fiscal year 2008 and paid in fiscal year 2009.
|
|
(5)
|
For 2010, this amount includes $994,875, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the LTIP.
The maximum value that was eligible to be earned under the LTIP for 2010 was 200% of target with a grant date fair value of $1,989,750. The
|
43
|
|
actual amount earned under the LTIP in 2010 was 200% of target with a grant date fair value of $1,989,750. For 2009, this amount includes $791,250, which reflects the grant date fair value of
performance-based restricted stock units at 100% of target under the LTIP. The maximum value that was eligible to be earned under the LTIP for 2009 was 200% of target with a grant date fair value of $1,582,500. The actual amount earned under the
LTIP in 2009 was 137.8% of target with a grant date fair value of $1,090,015.
|
|
(6)
|
For 2010, this number represents $197,205 that was earned and paid in fiscal year 2010, and $84,108 that was earned in fiscal year 2010 and paid in fiscal year 2011. For 2009,
this number represents $112,438 that was earned and paid in fiscal year 2009, and $47,926 that was earned in fiscal year 2009 and paid in fiscal year 2010. For 2008, this number represents $76,084 that was earned and paid in fiscal year 2008, and
$35,998 that was earned in fiscal year 2008 and paid in fiscal year 2009.
|
|
(7)
|
For 2010, this amount includes $1,989,750, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the LTIP. The maximum
value that was eligible to be earned under the LTIP for 2010 was 200% of target with a grant date fair value of $3,979,500. The actual amount earned under the LTIP in 2010 was 200% of target with a grant date fair value of $3,979,500. For 2009, this
amount includes $1,582,500, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the LTIP. The maximum value that was eligible to be earned under the LTIP for 2009 was 200% of target with a
grant date fair value of $3,165,000. The actual amount earned under the LTIP in 2009 was 137.8% of target with a grant date fair value of $2,180,020.
|
|
(8)
|
For 2010, this number represents $185,990 that was earned and paid in fiscal year 2010, and $78,851 that was earned in fiscal year 2010 and paid in fiscal year 2011. For 2009,
this number represents $109,546 that was earned and paid in fiscal year 2009, and $45,970 that was earned in fiscal year 2009 and paid in fiscal year 2010. For 2008, this number represents $76,084 that was earned and paid in fiscal year 2008, and
$35,998 that was earned in fiscal year 2008 and paid in fiscal year 2009.
|
|
(9)
|
For 2010, this number represents $378,248 that was earned and paid in fiscal year 2010, and $157,703 that was earned in fiscal year 2010 and paid in fiscal year 2011. For 2009,
this number represents $217,256 that was earned and paid in fiscal year 2009, and $89,658 that was earned in fiscal year 2009 and paid in fiscal year 2010. For 2008, this number represents $142,610 that was earned and paid in fiscal year 2008, and
$66,663 that was earned in fiscal year 2008 and paid in fiscal year 2009.
|
|
(10)
|
For 2010, this number represents $249,683 that was earned and paid in fiscal year 2010, and $110,392 that was earned in fiscal year 2010 and paid in fiscal year 2011. For 2009,
this number represents $129,616 that was earned and paid in fiscal year 2009, and $54,338 that was earned in fiscal year 2009 and paid in fiscal year 2010. For 2008, this number represents $88,957 that was earned and paid in fiscal year 2008, and
$42,664 that was earned in fiscal year 2008 and paid in fiscal year 2009.
|
Salary and non-equity incentive compensation in proportion
to total compensation
The amount of salary and non-equity incentive compensation earned in 2010 in proportion to the total
compensation reported for each of our named executive officers was:
|
|
•
|
|
Jerry M. Kennelly: 28.4%
|
|
|
•
|
|
Randy S. Gottfried: 30.9%
|
|
|
•
|
|
Steven McCanne, Ph.D.: 17.4%
|
|
|
•
|
|
David M. Peranich: 38.7%
|
44
2010 Grants of Plan-Based Awards
The following table sets forth each equity award granted to our named executive officers during fiscal year 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
|
Estimated
Future
Payouts
Under
Non-Equity
Incentive
Plan Awards (1)
|
|
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) (5)
|
|
|
Grant Date
Fair
Value
of
Stock
and Option
Awards
($) (6)
|
|
|
|
|
Threshold
($) (2)
|
|
|
Target
($) (3)
|
|
|
Threshold
(#)
|
|
|
Target
(#)
|
|
|
Maximum
(#) (4)
|
|
|
|
|
Jerry M. Kennelly
|
|
|
02/17/10
|
|
|
|
237,500
|
|
|
|
593,750
|
|
|
|
0
|
|
|
|
210,000
|
|
|
|
420,000
|
|
|
|
70,000
|
|
|
|
3,714,200
|
|
|
Randy S. Gottfried
|
|
|
02/17/10
|
|
|
|
64,000
|
|
|
|
160,000
|
|
|
|
0
|
|
|
|
75,000
|
|
|
|
150,000
|
|
|
|
25,000
|
|
|
|
1,326,500
|
|
|
Steven McCanne, Ph.D.
|
|
|
02/17/10
|
|
|
|
60,000
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
150,000
|
|
|
|
300,000
|
|
|
|
50,000
|
|
|
|
2,653,000
|
|
|
David M. Peranich
|
|
|
02/17/10
|
|
|
|
120,000
|
|
|
|
300,000
|
|
|
|
0
|
|
|
|
75,000
|
|
|
|
150,000
|
|
|
|
25,000
|
|
|
|
1,326,500
|
|
|
Eric S. Wolford
|
|
|
02/17/10
|
|
|
|
84,000
|
|
|
|
210,000
|
|
|
|
0
|
|
|
|
75,000
|
|
|
|
150,000
|
|
|
|
25,000
|
|
|
|
1,326,500
|
|
|
(1)
|
Represents target bonus amounts effective beginning with the Company’s second fiscal quarter in 2010.
|
|
(2)
|
This column sets forth the annual threshold amount payout based on 85% of plan for each executive’s non-equity incentive plan payment for 2010.
|
|
(3)
|
This column sets forth the annual target amount payout based on 100% of plan for each executive’s non-equity incentive plan payment for 2010.
|
|
(4)
|
Performance-based RSUs granted on February 17, 2010 represent 200% of the target amount earned under the 2010 LTIP. Such RSUs will vest with respect to 100% of the shares
subject to the RSUs on December 31, 2012.
|
|
(5)
|
Represents time-based RSUs granted on February 17, 2010 under the 2010 LTIP. Such RSUs vested with respect to one-third of the total units granted on December 31, 2010,
and will vest with respect to one-third on December 31, 2011 and one-third on December 31, 2012.
|
|
(6)
|
Represents the combined fair value of all stock awards as of the date they were granted, computed in accordance with FASB Accounting Standards Codification ASC Topic 718, Stock
Compensation (formerly, FASB Statement 123R).
|
45
Outstanding Equity Awards at Fiscal Year End 2010
The following table sets forth information regarding unexercised options and unvested RSUs held by each of our named executive officers as of
December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
|
|
|
Option
Exercise
Price ($)
|
|
|
Option
Expiration
Date
|
|
|
Number of
Shares or
Units of
Stock that
have not
Vested (#)
|
|
|
Market
Value of
Shares or
Units of
Stock that
have not
Vested
($) (1)
|
|
|
Equity
incentive plan
awards:
Number of
unearned
shares, units
or other
rights
that
have not
vested (#) (2)
|
|
|
Equity
incentive plan
awards:
Market or
payout value
of unearned
shares,
units
or other
rights that
have not
vested ($) (1)
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
|
|
|
|
|
|
Jerry M. Kennelly
|
|
|
800,000
|
(3)
|
|
|
—
|
|
|
|
3.00
|
|
|
|
04/30/16
|
|
|
|
75,000
|
(4)
|
|
|
2,637,750
|
|
|
|
140,000
|
|
|
|
4,923,800
|
|
|
|
|
559,721
|
(5)
|
|
|
306,945
|
(5)
|
|
|
7.19
|
|
|
|
04/30/15
|
|
|
|
46,666
|
(6)
|
|
|
1,641,243
|
|
|
|
|
|
|
|
|
|
|
|
|
537,500
|
(7)
|
|
|
62,500
|
(7)
|
|
|
15.96
|
|
|
|
04/29/14
|
|
|
|
578,584
|
(8)
|
|
|
20,348,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,666
|
(9)
|
|
|
1,641,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
420,000
|
(10)
|
|
|
14,771,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,000
|
(11)
|
|
|
2,461,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy S. Gottfried
|
|
|
80,000
|
(3)
|
|
|
—
|
|
|
|
3.00
|
|
|
|
04/30/16
|
|
|
|
30,000
|
(4)
|
|
|
1,055,100
|
|
|
|
50,000
|
|
|
|
1,758,500
|
|
|
|
|
245,416
|
(5)
|
|
|
134,584
|
(5)
|
|
|
7.19
|
|
|
|
04/30/15
|
|
|
|
16,666
|
(6)
|
|
|
586,143
|
|
|
|
|
|
|
|
|
|
|
|
|
215,000
|
(7)
|
|
|
25,000
|
(7)
|
|
|
15.96
|
|
|
|
04/29/14
|
|
|
|
206,638
|
(8)
|
|
|
7,267,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,666
|
(9)
|
|
|
586,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
(10)
|
|
|
5,275,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(11)
|
|
|
879,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven McCanne, Ph.D.
|
|
|
380,000
|
(3)
|
|
|
—
|
|
|
|
3.00
|
|
|
|
04/30/16
|
|
|
|
60,000
|
(4)
|
|
|
2,110,200
|
|
|
|
100,000
|
|
|
|
3,517,000
|
|
|
|
|
585,555
|
(5)
|
|
|
321,111
|
(5)
|
|
|
7.19
|
|
|
|
04/30/15
|
|
|
|
33,333
|
(6)
|
|
|
1,172,322
|
|
|
|
|
|
|
|
|
|
|
|
|
537,500
|
(7)
|
|
|
62,500
|
(7)
|
|
|
15.96
|
|
|
|
04/29/14
|
|
|
|
413,274
|
(8)
|
|
|
14,534,847
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,333
|
(9)
|
|
|
1,172,322
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
(10)
|
|
|
10,551,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(11)
|
|
|
1,758,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David M. Peranich
|
|
|
41,666
|
(12)
|
|
|
—
|
|
|
|
3.25
|
|
|
|
07/18/13
|
|
|
|
30,000
|
(4)
|
|
|
1,055,100
|
|
|
|
50,000
|
|
|
|
1,758,500
|
|
|
|
|
5,278
|
(5)
|
|
|
89,723
|
(5)
|
|
|
7.19
|
|
|
|
04/30/15
|
|
|
|
16,666
|
(6)
|
|
|
586,143
|
|
|
|
|
|
|
|
|
|
|
|
|
134,375
|
(7)
|
|
|
15,625
|
(7)
|
|
|
15.96
|
|
|
|
04/29/14
|
|
|
|
206,638
|
(8)
|
|
|
7,267,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,666
|
(9)
|
|
|
586,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
(10)
|
|
|
5,275,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(11)
|
|
|
879,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Wolford
|
|
|
30,000
|
(13)
|
|
|
—
|
|
|
|
3.00
|
|
|
|
04/30/16
|
|
|
|
37,500
|
(4)
|
|
|
1,318,875
|
|
|
|
50,000
|
|
|
|
1,758,500
|
|
|
|
|
107,426
|
(5)
|
|
|
212,500
|
(5)
|
|
|
7.19
|
|
|
|
04/30/15
|
|
|
|
16,666
|
(6)
|
|
|
586,143
|
|
|
|
|
|
|
|
|
|
|
|
|
322,500
|
(7)
|
|
|
37,500
|
(7)
|
|
|
15.96
|
|
|
|
04/29/14
|
|
|
|
206,638
|
(8)
|
|
|
7,267,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,666
|
(9)
|
|
|
586,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
(10)
|
|
|
5,275,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
(11)
|
|
|
879,250
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The market value of restricted stock units is based on $35.17 per share, which was the closing price of our common stock on December 31, 2010.
|
|
(2)
|
Represents performance-based awards granted under the 2011 LTIP. These shares are at-risk and may range from 0% to 150% of the target amount based on achievement of corporate
goals. Any shares earned will vest on December 31, 2013. Please see “2011 LTIP Awards”.
|
|
(3)
|
This option grant was originally subject to a four-year vesting schedule and became fully vested on May 1, 2010.
|
|
(4)
|
This award vests with respect to one-third of the shares on May 15, 2011, one-third on November 15, 2011 and one-third on May 15, 2012.
|
|
(5)
|
This option grant was originally subject to a four-year vesting schedule. The unvested options shown in the table become exercisable in equal monthly installments and become
fully vested on May 1, 2012.
|
46
|
(6)
|
This award vests on December 31, 2011.
|
|
(7)
|
This option grant was originally subject to a four-year vesting schedule. The unvested options shown in the table become exercisable in equal monthly installments and become
fully vested on May 1, 2011.
|
|
(8)
|
This award vests with respect to 100% of the shares on December 31, 2011.
|
|
(9)
|
This award vests with respect to 50% of the shares on December 31, 2011 and 50% of the shares on December 31, 2012.
|
|
(10)
|
This award vests with respect to 100% of the shares on December 31, 2012.
|
|
(11)
|
This award vests with respect to 100% of the shares on December 31, 2013.
|
|
(12)
|
This option grant was originally subject to a four-year vesting schedule and became fully vested on July 10, 2010.
|
|
(13)
|
This option grant was originally subject to a four-year vesting schedule and became fully vested on May 1, 2010.
|
2010 Option Exercises and Stock Vested
The following table reflects stock option exercises and restricted stock units that became vested for each of the named executive officers during fiscal year 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
Shares
Acquired on
Exercise (#)
|
|
|
Value
Realized
on
Exercise
($) (1)
|
|
|
Number of
Shares
Acquired on
Vesting (#)
|
|
|
Value
Realized
on Vesting
($) (2)
|
|
|
Jerry M. Kennelly
|
|
|
—
|
|
|
|
—
|
|
|
|
120,001
|
|
|
|
3,548,935
|
|
|
Randy S. Gottfried
|
|
|
20,000
|
|
|
|
626,906
|
|
|
|
45,001
|
|
|
|
1,314,085
|
|
|
Steven McCanne, Ph.D.
|
|
|
—
|
|
|
|
—
|
|
|
|
90,000
|
|
|
|
2,628,100
|
|
|
David M. Peranich
|
|
|
323,335
|
|
|
|
5,302,909
|
|
|
|
45,001
|
|
|
|
1,314,085
|
|
|
Eric S. Wolford
|
|
|
440,000
|
|
|
|
7,803,675
|
|
|
|
50,001
|
|
|
|
1,422,785
|
|
|
(1)
|
The value realized on exercise is calculated as follows: Number of shares acquired upon exercise times the difference between our closing price on the date of exercise and the
exercise price of the underlying stock option.
|
|
(2)
|
The value realized on vesting is calculated as follows: Number of shares acquired upon vesting times the closing price on the vesting date.
|
Equity Compensation Plan Information
The following table summarizes the number of outstanding options, warrants and rights granted to employees and directors, as well as the number of securities remaining available for future issuance, under our
equity compensation plans as of December 31, 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan category
|
|
Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and
rights
(#) (a)
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
($) (b)
|
|
|
Number of securities
remaining available for
future issuance
under
equity compensation plans
(excluding securities
reflected in column (a)
(#) (c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
29,647,228
|
(1)
|
|
|
9.7634
|
(2)
|
|
|
5,296,595
|
(3)
|
|
Equity compensation plans not approved by security holders
|
|
|
882,374
|
|
|
|
17.9322
|
|
|
|
1,913,246
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
30,529,602
|
|
|
|
|
|
|
|
7,209,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
|
(1)
|
Includes 9,878,518 shares that may be issued under performance-based share awards and restricted stock unit awards at December 31, 2010.
|
|
(2)
|
Excludes 9,878,518 shares that may be issued under performance-based share awards and restricted stock unit awards, as such awards are issuable for no consideration.
|
|
(3)
|
Includes 609,538 shares available for future issuance under our 2006 Employee Stock Purchase Plan.
|
2011 LTIP Awards
The following table sets forth each equity award
granted to our named executive officers for fiscal year 2011. These equity awards were granted on December 6, 2010 under the 2011 LTIP. As of December 31, 2010, all awards in the table below were unvested and no performance-based awards
have been earned under the 2011 LTIP.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant Date
|
|
|
Estimated Future Payouts
Under Equity Incentive
Plan
Awards
|
|
|
All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#) (2)
|
|
|
Grant Date
Fair
Value
of
Stock
and Option
Awards
($) (3)
|
|
|
|
|
Threshold(#)
|
|
|
Target (#)
|
|
|
Maximum
(#) (1)
|
|
|
|
|
Jerry M. Kennelly
|
|
|
12/06/10
|
|
|
|
0
|
|
|
|
140,000
|
|
|
|
210,000
|
|
|
|
70,000
|
|
|
|
7,469,700
|
|
|
Randy S. Gottfried
|
|
|
12/06/10
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
75,000
|
|
|
|
25,000
|
|
|
|
2,667,750
|
|
|
Steven McCanne, Ph.D.
|
|
|
12/06/10
|
|
|
|
0
|
|
|
|
100,000
|
|
|
|
150,000
|
|
|
|
50,000
|
|
|
|
5,335,500
|
|
|
David M. Peranich
|
|
|
12/06/10
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
75,000
|
|
|
|
25,000
|
|
|
|
2,667,750
|
|
|
Eric S. Wolford
|
|
|
12/06/10
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
75,000
|
|
|
|
25,000
|
|
|
|
2,667,750
|
|
|
(1)
|
These performance-based share amounts represent 150% of the target amount. These shares are at-risk and may range from 0% to 150% of the target amount based on achievement of
corporate goals. Any shares earned will vest on December 31, 2013, subject to the officer remaining a service provider through such date.
|
|
(2)
|
These time-based RSUs vest with respect to 100% of the total units granted on December 31, 2013, subject to the officer remaining a service provider through such date.
|
|
(3)
|
Represents the combined fair value of all stock awards granted under the 2011 LTIP as of the date they were granted, computed in accordance with FASB Accounting Standards
Codification (ASC) Topic 718, Stock Compensation (formerly, FASB Statement 123R).
|
Severance and Change in
Control Arrangements
Acceleration
The named executive officers are entitled to the following equity acceleration upon the occurrence of certain events:
Each option granted to our named executive officers in 2007 and 2008, and each RSU granted to our named executive officers in 2008, will vest with respect to 100% of the shares subject to the option or RSU grant if
(x) there is a change in control
and
(y) the employment of the named executive officer is involuntarily terminated within 12 months after the change in control.
Each RSU granted to our named executive officers in 2009 and 2010 under the LTIP will vest with respect to 100% of the shares subject to the RSU
grant if (x) there is a change in control
and
(y) the employment of the named executive officer is involuntarily terminated after the change in control.
48
Severance
Other than the change in control severance agreements with Messrs. Gottfried and Kennelly described in “Compensation Discussion and Analysis — Post-Termination Protection” above, there are no current
arrangements pursuant to which we have agreed to make any severance payments to any of our executive officers.
Estimated
Payments and Benefits Upon Termination
The amount of compensation and benefits payable to each named executive officer in each
termination and change in control situation has been estimated in the tables below. The value of the option and common stock vesting acceleration was calculated based on the assumption that the change in control and the executive’s employment
termination occurred on December 31, 2010. The closing price of our stock as of December 31, 2010 was $35.17, which was used as the value of our stock in the change in control. The value of the unvested stock awards granted under the 2009
LTIP was based on the actual amount earned, which was 137.8% of target. The value of the unvested stock awards granted under the 2010 LTIP was based on the actual amount earned, which was 200% of target. The value of the unvested stock awards
granted under the 2011 LTIP was based on 100% of the target shares. The value of the vesting acceleration was calculated by multiplying the number of accelerated option and stock award shares as of December 31, 2010 by the spread between the
closing price of our stock as of December 31, 2010 and the exercise price for such unvested option and stock award shares.
49
Jerry M. Kennelly
The following table describes the potential payments and benefits upon employment termination before or after a change in control for Mr. Kennelly, our President and Chief Executive Officer, as if his
employment terminated as of December 31, 2010, the last business day of our last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Termination
|
|
Voluntary
Resignation
Not for Good
Reason
($)
|
|
|
Voluntary
Resignation
for Good
Reason
($)
|
|
|
Termination
by Company
Not for Cause
($)
|
|
|
Termination
by Company
For Cause
($)
|
|
|
Change in
Control
($)
|
|
|
Involuntary
Termination
in connection
with or
following
Change in
Control
($)
(1)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
950,000
|
(2)
|
|
Highest Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,187,500
|
(2)
|
|
Unvested/Unexercisable Option and Stock Award Shares Accelerated
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
58,215,394
|
(3)
|
|
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Premiums/ Contributions (4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,706
|
|
|
Accrued Vacation
Pay (5)
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
27,099
|
|
|
|
60,400,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The values set forth are calculated based on a closing price on December 31, 2010 of $35.17 per share. The corresponding values set forth in the Company’s 2009 proxy
statement were based on a closing price on December 31, 2009 of $11.485 per share (as adjusted to reflect the Company's two-for-one stock split effected on November 8, 2010).
|
|
(2)
|
To be paid in one lump sum pursuant to the terms of the change in control severance agreement.
|
|
(3)
|
Represents the unvested stock options granted to Mr. Kennelly in 2007 and 2008 that will vest with respect to 100% of such shares if he is involuntarily terminated within 12
months of a change in control. Also represents 100% of the unvested RSUs granted in 2008 that will vest if he is involuntarily terminated within 12 months after a change in control and 100% of RSUs granted under the LTIP that will vest if he is
involuntarily terminated following a change in control as provided under the LTIP.
|
|
(4)
|
Represents the cost of medical, dental and vision care premiums under COBRA for a 12-month period that will be paid on behalf of Mr. Kennelly upon a change in control.
|
|
(5)
|
Assumes that Mr. Kennelly had three weeks of accrued but unused vacation, which was paid based on his annual base salary for the last fiscal year.
|
50
Randy S. Gottfried
The following table describes the potential payments and benefits upon employment termination before or after a change in control for Mr. Gottfried, our Chief Financial Officer and Executive Vice President of
Business Services, as if his employment terminated as of December 31, 2010, the last business day of our last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Termination
|
|
Voluntary
Resignation
Not for Good
Reason
($)
|
|
|
Voluntary
Resignation
for Good
Reason
($)
|
|
|
Termination
by Company
Not for Cause
($)
|
|
|
Termination
by Company
For Cause
($)
|
|
|
Involuntary
Termination
in connection
with or
following
Change in
Control
($)
(1)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
320,000
|
(2)
|
|
Highest Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
160,000
|
(2)
|
|
Unvested/Unexercisable Option and Stock Award Shares Accelerated
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,654,130
|
(3)
|
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Premiums/Contributions (4)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,652
|
|
|
Accrued Vacation Pay (5)
|
|
|
21,949
|
|
|
|
21,949
|
|
|
|
21,949
|
|
|
|
21,949
|
|
|
|
21,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
21,949
|
|
|
|
21,949
|
|
|
|
21,949
|
|
|
|
21,949
|
|
|
|
22,162,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The values set forth are calculated based on a closing price on December 31, 2010 of $35.17 per share. The corresponding values set forth in the Company’s 2009 proxy
statement were based on a closing price on December 31, 2009 of $11.485 per share (as adjusted to reflect the Company's two-for-one stock split effected on November 8, 2010).
|
|
(2)
|
To be paid in one lump sum pursuant to the terms of the change in control severance agreement.
|
|
(3)
|
Represents the unvested stock options granted to Mr. Gottfried in 2007 and 2008 that will vest with respect to 100% of such shares if he is involuntarily terminated within
12 months of a change in control. Also represents 100% of the unvested RSUs granted in 2008 that will vest if he is involuntarily terminated within 12 months after a change in control and 100% of RSUs granted under the LTIP that will vest if he is
involuntarily terminated following a change in control as provided under the LTIP.
|
|
(4)
|
Represents the cost of medical, dental and vision care premiums under COBRA for a 12-month period that will be paid on behalf of Mr. Gottfried upon a change in control.
|
|
(5)
|
Assumes that Mr. Gottfried had 3.6 weeks of accrued but unused vacation, which was paid based on his annual base salary for the last fiscal year.
|
51
Steven McCanne, Ph.D.
The following table describes the potential payments and benefits upon employment termination before or after a change in control for Dr. McCanne, our Chief Technology Officer, as if his employment terminated
as of December 31, 2010, the last business day of our last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Termination
|
|
Voluntary
Resignation
Not for Good
Reason
($)
|
|
|
Voluntary
Resignation
for Good
Reason
($)
|
|
|
Termination
by Company
Not for Cause
($)
|
|
|
Termination
by Company
For Cause
($)
|
|
|
Change in
Control
($)
|
|
|
Involuntary
Termination
in connection
with or
following
Change in
Control
($)
(1)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Highest Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Unvested/Unexercisable Option and Stock Award Shares Accelerated
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
45,001,813
|
(2)
|
|
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Premiums/ Contributions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Accrued Vacation Pay (3)
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
23,077
|
|
|
|
45,024,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The values set forth are calculated based on a closing price on December 31, 2010 of $35.17 per share. The corresponding values set forth in the Company’s 2009 proxy
statement were based on a closing price on December 31, 2009 of $11.485 per share (as adjusted to reflect the Company's two-for-one stock split effected on November 8, 2010).
|
|
(2)
|
Represents the unvested stock options granted to Dr. McCanne in 2007 and 2008 that will vest with respect to 100% of such shares if he is involuntarily terminated within 12
months of a change in control. Also represents 100% of the unvested RSUs granted in 2008 that will vest if he is involuntarily terminated within 12 months after a change in control and 100% of RSUs granted under the LTIP that will vest if he is
involuntarily terminated following a change in control as provided under the LTIP.
|
|
(3)
|
Assumes that Dr. McCanne had four weeks of accrued but unused vacation, which was paid based on his annual base salary for the last fiscal year.
|
52
David M. Peranich
The following table describes the potential payments and benefits upon employment termination before or after a change in control for Mr. Peranich, our Executive Vice President of Worldwide Sales, as if his
employment terminated as of December 31, 2010, the last business day of our fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Termination
|
|
Voluntary
Resignation
Not for Good
Reason
($)
|
|
|
Voluntary
Resignation
for Good
Reason
($)
|
|
|
Termination
by Company
Not for Cause
($)
|
|
|
Termination
by Company
For Cause
($)
|
|
|
Involuntary
Termination
in connection
with or
following
Change in
Control
($)
(1)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Highest Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Unvested Option Shares and Unexercisable Options Accelerated
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,218,779
|
(2)
|
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Premiums/ Contributions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Accrued Vacation Pay (3)
|
|
|
21,731
|
|
|
|
21,731
|
|
|
|
21,731
|
|
|
|
21,731
|
|
|
|
21,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
21,731
|
|
|
|
21,731
|
|
|
|
21,731
|
|
|
|
21,731
|
|
|
|
20,240,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The values set forth are calculated based on a closing price on December 31, 2010 of $35.17 per share. The corresponding values set forth in the Company’s 2009 proxy
statement were based on a closing price on December 31, 2009 of $11.485 per share (as adjusted to reflect the Company's two-for-one stock split effected on November 8, 2010).
|
|
(2)
|
Represents the unvested stock options granted to Mr. Peranich in 2007 and 2008 that will vest with respect to 100% of such shares if he is involuntarily terminated within 12
months of a change in control. Also represents 100% of the unvested RSUs granted in 2008 that will vest if he is involuntarily terminated within 12 months after a change in control and 100% of RSUs granted under the LTIP that will vest if he is
involuntarily terminated following a change in control as provided under the LTIP.
|
|
(3)
|
Assumes that Mr. Peranich had 3.8 weeks of accrued but unused vacation, which was paid based on his annual base salary for the last fiscal year.
|
53
Eric S. Wolford
The following table describes the potential payments and benefits upon employment termination before or after a change in control for Mr. Wolford, our Executive Vice President of Marketing and Business
Development, as if his employment terminated as of December 31, 2010, the last business day of our last fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Termination
|
|
Voluntary
Resignation
Not for Good
Reason
($)
|
|
|
Voluntary
Resignation
for Good
Reason
($)
|
|
|
Termination
by Company
Not for Cause
($)
|
|
|
Termination
by Company
For Cause
($)
|
|
|
Involuntary
Termination
in connection
with or
following
Change in
Control
($)
(1)
|
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Highest Target Bonus
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Unvested/Unexercisable Option and Stock Award Shares Accelerated
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
24,338,182
|
(2)
|
|
|
|
|
|
|
|
|
Benefits and Perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care Premiums/ Contributions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Accrued Vacation Pay (3)
|
|
|
19,744
|
|
|
|
19,744
|
|
|
|
19,744
|
|
|
|
19,744
|
|
|
|
19,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
19,744
|
|
|
|
19,744
|
|
|
|
19,744
|
|
|
|
19,744
|
|
|
|
24,357,926
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The values set forth are calculated based on a closing price on December 31, 2010 of $35.17 per share. The corresponding values set forth in the Company’s 2009 proxy
statement were based on a closing price on December 31, 2009 of $11.485 per share (as adjusted to reflect the Company's two-for-one stock split effected on November 8, 2010).
|
|
(2)
|
Represents the unvested stock options granted to Mr. Wolford in 2007 and 2008 that will vest with respect to 100% of such shares if he is involuntarily terminated within 12
months of a change in control. Also represents 100% of the unvested RSUs granted in 2008 that will vest if he is involuntarily terminated within 12 months after a change in control and 100% of RSUs granted under the LTIP that will vest if he is
involuntarily terminated following a change in control as provided under the LTIP.
|
|
(3)
|
Assumes that Mr. Wolford had 2.9 weeks of accrued but unused vacation, which was paid based on his annual base salary for the last fiscal year.
|
54
REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
Related Person Transactions Policy.
Transactions, arrangements or relationships in which we
were, are or will be a participant and the amount involved exceeds $120,000, and in which any related person had, has or will have a direct or indirect material interest, are subject to review, approval or ratification by the Board of Directors or a
committee comprised of members of the Board of Directors.
Our Audit Committee has the principal responsibility for reviewing related
person transactions pursuant to written policies and procedures adopted by the Board of Directors, subject to specified exceptions and other than those that involve compensation. In conformance with SEC regulations, these policies and procedures
define related persons to include our executive officers, our directors and nominees to become a director of our company, any person who is known to us to be the beneficial owner of more than 5% of any class of our voting securities, any immediate
family member of, or person sharing the household with, any of the foregoing persons, and any firm, corporation or other entity in which any of the foregoing persons is employed, is a general partner or in which such person has a 5% or greater
beneficial ownership interest.
As set forth in our policies and procedures, it is our general policy that related person transactions
shall be consummated or shall continue only if approved or ratified by the Audit Committee or the disinterested members of the Board of Directors and only if the terms of the transaction are determined to be in, or not to be inconsistent with, the
best interests of our company and our stockholders.
Transactions with Related Persons.
The Company
regularly enters into commercial dealings with BT and EMC Corporation, both of which re-sell the Company’s products. The Company has also entered into sales or purchase arrangements with Polycom, Inc. and other entities that are affiliated with
the Company either by virtue of a director relationship or by the entity’s shareholdings. The Company enters into these commercial dealings in the ordinary course of its business, and considers these arrangements to be arms-length.
Mr. Boustridge served as President, BT Global Services Multi-National Corporations during 2010. Mr. Lewis has served as Chief Strategy Officer for the Information Infrastructure Products Business of EMC since October 2010, and served as
President of the Content Management and Archiving Division of EMC prior to that in 2010. Mr. Kourey served in 2010 and continues to serve as Senior Vice President of Finance and Administration, Chief Financial Officer and a director of Polycom.
The Company does not believe that any of Messrs. Boustridge, Lewis or Kourey has or had a direct or indirect material interest in any of such commercial dealings.
The Board of Directors has determined that all Board members, excluding Messrs. Kennelly and McCanne, are independent under applicable Nasdaq rules. In making this determination, the Board considered information
relating to any sales of our products and services to, and purchases by us of products and services from, entities (or affiliates of such entities) where any of our directors are employed.
Compensation Transactions.
The approval of our Compensation Committee is required to approve any transaction
that involves compensation to our directors and executive officers. This approval process does not apply to any transaction that is available to all of our U.S. employees generally.
Indemnification Agreements.
We entered into indemnification agreements with each of our directors and
executive officers and certain other key employees. The form of agreement provides that we will indemnify each of our directors, executive officers and such other key employees against any and all expenses incurred by that director, executive
officer or other key employee because of his or her status as one of our directors, executive officers or other key employees, to the fullest extent permitted by Delaware law, our Charter and our Bylaws (except in a proceeding initiated by such
person without board approval). In addition, the form agreement provides that, to the fullest extent permitted by Delaware law, we will advance all expenses incurred by our directors, executive officers and such other key employees in connection
with a legal proceeding.
55
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on such matters in accordance with their best judgment.
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By Order of the Board of Directors
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Brett A. Nissenberg
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General Counsel, Senior Vice President of Corporate and Legal Affairs and Secretary
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April 20, 2011
56
YOUR VOTE IS
IMPORTANT. PLEASE VOTE TODAY.
We encourage you to take advantage of Internet or telephone voting. Both are
available 24 hours a day, 7 days a week.
Internet and telephone voting is available through 11:59 PM Eastern
Time the day prior to the stockholder meeting date.
INTERNET http://www.proxyvoting.com/rvbd
Use the Internet to vote your proxy. Have your proxy card in hand when you access the website.
OR
riverbed®
Think fastTM TELEPHONE
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid envelope.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked,
signed and returned your proxy card.
Fulfillment
95670
96174
FOLD AND DETACH HERE
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” EACH OF THE NOMINEES
LISTED IN PROPOSAL 1, “FOR” PROPOSALS 2 AND 3 AND “3 YEARS” ON PROPOSAL 4.
Please mark
your votes as indicated in this example X
FOR AGAINST ABSTAIN
1. To elect the following directors to serve until the 2014 annual meeting of stockholders or until such persons’
successors have been duly elected and qualified.
2. To ratify the appointment of Ernst & Young LLP as
the independent registered public accounting firm of Riverbed Technology, Inc. for its fiscal year ending December 31, 2011.
Nominees:
FOR WITHHOLD ABSTAIN
1.1 Michael R. Kourey
1.2 Mark S. Lewis
1.3 Steven McCanne, Ph.D.
3. To approve, on a non-binding advisory basis, the compensation of our named executive officers as described
in the proxy statement.
1 YEAR 2 YEARS 3 YEARS ABSTAIN
4. To recommend, on a non-binding advisory basis, the frequency of future advisory votes on executive compensation.
The Board of Directors Recommends a Vote “For” each of the Nominees listed in Proposal 1,
“For” Proposals 2 and 3 and “3 years” on Proposal 4.
Mark Here for Address Change or
Comments SEE REVERSE
RESTRICTED AREA - SCAN LINE
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such.
Signature Signature Date
You can now
access your Riverbed Technology, Inc. account online.
Access your Riverbed Technology, Inc. account online via
Investor ServiceDirect® (ISD).
BNY Mellon Shareowner Services, the transfer agent for Riverbed Technology,
Inc., now makes it easy and convenient to get current information on your shareholder account.
View account
status View book-entry information
View certificate history Make address changes
Visit us on the web at http://www.bnymellon.com/shareowner/equityaccess For Technical Assistance Call 1-877-978-7778
between 9am-7pm Monday-Friday Eastern Time
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-877-897-6918
Choose MLinkSM
for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on to Investor ServiceDirect® at www.bnymellon.com/shareowner/equityaccess where step-by-step
instructions will prompt you through enrollment.
Important notice regarding the Internet availability of proxy
materials for the Annual Meeting of Stockholders to be held on June 1, 2011. The Proxy Statement and the 2010 Annual Report on Form 10-K are available at: http://bnymellon.mobular.net/bnymellon/rvbd
FOLD AND DETACH HERE
PROXY
RIVERBED TECHNOLOGY, INC.
Annual Meeting of Stockholders – June 1, 2011
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Jerry M. Kennelly and Randy S. Gottfried, and each of them, with power to act without the
other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Riverbed Technology, Inc. Common Stock which the undersigned is entitled to
vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of Riverbed to be held June 1, 2011 or any adjournment or postponement thereof, with all powers which the
undersigned would possess if present at the Meeting.
Address Change/Comments
(Mark the corresponding box on the reverse side)
BNY MELLON SHAREOWNER SERVICES P.O. BOX 3550 SOUTH HACKENSACK, NJ 07606-9250
RESTRICTED AREA - SCAN LINE
Fulfillment
(Continued and to be marked, dated and signed, on the other side) 95670
96174
RESTRICTED AREA - SIGNATURE LINES
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