SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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[ ] Preliminary Proxy Statement
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Rule 14a-6(e)(2))
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[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
JUNIPER NETWORKS, INC.
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[JUNIPER LOGO]
NOTICE OF 2002 ANNUAL MEETING OF STOCKHOLDERS
The 2002 Annual Meeting of Stockholders of Juniper Networks, Inc. will be
held on Wednesday, May 8, 2002 at 9:00 a.m. at The Historic Del Monte Building,
100 South Murphy Street, Third Floor, Sunnyvale, California 94086, to conduct
the following business:
1. Elect two directors for three-year terms;
2. To ratify the appointment of Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending December 31,
2002;
3. To consider a stockholder proposal submitted to the Company; and
4. To consider such other business as may properly come before the
meeting.
Stockholders who owned shares of Juniper Networks common stock at the close
of business on March 15, 2002 are entitled to attend and vote at the meeting. A
complete list of the Company's stockholders will be available at the Company's
offices at 1194 North Mathilda Avenue, Sunnyvale, California 94089 prior to the
meeting.
By Order of the Board of Directors
Lisa C. Berry
Vice President, General Counsel and Secretary
This notice of meeting and proxy statement and accompanying proxy card are being
distributed on or about April 11, 2002.
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As a stockholder of Juniper Networks, Inc. you have a right to vote on certain
matters affecting the Company. This proxy statement describes the proposals you
are voting on this year. It contains important information for you to consider
when deciding how to vote so please read it carefully.
YOUR VOTE IS IMPORTANT.
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PROXY STATEMENT
QUESTIONS AND ANSWERS
Q: WHO CAN VOTE AT THE ANNUAL MEETING?
A: Stockholders who owned Juniper Networks common stock on March 15, 2002
may attend and vote at the annual meeting. Each share is entitled to one
vote. There were 331,132,540 shares of Juniper Networks common stock
outstanding on March 15, 2002.
Q: WHY AM I RECEIVING THIS PROXY STATEMENT?
A: This proxy statement describes proposals on which we would like
stockholders to vote. It gives you information on these proposals, as
well as other information, so that you can make an informed decision.
Q: WHAT AM I VOTING ON?
A: We are asking you to vote:
- in favor of the election of two directors;
- in favor of the ratification of Ernst & Young LLP as the
Company's independent auditors for the fiscal year ending
December 31, 2002; and
- against the stockholder proposal relating to stock option
exchange programs.
There is additional information appearing later in this proxy statement
relating to each of the proposals.
Q: HOW DO I VOTE?
A: You may vote by any one of the four methods described below.
1. YOU MAY VOTE BY MAIL.
You do this by completing and signing your proxy card and mailing it in
the enclosed prepaid and addressed envelope. If you mark your voting
instructions on the proxy card your shares will be voted as you
instruct.
If you do not mark your voting instructions on the proxy card, your
shares will be voted:
- FOR the two named nominees for director,
- FOR the ratification of the appointment of Ernst & Young LLP
as the Company's independent auditors for the fiscal year
ending December 31, 2002; and
- AGAINST the stockholder proposal to limit the ability of the
Company to offer option exchange programs to employees
without prior consent of stockholders.
2. YOU MAY VOTE BY TELEPHONE.
You do this by following the "Vote by Telephone" instructions that came
with this proxy statement. If you vote by telephone, you do not need to
mail in your proxy card.
3. YOU MAY VOTE ON THE INTERNET.
You do this by following the "Vote by Internet" instructions that came
with this proxy statement. If you vote by Internet, you do not need to
mail in your proxy card.
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4. YOU MAY VOTE IN PERSON AT THE MEETING.
We will pass out written ballots to anyone who would like to vote at the
meeting. However, if you hold your shares in street name, you must
request a proxy from your stockbroker in order to vote at the meeting.
Holding shares in "street name" means that your shares are held by the
broker in its name but in your account. This is not the same as shares
that may be described on your brokerage statements as in "safekeeping"
-- those shares are in fact in your name.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It means that you have multiple accounts at the transfer agent or with
stockbrokers. Please complete and return all proxy cards to ensure that
all of your shares are voted.
Q: WHAT IF I CHANGE MY MIND AFTER I RETURN MY PROXY?
A: You may revoke your proxy and change your vote at any time before the
polls close at the meeting. You may do this by:
- signing another proxy card with a later date,
- voting by telephone or on the Internet (your latest
telephone or Internet vote is counted), or
- voting at the meeting.
Q: WILL MY SHARES BE VOTED IF I DO NOT RETURN MY PROXY CARD?
A: If your shares are held in street name, your brokerage firm, under
certain circumstances, may vote your shares.
Brokerage firms have authority to vote clients' unvoted shares on some
"routine" matters. If you do not give a proxy to vote your shares, your
brokerage firm may either:
- vote your shares on routine matters, or
- leave your shares unvoted.
When a brokerage firm votes its customers' unvoted shares on routine
matters, these shares are counted to determine if a quorum exists to
conduct business at the meeting. A brokerage firm cannot vote customers'
unvoted shares on non-routine matters. These shares are considered not
entitled to vote on non-routine matters, rather than as a vote against
the matters.
We encourage you to provide instructions to your brokerage firm by
giving your proxy. This ensures that your shares will be voted at the
meeting.
You may have granted discretionary voting authority over your account to
your stockbroker.
Your stockbroker may be able to vote your shares depending on the terms
of the agreement you have with your stockbroker.
If you hold the shares in your own name, you must vote your shares
either by returning a proxy card, voting by telephone or on the Internet
or by voting in person at the meeting.
If you do not vote your shares by mail, telephone, Internet or in
person, your shares will not be counted.
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Q: HOW MANY SHARES MUST BE PRESENT TO HOLD THE MEETING?
A: To hold the meeting and conduct business, a majority of the Company's
outstanding shares as of March 15, 2002 must be present at the meeting.
This is called a quorum.
Shares are counted as present at the meeting if the stockholder either:
- is present and votes in person at the meeting, or
- has properly submitted a proxy card, either by mail,
telephone or on the Internet.
Q: HOW MANY VOTES MUST THE NOMINEES HAVE TO BE ELECTED AS DIRECTORS?
A: The two nominees receiving the highest number of "FOR" votes will be
elected as directors. This number is called a plurality.
Q: HOW MANY VOTES MUST THE RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT AUDITORS RECEIVE?
A: To pass, the ratification of the independent auditors must receive "FOR"
votes from a majority of the shares present at the meeting in person or
by proxy.
Q: HOW MANY VOTES MUST THE STOCKHOLDER PROPOSAL RECEIVE?
A: Approval of the stockholder proposal requires the affirmative vote of a
majority of the total votes that are cast on this proposal. If you hold
shares in your name, we will vote your shares "AGAINST" the stockholder
proposal unless you specify that your shares are to be voted otherwise.
If you hold your shares in your own name and abstain from voting, your
abstention will have no effect on the vote. Similarly, if you hold your
shares through your broker, bank or other institution and you do not
instruct them on how to vote on this proposal, they may not vote your
shares, and your shares will have no effect on the vote.
Q: IS CUMULATIVE VOTING PERMITTED FOR THE ELECTION OF DIRECTORS?
A: In the election of directors, you may elect to cumulate your vote.
Cumulative voting will allow you to allocate, as you see fit, the total
number of votes equal to the number of director positions to be filled
multiplied by the number of shares held by you. For example, if you own
three shares of stock, you can allocate six "FOR" votes (3X2) to as few
or as many persons as you choose. Cumulative voting only applies to the
election of directors. If you choose to cumulate your votes, you will
need to make an explicit statement of your intent to do so, either by so
indicating in writing on the proxy card or by stating so when voting at
the annual meeting.
Q: HOW ARE VOTES COUNTED?
A: You may either vote "FOR" or "AGAINST" each nominee for director. You
may vote "FOR," "AGAINST" or "ABSTAIN" on the proposal to ratify the
appointment of the independent auditors and on the stockholder proposal.
If you abstain from voting on the ratification of the appointment of the
independent auditors, it has the same effect as a vote against.
If you give your proxy without voting instructions, your shares will be
counted as a vote FOR each nominee, FOR ratification of the appointment
of the independent auditors and AGAINST the stockholder proposal.
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Q: WHO WILL COUNT THE VOTES?
A: Voting results are tabulated and certified by our agent, ADP Investor
Communications Services.
Q: IS MY VOTE CONFIDENTIAL?
A: Proxies, ballots and voting tabulations identifying stockholders are
kept confidential and will not be disclosed except as may be necessary
to meet legal requirements.
Q: WHAT HAPPENS IF ADDITIONAL PROPOSALS ARE PRESENTED AT THE MEETING?
A: The proxy card enables you to grant a proxy to those persons named as
proxy holders, Marcel Gani, the Company's Chief Financial Officer and
Lisa C. Berry, the Company's Vice President, General Counsel and
Secretary, to vote your shares at the meeting, as you have instructed
them on the proxy card. If an additional proposal is properly presented
for a vote they will have the discretion to vote your shares on such
additional matters. If for some unforeseen reason any of our nominees is
not available as a candidate for director, the persons named as proxy
holders will vote your proxy for such other candidate or candidates as
may be nominated by the Board of Directors.
Even if you plan to attend the meeting, it is a good idea to complete
and return your proxy card before the meeting date.
Q: WHERE DO I FIND VOTING RESULTS OF THE MEETING?
A: We will announce preliminary voting results at the meeting. We will
publish the final result in our quarterly report on Form 10-Q for the
second quarter of fiscal year 2002.
Q: WHO PAYS FOR THE COST OF SOLICITING PROXIES?
A: The Company is using Skinner & Co., an outside proxy solicitation firm,
to solicit proxies this year at a cost of approximately $7,000. The
Company is paying the cost of distributing and soliciting proxies. As a
part of the process, the Company reimburses brokers, nominees,
fiduciaries and other custodians reasonable fees and expenses in
forwarding proxy materials to stockholders.
Q: HOW DO I SUBMIT A PROPOSAL TO BE INCLUDED IN THE PROXY?
A: If you want us to consider including a proposal in the proxy statement
for next year, you must deliver it to the Company's Corporate Secretary
at our principal executive offices no later than December 12, 2002. The
Company's bylaws contain specific procedural requirements regarding a
stockholder's ability to nominate a director or submit a proposal to be
considered at a meeting of stockholders. If you would like a copy of the
procedures contained in our bylaws, please contact: Corporate Secretary,
Juniper Networks, Inc., 1194 North Mathilda Avenue, Sunnyvale, CA 94089.
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STRUCTURE AND COMPENSATION OF THE BOARD OF DIRECTORS
NUMBER OF DIRECTORS AND TERMS
Our Board of Directors consists of seven authorized members. Two directors
are nominees for election this year. The remaining five directors will continue
to serve the terms described below.
The structure of our Board of Directors is that of a staggered board. The
directors are divided into three classes, Class I, Class II and Class III, with
each class being as nearly equal in number as possible and with a three year
term for each class. Mr. Hearst and Mr. Kramlich are each Class III directors
and have been nominated for re-election as described herein. Mr. Kriens, Mr.
Sclavos and Mr. Stensrud are each Class I directors and will stand for
re-election at the Company's annual meeting of stockholders to be held in 2003.
Dr. Sindhu and Mr. Khosla are Class II directors and will stand for re-election
at the Company's annual meeting of stockholders to be held in 2004.
BOARD OF DIRECTORS AND COMMITTEE MEETINGS
The Board of Directors held six regular meetings during 2001. Except for Mr.
Khosla and Mr. Sclavos, each director attended at least 75% of all board and
applicable committee meetings during 2001. The committees of the Board of
Directors are described in the table below. The Board of Directors does not have
a nominating committee or a committee serving a similar function; instead the
Board of Directors acts as a whole on such matters.
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COMMITTEE - MEMBERS FUNCTIONS OF THE NUMBER OF MEETINGS -- COMMITTEE 2001
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Audit Committee:
- Please refer to the written charter of the
Audit Committee approved by the Board of 4
Directors and included in Appendix A.
William R. Hearst III
C. Richard Kramlich
Stratton Sclavos
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Compensation Committee: - Reviews and recommends to the Board
of Directors the compensation of all 1
Vinod Khosla officers and directors, including stock
compensation and loans.
William R. Stensrud - Establishes and reviews general policies
relating to the compensation and benefits
of employees.
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DIRECTOR COMPENSATION
For years beginning in 2002, the Compensation Committee recommended and the
Board of Directors approved, a compensation plan for our non-employee directors.
As the Company has grown from a start-up to a more mature company, the Board
believes that it is necessary to offer a compensation plan in order to attract
new directors. Pursuant to the compensation plan, non-employee directors will
receive a $10,000 annual retainer, payable quarterly. In addition, non-employee
directors will be paid $1,000 per regular Board meeting attended ($500 if
attending by telephone) and $500 per regular committee meeting attended ($250 if
attending by telephone) as well as reimbursement of expenses incurred in
connection with attending the board or committee meetings. Newly elected or
appointed non-employee members of the Board of Directors will receive a
non-qualified stock option grant of 20,000 shares following his or her election
or
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appointment to the Board which shall vest annually in 50% increments beginning
one year after the date of grant. Following such non-employee director's
re-election to the Board in accordance with his or her class, an additional
non-qualified stock option grant of 10,000 shares each shall be granted and
shall vest in equal annual increments over three years beginning one year after
the date of grant. Each option shall be granted pursuant to our Amended and
Restated 1996 Stock Plan and shall have a term of not more than ten years;
provided however that no option shall continue to vest after a director's
resignation or other termination of service as a board member. All vested
options must be exercised within 30 days following the board member's cessation
of service or they will be cancelled.
MEMBERS OF THE BOARD OF DIRECTORS
SCOTT KRIENS Mr. Kriens has served as President, Chief Executive Officer and
Chairman of the Board of Directors of Juniper Networks since October 1996. From
April 1986 to January 1996, Mr. Kriens served as Vice President of Sales and
Vice President of Operations at StrataCom, Inc., a telecommunications equipment
company, which he co-founded in 1986. Mr. Kriens received a B.A. in Economics
from California State University, Hayward. Mr. Kriens also serves on the boards
of directors of Equinix, Inc. and VeriSign, Inc.
PRADEEP SINDHU Dr. Sindhu co-founded Juniper Networks in February 1996 and
served as Chief Executive Officer and Chairman of the Board of Directors until
September 1996. Since then, Dr. Sindhu has served as Vice Chairman of the Board
of Directors and Chief Technical Officer of Juniper Networks. From September
1984 to February 1991, Dr. Sindhu worked as a Member of the Research Staff, and
from March 1987 to February 1996, as the Principal Scientist, and from February
1994 to February 1996, as Distinguished Engineer at the Computer Science Lab,
Xerox Corporation, Palo Alto Research Center, a technology research center. Dr.
Sindhu holds a B.S.E.E. from the Indian Institute of Technology in Kanpur, an
M.S.E.E. from the University of Hawaii and a Masters in Computer Science and
Ph.D. in Computer Science from Carnegie-Mellon University.
WILLIAM R. HEARST III Mr. Hearst is a partner with Kleiner Perkins Caufield &
Byers, a venture capital firm located in Menlo Park, California. He has served
on the Board of Directors of Juniper Networks since February 1996. From May 1995
to August 1996, he was the Chief Executive Officer of At Home Corporation, a
high speed Internet access and consumer online services company. Mr. Hearst was
editor and publisher of the San Francisco Examiner from 1984 until 1995. Mr.
Hearst serves on the boards of directors of The Hearst Corporation and
Hearst-Argyle Television. He also serves on the boards of Oblix, Inc.,
AllBusiness, Zing, OnFiber and Applied Minds. He is a Fellow of the American
Association for the Advancement of Science and a trustee of Carnegie
Institution, the Hearst Foundation, Mathematical Sciences Research Institute,
the California Academy of Sciences and Grace Cathedral of San Francisco. Mr.
Hearst received an AB degree in Mathematics in 1972 from Harvard University.
VINOD KHOSLA Mr. Khosla has been a General Partner with the venture capital
firm of Kleiner Perkins Caufield & Byers since February 1986. He has served on
the Board of Directors of Juniper Networks since February 1996. Mr. Khosla was a
co-founder of Daisy Systems Corporation, an electronic design automation
company, and the founding Chief Executive Officer of Sun Microsystems, Inc., a
computer and data networking company. Mr. Khosla also serves on the boards of
directors of Asera, Redback Networks, Inc., QWEST Communications International,
Inc., Centrata, Nanotectonica, Zambeel, Zaplet and Zepton Networks. Mr. Khosla
holds a B.S.E.E. from the Indian Institute of Technology in New Delhi, an M.S.E.
from Carnegie-Mellon University, and an M.B.A. from the Stanford Graduate School
of Business.
C. RICHARD KRAMLICH Mr. Kramlich is the co-founder and has been a General
Partner of New Enterprise Associates, L.P., a venture capital fund, since 1978.
He has served on the Board of Directors of Juniper Networks since February 1996.
He also serves on the boards of directors of Zhone Technologies, Force 10
Networks, Financial Engines, Zambeel, Foveon and Silicon
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Graphics, Inc. Mr. Kramlich holds a B.S. in History from Northwestern University
and an M.B.A. from Harvard Business School.
STRATTON SCLAVOS. Mr. Sclavos has been President and Chief Executive Officer
of VeriSign Inc. since July 1995. He has served on the Board of Directors of
Juniper Networks since May 2000. From October 1993 to June 1995, he was Vice
President, Worldwide Marketing and Sales of Taligent, Inc., a software
development company that was a joint venture among Apple Computer, Inc., IBM and
Hewlett-Packard. Prior to that time, he served in various sales, business
development and marketing capacities for GO Corporation, MIPS Computer Systems,
Inc. and Megatest Corporation. Mr. Sclavos also serves on the boards of
directors of Keynote Systems, Inc. and Marimba, Inc. Mr. Sclavos received his
B.S. in Electrical and Computer Engineering from the University of California at
Davis in 1981.
WILLIAM R. STENSRUD Mr. Stensrud has been a General Partner with the venture
capital firm of Enterprise Partners since January 1997. He has served on the
Board of Directors of Juniper Networks since October 1996. Mr. Stensrud was an
independent investor and turnaround executive from March 1996 to January 1997.
During this period, Mr. Stensrud served as President of Paradyne Corporation and
as a director of Paradyne Corporation, GlobeSpan Corporation and Paradyne
Partners LLP, all data networking companies. From January 1992 to July 1995, Mr.
Stensrud served as President and Chief Executive Officer of Primary Access
Corporation, a data networking company acquired by 3Com Corporation. From 1986
to 1992, Mr. Stensrud served as the Marketing Vice President of StrataCom, Inc.,
a telecommunications equipment company, which Mr. Stensrud co-founded. Mr.
Stensrud also serves on the boards of directors of Paradyne Corporation,
Airfiber, Alvesta, Calient Networks, Ensemble Communications, Inc., LongBoard,
Inc., Solus Micro Technologies, Novera Optics. He holds a B.S. degree in
Electrical Engineering and Computer Science from Massachusetts Institute of
Technology.
PROPOSAL ONE
ELECTION OF DIRECTORS
There are two nominees for election to the Board of Directors this year. The
nominees for director this year are William R. Hearst III and C. Richard
Kramlich. Each nominee is presently a director of the Company and has served as
a director since 1996. Information regarding the business experience of each
nominee is provided below. The Company has a classified board of directors and
Mr. Hearst and Mr. Kramlich, if elected, will each serve a three year term until
the Company's annual meeting in 2005 and until their respective successors are
elected. Each of the nominees has consented to serve a new three-year term.
There are no family relationships among our executive officers and directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION TO THE BOARD OF
EACH OF THE FOLLOWING.
VOTE REQUIRED
The two persons receiving the highest number of votes represented by
outstanding shares of common stock present or represented by proxy and entitled
to vote will be elected.
WILLIAM R. HEARST III Mr. Hearst is a partner with Kleiner Perkins Caufield
Director since February 1996 & Byers, a venture capital firm located in Menlo Park,
Age 53 California. He has served on the Board of Directors
of Juniper Networks since February 1996. From
May 1995 to August 1996, he was the Chief
Executive Officer of At Home Corporation, a
high speed Internet access and consumer
online services
8
company. Mr. Hearst was editor and publisher of the
San Francisco Examiner from 1984 until 1995. Mr.
Hearst serves on the boards of directors of The Hearst
Corporation and Hearst-Argyle Television. He also
serves on the boards of Oblix, Inc., AllBusiness,
Zing, OnFiber and Applied Minds. He is a Fellow of
the American Association for the Advancement of
Science and a trustee of Carnegie Institution, the
Hearst Foundation, Mathematical Sciences Research
Institute, the California Academy of Sciences and
Grace Cathedral of San Francisco. Mr. Hearst received
an AB degree in Mathematics in 1972 from Harvard
University.
C. RICHARD KRAMLICH Mr. Kramlich is the co-founder and has been a General
Director since February 1996 Partner of New Enterprise Associates, L.P., a venture
Age 67 capital fund, since 1978. He has served on the Board
of Directors of Juniper Networks since February 1996.
He also serves on the boards of directors of Zhone
Technologies, Force 10 Networks, Financial Engines,
Zambeel, Foveon and Silicon Graphics, Inc. Mr.
Kramlich holds a B.S. in History from Northwestern
University and an M.B.A. from Harvard Business School.
PROPOSAL TWO
RATIFICATION OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders, the Board of Directors has
reappointed Ernst & Young LLP as independent auditors to audit the financial
statements of the Company for the current fiscal year. Fees paid to the
independent auditors were $495,000 for the audit of the consolidated financial
statements for the fiscal year ended December 31, 2001 and for the review of the
consolidated financial statements included in the Company's quarterly filings on
Form 10Q, $194,000 for audit-related services and $280,000 for non-audit
services, which were primarily tax services. Audit related services generally
include fees for statutory audits, due diligence, and SEC registration
statements.
Representatives of the firm of Ernst & Young LLP are expected to attend the
meeting, where they will be available to respond to questions and, if they
desire, make a statement.
VOTE REQUIRED
Ratification of the appointment of the independent auditors for the 2002 fiscal
year requires the vote of a majority of the shares present at the meeting in
person or by proxy.
THE AUDIT COMMITTEE AND THE BOARD OF DIRECTORS RECOMMEND A VOTE FOR RATIFICATION
OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE 2002 FISCAL YEAR.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process
on behalf of the Board of Directors. Management has the primary responsibility
for the financial statements and the reporting process including the systems of
internal controls. The Audit Committee discussed with the Company's independent
auditors the overall scope and plans for the audit. The Audit Committee meets
with the independent auditors, with and without management present, to
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discuss the results of their examinations, their evaluations of the Company's
internal controls, and the overall quality of the Company's financial reporting.
The Audit Committee held four meetings during fiscal year 2001.
In fulfilling its oversight responsibilities, the Audit Committee
reviewed with management the audited financial statements included in the Annual
Report on Form 10-K for the year ended December 31, 2001, including a discussion
of the acceptability and quality of the accounting principles, the
reasonableness of significant judgments and the clarity of disclosures in the
financial statements.
The Audit Committee reviewed with the independent auditors, who are
primarily responsible for expressing an opinion on the conformity of those
audited financial statements with generally accepted accounting principles,
their judgments as to the acceptability and quality of the Company's accounting
principles and such other matters as are required to be discussed with the Audit
Committee under generally accepted auditing standards. The Audit Committee has
discussed with the independent auditors their independence from management and
the Company (including the matters in the written disclosures required by the
Independence Standards Board) and considered the compatibility of non-audit
services with the auditors' independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors (and the Board has approved)
that the audited financial statements be included in the Annual Report on Form
10-K for the year ended December 31, 2001 for filing with the Securities and
Exchange Commission. The Audit Committee and the Board of Directors have also
recommended, subject to ratification by the stockholders, the selection of Ernst
& Young LLP as the Company's independent auditors.
MEMBERS OF THE AUDIT COMMITTEE
William R. Hearst III
C. Richard Kramlich
Stratton Sclavos
PROPOSAL THREE
We received a stockholder proposal this year. The author and proponent
of the following resolution is the New York State Common Retirement Fund,
Albany, New York 12236 (the "Proponent"). The Proponent beneficially owns
932,490 shares of our common stock. The Proponent has requested that we include
the following proposal and supporting statement in this proxy statement. The
stockholder proposal is quoted verbatim in italics, below. FOR THE REASONS
STATED IN OUR RESPONSE, WHICH FOLLOWS THE STOCKHOLDER PROPOSAL, OUR BOARD OF
DIRECTORS STRONGLY AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE "AGAINST" THE
STOCKHOLDER PROPOSAL.
PROPONENT'S PROPOSAL
RESOLVED: That the shareholders of Juniper Networks, Incorporated ("Juniper")
urge the Board of Directors of Juniper to adopt a policy that Juniper shall not
reprice (or terminate and later re-grant options) to a lower exercise price any
stock option already granted to any employee or director of Juniper, without the
approval of the holders of a majority of Juniper's issued and outstanding shares
of common stock.
SUPPORTING STATEMENT:
This proposal is made by the New York State Common Retirement Fund, one of the
largest public pension funds in the world. The Fund has assets in excess of $110
billion which are invested on behalf of over 900,000 active and retired
employees of New York State and local governments.
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The Fund periodically introduces proposals like this one to encourage companies
in which it invests to adopt corporate governance principles that are consistent
with the best interests of all shareholders.
Following a substantial decline in its stock price, Juniper announced that
effective November 26, 2001, it was repricing certain stock options by offering
option holders the choice to terminate options previously granted in exchange
for options to purchase an equal number of shares at an exercise price equal to
the market price on a new grant date.
Stock option grants are used to attract, retain and motivate qualified
employees. Shareholders generally support the use of reasonable incentive
compensation, particularly when the compensation plan is designed to reward
superior performance and align management's interests with those of the
shareholders.
Repricing is the practice of lowering the exercise price for stock options whose
exercise price is above the market price of the stock, or allowing such options
to be exchanged for options with lower exercise prices. This practice undermines
the goal of linking executive compensation to company performance. Repricing
essentially rewards poor performance and divides the interests of option holders
from those of shareholders who cannot reprice their stock.
In an effort to discourage repricings, the Financial Accounting Standards Board
(FASB) has ruled that repriced options will not receive the favorable accounting
treatment normally given to stock option grants. While Juniper's plan to
terminate and re-grant options may circumvent those rules and technically avoid
unfavorable accounting treatment, it is clear that Juniper's repricing is
substantially the practice that the FASB rule was intended to discourage.
As reasonable shareholders, we recognize that certain situations may justify
stock option repricing. In those rare instances, however, shareholders, not then
Board of Directors, should decide on the appropriateness of repricing.
In the year ending November 23, 2001, Juniper's stock performance has declined
significantly and it has lagged major market indices substantially. Shareholders
have suffered from this decline, and we believe the incentive should be for
management to increase the long-term performance of Juniper rather than increase
their opportunity to gain personally from a decline in market value.
For all of these reasons, we urge you to support this proposal.
MANAGEMENT'S RESPONSE
Our Board of Directors unanimously recommends a vote "AGAINST" the proposal for
the following reasons:
Stock options are used by us to attract and retain qualified employees. In the
competitive job market where we have to compete against both established
companies with more traditional compensation programs and start up companies
with compensation programs that are primarily stock-based, we have to strike a
balance between salary compensation and stock option incentives. Between June
1999 (when we went public) until October 2000, the market price for our stock
increased significantly as did that of many companies in the telecommunications
sector. After the economy began to falter at the end of 2000 and we entered into
a recession in 2001, our stock price began to decline as did most other
companies in the telecommunications sector.
As a general matter, we agree with the Proponent that the repricing of stock
options is only justified in extraordinary circumstances; however we disagree
with the Proponent that stockholder approval should be a precondition to an
exchange of options. The focused nature of our Exchange Program shows that the
Board of Directors acted in the best interests of the Company and its
stockholders in light of the circumstances with which it was faced.
11
The competition for qualified employees was and continues to present us with
significant challenges. Our employee option holders do not own shares of stock
by virtue of stock option grants. They have a right to purchase stock in the
future at a price which is the fair market value on the date of the stock option
grant. Unlike a stockholder that can sell its holdings at any time, our
employees have to work at the Company for a year before he or she can exercise
the vested portion of the option granted.
The Financial Accounting Standards Board (the "FASB") introduced the requirement
of a minimum six-month waiting period between termination of old options and
grant of new options because prior practice had allowed for simultaneous
repricing. In fact, the old grants were not cancelled -- they remained in place
and the exercise price simply changed. The FASB believed that a simultaneous
repricing was effectively compensation to the employees as there was no risk.
The new rules addressed that concern and require that an employee be at risk for
at least six months and, in that case, the new grant is not treated the same as
compensation. During the six month waiting period, the employee is at risk
because if he or she is not employed on the date of the new grant, for any
reason (voluntary or involuntary termination, reduction in force, death) he or
she does not receive the new option grant. It is also not the case that an
employee will automatically receive a lower price than the original option
exercise price -- the new options are granted at fair market value on the date
of grant regardless of whether that is above or below the price of the exchanged
options.
In the fall of 2001, we decided that it was in the Company's best interest to
address the fact that the stock options that had been granted to employees in
2000 were priced such that they did not have the necessary retention value --
most of our current employees were hired during 2000 and none of them had stock
options with exercise prices equal to or lower than the market value of our
stock as of their vesting dates one year after being hired. Although employees
always face the possibility that other employees that are hired after them may
have or get an exercise price that is more favorable than theirs (even after
having put in substantial time and effort on behalf of the Company), we were
nevertheless faced with a majority of our employees having options that provided
little or no retention value. We believed very strongly that simply to grant new
options would not be in the best interests of the stockholders as it would
increase the total number of stock options outstanding and dilute their Company
holdings. Accordingly, we implemented an Exchange Program as a tender offer in
accordance with the requirements of the Securities and Exchange Commission's
tender offer rules.
The Proponent is asking you to limit the discretion of your Board of Directors,
hinder its ability to act quickly and decisively if future circumstances warrant
an exchange and to require the Company to incur the time delay and expense of
holding a special stockholder meeting in order to have an option exchange in the
future.
The Proponent notes that stockholders suffered from the stock price decline and
appears to suggest that the Exchange Program somehow caused a divided interest
between our employees and our stockholders who cannot reprice their stock. This
argument ignores that virtually all of our senior management are substantial
stockholders, who have a large proportion of their net worth invested in our
common stock. Management, our employees and our stockholders have the same
interests -- maximizing the Company's value and thereby increasing shareholder
value. The stock option incentives put in place by the Company for our employees
motivates and incentivizes them to further those goals of maximizing shareholder
value.
VOTE REQUIRED
Approval of this stockholder proposal requires the affirmative vote of a
majority of the total votes that are cast on this proposal. If you hold shares
in your name, we will vote your shares "AGAINST" the stockholder proposal unless
you specify that your shares be voted in a different manner. If you hold your
shares in your own name and abstain from voting, your abstention will
12
have no effect on the vote. Similarly, if you hold your shares through your
broker, bank or other institution and you do not instruct them on how to vote on
this proposal, they may not vote your shares, and your shares will have no
effect on the vote.
FOR THE REASONS ABOVE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE
"AGAINST" APPROVAL OF THE STOCKHOLDER PROPOSAL REGARDING REPRICING OF STOCK
OPTIONS.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of March 15, 2002 concerning
each beneficial owner of more than 5% of the Company's common stock. The number
of shares beneficially owned is determined under the rules of the Securities and
Exchange Commission and the information is not necessarily indicative of
beneficial ownership for any other purpose. Under such rules, beneficial
ownership includes any shares as to which such owner has the sole or shared
voting power or investment power and also any shares that such owner has the
right to acquire as of May 15, 2002 (within 60 days of the record date of March
15, 2002) through the exercise of any stock option or other right. Unless
otherwise indicated, each person has sole investment and voting power (or shares
such powers with his spouse) with respect to the shares set forth in the
following table.
--------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENTAGE OF
BENEFICIAL OWNERSHIP CLASS
--------------------------------------------------------------------------------------------
AXA Financial, Inc.
1290 Avenue of the Americas 27,693,259 shares(1) 8.6%(1)
New York, N.Y. 10104
--------------------------------------------------------------------------------------------
Oak Associates, Ltd.
3875 Embassy Parkway 17,638,000(2) 5.46%(2)
Akron, Ohio 44333
--------------------------------------------------------------------------------------------
Scott Kriens
c/o Juniper Networks, Inc. 17,383,709 shares(3) 5.25%
1194 North Mathilda Avenue
Sunnyvale, CA 94089
---------------------------------------- -------------------------------- ------------------
----------
(1) Based on information reported on Schedule 13G filed with the Securities and
Exchange Commission on February 12, 2002. AXA Financial, Inc. is the parent
holding company for several entities that hold our common stock as
investment advisors, including Alliance Capital Management L.P. which holds
27,218,022 shares on behalf of client discretionary investment advisory
accounts.
(2) Based on information reported on Schedule 13G filed with the Securities and
Exchange Commission on February 5, 2002.
(3) Includes 17,356,672 shares held by the Kriens 1996 Trust, of which Mr.
Kriens and his spouse are the trustees and 27,037 shares held by the Kriens
Family Foundation.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of March 15, 2002 concerning the
ownership by the executive officers and directors of the Company's common stock.
The number of shares beneficially owned is determined under the rules of the
Securities and Exchange Commission and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which such owner has the sole or
shared voting power or investment power and also any shares that such owner has
the right to acquire as of May 15, 2002 (within 60 days of March 15, 2002)
through the exercise of any stock option or other right. Unless otherwise
indicated, each person has sole investment and voting
13
power (or shares such powers with his spouse) with respect to the shares set
forth in the following table.
AMOUNT AND NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP CLASS(2)
--------------------------------------- -------------------- -------------
Scott Kriens(3)
Chairman, Chief Executive Officer and
President 17,383,709 shares 5.25%
Pradeep Sindhu(4)
Vice Chairman, Chief Technical Officer 13,317,649 shares 4.01%
Marcel Gani(5)
Chief Financial Officer 2,023,755 shares *
Peter Wexler(6)
Vice President Wireless Business 3,286,080 shares *
William R. Hearst III
Director
c/o Kleiner Perkins Caufield & Byers 1,131,018 shares *
2750 Sand Hill Road
Menlo Park, CA 94025
Vinod Khosla(7)
Director
c/o Kleiner Perkins Caufield & Byers 2,705,964 shares *
2750 Sand Hill Road
Menlo Park, CA 94025
C. Richard Kramlich
Director
c/o New Enterprise Associates 457,881 shares *
2490 Sand Hill Road
Menlo Park, CA 94025
Stratton Sclavos(8)
Director 48,000 shares *
VeriSign, Inc.
1350 Charleston Road
Mountain View, CA 94303
William R. Stensrud(9)
Director
c/o Enterprise Partners 1,600,752 shares *
7979 Ivanhoe Avenue, Suite 550
La Jolla, CA 92037
All Directors and Executive Officers
as a group (9 persons)(10) 41,954,808 shares 12.64%
----------
* Less than 1% of the outstanding shares of common stock.
(1) Unless otherwise noted above, the address for each of the officers and
directors is c/o Juniper Networks, Inc., 1194 North Mathilda Avenue,
Sunnyvale, CA 94089.
(2) The percentages are calculated using 331,132,540 outstanding shares of the
Company's common stock on March 15, 2002 as adjusted pursuant to Rule
13d-3(d)(1)(i).
(3) Includes 17,356,672 shares held by the Kriens 1996 Trust, of which Mr.
Kriens and his spouse are the trustees and 27,073 shares held by the Kriens
Family Foundation.
(4) Includes 840,000 shares which are subject to options that may be exercised
within 60 days of March 15, 2002. Also includes a total of 360,000 shares
held in custody for Dr. Sindhu's children pursuant to the California
Uniform Transfers to Minors Act, a total of 1,405,090 shares held in trusts
for the benefit of Dr. Sindhu and his spouse, 9,117,815 shares held by the
Sindhu Family Trust and 6,867 shares held by Dr. Sindhu's spouse.
14
(5) Includes 2,018,851 shares held in the name of the Gani 1995 Trust of which
Mr. Gani and his spouse are the trustees.
(6) Includes 6,120 shares which are subject to options that may be exercised
within 60 days of March 15, 2002.
(7) Includes 1,300,106 shares held in trust for the benefit of Mr. Khosla's
children.
(8) Includes 40,000 shares which are subject to options that may be exercised
within 60 days of March 15, 2002.
(9) Includes 20,000 shares which are subject to options that may be exercised
within 60 days of March 15, 2002 and 1,580,752 shares held in a trust as
community property.
(10) Includes all shares referenced in Notes 3 through 9 above.
EXECUTIVE COMPENSATION
The following table shows, for the last three fiscal years, compensation
information for the Company's Chief Executive Officer and the other most highly
compensated executive officers. These officers are referred to herein as Named
Executive Officers.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- --------------------------------------
AWARDS
----------
RESTRICTED SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS COMPENSATION
---------------------------- ---- -------- -------- ------------ --------- ----------- ------------
Scott Kriens 2001 $275,000 $157,960 --(1) NA -0-(2) $ --
Chairman, Chief Executive 2000 250,000 114,000 --(1) NA 400,000(2) --
Officer and President 1999 170,000 5,000 --(1) NA 1,800,000(2) --
Pradeep Sindhu 2001 $185,000 $ 62,600 --(1) NA -0-(2) $ --
Vice Chairman and Chief 2000 170,000 48,936 --(1) NA 100,000 --
Technical Officer 1999 145,000 12,425 --(1) NA 1,080,000(2) --
Marcel Gani 2001 $185,000 $ 90,806 --(1) NA -0-(2) $ --
Chief Financial Officer 2000 170,000 77,781 --(1) NA 100,000(2) --
1999 150,000 12,500 --(1) NA 480,000(2) --
Peter Wexler 2001 $185,000 $ 62,735 --(1) NA -0-(2) $ --
Vice President 2000 170,000 54,688 --(1) NA 100,000(2) --
Wireless Business 1999 150,000 6,000 --(1) NA 480,000(2) --
----------
(1) Consists of the standard employee benefit portion paid by the Company for
all employees for premiums for term life insurance. No amounts are reported
because they are less than the lesser of: (a) $50,000 or (b) 10% of the
total salary and bonus for each of the Named Executive Officers.
(2) In October 2001, the Company commenced a tender offer for certain of the
stock options held by its employees that had an exercise price in excess of
$10 per share. On November 26, 2001, the tender offer period expired and
any options exchanged were cancelled effective on
15
that date. In accordance with the requirements of the Financial Accounting
Standards Board, if an employee participated in the option exchange program
he or she may not receive any stock option grants for a minimum of six
months and one day after the date of cancellation. Our executive officers,
but not our directors, were entitled to participate in the exchange
program. Mr. Kriens elected to participate and accordingly, effective
November 26, 2001, the options listed on the above chart for the years 1999
and 2000 were cancelled. Dr. Sindhu elected to participate as to those
options granted to him in 2000 and accordingly, effective November 26,
2001, those options listed on the above chart for the year 2000 were
cancelled. Mr. Gani elected to participate and accordingly, effective
November 26, 2001, those options listed on the above chart for the years
1999 and 2000 were cancelled. Mr. Wexler elected to participate and
accordingly, effective November 26, 2001, the options listed on the above
chart for the years 1999 and 2000 were cancelled. The Company expects that
new options will be granted on or after May 28, 2002.
STOCK OPTION GRANTS AND EXERCISES
The following tables set forth the stock options granted to the Named
Executive Officers under the Company's stock option plans and the options
exercised by such Named Executive Officers during the fiscal year ended December
31, 2001.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The Option/SAR Grant Table sets forth hypothetical gains or "option spreads"
for the options at the end of their respective ten-year terms, as calculated in
accordance with the rules of the Securities and Exchange Commission. During
2001, no stock options were granted to any of the Named Executive Officers.
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NO. OF TOTAL OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED EXERCISE STOCK APPRECIATION FOR OPTION
UNDERLYING TO EMPLOYEES PRICE TERM
OPTIONS DURING PER EXPIRATION -----------------------------
NAME GRANTED(1) PERIOD SHARE DATE 5% 10%
---- --------- ------------- -------- ---------- ------------- -------------
Scott Kriens None NA NA NA NA NA
Pradeep Sindhu None NA NA NA NA NA
Marcel Gani None NA NA NA NA NA
Peter Wexler None NA NA NA NA NA
----------
(1) No options were granted to any of the Named Executive Officers during the
last fiscal year.
16
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table shows stock option exercises and the value of
unexercised stock options held by the Named Executive Officers during the last
fiscal year.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 2001 DECEMBER 31, 2001(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
Scott Kriens -- -- -- -- -- --
Pradeep Sindhu -- -- 690,000 390,000 -- --
Marcel Gani -- -- -- -- -- --
Peter Wexler -- -- 6,120 -- $114,273 --
----------
(1) The value of in-the-money options is based on the closing price on December
31, 2001 of $18.95 per share, minus the per share exercise price,
multiplied by the number of shares underlying the option.
EMPLOYMENT AGREEMENTS
The Company entered into a change of control agreement with Mr. Kriens on
October 1, 1996, which provides that he will be entitled to base compensation
and benefit payments for a period of three months in the event that his
employment is terminated in connection with a change of control of Juniper
Networks. Further, Mr. Kriens' restricted stock would be released from any
repurchase option and his stock options would become vested and exercisable as
to an additional amount equal to that amount which would have vested and become
exercisable had Mr. Kriens remained employed for a period of 18 months following
the change of control. If his employment continues following a change of
control, his stock options will be vested and exercisable at a rate 1.5 times
the rate otherwise set forth in the stock option agreement for a period of
twelve months following the change of control. Under the employment agreement,
Mr. Kriens is entitled to receive three months' base compensation and benefits,
regardless of whether there is a change of control, in the event that his
employment is involuntarily terminated. Upon involuntary termination, and
regardless of whether there has been a change of control, Mr. Kriens' restricted
stock and stock options would become immediately vested and exercisable as to an
additional amount equal to the number of stock options which would have become
vested and exercisable during the three-month period following the involuntary
termination had Mr. Kriens remained employed by the Company.
The Company entered into a change of control agreement with Mr. Gani in
February 1997, which provides that he will be entitled to receive base
compensation and benefits for a period of three months, in the event of
involuntary termination. In the event of a change of control at Juniper
Networks, the vesting of Mr. Gani's stock options will accelerate as to that
number of options equal to the number of shares that would vest over the next 30
months in accordance with the Company's standard vesting schedule or the balance
of his unvested stock, whichever amount is less.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
17
COMPENSATION COMMITTEE
The Compensation Committee is comprised of two of the independent,
non-employee members of the Board of Directors, neither of whom have
interlocking relationships as defined by the Securities and Exchange Commission.
The Compensation Committee is responsible for setting and administering the
policies governing annual compensation of executive officers, considers their
performance and makes recommendations regarding their cash compensation and
stock options to the full Board of Directors. The Compensation Committee,
pursuant to its charter, periodically reviews the approach to executive
compensation and makes changes as competitive conditions and other circumstances
warrant.
COMPENSATION PHILOSOPHY
At the end of 1999 following the Company's successful initial public
offering, the Compensation Committee reviewed the compensation of the Company's
executive officers and determined that the Company needed to make adjustments to
the compensation to move away from a compensation structure reflective of a
"start-up" company and to more appropriately reflect the Company's size and
value. The Compensation Committee also recognized that in order for the Company
to develop new products and scale the business, the ability to attract, retain
and reward executive officers who will be able to operate effectively in a high
growth, complex environment is vital. In that regard, the Company must offer
compensation that (a) is competitive in the industry; (b) motivates executive
officers to achieve the Company's strategic business objectives; and (c) aligns
the interests of executive officers with the long-term interests of
stockholders. In 2000, the Compensation Committee continued implementing its
plan to normalize the compensation structure for the executive officers of the
Company and expected that it would do the same during 2001.
The Company uses salary, a management incentive plan and stock options to
meet these requirements. For incentive-based compensation, the Compensation
Committee considers the desirability of structuring such compensation
arrangements so as to qualify for deductibility under Section 162(m) of the
Internal Revenue Code. As the Compensation Committee applies this compensation
philosophy in determining appropriate executive compensation levels and other
compensation factors, the Compensation Committee reaches its decisions with a
view towards the Company's overall performance. The economic downturn during
2001 presented significant challenges to the Company and also caused the
Compensation Committee to re-evaluate its plan of normalizing the compensation
structure.
EXECUTIVE OFFICER COMPENSATION
The Compensation Committee's approach is predicated upon the philosophy that
a substantial portion of aggregate annual compensation for executive officers
should be contingent upon the Company's performance and an individual's
contribution to the Company's success in meeting certain critical objectives. In
addition, the Compensation Committee strives to align the interests of the
Company's executive officers with the long-term interests of stockholders
through stock option grants such that grants of stock options should relate the
performance of the executive to the market perception of the performance of the
Company.
The Company provides its executive officers with a compensation package
consisting of base salary, variable incentive pay and participation in benefit
plans generally available to other employees. The Compensation Committee
considers market information from published survey data provided to the
Compensation Committee by the Company's human resources staff. The market data
consists primarily of base salary and total cash compensation rates, as well as
incentive bonus and stock programs of other companies considered by the
Compensation Committee to be peers in the Company's industry.
18
BASE SALARY. The Compensation Committee, in reviewing compensation at the
end of 2001 determined that although the plan to continue normalizing the
compensation structure is important for the long term growth of the executive
team and the Company, it accepted management's recommendation for no increases
to base salary for the upcoming fiscal year. Management's recommendation and
agreement by the Compensation Committee was based on the current business
environment.
MANAGEMENT INCENTIVE PLAN. The Company has an incentive bonus plan which is a
percentage of base salary measured against the performance of the Company
relative to certain goals for profitability and individual performance of
certain key strategic objectives of the Company.
STOCK OPTION GRANTS. Grants of stock options to executive officers are based
upon each executive officer's relative position, responsibilities, historical
and expected contributions to the Company, and the executive officer's existing
stock ownership and previous option grants. Stock options are granted at market
price on the date of grant and will provide value to the executive officers only
when the price of the Company's Common Stock increases over the exercise price.
The Company offered employees, including executive officers, the opportunity
to participate in an option exchange program. The Compensation Committee
approved and ratified the participation by the executive officers of the
Company. It determined that, with the exercise price of the stock options being
far in excess of market values, the stock options did not provide the necessary
incentive for the executive officers and to simply grant more options would not
be appropriate.
CHIEF EXECUTIVE OFFICER COMPENSATION
Effective for fiscal year 2002, the base salary of Mr. Kriens remains at
$275,000 with a target bonus percentage of 100% of base salary. No option shares
were granted to Mr. Kriens in 2001.
MEMBERS OF THE COMPENSATION COMMITTEE
Vinod Khosla
William R. Stensrud
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Company's Board of Directors or Compensation
Committee.
STOCK PERFORMANCE GRAPH
The following performance graph shows the cumulative total stockholder return
assuming the investment of $100 on June 25, 1999 (the date of the Company's
initial public offering) in each of Juniper Networks common stock, the Nasdaq
Composite Index and the Nasdaq Telecommunications Index. The performance shown
is not necessarily indicative of future performance.
COMPARISON OF CUMULATIVE TOTAL RETURN AMONG
JUNIPER NETWORKS, INC.,
19
THE NASDAQ COMPOSITE INDEX AND
THE NASDAQ TELECOMMUNICATIONS INDEX
CUMULATIVE TOTAL RETURN
JUNE 25, 1999 THROUGH DECEMBER 31, 2001
Date JNPR Telecom Composite
31-Dec-2001 114.994 35.842 76.407
28-Sep-2001 58.862 30.763 58.715
29-Jun-2001 188.723 47.200 84.667
30-Mar-2001 230.352 49.693 72.092
29-Dec-2000 764.981 70.196 96.783
29-Sep-2000 1328.572 110.562 143.883
30-Jun-2000 883.312 131.882 155.372
31-Mar-2000 799.684 166.918 179.141
31-Dec-1999 343.869 153.800 159.415
30-Sep-1999 184.134 94.635 107.581
25-Jun-1999 100.000 100.000 100.000
Source: FactSet Research 3/21/02
CERTAIN TRANSACTIONS
During our last fiscal year ending December 31, 2001, there has not been, nor is
there currently proposed, any transaction or series of similar transactions to
which we were or are to be a party in which the amount involved exceeds $60,000,
and in which any director, executive officer, holder of more than 5% of our
common stock or any member of the immediate family of any of these people had or
will have a direct or indirect material interest.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Juniper Networks believes that during 2001, all filings with the SEC by its
officers, directors and 10% stockholders complied with requirements for
reporting ownership and changes in ownership of Juniper Networks common stock
under Section 16(a) of the Securities Exchange Act of 1934, as amended; however
the Company determined that Mr. Wexler inadvertently failed to report the sale
of shares of the Company's Common Stock on his Form 4 for the month of April
2001. Mr. Wexler subsequently filed a Form 4 reporting such sale.
OTHER MATTERS
20
The Board of Directors knows of no other matters to be submitted to the
meeting. If any other matters properly come before the meeting, it is the
intention of the persons named in the enclosed form of proxy to vote the shares
they represent as the Board of Directors may recommend.
THE BOARD OF DIRECTORS
April 11, 2002
21
APPENDIX A
AUDIT COMMITTEE CHARTER OF THE BOARD OF DIRECTORS OF
JUNIPER NETWORKS, INC.
PURPOSE
The Audit Committee will make such examinations as are necessary to monitor the
corporate financial reporting and external audit requirements of Juniper
Networks, Inc. and its subsidiaries (the "Company"), to provide to the Board of
Directors the results of its examinations and recommendations derived therefrom,
to outline to the Board improvements made, or to be made, in internal accounting
controls, to nominate independent auditors, and to provide to the Board such
additional information and materials as it may deem necessary to make the Board
aware of significant financial matters that require Board attention.
In addition, the Audit Committee will undertake those specific duties and
responsibilities listed below and such other duties as the Board of Directors
from time to time prescribe.
MEMBERSHIP
The Audit Committee will consist of at least three members of the Board, all of
whom shall be independent, financially literate, and at least one of which shall
have accounting or related financial management expertise, in accordance with
the rules of the Nasdaq National Market and the Securities and Exchange
Commission. The members of the Audit Committee will be appointed by and will
serve at the discretion of the Board of Directors.
RESPONSIBILITIES
The responsibilities of the Audit Committee shall include:
1. Reviewing on a continuing basis the adequacy of the Company's system of
internal controls.
2. Reviewing the independent auditors' proposed audit scope and approach.
3. Conducting a post-audit review of the financial statements and audit
findings, including any significant suggestions for improvements
provided to management by the independent auditors.
4. Reviewing the performance of the independent auditors and ensure that
the independent auditors are accountable to the Board of Directors, as
representatives of shareholders.
5. Recommending the appointment of independent auditors to the Board of
Directors.
6. Reviewing fee arrangements with the independent auditors.
7. Ensuring receipt from the independent auditors of a formal written
statement delineating between the auditor and the Company, consistent
with Independence Standards Board Standard 1, as well as actively
engaging in a dialog with the independent auditors with respect to any
disclosed relationships or services that may impact the objectivity and
independence of the independent auditor.
22
8. Reviewing before release the audited financial statements and
Management's Discussion and Analysis in the Company's annual report on
Form 10-K;
9. Reviewing before release the unaudited quarterly operating results in
the Company's quarterly earnings release;
10. Overseeing compliance with SEC requirements for disclosure of auditor's
services and audit committee members and activities;
11. Reviewing management's monitoring of compliance with the Company's
Standards of Business Conduct and with the Foreign Corrupt Practices
Act;
12. Reviewing, in conjunction with counsel, any legal matters that could
have a significant impact on the Company's financial statements;
13. Providing oversight and review of the Company's asset management
policies, including an annual review of the Company's investment
policies and performance for cash and short-term investments;
14. If necessary, instituting special investigations and, if appropriate,
hiring special counsel or experts to assist;
15. Reviewing related party transactions for potential conflicts of
interest;
16. Reviewing and reassessing the adequacy of this formal written charter on
an annual basis; and
17. Performing other oversight functions as requested by the full Board of
Directors.
In addition to the above responsibilities, the Audit Committee will undertake
such other duties as the Board of Directors delegates to it, and will report, at
least annually, to the Board regarding the Committee's examinations and
recommendations.
MEETINGS
The Audit Committee will meet at least one time each year. The Audit Committee
may establish its own schedule which it will provide to the Board of Directors
in advance.
The Audit Committee will meet separately with the Chief Executive Officer and
separately with the Chief Financial Officer of the Company at least annually to
review the financial affairs of the Company. The Audit Committee will meet with
the independent auditors of the Company, at such times as it deems appropriate,
to review the independent auditor's examination and management report.
REPORTS
The Audit Committee will record its summaries of recommendations to the Board in
written form which will be incorporated as a part of the minutes of the Board of
Directors meeting at which those recommendations are presented.
MINUTES
The Audit Committee will maintain written minutes of its meetings, which minutes
will be filed with the minutes of the meetings of the Board of Directors.
23
DIRECTIONS TO THE HISTORIC DEL MONTE BUILDING
100 S. MURPHY AVE. #103
SUNNYVALE, CA 94086-6118
FROM HIGHWAY 101 NORTHBOUND OR SOUTHBOUND:
Exit Mathilda Avenue South. Proceed 1.5 miles to Washington Avenue. Turn left.
Go 3 blocks to Murphy Avenue and turn left. The Historic Del Monte Building is
at the end of the block on the right. (See map) "for parking" (See map for
parking) "The banquet office is on the rear of the building facing Sunnyvale
Ave. Look for the green awning that says "Banquet Office" and " The elevator can
be found at the rear entrance".
FROM HIGHWAY 280 NORTHBOUND:
Exit at De Anza Blvd and turn right. (De Anza Blvd. will become
Sunnyvale/Saratoga Rd.) Proceed 2 miles to El Camino Real. Cross El Camino and
drive to Washington Avenue. Turn right on Washington. Go 3 blocks to Murphy
Avenue and turn left. The Historic Del Monte Building is at the end of the block
on the right. (See map) "for parking" (See map for parking) "The banquet office
is on the rear of the building facing Sunnyvale Ave. Look for the green awning
that says "Banquet Office" and " The elevator can be found at the rear
entrance".
FROM HIGHWAY 280 SOUTHBOUND:
Exit at De Anza Blvd. and turn left. (De Anza Blvd. will become
Sunnyvale/Saratoga Rd.) Proceed 2 miles to El Camino Real. Cross El Camino and
drive to Washington Avenue. Turn right on Washington. Go 3 blocks to Murphy
Avenue and turn left. The Historic Del Monte Building is at the end of the block
on the right. (See map) "for parking" (See map for parking) "The banquet office
is on the rear of the building facing Sunnyvale Ave. Look for the green awning
that says "Banquet Office" and " The elevator can be found at the rear
entrance".
FROM HIGHWAY 880 NORTHBOUND OR SOUTHBOUND:
Exit at Highway 237 and drive to the Mathilda Exit. Turn left and drive 2 miles
to Washington Avenue. Turn left. Go 3 blocks to Murphy Avenue and turn left. The
Historic Del Monte Building is at the end of the block on the right. (See map)
"for parking" (See map for parking) "The banquet office is on the rear of the
building facing Sunnyvale Ave. Look for the green awning that says "Banquet
Office" and " The elevator can be found at the rear entrance".
[BOX OMITTED]
24
[BOX OMITTED]
25
JUNIPER NETWORKS, INC.
2002 ANNUAL MEETING OF STOCKHOLDERS
WEDNESDAY, MAY 8, 2002
9:00 A.M.
THE HISTORIC DEL MONTE BUILDING
100 SOUTH MURPHY STREET
THIRD FLOOR
SUNNYVALE, CA 94068
================================================================================
JUNIPER NETWORKS, INC.
1194 N. MATHILDA AVENUE, SUNNYVALE, CA 94089
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING
ON MAY 8, 2002.
IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED "FOR" ITEMS 1 AND 2 AND
"AGAINST" ITEM 3.
By signing the proxy, you revoke all prior proxies and appoint Marcel Gani and
Lisa C. Berry, and each of them, with full power of substitution, to vote your
shares on the matters shown on the reverse side and any other matters which may
come before the Annual Meeting and all adjournments.
Address Change: _______________________________________________________
_______________________________________________________
_______________________________________________________
If you noted an Address Change above, please check the
corresponding box on the reverse side.
JUNIPER NETWORKS, INC.
1194 N. MATHILDA AVENUE
SUNNYVALE, CA 94089
(*)HOUSEHOLDING OPTION
MARK "FOR" TO ENROLL THIS ACCOUNT TO RECEIVE CERTAIN FUTURE SECURITY HOLDER
DOCUMENTS IN A SINGLE PACKAGE PER HOUSEHOLD. MARK "AGAINST" IF YOU DO NOT WANT
TO PARTICIPATE. SEE ENCLOSED NOTICE. TO CHANGE YOUR ELECTION IN THE FUTURE, CALL
1-800-542-1061.
VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access the
web site. You will be prompted to enter your 12-digit Control Number which is
located below to obtain your records and to create an electronic voting
instruction form.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59
P.M. Eastern Time the day before the cut-off date or meeting date. Have your
proxy card in hand when you call. You will be prompted to enter your 12-digit
Control Number which is located below and then follow the simple instructions
the Vote Voice provides you.
VOTE BY MAIL
Mark, sign, and date your proxy card and return it in the postage-paid envelope
we have provided or return it to Juniper Networks, Inc., c/o ADP, 51 Mercedes
Way, Edgewood, NY 11717.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: JNPERP KEEP THIS PORTION FOR YOUR RECORDS
--------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
================================================================================================================================
JUNIPER NETWORKS, INC.
The Board of Directors Recommends a Vote
FOR Items 1 and 2.
FOR WITHHOLD FOR ALL To withhold authority to vote, mark
1. ELECTION OF DIRECTORS: ALL ALL EXCEPT "For All Except" and write the nominee's
01) William R. Hearst III 02) C. Richard Kramlich [ ] [ ] [ ] number on the line below.
________________________________________
FOR AGAINST ABSTAIN
VOTE ON PROPOSALS [ ] [ ] [ ]
2. RATIFICATION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 3
3. STOCKHOLDER PROPOSAL FOR JUNIPER NETWORKS TO ADOPT A POLICY NOT TO REPRICE
STOCK OPTIONS WITHOUT THE PRIOR APPROVAL OF A MAJORITY OF OUTSTANDING
SHARES. [ ] [ ] [ ]
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO
DIRECTION IS GIVEN, WILL BE VOTED "FOR" PROPOSALS 1 AND 2 AND "AGAINST" PROPOSAL
3.
Please sign exactly as your name(s) appears on this Proxy. If held in joint
tenancy, all persons must sign. Trustees, administrators, etc., should include
title and authority. Corporations should provide full name of corporation and
title of authorized officer signing the proxy.
Address Change? Mark this box and indicate changes on the [ ]
reverse side.
FOR AGAINST
(*)HOUSEHOLDING OPTION [ ] [ ]
--------------------------------------------- ---------------------------------------------
--------------------------------------------- ---------------------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
================================================================================================================================