<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
REDBACK NETWORKS INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
REDBACK NETWORKS INC.
1389 MOFFETT PARK DRIVE
SUNNYVALE, CALIFORNIA 94089
February 14, 2000
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Redback Networks Inc., which will be held at the Sheraton Hotel, 1100 North
Mathilda Avenue, Sunnyvale, California, 94089 on Tuesday, March 7, 2000, at
10:00 a.m.
Details of the business to be conducted at the annual meeting are given in
the attached proxy statement and notice of annual meeting of stockholders.
It is important that your shares be represented and voted at the meeting.
Your vote as a stockholder of Redback is important. YOU MAY VOTE YOUR SHARES BY:
- marking, signing, dating and returning the enclosed proxy card as
promptly as possible in the postage prepaid envelope provided;
- dialing the telephone number indicated on the enclosed proxy card and
casting your vote in accordance with the instructions given to you on the
telephone; or
- casting your vote via the Internet at http://www.cybervote.georgeson.com
You may also vote in person at the annual meeting, even if you use any of
the three options above. If your shares are not registered in your own name and
you plan to attend the annual meeting and vote your shares in person, you will
need to ask the broker, trust company, bank or other nominee that holds your
shares to provide you with evidence of your share ownership as of January 28,
2000 and bring that evidence to the annual meeting.
On behalf of the board of directors, I would like to express our
appreciation for your continued interest in the affairs of Redback. We look
forward to seeing you at the annual meeting.
Sincerely,
LOGO
Dennis L. Barsema
Director, Chief Executive Officer and
President
<PAGE> 3
LOGO
REDBACK NETWORKS INC.
1389 MOFFETT PARK DRIVE
SUNNYVALE, CALIFORNIA 94089
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 7, 2000
The annual meeting of stockholders of Redback Networks Inc. ("Redback")
will be held at the Sheraton Hotel, 1100 North Mathilda Avenue, Sunnyvale,
California, on Tuesday, March 7, 2000, at 10:00 a.m. for the following purposes:
1. To elect all of the directors of the board of directors to serve until
the next annual meeting or until their successors have been duly elected
and qualified;
2. To ratify the appointment of PricewaterhouseCoopers LLP as Redback's
independent public accountants for the fiscal year ending December 31,
2000; and
3. To transact such other business as may properly come before the meeting
or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the attached
proxy statement.
Only stockholders of record at the close of business on January 28, 2000
are entitled to notice of, and to vote at, the annual meeting and at any
adjournments or postponements thereof. A list of such stockholders will be
available for inspection at Redback's headquarters located at 1389 Moffett Park
Drive, Sunnyvale, California, 94089 during ordinary business hours for the
ten-day period prior to the annual meeting.
BY ORDER OF THE BOARD OF DIRECTORS,
LOGO
Dennis L. Barsema
Director, Chief Executive Officer and
President
Sunnyvale, California
February 14, 2000
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE-PAID
ENVELOPE; OR YOU MAY VOTE TELEPHONICALLY OR VIA THE INTERNET IN ACCORDANCE WITH
THE INSTRUCTIONS ON YOUR PROXY CARD. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR
TO THE ANNUAL MEETING. IF YOU DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO
CHANGE YOUR PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY VOTING IN PERSON AT THE
MEETING.
<PAGE> 4
REDBACK NETWORKS INC.
1389 MOFFETT PARK DRIVE
SUNNYVALE, CALIFORNIA 94089
------------------------
PROXY STATEMENT
FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 7, 2000
These proxy materials are furnished in connection with the solicitation of
proxies by the board of directors of Redback Networks Inc., a Delaware
corporation ("Redback"), for the annual meeting of stockholders to be held at
the Sheraton Hotel, 1100 North Mathilda Avenue, Sunnyvale, California, on
Tuesday, March 7, 2000, at 10:00 a.m., and at any adjournment or postponement of
the annual meeting. These proxy materials were first mailed to stockholders on
or about February 14, 2000.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the annual
meeting are summarized in the accompanying notice of annual meeting of
stockholders. Each proposal is described in more detail in this proxy statement.
VOTING RIGHTS AND SOLICITATION OF PROXIES
Redback's common stock is the only type of security entitled to vote at the
annual meeting. On January 28, 2000, the record date for determination of
stockholders entitled to vote at the annual meeting, there were 44,135,869
shares of common stock outstanding. Each stockholder of record on January 28,
2000 is entitled to one vote for each share of common stock held by such
stockholder on January 28, 2000. Shares of common stock may not be voted
cumulatively. All votes will be tabulated by the inspector of election appointed
for the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes.
QUORUM REQUIRED
Redback's bylaws provide that the holders of fifty percent (50%) of
Redback's common stock issued and outstanding and entitled to vote at the annual
meeting, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at the annual meeting. Abstentions and broker
non-votes will be counted as present for the purpose of determining the presence
of a quorum.
VOTES REQUIRED
PROPOSAL 1. Directors are elected by a plurality of the affirmative votes
cast by those shares present in person, or represented by proxy, and entitled to
vote at the annual meeting. The nominees for director receiving the highest
number of affirmative votes will be elected. Abstentions and broker non-votes
will not be counted toward a nominee's total. Stockholders may not cumulate
votes in the election of directors.
PROPOSAL 2. Ratification of the appointment of PricewaterhouseCoopers LLP
as Redback's independent public accountants for the fiscal year ending December
31, 2000 requires the affirmative vote of a majority of those shares present in
person, or represented by proxy, and cast either affirmatively or negatively at
the annual meeting. Abstentions and broker non-votes will not be counted as
having been voted on the proposal.
PROXIES
Whether or not you are able to attend the annual meeting, you are urged to
complete and return the enclosed proxy, which is solicited by our board of
directors and which will be voted as you direct on your proxy when properly
completed. In the event no directions are specified, such proxies will be voted
FOR the
<PAGE> 5
nominees of the board of directors (as set forth in Proposal No. 1), FOR
Proposal No. 2, and in the discretion of the proxy holders as to other matters
that may properly come before the annual meeting. You may also revoke or change
your proxy at any time before the annual meeting. To do this, send a written
notice of revocation or another signed proxy with a later date to Redback's
corporate secretary at our principal executive offices before the beginning of
the annual meeting. You may also automatically revoke your proxy by attending
the annual meeting and voting in person. 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 bring to the meeting a letter from the broker,
bank or other nominee confirming your beneficial ownership as of the record
date. All shares represented by a valid proxy received prior to the annual
meeting will be voted.
SOLICITATION OF PROXIES
Redback will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this proxy statement, the proxy,
and any additional soliciting material furnished to stockholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, Redback may reimburse such persons for their costs of forwarding
the solicitation material to such beneficial owners. The original solicitation
of proxies by mail may be supplemented by solicitation by telephone, telegram,
or other means by directors, officers, employees or agents of Redback. No
additional compensation will be paid to these individuals for any such services.
Redback has also retained Georgeson & Company, Inc. ("Georgeson") to assist in
the solicitation of proxies. Georgeson will receive a fee for such services of
approximately $15,000 including out-of-pocket expenses, which will be paid by
Redback. Except as described above, Redback does not presently intend to solicit
proxies other than by mail.
2
<PAGE> 6
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our bylaws provide that the authorized number of directors of Redback shall
be set by the board of directors. The board of directors has adopted a
resolution dated October 19, 1999 that sets the authorized number of directors
of the Company at five (5). The directors who are being nominated for election
to the board of directors, their ages as of December 31, 1999, their positions
and offices held with Redback and certain biographical information are set forth
below. The proxy holders intend to vote all proxies received by them in the
accompanying form FOR the nominees listed below unless otherwise instructed. In
the event any nominee is unable or declines to serve as a director at the time
of the annual meeting, the proxies will be voted for any nominee who may be
designated by the present board of directors to fill the vacancy. As of the date
of this proxy statement, the board of directors is not aware of any nominee who
is unable or will decline to serve as a director. The five (5) nominees
receiving the highest number of affirmative votes of the shares entitled to vote
at the annual meeting will be elected directors of Redback.
<TABLE>
<CAPTION>
NOMINEES AGE POSITIONS AND OFFICES HELD AT REDBACK
-------- --- -------------------------------------
<S> <C> <C>
Dennis L. Barsema............................ 45 Director, Chief Executive Officer and President
James R. Flach............................... 52 Director
William Kurtz................................ 42 Director
Pierre Lamond................................ 69 Director
Daniel J. Warmenhoven........................ 49 Director
</TABLE>
Dennis L. Barsema has served as Redback's President and Chief Executive
Officer and has been a director since joining Redback in November 1997. Prior to
November 1997, Mr. Barsema was the Senior Vice President and General Manager at
Centigram, a telecommunications company, from January 1996 to November 1997.
From October 1993 to December 1995, he served as Vice President at SoftSwitch, a
telecommunications company. Prior to that time, he served as Vice President at
Primary Access and AT&T Paradyne. Mr. Barsema holds a BS in Business Management
from Northern Illinois University.
James R. Flach has served as a director of Redback since January 1997. From
January 1997 to November 1997, Mr. Flach served as President and Chief Executive
Officer of Redback. Mr. Flach has been a partner of Accel Partners, a venture
capital firm, since September 1992. He currently serves as Chairman of Sentient
Networks, a multi-service access switch company, and is also a director of
Hybrid Networks, a broadband access equipment company. Additionally, Mr. Flach
serves on the board of a number of private companies. Mr. Flach holds a BS in
Physics from Rensselaer Polytechnic Institute and an MS in Applied Mathematics
from the Rochester Institute of Technology.
William Kurtz has served as a Redback director since October 1999. Mr.
Kurtz has served as Chief Financial Officer of Scient since August 1998. Before
joining Scient, Mr. Kurtz served in various capacities at AT&T from July 1983 to
August 1998, including Vice President of Cost Management and Chief Financial
Officer of AT&T's Business Markets Division. Mr. Kurtz is a certified public
accountant and received a BS in Accounting from Rider University and a MS in
Management from the Stanford University Graduate School of Business.
Pierre R. Lamond has served as Redback's Chairman of the Board since
November 1996. Mr. Lamond has been a partner with Sequoia Capital, a venture
capital firm, since 1981. He is currently the Chairman of Vitesse Semiconductor,
a semiconductor company. Additionally, Mr. Lamond serves on the board of a
number of private companies. Prior to joining Sequoia, Mr. Lamond was a founder
and technical director of National Semiconductor and the general manager of its
Integrated Circuit Division. Mr. Lamond holds an MS in Electrical Engineering
from Northeastern University and an MS in Physics from Toulouse University.
Daniel J. Warmenhoven has served as a Redback director since January 1998.
Mr. Warmenhoven has been President, Chief Executive Officer and a Director of
Network Appliance, a network data storage devices company, since October 1994.
Prior to that time, Mr. Warmenhoven served as Chairman, President and Chief
Executive Officer of Network Equipment Technologies. Prior to joining Network
Equipment Technologies, he spent five
3
<PAGE> 7
years with Hewlett-Packard serving in a number of senior management positions.
Before that time, he served thirteen years with IBM. Mr. Warmenhoven holds a BS
in Electrical Engineering from Princeton University.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1999, the board of directors held
twenty (20) meetings and acted by written consent in lieu of a meeting on two
(2) occasions. For the fiscal year, each of the directors during the term of
their tenure attended or participated in at least 75% of the aggregate of (i)
the total number of meetings or actions by written consent of the board of
directors and (ii) the total number of meetings held by all committees of the
board of directors on which each such director served. The board of directors
has two standing committees: the audit committee and the compensation committee.
During the fiscal year ended December 31, 1999, the audit committee of the
board of directors held no meetings and did not act by written consent in lieu
of a meeting on any occasions. The audit committee reviews, acts on and reports
to the board of directors with respect to various auditing and accounting
matters, including the selection of Redback's accountants, the scope of the
annual audits, fees to be paid to Redback's accountants, the performance of
Redback's accountants and the accounting practices of Redback. The current
members of the audit committee are Messrs. Kurtz, Lamond and Warmenhoven.
During the fiscal year ended December 31, 1999, the compensation committee
of the board of directors held one (1) meeting and did not act by written
consent in lieu of a meeting on any occasions. The compensation committee
reviews the performance of Redback's executive officers, establishes
compensation programs for the officers, and reviews the compensation programs
for other key employees, including salary and cash bonus levels and option
grants under the 1999 Stock Incentive Plan. The current members of the
compensation committee are Messrs. Flach and Warmenhoven.
DIRECTOR COMPENSATION
Except for grants of stock options, our directors generally do not receive
compensation for services provided as a director. We also do not pay
compensation for committee participation or special assignments of the board of
directors.
Non-employee board members are eligible for option grants pursuant to the
provisions of the 1999 Directors' Option Plan. Under the 1999 Directors' Option
Plan, each individual who first becomes a non-employee board member after the
date of our initial public offering will be granted an option to purchase 50,000
shares on the date such individual joins the board, provided such individual has
not been in the prior employ of Redback. In addition, at each annual meeting of
stockholders, each non-employee board member will receive an additional option
grant to purchase 20,000 shares of common stock, whether or not such individual
has been in the prior employ of Redback. However, a director will not receive
the initial 50,000-share grant and an annual 20,000-share grant in the same
calendar year. The option price for each option grant under the 1999 Directors'
Option Plan will be equal to the fair market value per share of common stock on
the automatic grant date. Each option grant is fully exercisable at grant for
fully vested shares. On October 19, 1999, in connection with his appointment to
the board of directors, Mr. William Kurtz was granted an option to purchase
50,000 shares of common stock at an exercise price of $120 per share. Pursuant
to the 1999 Directors' Option Plan, each of Messrs. Flach, Kurtz, Lamond and
Warmenhoven will be granted options to purchase 20,000 shares of common stock on
the date of the annual meeting.
Directors are eligible to receive options and be issued shares of common
stock directly under the 1999 Stock Incentive Plan, and directors who are also
Redback employees are also eligible to participate in the Redback's Employee
Stock Purchase Plan.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED HEREIN.
4
<PAGE> 8
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
The Company is asking the stockholders to ratify the appointment of
PricewaterhouseCoopers LLP as Redback's independent public accountants for the
fiscal year ending December 31, 2000. The affirmative vote of the holders of a
majority of shares present or represented by proxy and voting at the annual
meeting will be required to ratify the appointment of PricewaterhouseCoopers
LLP.
In the event the stockholders fail to ratify the appointment, the board of
directors will reconsider its selection. Even if the appointment is ratified,
the board of directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if the board
of directors feels that such a change would be in Redback's and its
stockholders' best interests.
PricewaterhouseCoopers LLP has audited Redback's financial statements since
1996. Its representatives are expected to be present at the annual meeting, will
have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS REDBACK'S INDEPENDENT PUBLIC
ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
5
<PAGE> 9
OWNERSHIP OF SECURITIES
The following table sets forth the beneficial ownership of Redback common
stock as of December 31, 1999: (1) each person who is known by us to
beneficially own more than 5% of our common stock; (2) the chief executive
officer and each of our executive officers, (3) each of our directors; and (4)
all of our directors and executive officers as a group. Except as otherwise
indicated, we believe that the beneficial owners of the common stock listed
below, based on information furnished by such owners, have sole voting and
investment power with respect to such shares. The percentage of beneficial
ownership for the following table is based on 43,896,937 shares of common stock
outstanding as of December 31, 1999. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
generally includes voting or investment power with respect to securities. Common
stock subject to options currently exercisable within 60 days of December 31,
1999 are deemed outstanding for purposes of computing the percentage ownership
of the person holding such option but are not deemed outstanding for purposes of
computing the percentage ownership of any other person. Except where indicated,
and subject to community property laws where applicable, the persons in the
table below have sole voting and investment power with respect to all common
stock shown as beneficially owned by them. Unless otherwise indicated, the
address of each of the individuals listed in the table is c/o Redback Networks
Inc., 1389 Moffett Park Drive, Sunnyvale, CA 94089.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES BENEFICIALLY SHARES BENEFICIALLY
NAME AND ADDRESS (IF APPLICABLE) BENEFICIAL OWNER OWNED OWNED
------------------------------------------------- ------------------- -------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Dennis J. Barsema........................................... 1,300,710 2.96%
Craig M. Gentner............................................ 0 *
Randall J. Kruep(1)......................................... 504,300 1.1%
William E. Miskovetz(2)..................................... 550,702 1.2%
Geoffrey C. Darby(3)........................................ 387,500 *
James R. Flach(4)........................................... 389,942 *
William Kurtz(5)............................................ 49,982 *
Pierre R. Lamond(6)......................................... 2,865,301 6.5%
Daniel J. Warmenhoven....................................... 150,000 *
OTHER 5% STOCKHOLDERS
Entities affiliated with Sequoia Capital(7)................. 2,463,134 5.6%
3000 Sand Hill Road
Building 4, Suite 280
Menlo Park, CA 94025
All executive officers and directors as a group (8
persons)(8)............................................... 3,735,303 8.4%
</TABLE>
- ---------------
* Represents beneficial ownership of less than 1%.
(1) Includes 408,300 shares and options immediately exercisable for 90,000
shares owned individually by Mr. Kruep, 2,000 shares owned by the Julia
Kruep Trust dated May 14th, 1999, 2,000 shares owned by the Andrew Kruep
Trust dated May 14th, 1999 and 2,000 shares owned by the Christian Kruep
Trust dated May 14th, 1999.
(2) Includes options immediately exercisable for 440,000 shares of common stock.
(3) Includes options immediately exercisable for 187,500 shares of common stock.
(4) Includes 339,942 shares and options immediately exercisable for 50,000
shares owned individually by Mr. Flach.
(5) Includes options immediately exercisable for 49,900 shares.
(6) Includes 61,442 shares and options immediately exercisable for 50,000 shares
owned individually by Mr. Lamond, 180,973 shares owned by the Pierre R. and
Christine E. Lamond Trust dated November 22, 1985, 109,752 shares held in
the David A. Lamond Trust dated November 16, 1992, 70,101 shares held by
Sequoia 1995 LLC, 2,270 shares held by Sequoia 1997, 2,256,168 shares held
by Sequoia Capital VII, 130,567 shares held by Sequoia Technology Partners
VII and 4,028 shares held by SQP 1997. Mr. Lamond disclaims beneficial
ownership of the shares held by Sequoia 1995 LLC, Sequoia 1997, Sequoia
Capital VII, Sequoia Technology Partners VII and SQP 1997, except to the
extent of his pecuniary interest therein.
(7) Includes 70,101 shares held by Sequoia 1995 LLC, 2,270 shares held by
Sequoia 1997, 2,256,178 shares held by Sequoia Capital VII, 130,567 shares
held by Sequoia Technology Partners VII and 4,028 shares held by SQP 1997.
(8) Includes options immediately exercisable for 239,900 shares.
6
<PAGE> 10
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the board of directors, the executive officers and persons
who hold more than 10% of Redback's outstanding common stock are subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act of 1934,
as amended, which require them to file reports with respect to their ownership
of Redback's common stock and their transactions in such common stock. Based
upon (i) the copies of Section 16(a) reports that Redback received from such
persons for their 1999 fiscal year transactions in the common stock and their
common stock holdings and (ii) the written representations received from one or
more of such persons that no annual Form 5 reports were required to be filed by
them for the 1999 fiscal year, Redback believes that all reporting requirements
under Section 16(a) for such fiscal year were met in a timely manner by its
executive officers, board members and greater than ten-percent stockholders,
except that the Form 3 for William Kurtz, a director of Redback, was filed late.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE POSITION HELD AS OF DECEMBER 31, 1999
---- --- -------------------------------------
<S> <C> <C>
Dennis L. Barsema.......................... 45 President, Chief Executive Officer and
Director
Craig M. Gentner........................... 53 Vice President of Finance, Chief Financial
Officer and Corporate Secretary
Randall J. Kruep........................... 38 Vice President of Worldwide Sales
William E. Miskovetz....................... 40 Vice President of Engineering
</TABLE>
Dennis L. Barsema -- See "Proposal No. 1 -- Election of Directors."
Craig M. Gentner has served as Vice President of Finance, Chief Financial
Officer and Corporate Secretary of Redback since October 1999. From July of 1989
to December of 1998, Mr. Gentner was the Senior VP of Finance and CFO for
Network Equipment Technologies, a leading supplier of multi-service wide area
networking equipment company. Mr. Gentner holds a BS in Accounting from the
University of Utah.
Randall J. Kruep has served as Vice President of Worldwide Sales of Redback
since January 1999. From September 1997 to January 1999, Mr. Kruep served as
Redback's Vice President of Sales. Previously, Mr. Kruep was Senior Director of
Telecom Sales for Fore Systems, an ATM/switching company, from May 1996 to July
1997. Prior to that time, he was a Regional Sales Manager at Cisco, a networking
company, from May 1992 to May 1996. From May 1982 to May 1992 he was Director of
Sales at Motorola in the Information Systems Group. Mr. Kruep holds a BA in
Finance and Communications from Southern Illinois University and an MBA from
Fontbonne College.
William E. Miskovetz has served as Vice President of Engineering of Redback
since May 1998. Previously, he was Vice President of Engineering at FreeGate, a
networking company, from January 1997 to May 1998. From May 1991 to January
1997, he held various engineering and management positions at Cisco, a
networking company. Mr. Miskovetz holds a BS in Computer Science from the
University of Illinois.
7
<PAGE> 11
COMPENSATION COMMITTEE REPORT
The compensation committee of Redback's board of directors has the
exclusive authority to establish the level of base salary payable to the chief
executive officer and certain other executive officers of Redback and to
administer Redback's 1999 Stock Incentive Plan, 1999 Employee Stock Purchase
Plan and 1999 Directors' Option Plan. In addition, the compensation committee
has the responsibility for approving the individual bonus programs to be in
effect for the chief executive officer and certain other executive officers. The
compensation committee is composed of non-employee directors and meets on a
scheduled basis to evaluate the effectiveness of the compensation program in
linking performance and executive pay. Additionally, the compensation committee
is routinely consulted to approve the compensation package of a newly hired
executive or of an executive whose scope of responsibility has changed
significantly.
For the fiscal year ended December 31, 1999, the process utilized by the
compensation committee in determining executive officer compensation levels was
based on the subjective judgment of the compensation committee. Among the
factors considered by the compensation committee were the recommendations of the
chief executive officer with respect to the compensation of Redback's key
executive officers. However, the compensation committee made the final
compensation decisions concerning such officers.
General Compensation Policy. The objective of Redback's executive
compensation program is to align executive compensation with Redback's long and
short-term business objectives and performance. Additionally, it is imperative
that executive compensation enables Redback to attract, retain, and motivate
qualified executives who are able to contribute to the long-term success of
Redback. The following specific strategies are utilized to guide Redback's
executive compensation decisions:
- Risk and Reward. A significant portion of an executive's compensation
should be tied to his or her performance and contributions to the success
of Redback.
- Pay for Performance. If an executive performs at a higher level, then the
executive should be rewarded with a higher level of compensation.
Similarly, if performance is below minimum expectations, then there
should be a lower level of compensation or there may be no variable
compensation.
- Compensate Competitively. Redback compares its compensation programs to
those of other companies of comparable size and in similar industries and
establishes compensation programs that are substantially at market.
During 1999, Redback's executive compensation program included these key
elements:
- Base Salary. Redback establishes the base salaries of its executives
based on competitive market practices derived from comparisons with
companies of similar size and in similar industries. Additionally, each
executive's base pay is positioned relative to the total compensation
package, including cash incentives and equity-based incentives.
- Cash-Based Incentives. During 1999, five executives of Redback
participated in a cash incentive program under which payment was based
upon the achievement of specific goals pertaining to revenue performance,
bookings, and customer satisfaction. This incentive program is designed
to award no payment when Redback does not achieve threshold levels of
performance. Specifically, a target incentive was established at the
beginning of the year based on performance in the areas of bookings,
revenues, and customer satisfaction. During the 1999 fiscal year, Redback
far exceeded the goals set for bookings and revenues. Consequently, the
bonus paid to the chief executive officer and other executives was at
least 100% of target. Each year, the annual incentive plan is reevaluated
and new performance targets are established reflecting Redback's business
plan and financial goals.
- Equity-Based Incentives. Stock options are designed to align the
interests of each executive with those of the stockholders. Each year,
the compensation committee considers the grant to executives of stock
option awards. The compensation committee believes that stock options
provide added incentive for executives to influence the strategic
direction of Redback and to create and grow value for customers,
stockholders and employees. Options are granted at fair market value and
typically have four-year vesting periods, contingent upon the executives,
continued employment with Redback. The number of
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<PAGE> 12
stock option shares that are granted to individual executives is based on
demonstrated performance and independent survey data reflecting
competitive market practice.
CEO Compensation. The annual base salary for Mr. Barsema, Redback's chief
executive officer and president, was increased from $180,000 in 1998 to $225,000
in 1999. The compensation committee felt that the increase in Mr. Barsema's
salary was justified given the growth of Redback and Mr. Barsema's increasing
responsibilities following Redback's initial public offering. The remaining
components of the chief executive officer's 1999 fiscal year incentive
compensation were entirely dependent upon Redback's performance and provided no
dollar guarantees. The bonus paid to the chief executive officer for the fiscal
year was based on the same incentive plan as the other executives.
Tax Limitation. Under the Federal tax laws, a publicly-held company such as
Redback will not be allowed a federal income tax deduction for compensation paid
to certain executive officers to the extent that compensation exceeds $1 million
per officer in any year. To qualify for an exemption from the $1 million
deduction limitation, the stockholders were asked to approve a limitation under
Redback's 1999 Stock Incentive Plan on the maximum number of shares of common
stock for which any one participant may be granted stock options per calendar
year. Because this limitation was adopted, any compensation deemed paid to an
executive officer when he or she exercises an outstanding option under the 1999
Stock Incentive Plan with an exercise price equal to the fair market value of
the option shares on the grant date will qualify as performance-based
compensation that will not be subject to the $1 million limitation. Since it is
not expected that the cash compensation to be paid to Redback's executive
officers for the fiscal year ended December 31, 1999 will exceed the $1 million
limit per officer, the compensation committee will defer any decision on whether
to limit the dollar amount of all other compensation payable to Redback's
executive officers to the $1 million cap.
Compensation Committee
James R. Flach
Daniel J. Warmenhoven
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee of Redback's board of directors was formed in
September of 1998, and the members of the compensation committee are Messrs.
Flach and Warmenhoven. Neither of these individuals was at any time during
fiscal 1999 an officer or employee of Redback. No executive officer of Redback
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 Redback's
board of directors or compensation committee.
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<PAGE> 13
EXECUTIVE COMPENSATION
The following table sets forth the compensation, for the fiscal years ended
December 31, 1999 and December 31, 1998, earned by Redback's chief executive
officer and the three other most highly compensated executive officers, each of
whose aggregate compensation for fiscal 1999 exceeded $100,000 for services
rendered in all capacities to Redback and its subsidiaries for that fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
FISCAL --------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
--------------------------- ------ --------- -------- ------------
<S> <C> <C> <C> <C>
Dennis L. Barsema................................. 1999 $225,000 $100,000 --
President, Chief Executive Officer and 1998 180,000 90,000 --
Director
Craig M. Gentner.................................. 1999 45,000(1) -- 250,000
Vice President of Finance, Chief Financial
Officer and
Corporate Secretary
Randall J. Kruep.................................. 1999 125,000 295,000(2) --
Vice President of 1998 90,000 135,442(2) 150,000
Worldwide Sales
William E. Miskovetz.............................. 1999 160,000 -- --
Vice President of 1998 93,750 15,000 635,000
Engineering
Geoffrey C. Darby................................. 1999 175,000 -- --
Vice President of Finance, 1998 72,000(3) 7,000 450,000
Chief Financial Officer and Secretary
</TABLE>
- -------------------------
(1) Mr. Gentner joined Redback in October 1999. This amount represents the
total amount of compensation Mr. Gentner received in 1999. Mr. Gentner's
annualized salary for 1999 was $200,000.
(2) Represents commission income.
(3) Mr. Darby joined Redback in August 1998. This amount represents the total
amount of compensation Mr. Darby received in 1998. Mr. Darby's annualized
salary for 1998 was $175,000. Mr. Darby resigned from Redback effective
February 2000.
OPTIONS GRANTED IN LAST FISCAL YEAR
The following table contains information concerning the stock option grants
made to each of the named officers for the fiscal year ended December 31, 1999.
No stock appreciation rights were granted during such year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------------ POTENTIAL REALIZABLE
NUMBER % OF TOTAL VALUE AT ASSUMED
OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES PRICE FOR OPTION TERM(3)
OPTIONS IN FISCAL PER SHARE EXPIRATION -------------------------
NAME GRANTED(#) YEAR(2) ($/SH) DATE 5%($) 10%($)
---- ---------- ---------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Craig M. Gentner.............. 250,000 4.5% $120.00 10/17/09 $18,866,839 $47,812,274
</TABLE>
- ---------------
(1) The options disclosed in the table were granted on October 18, 1999. The
exercise price for each option may be paid in cash, in shares of common
stock valued at fair market value on the exercise date or through a same-day
sale of the purchased shares. Redback may also finance the option exercise
by loaning the optionee sufficient funds to pay the exercise price for the
purchased shares, together with any federal and state income tax liability
incurred by the optionee in connection with such exercise. The options have
a maximum term of 10 years measured from the option grant date, subject to
earlier termination in the event of the optionee's cessation of service with
Redback. Except as otherwise noted,
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<PAGE> 14
the options listed in the table become exercisable for 25% of the shares
after one year of service from the designated vesting date and for the
balance of the shares in a series of 36 equal monthly installments from the
first anniversary of the designated vesting date. Under each of the options,
the option shares will vest upon an acquisition of Redback by merger or
asset sale, unless the acquiring company assumes the options.
(2) Based on an aggregate of 5,505,500 options granted in the fiscal year.
(3) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of
Redback's securities that the actual stock price appreciation over the
10-year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the common stock appreciates over
the option term, no value will be realized from the option grants made to
the executive officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning option exercises in
fiscal year 1999 and option holdings as of December 31, 1999 with respect to
each of the named officers. No stock appreciation rights were outstanding at the
end of that year.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
VALUE REALIZED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES (MARKET PRICE AT AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON EXERCISE LESS --------------------------- ---------------------------
NAME EXERCISE(#) EXERCISE PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------- ------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Craig M. Gentner..... -- -- 250,000 $14,375,000
Geoffrey C. Darby.... 262,500 $5,759,000 187,500 -- $33,206,250 --
Randall J. Kruep..... -- -- 90,000 -- 15,840,000 --
William E.
Miskovetz.......... -- -- 440,000 -- 77,905,000 --
</TABLE>
- ---------------
(1) Based on the fair market value of Redback's common stock at December 31,
1999 ($177.50) per share less the exercise price payable for such shares.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The compensation committee, as administrator of the 1999 Stock Incentive
Plan, may provide for accelerated vesting of the shares of common stock subject
to outstanding options held by any executive officer of Redback in connection
with certain changes in control of Redback. The accelerated vesting may be
conditioned on the termination of the individual's employment following the
change in control event. None of Redback's executive officers have employment
agreements with Redback, and they may resign and their employment may be
terminated at any time.
STOCK PERFORMANCE GRAPH
The graph set forth below compares the cumulative total stockholder return
on Redback's common stock between May 18, 1999 (the date Redback's common stock
commenced public trading) and December 31, 1999 with the cumulative total return
of (i) the Nasdaq Composite Index and (ii) the Hambrecht and Quist Technology
Index, over the same period. This graph assumes the investment of $100.00 on May
18, 1999 in Redback's common stock, the Nasdaq Composite Index and the Hambrecht
and Quist Technology Index, and assumes the reinvestment of dividends, if any.
The comparisons shown in the graph below are based upon historical data.
Redback cautions that the stock price performance shown in the graph below is
not indicative of, nor intended to forecast, the potential future performance of
Redback's common stock.
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<PAGE> 15
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG REDBACK NETWORKS INC.,
THE NASDAQ COMPOSITE INDEX AND THE HAMBRECHT AND QUIST TECHNOLOGY INDEX
<TABLE>
<CAPTION>
HAMBRECHT AND QUIST
REDBACK NASDAQ COMPOSITE INDEX TECHNOLOGY INDEX
------- ---------------------- -------------------
<S> <C> <C> <C>
5/18/99 100.00 100.00 100.00
6/30/99 142.29 104.85 108.84
9/30/99 244.74 107.16 115.11
12/31/99 402.22 158.59 188.22
</TABLE>
Redback effected its initial public offering of common stock on May 18,
1999 at a price of $11.50 per share (as adjusted to reflect its 2 for 1 forward
stock split effected in August 1999). The graph above, however, commences with
the closing price of $42.06 per share (as adjusted to reflect the August 1999
stock split) on May 18, 1999 -- the date Redback's common stock commenced public
trading.
Notwithstanding anything to the contrary set forth in any of Redback's
previous or future filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate this proxy
statement or future filings made by Redback under those statutes, the
compensation committee report and stock performance graph shall not be deemed
filed with the Securities and Exchange Commission and shall not be deemed
incorporated by reference into any of those prior filings or into any future
filings made by Redback under those statutes.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Redback's certificate of incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
Redback's bylaws provide that Redback shall indemnify its directors and
officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under Delaware
law. Redback has also entered into indemnification agreements with its officers
and directors containing provisions that may require Redback, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as directors or officers and
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified.
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<PAGE> 16
There has not been, nor is there currently proposed, any transaction or
series of similar transactions in which Redback was or is to be a party in which
the amount involved exceeds $60,000 and in which any person who is a director or
executive officer of Redback, had or will have a direct or indirect interest
other than the following:
- In December 1997, we loaned $104,696 to Dennis Barsema, our president,
chief executive officer and a director, under a promissory note. The note
accrues interest at a rate of 5.81% compounded annually and expires on
December 3, 2000, on which date all unpaid interest and principal is due
on demand. $117,330 of this note is currently outstanding, including
accrued interest.
- In January 1998, we advanced $210,626 to Mr. Barsema for the purchase of
2,106,960 shares of Redback common stock pursuant to a subscription
agreement dated December 1997. The principal balance of this note,
together with interest accrued and unpaid to date, is due and payable in
January 2002. Interest will accrue under the note on any unpaid principal
balance at the rate of 5.93% per annum, compounded annually. $143,368 of
this note is currently outstanding, including accrued interest. The note
is full recourse and secured by a pledge of the purchased common stock.
- We granted James R. Flach, a director of Redback, an option to purchase
50,000 shares of Redback common stock, at an exercise price of $11.50 per
share, on May 18, 1999.
- We granted William Kurtz, a director of Redback, an option to purchase
50,000 shares of Redback common stock, at an exercise price of $120.00
per share, on October 19, 1999.
- We granted Pierre R. Lamond, a director of Redback, an option to purchase
50,000 shares of Redback common stock, at an exercise price of $11.50 per
share, on May 18, 1999.
STOCKHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Stockholder proposals intended to be presented at the 2001 annual meeting
must be received by Redback at its offices at 1389 Moffett Park Drive,
Sunnyvale, California 94089, Attn: Olivia Martinez, not later than October 17,
2000 and satisfy the conditions established by the Securities and Exchange
Commission for stockholder proposals to be included in Redback's proxy statement
for that meeting. Pursuant to new amendments to Rule 14a-4(c) of the Securities
Exchange Act of 1934, as amended, a stockholder proposal intended to be
presented at the 2001 annual meeting must be received by Redback at its offices
at 1389 Moffett Park Drive, Sunnyvale, California 94089, Attn: Olivia Martinez,
not later than January 1, 2001 in order for proxy holders to be allowed to use
their discretionary voting authority to vote on such proposal when the proposal
is raised at the 2001 annual meeting, even though there is no discussion of such
proposal in Redback's proxy statement for that meeting.
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<PAGE> 17
OTHER MATTERS
The board knows of no other matters to be presented for stockholder action
at the annual meeting. However, if other matters do properly come before the
annual meeting or any adjournments or postponements thereof, the board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS,
LOGO
Dennis L. Barsema
Director, Chief Executive Officer and
President
Sunnyvale, California
February 14, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE; OR YOU MAY VOTE TELEPHONICALLY OR VIA THE INTERNET IN
ACCORDANCE WITH THE INSTRUCTIONS ON YOUR PROXY CARD. YOU MAY REVOKE YOUR PROXY
AT ANY TIME PRIOR TO THE ANNUAL MEETING. IF YOU DECIDE TO ATTEND THE ANNUAL
MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY
VOTING IN PERSON AT THE MEETING.
THANK YOU FOR YOUR ATTENTION TO THIS MATTER. YOUR PROMPT RESPONSE WILL
GREATLY FACILITATE ARRANGEMENTS FOR THE ANNUAL MEETING.
14
<PAGE> 18
PROXY REDBACK NETWORKS INC. PROXY
1389 MOFFETT PARK DRIVE, SUNNYVALE, CA 94089
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
REDBACK NETWORKS INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 7, 2000
The undersigned holder of Common Stock, par value $0.0001, of Redback
Networks Inc. (the "Company") hereby appoints Dennis L. Barsema and Craig M.
Gentner, or either of them, proxies for the undersigned, each with full power of
substitution, to represent and to vote as specified in this Proxy all Common
Stock of the Company that the undersigned stockholder would be entitled to vote
if personally present at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held on Tuesday, March 7, 2000 at 10:00 a.m. local time, at the
Sheraton Hotel, 1100 North Mathilda Avenue, Sunnyvale, California, and at any
adjournments or postponements of the Annual Meeting. The undersigned stockholder
hereby revokes any proxy or proxies heretofore executed for such matters.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER AS
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS
PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS, FOR PROPOSAL 2, AND IN
THE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME
BEFORE THE MEETING. THE UNDERSIGNED STOCKHOLDER MAY REVOKE THIS PROXY AT ANY
TIME BEFORE IT IS VOTED BY DELIVERING TO THE CORPORATE SECRETARY OF THE COMPANY
EITHER A WRITTEN REVOCATION OF THE PROXY OR A DULY EXECUTED PROXY BEARING A
LATER DATE, OR BY APPEARING AT THE ANNUAL MEETING AND VOTING IN PERSON.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE DIRECTORS
AND "FOR" PROPOSAL 2.
PLEASE MARK, SIGN, DATE AND RETURN THIS CARD PROMPTLY USING THE ENCLOSED
RETURN ENVELOPE. IF YOU RECEIVE MORE THAN ONE PROXY CARD, PLEASE SIGN AND RETURN
ALL CARDS IN THE ENCLOSED ENVELOPE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
(Reverse)
REDBACK NETWORKS INC.
[X] PLEASE MARK VOTES
AS IN THIS EXAMPLE
1. To elect the following directors to serve for a term ending upon the 2001
Annual Meeting of Stockholders or until their successors are elected and
qualified:
NOMINEES: ____________ and ____________
FOR WITHHELD For all nominees, except for
nominees written below.
________________________
Nominee exception(s).
2. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending December 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting.
The undersigned acknowledges receipt of the accompanying Notice of Annual
Meeting of Stockholders and Proxy Statement.
Signature: _________________________________________________
Signature (if held jointly):________________________________
Date:_________________________________________________, 2000
Please date and sign exactly as your name(s) is (are) shown on the share
certificate(s) to which the Proxy applies. When shares are held as
joint-tenants, both should sign. When signing as an executor, administrator,
trustee, guardian, attorney-in fact or other fiduciary, please give full title
as such. When signing as a corporation, please sign in full corporate name by
President or other authorized officer. When signing as a partnership, please
sign in partnership name by an authorized person.
17
