UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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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x
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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 9, 2014
Dear Stockholder:
I am pleased to
invite you to attend Riverbed Technology, Inc.s 2014 Annual Meeting of Stockholders, to be held on Thursday, May 22, 2014 at InterContinental San Francisco, 888 Howard Street, San Francisco, CA 94103. 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 Riverbeds 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
and Chief Executive Officer
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199 Fremont Street
San Francisco, CA 94105
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415.247.8800
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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 Thursday, May 22, 2014
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 Thursday, May 22, 2014, at 2:00 p.m. local time at InterContinental San
Francisco, 888 Howard Street, San Francisco, CA 94103 for the following purposes:
1. To elect one member of the Board of Directors to serve until
the 2017 annual meeting of stockholders of the Company or until such persons successor has 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, 2014.
3. To hold a non-binding advisory vote to approve the compensation of the Companys named executive officers.
4. To approve the Companys 2014 Equity Incentive Plan.
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 Companys Proxy Statement.
The record date for the meeting is March 25, 2014. Only stockholders of record at the close of business on that date may vote at the meeting or
any adjournment or postponement 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 9, 2014
You are cordially invited to attend the meeting in person. Whether or not you expect to attend the meeting, please
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 by ballot 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 legal proxy from that record holder.
IMPORTANT NOTICE
REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 22, 2014
The Proxy Statement and Annual Report on Form 10-K are available at
www.envisionreports.com/RVBD.
2014 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE
OF CONTENTS
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iii
Riverbed Technology, Inc.
199 Fremont Street
San Francisco,
California 94105
PROXY STATEMENT
FOR THE 2014 ANNUAL MEETING OF STOCKHOLDERS
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 (the Board of Directors or the Board) of Riverbed Technology, Inc. (sometimes referred to as the Company or Riverbed) of your proxy to
vote at the 2014 Annual Meeting of Stockholders or any adjournment, postponement or other delay thereof (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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A letter from our Chief Executive Officer;
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This Proxy Statement; and
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Riverbeds Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the SEC on February 14, 2014 (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 voting instruction form for use in connection with 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 Riverbeds 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 Riverbeds annual meetings on the
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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.
Who can vote at the
Annual Meeting?
Only stockholders of record at the close of business on March 25, 2014 (the Record Date) will be entitled to
vote at the Annual Meeting. On the Record Date, there were 160,501,943 shares of Company common stock (Common Stock) outstanding. All of these outstanding shares are entitled to vote at the Annual Meeting.
Attendance at the Annual Meeting will be limited to stockholders and the Companys invited guests. Each stockholder may be asked to present valid
picture identification, such as a drivers license or passport. Stockholders holding shares of Common Stock in brokerage accounts or through a bank or other nominee may be required to show a brokerage statement or account statement reflecting
stock ownership. Cameras, recording devices and other electronic devices will not be permitted 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 the Record Date your shares were registered directly in your name with our transfer agent, Computershare, 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 the Record Date 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 voting instruction form. If you request printed copies of the proxy materials by mail, you will receive
a voting instruction form with instructions for how to cast your vote at the Annual Meeting. 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 legal proxy from your
broker or bank.
What am I voting on?
There are four matters scheduled for a vote:
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Proposal 1: Election of one director to serve until the 2017 annual meeting of stockholders or until such persons successor has been duly elected and qualified;
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Proposal 2: Ratification of Ernst & Young LLP as the Companys independent registered public accounting firm for the fiscal year ending December 31, 2014;
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Proposal 3: A non-binding advisory vote to approve the compensation of the Companys named executive officers; and
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Proposal 4: Approval of our 2014 Equity Incentive Plan.
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What are the Boards voting recommendations?
Riverbeds Board of Directors recommends that you vote your shares:
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For
the nominee to the Board (Proposal 1);
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For
ratification of the appointment of Ernst & Young LLP as the Companys independent registered public accounting firm for the
fiscal year ending December 31, 2014 (Proposal 2);
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For
the proposal regarding a non-binding advisory vote to approve the compensation of the Companys named executive officers (Proposal
3); and
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For
the 2014 Equity Incentive Plan (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 the Record Date.
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 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 on your proxy card.
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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 voting 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 Notice.
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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.
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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 stockholders instructions.
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 Companys independent registered public
accounting firm for the 2014 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 non-binding advisory vote to approve the compensation of the Companys named executive
officers (Proposal 3) and the approval of our 2014 Equity Incentive Plan (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, Riverbeds 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.
We have engaged the services of Innisfree M&A Incorporated to assist us in the solicitation of
proxies at the Annual Meeting for an anticipated fee of $40,000, plus expenses.
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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.
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 Companys 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: Corporate 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 voting 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 by ballot. 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 the 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 Companys independent
registered public accounting firm for the fiscal year ending December 31, 2014 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 advisory vote to approve
the compensation of the Companys named executive officers 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
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having been voted on the proposal. Although the proposal is non-binding, Riverbeds Board of Directors intends to carefully review the results of this vote.
Proposal 4.
Approval of our 2014 Equity Incentive Plan 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.
You may vote FOR, AGAINST, or ABSTAIN on the nominee for election as director (Proposal 1). You may not vote
FOR the election of any persons other than the named nominee.
You may vote FOR, AGAINST, or ABSTAIN
on the proposal to ratify the appointment of Ernst & Young LLP as Riverbeds independent registered public accounting firm (Proposal 2), on the non-binding advisory vote to approve the compensation of the Companys named executive
officers (Proposal 3), and on the proposal to approve the 2014 Equity Incentive Plan (Proposal 4).
How is the majority voting
standard applied to the election of directors?
Riverbeds 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 nominees election must exceed the
votes cast against such nominees 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 Riverbeds 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
160,501,943 shares of Common Stock outstanding and entitled to vote. Thus, 80,250,972 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 our Proxy Statement for the 2015 Annual Meeting?
To be included in our Proxy
Statement for the 2015 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 10, 2014, 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 years Annual Meeting.
How can stockholders submit proposals to be raised at the 2015
Annual Meeting that will not be included in our Proxy Statement for the 2015 Annual Meeting?
To be raised at the 2015 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 stockholders notice shall be delivered to our Corporate Secretary at our principal executive offices not less than 45 or more than 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 years Annual Meeting. Since our Notice or proxy materials for our 2014 Annual Meeting were first mailed to stockholders on April 9, 2014, stockholder proposals
must be received by our Corporate Secretary at our principal executive offices no earlier than January 24, 2015 and no later than February 23, 2015, in order to be raised at our 2015 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 2015 Annual Meeting changes by more than 30 days from the anniversary of this years Annual Meeting?
Under Rule 14a-8 of the Exchange Act, if the date of the 2015 Annual Meeting changes by more than 30 days from the anniversary of this years 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 2015 Annual Meeting is advanced by more than 30 days or delayed by more than 60 days from the anniversary of this
years Annual Meeting, stockholder proposals to be brought before the 2015 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 stockholders 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.
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 2015 Annual Meeting that is not in compliance with the deadlines described above, we will use our
discretion in determining whether or not to bring
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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 Riverbeds 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 eight authorized directors. The class of directors standing for election at the Annual Meeting currently consists of two directors. Michael R. Kourey is not standing for re-election to the Board of Directors after his current
term expires immediately prior to the Annual Meeting. The Board of Directors thanks Mr. Kourey for his service. Immediately following the Annual Meeting, the number of authorized directors will be reduced to seven.
The director elected at the Annual Meeting will serve until our 2017 annual meeting of stockholders or until his successor is duly elected and
qualified. The director being nominated for election to the Board of Directors (the Nominee), his age as of March 10, 2014, any 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 Nominee
listed below unless otherwise instructed. In the event that the 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 the Nominee is unable or will decline to serve as a director. Proxies cannot be voted for more than one individual. 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.
Riverbeds 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 nominees
election must exceed the votes cast against such nominees 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
Riverbeds 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 Nominee
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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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Mark S. Lewis
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51
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Director
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Mark S. Lewis,
age 51, has been a member of the Board of Directors since February 2010. Since September 2012,
Mr. Lewis has been the Chairman and CEO of Formation Data Systems, a data services platform for web-scale cloud computing, as well as a senior advisor to Silver Lake, a technology company investment firm. Mr. Lewis served as Chief Strategy
Officer for the Information Infrastructure Products Business of EMC Corporation, an information infrastructure technology and solutions company, from October 2010 to February 2012. Mr. Lewis prior roles at EMC 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
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Hewlett-Packard/Compaq, where he was Vice President and General Manager of Compaqs Enterprise Storage Group. From 1998 to 1999, Mr. Lewis led Compaqs 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.
The Board of Directors Recommends a Vote FOR The Nominee.
Information Regarding Other Directors Continuing in Office
Set forth below is information regarding each of the continuing directors of Riverbed, including his or her age as of March 10, 2014, the period
during which he or she has served as a director, and certain information as to principal occupations and directorships held by him or her in corporations whose shares are publicly registered.
Continuing Directors Term Ending in 2015
Michael
Boustridge,
age 50, has been a member of the Board of Directors since February 2010. Mr. Boustridge has been the Chief Executive Officer of Contact Solutions, a cloud-based customer self-service solutions provider, since June 2013, and has
been a member of the Board of Directors of Contact Solutions since 2011. Mr. Boustridge served as President, BT Global Services Multi-National Corporations until April 2011, where he had responsibility for all aspects of BTs operations
and performance for the global Multi-National Corporations worldwide, including BTs 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 currently
serves as a member of the board of directors of Cyan, Inc., a global supplier of software-defined networks, and Ciber, a global information technology company.
We believe that Mr. Boustridges experience and skills make him a qualified and valuable member of our Board of Directors. In particular,
Mr. Boustridges 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 63, co-founded Riverbed in May 2002 and serves as Chairman of the Board of Directors and as our
Chief Executive Officer. Immediately prior to founding Riverbed, 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
10
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
Bachelors degree from Williams College and a Masters degree from the New York University Graduate School of Business Administration. Mr. Kennelly currently serves as a member of the board of directors of Nimble Storage, a provider of
flash-optimized hybrid storage solutions.
We believe that Mr. Kennellys experience and skills make him a qualified and valuable member
of our Board of Directors. In particular, Mr. Kennelly, a co-founder of Riverbed, 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 Companys 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 Riverbed.
Kimberly S. Stevenson
, age 51, has been a member of the Board of Directors since March 2013.
Ms. Stevenson has been the vice president and Chief Information Officer of Intel Corporation since January 2012. Ms. Stevenson served as vice president and general manager of Intels Global IT Operations and Services from September
2009 to January 2012. Prior to joining Intel, Ms. Stevenson spent 7 years at the former EDS, now HP Enterprise Services, holding a variety of positions, including vice president of Worldwide Communications, Media and Entertainment (CM&E)
Industry Practice from January 2005 to July 2009, and vice president of Enterprise Service Management, where she oversaw the global development and delivery of enterprise services. Before joining EDS, Ms. Stevenson spent 18 years at IBM holding
several executive positions including vice president of Marketing and Operations of the eServer iSeries division. Ms. Stevenson holds a Bachelors degree in Finance & Accounting from Northeastern University and an M.B.A. from
Cornell University.
We believe that Ms. Stevensons experience and skills make her a qualified and valuable member of our Board of
Directors. In particular, Ms. Stevenson offers important perspectives on how to align IT with business priorities, offering us valuable first-hand insight into the needs of both current and prospective customers. In addition,
Ms. Stevensons breadth and depth of IT experience gives her a unique understanding of the demands placed on CIOs and the ways in which todays enterprise IT infrastructures will be re-architected in the future.
Continuing Directors Term Ending in 2016
Mark A.
Floyd
, age 58, has been a member of the Board of Directors since August 2007. Mr. Floyd has been the Chief Executive Officer of Cyan, Inc., a global supplier of software-defined networks, since May 2012, its chairman since January 2012, and
a member of Cyans board of directors since 2007. Mr. Floyd served as the Chief Executive Officer of SafeNet, Inc., an information security company, from July 2009 to July 2011. Mr. Floyd served as President and Chief Executive
Officer of Entrisphere, Inc., a telecommunications equipment company, from August 2002 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 2001 until January 2002, and President and Chief Executive Officer of Efficient Networks, Inc., a telecommunications equipment company, from July 1993 to April 2001. Mr. Floyd holds a B.B.A.
degree in Finance from the University of Texas. Mr. Floyd served as a director of Tekelec, Inc., a network applications company, from October 2004 to May 2011. In addition, Mr. Floyd served as a director of Carrier Access Corporation, a
telecommunications equipment manufacturer, from June 2001 to March 2008.
11
We believe that Mr. Floyds 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 five 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
50, has been a member of the Board of Directors since December 2002. Mr. Schaepe is a founding partner 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 previously served as a director of Fusion-io, Inc., a storage memory platform company, from April 2009 to December 2011, and as a director of eHealth, Inc., an online health insurance provider, from April 1999 to September
2008.
We believe that Mr. Schaepes 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.
Eric S. Wolford
, age 47, has been a member of the Board of Directors since August 2013. Mr. Wolford has served as a venture partner at Accel
Partners, a venture capital firm, since January 2014. Mr. Wolford served as our President, Products and Marketing from October 2012 until his departure as an employee of the Company in November 2013. He served as our Executive Vice President,
General Manager of Products Group from January 2012 until October 2012. He served as our Executive Vice President of Marketing and Business Development from January 2011 to January 2012. 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 Bachelors degree in Pre-Medicine from
Pepperdine University and an M.B.A. from the New York University Stern School of Business.
We believe that Mr. Wolfords experience and
skills make him a qualified and valuable member of our Board of Directors. In particular, Mr. Wolford possesses strong technical and business insight into the markets the Company serves. In addition, Mr. Wolfords in-depth knowledge
of our business and products, a result of his more than ten years as a Riverbed executive, will serve as a significant contributor to the Companys strategic and growth planning efforts.
12
CORPORATE GOVERNANCE
Independence of the Board of Directors
The Board of Directors is currently comprised of eight members. Six of our current eight members, Messrs. Boustridge, Floyd, Kourey, Lewis and Schaepe,
and Ms. Stevenson, 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 directors 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 (or were employed at the time of any such sale or purchase). See Review, Approval or Ratification of Transactions with Related Persons.
Chairman of the Board
Mr. Kennelly, our Chief Executive Officer, also serves as the Chairman of our Board of Directors. It is the opinion of the Board of Directors that
Mr. Kennellys 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 Companys 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. Lewis has served as our Lead Independent Director since May 2013. 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 Boards three committees, and the Nominating/Corporate Governance Committee is chaired by our Lead Independent Director. Six of our eight Board members are independent under
13
Nasdaq rules. In addition, every member of each of the Boards 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 SEC rules. The following table provides membership and meeting information for each of the Board committees during 2013, provided that certain changes occurred
in Riverbeds Board committee membership composition in March 2013, as detailed below the table:
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Name
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Audit
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|
Compensation
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Nominating/Corporate
Governance
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Michael Boustridge
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|
|
|
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X
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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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Michael R. Kourey
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X
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(1)
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X
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Mark S. Lewis
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X
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|
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X
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(1)
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Satya Nadella
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X
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Christopher J. Schaepe
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X
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(1)
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X
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Kimberly S. Stevenson
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X
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James R. Swartz
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X
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Eric S. Wolford
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Total meetings in fiscal year 2013
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11
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17
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4
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(1)
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Committee Chairperson
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In March 2013, the following changes occurred in Riverbeds Board committee
membership composition:
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Mr. Nadella joined the Nominating/Corporate Governance Committee.
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Ms. Stevenson joined the Audit Committee.
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Mr. Lewis service on the Audit Committee ended.
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In May 2013, Mr. Swartz did not stand
for re-election at the 2013 Annual Meeting, and therefore his service on the Nominating/Corporate Governance Committee ended at the 2013 Annual Meeting. Mr. Lewis assumed the chairpersonship of the Nominating/Corporate Governance Committee
immediately after the 2013 Annual Meeting.
Mr. Kourey, who is not standing for re-election at the Annual Meeting, will not be serving on the
Audit Committee and the Nominating/Corporate Governance Committee after the Annual Meeting. The Board of Directors, upon the recommendation of the Nominating/Corporate Governance Committee, has appointed Mr. Lewis to serve on the Audit
Committee and has appointed Ms. Stevenson to serve on the Nominating/Corporate Governance Committee, each effective as of immediately following the Annual Meeting. Mr. Floyd will assume the chairpersonship of the Audit Committee
immediately following the Annual Meeting.
In February 2014, Mr. Nadella retired from the Board of Directors in order to more fully devote time
to his new role as chief executive officer of Microsoft Corporation. As a result, Mr. Nadellas service on the Nominating/Corporate Governance Committee ended in February 2014. The Board of Directors thanks Mr. Nadella for his
service.
14
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 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 Committees functions can be found in the
Audit Committee charter.
The members of the Audit Committee in 2013 were Messrs. Floyd, Kourey and Lewis, and Ms. Stevenson, with
Ms. Stevenson joining the Committee in March 2013 and Mr. Lewis no longer serving on the Committee after March 2013.
The members of the
Audit Committee currently are Messrs. Floyd and Kourey and Ms. Stevenson. Mr. Kourey has chaired the Audit Committee since April 2011.
Mr. Kourey, who is not standing for re-election at the Annual Meeting, will not be serving on the Audit Committee after the Annual Meeting.
Mr. Lewis will join the Audit Committee effective as of immediately following the Annual Meeting. Mr. Floyd will assume the chairpersonship of the Audit Committee immediately following the Annual Meeting.
The Board of Directors has determined that Messrs. Floyd and Kourey 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 and Kourey 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
15
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 Committees 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 Committees 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 2013 compensation matters the Compensation Committee retained Radford, an AonHewitt Company
(Radford), as its independent compensation consultant. See Compensation Discussion and Analysis for more information on the Compensation Committees engagement of Radford.
The members of the Compensation Committee in 2013 were Messrs. Boustridge, Floyd and Schaepe, and they continue as members of the Compensation
Committee.
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 and Schaepe. None of these individuals was at any
time during fiscal year 2013, 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 Committees 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 our business and the markets in which we compete, financial expertise, diversity and local and community
ties.
16
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, including diversity in terms of gender, race and
ethnicity, 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. As noted above, we 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 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. If a stockholder of the Company wishes to recommend a
director candidate for consideration by the Nominating/Corporate Governance Committee, pursuant to the Companys 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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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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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 Companys voting securities reasonably believed by such stockholder or Stockholder Associated Person to be necessary to elect such nominee;
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Such other information as required by our Companys Bylaws;
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The proposed nominees written consent to (A) if selected, be named in the Companys proxy statement and proxy and (B) if elected, serve on the Board of Directors;
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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
stockholders understanding of the independence, or lack thereof, of such nominee; and
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Any other information that such stockholder believes is relevant in considering the director candidate.
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17
The members of the Nominating/Corporate Governance Committee in 2013 were Messrs. Kourey, Lewis, Nadella,
Schaepe and Swartz, with Mr. Swartz no longer serving on the Committee after May 2013.
The members of the Nominating/Corporate Governance
Committee currently are Messrs. Kourey, Lewis and Schaepe. Mr. Lewis has chaired the Nominating/Corporate Governance Committee since May 2013.
Mr. Kourey, who is not standing for re-election at the Annual Meeting, will not be serving on the Nominating/Corporate Governance Committee after
the Annual Meeting. Ms.
Stevenson will join the Nominating/Corporate Governance Committee effective as of immediately following the Annual Meeting.
Risk
Management Oversight
The Board of Directors actively manages Riverbeds 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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The Audit Committee assists the Board of Directors with its oversight of Riverbeds major financial risk exposures. The Audit Committee regularly reviews with management Riverbeds risk assessment and risk
management policies. Risk assessment reports are regularly provided by management to the Audit Committee.
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The Compensation Committee assists the Board of Directors with its oversight of risks arising from our compensation policies and programs.
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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, as well as with its oversight of
risks associated with succession planning.
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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 the Company. In performing its duties, the Compensation Committee meets at least annually with our management and the Compensation
Committees independent compensation consultant to review and discuss potential risks relating to our employee compensation plans and programs.
In March 2013, the Compensation Committee reviewed and discussed with our management and the Compensation Committees 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 the 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.
18
Board of Directors Meeting Attendance
The Board of Directors met ten times during the fiscal year ended December 31, 2013. During 2013, each director then in office attended 75% or more
of the meetings held of the Board of Directors and committees on which he or she 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 2013.
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, our non-employee directors received the following cash compensation and equity compensation in 2013:
Cash Compensation.
During 2013, 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 (with the amounts below paid quarterly on a pro-rated basis):
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Annual retainer fee of $45,000 for each non-employee director (with such annual retainer fee increased to $50,000 effective as of the Companys second fiscal quarter);
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Additional annual retainer fee of $20,000 for serving as Lead Independent Director;
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Additional annual retainer fee of $30,000 for serving as chair of the Audit Committee;
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Additional annual retainer fee of $20,000 for serving as chair of the Compensation Committee;
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Additional annual retainer fee of $10,000 for serving as chair of the Nominating/Corporate Governance Committee;
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Additional annual retainer fee of $15,000 for serving as a member of the Audit Committee;
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Additional annual retainer fee of $10,000 for serving as a member of the Compensation Committee; and
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|
|
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Additional annual retainer fee of $5,000 for serving as a member of the Nominating/Corporate Governance Committee.
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Equity Compensation.
Each non-employee member of our Board of Directors that served in 2013, other than Mr. Swartz,
who did not stand for re-election at the 2013 Annual Meeting, other than Mr. Wolford, who did not receive a restricted stock unit award in connection with his service on the Board of Directors, and other than Mr. Nadella and
Ms. Stevenson, who joined our Board of Directors in March 2013, received a restricted stock unit award covering 16,900 shares of our common stock. The award amount was determined by the Board of Directors after considering the recommendation of
19
the Compensation Committee and its independent compensation consultant, Radford. The recommendation was based on an assessment of competitive market practices in relation to compensation programs
for continuing non-employee Board members. The shares underlying the award fully vest the day prior to this years annual meeting of stockholders or, if earlier, if we are acquired while the director is in our service. Our Board of Directors
intends to make an annual grant of restricted stock unit awards to our non-employee directors in an amount to be determined by the Board of Directors after considering the recommendation of the Compensation Committee and its independent compensation
consultant, Radford.
Grants Upon Initial Election.
Prior to its amendment in May 2013, our 2006 Director Option Plan
provided for an automatic grant of a stock option award to purchase 30,000 shares of our common stock to a non-employee director upon such directors initial election to the Board of Directors. Mr. Nadella and Ms. Stevenson each
received an option to purchase 30,000 shares of our common stock upon their appointment to the Board of Directors in March 2013. The options were granted at the fair market value on the date of the award. Each such option will become exercisable for
the shares in 36 equal monthly installments beginning with Mr. Nadellas and Ms. Stevensons service as members of our Board of Directors and will fully vest if we are acquired while the director is in our service.
In May 2013, after considering the recommendation of the Compensation Committee and its independent compensation consultant, Radford, the Board of
Directors amended the 2006 Director Option Plan to provide for the suspension of the automatic option grant program to new non-employee directors. The recommendation was based on an assessment of competitive market practices in relation to
compensation programs for new non-employee Board members.
Further to the recommendations noted above, the Board of Directors replaced the automatic
option grant program with a program providing that future non-employee directors, upon their initial election to the Board of Directors, will be awarded a restricted stock unit award valued at $400,000, with such award vesting annually over the
first 36 months of the directors service as a member of our Board of Directors, or, if earlier, vesting in full if we are acquired while the director is in our service.
In light of this change to the Companys program regarding initial equity grants to new non-employee members of our Board of Directors, in May 2013
the Board of Directors awarded each of Mr. Nadella and Ms. Stevenson a restricted stock unit award covering 11,400 shares of our common stock. The award amount was determined by the Board of Directors after considering the recommendation
of the Compensation Committee and its independent compensation consultant, Radford, and after a review of the value of the March option grants to Mr. Nadella and Ms. Stevenson in relation to the target value of the restricted stock unit
award under the new non-employee director initial equity grant program. The shares underlying the May 2013 awards to Mr. Nadella and Ms. Stevenson vest annually over 36 months beginning with March 1, 2013, or, if earlier, vest in full
if we are acquired while the director is in our service.
In February 2014, Mr. Nadella retired from the Board of Directors in order to more
fully devote time to his new role as chief executive officer of Microsoft Corporation. In consideration of Mr. Nadellas service to the Company as a member of the Board of Directors, the Compensation Committee amended the above-mentioned
stock option award and restricted stock unit award to accelerate the vesting of the portion of each award that would have vested on March 1, 2014, or approximately one week after Mr. Nadellas departure from the Board of
Directors. The remainder of the above-mentioned stock option award and restricted stock unit award was cancelled.
20
Directors Compensation
The following table sets forth all of the reportable compensation of our non-employee directors in fiscal year 2013.
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|
|
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|
|
|
|
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|
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Name
|
|
Fees Earned or
Paid in Cash
($) (1)
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|
|
Option Awards
($) (2)
|
|
|
Stock Awards
($) (2)
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Total
($)
|
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Michael Boustridge
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58,750
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|
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0
|
|
|
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261,764
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(3)
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|
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320,514
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Mark A. Floyd
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73,750
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|
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0
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|
|
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261,764
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(4)
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335,514
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Michael R. Kourey
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83,750
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|
|
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0
|
|
|
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261,764
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(5)
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|
|
345,514
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Mark S. Lewis
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71,456
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|
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0
|
|
|
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261,764
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(6)
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333,220
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Satya Nadella
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45,556
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223,422
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(7)
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176,575
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(8)
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445,553
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Christopher J. Schaepe
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73,750
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0
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261,764
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(9)
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335,514
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Kimberly S. Stevenson
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53,917
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223,422
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(10)
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176,575
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(11)
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453,914
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James R. Swartz
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30,179
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0
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|
0
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(12)
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30,179
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Eric S. Wolford
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6,250
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0
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0
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(13)
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6,250
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(1)
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Reflects all fees earned during fiscal year 2013. Fees earned during the last quarter of fiscal year 2013 were paid in the first quarter of fiscal year 2014. Fees earned during the last quarter of fiscal year 2012 were
paid in the first quarter of fiscal year 2013 and are not included in this table.
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(2)
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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. See Note 14
of the notes to our consolidated financial statements contained in our Annual Report on Form 10-K filed on February 14, 2014 for a discussion of all assumptions made by the Company in determining the grant date fair value of its equity awards.
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(3)
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On May 22, 2013, Mr. Boustridge was granted a restricted stock unit award for 16,900 shares of our common stock. As of December 31, 2013, Mr. Boustridge held outstanding options to purchase an
aggregate of 120,000 shares of our common stock.
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(4)
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On May 22, 2013, Mr. Floyd was granted a restricted stock unit award for 16,900 shares of our common stock. As of December 31, 2013, Mr. Floyd held outstanding options to purchase an aggregate of
160,168 shares of our common stock.
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(5)
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On May 22, 2013, Mr. Kourey was granted a restricted stock unit award for 16,900 shares of our common stock. As of December 31, 2013, Mr. Kourey held outstanding options to purchase an aggregate of
122,000 shares of our common stock.
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(6)
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On May 22, 2013, Mr. Lewis was granted a restricted stock unit award for 16,900 shares of our common stock. As of December 31, 2013, Mr. Lewis held outstanding options to purchase an aggregate of
120,000 shares of our common stock.
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(7)
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On March 1, 2013, Mr. Nadella was granted a stock option award for 30,000 shares of our common stock.
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(8)
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On May 22, 2013 Mr. Nadella was granted a restricted stock unit award for 11,400 shares of our common stock. As of December 31, 2013, Mr. Nadella held outstanding options to purchase an aggregate of
30,000 shares of our common stock.
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(9)
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On May 22, 2013, Mr. Schaepe was granted a restricted stock unit award for 16,900 shares of our common stock. As of December 31, 2013, Mr. Schaepe held outstanding options to purchase an aggregate of
48,334 shares of our common stock.
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(10)
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On March 1, 2013, Ms. Stevenson was granted a stock option award for 30,000 shares of our common stock.
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21
(11)
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On May 22, 2013, Ms. Stevenson was granted a restricted stock unit award for 11,400 shares of our common stock. As of December 31, 2013, Ms. Stevenson held outstanding options to purchase an
aggregate of 30,000 shares of our common stock.
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(12)
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Mr. Swartz did not receive a restricted stock unit award in 2013 because his service as a director ended immediately prior to the 2013 Annual Meeting. As of December 31, 2013, Mr. Swartz held outstanding
options to purchase an aggregate of 148,332 shares of our common stock.
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(13)
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Mr. Wolford did not receive a restricted stock unit award in connection with his service on the Board of Directors. For stock awards received in connection with Mr. Wolfords employment with the Company,
see the Summary Compensation Table. As of December 31, 2013, Mr. Wolford held outstanding options to purchase an aggregate of 220,000 shares of our common stock.
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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 Companys annual meeting of stockholders.
Six of our eight directors that were members of our Board of Directors at the time of and immediately following the 2013 Annual Meeting of Stockholders attended the Companys 2013 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, 2014 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 Ernst & Young LLP.
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.
Independent Registered Public Accounting Firms 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, 2013 and 2012.
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(in thousands)
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2013
|
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2012
|
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Audit fees (1)
|
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$
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1,674
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$
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1,613
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Audit-related fees (2)
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192
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|
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485
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Tax fees (3)
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530
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320
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All other fees
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total fees
|
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$
|
2,396
|
|
|
$
|
2,418
|
|
|
|
|
|
|
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|
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(1)
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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.
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(2)
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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.
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23
Pre-Approval Policies and Procedures
All audit, audit-related and tax services were pre-approved by the Audit Committee. The Audit Committees 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 Committees 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 accountants independence.
The Board of Directors Recommends a Vote FOR the Ratification of the Appointment of
Ernst & Young LLP as Riverbeds Independent Registered Public Accounting Firm For Its
Fiscal Year Ending December 31, 2014.
24
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors currently consists of three non-employee directors: Messrs. Floyd and Kourey and Ms. Stevenson. The
Board of Directors annually reviews the Nasdaq listing standards definition of independence for audit committee members and has determined that each current member of the Audit Committee meets that standard. The Board of Directors has also
determined that each of Messrs. Floyd and Kourey 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 Companys 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 Committees 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 Companys 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, 2013 (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 Public Company Accounting Oversight Board Auditing Standard No. 16, Communications with Audit Committees. 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 accountants 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 Companys 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 at the end of the Companys 2013 fiscal year:
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Mark A. Floyd
|
Michael R. Kourey, Chairman
|
Kimberly S. Stevenson
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25
PROPOSAL 3
NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE COMPANYS NAMED EXECUTIVE OFFICERS
The Company, in accordance with the 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 a non-binding advisory vote to approve the compensation of the Companys named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall
compensation of our named executive officers and the compensation philosophy, policies, practices and objectives described in this Proxy Statement. The non-binding advisory vote to approve the compensation of the Companys named executive
officers 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 the Company. Therefore, the goal for our executive compensation program is to compensate fairly 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 satisfies this goal by emphasizing long-term performance-based equity awards, which strongly align the long-term interests of our executives and our stockholders.
The Compensation Discussion and Analysis in this Proxy Statement describes the Companys executive compensation program and the decisions made by
the Compensation Committee in 2013 in more detail. The Company annually reviews its executive compensation practices and programs, utilizing peer and survey group data. Highlights of the program for 2013 include the following:
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Compensation decisions are based upon an assessment of individual performance and potential to enhance long-term stockholder value.
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Under the Companys Long-Term Incentive Plan, the named executive officers receive long-term equity awards in the form of RSUs and all of these shares are at-risk and earned only upon the achievement of specified
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. For 2013, these performance goals included quarterly revenue targets, a full year non-GAAP
EPS target, and revenue growth tied closely to the December 2012 acquisition by the Company of OPNET Technologies, Inc. The RSUs eligible to be earned under the Companys Long-Term Incentive Plan constitute the majority of each officers
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.
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|
The Companys Management Bonus Plan, under which our executives may earn quarterly cash incentive amounts, is directly tied to the achievement of revenue targets and the consistency of achievement of revenue
targets.
|
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|
|
In anticipation of the significant efforts expected to be required to successfully integrate the operations of OPNET in 2013, and in order to highlight the importance of achieving expense synergies in a relatively quick
timeframe, our executive officers received an at-risk equity award tied to a more aggressive full year non-GAAP EPS target for the Company than the non-GAAP EPS target set forth in the Long-Term Incentive Plan, with subsequent vesting of any earned
shares not occurring until one year after achievement of the goal, for a total of two years. This award is viewed by the Compensation Committee as special under the circumstances and non-recurring.
|
26
|
|
|
The targets relating to equity grants and cash incentive amounts, namely revenue achievement, consistency of revenue achievement, and EPS achievement, 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.
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|
|
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 and
business performance.
In 2013:
|
|
|
The Companys revenue grew to $1.0 billion, representing an increase of 24% over the prior year.
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|
|
Gross profit grew to $759 million, an increase of $127 million over the prior year.
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Product revenue increased 12% versus the prior year, and service and support revenue increased 47% versus the prior year.
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The Company generated $192 million in free cash flow.
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The Company completed the business and sales integration of OPNET Technologies, Inc., positioning Riverbed as a leader in the converging application and network performance management segments.
|
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The Company announced its multi-product platform strategy to expand within the estimated $11 billion Application Performance Infrastructure market.
|
The Company requests stockholder approval of the compensation of the Companys 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 Companys 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 approving the Compensation of the Companys Named Executive Officers For its Fiscal Year Ending December 31, 2013.
27
PROPOSAL 4
APPROVAL OF RIVERBED TECHNOLOGY, INC. 2014 EQUITY INCENTIVE PLAN
General
We are seeking approval of a new Riverbed
Technology, Inc. 2014 Equity Incentive Plan (the 2014 Plan) to consolidate our stockholder-approved equity compensation plans into one plan. We are not requesting approval of additional shares to be added to the 2014 Plan; instead, the
shares available for grant under our existing plans (as described below) will be combined into the 2014 Plan if it is approved.
The Board of
Directors has adopted the 2014 Plan, subject to approval from our stockholders at the 2014 annual meeting of stockholders. If approved, the 2014 Plan will replace our 2006 Equity Incentive Plan (the 2006 Plan), 2006 Director Option Plan
(the Director Plan), and 2012 Stock Incentive Plan (the 2012 Plan and, together with the 2006 Plan, and the Director Plan, the existing plans), and no new awards will be granted under the existing plans. The
existing plans, however, will continue to govern awards previously granted under the respective plan.
The Board believes that the current structure
of the equity incentive program significantly limits our flexibility and increases our administrative costs, with shares distributed across multiple plans with various limitations on the use of each specific pool. As of March 10, 2014, a total
of 12,405,193 shares were available for issuance under the existing plans.
The 2014 Plan would simply consolidate all of these shares that remain available for grant under the existing plans as of March 10, 2014, with no net increase in that
number of shares.
If the 2014 Plan is approved, the number of shares initially reserved for issuance thereunder will equal 12,405,193, which
is the number of shares that are available for grant under the 2006 Plan, the Director Plan, and the 2012 Plan, each as of March 10, 2014. In addition, any shares subject to outstanding awards that were previously granted under the existing
plans that, after March 10, 2014, expire or otherwise terminate without having been vested or exercised in full, or that are forfeited to or repurchased by the Company, or that are used to pay the exercise price of an award or to satisfy the
tax withholding obligations related to an award, up to a maximum of 18,479,025 shares, would be added to the 2014 Plan from the existing plans. Between March 10, 2014 and the date of filing of this proxy statement, the Company does not expect
to make any additional grants under the existing plans.
The Board believes that we must offer a competitive equity incentive program if we are to
continue to successfully attract and retain the best possible candidates for positions within the Company. In the technology industry, equity compensation awards are an important tool in retaining and motivating the highly qualified technical and
other key employees who help us meet our goals.
We believe that the adoption of the 2014 Plan is essential to our continued success, and therefore
is in the best interests of the Company and our stockholders. Our employees are our most valuable assets. The Board believes that grants of equity awards available under the 2014 Plan will help create long-term equity participation in the Company
and, thereby, assist us in attracting, retaining, motivating and rewarding employees, directors, and consultants.
Accordingly, the Board has
determined that it is in the best interests of the Company to adopt the 2014 Plan and is asking our stockholders to approve the 2014 Plan.
Why You
Should Vote for the 2014 Plan
Not a Request for Stockholders to Authorize Additional Number of Shares
Our goal in adopting the 2014 Plan is to consolidate all of the remaining shares previously reserved and approved by the Companys stockholders for
issuance under the existing plans into a
28
single plan, which will streamline our equity compensation program and cut down on administrative burden and expense. We therefore are asking stockholders to approve a share reserve for the 2014
Plan that represents only the total number of shares that are available under the 2006 Plan, the Director Plan, and the 2012 Plan and that would become available under the existing plans pursuant to the plans provisions regarding lapsed,
forfeited, and repurchased awards.
Elimination of Annual Evergreen Provision
Unlike the Director Plan and the 2012 Plan, the 2014 Plan does not contain an annual evergreen provision that increases the number of shares
available for issuance each year. The 2014 Plan authorizes a fixed number of shares, so that stockholder approval is required to increase the maximum number of shares that may be issued subject to awards under the 2014 Plan. Because the Director
Plan and the 2012 Plan each have an annual evergreen provision and the 2014 Plan does not,
the replacement of the existing plans with the 2014 Plan effectively would have a long-term net effect of reducing the number of shares that
will be available for issuance under the Companys equity plans.
Stock Repurchase Program Reduces Stockholder Dilution
Since the Companys stock repurchase program was announced in August 2011, through the end of 2013, we have repurchased a total of 21,294,144 shares
in the open market. Over the same time period, we granted a total of 19,972,522 shares under all of our stock plans. Since we repurchased more stock than we actually granted under our stock plans, we have reduced overall stockholder dilution from
our equity plans, as demonstrated on an annual basis below. These numbers do not reflect the issuance of shares or the assumption of options in connection with acquisitions.
The Company has a demonstrated commitment to offering the best possible balance between providing strong retention and equity participation incentives
to our employees, while accommodating a meaningful and continuing effort to minimize the dilutive effects of our equity awards on our stockholders.
*The 2011 figure
represents the equity granted and stock repurchased from the inception of the stock repurchase program in August 2011.
We believe that the
consolidation of all of the remaining shares previously reserved and approved by the Companys stockholders for issuance under the existing plans into a single plan will streamline our equity compensation program and will assist with reducing
stockholder dilution through the ease of administration.
29
The 2014 Plan Combines Compensation and Governance Best Practices
The 2014 Plan includes provisions that are designed to protect our stockholders interests:
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Administration
.
The 2014 Plan will be administered by the Compensation Committee of the Board, which is comprised entirely of independent non-employee directors.
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|
|
|
Repricing is not allowed without stockholder approval
.
The 2014 Plan prohibits the repricing or other exchange of awards without prior stockholder approval.
|
|
|
|
Limits on Awards to Non-Employee Directors
.
The 2014 Plan sets reasonable limits as to the maximum number of awards that could be granted in each fiscal year of the Company to
non-employee directors.
|
|
|
|
No Single Trigger Vesting Acceleration on Change in Control
.
The 2014 Plan provides that upon a change in control, outstanding awards may be treated as provided by the
administrator, and that, other than with respect to outside directors, only in the event an award is not assumed or substituted will the award vest on a change in control.
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|
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|
Limited transferability
. In general, awards may not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by
operation of law, unless otherwise approved by the Board or a committee of the Board administering the 2014 Plan.
|
|
|
|
No tax gross-ups
. The 2014 Plan does not provide for any tax gross-ups.
|
The 2014 Plan is also designed to provide us the ability to deduct in full for federal income tax purposes the compensation recognized by certain
executive officers in connection with certain awards granted under the 2014 Plan. Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), generally denies a corporate tax deduction for annual compensation
exceeding $1 million paid to the chief executive officer and other covered employees, as determined under Section 162(m) of the Code and applicable guidance. However, certain types of compensation, including performance-based
compensation, are generally excluded from this deductibility limit. To enable compensation in connection with stock options, stock appreciation rights and certain restricted stock grants, restricted stock units, performance shares and performance
units awarded under the 2014 Plan to qualify as performance-based within the meaning of Section 162(m), the 2014 Plan imposes the same limits on the sizes of such awards as the limits in the 2006 Plan, as further described below. By
approving the 2014 Plan, our stockholders will be approving eligibility requirements for participation in the 2014 Plan, the other material terms of the 2014 plan and awards granted under the 2014 plan, including limits on the numbers of shares or
compensation that could be made to participants, and re-approving, among other things, performance measures upon which specific performance goals applicable to certain awards would be based. Notwithstanding the foregoing, we retain the ability to
grant equity awards under the 2014 Plan that do not qualify as performance-based compensation within the meaning of Section 162(m).
Our executive officers and directors have an interest in the approval of the 2014 Plan because they are eligible for awards under the 2014 Plan.
Summary of the 2014 Equity Incentive Plan
The following is a
summary of the principal features of the 2014 Plan and its operation. The summary is qualified in its entirety by reference to the 2014 Plan, a copy of which is attached to this proxy statement as Appendix A, and which is incorporated herein by
reference.
General Description of the 2014 Equity Incentive Plan
The purposes of the 2014 Plan are to attract and retain the best available personnel; to provide additional incentive to employees, directors, and
consultants; and to promote the success of our
30
business. These incentives are provided through the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance units, and performance shares as the
plan administrator (as defined below) may determine.
Authorized Shares
Subject to the adjustment provisions contained in the 2014 Plan, our stockholders are being asked to approve a number of shares of our common stock for
issuance under the 2014 Plan equal to the sum of (i) any shares that are available for issuance under the 2006 Plan, the Director Plan, and the 2012 Plan, each as of March 10, 2014, and (ii) any shares subject to outstanding stock
options, restricted stock units or similar awards that were previously granted under the existing plans that, after March 10, 2014, expire or otherwise terminate without having been vested or exercised in full, or that are forfeited to or
repurchased by the Company, or that are used to pay the exercise price of an award or to satisfy the tax withholding obligations related to an award, with any such shares credited to the aggregate number of shares that may be awarded under the 2014
Plan and with the maximum number of shares to be added under this clause (ii) from the existing plans equal to 18,479,025 shares. The shares may be authorized, but unissued, or reacquired common stock.
If any award granted under the 2014 Plan expires or becomes unexercisable without having been exercised in full, is surrendered pursuant to an exchange
program, or is forfeited to or repurchased by the Company, then the expired, unexercised, forfeited, or repurchased shares subject to such award will become available for future grant or sale under the 2014 Plan. With respect to the exercise of
stock appreciation rights, only shares actually issued pursuant to a stock appreciation right will cease to be available under the 2014 Plan. If unvested shares of restricted stock, restricted stock units, performance shares or performance units are
forfeited to or repurchased by the Company, such shares will become available for future grant under the 2014 Plan. Shares used to pay the exercise price of an award or to satisfy the tax withholding obligations related to an award will become
available for future grant or sale under the 2014 plan. Payment of cash rather than shares pursuant to an award will not result in reducing the number of shares available for issuance under the 2014 plan.
Limitations
The 2014 Plan contains annual grant
limits intended to satisfy Section 162(m). Specifically, the maximum number of shares and/or dollars which could be issued to any one individual pursuant to the 2014 Plan in any fiscal year is set forth below:
|
|
|
Award Type
|
|
Annual Number of Shares
or Dollar Value
|
Stock Option
|
|
5,000,000 shares
|
Stock Appreciation Right
|
|
5,000,000 shares
|
Restricted Stock
|
|
5,000,000 shares
|
Restricted Stock Units
|
|
5,000,000 shares
|
Performance Shares
|
|
5,000,000 shares
|
Performance Units
|
|
Initial Value of $10,000,000
|
Separately, apart from Section 162(m), the 2014 Plan provides that a non-employee board member may not receive
cash-settled awards with a grant date fair value of greater than $2,500,000 (increased to $5,000,000 in the fiscal year his or her service begins) or stock-settled awards with a grant date fair value of greater than $2,500,000 (increased to
$5,000,000 in the fiscal year his or her service begins).
In the event of any dividend or other distribution (whether in the form of cash, shares,
other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares or other securities or
31
other change in the corporate structure affecting our common stock, the 2014 Plan administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended to be
made available under the 2014 Plan, will adjust the number and class of shares that may be delivered under the 2014 Plan, and/or the number, class and price of shares of stock subject to outstanding awards, and the award grant limitations discussed
above.
Administration
The Board has delegated
administration of the 2014 Plan to the Boards Compensation Committee. The Board and the Compensation Committee may further delegate administration of the 2014 Plan to any committee of the Board, or a committee of individuals satisfying
applicable laws appointed by the Board in accordance with the terms of the 2014 Plan. For purposes of this summary of the 2014 Plan, the term administrator will refer to the Board or any committee designated by the Board to administer
the 2014 Plan. To make grants to certain officers and key employees, the members of the committee must qualify as non-employee directors under Rule 16b-3 of the Securities Exchange Act of 1934. In the case of awards intended to qualify
for the performance-based compensation exemption under Section 162(m), administration must be by a committee comprised solely of two or more outside directors within the meaning of Section 162(m).
Subject to the terms of the 2014 Plan, the administrator has the sole discretion to select the service providers who will receive awards; to determine
the terms and conditions of awards; to approve forms of award agreements for use under the 2014 Plan; to modify or amend each award (subject to the repricing restrictions of the 2014 Plan), including to accelerate vesting or waive forfeiture
restrictions, and to interpret the provisions of the 2014 Plan and outstanding awards; and to institute and determine the terms and conditions of an exchange program (with the prior consent of our stockholders). The administrator may allow a
participant to defer the receipt of payment of cash or delivery of shares that otherwise would be due to such participant. The administrator may make rules and regulations relating to sub-plans established for the purpose of satisfying applicable
foreign laws and may make all other determinations deemed necessary or advisable for administering the 2014 Plan. The administrator will issue all awards pursuant to the terms and conditions of the 2014 Plan.
Eligibility
All types of awards may be granted to
non-employee directors of the Company and employees and consultants of the Company or any parent or subsidiary corporation of the Company. Incentive stock options may be granted only to employees who, as of the time of grant, are employees of the
Company or any parent or subsidiary corporation of the Company. As of March 10, 2014, we had approximately 2,583 employees (including one employee director), seven non-employee directors and no consultants.
Stock Options
Each option granted under the 2014 Plan
will be evidenced by a written or electronic agreement between the Company and a participant specifying the number of shares subject to the option and the other terms and conditions of the option, consistent with the requirements of the 2014 Plan.
The exercise price per share of each option may not be less than the fair market value of a share of our common stock on the date of grant.
However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company
must have an exercise price per share equal to at least 110% of the fair market value of a share on the date of grant. The aggregate fair market value of the shares (determined on the grant date) covered by incentive stock options which first become
exercisable by any participant during any calendar year also
32
may not exceed $100,000. Generally, the fair market value of the common stock is the closing sales price of our stock as reported on the Nasdaq Stock Market or such other national securities
exchange or automated inter-dealer quotation system on which the shares are listed.
The 2014 Plan provides that the administrator will determine
the acceptable form(s) of consideration for exercising an option. An option will be deemed exercised when we receive the notice of exercise and full payment for the shares to be exercised, together with applicable tax withholdings.
Options will be exercisable at such times or under such conditions as determined by the administrator and set forth in the award agreement. The maximum
term of an option will be specified in the award agreement, provided that options will have a maximum term of no more than seven years, and provided further that an incentive stock option granted to a ten percent stockholder must have a term not
exceeding five years.
The administrator will determine and specify in each award agreement, and solely in its discretion, the period of
post-termination exercise applicable to each option following the participants cessation of service with the Company. In the absence of such a determination by the administrator, the participant or his or her estate generally will be able to
exercise the vested portion of an option for: (i) 3 months following his or her cessation of service for reasons other than death or disability and (ii) 12 months following his or her cessation of service due to death or disability.
Stock Appreciation Rights
A stock appreciation right
gives a participant the right to receive the appreciation in the fair market value of our common stock between the date of grant of the award and the date of its exercise. Each stock appreciation right granted under the 2014 Plan will be evidenced
by a written or electronic agreement between the Company and the participant specifying the exercise price and the other terms and conditions of the award, consistent with the requirements of the 2014 Plan.
The exercise price per share of each stock appreciation right may not be less than the fair market value of a share on the date of grant. Upon exercise
of a stock appreciation right, the holder of the award will be entitled to receive an amount determined by multiplying: (i) the difference between the fair market value of a share on the date of exercise and the exercise price; by (ii) the
number of exercised stock appreciation rights. We may pay the appreciation in cash, in shares, or in some combination thereof. The term of a stock appreciation right will be no more than seven years from the date of grant. The terms and conditions
relating to the period of post-termination exercise with respect to options described above also apply to stock appreciation rights.
Restricted Stock Awards
Awards of restricted stock are rights to acquire or purchase shares, which vest in accordance with the terms and conditions established by
the administrator in its sole discretion. Each restricted stock award granted will be evidenced by a written or electronic agreement between the Company and the participant specifying the number of shares subject to the award and the other terms and
conditions of the award, consistent with the requirements of the 2014 Plan. Restricted stock awards may be subject to vesting conditions as the administrator specifies. Notwithstanding the foregoing, if the administrator desires that the award
qualify as performance-based compensation under Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements, as further discussed below.
Unless otherwise provided by the administrator, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed
prior to the participants termination of service. Unless the administrator provides otherwise, participants holding restricted stock will have the right to
33
vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions and forfeitability as the original award.
The administrator may, in its sole discretion, reduce or waive any restrictions and may accelerate the time at which any restrictions will lapse or be removed.
Restricted Stock Units
The administrator may grant
restricted stock units, which represent a right to receive cash or shares at a future date as set forth in the participants award agreement. Each restricted stock unit granted under the 2014 Plan will be evidenced by a written or electronic
agreement between the Company and the participant specifying the number of shares subject to the award and other terms and conditions of the award, consistent with the requirements of the 2014 Plan.
Restricted stock units will result in a payment to a participant only if the performance goals or other vesting criteria the administrator may establish
are achieved or the awards otherwise vest. The administrator may set vesting criteria based upon the achievement of company-wide, divisional, business unit or individual goals (including, but not limited to, continued employment or service),
applicable federal or state securities laws, or any other basis determined by the administrator, in its discretion. Notwithstanding the foregoing, if the administrator desires that the award qualify as performance-based compensation under
Section 162(m), any restrictions will be based on a specified list of performance goals and certain other requirements, as further discussed below.
After the grant of a restricted stock unit award, the administrator, in its sole discretion, may reduce or waive any restrictions or vesting criteria
that must be met to receive a payout and may accelerate the time at which any restrictions will lapse or be removed. A participant will forfeit any unearned restricted stock units as of the date set forth in the award agreement. The administrator in
its sole discretion may pay earned restricted stock units in cash, shares of our common stock, or a combination of cash and shares.
Performance Units and
Performance Shares
Performance units and performance shares may also be granted under the 2014 Plan. Each award of performance units or
shares granted under the 2014 Plan will be evidenced by a written or electronic agreement between the Company and the participant specifying the performance period and other terms and conditions of the award, consistent with the requirements of the
2014 Plan. Performance units and performance shares will result in a payment to a participant only if the performance goals or other vesting criteria the administrator may establish are achieved or the awards otherwise vest.
Earned performance units and performance shares will be paid, in the sole discretion of the administrator, in the form of cash, shares (which will have
an aggregate fair market value equal to the earned performance units or shares at the close of the applicable performance period) or in a combination thereof. The administrator may set vesting criteria based upon the achievement of company-wide,
divisional, business unit or individual goals (including, but not limited to, continued employment or service), applicable federal or state securities laws, or any other basis determined by the administrator, in its discretion. Notwithstanding the
foregoing, if the administrator desires that the award qualify as performance-based compensation under Section 162(m), any vesting criteria will be based on a specified list of performance goals and certain other requirements, as further
discussed below.
After the grant of a performance unit or performance share, the administrator, in its sole discretion, may accelerate, reduce or
waive any performance objectives or other vesting provisions for
34
such performance units or shares. Performance units will have an initial value established by the administrator on or before the date of grant. Each performance share will have an initial value
equal to the fair market value of a share on the grant date. A participant will forfeit any performance shares or units that are unearned or unvested as of the date set forth in the award agreement.
Performance Goals
The granting and/or vesting of
awards of restricted stock, restricted stock units, performance shares and performance units, and other incentives under the 2014 Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the
meaning of Section 162(m) and may provide for a targeted level or levels of achievement, including: cash flow (including operating cash flow or free cash flow), revenue (on an absolute basis or adjusted for currency effects), gross margin,
operating expenses or operating expenses as a percentage of revenue, earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings or EBITDA), earnings per share, stock price, return on equity, total stockholder
return, growth in stockholder value relative to the moving average of the S&P 500 Index, or another index, return on capital, return on assets or net assets, return on investment, economic value added, operating income or net operating income,
operating margin, market share, overhead or other expense reduction, credit rating, objective customer indicators, improvements in productivity, attainment of objective operating goals, objective employee metrics, return ratios, objective
qualitative milestones, or other objective financial or other metrics relating to the progress of the Company or to a subsidiary, division or department of the Company. Any performance goals may be used to measure the performance of the Company as a
whole or, except with respect to stockholder return metrics, to a region, business unit, affiliate or business segment, and may be measured either on an absolute basis, a per share basis or relative to a pre-established target, to a previous
periods results or to a designated comparison group, and, with respect to financial metrics, which may be determined in accordance with United States Generally Accepted Accounting Principles (GAAP), in accordance with accounting
principles established by the International Accounting Standards Board (IASB) or which may be adjusted when established to either exclude any items otherwise includable under GAAP or under IASB principles or include any items otherwise
excludable under GAAP or under IASB principles. The performance goals may differ from participant to participant and from award to award.
To the
extent necessary to comply with the performance-based compensation provisions of Section 162(m), with respect to any award granted subject to performance goals, and within the first 25% of the performance period and no more than 90 days
following the commencement of the performance period (or such other time required or permitted by Section 162(m)), the administrator will, in writing: (i) designate one or more participants to whom an award will be made; (ii) select
the performance goals applicable to the performance period; (iii) establish the performance goals, and amounts or methods of computation of the awards which may be earned for the performance period; and (iv) specify the relationship
between performance goals and the amounts or methods of computation of such awards, as applicable, to be earned by each participant for such performance period. Following the completion of each performance period, the administrator will certify in
writing whether the applicable performance goals have been achieved for such performance period. In determining the amounts earned by a participant, the administrator may reduce or eliminate (but not increase) the amount payable at a given level of
performance to take into account additional factors that the administrator may deem relevant to the assessment of individual or corporate performance for the performance period. A participant will be eligible to receive payment pursuant to an award
for a performance period only if the performance goals for such period are achieved.
Transferability of Awards
Awards generally are not transferable other than by will or by the laws of descent or distribution.
35
Dissolution or Liquidation
In the event of the Companys proposed dissolution or liquidation, the administrator will notify each participant as soon as practicable prior to
the effective date of such proposed transaction. An award will terminate immediately prior to consummation of such proposed action to the extent the award has not been previously exercised or remains unvested.
Change in Control
The 2014 Plan provides that, in the
event of a change in control (as defined in the 2014 Plan), each award will be treated as the administrator determines, including that each award be assumed or substantially equivalent awards substituted by the acquiring or succeeding
corporation or its affiliate. The administrator will not be required to treat all outstanding awards the same in the transaction.
If the successor
corporation does not assume or substitute for the award, the participant will fully vest in and have the right to exercise all of his or her outstanding options and stock appreciation rights, all restrictions on restricted stock and restricted stock
units will lapse, and, with respect to awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, if an option or stock
appreciation right is not assumed or substituted for, the administrator will notify the participant in writing or electronically that the option or stock appreciation right will be exercisable for a period of time determined by the administrator, in
its sole discretion, and the option or stock appreciation right will terminate upon the expiration of such period.
For awards granted to our
non-employee directors that are assumed or substituted for, if such a director ceases to be a director immediately prior to, on the closing of, or within twelve months following the change in control, then the director will fully vest in and have
the right to exercise all of his or her outstanding options and stock appreciation rights, all restrictions on restricted stock and restricted stock units will lapse, and, with respect to awards with performance-based vesting, all performance goals
or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met.
Termination or Amendment
The 2014 Plan will automatically terminate ten years from the date of its adoption by the Board, unless terminated at an earlier time by the Board. The
administrator may amend, alter, suspend or terminate the 2014 Plan at any time, provided that no amendment may be made without stockholder approval to the extent approval is necessary or desirable to comply with any applicable laws. No amendment,
alteration, suspension or termination may impair the rights of any participant unless mutually agreed otherwise between the participant and the administrator.
Summary of U.S. Federal Income Tax Consequences
The
following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the 2014 Plan. The summary is based on existing U.S. laws and regulations, and there can be no assurance that those laws and
regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participants death, or the provisions of the income tax laws of any municipality, state or foreign country
in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances.
Incentive Stock
Options
An optionee recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock
option qualifying under Section 422 of the Internal Revenue
36
Code of 1986, as amended. Optionees who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option
normally will recognize a capital gain or loss equal to the difference, if any, between the sale price and the purchase price of the shares. If an optionee satisfies such holding periods upon a sale of the shares, we will not be entitled to any
deduction for federal income tax purposes. If an optionee disposes of shares within two years after the date of grant or within one year after the date of exercise (a disqualifying disposition), the difference between the fair market
value of the shares on the exercise date and the option exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income
at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the optionee upon the
disqualifying disposition of the shares generally should be deductible by the Company for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Internal Revenue Code of 1986, as amended.
The difference between the option exercise price and the fair market value of the shares on the exercise date is treated as an adjustment in computing
the optionees alternative minimum taxable income in the year of exercise and may be subject to an alternative minimum tax which is paid if such tax exceeds the regular tax for the year. Special rules may apply with respect to certain
subsequent sales of the shares in a disqualifying disposition, certain basis adjustments for purposes of computing the alternative minimum taxable income on a subsequent sale of the shares and certain tax credits which may arise with respect to
optionees subject to the alternative minimum tax.
Nonstatutory Stock Options
Options not designated or qualifying as incentive stock options will be nonstatutory stock options having no special U.S. tax status. An optionee
generally recognizes no taxable income as the result of the grant of such an option. Upon exercise of a nonstatutory stock option, the optionee normally recognizes ordinary income equal to the amount that the fair market value of the shares on such
date exceeds the exercise price. If the optionee is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or
loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as capital gain or loss. No tax deduction is available to the Company with respect to the grant of a nonstatutory stock option or the
sale of the stock acquired pursuant to such grant.
Stock Appreciation Rights
In general, no taxable income is reportable when a stock appreciation right is granted to a participant. Upon exercise, the participant generally will
recognize ordinary income in an amount equal to the fair market value of any shares of our common stock received. Any additional gain or loss recognized upon any later disposition of the shares would be capital gain or loss.
Restricted Stock Awards
A participant acquiring
restricted stock generally will recognize ordinary income equal to the fair market value of the shares on the vesting date. If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes.
The participant may elect, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to accelerate the ordinary income tax event to the date of acquisition by filing an election with the Internal Revenue Service no later than
thirty days after the date the shares are acquired. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax
event occurs, will be taxed as capital gain or loss.
37
Restricted Stock Unit Awards
There are no immediate tax consequences of receiving an award of restricted stock units. A participant who is awarded restricted stock units generally
will be required to recognize ordinary income in an amount equal to the fair market value of shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date elected by the administrator or a
participant. Any additional gain or loss recognized upon any later disposition of any shares received would be capital gain or loss.
Performance Shares and
Performance Unit Awards
A participant generally will recognize no income upon the grant of a performance share or a performance unit award.
Upon the settlement of such awards, participants normally will recognize ordinary income in the year of receipt in an amount equal to the cash received and the fair market value of any cash or unrestricted shares received. If the participant is an
employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value on the date the
ordinary income tax event occurs, will be taxed as capital gain or loss.
Section 409A
Section 409A provides certain requirements for non-qualified deferred compensation arrangements with respect to an individuals deferral and
distribution elections and permissible distribution events. Awards granted under the 2014 Plan with a deferral feature will be subject to the requirements of Section 409A. If an award is subject to and fails to satisfy the requirements of
Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is
subject to Section 409A fails to comply with Section 409As provisions, Section 409A imposes an additional 20% federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation.
Tax Effect for the Company
We generally will be
entitled to a tax deduction in connection with an award under the 2014 Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a nonstatutory stock
option) except to the extent such deduction is limited by applicable provisions of the Internal Revenue Code of 1986, as amended. Special rules limit the deductibility of compensation paid to our chief executive officer and other covered
employees as determined under Section 162(m) and applicable guidance. Under Section 162(m), the annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000.
However, we can preserve the deductibility of certain compensation in excess of $1,000,000 if the conditions of Section 162(m) are met. These conditions include (among others) stockholder approval of the 2014 Plan and its material terms,
setting limits on the number of awards that any individual may receive and for awards other than certain stock options and stock appreciation rights, establishing performance criteria that must be met before the award actually will vest or be paid.
The 2014 Plan has been designed to permit (but not require) the plan administrator to grant awards that are intended to qualify as performance-based for purposes of satisfying the conditions of Section 162(m).
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECTS OF FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY WITH RESPECT TO AWARDS UNDER THE 2014 PLAN.
IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX CONSEQUENCES OF A PARTICIPANTS DEATH OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN
WHICH THE PARTICIPANT MAY RESIDE.
38
Number of Awards Granted to Employees, Consultants and Directors
The number of awards that an employee, director or consultant may receive under the 2014 Plan is in the discretion of the administrator and therefore
cannot be determined in advance. The following table sets forth: (i) the aggregate number of shares of common stock subject to options granted under the existing plans during fiscal year 2013 to each of our named executive officers; executive
officers, as a group; directors who are not executive officers, as a group; and all employees who are not executive officers, as a group; (ii) the average per share exercise price of such options; and (iii) the aggregate number of shares
of restricted stock or restricted stock units granted under the existing plans during fiscal year 2013 to each of our named executive officers; executive officers, as a group; directors who are not executive officers, as a group; and all employees
who are not executive officers, as a group.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name of Individual or Group
|
|
Number of
Shares
Subject to
Options
Granted
|
|
|
Average Per
Share
Exercise
Price of
Option
Grants
|
|
|
Number of
Shares
Subject to
Restricted
Stock Units
Granted
|
|
|
Dollar Value of
Shares Subject
to Restricted
Stock Units
Granted
|
|
Jerry M. Kennelly, Chief Executive Officer & Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
574,300
|
|
|
$
|
10,383,344
|
|
Ernest E. Maddock, Executive Vice President and Chief Financial Officer
|
|
|
50,000
|
|
|
$
|
15.69
|
|
|
|
75,000
|
|
|
$
|
1,356,000
|
|
Randy S. Gottfried, former Chief Financial Officer and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
172,600
|
|
|
$
|
3,120,608
|
|
Eric S. Wolford, former President, Products and Marketing
|
|
|
|
|
|
|
|
|
|
|
230,400
|
|
|
$
|
4,165,632
|
|
David M. Peranich, President, Worldwide Field Operations
|
|
|
|
|
|
|
|
|
|
|
219,700
|
|
|
$
|
3,972,176
|
|
Brett A. Nissenberg, General Counsel, Senior Vice President of Corporate and Legal Affairs and Secretary
|
|
|
|
|
|
|
|
|
|
|
78,800
|
|
|
$
|
1,424,704
|
|
All executive officers, as a group
|
|
|
50,000
|
|
|
$
|
15.69
|
|
|
|
1,627,200
|
|
|
$
|
29,419,776
|
|
All directors who are not executive officers, as a group
|
|
|
60,000
|
|
|
$
|
15.15
|
|
|
|
107,300
|
|
|
$
|
1,939,984
|
|
All employees who are not executive officers, as a group
|
|
|
2,020,700
|
|
|
$
|
15.77
|
|
|
|
6,218,517
|
|
|
$
|
112,430,787
|
|
Recommendation of the Board of Directors
The Board recommends that stockholders vote FOR approval of Proposal 4
Approval of Riverbed Technology, Inc. 2014 Equity Incentive Plan.
39
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 10,
2014 are set forth below:
Ernest E. Maddock
, age 55, has served as our Chief Financial Officer since May 2013 and as Executive Vice
President since April 2013. From September 2008 to March 2013, Mr. Maddock served as Executive Vice President and Chief Financial Officer of Lam Research Corporation, a designer and manufacturer of semiconductor processing equipment, and in
April 2013, prior to his joining Riverbed, Mr. Maddock served as Executive Vice President of Lam Research Corporation. From October 2003 to September 2008, Mr. Maddock served as Senior Vice President of Global Operations of Lam Research
Corporation. Mr. Maddock holds a Bachelors degree in business management from the Georgia Institute of Technology and a master of business administration degree in finance from Georgia State University.
David M. Peranich
, age 52, has served as our President, Worldwide Field Operations since October 2012. He served as our Executive Vice President
of Worldwide Sales from January 2011 until October 2012. 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 Bachelors degree in Mechanical Engineering from Virginia Polytechnic Institute and State University and an M.S. in Systems Management from the University of Southern California.
Brett A. Nissenberg
, age 40, has served as our General Counsel since joining us in February 2005, as our Senior Vice President of Corporate and
Legal Affairs since January 2011 and as our Secretary since April 2006. He served as our Vice President of Corporate and Legal Affairs from February 2005 to January 2011. From October 1997 to January 2005, Mr. Nissenberg was an attorney with
the law firm of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, where he represented investors and public and private technology companies in venture capital and corporate financings, public offerings, mergers and
acquisitions and other strategic transactions. Mr. Nissenberg holds a Bachelors degree in Political Science from the University of California, Los Angeles, and a J.D. from UCLA School of Law.
40
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 10, 2014 by:
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each person known by us to be the beneficial owner of more than 5% of any class of our voting securities;
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our named executive officers;
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each of our directors; and
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all executive officers and directors as a group.
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The table below is based upon information supplied by
officers, directors and principal stockholders and filings made 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 10, 2014 and restricted stock units
that will become vested within 60 days of March 10, 2014 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. Percent beneficially owned is based on 160,572,259 shares of common stock outstanding on
March 10, 2014. 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.
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Beneficial Ownership
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Name and Address of Beneficial Owner
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Amount and
Nature of
Beneficial
Ownership
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Percent
Beneficially
Owned
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5% Stockholders:
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BlackRock, Inc. (1)
40
East 52
nd
Street
New York, NY 10022
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10,097,903
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6.3
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%
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Elliott Associates, L.P. (2)
40 West 57
th
Street, 30
th
Floor
New York, NY 10019
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14,716,446
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9.2
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%
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FMR LLC (3)
245 Summer Street
Boston, MA
02210
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24,581,239
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15.3
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%
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Orbis Investment Management, Limited (4)
ORBIS House
25
Front Street
Hamilton Bermuda, HM11
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12,951,420
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8.1
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%
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The Vanguard Group, Inc. (5)
100 Vanguard Blvd.
Malvern, PA
19355
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9,153,479
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5.7
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%
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41
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Beneficial Ownership
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Name and Address of Beneficial Owner
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Amount and
Nature of
Beneficial
Ownership
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Percent
Beneficially
Owned
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Directors and Named Executive Officers:
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Jerry M. Kennelly (6)
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4,477,640
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2.8
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%
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Michael Boustridge (7)
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100,000
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*
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Mark A. Floyd (8)
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85,467
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*
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Michael R. Kourey (9)
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135,645
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*
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Mark S. Lewis (10)
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143,300
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*
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Christopher J. Schaepe (11)
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90,412
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*
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Kimberly S. Stevenson (12)
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15,467
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*
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Ernest E. Maddock (13)
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24,181
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*
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Randy S. Gottfried (14)
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25,000
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*
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Eric S. Wolford (15)
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46,095
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*
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David M. Peranich (16)
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309,161
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*
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Brett A. Nissenberg (17)
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19,722
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*
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All current directors and executive officers as a group (12 persons) (18)
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5,472,090
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3.4
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%
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*
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Less than 1% of the outstanding shares of common stock.
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(1)
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Information concerning stock ownership was obtained from Amendment No. 3 to the Schedule 13G filed by BlackRock, Inc. with the SEC on January 30, 2014. BlackRock, Inc. reported sole voting power with respect
to 9,528,412 shares of common stock and sole dispositive power with respect to 10,097,903 shares of common stock.
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(2)
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Information concerning stock ownership was obtained from Amendment No. 3 to the Schedule 13D filed with the SEC on January 14, 2014 by Elliott Associates, L.P., Elliott International, L.P. and Elliott
International Capital Advisors Inc. Elliott Associates, L.P. reported sole voting and dispositive power with respect to 5,150,756 shares of common stock. Elliott International, L.P. and Elliott International Capital Advisors each reported shared
voting and dispositive power with respect to 9,565,690 shares of common stock. Elliott Associates, L.P., Elliott International, L.P. and Elliott International Capital Advisors also reported economic exposure to approximately 1.5% of additional
shares of common stock.
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(3)
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Information concerning stock ownership was obtained from Amendment No. 7 to the Schedule 13G filed with the SEC on February 14, 2014 by FMR LLC and Edward C. Johnson III. FMR LLC and Mr. Johnson reported
sole voting power with respect to 2,512,052 shares of common stock and sole dispositive power with respect to 24,581,239 shares of common stock.
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(4)
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Information concerning stock ownership was obtained from the Schedule 13G filed with the SEC on February 14, 2014 by Orbis Investment Management (U.S.), LLC, Orbis Investment Management Limited, and Orbis Asset
Management Limited. The foregoing entities reported sole voting and dispositive power with respect to 12,951,420 shares of common stock.
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(5)
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Information concerning stock ownership was obtained from the Schedule 13G filed with the SEC on February 12, 2014 by the Vanguard Group, Inc. The Vanguard Group, Inc. reported sole voting power with respect to
102,929 shares of common stock, sole dispositive power with respect to 9,061,316 shares of common stock and shared dispositive power with respect to 92,163 shares of common stock.
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(6)
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Represents 858,476 shares of common stock held by Mr. Kennelly, 2,585,834 shares of common stock held by Kennelly Partners, L.P., and 1,033,330 shares of
common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 601,688 shares
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42
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subject to restricted stock units that are not vested within 60 days of March 10, 2014. On May 23, 2002, Mr. Kennelly purchased 10,000,000 shares of common stock in connection with
his co-founding of Riverbed. Shares from that purchase continue to comprise a significant portion of Mr. Kennellys overall shareholdings.
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(7)
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Represents 100,000 shares of common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 16,900 shares subject to restricted stock units that are not vested within 60 days
of March 10, 2014.
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(8)
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Represents 19,800 shares of common stock held by Mr. Floyd and 65,667 shares of common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 1,167 shares subject to
options that are not exercisable, and 16,900 shares subject to restricted stock units that are not vested, within 60 days of March 10, 2014.
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(9)
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Represents 19,800 shares of common stock held by Mr. Kourey, 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 110,833 shares of
common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 1,167 shares subject to options that are not exercisable, and 16,900 shares subject to restricted stock units that are not vested, within 60
days of March 10, 2014.
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(10)
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Represents 23,300 shares of common stock held by Mr. Lewis and 120,000 shares of common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 16,900 shares subject to
restricted stock units that are not vested within 60 days of March 10, 2014.
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(11)
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Represents 42,912 shares of common stock held by Mr. Schaepe and 47,500 shares of common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 834 shares subject to
options that are not exercisable, and 16,900 shares subject to restricted stock units that are not vested, within 60 days of March 10, 2014.
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(12)
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Represents 3,800 shares of common stock held by Ms. Stevenson and 11,667 shares of common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 18,333 shares subject to
options that are not exercisable, and 7,600 shares subject to restricted stock units that are not vested, within 60 days of March 10, 2014.
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(13)
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Represents 11,681 shares of common stock held by Mr. Maddock, and 12,500 shares of common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 37,500 shares subject to
options that are not exercisable, and 75,000 shares subject to restricted stock units that are not vested, within 60 days of March 10, 2014.
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(14)
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Represents 25,000 shares of common stock held by Randy S. Gottfried, Trustee of the Randy S. Gottfried Trust dated January 7, 2005.
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(15)
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Represents 46,095 shares of common stock held by Mr. Wolford.
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(16)
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Represents 235,271 shares of common stock held by Mr. Peranich and 73,890 shares of common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014. Excludes 222,955 shares subject
to restricted stock units that are not vested within 60 days of March 10, 2014.
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(17)
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Represents 19,722 shares of common stock held by Mr. Nissenberg. Excludes 79,707 shares subject to restricted stock units that are not vested within 60 days of March 10, 2014.
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(18)
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Includes 1,575,387 shares of common stock issuable upon exercise of options exercisable within 60 days of March 10, 2014.
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43
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 2013 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 2013, 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 2013.
44
COMPENSATION OF EXECUTIVE OFFICERS
Compensation Committee Report
In
2013, the Compensation Committee of the Board of Directors was comprised of the following non-employee members of the Board of Directors: Messrs. Boustridge, Floyd and Schaepe. 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 Committees primary responsibility is to review the performance of our management in achieving corporate goals and objectives and
to ensure that our management is compensated effectively in a manner consistent with our strategy and competitive practices. Toward that end, the Compensation Committee oversees, reviews and administers all of our 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 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, Chairman
Compensation Discussion and Analysis
This section explains our executive compensation program as it relates to the following individuals
that were our named executive officers in 2013:
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Jerry M. Kennelly
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Chief Executive Officer
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Ernest E. Maddock
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Chief Financial Officer
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David M. Peranich
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President, Worldwide Field Operations
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Brett A. Nissenberg
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General Counsel and Senior Vice President
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Randy S. Gottfried
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Former Chief Financial Officer and Chief Operating Officer
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Eric S. Wolford
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Former President, Products and Marketing
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Mr. Gottfrieds last day of employment with us was May 2, 2013.
Mr. Wolfords last day of employment with us was November 15, 2013.
The tables immediately following this section provide compensation information for the named executive officers.
Executive Summary
We believe that the skill, talent,
judgment and dedication of our executive officers are critical factors affecting the long-term value of the Company. Therefore, the goal for our executive compensation program is to compensate our executives fairly, 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. Our executive compensation program
satisfies this goal by emphasizing long-term performance based equity awards, which strongly align the long-term interests of our executives and our stockholders. This structure has benefited the Company and our stockholders by focusing on sustained
growth.
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We believe the compensation program for the named executive officers was instrumental in helping us achieve
strong financial performance in 2013 despite a mixed economic environment.
Three Year Financial Performance.
Over the
past three fiscal years:
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Our revenues have increased over 43% from fiscal year 2011 to fiscal year 2013, representing annual compounded growth of approximately 20%.
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Our gross profits have increased over 37% from fiscal year 2011 to fiscal year 2013, representing annual compounded growth of approximately 17%.
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2013 Financial Performance.
In 2013:
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The Companys revenue grew to $1.0 billion, representing an increase of 24% over 2012.
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Gross profit grew to $759 million, an increase of $127 million over 2012.
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Product revenue increased 12% versus 2012, and service and support revenue increased 47% versus 2012.
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The Company generated $192 million in free cash flow.
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The Company enjoyed another year of strong earnings and operational excellence.
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2013 Business
Performance.
Among our business highlights for 2013:
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Announced a multi-product platform strategy to expand within the estimated $11 billion Application Performance Infrastructure market.
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Continued to maintain the market leadership position in WAN Optimization.
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Extended the market-leading Steelhead
®
solution set with the introduction of RiOS
®
8.5. RiOS 8.5
introduces Path Selection, which allows IT organizations to cost-effectively deploy and manage complex hybrid networks, ensuring the right path and service level for each application with no impact to end user experience.
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Introduced the Steelhead CX 255 Series appliance, bringing our award-winning enterprise-class wide area network (WAN) optimization cost-effectively to every branch office.
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Received InfoWorld Technology of the Year awards for both Riverbed Granite
®
and Steelhead WAN optimization solutions. Granite received this recognition for the
second consecutive year, and Steelhead has received this recognition eight consecutive times.
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Achieved the integration of the Riverbed Cascade
®
and OPNET product families, introducing a single appliance combining application-aware network performance
management and application performance management. The integrated solution provides end-to-end performance management, giving customers a single solution to maximize performance, availability and productivity of critical applications.
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Introduced a single integrated WAN Optimization and Performance Management solution that brings together the Riverbed Steelhead WAN Optimization product family and the Riverbed Cascade network performance management
product family to deliver application acceleration anywhere while enhancing end-user experience and visibility.
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Announced general availability of Riverbed Granite 2.6, with new features that support more branches, bigger data sets and additional enterprise-class storage solutions. Riverbed Granite extends the virtual edge of the
data center to the branch office, allowing IT to consolidate and manage all edge servers in the data center.
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Introduced new application delivery as a service with the Riverbed Stingray
®
Services Controller, making possible an ADC per application deployment
model that directly addresses the evolving application and data center architectures, workflows and operations models that call for a next-generation application delivery controller (ADC) architecture.
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46
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Released Riverbed Stingray Traffic Manager 9.5, a full-performance software and virtual Layer 7 ADC that enables enterprises and cloud operators to create, manage and deliver key services more quickly, more flexibly,
and at a lower cost.
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Announced important improvements to our partner program intended to better enable partners to capitalize on new market prospects and accelerate their growth.
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Received certification under the J.D. Power and Associates Certified Technology Service & Support (CTSS) program and the Technology Service Industry Associations (TSIA) Excellence in Service Operations
for the third consecutive year.
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Recognized as one of the top 20 Best Places to Work in the Glassdoor Employees Choice Awards for the second consecutive year. Riverbed was also ranked among the top 10 best places to work in the technology
industry.
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2013 Executive Compensation.
Among our highlights for 2013 executive officer compensation:
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Base salaries generally increased on a larger percentage basis versus 2012, primarily driven by promotions and increasing job responsibilities for three of our executive officers as well as by alignment in relation to
peer companies.
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Target performance-based cash bonuses generally increased on a smaller percentage basis versus 2012, primarily driven by alignment in relation to peer companies.
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As compared to 2012, target value of long-term equity awards under the 2013 Long-Term Incentive Plan declined for Mr. Kennelly, and remained the same for Mr. Gottfried. Overall, target values of long-term
equity awards under the 2013 Long-Term Incentive Plan increased as compared to the target values from 2012 for only three of our executive officers.
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100% of the equity grants received by our executive officers were tied to performance-based RSUs and therefore at risk of complete forfeiture in the event we failed to achieve defined criteria set forth in our 2013
Long-Term Incentive Plan.
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In anticipation of the significant efforts expected to be required to successfully integrate the operations of OPNET in 2013, and in order to highlight the importance of achieving expense synergies in a relatively quick
timeframe, our executive officers received a supplemental at-risk equity award tied to a full year non-GAAP EPS target for the Company, with subsequent vesting of any earned shares not occurring until one year after achievement of the goal, for a
total of two years (the OPNET equity awards). The OPNET equity awards are viewed by the Compensation Committee as unique and non-recurring, and were intended to motivate towards achievement of a key short-term Company goal.
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Our executive officers earned 82% of the Long-Term Incentive Plan equity awards tied to revenue targets and 100% of the Long-Term Incentive Plan equity awards tied to non-GAAP earnings per share. In addition, our
executive officers earned 88% of the OPNET equity awards.
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Our Board of Directors adopted stock ownership guidelines and a financial restatement clawback policy, each effective with respect to our executive officers and each as further described below.
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Messrs. Gottfried, Peranich and Wolford each received promotions in the fourth quarter of 2012 in recognition of their significant individual
contributions, increasing job responsibilities, and opportunity to further beneficially expand their roles with us. Mr. Nissenberg was made one of our executive officers by the Board of Directors in the fourth quarter of 2012 in light of the
increasing scale of the prevailing legal and regulatory environment and Mr. Nissenbergs key role in determining our legal and corporate governance policy. Each of these changes was taken into account by the Compensation Committee in
evaluating and determining executive officer compensation for 2013.
47
Overall for 2013, the total amount of at-risk compensation reported for the named executive officers,
either in the form of performance-based equity awards or variable cash incentives, in proportion to the total compensation reported for the named executive officers in the Summary Compensation Table below is approximately 94% for our Chief Executive
Officer and approximately 89% for all of our other named executive officers combined.
The above information regarding 2013 executive compensation excludes Mr. Maddock, who joined us in April 2013
and began his tenure as Chief Financial Officer in May 2013. Mr. Maddock, as part of his initial equity award arrangement, was granted an option to purchase 50,000 shares of our common stock at a per share exercise price equal to the fair
market value of a share of common stock on the grant date. The option vests and becomes exercisable over four years. Mr. Maddock was also granted a restricted stock unit award for 75,000 shares of our common stock that vests over two years.
Mr. Maddocks compensation package was determined in arms length negotiations and was approved by our Compensation Committee. Beginning in 2014, Mr. Maddocks compensation will be determined similar to our other executive
officers, including equity awards that are performance-based only and therefore subject to complete forfeiture or substantial reduction in the event the applicable performance goals are not achieved.
48
Compensation Philosophy and Objectives
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 officers 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 our share burn rate and the dilutive effects of our equity awards on our stockholders. As part of this review, the
Compensation Committee reviews our gross and net share burn rates compared to our peer group and the broader industry, as summarized by Radford.
The specific goals of our 2013 executive compensation program were revenue growth, consistency of revenue growth and earnings per share. We believe that
growth and revenue-oriented targets continue to be more appropriate to overweight versus targets focused on other criteria. In particular, because we have been able to consistently achieve high gross margins, revenue growth translates to additional
earnings at a high rate. As a result, additional revenue is the strongest lever for increasing profitability.
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 executives generally. In general, the annual pay targets for our executive officers are positioned in relation to peer companies to be above the 50
th
percentile in base
salary, and at the 75
th
percentile for both target total cash compensation (base salary plus short-term cash incentives) and target total direct compensation (including long-term equity
incentives). An individual executive may be either above or below the targeted compensation positioning based on a variety of factors, including job performance and experience. For 2013, excluding the OPNET equity awards, the
target
total
direct compensation for our continuing executive officers, Messrs. Kennelly, Maddock, Peranich and Nissenberg, fell between the 50
th
and 75
th
percentile in relation to peer companies.
The Compensation Committee recognizes that we are outside the norm as measured against our peer companies
in our exclusive use of performance-based equity awards for our executive officers. Based on peer data reviewed by the Compensation Committee during 2013, approximately 40% of our peer companies grant equity to executive officers as a mix of
time-based and performance-based RSUs, and approximately 33% of our peer companies grant executive officers a mix of stock options, time-based RSUs and performance-based RSUs. Performance-based RSUs make up, on average, only approximately 35% of the
total annual equity granted to executive officers by our peer companies.
Riverbed, however, exclusively provides long-term incentive opportunities
to our executive officers via at-risk performance-based awards, except in circumstances where it may be necessary to entice a new executive officer to join us as was the case with Mr. Maddock in 2013. Given that a meaningfully larger portion of
the total compensation opportunity for our executive officers is comprised of at-risk awards tied to performance, the Compensation Committee believes that it is reasonable to target total direct compensation for our executive officers in the 75
th
percentile range in relation to peer companies.
The targeted compensation positioning as it
relates to both short-term cash incentives and
long-term
equity incentives is met only if specific performance goals are achieved. These performance goals have historically been set aggressively. For example,
despite strong 15% year over year revenue
49
growth in 2012, none of the 2012 equity awards relating to revenue achievement were earned by our executive officers. In 2013, despite 24% year over year revenue growth, only 82% of the 2013
equity awards relating to revenue achievement were earned by our executive officers.
The chart below illustrates the alignment between our year
over year revenue growth for the past three fiscal years and the total earned compensation paid to our Chief Executive Officer during the corresponding fiscal year.
*Total earned compensation is defined to include base salary, actual earned cash-based incentives, the equity awards
under the Long-Term Incentive Plan that became eligible to vest based on performance (as measured based on the grant date value of such awards), and all other compensation paid during the fiscal year. For 2013, the earned OPNET equity awards are
excluded from this calculation.
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 designed to enhance
stockholder value.
Compensation Governance Practices
The Compensation Committee believes that a demonstrated commitment to best practices in compensation governance is itself a critical component of our
approach to executive compensation. The following practices are some examples of this commitment:
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|
|
Pay-for-performance
: A substantial portion of our executive officers compensation opportunity is tied to the achievement of specified corporate objectives; in 2013, for example, 100%
of the equity awards made to our executive officers (other than Mr. Maddock, who received only initial hire grants) were performance-based and at-risk. Failure to achieve these objectives results in significantly lower compensation, and in some
instances outright forfeiture of equity grants. Even after any performance-based equity grants are earned under our
Long-Term
Incentive Plan, an additional two years of service is required before vesting,
reinforcing the long-term focus of our executive compensation programs;
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50
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Mix of short-term and long-term compensation
: Short-term compensation for our executive officers is comprised of base salaries and target cash bonuses under our Management Bonus Plan. Cash
incentives represent a relatively small percentage of the total compensation opportunity given our emphasis on long-term stockholder value creation;
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Independent compensation consultant
: The Compensation Committee directly retains the services of Radford, an independent compensation consultant, to advise it in determining reasonable and
market-based compensation policies;
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Prohibition on hedging
: Our executive officers, together with all other employees, are prohibited from engaging in hedging or similar transactions with respect to our securities;
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No tax gross-ups on a change in control
: Our executive officers are not provided with any excise tax gross-ups on change-in-control payments;
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Stock ownership guidelines
: Our executive officers are subject to stock ownership guidelines requiring them to hold a number of shares of our common stock with a value equal to at least
their annual base salary (three times annual base salary in the case of our Chief Executive Officer) and to maintain this minimum amount of stock ownership throughout their employment.
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Clawback policy regarding financial restatements
: Our executive officers are subject to a policy providing that the Board of Directors may, in certain circumstances, seek reimbursement of
any portion of performance-based or incentive compensation paid to an executive officer where the payment was predicated upon the achievement of financial results that were subsequently the subject of a restatement.
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No single-trigger change of control acceleration
: All change of control arrangements with our executive officers provide for acceleration only in the event that we are
both
subject
to a change in control and the executive officers employment terminates thereafter for specified reasons; and
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Strong compensation risk management
: The Compensation Committee reviews and analyzes the risk profile of our compensation programs and practices at least annually.
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Compensation of the Chief Executive Officer
Overview
The Compensation Committee
recognizes that special scrutiny is applied to the compensation of the Chief Executive Officer, as the most highly compensated of the named executive officers. The Compensation Committee believes that the total compensation opportunity for
Mr. Kennelly, our Chief Executive Officer, in 2013 was both appropriate and fair.
Mr. Kennelly, a co-founder of Riverbed, has overseen
the creation of significant long-term stockholder value since our public offering in September 2006, and has played a critical role in guiding our growth and operational accomplishments in spite of a challenging economic environment.
Mr. Kennelly is also tasked with sustaining and building upon our technology and market leadership positions while continuing to deliver superior returns to our stockholders.
Mr. Kennellys performance in 2013 contributed to a year of significant accomplishments for us. See 2013 Financial Performance and
2013 Business Performance in the Executive Summary section above. As discussed below, however, the total compensation realized by Mr. Kennelly in 2013 was lower than his total compensation opportunity, owing in particular to the
application of the revenue target provisions in the 2013 Long-Term Incentive Plan.
51
*
Total target compensation is defined to include the sum of the base salary, target cash-based incentives, and target equity awards under the Long-Term Incentive Plan that could become eligible to vest based on performance (as measured based on the
grant date value of such awards). The target OPNET equity awards are excluded from this calculation.
**Total realizable compensation is defined to
include base salary, actual earned cash-based incentives, and the equity awards under the Long-Term Incentive Plan that became eligible to vest based on performance (as measured based on the value of such awards as of December 31, 2013). The
earned OPNET equity awards are excluded from this calculation.
Performance-based Compensation
Given the Compensation Committees belief that long-term stockholder value creation should receive greater emphasis in compensation considerations
than short-term operating results, the Compensation Committee approved 2013 compensation for Mr. Kennelly, as well as the other executive officers, that is significantly weighted towards performance-based equity tied to the achievement of
corporate objectives versus short-term cash compensation.
All equity awards are tied to performance.
In 2013,
Mr. Kennelly and the other executive officers (other than Mr. Maddock, who received only initial hire grants in 2013) received equity grants under the Long-Term Incentive Plan. 100% of those equity grants were tied to performance-based
RSUs and were at risk of complete forfeiture in the event we failed to achieve defined criteria set forth in the Long-Term Incentive Plan. The Compensation Committee did not grant any equity awards to the executive officers featuring time-based
vesting only (other than Mr. Maddocks initial hire grants).
In 2013, Mr. Kennelly and the other executive officers (other than
Mr. Maddock, who received only initial hire grants in 2013) also received one-time equity grants in anticipation of the significant efforts that would be required to successfully integrate the operations of OPNET in 2013, and in order to
highlight the importance of achieving expense synergies in a relatively quick timeframe. Earning shares under these performance awards was tied to the achievement of a more aggressive full year non-GAAP EPS target for us than the non-GAAP EPS target
set forth in the Long-Term Incentive Plan,
52
with subsequent vesting of any earned shares not occurring until one year after achievement of the goal, for a total of two years. These awards are viewed by the Compensation Committee as special
under the circumstances.
Overall ratio of performance-based compensation to total
compensation.
Mr. Kennellys 2013 performance-based equity awards (calculated at 100% on-target payout), including under the Long-Term Incentive Plan, represented 88.2% of Mr. Kennellys total 2013
compensation opportunity. In addition, 94.1% of Mr. Kennellys total 2013 compensation opportunity was tied to at-risk performance-based equity awards and variable cash incentives.
Long-term value creation and focus.
Even after earning any performance-based shares under the Long-Term Incentive Plan, an
additional two years of service to us is required before any of those earned shares may be sold. This 3-year overall vesting period ensures that the focus of Mr. Kennelly and the other executive officers remains on the creation of long-term
value for our stockholders.
2013 Performance Goals.
The Compensation Committee believes that the performance goals
set forth in the 2013 Long-Term Incentive Plan were rigorous and not easily achieved. Two-thirds of the equity awards under the 2013 Long-Term Incentive Plan were eligible to be earned based on achievement of quarterly revenue targets, and one-third
of the equity awards were eligible to be earned based on our 2013 non-GAAP earnings per share. In addition, the equity awards tied to revenue were further subject to performance modifiers, including those relating to revenue growth of our Riverbed
Performance Management business, which includes the former OPNET business. Our 2013 performance resulted in a strong year-over-year revenue increase of 24% and non-GAAP net income of $1.01 per diluted share. However, our Riverbed Performance
Management business, which includes the former OPNET business, did not achieve the revenue growth target set forth in the Long-Term Incentive Plan. As a result of this performance, Mr. Kennelly and the other executive officers earned 82% of the
Long-Term Incentive Plan equity awards tied to revenue targets and 100% of the Long-Term Incentive Plan equity awards tied to non-GAAP earnings per share. In addition, Mr. Kennelly and the other executive officers earned 88% of the OPNET equity
awards.
Executive Compensation Decision-Making Process
Discretion and Judgment of the Compensation Committee.
The Compensation Committee determines all compensation for the named
executive officers. 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.
Each year, the Compensation Committee reviews historical and prospective breakdowns of the total compensation components for each executive officer. The
Compensation Committees decisions on compensation for our executive officers are based upon its assessment of a number of factors such as:
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The executive officers performance, experience and qualifications;
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Competitive pay practices, including compensation practices at peer companies, and prevailing market conditions;
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The executive officers potential to enhance long-term stockholder value;
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The executive officers performance compared to strategic goals established for the Company at the beginning of the year;
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The nature and scope of the executive officers responsibilities; and
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The executive officers effectiveness in leading our initiatives to achieve corporate goals.
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53
Determining Compensation for the Chief Executive Officer and Other Named Executive
Officers.
The performance of our executive officers is reviewed once per year. Prior to 2013, base salaries and performance-based cash incentive compensation for our executive officers had typically been evaluated and any
changes implemented on or around May 1 each year. However, in light of a substantial portion of executive officer compensation being tied to the achievement of annual and quarterly corporate objectives, the Compensation Committee determined,
beginning with 2013, to review base salaries and performance-based cash incentive compensation for our executive officers prior to year-end, with any changes implemented on January 1 of the following year. The alignment of base salary and
performance-based cash incentive compensation reviews with reviews of long-term equity awards was also intended to more readily facilitate year-to-year comparisons of overall executive compensation decisions.
Long-term equity awards for our executive officers, in the form of RSUs under our 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. Kennellys contributions to corporate goals and achievement of individual goals. Mr. Kennelly does not participate in the Compensation Committees 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 2013, the Compensation Committee retained Radford, an independent compensation consultant, to advise the Compensation Committee on matters related to executive officer compensation.
The Compensation Committee consulted Radford in connection with reviewing our 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.
Compensation Committee Advisor
Independence
. The Compensation Committee has considered the independence of Radford pursuant to Nasdaq and SEC rules, and has found no conflict of interest in Radford continuing to provide advice to the Compensation
Committee. The Compensation Committee is also regularly advised by our primary outside legal counsel, Wilson Sonsini Goodrich & Rosati. The Compensation Committee has considered the independence of Wilson Sonsini Goodrich & Rosati
pursuant to Nasdaq and SEC rules, and has found no conflict of interest in Wilson Sonsini Goodrich & Rosati continuing to provide advice to the Compensation Committee. The Compensation Committee intends to reassess the independence of its
advisors at least annually.
The Role of Peer Companies and Benchmarking.
The Compensation Committee reviews
compensation practices at peer companies in order to better inform the Compensation Committees decision-making process regarding the determination of appropriate and reasonably competitive compensation amounts. The Compensation Committee
reviews the peer group at least annually to take into account any changes in the Company, the peer group companies, our industry and other factors.
54
In 2013, the Compensation Committee, with the assistance of Radford, selected a peer group of companies to
evaluate executive officer compensation. Our peer group consisted of technology companies with which we may compete 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 ours.
The peer group was further refined to directly take into account the
compensation practices at other technology companies using the following criteria:
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Hardware and software companies with a similar business profile to Riverbed and with similar revenue growth rates to Riverbed;
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Companies with revenues between $500 million and $2.5 billion, or approximately 50% to 250% of our expected near-term revenues;
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Companies with market capitalizations greater than $1 billion, or approximately 30% of our current market capitalization; and
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Companies with expected revenue growth greater than 10% and with operating income generally greater than 10% of revenue.
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Our 2013 peer group was as follows:
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Akamai Technologies, Inc.
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Nuance Communications, Inc.
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Aruba Networks, Inc.
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Polycom, Inc.
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Autodesk, Inc.
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Rackspace Hosting, Inc.
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Citrix Systems, Inc.
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Red Hat, Inc.
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F5 Networks, Inc.
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Rovi Corporation
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Fortinet, Inc.
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TIBCO Software Inc.
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Informatica Corporation
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Verisign, Inc.
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NETGEAR, Inc.
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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.
We are providing our stockholders with the opportunity to cast an advisory vote to approve the compensation of our named executive officers for the 2013 fiscal year. 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 our named executive
officers.
On May 22, 2013, we held a say-on-pay advisory vote to approve the compensation of our named executive officers for
2012. Our stockholders approved the compensation of our named executive officers, with approximately 92% of stockholder votes cast in favor of our compensation for our named executive officers. Given this result, and following consideration of it,
the Compensation Committee decided to retain our overall pay-for-performance approach to executive compensation. In determining how often to hold a stockholder advisory vote to approve the compensation of our named executive officers, the Board of
Directors took into account our stockholders preference (approximately 67% of stockholder votes cast at our 2011 Annual Meeting of Stockholders) for an annual vote. Specifically, the Board of Directors determined that we will hold an annual
advisory stockholder vote to approve the compensation of our named executive officers until considering the results of our next say-on-pay frequency vote, anticipated to be held at our 2017 annual meeting.
55
Principal Elements of the Executive Compensation Program and 2013 Compensation
Overview.
The Companys executive compensation program consists of the following three components:
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Performance-based cash bonuses
under the Management Bonus Plan; and
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Long-term equity awards
in the form of RSUs under the Long-Term Incentive Plan. In 2013, the RSUs under the Long-Term Incentive Plan were 100% performance-based.
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In addition to the standard components of the Companys executive compensation program, in 2013 our executive officers received one-time equity
grants, the OPNET equity awards.
The Compensation Committees 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. The Compensation Committee considers each executive officers total compensation mix as a whole.
Calculation of 2013 Targets.
The quarterly revenue targets under the Management Bonus Plan and under the 2013 LTIP were
non-GAAP. Non-GAAP revenue was calculated using GAAP revenue and adding back the revenue that was reduced by the acquisition related fair value accounting for deferred support contracts. Business combination accounting rules require us to account
for the fair value of deferred revenue assumed in connection with an acquisition. The non-GAAP adjustment is intended to reflect the full amount of support and service revenue that would have otherwise been recorded by the acquired entity.
The full-year EPS targets under the 2013 LTIP and under the OPNET equity award were non-GAAP. Non-GAAP EPS was calculated based on the adjustments set
forth in the tables titled GAAP to Non-GAAP Reconciliations included in our quarterly releases of financial results for 2013.
Our
management regularly uses our supplemental non-GAAP financial measures internally to understand and manage our business and forecast future periods. Board-approved internal business plans are based on these non-GAAP measures.
OPNET Equity Award.
In December 2012, we completed the acquisition of OPNET Technologies, Inc., making us a leader in the
converging application and network performance management segments. In anticipation of the significant efforts that would be required to successfully integrate the operations of OPNET in 2013, and to highlight the importance of achieving expense
synergies in a relatively quick timeframe, the Compensation Committee determined to award to the executive officers (other than Mr. Maddock, who joined the Company in April 2013 and therefore received only initial hire grants in 2013) one-time
performance-based RSU awards, the OPNET equity awards.
These OPNET equity awards were tied to the achievement of a more aggressive full year
non-GAAP EPS target for the Company than the non-GAAP EPS target set forth in the Long-Term Incentive Plan, with subsequent vesting of any earned shares not occurring until one year after achievement of the goal, for a total of two years. Failure to
achieve the non-GAAP EPS target would result in forfeiture of a portion of the award determined by reference to the actual non-GAAP EPS achieved by us in 2013. These awards are viewed by the Compensation Committee as special under the circumstances.
The 2013 non-GAAP EPS target for the OPNET equity awards was $1.13, which was 13% higher than the non-GAAP EPS target set forth in the 2013 LTIP.
The number of shares eligible to be earned
56
by the named executive officers would increase by 1% for each $0.01 of non-GAAP EPS achieved by us above $1.13, up to a maximum of 110%; conversely, if the total 2013 non-GAAP EPS achieved by the
Company was less than $1.13, then the number of shares would decrease by 1% for each $0.01 of non-GAAP EPS below $1.13.
The target amounts of RSUs
for the OPNET equity awards granted to our named executive officers were as follows:
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Name
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OPNET equity award
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Jerry M. Kennelly
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200,000
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Randy S. Gottfried
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55,000
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Eric S. Wolford
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70,000
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David M. Peranich
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70,000
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Brett A. Nissenberg
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20,000
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Based on our achievement of 2013 non-GAAP net income of $1.01 per diluted share, each named executive officer received
88% of the respective target amount.
Messrs. Gottfried and Wolford forfeited these awards when their employment with us terminated in May 2013 and
November 2013, respectively.
Base Salaries
Overview.
The salaries of our Chief Executive Officer and our other executive officers are established based on the scope
of their responsibilities, taking into account competitive market compensation based on compensation surveys and reviewing salaries paid by the peer group of companies for similar positions.
2013 Base Salaries.
In December 2012, the Compensation Committee reviewed the base salaries of our named executive
officers. After considering the recommendations of Radford and our Chief Executive Officer (with regard to the salaries of named executive officers other than himself), and after considering both the Company and individual performance as well as
market data regarding base salaries for comparable positions at the peer group of companies, the Compensation Committee approved the following base salaries, effective as of January 1, 2013 (other than with respect to Mr. Maddock, whose
base salary was effective when he joined us in April 2013):
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Name
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2013 Base Salary
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Jerry M. Kennelly
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$
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750,000
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Ernest E. Maddock
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450,000
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Randy S. Gottfried
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475,000
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Eric S. Wolford
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600,000
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David M. Peranich
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550,000
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Brett A. Nissenberg
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350,000
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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 at risk. To the extent
these amounts are earned, they are paid quarterly, based on our performance against the predetermined goals. As detailed below, in the event the Company fails to achieve at least 85% of a quarterly revenue target, no bonus will be paid for that
quarter. The Compensation Committee did not make any adjustments to the incentive award amounts for the executive officers in 2013 resulting from the application of the Management Bonus Plan.
57
Cash incentives represent a relatively small percentage of our executive officers total compensation
opportunity because our executive compensation program emphasizes long-term stockholder value creation over short-term operating results.
2013
Performance-based Cash Bonuses.
In December 2012, the Compensation Committee reviewed the quarterly target bonus amounts of our named executive officers. 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 our first fiscal quarter in 2013 (other than with respect to Mr. Maddock whose 2013 quarterly target bonus
amount was effective beginning with our second fiscal quarter in 2013 after he joined us in April 2013):
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Name
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2013 Quarterly
Target Bonus
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Jerry M. Kennelly
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$
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212,500
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Ernest E. Maddock
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100,000
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Randy S. Gottfried
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93,750
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Eric S. Wolford
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100,000
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David M. Peranich
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112,500
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Brett A. Nissenberg
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50,000
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Performance Criteria and Determination of 2013 Targets.
Under the Management Bonus Plan,
the performance metrics against which our executive officers were measured in 2013 were achievement of quarterly revenue targets and consistency of achievement of quarterly revenue targets. The revenue targets were based on the revenue objectives
set forth in our 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 in our development. In addition, because we have been able to consistently achieve high gross margins, revenue growth translates to additional earnings at a high rate. As a result, additional
revenue is the strongest lever for increasing profitability.
Payout Structure.
Our Management Bonus Plan operated as
follows for our named executive officers during 2013:
Revenue Achievement.
At achievement of 97% to 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 100% of the target, the
bonus multiplier would increase by 7.5%. For each percent of quarterly revenue achievement below 97% of 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 52% of
their quarterly target bonus amount. At less than 85% of achievement of a particular quarterly revenue target, our named executive officers would not receive a quarterly bonus. These awards also have a cap, pursuant to which the bonus multiplier
under the revenue achievement factor cannot exceed 2. As a result, in combination with the consistency award factor detailed below, an executive officers quarterly bonus cannot exceed 225%.
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Consistency of Revenue Achievement.
If the performance for a quarter was at
or above 97% of the quarterly revenue target and the preceding quarter(s) were also at or above 97% of the quarterly revenue target(s), then a consistency award factor would be administered as follows:
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Sequential Quarters at or above
Target Quarterly Revenue
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Consistency Award
Factor added to
Bonus Multiplier
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1 Sequential Quarter (2nd Quarter at or above target)
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10
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%
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2 Sequential Quarters (3rd Quarter at or above target)
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15
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%
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3 Sequential Quarters (4th Quarter at or above target)
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20
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%
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4 or more Sequential Quarters (5th Quarter or more at or above target)
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25
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%
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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 97% of the target, then the bonus multiplier would be 130% (100% for achievement of the quarterly revenue target; plus 15% for the 2%
overachievement; plus an additional 15% for it being the third consecutive quarter at or above 97% of the target). If a quarter does not meet at least 97% of the quarterly revenue target, then no consistency award factor is added.
2013 Targets and Results.
Set forth below are the quarterly revenue targets under our Management Bonus Plan for 2013
(revenue targets non-GAAP), as well as the bonus multipliers and consistency factors used to determine quarterly performance-based cash bonuses in 2013 resulting from each quarters achievement against the revenue target:
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Revenue Target
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Bonus Multiplier
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Consistency Factor
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Q1:
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$267,000,000
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90.3%
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0%
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Q2:
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$267,000,000
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93.7%
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0%
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Q3:
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$270,000,000
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100.0%
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0%
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Q4:
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$275,000,000
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126.8%
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10%
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The amounts paid to our executive officers under our Management Bonus Plan based on our 2013 operating results are
described below in the Summary Compensation Table under the column Non-equity Incentive Plan Compensation.
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 our stockholders. We believe the use of performance-based RSUs ensures that our executive officers are
properly focused on the attainment of key corporate goals. Consequently, our executive compensation program is weighted substantially toward the use of performance-based long-term equity 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 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 stock option grants that are generally for larger numbers of shares.
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Long-Term Incentive Plan.
As part of the Compensation Committees focus
on retaining and motivating our executive officers to achieve our key performance objectives and 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.
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 Companys long-term success between our executive officers and our stockholders, and ensures that the RSU grants
demonstrate a significant retention incentive.
2013 Equity Awards.
In 2013, 100% of the grants made under the LTIP
were tied to our performance and were subject to complete forfeiture based on our performance against the performance metrics determined by the Compensation Committee. Each executive officer received two performance-based RSU grants under the LTIP.
Two-thirds of the total RSUs granted were eligible to be earned based on achievement of quarterly revenue targets (Revenue Target Award), and one-third of the total RSUs granted were eligible to be earned based on our 2013 non-GAAP
earnings per share (EPS Target Award). In addition, the equity awards tied to revenue were further subject to performance modifiers, including those relating to revenue growth of our Riverbed Performance Management business, which
includes the former OPNET business.
For the 2013 LTIP awards, the Compensation Committee designated our 2013 quarterly revenue targets as the
primary performance metric because the Compensation Committee believes that, at this stage in our development, revenue growth continues to be a key measure of superior operational performance. The Compensation Committee also designated non-GAAP
earnings per share as a performance metric in order to ensure that revenue growth was not favored at the expense of achieving profitability goals.
The Revenue Target Awards were eligible to be earned in an amount ranging from 0% to 150% of the target amount based on achievement of quarterly revenue
targets. The Revenue Target Awards were therefore subject to complete forfeiture in the event that we were unable to achieve at least a minimum level of performance against predetermined quarterly revenue targets.
Even after determining any amounts earned based on achievement of quarterly revenue targets, the Revenue Target Awards were further subject to either
increase or decrease based on achievement against two performance modifiers described below, with the requirement that in no event would the total amount of earned Revenue Shares exceed 150% of the target amount.
The EPS Target Awards were eligible to be earned either at the 100% level or not at all, based on our 2013 non-GAAP earnings per share results. The EPS
Target Awards were therefore subject to complete forfeiture in the event that we were unable to meet a predetermined non-GAAP earnings per share target.
Subject to continuing service requirements, any shares earned under the 2013 LTIP will vest in full on December 31, 2015.
60
The following performance-based Revenue Target Awards and EPS Target Awards were granted to our named
executive officers under the 2013 LTIP (with the listed Revenue Target Award amounts equivalent to the amounts that would have been earned at 100% of the target amount):
|
|
|
|
|
|
|
|
|
Name
|
|
Revenue Target
Award RSUs
|
|
|
EPS Target Award
RSUs
|
|
Jerry M. Kennelly
|
|
|
249,500
|
|
|
|
124,800
|
|
Randy S. Gottfried
|
|
|
78,400
|
|
|
|
39,200
|
|
Eric S. Wolford
|
|
|
106,900
|
|
|
|
53,500
|
|
David M. Peranich
|
|
|
99,800
|
|
|
|
49,900
|
|
Brett A. Nissenberg
|
|
|
39,200
|
|
|
|
19,600
|
|
Messrs. Gottfried and Wolford forfeited these awards when they terminated their employment with us in May 2013 and
November 2013, respectively.
2013 Targets.
Under the 2013 LTIP, the initial determination of earned Revenue Target Awards was made based on the following payout matrix:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier
|
|
1
|
|
|
2
|
|
|
3
|
|
|
4
|
|
|
5
|
|
|
6
|
|
2013 Non GAAP Quarterly Revenue vs. Target
|
|
|
<85
|
%
|
|
|
85.0
|
%
|
|
|
95.0
|
%
|
|
|
100.0
|
%
|
|
|
110.0
|
%
|
|
|
³
117
|
%
|
Percent Payout
|
|
|
0.0
|
%
|
|
|
70.0
|
%
|
|
|
90.0
|
%
|
|
|
100.0
|
%
|
|
|
130.0
|
%
|
|
|
150.0
|
%
|
One-quarter of the total Revenue Target Award RSUs was eligible to be earned each quarter, with any earned amount
determined by reference to the above matrix. At the end of 2013, after aggregating any earned quarterly shares, the total number of earned shares was further subject to the following performance modifiers: (1) if our total 2013 revenue equaled
or exceeded $1.158 billion, then the earned shares would be increased by 20%; and (2) if our total 2013 revenue for our Performance Management business, including the former OPNET business, grew less than 10% relative to the 2012 revenue
achieved by those component businesses, then the earned shares would be decreased by 15%.
Under the 2013 LTIP, the non-GAAP earnings per share
amount required to be achieved for an on-target payout on the EPS Target Awards was $1.00. Non-GAAP earnings per share achievement of less than $1.00 would have resulted in a zero payout on, and complete forfeiture of, the EPS Target Awards.
Determination of 2013 Targets.
The 2013 LTIP quarterly revenue targets were based on objectives set forth in our
Board-approved internal business plan. For the first and second fiscal quarters of 2013, the revenue targets consisted of all revenue other than revenue attributable to our Performance Management business. The Compensation Committee chose this
target for the first and second fiscal quarters of 2013 in light of the substantial business and sales integration efforts underway in the first half of the year involving the former OPNET business, which is part of the Performance Management
business. For the third and fourth fiscal quarters of 2013, the revenue targets consisted of all Company revenue.
The 2013 LTIP annual EPS target
of $1.00 was set in December 2012 for 2013. The amount, which represents an increase over the full-year 2012 non-GAAP EPS result for the Company, was intended to emphasize the importance of achieving increasing profitability on a year-over-year
basis.
2013 Results.
Our 2013 performance resulted in a strong year-over-year revenue increase of 24% and non-GAAP
net income of $1.01 per diluted share. As a result of this performance, the named executive officers earned 82% of the LTIP equity awards tied to revenue targets and 100% of the Long-Term Incentive Plan equity awards tied to non-GAAP earnings per
share.
61
The specific quarterly revenue targets (revenue targets non-GAAP) and achievement against those targets is
set forth below. There was no increase to the earned shares given our total 2013 revenue of less than $1.158 billion. In addition, the earned share amounts, calculated based on the below, were decreased by 15% because our total 2013 revenue for our
Performance Management business, including the former OPNET business, grew less than 10% relative to the 2012 revenue achieved by those component businesses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
Revenue Target ($000)
|
|
$
|
198,000
|
|
|
$
|
204,000
|
|
|
$
|
270,000
|
|
|
$
|
275,000
|
|
Revenue Achievement ($000)
|
|
$
|
185,046
|
|
|
$
|
196,574
|
|
|
$
|
264,973
|
|
|
$
|
284,829
|
|
Percentage Achievement
|
|
|
93.46%
|
|
|
|
96.36%
|
|
|
|
98.14%
|
|
|
|
103.57%
|
|
Quarterly Earned Amount
|
|
|
86.9%
|
|
|
|
92.7%
|
|
|
|
96.3%
|
|
|
|
110.7%
|
|
At-risk compensation in proportion to total compensation
Overall for the 2013 fiscal year, a significant majority of each executive officers total compensation opportunity (other than Mr. Maddock,
who received only initial hire grants in 2013) was tied to at-risk performance-based equity awards and variable cash incentives. The total amount of at-risk compensation reported for the named executive officers, in proportion to the total
compensation reported for the named executive officers in the Summary Compensation Table below, ranged from 83.4% to 94.5%, as follows:
Risk Assessment
As
discussed earlier, under Risk Management Regarding Compensation Policies and Programs, the Compensation Committee retained Radford to evaluate the risk inherent in our executive and non-executive compensation programs. In March 2013,
Radford provided a report to the Compensation Committee that concluded, among other things:
|
|
|
Incentive plans are well-aligned with compensation design principles that generally follow best practices; and
|
|
|
|
Senior company management has a high percentage of their compensation tied to performance-based LTIP awards that vest over time, ensuring a longer-term view of the business since both short- and long-term results must
be maintained for the stock to retain value.
|
62
Stock Ownership Guidelines
In November 2013 our Board of Directors adopted stock ownership guidelines for our executive officers and members of our Board of Directors. These
guidelines are intended to help ensure continued alignment with the long-term interests of our stockholders. Pursuant to these guidelines, our Chief Executive Officer is expected to hold a number of shares of our common stock with a value equal to
at least three times his annual base salary, and our other executive officers are expected to hold a number of shares of our common stock with a value equal to at least one time their annual base salary. All executive officers are expected to
maintain this minimum level of stock ownership throughout their employment with Riverbed. The full texts of our stock ownership guidelines are posted on our website at www.riverbed.com in the Corporate Governance section of the Investor Relations
page.
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 generally
provide special benefits or other perquisites to our executive officers.
Post-Termination Protection
We issued offer letters to Messrs. Maddock, Peranich and Nissenberg when they were recruited for their current positions. Each offer letter provides for
accelerated vesting of outstanding equity awards in the event that we are
both
subject to a change in control and the executive officers 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 our stock plans provide for 100% acceleration in the
event that we are
both
subject to a change in control and the executive officers or non-executive employees employment terminates thereafter for specified reasons. This protection is built into each stock 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
participants employment terminates thereafter for specified reasons.
In May 2008, we entered into a change in control severance agreement
with Mr. Kennelly, and in May 2013 we entered into a change in control severance agreement with Mr. Maddock. 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. Kennelly and Maddock, 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. Kennelly or Mr. Maddock 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
63
compliance with the terms of any confidential information agreement, (i) 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; and (ii) in the case of Mr. Maddock, 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.
The agreements do not provide for any tax gross-ups.
Financial Restatements; Clawback Policy
In November 2013, our Board of Directors adopted an executive officer clawback policy permitting the Board of Directors, under certain circumstances, to
make retroactive adjustments to any cash or equity-based incentive compensation paid to executive officers where the payment was predicated upon the achievement of financial results that were subsequently the subject of a restatement. The full text
of our clawback policy is posted on our website at www.riverbed.com in the Corporate Governance section of the Investor Relations page.
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 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. In proposal 4, we are seeking approval of the material terms of our
2014 Equity Incentive Plan. If approved, the 2014 Equity Incentive Plan will replace our 2006 Equity Incentive Plan and other stockholder-approved plans and allow the opportunity to grant full-value awards that qualify for the
performance-based compensation exemption. 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. Riverbed does not guarantee that any compensation intended to qualify as deductible performance-based compensation under Section 162(m) of the Internal Revenue Code so qualifies.
We account for stock-based grants awarded 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.
64
Summary Compensation Table 2013, 2012 and 2011
The following table sets forth all of the reportable compensation of our principal executive officer, principal financial officer, former principal
financial officer and the three other highest paid executive officers whose total compensation in fiscal year 2013 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
|
|
|
2013
|
|
|
|
750,000
|
|
|
|
11,333,196
|
(3)
|
|
|
0
|
|
|
|
751,853
|
(4)
|
|
|
13,205
|
|
|
|
12,848,254
|
|
Chief Executive Officer and
Chairman of the Board
|
|
|
2012
|
|
|
|
650,000
|
|
|
|
6,763,300
|
(3)
|
|
|
0
|
|
|
|
568,399
|
(4)
|
|
|
576
|
|
|
|
7,982,275
|
|
|
|
2011
|
|
|
|
565,000
|
|
|
|
7,469,700
|
(3)
|
|
|
0
|
|
|
|
923,161
|
(4)
|
|
|
576
|
|
|
|
8,958,437
|
|
|
|
|
|
|
|
|
|
Ernest E. Maddock (5)
|
|
|
2013
|
|
|
|
303,409
|
|
|
|
1,176,750
|
|
|
|
351,305
|
|
|
|
301,645
|
(6)
|
|
|
288
|
|
|
|
2,133,397
|
|
Executive Vice President
and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy S. Gottfried
|
|
|
2013
|
|
|
|
200,268
|
(7)
|
|
|
3,405,872
|
(8)
|
|
|
0
|
|
|
|
84,668
|
|
|
|
1,381
|
|
|
|
3,692,189
|
|
Former Chief Financial
Officer and Chief
Operating Officer
|
|
|
2012
2011
|
|
|
|
390,000
353,333
|
|
|
|
2,082,100
2,667,750
|
(8)
(8)
|
|
|
0
0
|
|
|
|
323,796
291,508
|
(9)
(9)
|
|
|
3,172
355
|
|
|
|
2,799,068
3,312,946
|
|
|
|
|
|
|
|
|
|
Eric S. Wolford
|
|
|
2013
|
|
|
|
539,229
|
(10)
|
|
|
4,546,288
|
(11)
|
|
|
0
|
|
|
|
283,964
|
|
|
|
8,010
|
|
|
|
5,377,491
|
|
Director and Former
President, Products and
Marketing
|
|
|
2012
2011
|
|
|
|
416,667
383,333
|
|
|
|
2,498,050
2,667,750
|
(11)
(11)
|
|
|
0
0
|
|
|
|
343,134
341,826
|
(12)
(12)
|
|
|
1,798
384
|
|
|
|
3,259,649
3,393,293
|
|
|
|
|
|
|
|
|
|
David M. Peranich
|
|
|
2013
|
|
|
|
550,000
|
|
|
|
4,335,284
|
(13)
|
|
|
0
|
|
|
|
473,370
|
(14)
|
|
|
12,102
|
|
|
|
5,370,756
|
|
President, Worldwide
Field Operations
|
|
|
2012
|
|
|
|
383,333
|
|
|
|
2,082,100
|
(13)
|
|
|
0
|
|
|
|
368,339
|
(14)
|
|
|
3,137
|
|
|
|
2,836,909
|
|
|
|
2011
|
|
|
|
341,667
|
|
|
|
2,667,750
|
(13)
|
|
|
0
|
|
|
|
442,899
|
(14)
|
|
|
336
|
|
|
|
3,452,652
|
|
|
|
|
|
|
|
|
|
Brett A. Nissenberg
|
|
|
2013
|
|
|
|
350,000
|
|
|
|
1,554,736
|
(15)
|
|
|
0
|
|
|
|
210,387
|
(16)
|
|
|
2,223
|
|
|
|
2,117,346
|
|
General Counsel, Senior
Vice President of
Corporate and Legal
Affairs and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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. See Note 14 of the notes to our consolidated
financial statements contained in our 2013 Annual Report on Form 10-K filed on February 14, 2014, Note 14 of the notes to our consolidated financial statements contained in our 2012 Annual Report on Form 10-K filed on February 19, 2013,
and Note 12 of the notes to our consolidated financial statements contained in our 2011 Annual Report on Form 10-K filed on February 10, 2012, for a discussion of all assumptions made by us in determining the fair values of equity awards for
2013, 2012 and 2011, respectively. No options were awarded to our named executive officers in 2013, 2012 or 2011 other than Mr. Maddocks initial hire-on options.
|
(2)
|
For 2013, this amount represents the value of items or services provided in connection with the employee award program attended by our named executive officers
and their spouses as follows: Mr. Kennelly, $12,845 and Mr. Peranich, $9,642. Also represents the dollar amount paid for life insurance premiums as follows: Mr. Kennelly, $360; Mr. Maddock, $288; Mr. Gottfried, $285;
Mr. Wolford, $360; Mr. Peranich, $360; and Mr. Nissenberg, $240. Also includes a company matching contribution under our 401(k) plan as follows: Mr. Gottfried, $1,096; Mr. Wolford, $1,400; Mr. Peranich, $2,100; and
Mr. Nissenberg, $1,983. Also includes board fees paid to Mr. Wolford of $6,250 (See Directors Compensation Table). For 2012, represents a company matching contribution under our 401(k) plan as follows: Mr. Gottfried, $2,800;
Mr. Wolford, $1,400; and Mr. Peranich, $2,773. Such amounts were inadvertently excluded from our 2012 Fiscal Year Summary Compensation Table. The Total Compensation for 2012 has been adjusted to include these amounts. Also represents the
dollar amount paid for life insurance premiums as follows: Mr. Kennelly, $576; Mr. Gottfried, $372; Mr. Wolford, $398; and Mr. Peranich, $364. The
|
65
|
amounts in this column for 2011 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 2013, this amount includes $2,461,056, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS portion of the 2013 LTIP, which was the maximum amount that
was eligible to be earned. Also includes $4,920,140, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the 2013 LTIP. The maximum amount that was eligible to be earned
under the Revenue portion of the 2013 LTIP was 150% of target with a grant date fair value of $7,381,196. Also includes $3,952,000, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the
OPNET equity award. The maximum amount that was eligible to be earned under the OPNET equity award was 110% of target with a grant date fair value of $4,347,200. The actual amount earned under the 2013 LTIP in 2013 was 100% of target for the EPS
portion with a grant date fair value of $2,461,056 and 82.16% of target for the Revenue portion with a grant date fair value of $4,042,363. The actual amount earned under the OPNET equity award in 2013 was 88% of target with a grant date fair value
of $3,477,760. For 2012, this amount includes $2,253,650, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS portion of the 2012 LTIP, which was the maximum amount that was eligible
to be earned. Also includes $4,509,650, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the 2012 LTIP. The maximum amount that was eligible to be earned under the
Revenue portion of the 2012 LTIP was 150% of target with a grant date fair value of $6,763,300. The actual amount earned under the 2012 LTIP in 2012 was 100% of target for the EPS portion with a grant date fair value of $2,253,650 and no amount was
earned under the Revenue portion of the 2012 LTIP. For 2011, this amount includes $2,489,900, which reflects the grant date fair value of time-based restricted stock units, and $4,979,800, which reflects the grant date fair value of
performance-based restricted stock units at 100% of target under the LTIP. The maximum amount that was eligible to be earned under the LTIP for 2011 was 150% of target with a grant date fair value of $7,469,700. The actual amount earned under the
LTIP in 2011 was 103.5% of target with a grant date fair value of $5,156,227.
|
(4)
|
For 2013, this number represents $461,134 that was earned and paid in fiscal year 2013, and $290,719 that was earned in fiscal year 2013 and paid in fiscal year 2014. For 2012, this number represents $426,108 that was
earned and paid in fiscal year 2012, and $142,291 that was earned in fiscal year 2012 and paid in fiscal year 2013. For 2011, this number represents $684,420 that was earned and paid in fiscal year 2011, and $238,741 that was earned in fiscal year
2011 and paid in fiscal year 2012.
|
(5)
|
Mr. Maddock began his employment with us on April 29, 2013.
|
(6)
|
For 2013, this number represents $164,836 that was earned and paid in fiscal year 2013, and $136,809 that was earned in fiscal year 2013 and paid in fiscal year 2014.
|
(7)
|
For 2013, represents salary of $163,731 and accrued vacation of $36,537 paid to Mr. Gottfried upon his termination of employment on May 3, 2013.
|
(8)
|
For 2013, this amount includes $773,024, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS
portion of the 2013 LTIP, which was the maximum amount that was eligible to be earned. Also includes $1,546,048, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the
2013 LTIP. The maximum amount that was eligible to be earned under the Revenue portion of the 2013 LTIP was 150% of target with a grant date fair value of $2,319,072. Also includes $1,086,800, which reflects the grant date fair value of
performance-
|
66
|
based restricted stock units at 100% of target under the OPNET equity award. The maximum amount that was eligible to be earned under the OPNET equity award was 110% of target with a grant date
fair value of $1,195,480. Mr. Gottfrieds employment terminated on May 3, 2013. As a result, no amounts were earned under the 2013 LTIP or the OPNET equity award. In connection with Mr. Gottfrieds termination of employment,
the Company accelerated the vesting of 20,000 shares that had previously been earned under the 2011 LTIP. Such shares vested on May 3, 2013 and the Company incurred no additional incremental cost under ASC718. For 2012, this amount includes
$693,250, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS portion of the 2012 LTIP, which was the maximum amount that was eligible to be earned. Also includes $1,388,850, which
reflects the grant date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the 2012 LTIP. The maximum amount that was eligible to be earned under the Revenue portion of the 2012 LTIP was 150% of
target with a grant date fair value of $2,082,100. The actual amount earned under the 2012 LTIP in 2012 was 100% of target for the EPS portion with a grant date fair value of $693,250 and no amount was earned under the Revenue portion of the 2012
LTIP. For 2011, this amount includes $889,250, which reflects the grant date fair value of time-based restricted stock units, and $1,778,500, which reflects the grant date fair value of performance-based restricted stock units at 100% of target
under the LTIP. The maximum amount that was eligible to be earned under the LTIP for 2011 was 150% of target with a grant date fair value of $2,667,750. The actual amount earned under the LTIP in 2011 was 103.5% of target with a grant date fair
value of $1,841,494.
|
(9)
|
For 2012, this number represents $264,508 that was earned and paid in fiscal year 2012, of which $100,000 was received in connection with Mr. Gottfrieds promotion in 2012 to Chief Operating Officer, and
$59,288 that was earned in fiscal year 2012 and paid in fiscal year 2013. For 2011, this number represents $212,975 that was earned and paid in fiscal year 2011, and $78,533 that was earned in fiscal year 2011 and paid in fiscal year 2012.
|
(10)
|
For 2013, represents salary of $525,000 and accrued vacation of $14,229 paid to Mr. Wolford upon his termination of employment on November 15, 2013.
|
(11)
|
For 2013, this amount includes $1,055,020, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS
portion of the 2013 LTIP, which was the maximum amount that was eligible to be earned. Also includes $2,108,068, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the
2013 LTIP. The maximum amount that was eligible to be earned under the Revenue portion of the 2013 LTIP was 150% of target with a grant date fair value of $3,163,088. Also includes $1,383,200, which reflects the grant date fair value of
performance-based restricted stock units at 100% of target under the OPNET equity award. The maximum amount that was eligible to be earned under the OPNET equity award was 110% of target with a grant date fair value of $1,521,520.
Mr. Wolfords employment terminated on November 15, 2013. As a result, no amounts were earned under the 2013 LTIP or the OPNET equity award. In connection with Mr. Wolfords termination of employment, the Company accelerated
the vesting of 76,771 shares that had previously been earned under the 2011 LTIP. Such shares vested on November 15, 2013 and the Company incurred no additional incremental cost under ASC718. For 2012, this amount includes $831,900, which
reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS portion of the 2012 LTIP, which was the maximum amount that was eligible to be earned. Also includes $1,666,150, which reflects the grant
date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the 2012 LTIP. The maximum amount that was eligible to be earned under the Revenue portion of the 2012 LTIP was 150% of target with a grant
date fair value of $2,498,050. The actual amount earned under the 2012 LTIP in 2012 was 100% of target for the EPS portion with a grant date fair value of $831,900 and no amount was earned
|
67
|
under the Revenue portion of the 2012 LTIP. For 2011, this amount includes $889,250, which reflects the grant date fair value of time-based restricted stock units, and $1,778,500, which reflects
the grant date fair value of performance-based restricted stock units at 100% of target under the LTIP. The maximum amount that was eligible to be earned under the LTIP for 2011 was 150% of target with a grant date fair value of $2,667,750. The
actual amount earned under the LTIP in 2011 was 103.5% of target with a grant date fair value of $1,841,494.
|
(12)
|
For 2012, this number represents $279,611 that was earned and paid in fiscal year 2012, of which $100,000 was received in connection with Mr. Wolfords promotion in 2012 to President, Products and Marketing,
and $63,523 that was earned in fiscal year 2012 and paid in fiscal year 2013. For 2011, this number represents $252,298 that was earned and paid in fiscal year 2011, and $89,528 that was earned in fiscal year 2011 and paid in fiscal year 2012.
|
(13)
|
For 2013, this amount includes $984,028, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS portion of the 2013 LTIP, which was the maximum amount that
was eligible to be earned. Also includes $1,968,056, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the 2013 LTIP. The maximum amount that was eligible to be earned
under the Revenue portion of the 2013 LTIP was 150% of target with a grant date fair value of $2,952,084. Also includes $1,383,200, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the
OPNET equity award. The maximum amount that was eligible to be earned under the OPNET equity award was 110% of target with a grant date fair value of $1,521,520. The actual amount earned under the 2013 LTIP in 2013 was 100% of target for the EPS
portion with a grant date fair value of $984,028 and 82.16% of target for the Revenue portion with a grant date fair value of $1,616,941. The actual amount earned under the OPNET equity award in 2013 was 88% of target with a grant date fair value of
$1,217,216. For 2012, this amount includes $693,250, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS portion of the 2012 LTIP, which was the maximum amount that was eligible to be
earned. Also includes $1,388,850, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the 2012 LTIP. The maximum amount that was eligible to be earned under the Revenue
portion of the 2012 LTIP was 150% of target with a grant date fair value of $2,082,100. The actual amount earned under the 2012 LTIP in 2012 was 100% of target for the EPS portion with a grant date fair value of $693,250 and no amount was earned
under the Revenue portion of the 2012 LTIP. For 2011, this amount includes $889,250, which reflects the grant date fair value of time-based restricted stock units, and $1,778,500, which reflects the grant date fair value of performance-based
restricted stock units at 100% of target under the LTIP. The maximum amount that was eligible to be earned under the LTIP for 2011 was 150% of target with a grant date fair value of $2,667,750. The actual amount earned under the LTIP in 2011 was
103.5% of target with a grant date fair value of $1,841,494.
|
(14)
|
For 2013, this number represents $319,460 that was earned and paid in fiscal year 2013, and $153,910 that was earned in fiscal year 2013 and paid in fiscal year 2014. For 2012, this number represents $300,581 that was
earned and paid in fiscal year 2012, of which $100,000 was received in connection with Mr. Peranichs promotion in 2012 to President, Worldwide Field Operations, and $67,758 that was earned in fiscal year 2012 and paid in fiscal year 2013.
For 2011, this number represents $332,953 that was earned and paid in fiscal year 2011, and $109,946 that was earned in fiscal year 2011 and paid in fiscal year 2012.
|
(15)
|
For 2013, this amount includes $386,512, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the EPS
portion of the 2013 LTIP, which was the maximum amount that was eligible to be earned. Also includes $773,024, which reflects the grant date fair value of performance-based restricted stock units at 100% of target under the Revenue portion of the
2013 LTIP. The maximum amount that was eligible to be earned under
|
68
|
the Revenue portion of the 2013 LTIP was 150% of target with a grant date fair value of $1,159,536. Also includes $395,200, which reflects the grant date fair value of performance-based
restricted stock units at 100% of target under the OPNET equity award. The maximum amount that was eligible to be earned under the OPNET equity award was 110% of target with a grant date fair value of $434,720. The actual amount earned under the
2013 LTIP in 2013 was 100% of target for the EPS portion with a grant date fair value of $386,512 and 82.16% of target for the Revenue portion with a grant date fair value of $635,122. The actual amount earned under the OPNET equity award in 2013
was 88% of target with a grant date fair value of $347,776.
|
(16)
|
For 2013, this number represents $141,982 that was earned and paid in fiscal year 2013, and $68,405 that was earned in fiscal year 2013 and paid in fiscal year 2014.
|
69
2013 Grants of Plan-Based Awards
The following table sets forth each plan-based award granted to our named executive officers relating to fiscal year 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date (2)
|
|
|
Estimated Future
Payouts Under
Non-Equity Incentive Plan
Awards (1)
|
|
|
Estimated Future Payouts
Under Equity Incentive Plan
Awards
|
|
|
All
other
stock
awards:
number
of
shares
of
stock
or
units
(#)
|
|
|
All other
option
awards:
number
of
securities
underlying
options
(#)
|
|
|
Exercise
or base
price
of option
awards
($/Sh)
|
|
|
Grant
Date
Fair
Value of
Stock
and
Option
Awards
($) (8)
|
|
|
|
Threshold
($) (3)
|
|
|
Target
($) (4)
|
|
|
Maximum
($) (5)
|
|
|
Threshold
(#) (6)
|
|
|
Target
(#)
|
|
|
Maximum
(#) (7)
|
|
|
|
|
|
Jerry M. Kennelly
|
|
|
01/01/13
02/04/13
N/A
|
|
|
|
442,000
|
|
|
|
850,000
|
|
|
|
1,912,500
|
|
|
|
299,450
|
|
|
|
374,300
200,000
|
|
|
|
499,100
220,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,381,196
3,952,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ernest E. Maddock
|
|
|
05/06/13
N/A
|
|
|
|
208,000
|
|
|
|
400,000
|
|
|
|
900,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
|
50,000
|
|
|
|
15.69
|
|
|
|
1,528,055
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy S. Gottfried (9)
|
|
|
01/01/13
02/04/13
N/A
|
|
|
|
195,000
|
|
|
|
375,000
|
|
|
|
843,750
|
|
|
|
94,080
|
|
|
|
117,600
55,000
|
|
|
|
156,800
60,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,319,072
1,086,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Wolford (9)
|
|
|
01/01/13
02/04/13
N/A
|
|
|
|
208,000
|
|
|
|
400,000
|
|
|
|
900,000
|
|
|
|
128,330
|
|
|
|
160,400
70,000
|
|
|
|
213,900
77,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,163,088
1,383,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David M. Peranich
|
|
|
01/01/13
02/04/13
N/A
|
|
|
|
234,000
|
|
|
|
450,000
|
|
|
|
1,012,500
|
|
|
|
119,760
|
|
|
|
149,700
70,000
|
|
|
|
199,600
77,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,952,084
1,383,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brett A. Nissenberg
|
|
|
01/01/13
02/04/13
N/A
|
|
|
|
104,000
|
|
|
|
200,000
|
|
|
|
450,000
|
|
|
|
47,040
|
|
|
|
58,800
20,000
|
|
|
|
78,400
22,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,159,536
395,200
|
|
(1)
|
Represents annual threshold and target bonus amounts under our Management Bonus Plan, as described in Compensation Discussion and Analysis above. The actual amounts awarded under our Management Bonus Plan for fiscal
2013 are reflected in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table above.
|
(2)
|
This column sets forth the grant date of equity incentive plan awards.
|
(3)
|
This column sets forth the annual threshold amount payout based on 85% of plan for each executives non-equity incentive plan payment for 2013. In the event the Company fails to achieve at least 85% of a quarterly
revenue target, no bonus is paid for that quarter.
|
(4)
|
This column sets forth the annual target amount payout based on 100% of plan for each executives non-equity incentive plan payment for 2013.
|
(5)
|
This column sets forth the maximum amount payout based on 225% of plan for each executives non-equity incentive plan payment for 2013.
|
(6)
|
Performance-based RSUs granted on January 1, 2013 represents 70% of the target amount under the Revenue portion of the 2013 LTIP and 100% under the EPS portion of the 2013 LTIP. In the event the Company fails to
achieve at least 85% of a quarterly revenue target then no shares will be earned under the Revenue portion of the 2013 LTIP for that quarter. In the event the Company fails to achieve at least 100% of the annual EPS target then no shares will be
earned under the EPS portion of the 2013 LTIP.
|
(7)
|
Performance-based RSUs granted on January 1, 2013 represents 100% of the target amount under the EPS portion of the 2013 LTIP, which is the maximum amount
that was eligible to be earned under the 2013 LTIP, and 150% of the target amount under the Revenue portion of the 2013 LTIP, which is the maximum amount that was eligible to be earned under the Revenue portion of the 2013 LTIP. The actual amount
earned under the LTIP in 2013 was 100% of the EPS portion of the 2013 LTIP and 82.16% of the Revenue
|
70
|
2013 LTIP, which is the maximum amount that was eligible to be earned under the Revenue portion of the 2013 LTIP. The actual amount earned under the LTIP in 2013 was 100% of the EPS portion of
the 2013 LTIP and 82.16% of the Revenue portion of the 2013 LTIP. The amount earned under the 2013 LTIP will vest with respect to 100% of the shares subject to the RSUs on December 31, 2015, subject to the officer remaining a service provider
through such date. The OPNET equity award granted on February 4, 2013 represents 110% of the target amount, which is the maximum amount that was eligible to be earned. The actual amount earned was 88%. The amount earned will vest with respect
to 100% of the shares subject to the RSUs on December 31, 2014, subject to the officer remaining a service provider through such date.
|
(8)
|
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. See Note 14 of the notes to
our consolidated financial statements contained in our 2013 Annual Report on Form 10-K filed on February 14, 2014, for a discussion of all assumptions made by us in determining the fair values of equity awards for 2013.
|
(9)
|
Awards granted on January 1, 2013 and February 4, 2013 to Messrs. Gottfried and Wolford were forfeited when they left the employ of the Company in May 2013 and November 2013, respectively.
|
Outstanding Equity Awards at Fiscal Year End 2013
The following table sets forth information regarding unexercised options and unvested RSUs held by each of our named executive officers as of
December 31, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
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 (#)
|
|
|
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
|
|
|
541,664
600,000
|
(2)
(5)
|
|
|
|
|
|
|
7.19
15.96
|
|
|
|
04/30/15
04/29/14
|
|
|
|
95,900
|
(3)
|
|
|
1,733,872
|
|
|
|
249,500
124,800
|
(4)
(6)
|
|
|
4,510,960
2,256,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
(7)
|
|
|
3,616,000
|
|
|
|
|
|
|
|
|
|
|
Ernest E. Maddock
|
|
|
|
|
|
|
50,000
|
(8)
|
|
|
15.69
|
|
|
|
05/05/20
|
|
|
|
75,000
|
(9)
|
|
|
1,356,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy S. Gottfried
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric S. Wolford
|
|
|
220,000
|
(5)
|
|
|
|
|
|
|
15.96
|
|
|
|
03/15/14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David M. Peranich
|
|
|
73,890
110,000
|
(2)
(5)
|
|
|
|
|
|
|
7.19
15.96
|
|
|
|
04/30/15
04/29/14
|
|
|
|
29,500
|
(3)
|
|
|
533,360
|
|
|
|
99,800
49,900
70,000
|
(4)
(6)
(7)
|
|
|
1,804,384
902,192
1,265,600
|
|
|
|
|
|
|
|
|
|
|
Brett A. Nissenberg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,300
|
(3)
|
|
|
186,224
|
|
|
|
39,200
|
(4)
|
|
|
708,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,600
|
(6)
|
|
|
354,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(7)
|
|
|
361,600
|
|
(1)
|
The market value of restricted stock units is based on $18.08 per share, which was the closing price of our common stock on December 31, 2013, the last trading day of our 2013 fiscal year.
|
(2)
|
This option grant became fully vested on May 1, 2012.
|
(3)
|
This award was granted under our 2012 LTIP and vests on December 31, 2014.
|
(4)
|
Represents performance-based awards granted under the 2013 LTIP at 100% of target for the Revenue portion of the 2013 LTIP. The maximum amount that was eligible to be earned under the Revenue portion of the 2013 LTIP
was 150% of target and the actual amount earned was 82.16%.
|
71
(5)
|
This option grant became fully vested on May 1, 2011.
|
(6)
|
Represents performance-based awards granted under the 2013 LTIP at 100% of target for the EPS portion of the 2013 LTIP. The maximum amount that was eligible to be earned under the EPS portion of the 2013 LTIP was 100%
of target and the actual amount earned was 100%. Earned shares will vest on December 31, 2015.
|
(7)
|
Represents performance-based awards granted under the OPNET equity award at 100% of target. The maximum amount that was eligible to be earned was 110% of target and the actual amount earned was 88%. Earned shares will
vest on December 31, 2014.
|
(8)
|
This option vests with respect to 25% of the shares on April 29, 2014 and in equal monthly installments thereafter over the following 36 months.
|
(9)
|
This award vests with respect to 50% of the shares on May 15, 2014 and the remaining 50% on May
15, 2015.
|
2013 Option Exercises and Stock Vested
The following table reflects stock option exercises and restricted stock units that became vested for each of the named executive officers during fiscal
year 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired on
Exercise (#)
|
|
|
Value
Realized
on
Exercise
($) (1)
|
|
|
Number of
Shares
Acquired on
Vesting (#)
|
|
|
Value
Realized on
Vesting
($) (2)
|
|
Jerry M. Kennelly
|
|
|
725,002
|
|
|
|
8,416,138
|
|
|
|
214,960
|
|
|
|
3,886,477
|
|
Ernest E. Maddock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Randy S. Gottfried (3)
|
|
|
400,000
|
|
|
|
2,083,496
|
|
|
|
20,000
|
|
|
|
310,600
|
|
Eric S. Wolford (4)
|
|
|
|
|
|
|
|
|
|
|
76,771
|
|
|
|
1,385,717
|
|
David M. Peranich
|
|
|
18,666
|
|
|
|
229,218
|
|
|
|
76,771
|
|
|
|
1,388,020
|
|
Brett A. Nissenberg
|
|
|
|
|
|
|
|
|
|
|
30,709
|
|
|
|
555,219
|
|
(1)
|
The value realized on exercise is calculated as follows: Number of shares acquired upon exercise multiplied by 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 multiplied by the closing price on the vesting date.
|
(3)
|
The stock awards were earned by Mr. Gottfried under our 2011 Long Term Incentive Plan and were due to vest on December 31, 2013. In consideration of Mr. Gottfrieds service with the Company, the
vesting of such awards was accelerated on May 3, 2013, which was Mr. Gottfrieds last day as an employee of the Company.
|
(4)
|
The stock awards were earned by Mr. Wolford under our 2011 Long Term Incentive Plan and were due to vest on December 31, 2013. In consideration of Mr. Wolfords service with the Company, the vesting
of such awards was accelerated on November 15, 2013, which was Mr. Wolfords last day as an employee of the Company.
|
72
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, 2013.
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
16,121,342
|
(1)
|
|
|
16.0205
|
(2)
|
|
|
18,381,272
|
(3)
|
Equity compensation plans not approved by security holders (4)
|
|
|
4,955,839
|
(5)
|
|
|
18.6690
|
(6)
|
|
|
4,302,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
21,077,181
|
|
|
|
|
|
|
|
22,683,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes 7,849,677 shares that may be issued under performance-based share awards and restricted stock unit awards at December 31, 2013.
|
(2)
|
Excludes 7,849,677 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 10,714,822 shares available for future issuance under our 2006 Employee Stock Purchase Plan.
|
(4)
|
Includes awards issued and issuable under our 2000 Stock Incentive Plan and our 2012 Stock Incentive Plan. These plans were assumed pursuant to the acquisition of OPNET Technologies, Inc. on December 18, 2012. No
additional awards have been made under the 2000 Stock Incentive Plan and no shares remain available for grant. Also includes awards issued and issuable under our 2009 Inducement Equity Incentive Plan.
|
(5)
|
Includes 1,271,752 shares that may be issued under restricted stock unit awards at December 31, 2013.
|
(6)
|
Excludes 1,271,752 shares that may be issued under restricted stock unit awards and 4,467 shares that are subject to vesting of restricted stock awards, as such awards are issuable for no consideration.
|
Severance and Change in Control Arrangements
Acceleration of Equity Awards
The named executive
officers are entitled to the following equity acceleration upon the occurrence of certain events:
Each RSU granted to our named executive officers
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.
The foregoing acceleration is additionally conditioned upon the individual signing and not revoking a release of claims.
The new-hire equity grants
made to Mr. Maddock in 2013 contain similar provisions, and specify that vesting of previously unvested shares will occur only if (x) there is a change in control
and
(y) the employment of Mr. Maddock is involuntarily
terminated after the change in control.
73
Severance
Other than the change in control severance agreements with Messrs. Kennelly and Maddock 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 table below. The value of the option and common stock vesting acceleration was calculated based on the assumption that the change in control and the executives employment termination occurred on December 31, 2013. The closing price of
our stock as of December 31, 2013, the last trading day of our 2013 fiscal year, was $18.08, which was used as the value of our stock in the change in control. The value of the unvested stock awards granted under the 2012 LTIP was based on the
actual amount earned, which was 100% of target for the EPS portion. The revenue portion of the 2012 LTIP was forfeited. The value of the unvested stock awards granted under the 2013 LTIP and the unvested OPNET equity award was based on 100% of the
target shares. The value of the vesting acceleration was calculated by multiplying the number of accelerated stock award shares as of December 31, 2013 by the closing price of our stock as of December 31, 2013. The actual amounts that
would be paid to any named executive officer in the event of a termination and change in control situation can only be determined at the time of such executives separation from the Company.
74
The following table describes the potential payments and benefits upon employment termination before or
after a change in control for our named executive officers as if their employment terminated as of December 31, 2013. Other than with respect to an involuntary termination in connection with a change in control, the only payment owing to named
executive officers in connection with any termination of employment or change in control would be accrued and unused vacation pay.
|
|
|
|
|
|
|
Name
|
|
Executive Benefits and Payments Upon Termination
|
|
Involuntary Termination
in connection with or
following Change in
Control ($) (1)
|
|
Jerry M. Kennelly
|
|
Base Salary (2)
|
|
$
|
1,500,000
|
|
|
|
Highest Target Bonus (2)
|
|
|
1,700,000
|
|
|
|
Accelerated Vesting of RSUs (3)
|
|
|
12,117,216
|
|
|
|
Health Care Premiums/Contribution (4)
|
|
|
23,162
|
|
|
|
Accrued Vacation Pay (5)
|
|
|
57,692
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
15,398,070
|
|
|
|
|
Ernest E. Maddock
|
|
Base Salary (2)
|
|
$
|
450,000
|
|
|
|
Highest Target Bonus (2)
|
|
|
400,000
|
|
|
|
Accelerated Vesting of RSUs (6)
|
|
|
2,260,000
|
|
|
|
Health Care Premiums/Contribution (4)
|
|
|
|
|
|
|
Accrued Vacation Pay (5)
|
|
|
10,385
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,120,385
|
|
|
|
|
Randy S. Gottfried
|
|
Base Salary
|
|
|
|
|
|
|
Highest Target Bonus
|
|
|
|
|
|
|
Accelerated Vesting of RSUs (7)
|
|
|
310,600
|
|
|
|
Health Care Premiums/Contribution
|
|
|
|
|
|
|
Accrued Vacation Pay (5)
|
|
|
36,537
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
347,137
|
|
|
|
|
Eric S. Wolford
|
|
Base Salary
|
|
|
|
|
|
|
Highest Target Bonus
|
|
|
|
|
|
|
Accelerated Vesting of RSUs (8)
|
|
|
1,385,717
|
|
|
|
Health Care Premiums/Contribution
|
|
|
|
|
|
|
Accrued Vacation Pay (5)
|
|
|
14,229
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,399,946
|
|
|
|
|
David M. Peranich
|
|
Base Salary
|
|
|
|
|
|
|
Highest Target Bonus
|
|
|
|
|
|
|
Accelerated Vesting of RSUs (3)
|
|
|
4,505,536
|
|
|
|
Health Care Premiums/Contribution
|
|
|
|
|
|
|
Accrued Vacation Pay (5)
|
|
|
42,308
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,547,844
|
|
|
|
|
Brett A. Nissenberg
|
|
Base Salary
|
|
|
|
|
|
|
Highest Target Bonus
|
|
|
|
|
|
|
Accelerated Vesting of RSUs (3)
|
|
|
1,610,928
|
|
|
|
Health Care Premiums/Contribution
|
|
|
|
|
|
|
Accrued Vacation Pay (5)
|
|
|
26,923
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,637,851
|
|
75
(1)
|
The values set forth are calculated based on the closing price on December 31, 2013, the last trading day of our 2013 fiscal year, of $18.08 per share.
|
(2)
|
To be paid in one lump sum pursuant to the terms of the change in control severance agreement.
|
(3)
|
Represents 100% of the unvested RSUs granted under the 2012 LTIP and 2013 LTIP and under the OPNET equity award that would vest if the named executive officer was involuntarily terminated following a change in control
as provided under the LTIP and under the OPNET equity award. Includes the following amounts that were not earned under the Revenue portion of the 2013 LTIP: Mr. Kennelly $804,777; Mr. Peranich $321,914; and
Mr. Nissenberg $126,433. Includes the following amounts that were not earned under the OPNET equity award: Mr. Kennelly $433,920; Mr. Peranich $151,872; and Mr. Nissenberg $43,392.
|
(4)
|
Represents the cost of medical, dental and vision care premiums under COBRA for a 12-month period that will be paid pursuant to the terms of the change in control severance agreement. Mr. Maddock did not
participate in our health care coverage for 2013, and therefore was not eligible to receive COBRA benefits as of December 31, 2013. Mr. Maddock will be eligible to receive such benefits in the future provided he enrolls in our health care
coverage.
|
(5)
|
Accrued Vacation Pay assumes four weeks of accrued but unused vacation for Mr. Kennelly, Mr. Peranich and Mr. Nissenberg and 1.2 weeks of accrued but unused vacation for Mr. Maddock. Amounts for
Mr. Gottfried and Mr. Wolford represent the amount of accrued but unused vacation paid in connection with their employment termination. Other than with respect to an involuntary termination in connection with a change in control, the only
payment owing to named executive officers in connection with any termination of employment or change in control would be accrued and unused vacation pay.
|
(6)
|
Represents 100% of the unvested time-based RSUs granted to Mr. Maddock that would vest if Mr. Maddock was involuntarily terminated following a change in control as provided under the 2012 Stock Incentive Plan.
|
(7)
|
The stock awards were earned by Mr. Gottfried under our 2011 Long Term Incentive Plan and were due to vest on December 31, 2013. In consideration of Mr. Gottfrieds service with us, the vesting of
such awards was accelerated on May 3, 2013, which was Mr. Gottfrieds last day as an employee of the Company. The value was calculated based on the closing price of our stock as of May 3, 2013, which was $15.53.
|
(8)
|
The stock awards were earned by Mr. Wolford under the Companys 2011 Long Term Incentive Plan and were due to vest on December 31, 2013. In consideration of Mr. Wolfords service with the
Company, the vesting of such awards was accelerated on November 15, 2013, which was Mr. Wolfords last day as an employee of the Company. The value was calculated based on the closing price of our stock as of November 15, 2013,
which was $18.05.
|
76
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 the 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 inconsistent with, the best interests of the Company and our stockholders.
Transactions with Related Persons.
The Company has entered into sales or purchase arrangements with Intel
Corporation, Microsoft Corporation and other entities that are affiliated with the Company either by virtue of a director relationship or by the entitys shareholdings. The Company enters into these commercial dealings in the ordinary course of
its business, and considers these arrangements to be arms-length. Ms. Stevenson serves as the vice president and Chief Information Officer of Intel Corporation. Mr. Nadella, who was a member of the Board of Directors from March 2013 to
February 2014, serves as the Chief Executive Officer of Microsoft Corporation. The Company does not believe that either of Ms. Stevenson or Mr. Nadella, or any other members of our Board of Directors, 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
Wolford, 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.
77
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.
|
By Order of the Board of Directors
|
|
|
Brett A. Nissenberg
|
General Counsel, Senior Vice President of Corporate and Legal Affairs and Secretary
|
April 9, 2014
78
APPENDIX A
R
IVERBED
T
ECHNOLOGY
, I
NC
.
2014 E
QUITY
I
NCENTIVE
P
LAN
A-1
RIVERBED TECHNOLOGY, INC.
2014 EQUITY INCENTIVE PLAN
1.
Purposes of
the Plan
. The purposes of this Plan are:
|
|
|
to attract and retain the best available personnel for positions of substantial responsibility,
|
|
|
|
to provide additional incentive to Employees, Directors and Consultants, and
|
|
|
|
to promote the success of the Companys business.
|
The Plan permits the grant of Incentive Stock
Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units, Performance Shares, and other stock or cash awards as the Administrator may determine.
2.
Definitions
. As used herein, the following definitions will apply:
(a)
Administrator
means the Board or any of its Committees as will be administering the Plan, in accordance with
Section 4 of the Plan.
(b)
Applicable Laws
means the requirements relating to the administration of
equity-based awards under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any foreign country or
jurisdiction where Awards are, or will be, granted under the Plan.
(c)
Award
means, individually or collectively,
a grant under the Plan of Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Units, Performance Shares, or other stock or cash awards as the Administrator may determine.
(d)
Award Agreement
means the written or electronic agreement setting forth the terms and provisions applicable to
each Award granted under the Plan. The Award Agreement is subject to the terms and conditions of the Plan.
(e)
Board
means the Board of Directors of the Company.
(f)
Change in Control
means the occurrence
of any of the following events:
(i) A change in the ownership of the Company which occurs on the date that any one person, or more
than one person acting as a group (
Person
), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of
the Company; provided, however, that for purposes of this subsection, the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not
be considered a Change in Control; provided, however, that for purposes of this clause (i), (1) the acquisition of beneficial ownership of additional stock by any one Person who is considered to beneficially own more than fifty percent
(50%) of the total voting power of the stock of the Company will not be considered a Change in Control; and (2) if the stockholders of the Company immediately before such change in ownership continue to retain immediately after the change
in ownership, in substantially the same proportions as their ownership of shares of the Companys voting stock immediately prior to the change in ownership, direct or indirect beneficial ownership of fifty percent (50%) or more of the
total voting power of the stock of the Company, such event shall not be considered a Change in Control under this clause (i). For this purpose, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of
the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities; or
A-2
(ii) A change in the effective control of the Company which occurs on the date that a
majority of members of the Board is replaced during any twenty-four (24) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For
purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control; or
(iii) A change in the ownership of a substantial portion of the Companys assets which occurs on the date that any Person acquires
(or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty percent
(50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in
the ownership of a substantial portion of the Companys assets: (A) a transfer to an entity that is controlled by the Companys stockholders immediately after the transfer, or (B) a transfer of assets by the Company to:
(1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Companys stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is
owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least
fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the assets
of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.
For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into
a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.
Notwithstanding the
foregoing, a transaction will not be deemed a Change in Control unless the transaction qualifies as a change in control event within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or
final Treasury Regulations and Internal Revenue Service guidance that has been promulgated or may be promulgated thereunder from time to time.
Further and for the avoidance of doubt, a transaction will not constitute a Change in Control if: (i) its sole purpose is to change
the state of the Companys incorporation, or (ii) its sole purpose is to create a holding company that will be owned in substantially the same proportions by the persons who held the Companys securities immediately before such
transaction.
(g)
Code
means the Internal Revenue Code of 1986, as amended. Reference to a specific section of the
Code or regulation thereunder will include such section or regulation, any valid regulation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or
regulation.
(h)
Committee
means a committee of Directors or of other individuals satisfying Applicable Laws
appointed by the Board, or a duly authorized committee of the Board, in accordance with Section 4 hereof.
(i)
Common
Stock
means the common stock of the Company.
(j)
Company
means Riverbed Technology, Inc., a Delaware
corporation, or any successor thereto.
A-3
(k)
Consultant
means any natural person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render bona fide services to such entity, provided the services (i) are not in connection with the offer or sale of securities in a capital-raising transaction, and (ii) do not directly promote
or maintain a market for the Companys securities.
(l)
Determination Date
means the latest possible date
that will not jeopardize the qualification of an Award granted under the Plan as performance-based compensation under Section 162(m) of the Code.
(m)
Director
means a member of the Board.
(n)
Disability
means total and permanent disability as defined in Section 22(e)(3) of the Code, provided
that in the case of Awards other than Incentive Stock Options, the Administrator in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Administrator
from time to time.
(o)
Employee
means any person, including Officers and Directors, employed by the Company or
any Parent or Subsidiary of the Company. Neither service as a Director nor payment of a directors fee by the Company will be sufficient to constitute employment by the Company.
(p)
Exchange Act
means the Securities Exchange Act of 1934, as amended.
(q)
Exchange Program
means a program under which (i) outstanding Awards are surrendered or cancelled in exchange
for awards of the same type (which may have higher or lower exercise prices and different terms), awards of a different type, and/or cash, (ii) Participants would have the opportunity to transfer any outstanding Awards to a financial
institution or other person or entity selected by the Administrator, and/or (iii) the exercise price of an outstanding Award is increased or reduced. The Administrator will determine the terms and conditions of any Exchange Program in its sole
discretion.
(r)
Fair Market Value
means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the New
York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global Market or the NASDAQ Capital Market of The NASDAQ Stock Market, its Fair Market Value will be the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system on the day of determination, as reported in
The Wall Street Journal
or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market
Value of a Share will be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were
reported), as reported in
The Wall Street Journal
or such other source as the Administrator deems reliable; or
(iii) In the
absence of an established market for the Common Stock, the Fair Market Value will be determined in good faith by the Administrator.
(s)
Fiscal Year
means the fiscal year of the Company.
(t)
Incentive Stock Option
means an Option that by its terms qualifies and is intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code.
(u)
Nonstatutory Stock Option
means an Option
that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.
(v)
Officer
means
a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
A-4
(w)
Option
means a stock option granted pursuant to the Plan.
(x)
Outside Director
means a Director who is not an Employee.
(y)
Parent
means a parent corporation, whether now or hereafter existing, as defined in
Section 424(e) of the Code.
(z)
Participant
means the holder of an outstanding Award.
(aa)
Performance Goals
will have the meaning set forth in Section 11 of the Plan.
(bb)
Performance Period
means any Fiscal Year of the Company or such other period as determined by the Administrator
in its sole discretion.
(cc)
Performance Share
means an Award denominated in Shares which may be earned in whole
or in part upon attainment of Performance Goals or other vesting criteria as the Administrator may determine pursuant to Section 10.
(dd)
Performance Unit
means an Award which may be earned in whole or in part upon attainment of Performance Goals or
other vesting criteria as the Administrator may determine and which may be settled for cash, Shares or other securities or a combination of the foregoing pursuant to Section 10.
(ee)
Period of Restriction
means the period during which the transfer of Shares of Restricted Stock are subject to
restrictions and therefore, the Shares are subject to a substantial risk of forfeiture. Such restrictions may be based on the passage of time, the achievement of target levels of performance, or the occurrence of other events as determined by the
Administrator.
(ff)
Plan
means this 2014 Equity Incentive Plan.
(gg)
Restricted Stock
means Shares issued pursuant to a Restricted Stock award under Section 7 of the Plan, or
issued pursuant to the early exercise of an Option.
(hh)
Restricted Stock Unit
means a bookkeeping entry
representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 8. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.
(ii)
Rule 16b-3
means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the Plan.
(jj)
Section 16(b)
means Section 16(b) of the Exchange
Act.
(kk)
Securities Act
means the Securities Act of 1933, as amended.
(ll)
Service Provider
means an Employee, Director or Consultant.
(mm)
Share
means a share of the Common Stock, as adjusted in accordance with Section 15 of the Plan.
(nn)
Stock Appreciation Right
means an Award, granted alone or in connection with an Option, that pursuant to
Section 9 is designated as a Stock Appreciation Right.
(oo)
Subsidiary
means a subsidiary
corporation, whether now or hereafter existing, as defined in Section 424(f) of the Code.
3.
Stock Subject to the Plan
.
(a)
Stock Subject to the Plan
. Subject to the
provisions of Section 15 of the Plan, the maximum aggregate number of Shares that may be issued under the Plan shall equal the sum of (i) any Shares that, as of March 10, 2014, are available for issuance under the Companys 2006
Equity Incentive Plan, 2006 Director Option Plan, and 2012 Stock Incentive Plan (together, the
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Existing Plans
) and are not subject to any awards granted thereunder, equal to 12,405,193 Shares and (ii) any Shares subject to stock options or other awards granted under
the Existing Plans that, after March 10, 2014, expire or otherwise terminate without having been vested or exercised in full, or that are forfeited to or repurchased by the Company, or that are used to pay the exercise price of an Award or to
satisfy the tax withholding obligations related to an Award, with the maximum number of Shares under this clause (ii) to be added to the Plan from previously granted awards under the Existing Plans not to exceed 18,479,025 Shares. The Shares
may be authorized, but unissued, or reacquired Common Stock.
(b)
Lapsed Awards
. If an Award expires or becomes unexercisable
without having been exercised in full, is surrendered pursuant to an Exchange Program, or, with respect to Restricted Stock, Restricted Stock Units, Performance Units or Performance Shares, is forfeited to, or repurchased by, the Company due to
failure to vest, then the unpurchased Shares (or for Awards other than Options or Stock Appreciation Rights the forfeited or repurchased Shares), which were subject thereto will become available for future grant or sale under the Plan (unless the
Plan has terminated). With respect to Stock Appreciation Rights, only Shares actually issued (i.e., the net Shares issued) pursuant to a Stock Appreciation Right will cease to be available under the Plan; all remaining Shares under Stock
Appreciation Rights will remain available for future grant or sale under the Plan (unless the Plan has terminated). Shares that actually have been issued under the Plan under any Award will not be returned to the Plan and will not become available
for future distribution under the Plan; provided, however, that if Shares issued pursuant to Awards of Restricted Stock, Restricted Stock Units, Performance Shares or Performance Units are repurchased by the Company or are forfeited to the Company,
such Shares will become available for future grant under the Plan. Shares used to pay the exercise price of an Award or to satisfy the tax withholding obligations related to an Award will become available for future grant or sale under the Plan. To
the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Notwithstanding the foregoing and, subject to adjustment as provided
in Section 15, the maximum number of Shares that may be issued upon the exercise of Incentive Stock Options will equal the aggregate Share number stated in Section 3(a), plus, to the extent allowable under Section 422 of the Code, any
Shares that become available for issuance under the Plan pursuant to Section 3(b).
(c)
Share Reserve
. The Company,
during the term of this Plan, will at all times reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of the Plan.
4.
Administration of the Plan
.
(a)
Procedure
.
(i)
Multiple Administrative Bodies
. Different Committees with respect to different groups of Service Providers may administer the
Plan.
(ii)
Section 162(m)
. To the extent that the Administrator determines it to be desirable to qualify Awards granted
hereunder as performance-based compensation within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or more outside directors within the meaning of
Section 162(m) of the Code.
(iii)
Rule 16b-3
. To the extent desirable to qualify transactions hereunder as exempt
under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv)
Other Administration
. Other than as provided above, the Plan will be administered by (A) the Board or (B) a
Committee, which committee will be constituted to satisfy Applicable Laws.
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(b)
Powers of the Administrator
. Subject to the provisions of the Plan, and in the
case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator will have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Awards may be granted hereunder;
(iii) to determine the number of Shares to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or times when Awards may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Administrator will determine;
(vi) to institute and determine the terms and conditions of an Exchange Program (provided that the Administrator may not institute an
Exchange Program without first receiving the consent of the Companys stockholders);
(vii) to construe and interpret the terms
of the Plan and Awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws or for qualifying for favorable tax treatment under applicable foreign laws;
(ix) to modify or amend each Award (subject to Section 20 of the Plan), including but not limited to the discretionary authority to
extend the post-termination exercisability period of Awards and to extend the maximum term of an Option (subject to Section 6(b) of the Plan regarding Incentive Stock Options);
(x) to allow Participants to satisfy tax withholding obligations in such manner as prescribed in Section 16 of the Plan;
(xi) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Award previously
granted by the Administrator;
(xii) to allow a Participant to defer the receipt of the payment of cash or the delivery of Shares
that otherwise would be due to such Participant under an Award; and
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c)
Effect of Administrators Decision
. The Administrators decisions,
determinations and interpretations will be final and binding on all Participants and any other holders of Awards.
5.
Eligibility
.
Nonstatutory Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units, and such other cash or stock awards as the Administrator determines may be granted to Service Providers.
Incentive Stock Options may be granted only to Employees.
6.
Stock Options
.
(a)
Limitations
.
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(i) Each Option will be designated in the Award Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant
during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as Nonstatutory Stock Options. For purposes of this Section 6(a)(i),
Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.
(ii) The Administrator will have complete discretion to determine the number of Shares subject to an Option granted to any Participant,
provided that during any Fiscal Year, no Participant will be granted an Option covering more than 5,000,000 Shares.
(b)
Term of
Option
. The term of each Option will be stated in the Award Agreement. In the case of an Incentive Stock Option, the term will be seven (7) years from the date of grant or such shorter term as may be provided in the Award Agreement.
Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock
of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five (5) years from the date of grant or such shorter term as may be provided in the Award Agreement.
(c)
Option Exercise Price and Consideration
.
(i)
Exercise Price
. The per share exercise price for the Shares to be issued pursuant to exercise of an Option will be determined
by the Administrator, subject to the following:
(1) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price will
be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(2) In the case of a
Nonstatutory Stock Option, the per Share exercise price will be no less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(3) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than one hundred percent
(100%) of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.
(ii)
Waiting Period and Exercise Dates
. At the time an Option is granted, the Administrator will fix the period within which the
Option may be exercised and will determine any conditions that must be satisfied before the Option may be exercised.
(iii)
Form
of Consideration
. The Administrator will determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator will determine the acceptable form of
consideration at the time of grant. Such consideration may consist entirely of: (1) cash;
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(2) check; (3) promissory note, to the extent permitted by Applicable Laws, (4) other Shares, provided that such Shares have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which such Option will be exercised and provided that accepting such Shares will not result in any adverse accounting consequences to the Company, as the Administrator determines in its sole
discretion; (5) consideration received by the Company under a broker-assisted (or other) cashless exercise program (whether through a broker or otherwise) implemented by the Company in connection with the Plan; (6) by net
exercise; (7) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws; or (8) any combination of the foregoing methods of payment.
(d)
Exercise of Option
.
(i)
Procedure for Exercise; Rights as a Stockholder
. Any Option granted hereunder will be exercisable according to the terms of
the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share.
An Option will be deemed exercised when the Company receives: (i) a notice of exercise (in such form as the Administrator may
specify from time to time) from the person entitled to exercise the Option, and (ii) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any
consideration and method of payment authorized by the Administrator and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant or, if requested by the Participant, in the
name of the Participant and his or her spouse. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other
rights as a stockholder will exist with respect to the Shares subject to an Option, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment
will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 15 of the Plan.
Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.
(ii)
Termination of Relationship as a Service
Provider
. If a Participant ceases to be a Service Provider, other than upon the Participants termination as the result of the Participants death or Disability, the Participant may exercise his or her Option within such period of time
as is specified in the Award Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time
in the Award Agreement, the Option will remain exercisable for three (3) months following the Participants termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his
or her entire Option, the Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified by the Administrator, the Option will
terminate, and the Shares covered by such Option will revert to the Plan.
(iii)
Disability of Participant
. If a Participant
ceases to be a Service Provider as a result of the Participants Disability, the Participant may exercise his or her Option within such period of time as is specified in the Award Agreement to the extent the Option is vested on
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the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Award Agreement). In the absence of a specified time in the Award Agreement, the
Option will remain exercisable for twelve (12) months following the Participants termination. Unless otherwise provided by the Administrator, if on the date of termination the Participant is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option will revert to the Plan. If after termination the Participant does not exercise his or her Option within the time specified herein, the Option will terminate, and the Shares covered by such Option
will revert to the Plan.
(iv)
Death of Participant
. If a Participant dies while a Service Provider, the Option may be
exercised following the Participants death within such period of time as is specified in the Award Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of
the term of such Option as set forth in the Award Agreement), by the Participants designated beneficiary, provided such beneficiary has been designated prior to Participants death in a form acceptable to the Administrator. If no such
beneficiary has been designated by the Participant, then such Option may be exercised by the personal representative of the Participants estate or by the person(s) to whom the Option is transferred pursuant to the Participants will
or in accordance with the laws of descent and distribution. In the absence of a specified time in the Award Agreement, the Option will remain exercisable for twelve (12) months following Participants death. Unless otherwise provided by
the Administrator, if at the time of death Participant is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option will immediately revert to the Plan. If the Option is not so exercised within the time
specified herein, the Option will terminate, and the Shares covered by such Option will revert to the Plan.
(v)
Other
Termination
. A Participants Award Agreement may also provide that if the exercise of the Option following the termination of Participants status as a Service Provider (other than upon the Participants death or Disability) would
result in liability under Section 16(b), then the Option will terminate on the earlier of (A) the expiration of the term of the Option set forth in the Award Agreement, or (B) the 10th day after the last date on which such exercise
would result in such liability under Section 16(b). Finally, a Participants Award Agreement may also provide that if the exercise of the Option following the termination of the Participants status as a Service Provider (other than
upon the Participants death or Disability) would be prohibited at any time solely because the issuance of Shares would violate the registration requirements under the Securities Act, then the Option will terminate on the earlier of
(A) the expiration of the term of the Option set forth in the Award Agreement or (B) the expiration of a period of three (3) months after the termination of the Participants status as a Service Provider during which the exercise
of the Option would not be in violation of such registration requirements.
7.
Restricted Stock
.
(a)
Grant of Restricted Stock
. Subject to the terms and provisions of the Plan, the Administrator, at any time and from time to
time, may grant Shares of Restricted Stock to Service Providers in such amounts as the Administrator, in its sole discretion, will determine.
(b)
Restricted Stock Agreement
. Each Award of Restricted Stock will be evidenced by an Award Agreement that will specify the
Period of Restriction, the number of Shares granted, and such other terms and conditions as the Administrator, in its sole discretion, will determine. Notwithstanding the foregoing sentence, for restricted stock intended to qualify as
performance-based compensation within the meaning of Section 162(m) of the Code, during any Fiscal Year no Participant will receive more than an aggregate of 5,000,000 Shares of Restricted Stock. Unless the Administrator determines
otherwise, Shares of Restricted Stock will be held by the Company as escrow agent until the restrictions on such Shares have lapsed.
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(c)
Transferability
. Except as provided in this Section 7, Shares of Restricted
Stock may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
(d)
Other Restrictions
. The Administrator, in its sole discretion, may impose such other restrictions on Shares of Restricted
Stock as it may deem advisable or appropriate.
(e)
Removal of Restrictions
. Except as otherwise provided in this
Section 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan will be released from escrow as soon as practicable after the last day of the Period of Restriction. The Administrator, in its discretion, may
accelerate the time at which any restrictions will lapse or be removed.
(f)
Voting Rights
. During the Period of Restriction,
Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless the Administrator determines otherwise.
(g)
Dividends and Other Distributions
. During the Period of Restriction, Service Providers holding Shares of Restricted Stock will
be entitled to receive all dividends and other distributions paid with respect to such Shares unless otherwise provided in the Award Agreement. If any such dividends or distributions are paid in Shares, the Shares will be subject to the same
restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid.
(h)
Return of Restricted Stock to Company
. On the date set forth in the Award Agreement, the Restricted Stock for which restrictions have not lapsed will revert to the Company and again will become available for grant under the Plan.
(i)
Section 162(m) Performance Restrictions
. For purposes of qualifying grants of Restricted Stock as performance-based
compensation under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the
Determination Date. In granting Restricted Stock which is intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure
qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
8.
Restricted Stock Units
.
(a)
Grant
. Restricted Stock Units may be granted at any time and from time to time as determined by the Administrator. Each
Restricted Stock Unit grant will be evidenced by an Award Agreement that will specify such other terms and conditions as the Administrator, in its sole discretion, will determine, including all terms, conditions, and restrictions related to the
grant, the number of Restricted Stock Units and the form of payout, which, subject to Section 8(d), may be left to the discretion of the Administrator. Notwithstanding anything to the contrary in this subsection (a), for Restricted Stock
Units intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code, during any Fiscal Year of the Company, no Participant will receive more than an aggregate of 5,000,000 Restricted Stock
Units.
(b)
Vesting Criteria and Other Terms
. The Administrator will set vesting criteria in its discretion, which, depending
on the extent to which the criteria are met, will determine the number of Restricted Stock Units that will be paid out to the Participant. The Administrator may set vesting criteria based upon the achievement of Company-wide, divisional, business
unit, or individual goals (including, but not limited to, continued employment or service), applicable federal or state securities laws or any other basis determined by the Administrator in its discretion. After the grant of Restricted Stock Units,
the Administrator, in its sole discretion, may reduce or waive any restrictions for such Restricted Stock Units.
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(c)
Earning Restricted Stock Units
. Upon meeting the applicable vesting criteria,
the Participant will be entitled to receive a payout as specified in the Award Agreement.
(d)
Form and Timing of Payment
.
Payment of earned Restricted Stock Units will be made as soon as practicable after the date(s) set forth in the Award Agreement. The Administrator, in its sole discretion, may pay earned Restricted Stock Units in cash, Shares, or a combination
thereof. Shares represented by Restricted Stock Units that are fully paid in cash again will be available for grant under the Plan.
(e)
Cancellation
. On the date set forth in the Award Agreement, all unearned Restricted Stock Units will be forfeited to the
Company.
(f)
Section 162(m) Performance Restrictions
. For purposes of qualifying grants of Restricted Stock Units as
performance-based compensation under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Administrator on
or before the Determination Date. In granting Restricted Stock Units which are intended to qualify under Section 162(m) of the Code, the Administrator will follow any procedures determined by it from time to time to be necessary or appropriate
to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
9.
Stock Appreciation
Rights
.
(a)
Grant of Stock Appreciation Rights
. Subject to the terms and conditions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as will be determined by the Administrator, in its sole discretion.
(b)
Number of Shares
. The Administrator will have complete discretion to determine the number of Stock Appreciation Rights granted
to any Participant, provided that during any Fiscal Year, no Participant will be granted Stock Appreciation Rights covering more than 5,000,000 Shares.
(c)
Exercise Price and Other Terms
. The Administrator, subject to the provisions of the Plan, will have complete discretion to
determine the terms and conditions of Stock Appreciation Rights granted under the Plan, provided, however, that the exercise price will be not less than 100% of the Fair Market Value of a Share on the date of grant.
(d)
Stock Appreciation Right Agreement
. Each Stock Appreciation Right grant will be evidenced by an Award Agreement that will
specify the exercise price, the term of the Stock Appreciation Right, the conditions of exercise, and such other terms and conditions as the Administrator, in its sole discretion, will determine.
(e)
Expiration of Stock Appreciation Rights
. A Stock Appreciation Right granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the Award Agreement; provided, however, that the term will be no more than seven (7) years from the date of grant thereof. Notwithstanding the foregoing, the rules of
Section 6(d) also will apply to Stock Appreciation Rights.
(f)
Payment of Stock Appreciation Right Amount
. Upon exercise
of a Stock Appreciation Right, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying:
(i) The difference between the Fair Market Value of a Share on the date of exercise over the exercise price; times
(ii) The number of Shares with respect to which the Stock Appreciation Right is exercised.
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At the discretion of the Administrator, the payment upon Stock Appreciation Right exercise may be in cash, in Shares of
equivalent value, or in some combination thereof.
10.
Performance Units and Performance Shares
.
(a)
Grant of Performance Units/Shares
. Performance Units and Performance Shares may be granted to Service Providers at any time
and from time to time, as will be determined by the Administrator, in its sole discretion. The Administrator will have complete discretion in determining the number of Performance Units/Shares granted to each Participant provided that during any
Fiscal Year, for Performance Units or Performance Shares intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code, (i) no Participant will receive Performance Units having an
initial value greater than $10,000,000, and (ii) no Participant will receive more than 5,000,000 Performance Shares.
(b)
Value of Performance Units/Shares
. Each Performance Unit will have an initial value that is established by the Administrator on or before the date of grant. Each Performance Share will have an initial value equal to the Fair Market Value of a
Share on the date of grant.
(c)
Performance Objectives and Other Terms
. The Administrator will set performance objectives or
other vesting provisions (including, without limitation, continued status as a Service Provider) in its discretion which, depending on the extent to which they are met, will determine the number or value of Performance Units/Shares that will be
paid out to the Service Providers. Each Award of Performance Units/Shares will be evidenced by an Award Agreement that will specify the Performance Period, and such other terms and conditions as the Administrator, in its sole discretion, will
determine. The Administrator may set performance objectives based upon the achievement of Company-wide, divisional, business unit or individual goals (including, but not limited to, continued employment or service), applicable federal or state
securities laws, or any other basis determined by the Administrator in its discretion.
(d)
Earning of Performance
Units/Shares
. After the applicable Performance Period has ended, the holder of Performance Units/Shares will be entitled to receive a payout of the number of Performance Units/Shares earned by the Participant over the Performance Period, to be
determined as a function of the extent to which the corresponding performance objectives or other vesting provisions have been achieved. After the grant of a Performance Unit/Share, the Administrator, in its sole discretion, may reduce or waive any
performance objectives or other vesting provisions for such Performance Unit/Share.
(e)
Form and Timing of Payment of Performance
Units/Shares
. Payment of earned Performance Units/Shares will be made as soon as practicable after the expiration of the applicable Performance Period. The Administrator, in its sole discretion, may pay earned Performance Units/Shares in the
form of cash, in Shares (which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period) or in a combination thereof.
(f)
Cancellation of Performance Units/Shares
. On the date set forth in the Award Agreement, all unearned or unvested Performance
Units/Shares will be forfeited to the Company, and again will be available for grant under the Plan.
(g)
Section 162(m)
Performance Restrictions
. For purposes of qualifying grants of Performance Units/Shares as performance-based compensation under Section 162(m) of the Code, the Administrator, in its discretion, may set restrictions based upon
the achievement of Performance Goals. The Performance Goals will be set by the Administrator on or before the Determination Date. In granting Performance Units/Shares which are intended to qualify under Section 162(m) of the Code, the
Administrator will follow any procedures determined by it from time to time to be necessary or appropriate to ensure qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).
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11.
Performance-Based Compensation Under Code Section 162(m)
.
(a)
General
. If the Administrator, in its discretion, decides to grant an Award intended to qualify as performance-based
compensation under Code Section 162(m), the provisions of this Section 11 will control over any contrary provision in the Plan; provided, however, that the Administrator may in its discretion grant Awards that are not intended to
qualify as performance-based compensation under Section 162(m) of the Code to such Participants that are based on Performance Goals or other specific criteria or goals but that do not satisfy the requirements of this
Section 11.
(b)
Performance Goals
. The granting and/or vesting of Awards of Restricted Stock, Restricted Stock Units,
Performance Shares and Performance Units and other incentives under the Plan may be made subject to the attainment of performance goals relating to one or more business criteria within the meaning of Code Section 162(m) and may provide for a
targeted level or levels of achievement (
Performance Goals
) including (i) cash flow (including operating cash flow or free cash flow), (ii) revenue (on an absolute basis or adjusted for currency effects),
(iii) gross margin, (iv) operating expenses or operating expenses as a percentage of revenue, (v) earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings or EBITDA), (vi) earnings per
share, (vii) stock price, (viii) return on equity, (ix) total stockholder return, (x) growth in stockholder value relative to the moving average of the S&P 500 Index, or another index, (xi) return on capital,
(xii) return on assets or net assets, (xiii) return on investment, (xiv) economic value added, (xv) operating income or net operating income, (xvi) operating margin, (xvii) market share, (xviii) overhead or other
expense reduction, (xix) credit rating, (xx) objective customer indicators, (xxi) improvements in productivity, (xxii) attainment of objective operating goals, (xxiii) objective employee metrics, (xxiv) return ratios,
(xxv) objective qualitative milestones, or (xxvi) other objective financial or other metrics relating to the progress of the Company or to a Subsidiary, division or department thereof. Any Performance Goals may be used to measure the
performance of the Company as a whole or, except with respect to stockholder return metrics, to a region, business unit, affiliate or business segment, and may be measured either on an absolute basis, a per share basis or relative to a
pre-established target, to a previous periods results or to a designated comparison group, and, with respect to financial metrics, which may be determined in accordance with United States Generally Accepted Accounting Principles
(GAAP), in accordance with accounting principles established by the International Accounting Standards Board (IASB Principles) or which may be adjusted when established to either exclude any items otherwise includable under
GAAP or under IASB Principles or include any items otherwise excludable under GAAP or under IASB Principles. The Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Administrator
will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant.
(c)
Procedures
. To the extent necessary to comply with the performance-based compensation provisions of Code Section 162(m),
with respect to any Award granted subject to Performance Goals, within the first twenty-five percent (25%) of the Performance Period, but in no event more than ninety (90) days following the commencement of any Performance Period (or such
other time as may be required or permitted by Code Section 162(m)), the Administrator will, in writing, (i) designate one or more Participants to whom an Award will be made, (ii) select the Performance Goals applicable to the
Performance Period, (iii) establish the Performance Goals, and amounts of such Awards, as applicable, which may be earned for such Performance Period, and (iv) specify the relationship between Performance Goals and the amounts of such
Awards, as applicable, to be earned by each Participant for such Performance Period. Following the completion of each Performance Period, the Administrator will certify in writing whether the applicable Performance Goals have been achieved for such
Performance Period. In determining the amounts earned by a Participant, the Administrator will have the right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into account
A-14
additional factors that the Administrator may deem relevant to the assessment of individual or corporate performance for the Performance Period. A Participant will be eligible to receive payment
pursuant to an Award for a Performance Period only if the Performance Goals for such period are achieved.
(d)
Additional
Limitations
. Notwithstanding any other provision of the Plan, any Award which is granted to a Participant and is intended to constitute qualified performance based compensation under Code Section 162(m) will be subject to any additional
limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are requirements for qualification as qualified performance-based compensation as described in
Section 162(m) of the Code, and the Plan will be deemed amended to the extent necessary to conform to such requirements.
12.
Outside
Director Limitations
.
(a)
Cash-settled Awards
. No Outside Director may be granted, in any Fiscal Year,
cash-settled
Awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of greater than $2,500,000, increased to $5,000,000 in the Fiscal Year of his or her
initial service as an Outside Director.
(b)
Stock-settled Awards
. Subject to the provisions of Section 15 of the Plan,
no Outside Director may be granted, in any Fiscal Year,
stock-settled
Awards with a grant date fair value (determined in accordance with U.S. generally accepted accounting principles) of greater than
$2,500,000, increased to $5,000,000 in the Fiscal Year of his or her initial service as an Outside Director.
Any Awards granted to an individual
while he or she was an Employee, or while he or she was a Consultant but not an Outside Director, will not count for purposes of the limitations under this Section 12.
13.
Leaves of Absence/Transfer Between Locations
. Unless the Administrator provides otherwise, vesting of Awards granted hereunder will not be
suspended during any unpaid leave of absence approved by the Company. A Participant will not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, or any Subsidiary. For purposes of Incentive Stock Options, no such leave may exceed three (3) months, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed, then six (6) months following the first (1st) day of such leave any Incentive Stock Option held by the Participant will cease to be treated as an Incentive
Stock Option and will be treated for tax purposes as a Nonstatutory Stock Option.
14.
Transferability of Awards
. Unless determined otherwise
by the Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant,
only by the Participant. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.
15.
Adjustments; Dissolution or Liquidation; Change in Control
.
(a)
Adjustments
. In the event that any dividend or other distribution (whether in the form of cash, Shares, other securities, or
other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares occurs, the Administrator, in order to prevent diminution or
A-15
enlargement of the benefits or potential benefits intended to be made available under the Plan, will adjust the number and class of Shares that may be delivered under the Plan and/or the number,
class, and price of Shares covered by each outstanding Award, and the numerical Share limits in Sections 3, 6(a)(ii), 7, 8, 9, 10, 12(a), and 12(b) of the Plan.
(b)
Dissolution or Liquidation
. In the event of the proposed dissolution or liquidation of the Company, the Administrator will
notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it previously has not been exercised or remains unvested, an Award will terminate immediately prior to the consummation of such
proposed action.
(c)
Change in Control
. In the event of a Change in Control, each outstanding Award will be treated as the
Administrator determines, including, without limitation, that (i) Awards may be assumed, or substantially equivalent Awards will be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments
as to the number and kind of shares and prices; (ii) upon written notice to a Participant, that the Participants Awards will terminate upon or immediately prior to the consummation of such Change in Control; (iii) outstanding Awards
will vest and become exercisable, realizable, or payable, or restrictions applicable to an Award will lapse, in whole or in part prior to or upon consummation of such Change in Control, and, to the extent the Administrator determines, terminate upon
or immediately prior to the effectiveness of such merger or Change in Control; (iv) (A) the termination of an Award in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the
exercise of such Award or realization of the Participants rights as of the date of the occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Administrator determines in good
faith that no amount would have been attained upon the exercise of such Award or realization of the Participants rights, then such Award may be terminated by the Company without payment), or (B) the replacement of such Award with other
rights or property selected by the Administrator in its sole discretion; or (v) any combination of the foregoing. In taking any of the actions permitted under this Section 15(c), the Administrator will not be required to treat all Awards
similarly in the transaction.
In the event that the successor corporation does not assume or substitute (with a substantially
equivalent Award) for the Award, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and Stock Appreciation Rights, including Shares as to which such Awards would not otherwise be vested or
exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting, all performance goals or other vesting criteria will be deemed achieved at one hundred percent
(100%) of target levels and all other terms and conditions met. In addition, if an Option or Stock Appreciation Right is not assumed or substituted in the event of a Change in Control, the Administrator will notify the Participant in writing or
electronically that the Option or Stock Appreciation Right will be exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or Stock Appreciation Right will terminate upon the expiration of such period.
For the purposes of this subsection (c), an Award will be considered assumed if, following the Change in Control, the Award confers
the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such
consideration received in the Change in Control is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the
A-16
exercise of an Option or Stock Appreciation Right or upon the payout of a Restricted Stock Unit, Performance Unit or Performance Share, for each Share subject to such Award, to be solely common
stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the Change in Control.
Notwithstanding anything in this Section 15(c) to the contrary, an Award that vests, is earned or paid-out upon the
satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participants consent; provided, however, a modification to such performance goals
only to reflect the successor corporations post-Change in Control corporate structure will not be deemed to invalidate an otherwise valid Award assumption.
(d)
Outside Director Awards
. With respect to Awards granted to an Outside Director, in the event of a Change in Control before the
Outside Directors Service terminates, then, as of the date of the Change in Control, the Outside Director will fully vest in and have the right to exercise Options and/or Stock Appreciation Rights as to all of the Shares underlying such Award,
including those Shares which otherwise would not be vested or exercisable, all restrictions on Restricted Stock and Restricted Stock Units will lapse, and, with respect to Awards with performance-based vesting, all performance goals or other vesting
criteria will be deemed achieved at one hundred percent (100%) of target levels and all other terms and conditions met.
16.
Tax
.
(a)
Withholding Requirements
. Prior to the delivery of any Shares or cash pursuant to an Award (or exercise thereof) or such
earlier time as any tax withholding obligations are due, the Company will have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local, foreign or other
taxes (including the Participants FICA obligation) required to be withheld with respect to such Award (or exercise thereof).
(b)
Withholding Arrangements
. The Administrator, in its sole discretion and pursuant to such procedures as it may specify from
time to time, may permit a Participant to satisfy such tax withholding obligation, in whole or in part by (without limitation) (i) paying cash, (ii) electing to have the Company withhold otherwise deliverable Shares having a Fair Market
Value equal to the minimum statutory amount required to be withheld, (iii) delivering to the Company already-owned Shares having a Fair Market Value equal to the statutory amount required to be withheld, provided the delivery of such Shares
will not result in any adverse accounting consequences, as the Administrator determines in its sole discretion, or (iv) selling a sufficient number of Shares otherwise deliverable to the Participant through such means as the Administrator may
determine in its sole discretion (whether through a broker or otherwise) equal to the amount required to be withheld. The amount of the withholding requirement will be deemed to include any amount which the Administrator agrees may be withheld at
the time the election is made, not to exceed the amount determined by using the maximum federal, state or local marginal income tax rates applicable to the Participant with respect to the Award on the date that the amount of tax to be withheld is to
be determined. The Fair Market Value of the Shares to be withheld or delivered will be determined as of the date that the taxes are required to be withheld.
(c)
Compliance With Code Section 409A
. Awards will be designed and operated in such a manner that they are either exempt from
the application of, or comply with, the requirements of Code Section 409A such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code Section 409A, except as otherwise
determined in the sole discretion of the Administrator. The Plan and each Award Agreement under the Plan is intended to meet the requirements of Code Section 409A and will be construed and interpreted in accordance with such intent, except
as otherwise determined in the sole discretion of the Administrator. To the extent that an Award or payment, or the settlement or deferral thereof, is subject to Code Section 409A, the Award will be granted, paid, settled or deferred in a
manner
A-17
that will meet the requirements of Code Section 409A, such that the grant, payment, settlement or deferral will not be subject to the additional tax or interest applicable under Code
Section 409A.
17.
No Effect on Employment or Service
. Neither the Plan nor any Award will confer upon a Participant any right with
respect to continuing the Participants relationship as a Service Provider with the Company, nor will they interfere in any way with the Participants right or the Companys right to terminate such relationship at any time, with or
without cause, to the extent permitted by Applicable Laws.
18.
Date of Grant
. The date of grant of an Award will be, for all purposes, the
date on which the Administrator makes the determination granting such Award, or such other later date as is determined by the Administrator. Notice of the determination will be provided to each Participant within a reasonable time after the date of
such grant.
19.
Term of Plan
. Subject to Section 23 of the Plan, the Plan will become effective upon its adoption by the Board. It will
continue in effect for a term of ten (10) years from the date adopted by the Board, unless terminated earlier under Section 20 of the Plan.
20.
Amendment and Termination of the Plan
.
(a)
Amendment and Termination
. The Administrator may at any time amend, alter, suspend or terminate the Plan.
(b)
Stockholder Approval
. The Company will obtain stockholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.
(c)
Effect of Amendment or Termination
. No amendment, alteration, suspension or termination
of the Plan will materially impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by the Participant and the Company. Termination of the
Plan will not affect the Administrators ability to exercise the powers granted to it hereunder with respect to Awards granted under the Plan prior to the date of such termination.
21.
Conditions Upon Issuance of Shares
.
(a)
Legal Compliance
. Shares will not be issued pursuant to the exercise of an Award unless the exercise of such Award and the
issuance and delivery of such Shares will comply with Applicable Laws and will be further subject to the approval of counsel for the Company with respect to such compliance.
(b)
Investment Representations
. As a condition to the exercise of an Award, the Company may require the person exercising such
Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
22.
Inability to Obtain Authority
. The inability of the Company to obtain authority from any regulatory body
having jurisdiction or to complete or comply with the requirements of any registration or other qualification of the Shares under any state, federal or foreign law or under the rules and regulations of the Securities and Exchange Commission, the
stock exchange on which Shares of the same class are then listed, or any other governmental or regulatory body, which authority, registration, qualification or rule compliance is deemed by the Companys counsel to be necessary or advisable for
the issuance and sale of any Shares hereunder, will relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority, registration, qualification or rule compliance will not have been
obtained.
23.
Stockholder Approval
. The Plan will be subject to approval by the stockholders of the Company within twelve (12) months
after the date the Plan is adopted by the Board. Such stockholder approval will be obtained in the manner and to the degree required under Applicable Laws.
A-18
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Electronic Voting Instructions
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the voting methods outlined
below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE
TITLE BAR.
Proxies submitted by the Internet or telephone must be
received by 11:59 p.m., Eastern Time, on May 21, 2014.
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Vote by Internet
Go to
www.envisionreports.com/RVBD
Or
scan the QR code with your smartphone
Follow the steps outlined on the secure website
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Vote by telephone
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Call toll free
1-800-652-VOTE (8683)
within the USA, US territories
& Canada on a touch tone telephone
Follow the instructions provided by the recorded message
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Using a
black ink
pen, mark your votes
with an
X
as shown in this example. Please do not write outside the designated areas.
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x
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q
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE
PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
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A
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Proposals The Board of Directors Recommends a Vote For the Nominee listed in Proposal 1, and For Proposals 2, 3 and 4.
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1.
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To elect the following director to serve until
the 2017 annual meeting of stockholders or until such persons successor has been duly elected and qualified.
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+
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For
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Against
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Abstain
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1.1 - Mark S. Lewis
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¨
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For
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Against
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Abstain
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For
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Against
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Abstain
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2.
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To ratify the appointment of Ernst & Young LLP as our
independent registered public accounting firm for the fiscal year ending December 31, 2014.
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3.
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To approve, on a non-binding advisory basis, the compensation of
our named executive officers as described in the proxy statement.
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4.
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To approve our 2014 Equity Incentive Plan.
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THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO
DIRECTION IS INDICATED, WILL BE VOTED FOR THE NOMINEE LISTED IN PROPOSAL 1, AND FOR PROPOSALS 2, 3 AND 4.
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Change of Address
Please print new address
below.
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Comments
Please print your comments below.
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C
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
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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.
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Date (mm/dd/yyyy) Please print date
below.
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Signature 1 Please keep signature within the
box.
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Signature 2 Please keep signature within the
box.
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01SWHC
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Important notice regarding the Internet availability of proxy materials for the Annual Meeting of Stockholders to be held on May 22,
2014.
The Proxy Statement and the 2013 Annual Report on Form 10-K are available at:
http://www.envisionreports.com/rvbd
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q
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG
THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
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Proxy RIVERBED TECHNOLOGY, INC.
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Annual Meeting of Stockholders May 22, 2014
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
The undersigned hereby
appoints Jerry M. Kennelly and Brett A. Nissenberg, 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 that 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
Technology, Inc. to be held May 22, 2014 or any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the meeting.
(Continued and to be marked, dated and signed, on the other side)
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(MM) (NASDAQ:RVBD)
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(MM) (NASDAQ:RVBD)
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