The following table discloses compensation received by Juniper Networks’ Chief Executive
Officer during fiscal 2004 and Juniper Networks’ four other most highly paid executive officers
(together with the CEO, the “named executive officers”) during fiscal 2004 as well as their
compensation received from Juniper Networks for each of the fiscal years ending December 31, 2003
and December 31, 2002.
Summary Compensation Table
Long-Term Compensation
Annual Compensation
Restricted
Securities
Name and
Other Annual
Stock
Underlying
All Other
Principal Position
Year
Salary
Bonus
(1)
Compensation
(14)
Award(s)
Options
Compensation
(2)
Scott Kriens
2004
$
412,500
$
539,077
$
2000
NA
750,000
(3)
$
540
Chairman and Chief
2003
275,000
161,350
2000
NA
800,000
(4)
510
Executive Officer
2002
275,000
0
2000
NA
2,750,000
(5)
462
Pradeep Sindhu
2004
$
198,750
$
253,683
$
2000
NA
200,000
(3)
$
828
Vice Chairman and
2003
185,000
70,554
2000
NA
300,000
(4)
377
Chief Technical Officer
2002
185,000
10,000
2000
NA
400,000
(6)
462
Marcel Gani
2004
$
245,833
$
315,851
$
2000
NA
300,000
(3)
$
828
Executive Vice
2003
200,000
117,345
2000
NA
500,000
(4)
408
President, Chief
2002
200,000
0
2000
NA
1,080,000
(7)
462
Financial Officer
James A. Dolce, Jr.
2004
$
249,167
$
319,611
$
0
NA
300,000
(3)
$
40,978
(9)
Executive Vice
2003
254,581
70,407
0
NA
500,000
(4)
125,922
(9)
President, Field
2002
(8)
120,000
0
0
NA
0
26,922
(9)
Operations
Krishna “Kittu” Kolluri.
2004
(10)
$
249,167
$
486,288
(11)
$
2000
NA
0
(12)
$
91,421
(13)
General Manager,
2003
NA
NA
NA
NA
Security Products
2002
NA
NA
NA
NA
(1)
Amounts in this column reflect bonuses earned in 2004, although such amounts were paid in
2005.
(2)
Consists of the standard employee benefit portion paid by the Company for all employees for
premiums for term life insurance and, in the case of Mr. Dolce and Mr. Kolluri, the additional
amounts described in footnotes 9 and 12, respectively.
(3)
Mr. Kriens was granted an option for 750,000 shares, Dr. Sindhu was granted an option for
200,000 shares, Mr. Gani was granted an option for 300,000 shares and Mr. Dolce was granted an
option for 300,000 shares on January 29, 2004 at an exercise price of $28.17.
(4)
Mr. Kriens was granted an option for 800,000 shares, Dr. Sindhu was granted an option for
300,000 shares, Mr. Gani was granted an option for 500,000 shares and Mr. Dolce was granted an
option for 500,000 shares on September 26, 2003 at an exercise price of $15.00 per share.
(5)
Mr. Kriens was granted an exchange option on May 28, 2002 for 2,200,000 shares at an exercise
price of $10.31 per share. In connection with the acquisition of Unisphere Networks and in
recognition of the additional responsibility associated therewith, on July 1, 2002 an
additional option for 550,000 shares was granted at an exercise price of $5.69 per share.
(6)
Dr. Sindhu was granted an exchange option on May 28, 2002 for 100,000 shares at an exercise
price of $10.31 per share. In connection with the acquisition of Unisphere Networks and in
recognition of the additional responsibility associated therewith, on July 1, 2002 an
additional option for 300,000 shares was granted at an exercise price of $5.69 per share.
(7)
Mr. Gani was granted an exchange option on May 28, 2002 for 580,000 shares at an exercise
price of $10.31 per share. In connection with the acquisition of Unisphere Networks and in
recognition of the additional responsibility associated therewith, on July 1, 2002 an
additional option for 500,000 shares was granted at an exercise price of $5.69 per share.
Mr. Dolce was elected a named executive officer upon the closing of the acquisition of
Unisphere Networks on July 1, 2002. The data shown in the Summary Compensation Table only
reflects the amounts he received while an executive officer of Juniper Networks.
(9)
Amounts paid in 2004 reflect $40,618 in commissions paid. Amounts in 2003 reflect $125,414
in commissions paid. Amounts in 2002 reflect $26,634 in commissions paid on or after July 1,
2002 as the data shown in the Summary Compensation Table only reflects the amounts he received
while an executive officer of Juniper Networks.
(10)
Mr. Kolluri was elected a named executive officer upon the closing of the acquisition of
NetScreen Technologies, Inc. on April 16, 2004. The data shown in the Summary Compensation
Table only reflects the amounts he received while an executive officer of Juniper Networks.
(11)
Includes a bonus of $200,000 paid in 2005 relating to the acquisition of Neoteris Inc. by
NetScreen Technologies Inc. Also includes a $50,000 sales bonus committed to Mr. Kolluri
prior to the acquisition of NetScreen Technologies, Inc. by the Company.
(12)
No options were granted in 2004.
(13)
Amounts paid in 2004 reflect $91,331 in escrowed merger consideration relating to the
acquisition by NetScreen Technologies Inc. of Neoteris Inc.
(14)
In all cases, consists of matching contributions paid under the Company’s 401(k) plan.
Option Grants In Last Fiscal Year
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, 2004.
The Option/SAR Grant Table below 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.
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
Value of Unexercised
Shares
Unexercised Options at
In-the-Money Options at
Acquired on
Value
December 31, 2004
December 31, 2004
(1)
Name
Exercise
Realized
Exercisable
Unexercisable
Exercisable
Unexercisable
Scott Kriens
0
$
0
2,782,291
1,517,709
47,327,757
11,385,244
Pradeep Sindhu
0
0
1,452,656
527,344
6,688,121
5,106,879
Marcel Gani
500,000
8,433,333
288,333
774,395
4,374,872
8,445,528
James A. Dolce, Jr.
1,000,000
19,353,938
2,103,181
774,395
43,841,581
7,004,406
Krishna “Kittu” Kolluri
70,000
1,634,324
99,192
365,637
(2)
1,305,715
6,154,221
(1)
The value of in-the-money options is based on the closing price on December 31, 2004 of
$27.19 per share, minus the per share exercise price, multiplied by the number of shares
underlying the option.
(2)
Includes 50,806 shares that are subject to repurchase.
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 an Amendment and Assumption Agreement with Krishna “Kittu” Kolluri on
April 15, 2004 in connection with the Company’s acquisition of NetScreen Technologies, Inc.
Pursuant to the Amendment and Assumption Agreement, Mr. Kolluri agreed that the commencement of his
employment with the Company upon the closing of the NetScreen acquisition did not constitute (i)
“Good Reason,” as defined in Section 5.5b of Mr. Kolluri’s Employment Agreement with NetScreen, for
a voluntary termination of Employee’s employment, (ii) any other type of “constructive termination”
or (iii) grounds for termination without cause under Mr. Kolluri’s employment agreement. Pursuant
to Mr. Kolluri’s employment agreement, as amended, Mr. Kolluri is eligible for a bonus of up to
100% of his base salary pursuant to Juniper Networks’ Executive Officer Incentive Plan. The
employment agreement, as amended, in connection with Net
Screen’s acquisition of Neoteris, Inc., also provides for a grant of options to purchase 200,000 shares
of Net Screen’s
common stock and makes Mr. Kolluri eligible to receive a bonus of up to $200,000,
partially payable upon on the completion of performance objectives. If Mr. Kolluri is terminated
without cause or terminates his employment for good reason (in each case, as defined in the amended
employment agreement) within 24 months of the effectiveness of Net Screen’s acquisition of
Neoteris, he will be entitled to the continuation of his base salary (payable in accordance with
usual payroll practice) and health insurance coverage for a period of six months.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Committee
The Compensation Committee is comprised of three independent, non-employee members of the
Board of Directors, as defined by the Nasdaq rules. None of the members have interlocking
compensation committee relationships as defined by the Securities and Exchange Commission. The
Compensation Committee is responsible for reviewing and approving the annual base salary, the
annual incentive bonus, including the specific goals and amounts, equity compensation and other
benefits or compensation arrangements of the Company’s Chief Executive Officer and its other
executive officers.
Compensation Philosophy
The Compensation Committee recognizes that in order for the Company to successfully develop,
introduce, market and sell products, the Company must be able to attract, retain and reward
qualified executive officers who will be able to operate effectively in a high growth, complex
environment. 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.
The Company provides its executive officers with a compensation package consisting of base
salary, performance-based incentive pay, stock options and participation in benefit plans generally
available to other employees. The Compensation Committee’s intention is to adopt compensation
programs that encourage creation of long-term value for stockholders, employee retention, and
equity ownership through stock option grants. 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 overall performance and an individual’s
contribution to the Company’s success in meeting certain critical objectives. In this regard, the
Compensation Committee has tended to target base salary at approximately the 50
th
percentile relative to peer companies. Incentive compensation and long term equity awards are
intended to target overall compensation at between the 50
th
and 75
th
percentile, although changes in the market price of the Company’s common stock can result in total
compensation outside the target range. As the Compensation Committee applies these compensation
philosophies in determining appropriate executive compensation levels and other compensation
factors, the Compensation Committee reaches its decisions with a view towards maximizing the
Company’s overall performance.
The Compensation Committee considers market information about its peer companies 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
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