Riverbed Technology (RVBD)

Principal Elements of Executive Compensation

Our executive compensation program consists of the three components discussed below. In general, the Compensation Committee’s determination with regard to one component does not affect its determinations with regard to the other components.

Base Salaries.    The salaries of our Chief Executive Officer and our other executive officers are established based on the scope of their responsibilities, taking into account competitive market compensation based on compensation surveys and benchmarking salaries paid by the peer group of companies for similar positions. In the spring of 2006, the Compensation Committee analyzed the base salary of each executive officer based on the 2005 Radford Survey and the 2005 Pre-IPO San Francisco Bay Area Survey. Compensation data from peer companies was also considered. Our base salary levels were found to be below levels necessary to achieve our compensation objectives based on companies in Northern California and technology companies throughout the United States, because they generally were established during the first few years of our operation when our revenue levels were lower. Therefore, we increased the executive officers’ salaries. We believe that compensation below the higher levels of the market could, in the long run, jeopardize our ability to retain our executive officers. Due to the intensely competitive market for highly qualified employees in our industry, our geographic location and our aggressive performance goals, we may choose to set our cash compensation levels at the higher end of the market in the future. We conduct reviews of our employees, including our executive officers, in two cycles per year, in May and November. Additional salary adjustments are expected to be based on competitive conditions, market increases in salaries, individual performance, our overall financial results and changes in job duties and responsibilities. Although currently our executive officers are still paid below high end of the market in cash compensation, we believe that their total compensation (including stock options) is appropriate.

In April 2007, the Compensation Committee again reviewed the base salaries of our named executive officers other than David M. Peranich. Mr. Peranich’s salary was not reviewed, since he had

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been employed by us for less than one year. After considering the recommendations of the Omura Consulting Group and our Chief Executive Officer (with regard to the salaries of named executive officers other than himself), the Compensation Committee approved the following base salaries, effective as of May 1, 2007:

Incentive Compensation.    Cash incentives for our executive officers are designed to reward performance that furthers key corporate goals. In 2006, the Compensation Committee approved performance goals for that year. The quarterly incentive awards for executive officers are determined on the basis of our achievement of these goals. The performance metrics against which our executive officers are measured are clearly communicated, measurable and consistently applied, and focus on corporate objectives. Our executive officers participate in our management bonus program that is designed to motivate management to achieve specific goals related to revenue relative to our plan and consistency in achieving our revenue goals from quarter to quarter. These metrics were selected because we believe that, at this stage of our development, they are most closely correlated with stockholder value. We believe that our revenue and consistency goals are aggressive and not easy to achieve.

A target cash incentive amount is set for each executive officer’s award after considering targets for comparable positions at the peer group of companies. These awards are paid quarterly, based on our performance against the predetermined goals. As noted above, these target amounts are determined so as to contribute to overall compensation that is above the median level of compensation at the peer group of companies.

To date, the Compensation Committee has not exercised discretion to increase or reduce the bonus amounts that resulted from the application of our management bonus plan. However, the committee has the authority to do so in the future if it determines that an adjustment would serve our interests and the goals of the management bonus program.

As part of its review of the compensation of our named executive officers other than David M. Peranich in April 2007, the Compensation Committee approved the following quarterly target bonus amounts, effective as of April 1, 2007:

Mr. Peranich’s target bonus amount was not reviewed, since he had been employed by us for less than one year. Incentive awards for the second quarter of 2007 and subsequent quarters will be paid under the Management Bonus Plan, which our Compensation Committee adopted in May 2007.

Long-Term Incentive Compensation.    Generally, a significant stock option grant is made in the year when an executive officer commences employment. This grant is made within our written guidelines for new-hire grants, consistent with the executive’s position. The guidelines were developed based on our historical practices as well as information provided to us by The Omura Consulting

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Group, using the VC 2005 Pre-IPO, SF Bay Area survey and the Pre-IPO, SF Bay Area, All IT survey. The size of each grant is generally set at a level that the Compensation Committee deems appropriate to create a meaningful opportunity for stock ownership based upon the grant guidelines, the individual’s position with us and the individual’s potential for future responsibility and promotion. The relative weight given to each of these factors will vary from individual to individual at the Compensation Committee’s discretion. Adjustments may be made as the Compensation Committee deems reasonable to attract candidates in the competitive environment in which we operate.

Subsequent option grants may be made at varying times and in varying amounts in the discretion of the Compensation Committee. Historically, they have been made during our semi-annual review cycles, in May and November. Each May and November, the Compensation Committee considers replenishment grants for existing employees, including our executive officers, who have completed approximately one year of service since their last review. Each executive officer’s performance during the prior year is measured during the performance review process, but corporate performance is also considered when follow-on options are granted. The vesting schedule and the number of shares granted are established to ensure a meaningful incentive to remain in the company’s employ. The option will provide a return to the executive officer only if he or she remains in our employ, and then only if the market price of our common stock increases over the option term.

In 2006, the Compensation Committee granted follow-on stock options to our named executive officers during our May review cycle, as follows:

David M. Peranich received a grant of 400,000 option shares in July of 2006 in connection with the commencement of his employment.

As part of its review of our named executive officers’ compensation in April 2007, the Compensation Committee made the following stock option grants:

When a new executive officer is hired, an option grant will be made at the first regularly scheduled meeting of the Compensation Committee after the officer commences employment. Replenishment option grants to officers are made at regularly scheduled meetings of the Compensation Committee in accordance with the semi-annual schedule described above. The exercise price of stock options is always equal to the closing price of our Common Stock on the day of the committee’s action.

To date, we have not awarded shares of restricted stock to our executive officers. Since we have been in a high-growth phase of our business and our stock has only recently become publicly traded, the Compensation Committee believes that options currently provide a more powerful incentive to our officers. However, the Compensation Committee may make restricted stock grants in the future.

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Principal Elements of Executive Compensation

Our executive compensation program consists of the three components discussed below. In general, the compensation committee’s determination with regard to one component does not affect its determinations with regard to the other components.

Base Salaries.    The salaries of our Chief Executive Officer and our other executive officers are established based on the scope of their responsibilities, taking into account competitive market compensation based on compensation surveys and benchmarking salaries paid by the peer group of companies for similar positions. In the spring of 2006, the compensation committee analyzed the base salary of each executive officer based on the 2005 Radford Survey and the 2005 Pre-IPO San Francisco Bay Area Survey. Compensation data from peer companies was also considered. Our base salary levels were found to be below levels necessary to achieve our compensation objectives based on companies in Northern California and technology companies throughout the United States, because they generally were established during the first few years of our operation when our revenue levels were lower. Therefore, we increased the executive officers’ salaries. We believe that compensation below the higher levels of the market could, in the long run, jeopardize our ability to retain our executive officers. Due to the intensely competitive market for highly qualified employees in our industry, our geographic location and our aggressive performance goals, we may choose to set our

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cash compensation levels at the higher end of the market in the future. We conduct reviews of our employees, including our executive officers, in two cycles per year, in May and November. Additional salary adjustments are expected to be based on competitive conditions, market increases in salaries, individual performance, our overall financial results and changes in job duties and responsibilities. Although currently our executive officers are still paid below high end of the market in cash compensation, we believe that their total compensation (including stock options) is appropriate.

Annual Incentive Compensation.    Annual cash incentives for our executive officers are designed to reward performance that furthers key corporate goals. In 2006, the compensation committee approved annual performance goals for that year. The annual incentive awards for executive officers are determined on the basis of our achievement of these goals. The performance metrics against which our executive officers are measured are clearly communicated, measurable and consistently applied, and focus on corporate objectives. Our executive officers participate in our management bonus program that is designed to motivate management to achieve specific goals related to revenue relative to our plan and consistency in achieving our revenue goals from quarter to quarter. These metrics were selected because we believe that, at this stage of our development, they are most closely correlated with stockholder value. We believe that our revenue and consistency goals are aggressive and not easy to achieve.

A target cash incentive amount is set for each executive officer’s award after considering targets for comparable positions at the peer group of companies. These awards are paid quarterly, based on our performance against the predetermined goals. As noted above, these target amounts are determined so as to contribute to overall compensation that is at least above the median level of compensation at the peer group of companies.

To date, the compensation committee has not exercised discretion to increase or reduce the bonus amounts that resulted from the application of our management bonus plan. However, the committee has the authority to do so in the future if it determines that an adjustment would serve our interests and the goals of the management bonus program.

Long-Term Incentive Compensation.    Generally, a significant stock option grant is made in the year when an executive officer commences employment. This grant is made within our written guidelines for new-hire grants, consistent with the executive’s position. The guidelines were developed based on our historical practices as well as information provided to us by The Omura Consulting Group, using the VC 2005 Pre-IPO, SF Bay Area survey and the Pre-IPO, SF Bay Area, All IT survey. The size of each grant is generally set at a level that the compensation committee deems appropriate to create a meaningful opportunity for stock ownership based upon the grant guidelines, the individual’s position with us and the individual’s potential for future responsibility and promotion. The relative weight given to each of these factors will vary from individual to individual at the compensation committee’s discretion. Adjustments may be made as the compensation committee deems reasonable to attract candidates in the competitive environment in which we operate.

Subsequent option grants may be made at varying times and in varying amounts in the discretion of the compensation committee. Historically, they have been made during our semi-annual review cycles, in May and November. Each May and November, the compensation committee considers replenishment grants for existing employees, including our executive officers, who have completed approximately one year of service since their last review. Each executive officer’s performance during the prior year is measured during the performance review process, but corporate performance is also considered when follow-on options are granted. The vesting schedule and the number of shares granted are established to ensure a meaningful incentive to remain in the company’s employ. The option will provide a return to the executive officer only if he or she remains in our employ, and then only if the market price of our common stock increases over the option term.

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In 2006, the compensation committee granted follow-on stock options to our named executive officers during our May review cycle, as follows:

David M. Peranich received a grant of 400,000 option shares in July of 2006 in connection with the commencement of his employment.

When a new executive officer is hired, an option grant will be made at the first regularly scheduled meeting of the compensation committee after the officer commences employment. Replenishment option grants to officers are made at regularly scheduled meetings of the compensation committee in accordance with the semi-annual schedule described above. The exercise price of stock options is always equal to the closing price of our Common Stock on the day of the committee’s action.

To date, we have not awarded shares of restricted stock to our executive officers. Since we have been in a high-growth phase of our business and our stock has only recently become publicly traded, the compensation committee believes that options currently provide a more powerful incentive to our officers. However, the compensation committee may make restricted stock grants in the future.