Employee Benefit Plans

Share-Based Compensation Plans

The Company’s share-based compensation plans include the 2006 Equity Incentive Plan (the “2006 Plan”), 2000 Nonstatutory Stock Option Plan (the “2000 Plan”), Amended and Restated 1996 Stock Plan (the “1996 Plan”), as well as various equity incentive plans assumed through acquisitions. Under these plans, the Company has granted (or in the case of acquired plans, assumed) stock options, RSUs, and PSAs. In addition, the Company’s 2008 Employee Stock Purchase Plan (the “2008 Purchase Plan”) permits eligible employees to acquire shares of the Company’s common stock at a 15% discount to the offering price (as determined in the 2008 Purchase Plan) through periodic payroll deductions of up to 10% of base compensation, subject to individual purchase limits of 6,000 shares in any twelve-month period or $25,000 worth of stock, determined at the fair market value of the shares at the time the stock purchase option is granted, in one calendar year.

The 2006 Plan, adopted and approved by the Company’s stockholders in May 2006, had an initial authorized share reserve of 64.5 million shares of common stock plus the addition of any shares subject to options under the 2000 Plan and the 1996 Plan that were outstanding as of May 18, 2006, and that subsequently expire unexercised, up to a maximum of an additional 75.0 million shares. In the second quarters of 2010 and 2011 the Company’s stockholders’ approved amendments to the 2006 Plan that increased the number of shares reserved for issuance thereby increasing the authorized share reserve by 30.0 million shares in May 2010 and 2011. As of September 30, 2011, the 2006 Plan had 57.7 million shares subject to currently outstanding equity awards and 43.3 million shares available for future issuance.

In connection with past acquisitions, the Company assumed stock option and RSU awards under the stock plans of the acquired companies. The Company exchanged those awards for Juniper Networks' stock options and RSUs. As of September 30, 2011, stock options and RSUs covering approximately 1.5 million shares of common stock were outstanding under awards assumed through the Company's past acquisitions.

Stock Option Activities

Since 2006, the Company has granted stock option awards that have a maximum contractual life of seven years from the date of grant. Prior to 2006, stock option awards generally had a ten-year contractual life from the date of grant. The following table summarizes the Company’s stock option activity and related information as of and for the nine months ended September 30, 2011 (in millions, except for per share amounts and years):



	Outstanding Options
	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance at January 1, 2011	49.4		$	21.90
Options granted	4.8		40.16
Options canceled	(1.7	)	26.31
Options exercised	(13.5	)	21.37
Options expired	(0.2	)	46.12
Balance at September 30, 2011	38.8		$	23.99	3.9	$	39.2

As of September 30, 2011:
Vested or expected-to-vest options	36.9		$	23.60	3.8	$	38.5
Exercisable options	25.2		$	21.28	3.1	$	32.1

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the period, which was $17.26 per share as of September 30, 2011, and the exercise price multiplied by the number of related options. The pre-tax intrinsic value of options exercised, representing the difference between the fair market value of the Company’s common stock on the date of the exercise and the exercise price of each option, was $5.2 million and $246.1 million for the three and nine months ended September 30, 2011, respectively. Total fair value of options vested for the three and nine months ended September 30, 2011, was $17.2 million and $63.4 million, respectively.

Restricted Stock Units and Performance Share Awards Activities

RSUs generally vest over a period of three to four years from the date of grant, and PSAs generally vest after three years provided that certain annual performance targets and other vesting criteria are met. Until vested, RSUs and PSAs do not have the voting and dividend participation rights of common stock and the shares underlying the awards are not considered issued and outstanding.

The following table summarizes the Company’s RSU and PSA activity and related information as of and for the nine months ended September 30, 2011 (in millions, except per share amounts and years):



	Outstanding RSUs and PSAs
	Number of Shares		Weighted Average Grant-Date Fair Value per Share		Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value
Balance at January 1, 2011	14.2		$	25.94
RSUs granted	4.5		38.58
PSAs granted (1)	4.1		40.18
RSUs vested	(1.4	)	22.86
PSAs vested	(0.8	)	24.76
RSUs canceled	(0.7	)	31.49
PSAs canceled	(1.0	)	29.52
Balance at September 30, 2011	18.9		$	31.88	1.7	$	329.4

As of September 30, 2011:
Vested and expected-to-vest RSUs and PSAs	16.4		$	31.40	1.6	$	282.9

________________________________

(1)

The number of shares subject to PSAs granted represents the aggregate maximum number of shares that may be issued pursuant to the award over its full term. The aggregate number of shares subject to these PSAs that would be issued if performance goals determined by the Compensation Committee are achieved at target is 1.7 million shares. Depending on achievement of such performance goals, the range of shares that could be issued under these awards is 0 to 4.1 million shares.

Shares Available for Grant

The following table presents the stock grant activity and the total number of shares available for grant under the 2006 Plan as of September 30, 2011 (in millions):



	Number of Shares
Balance at January 1, 2011	30.7
Additional authorized share reserve approved by stockholders	30.0
RSUs and PSAs granted (1)	(18.0	)
Options granted	(4.8	)
RSUs and PSAs canceled (1)	3.5
Options canceled (2)	1.7
Options expired (2)	0.2
Balance at September 30, 2011	43.3

________________________________

(1)

RSUs and PSAs with a per share or unit purchase price lower than 100% of the fair market value of the Company's common stock on the day of the grant under the 2006 Plan are counted against shares authorized under the plan as two and one-tenth shares of common stock for each share subject to such award. The number of shares subject to PSAs granted represents the maximum number of shares that may be issued pursuant to the award over its full term.


(2)	Includes canceled or expired options under the 1996 Plan and the 2000 Plan that expired unexercised after May 18, 2006, which become available for grant under the 2006 Plan according to its terms.

Employee Stock Purchase Plan

The Company's 2008 Purchase Plan is implemented in a series of offering periods, each six months in duration, or a shorter period as determined by the Board. Under the 2008 Purchase Plan, employees purchased approximately 1.4 million shares at an average per share price of $19.88 for the three months ended September 30, 2011, and 1.0 million shares at an average price of $21.30 for the three months ended September 30, 2010. Employees purchased 2.4 million shares at an average per share price of $21.53 in the nine months ended September 30, 2011, and approximately 2.0 million shares of common stock at an average price of $21.20 per share in the nine months ended September 30, 2010.

As of September 30, 2011, approximately 6.0 million shares had been issued and 6.0 million shares remained available for future issuance under the 2008 Purchase Plan.

Common Stock Reserved for Future Issuance

As of September 30, 2011, the Company had reserved an aggregate of approximately 107.0 million shares of common stock for future issuance under its equity incentive plans and the 2008 Purchase Plan.

Share-Based Compensation Expense

The Company determines the fair value of its stock options utilizing the Black-Scholes-Merton (“BSM”) option-pricing model, which incorporates various assumptions including volatility, risk-free interest rate, expected life, and dividend yield. The expected volatility is based on the implied volatility of market-traded options on the Company’s common stock, adjusted for other relevant factors including historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options. The expected life of a stock option award is based on historical experience and on the terms and conditions of the stock awards granted to employees, as well as the potential effect from stock options that had not been exercised at the time. The Company determines the fair value of its RSUs and PSAs based upon the fair market value of the shares of the Company’s common stock at the date of grant.

The assumptions used and the resulting estimates of fair value for employee stock options and the employee stock purchase plan during the three and nine months ended September 30, 2011, and 2010 were:



	Three Months Ended September 30,		Nine Months Ended September 30,
	2011	2010	2011	2010
Employee Stock Options:
Volatility factor	43% - 50%	39% - 42%	41% - 50%	33% - 42%
Risk-free interest rate	0.7% - 1.1%	1.1% - 1.4%	0.7% - 1.9%	1.1% - 2.2%
Expected life (years)	4.1	4.3	4.1	4.3
Dividend yield	—	—	—	—
Fair value per share	$7.35- $10.79	$8.93 - $9.81	$7.35- $15.22	$7.83 - $30.36

Employee Stock Purchase Plan:
Volatility factor	45%	36%	33% - 45%	35% - 36%
Risk-free interest rate	0.2%	0.2%	0.2%	0.2%
Expected life (years)	0.5	0.5	0.5	0.5
Dividend yield	—	—	—	—
Weighted-average fair value per share	$6.37	$7.09	$6.37 - $9.07	$6.19 - $7.09

The Company expenses the cost of its stock options on a straight-line basis over the vesting period and expenses the cost of its RSUs ratably over the vesting period. With respect to PSAs, for the portion of the award attributable to each performance year, the Company recognizes PSA expense ratably over the remaining vesting period starting in the period in which the annual performance targets are set for each such performance year.

The Company’s share-based compensation expense associated with stock options, employee stock purchases, RSUs, and PSAs is recorded in the following cost and expense categories for the three and nine months ended September 30, 2011, and 2010 (in millions):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
Cost of revenues - Product	$	1.2	$	1.0	$	3.4	$	3.1
Cost of revenues - Service	3.8		3.2		12.1		10.0
Research and development	26.5		19.3		75.4		55.0
Sales and marketing	20.6		13.4		53.0		39.0
General and administrative	8.4		7.5		25.7		22.5
Total	$	60.5	$	44.4	$	169.6	$	129.6

The following table summarizes share-based compensation expense by award type (in millions):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Options	$	18.8	$	20.5	$	58.4	$	61.4
Assumed options	—		—		—		0.6
RSUs and PSAs	35.6		19.1		93.6		54.6
Assumed RSUs	—		—		—		0.5
Employee stock purchase plan	4.6		3.5		13.2		9.9
Other acquisition-related compensation	1.5		1.3		4.4		2.6
Total	$	60.5	$	44.4	$	169.6	$	129.6

As of September 30, 2011, approximately $105.5 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested stock options will be recognized over a weighted-average period of approximately 2.3 years while approximately $249.1 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to unvested RSUs and PSAs will be recognized over a weighted-average period of approximately 2.2 years.

401(k) Plan

The Company maintains a savings and retirement plan qualified under Section 401(k) of the Internal Revenue Code of 1986, as amended. Employees meeting the eligibility requirements, as defined, may contribute up to the statutory limits of the year. The Company has matched employee contributions since January 1, 2001, currently matching 25% of all eligible employee contributions. All matching contributions vest immediately. The Company’s matching contributions to the plan totaled $3.9 million and $13.7 million in the three and nine months ended September 30, 2011, respectively, and $3.2 million and $10.7 million in the three and nine months ended September 30, 2010, respectively.

Deferred Compensation Plan

The Company’s non-qualified deferred compensation (“NQDC”) plan is an unfunded and unsecured deferred compensation arrangement. Under the NQDC plan, officers and other senior employees may elect to defer a portion of their compensation and contribute such amounts to one or more investment funds. The NQDC plan assets are included within short-term investments, and offsetting obligations are included within accrued compensation on the condensed consolidated balance sheet. The investments are considered trading securities and are reported at fair value. The realized and unrealized holding gains and losses related to these investments are recorded in interest and other income, net, and the offsetting compensation expense are recorded as operating expenses in the condensed consolidated results of operations. The deferred compensation liability under the NQDC plan was approximately $10.1 million and $8.1 million as of September 30, 2011, and December 31, 2010, respectively. For additional information regarding the Company's NQDC, see Note 5, Cash, Cash Equivalents, and Investments.