UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.         )

 

 

Filed by the Registrant  ☑                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

☐		Preliminary Proxy Statement
☐		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☑		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Material Pursuant to § 240.14a-12

Infinera Corporation

(Name of Registrant as Specified In Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)

Payment of Filing Fee (Check all boxes that apply):

☑		No fee required.
☐		Fee paid previously with preliminary materials.
☐		Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(l) and 0-11

 

 

 

Infinera Corporation

6373 San Ignacio Avenue

San Jose, California 95119

Dear Shareholders,

It is difficult to reflect on 2021 without noting the formidable challenges the company faced throughout the year, including the ongoing effects of a global pandemic, a continuation of supply chain disruption, and the economic impact of rising inflation. Despite these headwinds, our people demonstrated remarkable resilience and unwavering focus on executing against our strategy. The result was a year of significant achievements:

 

•

Delivered strong financial performance — in 2021, we did what we said we would do, delivering against key financial milestones including above market revenue growth, margin expansion, and record bookings and backlog, milestones that mark solid progress toward our long-term business model.

 

•

Drove substantial portfolio innovation — driven by superior performance and game-changing innovation, we continued to advance our vertically integrated portfolio of coherent optical networking solutions in the year, gaining share in key growth markets and positioning us for expansion in new markets as network architectures evolve to meet the challenges of relentless bandwidth growth.

 

•

Improved customer experience — while aligning the organization to deliver increased value to our customers, 2021 marked another year of tangible improvements in key metrics that reflect our commitment to delivering a superior customer experience and unlocking the value of true customer centricity.

Our accomplishments this past year further underscore the dedication and talent of an exceptional global team I am honored to lead and the power of a culture we continue to strengthen through our commitment to inclusion, social responsibility, innovation, and execution excellence. We continued to bolster our executive leadership team by attracting several industry veterans in 2021. Our people remain our greatest asset and the heart of our success, and we continue to focus on their safety, well-being, and career advancement as we drive the business forward.

Our global communications infrastructure serves as a robust foundation for sustainable social and economic value, from enhanced business efficiency and improved education to better health care and the connectivity of diverse cultures and communities. As a technology leader in optical networking and vertically integrated company with optical semiconductor manufacturing based in the U.S., Infinera is helping its customers around the world successfully realize unprecedented levels of infrastructure network efficiency and scalability that empower these and other critical end-user applications. With a strategy to drive shareholder value in the years ahead, our progress in 2021 represents a tangible proof point that we are on the right trajectory to gain market share, continue to innovate to the delight of our customers, and achieve our long-term business objectives.

We remain confident in our ability to create sustainable, long-term value for our shareholders, customers, partners, and employees as we advance our mission of delivering industry-leading innovation in open optical systems and coherent optical subsystems.

Your voting support of the proposals described in the accompanying proxy statement would be deeply appreciated as we work together to increase the value of your investment in Infinera. We continue to thank you for your commitment to Infinera and belief in our team.

Sincerely,

 

 

David W. Heard

Chief Executive Officer

Infinera Corporation

6373 San Ignacio Avenue

San Jose, California 95119

Dear Fellow Shareholders,

Infinera has undergone a remarkable transformation in recent years as it set a clear course to extend market leadership in coherent optical networking. Marking progress along this journey, we are pleased with the company’s financial performance and portfolio advances in 2021 as it rose to the challenge of navigating another year of profound changes impacting not only our industry, but the world around us. If anything, these changes have taught us that the vision of the company — “A connected world with unlimited bandwidth for everyone — Everywhere, Always and Instantly” — has never been more important.

We are encouraged by the robust demand we are seeing for our solutions across geographies, customers, and network segments, including long-haul, subsea, metro, and access. This demand helped drive operating improvements in 2021 and bodes well for the future as bandwidth and connectivity become increasingly integral to all of our lives. Drawing on an expanded portfolio, a newly strengthened leadership team, a customer-centric approach infusing the entire organization, and strong market cycles driving new growth opportunities, we are well-positioned to execute our strategy and drive continued progress toward our long-term business model.

In keeping with our strategy and long-term goals, we remain committed to becoming increasingly sophisticated in environmental, social, and governance (ESG) practices and taking a proactive and collaborative approach by anticipating evolving regulations and keeping pace with customer and investor expectations. Our commitment to ESG starts at the top with the Board and our executive leadership team, and our programs have full support and enablement from management. Our employees share the company’s vision of sustainability and equity and support our goal of creating value for our stakeholders through our ESG initiatives. We are proud of the achievements we’ve made in 2021, and know that with dedication and innovation, we can tackle the challenges and seize the opportunities ahead of us.

I have the privilege of leading a highly qualified, independent and diverse Board, one which continues to be inspired by the ability of the Infinera team to overcome challenging external conditions to deliver strong results while looking after its customers, partners, and employees and living the core values that define great companies. We are excited about the future ahead and the company’s ability to achieve long-term success.

In closing, as you review the accompanying proxy statement, the Board hopes our collective commitment to excellence in our corporate governance and executive compensation practices is evident. We value the ongoing support of our shareholders and thank you for your investment.

Sincerely,

 

 

George A. Riedel

Independent Board Chair

Infinera Corporation

6373 San Ignacio Avenue

Sunnyvale, California 95119

NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS

To Be Held on May 19, 2022

10:00 a.m. Pacific Time

Dear Shareholder:

You are cordially invited to attend the virtual 2022 Annual Meeting of Shareholders of Infinera Corporation (“Infinera”), a Delaware corporation, and any postponement, adjournment or other delay thereof (the “Annual Meeting”). The Annual Meeting will be held via live webcast at www.virtualshareholdermeeting.com/INFN2022 on Thursday, May 19, 2022 at 10:00 a.m. Pacific Time. You will be able to attend the Annual Meeting online and submit questions during the Annual Meeting by visiting the website listed above. You will also be able to vote your shares electronically at the Annual Meeting.

This Annual Meeting is being held for the following purposes:

 

1.

To elect three Class III directors to the Board of Directors to hold office until the 2025 annual meeting of stockholders or until their respective successors have been duly elected and qualified, or until their earlier death, resignation or removal from the Board of Directors;

 

2.

To approve the Infinera Corporation 2016 Equity Incentive Plan, as amended, which increases the number of shares authorized for issuance thereunder by 8,500,000 shares;

 

3.

To approve, on an advisory basis, the compensation of Infinera’s named executive officers, as described in the Proxy Statement;

 

4.

To ratify the appointment of Ernst & Young LLP as Infinera’s independent registered public accounting firm for the fiscal year ending December 31, 2022; and

 

5.

To transact such other business as may properly come before the meeting or any postponement or adjournment thereof.

These items of business are more fully described in the Proxy Statement accompanying this Notice.

The record date for the Annual Meeting was March 22, 2022 (the “Record Date”). Only shareholders of record at the close of business on that date may vote at the Annual Meeting. Your vote is important. Whether or not you expect to attend the Annual Meeting, it is important that you vote as soon as possible so that your shares are represented. To vote your shares, please follow the instructions in the Notice of Internet Availability of Proxy Materials, which is being mailed to you on or about April 1, 2022. The proxy materials and our annual report can be accessed by visiting www.virtualshareholdermeeting.com/INFN2022.

On behalf of the Board of Directors, thank you for your participation in this important annual process.

 

Important Notice Regarding Proxy Materials for the Shareholder Meeting

to be Held on May 19, 2022

The Notice of Annual Meeting, Proxy Statement and Form of Proxy are first being mailed on or about April 1, 2022 to all shareholders entitled to vote at the Annual Meeting. This Proxy Statement and our 2021 Annual Report are also available on the Investors page at investors.infinera.com.

Virtual Meeting Admission

Shareholders of record as of March 22, 2022 will be able to participate in the Annual Meeting by visiting our Annual Meeting website at www.virtualshareholdermeeting.com/INFN2022. To participate in the Annual Meeting, you will need the 16-digit control number included on your proxy card.

The Annual Meeting will begin promptly at 10:00 a.m. Pacific time on Thursday, May 19, 2021. Online check-in will begin at 9:45 a.m. Pacific time, and you should allow approximately 15 minutes for the online check-in procedures.

Voting. Whether or not you plan to virtually attend the Annual Meeting and regardless of the number of shares of common stock that you own, please cast your vote, at your earliest convenience, as instructed on your proxy card and/or voting instruction form. Your vote is very important. Your vote before the Annual Meeting will ensure representation of your shares at the Annual Meeting even if you are unable to virtually attend. You may submit your vote by the Internet, telephone, mail or virtually at the Annual Meeting. Voting over the Internet or by telephone is fast and convenient, and your vote is immediately confirmed and tabulated. By using the Internet or telephone, you help us reduce postage, printing and proxy tabulation costs. We encourage all holders of record to vote in accordance with the instructions on the proxy card and/or voting instruction form prior to the Annual Meeting even if they plan on virtually attending the Annual Meeting. Submitting a vote before the Annual Meeting will not preclude you from voting your shares at the Annual Meeting should you decide to virtually attend. You may vote using the following methods:

 

		Prior to the Annual Meeting, visit the website listed on your proxy card/voting instruction form to vote via the Internet.   During the Annual Meeting, visit our Annual Meeting website at www.virtualshareholdermeeting.com/INFN2022
		Sign, date and return your proxy card/voting instruction form to vote by mail.
		Call the telephone number on your proxy card/voting instruction form to vote by telephone.

INFINERA AT A GLANCE

 

About Infinera
		Our Vision A connected world with unlimited bandwidth for everyone — Everywhere, Always and Instantly
		Our Mission Lead the industry into an era of Open Optical Networking — a simplified, open, and modular approach to delivering innovations that fundamentally change the economics and agility of networks — in order to provide meaningful value to our customers and shareholders
		Our Differentiation The Infinera Experience defines our promise of a differentiated business relationship with our customers — from how we design our products for ease of use and help our customers gain a competitive advantage to how we rapidly respond to customer needs, issues, and challenges

Our Company, Customers, and Solutions
$1.4B+ in Revenue		~1,900 Patents		3,000+ Employees		45+ Countries with Operations
High-End Subcomponent Technology		Transport Systems for Network Infrastructure		Automation Software		Professional Services
1,000+ Customers Worldwide		9 of the Top 10 Service Providers		7 of the Top 9 Internet Content Providers
History of Technology Innovation
Infinera has a distinguished history of delivering breakthrough innovation through multi-discipline opto-electronic R&D including: industry-leading high-performance optical engines, revolutionary point-to-multipoint coherent optics, and customized design and production
AISC/DSP Design		Analog Electronics Design		PIC Design and Fabrication		Solution Packaging
Holistic Co-design		RF Interconnects		TROSA Design and Production		Coherent Pluggables Design and Production

Responsibility & Ethics Throughout Our Business

At Infinera, we focus our innovation and our efforts on the elements of sustainability that are most material to our business and to our stakeholders.

 

Table of Contents

 

		Page
Proxy Statement Summary			1
Meeting Agenda and Voting Matters			1
Board Nominees			1
Board and Governance Highlights			1
Executive Compensation Program Highlights			2
Our Board of Directors			4
Proposal 1—Election of Directors			4
Who We Are			4
How We Are Selected and Elected			15
How We Govern and Are Governed			17
How We Are Organized			20
How to Communicate with Us			25
How We Are Paid			25
Our Pay			30
Compensation Discussion and Analysis			30
Executive Summary			30
Overview of our Executive Compensation Program Philosophy and Process			34
Fiscal 2021 Compensation			39
Additional Information Regarding Our Compensation Practices			44
Compensation Committee Report			48
Executive Compensation Tables			49
Risk Assessment of Compensation Practices			59
Proposal 2—Approval of the Infinera Corporation 2016 Equity Incentive Plan, As Amended			60
Proposal 3—Advisory Approval of Named Executive Officer Compensation			71
Our Auditors			72
Proposal 4—Ratification of Appointment of Independent Registered Public Accounting Firm			72
Report of the Audit Committee			74
Certain Relationships and Related Party Transactions			75
Delinquent Section 16(a) Reports			75
Equity Compensation Plan Information			76
Our Shareholders			77
Security Ownership of Certain Beneficial Owners and Management			77
Shareholder Proposals for 2023 Annual Meeting			78
Delivery of Documents to Shareholders Sharing the Same Last Name and Address			79
Other Matters			80
User’s Guide			81
Annual Meeting			81
Stock Ownership			83
Quorum and Voting			83
Additional Information			86
Appendix A—Unaudited Reconciliations from GAAP to Non-GAAP			A-1
Appendix B—Infinera Corporation 2016 Equity Incentive Plan			B-1

 

1

 

2

 

3

INFINERA CORPORATION

PROXY STATEMENT

2022 ANNUAL MEETING OF SHAREHOLDERS

OUR BOARD OF DIRECTORS

Proposal 1—Election of Directors

WHO WE ARE

Our Board members have created and patented technologies, founded and grown companies, managed complex financial, accounting and technology matters and spent significant time representing customers, investors and shareholders. We believe that the caliber of our people and the breadth, diversity and complementary nature of their skills, attributes and experiences are among the most important aspects of our governance best practices.

The director information we provide includes information related to principal occupations, public company directorships, and qualifications for serving as a member of the Board, including the skills, qualities, attributes and experiences that led the Board to determine it is appropriate to nominate these directors. The committee memberships listed in the director information provided below do not incorporate expected changes to our committee composition to be effective upon the conclusion of our 2022 Annual Meeting of Shareholders. For additional information on expected changes to our committee composition, please see the section entitled “Our Board of Directors–How We Are Organized,” below. Our Board is divided into three classes with staggered three-year terms. Thus, at each annual meeting of shareholders, a class of directors will be elected for a three-year term to succeed the class whose term is then expiring.

Nominees for Election as Class III Directors. If re-elected, the Class III Director terms would expire at the 2025 Annual Meeting of Shareholders.

Vote Required

Directors are elected by a majority vote, which means that each of the three director nominees requires the affirmative vote of a majority of the votes cast in order to be elected. Abstentions will have the same effect as an “AGAINST” vote. Broker non-votes are not deemed to be votes cast and, therefore, are not included in the tabulation of the voting results on this proposal and will not affect the outcome of the vote.

 

4

Proposal 1—Recommendation of the Board

The Board unanimously recommends a vote “FOR” the election of each of the three Class III nominees listed below. Messrs. Gani and Wegleitner are current Class III directors and are not standing for re-election to our Board. Effective upon the conclusion of our 2022 Annual Meeting of Shareholders and the election of these nominees, the number of Class III directors will be reduced from four directors to three directors.

 

		Christine Bucklin   Age: 59   Independent Director since June 2020   Current Committees: Audit

Experience:

 

•

Managing Director, Operations Group at Gryphon Investors, Inc., a private equity firm (2015 to 2018)

 

•

Senior Vice President, Corporate Strategic Planning at Sun Microsystems, Inc., a technology company, prior to its acquisition by Oracle Corporation in 2010 (2008 to 2010)

 

•

Chief Operating Officer of Internet Brands, Inc., an Internet media company (1999 to 2007)

 

•

Held multiple roles at McKinsey & Company, a consulting company, including as a partner (1988 to 1999)

Qualifications:

 

•

Substantial experience in operations, strategic planning and sales and marketing

 

•

Provides perspective from outside the optical networking industry

 

5

		Gregory P. Dougherty(1)   Age: 62   Independent Director since January 2019   Current Committees: Compensation

Experience:

 

•

CEO of Oclaro, Inc. (June 2013 until its acquisition by Lumentum Holdings Inc. in December 2018)

 

•

Interim CEO of Picarro, Inc., a manufacturer of ultra-sensitive gas spectroscopy equipment using laser-based technology (January 2003 to April 2004)

 

•

COO of SDL (1997 to 2001, when the company was acquired by JDS Uniphase Corporation), where he continued in the role until 2002

 

•

Director of Product Management and Marketing at Lucent Technologies Microelectronics in the Optoelectronics Strategic Business Unit (1989 to 1997)

Other Boards:

 

•

IPG Photonics Corporation, a fiber laser manufacturer (January 2019 to present)

 

•

Max Linear, a fabless integrated circuit design company (March 2020 to present)

 

•

Former:

 

•

Fabrinet, an optical, electro-mechanical and electronic manufacturing services company (February 2019 to January 2022)

 

•

Oclaro, Inc. (April 2009 to December 2018)

 

•

Avanex Corporation, a leading global provider of intelligent photonic solutions (April 2005 to April 2009, when Avanex and Bookham merged to become Oclaro)

Qualifications:

 

•

Board expertise as Lead Independent Director and Compensation Committee chair

 

•

Extensive knowledge of the fiber optic component and transceiver markets

 

•

Significant restructuring and integration experience

 

(1)	Mr. Dougherty is currently a Class II director and is standing for election to Class III at the 2022 Annual Meeting of Shareholders. Mr. Dougherty has agreed to no longer serve as a Class II director if elected as a Class III director.

 

6

		Sharon Holt   Age: 57   Independent Director since June 2019   Current Committees: Nominating and Governance (Chair)

Experience:

 

•

Principal at Fraser Stuart Ventures, LLC, a private investment and advisory firm (2016 to present)

 

•

Advisor to several technology companies (2012 to present)

 

•

Senior executive at Rambus Inc., a leading technology development and licensing company, where she served as Senior Vice President of Sales, Licensing and Marketing, and Senior Vice President and General Manager of the Semiconductor Business Group (2004 to 2012)

 

•

Executive at Agilent Technologies in the Semiconductor Products Group (now Broadcom), where her last position was Vice President & General Manager of Americas Field Operations, overseeing sales and technical support operations for the semiconductor business, including ASICs, ASSPs, optical and wireless ICs and previously ran sales operations focused on Agilent’s largest global customers (1999 to 2004)

 

•

Worked at HP in Applications Engineering, Sales, and Distribution Channel Management for the Semiconductor Products Group (1986 to 1999)

Other Boards:

 

•

Former: Immersion Corporation, a developer of haptics technology for cellphones and other devices (August 2016 to May 2021)

Qualifications:

 

•

Board expertise as Lead Independent Director and Nominating and Governance and Compensation Committee chairs

 

•

Wide technology sector executive leadership experience and intellectual property expertise

 

7

Class I Directors whose terms expire at the 2023 Annual Meeting of Shareholders

 

		Roop K. Lakkaraju   Age: 51   Independent Director since February 2021   Current Committees: Audit

Experience:

 

•

EVP, CFO of Benchmark Electronics, Inc., a worldwide provider of product design services, engineering services, technology solutions and advanced manufacturing services company (January 2018 to present)

 

•

CFO of Maana, Inc., an enterprise software company (February 2017 to January 2018)

 

•

COO and CFO of Support.com, a provider of cloud-based software and services for technology support (October 2013 to February 2017)

 

•

CFO of Quantros, Inc., a provider of enterprise SaaS-based solutions and information services (July 2011 to October 2013)

 

•

Held various executive financial and operational roles at 2Wire, Solectron Corporation, and Safeguard Scientifics

 

•

Began career as an auditor with Grant Thornton before joining PricewaterhouseCoopers in their Audit and Business Advisory Services

Qualifications:

 

•

Management experience in overall financial strategy, including as a public company CFO

 

•

Significant finance, accounting and technology operations experience; Financial Expert

 

8

		Amy H. Rice   Age: 42   Independent Director since April 2020   Current Committees: Nominating and Governance

Experience:

 

•

Managing Director in Oaktree Capital Management L.P.’s Special Situations Group and leads the group’s investing efforts in several industry sectors (February 2019 to present)

 

•

Senior Vice President for Oaktree Capital Management L.P. (February 2013 to February 2019)

 

•

Prior to joining Oaktree in 2009, Ms. Rice spent two years as an associate at Lindsay Goldberg, LLC, and before that, she spent two years as an analyst in the Leveraged Finance group at Deutsche Bank

Qualifications:

 

•

Expertise in capital markets transactions and merger and acquisition transactions, outside of her primary industry coverage

 

•

Representative of the investor perspective

 

9

		George A. Riedel   Age: 64   Chairman of the Board since November 2020   Independent Director since June 2020   Current Committees: Compensation

Experience:

 

•

Senior Lecturer in the General Management Unit at Harvard Business School (2017 to present)

 

•

Chairman and Chief Executive Officer of CloudMark, Inc., a cybersecurity company, overseeing the company’s sale to Proofpoint, Inc. in 2017 (2014 to 2017)

 

•

Held executive leadership roles at Nortel Networks Corporation, a telecommunications and data networking equipment manufacturing company, including Chief Strategy Officer and Vice President of Business Units (2006 to 2011)

 

•

Vice President of Strategy and M&A at Juniper Networks, a networking and cybersecurity company (2003 to 2006)

 

•

Held multiple roles at McKinsey & Company, including as a senior partner (1987 to 2003)

Other Boards:

 

•

Cerner Corporation, a health information technology company (April 2019 to present)

 

•

Former: Xperi Corporation, a technology and intellectual property licensing company (May 2013 to June 2020)

Qualifications:

 

•

Extensive executive leadership experience in the global networking and cybersecurity industries

 

•

Excellent track record in strategy and M&A

 

10

Class II Directors whose terms expire at the 2024 Annual Meeting of Shareholders⁽²⁾

 

		David W. Heard   Age: 53   Chief Executive Officer of Infinera   Director since November 2020   Committees: None

Experience:

 

•

CEO of Infinera (November 2020 to present); COO (October 2018 to November 2020); oversaw Product Realization Team, encompassing marketing, business development, product management, R&D, global services, and business operations (June 2017 to October 2018)

 

•

President of Network and Service Enablement at JDS Uniphase (October 2010 to April 2015)

 

•

COO at BigBand Networks (now Arris) (2007 to 2010)

 

•

President and CEO at Somera Communications (now Jabil) (2004 to 2006)

 

•

President and General Manager, Switching Division, at Tekelec (now Oracle) (2003 to 2004)

 

•

President and CEO at Santera Systems (2000 to 2003)

 

•

Various positions at Lucent Technologies and AT&T (1990 to 2000)

Qualifications:

 

•

Expertise in operations and corporate strategy

 

•

Extensive knowledge of Infinera and the optical networking industry

 

(2)

Mr. Dougherty is currently a Class II director and is standing for election to Class III at the 2022 Annual Meeting of Shareholders. Mr. Dougherty has agreed to no longer serve as a Class II director if elected as a Class III director. Effective upon the conclusion of our 2022 Annual Meeting of Shareholders and the election of Mr. Dougherty to Class II, the number of Class II directors will be reduced from four directors to three directors.

 

11

		Paul J. Milbury   Age: 73   Independent Director since July 2010   Current Committees: Audit (Chair); Compensation

Experience:

 

•

Cisco Systems — Played a key role in integrating Starent Networks into Cisco Systems to create the Mobile Internet Technology Group (2009 to 2010)

 

•

Vice President of Operations and CFO of Starent Networks, Corp, a provider of mobile network solutions (2006 to 2009, when acquired by Cisco Systems)

 

•

Vice President and CFO of Avid Technology, a digital media creation, management and distribution solutions company (2000 to 2007)

 

•

Vice President and CFO of private internet companies iBelong and JuniorNet (1998 to 2000)

 

•

Vice President and Treasurer of Digital Equipment Corporation (1994 to 1998, when acquired by Compaq Computer)

Other Boards:

 

•

Former: Gigamon, a provider of network visibility and analytics (January 2014 to December 2017, acquired by Elliott Management Corp)

Qualifications:

 

•

Significant finance, accounting and technology operations experience; Financial Expert

 

•

Wide executive management and board experience at leading public and private technology companies

 

12

		David F. Welch, Ph.D   Age: 61   Director since October 2010; previously May 2001 to November 2006   Committees: None

Experience:

 

•

Co-founded the Company; Chief Innovation Officer (October 2018 to present); Chief Strategy and Technology Officer (November 2017 to October 2018); President (June 2013 to November 2017); Executive Vice President and Chief Strategy Officer (May 2004 to June 2013); Chief Development Officer/Chief Technology Officer (May 2001 to May 2004)

 

•

Chief Technology Officer of the Transmission Division of JDS Uniphase Corporation, an optical component company (February 2001 to April 2001)

 

•

Served in various executive roles, including Chief Technology Officer and Vice President of Corporate Development of SDL, an optical component company (January 1985 to February 2001)

Other Boards:

 

•

Former:

•

CytoDyn Inc., a biopharmaceutical company (January 2019 to September 2020)

 

•

Rezolute, Inc., a clinical stage biopharmaceutical company (June 2015 to January 2019)

Other:

 

•

Holds over 130 patents

 

•

Has been awarded the Optical Society of America’s (“OSA”) Adolph Lomb Medal, Joseph Fraunhofer Award, the John Tyndall Award and the IET JJ Thompson Medal for Achievement in Electronics, in recognition of his technical contributions to the optical industry

 

•

Fellow of OSA and the Institute of Electrical and Electronics Engineers

Qualifications:

 

•

One of the most highly regarded innovators in our sector

 

•

Deep technology knowledge of the optical networking industry

 

•

Experience as an Infinera founder, executive leader and board member

 

•

Product development, marketing and sales strategies insights

 

13

Departing Directors

Infinera thanks Messrs. Gani and Wegleitner for their dedicated service on the Infinera Board.

 

		Marcel Gani   Age: 69   Independent Director since June 2014   Current Committees: Compensation (Chair); Audit

Experience:

 

•

Independent consultant (2009 to present)

 

•

Lecturer in Accounting and Finance at the Leavey School of Business at Santa Clara University (2005 to 2009)

 

•

Held multiple roles at Juniper Networks, Inc., including Chief of Staff (January 2005 to March 2006); Executive Vice President and CFO (February 1997 to December 2004)

 

•

Vice President and CFO of NVIDIA Corporation (February 1996 to February 1997)

 

•

Served as CFO of Grand Junction Networks, Primary Access Corporation and NeXT Computer, Inc.

Other Boards:

 

•

SolarEdge Technologies, Inc., a power optimizer solutions company (March 2015 to present)

 

•

Former: Envivio, Inc., a video technology company (May 2011 to October 2015.)

Qualifications:

 

•

Public and private company technology industry CFO experience

 

•

Financial, accounting and financial reporting experience; Financial Expert

 

14

		Mark A. Wegleitner   Age: 71   Independent Director since May 2011   Current Committees: Nominating and Governance

Experience:

 

•

President of Wegleitner Consulting, LLC, a privately-owned telecommunications consulting company (April 2011 to present)

 

•

Senior Vice President, Technology, for Verizon Communications Inc., a telecommunications company, where his responsibilities included technology assessment, network architecture, platform development and laboratory testing for wireline and wireless communications networks (September 2007 until his retirement in July 2010); Chief Technology Officer, with responsibility for wireline communications technologies (July 2000 to September 2007)

 

•

Held various positions in the Network Services division of Bell Atlantic, a telecommunications company, including Chief Technology Officer from January 1999 to July 2000

 

•

Worked at Bell Laboratories and AT&T General Departments

Qualifications:

 

•

Extensive telecommunications industry experience

 

•

Representative of the customer perspective

 

•

Technical expertise

HOW WE ARE SELECTED AND ELECTED

Director Qualifications

The Nominating and Governance Committee reviews candidates for service on the Board and recommends nominees for election to fill vacancies on the Board, including nomination for re-election of directors whose terms are due to expire. In discharging its responsibilities to nominate candidates for election to the Board, the Nominating and Governance Committee endeavors to identify, recruit and nominate candidates characterized by wisdom, maturity, sound judgment, excellent business skills and high integrity. The Nominating and Governance Committee seeks to ensure that the Board is composed of individuals of diverse backgrounds who have a variety of complementary experience, training, attributes and relationships relevant to our business. In nominating candidates to fill vacancies created by the expiration of the term of a director, the Nominating and Governance Committee determines whether the incumbent director is willing to stand for re-election. The Nominating and Governance Committee evaluates each director’s performance to determine suitability for re-election, taking into consideration, among other things, each director’s willingness to fully participate and contribute to the Board and its committees, ability to work constructively with the rest of the members of the Board, personal and professional integrity and familiarity with our business, operations and markets.

Each of the nominees to fill positions as Class III directors has consented to serve if elected. However, if any of the persons nominated by the Board subsequently declines to accept election, or is otherwise unavailable for election prior to the Annual Meeting, proxies solicited by the Board will be voted by the proxy holders for the election of any other person or persons as the Board may recommend, at its option, or may decide to further reduce the number of directors that constitute the entire Board. After the Annual Meeting, the Board expects that it will have nine directors.

 

15

The Board currently consists of eleven directors and is divided into three classes. Each class of the Board serves a staggered three-year term. Our Class III directors, whose terms expire at the Annual Meeting, are Christine Bucklin, Marcel Gani, Sharon Holt and Mark Wegleitner. Messrs. Gani and Weigleitner are not standing for re-election.

There are three nominees for election to Class III of the Board this year: Mses. Bucklin and Holt and Gregory P. Dougherty. Mr. Dougherty is currently a Class II director and has agreed to no longer serve as a Class II director if elected as a Class III director. The nomination of these directors to stand for election at the Annual Meeting has been recommended by the Nominating and Governance Committee and has been approved by the Board. Each of the nominees for our Class III directors, if elected, will serve for a three-year term expiring at the 2025 Annual Meeting of Shareholders, or until his or her successor is duly elected and qualified, or until his or her earlier death, resignation or removal from the Board.

Our Amended and Restated Bylaws (“Bylaws”) provide that, in an election of directors where the number of nominees does not exceed the number of directors to be elected, each director nominee must receive a majority of votes cast with respect to that director nominee. Should one of the nominees up for election not receive a majority of votes cast, the Board, after taking into consideration the recommendation of the Nominating and Governance Committee, will determine whether or not to accept a pre-tendered resignation of such nominee. The Board will publicly disclose its decision and its rationale within 90 days of the certification of the election results. The director whose resignation is under consideration shall abstain from participating in any decision regarding that resignation.

We will also disclose the voting results from the Annual Meeting on a Current Report on Form 8-K that we will file with the SEC within four business days after the meeting. If final voting results are not available to us in time to file a Form 8-K, we will file a Form 8-K to publish preliminary results and will provide the final results in an amendment to the Form 8-K as soon as they become available.

Director Diversity

We believe the current Board consists of a diverse group of professionals, including former CEOs, CFOs and industry leaders, who bring significant leadership and distinct qualities and skill sets to Infinera, including direct shareholder representation by our second largest shareholder. This group provides a diverse range of perspectives and experience to engage each other and management to effectively represent our shareholders. In addition, the Board added its first female director in June 2019 and second and third female directors in 2020. In 2020, the Board appointed a female director to chair our Nominating and Governance Committee; she will become chair of our Compensation Committee effective upon the conclusion of our 2022 Annual Meeting of Shareholders, relinquishing her position on our Nominating and Governance Committee. In 2022, the Board added a director who is an “underrepresented minority,” as such term is defined under the Nasdaq Board Diversity Rule. These actions further highlight our commitment to diversity. Any search firms retained to assist the Nominating and Governance Committee will be specifically advised to seek to include qualified, diverse candidates from traditional and nontraditional environments, including members of underrepresented communities, as was done for the Board search process conducted in 2021.

 

16

The following table provides certain information regarding the diversity of our Board of directors as of April 1, 2022. As shown below in the board diversity matrix, the Company is currently in compliance with the diversity requirements of Sections 301.3 and 301.4 of the California Corporations Code.

 

Board Diversity Matrix (As of April 1, 2022)
Total number of directors		11
		Female		Male		Did Not Disclose Gender
Gender Identity
Directors		3		7		1
Demographic Background
Asian		0		1
White		3		6
Did Not Disclose Demographic Background		1
Directors Who Are Military Veterans		1

Independence of the Board

On an annual basis, in accordance with the current listing standards of Nasdaq, the Board affirmatively determines the independence of each director or nominee for election as a director. The Board has determined that nine out of eleven of our directors (with the exception of Mr. Heard and Dr. Welch, both of whom are employees of Infinera) are “independent” in accordance with the rules and regulations of the SEC and the listing standards of Nasdaq. Also, all members of the Audit Committee, Compensation Committee and Nominating and Governance Committee, as more fully described below, are independent directors. In making these determinations, our Board considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances that our Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director, and the transactions involving them described in the section titled “Certain Relationships and Related Person Transactions.” There are no family relationships among any of our directors, director nominees or executive officers.

HOW WE GOVERN AND ARE GOVERNED

Although it is important and exciting to focus on opportunities and successes, we at Infinera believe it is also important to focus on responsible compliance, risk management, and governance structures and functions. Success in our sector in particular depends on maintaining an ability to identify challenges early, maintaining best possible security and governance practices, and fostering an ability to pivot quickly and continually.

Board Oversight of Risk

Risk is inherent with every business and the Board is responsible for overseeing our risk management function, including a regular review of our strategic plans and business objectives. Members of our senior management team are responsible for implementation of our day-to-day risk management processes, while the Board, as a whole and through its committees, has responsibility for the oversight of overall risk management. In addition, each of the committees of the Board considers any risks that may be within its area of responsibilities and Board members, or Board committee members, periodically engage in discussions with members of our senior management team as appropriate. Specifically, the Audit Committee assists the Board in fulfilling its oversight responsibilities with respect to risk management in the areas of financial reporting, internal controls, key accounting and reporting policies, and cybersecurity, as well as meeting with the Head of Internal Audit and our external independent auditors. The Compensation Committee assists the Board in fulfilling its oversight

 

17

responsibilities with respect to the management of risks arising from our compensation policies and programs. The Nominating and Governance Committee assists the Board in fulfilling its oversight responsibilities with respect to the management of risks associated with Board organization, membership and structure, succession planning for our directors and executive officers, and corporate governance. Each of the committee chairs reports to the full Board at regular meetings concerning the activities of the committee, the significant issues it has discussed, and the actions taken by the committee.

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics, most recently updated in March 2019, which applies to all of our employees, officers (including our principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions) and our directors. The Code of Business Conduct and Ethics reflects our policy of dealing honestly and with integrity with everyone, including our customers, employees, investors and suppliers. We require all employees to complete training on our Code of Business Conduct and Ethics.

Our Code of Business Conduct and Ethics is just one element of the many practices and procedures we utilize to try to create a diverse and inclusive culture that encourages helpful and honest communication both up and down reporting relationship chains. Our executive leaders set the tone for this culture at the top and our ability to maintain a positive and creative work environment depends on its success. Our annual Infinera Sustainability Report describes some of the additional programs and practices we maintain to protect our people and their productivity, health and well-being.

A copy of our Code of Business Conduct and Ethics is available on our website at investors.infinera.com/ by clicking on “Governance Documents” under the “Governance” heading. You may also obtain a copy of our Code of Business Conduct and Ethics without charge by writing to: Infinera Corporation, c/o Corporate Secretary, 6373 San Ignacio Avenue, San Jose, California 95119. We intend to disclose future amendments to certain provisions of our Code of Business Conduct and Ethics, or waivers of such provisions, applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions and our directors on our website identified above or on a Current Report on Form 8-K if required by the applicable listing standards.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines which govern, among other things, Board composition, Board responsibilities, committee composition, management succession and shareholder communications. You can access these Corporate Governance Guidelines, along with other materials such as Board committee charters, on our website at investors.infinera.com/ by clicking on “Governance Documents” under the “Governance” heading.

Stock Ownership Policy

The Board believes that it is important to link the interests of our directors and management to those of our shareholders. Accordingly, the Board has adopted a Stock Ownership Policy for our directors and executive officers who are designated as reporting officers under Section 16 (“Section 16 Officers”) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For additional information regarding our Stock Ownership Policy, please see the section entitled “Compensation Discussion and Analysis—Additional Information Regarding Our Compensation Practices—Stock Ownership Policy.”

 

18

ESG and Corporate Social Responsibility

We focus our efforts on the elements of sustainability that are most important and impactful to our business and to our stakeholders. Through our last materiality assessment, the following topics were determined to be the most material ESG issues. Our programs, goals and disclosures have been aligned to emphasize these topics.

 

Corporate Governance		Environmental Responsibility		Social Responsibility
Business ethics		Greenhouse gas emissions		Employee health and safety
Transparency and reporting		Energy management		Employee development and engagement
Supply chain management		Waste and hazardous materials management		Diversity and inclusion
Data security		Environmental compliance		Labor practices and human rights
Product safety and compliance

We are committed to acting as a good corporate citizen and recognize our role and influence in the global community. We are dedicated to paving a sustainable path that strategically considers our impact on our key stakeholders, our communities, and our planet. In our operations and our supply chain, we strive to act in ways that support a more sustainable, equitable, and connected world and to execute our programs with intention through our global sustainability program.

Each year we summarize our sustainability program and activities in the Infinera Sustainability Report, which describes our practices, metrics, targets and disclosures. We encourage you to read our 2020 Infinera Sustainability Report, published in 2021, as well as our 2021 report when released in the coming months. A copy of the Sustainability Report can be found on the “Corporate Social Responsibility” page at our website at www.infinera.com/social-responsibility, where you can also find other related policies and information.

In 2021, we continued to make progress toward our ESG goals and improved our programs with dedicated resources. Some notable highlights of the year include:

 

•

ESG Management: Our Global ESG Working Group collaborates with functions across the globe to set goals, report progress, implement programs and meet customer expectations. In 2021, this team worked closely with our sales teams to ensure alignment on our ESG objectives and progress.

 

•

Transparency and Reporting: In 2021, we’re proud to have been awarded EcoVadis’ gold medal in recognition of our sustainability achievements in the areas of Environment, Labor & Human Rights, Ethics, and Sustainable Procurement.

 

•

Diversity and Inclusion (D&I): We strive to foster a diverse and inclusive workforce, where employees are treated with respect and valued for their differences in perspective and experience. Last year, we are proud that through our ALL-In program, in addition to our Women In Infinera employee resource group, we were able to launch two new employee resource groups for our Black and Latin American colleagues. Through engaging with our D&I site leaders around the globe, we identified and provided specialized training and speakers series to help our employees be more conscious and inclusive in the workplace.

 

•

Employee Health and Safety: We are proud of our strong safety culture and comprehensive health and safety management system, which is standardized around the globe. Last year, we completed the roll-out of our health and safety working committees across all Tier 1 and Tier 2 sites—which include manufacturing and research and development—to better track, manage, and improve on health and safety metrics.

 

•

Carbon Emissions: It takes industry-wide effort to move the needle in mitigating climate change, and we are committed to doing our part to reduce emissions in our operations and from within our value chain. Last year, we completed our first full carbon report through CDP (formerly the Carbon Disclosure Project)

 

19

to share our emissions and our progress transparently. Though we have more work to do to meet our goal of 50% reduction of greenhouse gases by 2030, we know this disclosure will continue to hold us and our business partners accountable.

 

•

Supply Chain Management: We set high standards of conduct for our business and expect those standards be met in our supply chain as well. In 2021, we launched an ESG survey platform for our top customers to share their performance in the areas of labor practices and environmental sustainability.

 

•

Business Ethics: At Infinera, we strive to foster a culture of integrity and honesty, and provide our employees with the tools and training to make ethical decisions in their daily work. In 2021, we are proud that we surpassed our goal of a 95% completion rate for employee ethics trainings.

In addition:

 

•

As a global company, Infinera seeks to be a good corporate citizen when dealing with customers, suppliers, employees, and the communities where we operate throughout the world. To ensure alignment across the supply chain, the Infinera Supplier Code of Conduct sets out the minimum standards expected of Infinera’s suppliers, so they act ethically, responsibly, and in compliance with applicable laws and regulations. This code is required to be applied by our suppliers to their direct suppliers and subcontractors, including providers of contract labor, at a minimum. A copy of the Supplier Code of Conduct can be found on our website at www.infinera.com/social-responsibility/code-of-ethics/.

 

•

We are committed to using our design, development and sales practices to protect personal data against unauthorized access, use, retention and disclosure. Infinera’s data security practices are managed by our Chief Information Security Officer, and we have implemented an Information Security Management System and security controls for data privacy protection.

 

•

All of our full-time employees, and regular part-time employees working at least 24 hours per week, are eligible for all Infinera benefits.

 

•

We are members of the Responsible Minerals Initiative.

In addition to the accomplishments, best practices, activities and disclosures summarized above, our products and solutions help keep people connected socially and professionally; run their businesses more efficiently, fairly and globally; and manage the risks that are created by living in a connected global economy.

HOW WE ARE ORGANIZED

Board Leadership Structure

The Board believes its current leadership structure best serves the objectives of the Board’s oversight of management, the Board’s ability to carry out its roles and responsibilities on behalf of our shareholders, and our overall corporate governance. Separating the positions of Chairman of the Board and CEO allows our CEO to focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board in its fundamental role of providing advice to and independent oversight of management. While our Bylaws do not require that our Chairman of the Board and CEO positions be separate, the Board believes that having separate positions is the appropriate leadership structure for Infinera at this time and demonstrates our commitment to good corporate governance practices. The Board has assigned the Chairman of the Board responsibility for presiding over meetings of the Board, developing meeting agendas, facilitating communication between management and the Board, representing director views to management and improving meeting effectiveness, among other things.

The Board also believes that the combination of an independent Chairman of the Board, all three of our current standing committees being comprised entirely of independent directors and the regular use of executive sessions of the independent directors enables the Board to maintain independent oversight of our strategies and activities.

Agreement with Oaktree Optical Holdings

In April 2020, we entered into a letter agreement with Oaktree Optical Holdings, L.P. (“Oaktree”) pursuant to which we agreed, among other things, to nominate and support Ms. Rice for election as a director at the 2020

 

20

Annual Meeting of Shareholders. Subject to certain exceptions set forth in the letter agreement, Oaktree and certain affiliates agreed to vote all of its shares at the 2020 Annual Meeting of Shareholders in a manner consistent with the recommendation of our Board. Oaktree also agreed to customary standstill restrictions. Our letter agreement with Oaktree also required that Infinera and Oaktree reasonably cooperate to identify a director candidate (the “Independent Designee”) for consideration by our Nominating and Governance Committee. In June 2020, Ms. Bucklin joined the Board as the Independent Designee. Ms. Bucklin has been nominated for election as a Class III director at the 2022 Annual Meeting of Shareholders.

Information Regarding the Board and its Committees

Mr. Lakkaraju joined our Board in February 2022. Thomas J. Fallon and Kambiz Y. Hooshmand resigned from our Board in February 2022.

The Board met 11 times during fiscal 2021. The Board acted by written consent once during fiscal 2021. During fiscal 2021, each director then in office attended 75% or more of the meetings of the Board. During fiscal 2021, each director then in office attended 75% or more of the meetings of the committees on which he or she served during the period for which he or she was a committee chairman or committee member, as applicable. Our independent directors meet in executive sessions, without management present, during most regular meetings of the Board. Directors are encouraged, but not required, to attend our annual meetings of shareholders. All twelve of the then-serving members of the Board attended our 2021 Annual Meeting of Shareholders.

The Board had three standing committees as of the end of fiscal 2021: an Audit Committee, a Compensation Committee and a Nominating and Governance Committee. Mr. Fallon did not serve on any committees of the Board prior to his resignation in February 2022. Mr. Heard and Dr. Welch do not currently serve on any committees of the Board. The following table presents our current Board and committee composition.

 

Name		Board				Audit				Compensation				Nominating and Governance
Christine Bucklin			M				M				—				—
Gregory P. Dougherty			M				—				M				—
Marcel Gani			M				M				C				—
David W. Heard			M				—				—				—
Sharon E. Holt			M				—				—				C
Roop K. Lakkaraju(1)			M				M				—				—
Paul J. Milbury			M				C				M				—
Amy H. Rice(4)			M				—				—				M
George A. Riedel(5)			C				—				M				—
Mark A. Wegleitner			M				—				—				M
David F. Welch, Ph.D.			M				—				—				—
Total Meetings in Fiscal 2021			11				9				9				15

 

C = Chair; M = Member

(1)	Effective as of February 16, 2022, Mr. Lakkaraju joined the Board and was appointed to the Audit Committee.

 

21

The following table presents our Board and committee composition effective upon the conclusion of the 2022 Annual Meeting of Shareholders, assuming election of the nominees for Class III director who are standing for election at the 2022 Annual Meeting of Shareholders.

 

Name

Board

Audit

Compensation

Nominating and Governance

Christine Bucklin

M

M

—

—

Gregory P. Dougherty

M

—

M

M

David W. Heard

M

—

—

—

Sharon E. Holt(2)

M

—

C

—

Roop K. Lakkaraju

M

M

—

—

Paul J. Milbury

M

C

M

—

Amy H. Rice(4)

M

—

—

M

George A. Riedel(5)

C

—

—

C

David F. Welch, Ph.D.

M

—

—

—

 

C = Chair; M = Member

Audit Committee

The Audit Committee reviews and monitors our financial statements, financial reporting process and our external audits, including, among other things, our internal controls and audit functions, the results and scope of the annual audit and other services provided by our independent registered public accounting firm as well as our compliance with legal matters that have a significant impact on our financial statements. The Audit Committee also consults with our management and our independent registered public accounting firm prior to the presentation of financial statements to shareholders and, as appropriate, initiates inquiries into aspects of our financial affairs. The Audit Committee is responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. In addition, the Audit Committee is directly responsible for the appointment, retention, compensation and oversight of the work of our independent registered public accounting firm, including approving services and fee arrangements. Any related party transactions are subject to approval by the Audit Committee. A more detailed description of the Audit Committee’s functions can be found in our Audit Committee charter. In addition, the Audit Committee meets in executive sessions, without management present and with the independent registered public accounting firm, during most regular meetings of the Audit Committee. A copy of the Audit Committee charter is available on our website at investors.infinera.com/ by clicking on “Governance Documents” under the “Governance” heading.

The current members of the Audit Committee are Ms. Bucklin and Messrs. Gani, Lakkaraju and Milbury. Mr. Milbury chairs the Audit Committee. Mr. Hooshmand resigned from the Audit Committee effective as of February 16, 2022 in connection with his resignation from the Board. Mr. Lakkaraju was appointed to the Audit Committee effective as of February 16, 2022 and therefore did not serve on the Audit Committee during fiscal 2021. Effective upon the conclusion of our 2022 Annual Meeting of Shareholders, Mr. Gani will no longer be a member of the Audit Committee. Other than Mr. Lakkaraju, each current member of the Audit Committee and Mr. Hooshmand served the entirety of fiscal 2021. The Audit Committee met nine times during fiscal 2021. The Audit Committee did not act by written consent during fiscal 2021. Each member of the Audit Committee is independent for Audit Committee purposes under the rules and regulations of the SEC and the applicable Nasdaq listing standards. In addition to qualifying as independent under the Nasdaq rules, each member of the Audit Committee can read and understand fundamental financial statements in accordance with Nasdaq Audit Committee requirements. The Board has determined that Messrs. Gani, Lakkaraju and Milbury are each an “Audit Committee Financial Expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. The designation does not impose on Messrs. Gani, Lakkaraju and Milbury any duties, obligations or liabilities that are greater than those generally imposed on them as members of the Audit Committee and the Board.

Compensation Committee

The Compensation Committee has the responsibility, authority and oversight relating to the development of our overall compensation strategy and compensation policies and programs. The Compensation Committee

 

22

establishes our compensation philosophy and policies, administers all of our compensation plans for executive officers, and recommends the compensation for the non-employee directors of the Board. The Compensation Committee seeks to assure that our compensation policies and practices promote shareholder interests and support our compensation objectives and philosophy as described in more detail in the Compensation Discussion and Analysis section of this Proxy Statement.

The Compensation Committee also oversees, reviews and administers all of our material employee benefit plans, including our 401(k) plan, and reviews and approves various other compensation policies and matters. The Compensation Committee assists the Board in its oversight of our strategies, initiatives and programs relating to human capital management, including culture, talent acquisition, employee development, retention, and diversity, equity and inclusion. The Compensation Committee may form and delegate authority to one or more subcommittees as appropriate. A more detailed description of the Compensation Committee’s functions can be found in our Compensation Committee charter. A copy of the Compensation Committee charter is available on our website at investors.infinera.com/ by clicking on “Governance Documents” under the “Governance” heading.

The current members of the Compensation Committee are Messrs. Dougherty, Gani, Milbury and Riedel. Mr. Gani chairs the Compensation Committee. Effective upon the conclusion of our 2022 Annual Meeting of Shareholders, Messrs. Gani and Riedel will no longer be members of the Compensation Committee and Ms. Holt, assuming her re-election as a Class III director, will join the Compensation Committee, serving as Chair. Each current member of the Compensation Committee served the entirety of fiscal 2021. The Compensation Committee met nine times during fiscal 2021. The Compensation Committee acted by written consent three times during fiscal 2021. Each member of the Compensation Committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, an outside director, as defined pursuant to Section 162(m) (“Section 162(m)”) of the Internal Revenue Code, as amended (the “Code”) and satisfies the director and compensation committee independence requirements under the applicable Nasdaq listing standards.

Nominating and Governance Committee

The Nominating and Governance Committee reviews and recommends changes to corporate governance policies and practices applicable to Infinera. In addition, the Nominating and Governance Committee is responsible for identifying, evaluating and making recommendations of nominees to the Board and evaluating the performance of the Board and individual directors, including those eligible for re-election at the annual meeting of shareholders. The Nominating and Governance Committee also oversees an annual board evaluation process to determine whether the Board is functioning effectively. The Nominating and Governance Committee is also responsible for reviewing developments in corporate governance practices, and evaluating and making recommendations to the Board concerning corporate governance matters. In addition, the Nominating and Governance Committee oversees our succession planning process. A more detailed description of the Nominating and Governance Committee’s functions can be found in our Nominating and Governance Committee charter. A copy of the Nominating and Governance Committee charter is available on our website at investors.infinera.com/ by clicking on “Governance Documents” under the “Governance” heading.

The current members of the Nominating and Governance Committee are Mses. Holt and Rice and Mr. Wegleitner. Mr. Hooshmand resigned from the Audit Committee effective as of February 16, 2022 in connection with his resignation from the Board. Effective upon the conclusion of our 2022 Annual Meeting of Shareholders, Ms. Holt and Mr. Wegleitner will no longer be members of the Nominating and Governance Committee and Messrs. Dougherty, assuming his election as a Class III director, and Riedel will join the Nominating and Governance Committee, with Mr. Riedel serving as Chair. Each current member of the Nominating and Governance Committee and Mr. Hooshmand served the entirety of fiscal 2021. The Nominating and Governance Committee met fifteen times during fiscal 2021. The Nominating and Governance Committee did not act by written consent during fiscal 2021. Each member of the Nominating and Governance Committee satisfies the independence requirements under the applicable Nasdaq listing standards.

Board Nominees and Diversity

The Nominating and Governance Committee reviews and reports to the Board on a periodic basis with regard to matters of corporate governance, and reviews, assesses and makes recommendations on the effectiveness of

 

23

our corporate governance policies. In addition, the Nominating and Governance Committee reviews and makes recommendations to the Board regarding the size and composition of the Board and the appropriate skills and characteristics required of our directors in the context of the then-current composition of the Board. This includes an assessment of each candidate’s independence, personal and professional integrity, financial literacy or other professional or business experience relevant to an understanding of our business, ability to think and act independently and with sound judgment, and ability to serve our shareholders’ long-term interests. The Board and the Nominating and Governance Committee follow a process in which we consider governance best practices when reviewing the overall composition of the Board and considering the slate of nominees for annual election to the Board and the appointment of individual directors to the Board. The Board and Nominating and Governance Committee evaluate the skill sets needed to provide the right level of guidance and oversight to the management team. Within the context of evaluating the skills needed on the Board, the Nominating and Governance Committee also considers diversity attributes, including gender, race, ethnicity, specialized expertise and a range of insight gathered from relevant industries. These factors, and others considered useful by the Nominating and Governance Committee, are reviewed in the context of an assessment of the perceived needs of the Board at a particular point in time.

The Nominating and Governance Committee leads the search for, selects and recommends candidates for election to the Board. Consideration of new director candidates typically involves a series of committee discussions, review of information concerning candidates and interviews with selected candidates. From time to time, the Nominating and Governance Committee may engage the services of a search firm to identify director candidates. Any search firms retained to assist the Nominating and Governance Committee will be specifically advised to seek to include qualified, diverse candidates from traditional and nontraditional environments, including members of underrepresented communities, as was done for the Board search process conducted in 2021. The Nominating and Governance Committee will also consider candidates proposed in writing by shareholders, provided such proposal meets the eligibility requirements for submitting shareholder proposals for inclusion in our next proxy statement and is accompanied by the required information about the candidate specified in Section 2.4 of our Bylaws. Candidates proposed by shareholders are evaluated by the Nominating and Governance Committee using the same criteria as for all other candidates.

If a shareholder wishes to recommend a director candidate for consideration by the Nominating and Governance Committee, pursuant to our Corporate Governance Guidelines, the shareholder must have held at least 1,000 shares of our common stock for at least six months and must notify the Nominating and Governance Committee by writing to our Corporate Secretary at our principal executive offices, and must include the following information:

 

•

To the extent reasonably available, information relating to such director candidate that would be required to be disclosed in a proxy statement pursuant to Regulation 14A under the Exchange Act, in which such individual would be a nominee for election to the Board;

 

•

The director candidate’s written consent to (a) if selected, be named in our proxy statement and proxy, and (b) if elected, to serve on the Board;

 

•

The other information set forth in the applicable sections of Section 2.4 of our Bylaws; and

 

•

Any other information that such shareholder believes is relevant in considering the director candidate.

Non-Executive Equity Award Subcommittee

The guidelines for the size of new hire, promotional and annual retention equity awards for Section 16 Officers are periodically reviewed and approved by the Compensation Committee. The Compensation Committee has delegated to the Non-Executive Equity Award Subcommittee (the “Subcommittee”) the authority to formally approve new hire, promotional and retention equity awards to certain employees pursuant to guidelines pre-approved from time to time by the Compensation Committee. The delegation to the Subcommittee does not include the authority to grant equity awards to new employees who are or are reasonably expected to become Section 16 Officers or to current Section 16 Officers. The delegation of authority to the Subcommittee is not exclusive and the Board and Compensation Committee have retained the right to approve any equity awards at their discretion. The Subcommittee acted by written consent twelve times during fiscal 2021. This Subcommittee is currently comprised solely of our CEO (who is also a Board member).

 

24

Compensation Committee Interlocks and Insider Participation

During fiscal 2021, Messrs. Dougherty, Gani, Milbury and Riedel served on the Compensation Committee. None of these individuals was an executive officer or employee of Infinera at any time during fiscal 2021, or at any other time. No member of the Compensation Committee had any relationship with Infinera during fiscal 2021 requiring disclosure under Item 404 of Regulation S-K under the Exchange Act. None of our executive officers has ever served as a member of the board or compensation committee of any other entity that has or has had one or more executive officers serving as a member of the Board or Compensation Committee.

HOW TO COMMUNICATE WITH US

The Board actively seeks input from shareholders, stakeholders, thought leaders and many others to perform its functions optimally. As shareholders bring wide and relevant experiences and have a financial stake in the wisdom of their input, the Board values maintaining a number of avenues to receive that input. These include:

 

•

Shareholder attendance or participation at our annual shareholders meetings

 

•

Input from proxy voting

 

•

Use of the company’s various reporting mechanisms such as its “hot lines” and reports to the internal audit function

 

•

Participation in our numerous investor relations programs and conferences

Write to the Board as a whole, or to individual directors, at the following address:

Board of Directors c/o Corporate Secretary

Infinera Corporation

6373 San Ignacio Avenue

San Jose, California 95119

Communications are distributed to the Board or to any individual director, as appropriate, depending on the facts and circumstances outlined in the communication. At the direction of the Board, all mail received may be opened and screened for security purposes. Communications that are unduly hostile, threatening, illegal or similarly unsuitable will be excluded with the provision that any communication that is filtered out will be made available to any independent or non-employee director upon request.

HOW WE ARE PAID

Our compensation program for our non-employee directors is designed to attract and retain highly qualified, independent directors to represent shareholders on the Board and to act in their best interests. Non-employee directors receive a mix of cash compensation and equity awards under this program. Directors who are also employees of Infinera do not participate in our director compensation program, nor do they receive any additional compensation for their service as directors. The Compensation Committee, which consists solely of independent directors, has the primary responsibility for reviewing and recommending any changes to our director compensation program, with compensation changes approved or ratified by the full Board.

During fiscal 2021, as part of its review of our director compensation program, the Compensation Committee engaged Compensia, an independent compensation consultant, to provide relevant market data regarding the program derived from the same peer group used for evaluating our executive compensation, as discussed below in “Compensation Discussion and Analysis.” This review had previously occurred most recently in 2019. Following this review, in December 2021 the Compensation Committee recommended that the Board approve certain changes to our director compensation program to align more closely with market practice, including an increase in cash compensation for the Chairman of the Board, an increase in the annual equity grant value, the elimination of the initial equity grant for new non-employee directors, and the revision of the annual equity grant to provide for a full pro rata provision based on when a director joins the Board. In February 2022, our Board approved these compensation changes, which are discussed below in “How We Are Paid—Director Fees” and “How We Are Paid—Director Equity Awards.” Prior to these changes, cash and equity compensation amounts under the

 

25

program had not increased since 2015 and 2014, respectively, and cash compensation was temporarily decreased during fiscal 2020 as part of COVID-19-related compensation reductions at Infinera.

Director Fees

During fiscal 2021, our cash compensation program for our non-employee directors was as follows:

 

Position		Annual Retainer Fee(1) ($)
Non-Employee Director			50,000
Chairman of the Board(1)			50,000
Audit Committee Chairman			30,000
Audit Committee Member			12,500
Compensation Committee Chairman			20,000
Compensation Committee Member			10,000
Nominating and Governance Committee Chairman			11,000
Nominating and Governance Committee Member			6,000

 

(1)	Effective February 16, 2022, the annual retainer fee for the Chairman of the Board increased to $70,000.

We do not pay meeting fees for the Board or any of the committees of the Board. We pay the retainer fees set forth above in quarterly installments. Retainer fees are paid in arrears. In addition, we have a policy of reimbursing our non-employee directors for reasonable travel, lodging and other expenses incurred in connection with their attendance at Board and committee meetings.

Director Equity Awards

Prior to the February 2022 revisions in our non-employee director compensation program, non-employee directors have been eligible to receive equity awards as follows:

 

•

Initial RSU Award. Each individual who commences service as a non-employee director upon his or her appointment to the Board or election at an annual meeting of shareholders will be eligible for an RSU award covering a number of shares determined by dividing $165,000 by the closing price of the Company’s common stock on the date of grant, with any resulting fractional share rounded down to the nearest whole share (the “Initial RSU Award”). The Initial RSU Award vests in annual installments over three years, provided that the non-employee director remains a service provider of Infinera through each applicable vesting date.

 

•

Annual RSU Award. On the date of each annual meeting of shareholders, each individual who continues to serve as a non-employee director after that annual meeting will automatically be granted an RSU award covering a number of shares determined by dividing $165,000 by the closing price of the Company’s common stock on the date of grant, with any resulting fractional share rounded down to the nearest whole share (the “Annual RSU Award”). The Annual RSU Award will vest as to 100% of the underlying shares on the earlier of the date of the next annual meeting of shareholders or the one-year anniversary of the date of grant, provided that the non-employee director remains a service provider of Infinera on the applicable vesting date.

 

•

Prorated Annual RSU Award. Assuming a non-employee director is appointed to the Board after (rather than at) the most recently held annual meeting of shareholders but at least six months prior to the next annual meeting of shareholders, such non-employee director will be eligible for an annual RSU award covering a number of shares determined by first prorating $165,000 for the number of months remaining until the next scheduled annual meeting of shareholders and then dividing such prorated dollar amount by the closing price of the Company’s common stock on the date of grant, with any resulting fractional share rounded down to the nearest whole share (the “Prorated Annual RSU Award”). The Prorated Annual RSU Award will vest as to 100% of the underlying shares on the earlier of the date of the next annual meeting of shareholders or the one-year anniversary of the most recently held annual meeting of shareholders, provided that the non-employee director remains a service provider of Infinera on the applicable vesting date.

 

26

Beginning with grants made on or after our 2022 Annual Meeting of Shareholders, non-employee directors will be eligible to receive equity awards as follows:

 

•

Annual RSU Award. On the date of each annual meeting of shareholders, each individual who continues to serve as a non-employee director after that annual meeting will automatically be granted an RSU award covering a number of shares determined by dividing $200,000 by the closing price of the Company’s common stock on the date of grant, with any resulting fractional share rounded down to the nearest whole share (the “Revised Annual RSU Award”). The Revised Annual RSU Award will vest as to 100% of the underlying shares on the earlier of the date of the next annual meeting of shareholders or the one-year anniversary of the date of grant, provided that the non-employee director remains a service provider of Infinera on the applicable vesting date.

 

•

Prorated Annual RSU Award for New Directors. Each new non-employee director will be eligible for an annual RSU award covering a number of shares determined by first prorating $200,000 for the number of months remaining until the next scheduled annual meeting of shareholders and then dividing such prorated dollar amount by the closing price of the Company’s common stock on the date of grant, with any resulting fractional share rounded down to the nearest whole share (the “Revised Prorated Annual RSU Award”). The Revised Prorated Annual RSU Award will vest as to 100% of the underlying shares on the earlier of the date of the next annual meeting of shareholders or the one-year anniversary of the most recently held annual meeting of shareholders, provided that the non-employee director remains a service provider of Infinera on the applicable vesting date.

Fiscal 2021 Director Compensation

The following table sets forth all of the compensation awarded to or earned by the non-employee members of the Board in fiscal 2021. In addition, the table sets forth compensation awarded to or earned by Dr. Welch for his services as an employee of Infinera; Dr. Welch does not receive compensation for his services as a director. Compensation information for Dr. Welch is not disclosed in “Our Pay—Fiscal 2021 Compensation,” below, because he is not an NEO.

 

Name		Fees Earned or Paid in Cash ($)(1)				Stock Awards ($)(2)				All Other Compensation ($)				Total ($)
Christine Bucklin			62,500				164,992	(3)			—				227,492
Gregory P. Dougherty			60,000				164,992	(3)			—				224,992
Thomas J. Fallon(4)			45,055				164,992	(3)			39,375	(5)			249,422
Marcel Gani			82,500				164,992	(3)			—				247,492
Sharon E. Holt			61,000				164,992	(3)			—				225,992
Kambiz Y. Hooshmand(4)			68,500				164,992	(3)			—				233,492
Paul J. Milbury			90,000				164,992	(3)			—				254,992
Amy H. Rice(6)			—				—				—				—
George A. Riedel			110,000				164,992	(3)			—				274,992
Mark A. Wegleitner			56,000				164,992	(3)			—				220,992
David F. Welch, Ph.D.			—				721,518	(7)			457,504	(8)			1,179,022

 

(1)	For a description of the annual non-employee director retainer fees and retainer fees for chair positions and for service as Chairman of the Board, see the disclosure above under “Director Fees.”

(2)

The amounts reported in this column represent the aggregate grant date fair value of the RSU awards granted in fiscal 2021 computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation – Stock Compensation” (“ASC 718”). See Notes 2 and 15 of the notes to our consolidated financial statements contained in our 2021 Annual Report for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.

(3)	Reflects the value of the Annual RSU Award awarded in connection with the 2021 Annual Meeting of Stockholders, covering 18,211 shares of Infinera common stock based on Infinera’s closing stock price on May 21, 2021, the date of grant.

(4)	Messrs. Fallon and Hooshmand resigned from our Board in February 2022. Prior to the effective date of such resignations, Messrs. Fallon and Hooshmand each entered into an advisor agreement with the Company and will serve as an advisor to the Company through February 15, 2023.

(5)	As further discussed below, reflects compensation earned by Mr. Fallon as an advisor under his Transition Agreement during fiscal 2021. Mr. Fallon’s advisor role under the Termination Agreement terminated effective February 1, 2021.

 

27

(6)	Ms. Rice has waived any participation in the compensation benefits available to the Company’s non-employee directors, except for customary reimbursement of expenses.

(7)	Reflects the value of Dr. Welch’s equity compensation received as compensation for his services as an employee of Infinera.

(8)	Reflects Dr. Welch’s employee salary of $450,000 and payment of life insurance premiums and 401(k) match with a value of $7,504.

On November 23, 2020, following Mr. Fallon’s 16 years of service with our Company, including ten years as our CEO, Mr. Fallon transitioned to an advisory role that would be in effect through February 1, 2021 while continuing to serve as a member of our Board. Mr. Fallon’s transition was not treated as a termination of employment by the Company and did not trigger any of the severance benefits included in his change of control agreement. To support a smooth transition of leadership, our Compensation Committee approved our entering into a “Transition Agreement” with Mr. Fallon. The Transition Agreement provided that Mr. Fallon would continue as an advisor through February 1, 2021 to assist with the transition of his duties and continue to receive compensation at his previously effective base salary of $487,500, but would not be eligible for a bonus for any services he would provide in 2021.

Further, the Transition Agreement provided that upon termination of his services as an advisor, the vesting of all of Mr. Fallon’s outstanding restricted stock units would accelerate and his performance share award granted in 2018 (the “Fallon 2018 PSA”) would remain outstanding and would be paid (and shares issued) to the extent the goals were actually achieved during the performance period ending December 31, 2020. The treatment of this performance share award was approved with consideration given to Mr. Fallon’s service as our CEO or advisor for the full three-year performance period. In addition, Mr. Fallon’s options to purchase Company common stock, all of which were fully vested at the time of the transition, would continue in effect in accordance with their terms and conditions. At the time of his transition, Mr. Fallon also held unvested performance share awards that had been granted in 2019 and 2020 and would have been eligible to continue to vest during his ongoing service as a member of our Board. Pursuant to the Transition Agreement, these performance share awards held by Mr. Fallon would terminate and be cancelled. Under the Transition Agreement, Mr. Fallon waived all rights to any other compensation or severance and agreed to a release of claims and non-disparagement obligation in favor of the Company.

During fiscal 2021, Mr. Fallon received compensation in his advisor role at the annual compensation rate of $487,500 until his advisor role terminated pursuant to the Transition Agreement effective February 1, 2021. Upon termination of his services as an advisor and the effectiveness of his supplemental release of claims in favor of the Company, the vesting of Mr. Fallon’s outstanding restricted stock units accelerated. As a result, 316,415 shares of common stock underlying Mr. Fallon’s outstanding RSUs vested on February 9, 2021, at a value of $3,312,865 based on the fair market value of such shares at vesting. The performance objective related to the Fallon 2018 PSA was partially achieved for the third performance period, as determined by our Compensation Committee per the terms of the original grant. As a result, 64,485 shares of common stock underlying the Fallon 2018 PSA vested on May 5, 2021, at a value of $553,281 based on the fair market value of such shares at vesting. Following the termination of his advisor role, Mr. Fallon received compensation in fiscal 2021 for his services as a non-employee director in accordance with our non-employee director compensation program.

During fiscal 2021, Dr. Welch, our Chief Innovation Officer and employee member of the Board, did not receive compensation for his services as a director. Dr. Welch was paid a base salary of $450,000 in fiscal 2021. Dr. Welch was eligible for a target bonus opportunity of 90% during fiscal 2021, the same as in fiscal 2020, which was used to determine the value of a retention equity award for Dr. Welch in lieu of an annual cash incentive program. The retention equity award was intended to provide an award value at the time of award approximately equivalent to 75% of the target bonus opportunity for Dr. Welch. On March 9, 2021, Dr. Welch was granted a retention RSU award of 33,800 shares, which is scheduled to vest over a two-year period, with one-half of the underlying shares vesting on April 5, 2022, and one-eighth of the underlying shares vesting quarterly thereafter, subject to his continued service to Infinera through each applicable vesting date. This retention RSU award had an aggregate grant date fair market value of $291,018, computed in accordance with ASC 718. On March 9, 2021, Dr. Welch was also granted an RSU award of 50,000 shares, which is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2022, and one-twelfth of the underlying shares vesting quarterly thereafter, subject to his continued service to Infinera through each applicable vesting date. This RSU award had an aggregate grant date fair market value of $430,500, computed in accordance with ASC 718. See Notes 2 and 15 of the notes to our consolidated financial statements contained in our 2021 Annual Report for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.

 

28

Additional Information with Respect to Director Equity Awards

 

Name		Number of Shares Subject to Outstanding Stock Awards at Fiscal  Year-End (#)(1)
Christine Bucklin			39,907
Gregory P. Dougherty			30,825
Thomas J. Fallon(2)			18,211
Marcel Gani			18,211
Sharon E. Holt			36,068
Kambiz Y. Hooshmand(2)			18,211
Paul J. Milbury			18,211
Amy H. Rice(3)			—
George A. Riedel			39,907
Mark A. Wegleitner			18,211
David F. Welch, Ph.D			821,126	(4)

 

(1)	Unvested time-based RSU awards, except with respect to Dr. Welch.

(2)	Messrs. Fallon and Hooshmand resigned from our Board in February 2022.

(3)	Ms. Rice has waived any participation in the compensation benefits available to the Company’s non-employee directors, except for customary reimbursement of expenses.

(4)	Comprised of 165,570 unvested time-based RSU awards and 655,556 performance share awards for which the performance goals have not yet been met.

 

29

OUR PAY

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides information related to the fiscal 2021 compensation program and related decisions for our NEOs identified below.

Our Named Executive Officers

For fiscal 2021, our NEOs were the following:

 

•

David W. Heard, our CEO;

 

•

Nancy Erba, our CFO;

 

•

David L. Teichmann, our Chief Legal Officer (“CLO”) and Corporate Secretary; and

 

•

Nicholas Walden, our Senior Vice President, Worldwide Sales.

Executive Summary

Fiscal 2021 Business Results

Fiscal 2021 was a year in which we strengthened our product portfolio, accelerated growth and expanded margins. We were able to make strong progress toward our financial and strategic goals while navigating an ongoing global pandemic and the increased impact of supply chain disruptions. Below are five key accomplishments in fiscal 2021:

 

•

First, we delivered against our major financial milestones; we grew revenue faster than the optical dense wavelength division multiplexing (DWDM) systems telecommunications market, excluding China; we expanded non-GAAP annual gross margin year-over-year by 380 basis points, which was at the high end of our 300 basis point to 400 basis point goal; and we generated positive and improved non-GAAP operating margin and GAAP cash flow from operations.

 

•

Second, we drove commercial success across our customer footprint as we secured new Tier 1 design wins and won new Huawei displacement business. In fiscal 2021, we had record bookings and revenue with Internet content providers (“ICPs”); we have grown our ICP revenue at a 30% compound annual growth rate since 2019. And in subsea, a market characterized by stringent capacity and reach requirements, we grew overall bookings by over 50% in 2021.

 

•

Third, we expanded our product portfolio, securing design wins and gaining market share with our compact modular platforms, line systems, and metro products. At the end of fiscal 2021 we had grown revenue from our 800 gigabits per second ICE6 GX product to the low-teens as a percentage of product revenue. We exited the year with over 30 ICE6 customers and a healthy pipeline, and are on track to ramp ICE6 revenue to 20-25% of product revenue in 2022. In addition, line system bookings, a leading indicator of the future high-margin transponder sales, grew by 100%. This was primarily driven by ICE6 deployments. Bookings from our metro portfolio, including the XTM 7100 and GX platforms grew by 25% in fiscal 2021.

 

•

Fourth, we unveiled our suite of vertically integrated coherent pluggables to expand our addressable market and enable an increase in margins from higher levels of vertical integration in our metro portfolio. In June 2021, we launched the Open XR Forum with five leading carriers as initial members, and in fiscal 2022 we expect to continue announcing other major carriers as new members. Our current members collectively represent approximately 20% of the global telecom spend on capital expenditures.

 

•

Fifth and lastly, to execute our 8x4x1 strategy that we laid out at our Investor Day in May 2021, we organized the company into two business groups, one focused on optical systems and the other on coherent optical modules, with both groups supported by our services organization. We also bolstered our executive leadership team by bringing in additional industry veterans from leading companies to accelerate the execution of our growth and scale strategy.

 

30

The following table illustrates our GAAP revenue and non-GAAP operating income (loss) over the last three fiscal years:

 

 

 

(1)	For a reconciliation of GAAP to non-GAAP revenue, gross profit, gross margin, operating income (loss) and operating margin for fiscal 2021, 2020 and 2019, referenced in this table or elsewhere in this Proxy Statement, please see Appendix A.

The following graph shows our 1-, 3- and 5-year TSR as compared to the Standard & Poor’s North American Technology Multimedia Networking Index (“S&P Networking Index”), measured from the last trading day of fiscal 2021.

 

 

Fiscal 2021 Executive Compensation Program Overview

At the beginning of fiscal 2021, when a majority of executive compensation decisions were made, the Compensation Committee considered the performance of our company as we exited fiscal 2020 and the goals of achieving profitable revenue growth and non-GAAP operating income growth despite a very dynamic supply chain environment during the ongoing COVID-19 pandemic. The decisions made reflected a continuing effort to maintain a strong pay-for-performance profile and supported accountability of our leadership team for our financial performance.

As indicated below, a significant portion of our executive compensation program is designed to align the compensation outcomes for our participating NEOs with performance against measurable objectives.

 

31

Executive Compensation Program Structure

 

		Compensation Element (CEO/average NEO allocation at target)		Structure and Attributes
		Base Salary (16% CEO/24% NEOs)		•  Competitively benchmarked •  NEOs except for the CEO received a pay increase in FY’21
		Target Annual Incentive (0% CEO/8% NEOs)		•  NEOs did not participate in FY’21 annual cash incentive plan •  NEOs other than CEO instead were granted RSUs equal to 75% of their annual target bonus •  SVP, Worldwide Sales, was granted RSUs equal to 18.75% of annual target bonus and also had cash incentive opportunity based on bookings and gross profit metrics equal to 75% of annual target bonus
		Long-Term Performance- Based Stock Awards (50% CEO/36% NEOs)		•  Based on objective performance metrics: •  GAAP Revenue •  Non-GAAP Operating Income •  Vesting occurs when metrics are met for full fiscal year during performance period and time-based vesting requirement is met •  CEO received 42% performance-based shares; other NEOs received 30%
		Long-Term Restricted Stock Awards (34% CEO/32% NEOs)		•  Designed for long-term retention and to provide strong long-term shareholder alignment •  RSUs vest over three years, with one-third vesting after one year and then quarterly for the remaining two years •  CEO received 28% restricted stock; other NEOs received 33%

Proactive Measures Taken During Fiscal 2021 and Pay-for-Performance Outcome in Fiscal 2021

In fiscal 2020, our Compensation Committee took proactive measures to adjust the executive compensation program to reduce expenses, preserve cash and to better position us in light of the rapidly changing business environment and increased uncertainty due to the COVID-19 pandemic that began early in the year. These measures included temporary salary reductions for our NEOs. Additionally, no payments were made under our 2020 corporate bonus plan for participating NEOs.

In fiscal 2021, our Compensation Committee continued to focus on expense reduction and cash preservation in the face of continued challenges and uncertainty related to the ongoing COVID-19 pandemic, while balancing the need to effectively retain critical talent and incentivize achievement of key business objectives by our NEOs. In lieu of participating in our annual incentive cash compensation plan, our executive officers other than the CEO were provided with retention equity awards while we strategically conserved cash during the continuing COVID-19 pandemic, thus helping to continue to promote executive officer and shareholder alignment, as discussed further below. These retention equity awards also vest over a longer period than would be the case for incentive cash compensation to be earned under our normal annual cash bonus program. Although we did not have an incentive compensation program, either cash or equity, for our CEO, in March 2022 our Compensation Committee approved a cash bonus for our CEO in recognition of his leadership and performance in fiscal 2021.

 

32

During fiscal 2021, we continued to make progress toward achievement of our longer-term strategic goals. Under our fiscal 2021 executive compensation program, and consistent with our compensation policy promoting strong pay and performance alignment:

 

•

None of the performance shares granted in 2020 and 2021 became eligible to vest based on performance during 2021;

 

•

Performance shares granted in 2019 were earned during fiscal 2021 based on our achievement of positive non-GAAP operating income for four consecutive fiscal quarters; and

 

•

Realized compensation value for our CEO in fiscal 2021 was 105% of his target compensation.

Pay-for-Performance with Respect to Fiscal 2021 CEO Compensation

We emphasize performance-based incentives for compensation for all of our NEOs, including in particular our CEO, as evidenced in the chart below, which illustrates the target total direct compensation (i.e., base salary, target cash incentive opportunity, and equity awards) of our CEO versus our CEO’s actual realized compensation during the most recent three fiscal years, as well as our stock price during that time period. Mr. Heard served as our CEO during fiscal 2021. Thomas J. Fallon served as our CEO during fiscal 2019 and during fiscal 2020 until November 23, 2020; Mr. Fallon’s compensation is reflected for fiscal 2020 in the chart below. Target total direct compensation is defined as the sum of the base salary rate approved for each fiscal year, the target cash incentive for the year, and the grant date target value of equity awards. The target value of equity awards reflects the grant date share price of performance share awards, which differs from the value reported in the Summary Compensation Table below. Actual realized compensation includes the base salary and any cash annual incentive earned during the year plus the sum of any RSUs and performance shares that vested during the year, valued using the share price on the vesting date.

 

 

As described above, our CEO target total direct compensation emphasizes compensation that aligns with investor interests, including an at-risk annual incentive (in fiscal 2019 and 2020) and long-term vesting equity awards. Realized compensation for fiscal 2021 for our CEO exceeded target by approximately 6%, reflecting appreciation in the value of equity awards granted in prior years but that vested during fiscal 2021. This additional value was driven by a significant increase in the closing share price of our common stock, from $3.99 on December 31, 2018 (the start of the 3-year period detailed in the chart above) to a closing price of $9.55 on December 23, 2021 (which was the last trading day of our fiscal 2021). Our compensation programs are designed to reward executives with realized compensation that exceeds target through a combination of strong shareholder returns and performance that exceeds the targets approved for our short- and long-term incentive plans. As a result of our emphasis on pay-for-performance, the realized compensation of our then CEO fell significantly below target in fiscal 2019 and fiscal 2020. In addition, in furtherance of our pay-for-performance goals, 60% of Mr. Heard’s targeted equity awards in fiscal 2021 were granted in the form of performance share awards.

 

33

Governance of Executive Compensation

Our executive compensation program includes the following executive compensation governance policies and practices:

 

•

Compensation At Risk. Our executive compensation program is designed so that a significant portion of our NEO compensation is “at risk” based on corporate performance, as well as equity-based to align the interests of our NEOs and shareholders.

 

•

Executive Clawback Policy. We maintain an executive clawback policy that applies to our Section 16 Officers and provides for recovery of both cash and equity incentive compensation under specified circumstances.

 

•

Anti-Hedging Policy. Our Insider Trading Policy prohibits all employees, including our NEOs, and Board members from hedging their Infinera common stock.

 

•

Anti-Pledging Policy. Our Insider Trading Policy prohibits our NEOs and Board members from pledging Infinera common stock as collateral for a loan.

 

•

Fully Independent Compensation Committee. Our executive compensation program is administered annually by the Compensation Committee, which consists solely of independent directors.

 

•

Stock Ownership Policy. Our Section 16 Officers and Board members are subject to minimum stock ownership requirements.

 

•

“Double-trigger” Change of Control Arrangements. Our change of control agreements contain “double-trigger” arrangements that require a termination of employment without cause or a constructive termination of employment following a change of control of Infinera before payments and benefits are triggered, unless otherwise set forth in a specific equity award agreement.

 

•

Annual Compensation Risk Assessment. The Compensation Committee annually conducts a compensation risk assessment to determine whether our compensation arrangements, or components thereof, create risks that are reasonably likely to have a material adverse effect on Infinera.

 

•

Independent Compensation Consultant Reporting Directly to Compensation Committee. The Compensation Committee utilizes input from Compensia, Inc. (“Compensia”), an independent compensation consultant that is retained directly by the Compensation Committee and performed no services for Infinera during fiscal 2021 other than services for the Compensation Committee.

Overview of Our Executive Compensation Program Philosophy and Process

Compensation Objectives and Philosophy

Our executive compensation program is designed to attract, retain, and reward talented executive officers and to motivate them to pursue our corporate objectives, while fostering the creation of long-term value for our shareholders. To achieve this mission, we take a “pay-for-performance” approach that forms the foundation for the design of our executive compensation program. The Compensation Committee also designs the various components of our executive compensation program to support our company culture (i.e., increasing levels of accountability through the use of “at risk” pay for more senior level employees), the internal company environment relative to industry conditions, current business priorities, strategy and product development cycles, and current market practices of our peer group. Further, because we are in a period of transition, certain elements of our compensation program measure progress on similar metrics in the short and long term and contains rewards for our executives that are earned when certain strategically important financial milestones are met and sustained. We believe this program is in the best interests of and aligned with our shareholders and maximizes the incentive for our employees and executive team to deliver shareholder value.

Advisory Vote on Fiscal 2020 Named Executive Officer Compensation—“Say-on-Pay” Vote

In 2021, shareholders were provided with the opportunity to cast an advisory (non-binding) vote (a “say-on-pay” proposal) on the compensation of our NEOs for fiscal 2020. Our shareholders approved this say-on-pay proposal, with more than 96% of votes cast voting in favor of our executive compensation program.

 

34

Noting the results of this vote, the Compensation Committee considered this shareholder approval when making compensation decisions for fiscal 2021 as well as fiscal 2022.

In light of the 2021 say-on-pay vote, the Compensation Committee maintained a consistent general approach to our executive officer compensation program. This included a continued emphasis on pay-for-performance through the use of performance shares that reward executive officers only if they deliver value for our shareholders.

The Compensation Committee will continue to consider input from our shareholders as reflected in the outcome of our annual say-on-pay vote when making executive compensation program decisions.

Compensation-Setting Process

Role and Authority of Compensation Committee. The Compensation Committee is responsible for our executive compensation program and all related policies and practices. The Compensation Committee has the responsibility to establish and approve the compensation of each of our executive officers, including our NEOs. In addition, the Compensation Committee reviews and administers our equity and employee benefit plans and programs, which are generally available to our employees, including our NEOs. The Compensation Committee also has the authority to engage its own advisors to assist it in carrying out its responsibilities, and the reasonable compensation for such advisor services is paid by Infinera.

Role of Compensation Consultant. During fiscal 2021, the Compensation Committee engaged the services of Compensia, a national compensation consulting firm, as its independent compensation consultant to provide advice on matters relating to the compensation of our executives and non-employee directors. Compensia attended several of the Compensation Committee’s meetings during fiscal 2021 and provided the Compensation Committee with an analysis of industry-sector competitive market data regarding NEO compensation, information on compensation trends, peer group and general market data, as well as assistance with the parameters used to determine the peer group, base salary, incentive plan design and the structure of our executive compensation program. During fiscal 2021, Compensia also provided general observations about our compensation programs and reviewed and provided input on this Compensation Discussion and Analysis section.

Compensia reports directly to the Compensation Committee. During fiscal 2021, Compensia interacted with management at the direction of the Compensation Committee but did not provide any other services for Infinera or its management team. Compensia’s fees in fiscal year 2021 were paid by Infinera. The Compensation Committee annually reviews the independence of its compensation consultant and during fiscal 2021 determined that there were no conflicts of interest in connection with Compensia’s work.

Determination of CEO Compensation. Compensia provides market data and considerations for the Compensation Committee regarding the amount and form of our CEO’s compensation. As part of this process, the Compensation Committee considers input from the Board and feedback from the Chairman of the Board, in particular with respect to the performance of our CEO. After considering the feedback and recommendations received, all decisions regarding our CEO’s compensation are made by the Compensation Committee, based on its own judgment and after considering the interests of our shareholders, in executive sessions excluding our CEO.

Determination of Non-CEO Compensation. As a result of his close working relationship with each of the other NEOs, our CEO is asked to provide his assessment of their performance to the Compensation Committee, including considerations regarding retention and importance of their contributions to Infinera. Our CEO is assisted by our Chief Human Resources Officer in making these assessments. Our CEO then presents his performance assessment of the other NEOs and makes formal recommendations to the Compensation Committee regarding adjustments to base salary, annual cash incentive award opportunities, and equity awards for our NEOs (other than himself). While the Compensation Committee considers the recommendations of our CEO in determining compensation for our other NEOs, ultimately its decisions are based on its own judgment and the interests of our shareholders. None of our NEOs makes any recommendations regarding his or her own compensation and none of our NEOs are present at meetings at the time their compensation is determined.

 

35

Executive Compensation Elements

We consider the following to constitute the key elements of compensation for our executive officers:

 

•

Salary. We pay base salaries to attract, retain and motivate our executive officers for their day-to-day contributions.

 

•

Annual Incentive Compensation.

 

•

Historically, we have provided annual incentive cash compensation to link payments to the achievement of our annual financial and/or operational objectives and expect to resume this compensation program in the future. However, for the second half of fiscal 2020 and all of fiscal 2021, we cancelled this program in response to impacts from the COVID-19 pandemic.

 

•

In fiscal 2021, in lieu of incentive cash compensation, we provided our executive officers other than our CEO with retention equity awards while strategically conserving cash during the continuing COVID-19 pandemic, helping to ensure executive officer and shareholder alignment, as discussed further below. These retention equity awards also vest over a longer period than would be the case for incentive cash compensation to be earned under our normal annual cash bonus program. Our SVP, Worldwide Sales, also received incentive cash compensation tied to achievement of metrics for bookings and non-GAAP gross profit. In March 2022, our Compensation Committee awarded a cash bonus to our CEO in recognition of his performance and leadership in fiscal year 2021.

 

•

In fiscal 2022, we are reinstating an annual incentive cash compensation program for our CEO and CFO. For our other NEOs, the annual incentive compensation program will retain the retention equity component as to 50% of the target value and will reinstate annual incentive cash compensation as to the other 50% of the target value. Our SVP, Worldwide Sales, will participate in this annual incentive compensation program (including the 50%/50% ratio between cash and retention equity) as to 25% of his target value and will also participate in a separate incentive compensation program as to 75% of his target value that is tied to achievement of new financial targets for bookings and gross profit, measured on a non-GAAP basis.

 

•

Long-Term Incentive Compensation. We provide long-term incentive compensation delivered in the form of equity awards to align the interests of our executive officers with those of our shareholders and provide significant motivational and retention value to our executive officers.

These are the key elements of our executive compensation program. We believe each is necessary to attract, retain and motivate our executive officers, on whom our success largely depends. In addition, we also provide employee benefits that are generally available to all our employees including our NEOs, and certain severance and “double-trigger” change of control payments and benefits as part of our executive compensation program, as described further below.

Allocation of Compensation Across Pay Elements

In determining how to allocate an NEO’s target total direct compensation opportunity among these various elements, the Compensation Committee considers market-competitive practices for companies of a similar size and with a comparable business focus. Individual retention considerations specific to the individual are also factored in the Compensation Committee’s final determination of target total direct compensation. Equity awards, which for fiscal 2021 consisted of awards of time-based RSUs and performance shares, represented the largest component of our NEOs’ target total direct compensation opportunity. This approach was designed to encourage sustained, long-term performance and to ensure alignment of the interests of our NEOs with those of our shareholders. Consistent with our “pay-for-performance” philosophy, a significant portion of our NEOs’ fiscal 2021 target total direct compensation opportunity was completely “at risk,” including 50% of Mr. Heard’s target total direct compensation opportunity. We define “at risk” compensation as opportunities for which vesting eligibility is contingent upon achievement of specified performance conditions. In fiscal 2021, this included performance share awards, where the value of performance shares is included in the charts below based on the grant date target value of shares awarded.

 

36

The following charts show the target total direct compensation mix for fiscal 2021 for Mr. Heard and our other NEOs, with the value of equity awards determined using grant date fair value.

 

 

Role of the Compensation Peer Group and Market Data

In making compensation decisions for our executive officers, the Compensation Committee reviews and analyzes competitive market practices using data drawn from a group of peer companies and the Radford Global Technology survey.

In September 2020, the Compensation Committee reviewed the peer group used for executive compensation decision-making for purposes of fiscal 2020 compensation planning. The target selection criteria for the peer group identified in September 2020 and used for fiscal 2021 compensation planning were:

 

•

Industry: companies in the communications equipment sector and Infinera’s direct competitors, as well as other companies in broader technology sectors, with a focus on companies that overlap with key elements of Infinera’s business;

 

•

Annual Revenue: $625 million to $2.5 billion;

 

•

Market Capitalization: $222 million to $3.6 billion; and

 

•

Location: U.S.-based companies, with a preference for Bay Area-headquartered companies.

Our peer group for fiscal 2021 compensation planning consisted of the following 14 companies, which remained the same as the companies comprising the peer group for fiscal 2020 compensation planning:

 

Ciena Corporation		NETGEAR, Inc.
Cirrus Logic, Inc.		NetScout Systems, Inc.
Coherent, Inc.		OSI Systems, Inc.
Extreme Networks, Inc.		Plantronics, Inc.
Finisar Corporation		Ribbon Communications Inc.
II-VI Inc.		Synaptics Incorporated
Lumentum Holdings Inc.		Viavi Solutions Inc.

The Compensation Committee also reviewed market data derived from the Radford Global Technology survey to supplement the available peer group data for purposes of determining the compensation of Mr. Teichmann, our Chief Legal Officer and Mr. Walden, our Senior Vice President, Worldwide Sales. In this discussion, where we refer to “market” levels of pay and the “market data,” we are referring to the combined compensation peer group and survey data described above that were then in effect and applicable to our NEOs.

 

37

Use of Market Data

For its fiscal 2021 compensation decisions, the Compensation Committee continued to maintain a holistic and flexible approach in its use of market data. The Compensation Committee’s goal is generally to set all elements of compensation within a competitive range, using a balanced approach that does not use rigid percentiles to target pay levels for each compensation element, but instead makes its compensation decisions based on a variety of relevant factors, including those listed below. While the Compensation Committee continues to review and reference market data, the data generally is used to inform the Compensation Committee of market practices to ensure that our executive compensation program remains within a generally competitive range of our peers. In addition to the market data, several other factors are taken into account in setting the amount of each NEO’s target total direct compensation opportunity. These factors include:

 

•

Recruitment, retention and historical factors. The Compensation Committee reviews existing NEO compensation and retention levels relative to estimated replacement cost with respect to the scope, responsibilities and skills required of the particular position.

 

•

Lack of directly comparable data for some of our key roles. Compensation data for some of our key positions are often not explicitly reported by companies in our compensation peer group or survey data. This results in limited sample sizes and/or inconclusive data that can be misleading if targeting a specific percentile for market positioning.

 

•

Market positioning may be distorted by the source of the data. Certain elements of compensation reported from one source can be consistently higher or lower than the data collected from another, given differences in methods and samples used by each source to collect market data. Given this variability and volatility within the market data, the Compensation Committee has determined that targeting pay levels at specific percentiles of this data could result in outcomes that do not align with the internal value and strategic importance of various roles at Infinera.

 

•

Desire to account for other factors not captured in the market data. As discussed below, the Compensation Committee also considers several qualitative factors.

Relevant Qualitative Factors

In addition to our uses of competitive market data as described above, the Compensation Committee considers a range of subjective and qualitative factors when making compensation decisions for our NEOs, including:

 

•

The role the executive officer plays and the importance of such individual’s contributions to our ability to execute on our business strategy and to achieve our strategic objectives;

 

•

Each executive officer’s tenure, skills and experience;

 

•

The responsibilities and particular nature of the functions performed or managed by the executive officer;

 

•

Our CEO’s recommendations and his assessment of each executive officer’s performance (other than his own performance), and with respect to the CEO’s performance, assessment by the Board;

 

•

The value of unvested equity awards held by each executive officer and in comparison to other members of our executive management team and senior employees;

 

•

Internal pay equity across the executive management team;

 

•

The impact of our compensation decisions on key financial and other measures such as our equity award “burn rate” and, in 2021, the our utilization of cash versus equity;

 

•

Our overall performance as compared to internal plans and external benchmarks;

 

•

The potential impact on shareholder dilution of our compensation decisions relative to peers and historical practices; and

 

•

Competitive labor market pressures and the likely cost, difficulty and impact on our business and strategic objectives that would be encountered in recruiting a replacement for the role filled by each of our NEOs.

 

38

The Compensation Committee does not assign relative weights or rankings to any of these factors and does not solely use any quantitative formula, target percentile or multiple for establishing compensation among the executive officers or in relation to the market data. Instead, the Compensation Committee relies upon its members’ knowledge and judgment in assessing the various qualitative and quantitative inputs it receives regarding each individual and makes compensation decisions accordingly.

Fiscal 2021 Compensation

Base Salaries

For fiscal 2021, the Compensation Committee reviewed the base salaries in March 2021 for each of our NEOs. The Compensation Committee did not change our CEO’s base salary, which had been set in December 2020 in connection with his promotion to CEO. After considering peer market data provided by Compensia, noting the temporary salary reductions implemented in 2020 and taking into account their respective individual performance during this period, the Compensation Committee approved increases to the base salaries for the other NEOs as shown in the table below.

The following table shows the annual base salary for each of our NEOs for fiscal 2020 and fiscal 2021.

 

Name		Fiscal 2020 Annual Base Salary				Fiscal 2021 Annual Base Salary
David W. Heard(1)		$	520,000	(2)		$	700,000
Nancy Erba		$	425,000			$	445,000
David L. Teichmann		$	385,000			$	400,000
Nicholas Walden(3)		$	375,000			$	410,000

 

(1)	Mr. Heard was promoted to CEO effective as of November 23, 2020.

(2)	Mr. Heard’s annual base salary was increased to $700,000 effective as of December 5, 2020 in connection with his promotion to CEO.

(3)	Mr. Walden was promoted to Senior Vice President, Worldwide Sales, effective as of January 5, 2020.

Annual Incentive Compensation

Target Bonus Opportunities. In March 2021, the Compensation Committee reviewed the target bonus opportunities (which are expressed as a percentage of base salary) for fiscal 2021 for each of our NEOs, and determined that the target bonus opportunities for our NEOs except for Mr. Walden would remain the same in fiscal 2021 as in fiscal 2020. As noted above, these target bonus opportunities were used to determine the value of retention equity awards for our NEOs (other than our CEO) but our NEOs did not participate in any annual cash incentive program based on these target amounts. The Compensation Committee determined to increase Mr. Walden’s target bonus opportunity to 85%. In considering the increased target bonus opportunity for Mr. Walden, the Compensation Committee considered the competitive market data provided by Compensia and its desire to provide appropriate competitive compensation to Mr. Walden in his critical role as the SVP, Worldwide Sales.

The following table shows the target bonus opportunities for each of our NEOs for fiscal 2020 and fiscal 2021.

 

Name		Fiscal 2020 Target Bonus				Fiscal 2021 Target Bonus
David W. Heard			90	%(1)			125	%
Nancy Erba			75	%			75	%
David L. Teichmann			70	%			70	%
Nicholas Walden			75	%			85	%

 

(1)	Mr. Heard’s target bonus opportunity was increased to 125% effective as of December 5, 2020 in connection with his promotion to CEO.

2021 Retention Equity Awards. In March 2021, the Compensation Committee determined that we would provide our NEOs, other than the CEO, with retention equity awards in lieu of annual incentive cash

 

39

compensation. These retention equity awards were granted under our 2016 Plan in the form of RSUs. This approach allowed us to strategically conserve cash during the continuing COVID-19 pandemic while helping to ensure executive officer and shareholder alignment and executive officer retention. The Compensation Committee chose to grant these in the form of RSUs given that RSUs retain value generally in one-to-one correlation with our stock price, which the Compensation Committee believed was appropriate in delivering the desired retention value under these awards and would closely correlate with our corporate financial performance. The Compensation Committee determined it was important for the CEO not to participate in the annual cash incentive program as a demonstration of his support for our cash conservation goal in fiscal 2021. Further, it determined not to grant him a retention equity award in lieu of annual cash compensation after considering his recent promotion to CEO in November 2020 and the desire to preserve the ratio of at-risk equity compensation awards granted to him in fiscal 2021.

These retention equity awards were intended to provide an award value at the time of grant approximately equivalent to 75% of the target bonus opportunity for each NEO, other than Mr. Walden, under our annual performance-based incentive cash program used in prior fiscal years. The Compensation Committee believed that this 25% discount appropriately balanced the goal of conserving cash with the incentive value that RSUs are able to deliver in comparison to cash compensation. In the case of Mr. Walden, our SVP, Worldwide Sales, the retention equity award was intended to provide an award value at the time of grant approximately equivalent to 18.75% of his 2021 target bonus opportunity, which included the 25% discount noted above for the other NEOs. In addition, the Compensation Committee approved a variable cash compensation program for Mr. Walden as noted below.

The retention equity awards vest over a longer period than has been the case for incentive cash compensation to be earned under prior annual incentive cash bonus programs, with one-half of the RSUs vesting after twelve months and the remaining shares vesting ratably over the next four quarters.

Walden 2021 Variable Compensation Program. In March 2021, the Compensation Committee approved a fiscal 2021 variable compensation program for Mr. Walden with a target cash value equal to 63.75% of his base salary tied to achievement of financial targets for bookings and gross profit, measured on a non-GAAP basis, combined with his retention equity award described above. The Compensation Committee believed that these goals would be appropriate given Mr. Walden’s critical role leading the Company’s efforts in driving revenue, and for focusing efforts on our profitable revenue growth by emphasizing bookings, which are closely correlated with revenue balancing, and gross profit, which is an important measure of the Company’s business success.

 

		Bookings Threshold				Bookings Target				Gross Profit Threshold				Gross Profit Target
Amount		$	1.40 billion			$	1.45 billion			$	505.3 million			$	526.0 million
Funding % of Target			50	%			100	%			75	%			100	%
Actual Results			$1.72 billion								$537.5 million

We met both sets of financial targets for the cash portion of Mr. Walden’s fiscal 2021 variable compensation program, with bookings of $1.72 billion (weighted at 60%) and gross profit, measured on a non-GAAP basis, of $537.5 million (weighted at 40%). This resulted in an overall bonus achievement of 158% for Mr. Walden, for a payout of $412,082.

Fiscal 2022 Bonus Plan. In March 2022, the Compensation Committee approved a fiscal 2022 Bonus Plan that reinstates an annual incentive cash compensation program for our CEO and CFO. For our other NEOs, the annual incentive component of their compensation will continue to consist of the retention equity component utilized in fiscal 2021 as to 50% of the NEO’s target incentive opportunity and the 2022 Bonus Plan will reinstate annual incentive cash compensation as to the other 50% of the NEO’s target incentive opportunity. Mr. Walden will participate in this annual incentive compensation program (including the 50%/50% ratio between cash and retention equity) as to 25% of his target incentive opportunity and will also participate in a separate incentive compensation program as to 75% of his target value that is tied to achievement of new financial targets for bookings and gross profit, measured on a non-GAAP basis.

Heard One-Time Cash Bonus. In March 2022, the Compensation Committee approved a cash bonus for Mr. Heard of $200,000 in recognition of our fiscal 2021 financial performance and his strong leadership and

 

40

performance in achieving these results. The Compensation Committee believed that such bonus was appropriate in light of the significant progress we made during fiscal 2021 toward achieving our long-term financial and strategic goals. The Compensation Committee also considered that Mr. Heard was not eligible to receive a cash bonus under our annual short-term incentive plan in order to support our cash conservation efforts at the beginning of fiscal 2021. In addition, he was not awarded retention RSUs in-lieu-of an annual short-term incentive opportunity.

Long-Term Incentive Compensation

Our long-term incentive compensation opportunities are delivered in the form of equity awards. Under the 2016 Plan, the Compensation Committee grants equity awards to eligible employees, including our NEOs. All awards to our NEOs were made pursuant to the 2016 Plan. Annual equity awards for NEOs are generally approved by the Compensation Committee during the first open trading window of each new calendar year. The Compensation Committee actively monitors our annual aggregate equity utilization as measured by our burn rate.

Equity Compensation Design. The Compensation Committee believes that it is in the best interests of Infinera and our shareholders to grant a combination of time-based and performance-based equity awards to senior level employees, including our NEOs. It also believes that our performance-based equity awards foster a “pay-for-performance” culture and multi-year vesting schedules create longer-term incentives that maintain alignment of the interests of our NEOs with those of our shareholders. Our NEOs benefit from these equity awards based on our sustained performance over time and the ability of our NEOs to create the results that drive shareholder value.

In determining the appropriate mix of such equity awards, the Compensation Committee considered how each equity vehicle supports our compensation strategy as follows:

 

Type of Award		Description		Why It Is Used
Performance Share Award		•  Provides the opportunity to earn shares of Infinera common stock upon the achievement of pre-established performance objectives.   •  If the threshold performance level is not achieved, the entire portion of the award tied to such performance objective is forfeited.		•  Supports pay-for-performance philosophy and retention efforts.   •  Links compensation directly to Infinera’s stock performance in areas identified as important by the Compensation Committee.   •  Increases alignment with interests of shareholders.
RSU Award		•  Provides the opportunity to earn a specified number of shares of Infinera common stock subject to the participant’s continued employment for a specified period.   •  Typically has a three-year or four-year vesting period to encourage a long-term perspective and to encourage key employees to remain at Infinera.		•  Supports retention and succession planning.   •  Provides a direct incentive for future performance.   •  Useful in recruiting new executives.

Target Award Size. In determining the size of these annual equity awards, the Compensation Committee considered the factors described above in the sections entitled “Use of Market Data” and “Relevant Qualitative Factors,” with particular attention to market data, internal equity considerations, the potential dilutive impact of the equity awards, and the amount and value of unvested equity awards held by each of our NEOs. The Compensation Committee believed a combination of time-based and performance-based equity awards promote close alignment of the interests of our NEOs with those of our shareholders.

For fiscal 2021, the Compensation Committee first determined the target value of long-term incentive compensation for each executive. The number of RSUs and performance shares granted to each executive was

 

41

then determined based on an assumed stock price of $10.00 per share and assuming a 60% allocation of target value into performance shares for Mr. Heard, our CEO, and a 50% allocation of target value into performance shares for our other NEOs. The Committee determined to utilize a $10 reference price in order to facilitate the equity planning process and after taking into account recent volatility of our common stock share price, although the grant date value for these equity awards was below $10 per share. The target value approved by the Compensation Committee differs from the value of equity reported in the Summary Compensation Table below.

Fiscal 2021 Equity Awards. In March 2021, the Compensation Committee granted annual equity awards for fiscal 2021 in the form of a time-based RSU award and a performance share award to each of our NEOs. The following table sets forth the equity awards granted to our NEOs in March 2021.

 

Name		Number of Shares Subject to 2021 RSU Awards				Number of Shares Subject to 2021 Performance Share Awards
David W. Heard			172,000				258,000
Nancy Erba			60,000				60,000
David L. Teichmann			50,000				50,000
Nicholas Walden			55,000				55,000

The RSU awards in the table above vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2022, and one-twelfth of the underlying shares vesting quarterly thereafter, subject to each NEO’s continued service to Infinera through each applicable vesting date.

Performance Share Awards.

Determining the Performance Goal. In determining the performance criteria for the 2021 performance share awards for our NEOs, the Compensation Committee considered the importance of profitable revenue growth combined with non-GAAP operating income growth. The Compensation Committee also considered that the new performance share awards would be designed to work in concert with grants made in previous years that will have overlapping performance cycles with the awards granted in 2021. Fiscal 2019 awards were structured differently to encourage executives to accelerate our return to sustained profitability. Fiscal 2020 awards were structured to drive executive focus on increasing our gross margin.

Performance Criteria. Accordingly, the Compensation Committee decided to utilize two sets of performance goals for the fiscal 2021 awards, with each set of goals covering one-half of the fiscal 2021 performance shares. The 2021 performance share awards (the “2021 PSA”) can be earned during fiscal 2021 through fiscal 2023 (the “2021 PSA Performance Period”) based on the Company’s achievement of these two sets of performance goals (the “2021 PSA Goals”). The first set, referred to as “Tranche A Goals,” includes both an operating income goal, measured on a non-GAAP basis over a full fiscal year, and a revenue goal, measured on a GAAP basis over a full fiscal year. Upon achievement of both prongs of the Tranche A Goals, 50% of the shares subject to the 2021 PSA will become eligible to vest. The second set, referred to as the “Tranche B Goal,” includes an operating income goal, measured on a non-GAAP basis over a full fiscal year. Upon achievement of the Tranche B Goal, 50% of the shares subject to the 2021 PSA will become eligible to vest.

For purposes of the 2021 PSA, non-GAAP operating income is calculated by excluding from GAAP operating income the following: acquisition-related deferred revenue adjustment, stock-based compensation expense, amortization of acquired intangible assets, acquisition and integration costs, restructuring and other related costs, inventory related charges, COVID-19 related costs and litigation charges. For a reconciliation of GAAP to non-GAAP operating income for fiscal 2021, for example, please see Appendix A to this Proxy Statement. In addition, under the terms of the 2021 PSA, the Compensation Committee may modify the 2021 PSA Goals to reflect one or more of the following extraordinary items occurring during the 2021 PSA Performance Period: (a) items related to acquisitions, (b) items related to the disposal of a business or segment of a business, or (c) items related to discontinued operations that do not qualify as a segment of a business under GAAP.

In establishing the performance goal for our NEOs’ 2021 performance share awards, the Compensation Committee reflected that the prior awards included goals targeted at specific financial objectives that ultimately tie

 

42

to shareholder value, and that the 2021 awards should as well. The Compensation Committee believes the overlapping, multiyear performance period design provides our NEOs with significant incentives to achieve various objectives that are important for our long-term success.

Achievement and Vesting. The 2021 PSA will become eligible to vest upon the determination by the Compensation Committee of the achievement of the 2021 PSA Goals and are subject to each NEO’s continued service to Infinera through each applicable vesting date. Achievement of the 2021 PSA Goals will be determined by the Compensation Committee based on the relevant financial performance results disclosed in our earnings release filed on Form 8-K with respect to a fiscal year during the 2021 PSA Performance Period. Once the 2021 PSA Goals have been achieved (as determined and certified by the Compensation Committee), if achievement occurs in fiscal 2021 or fiscal 2022, then eligible shares underlying the 2021 PSA will vest immediately as to such portion of shares that is pro rata to the percentage of days elapsed from April 5, 2021 in the 2021 PSA Performance Period, with the remaining eligible shares vesting on the last day of fiscal 2023. If achievement occurs in fiscal 2023, then all eligible shares underlying the 2021 PSA will vest immediately on the certificate date by the Compensation Committee. Time-based vesting is subject to continuous service to us by each NEO. In the event of our change in control that occurs during the 2021 PSA Performance Period, the unvested portion of the 2021 PSA will vest at the target level.

Achievement Status for Performance Shares During Fiscal 2021. We did not achieve the 2021 PSA Goals for the 2021 PSA during fiscal 2021. As a result, as of the end of fiscal 2021, the target number of shares subject to the 2021 PSA granted to each NEO remained unearned and outstanding. These shares are eligible to be earned and vest if the 2021 PSA Goals are achieved during the remainder of the 2021 PSA Performance Period.

Outstanding Performance Share Awards Granted in Prior Fiscal Years. The following table provides information regarding outstanding performance share awards granted prior to fiscal 2021 that were eligible to be earned in fiscal 2021 by our NEOs based on the achievement of performance with respect to non-GAAP operating income and stretch gross margin goals, including the performance requirements and number of shares of Infinera common stock earned through fiscal 2021.

 

Name		Fiscal Year of Grant				Total Number of Performance Shares Remaining at Target (#)				Target Number of Shares that Could Vest for Fiscal 2021 Performance Period (#)				Maximum Number of Shares that Could Vest for Fiscal 2021 Performance Period (#)				Actual Number of Shares Vested for Fiscal 2021 Performance Period (#)
David W. Heard			2019	(1)			220,000				220,000				220,000				195,554	(2)
			2020	(3)			125,000				125,000				125,000				0	(4)
Nancy Erba			2019	(1)			187,500				187,500				187,500				166,666	(2)
			2020	(3)			77,500				77,500				77,500				0	(4)
David L. Teichmann			2019	(1)			65,000				65,000				65,000				57,776	(2)
			2020	(3)			68,500				68,500				68,500				0	(4)
Nicholas Walden			2019	(1)			12,500				12,500				12,500				11,110	(2)
			2020	(3)			47,100				47,100				47,100				0	(4)

 

(1)

In fiscal 2019, the Compensation Committee granted to the NEOs in the table above a performance share award (the “2019 Profitability PSA”) that can be earned during fiscal 2020 through fiscal 2022 based on our achievement of positive operating income, measured on a non-GAAP basis (the “Profitability Goal”), either (a) for a full fiscal year or (b) on an average basis, for any four consecutive fiscal quarters. In the event of our change of control that would have occurred during the 2019 Profitability PSA Performance Period, the unvested portion of the 2019 Profitability PSA would have vested at the target level.

(2)

We achieved the Profitability Goal for the 2019 Profitability PSAs, as we had positive non-GAAP operating income for four consecutive fiscal quarters, from Q3 fiscal 2020 through Q2 fiscal 2021. As a result, 100% of the target number of shares of our common stock became eligible to vest during fiscal 2021. In accordance with the time-based vesting provisions of the 2019 Profitability PSA, approximately 89% of the eligible shares vested in October 2021, with the remainder vesting in January 2022.

(3)

In fiscal 2020, the Compensation Committee granted to the NEOs in the table above a performance share award (the “2020 Gross Margin PSA”) that can be earned during fiscal 2020 through fiscal 2022 (the “2020 PSA Performance Period”) based on our achievement of a stretch gross margin goal, measured on a non-GAAP basis (the “Gross Margin Goal”), either (a) for

 

43

a full fiscal year or (b) on an average basis, for any four consecutive fiscal quarters. In the event of our change of control that occurs during the 2020 PSA Performance Period, the 2020 Gross Margin PSA would vest at the target level.

(4)

We did not achieve the Gross Margin Goal for the 2020 Gross Margin PSAs. As a result, as of the end of fiscal 2021, the target number of shares subject to the GM PSAs granted to each NEO remained unearned and outstanding. These shares are eligible to be earned and vest if the Gross Margin Goal is achieved during the remainder of the 2020 PSA Performance Period through the end of our fiscal 2022.

Employee Benefits and Perquisites

Generally, our NEOs are only eligible to receive the same benefits as our U.S. salaried employees . Infinera and the Compensation Committee believe this approach is reasonable and consistent with the overall compensation objectives to attract and retain employees. These benefits include medical, dental, vision and disability benefits, a Section 401(k) plan, and other plans and programs, including the 2007 ESPP, made available to other eligible employees in the applicable country of residence. We provide a matching contribution of up to $2,500 under the Section 401(k) plan that is applicable to all eligible participants, including our NEOs. Employee benefits and perquisites are reviewed periodically to ensure that benefit levels remain competitive, but are not included in the Compensation Committee’s annual determination of the total compensation for each of our NEOs.

All exempt U.S. employees, at any U.S. work location, participate in our “As Needed” FTO Program providing flexible time off. Under this program, these employees may schedule FTO as they see fit and as business necessity allows, although they must continue to meet all job expectations and remain responsible for ensuring appropriate coverage for the time they will be out of the office. Under this program, FTO does not accrue for these employees.

From time to time, Infinera may provide other benefits based on the particular circumstances and any business needs (for example, in order to recruit an individual to join the Company). In 2020, Mr. Heard received a relocation benefit of $120,385 under the relocation agreement he entered into with Infinera in 2017 as part of his COO new hire package. This relocation benefit was negotiated with Mr. Heard in connection with his hire, and the Compensation Committee believed that it was appropriate in order to recruit him to join the Company. In 2020, Mr. Walden received a relocation benefit of $90,000 under an agreement he entered into with Infinera following his promotion to Senior Vice President, Worldwide Sales, and received a further housing allowance benefit of $30,000 in 2021 under this agreement. These relocation benefits were negotiated with Mr. Walden in connection with the continuation of his assignment in California after relocating from the United Kingdom, and the Compensation Committee believed that these benefits were appropriate in order to enhance the operational effectiveness of the Company’s executive leadership.

Additional Information Regarding Our Compensation Practices

The estimated payments and benefits that would be received by each NEO in connection with a qualifying termination of employment, as described immediately below, are presented in the section entitled “Estimated Payments and Benefits upon Termination, Change of Control or Death/Disability” below.

Change of Control Payments and Benefits

The Compensation Committee considers maintaining a stable and effective management team to be essential to protecting the best interests of Infinera and its shareholders. Accordingly, Infinera has entered into Change of Control Agreements (the “COC Agreements”) with each of our NEOs to encourage their continued attention, dedication and continuity with respect to their roles and responsibilities without the distraction that may arise from the possibility or occurrence of a change of control of Infinera. The current terms of these COC Agreements are included below.

An NEO will receive payments and benefits under the COC Agreement only if his or her employment is terminated without “cause,” or by him or her as a result of a “constructive termination” (as more fully described in the section entitled “Estimated Payments and Benefits upon Termination, Change of Control or Death/Disability” below), beginning on the date three (3) months prior to the first change of control to occur following the effective date of the COC Agreement and ending on the date eighteen (18) months following a change of control of Infinera.

 

44

The Compensation Committee believes that this “double-trigger” structure provides an appropriate balance between the corporate objectives described above and the potential compensation payable to each NEO upon a change of control. The Compensation Committee also believes that should Infinera engage in any discussions or negotiations relating to a change of control that the Board believes is in the best interests of our shareholders, these COC Agreements will help to ensure that our NEOs remain focused on the consummation of such potential transaction, without significant distraction or concern regarding their personal circumstances, such as continued employment.

The following terms apply with respect to each of the NEOs if Infinera undergoes a change of control and the NEO’s employment is terminated without cause or as a result of a constructive termination during the Change of Control Period (that is, the period beginning three months prior to, and ending eighteen months after, a change of control), subject to such individual entering into and not revoking a release of claims in our favor within 60 days of the termination date:

 

•

100% of all outstanding equity awards will vest (awards based on the achievement of performance criteria will vest as to 100% of the amount of the award assuming the performance criteria have been achieved at target levels, unless otherwise provided in the agreement relating to such performance-based award);

 

•

Our CEO will be paid a lump sum severance payment (less applicable tax withholdings) equal to two times his annual base salary and our other NEOs will be paid a lump sum severance payment (less applicable tax withholdings) equal to one and one-half times their annual base salary;

 

•

Our CEO will be paid a lump sum severance payment (less applicable tax withholdings) equal to two times his annual target incentive bonus amount and our other NEOs will be paid a lump sum severance payment (less applicable tax withholdings) equal to one and one-half times their annual target incentive bonus amount; and

 

•

Our CEO will be reimbursed for premiums under COBRA for a period of up to 24 months and our other NEOs will be reimbursed for premiums under COBRA for a period of up to 18 months.

Each COC Agreement will have an initial term of three years commencing on the effective date of such COC Agreement. On the third anniversary of the effective date, such COC Agreement will renew automatically for an additional, one-year term unless either party provides the other party with written notice of nonrenewal at least one year prior to the date of automatic renewal.

In addition, the award agreements of certain performance share awards granted to our NEOs specify additional terms that apply to such awards in the event of our change in control, as described further above in the section titled “Long-Term Incentive Compensation.”

Executive Severance Policy

In addition to the change of control-related payments and benefits discussed above, the Compensation Committee has taken appropriate steps to provide competitive post-employment compensation arrangements that promote the continued attention, dedication and continuity of the members of our senior management team, including our NEOs, and enable us to continue to recruit talented senior executive officers. Accordingly, the Compensation Committee has adopted an executive severance policy, under which the following severance payments and benefits will become payable if the employment of one of our NEOs is terminated by us without “cause” (as defined in the policy) subject to such individual entering into and not revoking a release of claims in our favor:

 

•

Our CEO will be paid a lump sum severance payment equal to one and one-half times his annual base salary, and our other NEOs will be paid a lump sum severance payment equal to their annual base salary; and

 

•

Our CEO will be reimbursed for premiums under COBRA for a period of 18 months, and our other NEOs will be reimbursed for premiums under COBRA for a period of 12 months.

 

45

If an NEO’s employment with Infinera is less than one year, the amount of severance payable to such individual will be equal to the lesser of (x) the base salary paid to such individual during his or her period of employment, or (y) the severance amount set forth above.

Acceleration of Equity Awards upon Death or Disability

In addition, all awards granted under our equity incentive plans permit accelerated vesting in the event of an employee’s death or terminal illness (with exceptions in certain circumstances). Because we do not have any policy with respect to severance payments or benefits in the event of an employee’s death or disability other than certain disability and life insurance benefits generally available to our employees, the Compensation Committee believes that in the event of an employee’s death or terminal illness, it would be appropriate to provide the accelerated vesting of his or her RSU awards and performance share awards.

Equity Grant Policy

Under our Equity Grant Policy, the Compensation Committee has delegated to a Subcommittee the authority to grant new hire, promotional and retention equity awards to non-executive employees pursuant to certain pre-approved guidelines. At this time, the sole member of the Subcommittee is our CEO.

The Subcommittee approves the award by written consent on the second Monday of each month to approve new hire, promotional and retention equity awards. Annual focal equity awards are approved by the Compensation Committee. The delegation to the Subcommittee does not include the authority to grant equity awards to new employees who are or are reasonably expected to become Section 16 Officers or to current Section 16 Officers.

Executive Clawback Policy

We maintain an Executive Clawback Policy that applies to our Section 16 Officers (which includes each of our NEOs) and directors. Pursuant to this policy, the Compensation Committee has the authority to seek:

 

•

Repayment of any cash incentive payment;

 

•

Cancellation of unvested, unexercised or unreleased equity awards; and

 

•

Repayment of any compensation earned on previously exercised or released equity awards,

where such payments, equity awards and/or compensation earned on previously exercised or released cash incentive payments and equity awards was predicated on financial results that were augmented by fraud, embezzlement, gross negligence or deliberate disregard of applicable rules resulting in significant monetary loss, damage or injury to Infinera (the “Excess Compensation”), whether or not such activity resulted in a financial restatement. The Compensation Committee shall have sole discretion under this policy, consistent with any applicable statutory requirements, to seek reimbursement for any Excess Compensation paid or received by a Section 16 Officer or director for up to a 12-month period prior to the date of the Compensation Committee action to require reimbursement of the Excess Compensation. Further, following a restatement of our financial statements, we will recover any compensation received by our CEO and CFO that is required to be recovered by Section 304 of the Sarbanes-Oxley Act of 2002.

For purposes of this policy, Excess Compensation will be measured as the positive difference, if any, between the compensation earned by a Section 16 Officer or director and the compensation that would have been earned by a Section 16 Officer or director had the fraud, embezzlement, gross negligence or deliberate disregard of applicable rules resulting in significant monetary loss, damage or injury to Infinera not occurred.

Stock Ownership Policy

The Board believes that it is important to link the interests of our NEOs to those of our shareholders. Our Stock Ownership Policy requires our Section 16 Officers (which includes each of our NEOs) and directors to accumulate and hold a minimum number of shares of Infinera common stock within three years of the later of

 

46

(i) the effective date of the policy or (ii) the date of appointment of the director or appointment/promotion of the Section 16 Officer. As of the Record Date, each of our Section 16 Officers and directors has either satisfied these ownership guidelines or had time remaining to do so. Our stock ownership requirements for our Section 16 Officers and directors are as follows:

 

•  CEO: •  CFO: •  Other Section 16 Officers and employee directors:		4x annual base salary 2x annual base salary 1x annual base salary
•  Non-employee directors:		4x annual cash retainer for annual Board service

Shares of Infinera common stock that count towards satisfaction of this policy include: (i) shares owned outright by the Section 16 Officer or director or his or her immediate family members residing in the same household and (ii) shares held in trust for the benefit of the Section 16 Officer or director or his or her family. The value of a share of Infinera common stock is measured on the last trading day of the most recently completed fiscal quarter as the greater of (i) the closing price on the date of calculation or (ii) the purchase price actually paid by the person for such share of Infinera common stock. For the avoidance of doubt, the purchase price for shares of Infinera common stock subject to RSU awards, performance share awards and other similar full value awards is zero.

Anti-Hedging Policy

Under our Insider Trading Policy, we prohibit our employees, including our NEOs, and Board members from hedging the risk associated with ownership of shares of Infinera common stock and other securities.

Anti-Pledging Policy

Under our Insider Trading Policy, we prohibit our NEOs and directors from pledging any Infinera securities as collateral for a loan.

Tax and Accounting Treatment of Compensation

Prior to 2018, Section 162(m) of the Code generally limited the tax deductibility of compensation paid to the CEO and each of the next three most highly compensated executive officers (excluding the CFO) that exceeded $1 million in any taxable year unless the compensation over $1 million qualified as “performance-based” within the meaning of Section 162(m).

The ability to rely on the “performance-based” compensation exception under Section 162(m) was eliminated in 2017 and the $1 million limitation on deductibility generally was expanded to include any individuals serving as the CEO or CFO during the tax year, the next three most highly compensated executive officers during the tax year and any other individual who was considered a covered employee for any prior tax year beginning after 2016. Thus, we generally will not be able to take a deduction for any compensation paid to our NEOs in excess of $1 million unless the compensation qualifies for transition relief applicable to certain arrangements in place on November 2, 2017. We cannot guarantee that any compensation payable to our NEOs will qualify for the transition relief or that the compensation will ultimately be deductible. Historically, the Compensation Committee had not adopted a formal policy regarding tax deductibility of compensation paid to our CEO and other senior executive officers. Nonetheless, the Compensation Committee intends to maintain an approach to executive compensation that strongly links pay to performance.

We account for the equity compensation awarded to our executive officers and other employees under ASC 718, which requires us to estimate and record an expense for each award of equity compensation over the service period of the award. Accounting rules also require us to record cash compensation as an expense at the time the obligation is incurred.

 

47

COMPENSATION COMMITTEE REPORT

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis with management. Based on its review and discussions with management, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement and the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2021.

Compensation Committee

Marcel Gani (Chair)

Gregory P. Dougherty

Paul J. Milbury

George A. Riedel

The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Infinera specifically requests that the information be treated as soliciting material or incorporates it by reference into a document filed under the Securities Act of 1933, as amended (“Securities Act”), or the Exchange Act.

 

48

EXECUTIVE COMPENSATION TABLES

The following tabular information and accompanying narratives and footnotes provide all of the compensation awarded to, earned by, or paid to the individuals who served as our principal executive officer, principal financial officer and our two other highest paid executive officers during fiscal 2021. As previously noted, we refer to these executive officers as our NEOs.

Fiscal 2021 Summary Compensation Table

 

Name and Principal Position		Year				Salary ($)(1)				Bonus ($)				Stock Awards ($)(2)				Non-Equity Incentive Plan Compensation ($)				All Other Compensation ($)(3)				Total ($)
David W. Heard			2021				700,000				200,000	(4)			3,702,300				—				4,665				4,606,965
Chief Executive Officer			2020				483,846	(5)			—				3,532,500				—	(6)			123,280	(7)			4,139,627
			2019				520,000				—				2,156,000				809,900	(8)			2,968				3,488,868
Nancy L. Erba			2021				439,615				—				1,273,419				—				5,986				1,719,020
Chief Financial Officer			2020				384,135	(9)			—				912,950				—				2,896				1,299,981
			2019				166,731	(10)			—				3,660,000				130,120	(11)			2,432				3,959,283
David L. Teichmann			2021				395,962				—				1,062,474				—				11,530				1,469,965
Chief Legal Officer and Corporate Secretary			2020				358,346	(12)			—				806,930				—				2,896				1,168,172
			2019				281,346	(13)			50,000	(14)			1,187,450				110,052	(15)			2,968				1,631,816
Nicholas Walden			2021				400,577				—				1,009,953				412,082	(16)			34,665	(17)			1,857,277
Senior Vice President, Worldwide Sales			2020				371,539	(18)			50,000	(19)			658,929				—				92,896	(20)			1,173,364

 

(1)

Salary data is provided from payroll records based on the fiscal year. For fiscal 2020, in a proactive response to impacts from the COVID-19 pandemic, we instituted temporary reductions of the annual base salary amounts for certain of our NEOs, effective from May 23, 2020 through December 4, 2020, except as noted below.

(2)

The amounts reported in this column represent the aggregate grant date fair value of the listed equity awards, computed in accordance with ASC 718. See Notes 2 and 15 of the notes to our consolidated financial statements contained in our 2021 Annual Report for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.

(3)	This amount represented the payment of life insurance premiums and 401(k) match.

(4)	Mr. Heard was awarded a special one-time cash bonus by the Compensation Committee in March 2022 in recognition of his leadership and performance during fiscal 2021.

(5)

Mr. Heard’s fiscal 2020 annual base salary reduction related to the COVID-19 pandemic was 25%. His fiscal 2020 annual base salary prior to the reduction was $525,000. Mr. Heard was promoted from Chief Operating Officer to Chief Executive Officer effective as of November 23, 2020. Mr. Heard’s annual base salary as Chief Executive Officer was set at $700,000, effective as of December 5, 2020.

(6)	In connection with his promotion to CEO in November 2020, Mr. Heard waived his 2020 integration bonus opportunity with a potential maximum amount of $650,000.

(7)	Includes relocation benefit of $120,385 paid to Mr. Heard, including a tax gross-up of $38,418.

(8)	Mr. Heard received a payment of $257,400 from his participation in the revised 2019 Bonus Plan and a payment of $552,500 as part of his Integration Bonus.

(9)	Ms. Erba’s fiscal 2020 annual base salary reduction related to the COVID-19 pandemic was 25%.

(10)

Ms. Erba was appointed Senior Vice President of Strategic Finance on August 1, 2019 and was appointed Chief Financial Officer effective as of August 26, 2019. Ms. Erba’s annual base salary was set at $425,000 at the time of her appointment as Chief Financial Officer, which remained in effect prior to such reduction in fiscal 2020.

(11)	For fiscal 2019, Ms. Erba’s prorated annual target bonus opportunity was fully guaranteed at 100%.

(12)	Mr. Teichmann’s fiscal 2020 annual base salary reduction related to the COVID-19 pandemic was 20%.

(13)	Mr. Teichmann was appointed Chief Legal Officer and Corporate Secretary on April 1, 2019. Mr. Teichmann’s annual base salary was set at $385,000 at the time of his appointment, which remained in effect prior to such reduction in fiscal 2020.

(14)	Mr. Teichmann received a sign-on bonus in connection with his hiring on April 1, 2019.

(15)	Mr. Teichmann received a payment of $110,052 from his participation in the revised 2019 Bonus Plan.

(16)	Mr. Walden received a payment of $412,082 from the cash portion of his fiscal 2021 variable compensation program.

(17)	Includes housing allowance of $30,000 paid to Mr. Walden in connection with his promotion to Senior Vice President, Worldwide Sales. This housing allowance is the last relocation and housing benefit due to Mr. Walden in connection with his promotion to Senior Vice President, Worldwide Sales.

 

49

(18)	Mr. Walden was promoted from Senior Vice President, Strategic Accounts, to Senior Vice President, Worldwide Sales, effective as of January 5, 2020. Mr. Walden’s annual base salary as Senior Vice President, Worldwide Sales was set at $375,000 at the time of his appointment.

(19)	Mr. Walden was awarded a special one-time cash bonus by the Compensation Committee in February 2021 in recognition of his sales leadership and performance during fiscal 2020.

(20)	Includes relocation benefit of $90,000 paid to Mr. Walden in connection with his promotion to Senior Vice President, Worldwide Sales.

 

50

Fiscal 2021 Grants of Plan-Based Awards Table

The following table sets forth information regarding fiscal 2021 annual cash incentive compensation and equity awards granted to our NEOs during fiscal 2021.

 

Name		Grant Date				Estimated Future Payouts Under Non-Equity Incentive Plan Awards												Estimated Future Payouts Under Equity Incentive Plan Awards												All Other Stock Awards: Number of Shares of Stock or Units (#)				Grant Date Fair Value of Stock and Option Awards ($)(1)
						Threshold ($)				Target ($)				Maximum ($)				Threshold (#)				Target (#)				Maximum (#)
David W. Heard			3/9/2021				—				—				—				—				—				—				172,000	(2)			1,480,920
			3/9/2021				—				—				—				—				258,000	(3)			258,000	(3)			—				2,221,380
Nancy L. Erba			3/9/2021				—				—				—				—				—				—				60,000	(2)			516,600
			3/9/2021				—				—				—				—				—				—				27,900	(4)			240,219
			3/9/2021				—				—				—				—				60,000	(3)			60,000	(3)			—				516,600
David L. Teichmann			3/9/2021				—				—				—				—				—				—				50,000	(2)			430,500
			3/9/2021				—				—				—				—				—				—				23,400	(4)			201,474
			3/9/2021				—				—				—				—				50,000	(3)			50,000	(3)			—				430,500
Nicholas Walden			3/24/2021				156,412	(5)			260,550	(y)			468,825	(z)			—				—				—				—				—
			3/9/2021				—				—				—				—				—				—				55,000	(2)			473,550
			3/9/2021				—				—				—				—				—				—				7,300	(4)			62,853
			3/9/2021				—				—				—				—				55,000	(3)			55,000	(3)			—				473,550

 

(1)

For RSUs, represents the aggregate grant date fair value of each equity award computed in accordance with ASC 718. For performance shares, represents the aggregate grant date fair value of each equity award at the target payout level computed in accordance with ASC 718. See Notes 2 and 15 of the notes to our consolidated financial statements contained in our 2021 Annual Report for a discussion of all assumptions made by us in determining the ASC 718 values of equity awards.

(2)	This RSU award is scheduled to vest over a three-year period, with one-third of the underlying shares vesting on April 5, 2022, and one-twelfth of the underlying shares vesting quarterly thereafter, subject to each NEO’s continued service to Infinera through each applicable vesting date.

(3)

This performance share award can be earned during fiscal 2021 through fiscal 2023. One-half of the performance shares vest on the Company’s achievement of both an operating income goal, measured on a non-GAAP basis over a full fiscal year, and a revenue goal, measured on a GAAP basis over a full fiscal year. The other half of the performance shares vest on the Company’s achievement of an operating income goal, measured on a non-GAAP basis over a full fiscal year. For additional information regarding these performance share awards granted to our NEOs in fiscal 2021, please see the section entitled “Fiscal 2021 Compensation—Long-Term Incentive Compensation” in the Compensation Discussion and Analysis above.

(4)	This RSU award is scheduled to vest over a two-year period, with one-half of the underlying shares vesting on April 5, 2022, and one-eighth of the underlying shares vesting quarterly thereafter, subject to each NEO’s continued service to Infinera through each applicable vesting date.

(5)	For additional information on Mr. Walden’s fiscal 2021 variable compensation program, please see the section entitled “Fiscal 2021 Compensation – Walden 2021 Variable Compensation Program” in the Compensation Discussion and Analysis above.

 

51