def14a
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
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Check the appropriate box: |
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Soliciting Material Pursuant to § 240.14a-12 |
CAVIUM NETWORKS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
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CAVIUM
NETWORKS, INC.
805 East
Middlefield Road
Mountain View, CA 94043
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On May 8, 2009
Dear
Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders of Cavium
Networks, Inc., a Delaware corporation (the
Company). The meeting will be held on Friday,
May 8, 2009 at 10:00 a.m. local time at 805 East
Middlefield Road, Mountain View, CA 94043 for the following
purposes:
1. To elect the nominee for director named herein to
hold office until the 2012 Annual Meeting of Stockholders.
2. To ratify the selection by the Audit Committee of
the Board of Directors of PricewaterhouseCoopers LLP as
independent registered public accounting firm of the Company for
its fiscal year ending December 31, 2009.
3. To conduct any other business properly brought
before the meeting.
These items of business are more fully described in the Proxy
Statement accompanying this Notice.
The record date for the Annual Meeting is March 20, 2009.
Only stockholders of record at the close of business on that
date may vote at the meeting or any adjournment thereof.
Important
Notice Regarding the Availability of Proxy Materials for the
Stockholders Meeting to Be Held on May 8, 2009 at
10:00 a.m. local time at 805 East Middlefield Road,
Mountain View, CA 94043.
The proxy
statement and annual report to stockholders
are available at www.caviumnetworks.com.
By Order of the Board of Directors
Arthur D.
Chadwick
Secretary
Mountain View, California
April 6, 2009
You are cordially invited to attend the meeting in person.
Whether or not you expect to attend the meeting, please
complete, date, sign and return the enclosed proxy, or vote over
the telephone or the internet as instructed in these materials,
as promptly as possible in order to ensure your representation
at the meeting. A return envelope (which is postage prepaid if
mailed in the United States) has been provided for your
convenience. Even if you have voted by proxy, you may still vote
in person if you attend the meeting. Please note, however, that
if your shares are held of record by a broker, bank or other
nominee and you wish to vote at the meeting, you must obtain a
proxy issued in your name from that record holder.
The Board
of Directors recommends that you vote For the proposals
identified above.
TABLE OF CONTENTS
CAVIUM
NETWORKS, INC.
805 East
Middlefield Road
Mountain View, CA 94043
PROXY
STATEMENT
FOR THE 2009 ANNUAL MEETING OF STOCKHOLDERS
May 8,
2009
QUESTIONS
AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why am I
receiving these materials?
We have sent you these proxy materials because the Board of
Directors of Cavium
Networks, Inc. (sometimes referred to as the
Company or Cavium) is soliciting your proxy to vote
at the 2009 Annual Meeting of Stockholders, including at any
adjournments or postponements of the meeting. You are invited to
attend the annual meeting to vote on the proposals described in
this proxy statement. However, you do not need to attend the
meeting to vote your shares. Instead, you may simply complete,
sign and return the enclosed proxy card, or follow the
instructions below to submit your proxy over the telephone or
through the internet.
We intend to mail these proxy materials on or about
April 6, 2009 to all stockholders of record entitled to
vote at the annual meeting.
How do I
attend the annual meeting?
The meeting will be held on Friday, May 8, 2009 at
10:00 a.m. local time at 10:00 a.m. local time at 805
East Middlefield Road, Mountain View, CA
94043. Directions
to the annual meeting, which is located at our Corporate
Headquarters, may be found at www.caviumnetworks.com.
Information on how to vote in person at the annual meeting is
discussed below.
Who can
vote at the annual meeting?
Only stockholders of record at the close of business on
March 20, 2009 will be entitled to vote at the annual
meeting. On this record date, there were 41,247,868 shares
of common stock outstanding and entitled to vote.
Stockholder
of Record: Shares Registered in Your Name
If on March 20, 2009, your shares were registered directly
in your name with Caviums transfer agent, BNY Mellon
Shareowner Services, then you are a stockholder of record. As a
stockholder of record, you may vote in person at the meeting or
vote by proxy. Whether or not you plan to attend the meeting, we
urge you to fill out and return the enclosed proxy card or vote
by proxy over the telephone or on the internet as instructed
below to ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or
Bank
If on March 20, 2009, your shares were held, not in your
name, but rather in an account at a brokerage firm, bank,
dealer, or other similar organization, then you are the
beneficial owner of shares held in street name and
these proxy materials are being forwarded to you by that
organization. The organization holding your account is
considered to be 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 regarding how to
vote the shares in your account. 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 request and obtain a valid proxy from your broker or
other agent.
What am I
voting on?
There are two matters scheduled for a vote:
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Election of one director; and
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Ratification of selection by the Audit Committee of the Board of
Directors of PricewaterhouseCoopers LLP as the independent
registered public accounting firm of the Company for its fiscal
year ending December 31, 2009.
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What if
another matter is properly brought before the meeting?
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 those matters in accordance with their best judgment.
How do I
vote?
You may either vote For all the nominees to the
Board of Directors or you may Withhold your vote for
any nominee you specify. For each of the other matters to be
voted on, you may vote For or Against or
abstain from voting. The procedures for voting are fairly simple:
Stockholder
of Record: Shares Registered in Your Name
If you are a stockholder of record, you may vote in person at
the annual meeting, vote by proxy using the enclosed proxy card,
vote by proxy over the telephone, or vote by proxy through the
internet. Whether or not you plan to attend the meeting, we urge
you to vote by proxy to ensure your vote is counted. You may
still attend the meeting and vote in person even if you have
already voted by proxy.
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To vote in person, come to the annual meeting and we will give
you a ballot when you arrive.
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To vote using the proxy card, simply complete, sign and date the
enclosed 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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To vote over the telephone, dial toll-free 1-866-540-5760 using
a touch-tone phone and follow the recorded instructions. You
will be asked to provide the company number and control number
from the enclosed proxy card. Your vote must be received by
11:59 p.m., Eastern Time on May 7, 2009 to be counted.
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To vote through the internet, go to
http://www.proxyvoting.com/cavm
to complete an electronic proxy card. You will be asked to
provide the company number and control number from the enclosed
proxy card. Your vote must be received by 11:59 p.m.,
Eastern Time on May 7, 2009 to be counted.
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Beneficial
Owner: Shares Registered in the Name of Broker or
Bank
If you are a beneficial owner of shares registered in the name
of your broker, bank, or other agent, you should have received a
proxy card and voting instructions with these proxy materials
from that organization rather than from Cavium. Simply complete
and mail the proxy card to ensure that your vote is counted.
Alternatively, you may vote by telephone or over the internet as
instructed by your broker or bank. To vote in person at the
annual meeting, you must obtain a valid proxy from your broker,
bank, or other agent. Follow the instructions from your broker
or bank included with these proxy materials, or contact your
broker or bank to request a proxy form.
We provide internet proxy voting to allow you to vote your
shares online, 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 and telephone companies.
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 March 20, 2009.
What if I
return a proxy card or otherwise vote but do not make specific
choices?
If you return a signed and dated proxy card or otherwise vote
without marking voting selections, your shares will be voted, as
applicable, For the election of both of the two
nominees for director, and For the ratification of
PricewaterhouseCoopers LLP as independent registered public
accounting firm of the Company for its fiscal year
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ending December 31, 2009. If any other matter is properly
presented at the meeting, your proxyholder (one of the
individuals named on your proxy card) will vote your shares
using his or her best judgment.
Who is
paying for this proxy solicitation?
We will pay for the entire cost of soliciting proxies. In
addition to these proxy materials, our 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. We may also
reimburse brokerage firms, banks and other agents for the cost
of forwarding proxy materials to beneficial owners.
What does
it mean if I receive more than one set of proxy
materials?
If you receive more than one set of proxy materials, your shares
may be registered in more than one name or in different
accounts. Please follow the voting instructions on the proxy
cards in the proxy materials to ensure that all of your shares
are voted.
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. If you are the record holder of your shares, you
may revoke your proxy in any one of the following ways:
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You may submit another properly completed proxy card with a
later date.
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You may send a timely written notice that you are revoking your
proxy to Caviums Secretary at 805 East Middlefield Road,
Mountain View, CA
94043.
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You may attend the annual meeting and vote in person. Simply
attending the meeting will not, by itself, revoke your proxy.
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Your most current proxy card or telephone or internet proxy is
the one that is counted.
If your shares are held by your broker or bank as a nominee or
agent, you should follow the instructions provided by your
broker or bank.
When are
stockholder proposals due for next years annual
meeting?
If you wish to submit a proposal to be included in next
years proxy materials or nominate a director, you must
provide specified information to Caviums Secretary at 805
East Middlefield Road, Mountain View, CA 94043 between
January 8, 2010 and February 7, 2010, unless the date
of our 2010 annual meeting of stockholders is before
April 7, 2010 or after June 8, 2010, in which case
such proposals shall be submitted no earlier than 120 days
prior to the 2010 annual meeting of stockholders and no later
than the later of (i) 90 days before the 2010 annual
meeting of stockholders or (ii) ten days after notice of
the date of the 2010 annual meeting of stockholders is publicly
given. You are also advised to review our Bylaws, which contain
additional requirements regarding advance notice of stockholder
proposals and director nominations.
How are
votes counted?
Votes will be counted by the inspector of election appointed for
the meeting, who will separately count For and
Withhold and, with respect to proposals other than
the election of directors, Against votes,
abstentions and broker non-votes. Abstentions will be counted
towards the vote total for each proposal, and will have the same
effect as Against votes. Broker non-votes have no
effect and will not be counted towards the vote total for any
proposal.
What are
broker non-votes?
Broker non-votes occur when a beneficial owner of shares held in
street name does not give instructions to the broker
or nominee holding the shares as to how to vote on matters
deemed non-routine. Generally, if shares are held in
street name, the beneficial owner of the shares is entitled to
give voting instructions to the broker or nominee
3
holding the shares. If the beneficial owner does not provide
voting instructions, the broker or nominee can still vote the
shares with respect to matters that are considered to be
routine, but not with respect to
non-routine matters.
How many
votes are needed to approve each proposal?
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For the election of directors, the two nominees receiving the
most For votes (from the holders of votes of shares
present in person or represented by proxy and entitled to vote
on the election of directors) will be elected. Only votes
For or Withheld will affect the outcome.
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To be approved, Proposal No. 2, the ratification of
the selection by the Audit Committee of the Board of Directors
of PricewaterhouseCoopers LLP as the independent registered
public accounting firm of the company for its fiscal year ending
December 31, 2009, must receive For votes from
the holders of amajority of shares present and entitled to vote
either in person or by proxy. If you Abstain from
voting, it will have the same effect as an Against
vote. Broker non-votes will have no effect.
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What is
the quorum requirement?
A quorum of stockholders is necessary to hold a valid meeting. A
quorum will be present if stockholders holding at least a
majority of the outstanding shares entitled to vote are present
at the meeting in person or represented by proxy. On the record
date, there were
41,247,868
shares
outstanding and entitled to vote.
Your shares will be counted towards the quorum only if you
submit a valid proxy (or one is submitted on your behalf by your
broker, bank or other nominee) or if you vote in person at the
meeting. Abstentions and broker non-votes will be counted
towards the quorum requirement. If there is no quorum either the
chairman of the meeting or the holders of a majority of shares
present at the meeting in person or represented by proxy may
adjourn the meeting to another date.
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 our quarterly
report on
Form 10-Q
for the second quarter of 2009.
What
proxy materials are available on the
internet?
The proxy statement and annual report to stockholders are
available at www.caviumnetworks.com.
Proposal 1
Election
Of Directors
Caviums Board of Directors is divided into three classes.
Each class consists of one-third of the total number of
directors, and each class has a three-year term. Vacancies on
the Board of Directors may be filled only by persons elected by
a majority of the remaining directors. A director elected by the
Board of Directors to fill a vacancy in a class, including
vacancies created by an increase in the number of directors,
shall serve for the remainder of the full term of that class and
until the directors successor is duly elected and
qualified.
The Board of Directors presently has six members. There are two
directors in the class whose term of office expires in 2009 and
one who will be running for re-election. The nominee listed
below is a current director of the Company who was previously
appointed by the Board of Directors. If elected at the annual
meeting, the nominee would serve until the 2012 annual meeting
and until his successor has been duly elected and qualified, or,
if sooner, until his death, resignation or removal. It is the
Companys policy to encourage directors and nominees for
director to attend the Annual Meeting. None of the directors
attended the 2008 Annual Meeting of Stockholders.
Directors are elected by a plurality of the votes of the holders
of shares present in person or represented by proxy and entitled
to vote on the election of directors. The nominee receiving the
highest number of affirmative votes will be
elected. Shares
represented by executed proxies will be voted, if authority to
do so is not withheld, for the election of the nominee named
below. If the nominee becomes unavailable for election as a
result of an
4
unexpected occurrence, your shares will be voted for the
election of a substitute nominee proposed by Cavium. The person
nominated for election has agreed to serve if elected. The
Companys management has no reason to believe that the
nominee will be unable to serve.
The following is a brief biography of the nominee and each
director whose term will continue after the annual meeting.
Nominee
for Election for a Three-year Term Expiring at the 2012 Annual
Meeting
Kris
Chellam
Kris Chellam, age 58, has served as a director since
December 2005. In May 2007, Mr. Chellam became Managing
Partner of Galleon Special Opportunities Partners, LP (a Galleon
Group fund), a venture capital fund which invests in late stage
private companies. Prior to joining the Galleon Group,
Mr. Chellam served as Senior Vice President, Global
Enterprise Services at Xilinx, Inc., a programmable logic IC
company, from July 2005, until his retirement in February 2007.
Mr. Chellam joined Xilinx in July 1998 and served as Senior
Vice President of Finance and Chief Financial Officer until July
2005.
The
Board Of Directors Recommends
A Vote In Favor Of the Named Nominee.
Directors
Continuing in Office Until the 2010 Annual Meeting
Syed
B. Ali
Syed B. Ali, age 50, is one of our founders and has served
as our President, Chief Executive Officer and Chairman of the
Board of Directors since the inception of the Company in 2000.
From 1998 to 2000, Mr. Ali was Vice President of Marketing
and Sales at Malleable Technologies, a communication chip
company of which he was a founding management team member.
Malleable Technologies was acquired by PMC Sierra, a
communication IC company in 2000. From 1994 to 1998,
Mr. Ali was an Executive Director at Samsung Electronics.
Prior to that, he had various positions at Wafer Scale
Integration, a division of SGS-Thompson, Tandem Computer, and
American Microsystems. He received a BE (Electrical Engineering)
from Osmania University, in Hyderabad, India and an MSE from the
University of Michigan.
Anthony
S. Thornley
Anthony S. Thornley, age 62, has served as a director since
September 2006. Mr. Thornley currently serves as the Chief
Financial Officer of KMF Audio Inc., a microphone company. From
February 2002 to June 2005 he served as President and Chief
Operating Officer of Qualcomm Inc., a wireless communication
technology and integrated circuit company. From July 2001 to
February 2002 he served as Chief Financial and Operating Officer
of Qualcomm and from March 1994 to February 2002 as Chief
Financial Officer of Qualcomm. Prior to joining Qualcomm, he was
with Nortel Networks, a telecommunications equipment
manufacturer, for sixteen years in various financial and
information systems management positions, including Vice
President Finance and IS, Public Networks, Vice President
Finance NT World Trade and Corporate Controller Nortel Limited.
He has also worked for Coopers and Lybrand in public accounting.
Mr. Thornley is a director of Callaway Golf Company, a
golfing equipment manufacturer, Airvana, Inc., a wireless
equipment company, Proximetry, a network software company,
iSports Inc., a wireless software company, and Transdel
Pharmaceuticals, Inc., a development stage pharmaceutical
company. Mr. Thornley received his BS degree in Chemistry
from the University of Manchester, England.
Directors
Continuing in Office Until the 2011 Annual Meeting
Anthony
J. Pantuso
Anthony J. Pantuso, age 46, has served as a director since
2004. He has been a Managing Director at NeoCarta Ventures, a
venture capital firm, since November 1999. From November 1996 to
July 1999 he served as Senior Vice President for GE Equity, a
division of GE Capital, a private equity investment company.
Prior to working at GE
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Equity, Mr. Pantuso served in various positions at US WEST,
MediaOne and Ernst & Young. He currently serves on
several private company boards. Mr. Pantuso received a BS
in Business Administration from Colorado State University.
C.N.
Reddy
C.N. Reddy, age 53, has served as a director since 2001. He
is a co-founder of Alliance Semiconductor, which until 2006, was
a provider of semiconductor products and solutions, and has held
various positions. Since October 2000, he has served as the
Executive Vice President for Investments at Alliance, during
which time he has been responsible for Alliances
investments in private technology companies and identifying
future possible technology company acquisitions for Alliance.
From December 1997 to October 2000, he served as Executive Vice
President and Chief Operating Officer at Alliance. From May 1993
to December 1997, he served as Senior Vice-President Engineering
and Operations at Alliance. From 1985 to May 1993, he served as
Vice President Engineering at Alliance. From February 1985 to
October 2000 he also served as Secretary of Alliance.
Mr. Reddy has served as a member of the board of directors
since Alliances inception in 1985. He was a member of the
founding management team at Cypress Semiconductor. Prior to
that, he held positions at Texas Instruments and National
Semiconductor Corporation. Mr. Reddy is currently the
Executive Vice President of Investments and serves on the board
of directors at Alliance Semiconductor. He currently serves on
several private company boards. Mr. Reddy received an MSEE
from Utah State University.
INFORMATION
REGARDING THE BOARD OF DIRECTORS AND CORPORATE
GOVERNANCE
Independence
of The Board of Directors
As required under the Nasdaq Stock Market (NASDAQ)
listing standards, a majority of the members of a listed
companys Board of Directors must qualify as
independent, as affirmatively determined by the
Board of Directors. The Board of Directors consults with the
Companys counsel to ensure that the Board of
Directors determinations are consistent with relevant
securities and other laws and regulations regarding the
definition of independent, including those set forth
in pertinent listing standards of the NASDAQ, as in effect from
time to time.
Consistent with these considerations, after review of all
relevant identified transactions or relationships between each
director, or any of his or her family members, and the Company,
its senior management and its independent registered public
accounting firm, the Board of Directors has affirmatively
determined that the following current five directors are
independent directors within the meaning of the applicable
NASDAQ listing
standards: Messrs. Chellam, Jarve, Pantuso, Reddy, and
Thornley. In making this determination, the Board of Directors
found that none of the these directors or nominees for director
had a material or other disqualifying relationship with the
Company. Mr. Ali, the Companys President and Chief
Executive Officer, is not an independent director by virtue of
his employment with the Company.
Meetings
of The Board of Directors
The Board of Directors met five times during the last fiscal
year. Each Board of Directors member attended 75% or more of the
aggregate number of meetings of the Board of Directors and of
the committees on which he served, held during the portion of
the last fiscal year for which he was a director or committee
member.
6
Information
Regarding Committees of the Board of Directors
The Board of Directors has three
committees:
an Audit Committee, a Compensation Committee and a
Nominating and Corporate Governance Committee. The following
table provides membership and meeting information for fiscal
2008 for each of the committees:
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Nominating and
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Corporate
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Name
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Audit
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Compensation
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Governance
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Syed B. Ali
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Kris Chellam
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X
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John W. Jarve
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X
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*
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X
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Anthony J. Pantuso
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X
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X
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C.N. Reddy
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X
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X
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Anthony S. Thornley
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X
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*
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X
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*
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Total meetings in fiscal 2008
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5
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4
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1
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Below is a description of each committee of the Board of
Directors. Each of the committees has authority to engage legal
counsel or other experts or consultants, as it deems appropriate
to carry out its
responsibilities.
The Board of Directors has determined that each member of each
committee meets the applicable
NASDAQ rules and
regulations regarding independence and that each
member is free of any relationship that would impair his or her
individual exercise of independent judgment with regard to the
Company.
Audit
Committee
The Audit Committee of the Board of Directors was established in
accordance with Section 3(a)(58)(A) of the Securities
Exchange Act of 1934 to oversee the Companys corporate
accounting and financial reporting processes and audits of its
financial statements. For this purpose, the Audit Committee
performs several functions. The Audit Committee evaluates the
performance of and assesses the qualifications of the
independent registered public accounting firm; determines and
approves the engagement of the independent registered public
accounting firm; determines whether to retain or terminate the
existing independent registered public accounting firm or to
appoint and engage new independent registered public accounting
firm; reviews and approves the retention of the independent
registered public accounting firm to perform any proposed
permissible non-audit services; monitors the rotation of
partners of the independent registered public accounting firm on
the Companys audit engagement team as required by law;
review and approves or rejects transactions between the Company
and any related persons; confers with management and the
independent registered public accounting firm regarding the
effectiveness of internal controls over financial reporting;
establishes procedures, as required under applicable law, for
the receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting controls
or auditing matters and the confidential and anonymous
submission by employees of concerns regarding questionable
accounting or auditing matters; and meets to review the
companys annual audited financial statements and quarterly
financial statements with management and the independent
registered public accounting firm, including reviewing the
Companys disclosures under Managements
Discussion and Analysis of Financial Condition and Results of
Operations. The Audit Committee is composed of three
directors: Messrs. Chellam, Pantuso and Thornley. The Audit
Committee met five times during the fiscal year. The Audit
Committee has adopted a written charter that is available to
stockholders on the Companys website at
http://investor.caviumnetworks.com.
The Board of Directors reviews the NASDAQ listing standards
definition of independence for Audit Committee members on an
annual basis and has determined that all members of the
Companys Audit Committee are independent (as independence
is currently defined in Rule 4350(d)(2)(A)(i) and
(ii) of the NASDAQ
listing standards). The Board of Directors has also
determined that Messrs. Chellam and Thornley qualify as an
audit committee financial expert, as defined in
applicable SEC rules. The Board of Directors made a qualitative
assessment of Mr. Chellams and
Mr. Thornleys level of knowledge and experience based
on a number of factors, including their formal education and
experiences as Chief Financial Officers for public reporting
companies.
7
Report of
the Audit Committee of the Board of
Directors1
The Audit Committee has reviewed and discussed the audited
financial statements for the fiscal year ended December 31,
2008 with management of the Company. The Audit Committee has
discussed with the independent registered public accounting firm
the matters required to be discussed by Statement on Auditing
Standards No. 114, The Auditors Communication with
Those Charged with Governance, as adopted by the Public
Company Accounting Oversight Board (PCAOB) in
Rule 3200T. The Audit Committee has also received the
written disclosures and the letter from the independent
registered public accounting firm required by applicable
requirements of the PCAOB regarding the independent registered
public accounting firms communications with the audit
committee concerning independence, and has discussed with the
independent registered public accounting firms
independence. Based on the foregoing, the Audit Committee has
recommended to the Board of Directors that the audited financial
statements be included in the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008.
Mr. Kris Chellam
Mr. Anthony J. Pantuso
Mr. Anthony S. Thornley
Compensation
Committee
The Compensation Committee is currently composed of three
directors: Messrs. Jarve, Pantuso, and Reddy. All members
of the Companys Compensation Committee are independent (as
independence is currently defined in Rule 4200(a)(15) of
the NASDAQ listing
standards). The
Compensation Committee met four times during the fiscal
year. The
Compensation Committee has adopted a written charter that is
available to stockholders on the Companys website at
http://investor.caviumnetworks.com.
The Compensation Committee of the Board of Directors acts on
behalf of the Board of Directors to review, adopt and oversee
the Companys compensation strategy, policies, plans and
programs, including:
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establishment of corporate and individual performance objectives
relevant to the compensation of the Companys executive
officers, directors and other senior management and evaluation
of performance in
light of these stated objectives;
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review and approval of the compensation and other terms of
employment or service, including severance and
change-in-control
arrangements, of the Companys Chief Executive Officer and
the other executive officers and senior management; and
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administration of
the Companys equity compensation plans, pension and
profit-sharing plans,
deferred compensation plans and other similar plan and
programs.
|
Each year, the Compensation Committee reviews with management
the Companys Compensation Discussion and Analysis and
considers whether to recommend that it be included
in proxy
statements and other
filings.
Compensation
Committee Processes and Procedures
Typically, the Compensation Committee meets at least three times
annually, with greater frequency if necessary. The agenda
for each meeting is usually developed by the Chair of the
Compensation Committee, in consultation with chief executive
officers. The Compensation Committee meets regularly in
executive session. However, from time to time, various members
of management and other employees as well as outside advisors or
consultants may be invited by the Compensation Committee to make
presentations, provide financial or other background information
or advice or otherwise participate in Compensation Committee
meetings. The Chief
1 The
material in this report is not soliciting material,
is not deemed filed with the Securities and Exchange
Commission and is not to be incorporated by reference in any
filing of the Company under the Securities Act of 1933, as
amended, or the Exchange Act of 1934, as amended, whether made
before or after the date hereof and irrespective of any general
incorporation language in any such filing.
8
Executive Officer may not participate in or be present during
any deliberations or determinations of the Compensation
Committee regarding his compensation. The charter of the
Compensation Committee grants the Compensation Committee full
access to all books, records, facilities and personnel of the
Company, as well as authority to obtain, at the expense of the
Company, advice and assistance from internal and external legal,
accounting or other advisors and consultants and other external
resources that the Compensation Committee considers necessary or
appropriate in the performance of its duties. In particular, the
Compensation Committee has the sole authority to retain
compensation consultants to assist in its evaluation of
executive and director compensation, including the authority to
approve the consultants reasonable fees and other
retention terms. Additionally, under its charter, the
Compensation Committee may form, and delegate authority to,
subcommittees, as appropriate.
Historically, the Compensation Committee has made most
significant adjustments to annual compensation, and equity
awards at one or more meetings held during the first half of the
year, typically during the first quarter of each year. However,
the Compensation Committee also considers matters related to
individual compensation, such as compensation for new executive
hires, as well as high-level strategic issues, such as the
efficacy of the Companys compensation strategy, potential
modifications to that strategy and new trends, plans or
approaches to compensation, at various meetings throughout the
year. For executives other than the Chief Executive Officer, the
Compensation Committee solicits and considers evaluations and
recommendations submitted to the Committee by the Chief
Executive Officer. In the case of the Chief Executive Officer,
the evaluation of his performance is conducted by the
Compensation Committee, which determines any adjustments to his
compensation as well as awards to be granted. For all executive
officers and senior management, as part of its
deliberations, the Compensation Committee may review and
consider, as appropriate, materials such as financial reports
and projections, operational data, tax and accounting
information, executive and director stock ownership information,
company stock performance data, analyses of historical executive
compensation levels and current Company-wide compensation
levels, and recommendations of a compensation consultant,
including analyses of executive officers and senior
managements compensation paid at other companies
identified by the consultant.
In January 2008, the Compensation Committee engaged an
independent compensation consultant, Compensia, Inc., to provide
the committee with an analysis of our salaries and stock
incentive awards for executive officers. At the request of the
Compensation Committee, Compensia also conducted individual
interviews with members of the Compensation Committee and senior
management to learn more about the Companys business
operations, strategy, key performance metrics and strategic
goals, as well as the labor markets in which the Company
competes. Compensia ultimately developed recommendations that
were presented to the Compensation Committee for its
consideration, and as a result, the Compensation Committee made
changes to the base salaries, bonuses plans and stock option
awards as described in greater detail in the Compensation
Discussion and Analysis section of this proxy statement.
Compensation
Committee Interlocks and Insider Participation
None of the current members of our Compensation Committee is an
officer or employee of the Company. No current member of our
Compensation Committee serves as a member of the Board of
Directors or Compensation Committee of any entity that has one
or more executive officers serving as a member of our Board of
Directors.
Compensation
Committee
Report2
The Compensation Committee has reviewed and discussed with
management the Compensation Discussion and Analysis
(CD&A) contained in this proxy statement. Based
on this review and discussion, the Compensation
2 The
material in this report is not soliciting material,
is furnished to, but not deemed filed with, the
Commission and is not deemed to be incorporated by reference in
any filing of the Company under the Securities Act or the
Exchange Act, other than the Companys Annual Report on
Form 10-K,
where it shall be deemed to be furnished, whether
made before or after the date hereof and irrespective of any
general incorporation language in any such filing.
9
Committee has recommended to the Board of Directors that the
CD&A be included in this proxy statement and incorporated
into the Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2008.
Mr. John W. Jarve
Mr. Anthony J. Pantuso
Mr. C.N. Reddy
Nominating
and Corporate Governance Committee
The Nominating and Corporate Governance Committee of the Board
of Directors is responsible for identifying, reviewing and
evaluating candidates to serve as directors of the Company
(consistent with criteria approved by the Board of Directors),
reviewing and evaluating incumbent directors, recommending to
the Board of Directors for
selection
candidates for election to the Board of Directors,
making recommendations to the Board of Directors regarding the
membership of the committees of the Board of Directors,
considering nominations and proposals submitted by Caviums
stockholders, assessing the performance and independence of the
Board of Directors, and maintaining a set of corporate
governance principles for the Company. The Nominating and
Corporate Governance Committee is currently composed of three
directors: Messrs. Thornley, Jarve and Reddy. All current
members of the Nominating and Corporate Governance Committee are
independent (as independence is currently defined in
Rule 4200(a)(15) of the
NASDAQ listing
standards). The Nominating and Corporate Governance Committee
met one
time during the fiscal year. The Nominating and
Corporate Governance Committee has adopted a written charter
that is available to stockholders on the Companys website
at
http://investor.caviumnetworks.com.
The Nominating and Corporate Governance Committee believes that
candidates for director should have certain minimum
qualifications, including the ability to read and understand
basic financial statements, possessing extensive business and
industry experience, understanding of public company
responsibilities, as well as high personal integrity and ethical
standards. The Nominating and Corporate Governance Committee
also considers such factors as possessing relevant expertise
upon which to be able to offer advice and guidance to
management, having sufficient time to devote to the affairs of
the Company, demonstrated excellence in his or her field, having
the ability to exercise sound business judgment and having the
commitment to rigorously represent the long-term interests of
the Companys stockholders. However, the Nominating and
Corporate Governance Committee retains the right to modify these
qualifications from time to time. 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 and Corporate
Governance Committee considers diversity, age, skills, and such
other factors as it deems appropriate given the current needs of
the Board of Directors and the Company, to maintain a balance of
knowledge, experience and capability. In the case of incumbent
directors whose terms of office are set to expire, the
Nominating and Corporate Governance Committee reviews these
directors overall service to the Company during their
terms, including the number of meetings attended, level of
participation, quality of performance, and any other
relationships and transactions that might impair the
directors independence.
In the case of new director candidates, the Nominating and
Corporate Governance Committee also determines whether the
nominee is independent for
NASDAQ
purposes, which determination is based upon
applicable NASDAQlisting standards, applicable SEC rules and
regulations and the advice of counsel, if necessary. The
Nominating and Corporate Governance Committee then uses its
network of contacts to compile a list of potential candidates,
but may also engage, if it deems appropriate, a professional
search firm. The Nominating and Corporate Governance Committee
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 and Corporate Governance Committee meets to
discuss and consider the candidates qualifications and
then selects a nominee for recommendation to the Board of
Directors by majority vote.
The Nominating and Corporate Governance Committee will consider
director candidates recommended by stockholders. The Nominating
and Corporate Governance Committee does not intend to alter the
manner in which it evaluates candidates, including the minimum
criteria set forth above, based on whether or not the candidate
was recommended by a stockholder. Stockholders who wish to
recommend individuals for consideration by the
10
Nominating and Corporate Governance Committee to become nominees
for election to the Board of Directors may do so by delivering a
written recommendation to the Nominating and Corporate
Governance Committee at the following address: 805 East
Middlefield Road, Mountain View, CA
94043, at least
120 days prior to the anniversary date of the mailing of
the Companys proxy statement for the last Annual Meeting
of Stockholders.
Submissions must include the full name of the proposed
nominee, a description of the proposed nominees business
experience for at least the previous five years, complete
biographical information, a description of the proposed
nominees qualifications as a director and a representation
that the nominating stockholder is a beneficial or record holder
of the Companys stock and has been a holder for at least
one year. Any such submission must be accompanied by the written
consent of the proposed nominee to be named as a nominee and to
serve as a director if elected.
Stockholder
Communications With The Board Of Directors
Historically, the Company has not provided a formal process
related to stockholder communications with the Board of
Directors. Nevertheless, every effort has been made to ensure
that the views of stockholders are heard by the Board of
Directors or individual directors, as applicable, and that
appropriate responses are provided to stockholders in a timely
manner. The Company believes its responsiveness to stockholder
communications to the Board of Directors has been excellent.
Nevertheless, during the upcoming year the Nominating and
Corporate Governance Committee will give full consideration to
the adoption of a formal process for stockholder communications
with the Board of Directors and, if adopted, publish it promptly
and post it to the Companys website.
Code
Of Ethics
The Company has adopted the Cavium Networks, Inc. Code of
Business Ethics and Conduct, or Code of Ethics, that applies to
all employees, directors and consultants. The Code of Ethics is
available on the Companys website at
http://investor.caviumnetworks.com.
If the Company makes any substantive amendments to the
Code of Ethics or grants any waiver from a provision of the Code
of Ethics to any executive officer or director, the Company will
promptly disclose the nature of the amendment or waiver on its
website.
Proposal 2
Ratification of Selection of Independent Registered Public
Accounting Firm
The Audit Committee of the Board of Directors has selected
PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm for the fiscal year ending
December 31, 2009 and has further directed that management
submit the selection of independent registered public accounting
firm for ratification by the stockholders at the annual meeting.
PricewaterhouseCoopers LLP has audited the Companys
financial statements since 2000. Representatives of
PricewaterhouseCoopers 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 the Companys Bylaws nor other governing documents
or law require stockholder ratification of the selection of
PricewaterhouseCoopers LLP as the Companys independent
registered public accounting firm. However, the Audit Committee
of the Board of Directors is submitting the selection of
PricewaterhouseCoopers LLP to the stockholders for ratification
as a matter of good corporate practice. If the stockholders fail
to ratify the selection, the Audit Committee of the Board of
Directors will reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee of the
Board of Directors in its discretion may direct the appointment
of different independent registered public accounting firm at
any time during the year if they determine that such a change
would be in the best interests of the Company and its
stockholders.
The affirmative vote of the holders of a majority of the shares
present in person or represented by proxy and entitled to vote
at the annual meeting will be required to ratify the selection
of PricewaterhouseCoopers LLP. Abstentions will be counted
toward the tabulation of votes cast on proposals presented to
the stockholders and will have the same effect as negative
votes. Broker non-votes are counted towards a quorum, but are
not counted for any purpose in determining whether this matter
has been approved.
11
Principal
Accountant Fees and Services
In connection with the audit of the 2008 financial statements,
the Company entered into an engagement agreement with
PricewaterhouseCoopers LLP which sets forth the terms by which
PricewaterhouseCoopers LLP will perform audit services for the
Company.
The following table represents aggregate fees billed to the
Company for the fiscal years ended December 31, 2008 and
2007, respectively, by PricewaterhouseCoopers LLP, the
Companys principal accountant.
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Fiscal Year Ended
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December 31,
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2008
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2007
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($)
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($)
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(In thousands)
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Audit Fees(1)
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1,080.1
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1,771.7
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Audit-related Fees (specifically describe audit-related fees
incurred)
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Tax Fees (specifically describe tax fees incurred)(2)
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30.0
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50.3
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All Other Fees (specifically describe all other fees incurred)
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Total Fees
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1,110.1
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1,822.0
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(1) |
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Audit Fees consist of fees incurred for professional services
rendered for the audit of our annual consolidated financial
statements, review of our quarterly consolidated financial
statements, other services normally provided by
PricewaterhouseCoopers LLP in connection with regulatory
filings, and, in 2008, for the audit of the effectiveness of our
internal control over financial reporting. In 2007, this amount
included services rendered related to our initial public
offering, but excluded attestation services related to
compliance with the Sarbanes-Oxley Act of 2002. |
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(2) |
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Tax Fees for the years ended December 31, 2008 and
December 31, 2007 were for services related to tax
compliance. |
All fees described above were approved by the Audit Committee.
Pre-Approval
Policies and
Procedures.
The Audit Committee has adopted a policy and procedures for the
pre-approval of audit and non-audit services rendered by the
Companys independent registered public accounting firm,
PricewaterhouseCoopers LLP. The policy generally pre-approves
specified services in the defined categories of audit services,
audit-related services and tax services up to specified amounts.
Pre-approval may also be given as part of the Audit
Committees approval of the scope of the engagement of the
independent registered public accounting firm or on an
individual, explicit,
case-by-case
basis before the independent registered public accounting firm
is engaged to provide each service. The pre-approval of services
may be delegated to one or more of the Audit Committees
members, but the decision must be reported to the full Audit
Committee at its next scheduled meeting.
The Audit Committee has determined that the rendering of the
services other than audit services by PricewaterhouseCoopers LLP
is compatible with maintaining the principal accountants
independence.
The Board Of Directors
Recommends
A Vote In Favor Of Proposal 2.
12
Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the
ownership of the Companys common stock as of March 1,
2009 by: (i) each director and nominee for director;
(ii) each of the executive officers named in the Summary
Compensation Table; (iii) all executive officers and
directors of the Company as a group; and (iv) all those
known by the Company to be beneficial owners of more than five
percent of its common stock.
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Beneficial Ownership(1)
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Beneficial Owner
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Number of Shares
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Percent of Total
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Entities affiliated with Artis Capital Management, L.P.(2)
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2,235,535
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5.42
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%
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Entities affiliated with AVM Capital Partners LLC(3)
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3,963,032
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9.61
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%
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Entities affiliated with Turner Investment Partners, Inc.(4)
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2,074,492
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5.03
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%
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FMR LLC(5)
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2,687,006
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6.52
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%
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Prudential Financial, Inc.(6)
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2,655,562
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6.44
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%
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Syed B. Ali(7)
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2,163,268
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5.25
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%
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Arthur D. Chadwick(8)
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186,041
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*
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Anil Jain(9)
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720,243
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1.75
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%
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Rajiv Khemani(10)
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271,061
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*
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Sandeep Vij(11)
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51,562
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*
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C.N. Reddy(12)
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425,213
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1.03
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%
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John W. Jarve(13)
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477,988
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1.16
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%
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Anthony Pantuso(14)
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1,605,738
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3.89
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%
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Kris Chellam(15)
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93,750
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*
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Anthony Thornley(16)
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40,625
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*
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All executive officers and directors as a group
(10 persons)(17)
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6,035,489
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14.64
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%
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* |
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Less than one percent. |
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(1) |
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This table is based upon information supplied by officers,
directors, principal stockholders and Schedules 13G filed with
the SEC. Unless otherwise indicated in the footnotes to this
table and subject to community property laws where applicable,
the Company believes that each of the stockholders named in this
table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages
are based on 41,233,703 shares outstanding on March 1,
2009, adjusted as required by rules promulgated by the SEC. |
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(2) |
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Consists of shares owned by investment funds for which Artis
Capital Management, L.P. (Artis L.P.) is the
investment advisor. Artis Capital Management, Inc. (Artis
Inc.) is the general partner of Artis L.P. and Stuart L.
Peterson is the president of Artis Inc. Artis L.P., Artis Inc.
and Mr. Peterson have shared voting and dispositive power
over 2,235,535 shares. The address for Artis L.P., Artis
Inc. and Mr. Peterson is One Market Plaza, Steuart Street
Tower, Suite 2700, San Francisco, CA 94105. |
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(3) |
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Consists of 3,963,032 shares held by AVM Capital, L.P. AVM
Capital Partners LLC is the general partner of AVM Capital, L.P.
(together, AVM). The address for AVM is 12930
Saratoga Avenue,
Suite D-8,
Saratoga, CA 95070. |
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(4) |
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Consists of shares owned by record clients of Turner Investment
Partners, Inc., in its capacity as an investment advisor. Turner
Investment Partners, Inc. has sole voting power over
1,676,042 shares and sole investment power over
2,074,492 shares. The address for Turner Investment
Partners, Inc. is 1205 Westlake Drive, Suite 100,
Berwyn, PA 19312. |
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(5) |
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Consists of (a) 2,661,406 shares owned by Fidelity
Management & Research Company (Fidelity),
which is a wholly owned subsidiary of FMR LLC and
(b) 25,600 shares owned by Pyramis Global Advisors
Trust Company (Pyramis), which is an indirect
wholly owned subsidiary of FMR LLC. Edward C. Johnson 3rd is the
Chairman of FMR LLC. Mr. Johnson and FMR LLC, through its
control of Fidelity, has (a) sole dispositive power over
2,661,406 shares and (b) sole voting power over none
of the shares held by Fidelity. |
13
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Mr. Johnson and FMR LLC, through its control of Pyramis,
has (a) sole dispositive power over 25,600 shares and
(b) sole voting power over none of the shares held by the
institutional accounts managed by Pyramis. The address for FMR
LLC is 82 Devonshire Street, Boston, MA 02109. |
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(6) |
|
Consists of (a) 2,650,695 shares beneficially owned by
Jennison Associates LL, which acts as an investment advisor to
various investment companies, insurance separate accounts and
institutional clients, and of which Prudential Financial, Inc.
(Prudential) is the parent holding company, and
(b) 4,867 shares beneficially owned by other
registered investment advisors or broker dealers of which
Prudential is the parent holding company. As the parent holding
company for such entities, and as reported by the
Schedule 13G filed by Prudential on February 6, 2009,
Prudential has (i) sole voting power over
323,955 shares, (ii) shared voting power over
2,271,907 shares, (iii) sole dispositive power over
323,955 shares, and (iv) shared dispositive power over
2,331,607 shares. The address for Prudential is 751 Board
Street, Newark, New Jersey 07102. |
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(7) |
|
Includes (a) 1,538,062 shares held by Mr. Ali and
(b) 640,206 shares that Mr. Ali has a right to
acquire within 60 days of March 1, 2009 pursuant to
outstanding options. |
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(8) |
|
Consists of (a) 75,043 shares held by
Mr. Chadwick, 30,626 shares of which remain subject to
a repurchase option held by the Company,
(b) 62,495 shares held by Arthur D. Chadwick Living
Trust, dated 5/24/2000 for which Mr. Chadwick is the sole
beneficiary and sole trustee, (c) 11,257 shares held
by The Chadwick Living Trust, Arthur D. Chadwick and Farah
Subedar, Trustees, U.A DTD 05/24/2000,
(d) 23,705 shares held by Farah J. Subedar Living
Trust, dated 5/24/2000 for which Mr. Chadwicks spouse
is the sole beneficiary and sole trustee, and
(e) 13,541 shares that Mr. Chadwick has a right
to acquire within 60 days of March 1, 2009 pursuant to
outstanding options. |
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(9) |
|
Includes (a) 451,500 shares held by Mr. Jain,
(b) 95,000 shares held by the Jain Family
Trust Dated 2/27/07, a trust for the benefit of
Mr. Jains children, (c) 173,743 shares that
Mr. Jain has a right to acquire within 60 days of
March 1, 2009 pursuant to outstanding options. |
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(10) |
|
Includes (a) 212,082 shares held by Mr. Khemani,
4,167 shares of which remain subject to a repurchase option
held by the Company, and (b) 58,979 shares that
Mr. Khemani has a right to acquire within 60 days of
March 1, 2009 pursuant to outstanding options. |
|
(11) |
|
Includes 51,562 shares that Mr. Vij has a right to
acquire within 60 days of March 1, 2009 pursuant to
outstanding options. |
|
(12) |
|
Consists of (a) 15,601 shares held by Solar Venture
Partners, LP, (b) 308,172 shares held by Scenic
Investments L.P., (c) 86,207 shares held by Scenic
Capital, (d) 2,733 shares held directly by C.N. Reddy,
and (e) 12,500 shares that Mr. Reddy has a right
to acquire within 60 days of March 1, 2009 pursuant to
outstanding options that are early exercisable, of which
3,125 shares would be vested. C.N. Reddy, one of our
directors, is one of the general partners of Solar Venture
Partners, LP, one of the general partners of Scenic Investments,
L.P. and the general partner of Scenic Capital. Mr. Reddy
may be deemed to share voting and investment power over these
shares. Mr. Reddy disclaims beneficial ownership of these
shares except to the extent of his proportionate pecuniary
interest in them. |
|
(13) |
|
Consists of (a) 1,906 shares owned directly by Menlo
Entrepreneurs Fund IX(A), L.P., (b) 12,789 shares
owned directly by Menlo Entrepreneurs Fund IX, L.P.,
(c) 387,690 shares owned directly by Menlo Ventures
IX, L.P., (d) 8,418 shares owned directly by MMEF IX,
L.P., (e) 51,569 shares owned directly by the Jarve
Family Trust dated 4/25/95, (f) 3,116 shares owned
directly by Linden Partners II, L.P., and
(g) 12,500 shares that Mr. Jarve has a right to
acquire within 60 days of March 1, 2009 pursuant to
outstanding options that are early exercisable, of which
3,125 shares would be vested. John Jarve, one of our
directors, is a managing member of MV Management IX, L.L.C., the
general partner of Menlo Ventures, IX, L.P., Menlo Entrepreneurs
Fund IX, L.P., Menlo Entrepreneurs Fund IX(A), L.P.
and MMEF IX, L.P. and has shared voting and investment power
over the shares held by these entities. Mr. Jarve is a
trustee and beneficiary of the Jarve Family Trust dated
4/25/95 and a general partner of Linden Partners II, L.P. and
has shared voting and investment power over the shares held by
these entities. Mr. Jarve disclaims beneficial ownership of
all shares except to the extent of his proportionate pecuniary
interest in them. |
|
(14) |
|
Consists of (a) 1,433,916 shares held by NeoCarta
Ventures, L.P., (b) 159,322 shares held by NeoCarta
Scout Fund, L.L.C., and (c) 12,500 shares that Anthony
Pantuso has a right to acquire within 60 days of
March 1, 2009 pursuant to outstanding options that are
early exercisable, of which 3,125 shares would be vested. |
14
|
|
|
|
|
Mr. Pantuso, one of our directors, is a managing director
of NeoCarta Associates, LLC, which is the general partner of
NeoCarta Ventures, L.P. and the manager of NeoCarta Scout Fund,
L.L.C. Mr. Pantuso may be deemed to share dispositive and
voting power over these shares, which are, or may be, deemed to
be beneficially owned by NeoCarta Ventures, L.P. and NeoCarta
Scout Fund, L.L.C. Mr. Pantuso may be deemed to have an
indirect pecuniary interest in an indeterminate portion of the
shares held by NeoCarta Ventures, L.P. and NeoCarta Scout Fund,
L.L.C. Mr. Pantuso disclaims beneficial ownership of these
shares, except to the extent of his pecuniary interest therein. |
|
(15) |
|
Includes (a) 25,000 shares held by Mr. Chellam
that were early exercised and of which 19,791 are vested,
(b) 50,000 shares held by The Chellam Family Trust dtd
1/28/88, of which Mr. Chellam is a co-trustee, and
(b) 18,750 shares that Mr. Chellam has a right to
acquire within 60 days of March 1, 2009 pursuant to
outstanding options that are early exercisable, of which 9,375
would be vested. |
|
(16) |
|
Includes (a) 25,000 shares held by Mr. Thornley
that were early exercised and of which 15,104 are vested,
(b) 15,625 shares that Mr. Thornley has a right
to acquire within 60 days of March 1, 2009 pursuant to
outstanding options that are early exercisable, of which 4,817
would be vested. |
|
(17) |
|
Includes an aggregate of 1,009,906 shares that our
directors and named executive officers have a right to acquire
within 60 days of March 1, 2009 pursuant to
outstanding options. |
Section 16(a)
Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the
Companys directors and executive officers, and persons who
own more than ten percent of a registered class of the
Companys equity securities, to file with the SEC initial
reports of ownership and reports of changes in ownership of
common stock and other equity securities of the Company.
Officers, directors and greater than ten percent stockholders
are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
To the Companys knowledge, based solely on a review of the
copies of such reports furnished to the Company and written
representations that no other reports were required, during the
fiscal year ended December 31, 2008, all Section 16(a)
filing requirements applicable to its officers, directors and
greater than ten percent beneficial owners were complied with.
Equity
Compensation Plan Information
The following table provides certain information with respect to
all of the Companys equity compensation plans in effect as
of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining Available
|
|
|
|
|
|
|
|
|
|
for Future Issuance
|
|
|
|
Number of Securities
|
|
|
Weighted Average
|
|
|
Under Equity
|
|
|
|
to be Issued Upon
|
|
|
Exercise Price of
|
|
|
Compensation Plans
|
|
|
|
Exercise of Outstanding
|
|
|
Outstanding Options,
|
|
|
(Excluding Securities
|
|
Plan Category
|
|
Options, Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column(a)
|
|
|
Equity compensation plans approved by security holders:
|
|
|
|
|
|
|
|
|
|
|
|
|
2001 Stock Incentive Plan(1)
|
|
|
3,161,419
|
|
|
$
|
2.80
|
|
|
|
410,303
|
|
2007 Equity Incentive Plan(2)
|
|
|
2,516,968
|
|
|
$
|
15.32
|
|
|
|
4,466,013
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL:
|
|
|
5,678,387
|
|
|
$
|
8.35
|
|
|
|
4,876,316
|
|
|
|
|
(1) |
|
In February 2001, we adopted the 2001 Stock Incentive Plan, or
2001 Plan. A total of 10,345,979 shares of common stock are
reserved for issuance under the 2001 Plan. As a result of our
initial public offering and the adoption of the 2007 Equity
Incentive Plan, the Company no longer grants awards under the
2001 Plan; however, all outstanding options continue to be
governed by their existing terms. |
15
|
|
|
(2) |
|
In February 2007, we adopted the 2007 Equity Incentive Plan, or
2007 Plan, which became effective in May 2007 in connection with
our initial public offering. A total of 5,000,000 shares of
common stock were initially authorized for issuance under the
2007 Incentive Plan. Our board of directors may increase the
share reserve as of each January 1, from January 1,
2008 through January 1, 2017 (each such day a
Calculation Date), by an amount determined by our
board; provided, however that the increase for any year may not
exceed the lesser of (1) 5% of the total number of shares
of our common stock outstanding on the Calculation Date or
(2) 5,000,000 shares. |
Executive
Compensation
COMPENSATION
DISCUSSION AND ANALYSIS
The following discussion and analysis of compensation
arrangements of our named executive officers for fiscal year
2008 should be read together with the compensation tables and
related disclosures set forth below. This discussion contains
forward-looking statements that are based on our current plans,
considerations, expectations and determinations regarding future
compensation programs. Actual compensation programs that we
adopt may differ materially from currently planned programs as
summarized in this discussion.
The primary objectives of the Compensation Committee of our
Board of Directors with respect to executive compensation are to
attract and retain the best possible executive talent, to tie
annual and long-term cash and stock incentives to achievement of
measurable corporate, market segment and individual performance,
to align executives incentives with stockholder value
creation, to be affordable within the context of our operating
expense model, to be fairly and equitably administered and to
reflect our values. To achieve these objectives, our
Compensation Committee implements and maintains compensation
plans that tie a substantial portion of our executives
overall compensation to our financial performance and common
stock price through the issuance of equity as a significant
component of compensation. Overall, the total compensation
opportunity is intended to create an executive compensation
program that is based on comparable public companies.
As we administer our compensation programs, we work to:
|
|
|
|
|
evolve and modify our programs to reflect the competitive
environment and our changing business needs;
|
|
|
|
focus on simplicity wherever possible;
|
|
|
|
openly communicate the details of our programs with our
employees and managers to ensure that our programs and their
goals are understood;
|
|
|
|
provide our managers and employees with the tools they need to
administer our compensation programs; and
|
|
|
|
consistently apply our compensation philosophy to all our
locations, although our specific programs may vary from country
to country.
|
The Compensation Committee meets regularly in executive session.
In 2008, our Chief Financial Officer also attended each meeting
of the Compensation Committee. The Chief Financial Officer was
present in order to provide information regarding new employees
for whom stock option grants were being considered.
Additionally, in the first quarter of 2008 and the first quarter
of 2009, our Chief Executive Officer attended the Compensation
Committee meeting in order to discuss overall company-wide
compensation strategy and answer any questions raised by the
Compensation Committee in regards to general employee
compensation. Our Chief Executive Officer, however, may not and
did not participate in or be present during any deliberations or
determinations of the Compensation Committee regarding his
compensation. From time to time, various other members of
management and other employees as well as outside advisors or
consultants may be invited by the Compensation Committee to make
presentations, provide financial or other background information
or advice, or otherwise participate in Compensation Committee
meetings.
16
Compensation
Policies
Our Compensation Committees policy is to meet on a
periodic basis at least three times per year for the purpose of
granting equity awards. Historically, during the first quarter
of each calendar year, the Compensation Committee meets in order
to review and grant equity awards to current employees, as well
as to any individuals who became employees since the
Compensation Committees last meeting. During the following
three quarters of the calendar year, equity awards are typically
granted only to new employees. The Company expects that it will
likely continue to grant equity awards to current employees on a
yearly basis. Such determination will be made by the
Compensation Committee each year. In the first quarter of 2009,
the Compensation Committee awarded stock options to almost all
current employees of the company.
Historically, the Compensation Committee has made most
adjustments to annual compensation, determined equity awards and
established new performance objectives, if any, at one or more
meetings held during the first quarter of the year. However, at
various meetings throughout the year, the Compensation Committee
also considers matters related to individual compensation, such
as compensation for new executive hires, as well as high-level
strategic issues, such as the efficacy of the Companys
compensation strategy, potential modifications to that strategy
and new trends, plans or approaches to compensation. For
executives other than the Chief Executive Officer, the
Compensation Committee solicits and considers evaluations and
recommendations submitted to the Committee by the Chief
Executive Officer. In the case of the Chief Executive Officer,
the evaluation of his performance is conducted solely by the
Compensation Committee, which determines any adjustments to his
compensation as well as equity awards to be granted.
For all executive officers, as part of its deliberations, the
Compensation Committee may review and consider, as appropriate,
materials such as financial reports and projections, operational
data, tax and accounting information, executive and director
stock ownership information, Company stock performance data,
analyses of historical executive compensation levels and current
Company-wide compensation levels, and recommendations of the
Compensation Committees compensation consultant, including
analyses of executive officers compensation paid at other
companies identified by the consultant. The Compensation
Committee has not established any formal policies or guidelines
for allocating compensation between current and long-term
incentive compensation, or between cash and non-cash
compensation; however, in general the Compensation Committee
emphasizes equity compensation over cash compensation in order
to promote long-term thinking, strategy, and growth. In
determining the amount and mix of compensation elements and
whether each element provides the correct incentives and rewards
for performance consistent with our short and long-term goals
and objectives, the Compensation Committee relies on its
judgment about each individual rather than adopting a formulaic
approach to compensatory decisions. In 2008, the Compensation
Committee focused on financial reports and projections, stock
performance data and analyses by Compensia, Inc.
(Compensia) when determining compensation for the
executive officers.
Compensation
Consultant
The charter of the Compensation Committee grants the
Compensation Committee full access to all books, records,
facilities and personnel of the Company, as well as authority to
obtain, at the expense of the Company, advice and assistance
from internal and external legal, accounting or other advisors
and consultants and other external resources that the
Compensation Committee considers necessary or appropriate in the
performance of its duties. In particular, the Compensation
Committee has the sole authority to retain compensation
consultants to assist in its evaluation of executive and
director compensation, including the authority to approve the
consultants reasonable fees and other retention terms.
In January 2008, the Compensation Committee engaged an
independent compensation consultant, Compensia to provide the
Compensation Committee with an analysis of our salaries and
stock incentive awards for executive officers. At the request of
the Compensation Committee, Compensia also conducted individual
interviews with members of the Compensation Committee and senior
management to learn more about the Companys business
operations and strategy, key performance metrics and strategic
goals, as well as the labor markets in which the Company
competes. Compensia ultimately developed recommendations that
were presented to the Compensation Committee for its
consideration. While the Committee reviewed the information
provided by Compensia, as well as
17
the survey data discussed below, the Committee did not, as a
material factor, set or consider specific benchmarks in its
compensation decisions.
In order to learn more about overall market conditions, the
Committee reviewed market data compiled by Compensia regarding a
peer group of companies that was selected based on similar
industry and market capitalization to the Company. Compensia
presented a preliminary peer group that was then revised with
the assistance of the Companys management in order to
ensure that the companies selected were in fact considered
industry peers to the Company. The final peer group consisted of
the following sixteen companies: PMC-Sierra, Atheros
Communications, Sirf Technology Holdings, Applied Micro Circuits
Corporation, Rambus, Riverbed Technology, Sonicwall, Hittite
Microwave Corporation, Aruba Networks, Netscout Systems,
Netlogic Mircrosystems, Advanced Analogic Technologies, Data
Domain, PLX Technology, Volterra Semiconductor and Exar.
Additionally, Compensia provided market data from the Radford
October 2007 Executive Compensation Survey.
Compensias analysis indicated that the Companys cash
compensation for its executive officers was below the
25th percentile
as compared to the peer group. It was also recognized that the
executive officers salaries had not been raised for four
years. Additionally, Compensia found that the Companys
equity compensation for its executive officers was generally at
or above the
75th percentile
as compared to the peer group companies; however, it was also
noted that the pre-initial public offering equity holdings of
the executive officers would become fully vested over the next
several years. Based on the foregoing, Compensia recommended
eliminating the Companys short-term incentive program,
raising the executive officers salaries, and granting
equity incentive awards equal to half of those awarded in 2006.
After reviewing Compensias recommendations, the Company
decided to eliminate the short-term incentive program, increase
executive officer salaries by approximately ten percent, and
grant new stock option awards in order to strengthen long-term
compensation incentives.
Compensation
Components
Salary. Salaries for our named executive
officers are established based on the scope of their
responsibilities, taking into account competitive market
compensation paid by other companies for similar positions.
Generally, we believe that executive base salaries should be in
the range of salaries for executives in similar positions and
with similar responsibilities at comparable companies in line
with our straightforward compensation philosophy, which
emphasizes long-term compensation. Base salaries are reviewed by
our Compensation Committee annually, and adjusted from time to
time to realign salaries with market levels after taking into
account individual responsibilities, performance, experience and
cost of living adjustments, as appropriate. The Compensation
Committee neither bases its consideration on any single factor
nor does it specifically assign relative weights to factors, but
rather considers a mix of factors. The base salaries paid to our
executive officers did not change from fiscal year 2006 to
fiscal year 2007. Although 2007 salaries did not change,
Mr. Chadwicks salary compensation, as reflected in
the Summary Compensation Table below, was lower in 2007 compared
to 2006 due to an increase in unpaid time-off in 2007.
The Compensation Committee performed its annual review of the
named executive officer salaries for 2008 and after reviewing
Compensias analysis of our executive officer overall
compensation, decided to adjust the salary amounts and to
eliminate the officer bonus program effective April 1,
2008. The named executive officers salaries were
increased, effective April 1, 2008, such that
Mr. Alis yearly salary rate would be $295,000,
Mr. Chadwicks yearly salary would be $240,000,
Mr. Jains yearly salary would be $240,000 and
Mr. Khemanis yearly salary would be $275,000.
Mr. Vij joined the Company in May 2008 and his yearly
salary rate was set at $274,992. In making such salary
decisions, the Compensation Committee reviewed the information
and recommendations provided by Compensia, the historical
salaries paid to the named executive officers, and the varying
levels of responsibility and oversight held by each executive
officer. The base compensations of Mr. Ali,
Mr. Chadwick, Mr. Jain and Mr. Khemani as
reflected in the Summary Compensation Table below, are lower
than the salaries approved by the Compensation Committee for
2008 because the salary increases did not become effective until
April 1, 2008 and because some of the officers took varying
amounts of unpaid time-off during 2008.
In January 2009, as part of the Companys overall cost
reduction efforts in response to global economic conditions, the
Compensation Committee approved management-recommended
reductions in the base salaries of the Syed Ali, Arthur
Chadwick, Anil Jain, Rajiv Khemani and Sandeep Vij.
Consequently, effective January 1,
18
2009, Mr. Alis salary for 2009 was reduced by 50% and
Messrs. Chadwicks, Jains, Khemanis and
Vijs salaries for 2009 were reduced by 25%. These
reductions are from the base salaries that became effective on
April 1, 2008. An ending date for such salary reductions
has not yet been set, but a reinstatement of the prior salaries
will be reviewed on a quarterly basis.
Annual Bonus. In 2007, in addition to base
salaries, we awarded performance-based cash bonuses as an
additional incentive to achieve corporate goals. These cash
bonuses were intended to reward individual performance during
the year. Target bonus amounts were set biannually by the
Compensation Committee and full bonus payments were paid. In
2008, the Compensation Committee discontinued the annual bonus
program because it believed that base salaries and equity
compensation were sufficient to achieve our compensation goals
and provide both short and long-term incentives for our named
executive officers. The Compensation Committee does not intend
to award performance-based cash bonuses in 2009.
Long-Term Incentive Program. We believe that
long-term performance is achieved through an ownership culture
that encourages long-term performance by our named executive
officers through our grants of stock-based awards. Our long-term
equity incentive compensation for our named executive officers
is currently exclusively in the form of stock options to acquire
our common stock. In 2007, our Board of Directors adopted the
Cavium Networks, Inc. 2007 Equity Incentive Plan, the 2007
Plan, which permits the grant of stock options, stock
appreciation rights, restricted stock grants or awards,
performance shares, and other stock-based awards. The 2007 Plan
was established to provide our employees, including our named
executive officers, with incentives to help align those
employees incentives with the interests of our
stockholders. Our Compensation Committee does not apply a rigid
formula in allocating stock options to named executive officers
as a group or to any particular named executive officer.
Instead, our Compensation Committee exercises its judgment and
discretion and considers, among other things, the role and
responsibility of the named executive officer, competitive
factors, the amount of stock-based equity compensation already
held by the named executive officer, the non-equity compensation
received by the named executive officer and the total number of
options to be granted to all employees during the year. Our
Compensation Committee also considers each named executive
officers unvested stock options, as we believe the vesting
of stock options over time is important to the future
performance of our named executive officers. In the past, our
practice has been to review annually equity awards to our named
executive officers, and make additional awards when appropriate.
Like our other compensation components, we intend that the
annual aggregate value of long-term incentive awards will be set
in line with that of comparable companies.
In March 2006, the Compensation Committee granted equity
incentive plan awards to Mr. Ali, Mr. Chadwick,
Mr. Jain, and Mr. Khemani. These grants consisted of
two separate stock option grants one with a four
year vesting period and one with a five year vesting period. In
2007, none of our named executive officers received equity
incentive plan awards. In March 2008, the Compensation Committee
granted equity incentive plan awards to Mr. Ali,
Mr. Chadwick, Mr. Jain, and Mr. Khemani in
connection with recommendations from Compensia, as previously
discussed.
In February 2009, the Compensation Committee granted additional
equity incentive plan awards to Mr. Ali, Mr. Chadwick,
Mr. Jain, Mr. Khemani, and Mr. Vij. Each of these
option grants vests as to 12.5% on the date six months from the
vesting commencement date and 1/48th of the shares subject
to the stock option vest monthly thereafter. In the event there
is a change in control (as defined in the stock option
agreements), 100% of the stock options will immediately vest if
any of the following events occur: (i) the employee is
terminated by the Company without cause (as defined in the stock
option agreements) within 24 months following such change
in control, or (ii) the employee resigns for good reason
(as defined in the stock option agreements) within
24 months following such change in control. When making
these grants, the Compensation committee considered, among other
things, the fact that a majority of the stock options then held
by Mr. Ali, Mr. Chadwick, Mr. Jain and
Mr. Khemani would become fully vested by 2010, and the fact
that the exercise prices of the grants made to Mr. Ali,
Mr. Chadwick, Mr. Jain, Mr. Khemani and to
Mr. Vij in 2008 were greater than the then-trading price of
the Companys common stock. These new grants were made to
continue to foster long-term planning and performance by
aligning our named executive officers interests with those
of our stockholders.
Our Compensation Committee does not time the granting of our
stock options with any favorable or unfavorable news released by
us and the proximity of the grant of any awards to an earnings
announcement or
19
other market event is coincidental. The exercise price of
options is set at the closing price of our common stock on the
date of grant.
Stock Appreciation Rights. Our 2007 Plan
authorizes us to grant stock appreciation rights. To date no
stock appreciation rights have been awarded to any of our named
executive officers. Our Compensation Committee, in its
discretion, may in the future elect to make such grants to our
named executive officers if it deems it advisable. However, the
Compensation Committee has no current plans to grant any stock
appreciation rights to our named executive officers in 2009.
Restricted Stock Grants or Awards. Our
Compensation Committee did not grant restricted stock or
restricted stock awards to any of our named executive officers
in the years ended December 31, 2008 or 2007. Our 2007 Plan
authorizes restricted stock and restricted stock awards and our
Compensation Committee, in its discretion, may in the future
elect to make such grants to our named executive officers if it
deems it advisable. However, the Compensation Committee has no
current plans to grant any restricted stock grants or awards to
our named executive officers in 2009.
Restricted Stock Units. Our Compensation
Committee did not grant restricted stock units to any of our
named executive officers in the years ended December 21,
2008 or 2007. Our 2007 Plan authorizes restricted stock units
and our Compensation Committee, in its discretion, may in the
future elect to make such grants to our named executive officers
if it deems it advisable. However, the Compensation Committee
has no current plans to grant any restricted stock units to our
named executive officers in 2009.
Stock Ownership Guidelines. While we encourage
our named executive officers to hold a significant equity
interest in the Company, we do not have specific share retention
and ownership guidelines for our named executive officers. We
may implement guidelines regarding the issuance of new stock
option awards in the future in order to assure that our officers
are appropriately incentivized.
Additional Compensation. All of our full-time
employees in the United States, including our named executive
officers, may participate in our health programs, which include
medical, dental and vision care coverage, and our 401(k) and
life insurance programs. We provide these programs to provide a
competitive benefit program for our employees.
Accounting
and Tax Considerations
Under Financial Accounting Standards Board Statement
No. 123(R) (revised 2004), Share-Based Payment,
or SFAS 123R, we are required to estimate and record an
expense for each award of equity compensation including stock
options and restricted stock units over the vesting period of
the award. The Compensation Committee has determined to retain
for the foreseeable future its stock option program as the sole
component of its long-term compensation program. The
Compensation Committee has considered, and may in the future
consider, the grant of restricted stock to our named executive
officers in lieu of stock option grants in light of the
accounting impact of SFAS 123R with respect to stock option
grants and other considerations.
Section 162(m) of the Internal Revenue Code of 1986 limits
our deduction for federal income tax purposes to not more than
$1.0 million of compensation paid to certain executive
officers in a calendar year. Compensation above
$1.0 million may be deducted if it is
performance-based compensation within the meaning of
the Code. The Compensation Committee has not yet established a
policy for determining which forms of incentive compensation
awarded to our executive officers shall be designed to qualify
as performance-based compensation. The Compensation
Committee intends to continue to evaluate the effects of the
compensation limits of Section 162(m) on any compensation
it proposes to grant, and the Compensation Committee intends to
provide future compensation in a manner consistent with the best
interests of the Company and those of our stockholders.
20
Summary
Compensation Table
The following table shows for the fiscal years ended
December 31, 2008, 2007 and 2006, compensation awarded to,
paid to or earned by the Companys Principal Executive
Officer, or Chief Executive Officer, Principal Financial
Officer, or Chief Financial Officer, and its three other most
highly compensated executive officers as of December 31,
2008:
Summary
Compensation Table for Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option
|
|
|
Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards
|
|
|
Compensation
|
|
|
All Other
|
|
|
Total
|
|
Name and Principal Position
|
|
Year
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)
|
|
|
Compensation ($)
|
|
|
($)
|
|
|
Syed B. Ali,
|
|
|
2008
|
|
|
|
264,748
|
|
|
|
|
|
|
|
412,083
|
|
|
|
|
|
|
|
13,363
|
(3)
|
|
|
678,191
|
|
President and Chief
|
|
|
2007
|
|
|
|
194,480
|
|
|
|
50,000
|
|
|
|
154,996
|
|
|
|
|
|
|
|
11,114
|
(3)
|
|
|
410,590
|
|
Executive Officer
|
|
|
2006
|
|
|
|
194,480
|
|
|
|
45,650
|
|
|
|
120,599
|
|
|
|
|
|
|
|
10,640
|
(3)
|
|
|
371,369
|
|
Arthur D. Chadwick,
|
|
|
2008
|
|
|
|
196,557
|
|
|
|
|
|
|
|
117,738
|
|
|
|
|
|
|
|
13,363
|
(3)
|
|
|
324,228
|
|
Vice President of Finance
|
|
|
2007
|
|
|
|
182,250
|
|
|
|
20,000
|
|
|
|
44,284
|
|
|
|
|
|
|
|
11,284
|
(3)
|
|
|
257,818
|
|
and Administration, Chief Financial Officer and Secretary
|
|
|
2006
|
|
|
|
188,625
|
|
|
|
18,260
|
|
|
|
34,457
|
|
|
|
|
|
|
|
10,780
|
(3)
|
|
|
252,122
|
|
Anil K. Jain,
|
|
|
2008
|
|
|
|
228,619
|
|
|
|
|
|
|
|
121,168
|
|
|
|
|
|
|
|
11,633
|
(3)
|
|
|
357,891
|
|
Corporate Vice President,
|
|
|
2007
|
|
|
|
194,480
|
|
|
|
20,000
|
|
|
|
47,606
|
|
|
|
|
|
|
|
11,283
|
(3)
|
|
|
273,369
|
|
IC Engineering
|
|
|
2006
|
|
|
|
194,480
|
|
|
|
18,260
|
|
|
|
37,041
|
|
|
|
|
|
|
|
10,779
|
(3)
|
|
|
260,560
|
|
Rajiv Khemani,
|
|
|
2008
|
|
|
|
228,370
|
|
|
|
|
|
|
|
312,883
|
|
|
|
|
|
|
|
15,363
|
(3)
|
|
|
547,503
|
|
Vice President and General
|
|
|
2007
|
|
|
|
187,200
|
|
|
|
35,000
|
|
|
|
95,729
|
|
|
|
|
|
|
|
11,049
|
(3)
|
|
|
328,978
|
|
Manager of Networking and Communications Division
|
|
|
2006
|
|
|
|
187,200
|
|
|
|
18,260
|
|
|
|
42,060
|
|
|
|
|
|
|
|
10,528
|
(3)
|
|
|
258,048
|
|
Sandeep Vij,
|
|
|
2008
|
|
|
|
178,309
|
|
|
|
|
|
|
|
394,320
|
|
|
|
|
|
|
|
9,668
|
(3)
|
|
|
570,811
|
|
Vice President and General
|
|
|
2007
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Manager Broadband and Consumer Division
|
|
|
2006
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
(1) |
|
Bonuses listed on this table reflect the performance of the
named executive officer, named financial officer and each of the
named executive officers. However, a portion of the bonuses for
2006 and 2007 were actually paid in the following calendar year. |
|
(2) |
|
The dollar amounts in this column represent the expensed fair
value of stock options granted in the fiscal years ended
December 31, 2008, 2007 and 2006, calculated in accordance
with SFAS No. 123(R). See Note 8 of our financial
statements included in our Annual Report on
Form 10-K
for the year ended December 31, 2008, as filed with the SEC
on March 2, 2009, for a discussion of assumptions made in
determining the grant date and fair market value and
compensation expense of our stock options. |
21
|
|
|
(3) |
|
Includes the following payments we paid on behalf of the
executives: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health Care
|
|
|
Life Insurance
|
|
|
401k Contributions made
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution
|
|
|
Premium
|
|
|
by the Company
|
|
|
Other
|
|
|
Total
|
|
Name
|
|
Year
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)(a)
|
|
|
($)
|
|
|
Syed B. Ali
|
|
|
2008
|
|
|
|
10,898
|
|
|
|
465
|
|
|
|
2,000
|
|
|
|
|
|
|
|
13,363
|
|
|
|
|
2007
|
|
|
|
10,884
|
|
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
11,144
|
|
|
|
|
2006
|
|
|
|
10,380
|
|
|
|
260
|
|
|
|
|
|
|
|
|
|
|
|
10,640
|
|
Arthur D. Chadwick
|
|
|
2008
|
|
|
|
10,937
|
|
|
|
426
|
|
|
|
2,000
|
|
|
|
|
|
|
|
13,363
|
|
|
|
|
2007
|
|
|
|
10,884
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
11,284
|
|
|
|
|
2006
|
|
|
|
10,380
|
|
|
|
400
|
|
|
|
|
|
|
|
|
|
|
|
10,780
|
|
Anil K. Jain
|
|
|
2008
|
|
|
|
9,208
|
|
|
|
425
|
|
|
|
2,000
|
|
|
|
|
|
|
|
11,633
|
|
|
|
|
2007
|
|
|
|
10,884
|
|
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
11,283
|
|
|
|
|
2006
|
|
|
|
10,380
|
|
|
|
399
|
|
|
|
|
|
|
|
|
|
|
|
10,779
|
|
Rajiv Khemani
|
|
|
2008
|
|
|
|
11,187
|
|
|
|
176
|
|
|
|
2,000
|
|
|
|
2,000
|
|
|
|
15,363
|
|
|
|
|
2007
|
|
|
|
10,884
|
|
|
|
165
|
|
|
|
|
|
|
|
|
|
|
|
11,049
|
|
|
|
|
2006
|
|
|
|
10,380
|
|
|
|
148
|
|
|
|
|
|
|
|
|
|
|
|
10,528
|
|
Sandeep Vij
|
|
|
2008
|
|
|
|
7,488
|
|
|
|
180
|
|
|
|
2,000
|
|
|
|
|
|
|
|
9,668
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Reflects a bonus awarded for the hiring by the Company of an
individual referred to the Company by Mr. Khemani. |
Grants
of Plan-Based Awards
The following table shows for the fiscal year ended
December 31, 2008, certain information regarding grants of
plan-based awards to the Named Executive Officers:
Grants
of Plan-Based Awards in Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Option
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards: Number of
|
|
|
Exercise or Base
|
|
|
Grant Date Fair
|
|
|
|
|
|
|
Securities
|
|
|
Price of Option
|
|
|
Value of Stock and
|
|
|
|
|
|
|
Underlying Options
|
|
|
Awards
|
|
|
Option Awards
|
|
Name
|
|
Grant Date
|
|
|
(#)(1)
|
|
|
($/Sh)
|
|
|
($)(2)
|
|
|
Syed B. Ali
|
|
|
3/17/08
|
|
|
|
175,000
|
|
|
|
14.80
|
|
|
|
1,236,847
|
|
Arthur D. Chadwick
|
|
|
3/17/08
|
|
|
|
50,000
|
|
|
|
14.80
|
|
|
|
353,385
|
|
Anil K. Jain
|
|
|
3/17/08
|
|
|
|
50,000
|
|
|
|
14.80
|
|
|
|
353,385
|
|
Rajiv Khemani
|
|
|
1/18/08
|
|
|
|
75,000
|
|
|
|
20.33
|
|
|
|
728,145
|
|
|
|
|
3/17/08
|
|
|
|
60,000
|
|
|
|
14.80
|
|
|
|
424,062
|
|
Sandeep Vij
|
|
|
5/1/08
|
|
|
|
225,000
|
|
|
|
20.98
|
|
|
|
2,292,300
|
|
|
|
|
(1) |
|
Represents stock options granted to our named executive officers
pursuant to the Companys 2007 Equity Incentive Plan, which
are described further in the Outstanding Equity Awards at Fiscal
Year-End Table below. |
|
(2) |
|
Represents the grant date fair value of such stock option award
as determined in accordance with SFAS 123(R). Stock options
are valued using the Black Scholes option valuation model and
the assumptions outlined in Note 8 of our financial
statements included in our Annual Report on Form
10-K for the
year ended December 31, 2008, as filed with the SEC on
March 2, 2009. |
Employee
Agreements and Potential Payments Upon Termination or Change in
Control
The following summaries set forth the employment agreements and
potential payments payable to our named executive officers upon
termination of employment or a change in control of us under
their current employment agreements and our other compensation
programs. The Compensation Committee may in its discretion
revise, amend or add to the benefits if it deems advisable. Thus
far, the Compensation Committee has only revised the
22
employment agreements of Mr. Ali, Mr. Jain and
Mr. Vij in order to ensure that the terms of such
agreements were in documentary compliance with Section 409A
of the Internal Revenue Code, as amended.
We do not currently maintain a qualified or non-qualified
defined benefit plan, nor do we currently maintain a
nonqualified defined contribution plans or other deferred
compensation plans.
We believe that the severance benefits are appropriate and
provide us with greater flexibility to make changes in our
executive management if such changes are in the
stockholders best interests. This flexibility is provided
by already having in place certain mutually agreed upon
severance packages such that parties are aware of and have
agreed upon the payments that would occur upon various
termination events. In addition to the potential payments set
forth below, each of the named executive officers, as employees,
may be entitled to certain benefits under the 2007 Equity
Incentive Plan relating to a change in control or other
corporate transaction.
Syed B. Ali. In January 2001, we entered into
an employment agreement with Mr. Ali, our President and
chief executive officer. In December 2008, we entered into an
amendment to such employment agreement in order to comply with
the requirements of Section 409A of the Internal Revenue
Code of 1986, as amended. The salary paid to Mr. Ali in
2006 and 2007 was $194,480. The salary approved by the
Compensation Committee for Mr. Ali, effective April 1,
2008 was $295,000. The base annual salary paid to Mr. Ali
in 2008 was $264,748. This figure is lower than the salary
approved by the Compensation Committee for 2008 because the
salary increase did not become effective until April 1,
2008. Mr. Alis agreement provides that he is an
at-will employee and his employment may be terminated at any
time by us or Mr. Ali. If we terminate Mr. Alis
employment without cause (as defined in his employment
agreement) or Mr. Ali is constructively terminated, and
Mr. Ali executes a release of claims against the Company,
Mr. Ali will be entitled to receive $14,583 (less
applicable withholding taxes) per month for a period of
12 months and reimbursement for health care continuation
coverage for the same period. If, during that twelve-month
period, Mr. Ali obtains full time employment (or its
equivalent), then Mr. Alis severance payments will be
decreased by the salary or fees paid for such work (but not
decreased by more than $50,000) and his health care continuation
reimbursements will cease if he has been provided with
substantially similar coverage. For a period of eighteen months
after his termination of employment, Mr. Ali will be
subject to certain restrictions on competition with the Company
and on the solicitation of employees, customers and clients.
Mr. Ali is also eligible to participate in our general
employee benefit plans in accordance with the terms and
conditions of such plans.
Arthur D. Chadwick. In December 2004, we
entered into an employment offer letter with Mr. Chadwick,
our Vice President of Finance & Administration and
Chief Financial Officer. The salary paid to Mr. Chadwick in
2006 and 2007 was $188,625. The salary approved by the
Compensation Committee for Mr. Chadwick effective
April 1, 2008 was $240,000. The salary paid to
Mr. Chadwick in 2008 was $196,557. This figure is lower
than the salary approved by the Compensation Committee for 2008
because the salary increase did not become effective until
April 1, 2008 and because Mr. Chadwick took unpaid
time-off during the year. Mr. Chadwicks offer letter
provides that he is an at-will employee and his employment may
be terminated at any time by us or Mr. Chadwick. If we
terminate Mr. Chadwicks employment without cause (as
defined in his offer letter) or Mr. Chadwick resigns for
good reason (as defined in his offer letter), one half of his
unvested Company stock and stock options will become vested.
Additionally, Mr. Chadwicks unvested Company stock
and stock options will fully vest if we terminate
Mr. Chadwicks employment or Mr. Chadwick resigns
for good reason within three months prior to or 12 months
following a change in control (as defined in his offer letter)
or Mr. Chadwick is not offered the position of chief
financial officer of the surviving or continuing entity within
three months following the change in control. In addition, in
the event of a change in control, Mr. Chadwick has agreed
to assist the Company with the transition following such a
transaction for up to six months. Mr. Chadwick is also
eligible to participate in our general employee benefit plans in
accordance with the terms and conditions of such plans.
Anil K. Jain. In January 2001, we entered into
an employment offer letter with Mr. Jain, our Vice
President of IC Engineering. In December 2008, we entered into
an amendment to such employment offer letter in order to comply
with the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended. The salary paid to
Mr. Jain in 2006 and 2007 was $194,480. The salary approved
by the Compensation Committee for Mr. Jain effective
April 1, 2008 was $240,000. The base annual salary paid to
Mr. Jain in 2008 was $228,619. This figure is lower than
the salary approved by the Compensation Committee for 2008
because the salary increase did not
23
become effective until April 1, 2008. Mr. Jains
offer letter provides that Mr. Jain is an at-will employee
and his employment may be terminated at any time by us or
Mr. Jain. If we terminate Mr. Jains employment
for any reason, Mr. Jain is entitled to receive his salary
as well as benefits for three months after termination.
Mr. Jain is also eligible to participate in our general
employee benefit plans in accordance with the terms and
conditions of such plans.
Rajiv Khemani. In May 2003, we entered into an
employment offer letter with Mr. Khemani, our Vice
President of Marketing and Sales. The salary paid to
Mr. Khemani in 2006 and 2007 was $194,480. The salary
approved by the Compensation Committee for Mr. Khemani
effective April 1, 2008 was $275,000. The salary paid to
Mr. Khemani in 2008 was $228,370. This figure is lower than
the salary approved by the Compensation Committee for 2008
because the salary increase did not become effective until
April 1, 2008 and because Mr. Khemani took unpaid
time-off during the year. Mr. Khemanis offer letter
provides that Mr. Khemani is an at-will employee and his
employment may be terminated at any time by us or
Mr. Khemani. The offer letter does not provide
Mr. Khemani with any severance or change in control
benefits. Mr. Khemani is eligible to participate in our
general employee benefit plans in accordance with the terms and
conditions of such plans.
Sandeep Vij. In May 2008, we entered into an
employment offer letter with Mr. Vij, our Vice President of
Strategic Markets and Business Development. In December 2008, we
entered into an amendment to such employment offer letter in
order to comply with the requirements of Section 409A of
the Internal Revenue Code of 1986, as amended. The salary for
Mr. Vij per his employment offer letter is $274,992 per
year. The salary paid to Mr. Vij in 2008 was $178,309.
Mr. Vijs offer letter provides that Mr. Vij is
an at-will employee and his employment may be terminated at any
time by us or Mr. Vij. If we terminate Mr. Vijs
employment without cause (as defined in his offer letter) or
Mr. Vij resigns for good reason (as defined in his offer
letter), then two-thirds of his then unvested stock options
granted pursuant to his offer letter will become vested, he will
receive 12 months of his salary and one hundred percent of
his target yearly bonus (if such bonus exists), and the Company
will pay for his health care continuation coverage for a period
of 12 months; provided, that such health care continuation
payments shall cease if he receives comparable benefits from a
new employer. Additionally, if there is a change in control (as
defined in his offer letter), then all of Mr. Vijs
unvested stock options granted pursuant to his offer letter will
become vested if we terminate him or he resigns for good reason
within three months prior to or 12 months following such
change in control, or if he is not offered a similar position of
responsibility with the surviving or continuing entity within
three months following the change in control. Mr. Vij is
eligible to participate in our general employee benefit plans in
accordance with the terms and conditions of such plans.
The amount of potential compensation and benefits payable to
each named executive officer in various termination and change
in control, situations has been estimated in the table below and
assumes that the event occurred on December 31, 2008, the
last business day of the Companys last fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Continuation
|
|
|
Acceleration
|
|
|
Total
|
|
|
|
|
|
Severance
|
|
|
of Medical
|
|
|
of Vesting of
|
|
|
Termination
|
|
Named Executive
|
|
Termination or Change in
|
|
Payment
|
|
|
Benefits
|
|
|
Stock Options
|
|
|
Benefits
|
|
Officer
|
|
Control Event
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
Syed B. Ali
|
|
Termination without cause or constructive termination
|
|
|
174,996
|
|
|
|
10,898
|
(2)
|
|
|
|
|
|
|
185,894
|
|
Arthur D. Chadwick
|
|
Termination without cause or resignation for good reason
|
|
|
|
|
|
|
|
|
|
|
413,831
|
|
|
|
413,831
|
|
|
|
Termination of employment or resignation for good reason within
three months prior to or 12 months following a change in
control, or if he is not offered the position of chief financial
officer of the surviving or continuing entity within three
months following the change in control
|
|
|
|
|
|
|
|
|
|
|
827,662
|
|
|
|
827,662
|
|
Anil K. Jain
|
|
Termination for any reason
|
|
|
60,000
|
|
|
|
2,302
|
|
|
|
|
|
|
|
62,302
|
|
Rajiv Khemani
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Continuation
|
|
|
Acceleration
|
|
|
Total
|
|
|
|
|
|
Severance
|
|
|
of Medical
|
|
|
of Vesting of
|
|
|
Termination
|
|
Named Executive
|
|
Termination or Change in
|
|
Payment
|
|
|
Benefits
|
|
|
Stock Options
|
|
|
Benefits
|
|
Officer
|
|
Control Event
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
Sandeep Vij
|
|
Termination without cause or resignation for good reason
|
|
|
274,992
|
|
|
|
11,232
|
|
|
|
0
|
(3)
|
|
|
286,224
|
|
|
|
Change in control followed by termination or resignation for
good reason within three months prior to or 12 months
following such change in control, or if he is not offered a
similar position of responsibility with the surviving or
continuing entity within three months following the change in
control
|
|
|
|
|
|
|
|
|
|
|
0
|
(3)
|
|
|
0
|
|
|
|
|
(1) |
|
The value of stock option vesting acceleration is based on the
closing stock price of $10.51 per share for our common stock as
reported on NASDAQ on December 31, 2008 with respect to
in-the-money unvested stock option shares minus the exercise
price of the unvested option shares. |
|
(2) |
|
If, during the twelve-month period, Mr. Ali obtains full
time employment (or its equivalent), then Mr. Alis
severance payments will be decreased by the salary or fees paid
for such work (but not decreased by more than $50,000) and his
health care continuation reimbursements will cease if he is
provided with substantially similar coverage. |
|
(3) |
|
Mr. Vijs stock options have an exercise price of
$20.98. Given the closing price of the Companys stock on
NASDAQ on December 31, 2008, the spread on such
hypothetical acceleration would result in a loss to Mr. Vij. |
Stock
Option Awards
We currently grant stock awards to executive officers under our
2007 Equity Incentive Plan, or the 2007 Plan. The 2007 Plan was
established to provide our employees with an opportunity to
participate in our long-term performance. The following is a
brief description of certain permissible terms of stock options
under the 2007 Plan:
Exercise Price. Incentive and nonstatutory
stock options are granted pursuant to stock option agreements
adopted by the plan administrator. The plan administrator
determines the exercise price for a stock option, within the
terms and conditions of the 2007 Plan, provided that the
exercise price of a stock option cannot be less than 100% of the
fair market value of our common stock on the date of grant
except in the case of certain incentive stock options.
Term. The plan administrator determines the
term of stock options granted under the 2007 Plan, up to a
maximum of seven years (except in the case of certain incentive
stock options). Unless the terms of an optionees stock
option agreement provide otherwise, if an optionees
relationship with us, or any of our affiliates, ceases for any
reason other than disability or death, the optionee may exercise
any vested stock options for a period of three months following
the cessation of service. If an optionees service
relationship with us, or any of our affiliates, ceases due to
disability or death (or an optionee dies within a certain period
following cessation of service), the optionee or a beneficiary
may exercise any vested stock options for a period of
12 months following such cessation of service in the event
of disability and 18 months following the date of death.
The stock option term may be extended in the event that exercise
of the stock option following termination of service is
prohibited by applicable securities laws. In no event, however,
may a stock option be exercised beyond the expiration of its
term.
Consideration. Acceptable consideration for
the purchase of common stock issued upon the exercise of a stock
option will be determined by the plan administrator and may
include (a) cash, check, bank draft or money order,
(b) a broker-assisted cashless exercise, (c) the
tender of common stock owned by the optionee, (d) a net
exercise arrangement,
and/or
(e) other legal consideration approved by the plan
administrator.
25
Restriction on Transfer. Unless the plan
administrator provides otherwise, stock options generally are
not transferable except by will, the laws of descent and
distribution, or pursuant to a domestic relations order. An
optionee may designate a beneficiary, however, who may exercise
the stock option following the optionees death.
Corporate Transactions. In the event of
certain significant corporate transactions, our Board of
Directors has the discretion to take one or more of the
following actions with respect to a stock award:
(i) arrange for the surviving or acquiring corporation (or
its parent) to assume or continue the stock award or to
substitute a similar stock award for the stock award;
(ii) arrange for the assignment of any reacquisition or
repurchase rights held by us for any shares issued pursuant to
the stock award to the surviving or acquiring corporation (or
its parent); (iii) accelerate the vesting and
exercisability of the stock award, if applicable, with such
stock award terminating if not exercised (if applicable) prior
to the corporate transaction; (iv) arrange for the lapse of
any reacquisition or repurchase rights held by us with respect
to the stock award; or (v) cancel the stock award, to the
extent not vested or not exercised prior to the corporate
transaction, in exchange for such cash consideration as our
Board of Directors, in its discretion, may consider appropriate.
Our Board of Directors does not need to take the same action
with respect to all stock awards or with respect to all
participants. Other terms may be provided in individual stock
award agreements.
For purposes of the 2007 Plan, a corporate transaction will be
deemed to occur in the event of (i) a sale of all or
substantially all of our consolidated assets and the
consolidated assets of our subsidiaries; (ii) a sale of at
least 90% of our outstanding securities; (iii) the
consummation of a merger or consolidation in which we are not
the surviving corporation; or (iv) the consummation of a
merger or consolidation in which we are the surviving
corporation but the shares of our outstanding common stock are
converted into other property by virtue of the transaction.
Prior to May 2007, we granted options under our 2001 Stock
Incentive Plan. The 2001 Stock Incentive Plan was terminated in
connection with our initial public offering so that no further
awards may be granted under the plan. Although the 2001 Stock
Incentive Plan has terminated, all outstanding options will
continue to be governed by their existing terms.
401(k)
Plan
We maintain a defined contribution employee retirement plan, or
401(k) plan, for our employees. Our named executive officers are
also eligible to participate in the 401(k) plan on the same
basis as our other employees. The 401(k) plan is intended to
qualify as a tax-qualified plan under Section 401(k) of the
Internal Revenue Code. The 401(k) plan provides that each
participant may contribute up to 15% of his or her pre-tax
compensation, up to the statutory limit, which was $15,500 for
calendar year 2008. Participants that are 50 years or older
can also make
catch-up
contributions, which in calendar year 2008 could be up to an
additional $5,000 above the statutory limit.
Under the 401(k) plan, each participant is fully vested in his
or her deferred salary contributions, when contributed. In 2008,
we made matching contributions equal to 50% of the employee
contribution up to a maximum matching amount of $2,000. In
January 2009, as part of the Companys overall cost
reduction efforts in response to global economic conditions, we
stopped all matching contributions to the 401(k) plan. Such
contributions may be resumed in the future. Participant
contributions are held and invested by the plans trustee.
26
Outstanding
Equity Awards at Fiscal year end.
The following table shows for the fiscal year ended
December 31, 2008, certain information regarding
outstanding equity awards at fiscal year end for the Named
Executive Officers.
Outstanding
Equity Awards At December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
|
|
Unexercised Options
|
|
|
Unexercised Options
|
|
|
Exercise
|
|
|
Option
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
Syed B. Ali
|
|
|
328,125
|
(1)
|
|
|
21,875
|
|
|
|
1.02
|
|
|
|
8/2/2015
|
|
|
|
|
32,812
|
(2)
|
|
|
142,188
|
|
|
|
14.80
|
|
|
|
3/17/2015
|
|
|
|
|
120,312
|
(3)
|
|
|
54,688
|
|
|
|
3.04
|
|
|
|
3/22/2016
|
|
|
|
|
96,250
|
(1)
|
|
|
78,750
|
|
|
|
3.04
|
|
|
|
3/22/2016
|
|
Arthur D. Chadwick
|
|
|
9,375
|
(2)
|
|
|
40,625
|
|
|
|
14.80
|
|
|
|
3/17/2015
|
|
Anil K. Jain
|
|
|
76,875
|
(1)
|
|
|
13,125
|
|
|
|
1.02
|
|
|
|
8/2/2015
|
|
|
|
|
29,562
|
(1)
|
|
|
24,188
|
|
|
|
3.04
|
|
|
|
3/22/2016
|
|
|
|
|
36,953
|
(3)
|
|
|
16,797
|
|
|
|
3.04
|
|
|
|
3/22/2016
|
|
|
|
|
9,375
|
(2)
|
|
|
40,625
|
|
|
|
14.80
|
|
|
|
3/17/2015
|
|
Rajiv Khemani
|
|
|
11,250
|
(2)
|
|
|
48,750
|
|
|
|
14.80
|
|
|
|
3/17/2015
|
|
|
|
|
417
|
(4)
|
|
|
0
|
|
|
|
5.42
|
|
|
|
11/14/2016
|
|
|
|
|
17,187
|
(2)
|
|
|
57,813
|
|
|
|
20.33
|
|
|
|
1/18/2015
|
|
|
|
|
6,167
|
(3)
|
|
|
22,500
|
|
|
|
3.04
|
|
|
|
3/22/2016
|
|
|
|
|
5,209
|
(1)
|
|
|
15,625
|
|
|
|
3.04
|
|
|
|
3/22/2016
|
|
Sandeep Vij
|
|
|
32,812
|
(5)
|
|
|
192,188
|
|
|
|
20.98
|
|
|
|
5/1/2015
|
|
|
|
|
(1) |
|
The stock option was granted pursuant to our 2001 Equity
Incentive Plan and vests as to 12.5% on the date six months from
the vesting commencement date and 1/48th of the shares subject
to the stock option vest monthly thereafter. The option may also
be early exercised in which case it would remain subject to a
repurchase right in favor of the Company that would vest
according the schedule previously described. |
|
(2) |
|
The stock option was granted pursuant to our 2007 Equity
Incentive Plan and vests as to 12.5% on the date six months from
the vesting commencement date and 1/48th of the shares subject
to the stock option vest monthly thereafter. |
|
(3) |
|
The stock option was granted pursuant to our 2001 Equity
Incentive Plan and vests as to 20% on the one year anniversary
of the vesting commencement date and 1/60th of the shares
subject to the stock option vest monthly thereafter. The option
may also be early exercised in which case it would remain
subject to a repurchase right in favor of the Company that would
vest according the schedule previously described. |
|
(4) |
|
The stock option was granted pursuant to our 2001 Equity
Incentive Plan and 15,000 shares vested on the date of
grant and
1/48th of
the shares subject to the stock option vest monthly over
12 months after the vesting commencement date. The option
may also be early exercised in which case it would remain
subject to a repurchase right in favor of the Company that would
vest according the schedule previously described. |
|
(5) |
|
The stock option was granted pursuant to our 2007 Equity
Incentive Plan and vests monthly over four years beginning on
the vesting commencement date. The stock option is subject to
acceleration such that if we terminate Mr. Vijs
employment without cause (as defined in his offer letter) or
Mr. Vij resigns for good reason (as defined in his offer
letter), then two-thirds of the then unvested stock options will
become vested, and if there is a change in control (as defined
in his offer letter), then all of the unvested stock options
will become vested if we terminate him or he resigns for good
reason within three months prior to or 12 months following
such change |
27
|
|
|
|
|
in control, or if he is not offered a similar position of
responsibility with the surviving or continuing entity within
three months following the change in control. |
OPTION
EXERCISES AND STOCK VESTED
The following table shows for the fiscal year ended
December 31, 2008, certain information regarding option
exercises and stock vested during the last fiscal year with
respect to the Named Executive Officers:
Option
Exercises and Stock Vested in Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
Acquired
|
|
|
Value Realized
|
|
|
|
on Exercise
|
|
|
on Exercise
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
Syed B. Ali
|
|
|
|
|
|
|
|
|
Arthur D. Chadwick
|
|
|
|
|
|
|
|
|
Anil K. Jain
|
|
|
|
|
|
|
|
|
Rhajiv Khemani
|
|
|
833
|
|
|
|
13,805
|
|
|
|
|
1,041
|
|
|
|
17,124
|
|
|
|
|
833
|
|
|
|
10,208
|
|
|
|
|
833
|
|
|
|
12,123
|
|
|
|
|
1,334
|
|
|
|
18,196
|
|
|
|
|
4,166
|
|
|
|
56,826
|
|
|
|
|
1,042
|
|
|
|
15,165
|
|
|
|
|
1,042
|
|
|
|
12,769
|
|
|
|
|
834
|
|
|
|
13,719
|
|
|
|
|
1,042
|
|
|
|
17,268
|
|
Sandeep Vij
|
|
|
|
|
|
|
|
|
DIRECTOR
COMPENSATION
The following table shows for the fiscal year ended
December 31, 2008 certain information with respect to the
compensation of all non-employee directors of the Company:
Director
Compensation for Fiscal 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Option
|
|
|
All Other
|
|
|
|
|
|
|
Paid in Cash
|
|
|
Awards
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
Kris Chellam
|
|
|
18,000
|
|
|
|
19,533(2
|
)
|
|
|
|
|
|
|
37,533
|
|
John W. Jarve
|
|
|
18,000
|
|
|
|
19,533(3
|
)
|
|
|
|
|
|
|
37,533
|
|
Anthony J. Pantuso
|
|
|
24,000
|
|
|
|
19,533(3
|
)
|
|
|
|
|
|
|
43,533
|
|
C.N. Reddy
|
|
|
18,000
|
|
|
|
19,533(3
|
)
|
|
|
|
|
|
|
37,533
|
|
Anthony S. Thornley
|
|
|
24,000
|
|
|
|
40,381(4
|
)
|
|
|
|
|
|
|
64,381
|
|
|
|
|
(1) |
|
The dollar amounts in this column represent the expensed fair
value of stock options granted in the fiscal years ended
December 31, 2008, 2007 and 2006, calculated in accordance
with SFAS No. 123(R). See Note 8 of our financial
statements included in our Annual Report on
Form 10-K
for the year ended December 31, 2008, as filed with the SEC
on March 2, 2009, for a discussion of assumptions made in
determining the grant date and fair market value and
compensation expense of our stock options. |
28
|
|
|
(2) |
|
The figure represents (a) a stock option to purchase
6,250 shares, which was granted December 15, 2006, is
fully vested, and has a grant date fair value of $33,875,
(b) a stock option to purchase 12,500 shares, which
was granted on April 18, 2008, vests in equal monthly
installments over four years such that as of December 31,
2008, 2,083 shares were vested and 10,417 shares were
unvested, and has a grant date fair value of $107,805, and
(c) a stock option to purchase 25,000 shares, which
was granted on December 7, 2005, early exercised, and vests
in equal monthly installments over four years such that as of
December 31, 2008, 18,750 shares were vested and
6,250 shares were unvested. |
|
(3) |
|
The figure represents a stock option to purchase
12,500 shares, which was granted on April 18, 2008 and
vests in equal monthly installments over four years. As of
December 31, 2008, 2,083 shares were vested and 10,417
were unvested. The grant date fair value of these options is
$107,805. |
|
(4) |
|
The figure represents (a) a stock option to purchase
3,125 shares, which was granted on February 1, 2007,
vests in equal monthly installments over four years such that as
of December 31, 2009, 1,432 shares were vested and
1,693 shares were unvested, and has a grant date fair value
of $19,369, (b) a stock option to purchase
12,500 shares, which was granted on April 18, 2008,
vests in equal monthly installments over four years such that as
of December 31, 2008, 2,083 shares were vested and
10,417 shares were unvested, and has a grant date fair
value of $107,805, and (c) a stock option to purchase
25,000 shares, which was granted on September 20,
2006, early exercised, and vests as to 12.5% on the date six
months from the vesting commencement date and
1/48th
of the shares subject to the stock option vest monthly
thereafter such that as of December 31, 2008,
14,062 shares were vested and 10,938 shares were
unvested and has a grant date fair value of $61,430. |
Mr. Syed Ali, our one employee director did not receive any
cash compensation for his services as a member of our Board of
Directors in 2008.
Our, non-employee directors received, in 2008, cash compensation
for their services as non-employee members of the Board of
Directors in the following amounts: $12,000 per year for service
on the Board of Directors, plus $6,000 per year for service on
the audit committee and $6,000 per year for service on the
Compensation Committee. In addition, the chairperson of the
audit committee received an additional $6,000. This cash
compensation was paid on, or soon thereafter, the date of our
2008 annual stockholders meeting. We plan to continue
these rates of cash compensation in 2009. Additionally, we have
a policy of reimbursing directors for travel, lodging and other
reasonable expenses incurred in connection with their attendance
at Board of Directors or committee meetings.
Each individual who is elected or appointed as a non-employee
director of the Board of Directors will automatically be granted
a stock option to purchase 50,000 shares of our common
stock. All of the shares subject to each such grant vest in
equal monthly installments over four years. The vesting
commencement date of these stock options will occur when the
director first takes office. At the time of each of our annual
stockholders meetings, beginning in 2008, each
non-employee director who has served for at least the preceding
six months and who will continue to be a director after that
meeting will automatically be granted a nonstatutory stock
option on such date to purchase 12,500 shares of our common
stock that will vest in equal monthly installments over four
years. All these stock options will be granted with an exercise
price equal to the fair market value of our common stock on the
date of the grant. In 2008, the following directors received
such stock option grants: Mr. C.N. Reddy, Mr. Anthony
Pantuso, Mr. Anthony Thornley, Mr. Kris Chellam, and
Mr. John Jarve.
Our intention is to make such grants to all non-employee
directors at the 2009 Annual Stockholders Meeting. We make
such grants because we believe that long-term performance from
our non-employee directors should be encouraged and rewarded
through a culture of stock option ownership. Therefore, our
long-term equity incentive compensation for non-employee
directors is currently exclusively in the form of stock options
to acquire our common stock. The 2007 Plan was established to
provide our employees, named executive officers, and our
non-employee directors with equity incentives to help align
their incentives with the interests of our stockholders.
29
Transactions
With Related Persons
CODE OF
CONDUCT POLICY AND PROCEDURES
In 2007, the Company adopted a written Code of Business Ethics
and Conduct, or Code of Ethics, that sets forth the
Companys policies and procedures regarding the
identification, review, consideration and approval or
ratification of related person transactions with employees,
directors and consultants. Pursuant to our written Code of
Ethics, our executive officers and directors are not permitted
to enter into such related person transactions without the
approval of either our Audit Committee or our Board of
Directors. Our Audit Committee
and/or Board
of Directors shall approve only those related person
transactions that, in light of known circumstances, are in, or
are not inconsistent with, our best interests, which our Audit
Committee or Board of Directors determines in the good faith
exercise of its discretion. Our Code of Ethics also prohibits
employees from entering into transactions that are a
conflict of interest, such as those in which a
persons private interest interferes in any way with the
Companys interests, without the approval of our designated
Compliance Officer.
CERTAIN
RELATED-PERSON TRANSACTIONS
The Company has entered into indemnity agreements with certain
officers and directors which provide, among other things, that
the Company will indemnify such officer or director, under the
circumstances and to the extent provided for therein, for
expenses, damages, judgments, fines and settlements he or she
may be required to pay in actions or proceedings which he or she
is or may be made a party by reason of his or her position as a
director, officer or other agent of the Company, and otherwise
to the fullest extent permitted under Delaware law and the
Companys Bylaws.
Householding
of Proxy Materials
The SEC has adopted rules that permit companies and
intermediaries (e.g., brokers) to satisfy the delivery
requirements for Annual Meeting materials with respect to two or
more stockholders sharing the same address by delivering a
single set of Annual Meeting materials addressed to those
stockholders. This process, which is commonly referred to as
householding, potentially means extra convenience
for stockholders and cost savings for companies.
This year, a number of brokers with account holders who are
Cavium Networks. Inc. stockholders will be
householding the Companys proxy materials. A
single set of Annual Meeting materials will be delivered to
multiple stockholders sharing an address unless contrary
instructions have been received from the affected stockholders.
Once you have received notice from your broker that they will be
householding communications to your address,
householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you
no longer wish to participate in householding and
would prefer to receive a separate set of Annual Meeting
materials , please notify your broker. Direct your written
request to Cavium Networks, Inc., Arthur D. Chadwick, Chief
Financial Officer, Cavium Networks, Inc., 805 East Middlefield
Road, Mountain View,
CA 94043.
Stockholders who currently receive multiple copies of the
Annual Meeting materials at their addresses and would like to
request householding of their communications should
contact their brokers.
30
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
Arthur D. Chadwick
Secretary
April 6, 2009
A copy of the Companys Annual Report to the Securities and
Exchange Commission on
Form 10-K
for the fiscal year ended December 31, 2008 is available
without charge upon written request to: Corporate Secretary,
Cavium Networks, Inc., 805 East Middlefield Road, Mountain View,
CA 94043.
31
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR THE PROPOSALS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
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Please mark
your votes as
indicated in
this example
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x |
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The
Board of Directors recommends a vote FOR Items 1 and 2. |
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FOR
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WITHHOLD
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FOR
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AGAINST
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ABSTAIN |
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ITEM 1Election of Director for a threeyear term expiring at the 2012 Annual Meeting:
Nominee:
01 Kris Chellam |
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ITEM 2 |
To ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm of Cavium Networks, Inc. for its fiscal year ending December 31, 2009. |
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WILLATTEND |
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If you plan to attend the Annual Meeting, please mark the WILLATTEND box
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Mark Here for Address
Change or Comments
SEE REVERSE
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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.
WE ENCOURAGE YOU TO TAKE ADVANTAGE OF INTERNET OR TELEPHONE VOTING,
BOTH ARE AVAILABLE 24 HOURS A DAY, 7 DAYS A WEEK.
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to the Annual Meeting day.
INTERNET
http://www.proxyvoting.com/cavm
Use the Internet to vote your proxy.
Have your proxy card in hand when you
access the web site.
OR
TELEPHONE
1-866-540-5760
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call.
If you vote your proxy by Internet or by telephone, you do NOT need to mail back your proxy card.
To vote by mail, mark, sign and date your proxy card and return it in the enclosed postage-paid
envelope.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same
manner as if you marked, signed and returned your proxy card.
47298
PROXY
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CAVIUM
NETWORKS, INC.
ANNUAL MEETING OF STOCKHOLDERS - MAY 8, 2009
The undersigned hereby appoints Syed B. Ali and Arthur D. Chadwick, 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 Cavium Networks, 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 the Company to be held May 8, 2009 (the "Annual Meeting") or any adjournment thereof, with
all powers that the undersigned would possess if present at the Annual Meeting.
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BNY MELLON SHAREOWNER SERVICES |
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Address Change/Comments
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P.O. BOX 3550 |
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(Mark the corresponding box on the reverse side)
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SOUTH HACKENSACK, NJ 07606-9250 |
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(Continued and to be marked, dated and signed, on the other side)
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5 FOLD AND DETACH HERE 5
You
can now access your Cavium Networks, Inc.account online.
Access
your Cavium Networks, Inc. stockholder account online via Investor
ServiceDirect® (ISD).
The transfer
agent for Cavium Networks, Inc. now makes it easy and
convenient to get current information
on your stockholder account.
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View account status |
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View certificate history |
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View book-entry information |
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View payment history for dividends |
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Make address changes |
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Obtain a duplicate 1099 tax form |
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Establish/change your PIN |
Visit us on the web at http://www.bnymellon.com/shareowner/isd
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
www.bnymellon.com/shareowner/isd
Investor ServiceDirect®
Available 24 hours per day, 7 days per week
TOLL FREE NUMBER: 1-800-370-1163
Choose MLinkSM for fast, easy and secure 24/7 online access to
your future proxy materials, investment plan statements, tax documents and
more. Simply log on to Investor ServiceDirect® at
www.bnymellon.com/shareowner/isd where step-by-step instructions
will prompt you through enrollment.
47298
PRINT AUTHORIZATION
(THIS BOXED AREA DOES NOT PRINT)
Please fax all revisions to:
212-691-9013 or email to proxyjobs@bnymellonproduction.com
To commence printing on this proxy card please sign, date and fax this card to: 212-691-9013
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Registered Quantity (common)
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40 |
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Broker Quantity |
0 |
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