<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 23, 2000
REGISTRATION NO. 333-96171
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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JUNIPER NETWORKS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3661 77-042258
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
385 RAVENDALE DRIVE
MOUNTAIN VIEW, CA 94043
(Address, including zip code, of Registrant's principal executive offices)
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LISA C. BERRY
GENERAL COUNSEL AND SECRETARY
JUNIPER NETWORKS, INC.
385 RAVENDALE DRIVE, MOUNTAIN VIEW, CA 94043
(650) 526-8000
(Name, address, and telephone number, including area code, of agent for service)
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Copies to:
<TABLE>
<S> <C>
JUDITH MAYER O'BRIEN NORA L. GIBSON
JOHN A. FORE LINDSAY C. FREEMAN
BRUCE M. MCNAMARA LORA D. BLUM
WILSON SONSINI GOODRICH & ROSATI BROBECK PHLEGER & HARRISON LLP
PROFESSIONAL CORPORATION ONE MARKET
650 PAGE MILL ROAD SPEAR STREET TOWER
PALO ALTO, CA 94304 SAN FRANCISCO, CA 94105
(650) 493-9300 (415) 442-0900
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [ ]
If this Form is file to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE(4)
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% Convertible Subordinated Notes due March 15, 2007 $575,000,000(2) $151,800
Common Stock, par value $0.00001 per share, issuable upon
conversion of % Convertible Subordinated Notes due
March 15, 2007 (3) (3)
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</TABLE>
(1) Estimated solely for the purpose of computing the registration pursuant to
Rule 457(o) of the Securities Act of 1933.
(2) Exclusive of accrued interest, if any. Includes $75,000,000 in principal
amount of convertible notes which the underwriters have an option to
purchase.
(3) No additional consideration will be received for any shares of common stock
issued upon conversion or exchange of the % Convertible Subordinated
Notes due March 15, 2007. Pursuant to Rule 416 under the Securities Act of
1933 this registration statement also includes an indeterminate number of
shares that may be issued upon conversion of the % Convertible
Subordinated Notes due March 15, 2007 as a result of anti-dilution and other
provisions of the convertible notes.
(4) Previously paid.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION. DATED FEBRUARY 23, 2000.
$500,000,000
[LOGO]
% Convertible Subordinated Notes due March 15, 2007
------------------------
We are offering $500,000,000 of % Convertible Subordinated Notes due
March 15, 2007. You may convert your convertible notes into our common stock at
any time prior to maturity or their prior redemption or repurchase by us. The
convertible notes will mature on March 15, 2007. The conversion rate is
shares per each $1,000 principal amount of convertible notes, subject
to adjustment. This is equivalent to a conversion price of approximately
$ per share. Our common stock is quoted on the Nasdaq National Market
under the symbol "JNPR". On February 22, 2000, the last reported bid price for
the common stock was $230.75 per share.
We will pay interest on the convertible notes on March 15 and September 15
of each year. The first interest payment will be made on September 15, 2000. The
convertible notes are subordinated in right of payment to all of our senior
debt. The convertible notes will be issued only in denominations of $1,000 and
integral multiples of $1,000.
On or after the third business day after March 15, 2003, we have the option
to redeem the convertible notes at the redemption prices set forth in this
prospectus. You have the option to require us to repurchase any convertible
notes held by you if there is a change in control, under the circumstances and
at the price described in this prospectus.
See "Risk Factors" beginning on page 6 of this prospectus to read about
important factors you should consider before buying the convertible notes.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY
HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
<TABLE>
<CAPTION>
Per Note Total
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<S> <C> <C>
Initial public offering price............................... % $
Underwriting discount....................................... % $
Proceeds, before expenses, to Juniper Networks.............. % $
</TABLE>
The initial public offering price set forth above does not include accrued
interest, if any. Interest on the convertible notes will accrue from ,
2000 and must be paid by the purchaser if the convertible notes are delivered
after , 2000.
To the extent that the underwriters sell more than $500,000,000 principal
amount of convertible notes, the underwriters have the option to purchase up to
an additional $75,000,000 principal amount of convertible notes from us at the
initial public offering price less the underwriting discount.
------------------------
The underwriters expect to deliver the convertible notes in book-entry form
only through the facilities of The Depository Trust Company against payment in
New York, New York on , 2000.
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
SG COWEN
WARBURG DILLON READ LLC
------------------------
Prospectus dated , 2000.
<PAGE> 3
PROSPECTUS SUMMARY
This summary may not contain all of the information that may be important
to you. You should read the entire prospectus as well as the information
regarding us, including our consolidated financial statements and the
accompanying notes, appearing elsewhere in this prospectus. All information in
this prospectus assumes the underwriters' overallotment option with respect to
the convertible notes offering is not exercised unless otherwise stated.
ABOUT JUNIPER NETWORKS
We are a leading provider of Internet infrastructure solutions that enable
Internet service providers and other telecommunications service providers to
meet the demands resulting from the rapid growth of the Internet. We deliver
next generation Internet backbone routers that are specifically designed, or
purpose-built, for service provider networks and offer our customers increased
reliability, performance, scalability, interoperability and flexibility, and
reduced complexity and cost compared to current alternatives. Our flagship
product is the M40 Internet backbone router and we recently introduced the M20,
an Internet backbone router purpose-built for emerging service providers. Our
Internet backbone routers combine the features of our JUNOS Internet Software,
high performance ASIC-based (application specific integrated circuit) packet
forwarding technology and Internet optimized architecture into a purpose-built
solution for service providers. Unlike conventional routers, which were
originally developed for enterprise applications and are increasingly inadequate
for service provider use in public networks, our Internet backbone routers are
specifically designed to accommodate the size and scope of the Internet.
We sell our Internet backbone routers primarily through a direct sales
force in the United States and through value added resellers internationally.
Our M40 Internet backbone router is currently used by several of the world's
leading service providers, such as UUNet, an MCI WorldCom Company, Cable &
Wireless USA, AT&T/IBM Global Services, Frontier GlobalCenter Inc. and Verio
Inc.
We believe that the Internet will continue to grow at significant rates and
will evolve into the next generation public network, superseding and expanding
upon many of the functions provided by the traditional telephone network. This
trend will drive the need for new Internet infrastructure equipment that can
deliver the high levels of reliability and scalability needed in a public
network. We believe we have developed the first commercially available Internet
backbone routing platform specifically designed and built to meet these
requirements. Ryan Hankin Kent, an industry research firm, estimated in 1999
that the market for Internet backbone routers was $169 million in 1998 and is
expected to increase to approximately $5.5 billion in 2003.
Our objective is to become the primary supplier of high performance
Internet backbone infrastructure equipment. The following are key elements of
our strategy:
- leverage our early lead as supplier of purpose-built Internet
infrastructure equipment;
- work closely with our key customers;
- increase our penetration in major service providers;
- leverage our early successes to rapidly penetrate new customers;
- expand our sales and distribution network;
- maintain and extend our technology leadership; and
- enable new IP-based services.
Our principal executive offices are located at 385 Ravendale Drive,
Mountain View, California 94043, and our telephone number is (650) 526-8000.
Juniper Networks is a registered trademark and the Juniper Networks logo, M40,
M20 and JUNOS are trademarks of Juniper Networks. Each trademark, trade name or
service mark of any other company appearing in this prospectus belongs to its
holder. Information contained on our website, www.juniper.net, does not
constitute part of this prospectus. We were incorporated in the State of
California in February 1996, and we reincorporated in the State of Delaware in
March 1998.
1
<PAGE> 4
THE OFFERING
Securities offered......... $500,000,000 aggregate principal amount of %
Convertible Subordinated Notes due March 15, 2007.
We also have granted the underwriters an
over-allotment option to purchase up to an
additional $75,000,000 aggregate principal amount
of convertible notes.
Offering price............. 100% of the principal amount of the convertible
notes, plus accrued interest, if any, from
, 2000.
Interest................... We will pay interest on the convertible notes
semi-annually on March 15 and September 15 of each
year, commencing September 15, 2000.
Conversion................. You may convert your convertible notes into shares
of our common stock at a conversion rate of
shares of common stock per $1,000
principal amount of convertible notes. This is
equivalent to a conversion price of approximately
$ per share. The conversion rate may be subject
to adjustment. The convertible notes will be
convertible at any time before the close of
business on the maturity date, unless we have
previously redeemed or repurchased the convertible
notes. You may convert your convertible notes
called for redemption or submitted for repurchase
up to and including the business day immediately
preceding the date fixed for redemption or
repurchase, as the case may be.
Subordination.............. The convertible notes are subordinated to our
senior debt, as that term is defined in
"Description of the Convertible
Notes -- Subordination". The convertible notes are
also effectively subordinated in right of payment
to all indebtedness and other liabilities of our
subsidiaries. As of December 31, 1999, we did not
have any outstanding senior debt. The indenture
under which the convertible notes will be issued
will not restrict the incurrence of senior debt or
other indebtedness by us.
Global note; book-entry
system..................... We will issue the convertible notes only in fully
registered form without interest coupons and in
minimum denominations of $1,000. The convertible
notes will be evidenced only by one or more global
notes in fully registered form and without coupons
deposited with the trustee for the convertible
notes, as custodian for DTC. Your interest in the
global notes will be shown on, and transfers of
your interest can only be made through, records
maintained by DTC and its participants and indirect
participants.
Optional redemption by
Juniper.................... On or after the third business day after March 15,
2003, we have the right at any time to redeem some
or all of your convertible notes at the redemption
prices set forth in this prospectus plus accrued
and unpaid interest.
2
<PAGE> 5
Repurchase at the option of
holders upon a change in
control.................... If we experience a change in control, as that term
is defined in "Description of Convertible
Notes -- Repurchase at Option of Holders Upon a
Change in Control", you will have the right,
subject to conditions and restrictions, to require
us to repurchase some or all of your convertible
notes at a price equal to 100% of the principal
amount, plus accrued and unpaid interest to the
repurchase date. The repurchase price is payable in
cash or, at our choice depending on the
circumstances, in shares of our common stock,
valued at 95% of the average closing sales prices
of the common stock for the five trading days
preceding and including the third trading day prior
to the repurchase date.
Use of proceeds............ We anticipate using the net proceeds from this
offering for working capital and other general
corporate purposes. Should the opportunity arise,
we may also use a portion of the net proceeds to
fund acquisitions of or investments in
complementary businesses, partnerships, minority
investments, products or technologies.
Events of default.......... Events of default include:
- we fail to pay principal of or any premium on
any convertible note when due, whether or not
the payment is prohibited by the subordination
provisions of the indenture;
- we fail to pay any interest on any convertible
note when due and that default continues for 30
days, whether or not the payment is prohibited
by the subordination provisions of the
indenture;
- we fail to provide the notice that we are
required to give in the event of a change in
control, whether or not the notice is prohibited
by the subordination provisions of the
indenture;
- we fail to perform any other covenant in the
indenture and that failure continues for 60 days
after written notice to us by the trustee or the
holders of at least 25% in aggregate principal
amount of outstanding convertible notes;
- we or any of our significant subsidiaries fail
to pay when due at final maturity thereof,
either at its maturity or upon acceleration, any
indebtedness under any bonds, debentures,
convertible notes or other evidences of
indebtedness for money borrowed, or any
guarantee thereof, in excess of $25,000,000 if
the indebtedness is not discharged, or the
acceleration is not annulled, within 30 days
after written notice to us by the trustee or the
holders of at least 25% in aggregate principal
amount of the outstanding convertible notes; and
- events of bankruptcy, insolvency or
reorganization with respect to us or any of our
significant subsidiaries specified in the
indenture.
3
<PAGE> 6
Listing of convertible
notes...................... The convertible notes will not be listed on any
securities exchange or quoted on the Nasdaq
National Market. The underwriters have advised us
that they currently intend to make a market in the
convertible notes. However, the underwriters are
not obligated to do so, and any such market making
may be discontinued at any time at the sole
discretion of the underwriters without notice. Our
common stock is traded on the Nasdaq National
Market under the symbol "JNPR".
Governing law.............. The indenture and the convertible notes will be
governed by the laws of the State of New York,
without regard to conflicts of laws principles.
Risk factors............... You should read the "Risk Factors" section,
beginning on page 6, as well as the other
cautionary statements, risks and uncertainties
described in this prospectus, so that you
understand the risks associated with an investment
in the convertible notes.
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
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<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues.......................................... $102,606 $ 3,807 $ --
Cost of revenues...................................... 45,272 4,416 --
-------- -------- --------
Gross profit (loss)................................... 57,334 (609) --
Operating expenses:
Research and development............................ 41,502 23,987 9,406
Sales and marketing................................. 20,931 4,216 1,149
General and administrative.......................... 5,235 2,223 1,043
Amortization of goodwill and purchased intangibles
and deferred stock compensation.................. 4,286 1,235 --
-------- -------- --------
Total operating expenses......................... 71,954 31,661 11,598
-------- -------- --------
Operating loss........................................ (14,620) (32,270) (11,598)
Interest income, net.................................. 8,011 1,301 1,235
-------- -------- --------
Loss before income taxes.............................. (6,609) (30,969) (10,363)
Provision for income taxes............................ 2,425 2 --
-------- -------- --------
Net loss.............................................. $ (9,034) $(30,971) $(10,363)
======== ======== ========
Basic and diluted net loss per share(1)............... $ (0.10) $ (0.80) $ (0.40)
======== ======== ========
Shares used in computing basic and diluted net loss
per share(1)........................................ 94,661 38,871 25,773
======== ======== ========
Pro forma basic and diluted net loss per share
(unaudited)(1)...................................... $ (0.07) $ (0.28)
======== ========
Shares used in computing pro forma basic and diluted
net loss per share (unaudited)(1)................... 131,480 111,210
======== ========
OTHER DATA:
Ratio of earnings to fixed charges(2)................. -- -- --
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------
ACTUAL AS ADJUSTED(3)
------------ --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $345,958 832,658
Working capital............................................. 322,170 808,870
Long-term investments....................................... 97,201 97,201
Total assets................................................ 513,378 1,013,378
Total long-term debt........................................ -- 500,000
Stockholders' equity........................................ 457,715 457,715
</TABLE>
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(1) See note 1 of the notes to consolidated financial statements for an
explanation of the determination of the shares used to compute net loss per
share. All share and per share amounts have been adjusted to reflect the
three-for-one split of our common stock paid to stockholders of record on
December 31, 1999.
(2) The pre-tax loss from continuing operations for the years ended December 31,
1999, 1998 and 1997 are not sufficient to cover fixed charges by a total of
approximately $6.6 million in 1999, $31.0 million in 1998 and $10.4 million
in 1997. As a result, the ratio of earnings to fixed charges has not been
computed for any of these years.
(3) Reflects net proceeds of approximately $486,700 from the sale of the
convertible notes, assuming an offering price of 100% of the principal
amount, and after deducting underwriters' discounts and commissions and
estimated offering expenses.
5
<PAGE> 8
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below before making an investment decision.
RISKS RELATED TO OUR BUSINESS
OUR FAILURE TO INCREASE OUR REVENUES WOULD PREVENT US FROM MAINTAINING
PROFITABILITY.
We have incurred significant losses since inception. As of December 31,
1999, we had an accumulated deficit of $52.2 million. Although our net revenues
have grown from zero in the quarter ended September 30, 1998 to $45.4 million in
the quarter ended December 31, 1999, we cannot be certain that our revenues will
continue to grow. We have large fixed expenses and we expect to continue to
incur significant and increasing sales and marketing, product development and
administrative expenses. As a result, we will need to generate significantly
higher revenues to maintain profitability. See "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Consolidated Financial Statements and the Notes to the
Consolidated Financial Statements for more information on our results of
operations.
OUR LIMITED OPERATING HISTORY MAKES FORECASTING DIFFICULT.
As a result of our limited operating history, it is difficult to forecast
accurately our revenues, and we have limited meaningful historical financial
data upon which to base planned operating expenses. Specifically, we began
operations in February 1996, introduced our M40 Internet backbone router product
in September 1998, began shipping the M40 in volume in October 1998 and
introduced the M20 in December 1999. In addition, our operating expenses are
largely based on anticipated revenue trends and a high percentage of our
expenses are and will continue to be fixed in the short-term. The revenue and
income potential of our products and business are unproven and the market that
we are addressing is rapidly evolving. If we do not achieve our expected
revenues, our operating results will be below our expectations and the
expectations of investors and market analysts, which could cause the price of
our convertible notes and common stock to decline.
OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP PRODUCTS AND PRODUCT ENHANCEMENTS
THAT WILL ACHIEVE MARKET ACCEPTANCE.
We cannot assure you that we will be able to develop new products or
product enhancements in a timely manner, or at all. Any failure to develop new
products or product enhancements will substantially decrease market acceptance
and sales of our present and future products which will significantly harm our
business and financial results. Even if we are able to develop and commercially
introduce new products and enhancements, we cannot assure you that the new
products or enhancements will achieve widespread market acceptance. Any failure
of our future products to achieve market acceptance could harm our business and
financial results.
THE LONG SALES AND IMPLEMENTATION CYCLES FOR OUR PRODUCTS, AS WELL AS OUR
EXPECTATION THAT CUSTOMERS WILL SPORADICALLY PLACE LARGE ORDERS WITH SHORT LEAD
TIMES MAY CAUSE REVENUES AND OPERATING RESULTS TO VARY SIGNIFICANTLY FROM
QUARTER TO QUARTER.
A customer's decision to purchase our products involves a significant
commitment of its resources and a lengthy evaluation and product qualification
process. As a result, our sales cycle may be lengthy. Throughout the sales
cycle, we often spend considerable time educating and providing information to
prospective customers regarding the use and benefits of the products. Even after
making the decision to purchase, our customers tend to deploy the products
slowly and deliberately. Timing of deployment can vary widely and depends on the
skill set of the
6
<PAGE> 9
customer, the size of the network deployment, the complexity of the customer's
network environment and the degree of hardware and software configuration
necessary to deploy the products. Customers with large networks usually expand
their networks in large increments on a periodic basis. Accordingly, we expect
to receive purchase orders for significant dollar amounts on an irregular basis.
Because of our limited operating history, we cannot predict these sales and
development cycles. These long cycles, as well as our expectation that customers
will tend to sporadically place large orders with short lead times, may cause
our revenues and operating results to vary significantly and unexpectedly from
quarter to quarter.
WE HAVE A LIMITED NUMBER OF CUSTOMERS UPON WHOM WE RELY, AND ANY DECREASE IN
REVENUE FROM THESE CUSTOMERS COULD HAVE AN ADVERSE EFFECT ON US.
We began recognizing revenues from sales of the M40 in the quarter ended
December 31, 1998. A significant portion of our revenues to date have been
recognized from a limited number of customers, with two customers, UUNet and
Cable & Wireless, representing 58% of our revenues for the year ended December
31, 1999. We expect that the majority of our revenues will continue to depend on
sales of our products to a small number of customers. Any downturn in the
business of these customers or potential new customers could significantly
decrease the sales of our products to these customers which could seriously harm
our revenues and results of operations.
IF THE INTERNET DOES NOT CONTINUE TO EXPAND AS A WIDESPREAD COMMUNICATIONS
MEDIUM, DEMAND FOR OUR PRODUCTS MAY DECLINE SIGNIFICANTLY.
Our future success depends on the continued growth of the Internet as a
widely used medium for commerce and communication. If the Internet does not
continue to expand as a widespread communications medium and commercial
marketplace, the growth of the market for Internet infrastructure equipment may
not continue and the demand for our products could decline significantly.
WE FACE INTENSE COMPETITION THAT COULD REDUCE OUR MARKET SHARE.
Competition in the Internet infrastructure market is intense. This market
has historically been dominated by Cisco Systems with other companies such as
Nortel Networks and Lucent Technologies providing products to a smaller segment
of the market. In addition, a number of private companies have announced plans
for new products to address the same problems which our products address.
In order to compete effectively in the Internet router market we must
deliver products which:
- provide extremely high network reliability;
- provide high performance interfaces and packet processing capabilities;
- scale easily and efficiently with minimum disruption to the network;
- interoperate with existing network designs and equipment vendors;
- reduce the complexity of the network by decreasing the need for
overlapping equipment; and
- provide a cost-effective solution for service providers.
If we are unable to compete successfully against our current and future
competitors, we could experience price reductions, reduced gross margins and
loss of market share, any one of which could materially and adversely affect our
business, operating results and financial condition. See "Business --
Competition" for detailed information about our competition.
7
<PAGE> 10
WE MUST EXPAND SUBSTANTIALLY OUR DIRECT AND INDIRECT SALES OPERATIONS IN ORDER
TO INCREASE MARKET AWARENESS AND SALES OF OUR PRODUCTS.
Our products and services require a sophisticated sales effort targeted at
several key people within each of our prospective customers' organizations. This
sales effort requires the efforts of select personnel as well as specialized
system and consulting engineers. We have recently expanded our direct sales
force and plan to hire additional qualified sales personnel and system and
consulting engineers. Competition for these individuals is intense, and we might
not be able to hire the kind and number of sales personnel and system and
consulting engineers we need. In addition, we believe that our future success is
dependent upon establishing successful relationships with a variety of
distribution partners. We have entered into agreements with several value added
resellers, some of whom also sell products that compete with our products. We
cannot be certain that we will be able to reach agreement with additional
resellers on a timely basis or at all, or that they will devote adequate
resources to selling our products.
If we are unable to expand our direct and indirect sales operations, we may
not be able to increase market awareness or sales of our products, which may
prevent us from maintaining profitability.
IF WE DO NOT EXPAND OUR CUSTOMER SERVICE AND SUPPORT ORGANIZATION SUBSTANTIALLY,
SALES OF OUR PRODUCTS MAY BE SIGNIFICANTLY REDUCED.
The complexity of our products and the difficulty of installing them
require highly trained customer service and support personnel. We currently have
a small customer service and support organization and will need to increase our
staff to support new customers and the expanding needs of existing customers.
Hiring customer service and support personnel is very competitive in our
industry due to the limited number of people available with the necessary
technical skills and understanding of the Internet. If we are unable to expand
our customer service and support organization, we may not be able to increase
sales of our products, which would seriously harm our business.
WE ARE DEPENDENT ON SOLE SOURCE AND LIMITED SOURCE SUPPLIERS FOR SEVERAL KEY
COMPONENTS, AND IF WE ARE UNABLE TO BUY THESE COMPONENTS ON A TIMELY BASIS, WE
WILL NOT BE ABLE TO DELIVER OUR PRODUCTS TO OUR CUSTOMERS.
We currently purchase several key components, including ASICs and power
supplies, from single or limited sources. We worked with IBM for over three
years to develop several of our key proprietary application specific integrated
circuits, or ASICs, which are custom designed integrated circuits built to
perform a specific function more rapidly than a general purpose microprocessor.
IBM is currently our sole source supplier of these ASICs. These ASICs are very
complex, and we may not be able to develop an alternate source to IBM in a
timely manner, which could hurt our ability to deliver our products to our
customers. We also purchase power supplies from a single source and purchase
other custom components from other sole or limited sources. If we are unable to
buy these components on a timely basis, we will not be able to deliver the
products to our customers, which would negatively impact present and future
sales and revenue which would, in turn, seriously harm our business.
WE CURRENTLY DEPEND PRIMARILY ON ONE CONTRACT MANUFACTURER, AND IF WE HAVE TO
QUALIFY A NEW CONTRACT MANUFACTURER WE MAY LOSE REVENUE AND DAMAGE OUR CUSTOMER
RELATIONSHIPS.
Solectron, a third party manufacturer for numerous companies, manufactures
the M40 and M20 at its Milpitas, California facility on a purchase order basis
and is our primary manufacturer. We currently do not have a long-term supply
contract with Solectron. If we should fail to effectively manage our
relationship with Solectron, or if Solectron experiences delays, disruptions or
quality control problems in its manufacturing operations, our ability to ship
products to our
8
<PAGE> 11
customers could be delayed. We have begun the process to qualify a new third
party contract manufacturer. Qualifying a new contract manufacturer and
commencing volume production is expensive and time consuming. If we are required
or choose to change contract manufacturers, we may lose revenue and damage our
customer relationships.
IF WE FAIL TO ACCURATELY PREDICT OUR MANUFACTURING REQUIREMENTS, WE COULD INCUR
ADDITIONAL COSTS OR EXPERIENCE MANUFACTURING DELAYS.
Because we currently do not have a long-term supply contract with
Solectron, it is not obligated to supply products to us for any specific period,
in any specific quantity or at any certain price, except as may be provided in a
particular purchase order. We provide forecasts of our demand to Solectron up to
six months prior to scheduled delivery of products to our customers. If we
overestimate our requirements, Solectron may have excess inventory, which would
increase our costs. If we underestimate our requirements, Solectron may have an
inadequate inventory, which could interrupt manufacturing of our products and
result in delays in shipments and revenues. In addition, lead times for
materials and components we order vary significantly and depend on factors such
as the specific supplier, contract terms and demand for each component at a
given time. We also may experience shortages of certain components from time to
time, which also could delay the manufacturing of our products.
THE UNPREDICTABILITY AND SEASONALITY OF OUR QUARTERLY RESULTS MAY ADVERSELY
AFFECT THE TRADING PRICE OF OUR COMMON STOCK AND THE CONVERTIBLE NOTES.
Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause our stock price to fluctuate. The primary factors that
may affect us include the following:
- demand for our products;
- the timing of sales of our products;
- the timing of recognizing revenue and deferred revenue;
- new product introductions by our competitors;
- changes in our pricing policies or the pricing policies of our
competitors;
- our ability to develop, introduce and ship new products and product
enhancements that meet customer requirements in a timely manner;
- our ability to obtain sufficient supplies of the sole or limited source
components, including ASICs and power supplies for our products;
- increases in the prices of the components we purchase;
- our ability to attain and maintain production volumes and quality levels
for our products;
- Internet growth and demand for Internet infrastructure;
- prototype expenses;
- costs related to acquisitions of technology or businesses; and
- general economic conditions as well as those specific to the Internet
and related industries.
In addition, we are dependent on decisions by customers to build their
Internet infrastructure, which decisions are in turn dependent upon the success
and expected demand for the services offered by those customers. Furthermore,
the long sales and implementation cycles for our products, as well as the degree
to which customers will sporadically place large orders with short
9
<PAGE> 12
lead times, may cause revenues and operating results to vary significantly from
quarter to quarter.
We plan to increase significantly our operating expenses to fund greater
levels of research and development, expand our sales and marketing operations,
broaden our customer support capabilities and develop new distribution channels.
We also plan to expand our general and administrative functions to address the
increased reporting and other administrative demands, that have resulted from
being a publicly traded company and the increasing size of our business. Our
operating expenses are largely based on anticipated revenue trends and a high
percentage of our expenses are, and will continue to be, fixed in the short
term. As a result, a delay in generating or recognizing revenue for the reasons
set forth above, or for any other reason, could cause significant variations in
our operating results from quarter to quarter and could result in substantial
operating losses.
Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that in some future quarters, our operating results
may be below the expectations of public market analysts and investors. In this
event, the price of our common stock and the convertible notes may fall.
IF OUR PRODUCTS DO NOT INTEROPERATE WITH OUR CUSTOMERS' NETWORKS, INSTALLATIONS
WILL BE DELAYED OR CANCELLED AND COULD RESULT IN SUBSTANTIAL PRODUCT RETURNS
WHICH COULD HARM OUR BUSINESS.
Our products are designed to interface with our customers' existing
networks, each of which has different specifications and utilizes multiple
protocol standards. Many of our customers' networks contain multiple generations
of products that have been added over time as these networks have grown and
evolved. Our products must interoperate with all of the products within these
networks as well as future products in order to meet our customers'
requirements. If we find errors in the existing software used in our customers'
networks, we must modify our JUNOS Internet Software to fix or overcome these
errors so that our products will interoperate and scale with the existing
software and hardware. If our products do not interoperate with those of our
customers' networks, installations could be delayed, orders for our products
could be cancelled or our products could be returned. This would also seriously
harm our reputation, which could seriously harm our business and prospects.
BECAUSE OUR PRODUCTS ARE COMPLEX AND ARE DEPLOYED IN COMPLEX ENVIRONMENTS, THEY
MAY HAVE ERRORS OR DEFECTS THAT WE FIND ONLY AFTER FULL DEPLOYMENT, WHICH COULD
SERIOUSLY HARM OUR BUSINESS.
Our products are highly complex and designed to be deployed in very large
and complex networks. Although we have thoroughly tested our products, because
of the nature of the product, it can only be fully tested when deployed in very
large networks with high amounts of traffic. To date, our products have been
deployed only on a limited basis. Consequently, our customers may discover
errors or defects in the hardware or the software after it has been fully
deployed. If we are unable to fix errors or other problems that may be
identified in full deployment, we could experience:
- loss of or delay in revenues and loss of market share;
- loss of customers;
- failure to achieve market acceptance;
- diversion of development resources;
- increased service and warranty costs;
- legal actions by our customers; and
- increased insurance costs.
10
<PAGE> 13
CUSTOMER PRODUCT LIABILITY CLAIMS BASED ON ERRORS IN OUR SOFTWARE OR MISTAKES IN
PERFORMING OUR SERVICES COULD RESULT IN COSTLY LITIGATION AGAINST US.
We may be subject to claims based on errors in our software or mistakes in
performing our services, including claims relating to damages to our customers'
internal systems. Our contracts with our customers generally contain provisions
designed to limit our exposure to potential product liability claims, such as
disclaimers of warranties and limitations on liability for special,
consequential and incidental damages. We believe our product liability insurance
is adequate to cover potential product liability claims. However, a product
liability claim, whether successful or not, could seriously impact our capital
reserves, harm our reputation, and direct the attention of key personnel away
from our business, any of which could harm our business.
PROBLEMS ARISING FROM USE OF OUR PRODUCTS IN CONJUNCTION WITH OTHER VENDORS'
PRODUCTS COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL CONDITION.
Service providers typically use our products in conjunction with products
from other vendors. As a result, when problems occur, it may be difficult to
identify the source of the problem. These problems may cause us to incur
significant warranty and repair costs, divert the attention of our engineering
personnel from our product development efforts and cause significant customer
relations problems.
OUR PRODUCTS ARE NEW AND FACE RAPID TECHNOLOGICAL CHANGES AND EVOLVING STANDARDS
AND IF WE DO NOT RESPOND IN A TIMELY MANNER, OUR BUSINESS COULD BE HARMED.
The Internet infrastructure market is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
evolving industry standards. In developing our products, we have made, and will
continue to make, assumptions with respect to which standards will be adopted by
our customers and competitors. If the standards adopted are different from those
which we have chosen to support, market acceptance of our products may be
significantly reduced or delayed and our business will be seriously harmed. In
addition, the introduction of products embodying new technologies and the
emergence of new industry standards could render our existing products obsolete.
In addition, in order to introduce products embodying new technologies and
new industry standards, we must be able to gain access to the latest
technologies of our suppliers such as IBM. Any failure to gain access to the
latest technologies could harm our business and operating results.
OUR FAILURE TO ESTABLISH AND MAINTAIN KEY CUSTOMER RELATIONSHIPS MAY RESULT IN
DELAYS IN INTRODUCING NEW PRODUCTS OR CAUSE CUSTOMERS TO FOREGO PURCHASING OUR
PRODUCTS.
Our future success will also depend upon our ability to develop and manage
key customer relationships in order to introduce a variety of new products and
product enhancements that address the increasingly sophisticated needs of our
customers. Our failure to establish and maintain these customer relationships
may adversely affect our ability to develop new products and product
enhancements. In addition, we may experience delays in releasing new products
and product enhancements in the future. Material delays in introducing new
products and enhancements or our inability to introduce competitive new products
may cause customers to forego purchases of our products and purchase those of
our competitors, which could seriously harm our business.
IF WE FAIL TO MANAGE EXPANSION EFFECTIVELY, OUR BUSINESS, FINANCIAL CONDITION
AND PROSPECTS COULD BE SERIOUSLY HARMED.
Our ability to successfully offer our products and implement our business
plan in a rapidly evolving market requires an effective planning and management
process. We continue to
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<PAGE> 14
increase the scope of our operations domestically and internationally and have
grown our headcount substantially. At December 31, 1998, we had a total of 156
employees and at December 31, 1999, we had a total of 335 employees. In
addition, we plan to continue to hire a significant number of employees this
year. This growth has placed, and our anticipated growth in future operations
will continue to place, a significant strain on our management systems and
resources. We expect that we will need to continue to improve our financial and
managerial controls, reporting systems and procedures, and will need to continue
to expand, train and manage our work force worldwide. Furthermore, we expect
that we will be required to manage multiple relationships with various customers
and other third parties.
WE DEPEND ON OUR KEY PERSONNEL TO MANAGE OUR BUSINESS EFFECTIVELY IN A RAPIDLY
CHANGING MARKET AND IF WE ARE UNABLE TO HIRE ADDITIONAL PERSONNEL, OUR ABILITY
TO SELL OUR PRODUCTS COULD BE HARMED.
Our future success depends upon the continued services of our executive
officers and other key engineering, sales, marketing and support personnel. None
of our officers or key employees is bound by an employment agreement for any
specific term and we do not have "key person" life insurance policies covering
any of our employees.
We also intend to hire a significant number of engineering, sales,
marketing and support personnel in the future, and we believe our success
depends, in large part, upon our ability to attract and retain these key
employees. Competition for this personnel is intense, especially in the San
Francisco Bay area. In particular, we have experienced difficulty in hiring
qualified ASIC, software, system and test and customer support engineers and
there can be no assurance that we will be successful in attracting and retaining
these individuals. The loss of the services of any of our key employees, the
inability to attract or retain qualified personnel in the future, or delays in
hiring required personnel, particularly engineers and sales personnel, could
delay the development and introduction of and negatively impact our ability to
sell our products.
IF WE BECOME SUBJECT TO UNFAIR HIRING CLAIMS WE COULD INCUR SUBSTANTIAL COSTS IN
DEFENDING OURSELVES.
Companies in our industry whose employees accept positions with competitors
frequently claim that their competitors have engaged in unfair hiring practices.
We have received claims of this kind in the past and we cannot assure you that
we will not receive claims of this kind in the future as we seek to hire
qualified personnel or that those claims will not result in material litigation.
We could incur substantial costs in defending ourselves against these claims,
regardless of their merits.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF WE ARE UNABLE TO PROTECT OUR
INTELLECTUAL PROPERTY RIGHTS FROM THIRD-PARTY CHALLENGES.
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property rights.
We also enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and control access to and distribution of
our software, documentation and other proprietary information. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy or otherwise obtain and use our products or technology. Monitoring
unauthorized use of our products is difficult and we cannot be certain that the
steps we have taken will prevent unauthorized use of our technology,
particularly in foreign countries where the laws may not protect our proprietary
rights as fully as in the United States.
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<PAGE> 15
NECESSARY LICENSES OF THIRD-PARTY TECHNOLOGY MAY NOT BE AVAILABLE TO US OR MAY
BE VERY EXPENSIVE.
From time to time we may be required to license technology from third
parties to develop new products or product enhancements. We cannot assure you
that third party licenses will be available to us on commercially reasonable
terms, if at all. The inability to obtain any third-party license required to
develop new products and product enhancements could require us to obtain
substitute technology of lower quality or performance standards or at greater
cost either of which could seriously harm our business, financial condition and
results of operations.
WE COULD BECOME SUBJECT TO LITIGATION REGARDING INTELLECTUAL PROPERTY RIGHTS
WHICH COULD SERIOUSLY HARM OUR BUSINESS.
In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. Although we have never
been involved in any intellectual property litigation, we may be a party to
litigation in the future to protect our intellectual property or as a result of
an alleged infringement of others' intellectual property. Claims for alleged
infringement and any resulting lawsuit, if successful, could subject us to
significant liability for damages and invalidation of our proprietary rights.
These lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve and would divert management time and attention. Any
potential intellectual property litigation could also force us to do one or more
of the following:
- stop selling, incorporating or using our products that use the
challenged intellectual property;
- obtain from the owner of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not be
available on reasonable terms, or at all; or
- redesign those products that use such technology.
If we are forced to take any of the foregoing actions, our business may be
seriously harmed. Although we carry general liability insurance, our insurance
may not cover potential claims of this type or may not be adequate to indemnify
us for all liability that may be imposed. For more information concerning our
intellectual property rights, see "Business -- Intellectual Property."
WE FACE RISKS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS THAT COULD HARM OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
We market, sell and service our products in the United States and
internationally. We have established offices in England, The Netherlands, France
and Germany to market, sell and service our products in Europe and in Japan,
Hong Kong and Australia to market, sell and service our products in the Asia
Pacific region.
We intend to expand substantially our international operations and enter
new international markets. This expansion will require significant management
attention and financial resources to develop successfully direct and indirect
international sales and support channels. We may not be able to maintain or
increase international market demand for our products.
We currently have limited experience in marketing and distributing our
products internationally and in developing versions of our products that comply
with local standards. In addition, international operations are subject to other
inherent risks, including:
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<PAGE> 16
- greater difficulty in accounts receivable collection and longer
collection periods;
- difficulties and costs of staffing and managing foreign operations;
- the impact of recessions in economies outside the United States;
- unexpected changes in regulatory requirements;
- certification requirements;
- reduced protection for intellectual property rights in some countries;
- potentially adverse tax consequences; and
- political and economic instability.
Our export revenues were $22.5 million for the year ended December 31, 1999
and are generally denominated in U.S. dollars. Consequently, we do not currently
engage in currency hedging activities. However, a portion of our international
revenues may be denominated in foreign currencies in the future.
ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL
CONDITION.
We intend to make investments in complementary companies, products or
technologies. In the event of any such investments or acquisitions, we could:
- issue stock that would dilute our current stockholders' percentage
ownership;
- incur debt;
- assume liabilities;
- incur amortization expenses related to goodwill and other intangible
assets; or
- incur large and immediate write-offs.
These acquisitions also involve numerous risks, including:
- problems combining the purchased operations, technologies or products;
- unanticipated costs;
- diversion of management's attention from our core business;
- adverse effects on existing business relationships with suppliers and
customers;
- risks associated with entering markets in which we have no or limited
prior experience; and
- potential loss of key employees, particularly those of the acquired
organizations.
We cannot assure you that we will be able to successfully integrate any
businesses, products, technologies or personnel that we might acquire in the
future.
RISKS RELATED TO THE CONVERTIBLE NOTES
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS MAY ADVERSELY AFFECT OUR CASH
FLOW.
We will have substantial amounts of outstanding indebtedness, primarily the
convertible notes, upon the completion of this offering. As a result of this
indebtedness, our principal and interest payment obligations will increase
substantially. There is the possibility that we may be unable to generate cash
sufficient to pay the principal of, interest on and other amounts due in respect
of our indebtedness when due. We may also add additional equipment loans and
lease lines to finance capital expenditures and may obtain additional long-term
debt, working capital lines of credit and lease lines.
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<PAGE> 17
Our substantial leverage could have significant negative consequences,
including:
- increasing our vulnerability to general adverse economic and industry
conditions;
- limiting our ability to obtain additional financing;
- requiring the dedication of a substantial portion of our expected cash
flow from operations to service our indebtedness, thereby reducing the
amount of our expected cash flow available for other purposes, including
capital expenditures;
- limiting our flexibility in planning for, or reacting to, changes in our
business and the industry in which we compete; and
- placing us at a possible competitive disadvantage relative to less
leveraged competitors and competitors that have better access to capital
resources.
THE CONVERTIBLE NOTES WILL RANK BELOW FUTURE SENIOR DEBT WE MAY INCUR, AND WE
MAY BE UNABLE TO REPAY OUR OBLIGATIONS UNDER THE CONVERTIBLE NOTES.
The convertible notes will be unsecured and subordinated in right of
payment to all future senior debt we may incur. Because the convertible notes
will be subordinate to our senior debt, if we experience:
- a bankruptcy, liquidation or reorganization;
- an acceleration of the convertible notes due to a default; or
- other specified events,
then our assets will be used to satisfy the holders of our senior debt before we
will be able to make additional payments on the convertible notes. Further, the
assets of each of our subsidiaries must be used to satisfy the holders of the
subsidiary's indebtedness before we can use the subsidiary's assets to make
payments on the convertible notes. Therefore, we may not have sufficient assets
remaining to pay amounts due on any or all of the convertible notes.
The convertible notes will be our obligations exclusively. The indenture
for the convertible notes does not limit our ability, or that of our
subsidiaries, to incur senior debt, other indebtedness and other liabilities. We
may have difficulty paying what we owe under the convertible notes if we, or any
of our subsidiaries, incur additional indebtedness or other liabilities. From
time to time we and our subsidiaries may incur additional indebtedness,
including senior debt, which could adversely affect our ability to pay our
obligations under the convertible notes.
WE MAY BE UNABLE TO REPAY OR REPURCHASE THE CONVERTIBLE NOTES.
At maturity, the entire outstanding principal amount of the convertible
notes will become due and payable. In addition, if we experience a change in
control, as defined in "Description of the Convertible Notes -- Repurchase at
Option of Holders Upon a Change in Control", each holder of the convertible
notes may require us to repurchase all or a portion of that holder's convertible
notes. At maturity or if a change in control occurs, we may not have sufficient
funds or may be unable to arrange for additional financing to pay the principal
amount or repurchase price due. Under the terms of the indenture for the
convertible notes, we may elect, subject to certain conditions, to pay the
repurchase price upon a change in control with shares of our common stock. Any
future borrowing arrangements or agreements relating to senior debt to which we
become a party may contain restrictions on, or prohibitions against, our
repayments or repurchases of the convertible notes. If the maturity date or
change in control occurs at a time when our other arrangements prohibit us from
repaying or repurchasing the convertible notes, we could try to obtain the
consent of the lenders under those arrangements, or we could attempt to
refinance the borrowings that contain the restrictions. If we do not obtain the
necessary
15
<PAGE> 18
consents or refinance these borrowings, we will be unable to repay or repurchase
the convertible notes. In that case, our failure to repurchase any tendered
convertible notes or repay the convertible notes due upon maturity would
constitute an event of default under the indenture. Any such default, in turn,
may cause a default under the terms of our senior debt. As a result, in those
circumstances, the subordination provisions of the indenture would, absent a
waiver, prohibit any repayment or repurchase of the convertible notes until we
pay the senior debt in full.
THE PRICE OF OUR COMMON STOCK AND THEREFORE THE PRICE OF OUR CONVERTIBLE NOTES
MAY FLUCTUATE SIGNIFICANTLY, WHICH MAY RESULT IN LOSSES FOR INVESTORS.
The market price for our common stock may be volatile. We expect our stock
price to be subject to fluctuations as a result of a variety of factors,
including factors beyond our control. These include:
- quarterly variations in operating results;
- changes in financial estimates by securities analysts;
- changes in market valuations of Internet related companies;
- announcements by us or our competitors of new products or of significant
acquisitions, strategic partnerships or joint ventures;
- any loss of a major customer;
- additions or departures of key personnel;
- any deviations in net revenues or in losses from levels expected by
securities analysts;
- future sales of common stock; and
- volume fluctuations, which are particularly common among highly volatile
securities of Internet related companies.
We may fail to meet the expectations of our stockholders or of securities
analysts at some time in the future, and our stock price, and therefore the
price of our convertible notes, could decline as a result.
THERE MAY BE NO PUBLIC MARKET FOR THE CONVERTIBLE NOTES.
Prior to this offering, there has been no trading market for the
convertible notes. Although the underwriters have advised us that they currently
intend to make a market in the convertible notes, they are not obligated to do
so and may discontinue their market-making activities at any time without
notice. Consequently, we cannot ensure that any market for the convertible notes
will develop, or if one does develop, that it will continue for any period of
time. If an active market for the convertible notes fails to develop or
continue, this failure could harm the trading price of the convertible notes. We
do not intend to apply for listing of the notes on any securities exchange or
any automated quotation system.
MANAGEMENT MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT INCREASE
OUR PROFITS OR MARKET VALUE.
The net proceeds from the sale of the convertible notes have not been
allocated for a particular purpose. We intend to use the net proceeds for
general corporate purposes and working capital. In addition, we may use the net
proceeds to make investments in and acquisitions of complementary businesses,
partnerships, minority investments, products or technologies, although no
agreement or understanding with respect to any future acquisition or investment
has been reached. Our management will have significant discretion as to the use
of the net proceeds of the offering and you will not have the opportunity, as
part of your investment
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decision, to assess whether the proceeds are being used appropriately. The net
proceeds from this offering may be applied to uses that ultimately may not
increase our operating results or our market value. See "How We Intend to Use
the Proceeds From This Offering."
OUR EXECUTIVE OFFICERS AND DIRECTORS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL
OVER JUNIPER NETWORKS AFTER THIS OFFERING, WHICH COULD ENABLE THEM TO CONTROL
OUR BUSINESS AND AFFAIRS.
Our executive officers, directors and entities affiliated with them,
beneficially own approximately 40% of our outstanding common stock as of
December 31, 1999. These stockholders, if acting together, would be able to
influence significantly all matters requiring approval by our stockholders,
including the election of directors and the approval of mergers or other
business combination transactions. See "Principal Stockholders."
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT COULD
PREVENT A CHANGE IN OUR CONTROL.
Provisions of our amended and restated certificate of incorporation,
bylaws, and Delaware law could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our stockholders. See
"Description of Capital Stock."
FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS THE PRICE OF
OUR CONVERTIBLE NOTES AND COMMON STOCK.
After this offering, we will have outstanding 156,485,674 shares of common
stock. Sales of a substantial number of shares of our common stock in the public
market following this offering could cause the price of our convertible notes
and common stock to decline. In particular, on February 8, 2000, certain of our
executive officers, in coordination with Goldman, Sachs & Co., sold an aggregate
of 855,000 shares of common stock in block trades on the open market. Any block
sales could cause the price of our convertible notes, once issued, and our
common stock to decline.
In connection with this offering and other than the block trades described
above, our officers and directors have agreed not to dispose of or hedge any
shares of our common stock for a total of 90 days after the effective date of
this prospectus, subject to exceptions described in the Underwriting Agreement.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify
forward-looking statements. This prospectus also contains forward-looking
statements attributed to third parties relating to their estimates regarding the
growth of Internet use. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us and
described in the preceding pages and elsewhere in this prospectus.
HOW WE INTEND TO USE THE PROCEEDS FROM THIS OFFERING
We are offering $500,000,000 of convertible notes. After deducting the
underwriters' discounts and estimated offering expenses, we anticipate retaining
approximately $486,700,000 of the proceeds from the sale of the convertible
notes, assuming a sale of the convertible notes at 100% of the principal amount.
We anticipate retaining approximately $559,825,000 if the underwriters exercise
their over-allotment option in full.
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<PAGE> 20
We intend to use our net proceeds from this offering for general corporate
purposes and working capital requirements. We may also use a portion of the net
proceeds to fund possible investments in and acquisitions of complementary
businesses, partnerships, minority investments, products or technologies.
Currently there are no commitments or agreements regarding any such acquisitions
or investments. Pending their ultimate use, we intend to invest the net proceeds
from this offering in short-term and long-term securities.
PRICE RANGE OF COMMON STOCK
Our common stock has been quoted on the Nasdaq National Market under the
symbol "JNPR" since June 25, 1999. Prior to that time, there was no public
market for the common stock. The following table sets forth, for the periods
indicated, the high and low closing prices per share of the common stock as
reported on the Nasdaq National Market. All per share amounts have been adjusted
to reflect the three-for-one split of our common stock paid to stockholders of
record on December 31, 1999.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1999
Second Quarter (since June 25, 1999)........................ $ 49.66 $ 32.96
Third Quarter............................................... $ 75.67 $ 41.67
Fourth Quarter.............................................. $118.17 $ 60.71
2000
First Quarter (through February 22, 2000)................... $241.25 $102.58
</TABLE>
On February 22, 2000 the reported last sale price of the common stock on
the Nasdaq National Market was $230.75. As of December 31, 1999 there were
approximately 300 stockholders of record.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any dividends in the
foreseeable future.
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<PAGE> 21
CAPITALIZATION
The following table sets forth our actual capitalization as of December 31,
1999, and our capitalization as adjusted to give effect to the issuance of
$500,000,000 in convertible notes being offered hereby at an assumed initial
public offering price of 100% principal amount. You should read this table in
conjunction with our consolidated financial statements and the related notes
included elsewhere herein.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE
AMOUNTS)
<S> <C> <C>
Debt:
% Convertible Subordinated Notes due March 15, 2007.... $ -- $500,000
Other long-term debt........................................ -- --
Stockholders' equity:
Convertible preferred stock, $0.00001 par value,
10,000,000 shares authorized, none issued or
outstanding (actual and as adjusted)................... -- --
Common stock, $0.00001 par value, 200,000,000 shares
authorized, 155,938,599 shares issued and outstanding
(actual and as adjusted)(1)............................ 2 2
Additional paid-in capital................................ 513,696 513,696
Deferred stock compensation............................... (3,001) (3,001)
Accumulated other comprehensive loss...................... (815) (815)
Accumulated deficit....................................... (52,167) (52,167)
-------- --------
Total stockholders' equity............................. 457,715 457,715
-------- --------
Total capitalization................................. $457,715 $957,715
======== ========
</TABLE>
- ---------------
(1) Based on shares outstanding as of December 31, 1999. It excludes: (a)
24,365,521 shares of common stock reserved for issuance under our Amended
1996 Stock Option Plan, of which 22,469,165 shares were subject to
outstanding options at a weighted average exercise price of $25.11 per share
and 1,896,356 shares available for future grants, and (b) 1,500,000 shares
available for issuance under our 1999 Employee Stock Purchase Plan. Shares
issued and outstanding and shares reserved for issuance have been adjusted
to reflect the three-for-one split of our common stock to be paid to
stockholders of record on December 31, 1999. See "Description of Capital
Stock" and Note 5 to the Consolidated Financial Statements.
19
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
related notes thereto included elsewhere herein. The consolidated statement of
operations data set forth below for the fiscal years ended December 31, 1999,
1998 and 1997, and the consolidated balance sheet data as of December 31, 1999
and 1998 have been derived from our audited consolidated financial statements
included elsewhere herein, which have been audited by Ernst & Young LLP,
independent auditors. The consolidated statement of operations data set forth
below for the period from February 2, 1996 (inception) to December 31, 1996, and
the consolidated balance sheet data as of December 31, 1997 have been derived
from our audited consolidated financial statements not included or incorporated
by reference elsewhere herein, which have been audited by Ernst & Young LLP,
independent auditors. The consolidated balance sheet data at December 31, 1996
are derived from unaudited consolidated financial statements that are not
included or incorporated by reference herein. The historical results are not
necessarily indicative of results to be expected for any future period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(FEBRUARY 2,
YEAR ENDED DECEMBER 31, 1996) TO
------------------------------ DECEMBER 31,
1999 1998 1997 1996
-------- -------- -------- ---------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues............................................... $102,606 $ 3,807 $ -- $ --
Cost of revenues........................................... 45,272 4,416 -- --
-------- -------- -------- --------
Gross profit (loss)........................................ 57,334 (609) -- --
Operating expenses:
Research and development................................. 41,502 23,987 9,406 1,850
Sales and marketing...................................... 20,931 4,216 1,149 --
General and administrative............................... 5,235 2,223 1,043 89
Amortization of goodwill and purchased intangibles and
deferred stock compensation............................ 4,286 1,235 -- --
-------- -------- -------- --------
Total operating expenses............................... 71,954 31,661 11,598 1,939
-------- -------- -------- --------
Operating loss............................................. (14,620) (32,270) (11,598) (1,939)
Interest income, net....................................... 8,011 1,301 1,235 140
-------- -------- -------- --------
Loss before income taxes................................... (6,609) (30,969) (10,363) (1,799)
Provision for income taxes................................. 2,425 2 -- --
-------- -------- -------- --------
Net loss................................................... $ (9,034) $(30,971) $(10,363) $ (1,799)
======== ======== ======== ========
Basic and diluted net loss per share(1).................... $ (0.10) $ (0.80) $ (0.40) $ (0.15)
======== ======== ======== ========
Shares used in computing basic and diluted net loss per
share(1)................................................. 94,661 38,871 25,773 11,874
======== ======== ======== ========
Pro forma basic and diluted net loss per share
(unaudited)(1)........................................... $ (0.07) $ (0.28)
======== ========
Shares used in computing pro forma basic and diluted net
loss per share (unaudited)(1)............................ 131,480 111,210
======== ========
OTHER DATA:
Ratio of earnings to fixed charges......................... --(2) --(2) --(2) --(3)
</TABLE>
- ---------------
(1) See Note 1 of notes to consolidated financial statements for an explanation
of the determination of the shares used to compute net loss per share. All
share and per share amounts have been adjusted to reflect the three-for-one
split of our common stock to be paid to stockholders of record on December
31, 1999.
(2) The pre-tax loss from continuing operations for the years ended December 31,
1999, 1998 and 1997 are not sufficient to cover fixed charges by a total of
approximately $6.6 million in 1999, $31.0 million in 1998 and $10.4 million
in 1997. As a result, the ratio of earnings to fixed charges has not been
computed for any of these years.
(3) The ratio of earnings to fixed charges calculation is not applicable as
there were no fixed charges during this period.
20
<PAGE> 23
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------------------------
1999 1998 1997 1996
-------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents, and short-term investments... $345,958 $20,098 $46,227 $ 9,468
Working capital...................................... 322,170 14,432 44,691 9,315
Long-term investments................................ 97,201 -- -- --
Total assets......................................... 513,378 36,671 50,210 10,388
Total long-term debt................................. -- 5,204 2,083 408
Stockholders' equity................................. 457,715 17,065 46,048 9,728
</TABLE>
21
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and our consolidated financial statements
and the related notes thereto included elsewhere herein. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in the
forward-looking statements as a result of certain factors including the risks
discussed in "Risk Factors" and elsewhere herein.
OVERVIEW
We are a leading provider of Internet infrastructure solutions that enable
Internet service providers and other telecommunications service providers,
collectively described in this discussion as service providers, to meet the
demands resulting from the rapid growth of the Internet. Our Internet backbone
routers are specifically designed and purpose-built for service provider
networks and offer our customers increased reliability, performance,
scalability, interoperability and flexibility, and reduced complexity and cost
compared to current alternatives.
In September 1998 we began shipping our first product, the M40 Internet
backbone router, with volume shipments beginning in October 1998. We began
shipping the M20, a derivative of the M40, in December 1999. We currently sell
our products to major service providers in North America through our direct
sales force and sell to international customers primarily through value added
resellers.
From our inception in February 1996 through September 1998, our operating
activities were primarily devoted to expanding our research and development
capabilities, designing our ASICs, developing our software, developing and
testing the M40 and developing other products. We also expanded our
administrative, marketing and sales organizations and implemented strategic
relationships. Since our inception, we have incurred significant losses, and as
of December 31, 1999, we had an accumulated deficit of $52.2 million. We
achieved our first quarter of profitability in the quarter ended December 31,
1999. In order to maintain profitability, we will need to generate significantly
higher revenues because we expect to continue to incur significant research and
development, sales and marketing and general and administrative expenses as the
business and operations continue to grow.
RESULTS OF OPERATIONS
NET REVENUES
We began generating net revenues in the fourth quarter of 1998. Our total
net revenue increased to $102.6 million for the year ended December 31, 1999
from $3.8 million for the year ended December 31, 1998. The increase in net
revenues was primarily due to the following three factors: 1999 being the first
full year of product sales; an increase in market acceptance of our products;
and overall growth in the marketplace due to the growth of the Internet and an
increase in emerging customers and networks.
Our revenues for the year ended December 31, 1999 were derived from sales
of one product, the M40. While we have introduced new products, such as the M20,
and plan to continue to introduce new products, there can be no assurance that
we will be successful in these efforts or that such products will be
well-received by our existing and potential customer base. A limited number of
customers have historically accounted for a substantial portion of our revenues.
Two customers accounted for 58% of our total net revenues for the year ended
December 31, 1999 and two customers accounted for 100% of our revenues for the
year ended December 31, 1998. We expect that a significant portion of our future
revenues will continue to come from sales of our products to a relatively small
number of customers because our direct
22
<PAGE> 25
sales and marketing efforts are focused primarily on the world's leading service
providers. For the year ended December 31, 1999, export sales accounted for
approximately 22% of our total net revenue. We are seeking to diversify our
customer base, but we cannot be certain that our efforts in this regard will be
successful.
Because the market for Internet backbone routers is new and evolving, the
volume and timing of orders are difficult to predict. A customer's decision to
purchase our products typically involves a significant commitment of their
resources and a lengthy evaluation and product qualification process which
involves technical evaluation, integration, testing, network planning and
implementation and typically takes several months. Even after making the
decision to purchase our products, our customers tend to deploy the products
slowly and deliberately. Timing of deployment can vary widely. Customers with
large networks usually expand their networks in large increments on a periodic
basis. Accordingly, we expect to receive purchase orders for significant dollar
amounts on an irregular basis. Because of our limited operating history, we
cannot predict these sales and development cycles. Long sales and implementation
cycles for our products, as well as the expectation that customers will tend to
sporadically place large orders with short lead times, may cause revenues and
operating results to vary significantly and unexpectedly from quarter to
quarter. Historically, selling prices in the Internet infrastructure equipment
market have been relatively stable. However, as competitors launch new products,
this pricing trend may change.
We generally recognize product revenue at the time of shipment, assuming
that collectibility is probable, unless we have future obligations for network
interoperability or have to obtain customer acceptance, in which case revenue is
deferred until these obligations are met. Revenue from service obligations is
deferred and recognized on a straight-line basis over the contractual period.
Amounts billed in excess of revenue recognized are included as deferred revenue
and accounts receivable in the accompanying consolidated balance sheets.
At December 31, 1999, a total of $19.3 million of revenue was deferred,
which we currently expect to recognize in 2000. Our products generally carry a
one year warranty that includes factory repair services as needed for
replacement parts. Estimated expenses for warranty obligations are accrued as
revenue is recognized.
COST OF REVENUES
Cost of revenues for the year ended December 31, 1999, were $45.3 million
resulting in a gross margin of 55.9% for the year. Cost of revenues for the year
ended December 31, 1998 were $4.4 million. The increase in cost of revenues is
primarily related to the increase in net revenues, as well as increases in our
customer service and support organizations. We expect cost of revenues to
continue to increase as net revenues increase. Our gross margins are highly
variable and dependent on many factors, some of which are outside of our
control. Some of the primary factors affecting gross margins include:
- demand for our products and services;
- changes in our pricing policies and those of our competitors;
- new product introductions both by us and by our competitors;
- the mix of interfaces sold;
- the volume manufacturing pricing we are able to attain from our partner
for outsourced manufacturing; and
- the mix of products and services sold.
Cost of revenues includes the cost of our manufacturing overhead and
customer service and support organizations. We have outsourced our
manufacturing, our repair operations and the
23
<PAGE> 26
majority of our supply chain management operations. Accordingly, a significant
portion of our cost of revenues consists of payments to Solectron, our primary
contract manufacturer. Solectron manufactures our products using quality
assurance programs and standards which we established. Manufacturing engineering
and documentation control are conducted at our facility in Mountain View,
California.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $41.5 million in 1999 from
$24.0 million in 1998 and $9.4 million in 1997. Research and development
expenses consist primarily of salaries and related personnel costs,
non-recurring engineering charges and prototype costs related to the design,
development, testing and enhancement of our ASICs. Salary and related personnel
costs accounted for 40% of the increase from 1998 to 1999 and 30% of the
increase from 1997 to 1998. Non-recurring engineering and prototype costs
accounted for approximately 20% of the increase from 1998 to 1999 and 50% of the
increase from 1997 to 1998.
We expense our research and development costs as they are incurred. Several
components of our research and development effort require significant
expenditures, the timing of which can cause significant quarterly variability in
our expenses. For example, a large number of prototypes are required to build
and test our products and the building and testing process occurs over a short
period of time. Our ASIC development requires a payment for non-recurring
engineering charges at the beginning of the process to design and develop the
ASIC, regardless of whether the integrated circuit works. In addition, a per
unit cost is payable as we purchase ASICs. With several large ASICs in our
architecture, we will incur large non-recurring engineering and prototype
expenses with every enhancement of the existing products and for any new product
development. We expect to continue to devote substantial resources to the
development of new products and the enhancement of existing products. We believe
that research and development is critical to our strategic product development
objectives and that to leverage our leading technology and meet the changing
requirements of our customers, we will need to fund investments in several
development projects in parallel. As a result, we expect our research and
development expenses to increase in absolute dollars in the future.
SALES AND MARKETING EXPENSES
Sales and marketing expenses increased to $20.9 million in 1999 from $4.2
million in 1998, and $1.1 million in 1997. The increases from period to period
in sales and marketing expenses were primarily attributable to salaries,
commissions (resulting from increased sales) and related expenses for personnel
engaged in sales, marketing and customer engineering support functions,
including international expansion, as well as costs associated with promotional
and other marketing expenses.
We intend to expand our direct and indirect sales operations substantially,
both domestically and internationally, in order to increase market awareness of
our products and to better support our existing customers worldwide. We believe
that continued investment in sales and marketing is critical to our success and
expect these expenses to increase in absolute dollars in the future as we hire
additional sales and marketing personnel, initiate additional marketing programs
to support our products and establish sales offices in new domestic and
international locations.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased to $5.2 million in 1999 from
$2.2 million in 1998 and $1.0 million in 1997. General and administrative
expenses consist primarily of salaries and related expenses for executive,
finance, accounting, facilities, and human resources personnel, as well as
recruiting expenses, professional fees and other corporate expenses. The
increases from period to period in general and administrative expenses were
primarily
24
<PAGE> 27
attributable to the costs associated with additional headcount to support
increased levels of business activity. In addition, the increase from 1998 to
1999 was also due to costs associated with being a publicly traded company. We
expect general and administrative expenses to increase in absolute dollars as we
add personnel and incur additional costs related to the growth of our business
and our operation as a public company.
AMORTIZATION OF GOODWILL AND PURCHASED INTANGIBLES AND DEFERRED STOCK
COMPENSATION
In connection with the grant of certain stock options to employees during
1998 and the three months ended March 31, 1999, we recorded deferred
compensation of $6.4 million in 1998 and $1.1 million in 1999 representing the
difference between the deemed value of the common stock for accounting purposes
and the exercise price of these options at the date of grant. Deferred
compensation is presented as a reduction of stockholders' equity and is
amortized over the vesting period of the applicable options using the graded
vesting method. This compensation expense relates to stock options granted to
individuals in all operating expense categories. In November 1999, we acquired
certain intellectual property and intangible assets resulting in our recording
of $18.4 million of goodwill and other intangibles. The goodwill and other
intangibles will be amortized over a three-year period. We expensed $4.3 million
of goodwill and purchased intangibles and deferred compensation during 1999, and
$1.2 million of deferred compensation during 1998.
INTEREST INCOME, NET
Net interest income includes income earned on cash and investments
partially offset by expenses related to financing obligations. Net interest
income was $8.0 million in 1999, $1.3 million in 1998 and $1.2 million in 1997.
The increase from 1998 to 1999 is directly due to interest earned on large cash
and investment balances as a result of our initial public offering in June 1999
and our secondary offering in October 1999.
PROVISION FOR INCOME TAXES
We recorded a tax provision of $2.4 million for the year ended December 31,
1999. The provision for income taxes consists primarily of federal alternative
minimum taxes, state taxes and foreign taxes. As of December 31, 1999 we had
approximately $37.0 million of federal net operating loss carryforwards and
$32.0 million of state net operating loss carryforwards for tax reporting
purposes available to offset future taxable income. Such net operating loss
carryforwards expire at various dates beginning in 2004 to the extent that they
are not utilized. We have not recognized any benefit from the future use of loss
carryforwards for these periods, or for any other periods, since inception.
Management's evaluation of all the underlying assumptions of future profitable
operations contain risks that do not provide sufficient assurance to recognize
the tax benefits currently.
25
<PAGE> 28
QUARTERLY RESULTS OF OPERATIONS
The following table presents our operating results for each quarter during
the years ended December 31, 1999 and 1998. The information for each of these
quarters is unaudited and has been prepared on the same basis as the audited
financial statements appearing elsewhere herein. In the opinion of management,
all necessary adjustments consisting only of normal recurring adjustments, have
been included to present fairly the unaudited quarterly results when read in
conjunction with our audited consolidated financial statements and the related
notes appearing elsewhere herein. These operating results are not necessarily
indicative of the results of any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1999 1999 1999 1999
------------ ------------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues............................... $45,442 $29,564 $17,556 $10,044
Cost of revenues........................... 18,389 12,490 8,046 6,347
------- ------- ------- -------
Gross profit............................. 27,053 17,074 9,510 3,697
Operating expenses:
Research and development................. 15,820 11,510 7,991 6,181
Sales and marketing...................... 8,869 5,610 3,849 2,603
General and administrative............... 1,781 1,701 977 776
Amortization of goodwill and purchased
intangibles and deferred stock
compensation.......................... 1,689 802 891 904
------- ------- ------- -------
Total operating expenses.............. 28,159 19,623 13,708 10,464
------- ------- ------- -------
Operating loss............................. (1,106) (2,549) (4,198) (6,767)
Interest income and provision for income
taxes, net............................... 4,186 962 346 92
------- ------- ------- -------
Net income (loss).......................... $ 3,080 $(1,587) $(3,852) $(6,675)
======= ======= ======= =======
Basic net income (loss) per share.......... $ 0.02 $ (0.01) $ (0.07) $ (0.15)
======= ======= ======= =======
Diluted net income (loss) per share........ $ 0.02 $ (0.01) $ (0.07) $ (0.15)
======= ======= ======= =======
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1998 1998 1998 1998
------------ ------------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Net revenues............................... $ 3,807 $ -- $ -- $ --
Cost of revenues........................... 3,815 382 180 39
------- -------- ------- -------
Gross loss............................... (8) (382) (180) (39)
Operating expenses:
Research and development................. 6,145 8,284 6,061 3,497
Sales and marketing...................... 1,718 1,215 764 519
General and administrative............... 882 562 444 335
Amortization of deferred stock
compensation.......................... 648 374 192 21
------- -------- ------- -------
Total operating expenses.............. 9,393 10,435 7,461 4,372
------- -------- ------- -------
Operating loss............................. (9,401) (10,817) (7,641) (4,411)
Interest income and provision for income
taxes, net............................... 117 238 438 506
------- -------- ------- -------
Net loss................................... $(9,284) $(10,579) $(7,203) $(3,905)
======= ======== ======= =======
Basic and diluted loss per share........... $ (0.22) $ (0.27) $ (0.20) $ (0.12)
======= ======== ======= =======
</TABLE>
Our revenues and operating results will vary significantly from quarter to
quarter due to a number of factors, many of which are outside of our control and
any of which may cause the price of our common stock and the convertible notes
to fluctuate. The primary factors that may affect us include the following:
- demand for our products;
- the timing of sales of our products;
- the timing of recognizing revenue and deferred revenue;
- new product introductions by our competitors;
- changes in our pricing policies or the pricing policies of our
competitors;
- our ability to develop, introduce and ship new products and product
enhancements that meet customer requirements in a timely manner;
- our ability to obtain sufficient supplies of sole or limited source
components;
- increases in the prices of the components we purchase;
- our ability to attain and maintain production volumes and quality levels
for the M40;
- decisions by end-users to reallocate their information resources to
other purposes;
- Internet growth and demand for Internet infrastructure;
- prototype expenses;
- costs related to acquisitions of technology or businesses; and
- general economic conditions as well as those specific to the Internet
and related industries.
In addition, we are dependent on decisions by customers to build their
Internet infrastructure, which decisions are in turn dependent upon the success
and expected demand for the services
27
<PAGE> 30
offered by those customers. Furthermore, the long sales and implementation
cycles for the M40, as well as the degree to which customers will sporadically
place large orders with short lead times, may cause revenues and operating
results to vary significantly from quarter to quarter.
We plan to increase significantly our operating expenses to fund greater
levels of research and development, expand our sales and marketing operations,
broaden our customer support capabilities and develop new distribution channels.
We also plan to expand our general and administrative functions to address the
increased reporting and other administrative demands, which have resulted from
being a publicly traded company and the increasing size of our business. Our
operating expenses are largely based on anticipated revenue trends, and a high
percentage of our expenses are and will continue to be fixed in the short term.
As a result, a delay in generating or recognizing revenue for the reasons set
forth above or for any other reason could cause significant variations in our
operating results from quarter to quarter and could result in substantial
operating losses.
Due to the foregoing factors, we believe that quarter-to-quarter
comparisons of our operating results are not a good indication of our future
performance. It is likely that in some future quarters, our operating results
may be below the expectations of public market analysts and investors. In this
event, the price of our common stock and the convertible notes may fall.
LIQUIDITY AND CAPITAL RESOURCES
Prior to our initial public offering, we financed operations primarily
through the private placement of convertible preferred stock and capital leases.
In June 1999, we completed the initial public offering of our common stock and
realized net proceeds from the offering of approximately $65.2 million. In
October 1999, we completed a secondary public offering of our common stock and
realized net proceeds from the offering of $324.3 million. At December 31, 1999,
we had cash and cash equivalents of $158.0 million, short-term investments of
$187.9 million and long-term investments of $97.2 million. We regularly invest
our excess funds in money market funds, commercial paper and government and
non-government debt securities.
Net cash provided by operating activities was $20.5 million for the year
ended December 31, 1999. Net cash used in operating activities was $24.8 million
for the year ended December 31, 1998 and $8.6 million for the year ended
December 31, 1997. Net cash flows used in operating activities primarily consist
of the net loss for all periods, as well as increases in accounts receivable for
the years ending December 31, 1999 and 1998. Net cash provided by operating
activities in each period are primarily attributed to non-cash charges such as
depreciation and amortization, as well as increases in accounts payable and
other liabilities and deferred revenue for the years ended December 31, 1999 and
1998.
Net cash used in investing activities was $305.4 million for the year ended
December 31, 1999 and $13.0 million for the year ended December 31, 1997. Net
cash provided by investing activities was $9.3 million for the year ended
December 31, 1998. Net cash used in investing activities for all periods
primarily consisted of purchases of available for sale investments, as well as
purchases of property and equipment. Net cash provided by investing activities
for all periods consisted entirely of maturities of available-for-sale
investments.
Net cash provided by financing activities was $422.9 million for the year
ended December 31, 1999, primarily from the net proceeds of our initial and
secondary public offerings, as well as our convertible preferred stock offering,
partially offset by payments on lease obligations. Net cash provided by
financing activities was $5.2 million for the year ended December 31, 1998,
primarily from proceeds from sale-leaseback liabilities, partially offset by
payments on lease obligations. Net cash provided by financing activities was
$48.5 million for the year ended December 31, 1997, primarily from the net
proceeds from private sales of convertible preferred stock, as well as proceeds
from sale-leaseback liabilities.
28
<PAGE> 31
Our capital requirements depend on numerous factors, including:
- market acceptance of our products;
- the resources we devote to developing, marketing, selling and supporting
our products; and
- the timing and extent of establishing international operations.
We expect to devote substantial capital resources to continue our research
and development efforts, to hire and expand our sales, support, marketing and
product development organizations, to expand marketing programs, to establish
additional facilities worldwide and for other general corporate activities.
Although we believe that our current cash balances will be sufficient to fund
our operations for at least the next 12 months, there can be no assurance that
we will not require additional financing within this time frame or that such
additional funding, if needed, will be available on terms acceptable to us or at
all.
YEAR 2000
We have not experienced any problems with our computer systems relating to
such systems being unable to recognize appropriate dates related to the year
2000. We are also not aware of any material problems with our clients or
vendors. Accordingly, we do not anticipate incurring material expenses or
experiencing any material operational disruptions as a result of any Year 2000
issues.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. FAS No. 133, as
amended, establishes methods for derivative financial instruments and hedging
activities related to those instruments, as well as other hedging activities. We
are required to adopt FAS No. 133 effective January 1, 2001. Because we do not
currently hold any derivative instruments and do not engage in hedging
activities, we do not currently believe that the adoption of FAS No. 133, as
amended, will have a significant impact on our financial position, results of
operations or cash flows.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, or SAB 101. This summarizes certain areas of the
Staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements. We believe that our current revenue
recognition principles comply with SAB 101.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET INTEREST RATE SENSITIVITY
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we have
invested in may be subject to market risk. This means that a change in
prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the principal amount of our investment will probably decline. To minimize
this risk, we maintain our portfolio of cash equivalents and short-term and
long-term investments in a variety of securities, including commercial paper,
money market funds and government and non-government debt securities. In
general, money market funds are not subject to market risk because the interest
paid on such funds fluctuates with the prevailing interest rate. See Note 2 to
the Consolidated Financial Statements.
29
<PAGE> 32
The following table presents the amounts of cash equivalents and
investments that are subject to market risk and the weighted-average interest
rates, by year of expected maturity for our investment portfolios as of December
31, 1999 and December 31, 1998. This table does not include money market funds
because those funds are not subject to market risk.
<TABLE>
<CAPTION>
MATURING MATURING MATURING
DURING 2000 DURING 2001 DURING 2002
----------- ----------- -----------
<S> <C> <C> <C>
DECEMBER 31, 1999:
Cash equivalents........................................... $ 89,151 $ -- $ --
Weighted-average interest rate........................... 5.68% -- --
Investments................................................ 187,915 93,963 3,238
Weighted-average interest rate........................... 5.96% 6.23% 7.01%
-------- -------- --------
Total...................................................... $277,066 $ 93,963 $ 3,238
======== ======== ========
Weighted-average interest rate........................... 5.87% 6.23% 7.01%
</TABLE>
<TABLE>
<CAPTION>
MATURING MATURING MATURING
DURING 1999 DURING 2000 DURING 2001
----------- ----------- -----------
<S> <C> <C> <C>
DECEMBER 31, 1998:
Cash equivalents........................................... $ 16,520 $ -- $ --
Weighted-average interest rate........................... 5.33% -- --
</TABLE>
EXCHANGE RATE SENSITIVITY
We operate primarily in the United States, and all sales to date have been
made in US dollars. Accordingly, we have had no material exposure to foreign
currency rate fluctuations.
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BUSINESS
OVERVIEW
We are a leading provider of Internet infrastructure solutions that enable
Internet service providers and other telecommunications service providers, to
meet the demands resulting from the rapid growth of the Internet. We deliver
next generation Internet backbone routers that are specifically designed, or
purpose-built, for service provider networks and offer our customers increased
reliability, performance, scalability, interoperability and flexibility, and
reduced complexity and cost compared to current alternatives. Our flagship
product is the M40 Internet backbone router, and we recently introduced the M20,
an Internet backbone router purpose-built for emerging service providers. Our
Internet backbone routers combine the features of our JUNOS Internet Software,
high performance ASIC-based packet forwarding technology and Internet-optimized
architecture into a purpose-built solution for service providers. Unlike
conventional routers, which were originally developed for enterprise
applications and are increasingly inadequate for service provider use in public
networks, our Internet backbone routers are specifically designed to accommodate
the size and scope of the Internet.
We believe that the Internet will continue to grow at significant rates and
will evolve into the next generation public network, superseding and expanding
upon many of the functions provided by the traditional telephone network. This
trend will drive the need for new Internet infrastructure equipment that can
deliver the high levels of reliability and scalability needed in a public
network. We believe we have developed the first commercially available Internet
backbone routing platform specifically designed and built to meet these
requirements. Ryan Hankin Kent, an industry research firm, estimated in 1999
that the market for Internet backbone routers was $169 million in 1998 and
expects that market to increase to approximately $5.5 billion in 2003.
We sell our Internet backbone routers primarily through a direct sales
force in the United States and through value added resellers internationally.
Our M40 Internet backbone router is currently used by several of the world's
leading service providers, such as UUNet, an MCI WorldCom Company, Cable &
Wireless USA, AT&T/IBM Global Services, Frontier GlobalCenter Inc. and Verio
Inc.
INDUSTRY BACKGROUND
The Internet has evolved from an academic research project into a network
of hundreds of separately administered, public and private networks
interconnected using Internet Protocol (IP). IP traffic is growing
exponentially, driven by increasing numbers of new users, connected devices and
Internet transactions. The result of the widespread use of IP is a ubiquitous
network that today carries a large and growing amount of data traffic enabling
millions of users to share information and conduct electronic commerce.
International Data Corporation, an industry research firm, forecasts continued
dramatic growth worldwide in the Internet and Internet traffic:
- World Wide Web users will grow from approximately 159 million in 1998 to
approximately 510 million in 2003;
- the number of computers and other devices with communications capability
accessing the World Wide Web will grow from approximately 175 million in
1998 to approximately 739 million by 2003; and
- commerce revenues on the Internet will grow from approximately $50
billion at the end of 1998 to approximately $1.3 trillion by the end of
2003.
The importance of IP continues to increase as the number of users,
connected devices and transactions over the Internet grows. This growth
highlights the potential for the Internet to replace the traditional telephone
network and the pervasive public network.
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The rapid adoption of the Internet and the tremendous growth of IP traffic
have prompted service providers to construct large scale data networks. These
networks are being optimized to transport data traffic as compared to
traditional telephone networks, which were optimized to transport voice traffic.
The architecture of these next generation networks is being driven by two key
technologies: packet/cell switching and optical networking.
Advantages of Packet/Cell Switching. Packet/cell switching technology,
which divides data traffic into distinct units called packets or cells and
routes each packet or cell independently, provides superior use of available
network capacity compared to traditional circuit switching technology. In a
circuit switched network, each data stream, such as a voice telephone call
between two points, is provided with a dedicated channel, or circuit, for the
duration of the telephone call. This approach leads to inefficient use of
network resources because a channel is fully dedicated to each transaction,
whether or not data is actually flowing at any given moment. As a result, a
circuit switched architecture is highly inefficient for Internet applications
which tend to create large bursts of data traffic followed by long periods of
silence. Packet/cell switching architectures enable greater utilization out of a
fixed capacity circuit by combining traffic that has different capacity demands
of the circuit at different times. Packet/cell switches more efficiently fill
the available network bandwidth with packets of data from many users, thereby
reducing the wasted bandwidth due to silence from any one particular user. The
use of packet/cell switching is driving the architecture of the Internet to be
fundamentally different from traditional circuit switched voice based networks.
In packet/cell switched networks, IP has emerged as the de facto standard for
providing services to end users. Primary packet/cell switching products include
frame relay switches, ATM switches and routers.
Rapid Advances in Optical Networking. Optical networking technology uses
pulses of light, rather than pulses of electricity, to transmit data in a
network, and uses fiber optic connections instead of wires. Optical networking
can be used to transmit much more information over a given connection than
electrical signals can convey. Optical networking advances, such as dense
wavelength division multiplexing, or DWDM, which allows transmission of several
frequencies of light over one strand of optical fiber, have enabled still higher
data transmission rates and improved efficiency of bandwidth utilization.
Currently available DWDM technology enables the transmission of up to 128
frequencies which allows a service provider to multiply the transmission
capacity of a fiber optic network by a factor of up to 128.
Packet/Cell Technologies Have Not Kept Up With Optical Technologies. Many
service providers are installing DWDM equipment and are increasingly focusing on
combining IP and optical networking technologies. However, traditional packet
switching equipment is not capable of forwarding packets at rates sufficient to
keep pace with optical transmission speeds. As affordable fiber optic
transmission capacity becomes widely available, the performance and complexity
of current packet/cell switching architectures is increasingly constraining the
growth of the Internet.
The intersection of traditional packet/cell switching and fiber optic
technology is demonstrated by the following diagram:
[DIAGRAM]
THE NEW REQUIREMENTS OF THE INTERNET
The reliability and performance of current Internet infrastructure
equipment have become critical issues for service providers as they continue to
support dramatic growth in IP traffic and increasingly seek to offer new revenue
generating, mission-critical services, such as Virtual Private Networks, or
VPNs, and voice-over IP. New requirements for next generation networks are
driving a set of new requirements for Internet infrastructure equipment,
including:
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- high reliability;
- high performance;
- high performance under stressful conditions;
- scalability;
- interoperability;
- reduced complexity; and
- cost effectiveness.
High Reliability. As businesses and consumers increasingly rely on the
Internet for mission-critical applications, high network reliability becomes
essential. Service providers are increasingly expected to provide a similar
degree of reliability on the Internet that users have become accustomed to on
the traditional telephone network. The "five nines" (99.999%) reliability
standard of the traditional telephone network is becoming the target to which
suppliers of next-generation Internet platforms are being compared. As service
providers begin to bundle voice and data on their networks, this high degree of
reliability is becoming even more critical.
High Performance. To handle the rapid growth in IP traffic, today's
networks increasingly require routers that can operate at interface speeds as
high as 2.5 billion bits of information per second (Gbps), and in the near
future, 10 Gbps. The processing of data packets at these high speeds requires
sophisticated forwarding technology to inspect each packet and assign it to a
destination based on priority, data type and other considerations. Since a large
number of IP packets, many of which perform critical administrative functions,
are small in size, high performance Internet routers need to achieve their
specified transmission speeds even for small packet sizes. Since smaller packets
increase packet processing demands, routing large numbers of smaller packets
tends to be more resource intensive than routing of larger packets. Routers
based on general-purpose microprocessors traditionally are unable to forward
small packets at maximum rates, and, as a consequence, fail to operate at wire
speed, which results in data loss, packet retransmission and network
instability. A wire speed router, which achieves its specified transmission rate
for any type of traffic passing through it, can accomplish this task. Unlike the
enterprise environment, where network capacity is relatively inexpensive and
service quality requirements are not as demanding, the additional capacity and
related costs of network bandwidth and low service levels resulting from
retransmission of dropped packets are increasingly unacceptable to service
providers. Thus, provisioning of mission-critical services increasingly requires
the high performance enabled by wire speed processing.
High Performance Under Stressful Conditions. In a large and complex
network, individual components inevitably fail. However, the failure of an
individual device or link must not compromise the network as a whole. In a
typical network, when a failure occurs, the network loses some degree of
capacity and, in turn, a greater load falls on the remaining network routers,
which must provide alternate routes. Routers must quickly adjust to the new
state of the network to maintain packet forwarding rates and avoid dropping
significant numbers of packets when active routes are lost or when large numbers
of routes change. Routing protocols are used to accomplish this convergence, a
process that places even greater stress on the router. Given the complexity of
Internet infrastructure, particularly compared to enterprise networks, the
convergence process is far more complex and places a far greater load on the
routing software, thereby requiring a much more sophisticated device.
Scalability. Due to the rapid growth in Internet users and IP traffic,
service providers must continuously expand their networks, both in terms of
increased numbers of access points of presence (PoPs), and also greater capacity
per PoP. To facilitate this expansion process, Internet infrastructure equipment
must be highly scalable. Next generation routers therefore need
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to be upgradeable and configurable to function within constantly changing
networks while incurring minimal downtime.
Interoperability. Service providers do not have the time or inclination to
change their existing networks to favor introduction of new products; rather,
new products must be compatible with the existing environment. Given the open
and inter-connected nature of the Internet, the complexity of running an
Internet backbone network requires a service provider to control and police
relations with other service providers. For example, service providers must
carefully control what traffic is accepted under what conditions from other
providers. Major service providers connect their respective networks via peering
arrangements, in which service providers agree to exchange traffic with one
another. These arrangements are prone to abuse, such as the illicit use by one
service provider of another service provider's backbone to carry excess traffic.
Service provider relationships are controlled by a set of rules called policies,
implemented through a data protocol called Border Gateway Protocol 4, or BGP4.
The software in each router must offer 100% compatibility with all aspects of
BGP4, as well as 100% compatibility with the interior protocols and standards
used within each service provider's backbone network. The compatibility level
must be maintained despite changes to software equipment configuration and
network architecture and upgrades to the various protocol standards. Thus,
routing software must be flexible and quickly upgradeable to support any
necessary revisions. This level of compatibility, in turn, cannot impact the
performance, scalability or reliability of the equipment. Attaining this
sophisticated level of interoperability is highly challenging and requires
significant testing to ensure compatibility.
Reduced Complexity. Today's Internet architectures are highly complex.
Since traditional routers have not fully met service providers' needs, many
service providers have tried to improve Internet backbone performance by adding
additional network devices such as ATM switches in the core of the network. As a
result, service providers have built networks with ATM switches surrounded by an
overlay network of lower capacity routers. These different layers of equipment
lead to higher capital costs and the need to manage distinct network elements.
ATM switches are also poorly suited to carrying IP traffic, which results in
inefficient use of network bandwidth. Moreover, this network design can cause
unpredictable router behavior during periods of stress because the routers are
not aware of the ATM backbone infrastructure and thus cannot quickly converge if
there is a partial network outage.
This type of layered backbone network with a complex patchwork of products
based on different technologies is represented below:
[DIAGRAM]
Cost Effectiveness. Exponential growth in IP traffic and intense price
competition in the telecommunications market is increasingly requiring service
providers to seek solutions that significantly reduce the capital expenditures
required to build and operate their networks. In addition to the basic cost of
equipment such as routers, service providers incur substantial ancillary costs
in terms of space required to deploy the equipment, power consumption and
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on-going operations and maintenance. Service providers therefore want to deploy
dense and varied equipment configurations in limited amounts of rack and floor
space. Currently, service providers are moving from OC-3 (155 million bits per
second, or Mbps) and OC-12 (622 Mbps) speed networks at the core to higher
capacity OC-12 and OC-48 (2.5 gigabits per second, or Gbps) speed networks. In
turn, the connections from each PoP to the core are evolving from 100 Mbps and
OC-3 speeds to gigabit and OC-12 transmission rates. Therefore, in order to
continue to scale their networks toward higher data speeds in a cost effective
manner, service providers need the ability to mix and match easily many
different speed connections at appropriate densities, without significantly
increasing the consumption of space or power.
There is a clear need for next generation routers that can support high
speeds and offer new IP-based services. Network operators are eagerly seeking
new solutions that increase the level of scalability and reliability within
their networks and reduce the cost and complexity of their architectures.
THE JUNIPER NETWORKS SOLUTION
We develop, market and sell what we believe is the first commercially
available purpose-built Internet backbone router optimized for the specific high
performance needs of service providers. Our flagship product, the M40 Internet
backbone router, combines the features of our JUNOS Internet Software,
high-performance ASIC-based packet forwarding technology and Internet-optimized
architecture. As the need for core bandwidth has continued to increase, it
created the need for service rich platforms at the edge of the network. In
December 1999 we introduced the M20 backbone router, purpose-built to alleviate
capacity demand on access points in the PoP. The M40 router operates at the
Internet's core while the M20 router extends purpose-built performance
capability to service provider entry points. The M20 router is also a
cost-efficient solution for new and emerging IP carriers (smaller service
providers) capable of enabling a high-bandwidth core and high-speed services for
the service provider edge in one device.
The M40 and M20 platforms share common software and services, and common
ASIC technology for full compatibility and scalability. Critical service
provider applications including high-speed access, peering, and hosting are
served by both platforms. Physical interfaces are interchangeable between
platforms, increasing user flexibility and allowing common sparing.
JUNOS Internet Software. Our Internet software, called JUNOS, is one of
our key competitive differentiators. JUNOS is designed to meet the IP network
routing, operations and control requirements of the world's largest service
providers and is an integral component of our product family system
architecture. The ability of JUNOS to manage the complex network sharing
relationships among service providers allows our products to be placed at
critical points in the core of a service provider's network. The JUNOS Internet
Software allows our products to have widespread network placement due to its
interoperability with Cisco's Internetwork Operating System, or IOS, currently
the most broadly deployed routing operating system. The ability to coexist has
enabled the M40 to achieve successful deployment where other products in the
past have failed.
Unconstrained by legacy routing software, we developed JUNOS using a
modular design, in which distinct functions are implemented as separate modules
with well defined interfaces and interactions, simplifying troubleshooting and
maintenance. JUNOS operates in protected memory mode. These features keep
functionality distinct, and minimize the impact of any failure that may occur to
the specific software application in which the failure occurs. Also, we believe
JUNOS' software modularity will enable the continuous upgrade of new enhanced
capabilities, while protecting reliability and compatibility with existing
networks. The design and development of the JUNOS Internet Software has been
possible due to the significant Internet engineering expertise of our
development team. Our expert engineers have authored or co-authored 22 Requests
for
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Comments, which are documents by industry experts that define major standards
for Internet protocols.
High Performance ASIC-based Packet Forwarding Technology. The M40 Internet
backbone router contains five major application specific integrated circuits
that we designed and built using the most advanced ASIC technology. These ASICs
contain over five million gates in total, with three of the designs each having
a larger number of transistors than the Intel Pentium II microprocessor. The
result is a system that is substantially faster than today's general purpose
microprocessor based routers in its ability to process and forward IP packets,
allowing our products to deliver high performance at wire speed. The ability to
enhance and implement large scale ASICs will be a long-term differentiator for
us, particularly as the sophistication required to forward traffic across higher
speed networks increases. As with the introduction of the M20, we expect to
continue to leverage our existing ASIC technology in future products and
continue to capitalize on our advanced ASIC design capabilities.
Internet Optimized Architecture. As purpose-built Internet backbone
routers, our products employ an architecture designed exclusively for the
Internet. The system architecture provides a clean separation between the
routing and packet-forwarding functions. Separating these two functions enables
us to develop independently a full-featured routing protocol and traffic
engineering functionality through our JUNOS Internet Software and wire speed
packet forwarding performance through high performance ASICs. Furthermore, with
the routing and forwarding functions segregated, the products do not sacrifice
performance, even when there is a failure in the network. When a failure occurs,
JUNOS detects the failure and is able to quickly converge to the new state of
the network while the ASICs continue to forward packets at wire speed until they
receive updated routes from JUNOS.
The key benefits of our solution are:
- carrier class reliability;
- wire speed performance;
- scalability;
- interoperability;
- flexibility;
- reduced complexity; and
- cost effectiveness.
Carrier Class Reliability. Our products' system architecture provides
reliable operation for service providers in large complex networks even under
abnormal conditions. This architecture, combined with JUNOS' modular software
design, limits the impact of a failure to the specific software application. In
addition, the hardware used in our products has been designed with a very high
level of integration to maximize the mean time between failure. Moreover, data
and instructions have appropriate error correction and parity checks in memory
to guarantee their integrity.
Wire Speed Performance. We believe the M40 is the first Internet backbone
router that can forward minimum-sized IP packets over OC-48 links at wire speed.
This maximizes network stability and the capacity utilization of expensive wide
area circuits. In contrast to available solutions, the M40 is able to maintain
packet forwarding rates and to avoid dropping significant numbers of packets
when active routes are lost or when large numbers of routes change.
Scalability. Our JUNOS Internet Software is designed to accommodate
service providers' scale requirements. In addition, the ASIC interface links
have been oversized, enabling the M40 to easily scale with growing levels of
data traffic. We believe our software and ASIC designs
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represent a competitive advantage, because it is very difficult for existing
vendors to graft these capabilities to their prior generation designs.
Interoperability. The M40 has demonstrated consistent interoperability
with existing network infrastructures. Our internal test environments confirm
interoperability with Cisco routers, a variety of leading ATM and Gigabit
Ethernet switches and SONET add drop multiplexers. Deployment of the M40 at
several major carriers has demonstrated that JUNOS is interoperable with
installed Cisco routers for both routing and administration. In addition, JUNOS
enables service providers to manage their complex peering relationships with
other service providers despite frequent software, equipment configuration and
network architecture changes.
Flexibility. Our ASICs are programmable and provide the flexibility to add
support for new protocols or changes in existing protocols. Since JUNOS is
modular in architecture and already supports existing and emerging protocols, it
is also a platform for efficiently introducing new interfaces and new services
in the network.
Reduced Complexity. Our products are purpose-built for service providers
and allow a simple and more structured approach to building Internet backbones
compared to the complex topologies in place today. With the M40 and the M20,
service providers can build more efficient networks with less dependence on
devices like ATM switches, which reduce the operational burdens of running
multiple distinct network layers.
Additionally, our products offer a thorough implementation of traffic
engineering based on MPLS, including the ability to dynamically adapt traffic
flows according to rules adopted by the network operator. Traffic engineering
refers to a set of capabilities for understanding underlying traffic trends in
the network and maximizing the utilization of the network on multiple
dimensions.
[DIAGRAM]
Cost Effectiveness. We have integrated these customer benefits into a
system that provides critical routing and forwarding functions at lower overall
cost. Our products' wire speed performance allows service providers to reduce
network operating cost by making more efficient use of their networks. In
addition, we designed the M40 to support a broad variety and density of
interfaces in a unit that occupies half a typical telecommunications rack. As a
result, service providers can cost effectively deploy the M40, which can be
easily upgraded, to connect to a variety of speed and circuit types at the
network core.
THE JUNIPER NETWORKS STRATEGY
Our objective is to become the primary supplier of high performance
Internet backbone infrastructure. The key elements of our strategy include:
- leverage early lead as supplier of purpose-built Internet
infrastructure;
- work very closely with key customers;
- increase penetration at major service providers;
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- leverage early success to penetrate new customers rapidly;
- expand sales and distribution network;
- maintain and extend technology leadership; and
- enable new IP-based services.
Leverage Early Lead as Supplier of Purpose-Built Internet
Infrastructure. From inception we have focused solely on designing and building
Internet infrastructure for service providers. We have integrated purpose-built
software and hardware into an Internet optimized architecture that specifically
meets service providers' needs and have seen significantly positive initial
responses from our existing and potential customers. We believe that many of
these customers will deploy Internet backbone infrastructure equipment from only
a few vendors. The purpose-built advantages of our products provide us with a
time-to-market lead, which is a critical advantage in gaining rapid penetration
as one of these selected vendors. Once our products are widely deployed in a
service provider's network as the primary or even secondary Internet backbone
infrastructure equipment, we believe we create a significant barrier to entry to
potential competitors who do not currently offer commercially-viable next
generation routing solutions.
Work Very Closely with Key Customers. In developing our products,
including our JUNOS Internet Software, we worked very closely with customers to
design and build a product specifically to meet their complex needs. Since JUNOS
has been available and used by our customers for over a year, we understand
clearly the challenges facing these carriers, enabling us to subsequently design
additional features and capabilities into both our software and hardware. We
believe our close relationships with, and constant feedback from, our customers
have been key elements in our design wins and rapid deployment to date. We plan
to continue to work very closely with our key customers to implement
enhancements to current products as well as to design future products that
specifically meet their evolving needs. We are also actively involved with these
customers in developing key standards, such as MPLS, and are an active
participant in standards organizations such as the Internet Engineering Task
Force and the Optical Internetworking Forum.
Increase Penetration at Major Service Providers. Our initial focus has
been to penetrate several of the largest service providers, where operators have
the technical sophistication, resources and desire to test and evaluate our
solution against potential alternatives. While we have received initial orders
from major service providers, such as UUNet (MCI Worldcom), Cable & Wireless,
AT&T/IBM Global Services, Frontier GlobalCenter and Verio, we believe that there
is a significant opportunity to further penetrate these large and complex
networks given the advantages of our products. As the growth of the Internet
requires these service providers to continue to build their networks and replace
outdated equipment, we will pursue further opportunities to capture greater
market share within these large accounts.
Leverage Early Successes to Penetrate New Customers Rapidly. We believe
that the Internet infrastructure equipment buying patterns of the medium and
smaller-sized service providers typically lag behind those of the larger service
providers. Since the network challenges that the large service providers face
today are likely to be the problems encountered by smaller service providers in
the near future, we believe smaller service providers are likely to deploy
equipment similar to larger service providers. Furthermore, smaller service
providers often lack the technical resources to thoroughly test different
vendors' products. Therefore, they typically piggyback on larger service
providers' evaluation efforts by purchasing the same platforms deployed by the
larger service providers. Since we have begun to sell to several of the largest
service providers, we intend to leverage this success by allocating our
marketing efforts towards a greater number of medium and smaller-sized service
providers.
Expand Sales and Distribution Network. In order to pursue the large number
of potential customers for our Internet infrastructure solutions, we plan to
continue to aggressively add to our
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sales and distribution capabilities. We are adding to our direct sales and
support capabilities for our major customers in North America and adding
value-added resellers to sell to and support our other domestic and
international customers. In the quarter ended December 31, 1999, we added 12
people to the sales organization for a total of 72 people.
Maintain and Extend Technology Leadership. Our Internet software, ASIC
technology and Internet-optimized architecture have been key elements to
establishing our technology leadership. We believe that these elements are
highly leverageable into future products we are currently developing. We intend
to maintain and extend our technological leadership in the Internet
infrastructure market through continued significant investment in JUNOS Internet
Software and ASIC designs to enhance the feature richness of our products and to
develop future differentiated offerings for service providers.
Enable New IP-based Services. Our platform enables service providers to
build networks cost effectively and to offer new differentiated services for
their customers more efficiently than conventional products. While we believe
that current service providers are likely to be the largest and most successful
IP network operators in the near term, many new service providers are likely to
emerge oriented around the delivery of IP-based services. These services, which
include web hosting, outsourced Internet and intranet services, VPNs, outsourced
enterprise applications and voice-over IP, are cost-effectively enabled by our
Internet infrastructure platform. Although the market for our products today is
driven primarily by the need for traditional Internet network capacity, as other
IP-based services and applications continue to grow in importance, the total
potential market for our products will continue to grow commensurately.
TECHNOLOGY
Our core technology consists of our Internet backbone router architecture,
JUNOS Internet Software and ASIC hardware expertise. Our general-purpose
architecture is initially embodied in the M40, but also is designed to serve as
the platform for future generations of products, such as the M20.
M40 ARCHITECTURE
The architecture of our products is exemplified by the M40. The following
diagram illustrates the architecture of the M40 Internet backbone router:
[DIAGRAM]
The M40 architecture delivers the forwarding rates and network control
necessary to scale Internet backbones rapidly and reliably. The M40 system
includes a Routing Engine, or RE, and a Packet Forwarding Engine, or PFE. The
clean separation of the routing and forwarding functions ensures that the two
functions do not compete for the same resources.
The Routing Engine. The RE consists of the JUNOS Internet Software
operating on an Intel-based platform. The JUNOS Internet Software features
Internet-scale protocol support, with
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flexible policy software that enables maximum control over the acceptance,
modification and advertisement of route prefixes. In addition, the JUNOS
Internet Software offers a range of configuration management tools that simplify
the configuration process and help protect against operator error. The RE
conducts the processing intensive activity of maintaining the routing table,
from which the forwarding table residing in the PFE is derived. The RE is
connected to the PFE through a dedicated 100 Mbps link. After constructing or
updating the forwarding table, the RE downloads a copy of the table to the PFE.
Updates to the forwarding table are done atomically in small incremental steps
so that packet forwarding is not interrupted by routing changes.
The Packet Forwarding Engine. The M40 delivers wire speed packet
forwarding using our ASIC designs. All links between ASICs are oversized,
dedicated channels, and the PFE architecture is free from the bottlenecks faced
by traditional crossbar switches, which use intelligent agent software to
perform both routing and forwarding functions over multiple connections to
either parts of the network. Bottlenecks can occur in a crossbar switch because
the routing and forwarding functions are not separated. The heart of the PFE is
the Internet Processor ASIC. With over one million gates and a lookup rate of
over 40 million packets per second, or Mpps, the Internet Processor represents
the largest and fastest route lookup ASIC currently available, capable of
processing data at throughput rates in excess of 40 Gbps.
All lookup rates reflect longest-match route table lookups for all packets
and all lookups are performed in hardware. There is no caching mechanism, which
is a mechanism by which critical information, such as destinations for traffic,
is stored in rapidly accessible memory to make the process of looking up traffic
destinations faster. In addition there is no risk of cache misses in the system
which can result in slower storage access and thus considerably slower traffic
delivery. In addition, the forwarding table can be updated without affecting
forwarding rates. The Internet Processor is programmable to support up to four
different forwarding tables (layer 2 and/or layer 3) simultaneously. Supported
forwarding protocols currently include unicast and multicast IPv4 and MPLS.
Finally, the Internet Processor maintains its performance regardless of length
of lookups or table size.
The PFE also features a shared memory system with single-stage buffering,
so packets are written to and read from memory only once. Single-stage buffering
greatly reduces the complexities and throughput delays associated with
multistage buffering systems. The pooled memory is distributed across the
Flexible PIC Concentrator, or FPC, cards, allowing memory to scale as interfaces
are added. The Internet Processor also features prefix accounting mechanisms
that operate at rates in excess of 20 Mpps.
JUNOS INTERNET SOFTWARE: TRAFFIC ENGINEERING AND CONTROL
JUNOS Internet Software offers a full suite of Internet-scale,
Internet-tested routing protocols. Protocols and software tools, which are used
to control and direct network traffic, are critical to an Internet backbone
routing solution. Software control is made more important by the fact that the
size and complexity of backbone networks are increasing at a time when service
providers are looking to differentiate themselves through value-added service
offerings.
JUNOS Internet Software features implementations of all major Internet
protocols, including BGP4, DVMRP, PIM, IS-IS, Open Shortest Path First. IS-IS
and Open Shortest Path First are algorithms broadly used in enterprise networks
and by service providers to determine and update the running state of the
network and available destinations in the network. These implementations were
developed in-house by our design team which has extensive experience in
addressing the scaling issues of rapidly growing service providers.
JUNOS Internet Software also provides a new level of traffic engineering
capabilities with its implementation of MPLS. Developed in conjunction with the
Internet Engineering Task Force, our MPLS capability offers enhanced visibility
into traffic patterns and the ability to control the path traffic takes through
the network. Path selection enables service providers to engineer traffic for
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efficient use of network capacity and avoidance of congestion. We expect MPLS
and its traffic engineering capabilities to become a crucial tool for service
providers as they scale their networks.
JUNOS Internet Software features a modular design, with separate programs
running in protected memory space in conjunction with an independent operating
system. Unlike monolithic, unprotected operating system designs, which are prone
to system wide failure, the protected, modular approach improves reliability by
ensuring that modifications made to one module have no unwanted side-effects on
other sections of the software. In addition, having clean software interfaces
between modules facilitates software development and maintenance, enabling
faster response to customer needs and delivery of new features.
JUNOS Internet Software has been extensively tested in multiple service
provider networks to ensure compatibility with Cisco's IOS. Since each major
service provider's network is different, this extensive testing is necessary to
ensure seamless introduction into existing service provider environments.
PRODUCTS
M40 INTERNET BACKBONE ROUTER
The M40 Internet backbone router is specifically designed for the
specialized needs of service providers. The M40 features leading-edge
packet-forwarding performance, very high port density and flexibility, and
purpose-built Internet software. The M40 delivers higher speed performance for
service providers than current alternatives. The M40 helps solve the critical
problem of managing backbone networks by ensuring greater control over traffic
and better use of network capacity and by providing service providers with the
necessary traffic engineering tools, such as MPLS.
FEATURES OF THE M40 INTERNET BACKBONE ROUTER
Port Density Per Rack-Inch. Our M40 Internet backbone router offers very
high port density per rack-inch, ensuring optimal use of valuable and scarce PoP
rack space. Because the forwarding engine is oversized, all interfaces perform
at wire speed for all packet sizes.
The M40 router features a highly flexible combination of backbone interface
speeds on the market today. In a 35-inch chassis, the M40 router provides 8
OC-48/STM-16, 32 OC-12/STM-4, 128 OC-3/STM-1 or 128 DS3 interfaces. M40
interfaces are located on Physical Interface Cards, or PICs, which plug into FPC
boards. There are eight FPC slots on the M40 and each FPC slot supports up to
four PICs and an aggregate throughput rate of more than 2.5 Gbps. In addition to
supporting wire speed OC-48 interfaces, each FPC supports various combinations
of interfaces, permitting the mixing of interface types and speeds on a single
FPC. Supported PIC interfaces include:
- 1-port OC-48/STM-16 SONET/SDH;
- 1-port OC-12/STM-4 SONET/SDH;
- 1-port OC-12/STM-4 ATM;
- 4-port OC-3/STM-1 SONET/SDH;
- 2-port OC-3/STM-1 ATM;
- 4-port DS3; and
- 1-port Gigabit Ethernet.
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The PIC interface cards are sold both as part of the initial product
configuration and also, subsequently, as add-on items. Interfaces are typically
added as the customer's network expands or the capacity of individual links is
upgraded.
Class-of-Service Flexibility. The M40 router is designed for a variety of
class-of-service applications. The M40's queuing mechanism is based on a
weighted round-robin selection among multiple queues on outgoing interfaces.
Queues can be configured with drop profiles to control the rate of packet drops
based on utilization of buffer capacity.
Low Power Consumption. As provider PoPs have grown and become more fully
populated with systems, power consumption has become a significant concern.
Access to sufficient power can be a constraint on the ability of a facility to
support a larger network. Because of its low part count and efficient design,
our M40 Internet backbone router draws less than 1700 watts of power (35A at
48V) in a fully loaded configuration, enabling it to offer very high performance
and port density per watt.
Engineered for Stressful Conditions. The M40 architecture is designed to
reliably handle stressful network conditions. For example, the route lookup
capacity of our Internet Processor has been oversized with respect to interface
speeds. In addition, the separation of routing and processing enables the M40 to
converge quickly while maintaining wire speed.
Built for Reliability. In addition to preserving network reliability, the
M40 router is designed to ensure system reliability. The M40's cooling system is
fully redundant to protect against individual fan failure. Similarly, the M40's
dual power supplies are fully redundant, each capable of supporting the full
power load of the system. The M40 can boot off of any one of multiple redundant
storage media, ensuring that the system remains operational in the event of a
disk failure. For software reliability, JUNOS Internet Software features a
protected, modular design with separate processes running in protected memory
space on top of an independent operating system. A modular design protects
against system wide failures, ensuring that modifications made to one module
have no unwanted side-effects on other portions of the code base. Finally, a low
component count and an efficient design combine to give the M40 system superior
reliability.
The M40 base price list ranges between $45,000 and $52,000. PIC module
prices begin at $18,000.
M20 INTERNET BACKBONE ROUTER
The M20 is purpose-built for new emerging carriers and smaller service
providers. It can serve a variety of high speed uses, starting at the core. As
new carriers build out the core, they determine that there is a need for high
speed connectivity to end customers, other carriers and hosting environments.
The M20, with its services and configuration flexibility can provide the
solution in one chassis, which is both cost and space effective.
The M20's small size, high performance and high port density make it an
optimum platform for high-speed access applications. Its Gigabit Ethernet port
density and 802.1q VLAN support makes it attractive for hosting applications.
The M20 also provides forwarding performance and the rich BGP4 and policy
implementations (with JUNOS Internet Software) needed for peering applications.
Although the M20 measures only 14 inches (35.56 cm) in height, it brings
new levels of port density and performance to provider edge applications,
supporting nearly 200 DS-3s in a single chassis and 1000 DS-3s in a standard
seven-foot (2.13 m) rack. The M20 supports a wide range of interfaces including:
- 1-port OC-48/STM-16 SONET/SDH;
- 1-port OC-12/STM-4 SONET/SDH;
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- 1-port OC-12/STM-4 ATM;
- 4-port OC-3/STM-1 SONET/SDH;
- 2-port OC-3/STM-1 ATM;
- 4-port DS3;
- 1-port Gigabit Ethernet; and
- Channelized OC-12/STM-4 to DS-3.
The M20 base list price is $20,000. PIC module prices begin at $18,000.
CUSTOMERS
The following is a representative list of our customers as of December 31,
1999:
<TABLE>
<S> <C>
END USERS: DISTRIBUTORS:
AboveNet Communications Alcatel
AT&T Ericsson
AT&T/IBM Global Services 3Com
Broadband Office K-Net Ltd.
Cable & Wireless Nissho Electronics
Frontier GlobalCenter NTT PC Communications
Globix OKI Electronics
GST Network Funding Samsung America
Level 3 Communications Softway
MCI WorldCom-vBNS Solunet
MIBH
PSINet
Qwest Communications International
TCG CERFnet.
University of Washington
UUNet
Verio
</TABLE>
We recognize revenue from the shipment of products at the time of shipment
unless we have future obligations for network interoperability or if we have to
obtain customer acceptance. In those cases, we defer recognition of the revenue
until we have met our obligations.
Two customers, UUNet and Cable & Wireless, comprised approximately 58% of
our recognized revenues for the year ended December 31, 1999.
SALES AND MARKETING
We sell and market our products primarily through our direct sales
organization, value-added resellers and an original equipment manufacturer.
Direct Sales. Our North American direct sales organization is divided into
Western and Eastern regional operations. Our direct sales efforts are focused on
the largest service providers. The direct sales account managers cover the
market on an assigned account basis and work as a team with account oriented
systems engineers. They are directed by a regional operations manager who
reports to the North American Director of Sales. We also have technical
engineers that consult with and provide our customers with guidance and
assistance on the evolution of their networks as it relates to the deployment of
our products. These consulting engineers also help in defining the features that
are required for our products to be successful in specific applications. A key
feature of our sales effort is the relationship we establish at various levels
in
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our customers' organization. Our sales team maintains contact with key
individuals who have service planning and infrastructure buildout
responsibility.
Value Added Resellers. We have complemented our direct sales effort in the
United States through the addition of several highly focused value added
resellers. Our arrangements with value added resellers typically have been
non-exclusive and provide the value added reseller with discounts based upon the
volume of their orders.
Original Equipment Manufacturer Partner. We have established a strategic
distribution relationship with Ericsson. We believe that Ericsson has
significant customer relationships in place and offers products which complement
ours. Ericsson will provide the first level of support to its customers. Our
agreement with Ericsson allows it to distribute our products on a worldwide,
non-exclusive basis with discounts based upon the volume of orders it receives.
International Resellers. In order to further our international sales
objectives, we have established a number of country specific value added
resellers such as Alcatel. These resellers have expertise in deploying complex
Internet infrastructure equipment in their respective markets and provide the
first level of support required by our international customers.
As of December 31, 1999, we employed 72 people in our sales support and
marketing organizations.
CUSTOMER SERVICE AND SUPPORT
We believe that a broad range of support services is essential to the
successful installation and ongoing support of our products. We have hired
support engineers with proven Internet experience. We offer the following
services: 24 hours a day, seven days a week technical assistance (on-line,
telephone and on-site), professional services, educational services, logistics
services and web-based information.
We offer a variety of flexible and comprehensive support programs,
including basic hardware and software warranty services, next day onsite parts
and labor, 24 hours a day, seven days a week same day parts and labor and
on-site resident engineers. We deliver these services directly to major end
users and also utilize a two-tiered support model, leveraging the capabilities
of our partners and third party organizations. We also train our partners in the
delivery of education and support services.
Customer service and support provide front line product support and is the
problem resolution interface to our partners and direct end users. If customer
service and support are unable to resolve an issue themselves, they duplicate
the problem scenario and provide the failure information, such as logs, dumps,
traces and system configuration to appropriate subject matter experts in our
engineering department.
Based on the severity of the problem and the impact to our customers'
network, there are strict escalation guidelines to ensure that the appropriate
technical resource and management attention is brought to bear on the problem in
a timeframe commensurate with problem priority. The overall goal is to fix the
problem, at the appropriate level, in the right timeframe in order to ensure our
customers' satisfaction.
As of December 31, 1999, we employed 31 people in our customer service and
support organization, with the majority located in our Mountain View, California
corporate headquarters.
RESEARCH AND DEVELOPMENT
We have assembled a team of skilled engineers with extensive experience in
the fields of high end computing, network system design, Internet routing
protocols and embedded software. These individuals have been drawn from leading
computer data networking and telecommunications companies. In addition to
building complex hardware and software systems, the engineering
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team has experience in delivering very large, highly integrated ASICs and
extremely scalable Internet software.
Our research and development department is organized into teams that work
in parallel on several projects in a way similar to the development of
successive generations of complex microprocessors. As a result, we will seek to
offer our customers next generation products as they are needed.
We believe that strong product development capabilities are essential to
our strategy of enhancing our core technology, developing additional
applications, incorporating that technology and maintaining the competitiveness
of our product and service offerings. We are leveraging our first generation
ASICs, developing additional network interfaces targeted to our customer
applications and continuing to develop next generation technology to support the
anticipated growth in network bandwidth requirements. We continue to expand the
functionality of our JUNOS Internet Software to improve performance and
scalability, and to provide an enhanced user interface.
Our research and development process is driven by the availability of new
technology, market demand and customer feedback. We have invested significant
time and resources in creating a structured process for undertaking all product
development projects. This process involves all functional groups and all levels
within our company. Following an assessment of market demand, our research and
development team develops a full set of comprehensive functional product
specifications based on inputs from the product management and sales
organizations. This process is designed to provide a framework for defining and
addressing the steps, tasks and activities required to bring product concepts
and development projects to market.
As of December 31, 1999, we employed 170 people in our research and
development organization.
Our research and development expenses totaled $41.5 million for the year
ended December 31, 1999, $24.0 million for the year ended December 31, 1998,
$9.4 million for the year ended December 31, 1997 and $1.9 million for the
period from February 2, 1996, the date of our inception, to December 31, 1996.
MANUFACTURING
Our manufacturing operation is entirely outsourced. We have developed a
strategic relationship with Solectron, under which we have subcontracted our
manufacturing activity. This subcontracting activity extends from prototypes to
full production and includes activities such as material procurement, final
assembly, test, control and shipment to our customers. We design, specify and
monitor all of the tests that are required to meet internal and external quality
standards. This arrangement provides us with the following benefits:
- we operate without dedicating any space to manufacturing operations;
- we conserve the working capital that would be required for funding
inventory;
- we can adjust manufacturing volumes quickly to meet changes in demand;
and
- we can quickly deliver products to customers through Solectron's turnkey
manufacturing and drop shipment capabilities.
We have recently established a relationship with an additional third party to
manufacture certain of our products.
Our ASICs are manufactured by IBM using its 0.25 micron process. IBM is
responsible for all aspects of the production of the ASICs using our proprietary
designs.
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COMPETITION
Competition in the Internet infrastructure market is intense. The market
historically has been dominated by Cisco Systems, Inc., with other companies
such as Nortel Networks and Lucent Technologies Inc. providing products to a
smaller segment of the market. In addition, a number of private companies have
announced plans for new products to address the same problems which our products
address.
Cisco traditionally has been the dominant supplier of solutions to this
market. We believe this is the result of its early leadership position in the
enterprise router market. As the Internet has grown rapidly, Cisco has leveraged
this position and has developed a broad product line of routers which support
all major local area and wide area interfaces. We believe that our ability to
compete with Cisco depends upon our ability to demonstrate that our products are
superior in meeting the needs of service providers and are extremely compatible
with Cisco's current and future products. Although we believe that we are
currently among the top providers of Internet infrastructure solutions
worldwide, we cannot assure you that we will be able to compete successfully
with Cisco, currently the leading provider in this market.
We expect that, over time, large companies with significant resources,
technical expertise, market experience, customer relationships and broad product
lines, such as Lucent and Nortel, will introduce new products which are designed
to compete more effectively in this market. As a result, we expect to face
increased competition in the future from larger companies with significantly
more resources than we have. Although we believe that our technology and the
purpose-built features of our products make them unique and will enable us to
compete effectively with these companies, we cannot assure you that we will be
successful.
Many of our current and potential competitors, such as Cisco, Lucent and
Nortel, have significantly broader product lines than we do and may bundle their
products with other networking products in a manner that may discourage
customers from purchasing our products. Also, many of our current and potential
competitors have greater name recognition and more extensive customer bases that
could be leveraged. Increased competition could result in price reduction, fewer
customer orders, reduced gross margins and loss of market share, any of which
could seriously harm our operating results.
There are also many small private companies which claim to have products
with greater capabilities than our products. Consolidation in this industry has
begun, with one or more of these smaller private companies being acquired by
large, established suppliers of Internet infrastructure products, and we believe
it is likely to continue. As a result, we expect to face increased competition
in the future from larger companies with significantly more resources than we
have.
Several companies also provide solutions which can substitute for some uses
of routers. For example, high bandwidth asynchronous transfer mode, or ATM,
switches, are used in the core of certain major backbone service providers. ATM
switches can carry a variety of traffic types, including voice, video and data,
using fixed, 53 byte cells. Companies that use ATM switches are enhancing their
products with new software technologies such as multi-protocol label switching,
or MPLS, which can potentially simplify the task of mixing routers and switches
in the same network. These substitutes can reduce the need for large numbers of
routers.
INTELLECTUAL PROPERTY
Our success and ability to compete are substantially dependent upon our
internally developed technology and know how. We have two patents issued
relating to high speed switching devices. These patents will expire in 2017 and
2016, respectively. In addition we have seven patent applications pending in the
United States relating to the design of our products. Our engineering teams have
significant expertise in ASIC design and we own all rights to the design
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of the ASICs which form the core of the M40. Our JUNOS Internet Software was
developed internally and is protected by United States and other copyright laws.
While we rely on patent, copyright, trade secret and trademark law to
protect our technology, we also believe that factors such as the technological
and creative skills of our personnel, new product developments, frequent product
enhancements and reliable product maintenance are essential to establishing and
maintaining a technology leadership position. There can be no assurance that
others will not develop technologies that are similar or superior to our
technology.
Our success will depend upon our ability to obtain necessary intellectual
property rights and protect our intellectual property rights. We cannot be
certain that we will be able to obtain the necessary intellectual property
rights or that other parties will not contest our intellectual property rights.
LEGAL PROCEEDINGS
We are not subject to any material legal proceedings.
EMPLOYEES
As of December 31, 1999, we had 335 full-time employees, 170 of whom were
engaged in research and development, 72 in sales and marketing, 31 in customer
support and 62 in finance, administration and operations. None of our employees
are represented by a labor union. We have not experienced any work stoppages and
we consider our relations with our employees to be good.
Our future performance depends in significant part upon the continued
service of our key technical, sales and senior management personnel, none of
whom is bound by an employment agreement requiring service for any defined
period of time. The loss of the services of one or more of our key employees
could have a material adverse effect on our business, financial condition and
results of operations. Our future success also depends on our continuing ability
to attract, train and retain highly qualified technical, sales and managerial
personnel. Competition for such personnel is intense, and there can be no
assurance that we can retain our key personnel in the future.
FACILITIES
We sublease approximately 60,000 square feet in two buildings located in
Mountain View, California. Approximately 33,000 square feet are subleased
pursuant to a sublease that expires December 31, 2001, and approximately 27,000
square feet are subleased pursuant to a lease that expires June 30, 2000. Also,
we have entered into leases for approximately 144,000 and 25,000 square feet of
office space in Sunnyvale, California. The lease on the office space for 144,000
square feet will commence on the later of May 1, 2000 or the completion of our
improvements on the premises, and it will expire on the later of May 1, 2012 or
twelve years after the completion of our improvements on the premises, with
certain options for extension and expansion. The lease on the office space for
25,000 square feet has commenced on October 1, 1999, and it will expire two
months after the later of May 1, 2000 or the completion of our improvements on
the 144,000 square foot facility. The commercial real estate market in the San
Francisco Bay area is volatile and unpredictable in terms of available space,
rental fees, occupancy rates and preferred locations. We cannot be certain that
additional space will be available when we require it, or that it will be
affordable or in a preferred location.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors and their ages, as of December 31,
1999, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Scott Kriens.............................. 42 President, Chief Executive Officer and
Chairman of the Board
Pradeep Sindhu............................ 47 Chief Technical Officer and
Vice Chairman of the Board
Joe Furgerson............................. 40 Vice President of Marketing
Marcel Gani............................... 47 Chief Financial Officer
Steven Haley.............................. 45 Vice President of Worldwide Sales and Service
Gary Heidenreich.......................... 51 Vice President of Operations
Peter L. Wexler........................... 44 Vice President of Engineering
William R. Hearst III(1).................. 50 Director
Vinod Khosla(2)........................... 44 Director
C. Richard Kramlich(1).................... 64 Director
William Stensrud(2)....................... 49 Director
</TABLE>
- ---------------
(1) Member of audit committee
(2) Member of compensation committee
SCOTT 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.
PRADEEP 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.
JOE FURGERSON joined Juniper Networks in January 1997. He served as our
Director of Marketing from January 1997 to September 1998 and has served as our
Vice President of Marketing since September 1998. From April 1994 to December
1996, Mr. Furgerson served as Director of Product Marketing, Network Systems
Division at 3Com Corporation, a data networking company. He holds a B.A. in
Economics from Claremont Men's College and an M.B.A. from the Stanford Graduate
School of Business.
MARCEL GANI joined Juniper Networks as Chief Financial Officer in February
1997. From January 1996 to January 1997, Mr. Gani served as Vice President and
Chief Financial Officer of NVIDIA Corporation, a 3D graphic processor company.
Mr. Gani also held the positions of Vice President and Chief Financial Officer
at Grand Junction Networks, a data networking company acquired by Cisco Systems,
Inc., from March 1995 to January 1996, and at Primary Access Corporation, a data
networking company acquired by 3Com Corporation, from March 1993 to March 1995.
Mr. Gani holds an M.B.A. from the University of Michigan.
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STEVEN HALEY joined Juniper Networks as Vice President of Worldwide Sales
and Service in August 1997. Prior to joining Juniper Networks, Mr. Haley served
as Vice President of Sales at Cisco Systems, Inc., a data networking company,
from July 1996 to August 1997. From February 1990 to July 1996, he worked for
StrataCom, Inc., serving in a variety of management roles from Managing
Director, Europe to Vice President of Sales, Americas. He holds a B.S. in
Marketing from the University of Massachusetts, Amherst.
GARY HEIDENREICH joined Juniper Networks in July 1997 as Vice President of
Operations. From August 1993 to July 1997, Mr. Heidenreich served as Vice
President of Systems Manufacturing at 3Com Corporation. Mr. Heidenreich holds a
B.S.I.E. from New Mexico State University and an M.B.A. from the University of
Dallas.
PETER L. WEXLER joined Juniper Networks as Vice President of Engineering
in January 1997. From April 1995 to January 1997, Mr. Wexler served as Vice
President of Engineering at Bay Networks, a data networking company. From April
1993 to April 1995, Mr. Wexler served as Director of High-End Platform
Development at Wellfleet Communications, a predecessor to Bay Networks and a
manufacturer of high-performance routers. He holds a B.S.E. from State
University of New York at Stony Brook, an M.S.E. from the University of Illinois
and an M.B.A. from Boston University.
WILLIAM R. HEARST III has served as a Director of Juniper Networks since
February 1996 and has served as a member of the audit committee since July 1998.
Mr. Hearst is a partner with Kleiner Perkins Caufield & Byers, a venture capital
firm located in Menlo Park, California. 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 also serves on the boards
of Excite@Home, RePlay Networks, Com21, Inc., Oblix, Inc., BigVine, Geocast,
Zing, New Access Communications, the Hearst Corporation and Hearst-Argyle
Television. He is a Fellow of the AAAS, a Trustee of Carnegie Institution in
Washington, D.C. and a Trustee of the California Academy of Sciences. Mr. Hearst
is a 1972 graduate of Harvard University, holding an A.B. degree in Mathematics.
VINOD KHOSLA has served a Director of Juniper Networks since February 1996
and has served as a member of the compensation committee since July 1998. Mr.
Khosla has been a General Partner with the venture capital firm of Kleiner
Perkins Caufield & Byers from February 1986 to the present. 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
Asera, Concentric Network Corporation, Corio Inc., Corvis Corporation, Siara
Systems and QWEST Communications International Inc., as well as several other
private companies. 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 has served as a Director of Juniper Networks since
July 1996 and has been a member of the audit committee since July 1998. 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 is a director of Zhone
Technologies, Force 10 Networks, Financial Engines, InfoGear, Netsolve,
Verticom, Visual EDGE, Healtheon Corporation, Com 21, Inc., Lumisys, Inc. and
Silicon Graphics, Inc. Mr. Kramlich holds a B.S. from Northwestern University
and an M.B.A. from Harvard Business School.
WILLIAM STENSRUD has served as a Director of Juniper Networks since
October 1996 and has served as a member of the compensation committee since July
1998. Mr. Stensrud has been a General Partner with the venture capital firm of
Enterprise Partners from January 1997 to the present. Mr. Stensrud was an
independent investor and turn-around executive from March 1996 to January 1997.
During this period Mr. Stensrud served as President at Paradyne Corporation
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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 the
acquisition through March 1996, Mr. Stensrud served as an executive at 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 Rhythms
NetConnections Corporation, Paradyne Corporation, Packeteer Corporation,
Airfiber, Asian Trading.com, Chromisys, Edupoint, Ensemble Communications, iAsia
Works, LongBoard, Reflex Communications and Solis Micro Technologies. He holds a
B.S. degree in Electrical Engineering and Computer Science from Massachusetts
Institute of Technology.
BOARD OF DIRECTORS
Our board of directors currently consists of six authorized members. The
board is divided into three classes, Class I, Class II and Class III, with each
class serving staggered three-year terms. The Class I Directors, currently
Messrs. Kriens and Stensrud, will stand for re-election at the 2000 annual
meeting of stockholders. The Class II Directors, currently Messrs. Khosla and
Sindhu, will stand for re-election at the 2001 annual meeting of stockholders
and the Class III Directors, currently Messrs. Hearst and Kramlich, will stand
for re-election at the 2002 annual meeting of stockholders. This classification
of the board of directors may delay or prevent a change in control of our
company or in our management. See "Description of Capital Stock -- Delaware
Anti-Takeover Law and Certain Charter and Bylaw Provisions."
Executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been elected and qualified. There
are no family relationships among any of our directors, officers or key
employees.
BOARD COMMITTEES
We established an audit committee and a compensation committee in July
1998. The audit committee consists of Messrs. Hearst and Kramlich. The audit
committee reviews our internal accounting procedures and consults with and
reviews the services provided by our independent auditors.
The compensation committee consists of Messrs. Khosla and Stensrud. The
compensation committee reviews and recommends to the board of directors the
compensation of all of our officers and directors, including stock compensation
and loans and establishes and reviews general policies relating to the
compensation and benefits of our employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
member of the board of directors or 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 our board of directors
or compensation committee.
DIRECTOR COMPENSATION
We do not currently compensate in cash our directors for their service as
members of the board of directors, although they are reimbursed for certain
expenses in connection with attendance at board of director and compensation
committee meetings. Under our 1996 Stock Plan, nonemployee directors are
eligible to receive stock option grants at the discretion of the board of
directors or other administrator of the plan.
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LIMITATIONS ON DIRECTORS' LIABILITY AND INDEMNIFICATION
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
The limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we will indemnify
our directors and officers and may indemnify our employees and other agents to
the fullest extent permitted by law. We believe that indemnification under our
bylaws covers at least negligence and gross negligence on the part of
indemnified parties. Our bylaws also permit us to secure insurance on behalf of
any officer, director, employee or other agent for any liability arising out of
his or her actions in their capacity as an officer, director, employee or other
agent, regardless of whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our directors, executive
officers and certain other employees, in addition to the indemnification
provided for in our bylaws. These agreements, among other things, provide for
indemnification for judgments, fines, settlement amounts and certain expenses,
including attorneys' fees incurred by in any action or proceeding, including any
action by or in the right of Juniper Networks, arising out of the person's
services as a director, executive officer or employee of us, any of our
subsidiaries or any other company or enterprise to which the person provides
services at our request. We believe that these provisions and agreements are
necessary to attract and retain qualified persons for those positions.
The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though a derivative action, if successful, might otherwise benefit us and our
stockholders. A stockholder's investment in us may be adversely affected to the
extent we pay the costs of settlement or damage awards under these
indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.
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<PAGE> 54
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the
compensation earned, awarded or paid for services rendered to us in all
capacities for the fiscal year ended December 31, 1999, by our Chief Executive
Officer and our four next most highly compensated executive officers who earned
more than $100,000 in salary and bonus during the fiscal year ended December 31,
1999, whom we refer to in this prospectus collectively as the named executive
officers:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS OPTIONS(1) COMPENSATION
- ---------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Scott Kriens....................... 1999 $170,000 $ 5,000 900,000 $ --(2)
President and 1998 170,000 -- 3,735 1,200
Chief Executive Officer 1997 170,000 -- -- --
Steven Haley....................... 1999 $175,000 $ -- 465,000 $284,203(3)
Vice President of 1998 150,000 69,039 114,390 1,133(2)
Worldwide Sales and Service 1997 62,109 -- -- --
Pradeep Sindhu..................... 1999 $145,000 $12,425 540,000 $ --(2)
Chief Technical Officer 1998 140,225 25,000 5,355 1,004
1997 114,000 -- -- --
Peter Wexler....................... 1999 $150,000 $ 6,000 240,000 $ --(2)
Vice President of Engineering 1998 150,000 -- 3,060 1,133
1997 137,500 -- -- --
Marcel Gani........................ 1999 $150,000 $12,500 240,000 $ --(2)
Chief Financial Officer 1998 150,000 -- 2,745 1,133
1997 131,250 -- -- --
</TABLE>
- ---------------
(1) The underlying share amounts have been adjusted for the three-for-one split
of our common stock for stockholders of record on December 31, 1999 and paid
on January 14, 2000.
(2) Consists of premiums paid by us for term life insurance.
(3) Consists of commissions.
Option Grants in Last Fiscal Year. The following table shows certain
information regarding stock options granted to the named executive officers
during the fiscal year ended December 31, 1999. All of these stock options were
granted under our 1996 Stock Plan. The material terms of these option grants are
as follows: (a) nonqualified stock options except as noted below; (b)granted at
fair market value at the time of grant; (c) vest as noted below; and (d) a term
of ten years, subject to earlier termination in the event the optionee ceases to
be employed by us. See "Certain Transactions" for a description of the exercises
of stock options granted to the named executive officers under the 1996 Stock
Plan. In accordance with the rules of the Securities and Exchange Commission,
also shown below is the potential realizable value over the term of the option,
the period from the grant date to the expiration date, based on assumed rates of
stock appreciation of 5% and 10%, compounded annually. These amounts are based
on certain assumed rates of appreciation and do not represent our estimate of
our future stock price. Actual gains, if any, on stock option exercises will be
dependent on the future performance of the common stock.
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<PAGE> 55
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERCENT OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL OPTIONS ASSUMED ANNUAL RATES OF
SECURITIES GRANTED EXERCISE STOCK APPRECIATION FOR OPTION
UNDERLYING TO EMPLOYEES PRICE TERM(3)
OPTIONS DURING PER EXPIRATION ------------------------------
NAME GRANTED PERIOD(1) SHARE(2) DATE 5% 10%
- ---- ---------- ------------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Scott Kriens............ 900,000(4) 5.387% $60.71 10/4/09 $34,361,211 $87,078,055
Steven Haley............ 30,303(5) 0.181 3.30 2/10/09 62,889 159,374
119,697(5) 0.716 3.30 2/10/09 248,413 629,528
315,000(6) 1.886 60.71 10/4/09 12,026,424 30,477,320
Pradeep Sindhu.......... 540,000(4) 3.232 60.71 10/4/09 20,616,727 52,246,834
Peter Wexler............ 240,000(7) 1.436 60.71 10/4/09 9,162,990 23,220,815
Marcel Gani............. 240,000(7) 1.436 60.71 10/4/09 9,162,990 23,220,815
</TABLE>
- ---------------
(1) Based on an aggregate of 16,837,006 options granted by us during the
fiscal year ended December 31, 1999, to our employees, directors and
consultants, including the named executive officers. All of the option
grant numbers and per share numbers have been adjusted for the
three-for-one split of our common stock for stockholders of record on
December 31, 1999.
(2) Options were granted at an exercise price equal to the fair market
value of our common stock, as determined in good faith by our board of
directors. As of the effective date of the initial public offering,
options are granted at fair market value on the date of grant.
(3) The potential realizable value is calculated based on the ten year term
of the option at its time of grant. It is calculated based on the
assumption that the closing price for the common stock on the date of
grant appreciates at the indicated annual rate compounded annually for
the entire term of the option and that the option is exercised and sold
on the last day of its term for the appreciated stock price.
(4) The option grants to Mr. Kriens and Mr. Sindhu vest in 36 equal monthly
installments beginning January 1, 2000.
(5) The option grant for 30,303 shares is an incentive stock option. The
option grant for 119,697 shares is a non-statutory stock option.
(6) The option grant for 315,000 shares has a staggered vesting schedule.
The option to purchase 195,000 of the shares vests in 12 equal monthly
installments beginning January 1, 2001. The option to purchase 120,000
shares vests in 12 equal monthly installments beginning January 1,
2002.
(7) The option grants to Mr. Wexler and Mr. Gani vest in 24 monthly
installments beginning January 1, 2001.
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<PAGE> 56
Aggregate Option Exercises and Option Values. The following table sets
forth information with respect to the named executive officers concerning option
exercises for the fiscal year ended December 31, 1999, and exercisable and
unexercisable options held as of December 31, 1999:
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES VALUE DECEMBER 31, 1999 DECEMBER 31, 1999(2)
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Scott Kriens......... -- $ -- -- 900,000 $ -- $47,362,500
Steven Haley......... 30,465 204,792 112,500 465,000 12,718,744 33,546,870
Pradeep Sindhu....... 5,355 22,015 -- 540,000 -- 28,417,500
Marcel Gani.......... -- -- -- 240,000 -- 12,630,000
Peter Wexler......... -- -- 3,060 240,000 345,100 12,630,000
</TABLE>
- ---------------
(1) Based on the fair market value of our stock on the date of exercise, minus
the exercise price, multiplied by the number of shares issued upon exercise
of the option.
(2) The value of in-the-money options is based on the closing price on December
31, 1999 of $113.333 per share, minus the per share exercise price,
multiplied by the number of shares underlying the option.
EMPLOYMENT AGREEMENTS
We 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 with us.
We 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 our
standard vesting schedule or the balance of his unvested stock, whichever amount
is less.
54
<PAGE> 57
CERTAIN TRANSACTIONS
During our last fiscal year ending December 31, 1999, 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 other than
compensation agreements and other arrangements, which are described where
required in "Management," and the transactions described below.
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS AND 5% STOCKHOLDERS
Common Stock. On February 26, 1996, we issued 2,250,000 shares of common
stock at a price of $0.044 per share to Mr. Sindhu, one of our founders,
executive officers and directors.
On June 11, 1996, we issued the following shares of common stock at a price
of $0.044 per share to the following purchasers, among others:
<TABLE>
<CAPTION>
SHARES OF
PURCHASER COMMON STOCK
- --------- ------------
<S> <C>
Kleiner, Perkins, Caufield & Byers VII...................... 5,493,749
KPCB VII Founders Fund...................................... 600,001
KPCB Information Sciences Zaibatsu Fund II.................. 156,249
</TABLE>
Kleiner, Perkins, Caufield & Byers VII, KPCB VII Founders Fund and KPCB
Information Sciences Zaibatsu Fund II are affiliated entities and together are
considered a holder of more than 5% of our common stock. Messrs. Khosla and
Hearst, two of our directors, are general partners of Kleiner, Perkins, Caufield
& Byers VII, KPCB VII Founders Fund and KPCB Information Sciences Zaibatsu Fund
II. Messrs. Khosla and Hearst disclaim beneficial ownership of the securities
held by such entities, except for their proportional interests in the entities.
Series A Preferred Stock. On June 11, 1996, we sold 1,743,751 shares of
our Series A Preferred Stock for $1.00 per share. Each share of Series A
Preferred Stock converted into 2.25 shares of common stock at the time of the
initial public offering. The purchasers of the Series A Preferred Stock
included, among others:
<TABLE>
<CAPTION>
AS CONVERTED
SHARES OF SHARES OF
PURCHASER SERIES A STOCK COMMON STOCK
- --------- -------------- ------------
<S> <C> <C>
Kleiner, Perkins, Caufield & Byers VII............... 1,513,834 3,406,127
KPCB VII Founders Fund............................... 165,333 371,999
KPCB Information Sciences Zaibatsu Fund II........... 43,056 96,876
</TABLE>
55
<PAGE> 58
Series B Preferred Stock. On August 5, 1996, November 8, 1996, and
December 30, 1996, we sold a total of 3,333,334 shares, 484,683 shares, and
3,958 shares, respectively, of our Series B Preferred Stock for $2.40 per share.
In addition, on December 16, 1996, and June 18, 1997, we granted warrants
exercisable for 83,333 shares and 10,000 shares, respectively, of our Series B
Preferred Stock at an exercise price of $2.40. Each share of Series B Preferred
Stock converted into 2.25 shares of common stock at the time of the initial
public offering. The purchasers of the Series B Preferred Stock included, among
others:
<TABLE>
<CAPTION>
AS CONVERTED
SHARES OF SHARES OF
PURCHASER SERIES B STOCK COMMON STOCK
- --------- -------------- ------------
<S> <C> <C>
Kleiner, Perkins, Caufield & Byers VII............... 304,688 685,548
KPCB Information Sciences Zaibatsu Fund II........... 7,812 17,577
New Enterprise Associates VI, Limited Partnership.... 1,214,583 2,732,812
NEA Presidents Fund, L.P............................. 31,250 70,313
NEA Ventures 1996, L.P............................... 4,167 9,376
Kriens 1996 Trust U/T/A October 29, 1996............. 364,683 820,537
Stensrud Family Trust U/T/A September 6, 1993........ 120,000 270,000
</TABLE>
New Enterprise Associates VI, Limited Partnership and NEA Presidents Fund,
L.P. and NEA Ventures 1996, L.P. are affiliated entities and together are
considered a holder of more than 5% of our common stock. Mr. Kramlich, one of
our directors, is a partner of New Enterprise Associates VI, Limited Partnership
and NEA Presidents Fund, L.P. and NEA Ventures 1996, L.P. Mr. Kramlich disclaims
beneficial ownership of the securities held by these entities, except for his
proportional interest in the entities. Mr. Kriens, one of our directors and
executive officers and a holder of more than 5% of our common stock, is a
trustee of the Kriens 1996 Trust U/T/A October 29, 1996. Mr. Stensrud, one of
our directors, is a trustee of the Stensrud Family Trust U/T/A September 16,
1993.
Series C Preferred Stock. On July 1, 1997, and September 30, 1997, we sold
4,479,286 shares and 671,892 shares, respectively, of our Series C Preferred
Stock for $8.93 per share. Each share of Series C Preferred Stock converted into
2.25 shares of common stock at the time of the initial public offering. The sale
of Series C Preferred Stock included, among others, the sale of 783,875 shares
of Series C Preferred Stock (1,763,718 shares as converted to common stock) to
Ericsson Business Networks AB, which is a holder of more than 5% of our common
stock.
Series D and D-1 Preferred Stock. On March 16, 1999, we sold 500,000
shares of our Series D Preferred Stock and 2,580,000 shares of our Series D-1
Preferred Stock for $11.03 per share to Ericsson Business Networks AB. Each
share of Series D Preferred Stock converted into one share of common stock at
the time of the initial public offering. Each share of D-1 Preferred Stock
converted into 0.38166 shares of common stock at the time of the initial public
offering.
INDEMNIFICATION
We have entered into indemnification agreements with each of our directors
and officers. These indemnification agreements will require us to indemnify our
directors and officers to the fullest extent permitted by Delaware law.
All future transactions, including any loans from us to our officers,
directors, principal stockholders or affiliates, will be approved by a majority
of the board of directors, including a majority of the independent and
disinterested members of the board of directors or, if required by law, a
majority of disinterested stockholders, and will be on terms no less favorable
to us than could be obtained from unaffiliated third parties.
56
<PAGE> 59
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of December 31, 1999:
- each stockholder known by us to own beneficially more than 5% of our
common stock, as explained below;
- each of the named executive officers;
- each of our directors; and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person that
are currently exercisable or will become exercisable within 60 days after
December 31, 1999, are deemed outstanding, while the shares are not deemed
outstanding for purposes of computing percentage ownership of any other person.
Unless otherwise indicated in the footnotes below, the persons and entities
named in the table have sole voting or investment power with respect to all
shares beneficially owned, subject to community property laws where applicable.
57
<PAGE> 60
The number and percentage of shares beneficially owned are based on the
aggregate of 155,938,599 shares of common stock outstanding as of December 31,
1999. All share amounts have been adjusted for the three-for-one split of our
common stock to stockholders of record on December 31, 1999.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
------------------------
NUMBER PERCENTAGE
---------- ----------
<S> <C> <C>
OFFICERS AND DIRECTORS(1):
Scott Kriens(2)............................................. 9,485,455 6.1%
Steven Haley(3)............................................. 1,164,393 *
Pradeep Sindhu(4)........................................... 6,770,355 4.3%
Peter Wexler(5)............................................. 2,028,060 1.3%
Marcel Gani(6).............................................. 1,251,495 *
William Hearst(7)........................................... 32,709,372 21.0%
c/o Kleiner Perkins Caufield & Byers
2750 Sand Hill Road, Menlo Park, CA 94025
Vinod Khosla(8)............................................. 32,709,372 21.0%
c/o Kleiner Perkins, Caufield & Byers
2750 Sand Hill Road, Menlo Park, CA 94025
C. Richard Kramlich(9)...................................... 5,812,311 3.7%
c/o New Enterprise Associates
2490 Sand Hill Road, Menlo Park, CA 94025
William R. Stensrud(10)..................................... 945,000 *
c/o Enterprise Partners
7979 Ivanhoe Ave., Suite 550, La Jolla, CA 92037
All directors and executive officers as a group (11
persons)(11).............................................. 62,444,026 40.0%
5% STOCKHOLDERS:
Kleiner Perkins Caufield & Byers............................ 32,709,372 21.0%
2750 Sand Hill Road, Menlo Park, CA 94025(12)
Ericsson Business Networks AB............................... 9,745,203 6.3%
S-131 89 Stockholm, Sweden
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of common stock.
(1) Unless otherwise indicated, the address of each listed stockholder is c/o
Juniper Networks, Inc., 385 Ravendale Drive, Mountain View, California
94043.
(2) Includes 9,460,455 shares held in the name of the Kriens 1996 Trust, of
which Mr. Kriens and his spouse are trustees, of which 1,621,377 shares are
subject to our right of repurchase, as of December 31, 1999, which lapses
over time and 25,000 shares subject to options which are currently
exercisable or will become exercisable within 60 days of December 31, 1999.
(3) Includes 60,000 shares held in the name of the Haley Family Foundation
Trust and an aggregate of 90,000 shares held in trust for the benefit of
Mr. Haley's children. Includes 421,875 shares subject to our right of
repurchase as of December 31, 1999 (which lapses over time) and 119,538
shares, subject to options which are currently exercisable or will become
exercisable within 60 days of December 31, 1999.
(4) Includes 281,250 shares subject to our right of repurchase, as of December
31, 1999 (which lapses over time) and 15,000 shares subject to options
which are currently exercisable or will be come exercisable within 60 days
of December 31, 1999. Includes an aggregate of 180,000 shares held in
custody for Mr. Sindhu's children pursuant to the California Uniform
Transfer to Minors Act.
58
<PAGE> 61
(5) Includes 590,625 shares subject to our right of repurchase, as of December
31, 1999 (which lapses over time) and 3,060 shares subject to options which
are currently exercisable or will become exercisable within 60 days of
December 31, 1999.
(6) Includes 1,251,495 shares held in the name of the Gani 1995 Trust dated
December 8, 1995, of which Mr. Gani and his spouse are trustees and of
which 442,969 shares are subject to our right of repurchase, as of December
31, 1999 (which lapses over time).
(7) Comprised of 32,709,372 shares held by entities affiliated with Kleiner
Perkins Caufield & Byers. Mr. Hearst is a general partner of Kleiner
Perkins Caufield & Byers and is a director of Juniper Networks. Mr. Hearst
disclaims beneficial ownership of shares held by those entities, except to
the extent of his proportional interest arising from his partnership
interest in Kleiner Perkins Caufield & Byers.
(8) Comprised of 32,709,372 shares held by entities affiliated with Kleiner
Perkins Caufield & Byers. Mr. Khosla is a general partner of Kleiner
Perkins Caufield & Byers and is a director of Juniper Networks. Mr. Khosla
disclaims beneficial ownership of shares held by those entities, except to
the extent of his proportional interest arising from his partnership
interest in Kleiner Perkins Caufield & Byers.
(9) Includes 5,737,500 shares held by entities affiliated with New Enterprise
Associates. Mr. Kramlich is a general partner of New Enterprise Associates
and is a director of Juniper Networks. Mr. Kramlich disclaims beneficial
ownership of shares held by those entities, except to the extent of his
proportional interest in New Enterprise Associates.
(10) Includes 810,000 shares held in the name of the Stensrud Family Trust U/T/A
September 16, 1993, as community property.
(11) Includes all shares referenced in notes 3 through 10 above, except that the
shares beneficially owned by Messrs. Hearst and Khosla are counted only
once in this calculation. Also includes 2,148,750 shares beneficially owned
by two other executive officers of which 738,048 shares are subject to our
right of repurchase as of December 31, 1999 (which lapses over time) and
128,475 shares subject to options which are exercisable or will become
exercisable within 60 days of December 31, 1999.
(12) Includes (i) 31,672,266 shares held by Kleiner Perkins Caufield & Byers
VII, (ii) 812,106 shares held by KPCB Information Sciences Zaibatsu Fund
II, and (iii) 225,000 shares held by KPCB IX Associates, LLC.
59
<PAGE> 62
DESCRIPTION OF CONVERTIBLE NOTES
The convertible notes will be issued under an indenture between us and
Norwest Bank Minnesota, National Association, as trustee, substantially in the
form filed as an exhibit to the registration statement of which this prospectus
forms a part. The indenture and the convertible notes are governed by New York
law. Because this section is a summary, it does not describe every aspect of the
convertible notes and the indenture. The following summaries of certain
provisions of the indenture do not purport to be complete and are subject to,
and are qualified in their entirety by reference to, the detailed provision of
the convertible notes and the indenture, including the definitions therein of
certain terms.
GENERAL
The convertible notes will be general, unsecured obligations of ours. The
convertible notes will be subordinated, which means that they will rank behind
certain of our indebtedness as described below. The convertible notes will be
limited to $500,000,000 aggregate principal amount or $575,000,000 if the
underwriters exercise in full their right to purchase additional convertible
notes. We are required to repay the principal amount of the convertible notes in
full on March 15, 2007.
The convertible notes will bear interest at the rate per annum shown on the
front cover of this prospectus from , 2000. We will pay interest on
the convertible notes on March 15 and September 15 of each year, commencing on
September 15, 2000. Interest payable per $1,000 principal amount of convertible
notes for the period from , 2000 to , 2000 will be
$ .
You may convert the convertible notes into shares of our common stock
initially at the conversion rate stated on the front cover of this prospectus at
any time before the close of business on March 15, 2007, unless the convertible
notes have been previously redeemed or repurchased. Holders of convertible notes
called for redemption or submitted for repurchase will be entitled to convert
the convertible notes up to and including the business day immediately preceding
the date fixed for redemption or repurchase, as the case may be. The conversion
rate may be adjusted as described below.
We may redeem the convertible notes at our option at any time on or after
the third business day after March 15, 2003, in whole or in part, at the
redemption prices set forth below under "-- Optional Redemption by Juniper,"
plus accrued and unpaid interest to the redemption date. If there is a change in
control of us, you will have the right to require us to repurchase your
convertible notes as described below under "-- Repurchase at Option of Holders
Upon a Change in Control."
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The convertible notes will be issued:
- only in fully registered form;
- without interest coupons; and
- in denominations of $1,000 and greater multiples.
The convertible notes will be evidenced by one or more global convertible
notes which will be deposited with the trustee as custodian for DTC and
registered in the name of Cede & Co., as nominee of DTC. Except as set forth
below, record ownership of the global note may be transferred, in whole or in
part, only to another nominee of DTC or to a successor of DTC or its nominee.
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<PAGE> 63
The global note will not be registered in the name of any person, or
exchanged for convertible notes that are registered in the name of any person,
other than DTC or its nominee unless either of the following occurs:
- DTC notifies us that it is unwilling, unable or no longer qualified to
continue acting as the depositary for the global note; or
- an event of default with respect to the convertible notes represented by
the global note has occurred and is continuing.
In those circumstances, DTC will determine in whose names any securities
issued in exchange for the global note will be registered.
DTC or its nominee will be considered the sole owner and holder of the
global note for all purposes, and as a result:
- you cannot get convertible notes registered in your name if they are
represented by the global note;
- you cannot receive physical certificated convertible notes in exchange
for your beneficial interest in the global convertible notes;
- you will not be considered to be the owner or holder of the global note
or any note it represents for any purpose; and
- all payments on the global note will be made to DTC or its nominee.
The laws of some jurisdictions require that certain kinds of purchasers can
only own securities in definitive, certificated form. These laws may limit your
ability to transfer your beneficial interests in the global note to these types
of purchasers.
Only institutions, such as a securities broker or dealer, that have
accounts with DTC or its nominee (called participants) and persons that may hold
beneficial interests through participants can own a beneficial interest in the
global note. The only place where the ownership of beneficial interests in the
global note will appear and the only way the transfer of those interests can be
made will be on the records kept by DTC (for their participants' interests) and
the records kept by those participants (for interests of persons held by
participants on their behalf).
Secondary trading in bonds and convertible notes of corporate issuers is
generally settled in clearinghouse (that is, next-day) funds. In contrast,
beneficial interests in a global note usually trade in DTC's same-day funds
settlement system, and settle in immediately available funds. We make no
representations as to the effect that settlement in immediately available funds
will have on trading activity in those beneficial interests.
We will make cash payments of interest on and principal of and the
redemption or repurchase price of the global note to Cede, the nominee for DTC,
as the registered owner of the global note. We will make these payments by wire
transfer of immediately available funds on each payment date.
We have been informed that DTC's practice is to credit participants'
accounts on the payment date with payments in amounts proportionate to their
respective beneficial interests in the convertible notes represented by the
global note as shown on DTC's records, unless DTC has reason to believe that it
will not receive payment on that payment date. Payments by participants to
owners of beneficial interests in convertible notes represented by the global
note held through participants will be the responsibility of those participants,
as is now the case with securities held for the accounts of customers registered
in street name.
We will send any redemption notices to Cede. We understand that if less
than all the convertible notes are being redeemed, DTC's practice is to
determine by lot the amount of the holdings of each participant to be redeemed.
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We also understand that neither DTC nor Cede will consent or vote with
respect to the convertible notes. We have been advised that under its usual
procedures, DTC will mail an omnibus proxy to us as soon as possible after the
record date. The omnibus proxy assigns Cede's consenting or voting rights to
those participants to whose accounts the convertible notes are credited on the
record date identified in a listing attached to the omnibus proxy.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants, the ability of a person having a beneficial
interest in the principal amount represented by the global note to pledge the
interest to persons or entities that do not participate in the DTC book-entry
system, or otherwise take actions in respect of that interest, may be affected
by the lack of a physical certificate evidencing its interest.
DTC has advised us that it will take any action permitted to be taken by a
holder of convertible notes, including the presentation of convertible notes for
exchange, only at the direction of one or more participants to whose account
with DTC interests in the global note are credited and only in respect of such
portion of the principal amount of the convertible notes represented by the
global note as to which such participant or participants has or have given such
direction.
DTC has also advised us as follows:
- DTC is a:
- limited purpose trust company organized under the laws of the State of
New York,
- member of the Federal Reserve System,
- clearing corporation within the meaning of the Uniform Commercial Code,
as amended, and
- clearing agency registered pursuant to the provisions of Section 17A of
the Exchange Act.
- DTC was created to hold securities for its participants and facilitate
the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants.
- Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and may include certain other
organizations.
- Certain participants, or their representatives, together with other
entities, own DTC.
- Indirect access to the DTC System is available to other entities such as
banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a participant, either directly or
indirectly.
The policies and procedures of DTC, which may change periodically, will
apply to payments, transfers, exchanges and other matters relating to beneficial
interests in the global note. We and the trustee have no responsibility or
liability for any aspect of DTC's or any participants' records relating to
beneficial interests in the global note, including for payments made on the
global note. Further, we and the trustee are not responsible for maintaining,
supervising or reviewing any of those records.
CONVERSION RIGHTS
You have the option to convert any portion of the principal amount of any
note that is an integral multiple of $1,000 into shares of our common stock at
any time on or prior to the close of business on the maturity date. The
conversion rate will be equal to the number of shares per $1,000 principal
amount of convertible notes shown on the cover page of this prospectus. The
conversion rate is equivalent to a conversion price of approximately
$ . Your right to convert a convertible note called for redemption or
delivered for repurchase will terminate at the
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close of business on the business day immediately preceding the redemption date
or repurchase date for that note, unless we default in making the payment due
upon redemption or repurchase.
You may convert all or part of any convertible note by delivering the
convertible note at the Corporate Trust Office of the trustee in the Borough of
Manhattan, the city of New York, accompanied by a duly signed and completed
conversion notice, a copy of which may be obtained by the trustee. The
conversion date will be the date on which the convertible note and the duly
signed and completed conversion notice are so delivered.
As promptly as practicable on or after the conversion date, we will issue
and deliver to the trustee a certificate or certificates for the number of full
shares of our common stock issuable upon conversion, together with payment in
lieu of any fraction of a share. The certificate will then be sent by the
trustee to the conversion agent for delivery to the holder. The shares of our
common stock issuable upon conversion of the convertible notes will be fully
paid and nonassessable and will rank equally with the other shares of our common
stock.
If you surrender a convertible note for conversion on a date that is not an
interest payment date, you will not be entitled to receive any interest for the
period from the next preceding interest payment date to the conversion date,
except as described below in this paragraph. Any note surrendered for conversion
during the period from the close of business on any regular record date to the
opening of business on the next succeeding interest payment date (except
convertible notes, or portions thereof, called for redemption on a redemption
date or to be repurchased on a repurchase date for which the right to convert
would terminate during such period) must be accompanied by payment of an amount
equal to the interest payable on such interest payment date on the principal
amount of convertible notes being surrendered for conversion. In the case of any
note which has been converted after any regular record date but before the next
succeeding interest payment date, interest payable on such interest payment date
shall be payable on such interest payment date notwithstanding such conversion,
and such interest shall be paid to the holder of such note on such regular
record date.
No other payment or adjustment for interest, or for any dividends in
respect of our common stock, will be made upon conversion. Holders of our common
stock issued upon conversion will not be entitled to receive any dividends
payable to holders of our common stock as of any record time or date before the
close of business on the conversion date. We will not issue fractional shares
upon conversion. Instead, we will pay cash based on the market price of our
common stock at the close of business on the conversion date.
You will not be required to pay any taxes or duties relating to the issue
or delivery of our common stock on conversion but you will be required to pay
any tax or duty relating to any transfer involved in the issue or delivery of
our common stock in a name other than yours. Certificates representing shares of
our common stock will not be issued or delivered unless all taxes and duties, if
any, payable by you have been paid.
The conversion rate will be subject to adjustment for, among other things:
- dividends and other distributions payable in our common stock on shares
of our capital stock,
- the issuance to all holders of our common stock of rights, options or
warrants entitling them to subscribe for or purchase our common stock at
less than the then current market price of such common stock as of the
record date for shareholders entitled to receive such rights, options or
warrants,
- subdivisions, combinations and reclassifications of our common stock,
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- distributions to all holders of our common stock of evidences of our
indebtedness, shares of capital stock, cash or assets, including
securities, but excluding:
- those dividends, rights, options, warrants and distributions referred
to above,
- dividends and distributions paid exclusively in cash, and
- distributions upon mergers or consolidations discussed below,
- distributions consisting exclusively of cash, excluding any cash portion
of distributions referred to in the bullet point immediately above, or
cash distributed upon a merger or consolidation to which the next
succeeding bullet point applies, to all holders of our common stock in
an aggregate amount that, combined together with:
- other all-cash distributions made within the preceding 365-day period
in respect of which no adjustment has been made, and
- any cash and the fair market value of other consideration payable in
connection with any tender offer by us or any of our subsidiaries for
our common stock concluded within the preceding 365-day period in
respect of which no adjustment has been made,
exceeds 10% of our market capitalization, being the product of the
current market price per share of the common stock on the record date for
such distribution and the number of shares of common stock then
outstanding, and
- the successful completion of a tender offer made by us or any of our
subsidiaries for our common stock which involves an aggregate
consideration that, together with:
- any cash and other consideration payable in a tender offer by us or
any of our subsidiaries for our common stock expiring within the
365-day period preceding the expiration of that tender offer in
respect of which no adjustment has been made, and
- the aggregate amount of any all cash distributions referred to in the
immediately preceding bullet point above to all holders of our common
stock within the 365-day period preceding the expiration of that
tender offer in respect of which no adjustments have been made,
exceeds 10% of our market capitalization on the expiration of such tender
offer.
We reserve the right to effect such increases in the conversion rate in
addition to those required by the foregoing provisions as we consider to be
advisable in order that any event treated for United States federal income tax
purposes as a dividend of stock or stock rights will not be taxable to the
recipients. We will not be required to make any adjustment to the conversion
rate until the cumulative adjustments amount to 1.0% or more of the conversion
rate. We will compute all adjustments to the conversion rate and will give
notice by mail to holders of the registered convertible notes of any
adjustments.
In any case in which we consolidate or merge with or into another entity or
in which another entity is merged into us, or in case of any sale or transfer of
all or substantially all of our assets, each note then outstanding will become
convertible only into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a holder of the
number of shares of common stock into which the convertible notes were
convertible immediately prior to the consolidation or merger or sale or
transfer. The preceding sentence will not apply to a merger which does not
result in any reclassification, conversion, exchange or cancellation of the
common stock.
We may increase the conversion rate for any period of at least 20 days,
upon at least 15 days notice, if our board of directors determines that the
increase would be in our best interest. The board of directors' determination in
this regard will be conclusive. We will give
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holders of convertible notes at least 15 days' notice of such an increase in the
conversion rate. Any increase, however, will not be taken into account for
purposes of determining whether the closing price of our common stock exceeds
the conversion price by 105% in connection with an event which otherwise would
be a change in control as defined below.
If at any time we make a distribution of property to our stockholders that
would be taxable to such stockholders as a dividend for United States federal
income tax purposes, such as distributions of evidences of indebtedness or
assets by us, but generally not stock dividends on common stock or rights to
subscribe for common stock, and, pursuant to the anti-dilution provisions of the
indenture, the number of shares into which convertible notes are convertible is
increased, that increase may be deemed for United States federal income tax
purposes to be the payment of a taxable dividend to holders of convertible
notes. See "Certain United States Federal Income and Estate Tax
Consequences -- U.S. Holders."
SUBORDINATION
The convertible notes are subordinated and, as a result, the payment of the
principal, any premium and interest on the convertible notes, including amounts
payable on any redemption or repurchase, will be subordinated to the prior
payment in full, in cash or other payment satisfactory to holders of senior
debt, of all of our senior debt. The convertible notes are also effectively
subordinated to any debt or other liabilities of our subsidiaries.
Senior debt is defined in the indenture to mean: the principal of, and
premium, if any, and interest, including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a claim for
post-petition interest is allowable as a claim in any such proceeding, on, and
all fees and other amounts payable in connection with, the following, whether
absolute or contingent, secured or unsecured, due or to become due, outstanding
on the date of the indenture or thereafter created, incurred or assumed:
- our indebtedness evidenced by a credit or loan agreement, note, bond,
debenture or other written obligation,
- all of our obligations for money borrowed,
- all of our obligations evidenced by a note or similar instrument given
in connection with the acquisition of any businesses, properties or
assets of any kind,
- our obligations:
- as lessee under leases required to be capitalized on the balance sheet
of the lessee under generally accepted accounting principles, or
- as lessee under other leases for facilities, capital equipment or
related assets, whether or not capitalized, entered into or leased for
financing purposes,
- all of our obligations under interest rate and currency swaps, caps,
floors, collars, hedge agreements, forward contracts or similar
agreements or arrangements,
- all of our obligations with respect to letters of credit, bankers'
acceptances and similar facilities, including reimbursement obligations
with respect to the foregoing,
- all of our obligations issued or assumed as the deferred purchase price
of property or services, but excluding trade accounts payable and
accrued liabilities arising in the ordinary course of business,
- all obligations of the type referred to in the above clauses of another
person and all dividends of another person, the payment of which, in
either case, we have assumed or guaranteed, or for which we are
responsible or liable, directly or indirectly, jointly or
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severally, as obligor, guarantor or otherwise, or which are secured by a
lien on our property, and
- renewals, extensions, modifications, replacements, restatements and
refundings of, or any indebtedness or obligation issued in exchange for,
any such indebtedness or obligation described in the above clauses of
this definition.
Senior debt will not include the convertible notes or any other indebtedness or
obligation if its terms or the terms of the instrument under which or pursuant
to which it is issued expressly provide that it is not superior in right of
payment to the convertible notes.
We may not make any payment on account of principal, premium or interest on
the convertible notes, or redemption or repurchase of the convertible notes, if:
- we default in our obligations to pay principal, premium, interest or
other amounts on our senior debt, including a default under any
redemption or repurchase obligation, and the default continues beyond any
applicable grace period; or
- any other default occurs and is continuing on any designated senior debt
and:
- the default permits the holders of the designated senior debt to
accelerate its maturity, and
- the trustee has received a notice (a payment blockage notice) of the
default from us, the holder of such debt or such other person permitted
to give such notice under the indenture.
If payments of the convertible notes have been blocked by a payment default
on senior debt, payments on the convertible notes may resume when the payment
default has been cured or waived or ceases to exist.
If payments on the convertible notes have been blocked by a nonpayment
default, payments on the convertible notes may resume on the earlier of:
- the date the nonpayment default is cured or waived or ceases to exist, or
- 179 days after the payment blockage notice is received.
No nonpayment default that existed on the day a payment blockage notice was
delivered to the trustee can be used as the basis for any subsequent payment
blockage notice. In addition, once a holder of designated senior debt has
blocked payment on the convertible notes by giving a payment blockage notice, no
new period of payment blockage can be commenced unless and until:
- 365 days have elapsed since the effectiveness of the immediately prior
payment blockage notice; and
- all scheduled payments of principal, any premium and interest with
respect to the convertible notes that have come due have been paid in
full in cash.
Designated senior debt means our obligations under any particular senior
debt in which the instrument creating or evidencing the same or the assumption
or guarantee thereof, or related agreements or documents to which we are a
party, expressly provides that such indebtedness shall be designated senior debt
for purposes of the indenture. The instrument, agreement or other document
evidencing any designated senior debt may place limitations and conditions on
the right of such senior debt to exercise the rights of designated senior debt.
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In addition, all principal, premium, if any, interest and other amounts due
on all senior debt must be paid in full in cash before you are entitled to
receive any payment otherwise due upon any acceleration of the principal on the
convertible notes as a result of:
- an event of default of the convertible notes, or
- payment or distribution of our assets to creditors upon any dissolution,
winding up, liquidation or reorganization, whether voluntary or
involuntary, marshaling of assets, assignment for the benefit of
creditors, or in bankruptcy, insolvency, receivership or other similar
proceedings.
In the event of insolvency, creditors who are holders of senior debt may
recover more, ratably, than you because of this subordination. The subordination
may result in a reduction or elimination of payments on the convertible notes to
you.
In addition, the convertible notes will be structurally subordinated to all
indebtedness and other liabilities of our subsidiaries, including trade payables
and lease obligations. This occurs because our right to receive any assets of
our subsidiaries upon their liquidation or reorganization, and your right to
participate in those assets, will be effectively subordinated to the claims of
that subsidiary's creditors, including trade creditors, except to the extent
that we are recognized as a creditor of such subsidiary. If we are recognized as
a creditor of that subsidiary, our claims would still be subordinate to any
security interest in the assets of the subsidiary and any indebtedness of the
subsidiary senior to us.
The indenture does not limit our ability to incur senior debt or our
ability or the ability of our subsidiaries to incur any other indebtedness.
OPTIONAL REDEMPTION BY JUNIPER NETWORKS
On or after the third business day after March 15, 2003 we may redeem the
convertible notes in whole or in part, at the prices set forth below. If we
elect to redeem all or part of the convertible notes, we will give at least 30,
but no more than 60, days notice to you.
The redemption price, expressed as a percentage of principal amount, is as
follows for the following periods:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------ ----------
<S> <C>
Beginning on the third business day after March 15, 2003 and
ending on March 14, 2004..................................
Beginning on March 15, 2004 and ending on March 14, 2005....
Beginning on March 15, 2005 and ending on March 14, 2006....
Beginning on March 15, 2006 and ending on March 14, 2007....
</TABLE>
and thereafter is equal to 100%. In each case, we will pay interest to, but
excluding the redemption date.
No sinking fund is provided for the convertible notes, which means that the
indenture does not require us to redeem or retire the convertible notes
periodically.
PAYMENT AND CONVERSION
We will make all payments of principal and interest on the convertible
notes by dollar check drawn on an account maintained at a bank in the city of
New York. If you hold registered convertible notes with a face value greater
than $2,000,000, at your request we will make payments of principal or interest
to you by wire transfer to an account maintained by you at a bank in the city of
New York. Payment of any interest on the convertible notes will be made to the
person in whose name the convertible note, or any predecessor note, is
registered at the
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close of business on March 1 or September 1, whether or not a business day,
immediately preceding the relevant interest payment date (a regular record
date). If you hold registered convertible notes with a face value in excess of
$2,000,000 and you would like to receive payments by wire transfer, you will be
required to provide the trustee with wire transfer instructions at least 15 days
prior to the relevant payment date.
Payments on any global note registered in the name of DTC or its nominee
will be payable by the trustee to DTC or its nominee in its capacity as the
registered holder under the indenture. Under the terms of the indenture, we and
the trustee will treat the persons in whose names the convertible notes,
including any global note, are registered as the owners for the purpose of
receiving payments and for all other purposes. Consequently, neither we, the
trustee nor any of our agents or the trustee's agents has or will have any
responsibility or liability for:
- any aspect of DTC's records or any participant's or indirect
participant's records relating to or payments made on account of
beneficial ownership interests in the global note, or for maintaining,
supervising or reviewing any of DTC's records or any participant's or
indirect participant's records relating to the beneficial ownership
interests in the global note, or
- any other matter relating to the actions and practices of DTC or any of
its participants or indirect participants.
We will not be required to make any payment on the convertible notes due on
any day which is not a business day until the next succeeding business day. The
payment made on the next succeeding business day will be treated as though it
were paid on the original due date and no interest will accrue on the payment
for the additional period of time.
Convertible notes may be surrendered for conversion at the Corporate Trust
Office of the trustee in the Borough of Manhattan, New York. Convertible notes
surrendered for conversion must be accompanied by appropriate notices and any
payments in respect of interest or taxes, as applicable.
We have initially appointed the trustee as paying agent and conversion
agent. We may terminate the appointment of any paying agent or conversion agent
and appoint additional or other paying agents and conversion agents. However,
until the convertible notes have been delivered to the trustee for cancellation,
or moneys sufficient to pay the principal of, premium, if any, and interest on
the convertible notes have been made available for payment and either paid or
returned to us as provided in the indenture, the trustee will maintain an office
or agency in the Borough of Manhattan, New York for surrender of convertible
notes for conversion. Notice of any termination or appointment and of any change
in the office through which any paying agent or conversion agent will act will
be given in accordance with "-- Notices" below.
All moneys deposited with the trustee or any paying agent, or then held by
us, in trust for the payment of principal of, premium, if any, or interest on
any convertible notes which remain unclaimed at the end of two years after the
payment has become due and payable will be repaid to us, and you will then look
only to us for payment.
REPURCHASE AT OPTION OF HOLDERS UPON A CHANGE IN CONTROL
If a change in control as defined below occurs, you will have the right, at
your option, to require us to repurchase all of your convertible notes not
previously called for redemption, or any portion of the principal amount
thereof, that is equal to $1,000 or an integral multiple of $1,000. The price we
are required to pay is 100% of the principal amount of the convertible notes to
be repurchased, together with interest accrued to, but excluding, the repurchase
date.
At our option, instead of paying the repurchase price in cash, we may pay
the repurchase price in our common stock valued at 95% of the average of the
closing prices of the our common
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stock for the five trading days immediately preceding and including the third
trading day prior to the repurchase date. We may only pay the repurchase price
in our common stock if we satisfy conditions provided in the indenture.
Within 30 days after the occurrence of a change in control, we are
obligated to give to you notice of the change in control and of the repurchase
right arising as a result of the change of control. We must also deliver a copy
of this notice to the trustee. To exercise the repurchase right, you must
deliver on or before the 30th day after the date of our notice irrevocable
written notice to the trustee of your exercise of your repurchase right,
together with the convertible notes with respect to which the right is being
exercised. We are required to repurchase the convertible notes on the date that
is 45 days after the date of our notice.
A change in control will be deemed to have occurred at the time after the
convertible notes are originally issued that any of the following occurs:
- any person, including any syndicate or group deemed to be a "person"
under Section 13(d)(3) of the Exchange Act, acquires a beneficial
ownership, directly or indirectly, through a purchase, merger or other
acquisition transaction or series of transactions, of shares of our
capital stock entitling the person to exercise 50% or more of the total
voting power of all shares of our capital stock that is entitled to vote
generally in elections of directors, other than an acquisition by us,
any of our subsidiaries or any of our employee benefit plans; or
- we merge or consolidate with or into any other person, any merger of
another person into us or we convey, sell, transfer or lease all or
substantially all of our assets to another person, other than
- any such transaction:
- that does not result in any reclassification, conversion, exchange
or cancellation of outstanding shares of our capital stock, and
- pursuant to which the holders of 50% or more of the total voting
power of all shares of our capital stock entitled to vote
generally in elections of directors immediately prior to such
transaction have the entitlement to exercise, directly or
indirectly, 50% or more of the total voting power of all shares of
capital stock entitled to vote generally in the election of
directors of the continuing or surviving corporation immediately
after such transaction, and
- any merger which is effected solely to change our jurisdiction of
incorporation and results in a reclassification, conversion or
exchange of outstanding shares of our common stock into solely shares
of common stock.
However, a change in control will not be deemed to have occurred if either:
- the closing price per share of our common stock for any five trading
days within the period of 10 consecutive trading days ending immediately
after the later of the change in control or the public announcement of
the change in control, in the case of a change in control relating to an
acquisition of capital stock, or the period of 10 consecutive trading
days ending immediately before the change in control, in the case of
change in control relating to a merger, consolidation or asset sale,
equals or exceeds 105% of the conversion price of the convertible notes
in effect on each of those trading days, or
- all of the consideration, excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights, in a
merger or consolidation otherwise constituting a change of control under
the first and second bullet points in the preceding paragraph above
consists of shares of common stock traded on a national securities
exchange or quoted on the Nasdaq National Market, or will be so traded
or
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quoted immediately following such merger or consolidation, and as a
result of such merger or consolidation the convertible notes become
convertible solely into such common stock.
For purposes of these provisions:
- the conversion price is equal to $1,000 divided by the conversion rate;
- whether a person is a beneficial owner will be determined in accordance
with Rule 13d-3 under the Exchange Act; and
- person includes any syndicate or group that would be deemed to be a
person under Section 13(d)(3) of the Exchange Act.
The rules and regulations promulgated under the Exchange Act requires the
dissemination of prescribed information to security holders in the event of an
issuer tender offer and may apply in the event that the repurchase option
becomes available to you. We will comply with this rule to the extent it applies
at that time.
We may, to the extent permitted by applicable law, at any time purchase
convertible notes in the open market, by tender at any price or by private
agreement. Any note that we purchase may, to the extent permitted by applicable
law and subject to restrictions contained in the purchase agreement with the
underwriters, be re-issued or resold or may, at our option, be surrendered to
the trustee for cancellation. Any convertible notes surrendered for cancellation
may not be re-issued or resold and will be canceled promptly.
The definition of change in control includes a phrase relating to the
conveyance, transfer, sale, lease or disposition of all or substantially all of
our assets. There is no precise, established definition of the phrase
substantially all under applicable law. Accordingly, your ability to require us
to repurchase your convertible notes as a result of conveyance, transfer, sale,
lease or other disposition of less than all of our assets may be uncertain.
The foregoing provisions would not necessarily provide you with protection
if we are involved in a highly leveraged or other transaction that may adversely
affect you.
Our ability to repurchase convertible notes upon the occurrence of a change
in control is subject to important limitations. Some of the events constituting
a change in control could result in an event of default under our senior debt.
Moreover, a change in control could cause an event of default under, or be
prohibited or limited by, the terms of our senior debt. As a result, unless we
were to obtain a waiver, a repurchase of the convertible notes in cash could be
prohibited under the subordination provisions of the indenture until the senior
debt is paid in full. Although we have the right to repurchase the convertible
notes with our common stock, subject to certain conditions, we cannot assure you
that we would have the financial resources, or would be able to arrange
financing, to pay the repurchase price in cash for all the convertible notes
that might be delivered by holders of convertible notes seeking to exercise the
repurchase right. If we were to fail to repurchase the convertible notes when
required following a change in control, an event of default under the indenture
would occur, whether or not such repurchase is permitted by the subordination
provisions of the indenture. Any such default may, in turn, cause a default
under our senior debt. See "-- Subordination".
MERGERS AND SALES OF ASSETS BY THE COMPANY
We may not consolidate with or merge into any other person or convey,
transfer, sell or lease our properties and assets substantially as an entirety
to any person, and we may not permit any person to consolidate with or merge
into us or convey, transfer, sell or lease such person's properties and assets
substantially as an entirety to us unless:
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- the person formed by such consolidation or into or with which we are
merged or the person to which our properties and assets are so conveyed,
transferred, sold or leased, shall be a corporation, limited liability
company, partnership or trust organized and existing under the laws of
the United States, any State within the United States or the District of
Columbia and, if we are not the surviving person, the surviving person
assumes the payment of the principal of, premium, if any, and interest
on the convertible notes and the performance of our other covenants
under the indenture, and
- immediately after giving effect to the transaction, no event of default,
and no event that, after notice or lapse of time or both, would become
an event of default, will have occurred and be continuing.
EVENTS OF DEFAULT
The following will be events of default under the indenture:
- we fail to pay principal of or premium, if any, on any note when due,
whether or not prohibited by the subordination provisions of the
indenture;
- we fail to pay any interest on any note when due, which failure
continues for 30 days, whether or not prohibited by the subordination
provisions of the indenture;
- we fail to provide notice of a change in control, whether or not such
notice is prohibited by the subordination provisions of the indenture;
- we fail to perform any other covenant in the indenture, which failure
continues for 60 days after written notice as provided in the indenture;
- any indebtedness under any bonds, debentures, convertible notes or other
evidences of indebtedness for money borrowed, or any guarantee thereto,
by us or any of our significant subsidiaries in an aggregate principal
amount in excess of $25,000,000 is not paid when due either at its stated
maturity or upon acceleration thereof, and such indebtedness is not
discharged, or such acceleration is not rescinded or annulled, within a
period of 30 days after notice as provided in the indenture; and
- certain events of bankruptcy, insolvency or reorganization involving us
or any of our significant subsidiaries.
Subject to the provisions of the indenture relating to the duties of the
trustee in case an event of default shall occur and be continuing, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request or direction of any holder, unless the holder shall
have furnished reasonable indemnity to the trustee. Subject to providing
indemnification of the trustee, the holders of a majority in aggregate principal
amount of the outstanding convertible notes will have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the trustee or exercising any trust or power conferred on the trustee.
If an event of default other than an event of default arising from events
of insolvency, bankruptcy or reorganization occurs and is continuing, either the
trustee or the holders of at least 25% in principal amount of the outstanding
convertible notes may, subject to the subordination provisions of the indenture,
accelerate the maturity of all convertible notes. However, after such
acceleration, but before a judgment or decree based on acceleration, the holders
of a majority in aggregate principal amount of outstanding convertible notes
may, under certain circumstances, rescind and annul the acceleration if all
events of default, other than the non-payment of principal of the convertible
notes which have become due solely by such declaration of acceleration, have
been cured or waived as provided in the indenture. If an event of default
arising from events of insolvency, bankruptcy or reorganization occurs, then the
principal of, and accrued interest on, all the convertible notes will
automatically become immediately due and payable without any
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declaration or other act on the part of the holders of the convertible notes or
the trustee. For information as to waiver of defaults, see "-- Meetings,
Modification and Waiver" below.
You will not have any right to institute any proceeding with respect to the
indenture, or for any remedy under the indenture, unless:
- you give the trustee written notice of a continuing event of default;
- the holders of at least 25% in aggregate principal amount of the
outstanding convertible notes have made written request and furnished
reasonable indemnity to the trustee to institute proceedings;
- the trustee has not received from the holders of a majority in aggregate
principal amount of the outstanding convertible notes a direction
inconsistent with the written request; and
- the trustee shall have failed to institute such proceeding within 60 days
of the written request.
However, these limitations do not apply to a suit instituted by you for the
enforcement of payment of the principal of, premium, if any, or interest on your
convertible note on or after the respective due dates expressed in your
convertible note or your right to convert your convertible note in accordance
with the indenture.
We will be required to furnish to the trustee annually a statement as to
our performance of certain of our obligations under the indenture and as to any
default in such performance.
MEETINGS, MODIFICATION AND WAIVER
The indenture contains provision for convening meetings of the holders of
convertible notes to consider matters affecting their interests.
Certain limited modifications of the indenture may be made without the
necessity of obtaining the consent of the holders of the convertible notes.
Other modifications and amendments of the indenture may be made, and certain
past defaults by us may be waived, either:
- with the written consent of the holders of not less than a majority in
aggregate principal amount of the convertible notes at the time
outstanding, or
- by the adoption of a resolution, at a meeting of holders of the
convertible notes at which a quorum is present, by the holders of at
least 66 2/3% in aggregate principal amount of the convertible notes
represented at such meeting.
The quorum at any meeting called to adopt a resolution will be persons holding
or representing a majority in aggregate principal amount of the convertible
notes at the time outstanding and, at any reconvened meeting adjourned for lack
of a quorum, 25% of such aggregate principal amount.
However, a modification or amendment requires the consent of the holder of
each outstanding note affected if it would:
- change the stated maturity of the principal or interest of a note;
- reduce the principal amount of, or any premium or interest on, any note;
- reduce the amount payable upon a redemption or mandatory repurchase;
- modify the provisions with respect to the repurchase rights of holders
of convertible notes in a manner adverse to the holders;
- change the place or currency of payment on a note;
- impair the right to institute suit for the enforcement of any payment on
any note;
- modify our obligation to maintain an office or agency in New York City;
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- modify the subordination provisions in a manner that is adverse to the
holders of the convertible notes;
- adversely affect the right to convert the convertible notes;
- reduce the above-stated percentage of the principal amount of the
holders whose consent is needed to modify or amend the indenture;
- reduce the percentage of the principal amount of the holders whose
consent is needed to waive compliance with certain provisions of the
indenture or to waive certain defaults; or
- reduce the percentage required for the adoption of a resolution or the
quorum required at any meeting of holders of convertible notes at which
a resolution is adopted.
The holders of a majority in aggregate principal amount of the outstanding
convertible notes may waive compliance by us with certain restrictive provisions
of the indenture by written consent. Holders of at least 66 2/3% in aggregate of
the principal amount of convertible notes represented at a meeting may also
waive compliance by us with certain restrictive provisions of the indenture by
the adoption of a resolution at the meeting if a quorum of holders are present
and certain other conditions are met. The holders of a majority in aggregate
principal amount of the outstanding convertible notes also may waive by written
consent any past default under the indenture, except a default in the payment of
principal, premium, if any, or interest.
NOTICES
Notice to holders of the registered convertible notes will be given by mail
to the addresses as they appear in the security register. Notices will be deemed
to have been given on the date of such mailing.
Notice of a redemption of convertible notes will be given not less than 30
nor more than 60 days prior to the redemption date and will specify the
redemption date. A notice of redemption of the convertible notes will be
irrevocable.
REPLACEMENT OF CONVERTIBLE NOTES
We will replace any note that becomes mutilated, destroyed, stolen or lost
at the expense of the holder upon delivery to the trustee of the mutilated
convertible notes or evidence of the loss, theft or destruction satisfactory to
us and the trustee. In the case of a lost, stolen or destroyed note, indemnity
satisfactory to the trustee and us may be required at the expense of the holder
of the note before a replacement note will be issued.
PAYMENT OF STAMP AND OTHER TAXES
We will pay all stamp and other duties, if any, which may be imposed by the
United States or any political subdivision thereof or taxing authority thereof
or therein with respect to the issuance of the convertible notes or of shares of
stock upon conversion of the convertible notes. We will not be required to make
any payment with respect to any other tax, assessment or governmental charge
imposed by any government or any political subdivision thereof or taxing
authority thereof or therein.
GOVERNING LAW
The indenture and the convertible notes will be governed by and construed
in accordance with the laws of the State of New York, United States of America.
THE TRUSTEE
If an event of default occurs and is continuing, the trustee will be
required to use the degree of care of a prudent person in the conduct of his own
affairs in the exercise of its powers. Subject to such provisions, the trustee
will be under no obligation to exercise any of its rights or powers under the
indenture at the request of any of the holders of convertible notes, unless they
shall have furnished to the trustee reasonable security or indemnity.
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DESCRIPTION OF CAPITAL STOCK
GENERAL
We are authorized to issue 200,000,000 shares of common stock, $0.00001 par
value, and 10,000,000 shares of undesignated preferred stock, $0.00001 par
value. The following description of our capital stock does not purport to be
complete and is subject to and qualified by our certificate of incorporation and
bylaws, which are included as exhibits to the Registration Statement of which
this prospectus forms a part, and by the provisions of applicable Delaware law.
COMMON STOCK
As of December 31, 1999, there were 155,938,599 shares of common stock
outstanding which were held of record by approximately 300 stockholders.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the board of directors out of funds legally available for that
purpose. See "Dividend Policy." In the event of a liquidation, dissolution or
winding up of us, the holders of common stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to prior distribution
rights of preferred stock, if any, then outstanding. The common stock has no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable, and the
shares of common stock to be issued upon the closing of this offering will be
fully paid and nonassessable.
PREFERRED STOCK
The board of directors has the authority, without action by the
stockholders, to designate and issue preferred stock in one or more series and
to designate the rights, preferences and privileges of each series, any or all
of which may be greater than the rights of the common stock. We cannot state the
actual effect of the issuance of any shares of preferred stock upon the rights
of holders of the common stock until the board of directors determines the
specific rights of the holders of such preferred stock. However, the effects
might include, among other things, restricting dividends on the common stock,
diluting the voting power of the common stock, impairing the liquidation rights
of the common stock and delaying or preventing a change in control of us without
further action by the stockholders. There are no shares of preferred stock
outstanding as of December 31, 1999. We have no present plans to issue any
shares of preferred stock.
REGISTRATION RIGHTS
Under the terms of certain registration rights agreements between us and
the holders of the registrable securities, twelve months after the closing of
our initial public offering and at their expense, require on three separate
occasions that we register their shares for public resale on Form S-3 or similar
short-form registration, provided that we are eligible to use Form S-3 or
similar short-form registration, and provided further that the value of the
securities to be registered is at least $5,000,000. Furthermore, in the event we
elect to register any of our shares of common stock for purposes of effecting
any public offering, the holders of registrable
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securities are entitled, at our expense, to include their shares of common stock
in the registration, subject to the right of the underwriter to reduce the
number of shares proposed to be registered in view of market conditions.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS
Certain provisions of Delaware law and our certificate of incorporation and
bylaws could make it more difficult to acquire us by means of a tender offer, a
proxy contest or otherwise and the removal of incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of us to first negotiate with us. We believe
that the benefits of increased protection of our potential ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to acquire or
restructure us outweigh the disadvantages of discouraging takeover or
acquisition proposals because, among other things, negotiation of these
proposals could result in an improvement of their terms.
We are subject to Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years following the date the person because an
interested stockholder, unless (with certain exceptions) the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a business
combination includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the interested stockholder. Generally, an
interested stockholder is a person who, together with affiliates and associates,
owns (or within three years prior to the determination of interested stockholder
status, did own) 15% or more of a corporation's voting stock. The existence of
this provision would be expected to have an anti-takeover effect with respect to
transactions not approved in advance by the board of directors, including
discouraging attempts that might result in a premium over the market price for
the shares of common stock held by stockholders.
Our certificate of incorporation and bylaws require that any action
required or permitted to be taken by our stockholders must be effected at a duly
called annual or special meeting of the stockholders and may not be effected by
a consent in writing. In addition, special meetings of our stockholders may be
called only by the board of directors or certain of our officers. Our
certificate of incorporation and bylaws also provide that, beginning upon the
closing of this offering, our board of directors will be divided into three
classes, with each class serving staggered three-year terms, and that certain
amendments of the certificate of incorporation and of the bylaws require the
approval of holders of at least 66 2/3% of the voting power of all outstanding
stock. These provisions may have the effect of deterring hostile takeovers or
delaying changes in control or management of us.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Norwest Bank
Minnesota, N.A.
CERTAIN UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSEQUENCES
The following is a general discussion of certain U.S. federal income and
estate tax consequences to beneficial owners of the convertible notes or
underlying common stock. This discussion is based upon the Internal Revenue Code
of 1986, as amended (the code), U.S. Treasury Regulations (regulations),
Internal Revenue Service (IRS) rulings and pronouncements, and judicial
decisions now in effect, all of which are subject to change, possibly with
retroactive effect, or different interpretation.
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This discussion is for general information only and does not address all
aspects of U.S. federal income taxation that may be relevant to beneficial
owners of the convertible notes or common stock. This discussion does not
describe the tax consequences:
- arising under the laws of any foreign, state or local jurisdiction,
- that may be relevant to particular beneficial owners in light of their
personal circumstances, such as holders subject to the U.S. federal
alternative minimum tax, or
- to certain types of beneficial owners, such as certain financial
institutions, insurance companies, tax-exempt entities, dealers in
securities, persons who hold the convertible notes or common stock in
connection with a straddle, hedging or conversion transaction for U.S.
federal income tax purposes, or persons that have a functional currency
other than the U.S. dollar, who may be subject to special rules.
This discussion assumes that each holder has acquired the convertible notes on
their original issuance at their original offering price and holds the
convertible notes and common stock received upon conversion thereof as capital
assets within the meaning of Section 1221 of the code. We have not sought any
ruling from the IRS with respect to statements made and the conclusions reached
in this discussion and there can be no assurance that the IRS will agree with
such statements and conclusions.
For purposes of this discussion, the term U.S. holder means a beneficial
owner who or that:
- is a citizen or resident of the United States,
- is a corporation or partnership created or organized in or under the laws
of the United States or a political subdivision thereof, unless, in the
case of a partnership, future regulations provide to the contrary,
- is an estate the income of which is subject to U.S. federal income
taxation regardless of its source,
- is a trust if a U.S. court is able to exercise primary supervision over
the administration of the trust and one more U.S. persons, within the
meaning of Section 7701(a)(30) of the code (U.S. persons), have authority
to control all substantial decisions of the trust, or
- is otherwise subject to U.S. federal income taxation on a net income
basis in respect of the convertible notes or common stock.
As used herein, a non-U.S. holder means a beneficial owner who or that is not a
U.S. holder. PROSPECTIVE PURCHASERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THEIR
PARTICIPATION IN THIS OFFERING, AND THEIR OWNERSHIP AND DISPOSITION OF THE
CONVERTIBLE NOTES, INCLUDING CONVERSION OF THE CONVERTIBLE NOTES, OR COMMON
STOCK, INCLUDING THE EFFECT THAT THEIR PARTICULAR CIRCUMSTANCES MAY HAVE ON SUCH
TAX CONSEQUENCES.
U.S. HOLDERS
Interest on Convertible Notes. Interest paid on a convertible note will be
taxable to a U.S. holder as ordinary interest income, at the time that such
interest is accrued or actually or constructively received, in accordance with
such U.S. holder's method of accounting for U.S. federal income tax purposes. We
expect that the convertible notes will not be issued with original issue
discount, within the meaning of the code.
Conversion of Convertible Notes. A U.S. holder of a convertible note
generally will not recognize gain or loss on the conversion of the convertible
note into common stock. Such U.S. holder's aggregate tax basis in the common
stock received upon conversion of the
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convertible note will be equal to the U.S. holder's adjusted tax basis in the
convertible note at the time of conversion, less any portion of that basis
allocable to cash received in lieu of a fractional share. The holding period of
the common stock received upon conversion of a convertible note generally will
include the period during which the U.S. holder held such convertible note prior
to the conversion.
Cash received in lieu of a fractional share of common stock should be
treated as a payment in exchange for such fractional share. Gain or loss
recognized on the receipt of cash paid in lieu of such fractional share
generally will be capital gain or loss equal to the difference between the
amount of cash received and the amount of tax basis allocable to the fractional
share.
Adjustment of Conversion Rate. The conversion rate of the convertible notes
is subject to adjustment in certain circumstances. Under Section 305(c) of the
code, adjustments that have the effect of increasing or decreasing the
proportionate interest of U.S. holders of the convertible notes in our assets or
earnings (for example, an adjustment following a distribution of property by us
to our stockholders) may in some circumstances give rise to deemed distributions
to U.S. holders. Similarly, a failure to adjust the conversion rate of the
convertible notes to reflect a stock dividend or other event increasing the
proportionate interest of shareholders of outstanding common stock can in some
circumstances give rise to deemed distributions to such shareholders. Deemed
distributions will be treated as a dividend, return of capital or capital gain
in accordance with the earnings and profits rules discussed under
"-- Distributions on Common Stock" below.
Distributions on Common Stock. Distributions on common stock will
constitute a dividend for U.S. federal income tax purposes to the extent of our
current or accumulated earnings and profits as determined under U.S. federal
income tax principles. Dividends paid to U.S. holders that are U.S. corporations
may qualify for the dividends-received deduction. Noncorporate taxpayers and
certain corporations are not entitled to the dividends-received deduction.
To the extent, if any, that a U.S. holder receives a distribution on common
stock that would otherwise constitute a dividend for U.S. federal income tax
purposes but that exceeds our current and accumulated earnings and profits, such
distribution will be treated first as a non-taxable return of capital reducing
the US. holder's tax basis in the common stock. Any such distributions in excess
of the U.S. holder's tax basis in the common stock will be treated as capital
gain.
Sale or Exchange of Convertible Notes or Common Stock. In general, subject
to the discussion under "Market Discount" below:
- a U.S. Holder of a convertible note will recognize capital gain or loss
upon the sale, redemption, retirement or other disposition of the
convertible note measured by the difference between the amount of cash
and the fair market value of any property received, except to the extent
attributable to the payment of accrued interest, and such U.S. Holder's
adjusted tax basis in the convertible note;
- a U.S. Holder of common stock received upon conversion of a convertible
note will recognize capital gain or loss upon the sale, exchange,
redemption or other disposition of the common stock under rules similar
to the computation of gain or loss on the disposition of the convertible
notes.
However, special rules may apply to a redemption of common stock which may
result in the proceeds of the redemption being treated as a dividend. In
general, the maximum tax rate for noncorporate taxpayers on long-term capital
gain is 20% with respect to capital assets, including the convertible notes and
common stock, but only if they have been held for more than 12 months at the
time of disposition.
Market Discount. The resale of convertible notes may be affected by the
impact on a purchaser of the market discount provisions of the code. For this
purpose, the market discount
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on a convertible note generally will be equal to the amount, if any, by which
the stated redemption price at maturity of the convertible note immediately
after its acquisition, other than at original issue, exceeds the U.S. holder's
adjusted tax basis in the convertible note. Subject to a de minimis exception,
these provisions generally require a U.S. holder who acquires a convertible note
at a market discount to treat as ordinary income any gain recognized on the
disposition of such convertible note to the extent of the accrued market
discount on such convertible note at the time of disposition, unless the U.S.
holder elects to include accrued market discount in income currently. In
general, market discount will be treated as accruing on a straight-line basis
over the remaining term of the convertible note at the time of acquisition, or,
at the election of the U.S. holder, under a constant yield method. A U.S. holder
who acquires a convertible note at a market discount and who does not elect to
include accrued market discount in income currently may be required to defer the
deduction of a portion of the interest on any indebtedness incurred or
maintained to purchase or carry the convertible note until the convertible note
is disposed of in a taxable transaction. If a U.S. holder acquires a convertible
note with market discount and receives common stock upon conversion of the
convertible note, the amount of accrued market discount not previously included
in income with respect to the convertible note through the date of conversion
will be treated as ordinary income upon the disposition of the common stock.
NON-U.S. HOLDERS
Payments of Interest. Generally, payments of interest on the convertible
notes to, or on behalf of, a non-U.S. holder will not be subject to U.S. federal
withholding tax if:
- the non-U.S. holder does not actually or constructively own 10% or more
of the total combined voting power of all classes of our stock;
- the non-U.S. Holder is not:
- a controlled foreign corporation for U.S. federal income tax purposes
that is related to us through stock ownership; or
- a bank that received the convertible note on an extension of credit
made pursuant to a loan agreement entered into in the ordinary course
of its trade or business; and
- the non-U.S. holder provides a statement signed under penalties of
perjury that includes its name and address and certifies that it is not a
U.S. person in compliance with applicable requirements of the regulations
or an exemption is otherwise established.
If these requirements cannot be satisfied, a non-U.S. holder will be subject to
U.S. federal withholding tax at a rate of 30%, or lower treaty rate, if
applicable, on interest payments on the convertible notes.
Conversion of Convertible Notes. A non-U.S. holder generally will not be
subject to U.S. federal withholding tax on the conversion of a convertible note
into common stock. To the extent a non-U.S. holder receives cash in lieu of a
fractional share on the conversion, such cash may give rise to gain that would
be subject to the rules described below with respect to the sale or exchange of
a convertible note or Common Stock. See "-- Sale or Exchange of Convertible
Notes or Common Stock" below.
Adjustment of Conversion Rate. The conversion rate of the convertible
notes is subject to adjustment in certain circumstances. Any such adjustment
could, in certain circumstances, give rise to a deemed distribution to non-U.S.
holders of the convertible notes. In such case, the deemed distribution would be
subject to the rules below regarding withholding of U.S. federal tax on
dividends in respect of common stock. See "-- Distributions on Common Stock"
below.
Distributions on Common Stock. Distributions on common stock will
constitute a dividend for U.S. federal income tax purposes to the extent of our
current or accumulated earnings and profits as determined under U.S. federal
income tax principles. Dividends paid on common stock
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held by a non-U.S. holder will be subject to U.S. federal withholding tax at a
rate of 30%, or lower treaty rate, if applicable.
Sale or Exchange of Convertible Notes or Common Stock. In general, a
non-U.S. holder will not be subject to U.S. federal withholding tax on gain
recognized upon the sale or other disposition, including a redemption, of a
convertible note or common stock received upon conversion thereof unless the
non-U.S. holder:
- is a nonresident alien individual who is present in the United States
for 183 or more days in the taxable year in which the gain is realized
and certain other conditions are satisfied, or
- is subject to tax pursuant to the provisions of U.S. tax law applicable
to certain U.S. expatriates.
U.S. Estate Tax. Convertible notes owned or treated as owned by an
individual who is not a citizen or resident, as specially defined for U.S.
federal estate tax purposes, of the United States at the time of death
(nonresident decedent) will not be included in the nonresident decedent's gross
estate for U.S. federal estate tax purposes as a result of the nonresident
decedent's death, provided that, at the time of death, the nonresident decedent
does not own, actually or constructively, 10% or more of the total combined
voting power of all classes of our stock and payments with respect to such
convertible notes would not have been effectively connected with the conduct of
a trade or business in the United States by the nonresident decedent. Common
stock owned or treated as owned by a nonresident decedent will be included in
the nonresident decedent's gross estate for U.S. federal estate tax purposes as
a result of the nonresident decedent's death. Subject to applicable treaty
limitations, if any, a nonresident decedent's estate may be subject to U.S.
federal estate tax on property included in the estate for U.S. federal estate
tax purposes.
IRS REPORTING AND BACKUP WITHHOLDING
Certain noncorporate U.S. holders may be subject to IRS reporting and
backup withholding at a rate of 31% on payments of interest on the convertible
notes, dividends on common stock and proceeds from the sale or other disposition
of the convertible notes or common stock. Backup withholding will only be
imposed where the noncorporate U.S. holder:
- fails to furnish its taxpayer identification number (TIN), which would
ordinarily be his or her social security number,
- furnishes an incorrect TIN,
- is notified by the IRS that he or she has failed to properly report
payments of interest or dividends, or
- under certain circumstances, fails to certify, under penalties of
perjury, that he or she has furnished a correct TIN and has not been
notified by the IRS that he or she is subject to backup withholding.
We must also institute backup withholding on payments made to a U.S. holder if
instructed to do so by the IRS. A failure to provide us with a correct TIN may
also subject a U.S. holder to penalties imposed by the IRS.
We will report annually to the IRS and to each non-U.S. holder any interest
and dividends paid with respect to a convertible note or common stock,
respectively, that is subject to U.S. federal withholding tax or that is exempt
from such tax under an applicable treaty or the code. We will also report to the
IRS and to each non-U.S. holder such income paid which is exempt from federal
withholding tax because it is effectively connected with such non-U.S. holder's
U.S. trade or business. However, a non-U.S. holder will not be subject to IRS
reporting
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or backup withholding if the payor has received appropriate certification
statements from or on behalf of the non-U.S. holder and provided that the payor
does not have actual knowledge that the non-U.S. holder is a U.S. person. The
payment of the proceeds from the disposition of the convertible notes or common
stock to or through the U.S. office of any U.S. or foreign broker will be
subject to IRS reporting and possibly backup withholding unless the owner
certifies as to its non-U.S. status under penalties of perjury or otherwise
establishes an exemption, provided that the broker does not have actual
knowledge that the holder is a U.S. person or that the conditions of any other
exemption are not, in fact, satisfied. The payment of the proceeds from the
disposition of a convertible note or common stock to or through a non-U.S.
office of a non-U.S. broker that is not a U.S. related person will not be
subject to IRS reporting or backup withholding. For this purpose, a U.S. related
person is:
- a controlled foreign corporation for U.S. federal income tax purposes,
- a non-U.S. person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year
preceding the payment, or for such part of the period that the broker
has been in existence, is derived from the activities that are
effectively connected with the conduct of a U.S. trade or business, or
- with respect to payments made after December 31, 2000, a foreign
partnership, if at any time during its tax year, one or more of its
partners are U.S. persons, as defined in regulations, who in the
aggregate hold more than 50% of the income or capital interest in the
partnership or if, at any time during its tax year, such foreign
partnership is engaged in a United States trade or business.
In the case of the payment of proceeds from the disposition of convertible
notes or common stock to or through a non-U.S. office of a broker that is a U.S.
related person, the regulations require IRS reporting on the payment unless the
broker has documentary evidence in its files that the owner is a non-U.S. holder
and the broker has no knowledge to the contrary. Backup withholding will not
apply to payments made through foreign offices of a broker that is a U.S. person
or a U.S. related person, absent actual knowledge that the payee is a U.S.
person.
Any amounts withheld under the backup withholding rules from a payment to a
holder will be allowed as a credit against such holder's U.S. federal income tax
liability, if any, or will otherwise be refundable, provided that the requisite
procedures are followed. Holders of the convertible notes or common stock should
consult their own tax advisors regarding their qualification for exemption from
backup withholding and the procedure for obtaining such an exemption, if
applicable.
PROSPECTIVE FINAL REGULATIONS
On October 6, 1997, new regulations were issued which modify the
requirements imposed on a non-U.S. holder and certain intermediaries for
establishing the recipient's status as a non-U.S. holder eligible for exemption
from U.S. federal withholding tax and backup withholding described above. The
new regulations generally are effective for payments made after December 31,
2000, subject to certain transition rules. In general, the new regulations do
not significantly alter the substantive withholding and IRS reporting
requirements, but, rather, unify current certification procedures and forms and
clarify reliance standards. In addition, the new regulations impose more
stringent conditions on the ability of financial intermediaries acting for a
non-U.S. holder to provide certifications on behalf of the non-U.S. holder,
which may include entering into an agreement with the IRS to audit certain
documentation with respect to such certifications. Non-U.S. holders should
consult their own tax advisors to determine the effects of the application on
the new regulations on their particular circumstances.
80
<PAGE> 83
WHERE YOU MAY FIND ADDITIONAL INFORMATION
We filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act for the convertible notes in this
offering. This prospectus does not contain all of the information in the
registration statement and the exhibits and schedule that were filed with the
registration statement or incorporated herein by reference. For further
information with respect to Juniper Networks, we refer you to the registration
statement and the exhibits and schedule that were filed with the registration
statement or incorporated herein by reference. Statements contained in this
prospectus about the contents of any contract or any other document that is
filed as an exhibit to the registration statement or incorporated herein by
reference are not necessarily complete, and we refer you to the full text of the
contract or other document filed as an exhibit to the registration statement or
incorporated herein by reference. A copy of the registration statement and the
exhibits and schedule that were filed with the registration statement or
incorporated herein by reference may be inspected without charge at the public
reference facilities maintained by the Securities and Exchange Commission in
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all or
any part of the registration statement may be obtained from the SEC upon payment
of the prescribed fee. The Securities and Exchange Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission. The address of the site is http://www.sec.gov.
We are subject to the information and periodic reporting requirements of
the Securities Exchange Act of 1934, and, in accordance with the requirements of
the Securities Exchange Act of 1934, we file periodic reports, proxy statements
and other information with the Securities and Exchange Commission. These
periodic reports, proxy statements and other information will be available for
inspection and copying at the regional offices, public reference facilities and
web site of the Securities and Exchange Commission referred to above.
LEGAL MATTERS
The validity of the convertible notes, and the underlying common stock
offered hereby will be passed upon for us by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California. Certain legal matters will be
passed upon for the underwriters by Brobeck Phleger & Harrison LLP, San
Francisco, California. As of September 29, 1999, WS Investment Company 96A and
WS Investment Co. 96B, each an investment partnership composed of certain
current and former members of and persons associated with Wilson Sonsini
Goodrich & Rosati, Professional Corporation, in addition to certain current
individual members of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, beneficially own an aggregate of 159,374 shares of our common
stock. Since that time the shares held by those partnerships have been
distributed to the individual partners and some of the shares have been sold in
open market transactions.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1999 and 1998, and for each of the three
years in the period ended December 31, 1999, as set forth in their report. We
have included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing.
81
<PAGE> 84
UNDERWRITING
Juniper Networks and the underwriters for the offering named below have
entered into an underwriting agreement with respect to the convertible notes
being offered. Subject to certain conditions, each underwriter has severally
agreed to purchase the principal amount of convertible notes indicated in the
following table.
<TABLE>
<CAPTION>
Principal Amount of
Underwriters Convertible Notes
------------ -------------------
<S> <C>
Goldman, Sachs & Co......................................... $
Credit Suisse First Boston Corporation......................
FleetBoston Robertson Stephens Inc..........................
Dain Rauscher Incorporated..................................
SG Cowen Securities Corporation.............................
Warburg Dillon Read LLC.....................................
------------
Total.................................................. $500,000,000
============
</TABLE>
------------------------
If the underwriters sell more convertible notes than the total principal
amount set forth in the table above, the underwriters have an option to buy up
to an additional $75,000,000 principal amount of convertible notes from Juniper
Networks to cover such sales. They may exercise that option for 30 days. If any
convertible notes are purchased pursuant to this option, the underwriters will
severally purchase convertible notes in approximately the same proportion as set
forth in the table above.
The following table shows the per convertible note and total underwriting
discounts and commissions to be paid to the underwriters by Juniper Networks.
Such amounts are shown assuming both no exercise and full exercise of the
underwriters' option to purchase additional convertible notes.
<TABLE>
<CAPTION>
Paid by the Company
----------------------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Convertible Note........................................ % %
Total....................................................... $ $
</TABLE>
Convertible notes sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the cover of this
prospectus. Any convertible notes sold by the underwriters to securities dealers
may be sold at a discount from the initial public offering price of up to %
of the principal amount of the convertible notes. Any such securities dealers
may resell any convertible notes purchased from the underwriters to certain
other brokers or dealers at a discount from the initial public offering price of
up to % of the principal amount of the convertible notes. If all the
convertible notes are not sold at the initial offering price, the underwriters
may change the offering price and the other selling terms.
Juniper Networks, the officers and the directors have agreed with the
underwriters not to dispose of or hedge any of its shares of common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 90 days
after the date of this prospectus, except with the prior written consent of the
underwriters, subject to certain exceptions.
The convertible notes are a new issue of securities with no established
trading market. Juniper Networks has been advised by the underwriters that the
underwriters intend to make a market in the convertible notes but are not
obligated to do so and may discontinue market
82
<PAGE> 85
making at any time without notice. No assurance can be given as to the liquidity
of the trading market for the convertible notes.
In connection with the offering, the underwriters may purchase and sell
convertible notes and common stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater principal amount of convertible notes than they are required to purchase
in this offering. Stabilizing transactions consist of certain bids or purchases
made for the purpose of preventing or retarding a decline in the market price of
the convertible notes or the common stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased convertible
notes sold by or for the account of such underwriter in stabilizing or short
covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the convertible notes and the common stock. As a
result, the price of the convertible notes or the common stock may be higher
than the price that otherwise might exist in the open market. If these
activities are commenced, they may be discontinued by the underwriters at any
time. These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.
Juniper Networks estimates that its share of the total expenses of the
offering, excluding underwriting discounts and commissions, will be
approximately $800,000.
Juniper Networks has agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
83
<PAGE> 86
(THIS PAGE INTENTIONALLY LEFT BLANK)
84
<PAGE> 87
JUNIPER NETWORKS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statement of Stockholders' Equity.............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 88
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Juniper Networks, Inc.
We have audited the accompanying consolidated balance sheets of Juniper
Networks, Inc. as of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Juniper
Networks, Inc. at December 31, 1999 and 1998, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Palo Alto, California
January 17, 2000
F-2
<PAGE> 89
JUNIPER NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $158,043 $ 20,098
Short-term investments.................................... 187,915 --
Accounts receivable, net of allowance for doubtful
accounts of $632 in 1999 (none in 1998)(1)............. 23,950 8,056
Prepaid expenses and other current assets................. 7,925 680
-------- --------
Total current assets........................................ 377,833 28,834
Property and equipment, net................................. 12,416 7,702
Long-term investments....................................... 97,201 --
Intangibles and other long-term assets...................... 25,928 135
-------- --------
Total assets................................................ $513,378 $ 36,671
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 15,368 $ 4,245
Accrued warranty.......................................... 9,641 684
Accrued compensation and related liabilities.............. 5,371 1,114
Other accrued liabilities................................. 6,013 500
Deferred revenue.......................................... 19,270 5,639
Current obligations under capital leases.................. -- 2,220
-------- --------
Total current liabilities................................... 55,663 14,402
Long-term liabilities....................................... -- 5,204
Commitments
Stockholders' equity:
Convertible preferred stock, $0.00001 par value, issuable
in series: 10,000 and 10,859 shares authorized at
December 31, 1999 and 1998; none and 10,717 shares
issued and outstanding at December 31, 1999 and 1998... -- --
Common stock, $0.00001 par value, 200,000 shares
authorized; 155,939 and 61,732 shares issued and
outstanding at December 31, 1999 and 1998.............. 2 1
Additional paid-in capital................................ 513,696 65,350
Deferred stock compensation............................... (3,001) (5,153)
Accumulated other comprehensive loss...................... (815) --
Accumulated deficit....................................... (52,167) (43,133)
-------- --------
Stockholders' equity........................................ 457,715 17,065
-------- --------
Total liabilities and stockholders' equity.................. $513,378 $ 36,671
======== ========
</TABLE>
- ---------------
(1) Includes $632 due from Ericsson Business Networks AB, a related party, as of
December 31, 1999.
See accompanying notes.
F-3
<PAGE> 90
JUNIPER NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net revenues(1)....................................... $102,606 $ 3,807 $ --
Cost of revenues...................................... 45,272 4,416 --
-------- -------- --------
Gross profit (loss)................................... 57,334 (609) --
Operating expenses:
Research and development............................ 41,502 23,987 9,406
Sales and marketing................................. 20,931 4,216 1,149
General and administrative.......................... 5,235 2,223 1,043
Amortization of goodwill and purchased intangibles
and deferred stock compensation.................. 4,286 1,235 --
-------- -------- --------
Total operating expenses......................... 71,954 31,661 11,598
-------- -------- --------
Operating loss........................................ (14,620) (32,270) (11,598)
Interest income, net.................................. 8,011 1,301 1,235
-------- -------- --------
Loss before income taxes.............................. (6,609) (30,969) (10,363)
Provision for income taxes............................ 2,425 2 --
-------- -------- --------
Net loss.............................................. $ (9,034) $(30,971) $(10,363)
======== ======== ========
Basic and diluted net loss per share.................. $ (0.10) $ (0.80) $ (0.40)
======== ======== ========
Shares used in computing basic and diluted net loss
per share........................................... 94,661 38,871 25,773
======== ======== ========
Pro forma basic and diluted net loss per share
(unaudited)......................................... $ (0.07) $ (0.28)
======== ========
Shares used in computing pro forma basic and diluted
net loss per share (unaudited)...................... 131,480 111,210
======== ========
</TABLE>
- ---------------
(1) Includes $5.5 million in revenue from Ericsson Business Networks AB, a
related party, for the year ended December 31, 1999.
See accompanying notes.
F-4
<PAGE> 91
JUNIPER NETWORKS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED OTHER
---------------- ---------------- PAID-IN STOCK COMPREHENSIVE ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION LOSS DEFICIT
------- ------ ------- ------ ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996........ 5,566 $-- 47,683 $-- $ 11,527 $ -- $ -- $ (1,799)
Issuance of warrants to purchase
Series B preferred stock......... -- -- -- -- 1 -- -- --
Issuance of Series C preferred
stock to investors............... 5,151 -- -- -- 45,953 -- -- --
Issuance of warrants to purchase
Series C preferred stock......... -- -- -- -- 3 -- -- --
Issuance of common stock, net of
repurchases...................... -- -- 9,681 -- 375 -- -- --
Compensation expense related to
stock options.................... -- -- -- -- 351 -- -- --
Net loss........................... -- -- -- -- -- -- -- (10,363)
------- -- ------- -- -------- ------- ----- --------
Balance at December 31, 1997........ 10,717 -- 57,364 -- 58,210 -- -- (12,162)
Exercise of stock options by
employees, net of repurchases.... -- -- 4,368 1 752 -- -- --
Deferred stock compensation........ -- -- -- -- 6,388 (6,388) -- --
Amortization of deferred stock
compensation..................... -- -- -- -- -- 1,235 -- --
Net loss........................... -- -- -- -- -- -- -- (30,971)
------- -- ------- -- -------- ------- ----- --------
Balance at December 31, 1998........ 10,717 -- 61,732 1 65,350 (5,153) -- (43,133)
Issuance of Series D and D-1
preferred stock to investors..... 3,080 -- -- -- 33,948 -- -- --
Conversion of preferred stock to
common stock..................... (13,797) -- 76,794 -- -- -- -- --
Issuance of common stock, net of
issuance costs of $1,885......... -- -- 11,613 1 389,454 -- -- --
Exercise of common stock
warrants......................... -- -- 779 -- -- -- -- --
Exercise of stock options by
employees, net of repurchases.... -- -- 4,888 -- 6,870 -- -- --
Issuance of common stock and
options in connection with the
acquisition of intellectual
property and other intangibles... -- -- 133 -- 16,960 -- -- --
Deferred stock compensation........ -- -- -- -- 1,114 (1,114) -- --
Amortization of deferred stock
compensation..................... -- -- -- -- -- 3,266 -- --
Other comprehensive loss:
Change in unrealized loss on
available-for-sale
securities..................... -- -- -- -- -- -- (815) --
Net loss......................... -- -- -- -- -- -- -- (9,034)
Comprehensive loss................. -- -- -- -- -- -- -- --
------- -- ------- -- -------- ------- ----- --------
Balance at December 31, 1999........ -- $-- 155,939 $2 $513,696 $(3,001) $(815) $(52,167)
======= == ======= == ======== ======= ===== ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance at December 31, 1996........ $ 9,728
Issuance of warrants to purchase
Series B preferred stock......... 1
Issuance of Series C preferred
stock to investors............... 45,953
Issuance of warrants to purchase
Series C preferred stock......... 3
Issuance of common stock, net of
repurchases...................... 375
Compensation expense related to
stock options.................... 351
Net loss........................... (10,363)
--------
Balance at December 31, 1997........ 46,048
Exercise of stock options by
employees, net of repurchases.... 753
Deferred stock compensation........ --
Amortization of deferred stock
compensation..................... 1,235
Net loss........................... (30,971)
--------
Balance at December 31, 1998........ 17,065
Issuance of Series D and D-1
preferred stock to investors..... 33,948
Conversion of preferred stock to
common stock..................... --
Issuance of common stock, net of
issuance costs of $1,885......... 389,455
Exercise of common stock
warrants......................... --
Exercise of stock options by
employees, net of repurchases.... 6,870
Issuance of common stock and
options in connection with the
acquisition of intellectual
property and other intangibles... 16,960
Deferred stock compensation........ --
Amortization of deferred stock
compensation..................... 3,266
Other comprehensive loss:
Change in unrealized loss on
available-for-sale
securities..................... (815)
Net loss......................... (9,034)
--------
Comprehensive loss................. (9,849)
--------
Balance at December 31, 1999........ $457,715
========
</TABLE>
See accompanying notes.
F-5
<PAGE> 92
JUNIPER NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $ (9,034) $ (30,971) $ (10,363)
Adjustments to reconcile net loss to net cash from operating
activities:
Depreciation and amortization............................. 5,306 2,171 712
Amortization of goodwill and purchased intangibles,
prepaid maintenance contracts and deferred stock
compensation............................................ 4,933 1,602 589
Loss on disposal of property and equipment................ -- -- 59
Issuance of stock for consulting services................. -- 30 21
Issuance of warrants in connection with certain leasing
arrangements............................................ -- -- 14
Changes in operating assets and liabilities:
Accounts receivable..................................... (15,894) (8,056) --
Prepaid expenses and other current assets............... (7,892) (504) (699)
Other long-term assets.................................. (398) (10) (104)
Accounts payable and other current liabilities.......... 16,593 4,084 489
Accrued warranty........................................ 8,957 684 --
Accrued milestone payment............................... -- (423) 423
Accrued compensation and related liabilities............ 4,257 869 245
Deferred revenue........................................ 13,631 5,639 --
Other long-term liabilities............................. -- 43 --
--------- --------- ---------
Net cash provided by (used in) operating activities......... 20,459 (24,842) (8,614)
INVESTING ACTIVITIES:
Purchases of property and equipment, net.................... (10,020) (6,531) (3,110)
Purchases of available-for-sale investments................. (324,437) (3,501) (20,715)
Maturities of available-for-sale investments................ 38,506 19,286 10,800
Minority equity investments................................. (8,000) -- --
Acquisition of intellectual property and other
intangibles............................................... (1,456) -- --
--------- --------- ---------
Net cash provided by (used in) investing activities......... (305,407) 9,254 (13,025)
FINANCING ACTIVITIES:
Proceeds from sale-leaseback liabilities.................... -- 5,705 2,603
Payments on lease obligations............................... (7,381) (1,157) (439)
Proceeds from issuance of preferred stock................... 33,948 -- 45,953
Proceeds from issuance of common stock...................... 396,326 696 366
--------- --------- ---------
Net cash provided by financing activities................... 422,893 5,244 48,483
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ 137,945 (10,344) 26,844
Cash and cash equivalents at beginning of period............ 20,098 30,442 3,598
--------- --------- ---------
Cash and cash equivalents at end of period.................. $ 158,043 $ 20,098 $ 30,442
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest...................................... $ 477 $ 592 $ 210
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of property and equipment under capital lease... $ -- $ 5,692 $ 2,243
========= ========= =========
Deferred stock compensation................................. $ 1,114 $ 6,388 $ --
========= ========= =========
Common stock issued in connection with the acquisition of
intellectual property and other intangibles............... $ 16,960 $ -- $ --
========= ========= =========
</TABLE>
See accompanying notes.
F-6
<PAGE> 93
JUNIPER NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Juniper Networks, Inc. ("Juniper Networks") was incorporated in the state
of California on February 2, 1996. Juniper Networks was reincorporated in the
state of Delaware effective as of March 15, 1998. Juniper Networks was
established for the purpose of providing Internet infrastructure solutions to
Internet service providers and other telecommunication service providers.
Juniper Networks develops next generation Internet backbone routers.
From inception, in February 1996, through September 1998, Juniper Networks'
operating activities were primarily devoted to increasing research and
development capabilities, designing ASICs, developing software, developing and
testing the M40 and other products, staffing the administrative, marketing and
sales organizations and establishing strategic relationships. Accordingly,
Juniper Networks was classified as a development stage company through that
date. Juniper Networks commenced product shipments in October 1998 and therefore
emerged from the development stage.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Juniper
Networks and its wholly-owned subsidiaries. All significant inter-company
balances and transactions have been eliminated.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those estimates.
RECLASSIFICATIONS
Certain reclassifications, none of which affected operating or net loss,
have been made to prior year amounts to conform to the current year
presentation.
CASH, CASH EQUIVALENTS, SHORT-TERM AND LONG-TERM INVESTMENTS
Juniper Networks considers all highly liquid investment securities with
maturities from date of purchase of 90 days or less to be cash equivalents.
Short-term and long-term investments consist of debt securities with original
maturities between three months and three years.
Management determines the appropriate classification of debt and equity
securities at the time of purchase and evaluates such designation as of each
balance sheet date. To date, all marketable debt securities have been classified
as available-for-sale and are carried at fair value with unrealized gains and
losses, if any, included in stockholders' equity. Realized gains and losses and
declines in value of securities judged to be other than temporary are included
in interest income and have not been significant to date. Interest and dividends
on all securities are included in interest income.
CONCENTRATIONS
Financial instruments that potentially subject Juniper Networks to
concentrations of credit risk consist principally of investments in debt
securities and trade receivables. Management
F-7
<PAGE> 94
believes the financial risks associated with these financial instruments are
minimal. Juniper Networks maintains its cash, cash equivalents and investments
with high quality financial institutions. Juniper Networks performs ongoing
credit evaluations of its customers and generally does not require collateral on
accounts receivable.
Juniper Networks' revenues to date have been derived for the sale of one
product, the M40. For the year ended December 31, 1999, two customers, A and C,
accounted for 32% and 26% of Juniper Networks' net revenues. For the year ended
December 31, 1998, two customers, A and B, accounted for 78% and 22% of Juniper
Networks' net revenues. For the year ended December 31, 1999, export sales to
Europe and Asia accounted for a total of 21.9% of net revenues.
Juniper Networks purchases certain custom semiconductor chips from a sole
supplier. Additionally, Juniper Networks relies on one hardware manufacturer for
the production of its product. The inability of the supplier or manufacturer to
fulfill supply requirements of Juniper Networks could negatively impact future
results.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of Juniper Networks' short-term and long-term investments is
based on quoted market prices.
The fair value of short-term and long-term capital lease obligations is
estimated based on current interest rates available to Juniper Networks for debt
instruments with similar terms, degrees of risk, and remaining maturities. The
carrying values of these obligations approximate their respective fair values as
of December 31, 1998.
PROPERTY AND EQUIPMENT
Property and equipment, including equipment leased under capital leases,
are recorded at cost less accumulated depreciation. Depreciation is calculated
using the straight-line method over the lesser of the estimated useful life,
generally three to five years, or the lease term of the respective assets.
INTANGIBLES AND OTHER ASSETS
Intangibles and other assets include equity investments made in privately
held companies in which Juniper Networks has less than a 20% equity ownership
interest and over which Juniper Networks has no ability to exercise significant
influence. Such investments are accounted for on the cost basis and are reviewed
for impairment indicators. Through December 31, 1999, no impairment indicators
have been identified and no write-downs of the cost basis of these investments
has been made. Also included in intangibles and other assets is goodwill and
other intangibles as a result of the November 1999 acquisition of intellectual
property and other intangible assets. The goodwill and other intangibles are
being amortized over a three-year period.
REVENUE RECOGNITION
Juniper Networks generally recognizes product revenue at the time of
shipment, assuming that collectibility is probable, unless Juniper Networks has
future obligations for network interoperability or has to obtain customer
acceptance, in which case revenue is deferred until these obligations are met.
Revenue from service obligations is deferred and recognized on a straight-line
basis over the contractual period. Amounts billed in excess of revenue
recognized are included as deferred revenue and accounts receivable in the
accompanying consolidated balance sheets.
F-8
<PAGE> 95
WARRANTY RESERVES
Juniper Networks' product generally carries a one-year warranty that
includes factory repair services as needed for replacement of parts. Estimated
expenses for warranty obligations are accrued as revenue is recognized.
RESEARCH AND DEVELOPMENT
Costs to develop Juniper Networks' products are expensed as incurred in
accordance with the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 2, "Accounting for Research and Development
Costs," which establishes accounting and reporting standards for research and
development.
Juniper Networks adopted SOP 98-1 "Accounting for Costs of Computer
Software Developed or Obtained for Internal Use" during 1999, which requires
that all costs related to the development of internal use software be expensed
as incurred, other than those incurred during the application development stage.
Costs incurred during the application development stage were insignificant for
all periods presented.
STOCK-BASED COMPENSATION
Juniper Networks accounts for its stock options and equity awards in
accordance with the provisions of the Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and has elected to follow the
"disclosure only" alternative prescribed by Financial Accounting Standards
Board's Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (FAS 123).
STOCK SPLITS
Juniper Networks effected a three-for-two stock split of its common stock
on June 27, 1997 and October 2, 1998 and a three-for-one stock split in the form
of a 200% common stock dividend paid on January 14, 2000. All share and per
share amounts have been adjusted to reflect the splits.
NET LOSS PER SHARE
Basic net loss per share and diluted net loss per share are presented in
conformity with Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (FAS 128), for all periods
presented. Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, common stock and convertible preferred stock issued or granted
for nominal consideration prior to the anticipated effective date of the initial
public offering must be included in the calculation of basic and diluted net
loss per common share as if they had been outstanding for all periods presented.
To date, Juniper Networks has not had any issuances or grants for nominal
consideration.
In accordance with FAS 128, basic and diluted net loss per share has been
computed using the weighted-average number of shares of common stock outstanding
during the period, less the weighted-average number of shares of common stock
issued to founders, investors and employees that are subject to repurchase (see
Note 5). Basic and diluted pro forma net loss per share, as presented in the
consolidated statements of operations, has been computed as described above and
also gives effect, under Securities and Exchange Commission guidance, to the
conversion of the convertible preferred stock (using the if-converted method)
from the original date of issuance, using the initial public offering price of
$11.33 per share to calculate the conversion ratio for Series D-1 convertible
preferred stock.
F-9
<PAGE> 96
The following table presents the calculation of basic and diluted and pro
forma basic and diluted net loss per share(in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net loss.............................................. $ (9,034) $(30,971) $(10,363)
-------- -------- --------
BASIC AND DILUTED:
Weighted-average shares of common stock
outstanding...................................... 109,652 59,073 55,869
Less: weighted-average shares subject to
repurchase....................................... (14,991) (20,202) (30,096)
-------- -------- --------
Weighted-average shares used in computing basic and
diluted net loss per share....................... 94,661 38,871 25,773
======== ======== ========
Basic and diluted net loss per share................ $ (0.10) $ (0.80) $ (0.40)
======== ======== ========
PRO FORMA:
Net loss............................................ $ (9,034) $(30,971)
======== ========
Shares used above................................... 94,661 38,871
Pro forma adjustment to reflect weighted effect of
assumed conversion of convertible preferred
stock............................................ 36,819 72,339
-------- --------
Shares used in computing pro forma basic and diluted
net loss per common share (unaudited)............ 131,480 111,210
======== ========
Pro forma basic and diluted net loss per common
share (unaudited)................................ $ (0.07) $ (0.28)
======== ========
</TABLE>
Juniper Networks has excluded all convertible preferred stock, warrants for
convertible preferred stock, outstanding stock options and shares subject to
repurchase from the calculation of diluted loss per share because all such
securities are antidilutive for all periods presented. The total number of
shares excluded from the calculations of diluted net loss per share were
68,288,000, 101,769,000 and 86,811,000 for the years ended December 31, 1999,
1998 and 1997, respectively.
SEGMENT INFORMATION
Juniper Networks has adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 131, "Disclosure About Segments
of an Enterprise and Related Information" (FAS 131). Juniper Networks operates
solely in one segment, the development and marketing of Internet infrastructure
equipment, and therefore there is no impact to Juniper Networks' consolidated
financial statements due to the adoption of FAS 131.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued FAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" (FAS 133). FAS
133, as amended, establishes methods for derivative financial instruments and
hedging activities related to those instruments, as well as other hedging
activities. Juniper Networks is required to adopt FAS 133 effective January 1,
2001. Because Juniper Networks currently does not hold any derivative
instruments and does not engage in hedging activities, Juniper Networks does not
currently believe that the adoption of FAS 133, as amended, will have a
significant impact on its financial position or results of operations.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 (SAB 101). SAB 101 summarizes certain areas of the
Staff's views in applying generally
F-10
<PAGE> 97
accepted accounting principles to revenue recognition in financial statements.
Juniper Networks believes that its current revenue recognition principles comply
with SAB 101.
2. CASH EQUIVALENTS, SHORT-TERM AND LONG-TERM INVESTMENTS
Cash equivalents, short-term and long-term investments consist of the
following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Money market funds............................ $ 56,034 $ -- $ -- $ 56,034
Commercial paper.............................. 79,862 -- -- 79,862
Certificates of deposit....................... 66 -- -- 66
Government securities......................... 135,325 5 (181) 135,149
Corporate debt securities..................... 151,829 12 (651) 151,190
Asset-backed securities....................... 8,000 -- -- 8,000
-------- -------- -------- --------
$431,116 $ 17 $ (832) $430,301
======== ======== ======== ========
Included in cash and cash equivalents......... $145,179 $ 6 $ -- $145,185
Included in short-term investments............ 188,170 11 (266) 187,915
Included in long-term investments............. 97,767 -- (566) 97,201
-------- -------- -------- --------
$431,116 $ 17 $ (832) $430,301
======== ======== ======== ========
Due within one year........................... $333,349 $ 17 $ (266) $333,100
Due between one year and two years............ 94,500 -- (537) 93,963
Due between two years and three years......... 3,267 -- (29) 3,238
-------- -------- -------- --------
$431,116 $ 17 $ (832) $430,301
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Money market funds............................ $ 3,037 $ -- $ -- $ 3,037
Commercial paper.............................. 16,520 -- -- 16,520
-------- -------- -------- --------
$ 19,557 $ -- $ -- $ 19,557
======== ======== ======== ========
Included in cash and cash equivalents......... $ 19,557 $ -- $ -- $ 19,557
======== ======== ======== ========
</TABLE>
F-11
<PAGE> 98
3. PROPERTY AND EQUIPMENT, NET
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1999 1998
------- ------
<S> <C> <C>
Computers and equipment..................................... $14,953 $7,435
Purchased software.......................................... 4,252 2,540
Furniture and fixtures...................................... 1,383 594
------- ------
Total....................................................... 20,588 10,569
Less accumulated depreciation and lease amortization........ (8,172) (2,867)
------- ------
Property and equipment , net................................ $12,416 $7,702
======= ======
</TABLE>
4. CAPITAL LEASE OBLIGATIONS
Juniper Networks enters into various capital leases, including sale and
leaseback transactions, to finance purchases of property and equipment. As of
December 31, 1998, under various lease lines of credit, Juniper Networks had
$1,891,000 available for future purchases of property and equipment that expired
on June 30, 1999. Under the terms of certain lease agreements, warrants to
purchase the Company's preferred stock were granted as described in Note 5.
Capitalized costs of $8,470,000, and accumulated amortization of $905,000 are
included in property and equipment at December 31, 1998. During the year ending
December 31, 1999, Juniper Networks paid off all of the then outstanding capital
lease balances.
5. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
<TABLE>
<CAPTION>
SHARES ISSUED
AND OUTSTANDING AT
SHARES DECEMBER 31,
INITIALLY ------------------------
AUTHORIZED 1999 1998
---------- ---------- ----------
<S> <C> <C> <C>
Series A......................................... 1,743,751 -- 1,743,751
Series B......................................... 3,915,308 -- 3,821,975
Series C......................................... 5,200,000 -- 5,151,178
Series D......................................... 600,000 -- --
Series D-1....................................... 2,580,000 -- --
---------- ---------- ----------
Total preferred stock............................ 14,039,059 -- 10,716,904
========== ========== ==========
</TABLE>
All outstanding shares of Juniper Networks' convertible preferred stock
automatically converted into 76,794,000 shares of Common Stock upon completion
of Juniper Networks' initial public offering. As of December 31, 1999,
10,000,000 shares of convertible preferred stock remain authorized and available
for issuance.
F-12
<PAGE> 99
WARRANTS
Juniper Networks periodically grants warrants in connection with certain
lease arrangements. Juniper Networks had the following warrants to purchase
shares of preferred stock outstanding at December 31, 1998:
<TABLE>
<CAPTION>
EXERCISE
PRICE EXPIRATION OF NUMBER OF SHARES
PREFERRED STOCK SERIES PER SHARE DATE ISSUED WARRANTS (PREFERRED STOCK)
- ---------------------- --------- ------------- ------------- -----------------
<S> <C> <C> <C> <C>
Series B................. $2.40 December 1996 December 2003 83,333
Series B................. 2.40 June 1997 December 2003 10,000
Series C................. 8.93 June 1997 December 2003 23,516
-------
Total.............................................................. 116,849
=======
</TABLE>
During the year ended December 31, 1999, all warrants were exercised for a
total of approximately 779,000 shares of Common Stock. All of the warrants were
exercisable immediately. The fair value of the warrants was amortized as
interest expense in accordance with the lease payments.
COMMON STOCK
Juniper Networks is authorized to issue up to 200,000,000 shares of its
common stock. At December 31, 1999 and 1998, 155,938,599 and 61,731,984 shares
were issued and outstanding. Prior to the adoption of the 1996 Stock Option
Plan, Juniper Networks issued shares of common stock to founders, investors, and
employees. The shares issued to investors were fully vested upon purchase.
Generally, shares issued to founders and employees were sold pursuant to
restricted stock purchase agreements containing provisions established by the
Board of Directors. These provisions give Juniper Networks the right to
repurchase the shares at the original sales price. This right expires at the
rate of 25% after one year and 2.0833% per month thereafter. At December 31,
1999 and 1998, 840,001 and 4,148,439 of these shares, issued outside of the 1996
Stock Option Plan, remained subject to repurchase.
STOCK OPTION PLAN
Juniper Networks' 1996 Stock Option Plan (the Plan) provides for the
granting of incentive stock options to employees and nonstatutory stock options
to employees, directors and consultants. Incentive stock options are granted at
an exercise price of not less than the fair value per share of the common stock
on the date of grant. Nonstatutory stock options may be granted at an exercise
price of not less than 85% of the fair value per share on the date of grant;
however, no statutory stock options have been granted for less than fair market
value on the date of grant. Vesting and exercise provisions are determined by
the Board of Directors. Options granted under the Plan generally become
exercisable over a four-year period beginning on the date of grant. Options
granted under the Plan have a maximum term of ten years. Options granted to
consultants are in consideration for the fair value of services previously
rendered, are not contingent upon future events and are expensed in the period
of grant. Juniper Networks has authorized 57,562,500 shares of common stock for
issuance under the Plan. At December 31, 1999, 1,896,356 shares were available
for future option grants or stock sales under the Plan.
F-13
<PAGE> 100
Option activity under the Plan is summarized as follows:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------
NUMBER WEIGHTED-AVERAGE
OF SHARES EXERCISE PRICE
---------- ----------------
<S> <C> <C>
Options granted............................................ 5,393,250 $ 0.07
----------
Balance at December 31, 1997............................... 5,393,250 0.07
Options granted............................................ 10,537,440 0.62
Options exercised.......................................... (4,521,948) 0.16
Options canceled........................................... (365,028) 0.09
----------
Balance at December 31, 1998............................... 11,043,714 0.56
Options granted............................................ 16,837,006 33.76
Options exercised.......................................... (4,935,090) 1.13
Options canceled........................................... (476,465) 7.78
----------
Balance at December 31, 1999............................... 22,469,165 25.11
==========
</TABLE>
The Plan also provides for the sale of shares of common stock to employees
and consultants at the fair value per share of the common stock. Shares issued
to consultants are for the fair value of services previously rendered and are
not contingent upon future events. Shares sold to employees are made pursuant to
restricted stock purchase agreements containing provisions established by the
Board of Directors. These provisions give Juniper Networks the right to
repurchase the shares at the original sales price. This right expires at a rate
determined by the Board of Directors, generally at the rate of 25% after one
year and 2.0833% per month thereafter.
During the year ended December 31, 1997 and the period from inception
(February 2, 1996) to December 31, 1996, Juniper Networks issued 10,717,299 and
14,522,652 shares under the Plan. No shares were issued under the Plan in the
years ended December 31, 1999 and 1998. At December 31, 1999 and 1998, 9,158,052
and 14,055,312 shares were subject to repurchase rights under the Plan. At
December 31, 1999 and 1998, 1,266,509 and 1,189,275 shares, respectively, had
been repurchased under the Plan.
The following schedule summarizes information about stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- ------------------------------
WEIGHTED-AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ------------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.04-$ 0.56 4,648,857 8.22 $ 0.29 1,177,599 $ 0.24
$ 0.64-$ 4.67 5,294,415 9.01 $ 2.88 353,777 $ 1.77
$ 7.00-$ 9.33 4,715,349 9.39 $ 7.61 4,125 $ 7.00
$21.44-$ 60.71 6,666,345 9.76 $60.44 31,095 $21.44
$63.63-$112.57 1,144,199 9.89 $89.60 -- $ --
---------- ---------
$ 0.04-$112.57 22,469,165 9.19 $25.11 1,566,596 $ 1.03
========== =========
</TABLE>
As of December 31, 1998, 325,608 options are exercisable at an average
exercise price of $0.05, and as of December 31, 1997, 79,980 options are
exercisable at an average price of $0.01.
During the year ended December 31, 1998 and the three months ended March
31, 1999, in connection with the grant of certain stock options to employees,
Juniper Networks recorded
F-14
<PAGE> 101
deferred stock compensation of $6,388,000 and $1,114,000 representing the
difference between the exercise price and the deemed fair value of Juniper
Networks' common stock on the date such stock options were granted. Such amount
is included as a reduction of stockholders' equity and is being amortized by
charges to operations on a graded vesting method. Juniper Networks recorded
amortization of deferred stock compensation expense of $3,266,000 and $1,235,000
for the years ended December 31, 1999 and 1998. At December 31, 1999 and 1998,
Juniper Networks had a total of $3,001,000 and $5,153,000 remaining to be
amortized over the corresponding vesting period of each respective option,
generally four years. The amortization expense relates to options awarded to
employees in all operating expense categories. This amount has not been
separately allocated to these categories.
EMPLOYEE STOCK PURCHASE PLAN
In April 1999, the Board of Directors approved the adoption of Juniper
Networks' 1999 Employee Stock Purchase Plan (the Purchase Plan). A total of
1,500,000 shares of common stock have been reserved for issuance under the 1999
Purchase Plan, plus, commencing on January 1, 2000, annual increases equal to
the lesser of 1,500,000 shares, or 1% of the outstanding common shares on such
date or a lesser amount determined by the Board of Directors. The 1999 Purchase
Plan permits eligible employees to acquire shares of Juniper Networks' common
stock through periodic payroll deductions of up to 10% of base compensation. No
more than 3,000 shares may be purchased by each employee in any twelve month
period, and in no event, may an employee purchase more than $25,000 worth of
stock, determined at the fair market value of the shares at the time such option
is granted, in one calendar year. The Purchase Plan will be implemented in a
series of offering periods, each six months in duration; provided, however, that
the first offering period will be approximately thirteen months in duration,
ending on the last trading day on or before July 31, 2000. The price at which
the common stock may be purchased is 85% of the lesser of the fair market value
of Juniper Networks' common stock on the first day of the applicable offering
period or on the last day of the respective offering period.
STOCK-BASED COMPENSATION
The Company has elected to follow APB 25 and related interpretations in
accounting for its employee stock-based compensation plans. Because the exercise
price of Juniper Networks' employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense was recognized.
Pro forma information regarding net loss has been determined as if Juniper
Networks had accounted for its employee stock options under the fair value
method prescribed by FAS 123. The resulting effect on pro forma net loss
disclosed is not likely to be representative of the effects on net income/(loss)
on a pro forma basis in future years, due to subsequent years including
additional grants and years of vesting.
The fair value of each option granted through December 31, 1999 was
estimated on the date of grant using the minimum value (before the Company went
public) or the Black-Scholes method. The Black-Scholes option valuation model
was developed for use in estimating the fair value of traded options that have
no vesting restrictions and are fully transferable. The Black-Scholes model
requires the input of highly subjective assumptions including the expected stock
price volatility. Because Juniper Networks' stock-based awards have
characteristics significantly different from those in traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
stock-based awards. The fair
F-15
<PAGE> 102
value of Juniper Networks' stock-based awards was estimated using the following
weighted-average assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Dividend yield.................................... -- -- --
Volatility factor................................. 80% -- --
Risk-free interest rate........................... 5.49% 5.23% 6.20%
Expected life..................................... 3.0 years 4.5 years 4.5 years
Weighted-average fair value of options granted in
the period...................................... $17.97 $0.37 $0.03
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of options
is amortized to pro forma expense over the options' vesting period. Pro forma
information follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported..................................... $ (9,034) $(30,971) $(10,363)
Pro forma....................................... (43,488) (31,143) (10,403)
Basic and diluted net loss per share:
As reported..................................... (0.10) (0.80) (0.40)
Pro forma....................................... (0.46) (0.80) (0.40)
</TABLE>
COMMON STOCK RESERVED FOR FUTURE ISSUANCE
The Company has reserved 25,865,521 shares of common stock for future
issuance under its 1996 Stock Option Plan and 1999 Employee Stock Purchase Plan.
6. 401(K) PLAN
Juniper Networks maintains a savings and retirement plan qualified under
Section 401(k) of the Internal Revenue Code of 1986, as amended. All employees
are eligible to participate on their first day of employment with Juniper
Networks. Under the plan, employees may contribute up to 20% of their pretax
salaries per year but not more than the statutory limits. Juniper Networks does
not contribute to the plan.
F-16
<PAGE> 103
7. COMMITMENTS
Juniper Networks leases its facilities under operating leases that expire
in 2012. Rental expense for the years ended December 31, 1999, 1998 and 1997,
were approximately $1,847,000, $937,000 and $529,000, respectively.
Future minimum payments under the noncancellable operating leases consist
of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
1999
------------
<S> <C>
2000........................................................ $ 3,892
2001........................................................ 5,401
2002........................................................ 4,660
2003........................................................ 4,762
2004........................................................ 4,898
Thereafter.................................................. 42,072
-------
Total minimum lease payments........................... $65,685
=======
</TABLE>
Juniper Networks has outstanding purchase order commitments for production
materials of approximately $6,357,000 and $2,442,000 at December 31, 1999 and
1998. Juniper Networks expects the purchase orders to be fulfilled in the first
quarter of 2000.
8. INCOME TAXES
Due to operating losses and the inability to recognize the benefits
therefrom, there is no tax provision for the years ended December 31, 1997. For
the year ended December 31, 1999 the provision for income taxes consists of the
following (in thousands):
<TABLE>
<S> <C>
Current Provision:
Federal................................................... $ 700
State..................................................... 800
Foreign................................................... 925
------
Total current provision..................................... $2,425
======
</TABLE>
The difference between the provision for income taxes and the amount
computed by applying the Federal statutory income tax rate (35 percent) to loss
before taxes is explained below (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
------- -------- -------
<S> <C> <C> <C>
Tax provision (benefit) at federal statutory rate........ $(2,313) $(10,839) $(3,627)
Federal alternative minimum tax.......................... 700 -- --
State taxes.............................................. 800 2 --
Foreign taxes............................................ 925 -- --
Unbenefitted net operating losses, reserves and
accruals............................................... 2,313 10,839 3,627
------- -------- -------
Total............................................... $ 2,425 $ 2 $ --
======= ======== =======
</TABLE>
F-17
<PAGE> 104
Significant components of Juniper Networks' deferred tax assets are as
follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards......................... $ 14,000 $ 13,470
Research credit carryforwards............................ 2,830 1,490
Deferred revenue......................................... 6,200 2,700
Reserves and accruals not currently deductible........... 7,250 500
Other temporary differences.............................. 840 (110)
-------- --------
Total deferred tax assets.................................. 31,120 18,050
Valuation allowance........................................ (31,120) (18,050)
-------- --------
Net deferred tax assets.................................... $ -- $ --
======== ========
</TABLE>
FASB Statement No. 109 provides for the recognition of deferred tax assets
if realization of such assets is more likely than not. Based upon the weight of
available evidence, which includes the Company's historical operating
performance and the reported cumulative net losses in all prior years, Juniper
Networks has provided a full valuation allowance against its net deferred tax
assets.
The net valuation allowance increased by $13,070,000 during the year ended
December 31, 1999 and increased by $12,850,000 during the year ended December
31, 1998, respectively. As of December 31, 1999 approximately $14,500,000 of the
valuation allowance reflected above relates to the tax benefits of stock option
deductions which will be credited to equity when realized.
As of December 31, 1999, Juniper Networks had net operating loss
carryforwards for federal and state tax purposes of approximately $37,000,000
and $32,000,000, respectively. Juniper Networks also had federal and state
research and development tax credit carryforwards of approximately $1,700,000
and $1,700,000, respectively. The federal and state net operating loss
carryforwards will expire at various dates beginning in year 2004, if not
utilized.
Utilization of the net operating losses and tax credits may be subject to a
substantial annual limitation due to the ownership change limitations provided
by the Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses and tax credits
before utilization.
F-18
<PAGE> 105
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 106
APPENDIX -- DESCRIPTION OF GRAPHICS
PROSPECTUS COVER
Juniper Networks, Inc. Logo
PAGE 32
Diagram showing areas of bottleneck when packet/cell switching and fiber optic
technologies are deployed together. The left side of the diagram is labeled
"Electronic Packet/Cell Switching" above pictures of computers. To the right of
the diagram is the text "Electronic Packet/Cell Switching" above pictures of
servers which are labeled "Servers." Between these pictures are links labeled
"Fiber Optic Core" and the text "Bottleneck" at the edges of the Fiber Optic
Core links.
PAGE 34
Diagram showing a typical architecture for a service provider's network
backbone, including the placement of network routes, switches and access
concentration points. Diagram contains the text "Enterprise Routers," "DS3,"
"DS1," "DS0," "OC-12," "OC-3," "ATM," "OC-12 ATM or OC-12 SONET or OC-48 SONET,"
"Core Backbone," "Intra-POP," "Access," "Router," "Switch" and "Access
Concentration Point."
PAGE 37
Diagram showing traffic path between router points labeled "San Francisco" and
"New York." Below the diagram is a legend of icons in the diagram which are
labeled "Shortest path," "Traffic Engineered Path" and "Router."
PAGE 39
Diagram showing the JUNOS Routing Engine with the text "Forwarding Table"
contained in the diagram. Also includes a diagram below this diagram of the
Packet Forwarding Engine containing the text "Forwarding Table," "Internet
Processor," "Memory-based Switch Fabric" and "I/O Card."
PROSPECTUS BACK COVER
Juniper Networks, Inc. Logo
<PAGE> 107
- ---------------------------------------------------------
- ---------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the convertible notes offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................... 1
Risk Factors............................. 6
Note Regarding Forward-Looking
Statements............................. 17
How We Intend to Use the Proceeds from
this Offering.......................... 17
Price Range of Common Stock.............. 18
Dividend Policy.......................... 18
Capitalization........................... 19
Selected Consolidated Financial Data..... 20
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 22
Business................................. 31
Management............................... 48
Certain Transactions..................... 55
Principal Stockholders................... 57
Description of Convertible Notes......... 60
Description of Capital Stock............. 74
Certain United States Federal Income and
Estate Tax Consequences................ 75
Where You May Find Additional
Information............................ 81
Legal Matters............................ 81
Experts.................................. 81
Underwriting............................. 82
Index to Consolidated
Financial Statements................... F-1
</TABLE>
- ---------------------------------------------------------
- ---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
$500,000,000
JUNIPER NETWORKS, INC.
% Convertible Subordinated Notes due March 15, 2007
------------------
LOGO
------------------
GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON
ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
SG COWEN
WARBURG DILLON READ LLC
---------------------------------------------------------
---------------------------------------------------------
<PAGE> 108
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of the convertible notes being registered. All amounts are estimates except
the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $151,800
NASD filing fee............................................. 30,500
Printing and engraving expenses............................. 150,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 75,000
Blue sky fees and expenses.................................. 3,000
Trustee fees................................................ 20,000
Miscellaneous fees and expenses............................. 69,700
--------
Total.................................................. $800,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by current law.
Article Eighth of our Amended and Restated Certificate of Incorporation
provides for the indemnification of directors and officers to the fullest extent
permissible under Delaware law.
Article VI of our Bylaws provides for the indemnification of officers,
directors and third parties acting on behalf of Juniper Networks if such person
acted in good faith and in a manner reasonably believed to be in and not opposed
to our best interest, and, with respect to any criminal action or proceeding,
the indemnified party had no reason to believe his or her conduct was unlawful.
We have entered into indemnification agreements with our directors and
officers, in addition to indemnification provided for in our Bylaws, and intend
to enter indemnification agreements with any new directors and officers in the
future. The indemnification agreements may require us, among other things, to
indemnify our directors and officers against certain liabilities that may arise
by reason of their status or service as directors and officers (other than
liabilities arising from willful misconduct of culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors and officers insurance, if
available on reasonable terms.
Reference is also made to Section 8 of the Underwriting Agreement contained
in Exhibit 1.1 hereto, indemnifying officers and directors of Juniper Networks
against certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since inception, we have issued unregistered securities to a limited number
of persons as described below:
1. On February 6, 1996 we sold 4,050,000 shares of our common stock at
an aggregate purchase price of $8,910.00.
II-1
<PAGE> 109
2. On April 15, 1996 we sold 225,000 shares of our common stock for an
aggregate purchase price of $2,002.50.
3. On June 12, 1996 we sold 450,000 shares of our common stock for an
aggregate purchase price of $20,025.40.
4. From inception through June 30, 1999, we granted stock options and
restricted stock purchase rights to purchase an aggregate of 16,677,997
shares of our common stock at prices ranging from $0.11 to $28.00 per share
to employees, consultants and directors pursuant to our 1996 Stock Plan.
5. From inception through June 30, 1999, we issued and sold an
aggregate of 11,302,289 shares of our common stock to employees,
consultants and directors for an aggregate consideration of $6,492,421
pursuant to exercise of options granted under our 1996 Stock Plan.
6. From inception through June 30, 1999 we issued an aggregate of
111,283 shares of our common stock under our 1996 Stock Plan to consultants
in consideration for past services rendered for an aggregate value of
$74,365.00.
7. On June 11, 1996 we sold 1,743,751 shares of Series A Preferred
Stock for $1.00 per share to the following private investors for an
aggregate purchase price of $1,743,751: Kleiner Perkins Caulfield & Byers
Fund VII, KPBC Information Sciences Zaibatsu Fund II, Kleiner Perkins
Caulfield & Byers VII and WS Investment Company 96A.
8. On June 11, 1996 we sold 6,328,123 shares of common stock for $0.44
per share to a the following private investors for an aggregate purchase
price of $281,249.90: Kleiner Perkins Caulfield & Byers Fund VII, KPCB
Information Sciences Zaibatsu Fund II, Kleiner Perkins Caulfield & Byers
VII and WS Investments 96A.
9. On August 5, 1996 and November 18, 1996 we sold 3,818,017 shares of
Series B Preferred Stock for $2.40 per share to the following private
investors for an aggregate purchase price of $9,163,240.80: Benchmark
Capital Partners, L.P., Benchmark Founders' Fund, L.P., Crosspoint Venture
Partners 1996, Institutional Venture Management VII, L.P., IVP Founders
Fund I, L.P., Institutional Venture Partners VI, L.P., KPCB Informational
Sciences Zaibatsu Fund II, Kleiner Perkins Caulfield & Byers VII, Kriens
1996 Trust U/T/A October 29, 1996, McQuillan Consulting Self-Employed
Profit Sharing Plan, NEA Presidents Fund L.P., NEA Ventures 1996, L.P., New
Enterprise Associates VI, Limited Partnership, O'Brien Family Trust, U/T/A
dated 7/1/92, Larry Sonsini, Stensrud Family Trust U/T/A September 16, 1993
and WS Investment Company 96B.
10. On December 16, 1996, in connection with an equipment lease, we
issued a warrant to purchase 83,333 shares of our Series B Preferred Stock
at an exercise price of $2.40 per share to Venture Lending & Leasing, Inc..
11. On December 30, 1996 we issued 3,958 shares of Series B Preferred
Stock at $2.40 per share to William Gunning and Florin Oprescu as
consideration for past services rendered.
12. On June 18, 1997, in connection with a lease agreement, we issued
a warrant to purchase 10,000 shares of our Series B Preferred Stock at an
exercise price of $2.40 per share to Excite@Home, a lessor of real
property.
13. On July 1, 1997 and September 30, 1997 we sold 5,151,178 shares of
our Series C Preferred Stock at $8.93 per share to the following private
investors for an aggregate purchase price of $46,000,020: 3Com Corporation,
Anschutz Family Investment Company LLC, AT&T Venture Fund II., L.P.,
Crosspoint Venture Partners 1996, Ericsson Business
II-2
<PAGE> 110
Networks AB, Lucent Technologies Inc., Newbridge Networks Corporation,
Nortel Networks Corporation and UUNet Technologies, Inc.
14. On September 30, 1997, in connection with an equipment lease, we
issued a warrant to purchase 23,516 shares of our Series C Preferred Stock
at an exercise price of $8.93 per share to Venture Lending & Leasing, Inc.
15. On March 3, 1999 we issued 130,000 shares of common stock to an
employee at an exercise price of $9.90 per share pursuant to a restricted
stock purchase agreement.
16. On March 16, 1999 we sold 500,000 shares of our Series D Preferred
Stock and 2,580,000 shares of our Series D-1 Preferred Stock both for
$11.03 per share to Ericsson Business Networks AB for an aggregate purchase
price of $33,972,400.
For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Transactions" in the form of prospectus included herein.
Except as indicated above, none of the foregoing transactions involved any
underwriters, underwriting discounts or commissions or any public offering, and
we believe that each transaction was exempt from the registration requirements
of the Securities Act by virtue of Section 4(2) thereof, Regulation D
promulgated thereunder or Rule 701 pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients in such transactions represented their intention to acquire the
securities for investment only and not with a view to or for resale in
connection with any distribution thereof, and appropriate legends were affixed
to the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with us, to
information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1** Amended and Restated Certificate of Incorporation of the
Registrant
3.3 Amended and Restated Bylaws of the Registrant
4.1* Form of Registrant's Convertible Note
4.2** Third Amended and Restated Registration Rights Agreement
dated March 9, 1999
4.3 Form of Indenture by and between the Registrant and Norwest
Bank Minnesota, N.A.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati Professional
Corporation
10.1** Form of Indemnification Agreement entered into by the
Registrant with each of its directors, officers and certain
employees
10.2** Amended and Restated 1996 Stock Plan
10.3** 1999 Employee Stock Purchase Plan
10.4** Sublease between Trident Microsystems, Inc. and the
Registrant dated July 1, 1998
10.5** Sublease between At Home Corporation and the Registrant
dated June 4, 1998
10.6** Change of Control Agreement between Scott Kriens and the
Registrant dated October 1, 1996
10.7** Change of Control Agreement between Marcel Gani and the
Registrant dated February 18, 1997
</TABLE>
II-3
<PAGE> 111
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.8*** Agreement for ASIC Design and Purchase of Products between
IBM Microelectronics and the Registrant dated August 26,
1997
10.8.1*** Amendment One to Agreement for ASIC Design and Purchase of
Products between IBM Microelectronics and the Registrant
dated January 5, 1998
10.8.2*** Amendment Two to Agreement for ASIC Design and Purchase of
Products between IBM Microelectronics and the Registrant
dated March 2, 1998
10.9*** Standard Manufacturing Agreement between Solectron
California Corporation, Fine Pitch Technology Inc. and the
Registrant dated June 10, 1998
10.10** Lease between Mathilda Associates LLC and the Registrant
dated June 18, 1999
21.1**** Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Counsel. Reference is made to Exhibit 5.1.
23.3**** Consent of International Data Corporation
23.4**** Consent of Ryan, Hankin, Kent, Inc.
24.1 Power of Attorney (see page II-6)
25.1**** Form T-1 Statement of Eligibility of Trustee for Indenture
under the Trust Indenture Act of 1939.
27.1**** Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
** Incorporated by reference herein to the Registration Statement of Form S-1
and all amendments thereto filed with the Securities and Exchange
Commission on April 21, 1999 and declared effective June 24, 1999.
*** Confidential treatment requested and received as to certain portions. These
exhibits are incorporated by reference herein to the Registration Statement
of Form S-1 and all amendments thereto filed with the Securities and
Exchange Commission on April 21, 1999 and declared effective June 24, 1999.
**** Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
The following financial statement schedule of Juniper Networks is filed as
part of this Report and should be read in conjunction with the Financial
Statements of Juniper Networks.
<TABLE>
<CAPTION>
SCHEDULE DESCRIPTION
- -------- ---------------------------------
<S> <C>
II Valuation and Qualifying Accounts
</TABLE>
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification by us for liabilities arising under the
Securities Act may be permitted to our directors, officers and certain employees
pursuant to the provisions referenced in Item 14 of this Registration Statement
or otherwise, we have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act, and is, therefore unenforceable. In the event of a claim
for indemnification against such liabilities (other than the payment by us of
expenses incurred or paid by a director, officer or other covered employee of
Juniper Networks in the successful
II-4
<PAGE> 112
defense of any action, suit or proceeding) is asserted by a director, officer or
other covered employee in connection with the securities being registered
hereunder, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We hereby undertake that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance on Rule 430A and contained in a
form of Prospectus filed by us pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 113
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Mountain
View, State of California, on the twenty-third day of February, 2000.
JUNIPER NETWORKS, INC.
By: *
------------------------------------
Scott Kriens
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENT, that the persons whose signatures appear
below each severally constitutes and appoints Marcel Gani and Lisa C. Berry, and
each of them, as true and lawful attorneys-in-fact and agents, with full powers
of substitution and resubstitution, for them in their name, place and stead, in
any and all capacities, to sign any and all amendments (including pre-effective
and post-effective amendments) to this Registration Statement and to sign any
registration statement (and any post-effective amendments thereto) relating to
the same offering as this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, as amended and
to file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as they might or
could do in person, hereby ratifying and confirming all which said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do, or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* President, Chief Executive Officer February 23, 2000
- --------------------------------------------- and Chairman of the Board
Scott Kriens (Principal Executive Officer)
* Chief Financial Officer (Principal February 23, 2000
- --------------------------------------------- Financial and Accounting Officer)
Marcel Gani
* Chief Technical Officer and Vice February 23, 2000
- --------------------------------------------- Chairman of Board
Pradeep Sindhu
* Director February 23, 2000
- ---------------------------------------------
William R. Hearst III
* Director February 23, 2000
- ---------------------------------------------
Vinod Khosla
* Director February 23, 2000
- ---------------------------------------------
C. Richard Kramlich
* Director February 23, 2000
- ---------------------------------------------
William Stensrud
* /s/ LISA C. BERRY Attorney-in-Fact February 23, 2000
- ------------------------------------------
Lisa C. Berry
</TABLE>
II-6
<PAGE> 114
JUNIPER NETWORKS, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS END OF YEAR
----------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended December 31, 1999
Allowance for doubtful accounts................ $ -- $632 $ -- $632
Year ended December 31, 1998
Allowance for doubtful accounts................ $ -- $ -- $ -- $ --
Year ended December 31, 1997
Allowance for doubtful accounts................ $ -- $ -- $ -- $ --
</TABLE>
<PAGE> 115
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1** Amended and Restated Certificate of Incorporation of the
Registrant
3.3 Amended and Restated Bylaws of the Registrant
4.1* Form of Registrant's Convertible Note
4.2** Third Amended and Restated Registration Rights Agreement
dated March 9, 1999
4.3 Form of Indenture by and between the Registrant and Norwest
Bank Minnesota, N.A.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati Professional
Corporation
10.1** Form of Indemnification Agreement entered into by the
Registrant with each of its directors, officers and certain
employees
10.2** Amended and Restated 1996 Stock Plan
10.3** 1999 Employee Stock Purchase Plan
10.4** Sublease between Trident Microsystems, Inc. and the
Registrant dated July 1, 1998
10.5** Sublease between At Home Corporation and the Registrant
dated June 4,1998
10.6** Change of Control Agreement between Scott Kriens and the
Registrant dated October 1, 1996
10.7** Change of Control Agreement between Marcel Gani and the
Registrant dated February 18, 1997
10.8*** Agreement for ASIC Design and Purchase of Products between
IBM Microelectronics and the Registrant dated August 26,
1997
10.8.1*** Amendment One to Agreement for ASIC Design and Purchase of
Products between IBM Microelectronics and the Registrant
dated January 5, 1998
10.8.2*** Amendment Two to Agreement for ASIC Design and Purchase of
Products between IBM Microelectronics and the Registrant
dated March 2, 1998
10.9*** Standard Manufacturing Agreement between Solectron
California Corporation, Fine Pitch Technology Inc. and the
Registrant dated June 10, 1998
10.10** Lease between Mathilda Associates LLC and the Registrant
dated June 18, 1999
21.1**** Subsidiaries of Registrant
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2* Consent of Counsel. Reference is made to Exhibit 5.1.
23.3**** Consent of International Data Corporation
23.4**** Consent of Ryan, Hankin, Kent, Inc.
24.1 Power of Attorney (see page II-6)
25.1**** Form T-1 Statement of Eligibility of Trustee for Indenture
Under the Trust Indenture Act of 1939.
27.1**** Financial Data Schedule
</TABLE>
<PAGE> 116
- ---------------
* To be filed by amendment.
** Incorporated by reference herein to the Registration Statement of Form S-1
and all amendments thereto filed with the Securities and Exchange
Commission on April 21, 1999 and declared effective June 24, 1999.
*** Confidential treatment requested and received as to certain portions. These
exhibits are incorporated by reference herein to the Registration Statement
of Form S-1 and all amendments thereto filed with the Securities and
Exchange Commission on April 21, 1999 and declared effective June 24, 1999.
**** Previously filed.
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
JUNIPER NETWORKS, INC.
A DELAWARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I CORPORATE OFFICES......................................................................1
1.1 REGISTERED OFFICE.................................................................1
1.2 OTHER OFFICES.....................................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS..............................................................1
2.1 PLACE OF MEETINGS.................................................................1
2.2 ANNUAL MEETING....................................................................1
2.3 SPECIAL MEETING...................................................................1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS...................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................................3
2.7 QUORUM............................................................................3
2.8 ADJOURNED MEETING; NOTICE.........................................................4
2.9 VOTING............................................................................4
2.10 WAIVER OF NOTICE..................................................................4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING...........................4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.......................5
2.13 PROXIES...........................................................................5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE.............................................6
2.15 CONDUCT OF BUSINESS...............................................................6
ARTICLE III DIRECTORS............................................................................6
3.1 POWERS............................................................................6
3.2 NUMBER............................................................................7
3.3 CLASSES OF DIRECTORS..............................................................7
3.4 RESIGNATION AND VACANCIES.........................................................7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..........................................8
3.6 REGULAR MEETINGS..................................................................8
3.7 SPECIAL MEETINGS; NOTICE..........................................................8
3.8 QUORUM............................................................................9
3.9 WAIVER OF NOTICE..................................................................9
3.10 ADJOURNED MEETING; NOTICE.........................................................9
3.11 CONDUCT OF BUSINESS...............................................................9
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................................10
3.13 FEES AND COMPENSATION OF DIRECTORS...............................................10
3.14 REMOVAL OF DIRECTORS.............................................................10
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE IV COMMITTEES...........................................................................10
4.1 COMMITTEES OF DIRECTORS..........................................................10
4.2 COMMITTEE MINUTES................................................................11
4.3 MEETINGS AND ACTION OF COMMITTEES................................................11
ARTICLE V OFFICERS..............................................................................12
5.1 OFFICERS.........................................................................12
5.2 APPOINTMENT OF OFFICERS..........................................................12
5.3 REMOVAL AND RESIGNATION OF OFFICERS..............................................12
5.4 CHAIRMAN OF THE BOARD............................................................12
5.5 CHIEF EXECUTIVE OFFICER..........................................................13
5.6 PRESIDENT........................................................................13
5.7 VICE PRESIDENT...................................................................13
5.8 SECRETARY........................................................................13
5.9 CHIEF FINANCIAL OFFICER..........................................................14
5.10 ASSISTANT SECRETARY..............................................................14
5.11 AUTHORITY AND DUTIES OF OFFICERS.................................................15
ARTICLE VI INDEMNITY............................................................................15
6.1 THIRD PARTY ACTIONS..............................................................15
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION....................................15
6.3 SUCCESSFUL DEFENSE...............................................................16
6.4 DETERMINATION OF CONDUCT.........................................................16
6.5 PAYMENT OF EXPENSES IN ADVANCE...................................................16
6.6 INDEMNITY NOT EXCLUSIVE..........................................................16
6.7 INSURANCE INDEMNIFICATION........................................................17
6.8 THE CORPORATION..................................................................17
6.9 EMPLOYEE BENEFIT PLANS...........................................................17
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES......................17
ARTICLE VII RECORDS AND REPORTS.................................................................18
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................................18
7.2 INSPECTION BY DIRECTORS..........................................................18
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...................................18
ARTICLE VIII GENERAL MATTERS....................................................................19
8.1 CHECKS...........................................................................19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.................................19
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES...........................................19
8.4 SPECIAL DESIGNATION ON CERTIFICATES..............................................20
8.5 LOST CERTIFICATES................................................................20
8.6 CONSTRUCTION; DEFINITIONS........................................................20
8.7 DIVIDENDS........................................................................20
8.8 FISCAL YEAR......................................................................21
8.9 SEAL.............................................................................21
8.10 TRANSFER OF STOCK................................................................21
8.11 STOCK TRANSFER AGREEMENTS........................................................21
8.12 REGISTERED STOCKHOLDERS..........................................................21
ARTICLE IX AMENDMENTS...........................................................................22
ARTICLE X DISSOLUTION...........................................................................22
ARTICLE XI CUSTODIAN............................................................................22
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES......................................22
11.2 DUTIES OF CUSTODIAN..............................................................23
ARTICLE XII LOANS TO OFFICERS...................................................................23
</TABLE>
-iii-
<PAGE> 5
AMENDED AND RESTATED
BYLAWS
OF
JUNIPER NETWORKS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the Corporation shall be 1209 Orange Street, in
the City of Wilmington, County of New Castle, State of Delaware, 19801. The name
of the registered agent of the Corporation at such location is The Corporation
Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the Corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the Corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. At the meeting, directors shall
be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
(i) board of directors, (ii) the chairman of the board, (iii) the president, or
(iv) the chief executive officer.
Prior to such time as a Registration Statement regarding the sale of
the Corporation's Common Stock to the public is declared effective by the
Securities and Exchange Commission, a special meeting of the stockholders may be
called at any time by one or more stockholders holding a majority of the
outstanding voting shares.
If a special meeting is called by any person other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to
<PAGE> 6
be transacted, and shall be delivered personally or sent by registered mail or
by telegraphic or other facsimile transmission to the chairman of the board, the
president, any vice president, or the secretary of the corporation. No business
may be transacted at such special meeting otherwise than specified in such
notice. The officer receiving the request shall cause notice to be promptly
given to the stockholders entitled to vote, in accordance with the provisions of
Sections 2.4 and 2.5 of this Article II, that a meeting will be held at the time
requested by the person or persons who called the meeting, not less than
thirty-five (35) nor more than sixty (60) days after the receipt of the request.
If the notice is not given within twenty (20) days after the receipt of the
request, the person or persons requesting the meeting may give the notice.
Nothing contained in this paragraph of this Section 2.3 shall be construed as
limiting, fixing, or affecting the time when a meeting of stockholders called by
action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.6 of these Bylaws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER
BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely written notice and in
proper form of his intent to bring such business before such meeting. To be
timely, such stockholder's notice must be delivered to or mailed and received by
the secretary of the Corporation not less than one hundred twenty (120) days
prior to the date of the Corporation's proxy statement released to stockholders
in connection with the Corporation's previous year's annual meeting of
stockholders. To be in proper form, a stockholder's notice to the secretary
shall set forth:
(i) the name and address of the stockholder who intends to
make the nominations, propose the business, and, as the
case may be, the name and address of the person or
persons to be nominated or the nature of the business
to be proposed;
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(ii) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at
such meeting and, if applicable, intends to appear in
person or by proxy at the meeting to nominate the
person or persons specified in the notice or introduce
the business specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee
and any other person or persons (naming such person or
persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder
as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been
nominated, or intended to be nominated, or the matter
been proposed, or intended to be proposed by the board
of directors; and
(v) if applicable, the consent of each nominee to serve as
director of the Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of
any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the Corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (i) the chairman of the meeting, or
(ii) the stockholders entitled to vote thereat, present in person or represented
by proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
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When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provisions of the statutes or
of the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the Corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Sections 2.12 and 2.14 of
these Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the Certificate of Incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the Certificate of Incorporation or these Bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Notwithstanding the following provisions of this Section 2.11, effective
upon the listing of the Common Stock of the Corporation on the Nasdaq Stock
Market and the registration of any class of securities of the Corporation
pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the stockholders of the Corporation may not take action by written consent
without a meeting but must take any such actions at a duly called annual or
special meeting.
Except as otherwise provided in this Section 2.11, any action required
by this chapter to be taken at any annual or special meeting of stockholders of
a Corporation, or any action that may be taken at any annual or special meeting
of such stockholders, may be taken without a meeting, without prior notice, and
without a vote if a consent in writing, setting forth the action so taken, is
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signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action.
If the board of directors does not so fix a record date, the fixing of
such record date shall be governed by the provisions of Section 213 of the
General Corporation Law of Delaware.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the Corporation, but no such
proxy shall be voted or acted upon after 3 years from its date, unless the proxy
provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder
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or the stockholder's attorney-in-fact. The revocability of a proxy that states
on its face that it is irrevocable shall be governed by the provisions of
Section 212(c) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a Corporation shall
prepare and make, at least 10 days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The stock ledger shall
also be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders and
of the number of shares held by each such stockholder.
2.15 CONDUCT OF BUSINESS
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his absence by the president, or in his absence by a vice
president, or in the absence of the foregoing persons by a chairman designated
by the board of directors, or in the absence of such designation by a chairman
chosen at the meeting. The secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation of the manner of voting and conduct of business.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the Certificate of Incorporation or these Bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
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3.2 NUMBER
The authorized number of directors of the Corporation shall be six
(6). No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 CLASSES OF DIRECTORS
At such time as a Registration Statement regarding the sale of the
Corporation's Common Stock to the public is declared effective by the Securities
and Exchange Commission, the Directors shall be divided into three classes
designated as Class I, Class II and Class III, respectively. Directors shall be
assigned to each class in accordance with a resolution or resolutions adopted by
the Board of Directors. At the first annual meeting of stockholders following
the closing of the Initial Public Offering, the term of office of the Class I
Directors shall expire and Class I Directors shall be elected for a full term of
three years. At the second annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class II Directors
shall expire and Class II Directors shall be elected for a full term of three
years. At the third annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class III Directors shall
expire and Class III Directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, Directors shall be elected
for a full term of three years to succeed the Directors of the class whose terms
expire at such annual meeting.
Notwithstanding the foregoing provisions of this Article, each Director
shall serve until his successor is duly elected and qualified or until his
earlier death, resignation or removal. No decrease in the number of Directors
constituting the Board of Directors shall shorten the term of any incumbent
Director.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
Corporation. Stockholders may remove directors with or without cause. Any
vacancy occurring in the board of directors with or without cause may be filled
by a majority of the remaining members of the board of directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a meeting
of stockholders, and each director so elected shall hold office until the
expiration of the term of office of the director whom he has replaced.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(i) Vacancies and newly created directorships resulting
from any increase in the authorized number of directors
elected by all of the stockholders having the right to
vote as a single class may be filled by a majority of
the directors then in office, although less than a
quorum, or by a sole remaining director.
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(ii) Whenever the holders of any class or classes of stock
or series thereof are entitled to elect one or more
directors by the provisions of the Certificate of
Incorporation, vacancies and newly created
directorships of such class or classes or series may be
filled by a majority of the directors elected by such
class or classes or series thereof then in office, or
by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may apply to the Court of Chancery for a decree summarily
ordering an election as provided in Section 211 of the General Corporation Law
of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least 10% of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the Corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the Corporation. If the notice is mailed, it
shall be deposited in the United States mail at least 4 days before the time of
the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least 48 hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the Certificate of
Incorporation or these Bylaws.
3.10 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.11 CONDUCT OF BUSINESS
Meetings of the board of directors shall be presided over by the
chairman of the board, if any, or in his absence by the chief executive officer,
or in their absence by a chairman chosen at the meeting. The secretary shall act
as secretary of the meeting, but in his absence the chairman of the
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meeting may appoint any person to act as secretary of the meeting. The chairman
of any meeting shall determine the order of business and the procedures at the
meeting.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the Certificate of Incorporation or these
Bylaws, the board of directors shall have the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.14 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the Certificate of
Incorporation or by these Bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors. If at any time a class
or series of shares is entitled to elect one or more directors, the provisions
of this Article 3.14 shall apply to the vote of that class or series and not to
the vote of the outstanding shares as a whole.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the Corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the Bylaws of the Corporation, shall have and may
exercise
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all the powers and authority of the board of directors in the management of the
business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers that may require it; but no such
committee shall have the power or authority to (i) amend the Certificate of
Incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the Corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the Corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the Corporation or a revocation
of a dissolution, or (v) amend the Bylaws of the Corporation; and, unless the
board resolution establishing the committee, the Bylaws or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these Bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.6 (regular
meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum),
Section 3.9 (waiver of notice), Section 3.10 (adjournment and notice of
adjournment), Section 3.11 (conduct of business) and 3.12 (action without a
meeting), with such changes in the context of those Bylaws as are necessary to
substitute the committee and its members for the board of directors and its
members; provided, however, that the time of regular meetings of committees may
also be called by resolution of the board of directors and that notice of
special meetings of committees shall also be given to all alternate members, who
shall have the right to attend all meetings of the committee. The board of
directors may adopt rules for the government of any committee not inconsistent
with the provisions of these Bylaws.
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ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the Corporation shall be a chief executive officer, one
or more vice presidents, a secretary and a chief financial officer. The
Corporation may also have, at the discretion of the board of directors, a
chairman of the board, a president, a chief operating officer, one or more
executive, senior or assistant vice presidents, assistant secretaries and any
such other officers as may be appointed in accordance with the provisions of
Section 5.2 of these Bylaws. Any number of offices may be held by the same
person.
5.2 APPOINTMENT OF OFFICERS
Except as otherwise provided in this Section 5.2, the officers of the
Corporation shall be appointed by the board of directors, subject to the rights,
if any, of an officer under any contract of employment. The board of directors
may appoint, or empower an officer to appoint, such officers and agents of the
business as the Corporation may require (whether or not such officer or agent is
described in this Article V), each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these Bylaws or
as the board of directors may from time to time determine. Any vacancy occurring
in any office of the Corporation shall be filled by the board of directors or
may be filled by the officer, if any, who appointed such officer.
5.3 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors or, in the case of an officer appointed by
another officer, by such other officer.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
5.4 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these Bylaws. If there
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is no chief executive officer, then the chairman of the board shall also be the
chief executive officer of the Corporation and shall have the powers and duties
prescribed in Section 5.5 of these Bylaws.
5.5 CHIEF EXECUTIVE OFFICER
The Chief Executive Officer of the Corporation shall, subject to the
control of the Board of Directors, have general supervision, direction and
control of the business and the officers of the Corporation. He or she shall
preside at all meetings of the stockholders and, in the absence or nonexistence
of a Chairman of the Board at all meetings of the Board of Directors. He or she
shall have the general powers and duties of management usually vested in the
chief executive officer of a Corporation, including general supervision,
direction and control of the business and supervision of other officers of the
Corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
The Chief Executive Officer shall, without limitation, have the
authority to execute bonds, mortgages and other contracts requiring a seal,
under the seal of the Corporation, except where required or permitted by law to
be otherwise signed and executed and except where the signing and execution
thereof shall be expressly delegated by the Board of Directors to some other
officer or agent of the Corporation.
5.6 PRESIDENT
Subject to such supervisory powers as may be given by these Bylaws or
the Board of Directors to the Chairman of the Board or the Chief Executive
Officer, if there be such officers, the president shall have general
supervision, direction and control of the business and supervision of other
officers of the Corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or these Bylaws. In the event a Chief
Executive Officer shall not be appointed, the President shall have the duties of
such office.
5.7 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the chief executive officer and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the chief executive
officer. The vice presidents shall have such other powers and perform such other
duties as from time to time may be prescribed for them respectively by the board
of directors, these Bylaws, the chief executive officer or the chairman of the
board.
5.8 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the Corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall
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show the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required to be given by law or
by these Bylaws. He shall keep the seal of the Corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these Bylaws.
5.9 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the Corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all reasonable times
be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables
in the name and to the credit of the Corporation with such depositaries as may
be designated by the board of directors. He shall disburse the funds of the
Corporation as may be ordered by the board of directors, shall render to the
chief executive officer and directors, whenever they request it, an account of
all of his transactions as treasurer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these Bylaws.
5.10 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
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5.11 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
Corporation shall respectively have such authority and perform such duties in
the management of the business of the Corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by an agent of the Corporation), or is or was serving at
the request of the Corporation, any predecessor of the Corporation, or any
subsidiary of the Corporation, as a director or officer of another corporation,
partnership, joint venture trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, any predecessor
of the Corporation, or any subsidiary of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interest of the Corporation, any predecessor of the
Corporation, or any subsidiary of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
The Corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by an agent of the Corporation), or is or was serving at
the request of the Corporation, any predecessor of the Corporation, or any
subsidiary of the Corporation, as an employee or agent of another corporation,
partnership, joint venture trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, any predecessor
of the Corporation, or any subsidiary of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interest of the Corporation, any predecessor of the
Corporation, or any subsidiary of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation, any predecessor of the Corporation,
or any subsidiary of the Corporation, to procure a judgment in its favor by
reason of the fact that he is or was a director or officer of Corporation, any
predecessor of the Corporation, or any subsidiary of the Corporation, or is or
was serving at the request of the Corporation, any predecessor of the
Corporation, or any subsidiary of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, any predecessor
of the Corporation, or any subsidiary of the Corporation, and except
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that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the
Corporation, any predecessor of the Corporation, or any subsidiary of the
Corporation, unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper.
The Corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation, any predecessor of the Corporation,
or any subsidiary of the Corporation, to procure a judgment in its favor by
reason of the fact that he is or was an employee or agent of the Corporation,
any predecessor of the Corporation, or any subsidiary of the Corporation, or is
or was serving at the request of the Corporation, any predecessor of the
Corporation, or any subsidiary of the Corporation, as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorney's fees) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, any predecessor
of the Corporation, or any subsidiary of the Corporation, and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation, any
predecessor of the Corporation, or any subsidiary of the Corporation, unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
Corporation, any predecessor of the Corporation, or any subsidiary of the
Corporation, has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the Corporation only as authorized in the specific case
upon a determination that the indemnification of the director, officer, employee
or agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by the board of Directors or the Executive Committee by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) or if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights or limiting any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any by-law,
certificate of incorporation, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another while holding such office.
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6.7 INSURANCE INDEMNIFICATION
The Corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation, any predecessor of the Corporation, or any subsidiary of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the Corporation" shall
include, in addition to the resulting Corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
and subject to the provisions of this Article VI (including, without limitation
the provisions of Section 6.4) with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably deemed to have acted in a manner "not opposed to the best interests
of the Corporation" as referred to in this Article VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advanced of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The Corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
Corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the Corporation's stock
ledger, a list of its stockholders and its other books and records for a purpose
reasonably related to his position as a director. The Court of Chancery is
hereby vested with the exclusive jurisdiction to determine whether a director is
entitled to the inspection sought. The Court may summarily order the Corporation
to permit the director to inspect any and all books and records, the stock
ledger, and the stock list and to make copies or extracts therefrom. The Court
may, in its discretion, prescribe any limitations or conditions with reference
to the inspection, or award such other and further relief as the Court may deem
just and proper.
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the chief executive officer, any vice
president, the chief financial officer, the secretary or assistant secretary of
this Corporation, or any other person authorized by the board of directors or
the chief executive officer or a vice president, is authorized to vote,
represent, and exercise on behalf of this Corporation all rights incident to any
and all shares of any other corporation or corporations standing in the name of
this Corporation. The authority granted herein may be exercised either by such
person directly or by any other person authorized to do so by proxy or power of
attorney duly executed by such person having the authority.
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ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the Corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the Corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
Corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the Corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
Corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has to be such officer, transfer agent or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent or registrar at
the date of issue.
The Corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the Corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend
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on fully paid shares, the Corporation shall declare a dividend upon partly paid
shares of the same class, but only upon the basis of the percentage of the
consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the Corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and"or rights shall be set forth in full or
summarized on the face or back of the certificate that the Corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the Corporation shall issue to represent
such class or series of stock a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and"or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the Corporation and cancelled at the same time. The Corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a Corporation and a natural
person.
8.7 DIVIDENDS
The directors of the Corporation, subject to any restrictions contained
in the Certificate of Incorporation, may declare and pay dividends upon the
shares of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the Corporation's
capital stock.
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The directors of the Corporation may set apart out of any of the funds
of the Corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
Corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The Corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The Corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
Corporation to restrict the transfer of shares of stock of the Corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
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ARTICLE IX
AMENDMENTS
The original or other Bylaws of the Corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
Corporation may, in its Certificate of Incorporation, confer the power to adopt,
amend or repeal Bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal Bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the Corporation that the Corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the Corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the Corporation shall be dissolved.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the Corporation is insolvent, to be
receivers, of and for the Corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to
elect successors to directors whose terms have expired
or would have expired upon qualification of their
successors; or
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(ii) the business of the Corporation is suffering or is
threatened with irreparable injury because the
directors are so divided respecting the management of
the affairs of the Corporation that the required vote
for action by the board of directors cannot be obtained
and the stockholders are unable to terminate this
division; or
(iii) the Corporation has abandoned its business and has
failed within a reasonable time to take steps to
dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the Corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
ARTICLE XII
LOANS TO OFFICERS
The Corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the Corporation or of its
subsidiaries, including any officer or employee who is a Director of the
Corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation. The loan, guarantee or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Bylaw shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the Corporation at common law
or under any statute.
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EXHIBIT 4.3
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION................................1
SECTION 1.1 Definitions.........................................................1
SECTION 1.2 Compliance Certificates And Opinions................................9
SECTION 1.3 Form of Documents Delivered to the Trustee.........................10
SECTION 1.4 Acts of Holders of Securities......................................11
SECTION 1.5 Notices, Etc to the Trustee and Company............................13
SECTION 1.6 Notice to Holders of Securities; Waiver............................13
SECTION 1.7 Effect of Headings and Table of Contents...........................14
SECTION 1.8 Successors and Assigns.............................................14
SECTION 1.9 Separability Clause................................................14
SECTION 1.10 Benefits of Indenture..............................................14
SECTION 1.11 Governing Law......................................................14
SECTION 1.12 Legal Holidays.....................................................14
SECTION 1.13 Conflict With Trust Indenture Act..................................15
ARTICLE II SECURITY FORMS.......................................................................15
SECTION 2.1 Form Generally.....................................................15
SECTION 2.2 Form of Security...................................................16
SECTION 2.3 Form of Certificate of Authentication..............................28
SECTION 2.4 Form of Conversion Notice..........................................29
SECTION 2.5 Form of Assignment.................................................30
ARTICLE III THE SECURITIES......................................................................31
SECTION 3.1 Title and Terms....................................................31
SECTION 3.2 Denominations......................................................31
SECTION 3.3 Execution, Authentication, Delivery and Dating.....................32
SECTION 3.4 Global Securities; Non-global Securities; Book-entry
Provisions.........................................................32
SECTION 3.5 Registration; Registration of Transfer and Exchange;
Restrictions on Transfer...........................................34
SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Securities....................35
SECTION 3.7 Payment of Interest; Interest Rights Preserved.....................36
SECTION 3.8 Persons Deemed Owners..............................................37
SECTION 3.9 Cancellation.......................................................37
SECTION 3.10 Computation of Interest............................................37
SECTION 3.11 CUSIP Numbers......................................................37
ARTICLE IV SATISFACTION AND DISCHARGE...........................................................37
SECTION 4.1 Satisfaction And Discharge of Indenture............................37
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SECTION 4.2 Application of Trust Money.........................................39
ARTICLE V REMEDIES..............................................................................39
SECTION 5.1 Events of Default..................................................39
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.................41
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee............................................................42
SECTION 5.4 Trustee May File Proofs of Claim...................................42
SECTION 5.5 Trustee May Enforce Claims Without Possession of
Securities.........................................................43
SECTION 5.6 Application of Money Collected.....................................43
SECTION 5.7 Limitation on Suits................................................44
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert................................44
SECTION 5.9 Restoration of Rights and Remedies.................................45
SECTION 5.10 Rights and Remedies Cumulative.....................................45
SECTION 5.11 Delay or Omission Not Waiver.......................................45
SECTION 5.12 Control by Holders of Securities...................................45
SECTION 5.13 Waiver of Past Defaults............................................46
SECTION 5.14 Undertaking for Costs..............................................46
SECTION 5.15 Waiver of Stay, Usury or Extension Laws............................46
ARTICLE VI THE TRUSTEE..........................................................................47
SECTION 6.1 Certain Duties and Responsibilities................................47
SECTION 6.2 Notice of Defaults.................................................48
SECTION 6.3 Certain Rights of Trustee..........................................48
SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.............49
SECTION 6.5 May Hold Securities, Act as Trustee under Other
Indentures.........................................................49
SECTION 6.6 Money Held in Trust................................................49
SECTION 6.7 Compensation and Reimbursement.....................................50
SECTION 6.8 Corporate Trustee Required; Eligibility............................50
SECTION 6.9 Resignation and Removal; Appointment of Successor..................51
SECTION 6.10 Acceptance of Appointment by Successor.............................52
SECTION 6.11 Merger, Conversion, Consolidation or Succession to
Business...........................................................52
SECTION 6.12 Authenticating Agents..............................................53
SECTION 6.13 Disqualification; Conflicting Interests............................54
SECTION 6.14 Preferential Collection of Claims Against Company..................54
ARTICLE VII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE................................54
SECTION 7.1 Company May Consolidate, Etc.......................................54
SECTION 7.2 Successor Substituted..............................................55
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ARTICLE VIII SUPPLEMENTAL INDENTURES............................................................55
SECTION 8.1 Supplemental Indentures Without Consent of Holders of Securities...55
SECTION 8.2 Supplemental Indentures with Consent of Holders of Securities......56
SECTION 8.3 Execution of Supplemental Indentures...............................57
SECTION 8.4 Effect of Supplemental Indentures..................................57
SECTION 8.5 Reference in Securities to Supplemental Indentures.................58
SECTION 8.6 Notice of Supplemental Indentures..................................58
ARTICLE IX MEETINGS OF HOLDERS OF SECURITIES....................................................58
SECTION 9.1 Purposes for Which Meetings May Be Called..........................58
SECTION 9.2 Call, Notice and Place of Meetings.................................58
SECTION 9.3 Persons Entitled to Vote at Meetings...............................59
SECTION 9.4 Quorum; Action.....................................................59
SECTION 9.5 Determination of Voting Rights; Conduct and Adjournment
of Meetings........................................................59
SECTION 9.6 Counting Votes and Recording Action of Meetings....................60
ARTICLE X COVENANTS.............................................................................61
SECTION 10.1 Payment of Principal, Premium and Interest.........................61
SECTION 10.2 Maintenance of Offices or Agencies.................................61
SECTION 10.3 Money for Security Payments to Be Held in Trust....................62
SECTION 10.4 Existence..........................................................63
SECTION 10.5 Maintenance of Properties..........................................63
SECTION 10.6 Payment of Taxes and Other Claims..................................63
SECTION 10.7 Reserved...........................................................63
SECTION 10.8 Statement by Officers as to Default................................63
SECTION 10.9 Reserved...........................................................64
SECTION 10.10 Reserved...........................................................64
SECTION 10.11 Reserved...........................................................64
SECTION 10.12 Waiver of Certain Covenants........................................64
ARTICLE XI REDEMPTION OF SECURITIES.............................................................64
SECTION 11.1 Right of Redemption................................................64
SECTION 11.2 Applicability of Article...........................................65
SECTION 11.3 Election to Redeem; Notice to Trustee..............................65
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed..................65
SECTION 11.5 Notice of Redemption...............................................65
SECTION 11.6 Deposit of Redemption Price........................................66
SECTION 11.7 Securities Payable on Redemption Date..............................66
</TABLE>
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SECTION 11.8 Conversion Arrangement on Call for Redemption......................67
ARTICLE XII CONVERSION OF SECURITIES............................................................68
SECTION 12.1 Conversion Privilege and Conversion Rate...........................68
SECTION 12.2 Exercise of Conversion Privilege...................................68
SECTION 12.3 Fractions of Shares................................................69
SECTION 12.4 Adjustment of Conversion Rate......................................70
SECTION 12.5 Notice of Adjustments of Conversion Rate...........................74
SECTION 12.6 Notice of Certain Corporate Action.................................75
SECTION 12.7 Company to Reserve Common Stock....................................76
SECTION 12.8 Taxes on Conversions...............................................76
SECTION 12.9 Covenant as to Common Stock........................................76
SECTION 12.10 Cancellation of Converted Securities...............................76
SECTION 12.11 Provision in Case of Consolidation, Merger or Sale of
Assets.............................................................76
SECTION 12.12 Rights Issued in Respect of Common Stock...........................77
SECTION 12.13 Responsibility of Trustee for Conversion Provisions................78
ARTICLE XIII SUBORDINATION OF SECURITIES........................................................78
SECTION 13.1 Securities Subordinate to Senior Debt..............................78
SECTION 13.2 No Payment in Certain Circumstances, Payment over of Proceeds upon
Dissolution, Etc...................................................79
SECTION 13.3 Prior Payment to Senior Debt upon Acceleration of Securities.......81
SECTION 13.4 Payment Permitted If No Default....................................81
SECTION 13.5 Subrogation to Rights of Holders of Senior Debt....................81
SECTION 13.6 Provisions Solely to Define Relative Rights........................82
SECTION 13.7 Trustee to Effectuate Subordination................................82
SECTION 13.8 No Waiver of Subordination Provisions..............................82
SECTION 13.9 Notice to Trustee..................................................82
SECTION 13.10 Reliance on Judicial Order or Certificate of Liquidating Agent.....83
SECTION 13.11 Trustee Not Fiduciary for Holders of Senior Debt...................84
SECTION 13.12 Reliance by Holders of Senior Debt on Subordination Provisions.....84
SECTION 13.13 Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights...................................................84
SECTION 13.14 Article Applicable to Paying Agents................................84
SECTION 13.15 Certain Conversions and Repurchases Deemed Payment.................84
ARTICLE XIV REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL.......85
SECTION 14.1 Right to Require Repurchase........................................85
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SECTION 14.2 Conditions to the Company's Election to Pay the Repurchase Price
in Common Stock....................................................86
SECTION 14.3 Notices; Method of Exercising Repurchase Right, Etc................86
SECTION 14.4 Certain Definitions................................................89
SECTION 14.5 Consolidation, Merger, etc.........................................90
ARTICLE XV HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE.......................91
SECTION 15.1 Company to Furnish Trustee Names and Addresses of Holders..........91
SECTION 15.2 Preservation of Information........................................91
SECTION 15.3 Reserved...........................................................92
SECTION 15.4 Reports by Trustee.................................................92
SECTION 15.5 Reports by Company.................................................92
ARTICLE XVI IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS.....................92
SECTION 16.1 Indenture and Securities Solely Corporate Obligations..............92
</TABLE>
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INDENTURE, dated as of _________, 2000, between JUNIPER NETWORKS,
INC., a corporation duly organized and existing under the laws of the State of
Delaware, having its principal office at 385 Ravendale Drive, Mountain View,
California 94043 (herein called the "Company"), and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association organized under the laws of
the United States, as Trustee hereunder (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of its __%
Convertible Subordinated Notes due March 15, 2007 (herein called the
"Securities") of substantially the tenor and amount hereinafter set forth, and
to provide therefor the Company has duly authorized the execution and delivery
of this Indenture.
All things necessary to make the Securities, when the Securities are
executed by the Company and authenticated and delivered hereunder, the valid
obligations of the Company, and to make this Indenture a valid agreement of the
Company, in accordance with their and its terms, have been done. Further, all
things necessary to duly authorize the issuance of the Common Stock of the
Company issuable upon the conversion of the Securities, and to duly reserve for
issuance the number of shares of Common Stock issuable upon such conversion,
have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to them
in this Article and include the plural as well as the singular;
(2) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles in
the United States, and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles as are
generally accepted at the date of such computation; and
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(3) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
"Act", when used with respect to any Holder of a Security, has the meaning
specified in Section 1.4.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control", when used with respect to any specified Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Agent Member" means any member of, or participant in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or transaction
involving a Global Security or beneficial interest therein, the rules and
procedures of The Depository Trust Company or any successor Depository, in each
case to the extent applicable to such transaction and as in effect from time to
time.
"Authenticating Agent" means any Person authorized pursuant to Section
6.12 to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the Company or
any duly authorized committee of that board.
"Board Resolution" means a resolution duly adopted by the Board of
Directors, a copy of which, certified by the Secretary or an Assistant Secretary
of the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification, shall have been
delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, Place of
Conversion or any other place, as the case may be, means each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking institutions
in such Place of Payment, Place of Conversion or other place, as the case may
be, are authorized or obligated by law or executive order to close; provided,
however, that a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close shall not be a
Business Day for purposes of Section 13.9.
"Change in Control" has the meaning specified in Section 14.4(2).
"Closing Price Per Share" means, with respect to the Common Stock, for any
day, (i) the last reported sale price regular way on the Nasdaq National Market
or, (ii) if the Common Stock is not quoted on the Nasdaq National Market, the
last reported sale price regular way per share or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices
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regular way, in either case, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or (iii) if the Common
Stock is not quoted on the Nasdaq National Market or listed or admitted to
trading on any national securities exchange, the average of the closing bid
prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Company for that purpose.
"Code" has the meaning specified in Section 2.l.
"Commission" means the United States Securities and Exchange Commission,
as from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" means the Common Stock, par value $0.00001 per share, of
the Company authorized at the date of this instrument as originally executed.
Subject to the provisions of Section 12.11, shares issuable on conversion or
repurchase of Securities shall include only shares of Common Stock or shares of
any class or classes of common stock resulting from any reclassification or
reclassifications thereof; provided, however, that if at any time there shall be
more than one such resulting class, the shares so issuable on conversion of
Securities shall include shares of all such classes, and the shares of each such
class then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications bears
to the total number of shares of all such classes resulting from all such
reclassifications.
"common stock" includes any stock of any class of capital stock which has
no preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the issuer
thereof and which is not subject to redemption by the issuer thereof.
"Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person.
"Company Notice" has the meaning specified in Section 14.3.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its (i) Chairman of the Board, its Vice
Chairman of the Board, its Chief Executive Officer, its President, an Executive
Vice President or a Vice President, and by its (ii) Principal financial officer,
Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
"Constituent Person" has the meaning specified in Section 12.11.
"Conversion Agent" means any Person authorized by the Company to convert
Securities in accordance with Article XII. The Company has initially appointed
the Trustee as its Conversion Agent pursuant to Section 10.2 hereof.
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"Conversion Price" has the meaning specified in Section 14.4(3).
"Conversion Rate" has the meaning specified in Section 12.1.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time the trust created by this Indenture shall be principally
administered (which at the date of this Indenture is located at N9303-120, Sixth
Street and Marquette Avenue, Minneapolis, Minnesota 55479, Attention: Corporate
Trust Administration (Juniper Networks, Inc., __% Convertible Subordinated Notes
due March 15, 2007)).
"corporation" means a corporation, company, association, joint-stock
company or business trust.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to any Securities (including any Global
Securities), a clearing agency that is registered as such under the Exchange Act
and is designated by the Company to act as Depositary for such Securities (or
any successor securities clearing agency so registered).
"Designated Senior Debt" means the Company's obligations under any
particular Senior Debt in which the instrument creating or evidencing the same
or the assumption or guarantee thereof (or related agreements or documents to
which the Company is a party) expressly provides that such Senior Debt shall be
"Designated Senior Debt" for purposes of this Indenture (provided that such
instrument, agreement or other document may place limitations and conditions on
the right of such Senior Debt to exercise the rights of Designated Senior Debt).
"Distribution Date" shall mean the "Distribution Date" as such term is
defined in the Registration Rights Agreement.
"Dollar" or "U.S. $" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation.
"Effective Failure" has the meaning specified in Section 10.11.
"Effectiveness Period" has the meaning specified in Section 10.11.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the United States Securities Exchange Act of 1934 (or
any successor statute), as amended from time to time.
"Global Security" means a Security that is registered in the Security
Register in the name of a Depositary or a nominee thereof.
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"Holder" means the Person in whose name the Security is registered in the
Security Register.
"Indenture" means this instrument as originally executed or as it may from
time to time be supplemented or amended by one or more indentures supplemental
hereto entered into pursuant to the applicable provisions hereof, including, for
all purposes of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
this instrument and any such supplemental indenture, respectively.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Issue Date" means _________, 2000.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security becomes due and payable as therein or
herein provided, whether at the Stated Maturity or by declaration of
acceleration, call for redemption, exercise of the repurchase right set forth in
Article XIV or otherwise.
"Non-electing Share" has the meaning specified in Section 12.11.
"Notice of Default" has the meaning specified in Section 5.1.
"Officers' Certificate" means a certificate signed by (i) the Chairman of
the Board, a Vice Chairman of the Board, the Chief Executive Officer, the
President, an Executive Vice President or a Vice President and by (ii) the
principal financial officer, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, and delivered to the
Trustee. One of the Officers signing an Officers' Certificate given pursuant to
Section 10.8 shall be the principal executive, financial or accounting officer
of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of the date
of determination, all Securities theretofore authenticated and delivered under
this Indenture, except:
(i) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(ii) Securities for the payment or redemption of which money in
the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in
trust or set aside and segregated in trust by the Company
(if the Company shall act as its own Paying Agent) for the
Holders of such Securities, provided that if such
Securities are to be redeemed, notice of such redemption
has been duly given pursuant to this Indenture or provision
therefor satisfactory to the Trustee has been made;
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(iii) Securities which have been paid pursuant to Section 3.6 or
in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this
Indenture, other than any such Securities in respect of
which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona
fide purchaser in whose hands such Securities are valid
obligations of the Company; and
(iv) Securities converted into Common Stock pursuant to Article
XII;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities are present at a meeting of Holders
of Securities for quorum purposes or have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in relying upon any such determination as to the presence of a quorum or upon
any such request, demand, authorization, direction, notice, consent or waiver,
only Securities which a Responsible Officer of the Trustee has been notified in
writing to be so owned shall be so disregarded. Securities so owned which have
been pledged in good faith may be regarded as Outstanding if the pledgee is not
the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor, and the Trustee shall be protected in relying
upon an Officer's Certificate to such effect.
"Over-allotment Option" has the meaning specified in Section 3.1.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or interest on any Securities on behalf of the Company and, except
as otherwise specifically set forth herein, such term shall include the Company
if it shall act as its own Paying Agent. The Company has initially appointed the
Trustee as its Paying Agent pursuant to Section 10.2 hereof.
"Payment Blockage Notice" has the meaning specified in Section 13.2.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Conversion" has the meaning specified in Section 3.1.
"Place of Payment" has the meaning specified in Section 3.1.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 3.6 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
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"Press Release" means any press release issued by the Company and
disseminated to Reuters Business News Services and Bloomberg News Services.
"Record Date" means any Regular Record Date or Special Record Date.
"Record Date Period" means the period from the close of business of any
Regular Record Date next preceding any Interest Payment Date to the opening of
business on such Interest Payment Date.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be redeemed,
means the price at which it is to be redeemed pursuant to this Indenture.
"Regular Record Date" for interest payable in respect of any Security on
any Interest Payment Date means the March 1 or September 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
"Representative" means the (a) indenture trustee or other trustee, agent
or representative for any Senior Debt or (b) with respect to any Senior Debt
that does not have any such trustee, agent or other representative, (i) in the
case of such Senior Debt issued pursuant to an agreement providing for voting
arrangements as among the holders or owners of such Senior Debt, any holder or
owner of such Senior Debt acting with the consent of the required persons
necessary to bind such holders or owners of such Senior Debt and (ii) in the
case of all other such Senior Debt, the holder or owner of such Senior Debt.
"Repurchase Date" has the meaning specified in Section 14.1.
"Repurchase Price" has the meaning specified in Section 14.1.
"Responsible Officer", when used with respect to the Trustee, means any
officer within the Corporate Trust Office of the Trustee with direct
responsibility for the administration of this Indenture and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge and familiarity with the particular
subject.
"Securities" has the meaning ascribed to it in the first paragraph under
the caption "Recitals of the Company".
"Securities Act" means the United States Securities Act of 1933 (or any
successor statute), as amended from time to time.
"Security Register" and "Security Registrar" have the respective meanings
specified in Section 3.5.
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"Senior Debt" means the principal of (and premium, if any) and interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) on, and all fees and
other amounts payable in connection with, the following, whether absolute or
contingent, secured or unsecured, due or to become due, outstanding on the date
of this Indenture or thereafter created, incurred or assumed: (a) indebtedness
of the Company evidenced by a credit or loan agreement, note, bond, debenture or
other written obligation, (b) all obligations of the Company for money borrowed,
(c) all obligations of the Company evidenced by a note or similar instrument
given in connection with the acquisition of any businesses, properties or assets
of any kind, (d) obligations of the Company (i) as lessee under leases required
to be capitalized on the balance sheet of the lessee under generally accepted
accounting principles and (ii) as lessee under other leases for facilities,
capital equipment or related assets, whether or not capitalized, entered into or
leased for financing purposes, (e) all obligations of the Company under interest
rate and currency swaps, caps, floors, collars, hedge agreements, forward
contracts or similar agreements or arrangements, (f) all obligations of the
Company with respect to letters of credit, bankers' acceptances and similar
facilities (including reimbursement obligations with respect to the foregoing),
(g) all obligations of the Company issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable and accrued
liabilities arising in the ordinary course of business), (h) all obligations of
the type referred to in clauses (a) through (g) above of another Person and all
dividends of another Person, the payment of which, in either case, the Company
has assumed or guaranteed, or for which the Company is responsible or liable,
directly or indirectly, jointly or severally, as obligor, guarantor or
otherwise, or which is secured by a lien on the property of the Company, and (i)
renewals, extensions, modifications, replacements, restatements and refundings
of, or any indebtedness or obligation issued in exchange for, any such
indebtedness or obligation described in clauses (a) through (h) of this
paragraph; provided, however, that Senior Debt shall not include any such
indebtedness or obligation if the terms of such indebtedness or obligation (or
the terms of the instrument under which, or pursuant to which it is issued)
expressly provide that such indebtedness or obligation is not superior in right
of payment to the Securities.
"Significant Subsidiary" means, with respect to any Person, a Subsidiary
of such Person that would constitute a "significant subsidiary" as such term is
defined under Rule 1-02 of Regulation S-X under the Securities Act and the
Exchange Act.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Company pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such Security as
the fixed date on which the principal of such Security or such installment of
interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Company or by one or
more other Subsidiaries, or by the Company and one or more other Subsidiaries.
For the purposes of this definition, "voting stock" means stock or other similar
interests in the corporation which ordinarily has or have voting power
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for the election of directors, or persons performing similar functions, whether
at all times or only so long as no senior class of stock or other interests has
or have such voting power by reason of any contingency.
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 3.6 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"Trading Day" means (i) if the Common Stock is quoted on the Nasdaq
National Market or any other system of automated dissemination of quotations of
securities prices, days on which trades may be effected through such system,
(ii) if the Common Stock is listed or admitted for trading on any national or
regional securities exchange, days on which such national or regional securities
exchange is open for business, or (iii) if the Common Stock is not listed on a
national or regional securities exchange or quoted on the Nasdaq National Market
or any other system of automated dissemination of quotation of securities
prices, days on which the Common Stock is traded regular way in the
over-the-counter market and for which a closing bid and a closing asked price
for the Common Stock are available.
"Trust Indenture Act" means the Trust Indenture Act of 1939, and the rules
and regulations thereunder, as in force at the date as of which this instrument
was executed, provided, however, that in the event the Trust Indenture Act of
1939 is amended after such date, "Trust Indenture Act" means, to the extent
required by any such amendment, the Trust Indenture Act of 1939, and the rules
and regulations thereunder, as so amended.
"Trustee" means the Person named as the "Trustee" in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee" shall mean
such successor Trustee.
"Underwriters" means Goldman, Sachs & Co., Credit Suisse First Boston
Corporation, FleetBoston Robertson Stephens, Inc., Dain Rauscher
Incorporated, SG Cowen Securities Corporation and Warburg Dillon Read LLC.
"Underwriting Agreement" means the Underwriting Agreement, dated as of
_________, 2000, between the Company and the Underwriters, as such agreement may
be amended from time to time.
"United States" means the United States of America (including the States
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (its "possessions" including Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana
Islands).
SECTION 1.2 Compliance Certificates And Opinions.
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Upon any application or request by the Company to the Trustee to take any
action under any provision of this Indenture, the Company shall furnish to the
Trustee an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (including certificates provided for
in Section 10.8) shall include:
(1) a statement that each individual signing such certificate or opinion
has read such covenant or condition and the definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to the Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which such certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company or any other Person
stating that the information with respect to such factual matters is in the
possession of the Company or such other Person, unless such counsel knows, or in
the exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
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Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.4 Acts of Holders of Securities.
(1) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given or taken by
Holders of Securities may be embodied in and evidenced by (A) one or more
instruments of substantially similar tenor signed by such Holders in person or
by an agent or proxy duly appointed in writing by such Holders or (B) the record
of Holders of Securities voting in favor thereof, either in person or by proxies
duly appointed in writing, at any meeting of Holders of Securities duly called
and held in accordance with the provisions of Article IX. Such action shall
become effective when such instrument or instruments or record is delivered to
the Trustee and, where it is hereby expressly required, to the Company. The
Trustee shall promptly deliver to the Company copies of all such instruments and
records delivered to the Trustee. Such instrument or instruments and records
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders of Securities signing such instrument or
instruments and so voting at such meeting. Proof of execution of any such
instrument or of a writing appointing any such agent or proxy, or of the holding
by any Person of a Security, shall be sufficient for any purpose of this
Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and
the Company if made in the manner provided in this Section. The record of any
meeting of Holders of Securities shall be proved in the manner provided in
Section 9.6.
(2) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority.
(3) The principal amount and serial number of any Security held by any
Person, and the date of his holding the same, shall be proved by the Security
Register.
(4) The fact and date of execution of any such instrument or writing and
the authority of the Person executing the same may also be proved in any other
manner which the Trustee deems sufficient; and the Trustee may in any instance
require further proof with respect to any of the matters referred to in this
Section 1.4.
(5) The Company may set any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted by this Indenture to be given or taken by
Holders. Promptly and in any case not later than ten days after setting a record
date, the Company shall notify the Trustee and the Holders of such record date.
If not set by the Company prior to the first solicitation of a Holder made by
any Person in respect of any such action, or, in the case of any such vote,
prior to such vote, the record date for any such action or vote shall be the
30th
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<PAGE> 17
day (or, if later, the date of the most recent list of Holders required to be
provided pursuant to Section 15.1) prior to such first solicitation or vote, as
the case may be. With regard to any record date, the Holders on such date (or
their duly appointed agents or proxies), and only such Persons, shall be
entitled to give or take, or vote on, the relevant action, whether or not such
Holders remain Holders after such record date. Notwithstanding the foregoing,
the Company shall not set a record date for, and the provisions of this
paragraph shall not apply with respect to, any notice, declaration or direction
referred to in the next paragraph.
Upon receipt by the Trustee from any Holder of (i) any notice of default
or breach referred to in Section 5.1(4), if such default or breach has occurred
and is continuing and the Trustee shall not have given such a notice to the
Company, (ii) any declaration of acceleration referred to in Section 5.2, if an
Event of Default has occurred and is continuing and the Trustee shall not have
given such a declaration to the Company, or (iii) any direction referred to in
Section 5.12, if the Trustee shall not have taken the action specified in such
direction, then, with respect to clauses (ii) and (iii), a record date shall
automatically and without any action by the Company or the Trustee be set for
determining the Holders entitled to join in such declaration or direction, which
record date shall be the close of business on the tenth day (or, if such day is
not a Business Day, the first Business Day thereafter) following the day on
which the Trustee receives such declaration or direction, and, with respect to
clause (i), the Trustee may set any day as a record date for the purpose of
determining the Holders entitled to join in such notice of default. Promptly
after such receipt by the Trustee of any such declaration or direction referred
to in clause (ii) or (iii), and promptly after setting any record date with
respect to clause (i), and as soon as practicable thereafter, the Trustee shall
notify the Company and the Holders of any such record date so fixed. The Holders
on such record date (or their duly appointed agents or proxies), and only such
Persons, shall be entitled to join in such notice, declaration or direction,
whether or not such Holders remain Holders after such record date; provided
that, unless such notice, declaration or direction shall have become effective
by virtue of Holders of the requisite principal amount of Securities on such
record date (or their duly appointed agents or proxies) having joined therein on
or prior to the 90th day after such record date, such notice, declaration or
direction shall automatically and without any action by any Person be canceled
and of no further effect. Nothing in this paragraph shall be construed to
prevent a Holder (or a duly appointed agent or proxy thereof) from giving,
before or after the expiration of such 90-day period, a notice, declaration or
direction contrary to or different from, or, after the expiration of such
period, identical to, the notice, declaration or direction to which such record
date relates, in which event a new record date in respect thereof shall be set
pursuant to this paragraph. In addition, nothing in this paragraph shall be
construed to render ineffective any notice, declaration or direction of the type
referred to in this paragraph given at any time to the Trustee and the Company
by Holders (or their duly appointed agents or proxies) of the requisite
principal amount of Securities on the date such notice, declaration or direction
is so given.
(6) Except as provided in Sections 5.12 and 5.13, any request, demand,
authorization, direction, notice, consent, election, waiver or other Act of the
Holder of any Security shall bind every future Holder of the same Security and
the Holder of every Security issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof in respect of anything done,
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<PAGE> 18
omitted or suffered to be done by the Trustee or the Company in reliance
thereon, whether or not notation of such action is made upon such Security.
(7) The provisions of this Section 1.4 are subject to the provisions of
Section 9.5.
SECTION 1.5 Notices, Etc to the Trustee and Company.
Any request, demand, authorization, direction, notice, consent, election,
waiver or other Act of Holders of Securities or other document provided or
permitted by this Indenture to be made upon, given or furnished to, or filed
with,
(1) the Trustee by any Holder of Securities or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed in
writing to or with a Responsible Officer of the Trustee and received at its
Corporate Trust Office, Attention: Corporate Trust Administration (Juniper
Networks, Inc., __% Convertible Subordinated Notes due March 15, 2007).
(2) the Company by the Trustee or by any Holder of Securities shall be
sufficient for every purpose hereunder (unless otherwise herein expressly
provided) if in writing, mailed, first-class postage prepaid, or telecopied and
confirmed by mail, first-class postage prepaid, or delivered by hand or
overnight courier, addressed to the Company at 385 Ravendale Drive, Mountain
View, California 94043, Attention: General Counsel, or at any other
address previously furnished in writing to the Trustee by the Company.
SECTION 1.6 Notice to Holders of Securities; Waiver.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of Securities of any event, such notice shall be
sufficiently given to Holders if in writing and mailed, first-class postage
prepaid or delivered by an overnight delivery service, to each Holder of a
Security affected by such event, at the address of such Holder as it appears in
the Security Register, not earlier than the earliest date and not later than the
latest date prescribed for the giving of such notice.
Neither the failure to mail such notice, nor any defect in any notice so
mailed, to any particular Holder of a Security shall affect the sufficiency of
such notice with respect to other Holders of Securities. In case by reason of
the suspension of regular mail service or by reason of any other cause it shall
be impracticable to give such notice by mail, then such notification to Holders
of Securities as shall be made with the approval of the Trustee, which approval
shall not be unreasonably withheld, shall constitute a sufficient notification
to such Holders for every purpose hereunder.
Such notice shall be deemed to have been given when such notice is mailed.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver
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<PAGE> 19
shall be the equivalent of such notice. Waivers of notice by Holders of
Securities shall be filed with the Trustee, but such filing shall not be a
condition precedent to the validity of any action taken in reliance upon such
waiver.
SECTION 1.7 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.8 Successors and Assigns.
All covenants and agreements in this Indenture by the Company shall bind
its successors and assigns, whether so expressed or not.
SECTION 1.9 Separability Clause.
In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.10 Benefits of Indenture.
Except as provided in the next sentence, nothing in this Indenture or in
the Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors assigns hereunder and the Holders of
Securities, any benefit or legal or equitable right, remedy or claim under this
Indenture. The provisions of Article XIII are intended to be for the benefit of,
and shall be enforceable directly by, the holders of Senior Debt.
SECTION 1.11 Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 1.12 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Repurchase
Date or Stated Maturity of any Security or the last day on which a Holder of a
Security has a right to convert his Security shall not be a Business Day at a
Place of Payment or Place of Conversion, as the case may be, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal of, premium, if any, or interest on, or the payment of the
Redemption Price or Repurchase Price (whether the same is payable in cash or in
shares of Common Stock in the case of the Repurchase Price) with respect to, or
delivery for conversion of, such Security need not be made at such Place of
Payment or Place of Conversion, as the case may be, on or by such day, but may
be
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<PAGE> 20
made on or by the next succeeding Business Day at such Place of Payment or Place
of Conversion, as the case may be, with the same force and effect as if made on
the Interest Payment Date, Redemption Date or Repurchase Date, or at the Stated
Maturity or by such last day for conversion; provided, however, that in the case
that payment is made on such succeeding Business Day, no interest shall accrue
on the amount so payable for the period from and after such Interest Payment
Date, Redemption Date, Repurchase Date, Stated Maturity or last day for
conversion, as the case may be.
SECTION 1.13 Conflict With Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a provision of
the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
Until such time as this Indenture shall be qualified under the Trust Indenture
Act, this Indenture, the Company and the Trustee shall be deemed for all
purposes hereof to be subject to and governed by the Trust Indenture Act to the
same extent as would be the case if this Indenture were so qualified on the date
hereof.
ARTICLE II
SECURITY FORMS
SECTION 2.1 Form Generally.
The Securities shall be in substantially the form set forth in this
Article, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by this Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange, the Internal Revenue Code of 1986, as amended, and
regulations thereunder (the "Code"), or as may, consistent herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof. All Securities shall be in fully registered form.
The Trustee's certificates of authentication shall be in substantially the
form set forth in Section 2.3.
Conversion notices shall be in substantially the form set forth in Section
2.4.
Repurchase notices shall be substantially in the form set forth in Section
2.2.
The Securities shall be printed, lithographed, typewritten or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any automated quotation system or securities
exchange (including on steel engraved borders if so required by any securities
exchange upon which the Securities may be listed) on which the Securities may be
quoted or listed, as the case may be, all as determined by the officers
executing such Securities, as evidenced by their execution thereof.
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<PAGE> 21
SECTION 2.2 Form of Security.
[FORM OF FACE]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL SECURITY:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A
NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND
ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE
INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY.]
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<PAGE> 22
JUNIPER NETWORKS, INC.
__% CONVERTIBLE SUBORDINATED NOTE DUE MARCH 15, 2007
No. ___________ $________
___________
CUSIP NO. __________
JUNIPER NETWORKS, INC., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture referred to on the reverse
hereof), for value received, hereby promises to pay to _________________, or
registered assigns, the principal sum of ________ United States Dollars
(U.S.$______ ) [IF THIS SECURITY IS A GLOBAL SECURITY, THEN INSERT -- (which
principal amount may from time to time be increased or decreased to such other
principal amounts (which, taken together with the principal amounts of all other
Outstanding Securities, shall not exceed $500,000,000 (or $575,000,000 if the
Over-allotment Option is exercised in full) by adjustments made on the records
of the Trustee hereinafter referred to in accordance with the Indenture)] on
March 15, 2007 and to pay interest thereon, from _________, 2000, or from the
most recent Interest Payment Date (as defined below) to which interest has been
paid or duly provided for, semi-annually in arrears on March 15 and September 15
in each year (each, an "Interest Payment Date"), commencing September 15, 2000,
at the rate of __% per annum, until the principal hereof is due, and at the rate
of __% per annum on any overdue principal and premium, if any, and, to the
extent permitted by law, on any overdue interest. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment Date will, as
provided in the Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall be the March 1 or
September 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Except as otherwise provided in the Indenture, any
such interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on such Regular Record Date and may either be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Company, notice
whereof shall be given to Holders of Securities not less than 10 days prior to
the Special Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any automated quotation system or
securities exchange on which the Securities may be quoted or listed, and upon
such notice as may be required by such exchange, all as more fully provided in
the Indenture. Payments of principal shall be made upon the surrender of this
Security at the option of the Holder at the Corporate Trust Office of the
Trustee, or at such other office or agency of the Company as may be designated
by it for such purpose in the Borough of Manhattan, The City of New York, in
such lawful monies of the United States of America as at the time of payment
shall be legal tender for the payment of public and private debts, or at such
other offices or agencies as the Company may designate, by United States Dollar
check drawn on, or wire transfer to, a United States Dollar account (such a
transfer to be made only to a Holder of an aggregate
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<PAGE> 23
principal amount of Securities in excess of U.S.$2,000,000 and only if such
Holder shall have furnished wire instructions in writing to the Trustee no later
than 15 days prior to the relevant payment date). Payment of interest on this
Security may be made by United States Dollar check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register,
or, upon written application by the Holder to the Security Registrar setting
forth wire instructions not later than the relevant Record Date, by transfer to
a United States Dollar account (such a transfer to be made only to a Holder of
an aggregate principal amount of Securities in excess of U.S. $2,000,000 and
only if such Holder shall have furnished wire instructions in writing to the
Trustee no later than 15 days prior to the relevant payment date).
Except as specifically provided herein and in the Indenture, the Company
shall not be required to make any payment with respect to any tax, assessment or
other governmental charge imposed by any government or any political subdivision
or taxing authority thereof or therein.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof or an Authenticating Agent by the
manual signature of one of their respective authorized signatories, this
Security shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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<PAGE> 24
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed.
JUNIPER NETWORKS, INC.
By:
-------------------------------
Name:
Title:
Attest:
By:
------------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
Dated:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION
as Trustee
By:
-------------------------------------
Authorized Signatory
<PAGE> 25
[FORM OF REVERSE]
This Security is one of a duly authorized issue of securities of the
Company designated as its "__% Convertible Subordinated Notes due March 15,
2007" (herein called the "Securities"), limited in aggregate principal amount to
U.S. [$500,000,000] or if the Over-allotment Option is exercised in full, up to
[$575,000,000], issued and to be issued under an Indenture, dated as of
_________, 2000 (herein called the "Indenture"), between the Company and Norwest
Bank Minnesota, National Association, as Trustee (herein called the "Trustee",
which term includes any successor trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Trustee, the holders of Senior Debt and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered. As provided in the Indenture and subject
to certain limitations therein set forth, Securities are exchangeable for a like
aggregate principal amount of Securities of any authorized denominations as
requested by the Holder surrendering the same upon surrender of the Security or
Securities to be exchanged, at the Corporate Trust Office of the Trustee. The
Trustee upon such surrender by the Holder will issue the new Securities in the
requested denominations.
No sinking fund is provided for the Securities. The Securities will not be
subject to redemption until on or after the third Business Day after March 15,
2003 and will be redeemable on and after that date at the option of the Company,
in whole or in part, upon not less than 30 nor more than 60 days notice to the
Holders prior to the Redemption Date at the Redemption Prices (expressed as
percentages of the principal amount) set forth below.
The following table sets forth the Redemption Prices (expressed as percentages
of the principal amount) if such Security is redeemed during the 12-month period
beginning March 15 (beginning the third Business Day after March 15, 2003
through March 14, 2004 in the case of the first such period):
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2003 %
2004
2005
2006
</TABLE>
and thereafter at a Redemption Price equal to 100% of the principal amount,
together, in each case, with accrued interest to the Redemption Date; provided,
however, that interest installments on Securities whose Stated Maturity is on or
prior to such Redemption Date will be payable to the Holders of such Securities,
or one or more Predecessor Securities, of record at the close of business on the
relevant Record Dates referred to on the face hereof, all as provided in the
Indenture.
In the event of a redemption of the Securities, the Company will not be
required (a) to register the transfer or exchange of Securities for a period of
15 days immediately preceding the date
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<PAGE> 26
notice is given identifying the serial numbers of the Securities called for such
redemption or (b) to register the transfer or exchange of any Security, or
portion thereof, called for redemption.
In any case where the due date for the payment of the principal of,
premium, if any, or interest on, any Security or the last day on which a Holder
of a Security has a right to convert his Security shall be, at any Place of
Payment or Place of Conversion as the case may be, a day on which banking
institutions at such Place of Payment or Place of Conversion are authorized or
obligated by law or executive order to close, then payment of principal,
premium, if any, interest, or delivery for conversion of such Security need not
be made on or by such date at such place but may be made on or by the next
succeeding day at such place which is not a day on which banking institutions
are authorized or obligated by law or executive order to close, with the same
force and effect as if made on the date for such payment or the date fixed for
redemption or repurchase, or by such last day for conversion, and no interest
shall accrue on the amount so payable for the period after such date.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time on or before the
close of business on the date of Maturity, or in case this Security or a portion
hereof is called for redemption or the Holder hereof has exercised his right to
require the Company to repurchase this Security or such portion hereof, then in
respect of this Security until the Business Day immediately preceding, but
(unless the Company defaults in making the payment due upon redemption or
repurchase, as the case may be) not after, the close of business on the Business
Day immediately preceding the Redemption Date or the Repurchase Date, as the
case may be, to convert this Security (or any portion of the principal amount
hereof that is an integral multiple of U.S.$1,000, provided that the unconverted
portion of such principal amount is U.S.$1,000 or any integral multiple of
U.S.$1,000 in excess thereof) into fully paid and nonassessable shares of Common
Stock of the Company at an initial Conversion Rate of ______ shares of Common
Stock for each U.S.$1,000 principal amount of Securities (or at the current
adjusted Conversion Rate if an adjustment has been made as provided in the
Indenture) by surrender of this Security, duly endorsed or assigned to the
Company or in blank and, in case such surrender shall be made during the period
from the close of business on any Regular Record Date next preceding any
Interest Payment Date to the opening of business on such Interest Payment Date
(except if this Security or portion thereof has been called for redemption on a
Redemption Date or is repurchasable on a Repurchase Date occurring, in either
case, during such period and, as a result, the right to convert this Security
would otherwise terminate in such period if not exercised), also accompanied by
payment in New York Clearing House or other funds acceptable to the Company of
an amount equal to the interest payable on such Interest Payment Date on the
principal amount of this Security then being converted, and also the conversion
notice hereon duly executed, to the Company at the Corporate Trust Office of the
Trustee, or at such other office or agency of the Company, subject to any laws
or regulations applicable thereto and subject to the right of the Company to
terminate the appointment of any Conversion Agent (as defined below) as may be
designated by it for such purpose in the Borough of Manhattan, The City of New
York, or at such other offices or agencies as the Company may designate (each a
"Conversion Agent"), provided, further, that if this Security or portion hereof
has been called for redemption on a Redemption Date or is repurchasable on a
Repurchase Date occurring, in either case, during the period from the close
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<PAGE> 27
of business on any Regular Record Date next preceding any Interest Payment Date
to the opening of business on such succeeding Interest Payment Date, and as a
result, the right to convert this Security would otherwise terminate in such
period if not exercised and this Security is surrendered for conversion during
such period, then the Holder of this Security on such Regular Record Date will
be entitled to receive the interest accruing hereon from the Interest Payment
Date next preceding the date of such conversion to such succeeding Interest
Payment Date and the Holder of this Security who converts this Security or a
portion hereof during such period shall not be required to pay such interest
upon surrender of this Security for conversion. Subject to the provisions of the
preceding sentence and, in the case of a conversion after the close of business
on the Regular Record Date next preceding any Interest Payment Date and on or
before the close of business on such Interest Payment Date, to the right of the
Holder of this Security (or any Predecessor Security) of record as of such
Regular Record Date to receive the related installment of interest to the extent
and under the circumstances provided in the Indenture, no cash payment or
adjustment is to be made on conversion for interest accrued hereon from the
Interest Payment Date next preceding the day of conversion, or for dividends on
the Common Stock issued on conversion hereof. The Company shall thereafter
deliver to the Holder the fixed number of shares of Common Stock (together with
any cash adjustment, as provided in the Indenture) into which this Security is
convertible and such delivery will be deemed to satisfy the Company's obligation
to pay the principal amount of this Security. No fractions of shares or scrip
representing fractions of shares will be issued on conversion, but instead of
any fractional interest (calculated to the nearest 1/100th of a share) the
Company shall pay a cash adjustment as provided in the Indenture. The Conversion
Rate is subject to adjustment as provided in the Indenture. In addition, the
Indenture provides that in case of certain consolidations or mergers to which
the Company is a party (other than a consolidation or merger that does not
result in any reclassification, conversion, exchange or cancellation of the
Common Stock) or the conveyance, transfer, sale or lease of all or substantially
all of the property and assets of the Company, the Indenture shall be amended,
without the consent of any Holders of Securities, so that this Security, if then
Outstanding, will be convertible thereafter, during the period this Security
shall be convertible as specified above, only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, transfer, sale or lease by a holder of the number of shares of
Common Stock of the Company into which this Security could have been converted
immediately prior to such consolidation, merger, conveyance, transfer, sale or
lease (assuming such holder of Common Stock is not a Constituent Person or an
Affiliate of a Constituent Person, failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality of
Non-electing Shares. No adjustment in the Conversion Rate will be made until
such adjustment would require an increase or decrease of at least one percent of
such rate, provided that any adjustment that would otherwise be made will be
carried forward and taken into account in the computation of any subsequent
adjustment.
If a Change in Control occurs, the Holder of this Security, at the
Holder's option, shall have the right, in accordance with the provisions of the
Indenture, to require the Company to repurchase this Security (or any portion of
the principal amount hereof that is at least $1,000 or an integral multiple of
$1,000 in excess thereof, provided that the portion of the principal amount of
this Security to be Outstanding after such repurchase is at least equal to
U.S.$1,000) for cash at a Repurchase Price equal to 100% of the principal amount
thereof plus interest accrued to the
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<PAGE> 28
Repurchase Date. At the option of the Company, the Repurchase Price may be paid
in cash or, subject to the conditions provided in the Indenture, by delivery of
shares of Common Stock having a fair market value equal to the Repurchase Price.
For purposes of this paragraph, the fair market value of shares of Common Stock
shall be determined by the Company and shall be equal to 95% of the average of
the Closing Prices Per Share for the five consecutive Trading Days immediately
preceding and including the third Trading Day prior to the Repurchase Date.
Whenever in this Security there is a reference, in any context, to the principal
of any Security as of any time, such reference shall be deemed to include
reference to the Repurchase Price payable in respect of such Security to the
extent that such Repurchase Price is, was or would be so payable at such time,
and express mention of the Repurchase Price in any provision of this Security
shall not be construed as excluding the Repurchase Price so payable in those
provisions of this Security when such express mention is not made; provided,
however, that, for the purposes of the second succeeding paragraph, such
reference shall be deemed to include reference to the Repurchase Price only to
the extent the Repurchase Price is payable in cash.
[THE FOLLOWING PARAGRAPH SHALL APPEAR IN EACH GLOBAL SECURITY:
In the event of a deposit or withdrawal of an interest in this Security,
including an exchange, transfer, redemption, repurchase or conversion of this
Security in part only, the Trustee, as custodian of the Depositary, shall make
an adjustment on its records to reflect such deposit or withdrawal in accordance
with the Applicable Procedures.]
[THE FOLLOWING PARAGRAPH SHALL APPEAR IN EACH SECURITY THAT IS NOT A
GLOBAL SECURITY:
In the event of redemption, repurchase or conversion of this Security in
part only, a new Security or Securities for the unredeemed, unrepurchased or
unconverted portion hereof will be issued in the name of the Holder hereof.]
The indebtedness evidenced by this Security is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of payment to
the prior payment in full of all Senior Debt of the Company, and this Security
is issued subject to such provisions of the Indenture with respect thereto. Each
Holder of this Security, by accepting the same, (a) agrees to and shall be bound
by such provisions, (b) authorizes and directs the Trustee on his behalf to take
such action as may be necessary or appropriate to effectuate the subordination
so provided and (c) appoints the Trustee his attorney-in-fact for any and all
such purposes.
If an Event of Default shall occur and be continuing, the principal of all
the Securities, together with accrued interest to the date of declaration, may
be declared due and payable in the manner and with the effect provided in the
Indenture. Upon payment (i) of the amount of principal so declared due and
payable, together with accrued interest to the date of declaration, and (ii) of
interest on any overdue principal and, to the extent permitted by applicable
law, overdue interest, all of the Company's obligations in respect of the
payment of the principal of and interest on the Securities shall terminate.
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<PAGE> 29
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities under the Indenture at
any time by the Company and the Trustee with either (a) the written consent of
the Holders of not less than a majority in principal amount of the Securities at
the time Outstanding, or (b) by the adoption of a resolution, at a meeting of
Holders of the Outstanding Securities at which a quorum is present, by the
Holders of at least 66-2/3% in aggregate principal amount of the Outstanding
Securities represented and entitled to vote at such meeting. The Indenture also
contains provisions permitting the Holders of specified percentages in principal
amount of the Securities at the time Outstanding, on behalf of the Holders of
all the Securities, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture and their
consequences. Any such consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Security and of any Security issued in exchange therefore or in lieu hereof
whether or not notation of such consent or waiver is made upon this Security or
such other Security.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default, the Holders of not less
than 25% in principal amount of the Outstanding Securities shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity and the
Trustee shall not have received from the Holders of a majority in principal
amount of the Securities Outstanding a direction inconsistent with such request,
and shall have failed to institute any such proceeding, for 60 days after
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for the enforcement
of any payment of principal hereof, premiums if any, or interest hereon on or
after the respective due dates expressed herein or for the enforcement of the
right to convert this Security as provided in the Indenture.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest on this Security at the times, places and rate, and in the coin or
currency, herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable on the Security Register
upon surrender of this Security for registration of transfer at the Corporate
Trust Office of the Trustee or at such other office or agency of the Company as
may be designated by it for such purpose in the Borough of Manhattan, The City
of New York (which shall initially be an office or agency of the Trustee), or at
such other offices or agencies as the Company may designate, duly endorsed by,
or accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing, and thereupon one or more new Securities,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees by the Registrar. No service
charge shall be made for any such
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<PAGE> 30
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to recover any tax or other governmental charge payable in
connection therewith.
Prior to due presentation of a this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered, as the owner thereof for
all purposes, whether or not such Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
No recourse for the payment of the principal (and premium, if any) or
interest on this Security and no recourse under or upon any obligation, covenant
or agreement of the Company in the Indenture or any indenture supplemental
thereto or in any Security, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
employee, agent, officer or director or subsidiary, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any assessment or
penalty or otherwise, all such liability being, by the acceptance hereof and as
part of consideration for the issue hereof, expressly waived and released.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF AMERICA,
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
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<PAGE> 31
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Security, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C> <C>
TEN COM as tenant in common UNIF GIFT MIN ACT ____ Custodian _______
TEN ENT as tenants by the entireties (Cust) (Cust) (Minor)
JT TEN as joint tenants with right under Uniform Gifts to Minors Act _____
of survivorship and not as (State)
tenants in common
</TABLE>
Additional abbreviations may also be used though not in the above list.
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<PAGE> 32
ELECTION OF HOLDER TO REQUIRE REPURCHASE
(1) Pursuant to Section 14.1 of the Indenture, the undersigned hereby
elects to have this Security repurchased by the Company.
(2) The undersigned hereby directs the Trustee or the Company to pay it or
______________ an amount in cash or, at the Company's election, Common Stock
valued as set forth in the Indenture, equal to 100% of the principal amount to
be repurchased (as set forth below), plus interest accrued to the Repurchase
Date, as provided in the Indenture.
Dated:
- --------------------------------------
- --------------------------------------
Signature(s)
Signature(s) must be guaranteed by an
Eligible Guarantor Institution with
membership in an approved signature
guarantee program pursuant to Rule 17Ad-15
under the Securities Exchange Act of 1934.
- --------------------------------------
Signature Guaranteed
Principal amount to be repurchased (at least
U.S. $1,000 or an integral multiple of $1,000
in excess thereof): ___________________
Remaining principal amount following such
repurchase (not less than U.S. $1,000):
- -------------------------
NOTICE: The signature to the foregoing Election must correspond to the Name as
written upon the face of this Security in every particular, without alteration
or any change whatsoever.
SECTION 2.3 Form of Certificate of Authentication.
The Trustee's certificate of authentication shall be in substantially the
following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
------------------
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<PAGE> 33
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Trustee
By:
------------------------------
Authorized Signatory
SECTION 2.4 Form of Conversion Notice.
CONVERSION NOTICE
The undersigned Holder of this Security hereby irrevocably exercises the
option to convert this Security, or any portion of the principal amount hereof
(which is U.S. $1,000 or an integral multiple of U.S. $1,000 in excess thereof,
provided that the unconverted portion of such principal amount is U.S. $1,000 or
any integral multiple of U.S. $1,000 in excess thereof) below designated, into
shares of Common Stock in accordance with the terms of the Indenture referred to
in this Security, and directs that such shares, together with a check in payment
for any fractional share and any Securities representing any unconverted
principal amount hereof, be delivered to and be registered in the name of the
undersigned unless a different name has been indicated below. If shares of
Common Stock or Securities are to be registered in the name of a Person other
than the undersigned, (a) the undersigned will pay all transfer taxes payable
with respect thereto and (b) signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an approved signature guarantee program
pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934. Any amount
required to be paid by the undersigned on account of interest accompanies this
Security.
Dated:
------------ ----------------------------------------------
Signature(s)
If shares or Securities are to be registered in the name of a Person other than
the Holder, please print such Person's name and address:
- --------------------------------------
(Name)
- --------------------------------------
- --------------------------------------
(Address)
- --------------------------------------
Social Security or other Identification
Number, if any
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<PAGE> 34
- --------------------------------------
[Signature Guaranteed]
If only a portion of the Securities is to be converted, please indicate:
1. Principal amount to be converted: U.S. $ ___________
2. Principal amount and denomination of Securities
representing unconverted principal amount to be issued:
Amount: U.S. $___________ Denominations: U.S. $____________
(U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof,
provided that the unconverted portion of such principal amount is U.S. $1,000
or any integral multiple of U.S. $1,000 in excess thereof)
SECTION 2.5 Form of Assignment.
For value received ________________ hereby sell(s), assign(s) and
transfer(s) unto ________________ (Please insert social security or other
identifying number of assignee) the within Security, and hereby irrevocably
constitutes and appoints ____________________as attorney to transfer the said
Security on the books of the Company, with full power of substitution in the
premises.
Dated:
------------ ----------------------------------------------
--------------------------------------
Signature(s)
Signature(s) must be guaranteed by an
Eligible Guarantor Institution with
membership in an approved signature
guarantee program pursuant to Rule
17Ad - 15 under the Securities
Exchange Act of 1934.
--------------------------------------
Signature Guaranteed
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<PAGE> 35
ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is limited to U.S. $500,000,000 (or
$575,000,000 if the Over-allotment Option set forth in Section 2 of the
Underwriting Agreement is exercised in full (the "Over-allotment Option")),
except for Securities authenticated and delivered pursuant to Section 3.4, 3.5,
3.6, 8.5, 12.2 or 14.3(5) in exchange for, or in lieu of, other Securities
previously authenticated and delivered under this Indenture.
The Securities shall be known and designated as the "__% Convertible
Subordinated Notes due March 15, 2007" of the Company. Their Stated Maturity
shall be March 15, 2007 and they shall bear interest on their principal amount
from __________, 2000, payable semi-annually in arrears on March 15 and
September 15 in each year, commencing September 15, 2000, at the rate of __% per
annum until the principal thereof is due and at the rate of __% per annum on any
overdue principal and, to the extent permitted by law, on any overdue interest;
provided, however, that payments shall only be made on a Business Day as
provided in Section 1.12.
The principal of, premium, if any, and interest on the Securities shall be
payable as provided in the form of Securities set forth in Section 2.2, and the
Repurchase Price, whether payable in cash or in shares of Common Stock, shall be
payable at such places as are identified in the Company Notice given pursuant to
Section 14.3 (any city in which any Paying Agent is located being herein called
a "Place of Payment").
The Securities shall be redeemable at the option of the Company at any
time on or after the third Business Day after March 15, 2003, in whole or in
part, subject to the conditions and as otherwise provided in Article XI and in
the form of Security set forth in Section 2.2.
The Securities shall be convertible as provided in Article XII (any city
in which any Conversion Agent is located being herein called a "Place of
Conversion").
The Securities shall be subordinated in right of payment to Senior Debt of
the Company as provided in Article XIII.
The Securities shall be subject to repurchase by the Company at the option
of the Holders as provided in Article XIV.
SECTION 3.2 Denominations.
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<PAGE> 36
The Securities shall be issuable only in registered form, without coupons,
in denominations of U.S. $1,000 and integral multiples of U.S. $1,000 in excess
thereof.
SECTION 3.3 Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by its Chairman
of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its
President, one of its Executive Vice Presidents or one of its Vice Presidents,
and attested by its Chief Financial Officer, Secretary or one of its Assistant
Secretaries. Any such signature may be manual or facsimile.
Securities bearing the manual or facsimile signature of individuals who
were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities executed by the Company to the
Trustee or to its order for authentication, together with a Company Order for
the authentication and delivery of such Securities, and the Trustee in
accordance with such Company Order shall authenticate and make available for
delivery such Securities as in this Indenture provided.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature of an authorized signatory, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered
hereunder.
SECTION 3.4 Global Securities; Non-global Securities; Book-entry Provisions.
(1) Global Securities
(i) Each Global Security authenticated under this Indenture shall
be registered in the name of the Depositary designated by the Company for such
Global Security or a nominee thereof and delivered to such Depositary or a
nominee thereof or custodian therefor, and each such Global Security shall
constitute a single Security for all purposes of this Indenture.
(ii) Except for exchanges of Global Securities for definitive,
Non-global Securities at the sole discretion of the Company, no Global Security
may be exchanged in whole or in part for Securities registered, and no transfer
of a Global Security in whole or in part may be registered, in the name of any
Person other than the Depositary for such Global Security or a nominee thereof
unless (A) such Depositary (i) has notified the Company that it is unwilling or
unable to continue as Depositary for such Global Security or (ii) has ceased to
be a clearing agency registered as such under the Exchange Act or announces an
intention permanently to cease business
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<PAGE> 37
or does in fact do so or (B) there shall have occurred and be continuing an
Event of Default with respect to such Global Security. In such event, if a
successor Depositary for such Global Security is not appointed by the Company
within 90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company will execute, and the Trustee, upon receipt of an
Officers' Certificate directing the authentication and delivery of Securities,
will authenticate and deliver, Securities, in any authorized denominations in an
aggregate principal amount equal to the principal amount of such Global Security
in exchange for such Global Security.
(iii) If any Global Security is to be exchanged for other
Securities or canceled in whole, it shall be surrendered by or on behalf of the
Depositary or its nominee to the Trustee, as Security Registrar, for exchange or
cancellation, as provided in this Article III. If any Global Security is to be
exchanged for other Securities or canceled in part, or if another Security is to
be exchanged in whole or in part for a beneficial interest in any Global
Security, in each case, as provided in Section 3.5, then either (A) such Global
Security shall be so surrendered for exchange or cancellation, as provided in
this Article III, or (B) the principal amount thereof shall be reduced or
increased by an amount equal to the portion thereof to be so exchanged or
canceled, or equal to the principal amount of such other Security to be so
exchanged for a beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Trustee, as Security
Registrar, whereupon the Trustee, in accordance with the Applicable Procedures,
shall instruct the Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Security, the Trustee shall, subject to Section 3.5(3) and as
otherwise provided in this Article III, authenticate and deliver any Securities
issuable in exchange for such Global Security (or any portion thereof) to or
upon the order of, and registered in such names as may be directed by, the
Depositary or its authorized representative. Upon the request of the Trustee in
connection with the occurrence of any of the events specified in the preceding
paragraph, the Company shall promptly make available to the Trustee a reasonable
supply of Securities that are not in the form of Global Securities. The Trustee
shall be entitled to rely upon any order, direction or request of the Depositary
or its authorized representative which is given or made pursuant to this Article
III if such order, direction or request is given or made in accordance with the
Applicable Procedures.
(iv) Every Security authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Security or any
portion thereof, whether pursuant to this Article III or otherwise, shall be
authenticated and delivered in the form of, and shall be, a registered Global
Security, unless such Security is registered in the name of a Person other than
the Depositary for such Global Security or a nominee thereof, in which case such
Security shall be authenticated and delivered in definitive, fully registered
form, without interest coupons.
(v) The Depositary or its nominee, as registered owner of a
Global Security, shall be the Holder of such Global Security for all purposes
under the Indenture and the Securities, and owners of beneficial interests in a
Global Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be effected only through,
records maintained
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<PAGE> 38
by the Depositary or its nominee or its Agent Members and such owners of
beneficial interests in a Global Security will not be considered the owners or
holders thereof.
(2) Non-global Securities. Securities issued upon the events described
in Section 3.4(l)(ii) shall be in definitive, fully registered form, without
interest coupons.
SECTION 3.5 Registration; Registration of Transfer and Exchange; Restrictions on
Transfer.
(1) The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office referred to as
the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Securities and
of transfers of Securities. The Trustee is hereby appointed "Security Registrar"
for the purpose of registering Securities and transfers and exchanges of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at an office
or agency of the Company designated pursuant to Section 10.2 for such purpose,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of any authorized denominations and of a like aggregate principal amount.
At the option of the Holder, and subject to the other provisions of this
Section 3.5, Securities may be exchanged for other Securities of any authorized
denomination and of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at any such office or agency. Whenever any Securities
are so surrendered for exchange, and subject to the other provisions of this
Section 3.5, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive. Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Security Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt and entitled to the same benefits under this Indenture as the Securities
surrendered upon such registration of transfer or exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Securities except as provided in Section 3.6, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Securities, other than exchanges pursuant to Section
3.4, 8.5, 12.2 or 14.3 (other than where the shares of Common Stock are to be
issued or delivered in a name other than that of the Holder of the Security) not
involving any transfer and other than any stamp and other duties, if any, which
may be imposed in connection with any such transfer or exchange by the United
States or any political subdivision thereof or therein, which shall be paid by
the Company.
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<PAGE> 39
In the event of a redemption of the Securities, neither the Company nor
the Securities Registrar will be required (a) to register the transfer of or
exchange Securities for a period of 15 days immediately preceding the date
notice is given identifying the serial numbers of the Securities called for such
redemption or (b) to register the transfer of or exchange any Security, or
portion thereof, called for redemption.
SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there be delivered to the Company and to the Trustee:
(1) evidence to their satisfaction of the destruction, loss or theft of
any Security, and
(2) such security or indemnity as may be satisfactory to the Company and
the Trustee to save each of them and any agent of either of them harmless, then,
in the absence of actual notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of like tenor and principal amount and bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion, but
subject to any conversion rights, may, instead of issuing a new Security, pay
such Security, upon satisfaction of the conditions set forth in the preceding
paragraph.
Upon the issuance of any new Security under this Section 3.6, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto (other than any
stamp and other duties, if any, which may be imposed in connection therewith by
the United States or any political subdivision thereof or therein, which shall
be paid by the Company) and any other expenses (including the fees and expenses
of the Trustee) connected therewith.
Every new Security issued pursuant to this Section 3.6 in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and such new Security shall be entitled to all the benefits of this Indenture
equally and proportionately with any and all other Securities duly issued
hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies of any Holder with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Securities.
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<PAGE> 40
SECTION 3.7 Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date (herein called "Defaulted
Interest") shall forthwith cease to be payable to the Holder on the relevant
Regular Record Date by virtue of having been such Holder, and such Defaulted
Interest may be paid by the Company, at its election in each case, as provided
in Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security, the date of the
proposed payment and the Special Record Date, and at the same time the Company
shall deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. The Special Record Date for the payment of such Defaulted Interest
shall be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at such Holder's address as it
appears in the Security Register, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on such Special
Record Date and shall no longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 3.5, each
Security delivered under this Indenture upon registration of transfer of or in
exchange for or in lieu of any other Security shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Security.
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<PAGE> 41
Interest on any Security which is converted in accordance with Section
12.2 during a Record Date Period shall be payable in accordance with the
provisions of Section 12.2.
SECTION 3.8 Persons Deemed Owners.
Prior to due presentment of a Security for registration of transfer, the
Company, the Trustee, any Paying Agent and any agent of the Company, the Trustee
or any Paying Agent may treat the Person in whose name such Security is
registered as the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 3.7) interest on such
Security and for all other purposes whatsoever, whether or not such Security be
overdue, and neither the Company, the Trustee, any Paying Agent nor any agent of
the Company, the Trustee or any Paying Agent shall be affected by notice to the
contrary.
SECTION 3.9 Cancellation.
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered to any
Person other than the Trustee, be delivered to the Trustee. All Securities so
delivered to the Trustee shall be canceled promptly by the Trustee (or its
agent). No Securities shall be authenticated in lieu of or in exchange for any
Securities canceled as provided in this Section 3.9. The Trustee shall dispose
of all canceled Securities in accordance with applicable law and its customary
practices in effect from time to time.
SECTION 3.10 Computation of Interest.
Interest on the Securities shall be computed on the basis of a 360-day
year of twelve 30-day months.
SECTION 3.11 CUSIP Numbers.
The Company in issuing Securities may use "CUSIP" numbers (if then
generally in use) in addition to serial numbers; if so, the Trustee shall use
such CUSIP numbers in addition to serial numbers in notices of redemption and
repurchase as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness of such CUSIP numbers
either as printed on the Securities or as contained in any notice of a
redemption or repurchase and that reliance may be placed only on the serial or
other identification numbers printed on the Securities, and any such redemption
or repurchase shall not be affected by any defect in or omission of such CUSIP
numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction And Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of conversion, or registration of transfer or
exchange, or replacement of Securities
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herein expressly provided for and in the form of Securities set forth in Section
2.2 and the Company's obligations to the Trustee pursuant to Section 6.7), and
the Trustee, at the expense of the Company, shall execute proper instruments in
form and substance satisfactory to the Trustee acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(i) all Securities theretofore authenticated and delivered (other
than (A) Securities which have been destroyed, lost or stolen and which have
been replaced or paid as provided in Section 3.6 and (B) Securities for whose
payment money has theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or discharged from
such trust, as provided in Section 10.3) have been delivered to the Trustee for
cancellation; or
(ii) all such Securities not theretofore delivered to the Trustee
or its agent for cancellation (other than Securities referred to in clauses (A)
and (B) of clause (1)(i) above)
(a) have become due and payable, or
(b) will have become due and payable at their Stated Maturity
within one year, or
(c) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of redemption
by the Trustee in the name, and at the expense, of the Company, and the Company,
in the case of clause (a), (b) or (c) above, has deposited or caused to be
deposited with the Trustee as trust funds (immediately available to the Holders
in the case of clause (a)) in trust for the purpose an amount in cash sufficient
to pay and discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal, premium, if any, and
interest to the date of such deposit (in the case of Securities which have
become due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture have
been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.7, the obligations of
the Company to any Authenticating Agent under Section 6.12, if money shall have
been deposited with the Trustee pursuant to clause (1)(ii) of this Section 4.1,
the obligations of the Trustee under Section 4.2 and the last paragraph of
Section 10.3 and the obligations of the Company and the Trustee under Section
3.5 and Article XII
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shall survive. Funds held in trust pursuant to this Section are not subject to
the provisions of Article XIII.
SECTION 4.2 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.3, all money
or property deposited with the Trustee pursuant to Section 4.1 and in accordance
with the provisions of Article XIII shall be held in trust for the sole benefit
of the Holders and not be subject to the subordination provisions of Article
XIII, and such monies shall be applied by the Trustee, in accordance with the
provisions of the Securities and this Indenture, to the payment, either directly
or through any Paying Agent, to the Persons entitled thereto, of the principal,
premium, if any, and interest for whose payment such money has been deposited
with the Trustee.
All moneys deposited with the Trustee pursuant to Section 4.1 (and held by
it or any Paying Agent) for the payment of Securities subsequently converted
shall be returned to the Company upon Company Request.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed or assessed against all money deposited with the Trustee
pursuant to Section 4.1 (other than income taxes and franchise taxes incurred or
payable by the Trustee and such other taxes, fees or charges incurred or payable
by the Trustee that are not directly the result of the deposit of such money
with the Trustee).
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
occasioned by the provisions of Article XIII or be voluntary or involuntary or
be effected by operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of the principal of or premium, if any, on any
Security at its Maturity, whether or not such payment is prohibited by the
subordination provisions of the Securities or of this Indenture; or
(2) default in the payment of any interest upon any Security when it
becomes due and payable, and continuance of such default for a period of 30
days, whether or not such payment is prohibited by the subordination provisions
of the Securities or of this Indenture; or
(3) failure by the Company to give a Company Notice in accordance with
Section 14.3 whether or not such Company Notice is prohibited by the
subordination provisions of the Securities or the Indenture; or
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(4) default in the performance, or breach, of any covenant or warranty of
the Company in this Indenture (other than a covenant or warranty a default in
the performance or breach of which is specifically dealt with elsewhere in this
Section), and continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice specifying such
default or breach and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(5) any indebtedness under any bonds, debentures, notes or other evidences
of indebtedness for money borrowed (or guarantee thereof) by the Company or any
Significant Subsidiary or under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
indebtedness for money borrowed by the Company or any Significant Subsidiary (an
"Instrument") with an aggregate principal amount in excess of U.S. $25,000,000,
whether such indebtedness now exists or shall hereafter be created, is not paid
at final maturity under any Instrument (either at its stated maturity or upon
acceleration thereof), and such indebtedness is not discharged, or such
acceleration is not rescinded or annulled, within a period of 30 days after
there shall have been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the Holders of at least 25% in
principal amount of the Outstanding Securities a written notice specifying such
default and requiring the Company to cause such indebtedness to be discharged or
cause such default to be cured or waived or such acceleration to be rescinded or
annulled and stating that such notice is a "Notice of Default" hereunder; or
(6) the entry by a court having jurisdiction in the premises of (A) a
decree or order for relief in respect of the Company or any Significant
Subsidiary in an involuntary case or proceeding under any applicable Federal or
State bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company or any Significant Subsidiary a bankrupt
or insolvent, or approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company or any
Significant Subsidiary under any applicable Federal or State law, or appointing
a custodian, receiver, liquidator, assignee, trustee, sequestrator or other
similar official of the Company or any Significant Subsidiary or of any
substantial part of the property of either, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a period of
60 consecutive days; or
(7) the commencement by the Company or any Significant Subsidiary of a
voluntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by either
to the entry of a decree or order for relief in respect of the Company or any
Significant Subsidiary in an involuntary case or proceeding under any applicable
Federal or State bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
either, or the filing by either of a petition or answer or consent seeking
reorganization or similar relief under any applicable Federal or State law, or
the consent by either to the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the
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Company or any Significant Subsidiary or of any substantial part of the property
of either, or the making by either of an assignment for the benefit of
creditors, or the admission by either in writing of its inability to pay its
debts generally as they become due, or the taking of corporate action by the
Company or any Significant Subsidiary in furtherance of any such action.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.1(6) or 5.1(7) with respect to the Company) occurs and is continuing,
then in every such case the Trustee or the Holders of not less than 25% in
principal amount of the Outstanding Securities may, subject to the provisions of
Article XIII, declare the principal of all the Securities to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by the Holders), and upon any such declaration such principal and all accrued
interest thereon shall become immediately due and payable. If an Event of
Default specified in Section 5.1(6) or 5.1(7) with respect to the Company
occurs, the principal of, and accrued interest on, all the Securities shall,
subject to the provisions of Article XIII, ipso facto become immediately due and
payable without any declaration or other Act of the Holders or any act on the
part of the Trustee.
At any time after such declaration of acceleration has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V provided, the Holders of a majority
in principal amount of the Outstanding Securities, by written notice to the
Company and the Trustee, may, on behalf of all Holders, rescind and annul such
declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a sum sufficient
to pay
(i) all overdue interest on all Securities,
(ii) the principal of and premium, if any, on any Securities
which have become due otherwise than by such declaration of acceleration and any
interest thereon at the rate borne by the Securities,
(iii) to the extent permitted by applicable law, interest upon
overdue interest at a rate of __% per annum, and
(iv) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
(2) all Events of Default, other than the nonpayment of the principal of
and any premium and interest on, Securities which have become due solely by such
declaration of acceleration, have been cured or waived as provided in Section
5.13; and
(3) such rescission and annulment would not conflict with any judgment or
decree issued in appropriate judicial proceedings regarding the payment by the
Trustee to the Holders of the amounts referred to in 5.2(1).
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No rescission or annulment referred to above shall affect any subsequent
default or impair any right consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if:
(1) default is made in the payment of any interest on any Security when it
becomes due and payable and such default continues for a period of 30 days, or
(2) default is made in the payment of the principal of or premium, if
any, on any Security at the Maturity thereof,
the Company will, upon demand of the Trustee but subject to the provisions of
Article XIII pay to it, for the benefit of the Holders of such Securities the
whole amount then due and payable on such Securities for principal and interest
and interest on any overdue principal and premium, if any, and, to the extent
permitted by applicable law, on any overdue interest, at a rate of __% per
annum, and in addition thereto, such further amount as shall be sufficient to
cover the reasonable costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon the Securities, wherever
situated.
If an Event of Default occurs and is continuing, the Trustee may in its
discretion proceed to protect and enforce its rights and the rights of the
Holders of Securities by such appropriate judicial proceedings as the Trustee
shall deem most effectual to protect and enforce any such rights, whether for
the specific enforcement of any covenant or agreement in this Indenture or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy.
SECTION 5.4 Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or the
creditors of either, the Trustee (irrespective of whether the principal of, and
any interest on, the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand on the Company for the payment of overdue principal
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
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(1) to file and prove a claim for the whole amount of principal, premium,
if any, and interest owing and unpaid in respect of the Securities and take such
other actions, including participating as a member, voting or otherwise, of any
official committee of creditors appointed in such matter, and to file such other
papers or documents, in each of the foregoing cases, as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel) and of the Holders of Securities allowed in
such judicial proceeding, and
(2) to collect and receive any moneys or other property payable or
deliverable on any such claim and to distribute the same; and any custodian,
receiver, assignee, trustee, liquidator, sequestrator or other similar official
in any such judicial proceeding is hereby authorized by each Holder of
Securities to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders of
Securities to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel and any other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of a Security
any plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder of a Security in any such proceeding;
provided, however, that the Trustee may, on behalf of such Holders, vote for the
election of a trustee in bankruptcy or similar official.
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities.
All rights of action and claims under this Indenture or the Securities may
be prosecuted and enforced by the Trustee without the possession of any of the
Securities or the production thereof in any proceeding relating thereto, and any
such proceeding instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall, after provision
for the payment of the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, be for the ratable benefit of
the Holders of the Securities in respect of which judgment has been recovered.
SECTION 5.6 Application of Money Collected.
Subject to Article XIII, any money or property collected by the Trustee
pursuant to this Article V shall be applied in the following order, at the date
or dates fixed by the Trustee and, in case of the distribution of such money on
account of principal, premium, if any, or interest, upon presentation of the
Securities and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section 6.7;
SECOND: To the payment of the amounts then due and unpaid for principal
of, premium, if any, or interest on, the Securities in respect of which or for
the benefit of which such money has
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been collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal, premium, if
any, and interest, respectively;
THIRD: To such other Person or Persons, if any, to the extent entitled
thereto; and
FOURTH: Any remaining amounts shall be repaid to the Company.
SECTION 5.7 Limitation on Suits.
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless:
(1) such Holder has previously given written notice to the Trustee of a
continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name as
Trustee hereunder;
(3) such Holder or Holders have furnished to the Trustee, and if
requested, shall have provided, reasonable indemnity against the costs, expenses
and liabilities to be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice and receipt
of indemnity has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has been given to
the Trustee during such 60 day period by the Holders of a majority in principal
amount of the Outstanding Securities, it being understood and intended that no
one or more of such Holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other of such Holders, or to obtain or seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal and ratable benefit of all such Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and
Interest and to Convert.
Notwithstanding any other provision in this Indenture, but subject to the
provisions of Article XIII, the Holder of any Security shall have the right,
which is absolute and unconditional, to receive payment of the principal of,
premium, if any, and (subject to Section 3.7) interest on such Security on the
respective Stated Maturities expressed in such Security (or, in the case of
redemption or repurchase, on the Redemption Date or Repurchase Date, as the case
may be), and to convert such Security in accordance with Article XII, and to
institute suit for the enforcement of any such
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payment and right to convert, and such rights shall not be impaired without the
consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies.
If the Trustee or any Holder of a Security has instituted any proceeding
to enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders of
Securities shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
such Holders shall continue as though no such proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Securities in the last paragraph of Section
3.6, no right or remedy herein conferred upon or reserved to the Trustee or to
the Holders of Securities is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security to
exercise any right or remedy accruing upon any Event of Default shall impair any
such right or remedy or constitute a waiver of any such Event of Default or any
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Holders of Securities may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or (subject to the
limitations contained in this Indenture) by the Holders of Securities as the
case may be.
SECTION 5.12 Control by Holders of Securities.
Subject to Section 6.3, the Holders of a majority in principal amount of
the Outstanding Securities shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of law or
with this Indenture, and
(2) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction, and
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(3) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders of Securities not
consenting.
SECTION 5.13 Waiver of Past Defaults.
The Holders, either (i) through the written consent of not less than a
majority in principal amount of the Outstanding Securities or (ii) by the
adoption of a resolution, at a meeting of Holders of the Outstanding Securities
at which a quorum is present, by the Holders of at least 66-2/3% in principal
amount of the Outstanding Securities represented at such meeting, may on behalf
of the Holders of all the Securities waive any past default hereunder and its
consequences, except a default (A) in the payment of the principal of, premium,
if any, or interest on any Security, or (B) in respect of a covenant or
provision hereof which under Article VIII cannot be modified or amended without
the consent of the Holder of each Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or any suit against the Trustee for any action taken, suffered
or omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 5.14 shall not apply to any suit instituted by the
Company, to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities, or to any suit instituted by any Holder of
any Security for the enforcement of the payment of the principal of, premium, if
any, or interest on any Security on or after the respective Stated Maturity or
Maturities expressed in such Security (or, in the case of redemption or
repurchase, on or after the Redemption Date or Repurchase Date, as the case may
be) or for the enforcement of the right to convert any Security in accordance
with Article XII.
SECTION 5.15 Waiver of Stay, Usury or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, usury or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede by reason of such law the
execution of any power herein granted
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to the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities.
(1) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied covenants
or obligations shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Trustee and conforming to the requirements of this Indenture, but in the case of
any such certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Indenture, but not to verify the contents thereof.
(2) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(3) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(i) this paragraph (3) shall not be construed to limit the effect
of paragraph (1) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a majority in principal amount of the Outstanding
Securities relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture; and
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(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it.
(4) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.2 Notice of Defaults.
Within 90 days after the occurrence of any default hereunder as to
which the Trustee has received written notice, the Trustee shall give to all
Holders of Securities, in the manner provided in Section 1.6, notice of such
default, unless such default shall have been cured or waived; provided, however,
that, except in the case of a default in the payment of the principal of,
premium, if any, or interest on any Security the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee or a trust committee of directors or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interest of the Holders; and provided, further, that in the case of any default
of the character specified in Section 5.1(4), no such notice to Holders of
Securities shall be given until at least 60 days after the occurrence thereof
or, if applicable, the cure period specified therein. For the purpose of this
Section, the term "default" means any event which is, or after notice or lapse
of time or both would become, an Event of Default.
SECTION 6.3 Certain Rights of Trustee.
Subject to the provisions of Section 6.1:
(1) the Trustee may rely, and shall be protected in acting or
refraining from acting, upon any resolution, Officers' Certificate, other
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, coupon, other evidence of indebtedness or
other paper or document (collectively, the "Documents") believed by it to be
genuine and to have been signed or presented by the proper party or parties, and
the Trustee need not investigate any fact or matter stated in such Documents;
(2) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any resolution
of the Board of Directors shall be sufficiently evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other evidence
be the one specifically prescribed) may, in the absence of bad faith on its
part, request and rely upon an Officers' Certificate or Opinion of Counsel;
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(4) the Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders of Securities pursuant to this Indenture, unless such Holders
shall have furnished and delivered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be incurred by
it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, coupon, other evidence of indebtedness or other paper or document, but the
Trustee may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney; and
(7) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
SECTION 6.4 Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture, of the Securities or of the Common Stock issuable upon the conversion
of the Securities. The Trustee shall not be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 6.5 May Hold Securities, Act as Trustee under Other Indentures.
The Trustee, any Authenticating Agent, any Paying Agent, any Conversion
Agent or any other agent of the Company or the Trustee, in its individual or any
other capacity, may become the owner or pledgee of Securities and may otherwise
deal with the Company with the same rights it would have if it were not Trustee,
Authenticating Agent, Paying Agent, Conversion Agent or such other agent.
The Trustee may become and act as trustee under other indentures under
which other securities, or certificates of interest or participation in other
securities, of the Company are outstanding in the same manner as if it were not
Trustee hereunder.
SECTION 6.6 Money Held in Trust.
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Money or property held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 6.7 Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree in
writing for its acceptance of this Indenture and for all services rendered by it
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee (including costs and expenses of enforcing this
Indenture and defending itself against any claim (whether asserted by the
Company, any Holder of Securities or any other Person) or liability in
connection with the exercise of any of its powers or duties hereunder) in
accordance with any provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee (and its directors, officers, employees
and agents) for, and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of this trust, including the
reasonable costs, expenses and reasonable attorneys' fees of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 5.1(6) or Section 5.1(7), the expenses
(including the reasonable charges of its counsel) and the compensation for the
services are intended to constitute expenses of the administration under any
applicable Federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture or the earlier resignation or removal of the Trustee.
To secure the Company's payment obligations in this Section 6.7, the
Trustee shall have a claim prior to the Notes on all money and property held or
collected by the Trustee other than money and property held in trust to pay
principal of, premium, if any, and interest on particular Notes.
SECTION 6.8 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be a Person
that is eligible pursuant to the Trust Indenture Act to act as such, having (or
being part of a holding company group with) a combined capital and surplus of at
least U.S. $50,000,000, subject to supervision or
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examination by federal or state authority, and in good standing. The Trustee or
an Affiliate of the Trustee shall maintain an established place of business in
the Borough of Manhattan, The City of New York. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of said supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article and a
successor shall be appointed pursuant to Section 6.9.
SECTION 6.9 Resignation and Removal; Appointment of Successor.
(1) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.10.
(2) The Trustee may resign at any time by giving written notice thereof
to the Company. If the instrument of acceptance by a successor Trustee required
by Section 6.10 shall not have been delivered to the Trustee within 30 days
after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(3) The Trustee may be removed at any time by an Act of the Holders of
a majority in principal amount of the Outstanding Securities, delivered to the
Trustee and the Company. If the instrument of acceptance by a successor Trustee
required by Section 6.10 shall not have been delivered to the Trustee within 30
days after the giving of such notice of removal, the removed Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(4) If at any time:
(i) the Trustee shall cease to be eligible under Section 6.8 and
shall fail to resign after written request therefor by the Company or by any
Holder of a Security who has been a bona fide Holder of a Security for at least
six months, or
(ii) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of the
Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation,
then, in any such case (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 5.14, any Holder of a Security who has been
a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(5) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall
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promptly appoint a successor Trustee and shall comply with the applicable
requirements of this Section and Section 6.10. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by Act of the Holders of a majority in
principal amount of the Outstanding Securities delivered to the Company and the
retiring Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable requirements of
Section 6.10, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders of Securities and accepted appointment in the
manner required by this Section and Section 6.10, any Holder of a Security who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(6) The Company shall give notice of each resignation and each removal
of the Trustee and each appointment of a successor Trustee to all Holders of
Securities in the manner provided in Section 1.6. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 6.10 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute, acknowledge
and deliver to the Company and to the retiring Trustee an instrument accepting
such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee, without any further
act, deed or conveyance, shall become vested with all the rights, powers, trusts
and duties of the retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall duly assign,
transfer and deliver to such successor Trustee all property and money held by
such retiring Trustee hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments for more fully and certainly
vesting in and confirming to such successor Trustee all such rights, powers and
trusts.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be eligible under this Article.
SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee (including the trust created by this Indenture), shall
be the successor of the Trustee hereunder, provided such corporation shall be
otherwise eligible under this Article, without the execution or filing of any
paper or any further act on the part of any of the parties hereto. In case any
Securities shall have been authenticated, but not delivered, by the Trustee then
in office, any successor by merger, conversion or consolidation to such
authenticating Trustee may adopt such
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authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 6.12 Authenticating Agents.
The Trustee may, with the consent of the Company, appoint an
Authenticating Agent or Agents acceptable to the Company with respect to the
Securities which shall be authorized to act on behalf of the Trustee to
authenticate Securities issued upon exchange or substitution pursuant to this
Indenture.
Securities authenticated by an Authenticating Agent shall be entitled
to the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder, and every reference in
this Indenture to the authentication and delivery of Securities by the Trustee
or the Trustee's certificate of authentication shall be deemed to include
authentication and delivery on behalf of the Trustee by an Authenticating Agent
and a certificate of authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be subject to acceptance
by the Company and shall at all times be a corporation organized and doing
business under the laws of the United States of America, any State thereof or
the District of Columbia, authorized under such laws to act as Authenticating
Agent and subject to supervision or examination by government or other fiscal
authority. If at any time an Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.12, such Authenticating Agent
shall resign immediately in the manner and with the effect specified in this
Section 6.12.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section 6.12, without the execution or filing of any paper or any
further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section 6.12, the Trustee may appoint a successor
Authenticating Agent which shall be subject to acceptance by the Company. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 6.12.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 6.12.
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If an Authenticating Agent is appointed with respect to the Securities
pursuant to this Section 6.12, the Securities may have endorsed thereon, in
addition to or in lieu of the Trustee's certification of authentication, an
alternative certificate of authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
----------------------------------------
As Authenticating Agent
By:
----------------------------------------
Authorized Signatory
SECTION 6.13 Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.14 Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
ARTICLE VII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 7.1 Company May Consolidate, Etc, . Only on Certain Terms.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease all its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer, sell or lease
such Person's properties and assets substantially as an entirety to the Company
unless:
(1) the Person formed by such consolidation or into or with which the
Company is merged or the Person to which the properties and assets of the
Company are so conveyed, transferred, sold or leased shall be a corporation,
limited liability company, partnership or trust organized and validly existing
under the laws of the United States of America, any State thereof or
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the District of Columbia and, if other than the Company, shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the principal
of, premium, if any, and interest on all of the Securities as applicable, and
the performance or observance of every covenant of this Indenture on the part of
the Company to be performed or observed and shall have provided for conversion
rights in accordance with Article XII;
(2) immediately after giving effect to such transaction, no Event of
Default, and no event that after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that such consolidation, merger,
conveyance, transfer or lease and, if a supplemental indenture is required in
connection with such transaction, such supplemental indenture comply with this
Article and that all conditions precedent herein provided for relating to such
transaction have been complied with, together with any documents required under
Section 8.3.
SECTION 7.2 Successor Substituted.
Upon any consolidation of the Company with, or merger of the Company
into any other Person or any conveyance, transfer or lease of all or
substantially all the properties and assets of the Company in accordance with
Section 7.1, the successor Person formed by such consolidation or into or with
which the Company is merged or to which such conveyance, transfer or lease is
made shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of all obligations
and covenants under this Indenture and the Securities.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Holders of Securities.
Without the consent of any Holders of Securities the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto for any of the
following purposes:
(1) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants and obligations of the Company
herein and in the Securities as permitted by Article VII of this Indenture; or
(2) to add to the covenants of the Company for the benefit of the
Holders of Securities or to surrender any right or power herein conferred upon
the Company; or
(3) to secure the Securities; or
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(4) to make provision with respect to the conversion rights of Holders
of Securities pursuant to Section 12.11 or to make provision with respect to the
repurchase rights of Holders of Securities pursuant to Section 14.5; or
(5) to comply with the requirements of the Trust Indenture Act or the
rules and regulations of the Commission thereunder in order to effect or
maintain the qualification of this Indenture under the Trust Indenture Act, as
contemplated by this Indenture or otherwise; or
(6) to evidence and provide for the acceptance of appointment hereunder
by a successor Trustee; or
(7) subject to Section 13.12, to make any change in Article XIII that
would limit or terminate the benefits available to any holder of Senior Debt
under such Article; or
(8) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein or which is
otherwise defective, or to make any other provisions with respect to matters or
questions arising under this Indenture as the Company and the Trustee may deem
necessary or desirable, provided such action pursuant to this clause (8) shall
not adversely affect the interests of the Holders of Securities in any material
respect.
Upon Company Request, accompanied by a Board Resolution authorizing the
execution of any such supplemental indenture, and subject to and upon receipt by
the Trustee of the documents described in Section 8.3 hereof, the Trustee shall
join with the Company in the execution of any supplemental indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained.
SECTION 8.2 Supplemental Indentures with Consent of Holders of Securities.
With either (i) the written consent of the Holders of not less than a
majority in principal amount of the Outstanding Securities, by the Act of said
Holders delivered to the Company and the Trustee, or (ii) by the adoption of a
resolution, at a meeting of Holders of the Outstanding Securities at which a
quorum is present, by the Holders of at least 66-2/3% in principal amount of the
Outstanding Securities represented at such meeting, the Company, when authorized
by a Board Resolution, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders of Securities under this
Indenture; provided, however, that no such supplemental indenture shall, without
the consent or affirmative vote of the Holder of each Outstanding Security
affected thereby,
(1) change the Stated Maturity of the principal of, or any installment
of interest on, any Security, or reduce the principal amount of, or the premium,
if any, or the rate of interest payable thereon, or reduce the amount payable
upon a redemption or mandatory repurchase, or change the place or currency of
payment of the principal of, premium, if any, or interest on any Security
(including any payment of Redemption Price or Repurchase Price in respect of
such Security) or impair the right to institute suit for the enforcement of any
payment in respect of any Security on or
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after the Stated Maturity thereof (or, in the case of redemption or any
repurchase, on or after the Redemption Date or Repurchase Date, as the case may
be) or, except as permitted by Section 12.11, adversely affect the right of
Holders to convert any Security as provided in Article XII, or modify the
provisions of this Indenture with respect to the subordination of the Securities
in a manner adverse to the Holders; or
(2) reduce the requirements of Section 9.4 for quorum or voting, or
reduce the percentage in principal amount of the Outstanding Securities the
consent of whose Holders is required for any such supplemental indenture or the
consent of whose Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture; or
(3) modify the obligation of the Company to maintain an office or
agency in the Borough of Manhattan, The City of New York, pursuant to Section
10.2; or
(4) modify any of the provisions of this Section or Section 5.13 or
10.12, except to increase any percentage contained herein or therein or to
provide that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security affected
thereby; or
(5) modify the provisions of Article XIV in a manner adverse to the
Holders.
It shall not be necessary for any Act of Holders of Securities under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such Act shall approve the substance
thereof.
SECTION 8.3 Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Sections 6.1 and 6.3) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture, and that such supplemental
indenture has been duly authorized, executed and delivered by the Company and
constitutes a valid and legally binding obligation of the Company enforceable
against the Company in accordance with its terms. The Trustee may, but shall not
be obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
SECTION 8.4 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
appertaining thereto shall be bound thereby.
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SECTION 8.5 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Company and the
Trustee, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 8.6 Notice of Supplemental Indentures.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 8.2, the Company
shall give notice to all Holders of Securities of such fact, setting forth in
general terms the substance of such supplemental indenture, in the manner
provided in Section 1.6. Any failure of the Company to give such notice, or any
defect therein, shall not in any way impair or affect the validity of any such
supplemental indenture.
ARTICLE IX
MEETINGS OF HOLDERS OF SECURITIES
SECTION 9.1 Purposes for Which Meetings May Be Called.
A meeting of Holders of Securities may be called at any time and from
time to time pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities.
SECTION 9.2 Call, Notice and Place of Meetings.
(1) The Trustee may at any time call a meeting of Holders of Securities
for any purpose specified in Section 9.1, to be held at such time and at such
place in the Borough of Manhattan, The City of New York, as the Trustee shall
determine. Notice of every meeting of Holders of Securities, setting forth the
time and the place of such meeting and in general terms the action proposed to
be taken at such meeting, shall be given, in the manner provided in Section 1.6,
not less than 21 nor more than 180 days prior to the date fixed for the meeting.
(2) In case at any time the Company, pursuant to a Board Resolution, or
the Holders of at least 10% in principal amount of the Outstanding Securities
shall have requested the Trustee to call a meeting of the Holders of Securities
for any purpose specified in Section 9.1, by written request setting forth in
reasonable detail the action proposed to be taken at the meeting, and the
Trustee shall not have mailed the notice of such meeting within 21 days after
receipt of such request or shall not thereafter proceed to cause the meeting to
be held as provided herein, then the Company or the Holders of Securities in the
amount specified, as the case may be, may determine the time and the place in
the Borough of Manhattan, The City of New York, for such meeting and may call
such meeting for such purposes by giving notice thereof as provided in paragraph
(1) of this Section.
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SECTION 9.3 Persons Entitled to Vote at Meetings.
To be entitled to vote at any meeting of Holders of Securities, a
Person shall be (i) a Holder of one or more Outstanding Securities, or (ii) a
Person appointed by an instrument in writing as proxy for a Holder or Holders of
one or more Outstanding Securities by such Holder or Holders. The only Persons
who shall be entitled to be present or to speak at any meeting of Holders shall
be the Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 9.4 Quorum; Action.
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities shall constitute a quorum. In the absence of a quorum
within 30 minutes of the time appointed for any such meeting, the meeting shall,
if convened at the request of Holders of Securities, be dissolved. In any other
case, the meeting may be adjourned for a period of not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
meeting. In the absence of a quorum at any such adjourned meeting, such
adjourned meeting may be further adjourned for a period not less than 10 days as
determined by the chairman of the meeting prior to the adjournment of such
adjourned meeting (subject to repeated applications of this sentence). Notice of
the reconvening of any adjourned meeting shall be given as provided in Section
9.2(1), except that such notice need be given only once not less than five days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage of
the principal amount of the Outstanding Securities which shall constitute a
quorum.
Subject to the foregoing, at the reconvening of any meeting adjourned
for a lack of a quorum, the Persons entitled to vote 25% in principal amount of
the Outstanding Securities at the time shall constitute a quorum for the taking
of any action set forth in the notice of the original meeting.
At a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid, any resolution and all matters (except as
limited by the proviso to Section 8.2 and except to the extent Section 10.12
requires a different vote) shall be effectively passed and decided if passed or
decided by the lesser of (i) the Holders of not less than a majority in
principal amount of Outstanding Securities and (ii) the Persons entitled to vote
not less than 66-2/3% in principal amount of Outstanding Securities represented
and entitled to vote at such meeting.
Any resolution passed or decisions taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities whether or not present or represented at the meeting. The
Trustee shall, in the name and at the expense of the Company, notify all the
Holders of Securities of any such resolutions or decisions pursuant to Section
1.6.
SECTION 9.5 Determination of Voting Rights; Conduct and Adjournment of Meetings.
(1) Notwithstanding any other provisions of this Indenture, the Trustee
may make such reasonable regulations as it may deem advisable for any meeting of
Holders of Securities in regard to
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proof of the holding of Securities and of the appointment of proxies and in
regard to the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to vote,
and such other matters concerning the conduct of the meeting as it shall deem
appropriate. Except as otherwise permitted or required by any such regulations,
the holding of Securities shall be proved in the manner specified in Section 1.4
and the appointment of any proxy shall be proved in the manner specified in
Section 1.4 or by having the signature of the Person executing the proxy
guaranteed by any bank, broker or other eligible institution participating in a
recognized medallion signature guarantee program.
(2) The Trustee shall, by an instrument in writing, appoint a temporary
chairman (which may be the Trustee) of the meeting, unless the meeting shall
have been called by the Company or by Holders of Securities as provided in
Section 9.2(1), in which case the Company or the Holders of Securities calling
the meeting, as the case may be, shall in like manner appoint a temporary
chairman. A permanent chairman and a permanent secretary of the meeting shall be
elected by vote of the Persons entitled to vote a majority in principal amount
of the Outstanding Securities represented at the meeting.
(3) At any meeting, each Holder of a Security or proxy shall be
entitled to one vote for each U.S. $1,000 principal amount of Securities held or
represented by him; provided, however, that no vote shall be cast or counted at
any meeting in respect of any Security challenged as not Outstanding and ruled
by the chairman of the meeting to be not Outstanding. The chairman of the
meeting shall have no right to vote, except as a Holder of a Security or proxy.
(4) Any meeting of Holders of Securities duly called pursuant to
Section 9.2 at which a quorum is present may be adjourned from time to time by
Persons entitled to vote a majority in principal amount of the Outstanding
Securities represented at the meeting, and the meeting may be held as so
adjourned without further notice.
SECTION 9.6 Counting Votes and Recording Action of Meetings.
The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy and
the principal amounts at Stated Maturity and serial numbers of the Outstanding
Securities held or represented by them. The permanent chairman of the meeting
shall appoint two inspectors of votes who shall count all votes cast at the
meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record, at least in duplicate, of the proceedings
of each meeting of Holders of Securities shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more Persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was given as provided in
Section 9.2 and, if applicable, Section 9.4. Each copy shall be signed and
verified by the affidavits of the permanent chairman and secretary of the
meeting and one such copy shall be delivered to the Company and another to the
Trustee to be preserved by the Trustee, the latter to have attached thereto the
ballots
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voted at the meeting. Any record so signed and verified shall be conclusive
evidence of the matters therein stated.
ARTICLE X
COVENANTS
SECTION 10.1 Payment of Principal, Premium and Interest.
The Company covenants and agrees that it will duly and punctually pay
the principal of and premium, if any, and interest on the Securities in
accordance with the terms of the Securities and this Indenture. The Company will
deposit or cause to be deposited with the Trustee, no later than the opening of
business on the date of the Stated Maturity of any Security or no later than the
opening of business on the due date for any installment of interest, all
payments so due, which payments shall be in immediately available funds on the
date of such Stated Maturity or due date, as the case may be.
SECTION 10.2 Maintenance of Offices or Agencies.
The Company will maintain in the Borough of Manhattan, The City of New
York, an office or agency where the Securities may be surrendered for
registration of transfer or exchange or for presentation for payment or for
conversion, redemption or repurchase and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency not designated or appointed by
the Trustee. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office or the office or agency of the Trustee in the Borough of
Manhattan, The City of New York.
The Company may at any time and from time to time vary or terminate the
appointment of any such agent or appoint any additional agents for any or all of
such purposes; provided, however, that until all of the Securities have been
delivered to the Trustee for cancellation, or moneys sufficient to pay the
principal of, premium, if any, and interest on the Securities have been made
available for payment and either paid or returned to the Company pursuant to the
provisions of Section 10.3, the Company will maintain in the Borough of
Manhattan, The City of New York, an office or agency where Securities may be
presented or surrendered for payment and conversion where Securities may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Company will give prompt written notice to the Trustee, and
notice to the Holders in accordance with Section 1.6, of the appointment or
termination of any such agents and of the location and any change in the
location of any such office or agency.
The Company hereby initially designates the Trustee as Paying Agent,
Security Registrar and Conversion Agent, and each of the Corporate Trust Office
of the Trustee and the office or agency of the Trustee in the Borough of
Manhattan, The City of New York, located at Norwest Corporate
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Trust, c/o Depository Trust Company, 1st Floor, TADS Department, 55 Water
Street, New York, New York 10041, Attention: Corporate Trust Administration
(Juniper Networks, Inc. __% Convertible Subordinated Notes due March 15, 2007)
as one such office or agency of the Company for each of the aforesaid purposes.
SECTION 10.3 Money for Security Payments to Be Held in Trust.
If the Company shall act as its own Paying Agent, it will, on or before
each due date of the principal of, premium, if any, or interest on any of the
Securities, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium, if any, or interest so
becoming due until such sums shall be paid to such Persons or otherwise disposed
of as herein provided and the Company will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will, no
later than the opening of business on each due date of the principal of,
premium, if any, or interest on any Securities, deposit with the Trustee a sum
in funds immediately payable on the payment date sufficient to pay the
principal, premium, if any, or interest so becoming due, such sum to be held for
the benefit of the Persons entitled to such principal, premium, if any, or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of any failure so to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided;
(2) give the Trustee notice of any default by the Company (or any other
obligor upon the Securities) in the making of any payment of principal, premium,
if any, or interest; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so held by
such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of, premium, if any,
or interest on any Security and remaining unclaimed for two years after such
principal, premium, if any, or interest has become due and payable shall be paid
to the Company on Company Request, or (if then held by the Company) shall
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be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 10.4 Existence.
Subject to Article VII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Company shall determine that the preservation thereof is no longer desirable in
the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
SECTION 10.5 Maintenance of Properties.
The Company will cause all properties used or useful in the conduct of
its business or the business of any Significant Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct of
its business or the business of any Significant Subsidiary and not
disadvantageous in any material respect to the Holders.
SECTION 10.6 Payment of Taxes and Other Claims.
The Company will pay or discharge, or cause to be paid or discharged,
before the same may become delinquent, (i) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Significant
Subsidiary or upon the income, profits or property of the Company or any
Significant Subsidiary, (ii) all claims for labor, materials and supplies which,
if unpaid, might by law become a lien or charge upon the property of the Company
or any Significant Subsidiary, and (iii) all stamps and other duties, if any,
which may be imposed by the United States or any political subdivision thereof
or therein in connection with the issuance, transfer, exchange or conversion of
any Securities or with respect to this Indenture; provided, however, that, in
the case of clauses (i) and (ii), the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim (A) if the failure to do so will not, in the aggregate, have a material
adverse impact on the Company, or (B) if the amount, applicability or validity
is being contested in good faith by appropriate proceedings.
SECTION 10.7 Reserved.
SECTION 10.8 Statement by Officers as to Default.
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The Company shall deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming aware
of any default or any Event of Default under the Indenture, an Officers'
Certificate specifying with particularity such default or Event of Default and
further stating what action the Company has taken, is taking or proposes to take
with respect thereto. For the purpose of this Section, the term "default" means
any event which is, or after notice or lapse of time or both would become, an
Event of Default.
Any notice required to be given under this Section 10.8 shall be
delivered to the Trustee at its Corporate Trust Office.
SECTION 10.9 Reserved.
SECTION 10.10 Reserved.
SECTION 10.11 Reserved.
SECTION 10.12 Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 10.4 (other than with respect to the
existence of the Company (subject to Article VII)), 10.5 and 10. 6, inclusive
(other than a covenant or condition which under Article VIII cannot be modified
or amended without the consent of the Holder of each Outstanding Security
affected), if before the time for such compliance the Holders shall, through (i)
the written consent of not less than a majority in principal amount of the
Outstanding Securities, or (ii) the adoption of a resolution at a meeting of
Holders of the Outstanding Securities at which a quorum is present, by the
Holders of not less than 66 2/3% in principal amount of the Outstanding
Securities represented at such meeting, either waive such compliance in such
instance or generally waive compliance with such covenant or condition, but no
such waiver shall extend to or affect such covenant or condition except to the
extent so expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee or any Paying or
Conversion Agent in respect of any such covenant or condition shall remain in
full force and effect.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Redemption.
The Securities may be redeemed in accordance with the provisions of the
form of Securities set forth in Section 2.2.
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SECTION 11.2 Applicability of Article.
Redemption of Securities at the election of the Company or otherwise,
as permitted or required by any provision of the Securities or this Indenture,
shall be made in accordance with such provision and this Article XI.
SECTION 11.3 Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution. In case of any redemption at the election of the Company
of any of the Securities, the Company shall, at least 45 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee in writing of such Redemption
Date.
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected by the Trustee within five Business
Days after it receives the notice described in 11.3, from the Outstanding
Securities not previously called for redemption, by lot or by such other method
as the Trustee may deem fair and appropriate.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed may be treated by
the Trustee as Outstanding for the purpose of such selection. The Trustee shall
promptly notify the Company and each Security Registrar in writing of the
securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 11.5 Notice of Redemption.
Notice of redemption shall be given in the manner provided in Section
1.6 to the Holders of Securities to be redeemed not less than 30 nor more than
60 days prior to the Redemption Date, and such notice shall be irrevocable. The
Company shall, concurrently with the giving of such notice, publish a Press
Release including the information required to be included in such notice of
redemption hereunder.
All notices of redemption shall state:
(1) the Redemption Date,
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(2) the Redemption Price, and accrued interest, if any, to the
Redemption Date,
(3) if less than all Outstanding Securities are to be redeemed, the
aggregate principal amount of Securities to be redeemed and the aggregate
principal amount of Securities which will be outstanding after such partial
redemption,
(4) that on the Redemption Date the Redemption Price, and accrued
interest, if any, to the Redemption Date, will become due and payable upon each
such Security to be redeemed, and that interest thereon shall cease to accrue on
and after said date,
(5) the Conversion Rate, the date on which the right to convert the
Securities to be redeemed will terminate and the places where such Securities
may be surrendered for conversion, and
(6) the place or places where such Securities are to be surrendered for
payment of the Redemption Price and accrued interest, if any, to the Redemption
Date.
In case of a partial redemption, the notice shall specify the serial
and CUSIP numbers (if any) and the portions thereof called for redemption and
that transfers and exchanges may occur on or prior to the Redemption Date.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's written request,
by the Trustee in the name of and at the expense of the Company. Notice of
redemption of Securities to be redeemed at the election of the Company received
by the Trustee shall be given by the Trustee to each Paying Agent in the name of
and at the expense of the Company.
SECTION 11.6 Deposit of Redemption Price.
On or prior to the Redemption Date, the Company shall deposit with the
Trustee (or, if the Company is acting as its own Paying Agent, segregate and
hold in trust as provided in Section 10.3) an amount of money (which shall be in
immediately available funds on such Redemption Date) sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest to the Redemption Date on, all the Securities
which are to be redeemed on that date other than any Securities called for
redemption on that date which have been converted prior to the date of such
deposit.
If any Security called for redemption is converted, any money deposited
with the Trustee or so segregated and held in trust for the redemption of such
Security shall (subject to any right of the Holder of such Security or any
Predecessor Security to receive interest as provided in the last paragraph of
Section 3.7) be paid to the Company on Company Request or, if then held by the
Company, shall be discharged from such trust.
SECTION 11.7 Securities Payable on Redemption Date.
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Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price, including accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
Security for redemption in accordance with said notice such Security shall be
paid by the Company at the Redemption Price together with accrued and unpaid
interest to the Redemption Date; provided, however, that installments of
interest on Securities whose Stated Maturity is on or prior to the Redemption
Date shall be payable to the Holders of such Securities, or one or more
Predecessor Securities, registered as such on the relevant Record Date according
to their terms and the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal amount of, premium, if any, and,
to the extent permitted by applicable law, accrued interest on such Security
shall, until paid, bear interest from the Redemption Date at a rate of __% per
annum and such Security shall remain convertible until the Redemption Price of
such Security (or portion thereof, as the case may be) shall have been paid or
duly provided for.
Any Security which is to be redeemed only in part shall be surrendered
at the Corporate Trust Office or an office or agency of the Company designated
for that purpose pursuant to Section 10.2 (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder thereof
or his attorney duly authorized in writing), and the Company shall execute, and
the Trustee shall authenticate and make available for delivery to the Holder of
such Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
SECTION 11.8 Conversion Arrangement on Call for Redemption.
In connection with any redemption of Securities, the Company may
arrange for the purchase and conversion of any Securities by an agreement with
one or more investment bankers or other purchasers (the "Purchasers") to
purchase such securities by paying to the Trustee in trust for the Holders, on
or before the Redemption Date, an amount not less than the applicable Redemption
Price, together with interest accrued to the Redemption Date, of such
Securities. Notwithstanding anything to the contrary contained in this Article
XI, the obligation of the Company to pay the Redemption Price, together with
interest accrued to the Redemption Date, shall be deemed to be satisfied and
discharged to the extent such amount is so paid by such Purchasers. If such an
agreement is entered into (a copy of which shall be filed with the Trustee prior
to the close of business on the Business Day immediately prior to the Redemption
Date), any Securities called for redemption that are not duly surrendered for
conversion by the Holders thereof may, at the option of the Company, be deemed,
to the fullest extent permitted by law, and consistent with any agreement or
agreements with such Purchasers, to be acquired by such Purchasers from such
Holders and (notwithstanding anything to the contrary contained in Article XII)
surrendered by such Purchasers for conversion, all as of immediately prior to
the close of business on the Redemption Date (and the
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right to convert any such Securities shall be extended through such time),
subject to payment of the above amount as aforesaid. At the direction of the
Company, the Trustee shall hold and dispose of any such amount paid to it by the
Purchasers to the Holders in the same manner as it would monies deposited with
it by the Company for the redemption of Securities. Without the Trustee's prior
written consent, no arrangement between the Company and such Purchasers for the
purchase and conversion of any Securities shall increase or otherwise affect any
of the powers, duties, responsibilities or obligations of the Trustee as set
forth in this Indenture, and the Company agrees to indemnify the Trustee from,
and hold it harmless against, any loss, liability or expense arising out of or
in connection with any such arrangement for the purchase and conversion of any
Securities between the Company and such Purchasers, including the costs and
expenses, including reasonable legal fees, incurred by the Trustee in the
defense of any claim or liability arising out of or in connection with the
exercise or performance of any of its powers, duties, responsibilities or
obligations under this Indenture.
ARTICLE XII
CONVERSION OF SECURITIES
SECTION 12.1 Conversion Privilege and Conversion Rate.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Security may be converted into fully paid
and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of Common Stock of the Company at the Conversion Rate,
determined as hereinafter provided, in effect at the time of conversion. Such
conversion right shall commence on the initial issuance date of the Securities
and expire at the close of business on the date of Maturity, subject, in the
case of conversion of any Global Security, to any Applicable Procedures. In case
a Security or portion thereof is called for redemption at the election of the
Company or the Holder thereof exercises his right to require the Company to
repurchase the Security, such conversion right in respect of the Security, or
portion thereof so called, shall expire at the close of business on the Business
Day immediately preceding the Redemption Date or the Repurchase Date, as the
case may be, unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be (in each case subject as aforesaid
to any Applicable Procedures with respect to any Global Security).
The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Rate") shall be initially [_____]
shares of Common Stock for each U.S.$1,000 principal amount of Securities. The
Conversion Rate shall be adjusted in certain instances as provided in this
Article XII.
SECTION 12.2 Exercise of Conversion Privilege.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed in blank,
at any office or agency of the Company maintained for that purpose pursuant to
Section 10.2, accompanied by a duly signed conversion notice substantially in
the form set forth in Section 2.4 stating that the Holder elects to convert such
Security or, if less than the entire principal amount thereof is to be
converted, the portion thereof to
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be converted. Each Security surrendered for conversion (in whole or in part)
during the Record Date Period shall (except in the case of any Security or
portion thereof which has been called for redemption on a Redemption Date, or is
repurchasable on a Repurchase Date, occurring, in either case, within such
Record Date Period and, as a result, the right to convert such Security would
otherwise terminate in such period if not exercised) be accompanied by payment
in New York Clearing House funds or other funds acceptable to the Company of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of such Security (or part thereof, as the case may be) being
surrendered for conversion. The interest so payable on such Interest Payment
Date with respect to any Security (or portion thereof, if applicable) which is
surrendered for conversion during the Record Date Period shall be paid to the
Holder of such Security as of such Regular Record Date in an amount equal to the
interest that would have been payable on such Security if such Security had been
converted as of the close of business on such Interest Payment Date. Interest
payable on any Interest Payment Date in respect of any Security surrendered for
conversion on or after such Interest Payment Date shall be paid to the Holder of
such Security as of the Regular Record Date next preceding such Interest Payment
Date, notwithstanding the exercise of the right of conversion. Except as
provided in this paragraph and subject to the last paragraph of Section 3.7, no
cash payment or adjustment shall be made upon any conversion on account of any
interest accrued from the Interest Payment Date next preceding the conversion
date, in respect of any Security (or part thereof, as the case may be)
surrendered for conversion, or on account of any dividends on the Common Stock
issued upon conversion. The Company's delivery to the Holder of the number of
shares of Common Stock (and cash in lieu of fractions thereof, as provided in
this Indenture) into which a Security is convertible will be deemed to satisfy
the Company's obligation to pay the principal amount of the Security.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes as the record holder or holders of such Common Stock at such
time. As promptly as practicable on or after the conversion date, the Company
shall issue and deliver to the Trustee, for delivery to the Holder, a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 12.3.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in an aggregate principal amount equal to
the unconverted portion of the principal amount of such Security. A Security may
be converted in part, but only if the principal amount of such Security to be
converted is any integral multiple of U.S. $1,000 and the principal amount of
such security to remain Outstanding after such conversion is equal to U.S.
$1,000 or any integral multiple of $1,000 in excess thereof.
SECTION 12.3 Fractions of Shares.
No fractional shares of Common Stock shall be issued upon conversion of
any Security or Securities. If more than one Security shall be surrendered for
conversion at one time by the same
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Holder, the number of full shares which shall be issuable upon conversion
thereof shall be computed on the basis of the aggregate principal amount of the
Securities (or specified portions thereof) so surrendered. Instead of any
fractional share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions thereof), the
Company shall calculate and pay a cash adjustment in respect of such fraction
(calculated to the nearest 1/100th of a share) in an amount equal to the same
fraction of the Closing Price Per Share at the close of business on the day of
conversion.
SECTION 12.4 Adjustment of Conversion Rate.
The Conversion Rate shall be subject to adjustments from time to time
as follows:
(1) In case the Company shall pay or make a dividend or other
distribution on shares of any class of capital stock payable in shares of Common
Stock, the Conversion Rate in effect at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be increased by dividing such
Conversion Rate by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. If, after
any such date fixed for determination, any dividend or distribution is not in
fact paid, the Conversion Rate shall be immediately readjusted, effective as of
the date the Board of Directors determines not to pay such dividend or
distribution, to the Conversion Rate that would have been in effect if such
determination date had not been fixed. For the purposes of this paragraph (1),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of Common
Stock. The Company will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Company.
(2) In case the Company shall issue rights, options or warrants to all
holders of its Common Stock entitling them to subscribe for or purchase shares
of Common Stock at a price per share less than the current market price per
share (determined as provided in paragraph (8) of this Section 12.4) of the
Common Stock on the date fixed for the determination of stockholders entitled to
receive such rights, options or warrants (other than any rights, options or
warrants that by their terms will also be issued to any Holder upon conversion
of a Security into shares of Common Stock without any action required by the
Company or any other Person), the Conversion Rate in effect at the opening of
business on the day following the date fixed for such determination shall be
increased by dividing such Conversion Rate by a fraction of which the numerator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock which the aggregate of the offering price of the total number of
shares of Common
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Stock so offered for subscription or purchase would purchase at such current
market price and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock so offered for subscription or
purchase, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. If, after
any such date fixed for determination, any such rights, options or warrants are
not in fact issued, or are not exercised prior to the expiration thereof, the
Conversion Rate shall be immediately readjusted, effective as of the date such
rights, options or warrants expire, or the date the Board of Directors
determines not to issue such rights, options or warrants, to the Conversion Rate
that would have been in effect if the unexercised rights, options or warrants
had never been granted or such determination date had not been fixed, as the
case may be. For the purposes of this paragraph (2), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
will not issue any rights, options or warrants in respect of shares of Common
Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be subdivided into
a greater number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Rate in effect at the opening of business
on the day following the day upon which such subdivision or combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(4) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock evidences of its indebtedness, shares of any
class of capital stock or other property (including cash or assets or
securities, but excluding (i) any rights, options or warrants referred to in
paragraph (2) of this Section, (ii) any dividend or distribution paid
exclusively in cash, (iii) any dividend or distribution referred to in paragraph
(1) of this Section and (iv) any consideration distributed in any merger or
consolidation to which Section 12.11 applies), the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by dividing the
Conversion Rate in effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (8) of this Section 12.4)
of the Common Stock on the date fixed for such determination less the then fair
market value (as determined by the Board of directors, whose determination shall
be conclusive and described in a Board Resolution filed with the Trustee) of the
portion of the assets, shares or evidences of indebtedness so distributed
applicable to one share of Common Stock and the denominator shall be such
current market price per share of the Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
distribution. If after any such date fixed for determination, any such
distribution is not in fact made, the Conversion Rate shall be immediately
readjusted, effective as of the date of the Board of Directors determines not to
make such distribution, to the Conversion Rate that would have been in effect if
such determination date had not been fixed.
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(5) In case the Company shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is distributed as
part of a distribution referred to in paragraph (4) of this Section or cash
distributed upon a merger or consolidation to which Section 12.11 applies) in an
aggregate amount that, combined together with (I) the aggregate amount of any
other all-cash distributions to all holders of its Common Stock made exclusively
in cash within the 365-day period preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to this paragraph
(5) has been made and (II) the aggregate of any cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) of consideration payable in
respect of any tender offer by the Company or any of its Subsidiaries for all or
any portion of the Common Stock concluded within the 365-day period preceding
the date of payment of such distribution and in respect of which no adjustment
pursuant to paragraph (6) of this Section 12.4 has been made (the "combined cash
and tender amount") exceeds 10% of the product of the current market price per
share (determined as provided in paragraph (8) of this Section 12.4) of the
Common Stock on the date for the determination of holders of shares of Common
Stock entitled to receive such distribution times the number of shares of Common
Stock outstanding on such date (the "aggregate current market price"), then, and
in each such case, immediately after the close of business on such date for
determination, the Conversion Rate shall be adjusted so that the same shall
equal the rate determined by dividing the Conversion Rate in effect immediately
prior to the close of business on the date fixed for determination of the
stockholders entitled to receive such distribution by a fraction (i) the
numerator of which shall be equal to the current market price per share
(determined as provided in paragraph (8) of this Section) of the Common Stock on
the date fixed for such determination less an amount equal to the quotient of
(x) the excess of such combined cash and tender amount over 10% of such
aggregate current market price divided by (y) the number of shares of Common
Stock outstanding on such date for determination and (ii) the denominator of
which shall be equal to the current market price per share (determined as
provided in paragraph (8) of this Section 12.4) of the Common Stock on such date
fixed for determination.
(6) In case a tender offer made by the Company or any Subsidiary for
all or any portion of the Common Stock shall expire and such tender offer (as
amended upon the expiration thereof) shall require the payment to stockholders
(based on the acceptance (up to any maximum specified in the terms of the tender
offer) of Purchased Shares (as defined below)) of an aggregate consideration
having a fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) that
combined together with (I) the aggregate of the cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration of such
tender offer, of consideration payable in respect of any other tender offer by
the Company or any Subsidiary for all or any portion of the Common Stock
expiring within the 365-day period preceding the expiration of such tender offer
and in respect of which no adjustment pursuant to this paragraph (6) has been
made and (II) the aggregate amount of any cash distributions to all holders of
the Common Stock within 365-day period preceding the expiration of such tender
offer and in respect of which no adjustment pursuant to paragraph (5) of this
Section has been made (the "combined tender and cash amount") exceeds 10% of the
product of the current market price per share of the Common Stock (determined as
provided in paragraph (8) of this Section 12.4) as of the last time (the
"Expiration Time") tenders
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could have been made pursuant to such tender offer (as it may be amended) times
the number of shares of Common Stock outstanding (including any tendered shares)
as of the Expiration Time, then, and in each such case immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Rate shall be adjusted so that the same shall equal the rate
determined by dividing the Conversion Rate immediately prior to close of
business on the date of the Expiration Time by a fraction (i) the numerator of
which shall be equal to (A) the product of (I) the current market price per
share of the Common Stock (determined as provided in paragraph (8) of this
Section 12.4) on the date of the Expiration Time multiplied by (II) the number
of shares of Common Stock outstanding (including any tendered shares) on the
Expiration Time less (B) the combined tender and cash amount, and (ii) the
denominator of which shall be equal to the product of (A) the current market
price per share of the Common Stock (determined as provided in paragraph (8) of
this Section 12.4) as of the Expiration Time multiplied by (B) the number of
shares of Common Stock outstanding (including any tendered shares) as of the
Expiration Time less the number of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted up to any such maximum,
being referred to as the "Purchased Shares").
(7) The reclassification of Common Stock into securities other than
Common Stock (other than any reclassification upon a consolidation or merger to
which Section 12.11 applies) shall be deemed to involve (a) a distribution of
such securities other than Common Stock to all holders of Common Stock (and the
effective date of such reclassification shall be deemed to be "the date fixed
for the determination of stockholders entitled to receive such distribution" and
"the date fixed for such determination" within the meaning of paragraph (4) of
this Section), and (b) a subdivision or combination, as the case may be, of the
number of shares of Common Stock outstanding immediately prior to such
reclassification into the number of shares of Common Stock outstanding
immediately thereafter (and the effective date of such reclassification shall be
deemed to be "the day upon which such subdivision becomes effective" or "the day
upon which such combination becomes effective", as the case may be, and "the day
upon which such subdivision or combination becomes effective" within the meaning
of paragraph (3) of this Section 12.4).
(8) For the purpose of any computation under paragraphs (2), (4), (5)
or (6) of this Section 12.4, the current market price per share of Common Stock
on any date shall be calculated by the Company and be the average of the daily
Closing Prices Per Share for the five consecutive Trading Days selected by the
Company commencing not more than 10 Trading Days before, and ending not later
than the earlier of the day in question and the day before the "ex" date with
respect to the issuance or distribution requiring such computation. For purposes
of this paragraph, the term "'ex' date", when used with respect to any issuance
or distribution, means the first date on which the Common Stock trades regular
way in the applicable securities market or on the applicable securities exchange
without the right to receive such issuance or distribution.
(9) No adjustment in the Conversion Rate shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(9)) would require an increase or decrease of at least one percent in such rate;
provided, however, that any adjustments which by reason of this paragraph (9)
are not required to be made shall be carried forward and taken into
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account in any subsequent adjustment. All calculations under this Article shall
be made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
(10) The Company may make such increases in the Conversion Rate, for
the remaining term of the Securities or any shorter term, in addition to those
required by paragraphs (1), (2), (3), (4), (5) and (6) of this Section 12.4, as
it considers to be advisable in order to avoid or diminish any income tax to any
holders of shares of Common Stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock or
from any event treated as such for income tax purposes. The Company shall have
the power to resolve any ambiguity or correct any error in this paragraph (10)
and its actions in so doing shall, absent manifest error, be final and
conclusive.
(11) Notwithstanding the foregoing provisions of this Section, no
adjustment of the Conversion Rate shall be required to be made (a) upon the
issuance of shares of Common Stock pursuant to any present or future plan for
the reinvestment of dividends or (b) because of a tender or exchange offer of
the character described in Rule 13e-4(h)(5) under the Exchange Act or any
successor rule thereto.
(12) To the extent permitted by applicable law, the Company from time
to time may increase the Conversion Rate by any amount for any period of time if
the period is at least twenty (20) days, the increase is irrevocable during such
period, and the Board of Directors shall have made a determination that such
increase would be in the best interests of the Company, which determination
shall be conclusive; provided, however, that no such increase shall be taken
into account for purposes of determining whether the Closing Price Per Share of
the Common Stock equals or exceeds 105% of the Conversion Price in connection
with an event which would otherwise be a Change of Control pursuant to Section
14.4. Whenever the Conversion Rate is increased pursuant to the preceding
sentence, the Company shall give notice of the increase to the Holders in the
manner provided in Section 1.6 at least fifteen (15) days prior to the date the
increased Conversion Rate takes effect, and such notice shall state the
increased Conversion Rate and the period during which it will be in effect.
SECTION 12.5 Notice of Adjustments of Conversion Rate.
Whenever the Conversion Rate is adjusted as herein provided:
(1) the Company shall compute the adjusted Conversion Rate in
accordance with Section 12.4 and shall prepare a certificate signed by the Chief
Financial Officer of the Company setting forth the adjusted Conversion Rate and
showing in reasonable detail the facts upon which such adjustment is based, and
such certificate shall promptly be filed with the Trustee and with each
Conversion Agent; and
(2) upon each such adjustment, a notice stating that the Conversion
Rate has been adjusted and setting forth the adjusted Conversion Rate shall be
required, and as soon as practicable after it is required, such notice shall be
provided by the Company to all Holders in accordance with Section 1.6.
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Neither the Trustee nor any Conversion Agent shall be under any duty or
responsibility with respect to any such certificate or the information and
calculations contained therein, except to exhibit the same to any Holder of
Securities desiring inspection thereof at its office during normal business
hours, and shall not be deemed to have knowledge of any adjustment in the
Conversion Rate unless and until a Responsible Officer of the Trustee shall have
received such a certificate. Until a Responsible Officer of the Trustee receives
such a certificate, the Trustee and each Conversion Agent may assume without
inquiry that the last Conversion Rate of which the Trustee has knowledge of
remains in effect.
SECTION 12.6 Notice of Certain Corporate Action.
In case:
(1) the Company shall declare a dividend (or any other distribution) on
its Common Stock payable (i) otherwise than exclusively in cash or (ii)
exclusively in cash in an amount that would require any adjustment pursuant to
Section 12.4; or
(2) the Company shall authorize the granting to all or substantially
all of the holders of its Common Stock of rights, options or warrants to
subscribe for or purchase any shares of capital stock of any class or of any
other rights; or
(3) of any reclassification of the Common Stock, or of any
consolidation, merger or share exchange to which the Company is a party and for
which approval of any stockholders of the Company is required, or of the
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Company; or
(4) of the voluntary or involuntary dissolution, liquidation or winding
up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Securities pursuant to Section 10.2, and shall
cause to be provided to all Holders in accordance with Section 1.6, at least 20
days (or 10 days in any case specified in clause (1) or (2) above) prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights, options or warrants, or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights, options or warrants are to be determined or
(y) the date on which such reclassification, consolidation, merger, conveyance,
transfer, sale, lease, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, sale, lease, dissolution,
liquidation or winding up. Neither the failure to give such notice or the notice
referred to in the following paragraph nor any defect therein shall affect the
legality or validity of the proceedings described in clauses (1) through (4) of
this Section 12.6. If at the time the Trustee shall not be the conversion agent,
a copy of such notice shall also forthwith be filed by the Company with the
Trustee.
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The Company shall cause to be filed at the Corporate Trust Office and
each office or agency maintained for the purpose of conversion of Securities
pursuant to Section 10.2, and shall cause to be provided to all Holders in
accordance with Section 1.6, notice of any tender offer by the Company or any
Subsidiary for all or any portion of the Common Stock at or about the time that
such notice of tender offer is provided to the public generally.
SECTION 12.7 Company to Reserve Common Stock.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Securities, the full number of shares of
Common Stock then issuable upon the conversion of all Outstanding Securities.
SECTION 12.8 Taxes on Conversions.
Except as provided in the next sentence, the Company will pay any and
all taxes and duties that may be payable in respect of the issue or delivery of
shares of Common Stock on conversion of Securities pursuant hereto. The Company
shall not, however, be required to pay any tax or duty which may be payable in
respect of any transfer involved in the issue and delivery of shares of Common
Stock in a name other than that of the Holder of the Security or Securities to
be converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such tax
or duty, or has established to the satisfaction of the Company that such tax or
duty has been paid.
SECTION 12.9 Covenant as to Common Stock.
The Company agrees that all shares of Common Stock which may be
delivered upon conversion of Securities, upon such delivery, will have been duly
authorized and validly issued and will be fully paid and nonassessable and,
except as provided in Section 12.8, the Company will pay all taxes, liens and
charges with respect to the issue thereof.
SECTION 12.10 Cancellation of Converted Securities.
All Securities delivered for conversion shall be delivered to the
Trustee or its agent to be canceled by or at the direction of the Trustee, which
shall dispose of the same as provided in Section 3.9.
SECTION 12.11 Provision in Case of Consolidation, Merger or Sale of Assets.
In case of any consolidation or merger of the Company with or into any
other Person, any merger of another Person with or into the Company (other than
a merger which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company) or any
conveyance, sale, transfer or lease of all or substantially all of the assets of
the Company, the Person formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be, shall execute and
deliver to the Trustee a supplemental indenture
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providing that the Holder of each Security then Outstanding shall have the right
thereafter, during the period such Security shall be convertible as specified in
Section 12.1, to convert such Security only into the kind and amount of
securities, cash and other property receivable upon such consolidation, merger,
conveyance, sale, transfer or lease by a holder of the number of shares of
Common Stock of the Company into which such Security might have been converted
immediately prior to such consolidation, merger, conveyance, sale, transfer or
lease, assuming such holder of Common Stock of the Company (i) is not (A) a
Person with which the Company consolidated or merged with or into or which
merged into or with the Company or to which such conveyance, sale, transfer or
lease was made, as the case may be (a "Constituent Person"), or (B) an Affiliate
of a Constituent Person and (ii) failed to exercise his rights of election, if
any, as to the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, sale, transfer or lease (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, sale, transfer, or lease is not the
same for each share of Common Stock of the Company held immediately prior to
such consolidation, merger, conveyance, sale, transfer or lease by others than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-electing Share"), then for the
purpose of this Section 12.11 the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance, sale, transfer
or lease by the holders of each Non-electing Share shall be deemed to be the
kind and amount so receivable per share by a plurality of the Non-electing
Shares). Such supplemental indenture shall provide for adjustments which, for
events subsequent to the effective date of such supplemental indenture, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article. The above provisions of this Section 12.11 shall similarly apply
to successive consolidations, mergers, conveyances, sales, transfers or leases.
Notice of the execution of such a supplemental indenture shall be given by the
Company to the Holder of each Security as provided in Section 1.6 promptly upon
such execution.
Neither the Trustee nor any Conversion Agent shall be under any
responsibility to determine the correctness of any provisions contained in any
such supplemental indenture relating either to the kind or amount of shares of
stock or other securities or property or cash receivable by Holders of
Securities upon the conversion of their Securities after any such consolidation,
merger, conveyance, transfer, sale or lease or to any such adjustment, but may
accept as conclusive evidence of the correctness of any such provisions, and
shall be protected in relying upon, an Opinion of Counsel with respect thereto,
which the Company shall cause to be furnished to the Trustee upon request.
SECTION 12.12 Rights Issued in Respect of Common Stock.
Rights or warrants distributed by the Company to all holders of Common
Stock entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances), which
rights or warrants, until the occurrence of a specified event or events
("Trigger Event"):
(i) are deemed to be transferred with such shares of Common Stock,
(ii) are not exercisable, and
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(iii) are also issued in respect of future issuances of Common Stock
shall not be deemed distributed for purposes of Section 12.4(2) until the
occurrence of the earliest Trigger Event. In addition, in the event of any
distribution of rights or warrants, or any Trigger Event with respect thereto,
that shall have resulted in an adjustment to the Conversion Rate under Section
12.4(2), (1) in the case of any such rights or warrants which shall all have
been redeemed or repurchased without exercise by any holders thereof, the
Conversion Rate shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Trigger Event, as the case may be, as though
it were a cash distribution, equal to the per share redemption or repurchase
price received by a holder of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase, and
(2) in the case of any such rights or warrants all of which shall have expired
without exercise by any holder thereof, the Conversion Price shall be readjusted
as if such issuance had not occurred.
SECTION 12.13 Responsibility of Trustee for Conversion Provisions.
The Trustee, subject to the provisions of Section 6.1, and any
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder of Securities to determine whether any facts exist which may require
any adjustment of the Conversion Rate, or with respect to the nature or extent
of any such adjustment when made, or with respect to the method employed, herein
or in any supplemental indenture provided to be employed, in making the same, or
whether a supplemental indenture need be entered into. Neither the Trustee,
subject to the provisions of Section 6.1, nor any Conversion Agent shall be
accountable with respect to the validity or value (or the kind or amount) of any
Common Stock, or of any other securities or property or cash, which may at any
time be issued or delivered upon the conversion of any Security; and it or they
do not make any representation with respect thereto. Neither the Trustee,
subject to the provisions of Section 6.1, nor any Conversion Agent shall be
responsible for any failure of the Company to make or calculate any cash payment
or to issue, transfer or deliver any shares of Common Stock or share
certificates or other securities or property or cash upon the surrender of any
Security for the purpose of conversion; and the Trustee, subject to the
provisions of Section 6.1, and any Conversion Agent shall not be responsible for
any failure of the Company to comply with any of the covenants of the Company
contained in this Article.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1 Securities Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Security, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article (subject to the provisions of
Article IV), the indebtedness represented by the Securities and the payment of
the principal of, or premium, if any, or interest on, each and all of the
Securities (including, but not limited to, the Redemption Price with respect to
the Securities to be called for redemption in accordance with Article XI or the
Repurchase Price with respect to Securities
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submitted for repurchase in accordance with Article XIV), are hereby expressly
made subordinate and subject in right of payment to the prior payment in full of
all Senior Debt.
SECTION 13.2 No Payment in Certain Circumstances, Payment over of Proceeds upon
Dissolution, Etc.
No payment shall be made with respect to the principal of, or premium,
if any, or interest on the Securities (including, but not limited to, the
Redemption Price with respect to the Securities to be called for redemption in
accordance with Article XI or the Repurchase Price with respect to Securities
submitted for repurchase in accordance with Article XIV), except payments and
distributions made by the Trustee as permitted by Section 13.9, if:
(i) a default in the payment of principal, premium, if any, or
interest (including a default under any repurchase or redemption obligation) or
other amounts with respect to any Senior Debt occurs and is continuing (or, in
the case of Senior Debt for which there is a period of grace, in the event of
such a default that continues beyond the period of grace, if any, specified in
the instrument or lease evidencing such Senior Debt) unless and until such
default shall have been cured or waived or shall have ceased to exist; or
(ii) any other event of default occurs and is continuing with
respect to Designated Senior Debt that then permits holders of such Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice of the
default (a "Payment Blockage Notice") from a Representative or holder of
Designated Senior Debt or the Company.
If the Trustee receives any Payment Blockage Notice pursuant to clause
(ii) above, no subsequent Payment Blockage Notice shall be effective for
purposes of this Section unless and until (A) at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice, and (B) all scheduled payments of principal, premium, if any,
and interest on the Securities that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the
basis for a subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Securities upon the earlier of:
(1) in the case of a default referred to in clause (i) above, the date
upon which the default is cured or waived or ceases to exist, or
(2) in the case of a default referred to in clause (ii) above, the date
upon which the default is cured or waived or ceases to exist or 179 days pass
after notice is received if the maturity of such Designated Senior Debt has not
been accelerated, unless this Article XIII otherwise prohibits the payment or
distribution at the time of such payment or distribution.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the
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Company or to its creditors, as such, or to its assets, or (b) any liquidation,
dissolution or other winding up of the Company, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or (c) any assignment for
the benefit of creditors or any other marshaling of assets and liabilities of
the Company, then and in any such event the holders of Senior Debt shall be
entitled to receive payment in full of all amounts due or to become due on or in
respect of all Senior Debt in cash before the Holders of the Securities are
entitled to receive any payment on account of principal of (or premium, if any)
or interest on the Securities or on account of the purchase, redemption or other
acquisition of Securities, and to that end the holders of Senior Debt shall be
entitled to receive, for application to the payment thereof, any payment or
distribution of any kind or character, whether in cash, property or securities,
which may be payable or deliverable in respect of the Securities in any such
case, proceeding, dissolution, liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, securities or other property, before all Senior Debt is paid in
full, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt.
For purposes of this Article only, the words "cash, securities or other
property" shall not be deemed to include shares of capital stock of the Company
as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment, which
shares of stock or securities are subordinated in right of payment to all then
outstanding Senior Debt to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article VII shall not be
deemed a dissolution, winding up, liquidation, reorganization, assignment for
the benefit of creditors or marshaling of assets and liabilities of the Company
for the purposes of this Section if the Person formed by such consolidation or
into which the Company is merged or which acquires by conveyance or transfer
such properties and assets substantially as an entirety, as the case may be,
shall, as a part of such consolidation, merger, conveyance or transfer, comply
with the conditions set forth in Article VII.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company, in the case of the Trustee, or the Trustee,
in the case of such Holder.
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SECTION 13.3 Prior Payment to Senior Debt upon Acceleration of Securities.
In the event of the acceleration of the Securities because of an Event
of Default, no payment or distribution shall be made to the Trustee or any
holder of Securities in respect of the principal of, premium, if any, or
interest on the Securities (including, but not limited to, the Redemption Price
with respect to the Securities called for redemption in accordance with Article
XI or the Repurchase Price with respect to the Securities submitted for
repurchase in accordance with Article XIV), except payments and distributions
made by the Trustee as permitted by Section 13.9, until all Senior Debt has been
paid in full in cash or other payment satisfactory to the holders of Senior Debt
or such acceleration is rescinded in accordance with the terms of this
Indenture. If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Debt of the
acceleration.
SECTION 13.4 Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other winding
up, assignment for the benefit of creditors or other marshaling of assets and
liabilities of the Company referred to in Section 13.2, or during the
circumstances referred to in the first paragraph of Section 13.2, or under the
conditions described in Section 13.3, from making payments at any time of
principal of (and premium, if any) or interest on the Securities, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of (and premium, if any) or interest
on the Securities or the retention of such payment by the Holders, if, at the
time of such application by the Trustee, it did not have knowledge that such
payment would have been prohibited by the provisions of this Article.
SECTION 13.5 Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full of all Senior Debt, the Holders of the
Securities shall be subrogated to the extent of the payments or distributions
made to the holders of such Senior Debt pursuant to the provisions of this
Article to the rights of the holders of such Senior Debt to receive payments and
distributions of cash, property and securities applicable to the Senior Debt
until the principal of (and premium, if any) and interest on the Securities
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Debt and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 13.6 Provisions Solely to Define Relative Rights.
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The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (i) impair, as among the Company, its creditors other than holders of
Senior Debt and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest on the Securities as and when
the same shall become due and payable in accordance with their terms; or (ii)
affect the relative rights against the Company of the Holders of the Securities
and creditors of the Company other than the holders of Senior Debt; or (iii)
prevent the Trustee or the Holder of any Security from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture, subject
to the rights, if any, under this Article of the holders of Senior Debt to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
SECTION 13.7 Trustee to Effectuate Subordination.
Each Holder of a Security by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee its attorney-in-fact for any and all such purposes.
SECTION 13.8 No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt, do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt, or otherwise
amend or supplement in any manner Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the collection of Senior Debt; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 13.9 Notice to Trustee.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the
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Trustee shall not be charged with knowledge of the existence of any facts which
would prohibit the making of any payment to or by the Trustee in respect of the
Securities, unless and until a Responsible Officer of the Trustee shall have
received written notice thereof from the Company or a Representative or a holder
of Senior Debt (including, without limitation, a holder of Designated Senior
Debt) and, prior to the receipt of any such written notice, the Trustee, subject
to the provisions of Section 6.1, shall be entitled in all respects to assume
that no such facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 13.9 at least two Business Days
prior to the date upon which by the terms hereof any money may become payable
for any purpose (including, without limitation, the payment of the principal of
(and premium, if any) or interest on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full power and
authority to receive such money and to apply the same to the purpose for which
such money was received and shall not be affected by any notice to the contrary
which may be received by it within one Business Day prior to such date.
Notwithstanding anything in this Article XIII to the contrary, nothing
shall prevent any payment by the Trustee to the Holders of monies deposited with
it pursuant to Section 4.1, and any such payment shall not be subject to the
provisions of Section 13.2 or 13.3.
Subject to the provisions of Section 6.1, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a Representative or a holder of Senior Debt (including, without
limitation, a holder of Designated Senior Debt) to establish that such notice
has been given by a Representative or a holder of Senior Debt (including,
without limitation, a holder of Designated Senior Debt). In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Debt to participate in any
payment or distribution pursuant to this Article, the Trustee may request such
Person to furnish evidence to the reasonable satisfaction of the Trustee as to
the amount of Senior Debt held by such Person, the extent to which such Person
is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article, and if such evidence
is not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such payment.
SECTION 13.10 Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 6.1, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Debt and other indebtedness of the
Company, the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
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SECTION 13.11 Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt and shall not be liable to any such holders if it shall
in good faith mistakenly pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article or otherwise.
SECTION 13.12 Reliance by Holders of Senior Debt on Subordination Provisions.
Each Holder by accepting a Security acknowledges and agrees that the
foregoing subordination provisions are, and are intended to be, an inducement
and a consideration to each holder of any Senior Debt, whether such Senior Debt
was created or acquired before or after the issuance of the Securities, to
acquire and continue to hold, or to continue to hold, such Senior Debt and such
holder of Senior Debt shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Debt, and no amendment or modification of the provisions
contained herein shall diminish the rights of such holders of Senior Debt unless
such holders shall have agreed in writing thereto.
SECTION 13.13 Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt,
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7.
SECTION 13.14 Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Section 13.13 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 13.15 Certain Conversions and Repurchases Deemed Payment.
For the purposes of this Article only, (i) the issuance and delivery of
junior securities upon conversion of Securities in accordance with Article XII
or upon the repurchase of Securities in accordance with Article XIV shall not be
deemed to constitute a payment or distribution on account of the principal of or
premium or interest on Securities or on account of the purchase or other
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acquisition of Securities, and (ii) the payment, issuance or delivery of cash
(except in satisfaction of fractional shares pursuant to Section 12.3 or
14.3(7)), property or securities (other than junior securities) upon conversion
of a Security shall be deemed to constitute payment on account of the principal
of such Security. For the purposes of this Section, the term "junior securities"
means (a) shares of any stock of any class of the Company and securities into
which the Securities are convertible pursuant to Article XII and (b) securities
of the Company which are subordinated in right of payment to all Senior Debt
which may be outstanding at the time of issuance or delivery of such securities
to substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities is intended to or
shall impair, as among the Company, its creditors other than holders of Senior
Debt and the Holders of the Securities, the right, which is absolute and
unconditional, of the Holder of any Security to convert such Security in
accordance with Article XII or to exchange such Security for Common Stock in
accordance with Article XIV if the Company elects to satisfy the obligations
under Article XIV by the delivery of Common Stock.
ARTICLE XIV
REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDER UPON A CHANGE IN CONTROL
SECTION 14.1 Right to Require Repurchase.
In the event that a Change in Control (as hereinafter defined) shall
occur, then each Holder shall have the right, at the Holder's option, but
subject to the provisions of Section 14.2, to require the Company to repurchase,
and upon the exercise of such right the Company shall repurchase, all of such
Holder's Securities not theretofore called for redemption, or any portion of the
principal amount thereof that is equal to U.S. $1,000 or any integral multiple
of U.S. $1,000 in excess thereof (provided that no single Security may be
repurchased in part unless the portion of the principal amount of such Security
to be Outstanding after such repurchase is equal to U.S. $1,000 or integral
multiples of U.S. $1,000 in excess thereof), on the date (the "Repurchase Date")
that is 45 days after the date of the Company Notice (as defined in Section
14.3) at a purchase price equal to 100% of the principal amount of the
Securities to be repurchased plus interest accrued to the Repurchase Date (the
"Repurchase Price"); provided, however, that installments of interest on
Securities whose Stated Maturity is on or prior to the Repurchase Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, registered as such on the relevant Record Date according to their
terms and the provisions of Section 3.7. Such right to require the repurchase of
the Securities shall not continue after a discharge of the Company from its
obligations with respect to the Securities in accordance with Article IV, unless
a Change in Control shall have occurred prior to such discharge. At the option
of the Company, the Repurchase Price may be paid in cash or, subject to the
fulfillment by the Company of the conditions set forth in Section 14.2, by
delivery of shares of Common Stock having a fair market value equal to the
Repurchase Price. Whenever in this Indenture (including Sections 2.2, 3.1,
5.1(1) and 5.8) there is a reference, in any context, to the principal of any
Security as of any time, such reference shall be deemed to include reference to
the Repurchase Price payable in respect of such Security to the extent that such
Repurchase Price is, was or would be so payable at such time, and express
mention of the Repurchase Price in any provision
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of this Indenture shall not be construed as excluding the Repurchase Price in
those provisions of this Indenture when such express mention is not made;
provided, however, that for the purposes of Article XIII such reference shall be
deemed to include reference to the Repurchase Price only to the extent the
Repurchase Price is payable in cash.
SECTION 14.2 Conditions to the Company's Election to Pay the Repurchase Price in
Common Stock.
The Company may elect to pay the Repurchase Price by delivery of shares
of Common Stock pursuant to Section 14.1 if and only if the following conditions
shall have been satisfied:
(1) The shares of Common Stock deliverable in payment of the Repurchase
Price shall have a fair market value as of the Repurchase Date of not less than
the Repurchase Price. For purposes of Section 14.1 and this Section 14.2, the
fair market value of shares of Common Stock shall be determined by the Company
and shall be equal to 95% of the average of the Closing Prices Per Share of the
Common Stock for the five consecutive Trading Days immediately preceding and
including the third Trading Day prior to the Repurchase Date;
(2) The Repurchase Price shall be paid only in cash in the event any
shares of Common Stock to be issued upon repurchase of Securities hereunder (i)
require registration under any federal securities law before such shares may be
freely transferable without being subject to any transfer restrictions under the
Securities Act upon repurchase and if such registration is not completed or does
not become effective prior to the Repurchase Date, and/or (ii) require
registration with or approval of any governmental authority under any state law
or any other federal law before such shares may be validly issued or delivered
upon repurchase and if such registration is not completed or does not become
effective or such approval is not obtained prior to the Repurchase Date;
(3) Payment of the Repurchase Price may not be made in Common Stock
unless such stock is, or shall have been, approved for quotation on the Nasdaq
National Market or listed on a national securities exchange, in either case,
prior to the Repurchase Date; and
(4) All shares of Common Stock which may be issued upon repurchase of
Securities will be issued out of the Company's authorized but unissued Common
Stock and, will upon issue, be duly and validly issued and fully paid and
non-assessable and free of any preemptive or similar rights.
If all of the conditions set forth in this Section 14.2 are not
satisfied in accordance with the terms thereof, the Repurchase Price shall be
paid by the Company only in cash.
SECTION 14.3 Notices; Method of Exercising Repurchase Right, Etc.
(1) Unless the Company shall have theretofore called for redemption all
of the Outstanding Securities, on or before the 30th day after the occurrence of
a Change in Control, the Company or, at the request and expense of the Company
on or before the 15th day after such occurrence, the Trustee, shall give to all
Holders of Securities, in the manner provided in Section 1.6, notice (the
"Company Notice") of the occurrence of the Change of Control and of the
repurchase
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right set forth herein arising as a result thereof and the Company shall issue a
Press Release including the information required to be included in such Company
Notice hereunder. The Company shall also deliver a copy of such Company Notice
to the Trustee.
Each Company Notice shall state:
(i) the Repurchase Date,
(ii) the date by which the repurchase right must be exercised,
(iii) the Repurchase Price, and whether the Repurchase Price shall
be paid by the Company in cash or by delivery of shares of Common Stock,
(iv) a description of the procedure which a Holder must follow to
exercise a repurchase right, and the place or places where such Securities are
to be surrendered for payment of the Repurchase Price and accrued interest, if
any to the Repurchase Date,
(v) that on the Repurchase Date the Repurchase Price, and accrued
interest, if any to the Repurchase Date, will become due and payable upon each
such Security designated by the Holder to be repurchased, and that interest
thereon shall cease to accrue on and after said date,
(vi) the Conversion Rate then in effect, the date on which the
right to convert the principal amount of the Securities to be repurchased will
terminate and the place or places where such Securities may be surrendered for
conversion, and
(vii) the place or places that the Security certificate with the
Election of Holder to Require Repurchase as specified in Section 2.2 shall be
delivered.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder' s right to exercise a repurchase right or affect
the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions or other provisions of this Article
XIV are inconsistent with applicable law, such law shall govern.
(2) To exercise a repurchase right, a Holder shall deliver to the
Trustee on or before the 30th day after the date of the Company Notice (i)
irrevocable written notice of the Holder's exercise of such right, which notice
shall set forth the name of the Holder, the principal amount of the Securities
to be repurchased (and, if any Security is to repurchased in part, the serial
number thereof, the portion of the principal amount thereof to be repurchased
and the name of the Person in which the portion thereof to remain Outstanding
after such repurchase is to be registered) and a statement that an election to
exercise the repurchase right is being made thereby, and, in the event that the
Repurchase Price shall be paid in shares of Common Stock, the name or names
(with addresses) in which the certificate or certificates for shares of Common
Stock shall be issued, and (ii) the Securities with respect to which the
repurchase right is being exercised. Such written notice shall be
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irrevocable, except that the right of the Holder to convert the Securities with
respect to which the repurchase right is being exercised shall continue until
the close of business on the Business Day immediately preceding the Repurchase
Date.
(3) In the event a repurchase right shall be exercised in accordance
with the terms hereof, the Company shall pay or cause to be paid to the Trustee
the Repurchase Price in cash or shares of Common Stock, as provided above, for
payment to the Holder on the Repurchase Date or, if shares of Common Stock are
to be paid, as promptly after the Repurchase Date as practicable, together with
accrued and unpaid interest to the Repurchase Date payable with respect to the
Securities as to which the repurchase right has been exercised; provided,
however, that installments of interest that mature on or prior to the Repurchase
Date shall be payable in cash to the Holders of such Securities, or one or more
Predecessor Securities, registered as such at the close of business on the
relevant Regular Record Date.
(4) If any Security (or portion thereof) surrendered for repurchase
shall not be so paid on the Repurchase Date, the principal amount of such
Security (or portion thereof, as the case may be) shall, until paid, bear
interest to the extent permitted by applicable law from the Repurchase Date at
the rate of __% per annum, and each Security shall remain convertible into
Common Stock until the principal of such Security (or portion thereof, as the
case may be) shall have been paid or duly provided for.
(5) Any Security which is to be repurchased only in part shall be
surrendered to the Trustee (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Security or Securities, containing
identical terms and conditions, each in an authorized denomination in aggregate
principal amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
(6) Any issuance of shares of Common Stock in respect of the Repurchase
Price shall be deemed to have been effected immediately prior to the close of
business on the Repurchase Date and the Person or Persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such repurchase shall be deemed to have become on the Repurchase Date the
holder or holders of record of the shares represented thereby; provided,
however, that any surrender for repurchase on a date when the stock transfer
books of the Company shall be closed shall constitute the Person or Persons in
whose name or names the certificate or certificates for such shares are to be
issued as the record holder or holders thereof for all purposes at the opening
of business on the next succeeding day on which such stock transfer books are
open. No payment or adjustment shall be made for dividends or distributions on
any Common Stock issued upon repurchase of any Security declared prior to the
Repurchase Date.
(7) No fractions of shares shall be issued upon repurchase of
Securities. If more than one Security shall be repurchased from the same Holder
and the Repurchase Price shall be payable in shares of Common Stock, the number
of full shares which shall be issuable upon such repurchase
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shall be computed on the basis of the aggregate principal amount of the
Securities so repurchased. Instead of any fractional share of Common Stock which
would otherwise be issuable on the repurchase of any Security or Securities, the
Company will deliver to the applicable Holder its check for the current market
value of such fractional share. The current market value of a fraction of a
share is determined by multiplying the current market price of a full share by
the fraction, and rounding the result to the nearest cent. For purposes of this
Section, the current market price of a share of Common Stock is the Closing
Price Per Share of the Common Stock on the Trading Day immediately preceding the
Repurchase Date.
(8) Any issuance and delivery of certificates for shares of Common
Stock on repurchase of Securities shall be made without charge to the Holder of
Securities being repurchased for such certificates or for any tax or duty in
respect of the issuance or delivery of such certificates or the securities
represented thereby; provided, however, that the Company shall not be required
to pay any tax or duty which may be payable in respect of (i) income of the
Holder or (ii) any transfer involved in the issuance or delivery of certificates
for shares of Common Stock in a name other than that of the Holder of the
Securities being repurchased, and no such issuance or delivery shall be made
unless and until the Person requesting such issuance or delivery has paid to the
Company the amount of any such tax or duty or has established, to the
satisfaction of the Company, that such tax or duty has been paid.
(9) Reserved.
(10) All Securities delivered for repurchase shall be delivered to the
Trustee to be canceled at the direction of the Trustee, which shall dispose of
the same as provided in Section 3.9.
SECTION 14.4 Certain Definitions.
For purposes of this Article XIV,
(1) the term "beneficial owner" shall be determined in accordance with
Rule 13d-3, as in effect on the date of the original execution of this
Indenture, promulgated by the Commission pursuant to the Exchange Act;
(2) a "Change in Control" shall be deemed to have occurred at the time,
after the original issuance of the Securities, of:
(i) the acquisition by any Person (including any syndicate or group
deemed to be a "person" under Section 13(d)(3) of the Exchange Act) of
beneficial ownership, directly or indirectly, through a purchase, merger or
other acquisition transaction or series of transactions, of shares of capital
stock of the Company entitling such person to exercise 50% or more of the total
voting power of all shares of capital stock of the Company entitled to vote
generally in the elections of directors, other than any such acquisition by the
Company, any subsidiary of the Company or any employee benefit plan of the
Company; or
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(ii) any consolidation of the Company with, or merger of the
Company into, any other Person, any merger of another Person into the Company,
or any conveyance, sale, transfer or lease of all or substantially all of the
assets of the Company to another Person (other than (a) any such transaction (x)
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of capital stock of the Company and (y)
pursuant to which the holders of 50% or more of the total voting power of all
shares of the Company's capital stock entitled to vote generally in the election
of directors immediately prior to such transaction have the entitlement to
exercise, directly or indirectly, 50% or more of the total voting power of all
shares of capital stock entitled to vote generally in the election of directors
of the continuing or surviving corporation immediately after such transaction
and (b) any merger which is effected solely to change the jurisdiction of
incorporation of the Company and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock into solely shares of common
stock); provided, however, that a Change in Control shall not be deemed to have
occurred if (I) the Closing Price Per Share of the Common Stock for any five
Trading Days within the period of 10 consecutive Trading Days ending immediately
after the later of the Change in Control or the public announcement of the
Change in Control (in the case of a Change in Control under clause (i) above) or
the period of 10 consecutive Trading Days ending immediately before the Change
in Control (in the case of a Change in Control under clause (ii) above) shall,
in the case of each of such five Trading Days, equal or exceed 105% of the
Conversion Price of the Securities in effect on each of such five Trading Days
or (II) all of the consideration (excluding cash payments for fractional shares
and cash payments made pursuant to dissenters' appraisal rights) in a merger or
consolidation otherwise constituting a Change of Control under clause (i) and/or
clause (ii) above consists of shares of common stock traded on a national
securities exchange or quoted on the Nasdaq National Market (or will be so
traded or quoted immediately following such merger or consolidation) and as a
result of such merger or consolidation the notes become convertible solely into
such common stock.
(3) the term "Conversion Price" shall equal U.S. $1,000 divided by the
Conversion Rate (rounded to the nearest cent); and
(4) for purposes of Section 14.4(2)(i), the term "person" shall include
any syndicate or group which would be deemed to be a "person" under Section
13(d)(3) of the Exchange Act, as in effect on the date of the original execution
of this Indenture.
SECTION 14.5 Consolidation, Merger, etc.
In the case of any merger, consolidation, conveyance, sale, transfer or
lease of all or substantially all of the assets of the Company to which Section
12.11 applies, in which the Common Stock of the Company is changed or exchanged
as a result into the right to receive shares of stock and other securities or
property or assets (including cash) which includes shares of Common Stock of the
Company or common stock of another Person that are, or upon issuance will be,
traded on a United States national securities exchange or approved for trading
on an established automated over-the-counter trading market in the United States
and such shares constitute at the time such change or exchange becomes effective
in excess of 50% of the aggregate fair market value of such shares of stock and
other securities, property and assets (including cash) (as determined by the
Company, which determination shall be conclusive and binding), then the Person
formed by such consolidation
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or resulting from such merger or combination or which acquires the properties or
assets (including cash) of the Company, as the case may be, shall execute and
deliver to the Trustee a supplemental indenture (which shall comply with the
Trust Indenture Act as in force at the date of execution of such supplemental
indenture) modifying the provisions of this Indenture relating to the right of
Holders to cause the Company to repurchase the Securities following a Change in
Control, including without limitation the applicable provisions of this Article
XIV and the definitions of the Common Stock and Change in Control, as
appropriate, and such other related definitions set forth herein as determined
in good faith by the Company (which determination shall be conclusive and
binding), to make such provisions apply in the event of a subsequent Change in
Control to the common stock and the issuer thereof if different from the Company
and Common Stock of the Company (in lieu of the Company and the Common Stock of
the Company).
ARTICLE XV
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE
SECTION 15.1 Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the Trustee:
(1) semi annually, not more than 15 days after the Regular Record Date,
a list, in such form as the Trustee may reasonably require, of the names and
addresses of the Holders of Securities as of such Regular Record Date, and
(2) at such other times as the Trustee may reasonably request in
writing, within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that no such list need be furnished so long as the
Trustee is acting as Security Registrar.
SECTION 15.2 Preservation of Information.
(1) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 15.1 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list, if any, furnished to it as provided
in Section 15.1 upon receipt of a new list so furnished.
(2) After this Indenture has been qualified under the Trust Indenture
Act, the rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights ,and duties of the Trustee, shall be as provided by the Trust Indenture
Act.
(3) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them
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<PAGE> 96
shall be held accountable by reason of any disclosure of information as to names
and addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 15.3 Reserved.
SECTION 15.4 Reports by Trustee.
(1) After this Indenture has been qualified under the Trust Indenture
Act, the Trustee shall transmit to Holders such reports concerning the Trustee
and its actions under this Indenture as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant thereto.
(2) After this Indenture has been qualified under the Trust Indenture
Act, a copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which the
Securities are listed, with the Commission and with the Company. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 15.5 Reports by Company.
After this Indenture has been qualified under the Trust Indenture Act,
the Company shall file with the Trustee and the Commission, and transmit to
Holders, such information, documents and other reports, and such summaries
thereof, as may be required pursuant to the Trust Indenture Act at the times and
in the manner provided pursuant to such Act; provided that any such information,
documents or reports required to be filed with the Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with
the Trustee within 15 days after the same is so required to be filed with the
Commission.
ARTICLE XVI
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 16.1 Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or
interest on any Security and no recourse under or upon any obligation, covenant
or agreement of the Company in this Indenture or in any supplemental indenture
or in any Security, or because of the creation of any indebtedness represented
thereby, shall be had against any incorporator, stockholder, employee, agent,
officer, or director or subsidiary, as such, past, present or future, of the
Company or of any successor corporation, whether by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is hereby
waived and released as a condition of, and as a consideration for, the execution
of this Indenture and the issue of the Securities.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed all as of the day and year first above written.
JUNIPER NETWORKS, INC.
By:
--------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Trustee
By:
--------------------------------------
Name:
Title:
<PAGE> 98
------------------------------------
JUNIPER NETWORKS, INC.
ISSUER
TO
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
TRUSTEE
------------------
INDENTURE
Dated as of _________, 2000
-------------------
__% CONVERTIBLE SUBORDINATED NOTES DUE MARCH 15, 2007
---------------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our reports dated
January 17, 2000, in Amendment No. 2 to the Registration Statement (Form S-1 No.
333-96171) and related Prospectus of Juniper Networks, Inc. for the registration
of its common stock issuable under the conversion of convertible notes.
Our audits also included the financial statement schedule listed in Item 16(b)
of this Registration Statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Palo Alto, California
February 23, 2000
