Digital River, Inc.
(Exact name of registrant as specified in charter)
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Delaware
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000-24643
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41-1901640 |
(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.) |
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9625 West 76th Street, Eden Prairie, MN
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55344 |
(Address of principal executive offices)
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(Zip Code) |
(952) 253-1234
Registrants telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under Exchange Act (17 CFR 240.13e-4(c)) |
Item 5.02. Departure of Directors or Principal Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers.
Item 8.01 Other Events.
Compensation of Non-Employee Directors
On March 4, 2008, the Board of Directors of Digital River, Inc. (the Company) approved minor
modifications to the compensation program for the Companys non-employee directors. Under the
program, non-employee directors will continue to receive cash compensation in the amount of $2,500
for each regular meeting of the Board they attend in person, which compensation decreases to $1,000
if the meeting is attended telephonically. Beginning in 2008, non-employees directors will receive
cash compensation in the amount of $1,000 for telephonic special meetings of the Board (meetings
other than regularly scheduled quarterly meetings), and each committee member will receive $1,000
for attending special telephonic meetings of their respective committees. In addition, each
non-employee director will continue to receive an annual retainer in the amount of $15,000, payable
quarterly. Further, each non-employee director will continue to receive an annual restricted stock
grant of 5,000 shares of the Companys common stock, which vests annually, one-third per year, over
a three-year period. This structure is designed to further align the directors interests with the
interests of the Companys stockholders and to provide the directors with an incentive to maximize
long-term stockholder value.
In addition to the aforementioned restricted stock grants, which are made to all non-employee
directors, the chairmen of the Compensation, Nominating and Governance, and Finance Committees each
will continue to receive additional annual restricted stock grant of 1,000 shares; the chairman of
the Audit Committee will continue to receive an additional annual restricted stock grant of 2,000
shares; members of the Audit Committee (other than the chairman) will continue to receive an annual
restricted stock grant of 1,000 shares; and the Boards Lead Director will continue to receive an
annual restricted stock grant of 1,500 shares. All of these restricted stock grants will vest
annually, one-third per year, over a three year period. The Board of Directors will annually
evaluate and consider whether to maintain or modify the compensation program for the non-employee
directors. A summary of the above described program is filed as Exhibit 99.1 hereto. On March 4,
2008, the Board of Directors made restricted stock grants to the non-employee directors in
accordance with the compensation program described above. In addition, the directors will continue
to be reimbursed for out-of-pocket costs and expenses incurred in connection with Board or
committee business, including travel and other expenses incurred in order to attend meetings.
Compensation of Chief Executive Officer
On March 4, 2008, upon recommendation of the Compensation Committee of the Board, the Board
approved an annual bonus for the Companys Chief Executive Officers performance during the fiscal
year ended December 31, 2007 in the amount of $500,000. Mr. Ronnings salary remains unchanged at
$450,000 per year. In addition, the Chief Executive Officer received a grant of an option to
purchase 100,000 shares of the Companys common stock, which will vest quarterly over a four-year
period, and a grant of 25,000 performance-based shares, which will vest in accordance with the
performance-based share program described below.
Compensation of Chief Financial Officer
On March 4, 2008, upon recommendation of the Compensation Committee of the Board, the Board
approved an annual bonus for the Companys Chief Financial Officers performance during the fiscal
year ended December 31, 2007 in the amount of $200,000. Mr. Donnellys salary remains unchanged at
$300,000 per year. In addition, the Chief Financial Officer received a grant of an option to
purchase 45,000 shares of the Companys common stock, which will vest quarterly over a four-year
period, and a grant of 22,500 performance-based shares, which will vest in accordance with the
performance-based share program described below.
On March 4, 2008, the Board of Directors also approved an amendment and restatement of the
Chief Financial Officers change in control and severance agreement, to provide that all of his
equity compensation awards will accelerate vesting in the event of Mr. Donnellys termination of
employment (other than an involuntary termination for cause or a voluntary termination without good
reason), a copy of which is filed as Exhibit 99.2 hereto and is incorporated herein by reference.
Compensation of Vice President and General Counsel
On March 4, 2008, upon recommendation of the Compensation Committee of the Board, the Board
approved an annual bonus for the Companys Vice President and General Counsels performance during
the fiscal year ended December 31, 2007 in the amount of $78,750, and adjusted his base annual
salary, effective immediately, to $250,000 per year. In addition, the Vice President and General
Counsel received a grant of an option to purchase 10,000 shares of the Companys common stock,
which will vest quarterly over a four-year period, and a grant of 8,000 performance-based shares,
which will vest in accordance with the performance-based share program described below.
In addition, the Board of Directors approved a change of control and severance agreement with
the Companys Vice President and General Counsel which provides, among other things, for severance
payments and acceleration of vesting in the event of the Vice President and General Counsels
termination, other than for cause. The foregoing description of the agreement does not purport to
be complete and is qualified in its entirety by reference to the full text of the agreement, which
is filed as Exhibit 99.3 hereto and is incorporated by herein reference.
A summary of the above described changes to the Companys executive officers compensation
program is filed as Exhibit 99.4 hereto.
Performance-Based Shares
On March 4, 2008, the Compensation Committee granted performance-based shares to the Companys
named executive officers and other eligible employees of the Company. The performance-based share
program is generally administered by the Compensation Committee pursuant to the terms and
conditions of the Companys 2007 Equity Incentive Plan. Performance-based shares are restricted
stock awards that vest based on attainment of certain specified performance goals during a
specified performance period. With respect to performance-based shares intended to qualify as
performance-based compensation for purposes of Internal Revenue Code Section 162(m), the applicable
performance goals will be based on objective performance criteria established in advance by the
Compensation Committee that are measured in terms of one or more of the following objectives: total
shareholder return; earnings per share; stock price; return on equity; net earnings; related return
ratios; cash flow; net earnings growth; earnings before interest, taxes, depreciation and
amortization (EBITDA); return on assets; revenues; expenses; funds from operations (FFO); and FFO
per share, as approved by the Companys shareholders.
For the 2008 fiscal year, performance-based shares shall vest upon the attainment of
performance goals related to revenue and operating income. If, and only if, the performance goals
are attained, the shares will vest 25% on the first anniversary of the date of grant, and 25%
thereafter on the second, third and fourth anniversaries of the date of grant. If the performance
goals for fiscal year 2008 are not attained, then the performance-based shares will be forfeited.
All performance-based shares are granted under the 2007 Equity Incentive Plan and are subject to
the terms and conditions of the plan and the Performance Share Agreement, a form of which is filed
as Exhibit 99.5 hereto and is incorporated herein by reference.
Performance Bonus Plan
On March 4, 2008, the Board adopted the Digital River, Inc. Performance Bonus Plan (the
Performance Bonus Plan). The Companys named executive officers are eligible to participate in
the Performance Bonus Plan. The Performance Bonus Plan is generally administered by the
Compensation Committee. In addition, the Board of Directors may select another committee composed
of not less than two directors, each of whom is an outside director (within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended (Section 162(m))) to administer
the Performance Bonus Plan. The Performance Bonus Plan generally provides for the grants of awards,
as determined by the Compensation Committee, to a participant based on that participants level of
attainment of certain specified performance goals during a specified performance period. With
respect to awards intended to qualify as performance-based compensation for purposes of Section
162(m), the applicable performance goals will be based on objective performance criteria established in advance by the Compensation
Committee that are measured in terms of one or more of the following objectives: revenues;
earnings per share; new market growth; employee satisfaction surveys; customer feedback surveys;
and enhancement of internal systems. The foregoing performance criteria may relate to the Company,
one or more of its affiliates, or one or more of its or their divisions or units, or departments or
functions, or any combination of the foregoing, and may be applied on an absolute basis and/or be
relative to one or more peer group companies or indices, or any combination thereof, all as the
Compensation Committee shall determine.
The Compensation Committee will establish for each performance period a maximum award (and, if
the Compensation Committee deems appropriate, a floor, threshold, and/or target award) and goals
relating to Company, subsidiary, divisional, departmental, and/or functional performance for each
participant. Awards will be earned by each participant based upon the level of attainment of his or
her goals during the applicable performance period; provided that the Compensation Committee may
reduce the amount of any award in its sole and absolute discretion. As soon as practicable after
the end of the applicable performance period, the Compensation Committee will determine the level
of attainment of the goals for each participant and the award to be made to each participant.
Awards earned during any performance period will be paid as soon as practicable following the end
of such performance period and the determination of the amount thereof will be made by the
Compensation Committee. Payment of bonus awards will be made in the form of cash. No award intended
to qualify as performance-based compensation for purposes of Section 162(m) may be paid pursuant to
the Performance Bonus Plan unless and until the shareholders of the Company have approved the
Performance Bonus Plan in a manner which complies with the shareholder approval requirements of
Section 162(m); and no such award will be paid until the Compensation Committee has certified the
level of attainment of the applicable performance criteria. The maximum amount of an award that is
intended to qualify as performance-based compensation for purposes of Section 162(m) to a single
participant shall not exceed $1,124,000. The foregoing description of the Performance Bonus Plan
does not purport to be complete and is qualified in its entirety by reference to the Performance
Bonus Plan, a copy of which is filed as Exhibit 99.6 hereto and incorporated herein by reference.
Fiscal 2008 Cash Bonus Opportunities
On March 4, 2008, the Compensation Committee set the targets and performance criteria for the
fiscal 2008 cash bonus opportunities for the named executive officers. These targets and
performance criteria were set pursuant to the Performance Bonus Plan. The following table sets
forth the target and maximum cash bonus opportunity for each of the named executive officers for
fiscal 2008.
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Target Bonus |
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Maximum Bonus |
Joel A. Ronning |
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562,000 |
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$ |
1,124,000 |
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Thomas M. Donnelly |
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$ |
300,000 |
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$ |
300,000 |
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Kevin L. Crudden |
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$ |
125,000 |
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$ |
125,000 |
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For fiscal 2008, each named executive officers cash bonus opportunity is based upon the
achievement of performance criteria relating to revenue, operating income, new market growth,
employee satisfaction surveys, customer satisfaction surveys and internal systems enhancement. The
fiscal 2008 weightings of the performance criteria are as follows: 30% revenue, 30% operating
income, 10% new market growth, 10% employee satisfaction surveys, 10% customer satisfaction surveys
and 10% internal systems enhancement.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit No. |
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Description |
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99.1
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Summary of Compensation Program for Non-Employee Directors. |
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99.2
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Amended and Restated Change in Control and Severance Agreement with Thomas M. Donnelly. |
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99.3
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Change in Control and Severance Agreement with Kevin L. Crudden. |
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99.4
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Summary of Compensation Program for Executive Officers. |
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99.5
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Form of Performance Share Agreement. |
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99.6
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Performance Bonus Plan. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
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Digital River, Inc.
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Date: March 7, 2008 |
By: |
/s/ Thomas M. Donnelly
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Thomas M. Donnelly |
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Chief Financial Officer |
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EXHIBIT INDEX
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Exhibit No. |
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Description |
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99.1
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Summary of Compensation Program for Non-Employee Directors. |
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99.2
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Amended and Restated Change in Control and Severance Agreement with Thomas M. Donnelly. |
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99.3
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Change in Control and Severance Agreement with Kevin L. Crudden. |
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99.4
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Summary of Compensation Program for Executive Officers. |
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99.5
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Form of Performance Share Agreement. |
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99.6
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Performance Bonus Plan. |