def14a
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant o |
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o Preliminary Proxy Statement
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o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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þ Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
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Ciena Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
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Form, schedule or registration statement no.: |
Ciena
Corporation
1201 Winterson Road
Linthicum, Maryland 21090
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD MARCH 26,
2008
To the shareholders of Ciena Corporation:
The 2008 Annual Meeting of Shareholders of Ciena Corporation
will be held at the Baltimore Marriott Waterfront Hotel located
at 700 Aliceanna Street in Baltimore, Maryland, on Wednesday,
March 26, 2008 at 3:00 p.m. local time for the
following purposes:
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1.
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To elect three members of the Board of Directors to serve as
Class II directors for three-year terms ending in 2011, or
until their respective successors are elected and qualified;
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2.
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To approve the 2008 Omnibus Incentive Plan;
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3.
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To approve an amendment and restatement of Cienas Third
Restated Certificate of Incorporation, as amended, to increase
the number of authorized shares of common stock from
140 million to 290 million and to make certain other
changes;
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4.
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To ratify the appointment of PricewaterhouseCoopers LLP as
Cienas independent registered public accounting firm for
the fiscal year ending October 31, 2008; and
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5.
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To consider and act upon such other business as may properly
come before the Annual Meeting or any adjournments thereof.
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These matters are more fully described in the proxy statement
accompanying this notice.
This year, new Securities and Exchange Commission rules allow us
to furnish proxy materials to our shareholders on the Internet.
We are pleased to take advantage of these new rules and believe
that they enable us to provide our shareholders with the
information that they need, while lowering the cost of delivery
and reducing the environmental impact of our Annual Meeting.
As shareholders of Ciena, your vote is important. Whether or not
you plan to attend the Annual Meeting in person, it is important
that you vote as soon as possible to ensure that your shares are
represented. Shareholders may listen to a webcast of the Annual
Meeting by following the instructions that will be available on
the Investor Relations page of our website at
www.ciena.com.
By Order of the Board of Directors,
Russell B. Stevenson, Jr.
Secretary
Linthicum, Maryland
February 8, 2008
CIENA
CORPORATION
PROXY STATEMENT FOR 2008 ANNUAL MEETING OF
SHAREHOLDERS
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ii
CIENA
CORPORATION
1201 WINTERSON ROAD
LINTHICUM, MARYLAND 21090
PROXY
STATEMENT
ANNUAL
MEETING OF SHAREHOLDERS
TO BE HELD MARCH 26, 2008
Our Board of Directors has made these proxy materials available
to you on the Internet, or, upon your request, has delivered
printed versions of these materials to you by mail. We are
furnishing this proxy statement in connection with the
solicitation by our Board of Directors of proxies to be voted at
our 2008 Annual Meeting. The Annual Meeting will be held at the
Baltimore Marriott Waterfront Hotel located at 700 Aliceanna
Street in Baltimore, Maryland, on Wednesday, March 26, 2008
at 3:00 p.m. local time, or at any adjournment thereof. We
mailed our Notice of Internet Availability of Proxy Materials
(the Notice) to each shareholder entitled to vote at
the Annual Meeting on or about February 8, 2008.
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Who may
vote at the Annual Meeting?
The Board of Directors has set January 28, 2008 as the
record date for the Annual Meeting. If you were the owner of
Ciena common stock at the close of business on January 28,
2008, you may vote at the Annual Meeting. You are entitled to
one vote for each share of common stock you held on the record
date.
A list of shareholders entitled to vote at the Annual Meeting
will be open to examination by any shareholder, for any purpose
germane to the Annual Meeting, during normal business hours for
a period of ten days before the Annual Meeting at our corporate
offices at 1201 Winterson Road, Linthicum, Maryland 21090, and
at the time and place of the Annual Meeting.
How many
shares must be present to hold the Annual Meeting?
A majority of our shares of common stock outstanding as of the
record date must be present at the Annual Meeting in order to
hold the meeting and conduct business. This is called a quorum.
On the record date, there were 87,046,455 shares of Ciena common
stock outstanding. Your shares are counted as present at the
Annual Meeting if you are present and vote in person at the
Annual Meeting or properly submit your proxy prior to the Annual
Meeting.
What
proposals will be voted on at the Annual Meeting?
The items scheduled to be voted on at the Annual Meeting are:
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the election of three Class II directors to the Board of
Directors for three-year terms ending in 2011, or until their
respective successors are elected and qualified;
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the approval of our 2008 Omnibus Incentive Plan;
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the approval of an amendment and restatement of our Third
Restated Certificate of Incorporation, as amended (the
Certificate), to increase the number of authorized
shares of common stock from 140 million to 290 million
and to make certain other changes; and
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the ratification of the appointment of PricewaterhouseCoopers
LLP as our independent registered public accounting firm for the
fiscal year ending October 31, 2008.
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We are not currently aware of any other business to be acted
upon at the Annual Meeting. If any other matters are properly
submitted for consideration at the Annual Meeting, including any
proposal to adjourn the Annual Meeting, the persons named as
proxies will vote the shares represented thereby in their
discretion. Adjournment of
the Annual Meeting may be made for the purpose of, among other
things, soliciting additional proxies. Any adjournment may be
made from time to time by approval of the holders of common
stock representing a majority of the votes present in person or
by proxy at the Annual Meeting, whether or not a quorum exists,
without further notice other than by an announcement made at the
Annual Meeting.
How does
the Board of Directors recommend that I vote?
The Board of Directors recommends that you vote:
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FOR the election of the Class II director
nominees named in this proxy statement;
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FOR approval of our 2008 Omnibus Incentive Plan;
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FOR approval of the amendment and restatement of the
Certificate; and
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FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public
accounting firm.
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Why did I
receive a one-page notice in the mail regarding the Internet
availability of proxy materials this year instead of a full set
of printed proxy materials?
Pursuant to the new rules adopted by the Securities and Exchange
Commission (SEC), we have elected to provide access to our proxy
materials over the Internet. Accordingly, we sent a Notice to
all of our shareholders as of the record date. All shareholders
may access our proxy materials on the website referred to in the
Notice. Shareholders may also request to receive a printed set
of our proxy materials. Instructions on how to access our proxy
materials over the Internet or to request a printed copy can be
found on the Notice. In addition, by following the instructions
in the Notice, shareholders may request to receive proxy
materials in printed form by mail or electronically by email on
an ongoing basis.
Choosing to receive your future proxy materials by email will
save us the cost of printing and mailing documents to you and
will reduce the impact of our annual meetings on the
environment. If you choose to receive future proxy materials by
email, you will receive an email next year with instructions
containing a link to those materials and a link to the proxy
voting site. Your election to receive proxy materials by email
will remain in effect until you terminate it.
How many
votes are required to approve each proposal?
During fiscal 2007, we amended our bylaws to adopt a majority
vote standard in uncontested director elections. As a result,
other than in a contested election (i.e., an election in
which the number of candidates exceeds the number of directors
to be elected), each director will be elected by the vote of the
majority of the votes cast by holders of shares present in
person or represented by proxy at the Annual Meeting. For
purposes of uncontested director elections, a majority of the
votes cast means that the number of votes cast FOR a
directors election exceeds the number of votes cast
AGAINST that directors election. In a
contested election, however, directors will continue to be
elected by plurality vote.
Approval of the amendment and restatement of the Certificate
requires the affirmative vote of a majority of the shares
outstanding.
Approval of the 2008 Omnibus Incentive Plan and ratification the
appointment of our independent registered public accounting firm
each require the affirmative vote of a majority of the total
votes cast by holders of shares present in person or represented
by proxy at the Annual Meeting and entitled to vote on these
proposals.
How are
votes counted?
You may vote FOR, AGAINST or
ABSTAIN as to any of proposals to be presented at
the Annual Meeting that are set forth in this proxy statement.
If you abstain from voting on these proposals, your shares will
be counted as present for purposes of establishing a quorum at
the Annual Meeting. An abstention will count as a vote
2
against approval of the amendment and restatement of the
Certificate. An abstention will not count as a vote for or
against the other proposals and will have no effect on the
outcome of the election of our directors.
Broker non-votes are counted as present for purposes of
determining the presence or absence of a quorum for the
transaction of business but will not be counted for purposes of
determining whether a proposal has been approved. Broker
non-votes occur when brokers do not receive voting instructions
from their customers and the broker does not have discretionary
voting authority with respect to a proposal. If you hold shares
through a broker, bank or other nominee and you do not give
instructions as to how to vote, your broker may have authority
to vote your shares on certain routine items but not on other
items. Broker non-votes will not be counted for purposes of the
election of directors and will have no effect on the outcome of
the vote on the approval or the 2008 Omnibus Incentive Plan or
the ratification of our independent registered public accounting
firm. Broker non-votes, like abstentions, will have the effect
of a vote against the approval of the amendment and restatement
of our Certificate, as that approval requires the affirmative
vote of a majority of our shares outstanding.
What is
the difference between holding shares as a shareholder of record
and as a beneficial owner of shares held in street
name?
If your shares are registered directly in your name with our
transfer agent, Computershare Trust Company, N.A., you are
considered the shareholder of record with respect to
those shares, and the Notice was sent directly to you.
If your shares are held in an account at a brokerage firm, bank,
broker-dealer, or other similar organization, then you are the
beneficial owner of shares held in street name, and
the Notice was forwarded to you by that organization. As a
beneficial owner, you have the right to direct that organization
on how to vote the shares held in your account.
How do I
vote my shares without attending the Annual Meeting?
Whether you are a shareholder of record or hold your
shares in street name, you may direct your vote
without attending the Annual Meeting in person.
If you are a shareholder of record, you may vote by Internet by
following the instructions on the Notice. If you request printed
copies of the proxy materials by mail, you may also vote by
signing and submitting your proxy card and returning by mail or
by submitting your vote by telephone. You should sign your name
exactly as it appears on the proxy card. If you are signing in a
representative capacity (for example, as guardian, executor,
trustee, custodian, attorney or officer of a corporation), you
should indicate your name and title or capacity.
If you are the beneficial owner of shares held in street name,
you may be eligible to vote your shares electronically over the
Internet or by telephone by following the instructions on the
Notice. If you request printed copies of the proxy materials by
mail, you may also vote by signing the voter instruction card
provided by your bank or broker and returning it by mail. If you
provide specific voting instructions by mail, telephone or the
Internet, your shares will be voted by your broker or nominee as
you have directed.
The persons named as proxies are officers of Ciena. All proxies
properly submitted in time to be counted at the Annual Meeting
will be voted in accordance with the instructions contained
therein. If you submit your proxy without voting instructions,
your shares will be voted in accordance with the recommendations
of the Board of Directors set forth above.
How do I
vote my shares in person at the Annual Meeting?
Even if you plan to attend the Annual Meeting, we encourage you
to vote by telephone or Internet, or by returning a proxy card
following your request of printed materials. This will ensure
that your vote will be counted if you are unable to, or later
decide not to, attend the Annual Meeting. If you are a
shareholder of record, you may vote in person by marking and
signing the ballot to be provided at the Annual Meeting. If you
hold your shares in street name, you must obtain a
proxy in your name from your bank, broker or other shareholder
of record in order to vote by ballot at the Annual Meeting.
3
What
happens if my shares are held in more than one
account?
If your shares are held in more than one account, you will
receive a Notice for each account. To ensure that all of your
shares in each account are voted, you must vote in accordance
with the Notice you receive for each account.
May I
revoke my proxy and change my vote after I have voted?
You may revoke your proxy and change your vote at any time
before the final vote at the Annual Meeting. You may revoke your
proxy by voting again on a later date on the Internet or by
telephone (only your latest Internet or telephone proxy
submitted prior to the Annual Meeting will be counted), or by
signing and returning a new proxy card with a later date, or by
attending the Annual Meeting and voting in person. Your
attendance at the Annual Meeting will not automatically revoke
your proxy unless you vote again at the Annual Meeting or
specifically request in writing at that time that your prior
proxy be revoked.
Where can
I find the voting results of the Annual Meeting?
The preliminary voting results will be announced at the Annual
Meeting. The final voting results will be tallied by the
inspector of elections and published in our quarterly report on
Form 10-Q
for the fiscal quarter ending on April 30, 2008.
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
General
Our Board of Directors currently consists of nine members. The
directors are divided into three classes, with each class
serving on the Board of Directors for a staggered three-year
term. Class II, whose term expires at the Annual Meeting,
consists of Harvey B. Cash, Judith M. OBrien and Gary B.
Smith. At the Annual Meeting, three directors will be elected to
fill positions in Class II. Each of the current
Class II directors is a nominee for election at the Annual
Meeting. The nomination of these directors to stand for election
at the Annual Meeting has been recommended by the Governance and
Nominations Committee and approved by the Board of Directors.
Each of the nominees for Class II, if elected, will serve
for a three-year term expiring at the 2011 Annual Meeting, or
until his or her successor is elected and qualified.
Each of the nominees has consented to serve if elected. However,
if any of the persons nominated by the Board of Directors fails
to stand for election, or declines to accept election, or is
otherwise unavailable for election prior to our Annual Meeting,
proxies solicited by our Board of Directors will be voted by the
proxy holders for the election of any other person or persons as
the Board of Directors may recommend, or our Board of Directors,
at its option, may reduce the number of directors that
constitute the entire Board of Directors.
The following tables present information, including age, term of
office and business experience, for each person nominated for
election as a Class II director and for those directors
whose terms of office will continue after the meeting.
Nominees
for Election as Class II Directors with Terms Expiring in
2011
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Harvey B. Cash |
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Mr. Cash, age 69, has served as a director of Ciena
since April 1994 and is Cienas lead independent director.
Mr. Cash is a general partner of InterWest Partners, a
venture capital firm in Menlo Park, California that he joined in
1985. Mr. Cash serves on the boards of directors of First
Acceptance Corp., i2 Technologies, Inc., Silicon
Laboratories, Inc., Argonaut Group, Inc. and Staktek Holdings,
Inc. |
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Judith M. OBrien |
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Ms. OBrien, age 57, has served as a director of
Ciena since July 2000. Since November 2006,
Ms. OBrien has served as executive vice president of
Obopay, Inc., a provider of mobile payment services. |
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From February 2001 until October 2006, Ms. OBrien
served as a managing director at Incubic Venture Fund, a venture
capital firm. From February 1984 until February 2001,
Ms. OBrien was a partner with Wilson Sonsini
Goodrich & Rosati, where she specialized in corporate
finance, mergers and acquisitions and general corporate matters.
Ms. OBrien serves on the board of directors of
Grandis Inc., a privately held company. |
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Gary B. Smith |
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Mr. Smith, age 47, joined Ciena in 1997 and has served
as President and Chief Executive Officer since May 2001.
Mr. Smith has served as a director of Ciena since October
2000. Mr. Smith serves on the boards of directors for
CommVault Systems, Inc. and the American Electronics
Association. Mr. Smith also serves as a member of the
Global Information Infrastructure Commission. |
Class III
Directors with Terms Expiring in 2009
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Stephen P. Bradley, Ph.D |
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Professor Bradley, age 66, has served as a director of
Ciena since April 1998. Professor Bradley is the William
Ziegler Professor of Business Administration and teaches
Competitive and Corporate Strategy in the Advanced Management
Program at the Harvard Business School. A member of the Harvard
faculty since 1968, Professor Bradley is also Chairman of
Harvards Executive Program in Competition and Strategy:
Building and Sustaining Competitive Advantage. Professor Bradley
serves on the boards of directors of i2 Technologies, Inc.
and the Risk Management Foundation of the Harvard Medical
Institutions. |
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Bruce L. Claflin |
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Mr. Claflin, age 56, has served as a director of Ciena
since August 2006. Mr. Claflin served as President and
Chief Executive Officer of 3Com Corporation, a provider of
enterprise and small-business networking solutions, from January
2001 until his retirement in February 2006. Mr. Claflin
joined 3Com as President and Chief Operating Officer in August
1998. Prior to 3Com, Mr. Claflin served as Senior Vice
President and General Manager, Sales and Marketing, for Digital
Equipment Corporation. Mr. Claflin also worked for
22 years at IBM, where he held various sales, marketing and
management positions, including general manager of IBM PC
Companys worldwide research and development, product and
brand management, as well as president of IBM PC Company
Americas. Mr. Claflin also serves on the board of directors
of Advanced Micro Devices, Inc. |
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Gerald H. Taylor |
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Mr. Taylor, age 66, has served as a director of Ciena
since January 2000. Mr. Taylor has served as a
managing member of mortonsgroup, LLC, a venture partnership
specializing in telecommunications and information technology,
since January 2000. From 1996 to 1998, Mr. Taylor was Chief
Executive Officer of MCI Communications Corporation. |
Class I
Directors with Terms Expiring in 2010
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Lawton W. Fitt |
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Ms. Fitt, age 54, has served as a director of Ciena
since November 2000. From October 2002 to March 2005,
Ms. Fitt served as Director of the Royal Academy of Arts in
London. From 1979 to October 2002, Ms. Fitt was an
investment banker with Goldman |
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Sachs & Co., where she was a partner from 1994 to
October 2002, and a managing director from 1996 to October 2002.
Ms. Fitt serves on the boards of directors of Reuters PLC,
Citizens Communications Company and Overture Acquisition
Corporation, and is a senior advisor of GSC Group. |
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Patrick H. Nettles, Ph.D |
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Dr. Nettles, age 64, has served as a director of Ciena
since April 1994 and as Executive Chairman of the Board of Ciena
since May 2001. From October 2000 to May 2001, Dr. Nettles
was Chairman of the Board and Chief Executive Officer of Ciena,
and he was President and Chief Executive Officer from April 1994
to October 2000. Dr. Nettles serves as a Trustee for the
California Institute of Technology and serves on the board of
directors of Axcelis Technologies, Inc. and The Progressive
Corporation. Dr. Nettles also serves on the board of
directors of Apptrigger, Inc., a privately held company. |
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Michael J. Rowny |
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Mr. Rowny, age 57, has served as a director of Ciena
since August 2004. Mr. Rowny has been Chairman of
Rowny Capital, a private equity firm, since 1999. From 1994 to
1999, and previously from 1983 to 1986, Mr. Rowny was with
MCI Communications in positions including President and Chief
Executive Officer of MCIs International Ventures,
Alliances and Correspondent Group, acting Chief Financial
Officer, Senior Vice President of Finance, and Treasurer.
Mr. Rowny serves on the board of directors of Neustar, Inc. |
Proposal No. 1
Recommendation of the Board of Directors
The Board of Directors recommends that Ciena shareholders vote
FOR the election of the three Class II nominees
listed above.
CORPORATE
GOVERNANCE AND THE BOARD OF DIRECTORS
Independent
Directors
The Board of Directors has determined that, with the exception
of Dr. Nettles and Mr. Smith, both of whom are
employees of Ciena, all of its members are independent
directors, as that term is defined in the listing
standards of The NASDAQ Stock Market.
Communicating
with the Board of Directors
The Board of Directors has adopted a procedure for receiving and
addressing communications from shareholders. Shareholders may
send written communications to the entire Board of Directors, to
the independent directors serving on the Board, or to any of the
Boards committees, by addressing communications to Ciena
Corporation, 1201 Winterson Road, Linthicum, Maryland 21090,
Attention: Corporate Secretary. Communication by
e-mail
should be addressed to ir@ciena.com and marked
Attention: Corporate Secretary in the
Subject field. Our General Counsel serves as
Corporate Secretary and determines, in his discretion, whether
the nature of the communication is such that it should be
brought to the attention of the Board, the independent directors
or one of the Board committees. In making this determination,
the Corporate Secretary takes into account the source of the
communication, including the number of shares held by the
shareholder (if available); the relevance and reasonableness of
the suggestions or ideas contained in the communication; and
such other information as he deems relevant to a determination
of the value of the information to the performance of the
Boards responsibilities. In case of doubt, the Corporate
Secretary errs on the side of transmitting the communication to
the directors.
6
Codes of
Ethics
Ciena has adopted a Code of Business Conduct and Ethics that is
applicable to all of its directors, officers and employees. The
Code of Business Conduct and Ethics reflects Cienas policy
of dealing with all persons, including our customers, employees,
investors, and suppliers, with honesty and integrity. All new
employees are required to complete training on our Code of
Business Conduct and Ethics and we conduct periodic courses
related to specific topics contained therein.
Ciena has also adopted a Code of Ethics for Senior Financial
Officers that is specifically applicable to Cienas Chief
Executive Officer, Chief Financial Officer and Controller. Its
purpose is to promote honest and ethical conduct, and compliance
with the law, particularly as it relates to the maintenance of
Cienas financial records and the preparation of financial
statements filed with the SEC. Our Code of Ethics for Senior
Financial Officers complies with the requirements of
Section 406(c) of the Sarbanes-Oxley Act.
A copy of Cienas Code of Business Conduct and Ethics and
Code of Ethics for Senior Financial Officers can each be found
on the Corporate Governance page of the Investor Relations
portion of our website at www.ciena.com. You may also
obtain copies of these documents without charge by writing to:
Ciena Corporation, 1201 Winterson Road, Linthicum, Maryland
21090, Attention: Corporate Secretary.
Principles
of Corporate Governance
Our Board has adopted Principles of Corporate Governance that
govern, among other things, the composition, structure,
interaction and operation of the Board of Directors. Some of the
key governance features in the Principles of Corporate
Governance, as well as those changes that we implemented in
fiscal 2007, are summarized below.
Majority Vote Standard in Director
Elections. During fiscal 2007, the Board amended
Cienas bylaws and Principles of Corporate Governance to
adopt a majority vote standard in uncontested director
elections. As a result, other than in a contested election
(i.e., an election in which the number of candidates
exceeds the number of directors to be elected), directors are
elected by a vote of the majority of the votes cast by holders
of shares present in person or represented by proxy at the
Annual Meeting. In a contested election, directors will continue
to be elected by plurality vote. Our Principles of Corporate
Governance provide additional information relating to the
procedures to be undertaken to implement the majority vote
standard in our bylaws.
As a condition of their nomination, incumbent directors and
director nominees are required to submit to Ciena an irrevocable
resignation that becomes effective only if (i) that person
fails to receive a majority vote in an election; and
(ii) the Board of Directors accepts his or her resignation.
Should any director fail to receive a majority of the votes cast
in an uncontested election, the Governance and Nominations
Committee will promptly consider the resignation and recommend
to the Board whether to accept or reject it, or whether other
action should be taken. No later than 90 days following the
date of the certification of the election results, the Board
will disclose its decision by press release and a
Form 8-K
filed with the SEC. The Board will provide a full explanation of
the process by which the decision was reached and, if
applicable, the rationale for rejecting the resignation. If a
resignation is accepted by the Board, the Governance and
Nominations Committee will recommend to the Board whether to
fill the vacancy or to reduce the size of the Board.
Any director whose resignation is being considered is not
permitted to participate in the recommendation of the Governance
and Nominations Committee or the decision of the Board as to his
or her resignation. If the resignations of a majority of the
members of the Governance and Nominations Committee have become
effective as a result of the voting, the remaining independent
directors will appoint a special committee among themselves for
the purpose of considering the resignations and recommending
whether to accept or reject them.
Selection of Board Members; Vacancies. During
fiscal 2007, the Board amended Cienas bylaws to limit the
term of office of any director elected by the Board to fill a
vacancy, to a term that lasts until the first annual meeting
following election. Previously, our Principles of Corporate
Governance required only shareholder ratification at the next
annual meeting for directors elected by the Board to fill a
vacancy in any class of directors that did not stand for
election at the next annual meeting.
7
Service on Other Boards of
Directors. Cienas Board of Directors
believes that directors should not serve on more than four other
boards of public companies in addition to our Board of
Directors. Ciena directors serving at the time of the adoption
of this requirement may maintain directorships in excess of this
limit unless the Board determines that doing so would impair the
directors service on our Board. In the event that a
director wishes to join the board of directors of another public
company in excess of the limit above, our Board, in its sole
discretion, will determine whether service on the additional
board of directors is likely to interfere with the performance
of the directors duties to Ciena, taking into account the
individual, the nature of his or her other activities and such
other factors or considerations as our Board deems relevant. In
selecting nominees for membership, the Governance and
Nominations Committee and the Board will take into account the
other demands on the time of a candidate, and avoid candidates
whose other responsibilities might interfere with effective
service on our Board of Directors.
Change in Principal Occupation of Director. In
some cases, when a director changes his or her principal
occupation, the change may result in an increased workload,
actual or apparent conflicts of interest, or other consequences
that may affect his or her ability to continue to serve on
Cienas Board of Directors. As a result, the Board of
Directors has determined that when a director substantially
changes his or her principal occupation, including by
retirement, that director will tender his or her resignation to
the Board of Directors. The Governance and Nominations Committee
will weigh such factors as it deems relevant and recommend to
the Board of Directors whether the resignation should be
accepted, and the Board will act promptly on the matter.
Director Stock Ownership Requirements. All
non-employee directors are required to hold at least
3,200 shares of Cienas common stock
and/or units
while serving as a director. New directors and directors serving
at the time of the adoption of this requirement have three years
to attain the director stock ownership threshold. Shares or
units held or beneficially owned by a director, including under
any applicable equity plan, are included in determining whether
this minimum ownership requirement has been met. Cienas
Board of Directors recognizes that exceptions to this policy may
be necessary or appropriate in individual cases, and may approve
exceptions from time to time as it deems appropriate and in the
interest of Ciena and its shareholders.
Lead Independent Director. One of our
independent Board members is elected to serve as lead
independent director. The lead independent director is
responsible for coordinating the activities of the other
independent directors and has the authority to preside at all
meetings of the Board at which the Executive Chairman is not
present, including executive sessions of the independent
directors. The lead independent director serves as principal
liaison on Board-wide issues between the independent directors
and the Executive Chairman, and approves meeting schedules and
agendas, as well as the quality, quantity and timeliness of
information sent to the Board. The lead independent director may
also recommend the retention of outside advisors and consultants
who report directly to the Board of Directors. If requested by
shareholders, when appropriate, the lead independent director
will also be available for consultation and direct
communication. Mr. Cash currently serves as our lead
independent director.
Separate Chairman and CEO. Although our Board
does not have a policy on whether the roles of Chief Executive
Officer and Chairman should be separate, Ciena has maintained
these positions as separate since 2001, when Mr. Gary Smith
was appointed Chief Executive Officer.
Committee Responsibilities. The Board has
three standing committees: the Audit Committee, the Compensation
Committee and the Governance and Nominations Committee. Each
committee meets regularly and has a written charter that is
available on the Corporate Governance page of the Investor
Relations portion of our website at www.ciena.com. At
each regularly scheduled Board meeting, the chairperson or a
member of each committee reports on any significant matters
addressed by the committee.
Executive Sessions. At the conclusion of each
regularly scheduled Board meeting, our independent directors
meet in executive session without
employee-directors
present. The lead independent director presides at these
meetings.
Outside Advisors. The Board may retain outside
advisors and consultants at its discretion and at Cienas
expense. The charters governing each standing committee of the
Board give each committee the same authority. Managements
consent to retain outside advisors is not required.
8
Board Effectiveness. To ensure that our Board
and its committees are performing effectively and in the best
interests of Ciena and its shareholders, the Board performs an
annual assessment of itself, its Committees and each of its
members.
Succession Planning. Our Board recognizes the
importance of effective executive leadership to our growth and
success, and meets regularly to discuss executive succession
planning.
Continuing Education for Board Members. Board
members are encouraged to attend seminars, conferences, and
other continuing education programs designed especially for
directors of public companies, including, specifically,
accredited director education programs, which may be attended at
Ciena expense during service on the Board.
A complete copy of our Principles of Corporate Governance can be
found on the Corporate Governance page of the Investor Relations
portion our website at www.ciena.com.
Committees
of the Board of Directors and Meetings
During fiscal 2007, the Board of Directors held seven meetings.
The Board of Directors has three standing committees:
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the Audit Committee, which held five meetings during fiscal 2007;
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the Compensation Committee, which held seven meetings during
fiscal 2007; and
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the Governance and Nominations Committee, which held six
meetings during fiscal 2007.
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All of our directors attended at least 75% of the aggregate of
the total number of meetings of the Board of Directors and the
committees on which they served during fiscal 2007. Ciena
encourages, but does not require, members of the Board of
Directors to attend the Annual Meeting. Two members of the Board
of Directors attended Cienas 2007 Annual Meeting. Each of
the three standing committees of the Board of Directors has a
written charter, copies of which can be found on the Corporate
Governance page of the Investor Relations portion of
Cienas website at www.ciena.com.
Committee
Composition
The table below details the composition of Cienas standing
Board committees. Mr. Smith and Dr. Nettles do not
serve on committees of the Board.
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Governance and
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Audit
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Compensation
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Nominations
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Director Name
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Committee
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Committee
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Committee
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Stephen P. Bradley, Ph.D.
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X
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X
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Harvey B. Cash
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X
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Chairperson
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Bruce L. Claflin
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X
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Lawton W. Fitt
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Chairperson
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Judith M. OBrien
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Chairperson
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X
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Michael J. Rowny
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X
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Gerald H. Taylor
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X
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Audit
Committee
The Audit Committee falls within the definition of audit
committee under Section 3(a)(58)(A) of the Securities
Exchange Act of 1934. In addition to meeting The NASDAQ Stock
Markets tests for director independence, directors on
audit committees must meet two basic criteria set forth in the
SECs rules. First, audit committee members are barred from
accepting, directly or indirectly, any consulting, advisory or
other compensatory fee from the company or an affiliate of the
company, other than in the members capacity as a member of
the Board of Directors and any Board committee. Second, a member
of an audit committee may not be an affiliated person of the
company or any subsidiary of the company apart from his or her
capacity as a member of
9
the Board and any Board committee. The Board of Directors has
determined that each member of the Audit Committee meets these
independence requirements, in addition to the independence
criteria established by The NASDAQ Stock Market. The Board of
Directors has determined that Mr. Rowny is an audit
committee financial expert as defined in Item 407 of
Regulation S-K.
Among its responsibilities, the Audit Committee appoints and
establishes the compensation for Cienas independent
registered public accounting firm, approves in advance all
engagements with Cienas independent registered public
accounting firm to perform audit and non-audit services, reviews
and approves the procedures used by Ciena to prepare its
periodic reports, reviews and approves Cienas critical
accounting policies, discusses the plans and reviews results of
the audit engagement with Cienas independent registered
public accounting firm, reviews the independence of Cienas
independent registered public accounting firm, and oversees
Cienas internal audit function and Cienas accounting
processes, including the adequacy of its internal controls over
financial reporting. Cienas independent registered public
accounting firm and internal audit department report directly to
the Audit Committee. The Audit Committee also reviews and
considers any related person transactions in accordance with our
Policy on Related Person Transactions and applicable rules of
The NASDAQ Stock Market. To assist it in carrying out its
responsibilities, the Audit Committee is authorized to retain
the services of independent advisors.
Compensation
Committee
The Compensation Committee has responsibility, authority and
oversight relating to the development of Cienas overall
compensation strategy. The Compensation Committee seeks to
assure that our compensation practices promote shareholder
interests, support our strategic and tactical objectives, and
provide appropriate incentives to recruit, retain and motivate
our employees. As part of its responsibility, the Compensation
Committee reviews and approves the structure of Cienas
bonus plans and administers Cienas stock option plans. At
the end of each fiscal year, the Compensation Committee
evaluates the performance of Cienas executive officers,
including the Executive Chairman and the Chief Executive
Officer, and establishes their compensation for the next fiscal
year.
The members of the Compensation Committee qualify as
outside directors within the meaning of
Section 162(m) of the Internal Revenue Code, meet the
requirements of
Rule 16b-3
of the Securities Exchange Act of 1934 and comply with the
independence requirements of The NASDAQ Stock Market. The
Compensation Committee has delegated limited authority to
Mr. Gary Smith, our President and Chief Executive Officer,
and a member of the Board of Directors, to make equity awards to
employees who are not part of the executive leadership team. For
more information regarding the Compensation Committee, its
determination of the form and amount of compensation paid to our
executive officers, including the Named Executive
Officers, and Mr. Smiths role in such
determination, please see Compensation Discussion and
Analysis below.
To assist it in carrying out its responsibilities, the
Compensation Committee is authorized to retain the services of
independent advisors. During fiscal 2007, the Compensation
Committee engaged Compensia, Inc. For more information regarding
the role of Compensia in determining or recommending the form or
amount of compensation paid to our executive officers, please
see Compensation Discussion and Analysis below.
Governance
and Nominations Committee
The Governance and Nominations Committee reviews, develops and
makes recommendations regarding various aspects of the Board of
Directors, including its size, composition, standing committees
and practices. The Governance and Nominations Committee also
reviews and implements corporate governance policies, practices
and procedures. The Governance and Nominations Committee
conducts an annual review of the performance of the Board of
Directors and its individual members. The Governance and
Nominations Committee is also responsible for making
recommendations to the Board of Directors regarding the
compensation of its non-employee members. The members of the
Governance and Nominations Committee are all independent
directors under applicable rules of The NASDAQ Stock Market.
The Governance and Nominations Committee reviews candidates for
service on the Board and recommends nominees for election to
fill vacancies on the Board of Directors, including nomination
for re-election of directors whose terms are due to expire. In
discharging its responsibilities to nominate candidates for
election to the Board of Directors, the Governance and
Nominations Committee endeavors to identify, recruit and
nominate candidates
10
characterized by wisdom, maturity, sound judgment, excellent
business skills and high integrity. The Governance and
Nominations Committee seeks to assure that the Board of
Directors is composed of individuals of diverse backgrounds who
have a variety of complementary experience, training and
relationships relevant to Cienas needs. In nominating
candidates to fill vacancies created by the expiration of the
term of a director, the Governance and Nominations Committee
determines whether the incumbent director is willing to stand
for re-election. If so, the Governance and Nominations Committee
evaluates his or her performance to determine suitability for
continued service, taking into consideration the value of
continuity and familiarity with Cienas business. In
addition, the Governance and Nominations Committee considers
recommendations for nomination from any reasonable source,
including Cienas officers, directors and shareholders. In
considering these recommendations, the Governance and
Nominations Committee utilizes the same standards described
above, as well as the current size and composition of the Board,
and the needs of the Board and its committees. When appropriate,
the Governance and Nominations Committee may retain executive
recruitment firms to assist in identifying suitable candidates.
Shareholders who wish to suggest potential nominees may address
their suggestions in writing to Ciena Corporation, 1201
Winterson Road, Linthicum, Maryland 21090, Attention: Corporate
Secretary. For a description of the process by which
shareholders may nominate directors in accordance with our
bylaws, please see Shareholder Proposals for 2009 Annual
Meeting below.
Compensation
Committee Interlocks and Insider Participation
Messrs. Cash and Taylor and Ms. OBrien, who
comprised the Compensation Committee in fiscal 2007, are each
independent directors and were not, at any time during fiscal
2007, or at any other time, officers or employees of Ciena.
During fiscal 2007, no member of the Compensation Committee was
an executive officer of another entity on whose compensation
committee or board of directors an executive officer of Ciena
served.
Director
Compensation
Our director compensation is designed to attract and retain
highly qualified, independent directors to represent
shareholders on the Board and act in their best interest. The
Governance and Nominations Committee, which consists solely of
independent directors, has primary responsibility for reviewing
and considering changes to our director compensation.
Compensation for the members of our Board is reviewed annually
by the Governance and Nominations Committee. The Board considers
the recommendations of the Governance and Nominations Committee
and determines the compensation to be paid to directors.
Director compensation currently consists of cash and equity
compensation. In December 2006, the Board approved a revised
compensation program, effective as of March 14, 2007, the
date of our 2007 Annual Meeting. In addition to the changes in
cash compensation described below, the Board modified its equity
compensation and discontinued the use of options in favor of
restricted stock units (RSUs). The Board based these changes in
compensation upon the determination and recommendations of the
Governance and Nominations Committee. In making its
recommendations regarding the composition and amount of
compensation to be paid to our non-employee directors, the
Governance and Nominations Committee received an evaluation of
the competitiveness of Cienas Board compensation program
from Compensia, Inc., a compensation consulting firm. This
evaluation included an overview of Board compensation trends and
developments, a review of our Board compensation practices and a
competitive analysis of the amount and composition of
compensation paid to our directors.
Our Board of Directors includes two Ciena executive officers;
Dr. Nettles, who serves as Executive Chairman of the Board,
and Gary Smith, who serves as Cienas President and Chief
Executive Officer. As a Named Executive Officer, information
regarding the determination of Mr. Smiths
compensation can be found in Compensation Discussion and
Analysis below. Mr. Smith does not receive
compensation for his service as a director and additional
information regarding his compensation can be found in the
Executive Compensation Tables below. Except as set
forth in Equity Compensation below, Dr. Nettles
does not receive compensation for his services as a director.
11
Cash Compensation. During fiscal 2007, our
non-employee directors received cash compensation in the form of
the annual retainers and attendance fees per meeting of the
Board and its committees, as set forth below:
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Amount Earned
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Amount Earned
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Prior to 2007
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After 2007
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Annual Meeting
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Annual Meeting
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Cash Compensation
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($)
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($)
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Annual Retainer for Each Non-Employee Director
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$20,000
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$25,000
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Additional Lead Outside Director Retainer
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$7,500
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$7,500
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Audit Committee Chairperson Annual Retainer
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$7,500
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$20,000
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Other Committee Chairperson Annual Retainer
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$7,500
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Board Meeting Attendance (Regular Mtg.)
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$1,500
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$1,500
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Board Meeting Attendance (Special Mtg.)
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$500
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Audit Committee Meeting Attendance (Regular Mtg.)
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$3,000 (Chairperson) $2,000 (other directors)
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$2,000 (Chairperson) $2,000 (other directors)
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Other Committee Meeting Attendance (Regular Mtg.)
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$1,500 (Chairperson) $1,000 (other directors)
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$1,000 (Chairperson) $1,000 (other directors)
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All Committee Meeting Attendance (Special Mtg.)
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$500
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$500
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We pay the Board and committee chair retainers set forth above
in quarterly installments. Meeting attendance fees are generally
paid promptly following each meeting, and directors are
reimbursed for reasonable out-of-pocket expenses incurred in
connection with attendance at Board and committee meetings.
Non-employee directors do not receive any perquisites as part of
their compensation.
Equity Compensation. During fiscal 2007, our
non-employee directors and Dr. Nettles were eligible for
equity compensation in the form of RSUs as set forth below.
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RSU Grant
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Equity Compensation
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(#)
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Initial RSU Grant Upon Election or Appointment
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6,500 shares
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Annual RSU Grant Non-Employee Directors
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3,250 shares
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Annual RSU Grant Executive Chairman of the Board
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6,500 shares
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Initial equity awards are made upon first election or
appointment to the Board of Directors and vest in equal annual
installments over a three-year period. Annual awards are made on
the date of each annual meeting of shareholders and vest in full
on the first anniversary of the date of grant. By operation of
the terms of the annual RSU awards made to the directors during
fiscal 2007, delivery of the shares following vesting is
deferred until the directors termination of service. For
awards in 2008 and thereafter, delivery of the shares following
vesting is subject to any applicable instruction provided by the
director under the Directors Restricted Stock Deferral
Plan described below.
Director Compensation Table. The following
table and the accompanying footnotes describe the total
compensation earned by our non-employee directors and
Dr. Nettles during fiscal 2007.
Total compensation does not reflect the actual compensation
received by our directors in fiscal 2007. Total compensation
includes the dollar amounts set forth in the Stock
Awards and Option Awards columns. These
amounts reflect the compensation expense we recognized for
financial statement reporting purposes with respect to equity
awards granted to directors during fiscal 2007, as well as
grants made in prior fiscal years, to the extent such awards
remained unvested in whole or in part at the beginning of fiscal
2007. The compensation expense included in the Stock
Awards and Option Awards columns will likely
vary from the actual amount ultimately realized by these
directors based on a number of factors, including the number of
shares that ultimately vest, the timing of any exercise or sale
of shares, the effect of any applicable instruction to defer
delivery, and the price of our stock.
12
Director
Compensation Table
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Fees Earned or
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All Other
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Paid in Cash
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Stock Awards
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Option Awards
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Compensation
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Total
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Name
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($)(1)
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($)(2)
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($)(3)
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($)(4)
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($)
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Patrick H. Nettles, Ph.D.
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$
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121,765
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$
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26,727
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$
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326,292
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$
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474,784
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Stephen P. Bradley, Ph.D.
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$
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46,000
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$
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68,468
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$
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26,727
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$
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141,195
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Harvey B. Cash
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$
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56,750
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$
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68,468
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$
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26,727
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$
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151,945
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Bruce L. Claflin
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$
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40,500
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$
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75,182
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$
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40,024
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$
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155,706
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Lawton W. Fitt
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$
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56,250
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$
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68,468
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$
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26,727
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$
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151,445
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Judith M. OBrien
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$
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49,250
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$
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68,468
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$
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26,727
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$
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144,445
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Michael J. Rowny
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$
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40,500
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$
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68,468
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$
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33,613
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$
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142,581
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Gerald H. Taylor
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$
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38,500
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$
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68,468
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$
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26,727
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$
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133,695
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(1) |
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Reflects the aggregate dollar amount of all cash compensation
earned for service as a director, including the annual Board and
committee chair retainers and meeting attendance fees described
in Cash Compensation above. |
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(2) |
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Reflects the amount of compensation expense we recognized for
stock awards under Statement of Financial Accounting Standards
123(R), Share-Based Payment (SFAS 123(R)), for
each director as reported in our fiscal 2007 audited financial
statements. Pursuant to SEC requirements, the amounts in the
table above exclude the impact of estimated forfeitures related
to service-based vesting conditions. For each director, the
amounts reported above represent the expense associated with
annual RSU awards granted on March 14, 2007, as described
in Equity Compensation above. For fiscal 2007,
delivery of the underlying shares is deferred until the
directors termination of service pursuant to the terms of
the award. No other equity awards were made to directors during
fiscal 2007. Because annual equity awards to directors are
typically granted in March of each year, and vest on the first
anniversary of the date of grant, the compensation expense
associated with these awards is recognized across two fiscal
years. As a result, the amount reported above also includes a
portion of the compensation expense related to RSU awards made
to directors in fiscal 2006, to the extent these awards were
unvested at the beginning of fiscal 2007. For Mr. Claflin,
the amount reported also includes compensation expense related
to an initial RSU award, which vests over three years, granted
upon his joining the Board during fiscal 2006. For information
regarding the relevant assumptions made in calculating
compensation expense, you should refer to the information set
forth in Note 15 to the audited financial statements
included in our annual report on
Form 10-K
filed on December 27, 2007, under the heading
Assumptions for RSU-Based Awards under
SFAS 123(R). The full grant date fair value of RSUs
awarded to directors in fiscal 2007 was: (a) $166,725 for
the RSU grant to Dr. Nettles; and (b) $83,363 for the
RSU grant to each of the other directors. This amount reflects,
as of the grant date, the total compensation expense for
financial reporting purposes that we would expect to incur over
the vesting period for the award. See Outstanding Equity
Awards for Directors at Fiscal Year End below for
information as to each directors unvested stock award
holdings at the end of fiscal 2007. |
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(3) |
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We did not make any option grants to directors during fiscal
2007. The amounts reported above represent the compensation
expense we recognized in our fiscal 2007 audited financial
statements for stock options granted to directors in years
prior, to the extent these awards remained unvested at the
beginning of fiscal 2007. For Messrs. Claflin and Rowny,
the amounts reported also reflect initial option awards made
upon joining the Board in fiscal 2006 and fiscal 2004,
respectively. Pursuant to SEC requirements, the amounts in the
table above exclude the impact of estimated forfeitures related
to service-based vesting conditions. For information regarding
the relevant assumptions made in calculating compensation
expense, you should refer to the information set forth in
Note 15 to the audited financial statements included in our
annual report on
Form 10-K
filed on December 27, 2007, under the heading
Assumptions for Option-Based Awards under
SFAS 123(R). See Outstanding Equity Awards for
Directors at Fiscal Year End below for information as to
each directors vested and unvested stock option holdings
at the end of fiscal 2007. |
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(4) |
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Reflects $305,770 of salary for service as an executive officer.
This amount is based on an annual salary of $300,000 and
reflects our 53 week fiscal 2007. Dr. Nettles does not
receive cash compensation for his service as |
13
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a director. Also includes: (a) the incremental expense of
an insurance premium paid by us for a supplemental executive
long-term disability insurance policy held by Dr. Nettles,
(b) the cost of tax preparation services made available to
executive officers; and (c) 401(k) plan matching
contributions paid by us and generally available to all
full-time U.S. employees on the same terms. |
Outstanding
Equity Awards for Directors at Fiscal Year End
The following table sets forth, on an aggregate basis,
information related to unexercised stock options and unvested
stock awards held by each of the non-employee directors and
Dr. Nettles as of the end of fiscal 2007.
Outstanding
Equity Awards at Fiscal Year-End
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Unexercised Option Awards
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Stock Awards
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Aggregate
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Aggregate
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Number of
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Number of
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Aggregate
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Shares
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Shares
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Number of
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Underlying
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Underlying
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Unvested
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Exercisable
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Unexercisable
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Shares
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Options
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Options
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or Units
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Name
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(#)
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(#)
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(#)
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Patrick H. Nettles, Ph.D.
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179,326
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6,500
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Stephen P. Bradley, Ph.D.
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50,426
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3,250
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Harvey B. Cash
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34,712
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3,250
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Bruce L. Claflin
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2,142
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4,286
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4,678
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Lawton W. Fitt
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37,336
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3,250
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Judith M. OBrien
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36,850
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3,250
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Michael J. Rowny
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13,451
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3,250
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Gerald H. Taylor
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35,859
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3,250
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Directors
Restricted Stock Deferral Plan
In August 2007, the Board of Directors adopted the
Directors Restricted Stock Deferral Plan. The plan allows
non-employee directors to defer receipt of all or a portion of
the shares underlying RSU awards granted in connection with
their service on the Board. Generally, deferral elections may
only be made as to awards to be granted in the calendar year
following a valid deferral election. Directors can elect the
amount deferred, the deferral period and the means of
distribution of their shares. If a director elects to defer any
portion of an award, upon the vesting of that award, we credit a
stock account with the amount deferred. There are no other
investment options under the plan and all such accounts will be
distributed in Ciena common stock. Distributions may be made in
a lump sum or installments, as designated by the participating
director, subject to early distribution of vested awards in a
lump sum in the event of the participants death,
termination of service, a change in control of Ciena or
termination of the plan.
PROPOSAL NO. 2
APPROVAL OF 2008 OMNIBUS INCENTIVE PLAN
This section provides a summary of the terms of the 2008 Omnibus
Incentive Plan, which we refer to as the 2008 Plan,
and the proposal that shareholders approve the plan.
The Board of Directors approved the 2008 Plan on
December 12, 2007, subject to approval from our
shareholders at the Annual Meeting. We are asking our
shareholders to approve the 2008 Plan as we believe that the
plan is important to our continued growth and success. The
purpose of the 2008 Plan is to attract, motivate and retain
highly qualified officers, directors, key employees and other
key individuals. We believe that providing these individuals an
opportunity to acquire a direct proprietary interest in the
operations and future success of Ciena will motivate these
individuals to serve Ciena and to expend maximum effort to
improve our business and results of operations. We believe that
an equity award grant under the 2008 Plan will be a valuable
incentive to participants
14
and will benefit shareholders by aligning more closely the
interests of 2008 Plan participants with those of our
shareholders.
The 2008 Plan will not be effective unless and until it is
approved by shareholders, and we will not make any awards
thereunder until such time as the plan is effective. If our
shareholders approve the 2008 Plan, we will not make any further
awards under our prior equity incentive compensation plans and
will make awards exclusively from the 2008 Plan and 2003
Employee Stock Purchase Plan (ESPP).
The 2008 Plan reserves eight million shares of common stock for
issuance. The number of shares available under the 2008 Plan
will be increased from time to time by: (i) the number of
shares subject to outstanding stock options or restricted stock
units granted under our prior equity compensation plans that are
forfeited, expire or are canceled without delivery of common
stock following the effective date of the 2008 Plan, and
(ii) the number of shares subject to awards assumed or
substituted in connection with the acquisition of another
company.
As of December 31, 2007, 6,091,593, shares of stock were
subject to outstanding stock option awards under the prior
plans, with a weighted average exercise price of $53.02 per
share and a weighted average remaining term of 6.0 years.
There were also 1,881,221 shares subject to outstanding
stock awards in the form of restricted stock units, performance
stock units or performance accelerated restricted stock units
awarded under our prior plans. On the Record Date, the closing
price of our common stock was $24.98 per share.
Because the 2008 Plan will not be effective unless and until
approved by shareholders, the Compensation Committee has not yet
granted any equity awards under the 2008 Plan. Participation and
the types of awards under the 2008 Plan are subject to the
discretion of the Compensation Committee, and, as a result, the
benefits or amounts that will be received by any participant or
groups of participants if the 2008 Plan is approved are not
currently determinable. On the Record Date, there were eight
executive officers, seven non-employee directors and
approximately 1,800 employees who were eligible to
participate in the 2008 Plan.
Plan
Highlights
The Board believes that approval of the 2008 Plan is in the
interest of Ciena and its shareholders and that the 2008 Plan is
preferable to Cienas existing incentive plans. Some of the
key features of the 2008 Plan that reflect Cienas
commitment to effective management of incentive compensation are
as follows:
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Plan Limits. Total awards under the 2008 Plan
are limited to eight million shares, subject to the exceptions
described above. There is no evergreen provision under the 2008
Plan. By way of comparison, Cienas 2000 Plan had
2,683,428 shares available for future grant at
December 31, 2007 and contains an evergreen provision that
permits the Board of Directors to add up to 5% of Cienas
outstanding shares to the plan annually on January 1. Under
this provision, the Board could have added approximately
4.3 million shares to the 2000 Plan this year alone. If the
2008 Plan is approved by shareholders, shares remaining
authorized and available for future issuance under prior plans,
including the 2000 plan, will no longer be available for
issuance.
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Limits on Full Value Awards. In recent years
our equity incentive compensation, particularly for executive
officers, has increasingly been in the form of restricted stock
units, including performance-based or performance-accelerated
restricted stock units. Under the 2008 Plan, every share subject
to a restricted stock or restricted stock unit award will reduce
the number of shares available for issuance by 1.6 shares.
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No Liberal Share Recycling Provisions. The
2008 Plan provides that only shares covering awards that expire,
are cancelled or are settled in cash, will again be available
for issuance under the 2008 Plan. The following shares will not
be added back to the aggregate plan limit: (i) shares
tendered in payment of the exercise price, and (ii) shares
withheld by Ciena or forfeited by the grantee to satisfy the tax
withholding obligation.
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Minimum Vesting Periods. The 2008 Plan
provides that restricted stock and stock units subject to
time-based vesting conditions may not vest in full in less than
three years from the date of grant. Restricted stock and stock
units subject to performance-based vesting conditions may not
vest in full in less than one year from the date of grant. These
minimum vesting periods are subject to exceptions where vesting
has occurred
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due to (i) a participants death, disability or
retirement, or (ii) a change in control. Only a limited
number of shares, equaling 5% of the shares authorized under the
2008 Plan, can be granted with, or subsequently modified to
contain, terms that do not meet the minimum vesting period
restrictions above.
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No Repricing. Under the 2008 Plan, repricing
of stock options and SARs (including reduction in the exercise
price of stock options or replacement of an award with cash or
another award type) is prohibited without shareholder approval.
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Option Exercise Price. Under the 2008 Plan,
the exercise price of stock options and SARs may not be less
than 100% of fair market value on the date of grant, except for
stock options and SARs assumed in connection with the
acquisition of another company.
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Limitation on amendments. No material
amendments that will increase the benefits under the plan
(including changing the vesting restrictions described above) or
that will increase the aggregate number of shares that may be
issued under the plan can be made to the plan without
shareholder approval.
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Section 162(M) eligibility. Under the
2008 Plan, the Compensation Committee will have the flexibility
to approve equity and cash awards eligible for treatment as
performance-based compensation under Section 162(M) of the
Internal Revenue Code.
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Description
of the Plan
A description of the provisions of the 2008 Plan is set forth
below. This summary is qualified in its entirety by the detailed
provisions of the 2008 Plan, a copy of which is attached as
Annex A to this proxy statement.
Administration. The 2008 Plan is administered
by the Compensation Committee of the Board of Directors. The
members of the Compensation Committee qualify as outside
directors within the meaning of Section 162(m) of the
Internal Revenue Code, meet the requirements of
Rule 16b-3
of the Securities Exchange Act of 1934 and comply with the
independence requirements of The NASDAQ Stock Market. Subject to
the terms of the plan, the Compensation Committee may select
participants to receive awards, determine the types of awards
and terms and conditions of awards, and interpret provisions of
the plan. Members of the Compensation Committee serve at the
pleasure of the Board of Directors. The Board of Directors may
also appoint one or more separate committees, composed of one or
more directors who need not satisfy the independence
requirements described above, that may administer the 2008 Plan
with respect to participants, provided such grantees are not
Ciena executive officers or directors. The Compensation
Committee may delegate its authority under the Plan to the
extent permitted by applicable law.
Common Stock Reserved for Issuance under the
Plan. The common stock issued or to be issued
under the 2008 Plan consists of authorized but unissued shares
or, to the extent permitted by applicable law, issued shares
that have been reacquired by Ciena. If any shares covered by an
award under the 2008 Plan or a prior plan are not purchased or
are forfeited, or if an award otherwise terminates without
delivery of any common stock, then the number of shares of
common stock counted against the aggregate number of shares
available under the plan with respect to the award will, to the
extent of any such forfeiture or termination, again be available
for making awards under the 2008 Plan. The number of shares of
common stock available for issuance under the 2008 Plan will not
be increased by any shares tendered or awards surrendered in
connection with the purchase of shares of common stock upon
exercise of an option or any shares of common stock deducted or
forfeited from an award in connection with Cienas tax
withholding obligations. The number of shares of common stock
available for issuance under the 2008 Plan will also be
increased by the number of shares subject to awards that are
assumed or substituted in connection with the acquisition of
another company.
Eligibility. Awards may be made under the 2008
Plan to employees, directors, and consultants of Ciena or its
affiliates, and any other individual whose participation in the
plan is determined to be in the best interests of Ciena by the
Board of Directors.
Amendment or Termination of the Plan. The
Board of Directors may terminate the plan at any time and for
any reason. The 2008 Plan will terminate, in any event, ten
years after its effective date. The Board of Directors may also
amend the 2008 Plan, provided that amendments will be submitted
for shareholder approval to the extent
16
required by the Internal Revenue Code or other applicable laws,
rules or regulations. In addition, amendments that will increase
the benefits under the plan (including changing the vesting
restrictions described above) or that will increase the
aggregate number of shares that may be issued under the plan
must be submitted for shareholder approval.
Options. The 2008 Plan permits the granting of
options to purchase shares of common stock intended to qualify
as incentive stock options under the Internal Revenue Code as
well as stock options that do not qualify as incentive stock
options.
The exercise price of a stock option may not be less than 100%
of the fair market value of our common stock on the date of
grant. The fair market value is generally determined as the
closing price of the common stock on the date of grant. In the
case of 10% shareholders who receive incentive stock options,
the exercise price may not be less than 110% of the fair market
value of the common stock on the date of grant. An exception to
these requirements is made for options that we grant in
substitution for options held by employees of companies that we
acquire. In such a case the exercise price is adjusted to
preserve the economic value of the employees stock option
from his or her former employer.
The term of each stock option is fixed by the Compensation
Committee and may not exceed ten years from the date of grant.
If the grantee is a 10% shareholder, an option intended to be an
incentive stock option will expire after five years. Subject to
the minimum vesting periods described above, the Compensation
Committee determines at what time or times each option may be
exercised and the period of time, if any, after retirement,
death, disability or termination of employment during which
options may be exercised. Options may be made exercisable in
installments. The ability to exercise options may be accelerated
by the Compensation Committee, subject to compliance with the
2008 Plan.
In general, an optionee may pay the exercise price of an option
by cash, certified check, by tendering shares of common stock,
or by means of a broker-assisted cashless exercise.
No amendment or modification may be made to an outstanding stock
option or stock appreciation right that would be treated as a
repricing under the rules of the stock exchange on which the
shares of common stock are listed (currently The NASDAQ Stock
Market), including replacement with cash or another award type,
without the approval of Cienas shareholders.
Stock options and stock appreciation rights granted under the
2008 Plan may not be sold, transferred, pledged or assigned
other than by will or under applicable laws of descent and
distribution. However, the 2008 Plan provides flexibility should
we determine to permit limited transfers of non-qualified
options for the benefit of immediate family members of grantees
to help with estate planning concerns.
Other Awards. The Compensation Committee may
also award:
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Unrestricted Stock, which are shares of common stock at
no cost or for a purchase price determined by the Compensation
Committee that are free from any restrictions under the plan.
Unrestricted shares of common stock may be issued to
participants in recognition of past services or other valid
consideration, and may be issued in lieu of cash compensation to
be paid to participants.
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Restricted Stock, which are shares of common stock
subject to restrictions.
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Restricted Stock Units, which are rights to receive
common stock subject to restrictions.
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Stock Appreciation Rights, which are rights to receive a
number of shares or, in the discretion of the Compensation
Committee, an amount in cash or a combination of shares and
cash, based on the increase in the fair market value of the
shares underlying the right during a stated period specified by
the Compensation Committee.
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Performance and Annual Incentive Awards, ultimately
payable in common stock or cash, as determined by the
Compensation Committee. The Compensation Committee may grant
multi-year, annual or quarterly incentive awards subject to
achievement of specified goals tied to business criteria
(described below). The Compensation Committee may specify the
amount of the incentive award as a percentage of these business
criteria, a percentage in excess of a threshold amount or as
another amount which need not bear a strictly
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mathematical relationship to these business criteria. The
Compensation Committee may modify, amend or adjust the terms of
each award and performance goal. Awards to individuals who are
covered under Section 162(m) of the Internal Revenue Code,
or who the Compensation Committee designates as likely to be
covered in the future, will comply with the requirement that
payments to such employees qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code
to the extent that the Compensation Committee so designates.
Such employees include the chief executive officer and the three
highest compensated executive officers (other than the chief
executive officer) determined at the end of each year (the
covered employees).
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Effect of Certain Corporate
Transactions. Certain change in control
transactions, such as a sale of Ciena, may cause awards granted
under the 2008 Plan to vest, unless the awards are continued or
substituted for in connection with the change in control.
Adjustments for Stock Splits, Stock Dividends and Similar
Events. The Compensation Committee will make
appropriate adjustments in outstanding awards and the number of
shares available for issuance under the 2008 Plan, including the
individual limitations on awards, to reflect stock splits and
other similar events.
Section 162(m) of the Internal Revenue
Code. Section 162(m) of the Internal Revenue
Code limits publicly-held companies such as Ciena to an annual
deduction for federal income tax purposes of $1 million for
compensation paid to their covered employees. However,
performance-based compensation is excluded from this limitation.
The 2008 Plan is designed to permit the Compensation Committee
to grant awards that qualify as performance-based for purposes
of satisfying the conditions of Section 162(m).
To qualify as performance-based:
(i) the compensation must be paid solely on account of the
attainment of one or more pre-established, objective performance
goals;
(ii) the performance goal under which compensation is paid
must be established by a compensation committee comprised solely
of two or more directors who qualify as outside directors for
purposes of the exception;
(iii) the material terms under which the compensation is to
be paid must be disclosed to and subsequently approved by
shareholders before payment is made in a separate vote; and
(iv) the compensation committee must certify in writing
before payment of the compensation that the performance goals
and any other material terms were in fact satisfied.
In the case of compensation attributable to stock options, the
performance goal requirement (summarized in (i) above) is
deemed satisfied, and the certification requirement (summarized
in (iv) above) is inapplicable, if the grant or award is
made by the Compensation Committee; the plan under which the
option is granted states the maximum number of shares with
respect to which options may be granted during a specified
period to an employee; and under the terms of the option, the
amount of compensation is based solely on an increase in the
value of the common stock after the date of grant.
Under the 2008 Plan, one or more of the following business
criteria, on a consolidated basis,
and/or with
respect to specified subsidiaries or business units (except with
respect to the total shareholder return and earnings per share
criteria), are used exclusively by the Compensation Committee in
establishing performance goals:
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net earnings or net income;
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operating earnings;
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pretax earnings;
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earnings (or loss) per share;
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share price, including growth measures and total shareholder
return; and appreciation in
and/or
maintenance of the price of the shares of common stock or any
publicly traded securities of Ciena;
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earnings (or losses), including earnings or losses before taxes,
earnings (or losses) before interest and taxes, earnings (or
losses) before interest, taxes and depreciation, earnings (or
losses) before interest, taxes, depreciation and amortization,
or earnings (or losses) before interest, taxes, depreciation,
amortization and stock-based compensation, and other similar
adjustments to earnings (or losses);
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bookings, orders, sales or revenue, or growth in these measures,
whether in general, by type of product or product line, by
service, or by customer or type of customer;
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net income (or loss) before or after taxes and before or after
allocation of corporate overhead and bonus;
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gross or operating margins;
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gross profit;
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return measures, including return on assets, capital,
investment, equity, sales or revenue;
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cash flow, including operating cash flow, free cash flow, cash
flow return on equity and cash flow return on investment and
cash flow per share;
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productivity ratios;
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expense targets or improvement in or attainment of expense
levels or cost reductions;
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market share;
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financial ratios as provided in credit agreements of Ciena and
its subsidiaries;
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working capital targets;
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cash or equivalents at the end of the fiscal year or fiscal
quarter;
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implementation, completion or attainment of measurable
objectives with respect to research, development, products or
projects, recruiting and maintaining personnel, and strategic or
operational objectives;
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completion of acquisitions of business or companies;
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completion of divestitures and asset sales; and
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any combination of any of the foregoing business criteria.
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Business criteria may be measured on an absolute or relative
basis and on a GAAP or non-GAAP basis.
Under the Internal Revenue Code, a director is an outside
director if he or she is not a current employee of Ciena;
is not a former employee who receives compensation for prior
services (other than under a qualified retirement plan); has not
been an officer of Ciena; and does not receive, directly or
indirectly (including amounts paid to an entity that employs the
director or in which the director has at least a 5% ownership
interest), remuneration from Ciena in any capacity other than as
a director.
The maximum number of shares of common stock subject to options
or stock appreciation rights that can be awarded under the 2008
Plan to any person is one million per year. The maximum number
of shares of common stock that can be awarded under the 2008
Plan to any person, other than pursuant to an option or stock
appreciation right, is one million per year. The maximum amount
that may be earned as an annual incentive award or other cash
award in any fiscal year by any one person is $5 million
and the maximum amount that may be earned as a performance award
or other cash award in respect of a performance period by any
one person is $25 million.
Federal
Income Tax Consequences
Incentive Stock Options. The grant of an
option will not be a taxable event for the grantee or for Ciena.
A grantee will not recognize taxable income upon exercise of an
incentive stock option (except that the alternative minimum tax
may apply), and any gain realized upon a disposition of our
common stock received pursuant to the exercise of an incentive
stock option will be taxed as long-term capital gain if the
grantee holds the shares of common stock for at least two years
after the date of grant and for one year after the date of
exercise (the holding
19
period requirement). Ciena will not be entitled to any
business expense deduction with respect to the exercise of an
incentive stock option, except as discussed below.
For the exercise of an option to qualify for the foregoing tax
treatment, the grantee generally must be our employee or an
employee of our subsidiary from the date the option is granted
through a date within three months before the date of exercise
of the option.
If all of the foregoing requirements are met except the holding
period requirement mentioned above, the grantee will recognize
ordinary income upon the disposition of the common stock in an
amount generally equal to the excess of the fair market value of
the common stock at the time the option was exercised over the
option exercise price (but not in excess of the gain realized on
the sale). The balance of the realized gain, if any, will be
capital gain. Ciena will be allowed a business expense deduction
to the extent the grantee recognizes ordinary income, subject to
our compliance with Section 162(m) of the Internal Revenue
Code and to certain reporting requirements.
Non-Qualified Options. The grant of an option
will not be a taxable event for the grantee or Ciena. Upon
exercising a non-qualified option, a grantee will recognize
ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the common stock on
the date of exercise. Upon a subsequent sale or exchange of
shares acquired pursuant to the exercise of a non-qualified
option, the grantee will have taxable capital gain or loss,
measured by the difference between the amount realized on the
disposition and the tax basis of the shares of common stock
(generally, the amount paid for the shares plus the amount
treated as ordinary income at the time the option was exercised).
If Ciena complies with applicable reporting requirements and
with the restrictions of Section 162(m) of the Internal
Revenue Code, Ciena will be entitled to a business expense
deduction in the same amount and generally at the same time as
the grantee recognizes ordinary income.
A grantee who has transferred a non-qualified stock option to a
family member by gift will realize taxable income at the time
the non-qualified stock option is exercised by the family
member. The grantee will be subject to withholding of income and
employment taxes at that time. The family members tax
basis in the shares of common stock will be the fair market
value of the shares of common stock on the date the option is
exercised. The transfer of vested non-qualified stock options
will be treated as a completed gift for gift and estate tax
purposes. Once the gift is completed, neither the transferred
options nor the shares acquired on exercise of the transferred
options will be includable in the grantees estate for
estate tax purposes.
In the event a grantee transfers a non-qualified stock option to
his or her ex-spouse incident to the grantees divorce,
neither the grantee nor the ex-spouse will recognize any taxable
income at the time of the transfer. In general, a transfer is
made incident to divorce if the transfer occurs
within one year after the marriage ends or if it is related to
the end of the marriage (for example, if the transfer is made
pursuant to a divorce order or settlement agreement). Upon the
subsequent exercise of such option by the ex-spouse, the
ex-spouse will recognize taxable income in an amount equal to
the difference between the exercise price and the fair market
value of the shares of common stock at the time of exercise. Any
distribution to the ex-spouse as a result of the exercise of the
option will be subject to employment and income tax withholding
at this time.
Restricted Stock. A grantee who is awarded
restricted stock will not recognize any taxable income for
federal income tax purposes in the year of the award, provided
that the shares of common stock are subject to restrictions
(that is, the restricted stock is nontransferable and subject to
a substantial risk of forfeiture). However, the grantee may
elect under Section 83(b) of the Internal Revenue Code to
recognize compensation income in the year of the award in an
amount equal to the fair market value of the common stock on the
date of the award (less the purchase price, if any), determined
without regard to the restrictions. If the grantee does not make
such a Section 83(b) election, the fair market value of the
common stock on the date the restrictions lapse (less the
purchase price, if any) will be treated as compensation income
to the grantee and will be taxable in the year the restrictions
lapse and dividends paid while the common stock is subject to
restrictions will be subject to withholding taxes. If Ciena
complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue
Code, Ciena will be entitled to a business expense deduction in
the same amount and generally at the same time as the grantee
recognizes ordinary income.
20
Restricted Stock Units. There are no immediate
tax consequences of receiving an award of restricted stock units
under the 2008 Plan. A grantee who is awarded restricted stock
units will be required to recognize ordinary income in an amount
equal to the fair market value of shares issued to such grantee
at the end of the restriction period or, if later, the payment
date. If Ciena complies with applicable reporting requirements
and with the restrictions of Section 162(m) of the Internal
Revenue Code, Ciena will be entitled to a business expense
deduction in the same amount and generally at the same time as
the grantee recognizes ordinary income.
Stock Appreciation Rights. There are no
immediate tax consequences of receiving an award of stock
appreciation rights under the 2008 Plan. Upon exercising a stock
appreciation right, a grantee will recognize ordinary income in
an amount equal to the difference between the exercise price and
the fair market value of the common stock on the date of
exercise. If Ciena complies with applicable reporting
requirements and with the restrictions of Section 162(m) of
the Internal Revenue Code, Ciena will be entitled to a business
expense deduction in the same amount and generally at the same
time as the grantee recognizes ordinary income.
Performance and Annual Incentive Awards. The
award of a performance or annual incentive award will have no
federal income tax consequences for us or for the grantee. The
payment of the award is taxable to a grantee as ordinary income.
If Ciena complies with applicable reporting requirements and
with the restrictions of Section 162(m) of the Internal
Revenue Code, Ciena will be entitled to a business expense
deduction in the same amount and generally at the same time as
the grantee recognizes ordinary income.
Unrestricted Common Stock. Participants who
are awarded unrestricted common stock will be required to
recognize ordinary income in an amount equal to the fair market
value of the shares of common stock on the date of the award,
reduced by the amount, if any, paid for such shares. If Ciena
complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue
Code, Ciena will be entitled to a business expense deduction in
the same amount and generally at the same time as the grantee
recognizes ordinary income.
Section 280(G). To the extent payments
that are contingent on a change in control are determined to
exceed certain Internal Revenue Code limitations, they may be
subject to a 20% nondeductible excise tax and Cienas
deduction with respect to the associated compensation expense
may be disallowed in whole or in part.
Section 409A. Ciena intends for awards
granted under the plan to comply with Section 409A of the
Internal Revenue Code. To the extent a grantee would be subject
to the additional 20% excise tax imposed on certain nonqualified
deferred compensation plans as a result of a provision of an
award under the plan, the provision will be deemed amended to
the minimum extent necessary to avoid application of the 20%
excise tax.
The Board of Directors recommends that Ciena shareholders vote
FOR approval of the 2008 Plan.
PROPOSAL NO. 3
AMENDMENT AND RESTATEMENT OF THIRD RESTATED CERTIFICATE OF
INCORPORATION
Our Board of Directors has approved and declares it advisable
and in the best interests of Ciena and its shareholders that our
Third Restated Certificate of Incorporation, as amended (the
Certificate) be amended and restated to:
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increase the number of authorized shares of common stock, par
value $0.01 per share, from 140 million to 290 million
shares; and
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make changes to delete or revise legacy provisions in the
Certificate that relate to the governance of Ciena prior to its
1997 initial public offering, including the removal of the
designations relating to shares of Series A, B and C
preferred stock, all of which ceased to be outstanding upon
Cienas initial public offering.
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We encourage you to read the proposed Amended and Restated
Certificate of Incorporation, a copy of which is attached as
Annex B to this proxy statement.
21
Increase
in Authorized Shares of Common Stock
The proposal to amend and restate our Certificate includes an
increase in the number of authorized shares of common stock, par
value $0.01 per share, from 140 million to 290 million
shares, and a corresponding increase in the number of shares of
authorized capital stock from 160 million to
310 million shares. Ciena is not proposing an increase in
the number of authorized shares of preferred stock.
As of December 31, 2007, there were 87,027,070 shares
of Ciena common stock outstanding. In addition, as of that date,
(i) options to purchase 6,091,593 shares were
outstanding under our equity compensation plans; and
(ii) stock awards, including restricted stock units,
performance stock units and performance accelerated restricted
stock units, representing 1,881,221 shares were outstanding
under our equity compensation plans. The Board of Directors
grants stock options, stock awards, and other forms of
equity-based compensation only under Cienas 2000 Plan. As
of December 31, 2007, there were 2,683,428 shares
available for future grant under this plan, excluding the effect
of the evergreen provision. Under the terms of the evergreen
provision, the number of shares authorized for issuance under
the 2000 Plan will increase by 5.0% of the number of Ciena
shares issued and outstanding on January 1 of each year, unless
the Compensation Committee reduces the amount of the increase in
any year. No additional shares have been added to the Plan since
January 1, 2004. If shareholders approve the 2008 Plan at
the Annual Meeting, as set forth in
Proposal No. 2 Approval of 2008
Omnibus Incentive Plan above, the Board will cease use of
our 2000 Plan and will make future grants only under the 2008
Plan.
At December 31, 2007, our ESPP had 3,571,428 shares of
common stock available for purchase. Under the ESPP, the number
of shares available will increase by up to 571,428 shares
on December 31 of each year, provided that the total number of
shares available under the ESPP at any time may not exceed
3,571,428 shares. Pursuant to this evergreen provision, the
maximum number of shares that may be added to the ESPP during
the remainder of its ten-year term is 2,857,140.
As of December 31, 2007, we also had
21,439,976 shares, in the aggregate, reserved for issuance
upon conversion of our three outstanding issues of convertible
debt and 344 shares underlying outstanding warrants.
Thus, at December 31, 2007, there were
38,525,130 shares reserved for issuance.
The Board believes that the increase is advisable in light of
the significant growth of Cienas business in recent years.
The Board believes that having the additional shares authorized
and available for issuance will in the future permit greater
flexibility in considering actions that may be desirable or
necessary to accommodate our business plan and continue our
growth, and that involve the issuance of our stock. These
actions may include, among other things, capital raising,
acquisitions and other strategic transactions. In addition, the
Board believes it is necessary to have the ability to issue such
additional shares for general corporate purposes, including
stock dividends or distributions, and equity awards or warrants.
The authorization of a total of 290 million shares of
common stock would give the Board the express authority, without
further action of shareholders (unless shareholder action or
approval were specifically required by applicable law or under
rules of The NASDAQ Stock Market) to issue such shares of common
stock from time to time as the Board deems necessary or
advisable. Ciena has no current plans or proposals to issue any
portion of the additional shares of common stock covered by this
proposal.
Effect on Outstanding Common Stock. The
additional shares of common stock authorized by the proposed
amendment and restatement would have the same privileges as the
shares of common stock currently authorized and issued. The
increase in authorized shares would not affect the terms or
rights of holders of existing shares of common stock. All
outstanding shares of common stock would continue to have one
vote per share on all matters to be voted on by the
shareholders, including the election of directors.
The issuance of any additional shares of common stock may,
depending on the circumstances under which those shares are
issued, reduce shareholders equity per share and, unless
additional shares are issued to all shareholders on a pro rata
basis, will reduce the percentage ownership of common stock of
existing shareholders. In addition, if our Board of Directors
elects to issue additional shares of common stock, such issuance
could have a dilutive effect on the earnings per share, voting
power and shareholdings of current shareholders. We expect,
however, to receive consideration for any additional shares of
common stock issued, thereby reducing or
22
eliminating any adverse economic effect to each shareholder of
such dilution. The proposed increase in the authorized number of
shares of common stock will not otherwise alter or modify the
rights, preferences, privileges or restrictions of the common
stock.
Potential Anti-takeover Effects. Although the
proposed increase in the authorized capital stock of Ciena could
be construed as having potential anti-takeover effects, neither
the Board nor management of Ciena views this proposal in that
perspective. Nevertheless, Ciena could use the additional shares
to frustrate persons seeking to effect a takeover or otherwise
gain control of Ciena by, for example, privately placing shares
to purchasers who might side with the Board in opposing a
hostile takeover bid, thereby diluting or impairing the voting
power of the other outstanding shares of common stock and
increasing the potential costs to acquire control of us. Shares
of common stock could be issued to a holder that would
thereafter have sufficient voting power to assure that any
proposal to amend or repeal our bylaws or certain provisions of
the Certificate would not receive the required vote. Shares of
common stock could also be used to facilitate the adoption of
measures intended to deter unfair or coercive takeover tactics
that the Board does not believe are in the best interest of
shareholders, including the adoption of a shareholder rights
plan or poison pill. Such uses of the common stock
could render more difficult or discourage an attempt to acquire
control of Ciena, if such transactions were opposed by the
Board. This proposal is not being submitted as a result of or in
response to any known accumulation of stock or threatened
takeover or attempt to obtain control of Ciena by means of a
business combination, tender offer, solicitation in opposition
to management or otherwise by any person.
Changes
to Certificate to Remove Pre-IPO References
The amendment and restatement of our Certificate includes other
changes to delete or revise legacy provisions or phrases in the
Certificate pertaining to the governance of Ciena prior to our
1997 initial public offering and the effectiveness of certain
governance changes upon the initial public offering. The
revisions are not substantive in nature, will not result in any
change in the governance of Ciena and will not affect
shareholders in any way. Each of the changes relate to phrases
or provisions that are no longer relevant or applicable and
therefore can be eliminated. Among these changes is the deletion
of the designations for Cienas Series A, B and C
preferred stock. These designations are included within the
Certificate and set forth the historical rights, preferences and
privileges of shares of Cienas preferred stock that were
outstanding prior to its initial public offering. Ciena does not
have any shares of preferred stock outstanding and has not had
any such shares outstanding since its initial public offering.
Ciena has no plans or current intention to issue preferred
stock. Ciena is making these revisions to improve the
readability and ease of use of the Certificate by investors, to
consolidate prior amendments to the Certificate and to reduce
the size of the Certificate.
Under our Certificate and Delaware law, this proposal to amend
and restate our Certificate must be approved by the affirmative
vote of the holders of a majority of the issued and outstanding
shares of our common stock.
Proposal No. 3
Recommendation of the Board of Directors
The Board of Directors recommends that Ciena shareholders for
FOR approval of the amendment and restatement of the
Certificate.
PROPOSAL NO. 4
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers LLP (PwC) as our independent
registered public accounting firm to audit Cienas
consolidated financial statements for the fiscal year ending
October 31, 2008, and is asking shareholders to ratify this
appointment at the Annual Meeting.
PwC has audited our consolidated financial statements annually
since Cienas incorporation in 1992. A representative of
PwC is expected to be present at the Annual Meeting, will have
the opportunity to make a statement if he or she desires to do
so and will be available to respond to appropriate questions. In
making its recommendation to the Board of Directors to select
PwC as Cienas independent registered public accounting
firm
23
for fiscal 2008, the Audit Committee has considered whether the
non-audit services provided by PwC are compatible with
maintaining the independence of PwC. Information regarding fees
billed by PwC for our 2006 and 2007 fiscal years is set forth
under the heading Relationship with Independent Registered
Public Accounting Firm below.
Our bylaws do not require that shareholders ratify the
appointment of our independent registered public accounting
firm. We are seeking ratification because we believe it is a
matter of good corporate governance. In the event that
shareholders fail to ratify the appointment, the Audit Committee
will reconsider whether to retain PwC, but may ultimately
determine to retain PwC as our independent registered public
accounting firm. Even if the appointment is ratified, the Audit
Committee, in its sole discretion, may direct the appointment of
a different independent registered public accounting firm at any
time during the year if it determines that such a change would
be in the best interests of Ciena and its shareholders.
Proposal No. 4
Recommendation of the Board of Directors
The Board of Directors recommends that Ciena shareholders vote
FOR the ratification of the appointment of PwC as
our independent registered public accounting firm for the
current fiscal year.
RELATIONSHIP
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table shows the fees that were billed to Ciena by
PwC for professional services rendered for fiscal years 2006 and
2007. In compliance with the Audit Committees internal
policy and auditor independence rules of the SEC, all audit and
permissible non-audit services provided by PwC to Ciena for the
fiscal years 2006 and 2007 were pre-approved by the Audit
Committee.
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Fee Category
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2006
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2007
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Audit Fees
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$
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2,046,149
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$
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2,260,647
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Audit-Related Fees
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$
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86,985
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$
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361,740
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Tax Fees
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$
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66,672
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$
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44,995
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All Other Fees
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Total Fees
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$
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2,199,806
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$
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2,667,342
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Audit
Fees
This category of the table above includes fees for the audit of
our annual financial statements, review of financial statements
included in our quarterly reports on
Form 10-Q
and services that are normally provided by PwC in connection
with statutory and regulatory filings or engagements. The
preparation of Cienas audited financial statements include
compliance with Section 404 of the Sarbanes-Oxley Act of
2002 and the preparation by PwC of a report expressing its
opinion regarding the effectiveness of our internal control over
financial reporting. As a result, audit fees for fiscal 2006 and
2007 reflect PwCs integrated audit of our financial
statements and our internal control over financial reporting as
of the end of each fiscal year.
Audit-Related
Fees
This category of the table above includes fees for assurance and
related services that are reasonably related to the performance
of the audit or review of our financial statements and are not
included above under Audit Fees. For fiscal 2006 and
fiscal 2007, audit-related fees include services in connection
with Cienas convertible note offerings. Fiscal 2007 also
reflects audit-related fees for PwCs services, related to
our internal control over financial reporting, in connection
with our implementation of a new version of our Oracle
management information system.
24
Tax
Fees
This category of the table above includes fees for tax
compliance, tax advice, and tax planning. Services for fiscal
2006 and fiscal 2007 include tax return preparation, expatriate
tax services and international VAT tax planning.
All Other
Fees
This category of the table above includes fees for services
provided by PwC that are not included in the service categories
reported above. Ciena did not incur any other fees during fiscal
2006 or fiscal 2007.
Pre-Approval
of Services
The Audit Committee pre-approves all services, including both
audit and non-audit services, provided by our independent
registered public accounting firm. For audit services (including
statutory audit engagements as required under local country
laws), each year our independent registered public accounting
firm provides the Audit Committee with an engagement letter
outlining the scope of the audit services proposed to be
performed during the year, which must be accepted by the Audit
Committee before the audit commences. Our independent registered
public accounting firm also submits an audit services fee
proposal, which also must be approved by the Audit Committee
before the audit commences.
Each year, management also submits to the Audit Committee a list
of non-audit services that it recommends the independent
registered public accounting firm be engaged to provide and an
estimate of the fees to be paid for each. Management and the
independent registered public accounting firm must each confirm
to the Audit Committee that the performance of the non-audit
services on the list would not compromise the independence of
our registered public accounting firm and would be permissible
under applicable legal requirements. The Audit Committee must
approve both the list of non-audit services and the budget for
each such service before commencement of the work. Our
management and our independent registered public accounting firm
report to the Audit Committee at each of its regular meetings as
to the non-audit services actually provided by the independent
registered public accounting firm and the approximate fees
incurred by Ciena for those services.
To ensure prompt handling of unexpected matters, the Audit
Committee has authorized its Chairperson to amend or modify the
list of approved permissible non-audit services and fees. If the
Chairperson exercises this delegation of authority, she reports
the action taken to the Audit Committee at its next regular
meeting.
All audit and permissible non-audit services provided by PwC to
Ciena for the fiscal years 2006 and 2007 were pre-approved by
the Audit Committee.
AUDIT
COMMITTEE REPORT
The information contained in this report shall not be deemed
to be soliciting material or filed or
incorporated by reference in future filings with the SEC, or
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, except to the extent that Ciena
specifically incorporates it by reference into a document filed
under the Securities Act of 1933 or the Exchange Act.
The Audit Committee met with management periodically during
fiscal 2007 to consider the adequacy of Cienas internal
controls, and discussed these matters with Cienas
independent registered public accounting firm,
PricewaterhouseCoopers LLP, and with appropriate Ciena financial
personnel. The Committee also discussed with senior management
and PricewaterhouseCoopers LLP Cienas disclosure controls
and procedures and the certifications by Cienas Chief
Executive Officer and Chief Financial Officer, which are
required by the SEC under the Sarbanes-Oxley Act of 2002 for
certain filings with the SEC. The Committee has established a
procedure for receiving and addressing anonymous complaints
regarding financial or accounting irregularities. It has also
considered and overseen the implementation of accounting
policies and their communication to financial and management
personnel.
25
The Audit Committee has reviewed and discussed Cienas
audited financial statements for fiscal 2007 with management and
with PricewaterhouseCoopers LLP. The Audit Committee has
discussed with PricewaterhouseCoopers LLP the matters required
to be discussed by Statement on Auditing Standards No. 61,
which relates to the conduct of the audit. The Audit Committee
has received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with PricewaterhouseCoopers LLP
its independence. Based on the Audit Committees review of
the audited financial statements and the review and discussions
described in this report, the Audit Committee recommended to the
Board of Directors that the audited financial statements for
fiscal 2007 be included in Cienas annual report on
Form 10-K
for fiscal 2007 for filing with the SEC.
Submitted by the members of the Audit Committee:
Lawton W. Fitt (Chairperson)
Stephen P. Bradley, Ph.D.
Bruce L. Claflin
Michael J. Rowny
26
OWNERSHIP
OF SECURITIES
The following table sets forth, as of January 2, 2008, the
beneficial ownership of Cienas common stock for the
following persons:
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all shareholders known by us to own beneficially more than 5% of
our common stock;
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our Chief Executive Officer and the other Named Executive
Officers (as that term is defined in the Executive
Compensation Tables below);
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each of our directors; and
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all of our directors and executive officers as a group.
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Certain information in the table concerning beneficial owners
other than our directors and executive officers is based on
information contained in filings made by such beneficial owners
with the SEC.
Pursuant to
Rule 13d-3
of the Securities Exchange Act of 1934, shares are deemed to be
beneficially owned by a person on a particular date if that
person has the right to acquire shares (for example, upon
exercise of an option) within sixty days of that date. In
computing the percentage ownership of any person, the amount of
shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by
reason of such acquisition rights. As a result, the percentage
of outstanding shares held by any person in the table below does
not necessarily reflect the persons actual voting power.
As of January 2, 2008, there were 87,036,309 shares of
Ciena common stock outstanding.
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Number
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Beneficial
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Percent of
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of Shares
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Right to
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Ownership
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Outstanding
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Name of Beneficial Owner
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Owned(1)
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Acquire(2)
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Total(3)
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Shares
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FMR Corp.(4)
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10,009,314
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218,942
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10,228,256
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11.7
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%
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T. Rowe Price Associates, Inc.(5)
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5,053,681
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5,053,681
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5.8
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%
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Jennison Associates LLC(6)
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5,969,300
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5,969,300
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6.9
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%
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Patrick H. Nettles, Ph.D.
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350,176
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179,326
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529,502
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*
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Gary B. Smith
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31,298
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446,259
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477,557
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*
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Stephen B. Alexander(7)
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36,623
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205,079
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241,702
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*
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Michael G. Aquino
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11,958
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35,430
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47,388
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*
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Joseph R. Chinnici(8)
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18,157
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28,914
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47,071
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*
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Arthur D. Smith, Ph.D.
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17,424
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104,916
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122,340
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*
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Stephen P. Bradley, Ph.D.
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6,785
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50,426
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57,211
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*
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Harvey B. Cash
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22,556
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34,712
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|
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57,268
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*
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Bruce L. Claflin
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714
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2,142
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|
|
2,856
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*
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Lawton W. Fitt
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|
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1,071
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|
|
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37,336
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38,407
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*
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Judith M. OBrien(9)
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5,302
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36,850
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42,152
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*
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Michael J. Rowny
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1,071
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13,451
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14,522
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*
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Gerald H. Taylor
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1,356
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35,859
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37,215
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*
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All executive officers and directors as a group (15 persons)
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507,339
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1,287,413
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1,794,752
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2.0
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%
|
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* |
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Represents less than 1%. |
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(1) |
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Excludes shares that may be acquired through the exercise of
stock options, the vesting of restricted stock units or other
convertible equity awards. |
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(2) |
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Except as otherwise set forth in the footnotes below, represents
shares of common stock that can be acquired upon the exercise of
stock options and vesting of restricted stock units within sixty
days of the date of this table. |
27
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(3) |
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Except as indicated in the footnotes to this table, the persons
named in this table have sole voting and investment power with
respect to all shares of common stock shown as beneficially
owned by them, subject to community property laws where
applicable. |
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(4) |
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Shareholders address is 82 Devonshire Street, Boston, MA
02109. Ownership information is based solely on a
Schedule 13G/A, filed jointly by FMR Corp.
(FMR) and Edward C. Johnson 3d with the SEC on
February 14, 2007, and reflects their beneficial ownership
as of December 31, 2006. Based on the Schedule 13G/A,
Fidelity Management & Research Company
(Fidelity) is a wholly-owned subsidiary of FMR. By
acting as investment adviser to various investment companies,
Fidelity is the beneficial owner of 10,144,427 shares of
Cienas common stock. The ownership of one investment
company, Fidelity Destiny II, amounted to 4,684,358 shares.
Shares included in the Right to Acquire column above
reflect shares of common stock issuable upon conversion of
Cienas outstanding convertible notes held by the
investment companies, as reported on Schedule 13G/A. |
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(5) |
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Shareholder is an investment adviser with its address at
100 E. Pratt Street, Baltimore, MD 21202. Ownership
information is based solely on a Schedule 13G/A, filed by
shareholder with the SEC on February 13, 2007, and reflects
beneficial ownership as of December 31, 2006. |
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(6) |
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Shareholder is an investment adviser with its address at 466
Lexington Avenue, New York, NY 10017. Ownership information is
based solely on a Schedule 13G/A, filed by shareholder with
the SEC on July 7, 2007, and reflects beneficial ownership
as of December 31, 2006. Shareholder furnishes investment
advice to several investment companies, insurance separate
accounts and institutional clients. Prudential Financial, Inc.
indirectly owns 100% of the equity interest in shareholder. |
|
(7) |
|
Voting and investment power is shared with
Mr. Alexanders spouse. |
|
(8) |
|
Mr. Chinnici is our former Chief Financial Officer and is
listed as a Named Executive Officer in the table above in
accordance with SEC requirements. Shares included in the
Right to Acquire column above reflect vested options
held by Mr. Chinnici as of the date of this table. |
|
(9) |
|
Voting and investment power is shared with
Ms. OBriens spouse. |
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee, which is composed solely of
independent members of the Board of Directors, assists the Board
in fulfilling its responsibilities with regard to compensation
matters, and is responsible under its charter for determining
the compensation of Cienas executive officers. The
Compensation Committee has reviewed and discussed the
Compensation Discussion and Analysis section of this
proxy statement with management, including our Chief Executive
Officer and our Chief Financial Officer. Based on this review
and discussion, the Compensation Committee recommended to the
Board of Directors that the Compensation Discussion and
Analysis be included in this proxy statement and
incorporated in Cienas annual report on
Form 10-K
for fiscal 2007 by reference to this proxy statement.
Submitted by the members of the Compensation Committee:
Judith M. OBrien (Chairperson)
Harvey B. Cash
Gerald H. Taylor
28
COMPENSATION
DISCUSSION AND ANALYSIS
This section of the proxy statement includes a description of
the objectives of our compensation program, how the components
of our compensation are designed to operate, and the
compensation-related decisions made with respect to our Chief
Executive Officer (CEO), Chief Financial Officer (CFO) and the
three most highly compensated executive officers during fiscal
2007. These employees, for whom we have included detailed
compensation information in the tables that are part of the
Executive Compensation Tables below, are referred to
as the Named Executive Officers. For fiscal 2007,
our Named Executive Officers were:
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Gary B. Smith, President and CEO
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Arthur D. Smith, Senior Vice President and Chief Operating
Officer
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Stephen B. Alexander, Senior Vice President and Chief Technology
Officer
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Michael G. Aquino, Senior Vice President, Worldwide Sales
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Joseph R. Chinnici, our former Senior Vice President and CFO
|
As previously disclosed, Mr. Chinnici resigned as our CFO
effective following the filing of our annual report on
Form 10-K
on December 27, 2007, and, otherwise as an employee, on
December 31, 2007. James E. Moylan became our Senior Vice
President and Chief Financial Officer as of December 27,
2007.
Background
During most of fiscal 2002 through 2005, Ciena was focused on
surviving and rebuilding its business in an industry that had
experienced an almost unprecedented collapse. In fiscal 2001,
our annual revenue reached $1.6 billion, based largely on
the success of a single product line. By fiscal 2003, our
revenue had dropped to $283.1 million, as the
telecommunications industry suffered a severe decline that
affected almost all of its participants, including equipment
suppliers like Ciena. Consequently, our executive compensation
program during this period was quite simple. Cash compensation
consisted primarily of base salary, which remained largely
unchanged, except where an executive was promoted or took on
greater responsibilities. In addition, in fiscal 2005, Gary
Smith, our CEO, voluntarily offered to reduce his base salary
from $650,000 to $500,000, which the Compensation Committee of
Cienas Board of Directors (the Committee)
accepted. To conserve cash, we paid no bonuses to our executives
or other employees from fiscal 2002 until the third quarter of
fiscal 2006. Because cash compensation paid to our executives
during this period was relatively low, to provide retention
incentives and to align the interests of our executive team with
the interests of shareholders, the Committee relied heavily on
stock option grants. Due to significant declines in our stock
price prior to mid-2005, however, the options granted to our
executives in earlier periods remain significantly out of the
money, and therefore have little value as incentives or for
retention.
29
We believe that the work of our executive team during these
difficult years is now beginning to bear fruit. Cienas
business has stabilized and is growing again. We grew revenues
32.0% from fiscal 2005 to fiscal 2006 and 38.2% from fiscal 2006
to fiscal 2007. During fiscal 2006, we returned to profitability
on a GAAP (generally accepted accounting principles) basis for
the first time since fiscal 2000 and increased net income per
share from $0.01 in fiscal 2006 to $0.87 in fiscal 2007. During
fiscal 2006 and 2007, our stock price significantly outperformed
major indexes, including the Standard & Poors
500 and The NASDAQ Telecom Index, as illustrated in the chart
below which assumes a $100 investment in each at the beginning
of our fiscal 2006.
As Ciena entered fiscal 2007, we believed that we were better
positioned to begin to use compensation practices in a more
nuanced way to support specific elements of our business
strategy, particularly the profitable growth of our business,
and to continue to drive increases in shareholder value. We were
also influenced by the belief that improvements in conditions in
our market, together with our relative success, would intensify
the competition we face for executive talent. These factors
increased the likelihood that we would have to compete with
larger companies, within and outside of our industry, that were
in a position to offer higher compensation to our executives
than we have been able to offer in recent years.
Compensation-setting
process for fiscal 2007
General
The Committee oversees our executive compensation program,
establishes our compensation philosophy and policies, and
administers our compensation plans. For more information on the
composition, responsibilities, and activities of the Committee,
see the Corporate Governance and the Board of
Directors Compensation Committee above.
30
Compensation
Consultant
For fiscal 2007, the Committee engaged Compensia, Inc., a
compensation consultant, to assist it with its work. During the
period prior to the commencement of fiscal 2007, Compensia:
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assisted with the establishment of a peer group of companies;
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provided information on compensation paid by peer companies to
their executive officers;
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provided survey data to supplement publicly available
information on compensation paid by peer group companies;
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advised on alternative structures, forms of compensation and
allocation considerations;
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advised the Committee on appropriate levels of compensation for
the Named Executive Officers and the other members of the
executive leadership team; and
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prepared tally sheets showing the amounts for all
elements of compensation proposed for each of the executive
officers and the current and projected value both of proposed
grants and of vested and unvested outstanding grants.
|
Ciena also engaged Compensia during fiscal 2007 to provide
information and advice related to our development of an equity
compensation plan for our employees in India. As this was a
relatively small engagement, the Committee does not believe it
compromised Compensias ability to provide the Committee
with an independent perspective in fiscal 2007. In order to
avoid any appearance of a conflict in the future, the Committee
will require that its compensation consultants not perform any
services for Ciena except as retained by the Committee or
another committee of the Board.
Selection
of peer group
For purposes of determining the compensation of our executives
for fiscal 2007, including the Named Executive Officers, the
Committee, assisted by Compensia, identified a group of
companies against which to compare its existing and proposed
compensation levels for Cienas executives. These companies
were selected because the Committee considered them to be
similar to, and competitive with, Ciena in the market for
executive talent, because they are in comparable or related
businesses, are publicly-held entities, and are of similar size
as measured by revenue, market capitalization, and employee
headcount. This group consisted of the following companies (the
Peer Group):
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ADC Telecommunications
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Juniper Networks
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ADTRAN
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McDATA
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Brocade Communications Systems
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Redback Networks
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Extreme Networks
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Sonus Networks
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Foundry Networks
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TEKELEC
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Harmonic
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Tellabs
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JDS Uniphase
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31
The following table shows how these companies compared to Ciena
as of July 2006 (when the Committee considered the composition
of the Peer Group for purposes of fiscal 2007 compensation)
according to several different measures. Note that information
in the table below as to our stock price and shares outstanding
does not give effect to our subsequent one-for-seven reverse
stock split in September 2006.
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Market Capitalization as of 7/21/06
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Last Four
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Last Four
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Total
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Market
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Quarters
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Quarters
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Common
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Cap as a
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Market
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Revenue
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Net Income
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Employees
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Stock
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Shares
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Market Cap
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Multiple
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Revenue per
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Cap per
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Company
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($MM)
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($MM)
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at FYE
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Price
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Outstanding
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($MM)
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of Revenue
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Employee
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Employee
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ADC Telecommunications
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$
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1,263.6
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$
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45.8
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9,300
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$
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11.98
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117,237,000
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$
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1,404.5
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1.1x
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$
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135,871
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$
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151,021
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ADTRAN
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$
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517.3
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$
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102.2
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1,594
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$
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20.26
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76,761,000
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$
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1,555.2
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3.0x
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$
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324,523
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$
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975,645
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Brocade Communications Systems
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$
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620.6
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$
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17.0
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1,208
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$
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5.66
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272,473,000
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$
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1,542.2
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2.5x
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$
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513,750
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$
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1,276,653
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Extreme Networks
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$
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372.2
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$
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13.0
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834
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$
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3.81
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119,192,000
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$
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454.1
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1.2x
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$
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446,295
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$
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544,510
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Foundry Networks
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$
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433.2
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$
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57.0
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719
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$
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9.07
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145,689,000
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$
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1,321.4
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3.1x
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$
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602,531
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$
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1,837,829
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Harmonic
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$
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240.7
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$
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(12.6
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)
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618
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$
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3.99
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74,169,000
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$
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295.9
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1.2x
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$
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389,450
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$
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478,858
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JDS Uniphase
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$
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1,057.0
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$
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(251.1
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)
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5,022
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$
|
2.08
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1,684,869,000
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$
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3,504.5
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3.3x
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$
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210,474
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$
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697,835
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Juniper Networks
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$
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2,181.6
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$
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354.4
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4,145
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$
|
13.63
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565,750,000
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$
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7,711.2
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3.5x
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$
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526,309
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$
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1,860,355
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McDATA
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$
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683.9
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$
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(37.3
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)
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1,447
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$
|
3.10
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159,030,000
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$
|
493.0
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.7x
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$
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472,619
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$
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340,700
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Redback Networks
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$
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176.8
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$
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(16.9
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)
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505
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$
|
13.03
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57,591,000
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$
|
750.4
|
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4.2x
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$
|
350,158
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$
|
1,485,962
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Sonus Networks
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$
|
221.0
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$
|
17.8
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|
|
719
|
|
|
$
|
4.27
|
|
|
|
252,505,000
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|
$
|
1,078.2
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4.9x
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$
|
307,330
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$
|
1,499,578
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TEKELEC
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$
|
536.9
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$
|
(33.7
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)
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|
|
1,759
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|
$
|
10.13
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|
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|
67,169,000
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$
|
680.4
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1.3x
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|
$
|
305,236
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$
|
386,823
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Tellabs
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$
|
1,962.5
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$
|
227.5
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|
3,609
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|
|
$
|
10.74
|
|
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|
448,100,000
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$
|
4,812.6
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2.5x
|
|
|
$
|
543,779
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$
|
1,333,498
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|
75th Percentile
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|
$
|
1,057.0
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|
|
$
|
57.0
|
|
|
|
3,609
|
|
|
$
|
11.98
|
|
|
|
272,473,000
|
|
|
$
|
1,555.2
|
|
|
|
3.3x
|
|
|
$
|
513,750
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|
|
$
|
1,485,962
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|
60th Percentile
|
|
$
|
633.3
|
|
|
$
|
23.4
|
|
|
|
1,627
|
|
|
$
|
10.25
|
|
|
|
177,725,000
|
|
|
$
|
1,432.0
|
|
|
|
3.0x
|
|
|
$
|
451,560
|
|
|
$
|
1,288,022
|
|
50th Percentile
|
|
$
|
536.9
|
|
|
$
|
17.0
|
|
|
|
1,447
|
|
|
$
|
9.07
|
|
|
|
145,689,000
|
|
|
$
|
1,321.4
|
|
|
|
2.5x
|
|
|
$
|
389,450
|
|
|
$
|
975,645
|
|
Average
|
|
$
|
789.8
|
|
|
$
|
37.2
|
|
|
|
2,421
|
|
|
$
|
8.60
|
|
|
|
310,810,385
|
|
|
$
|
1,969.5
|
|
|
|
2.5x
|
|
|
$
|
394,487
|
|
|
$
|
989,944
|
|
25th Percentile
|
|
$
|
372.2
|
|
|
$
|
(16.9
|
)
|
|
|
719
|
|
|
$
|
3.99
|
|
|
|
76,761,000
|
|
|
$
|
680.4
|
|
|
|
1.2x
|
|
|
$
|
307,330
|
|
|
$
|
478,858
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ciena
|
|
$
|
480.3
|
|
|
$
|
(312.1
|
)
|
|
|
1,497
|
|
|
$
|
3.45
|
|
|
|
587,679,000
|
|
|
$
|
2,027.5
|
|
|
|
4.2x
|
|
|
$
|
320,822
|
|
|
$
|
1,354,370
|
|
The Committee believes that measures such as base salaries,
target cash compensation and target total compensation paid by
companies in the Peer Group can serve as a useful comparative
tool. The Committee also considers how companies in the Peer
Group allocate compensation among the various elements of their
programs. On the other hand, the Committee recognizes that
executives in different companies can play significantly
different roles, even though they may hold the same nominal
positions. Moreover, there is no way to determine from the
available information about Peer Group compensation anything
relating to the respective qualitative factors that may
influence compensation, such as the performance of individual
executives or their perceived importance to their
companies business. Accordingly, the Committee looked to
information about the Peer Group only as a rough guide, and did
not benchmark compensation or consider itself
constrained to set compensation for any particular executive by
the compensation levels of executives occupying similar
positions at companies in the Peer Group.
The Committee reassesses its Peer Group as it believes necessary
to reflect those companies with which the Committee believes
that we compete for executive talent. As a result, the Peer
Group, in both fiscal 2007 and subsequent fiscal years, may
include companies that are larger than Ciena or in different
industries.
Role
of executive officers
The Chair of the Committee, in consultation with its other
members, worked with Compensia to develop proposed compensation
packages for our CEO and Executive Chairman. Meeting in
executive session at its regular meeting in October 2006, the
Committee reviewed and discussed these packages in view of its
assessment of the performance of the two executives. The Chair
of the Committee worked with Compensia on modifications to the
proposed packages on the basis of that discussion, and, acting
in executive session, the Committee considered final packages at
its regular meeting in December 2006. It formally approved those
packages at a special meeting on December 18, 2006.
The Chair of the Committee worked with Compensia and our CEO to
develop proposed compensation packages for our other executives,
including the other Named Executive Officers. At the
Committees regular meeting in October 2006, our CEO
presented the recommended packages to the Committee, providing
it with an
32
analysis of each package and explaining the value of the
executives role to Ciena, the contribution he or she makes
to Ciena in that role, and the quality of his or her individual
performance. With one exception, described below, the Committee
determined to make no changes in executives base salaries
for fiscal 2007. The Committee discussed the recommended equity
compensation for each executive. The Chair of the Committee
worked with Compensia and the CEO on final adjustments to the
equity compensation packages, which the Committee considered at
its regular meeting in December 2006. The Committee formally
approved the equity compensation of the Named Executive Officers
at a special meeting on December 18, 2006. As described in
Equity grant practices and timing, below, the timing
of the formal approval of the executives equity grants for
the year is driven, in part, by the Committees desire to
make equity awards to its executive officers following the
release of Cienas financial results for the fiscal year.
Internal
equity
In making compensation decisions, the Committee seeks to promote
teamwork among and high morale within our executive team.
Therefore, it is mindful of internal pay equity considerations,
and assesses the relationships of the compensation of each
executive to other members of the executive team.
Elements
of compensation
The executive compensation program for our executives, including
the Named Executive Officers, mirrors Cienas compensation
program for the majority of our salaried employees, and includes
three principal elements: base salary, cash incentive bonuses
that are contingent upon satisfaction of corporate,
departmental, or individual performance goals, and equity-based
incentive compensation. We also provide our employees, including
our executives, with certain health, welfare, and retirement
benefits. As described below, we maintain severance arrangements
with our executives, including the Named Executive Officers,
which entitle them to certain payments and benefits if their
employment is terminated following a change in control of Ciena.
We believe that each of these elements is important to
furthering the objectives of our executive compensation program.
Base
salary
In establishing the base salaries for our executives, including
the Named Executive Officers, we consider the market for
executive talent for similar positions as reflected by the Peer
Group. The Committee also generally takes into account the
responsibilities, skills and experience of the individual
executive, the nature of his or her position, the value of the
executives role to Ciena, his or her past performance in
that position, and the CEOs recommendations for each
position (other than his own). As discussed above, although we
view base salaries paid by companies in the Peer Group as useful
comparative information, we do not require that the base salary
of individual executives bear any particular relationship to
salaries of executives in similar positions in the Peer Group.
As discussed above, because of the extraordinary market
conditions faced by Ciena over the last few years, and the
resulting need to make prudent use of our cash, the Committee
had generally not increased the base salaries of our executive
team since fiscal 2001, except to recognize promotions or
increases in responsibility. With one exception, the Committee
again made no changes in the base salaries of our executives,
including the Named Executive Officers, for fiscal 2007. The
Committee decided to maintain Mr. Smiths annual base
salary at the existing level of $500,000, which is just below
the 50th percentile of base salaries for chief executive
officers of the Peer Group. The Committee considered that the
base salaries of our executives, including the Named Executive
Officers, were generally within the range of base salaries of
similar positions for companies in the Peer Group. The Committee
took into account that total cash compensation, including base
salary and bonus, for fiscal years prior to 2007 was generally
significantly below total cash compensation for equivalent
positions in the Peer Group, but, because the Committee decided
to reinstitute cash incentive bonuses for fiscal 2007, it
considered there to be less reason to increase base salaries.
Because of the important role he plays at Ciena, and because he
had taken on increased responsibilities, including oversight
responsibility for our development facility in India, the
Committee increased the base salary of Mr. Alexander, our
Senior Vice President and Chief Technology Officer, from
$325,000 to $375,000, for fiscal 2007.
33
Cash
incentive bonuses
We provide short-term incentive compensation to our executives
through our incentive bonus plan, in which all salaried
employees in North America and Europe, excluding our sales team,
participate. The Committee establishes target
bonuses, expressed as a percentage of base salary, for each
eligible employee. For non-executive employees, these targets
range from 7.5% to 35% of base salary, according to the
employees position and responsibilities; and for
executives, the targets range from 50% to 100% of base salary.
The Committee reviews these target levels from time to time to
assure that the potential bonus opportunities are competitive
and remain internally equitable. The bonus plan provides the
Committee with flexibility to establish for each employee the
performance objectives upon which bonus payments are contingent,
which may be related to Cienas financial performance or to
the achievement of individual, departmental, or team performance
objectives. Bonuses are paid in quarterly amounts following our
release of quarterly financial results.
Employees in our sales organization, including Mr. Aquino,
our Senior Vice President, Worldwide Sales, do not participate
in the bonus plan. Instead, they are eligible to receive sales
incentive compensation, the payment of which is conditioned upon
the achievement of certain sales-oriented performance measures,
such as revenue, customer orders, or gross margin. As they
relate to Mr. Aquino, the annual performance objectives for
his sales incentive compensation are approved by the Committee
and based upon the financial targets contained in our annual
operating plan which is approved by the Board.
For fiscal 2007, the Committee, acting on the recommendation of
the CEO, agreed to increase the target bonuses for
Mr. Alexander and Mr. Smith, our Senior Vice President
and Chief Operating Officer, from 50% to 75% of base salary to
reflect the increased responsibilities each had recently
assumed. As previously described, Mr. Alexander assumed
responsibility for our development facility in India.
Mr. Smith became Chief Operating Officer during fiscal 2006
and assumed responsibility for several additional functional
areas. With these changes, target bonuses for fiscal 2007 were
100% of base salary for our CEO and 75% of base salary for the
other Named Executive Officers, excluding Mr. Aquino. The
Committee determined that for each of our Named Executive
Officers, the total targeted cash compensation, consisting of
base salary and bonus opportunity at the target level, was
between the
50th and
the
75th percentile
of total cash compensation for equivalent positions in the Peer
Group.
For fiscal 2007, the Committee considered whether to base
payments under the bonus plan on quarterly, semi-annual, or
annual performance metrics. The CEO recommended, and the
Committee agreed, that the environment in which we operate
continues to be so dynamic that attempting to set performance
objectives over a period longer than one fiscal quarter risked
the possibility of setting goals that would prove either too
difficult or too easy to achieve.
The Committee also considered whether to use different
performance metrics for senior executives than for other
eligible employees. Because, prior to fiscal 2006, we had paid
no bonuses to our employees for nearly four years, we determined
that, at least initially, we would use the same performance
metric for all eligible employees, including our executives,
which, for fiscal 2007, was profitability. In establishing the
performance goal, we sought to build upon our return to
profitability in fiscal 2006, by leveraging our operating model
and making prudent use of operating expense, all with a focus
upon continuing the profitable growth of the company. To this
end, we determined to use quarterly profitability targets for
purposes of measuring performance under the bonus plan. In using
this performance metric, the Committee sought to provide
eligible employees, including the Named Executive Officers, an
incentive to continue to stress profitable growth of our
business and to improve operating profit during the fiscal year.
We believed that, in addition to providing short-term incentives
to meet our profitability objectives, treating all eligible
employees in the same manner was important to the promotion of
teamwork, morale and a highly productive work environment.
During fiscal 2007, the Committee set the quarterly
profitability goals at its regular meeting at or near the
beginning of each fiscal quarter, and the goals were
communicated to the executive team. For the first quarter of
fiscal 2007, the goal was based upon the achievement of the
quarterly estimate of as adjusted pre-tax profit
established in our fiscal 2007 operating plan, as approved by
the Board. The operating plan is prepared in advance of each
fiscal year to set out our targeted results, initiatives and
strategies for the year and to form the basis upon which we run
our business and allocate budgets. At the time it is prepared,
the operating plan represents our best estimate of our
forecasted financial results for the year. In general, we
believe that the overachievement or underachievement
34
of any performance measure contained in the operating plan is
equally likely. In determining the as adjusted profit, the
Committee makes adjustments to our GAAP results consistent with
those reported in our quarterly earnings releases and such other
adjustments as it considers equitable and necessary to reflect
appropriate measures of performance and the goals of the bonus
program. For the second, third and fourth quarters of fiscal
2007, when the Committee met to establish the bonus goals for
that quarter, our then-current projection was that we would
exceed the quarterly profit goal originally established in the
operating plan. Therefore, the Committee determined to base the
profitability goal for each of those quarters on the higher
level of profit that we were then projecting. Again, the
Committee believed that it was equally likely that we would
overachieve or underachieve those goals.
In structuring the bonus, the Committee provided for a range of
payments from a threshold amount to a maximum amount if the
targets were exceeded or satisfied in part. This prevented
employees from viewing the bonus plan as an
all-or-nothing plan, which the Committee believes is
generally undesirable. The percentage of the target bonus
opportunity paid at each of the threshold, target, and maximum
levels under the bonus plan is set forth in the following table,
with payments interpolated for performance results falling
between the designated payment levels.
|
|
|
|
|
|
|
|
|
|
|
Percentage of Performance
|
|
|
Percentage of Applicable
|
|
|
|
Goal Achieved
|
|
|
Target Bonus Paid
|
|
|
Threshold
|
|
|
70
|
%
|
|
|
50
|
%
|
Target
|
|
|
100
|
%
|
|
|
100
|
%
|
Maximum
|
|
|
120
|
%
|
|
|
150
|
%
|
Bonus payments were paid quarterly following our release of
quarterly financial results. During fiscal 2007, we exceeded the
target performance goal in each fiscal quarter,
resulting in the payment of more than 100% of the target bonus.
Mr. Aquinos sales incentive compensation during
fiscal 2007 was also paid quarterly and based upon his
achievement of performance measures approved by the Committee on
the recommendation of the CEO. His target incentive opportunity
for fiscal 2007 was 100% of his base salary. In approving this
amount, the Committee considered his total target cash
compensation to that of sales executives in the Peer Group. The
Committee conditioned half of his sales incentive compensation
upon the achievement of a specified value of total orders
received during a quarter, and half on the achievement of a
specified amount of gross margin dollars recognized. Each of
these performance measures was based on our operating plan for
fiscal 2007. The customer order goals were intended to
incentivize building a backlog of orders for Cienas
products and services, and the gross margin goals were intended
to incentivize increasing sales at prices and on terms that
generated high total gross margins. In establishing the gross
margin goals, the Committee targeted the achievement of certain
gross margin dollar targets by multiplying the revenues
projected in our operating plan by the gross margin percentages
projected in our operating plan. The Committee based the goals
upon gross margin dollars because it believed this measure
reflected an appropriate balance of incentivizing improvements
in gross margin, while still rewarding revenue growth.
Mr. Aquinos sales incentive compensation became
payable at the threshold level upon the achievement of 80% of
the performance goals, with 100% of the bonus paid upon
achievement of the goals. Payouts for performance in excess of
the goals were subject to accelerator factors, with no cap on
the amount payable if Mr. Aquino exceeded them. Because he
overachieved his incentive compensation goals during fiscal
2007, Mr. Aquinos sales incentive compensation was
119% of his base salary.
Equity-based
compensation
We believe that equity-based incentive compensation performs an
essential role in attracting and retaining executives and
providing them incentives to maximize shareholder value.
Depending upon the terms of these awards, including their
vesting schedules, the Committee uses equity-based awards to
focus upon, and reward the achievement of, short-term and
long-term objectives, as well as corporate, departmental, and
individual performance. Over the last six years, because we have
generally not increased the base salaries of our executives or,
until the end of fiscal 2006, paid them cash bonuses, we have
relied heavily on equity-based compensation, making substantial
awards to the executives in each of these years.
35
Historically, our equity-based compensation consisted primarily
of stock options. However, in recent years there has been a
rapid evolution of practices relating to equity-based
compensation among the companies with which we compete. Like
many of these companies, in fiscal 2006 we began to replace
options with restricted stock awards. As described below, the
Committee uses two forms of restricted stock units, which give
the recipients the right to receive shares as the units vest,
rather than making outright awards of stock subject to vesting
conditions.
By rewarding holders when the market price of Ciena common stock
increases, these awards are intended to align the interests of
our executives with those of our shareholders and to incentivize
them to increase shareholder value. Although prior to fiscal
2007 we tied vesting of some equity awards to the achievement of
specific performance objectives, because of the unstable
environment in which we had been operating, and the need for us
to adapt quickly to changes in that environment, it was
difficult to establish objectives that we could be confident
would have the intended incentive effect over any meaningful
period of time.
By the beginning of fiscal 2007, our business had begun to
stabilize, and visibility relating to our operations and the
market had improved. As a result, we were able to build more
meaningful incentives into our equity awards and better tie
their design to individual, departmental, or corporate
performance. Thus, in fiscal 2007, we used two types of metrics
for this performance-based compensation: metrics based on the
financial performance of Ciena as a whole and metrics based on
the accomplishment of narrower objectives related to particular
functions or activities for which an executive is responsible.
The metric used for a given executive depended on the nature of
his or her position, the elements of our business or operating
strategy to which that position relates, and the performance
that we are seeking to reward, each as determined in the
discretion of the Committee. Because we believe that overall
corporate performance is the ultimate objective, and fostering
teamwork is important, we generally use company-wide metrics for
at least a portion of the performance-based compensation of all
of our executives.
We value stock options using the Black-Scholes option pricing
model. We value restricted stock awards at the market price of
Ciena common stock at the time of grant. We use these same
methodologies to calculate the compensation expense we recognize
for financial reporting purposes under SFAS 123(R) and to
report the value of equity awards that vested during the fiscal
year in our Summary Compensation Table below. While
we believe that this approach overstates the true value of both
stock options and restricted stock, it provides a consistent
metric that the Committee finds to be a useful tool in
determining the appropriate size of equity awards.
Determination
of amount of fiscal 2007 awards
In making equity awards for fiscal 2007, the Committee, assisted
by Compensia, established the value that it believed was needed
to be delivered to our executives, including the Named Executive
Officers, in the form of equity compensation in order to
accomplish the twin objectives of retaining their services and
providing them incentives to achieve Cienas business and
strategic objectives. In so doing, the Committee and, for the
other executive officers, the CEO, considered:
|
|
|
|
|
the value of the equity awards made by the companies in our Peer
Group to their executives;
|
|
|
|
the executives current holdings of unvested equity and the
extent to which those holdings provide adequate retention
incentives;
|
|
|
|
the percentage of the outstanding shares of Ciena represented by
each of the executives equity holdings, as we believe that
it is important both to retention and alignment with shareholder
interest that senior executives have an opportunity to hold a
meaningful interest in the companys equity base;
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|
|
|
the other elements of compensation for the executive, primarily
base salary and incentive bonus opportunity during the
year; and
|
|
|
|
for each of the executives other than the CEO, the CEOs
assessment of the role that the executive plays at Ciena, the
importance of that role to Cienas success, and the quality
of the executives performance in the role. The Committee
considered the CEOs assessment and made its own similar
evaluation for the CEO.
|
The Committee then compared the compensation and equity holdings
of the Named Executive Officers with the compensation and equity
holdings of their counterparts in the Peer Group. It determined
that, with the restoration of the incentive bonus plan, the
total cash compensation of Cienas executives was now
competitive with
36
that of executives in the Peer Group. On the other hand, it
determined that the holdings of Cienas executives as a
percentage of its outstanding stock were, on the whole,
substantially lower than for the companies in the Peer Group.
The Committee was also cognizant that Ciena provides its
executives relatively modest perquisites and retirement benefits
in contrast to many companies in the Peer Group.
Based on this analysis, and in consultation with the CEO and
Compensia, the Committee decided that, in order to provide
sufficient assurance of retaining key executives, it was
necessary to make equity awards for fiscal 2007 having a value
delivered at the high end of the range of awards made by the
Peer Group, as measured by the total value delivered to each
executive. Based on these considerations, the Committee approved
the awards reported in our Grants of Plan-Based
Awards table below. The size of the awards to particular
executives in relation to their Peer Group counterparts varied
considerably due to differences in the individual situations of
the executives, the particular nature of the functions they
perform at Ciena, their perceived importance to Cienas
future, and the risk that they would leave Ciena if not
appropriately rewarded and motivated.
Determination
of form of fiscal 2007 awards
The Committee next considered the form of the equity awards to
the Named Executive Officers and the allocation between stock
options and restricted stock. The Committee compared the
outcomes for the executives of holding various combinations of
options and restricted stock over a five-year period, using
various assumptions about increases in the market price of
Cienas common stock. Based on that comparison, the
Committee concluded that a mix of options and restricted stock
would be appropriate, as it combined the relative certainty
offered by restricted stock and the leverage offered by stock
options. The actual allocation of the value of each award
between the two forms of equity varied from executive to
executive, depending on his or her role in Ciena and other
circumstances including compensation history, length of service
as an executive and duration with Ciena. The allocations of
value between options and restricted stock were recommended by
the CEO, for all of the executives other than himself, and
approved by the Committee. The Committee established the equity
allocations for the CEO based on its review of similar factors
discussed above.
In making the awards, the Committee took into account the
incentive and retention effects of each form of award. It
determined that, since stock options have value only if the
price of the underlying shares increases, it was not necessary
to condition vesting on meeting additional specific performance
criteria. Accordingly, the option awards were structured to vest
in equal monthly installments over a four-year period following
the date of grant.
Performance-based
RSUs
Although, by its nature, restricted stock serves to align the
interests of the holders with that of shareholders, the
Committee sought to amplify the incentive effect of the
restricted stock by tying the vesting of the awards to the
achievement of specific performance objectives. Accordingly, a
portion of the restricted stock awards for fiscal 2007 were in
the form of performance-accelerated restricted share
units (PARS) and a portion were in the form of
performance share units (PSUs).
Pursuant to their terms, the PARS vest in full four years after
the date of grant (assuming that the executive is still employed
by Ciena at that time), and, thus, provide a retention
incentive. However, at the beginning of each of the first three
fiscal years following the date of grant, the Committee
establishes performance targets which, if satisfied, provide for
the acceleration of vesting of one-third of the award. For
fiscal 2007, the Committee established the performance target as
the achievement of our projected annual operating income on an
as-adjusted basis, which represented a significant increase over
fiscal 2006. We believe this focused our executives
attention on the achievement of our financial goals for the
year. As the goal was achieved, one-third of each of the PARS
granted to the executives vested on December 20, 2007.
Pursuant to their terms, the PSUs vest upon the satisfaction of
individual performance objectives established for each
executive. With the exception of the CEO, each executives
objectives were defined by the CEO and approved by the
Committee. The CEOs objectives were established by the
Committee. Each executive was assigned a set of qualitative
performance objectives tailored to his or her role in helping us
achieve our operational objectives for the year. The Committee
recognized, however, that, in our dynamic business environment,
short-term priorities can change during the course of the year
and individual executives can be called on to assume different
37
responsibilities in response to market changes or changes in
operational or strategic priorities. Accordingly, the Committee
reserved the right to interpret these performance objectives in
light of the circumstances that existed at the end of the fiscal
year and to make equitable adjustments to them if it determined
that conditions outside the control of the executive prevented
him or her from achieving any particular objective. Following
the end of the fiscal year, the Committee reviewed the
performance of each of the Named Executive Officers against his
objectives, taking into account both the overachievement and the
underachievement of particular objectives. On the basis of this
review, the Committee determined that each of the executives had
fully satisfied his performance objectives, and that all of the
PSU awards should vest in their entirety. The size of the award,
along with the principal categories relating to the performance
objectives of each Named Executive Officer, are presented in the
table below:
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|
|
|
|
|
|
|
|
|
|
Performance Goals
|
Name
|
|
PSUs Awarded
|
|
Related to the Following Operational Objectives
|
|
Gary B. Smith
|
|
|
20,000
|
|
|
Establishment of executive-level relationships
with strategic customers
|
|
|
|
|
|
|
Further development of succession plan and
support of personnel in key functions
|
|
|
|
|
|
|
Expansion into additional customer market
segments
|
|
|
|
|
|
|
Market validation of Cienas FlexSelect
Architecture strategy
|
Joseph R. Chinnici
|
|
|
7,500
|
|
|
Broader international financial resources
|
|
|
|
|
|
|
Financial information and support to
facilitate global operations
|
|
|
|
|
|
|
Business process improvements intended to
promote automation
|
|
|
|
|
|
|
Cross-functional corporate productivity
|
Stephen B. Alexander
|
|
|
12,500
|
|
|
Timely delivery and development of product
releases
|
|
|
|
|
|
|
Succession planning within engineering function
|
|
|
|
|
|
|
Integrated forecasting function
|
|
|
|
|
|
|
Market strategy relating to competitors
|
Michael G. Aquino
|
|
|
10,000
|
|
|
Account plans and executive level
relationships with strategic customers
|
|
|
|
|
|
|
Integrated sales forecasting system
|
|
|
|
|
|
|
Securing sales to strategic customers
|
|
|
|
|
|
|
Sales growth within strategic customer markets
|
Arthur D. Smith
|
|
|
12,500
|
|
|
Hiring, retention and development of talented
management personnel
|
|
|
|
|
|
|
Achievement of cost reductions and inventory
process improvements
|
|
|
|
|
|
|
Implementation of information system
initiatives
|
|
|
|
|
|
|
Improved customer service functions
|
Mix of
Compensation
In determining the compensation mix among the elements above,
the Committee does not assign specific ratios or other relative
measures that dictate the total compensation mix to be awarded
or targeted to the executive team. Because our base salaries
have remained generally constant in recent years, our
reinstitution of the incentive bonus plan for a full fiscal
2007, and our issuance of the performance-based RSUs described
above, resulted in performance-based compensation representing a
higher portion of total compensation for our Named Executive
Officers during fiscal 2007 than years prior. Performance-based
compensation awarded during fiscal 2007 was geared toward
measures of profitability and the achievement of certain
operational objectives, which were achieved or exceeded. The
increased mix of performance-based compensation earned during
fiscal 2007 reflects the Committees determination to
utilize and award in a meaningful way performance-based elements
of compensation
38
as a motivation to achieve specific elements of our business
strategy in fiscal 2007. The increased portion of
performance-based compensation earned during fiscal 2007 also
reflects the significant improvement in our financial
performance during fiscal 2007.
Equity
grant practices and timing
In recent years, we have sought to provide a consistent approach
in our equity grant practices by granting equity awards to our
executives and directors at or around the same time each year.
Equity awards to our executives, including the Named Executive
Officers, are made by the Committee, and the date of these
awards is the same day that the Committee meets to approve the
awards. Stock option awards are granted with an exercise price
equal to the closing market price of Cienas common stock
as reported on the date of the grant. For its regular annual
consideration of equity awards to the Named Executive Officers,
the Committee generally endeavors to meet and approve equity
grants to the executive officers promptly following the release
of earnings for the fourth quarter and fiscal year. This
practice was begun in early fiscal 2007 and continued for grants
made in fiscal 2008.
Health,
welfare and other employee benefits
Our executives, including the Named Executive Officers, are
eligible for the same health and dental insurance, life and
accidental death insurance, disability insurance, vacation, and
other similar benefits as the rest of our salaried employees.
They are also are eligible to receive annual physical
examinations, tax preparation services, and financial planning
services. In addition, during fiscal 2007, we paid the annual
premium for a supplemental term life insurance policy that
provides our CEO with an additional $235,000 of coverage in
excess of our standard $500,000 cap. We also paid supplemental
long-term disability insurance premiums on behalf of our CEO and
CFO. The incremental cost of the supplemental insurance coverage
purchased for the benefit of these Named Executive Officers is
included in the All Other Compensation column of our
Summary Compensation Table below. Prior to the
completion of fiscal 2007, we discontinued company sponsorship
and payment of premiums for our CEOs supplemental term
life insurance policy and supplemental long-term disability
insurance policy. Supplemental insurance coverage for
Mr. Chinnici ceased upon his resignation.
Change in
control severance agreements
At the time of their initial employment, or promotion to senior
executive rank, we enter into severance agreements with
executives, including each of the Named Executive Officers, that
entitle them to certain payments and benefits if their
employment is terminated following a change in control of Ciena.
These agreements provide severance benefits in the event that
employment is terminated by us or any successor entity without
cause, or, by the officer for good
reason, within one year following a change in
control of Ciena. These agreements also provide that upon
a change in control of Ciena, any unvested performance-based
equity awards will be converted into awards with service-based
vesting conditions, the effect of which would be to cause
certain unvested awards to become immediately exercisable upon a
change in control. Details regarding the severance benefits
payable, continuation of benefits and acceleration of equity
awards, as well as the estimated value of these benefits, are
discussed in Potential Payments upon Termination or Change
in Control below. Except as described above, Ciena does
not have employment contracts with, or maintain deferred
compensation plans for, any of its Named Executive Officers, all
of whom serve as employees at will.
We believe that these arrangements are an important element of
compensation in attracting and retaining qualified executives
that could have other job alternatives that may appear to them
to be less risky absent these arrangements, particularly given
the significant level of acquisition activity in our industry
and our recent return to financial health. Except for the
conversion of performance-based awards to service-based awards
upon a change in control, as described above, our arrangements
are conditioned upon the occurrence of a double
trigger event. This means that the severance benefits,
including any acceleration of vesting, are not effective unless
the executives employment is terminated without cause, or
by the executive for good reason, within 12 months
following the transaction (a covered termination).
We believe this double trigger structure strikes an appropriate
balance between the potential compensation payable and the
recruitment and retention objectives described above. We also
believe that, were Ciena to engage in discussions or
negotiations relating to a corporate transaction that our Board
deems in the interest of shareholders, these agreements would
serve as an important tool in ensuring that our
39
executive team remained focused on the consummation of the
transaction, without significant distraction or concern relating
to personal circumstances such as continued employment.
During fiscal 2007, in order to conform to what it believes
constitutes preferred practices, the Committee made certain
revisions to these agreements to provide for the treatment of
RSUs and performance-based awards, and to remove the provision
that provided a tax
gross-up
payment in the event that an executive was subject to the
imposition of an excise tax as a result of a change in control
transaction. In addition, our CEOs agreement was amended
to reduce the minimum severance payment from $3 million to
$2 million and to reduce his benefits continuation period
to one year. As a result of these revisions, upon a covered
termination, we would make a lump sum payment to our CEO of the
greater of $2 million, or the sum of his base salary and
annual bonus, and vesting of his equity awards would be fully
accelerated. Upon a covered termination, our other Named
Executive Officers would receive one-year of salary continuation
and bonus payments, and accelerated vesting of 50% of their
unvested, outstanding equity awards. All Named Executive
Officers would be entitled to continuation of benefits as
described in Potential Payments upon Termination or Change
in Control below.
Separation
agreement with Mr. Chinnici
As previously disclosed, in April 2007, Mr. Chinnici
informed Ciena of his intent to resign his position on or before
December 31, 2007. In connection with the notification of
his intent to resign, we entered into a separation agreement
with Mr. Chinnici, which provides for certain
post-employment compensation benefits in exchange for his
agreement to assist in the transition of his responsibilities to
a successor. The terms of this agreement are described in
Potential Payments upon Termination or Change in
Control below. In view of the critical role played by
Mr. Chinnici as CFO, in overseeing our financial reporting,
internal controls over financial reporting and other projects in
process, the Committee believed that such arrangement was
prudent in order to facilitate a smooth transition of
responsibilities to a successor and to minimize disruption.
Income
tax considerations
Section 162(m) of the Internal Revenue Code limits to
$1 million the deductions we can take in determining our
federal income tax for compensation paid to our CEO, and,
pursuant to recent IRS guidance, the three other most highly
compensated executive officers of Ciena. There is an exception
to this limitation for compensation that is performance
based as defined in the Code and applicable regulations.
We generally seek to maximize the deductibility of executive
compensation; however, because of our large net operating
losses, it is unlikely that we will be required to pay federal
income taxes for years, and therefore meeting the requirements
of Section 162(m) is not of as great concern as it might
otherwise be. Accordingly, when we believe it to be in the best
interests of shareholders, we may structure compensation awards
and plans to be eligible under Section 162(m).
40
EXECUTIVE
COMPENSATION TABLES
The following discussion, tabular information and accompanying
footnotes provide compensation-related information for our CEO,
CFO and our other three highest-paid executive officers as of
the end of fiscal 2007. Pursuant to SEC requirements, the tables
below include compensation information for Joseph R. Chinnici,
our former CFO, who resigned following the conclusion of our
2007 fiscal year. James E. Moylan, Jr. became our
Senior Vice President and CFO upon Mr. Chinnicis
resignation. The individuals included in the compensation tables
below are collectively referred to as the Named Executive
Officers or NEOs.
Summary
Compensation Table
The summary compensation table below presents the total
compensation earned by our Named Executive Officers during
fiscal 2007. This amount is not the actual compensation received
by our NEOs during fiscal 2007. In addition to cash and other
forms of compensation actually received, total compensation
includes the dollar amounts set forth in the Stock
Awards and Option Awards columns. These
amounts reflect the compensation expense we recognized for
financial statement reporting purposes with respect to equity
awards granted to our NEOs in fiscal 2007, as well as grants
made in prior fiscal years, to the extent such awards remained
unvested in whole or in part at the beginning of fiscal 2007.
The compensation expense included in the Stock
Awards and Option Awards columns will likely
vary from the actual amounts ultimately realized by any NEO
based on a number of factors, including the number of shares
that ultimately vest, the timing of any exercise or sale of
shares, and the price of our stock.
The actual value realized by our NEOs from stock awards and
options during fiscal 2007 is presented in the Option
Exercises and Stock Vested table below. Details about the
equity awards granted to our NEOs during fiscal 2007 can be
found in the Grant of Plan-Based Awards table below.
Information in the table for salary is slightly higher than each
NEOs annual base salary because Cienas 2007 fiscal
year consisted of
53 weeks.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
All Other
|
|
|
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Total
|
Name and Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)(4)
|
|
($)(5)
|
|
($)
|
|
Gary B. Smith
|
|
|
2007
|
|
|
$
|
509,616
|
|
|
|
|
|
|
$
|
1,514,340
|
|
|
$
|
539,567
|
|
|
$
|
643,750
|
|
|
$
|
17,593
|
|
|
$
|
3,224,866
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph R. Chinnici
|
|
|
2007
|
|
|
$
|
356,731
|
|
|
|
|
|
|
$
|
739,477
|
|
|
$
|
296,649
|
|
|
$
|
337,970
|
|
|
$
|
15,254
|
|
|
$
|
1,746,081
|
|
Former Senior Vice President, Finance and Chief Financial
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen B. Alexander
|
|
|
2007
|
|
|
$
|
382,020
|
|
|
|
|
|
|
$
|
1,026,337
|
|
|
$
|
206,758
|
|
|
$
|
362,109
|
|
|
$
|
4,759
|
|
|
$
|
1,981,983
|
|
Senior Vice President, Products and Technology, Chief
Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael G. Aquino
|
|
|
2007
|
|
|
$
|
305,770
|
|
|
|
|
|
|
$
|
695,520
|
|
|
$
|
285,840
|
|
|
$
|
356,982
|
|
|
$
|
6,230
|
|
|
$
|
1,650,342
|
|
Senior Vice President, World Wide Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur D. Smith
|
|
|
2007
|
|
|
$
|
331,250
|
|
|
|
|
|
|
$
|
899,507
|
|
|
$
|
207,063
|
|
|
$
|
313,828
|
|
|
$
|
15,360
|
|
|
$
|
1,767,008
|
|
Senior Vice President, Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects the compensation expense we recognized for financial
statement reporting purposes in fiscal 2007 for stock awards.
Pursuant to SEC requirements, the amounts shown exclude the
impact of estimated forfeitures related to service-based vesting
conditions. The amounts reported above represent the expense
associated with performance stock units (PSUs) and performance
accelerated stock units (PARS) granted to each NEO during fiscal
2007, as well as restricted stock units (RSU) awards granted in
fiscal 2004 and 2006 that continued to vest |
41
|
|
|
|
|
during fiscal 2007. For Mr. Chinnici, the amount reported
also reflects an additional compensation expense of $229,752
incurred in fiscal 2007, associated with a separation agreement
providing for the acceleration of vesting of 50% of his unvested
stock awards on the date of his resignation. The calculation of
this expense for Mr. Chinnici during fiscal 2007 assumed a
December 31, 2007 resignation date and the vesting of his
PSUs and PARS on December 20, 2007. For information
regarding the other relevant assumptions made in calculating
compensation expense, see Note 15 to the audited financial
statements included in our Annual Report on
Form 10-K
filed on December 27, 2007, under the heading
Assumptions for RSU-Based Awards under
SFAS 123(R). |
|
(2) |
|
Reflects the compensation expense we recognized for financial
statement reporting purposes in fiscal 2007 for stock option
grants. Pursuant to SEC requirements, the amounts shown exclude
the impact of estimated forfeitures related to service-based
vesting conditions. The amounts reported above represent the
expense associated with stock options granted to each NEO during
fiscal 2007, as well as stock option awards granted in fiscal
2004, 2005, and 2006, that continued to vest during fiscal 2007.
For Mr. Chinnici, the amount reported also reflects an
additional compensation expense of $134,626 incurred in fiscal
2007, associated with a separation agreement providing for the
acceleration of vesting of 50% of his unvested stock options on
the date of his resignation. The calculation of this expense
during fiscal 2007 assumed a resignation date of
December 31, 2007. We calculate compensation expense
related to stock options using the Black-Scholes option pricing
model. For additional information regarding the relevant
assumptions made in calculating compensation expense, see
Note 15 to the audited financial statements included in our
Annual Report on
Form 10-K
filed on December 27, 2007, under the heading
Assumptions for Option-Based Awards under
SFAS 123(R). |
|
(3) |
|
Reflects the aggregate quarterly incentive awards earned during
fiscal 2007 under our incentive bonus plan. See
Compensation Discussion and Analysis Cash
incentive bonuses above for information regarding our
incentive bonus plan and a discussion regarding the
determination of quarterly corporate financial goals during
fiscal 2007. These financial goals were met or exceeded each
fiscal quarter and bonuses were paid as set forth below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Bonus Plan Compensation During Fiscal 2007
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
Name
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Quarter
|
|
|
Gary B. Smith
|
|
$
|
162,500
|
|
|
$
|
131,250
|
|
|
$
|
187,500
|
|
|
$
|
162,500
|
|
Joseph R. Chinnici
|
|
$
|
85,313
|
|
|
$
|
68,906
|
|
|
$
|
98,438
|
|
|
$
|
85,313
|
|
Stephen B. Alexander
|
|
$
|
91,406
|
|
|
$
|
73,828
|
|
|
$
|
105,469
|
|
|
$
|
91,406
|
|
Arthur D. Smith
|
|
$
|
79,219
|
|
|
$
|
63,984
|
|
|
$
|
91,406
|
|
|
$
|
79,219
|
|
|
|
|
(4) |
|
For Mr. Aquino, the amount reported represents aggregate
sales incentive compensation earned during fiscal 2007 as a
result of his achievement of certain sales performance measures
described in Compensation Discussion and
Analysis Cash incentive bonuses above. |
|
(5) |
|
All other compensation includes the following for each Named
Executive Officer (as applicable) during fiscal 2007: |
|
|
|
(a) As part of our standard compensation program, full-time
U.S. employees receive basic life insurance of two times annual
base salary, up to $500,000. We pay the premium for this
standard coverage. During fiscal 2007, we paid an additional
annual premium on behalf of Gary Smith for supplemental term
life insurance that offers $235,000 in coverage above the
limitation above. Only the premium for this supplemental
insurance coverage is included in the total above. Prior to the
end of fiscal 2007, we ceased our sponsorship of, and payment
for, this supplemental insurance policy.
|
|
|
|
(b) As part of our standard compensation program, full-time
U.S. employees receive long-term disability insurance coverage
that provides, upon a qualifying disability, monthly payments of
60% of base salary for the duration of the disability, with
payments ceasing at age 65. We pay the premium for this
standard coverage. During fiscal 2007, we paid additional annual
premiums on behalf of Gary Smith and Mr. Chinnici for
supplemental coverage that provides additional monthly
disability insurance payments of $7,500 and $10,375,
respectively, should either of these officers become disabled.
Only the premiums for supplemental insurance coverage for
Messrs. Smith and Chinnici are included in the total above.
Prior to
|
42
|
|
|
|
|
the end of fiscal 2007, we ceased our sponsorship of, and
payment for, this supplemental insurance policy on behalf of
Mr. Smith. |
|
|
|
(c) For Gary Smith, Arthur Smith and Joseph Chinnici, costs
associated with annual physical examination and tax preparation
services.
|
|
|
|
(d) For each Named Executive Officer, 401(k) plan matching
contributions paid by us and generally available to all
full-time U.S. employees.
|
|
|
|
(e) Gross up for tax purposes related to supplemental life
and disability insurance and tax preparation services, as
applicable.
|
Grants of
Plan-Based Awards
The following table sets forth, on a
grant-by-grant
basis, information regarding equity and non-equity awards made
to each of the NEOs during fiscal 2007. All equity grants were
made under our 2000 Equity Incentive Compensation Plan. For each
award made to our NEOs during fiscal 2007, the date the award
was approved by our Compensation Committee was the same as the
grant date. During fiscal 2007, we made grants in the form of
performance stock units (PSUs), performance accelerated stock
units (PARS) and stock options. The terms of these awards are
set forth in the footnotes below the table. The amounts reported
in the Full Grant Date Fair Value column reflect,
for each equity award granted in fiscal 2007, the total
compensation expense for financial reporting purposes, as of the
grant date, that we would expect to incur over entire the
vesting period of the award. By way of example, the amount
reported for each 2007 award of PARS sets forth the aggregate
compensation expense we would expect to incur over a period
beginning in fiscal 2007 and ending in fiscal 2011. This amount
will likely vary from the actual amount ultimately realized by
any NEO based on a number of factors, including the number of
shares that ultimately vest, the satisfaction or failure to meet
any performance criteria for vesting or acceleration, the timing
of any exercise or sale of shares, and the price of our stock.
Grants
of Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
Awards:
|
|
Exercise
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
Number of
|
|
or Base
|
|
|
|
|
|
|
|
|
Estimated Possible Payouts Under
|
|
|
|
|
|
|
|
of Stock
|
|
Securities
|
|
Price of
|
|
Full Grant
|
|
|
|
|
|
|
Non-Equity Incentive Plan Awards(1)
|
|
Estimated Future Payouts Under Equity Incentive Plan
Awards
|
|
or Stock
|
|
Underlying
|
|
Option
|
|
Date Fair
|
|
|
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Value
|
Name
|
|
Type of Awards
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)
|
|
(#)(4)
|
|
($/Sh)
|
|
($)(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gary B. Smith
|
|
Option
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,000
|
|
|
$
|
27.88
|
|
|
$
|
1,207,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
557,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARS
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,672,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Bonus
|
|
|
|
|
|
$
|
250,000
|
|
|
$
|
500,000
|
|
|
$
|
750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph R. Chinnici
|
|
Option
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
$
|
27.88
|
|
|
$
|
321,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
209,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARS
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
557,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Bonus
|
|
|
|
|
|
$
|
131,250
|
|
|
$
|
262,500
|
|
|
$
|
393,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting Acceleration(6)
|
|
|
04/05/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
468,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen B. Alexander
|
|
Option
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
$
|
27.88
|
|
|
$
|
482,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
348,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARS
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,394,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Bonus
|
|
|
|
|
|
$
|
140,625
|
|
|
$
|
281,250
|
|
|
$
|
421,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael G. Aquino
|
|
Option
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
|
|
$
|
27.88
|
|
|
$
|
482,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
278,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARS
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
836,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Bonus
|
|
|
|
|
|
$
|
240,000
|
|
|
$
|
300,000
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur D. Smith
|
|
Option
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
$
|
27.88
|
|
|
$
|
402,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PSU
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
348,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PARS
|
|
|
12/18/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,115,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Bonus
|
|
|
|
|
|
$
|
121,875
|
|
|
$
|
243,750
|
|
|
$
|
365,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
(1) |
|
There are no additional future payouts to NEOs upon the
satisfaction of non-equity incentive plan awards granted during
fiscal 2007. Pursuant to SEC requirements, the dollar amounts in
the table above reflect the estimated range of aggregate annual
payouts possible under non-equity incentive plan awards during
fiscal 2007. The actual amounts earned by the NEOs during fiscal
2007 are set forth in the Non-Equity Incentive
Compensation column of the Summary Compensation
Table above. For a description of the incentive bonus plan
and the actual quarterly awards paid thereunder, see footnote 3
to the Summary Compensation Table and
Compensation Discussion and Analysis Cash
incentive bonuses above. For Mr. Aquino, the table
above includes the estimated range of sales incentive
compensation payable during fiscal 2007. This sales incentive
compensation does not provide for a maximum award. The actual
amount earned by Mr. Aquino is set forth in the
Non-Equity Incentive Compensation column of the
Summary Compensation Table above. |
|
(2) |
|
Reflects the number of shares underlying PSUs granted to the
NEOs during fiscal 2007. These awards were to vest in their
entirety upon the achievement of certain management performance
goals described in Compensation Discussion and
Analysis Equity-based compensation above,
provided that the goals were met on or before December 20,
2007. Prior to December 20, 2007, the Compensation
Committee determined that these goals had been met and that each
of the PSUs granted to the NEOs vested in their entirety. |
|
(3) |
|
Reflects the number of shares underlying PARS granted to the
NEOs during fiscal 2007. These awards vest in their entirety,
based upon continued service by the NEO, upon the fourth
anniversary of the date of grant. The vesting of all or a
portion of the shares underlying the award, however, may be
accelerated upon the achievement of performance goals
established by the Compensation Committee on an annual basis.
For fiscal 2007, up to one-third of the shares underlying the
award were subject to acceleration upon the achievement of
certain corporate financial performance targets described in
Compensation Discussion and
Analysis Equity-based compensation above.
Prior to December 20, 2007, the Compensation Committee
determined that this performance goal had been achieved, and, on
December 20, 2007, one-third of the PARS granted to each of
the NEOs in fiscal 2007 vested in the following amounts: 20,000
as to Gary Smith, 16,667 as to Mr. Alexander, 10,000 as to
Mr. Aquino, 13,334 as to Arthur Smith and 6,667 as to
Mr. Chinnici. |
|
(4) |
|
Reflects the number of shares underlying stock option awards
granted to the NEOs during fiscal 2007. Option awards have a
ten-year term and vest monthly in 48 equal amounts over a
four-year period from the grant date. |
|
(5) |
|
Reflects the full grant date fair value under SFAS 123(R)
for PSUs, PARS and stock options awarded to the NEOs during
fiscal 2007. For information regarding the relevant assumptions
made in calculating compensation expense for stock awards and
stock options, you should refer to the information set forth in
Note 15 to the audited financial statements included in our
Annual Report on
Form 10-K
filed on December 27, 2007. |
|
(6) |
|
For Mr. Chinnici, the amount reported reflects an
additional share-based compensation expense incurred in fiscal
2007 associated with a separation agreement entered into on
April 5, 2007 providing for the acceleration of vesting of
50% of his unvested stock options and stock awards on the date
of his resignation. In calculating this amount, we applied the
assumptions described in footnotes (1) and (2) to the
Summary Compensation Table above. Mr. Chinnici
resigned as CFO following the filing of our Annual Report on
Form 10-K
on December 27, 2007, and, otherwise, as an employee of
Ciena on December 31, 2007. |
44
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth, on an
award-by-award
basis, information related to unexercised options, stock awards
that have not yet vested and other equity incentive plan awards
held by each NEO as of the end of fiscal 2007. The vesting
conditions for each award, including the identification of those
awards that are subject to performance-based vesting conditions,
are set forth in the footnotes below the table. The market value
of shares and equity incentive plan awards that have not vested
are calculated by multiplying the number of shares by $46.88,
the closing price per share of our common stock on The NASDAQ
Stock Market on the last trading day of our fiscal 2007.
Outstanding
Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
or Payout
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
of Unearned
|
|
|
Unearned
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
Units
|
|
|
Units of
|
|
|
Units or
|
|
|
Units or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Stock
|
|
|
Other
|
|
|
Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
That
|
|
|
That Have
|
|
|
Rights
|
|
|
Rights
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Not
|
|
|
That Have
|
|
|
That Have
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Gary B. Smith
|
|
|
17,188
|
|
|
|
57,812
|
(1)
|
|
|
|
|
|
$
|
27.88
|
|
|
|
12/18/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,946
|
|
|
|
53,571
|
(2)
|
|
|
|
|
|
$
|
16.52
|
|
|
|
11/02/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,960
|
|
|
|
|
|
|
|
|
|
|
$
|
19.95
|
|
|
|
12/10/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,857
|
|
|
|
|
|
|
|
|
|
|
$
|
47.32
|
|
|
|
12/09/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
$
|
31.71
|
|
|
|
11/19/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
$
|
72.03
|
|
|
|
03/12/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,442
|
|
|
|
|
|
|
|
|
|
|
$
|
114.66
|
|
|
|
10/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,333
|
|
|
|
|
|
|
|
|
|
|
$
|
104.35
|
|
|
|
10/20/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,643
|
|
|
|
|
|
|
|
|
|
|
$
|
112.88
|
|
|
|
08/23/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,903
|
|
|
|
|
|
|
|
|
|
|
$
|
60.81
|
|
|
|
11/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
953
|
|
|
|
|
|
|
|
|
|
|
$
|
43.31
|
|
|
|
09/17/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,857
|
(7)
|
|
$
|
133,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,216
|
(8)
|
|
$
|
1,088,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
(9)
|
|
$
|
2,812,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(11)
|
|
$
|
937,600
|
|
Joseph R. Chinnici
|
|
|
4,583
|
|
|
|
15,417
|
(1)
|
|
|
|
|
|
$
|
27.88
|
|
|
|
12/18/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,488
|
|
|
|
17,857
|
(2)
|
|
|
|
|
|
$
|
16.52
|
|
|
|
11/02/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,857
|
|
|
|
|
|
|
|
|
|
|
$
|
47.32
|
|
|
|
12/09/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,714
|
|
|
|
|
|
|
|
|
|
|
$
|
72.03
|
|
|
|
03/12/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27,584
|
|
|
|
|
|
|
|
|
|
|
$
|
114.66
|
|
|
|
10/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,714
|
|
|
|
|
|
|
|
|
|
|
$
|
104.35
|
|
|
|
10/20/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,500
|
|
|
|
|
|
|
|
|
|
|
$
|
60.81
|
|
|
|
11/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
667
|
(7)
|
|
$
|
31,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,144
|
(8)
|
|
$
|
334,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(9)
|
|
$
|
937,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,500
|
(11)
|
|
$
|
351,600
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
Equity Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
|
or Payout
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
Market
|
|
|
Number
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
of Unearned
|
|
|
Unearned
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Shares or
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
Securities
|
|
|
Securities
|
|
|
of Securities
|
|
|
|
|
|
|
|
|
Units
|
|
|
Units of
|
|
|
Units or
|
|
|
Units or
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
of Stock
|
|
|
Stock
|
|
|
Other
|
|
|
Other
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
That
|
|
|
That Have
|
|
|
Rights
|
|
|
Rights
|
|
|
|
Options
|
|
|
Options
|
|
|
Unearned
|
|
|
Exercise
|
|
|
Option
|
|
|
Have Not
|
|
|
Not
|
|
|
That Have
|
|
|
That Have
|
|
|
|
(#)
|
|
|
(#)
|
|
|
Options
|
|
|
Price
|
|
|
Expiration
|
|
|
Vested
|
|
|
Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Stephen B. Alexander
|
|
|
6,875
|
|
|
|
23,125
|
(1)
|
|
|
|
|
|
$
|
27.88
|
|
|
|
12/18/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,643
|
|
|
|
19,642
|
(2)
|
|
|
|
|
|
$
|
16.52
|
|
|
|
11/02/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,857
|
|
|
|
|
|
|
|
|
|
|
$
|
19.95
|
|
|
|
12/10/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,857
|
|
|
|
|
|
|
|
|
|
|
$
|
47.32
|
|
|
|
12/09/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
42,857
|
|
|
|
|
|
|
|
|
|
|
$
|
31.71
|
|
|
|
11/19/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,571
|
|
|
|
|
|
|
|
|
|
|
$
|
72.03
|
|
|
|
03/12/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,942
|
|
|
|
|
|
|
|
|
|
|
$
|
114.66
|
|
|
|
10/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,142
|
|
|
|
|
|
|
|
|
|
|
$
|
104.35
|
|
|
|
10/20/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,285
|
|
|
|
|
|
|
|
|
|
|
$
|
60.81
|
|
|
|
11/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
667
|
(7)
|
|
$
|
31,269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,716
|
(8)
|
|
$
|
502,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
(9)
|
|
$
|
2,344,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
(11)
|
|
$
|
586,000
|
|
Michael G. Aquino
|
|
|
6,875
|
|
|
|
23,125
|
(1)
|
|
|
|
|
|
$
|
27.88
|
|
|
|
12/18/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,191
|
|
|
|
18,452
|
(3)
|
|
|
|
|
|
$
|
31.43
|
|
|
|
06/01/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
417
|
|
|
|
5,000
|
(4)
|
|
|
|
|
|
$
|
17.43
|
|
|
|
10/26/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
84
|
|
|
|
833
|
(5)
|
|
|
|
|
|
$
|
16.52
|
|
|
|
06/10/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
|
|
|
|
669
|
(6)
|
|
|
|
|
|
$
|
16.87
|
|
|
|
10/26/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,820
|
|
|
|
|
|
|
|
|
|
|
$
|
46.90
|
|
|
|
11/05/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,785
|
|
|
|
|
|
|
|
|
|
|
$
|
38.85
|
|
|
|
05/14/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,685
|
|
|
|
|
|
|
|
|
|
|
$
|
48.30
|
|
|
|
05/19/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,000
|
(9)
|
|
$
|
1,406,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,700
|
(10)
|
|
$
|
314,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
(11)
|
|
$
|
468,800
|
|
Arthur D. Smith
|
|
|
5,729
|
|
|
|
19,271
|
(1)
|
|
|
|
|
|
$
|
27.88
|
|
|
|
12/18/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,616
|
|
|
|
23,214
|
(2)
|
|
|
|
|
|
$
|
16.52
|
|
|
|
11/02/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,362
|
|
|
|
|
|
|
|
|
|
|
$
|
19.95
|
|
|
|
12/10/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
|
|
|
|
|
|
|
|
|
|
$
|
47.32
|
|
|
|
12/09/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
$
|
31.71
|
|
|
|
11/19/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,785
|
|
|
|
|
|
|
|
|
|
|
$
|
72.03
|
|
|
|
03/12/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,899
|
|
|
|
|
|
|
|
|
|
|
$
|
114.66
|
|
|
|
10/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,142
|
|
|
|
|
|
|
|
|
|
|
$
|
388.08
|
|
|
|
05/16/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,086
|
|
|
|
|
|
|
|
|
|
|
$
|
233.85
|
|
|
|
01/17/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,229
|
|
|
|
|
|
|
|
|
|
|
$
|
104.35
|
|
|
|
10/20/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,686
|
|
|
|
|
|
|
|
|
|
|
$
|
60.81
|
|
|
|
11/12/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
524
|
(7)
|
|
$
|
24,565
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,716
|
(8)
|
|
$
|
502,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
(9)
|
|
$
|
1,875,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,500
|
(11)
|
|
$
|
586,000
|
|
46
|
|
|
(1) |
|
Remaining unvested options granted on December 18, 2006
vest in equal monthly amounts from December 1, 2007 through
December 1, 2010. |
|
(2) |
|
Remaining unvested options granted on November 1, 2005 vest
in equal monthly amounts from December 1, 2007 through
November 1, 2009. |
|
(3) |
|
Remaining unvested options granted on June 1, 2006 vest in
equal monthly from December 1, 2007 through June 1,
2010. |
|
(4) |
|
Remaining unvested options granted on October 26, 2005 vest
in equal monthly amounts from November 30, 2007 through
October 31, 2009. |
|
(5) |
|
Remaining unvested options granted on June 10, 2005 vest in
equal monthly amounts from November 30, 2007 through
June 30, 2009. |
|
(6) |
|
Remaining unvested options granted on October 26, 2004 vest
in equal monthly amounts from November 30, 2007 through
October 31, 2008. |
|
(7) |
|
Remaining unvested RSUs granted on December 9, 2003 will
vest in full on December 9, 2007. |
|
(8) |
|
Remaining unvested RSUs granted on November 1, 2005 vest in
equal amounts on the last day of each fiscal quarter through
October 31, 2009. |
|
(9) |
|
Remaining unvested PARS granted on December 18, 2006 vest
in their entirety on December 20, 2010. The vesting of all
or a portion of the shares, however, may be accelerated upon the
achievement of performance goals established by the Compensation
Committee on an annual basis. For fiscal 2007, up to one-third
of the shares underlying each award disclosed above was subject
to acceleration upon the achievement of certain corporate
financial targets described in Compensation Discussion and
Analysis Equity-based compensation above.
One-third of the PARS vested on December 20, 2007 as set
forth in footnote 3 to the Grants of Plan-Based
Awards table above. |
|
(10) |
|
Remaining unvested RSUs granted on June 1, 2006 vest in
equal amounts on the last day of each fiscal quarter through
May 1, 2010. |
|
(11) |
|
Remaining unvested PSUs granted on December 18, 2006 were
to vest in their entirety upon the achievement of certain
management performance goals described in Compensation
Discussion and Analysis Equity-based
compensation above, provided that these goals were met on
or before December 20, 2007. These PSUs vested in their
entirety on December 20, 2007 as set forth in footnote 2 to
the Grants of Plan-Based Awards table above. |
Option
Exercises and Stock Vested
The following table sets forth, as to each NEO, information
related to stock options exercised and stock awards vested
during fiscal 2007. Because this table only reflects activity
during fiscal 2007, it does not include the vesting on
December 20, 2007, following the completion of fiscal 2007,
of the PSUs and PARS awarded to the NEOs during fiscal 2007.
Information regarding the vesting of these awards is included in
the footnotes to the Grants of Plan-Based Awards
table above.
The value realized upon exercise of options is a pre-tax amount
that reflects the number of shares exercised during fiscal 2007,
multiplied by difference between the closing price per share of
our common stock on the date of exercise and the exercise price
of the option. The value realized upon vesting of stock awards
is a pre-tax amount determined by multiplying the number of
vested shares of stock during fiscal 2007 by the closing price
per share of our common stock on the vesting date for that
award. Information as to value is not the actual amount realized
by each NEO and does not take into account any reductions
related to brokerage commissions or fees, withholding tax, or
forfeiture or other disposition of shares to cover these amounts.
47
Option
Exercises and Stock Vested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Acquired on
|
|
|
Value Realized
|
|
|
Shares Acquired
|
|
|
Value Realized
|
|
|
|
Exercise
|
|
|
on Exercise
|
|
|
on Vesting
|
|
|
on Vesting
|
|
Name
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
Gary B. Smith
|
|
|
25,898
|
|
|
$
|
462,085
|
|
|
|
14,465
|
|
|
$
|
484,740
|
|
Joseph R. Chinnici
|
|
|
59,226
|
|
|
$
|
319,218
|
|
|
|
4,239
|
|
|
$
|
143,781
|
|
Stephen B. Alexander
|
|
|
|
|
|
|
|
|
|
|
6,023
|
|
|
$
|
207,140
|
|
Michael G. Aquino
|
|
|
50,059
|
|
|
$
|
866,930
|
|
|
|
2,676
|
|
|
$
|
95,038
|
|
Arthur D. Smith
|
|
|
30,093
|
|
|
$
|
530,803
|
|
|
|
5,880
|
|
|
$
|
203,512
|
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
This section describes and quantifies the estimated compensation
benefits that would be paid to our Named Executive Officers in
each of the following situations:
|
|
|
|
|
upon death or disability;
|
|
|
|
upon a change in control in Ciena; and
|
|
|
|
upon a termination of employment following a change in control
of Ciena.
|
These estimated payments are calculated based on compensation
arrangements in effect as of the end of fiscal 2007. Although
these calculations are intended to provide reasonable estimates
of potential compensation benefits payable, our estimates are
based on certain assumptions described below and may not
represent the actual amount that any individual would receive.
Except as described below, we do not maintain employment
agreements with our executive officers, including the NEOs. The
information below describes those limited instances in which our
NEOs would be entitled to payments following a termination of
employment or upon a change in control of Ciena. Our NEOs are
at will employees and, except as otherwise described
below, they are only entitled to payment of accrued salary and
vacation time, on the same terms as provided to our other
employees, upon any resignation, retirement or termination of
employment, with or without cause. The calculations below do not
include any estimated payments for those benefits that we
generally make available on the same terms to our full-time
employees.
Pursuant to SEC requirements, we have included Mr. Chinnici
in the following descriptions and estimates of the severance
payments and benefits payable upon death, disability, change in
control and termination subsequent to a change in control. These
represent estimated amounts payable had these triggering events
occurred as of the end of fiscal 2007. However, as previously
described, Mr. Chinnici resigned as an employee of Ciena on
December 31, 2007. As a result, the payments summarized
under Separation Agreement with Mr. Chinnici
below, represent, in entirety, all severance and benefits
payable to Mr. Chinnici by Ciena due to his termination of
employment in accordance with a separation agreement dated
April 5, 2007.
Payments
upon Death or Disability
Supplemental Insurance Benefits. As part of
our standard compensation program, full-time U.S. employees
receive short-term and long-term disability insurance coverage.
Generally, our long-term disability coverage provides that upon
a qualifying disability, employees are eligible to receive
monthly payments of 60% of base salary for the duration of the
disability, with payment ceasing at age 65. We pay the full
cost of the premiums for disability insurance coverage provided
to our employees, including the NEOs. As of the end of fiscal
2007, we also paid for executive long-term disability insurance
coverage on behalf of Mr. Chinnici that provided him an
additional monthly payment until age 65 of $10,375 should
he become disabled. Assuming that the triggering event took
place on the last day of our fiscal 2007, Mr. Chinnici
would have been entitled to receive, in absolute dollars,
approximately $1.5 million in the aggregate, paid in
monthly amounts up to age 65. Because Mr. Chinnici
resigned as an employee of Ciena effective December 31,
2007, no payments will be made to him under this policy.
48
Acceleration of Equity Awards. Prior to fiscal
2007, certain RSU awards granted to employees, including our
NEOs, provided for acceleration of vesting upon the death or
disability of the holder. While these acceleration provisions
were not unique to our NEOs, RSU awards were predominately
granted to our executive officers at that time. As a result, we
have reflected the value of this acceleration in the table
below. We do not currently grant RSU awards that provide for
acceleration of vesting upon death or disability. For purposes
of calculating the estimated payments associated with the
acceleration of these awards, we have assumed that the
triggering event took place on the last day of our fiscal 2007.
For each NEO, the amount in the table below reflects the value
of their RSUs that are subject to acceleration of vesting upon
death or disability, based on our fiscal year-end closing stock
price of $46.88 per share.
|
|
|
|
|
|
|
Value of
|
|
|
|
RSU Acceleration
|
|
|
|
Upon Death or
|
|
|
|
Disability
|
|
Name
|
|
($)
|
|
|
Gary B. Smith
|
|
$
|
1,222,302
|
|
Joseph R. Chinnici
|
|
$
|
366,180
|
|
Stephen B. Alexander
|
|
$
|
533,635
|
|
Michael G. Aquino
|
|
$
|
314,096
|
|
Arthur D. Smith
|
|
$
|
526,931
|
|
Payments
upon Change in Control
We have entered into change in control severance agreements with
our executive officers, including each of our NEOs. These
agreements provide that upon a change in control,
any unvested performance-based equity awards (including awards
that provide for performance-based acceleration of vesting such
as PARS), to the extent unvested, will be converted into awards
with time-based vesting conditions. The unvested awards will be
deemed to have commenced vesting on the grant date, with vesting
continuing as to
1/16th of
the grant amount at the end of each three-month period following
the grant date. The effect of this provision would be to cause
certain unvested awards to become immediately exercisable upon a
change in control. You should review the Applicable
Definitions below to better understand the meaning of the
term change in control under our change in control
severance agreements.
In addition, under the terms of our equity incentive plans and
stock option award agreements, certain outstanding stock options
held by employees, including our NEOs, are subject to
12 months acceleration of vesting upon a change in control
of Ciena.
49
The following table shows, for each NEO, the estimated value of:
(i) the conversion of performance-based stock awards, and
the resulting acceleration of vesting of these awards, and
(ii) the 12 months acceleration of vesting for stock
options, in each case, assuming the occurrence of a change in
control on the last day of our fiscal 2007. Conversion of
performance-based stock awards and acceleration of stock option
vesting upon a change in control does not require termination of
employment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of Stock
|
|
|
Conversion of Performance-Based Stock Awards
|
|
Option Awards Upon
|
|
|
Upon Change in Control
|
|
Change in Control
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance-
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
Based Shares
|
|
Shares
|
|
|
|
|
|
Value
|
|
|
|
|
|
|
Subject to
|
|
Subject to
|
|
Value
|
|
Number of
|
|
Realized on
|
|
|
|
|
|
|
Conversion
|
|
Accelerated
|
|
Realized on
|
|
Shares
|
|
Accelerated
|
|
|
|
|
|
|
to Time-
|
|
Vesting as a
|
|
Accelerated
|
|
Subject to
|
|
Vesting of
|
|
|
|
|
|
|
Based
|
|
Result of
|
|
Vesting of
|
|
Accelerated
|
|
Stock Option
|
|
|
|
|
Type of
|
|
Vesting
|
|
Conversion
|
|
Stock Awards
|
|
Vesting
|
|
Awards
|
Name
|
|
Grant Date
|
|
Award
|
|
(#)
|
|
(#)
|
|
($)(1)
|
|
(#)
|
|
($)(2)
|
|
Gary B. Smith
|
|
|
12/18/2006
|
|
|
|
PARS
|
|
|
|
60,000
|
|
|
|
11,250
|
|
|
$
|
527,400
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/2006
|
|
|
|
PSU
|
|
|
|
20,000
|
|
|
|
3,750
|
|
|
$
|
175,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,536
|
|
|
$
|
1,169,473
|
|
Joseph R. Chinnici
|
|
|
12/18/2006
|
|
|
|
PARS
|
|
|
|
20,000
|
|
|
|
3,750
|
|
|
$
|
175,800
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/2006
|
|
|
|
PSU
|
|
|
|
7,500
|
|
|
|
1,406
|
|
|
$
|
65,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,929
|
|
|
$
|
366,084
|
|
Stephen B. Alexander
|
|
|
12/18/2006
|
|
|
|
PARS
|
|
|
|
50,000
|
|
|
|
9,375
|
|
|
$
|
439,500
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/2006
|
|
|
|
PSU
|
|
|
|
12,500
|
|
|
|
2,343
|
|
|
$
|
109,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,321
|
|
|
$
|
440,666
|
|
Michael G. Aquino
|
|
|
12/18/2006
|
|
|
|
PARS
|
|
|
|
30,000
|
|
|
|
5,625
|
|
|
$
|
263,700
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/2006
|
|
|
|
PSU
|
|
|
|
10,000
|
|
|
|
1,875
|
|
|
$
|
87,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,312
|
|
|
$
|
361,741
|
|
Arthur D. Smith
|
|
|
12/18/2006
|
|
|
|
PARS
|
|
|
|
40,000
|
|
|
|
7,500
|
|
|
$
|
351,600
|
|
|
|
|
|
|
|
|
|
|
|
|
12/18/2006
|
|
|
|
PSU
|
|
|
|
12,500
|
|
|
|
2,343
|
|
|
$
|
109,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,857
|
|
|
$
|
471,139
|
|
|
|
|
(1) |
|
Reflects the value of stock awards subject to acceleration of
vesting based on our fiscal year-end closing stock price of
$46.88 per share. |
|
(2) |
|
Reflects the value of stock option awards subject to
acceleration of vesting based on the difference between the
actual exercise price of each award and our fiscal year-end
closing stock price of $46.88 per share. |
Payments
upon Termination following Change in Control
Our change in control severance agreements also provide our
executive officers, including each of our NEOs, with severance
benefits in the event that his or her employment is terminated
by us or any successor entity without cause, or, by
the officer for good reason, within one year
following a change in control. We refer to this
double trigger event, which requires both a change in control of
Ciena and a subsequent termination of employment, as a
covered termination. Severance benefits may also
apply where the officer is terminated in advance of a change in
control and the officer can reasonably demonstrate that his or
her termination was in connection with or in anticipation of the
change in control. Our change in control severance agreements
continue in effect for the duration of each officers
employment and for up to a period of 14 months following a
change in control. Payment of any severance benefits is
conditioned upon the officer agreeing to be bound by certain
provisions restricting his or her ability to compete with us,
and to solicit our employees or business, for one year after
termination, as well as the officers delivery to us of a
general release and waiver of claims. In the event of a breach
of these provisions, the officer must reimburse all severance
benefits paid. The severance benefits described below will be
paid by us or our successor upon a covered termination.
Salary and Bonus Payment. Upon a covered
termination, we will make a lump sum payment to Gary Smith of
the greater of $2 million, or the sum of his base salary
and annual bonus. Upon a covered termination, our other NEOs
will receive the following for one year: (i) salary
continuation, paid bi-weekly in accordance
50
with standard payroll practices; and (ii) continued
quarterly bonus payments under our incentive bonus plan. The
base salary and bonus payments will be determined based on the
salary rate and incentive compensation program in effect
immediately prior to either, the date of termination or the
effective date of the change in control, whichever is higher.
Bonus amounts will be paid at the target level.
Continuation of Benefits. Upon a covered
termination, each NEO and his or her family are eligible to
continue to participate in our group medical, dental, life and
disability plans until the earlier of the first anniversary of
the covered termination or the date of such officers
commencement of alternate employment. If we cannot continue
benefits coverage, we are obligated to pay for or provide
equivalent coverage at our expense. We will also pay the
officer, on a
grossed-up
basis at the highest marginal income tax rate for individuals,
an amount sufficient to cover any additional taxes incurred due
to income realized from continued benefits coverage, solely to
the extent such taxes result from non-employee status. We will
also continue to maintain director and officer insurance
coverage for the NEO and will maintain in effect any
indemnification agreement we have entered into with them.
Treatment of equity awards. Upon a covered
termination, all unvested options and RSUs held by Gary Smith
will immediately vest and become exercisable. For our other
NEOs, upon a covered termination, 50% of their unvested options
and RSUs (including any performance-based awards previously
converted to time-based vesting upon a change in control) will
vest immediately.
Applicability of Excise Taxes. Should any
payment of severance benefits to our NEOs be subject to excise
tax imposed under federal law, or any related interest or
penalties, the payments will be either paid in full by us or
paid in a lesser amount such that no portion of the payments
would be subject to the excise tax, whichever results in receipt
of a greater amount by the NEO.
You should review the Applicable Definitions below
to better understand the meaning of the terms change in
control, cause and good reason,
under our change in control severance agreements.
The following table shows the estimated value of the payments to
each NEO assuming the occurrence of a covered termination on the
last day of our fiscal 2007. Payment of the amounts below
requires a Ciena change in control and a qualified termination
of employment, a so called double trigger. Upon a
covered termination, payment of the amounts below would be in
addition to the amounts set forth in the Payments Upon
Change in Control table above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of Stock Option
|
|
|
|
|
|
|
|
|
|
Acceleration of Stock Awards Upon Covered Termination
|
|
|
Awards Upon Covered Termination
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value Realized on
|
|
|
|
Salary and
|
|
|
|
|
|
Number of
|
|
|
Value Realized on
|
|
|
Number of Shares
|
|
|
Accelerated
|
|
|
|
Bonus
|
|
|
Continuation
|
|
|
Shares Subject
|
|
|
Accelerated
|
|
|
Subject to
|
|
|
Vesting of
|
|
|
|
Severance
|
|
|
of Benefits
|
|
|
to Accelerated
|
|
|
Vesting of Stock
|
|
|
Accelerated
|
|
|
Stock Option
|
|
|
|
Payment
|
|
|
Coverage
|
|
|
Vesting
|
|
|
Awards
|
|
|
Vesting
|
|
|
Awards
|
|
Name
|
|
($)(1)
|
|
|
($)(2)
|
|
|
(#)
|
|
|
($)(3)
|
|
|
(#)
|
|
|
($)(4)
|
|
|
Gary B. Smith
|
|
$
|
2,000,000
|
|
|
$
|
10,665
|
|
|
|
91,073
|
|
|
$
|
4,269,502
|
|
|
|
65,847
|
|
|
$
|
1,555,371
|
|
Joseph R. Chinnici
|
|
$
|
612,500
|
|
|
$
|
11,797
|
|
|
|
15,078
|
|
|
$
|
706,857
|
|
|
|
9,673
|
|
|
$
|
234,498
|
|
Stephen B. Alexander
|
|
$
|
656,250
|
|
|
$
|
10,818
|
|
|
|
31,084
|
|
|
$
|
1,457,218
|
|
|
|
12,724
|
|
|
$
|
297,545
|
|
Michael G. Aquino
|
|
$
|
600,000
|
|
|
$
|
11,408
|
|
|
|
19,601
|
|
|
$
|
918,895
|
|
|
|
14,885
|
|
|
$
|
277,700
|
|
Arthur D. Smith
|
|
$
|
568,750
|
|
|
$
|
9,418
|
|
|
|
26,949
|
|
|
$
|
1,263,369
|
|
|
|
12,315
|
|
|
$
|
299,918
|
|
|
|
|
(1) |
|
Reflects pre-tax, absolute dollar amounts for severance payments
to each NEO based upon: (a) annual salary in effect as of
the end of fiscal 2007; and (b) annual incentive
compensation payable during fiscal 2007 at the target level. See
footnotes 3 and 4 to the Summary Compensation Table
above for information regarding the payouts to our NEOs pursuant
to our incentive bonus plan and sales incentive compensation, as
applicable, for fiscal 2007. |
|
(2) |
|
Includes aggregate incremental costs (a) for continuation
of medical and dental benefits as assumed for financial
reporting purposes, and (b) for continuation of life and
disability insurance benefits, in each case, assuming we are
able to continue benefits coverage for each NEO at the level of
coverage in place at the end of fiscal 2007, and, assuming
further, that no additional tax will be incurred by any NEO
solely resulting from their non-employee status. |
51
|
|
|
(3) |
|
Reflects the value of stock awards subject to acceleration of
vesting based on our fiscal year-end closing stock price of
$46.88 per share. |
|
(4) |
|
Reflects the value of stock option awards subject to
acceleration of vesting based on the difference between the
actual exercise price of each award and our fiscal year-end
closing stock price of $46.88 per share. |
Applicable
Definitions
For purposes of determining whether a change in control or
covered termination has occurred under the change in control
severance agreements, the following terms generally have the
following meanings:
Cause means:
|
|
|
|
|
the officers willful or continued failure substantially to
perform the duties of his position, as determined by the Board;
|
|
|
|
any willful act or omission constituting dishonesty, fraud or
other malfeasance;
|
|
|
|
any act or omission constituting immoral conduct or a willful
material violation of our Code of Business Conduct and Ethics,
that is injurious to our financial condition or business
reputation;
|
|
|
|
a final adjudication of liability of the officer in any SEC or
other civil or criminal securities law action; or
|
|
|
|
the officers conviction of, or plea of nolo contendere to,
a felony.
|
Good reason means:
|
|
|
|
|
removal from, or failure to be reappointed to, the
officers principal position held immediately prior to the
change in control;
|
|
|
|
material diminution in the officers position, duties or
responsibilities held immediately prior to the change in control;
|
|
|
|
reduction in base salary, incentive compensation opportunity or
participation in other benefit plans as in effect immediately
before the change in control;
|
|
|
|
relocation of principal workplace more than
50 miles; or
|
|
|
|
the failure to obtain the assumption of the change in control
severance agreement by any successor company.
|
Change in control means:
|
|
|
|
|
the sale or exchange by our shareholders of all or substantially
all of our outstanding stock, or a merger, consolidation, sale
or exchange transaction, in each case, where the shareholders
before such transaction do not retain at least a majority voting
interest in the acquiring corporation after such transaction;
|
|
|
|
the sale or transfer of all or substantially all of our assets;
|
|
|
|
our liquidation or dissolution; or
|
|
|
|
any other event determined to be a change in control by our
Board of Directors.
|
52
Separation
Agreement with Mr. Chinnici
On April 5, 2007, we entered into a separation agreement
with Mr. Chinnici, that provides certain benefits in
connection with his resignation and agreement to assist in the
transition of his responsibilities to his successor.
Mr. Chinnici resigned on December 31, 2007. Following
his resignation and delivery to Ciena of a general release from
liability on January 2, 2008, we paid Mr. Chinnici, in
a lump sum, a severance amount equal to his annual salary, plus
his annualized bonus payment under our incentive bonus plan at
the target level. In addition, we accelerated vesting of 50% of
Mr. Chinnicis unvested stock options and stock awards
upon his resignation. We will continue to provide
Mr. Chinnici medical and dental benefits until the earlier
of December 31, 2008 or the date he becomes eligible for
comparable coverage from another employer. We will also provide
outplacement services of up to $15,000. The estimated value of
amounts paid or payable to Mr. Chinnici under his
separation agreement is set forth in the table below:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration of
|
|
|
Continuation of
|
|
|
|
|
|
|
Salary and Bonus
|
|
|
Vesting of Stock
|
|
|
Medical and Dental
|
|
|
All Other
|
|
|
|
Severance Payment
|
|
|
Options and RSUs
|
|
|
Benefits Coverage
|
|
|
Compensation
|
|
Name
|
|
($)
|
|
|
($)(1)
|
|
|
($)(2)
|
|
|
($)(3)
|
|
|
Joseph R. Chinnici
|
|
$
|
612,500
|
|
|
$
|
502,055
|
|
|
$
|
8,196
|
|
|
$
|
15,000
|
|
|
|
|
(1) |
|
Reflects (a) the value of stock awards subject to
accelerated vesting based on the closing stock price of $32.42
per share on January 2, 2008; and (b) the value of
stock option awards subject to accelerated vesting based on the
difference between the actual exercise price of each award and
the closing stock price on January 2, 2008. |
|
(2) |
|
Includes estimated cost, as assumed for financial reporting
purposes, for continuation of medical and dental benefits
coverage through December 31, 2008, based on the level of
benefits participation upon resignation. |
|
(3) |
|
Assumes Mr. Chinnicis election to use the full
outplacement service allotment. |
Pursuant to SEC requirements, we are also required to disclose
the estimated value of payments to Mr. Chinnici assuming
that his resignation had occurred on November 3, 2007, the
last day of our fiscal 2007. Assuming this fiscal year-end
resignation, the amounts reported above would have been
unchanged, except (i) the value of the continuation of
Mr. Chinnicis medical and dental benefits coverage
would have been $9,562, reflecting an additional two-month
coverage period; and (ii) the value of the acceleration of
vesting of Mr. Chinnicis stock options and stock
awards would have been $1,245,269, reflecting his holdings at
that time, and our fiscal year-end closing stock price of $46.88
per share.
POLICY
FOR RELATED PERSON TRANSACTIONS
In February 2007, the Board of Directors adopted a written
Policy for Related Person Transactions. The purpose of the
policy is to describe the procedures used to identify, review,
approve and disclose, if necessary, any related party
transaction or series of transactions in which: (i) Ciena
was, is or will be a participant; (ii) the amount involved
exceeds $120,000; and (iii) a related person had, has or
will have a direct or indirect material interest.
For purposes of the policy, a related person is one of the
following:
|
|
|
|
|
any Ciena director, nominee for director or executive officer
(as such term is used in Section 16 of the Securities
Exchange Act of 1934),
|
|
|
|
any immediate family member of a Ciena director, nominee for
director or executive officer,
|
|
|
|
any person (including any group as such term is used
in Section 13(d) of the Exchange Act) who is known to Ciena
as a beneficial owner of more than 5% of its voting common
stock, and
|
|
|
|
any immediate family member of significant shareholder.
|
Under the policy, all related person transactions above a
certain de minimis threshold are required to be approved or
ratified by the Audit Committee, or another committee consisting
solely of independent directors. As a general rule, any director
who has a direct or indirect material interest in the related
person transaction should not participate in the consideration
of whether to approve or ratify the transaction. Prior to
entering into a related person transaction, the material facts
regarding the transaction, including the interest of the related
person, must be
53
presented to the Audit Committee for review. The Committee will
consider whether the related person transaction is advisable and
whether to approve, ratify or reject the transaction or refer it
to the full Board of Directors, in its discretion. If the
Committee approves a related person transaction, it will report
the action to the full Board of Directors, and Ciena will
disclose the terms of related person transactions in its filings
with the SEC to the extent required.
CERTAIN
RELATED PERSON TRANSACTIONS
Ciena has entered into indemnification agreements with each of
its directors and executive officers. These agreements require
Ciena to indemnify such individuals, to the fullest extent
permitted by Delaware law, for certain liabilities to which they
may become subject as a result of their affiliation with Ciena.
EQUITY
COMPENSATION PLAN INFORMATION
The Board of Directors previously determined that future grants
of stock options, restricted stock, or other forms of
equity-based compensation will be issued only under the 2000
Plan. The Board of Directors capped future equity grants under
all other current equity incentive plans, excluding Cienas
ESPP. The following table provides information as of the end of
fiscal 2007, with respect to the shares of Ciena common stock
that may be issued under Cienas existing equity
compensation plans. If our shareholders approve the 2008 Plan at
the Annual Meeting, we will not make any further awards under
our prior equity incentive compensation plans and will make
future awards exclusively from the 2008 Plan and ESPP. See
Proposal No. 2 Approval of 2008
Omnibus Incentive Compensation Plan above for more
information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
|
|
Number of securities to be
|
|
|
|
|
|
Number of securities remaining
|
|
|
|
issued upon exercise of
|
|
|
Weighted average exercise
|
|
|
available for future issuance under
|
|
|
|
outstanding options,
|
|
|
price of outstanding
|
|
|
equity compensation plans (excluding
|
|
Plan category
|
|
warrants and rights
|
|
|
options, warrants and rights
|
|
|
securities reflected in Column(A)
|
|
|
Equity compensation plans approved by security holders(1)
|
|
|
2,962,824
|
(2)
|
|
$
|
53.33
|
|
|
|
7,317,027
|
|
Equity compensation plans not approved by security holders(3)
|
|
|
2,907,828
|
|
|
$
|
54.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,870,652
|
|
|
$
|
53.67
|
|
|
|
7,317,027
|
(4)
|
|
|
|
(1) |
|
Consists of the following equity compensation plans: |
|
|
|
|
|
1994 Third Amended and Restated Stock Option Plan; |
|
|
|
1996 Outside Directors Stock Option Plan; |
|
|
|
2000 Plan; |
|
|
|
ESPP; and |
|
|
|
equity compensation plans assumed by Ciena in connection with
its merger with ONI Systems Corp., including, the ONI 1999
Equity Incentive Plan, the ONI 1998 Equity Incentive Plan and
the ONI 1997 Stock Option Plan (ONI Plans). There
are no shares available for future issuance under the ONI Plans.
Any shares subject to outstanding awards under the ONI Plans
that are forfeited, expire or are canceled without delivery of
common stock become available for grant and issuance under the
2000 Plan. |
|
|
|
(2) |
|
Does not include 1,135,578 shares underlying restricted
stock units issued and outstanding under the 2000 Plan. |
|
(3) |
|
Consists of 1999 Non-Officer Stock Option Plan and equity
compensation plans assumed by Ciena in connection with mergers
or acquisitions, including the Cyras Systems, Inc. 1998 Stock
Plan, the Omnia Communications, Inc. 1997 Stock Plan, the
Lightera Networks, Inc. 1998 Stock Plan, the WaveSmith Networks,
Inc. 2000 Stock Option and Incentive Plan, the Internet
Photonics, Inc. 2000 Corporate Stock Option Plan and the Catena
Networks, Inc. 1998 Equity Incentive Plan. |
54
|
|
|
(4) |
|
Consists solely of shares remaining available for future
issuance under the 2000 Plan and the ESPP. The 2000 Plan
incorporates an evergreen provision pursuant to which, on
January 1 of each year, the aggregate number of shares reserved
for issuance under the 2000 Plan automatically increases by 5%
of the total number of shares of Cienas common stock
outstanding, unless the Compensation Committee determines to
reduce the increase in that year. The Compensation Committee has
not increased the number of shares available under the 2000 Plan
since January 1, 2004. The ESPP also provides for an
evergreen provision, pursuant to which, on December 31 of each
year, the number of shares available for issuance annually
increases by up to 571,428 shares, provided that the total
number of shares available for issuance at any time under the
ESPP may not exceed 3,571,428 shares. |
SHAREHOLDER
PROPOSALS FOR 2009 ANNUAL MEETING
Pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934, some proposals by
shareholders may be eligible for inclusion in our proxy
statement for the 2009 Annual Meeting. Submitted shareholder
proposals must include proof of ownership of Ciena common stock
in accordance with
Rule 14a-8(b)(2).
These submissions must comply with the rules of the SEC for
inclusion in our proxy statement and must be received no later
than October 11, 2008. Submitting a shareholder proposal
does not guarantee that we will include it in our proxy
statement. We strongly encourage any shareholder interested in
submitting a proposal to contact our Corporate Secretary in
advance of this deadline to discuss the proposal, and
shareholders may want to consult knowledgeable counsel with
regard to the detailed requirements of applicable securities
laws.
If you wish to present a proposal or nomination before our 2009
Annual Meeting, but you do not intend to have your proposal
included in our 2009 proxy statement, your proposal must be
delivered no earlier than November 26, 2008 and no later
than December 26, 2008. If the date of our 2009 Annual
Meeting of shareholders is more than 30 calendar days before or
more than seventy days after the anniversary date of the Annual
Meeting, your submission must be delivered not earlier than
120 days prior to such annual meeting and not later than
the later of the
90th day
prior to such annual meeting or the tenth day following the
public announcement of the date of such meeting. The relevant
bylaw provisions regarding the requirements for making
shareholder proposals and nominating director candidates are
available on the Corporate Governance page of the Investor
Relations portion of our website at www.ciena.com.
To submit a proposal or nomination, shareholders should provide
written notice to Ciena Corporation, 1201 Winterson Road,
Linthicum, Maryland 21090, Attention: Corporate Secretary.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires
Cienas directors and officers, and persons who own more
than 10% of Cienas common stock, to file initial reports
of ownership and reports of changes in ownership with the SEC
and The NASDAQ Stock Market. Such persons are required by SEC
regulations to furnish Ciena with copies of all
Section 16(a) forms that they file.
Based solely on Cienas review of the copies of such forms
furnished to Ciena and written representations from our
executive officers and directors, we believe that Mr. Gary
Smith filed a Form 4 reporting a
Rule 10b5-1
sale transaction late and that all other Section 16(a)
filing requirements of our directors and executive officers were
met.
ANNUAL
REPORT ON
FORM 10-K
A copy of Cienas annual report to shareholders for fiscal
2007, which includes the annual report on
Form 10-K,
has been posted on the Internet along with this proxy statement,
each of which is accessible by following the instructions in the
Notice. The annual report is not incorporated into this proxy
statement and is not considered proxy-soliciting material.
Ciena filed its annual report on
Form 10-K
with the SEC on December 27, 2007. Ciena will mail without
charge, upon written request, a copy of its annual report on
Form 10-K
for fiscal 2007, excluding exhibits. Please
55
send a written request to Investor Relations, Ciena Corporation,
1201 Winterson Road, Linthicum, Maryland, 21090, or complete the
request form on the investor relations page of Cienas
website at www.ciena.com.
OTHER
MATTERS
Management knows of no matters to be presented for action at the
Annual Meeting other than those mentioned in this proxy
statement. However, if any other matters properly come before
the Annual Meeting, it is intended that the persons named as
proxies will vote on such other matters in accordance with their
judgment of the best interests of Ciena.
HOUSEHOLDING
OF PROXY MATERIALS
Shareholders residing in the same household who hold their stock
through a bank or broker may receive only one set of proxy
materials in accordance with a notice sent earlier by their bank
or broker. This practice of sending only one copy of proxy
materials is called householding. This saves Ciena
money in printing and distribution costs. This practice will
continue unless instructions to the contrary are received by
your bank or broker from one or more of the shareholders within
the household.
If you hold your shares in street name and reside in
a household that received only one copy of the proxy materials,
you can request to receive a separate copy in the future by
following the instructions sent by your bank or broker. If your
household is receiving multiple copies of the proxy materials,
you may request that only a single set of materials be sent by
following the instructions sent by your bank or broker.
DIRECTIONS
TO THE ANNUAL MEETING
From
Washington, DC via Interstate 95 North
Follow I-95 North to Exit 53 (395 Downtown). At the third light
turn right onto Pratt Street. Proceed on Pratt Street through
eight lights, take a right on President Street and proceed three
lights, getting into the right hand lane after the second light
(Eastern Avenue). Go straight at the third light towards the
Katyn Memorial. Enter the traffic circle and follow to the first
right onto Aliceanna Street. The hotel entrance is approximately
100 yards on the right.
From New
York and Philadelphia via Interstate 95 South
Follow I-95 South through the Fort McHenry Tunnel to Exit
53 (395 Downtown). At the third light turn right onto Pratt
Street. Proceed on Pratt Street through eight lights, take a
right on President Street and proceed three lights, getting into
the right hand lane after the second light (Eastern Avenue). Go
straight at the third light towards the Katyn Memorial. Enter
the traffic circle and follow to the first right onto Aliceanna
Street. The hotel entrance is approximately 100 yards on the
right.
From
Interstate 83 South
Follow I-83 South until it turns into President Street at
Fayette Street. Follow President Street for five lights, getting
into the right hand lane after the fourth light (Eastern
Avenue). Go straight at the fifth light towards the Katyn
Memorial. Enter the traffic circle and follow to the first right
onto Aliceanna Street. The hotel entrance is approximately 100
yards on the right.
56
MISCELLANEOUS
Ciena will bear the cost of soliciting proxies. We have engaged
The Altman Group as our proxy solicitor to help us solicit
proxies for a fee of $6,500, plus reasonable out of pocket
expense. Copies of solicitation material may be furnished to
brokers, custodians, nominees and other fiduciaries for
forwarding to beneficial owners of shares of Ciena common stock,
and normal handling charges may be paid for such forwarding
service. Officers and other Ciena employees, who will receive no
additional compensation for their services, may solicit proxies
by mail,
e-mail,
personal interview or telephone.
57
ANNEX A
CIENA CORPORATION
2008 OMNIBUS INCENTIVE PLAN
TABLE OF
CONTENTS
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Page
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1.
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|
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PURPOSE
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A-1
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2.
|
|
|
DEFINITIONS
|
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A-1
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|
|
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3.
|
|
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ADMINISTRATION OF THE PLAN
|
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A-4
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3.1.
|
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|
Board
|
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A-4
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3.2.
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|
|
Committee
|
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A-4
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|
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3.3.
|
|
|
Terms of Awards
|
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A-5
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3.4.
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No Repricing
|
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A-6
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3.5.
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|
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Deferral Arrangement
|
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A-6
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3.6.
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|
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No Liability
|
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A-6
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3.7.
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|
|
Share Issuance/Book-Entry
|
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A-6
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4.
|
|
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STOCK SUBJECT TO THE PLAN
|
|
|
A-6
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|
|
4.1.
|
|
|
Number of Shares Available for Awards
|
|
|
A-6
|
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|
|
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|
4.2.
|
|
|
Adjustments in Authorized Shares
|
|
|
A-6
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|
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|
4.3.
|
|
|
Share Usage
|
|
|
A-6
|
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|
5.
|
|
|
EFFECTIVE DATE, DURATION AND AMENDMENTS
|
|
|
A-7
|
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|
|
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|
5.1.
|
|
|
Effective Date
|
|
|
A-7
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|
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|
|
5.2.
|
|
|
Term
|
|
|
A-7
|
|
|
|
|
|
|
5.3.
|
|
|
Amendment and Termination of the Plan
|
|
|
A-7
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
|
|
AWARD ELIGIBILITY AND LIMITATIONS
|
|
|
A-7
|
|
|
|
|
|
|
6.1.
|
|
|
Service Providers and Other Persons
|
|
|
A-7
|
|
|
|
|
|
|
6.2.
|
|
|
Successive Awards and Substitute Awards
|
|
|
A-7
|
|
|
|
|
|
|
6.3.
|
|
|
Limitation on Shares of Stock Subject to Awards and Cash Awards
|
|
|
A-8
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7.
|
|
|
AWARD AGREEMENT
|
|
|
A-8
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8.
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TERMS AND CONDITIONS OF OPTIONS
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A-8
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8.1.
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Option Price
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A-8
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8.2.
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Vesting
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A-8
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8.3.
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Term
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A-8
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8.4.
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Termination of Service
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A-8
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8.5.
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Limitations on Exercise of Option
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A-9
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8.6.
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Method of Exercise
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A-9
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8.7.
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Rights of Holders of Options
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A-9
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8.8.
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Delivery of Stock Certificates
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A-9
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8.9.
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Transferability of Options
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A-9
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8.10.
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Family Transfers
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A-9
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8.11.
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Limitations on Incentive Stock Options
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A-9
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8.12.
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Notice of Disqualifying Disposition
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A-10
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9.
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TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS
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A-10
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9.1.
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Right to Payment and Grant Price
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A-10
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9.2.
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Other Terms
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A-10
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9.3.
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Term
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A-10
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9.4.
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Transferability of SARS
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A-10
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9.5.
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Family Transfers
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A-10
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10.
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TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK
UNITS
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A-11
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10.1.
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Grant of Restricted Stock or Restricted Stock Units
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A-11
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10.2.
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Restrictions
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A-11
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10.3.
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Restricted Stock Certificates
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A-11
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10.4.
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Rights of Holders of Restricted Stock
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A-11
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10.5.
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Rights of Holders of Restricted Stock Units
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A-11
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10.5.1.
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Voting and Dividend Rights
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A-11
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A-i
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Page
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10.5.2.
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Creditors Rights
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A-12
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10.6.
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Termination of Service
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A-12
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10.7.
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Purchase of Restricted Stock and Shares Subject to Restricted
Stock Units
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A-12
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10.8.
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Delivery of Stock
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A-12
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10.9.
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Unrestricted Pool
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A-12
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11.
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TERMS AND CONDITIONS OF UNRESTRICTED STOCK AWARDS
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A-12
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12.
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FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK
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A-13
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12.1.
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General Rule
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A-13
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12.2.
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Surrender of Stock
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A-13
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12.3.
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Cashless Exercise
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A-13
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12.4.
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Other Forms of Payment
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A-13
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13.
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RESERVED
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A-13
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14.
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TERMS AND CONDITIONS OF PERFORMANCE SHARES, PERFORMANCE SHARE
UNITS, PERFORMANCE AWARDS AND ANNUAL INCENTIVE AWARDS
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A-13
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14.1.
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Grant of Performance Share Units/Performance Shares
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A-13
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14.2.
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Value of Performance Share Units/Performance Shares
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A-13
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14.3.
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Earning of Performance Share Units/Performance Shares
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A-13
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14.4.
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Form and Timing of Payment of Performance Share
Units/Performance Shares
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A-14
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14.5.
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Performance Conditions
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A-14
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14.6.
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Performance Awards or Annual Incentive Awards Granted to
Designated Covered Employees
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A-14
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14.6.1.
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Performance Goals Generally
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A-14
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14.6.2.
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Timing For Establishing Performance Goals
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A-14
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14.6.3.
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Settlement of Awards; Other Terms
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A-14
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14.6.4.
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Performance Measures
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A-14
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14.6.5.
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Evaluation of Performance
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A-15
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14.6.6.
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Adjustment of Performance-Based Compensation
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A-16
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14.6.7.
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Board Discretion
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A-16
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14.7.
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Status of Section Awards Under Code Section 162(m)
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A-16
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15.
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PARACHUTE LIMITATIONS
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A-16
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16.
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REQUIREMENTS OF LAW
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A-17
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16.1.
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General
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A-17
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16.2.
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Rule 16b-3
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A-17
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17.
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EFFECT OF CHANGES IN CAPITALIZATION
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A-17
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17.1.
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Changes in Stock
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A-17
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17.2.
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Reorganization in Which the Company Is the Surviving Entity
Which does not Constitute a Corporate Transaction
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A-18
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17.3.
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Corporate Transaction in which Awards are not Assumed
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A-18
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17.4.
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Corporate Transaction in which Awards are Assumed
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A-19
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17.5.
|
|
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Adjustments
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A-19
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17.6.
|
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No Limitations on Company
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A-19
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18.
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GENERAL PROVISIONS
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A-19
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18.1.
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Disclaimer of Rights
|
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A-19
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18.2.
|
|
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Nonexclusivity of the Plan
|
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A-19
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18.3.
|
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Withholding Taxes
|
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A-20
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18.4.
|
|
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Captions
|
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A-20
|
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18.5.
|
|
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Other Provisions
|
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A-20
|
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18.6.
|
|
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Number and Gender
|
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A-20
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18.7.
|
|
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Severability
|
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A-20
|
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18.8.
|
|
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Governing Law
|
|
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A-20
|
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18.9.
|
|
|
Section 409A of the Code
|
|
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A-21
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A-ii
CIENA
CORPORATION
2008 OMNIBUS INCENTIVE PLAN
Ciena Corporation., a Delaware corporation (the
Company), sets forth herein the terms of its 2008
Omnibus Incentive Plan (the Plan), as follows:
The Plan is intended to enhance the Companys and its
Affiliates (as defined herein) ability to attract and
retain highly qualified officers, directors, key employees, and
other persons, and to motivate such persons to serve the Company
and its Affiliates and to expend maximum effort to improve the
business results and earnings of the Company, by providing to
such persons an opportunity to acquire or increase a direct
proprietary interest in the operations and future success of the
Company. To this end, the Plan provides for the grant of stock
options, stock appreciation rights, restricted stock, restricted
stock units (including deferred stock units), unrestricted
stock, and cash awards. Any of these awards may, but need not,
be made as performance incentives to reward attainment of annual
or long-term performance goals in accordance with the terms
hereof. Stock options granted under the Plan may be
non-qualified stock options or incentive stock options, as
provided herein, except that stock options granted to outside
directors and any consultants or advisers providing services to
the Company or an Affiliate shall in all cases be non-qualified
stock options.
For purposes of interpreting the Plan and related documents
(including Award Agreements), the following definitions shall
apply:
2.1 Affiliate means, with respect to the
Company, any company or other trade or business that controls,
is controlled by or is under common control with the Company
within the meaning of Rule 405 of Regulation C under
the Securities Act, including, without limitation, any
Subsidiary. For purposes of granting stock options or stock
appreciation rights, an entity may not be considered an
Affiliate unless the Company holds a controlling
interest in such entity, where the term controlling
interest has the same meaning as provided in Treasury
Regulation 1.414(c)-2(b)(2)(i),
provided that the language at least 50 percent
is used instead of at least 80 percent and,
provided further, that where granting of stock options or stock
appreciation rights is based upon a legitimate business
criteria, the language at least 20 percent is
used instead of at least 80 percent each place
it appears in Treasury
Regulation 1.414(c)-2(b)(2)(i).
2.2 Annual Incentive Award means an
Award made subject to attainment of performance goals (as
described in Section 14) generally over a one-year
Performance Period (the Companys fiscal year, unless
otherwise specified by the Committee).
2.3 Award means a grant of an Option,
Stock Appreciation Right, Restricted Stock, Unrestricted Stock,
Restricted Stock Unit, Performance Share, Performance Share Unit
or cash award under the Plan.
2.4 Award Agreement means the agreement
between the Company and a Grantee that evidences and sets out
the terms and conditions of an Award.
2.5 Benefit Arrangement shall have the
meaning set forth in Section 15 hereof.
2.6 Board means the Board of Directors
of the Company.
2.7 Cause means, as determined by the
Board and unless otherwise provided in an applicable agreement
with the Company or an Affiliate, (i) gross negligence or
willful misconduct in connection with the performance of duties;
(ii) plea of a felony or conviction of a criminal offense
(other than minor traffic offenses); or (iii) material
breach of any term of any employment, consulting or other
services, confidentiality, intellectual property or
non-competition agreements, if any, between the Service Provider
and the Company or an Affiliate.
2.8 Code means the Internal Revenue Code
of 1986, as now in effect or as hereafter amended.
A-1
2.9 Committee means a committee of, and
designated from time to time by resolution of, the Board, which
shall be constituted as provided in Section 3.2.
2.10 Company means Ciena Corporation.
2.11 Corporate Transaction means
(i) any person or group of persons (as defined in
Section 13(d) and 14(d) of the Exchange Act) together with
its affiliates, excluding employee benefit plans of the Company,
is or becomes, directly or indirectly, the beneficial
owner (as defined in
Rule 13d-3
of the Exchange Act) of securities of the Company representing
50% or more of the combined voting power of the Companys
then outstanding securities; (ii) the dissolution or
liquidation of the Company or a merger, consolidation, or
reorganization of the Company with one or more other entities in
which the Company is not the surviving entity, (iii) a sale
of substantially all of the assets of the Company to another
person or entity, or (iii) any transaction (including
without limitation a merger or reorganization in which the
Company is the surviving entity) which results in any person or
entity owning 50% or more of the combined voting power of all
classes of stock of the Company.
2.12 Covered Employee means a Grantee
who is a covered employee within the meaning of
Section 162(m)(3) of the Code.
2.13 Disability means the Grantee is
unable to perform each of the essential duties of such
Grantees position by reason of a medically determinable
physical or mental impairment which is potentially permanent in
character or which can be expected to last for a continuous
period of not less than 12 months; provided, however, that,
with respect to rules regarding expiration of an Incentive Stock
Option following termination of the Grantees Service,
Disability shall mean the Grantee is unable to engage in any
substantial gainful activity by reason of a medically
determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to
last for a continuous period of not less than 12 months.
2.14 Reserved.
2.15 Effective Date
means ,
2008, the date the Plan was approved by the Companys
stockholders.
2.16 Exchange Act means the Securities
Exchange Act of 1934, as now in effect or as hereafter amended.
2.17 Fair Market Value means the value
of a share of Stock, determined as follows: if on the Grant Date
or other determination date the Stock is listed on an
established national or regional stock exchange, or is publicly
traded on an established securities market, the Fair Market
Value of a share of Stock shall be the closing price of the
Stock on such exchange or in such market (if there is more than
one such exchange or market the Board shall determine the
appropriate exchange or market) on the Grant Date or such other
determination date (or if there is no such reported closing
price, the Fair Market Value shall be the mean between the
highest bid and lowest asked prices or between the high and low
sale prices on such trading day) or, if no sale of Stock is
reported for such trading day, on the next preceding day on
which any sale shall have been reported. If the Stock is not
listed on such an exchange or traded on such a market, Fair
Market Value shall be the value of the Stock as determined by
the Board by the reasonable application of a reasonable
valuation method, in a manner consistent with Code
Section 409A.
2.18 Family Member means a person who is
a spouse, former spouse, child, stepchild, grandchild, parent,
stepparent, grandparent, niece, nephew,
mother-in-law,
father-in-law,
son-in-law,
daughter-in-law,
brother, sister,
brother-in-law,
or
sister-in-law,
including adoptive relationships, of the Grantee, any person
sharing the Grantees household (other than a tenant or
employee), a trust in which any one or more of these persons
have more than fifty percent of the beneficial interest, a
foundation in which any one or more of these persons (or the
Grantee) control the management of assets, and any other entity
in which one or more of these persons (or the Grantee) own more
than fifty percent of the voting interests.
2.19 Grant Date means, as determined by
the Board, the latest to occur of (i) the date as of which
the Board approves an Award, (ii) the date on which the
recipient of an Award first becomes eligible to receive an Award
under Section 6 hereof, or (iii) such other
date as may be specified by the Board.
A-2
2.20 Grantee means a person who receives
or holds an Award under the Plan.
2.21 Incentive Stock Option means an
incentive stock option within the meaning of
Section 422 of the Code, or the corresponding provision of
any subsequently enacted tax statute, as amended from time to
time.
2.22 Non-qualified Stock Option means an
Option that is not an Incentive Stock Option.
2.23 Option means an option to purchase
one or more shares of Stock pursuant to the Plan.
2.24 Option Price means the exercise
price for each share of Stock subject to an Option.
2.25 Other Agreement shall have the
meaning set forth in Section 15 hereof.
2.26 Outside Director means a member of
the Board who is not an officer or employee of the Company.
2.27 Performance Award means an Award
made subject to the attainment of performance goals (as
described in Section 14) over a Performance Period
of up to ten years.
2.28 Performance-Based Compensation
means compensation under an Award that is intended to
satisfy the requirements of Code Section 162(m) for certain
performance-based compensation paid to Covered Employees.
Notwithstanding the foregoing, nothing in this Plan shall be
construed to mean that an Award which does not satisfy the
requirements for performance-based compensation under Code
Section 162(m) does not constitute performance-based
compensation for other purposes, including Code
Section 409A.
2.29 Performance Measures means measures
as described in Section 14 on which the performance
goals are based and which are approved by the Companys
stockholders pursuant to this Plan in order to qualify Awards as
Performance-Based Compensation.
2.30 Performance Period means the period
of time during which the performance goals must be met in order
to determine the degree of payout
and/or
vesting with respect to an Award.
2.31 Performance Share means an Award
under Section 14 herein and subject to the terms of
this Plan, denominated in shares of Stock, the value of which at
the time it is payable is determined as a function of the extent
to which corresponding performance criteria have been achieved.
2.32 Performance Share Unit means an
Award under Section 14 herein and subject to the
terms of this Plan, denominated in units, the value of which at
the time it is payable is determined as a function of the extent
to which corresponding performance criteria have been achieved.
2.33 Plan means this Ciena Corporation
2008 Omnibus Incentive Plan.
2.34 Prior Plans means the 2000 Equity
Incentive Compensation Plan, 1994 Third Amended and Restated
Stock Option Plan, 1996 Outside Directors Stock Option Plan, ONI
Systems Corp. 1999 Equity Incentive Plan, ONI Systems Corp. 1998
Equity Incentive Plan, ONI Systems Corp. 1997 Stock Option Plan,
1999 Non-Officer Stock Option Plan, Cyras Systems, Inc. 1998
Stock Plan, Omnia Communications, Inc. 1997 Stock Plan, Lightera
Networks, Inc. 1998 Stock Plan, WaveSmith Networks, Inc. 2000
Stock Option and Incentive Plan, Internet Photonics, Inc. 2000
Corporate Stock Option Plan and Catena Networks, Inc. 1998
Equity Incentive Plan.
2.35 Purchase Price means the purchase
price for each share of Stock pursuant to a grant of Restricted
Stock or Unrestricted Stock.
2.36 Reporting Person means a person who
is required to file reports under Section 16(a) of the
Exchange Act.
2.37 Restricted Stock means shares of
Stock, awarded to a Grantee pursuant to Section 10
hereof.
2.38 Restricted Stock Unit means a
bookkeeping entry representing the equivalent of one share of
Stock awarded to a Grantee pursuant to Section 10
hereof.
A-3
2.39 SAR Exercise Price means the per
share exercise price of a SAR granted to a Grantee under
Section 9 hereof.
2.40 Securities Act means the Securities
Act of 1933, as now in effect or as hereafter amended.
2.41 Service means service as a Service
Provider to the Company or an Affiliate. Unless otherwise stated
in the applicable Award Agreement, a Grantees change in
position or duties shall not result in interrupted or terminated
Service, so long as such Grantee continues to be a Service
Provider to the Company or an Affiliate. Subject to the
preceding sentence, whether a termination of Service shall have
occurred for purposes of the Plan shall be determined by the
Board, which determination shall be final, binding and
conclusive.
2.42 Service Provider means an employee,
officer or director of the Company or an Affiliate, or a
consultant or adviser (who is a natural person) currently
providing services to the Company or an Affiliate.
2.43 Stock means the common stock, par
value $0.01 per share, of the Company.
2.44 Stock Appreciation Right or
SAR means a right granted to a Grantee under
Section 9 hereof.
2.45 Subsidiary means any
subsidiary corporation of the Company within the
meaning of Section 424(f) of the Code.
2.46 Substitute Awards means Awards
granted upon assumption of, or in substitution for, outstanding
Awards previously granted by a company or other entity acquired
by the Company or any Affiliate or with which the Company or any
Affiliate combines.
2.47 Ten Percent Stockholder means
an individual who owns more than ten percent of the total
combined voting power of all classes of outstanding stock of the
Company, its parent or any of its Subsidiaries. In determining
stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied.
2.48 Unrestricted Stock means an Award
pursuant to Section 11 hereof.
|
|
3.
|
ADMINISTRATION
OF THE PLAN
|
3.1. Board.
The Board shall have such powers and authorities related to the
administration of the Plan as are consistent with the
Companys certificate of incorporation and by-laws and
applicable law. The Board shall have full power and authority to
take all actions and to make all determinations required or
provided for under the Plan, any Award or any Award Agreement,
and shall have full power and authority to take all such other
actions and make all such other determinations not inconsistent
with the specific terms and provisions of the Plan that the
Board deems to be necessary or appropriate to the administration
of the Plan, any Award or any Award Agreement. All such actions
and determinations shall be by the affirmative vote of a
majority of the members of the Board present at a meeting or by
unanimous consent of the Board executed in writing in accordance
with the Companys certificate of incorporation and by-laws
and applicable law. The interpretation and construction by the
Board of any provision of the Plan, any Award or any Award
Agreement shall be final, binding and conclusive.
3.2. Committee.
The Board from time to time may delegate to the Committee such
powers and authorities related to the administration and
implementation of the Plan, as set forth in Section 3.1
above and other applicable provisions, as the Board shall
determine, consistent with the certificate of incorporation and
by-laws of the Company and applicable law.
(i) Except as provided in Subsection (ii) and except
as the Board may otherwise determine, the Committee, if any,
appointed by the Board to administer the Plan shall consist of
two or more Outside Directors of the Company who:
(a) qualify as outside directors within the
meaning of Section 162(m) of the Code and who (b) meet
such other requirements as may be established from time to time
by the Securities and Exchange Commission for plans intended to
qualify for exemption under
Rule 16b-3
(or its successor) under the Exchange Act and who
(c) comply with the independence requirements of the stock
exchange on which the
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Common Stock is listed. Discretionary Awards to Outside
Directors shall be administered only by the Committee and may
not be subject to discretion of or determination by the
Companys management.
(ii) The Board may also appoint one or more separate
Committees of the Board, each composed of one or more directors
of the Company who need not be Outside Directors, who may
administer the Plan with respect to employees or other Service
Providers who are not executive officers (as defined under
Rule 3b-7
or the Exchange Act) or directors of the Company, may grant
Awards under the Plan to such employees or other Service
Providers, and may determine all terms of such Awards.
In the event that the Plan, any Award or any Award Agreement
entered into hereunder provides for any action to be taken by or
determination to be made by the Board, such action may be taken
or such determination may be made by the Committee if the power
and authority to do so has been delegated to the Committee by
the Board as provided for in this Section. Unless otherwise
expressly determined by the Board, any such action or
determination by the Committee shall be final, binding and
conclusive. To the extent permitted by law, the Committee may
delegate its authority under the Plan to a member of the Board
or such other person.
3.3. Terms of Awards.
Subject to the other terms and conditions of the Plan, the Board
shall have full and final authority to:
(i) designate Grantees,
(ii) determine the type or types of Awards to be made to a
Grantee,
(iii) determine the number of shares of Stock to be subject
to an Award,
(iv) establish the terms and conditions of each Award
(including, but not limited to, the exercise price of any
Option, the nature and duration of any restriction or condition
(or provision for lapse thereof) relating to the vesting,
exercise, transfer, or forfeiture of an Award or the shares of
Stock subject thereto, the treatment of an Award in the event of
a change of control, and any terms or conditions that may be
necessary to qualify Options as Incentive Stock Options),
(v) prescribe the form of each Award Agreement evidencing
an Award, and
(vi) amend, modify, or supplement the terms of any
outstanding Award. Such authority specifically includes the
authority, in order to effectuate the purposes of the Plan but
without amending the Plan, to make or modify Awards to eligible
individuals who are foreign nationals or are individuals who are
employed outside the United States to recognize differences in
local law, tax policy, or custom. Notwithstanding the foregoing,
no amendment, modification or supplement of any Award shall,
without the consent of the Grantee, impair the Grantees
rights under such Award.
The Company may retain the right in an Award Agreement to cause
a forfeiture of the gain realized by a Grantee on account of
actions taken by the Grantee in violation or breach of or in
conflict with any employment agreement, non-competition
agreement, any agreement prohibiting solicitation of employees
or clients of the Company or any Affiliate thereof or any
confidentiality obligation with respect to the Company or any
Affiliate thereof or otherwise in competition with the Company
or any Affiliate thereof, to the extent specified in such Award
Agreement applicable to the Grantee. In addition, the Company
may terminate and cause the forfeiture of an Award if the
Grantee is an employee of the Company or an Affiliate thereof
and is terminated for Cause as defined in the applicable Award
Agreement or the Plan, as applicable.
Furthermore, if the Company is required to prepare an accounting
restatement due to the material noncompliance of the Company, as
a result of misconduct, with any financial reporting requirement
under the securities laws, the individuals subject to automatic
forfeiture under Section 304 of the Sarbanes-Oxley Act of
2002 and any Grantee who knowingly engaged in the misconduct,
was grossly negligent in engaging in the misconduct, knowingly
failed to prevent the misconduct or was grossly negligent in
failing to prevent the misconduct, shall reimburse the Company
the amount of any payment in settlement of an Award earned or
accrued during the
12-month
period following the first public issuance or filing with the
United States Securities and Exchange Commission (whichever
first occurred) of the financial document that contained such
material noncompliance.
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3.4. No Repricing.
Notwithstanding anything in this Plan to the contrary, no
amendment or modification may be made to an outstanding Option
or SAR, including, without limitation, by replacement, exchange
or cancellation of Options or SARs for cash or another Award or
award type, that would be treated as a repricing under the rules
of the stock exchange on which the Stock is listed, in each
case, without the approval of the stockholders of the Company,
provided, that, appropriate adjustments may be made to
outstanding Options and SARs pursuant to Section 17
or Section 5.3 and may be made to make changes
to achieve compliance with applicable law, including Code
Section 409A.
3.5. Deferral Arrangement.
The Board may permit or require the deferral of any Award
payment into a deferred compensation arrangement, subject to
such rules and procedures as it may establish, which may include
provisions for the payment or crediting of interest or dividend
equivalents, including converting such credits into deferred
Stock equivalents. Any such deferrals shall be made in a manner
that complies with Code Section 409A.
3.6. No Liability.
No member of the Board or the Committee shall be liable for any
action or determination made in good faith with respect to the
Plan or any Award or Award Agreement.
3.7. Share Issuance/Book-Entry.
Notwithstanding any provision of this Plan to the contrary, the
issuance of the Stock under the Plan may be evidenced in such a
manner as the Board, in its discretion, deems appropriate,
including, without limitation, book-entry registration or
issuance of one or more Stock certificates.
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4.
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STOCK
SUBJECT TO THE PLAN
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4.1. Number of Shares Available for Awards.
Subject to adjustment as provided in Section 17
hereof, the number of shares of Stock available for issuance
under the Plan shall be eight million, all of which may be
granted as Incentive Stock Options, increased by shares of Stock
covered by awards granted under a Prior Plan that are not
purchased or are forfeited or expire, or otherwise terminate
without delivery of any Stock subject thereto, to the extent
such shares would again be available for issuance under such
Prior Plan. Stock issued or to be issued under the Plan shall be
authorized but unissued shares; or, to the extent permitted by
applicable law, issued shares that have been reacquired by the
Company.
4.2. Adjustments in Authorized Shares.
The Board shall have the right to substitute or assume Awards in
connection with mergers, reorganizations, separations, or other
transactions to which Section 424(a) of the Code applies.
The number of shares of Stock reserved pursuant to
Section 4 shall be increased by the corresponding
number of Awards assumed and, in the case of a substitution, by
the net increase in the number of shares of Stock subject to
Awards before and after the substitution.
4.3. Share Usage.
Shares covered by an Award shall be counted as used as of the
Grant Date. Any shares of Stock that are subject to Awards of
Options shall be counted against the limit set forth in
Section 4.1 as one share for every one share subject to an
Award of Options. With respect to SARs, the number of shares
subject to an award of SARs will be counted against the
aggregate number of shares available for issuance under the Plan
regardless of the number of shares actually issued to settle the
SAR upon exercise. Any shares that are subject to Awards other
than Options or Stock Appreciation Rights shall be counted
against the limit set forth in Section 4.1 as
1.6 shares for every one share granted. If any shares
covered by an Award granted under the Plan are not purchased or
are forfeited or expire, or if an Award otherwise terminates
without delivery of any Stock subject thereto or is settled in
cash in lieu of shares, then the number of shares of Stock
counted against the aggregate number of shares available under
the Plan with respect to such Award shall, to the extent of any
such forfeiture, termination or expiration, again be available
for
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making Awards under the Plan in the same amount as such shares
were counted against the limit set forth in
Section 4.1, provided that any shares covered by an
Award granted under a Prior Plan will again be available for
making Awards under the Plan in the same amount as such shares
were counted against the limits set forth in the applicable
Prior Plan. The number of shares of Stock available for issuance
under the Plan shall not be increased by (i) any shares of
Stock tendered or withheld or Award surrendered in connection
with the purchase of shares of Stock upon exercise of an Option
as described in Section 12.2, or (ii) any
shares of Stock deducted or delivered from an Award payment in
connection with the Companys tax withholding obligations
as described in Section 18.3.
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5.
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EFFECTIVE
DATE, DURATION AND AMENDMENTS
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5.1. Effective Date.
The Plan shall be effective as of the Effective Date, subject to
approval of the Plan by the Companys stockholders within
one year of the Effective Date. Upon approval of the Plan by the
stockholders of the Company as set forth above, all Awards made
under the Plan on or after the Effective Date shall be fully
effective as if the stockholders of the Company had approved the
Plan on the Effective Date. If the stockholders fail to approve
the Plan within one year of the Effective Date, any Awards made
hereunder shall be null and void and of no effect. Following the
Effective Date no awards will be made under the Prior Plans.
5.2. Term.
The Plan shall terminate automatically ten years after the
Effective Date and may be terminated on any earlier date as
provided in Section 5.3.
5.3. Amendment and Termination of the Plan
The Board may, at any time and from time to time, amend,
suspend, or terminate the Plan as to any shares of Stock as to
which Awards have not been made. An amendment shall be
contingent on approval of the Companys stockholders to the
extent stated by the Board, required by applicable law or
required by applicable stock exchange listing requirements. In
addition, an amendment will be contingent on approval of the
Companys stockholders if the amendment would:
(i) materially increase the benefits accruing to
participants under the Plan, (ii) materially increase the
aggregate number of shares of Stock that may be issued under the
Plan, or (iii) materially modify the requirements as to
eligibility for participation in the Plan. No Awards shall be
made after termination of the Plan. No amendment, suspension, or
termination of the Plan shall, without the consent of the
Grantee, impair rights or obligations under any Award
theretofore awarded under the Plan.
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6.
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AWARD
ELIGIBILITY AND LIMITATIONS
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6.1. Service Providers and Other Persons.
Subject to this Section 6, Awards may be made under
the Plan to: (i) any Service Provider to the Company or of
any Affiliate, including any Service Provider who is an officer
or director of the Company, or of any Affiliate, as the Board
shall determine and designate from time to time and
(ii) any other individual whose participation in the Plan
is determined to be in the best interests of the Company by the
Board.
6.2. Successive Awards and Substitute Awards.
An eligible person may receive more than one Award, subject to
such restrictions as are provided herein. Notwithstanding
Sections 8.1 and 9.1, the Option Price of an
Option or the grant price of a SAR that is a Substitute Award
(as defined in Section 2.46) may be less than 100% of the
Fair Market Value of a share of Common Stock on the original
date of grant; provided, that, the Option Price or grant price
is determined in accordance with the principles of Code
Section 424 and the regulations thereunder.
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6.3. Limitation on Shares of Stock Subject to Awards and
Cash Awards.
During any time when the Company has a class of equity security
registered under Section 12 of the Exchange Act:
(i) the maximum number of shares of Stock subject to
Options or SARs that can be awarded under the Plan to any person
eligible for an Award under Section 6 hereof is one
million per 12 month period;
(ii) the maximum number of shares that can be awarded under
the Plan, other than pursuant to an Option or SARs, to any
person eligible for an Award under Section 6 hereof
is one million per 12 month period; and
(iii) the maximum amount that may be earned as an Annual
Incentive Award or other cash Award in any 12 month period
by any person eligible for an Award shall be $5,000,000 and the
maximum amount that may be earned as a Performance Award or
other cash Award in respect of a Performance Period by any
person eligible for an Award shall be $25,000,000.
The preceding limitations in this Section 6.3 are
subject to adjustment as provided in Section 17
hereof.
Each Award granted pursuant to the Plan shall be evidenced by an
Award Agreement, in such form or forms as the Board shall from
time to time determine. Award Agreements granted from time to
time or at the same time need not contain similar provisions but
shall be consistent with the terms of the Plan. Each Award
Agreement evidencing an Award of Options shall specify whether
such Options are intended to be Non-qualified Stock Options or
Incentive Stock Options, and in the absence of such
specification such Options shall be deemed Non-qualified Stock
Options.
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8.
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TERMS AND
CONDITIONS OF OPTIONS
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8.1. Option Price
The Option Price of each Option shall be fixed by the Board and
stated in the Award Agreement evidencing such Option. Except in
the case of Substitute Awards, the Option Price of each Option
shall be at least the Fair Market Value on the Grant Date of a
share of Stock; provided, however, that in the
event that a Grantee is a Ten Percent Stockholder, the
Option Price of an Option granted to such Grantee that is
intended to be an Incentive Stock Option shall be not less than
110 percent of the Fair Market Value of a share of Stock on
the Grant Date. In no case shall the Option Price of any Option
be less than the par value of a share of Stock.
8.2. Vesting.
Subject to Sections 8.3 and 17.3 hereof, each Option
granted under the Plan shall become exercisable at such times
and under such conditions as shall be determined by the Board
and stated in the Award Agreement. For purposes of this
Section 8.2, fractional numbers of shares of Stock
subject to an Option shall be rounded down to the next nearest
whole number.
8.3. Term.
Each Option granted under the Plan shall terminate, and all
rights to purchase shares of Stock thereunder shall cease, upon
the expiration of ten years from the date such Option is
granted, or under such circumstances and on such date prior
thereto as is set forth in the Plan or as may be fixed by the
Board and stated in the Award Agreement relating to such Option;
provided, however, that in the event that the
Grantee is a Ten Percent Stockholder, an Option granted to
such Grantee that is intended to be an Incentive Stock Option
shall not be exercisable after the expiration of five years from
its Grant Date.
8.4. Termination of Service.
Each Award Agreement shall set forth the extent to which the
Grantee shall have the right to exercise the Option following
termination of the Grantees Service. Such provisions shall
be determined in the sole discretion of the Board, need not be
uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of
Service.
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8.5. Limitations on Exercise of Option.
Notwithstanding any other provision of the Plan, in no event may
any Option be exercised, in whole or in part, prior to the date
the Plan is approved by the stockholders of the Company as
provided herein or after the occurrence of an event referred to
in Section 17 hereof which results in termination of
the Option.
8.6. Method of Exercise.
Subject to the terms of Article 12 and
Section 18.3, an Option that is exercisable may be
exercised by the Grantees delivery to the Company of
notice of exercise on any business day, at the Companys
principal office, on the form specified by the Company. Such
notice shall specify the number of shares of Stock with respect
to which the Option is being exercised and shall be accompanied
by payment in full of the Option Price of the shares for which
the Option is being exercised plus the amount (if any) of
federal
and/or other
taxes which the Company may, in its judgment, be required to
withhold with respect to an Award.
8.7. Rights of Holders of Options.
Unless otherwise stated in the applicable Award Agreement, an
individual holding or exercising an Option shall have none of
the rights of a stockholder (for example, the right to receive
cash or dividend payments or distributions attributable to the
subject shares of Stock or to direct the voting of the subject
shares of Stock) until the shares of Stock covered thereby are
fully paid and issued to him. Except as provided in
Section 17 hereof, no adjustment shall be made for
dividends, distributions or other rights for which the record
date is prior to the date of such issuance.
8.8. Delivery of Stock Certificates.
Promptly after the exercise of an Option by a Grantee and the
payment in full of the Option Price, such Grantee shall be
entitled to the issuance of a stock certificate or certificates
evidencing his or her ownership of the shares of Stock subject
to the Option.
8.9. Transferability of Options.
Except as provided in Section 8.10, during the
lifetime of a Grantee, only the Grantee (or, in the event of
legal incapacity or incompetency, the Grantees guardian or
legal representative) may exercise an Option. Except as provided
in Section 8.10, no Option shall be assignable or
transferable by the Grantee to whom it is granted, other than by
will or the laws of descent and distribution.
8.10. Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may
transfer, not for value, all or part of an Option which is not
an Incentive Stock Option to any Family Member. For the purpose
of this Section 8.10, a not for value
transfer is a transfer which is (i) a gift, (ii) a
transfer under a domestic relations order in settlement of
marital property rights; or (iii) a transfer to an entity
in which more than fifty percent of the voting interests are
owned by Family Members (or the Grantee) in exchange for an
interest in that entity. Following a transfer under this
Section 8.10, any such Option shall continue to be
subject to the same terms and conditions as were applicable
immediately prior to transfer. Subsequent transfers of
transferred Options are prohibited except to Family Members of
the original Grantee in accordance with this
Section 8.10 or by will or the laws of descent and
distribution. The events of termination of Service of
Section 8.4 hereof shall continue to be applied with
respect to the original Grantee, following which the Option
shall be exercisable by the transferee only to the extent, and
for the periods specified, in Section 8.4.
8.11. Limitations on Incentive Stock Options.
An Option shall constitute an Incentive Stock Option only
(i) if the Grantee of such Option is an employee of the
Company or any Subsidiary of the Company; (ii) to the
extent specifically provided in the related Award Agreement; and
(iii) to the extent that the aggregate Fair Market Value
(determined at the time the Option is granted) of the shares of
Stock with respect to which all Incentive Stock Options held by
such Grantee become exercisable for the first time during any
calendar year (under the Plan and all other plans of the
Grantees employer
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and its Affiliates) does not exceed $100,000. This limitation
shall be applied by taking Options into account in the order in
which they were granted.
8.12. Notice of Disqualifying Disposition.
If any Grantee shall make any disposition of shares of Stock
issued pursuant to the exercise of an Incentive Stock Option
under the circumstances described in Code Section 421(b)
(relating to certain disqualifying dispositions), such Grantee
shall notify the Company of such disposition within ten days
thereof.
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9.
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TERMS AND
CONDITIONS OF STOCK APPRECIATION RIGHTS
|
9.1. Right to Payment and Grant Price.
A SAR shall confer on the Grantee to whom it is granted a right
to receive, upon exercise thereof, the excess of (A) the
Fair Market Value of one share of Stock on the date of exercise
over (B) the grant price of the SAR as determined by the
Board. The Award Agreement for a SAR shall specify the grant
price of the SAR, which shall be at least the Fair Market Value
of a share of Stock on the date of grant. SARs may be granted in
conjunction with all or part of an Option granted under the Plan
or at any subsequent time during the term of such Option, in
conjunction with all or part of any other Award or without
regard to any Option or other Award; provided that a SAR that is
granted subsequent to the Grant Date of a related Option must
have a SAR Price that is no less than the Fair Market Value of
one share of Stock on the SAR Grant Date.
9.2. Other Terms.
The Board shall determine at the date of grant or thereafter,
the time or times at which and the circumstances under which a
SAR may be exercised in whole or in part (including based on
achievement of performance goals
and/or
future service requirements), the time or times at which SARs
shall cease to be or become exercisable following termination of
Service or upon other conditions, the method of exercise, method
of settlement, form of consideration payable in settlement,
method by or forms in which Stock will be delivered or deemed to
be delivered to Grantees, whether or not a SAR shall be in
tandem or in combination with any other Award, and any other
terms and conditions of any SAR.
9.3. Term.
Each SAR granted under the Plan shall terminate, and all rights
thereunder shall cease, upon the expiration of ten years from
the date such SAR is granted, or under such circumstances and on
such date prior thereto as is set forth in the Plan or as may be
fixed by the Board and stated in the Award Agreement relating to
such SAR.
9.4. Transferability of SARS.
Except as provided in Section 9.5, during the
lifetime of a Grantee, only the Grantee (or, in the event of
legal incapacity or incompetency, the Grantees guardian or
legal representative) may exercise a SAR. Except as provided in
Section 9.5, no SAR shall be assignable or
transferable by the Grantee to whom it is granted, other than by
will or the laws of descent and distribution.
9.5. Family Transfers.
If authorized in the applicable Award Agreement, a Grantee may
transfer, not for value, all or part of a SAR to any Family
Member. For the purpose of this Section 9.5, a
not for value transfer is a transfer which is
(i) a gift, (ii) a transfer under a domestic relations
order in settlement of marital property rights; or (iii) a
transfer to an entity in which more than fifty percent of the
voting interests are owned by Family Members (or the Grantee) in
exchange for an interest in that entity. Following a transfer
under this Section 9.5, any such SAR shall continue
to be subject to the same terms and conditions as were
applicable immediately prior to transfer. Subsequent transfers
of transferred SARs are prohibited except to Family Members of
the original Grantee in accordance with this Section 9.5
or by will or the laws of descent and distribution.
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10.
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TERMS AND
CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK
UNITS
|
10.1. Grant of Restricted Stock or Restricted Stock
Units.
Awards of Restricted Stock or Restricted Stock Units may be made
for no consideration (other than par value of the shares which
is deemed paid by Services already rendered).
10.2. Restrictions.
(a) At the time a grant of Restricted Stock or Restricted
Stock Units is made, the Board may, in its sole discretion,
establish a period of time (a restricted period)
applicable to such Restricted Stock or Restricted Stock Units.
Each Award of Restricted Stock or Restricted Stock Units may be
subject to a different restricted period. The Board may in its
sole discretion, at the time a grant of Restricted Stock or
Restricted Stock Units is made, prescribe restrictions in
addition to or other than the expiration of the restricted
period, including the satisfaction of corporate or individual
performance objectives, which may be applicable to all or any
portion of the Restricted Stock or Restricted Stock Units as
described in Article 14. Neither Restricted Stock
nor Restricted Stock Units may be sold, transferred, assigned,
pledged or otherwise encumbered or disposed of during the
restricted period or prior to the satisfaction of any other
restrictions prescribed by the Board with respect to such
Restricted Stock or Restricted Stock Units.
(b) Notwithstanding the terms of Section 10.2(a), and
subject to Section 10.9 below, (i) Restricted Stock
and Restricted Stock Units that vest solely by the passage of
time shall not vest in full in less than three years from the
Grant Date; and (ii) Restricted Stock and Restricted Stock
Units that vest, or are subject to acceleration of vesting, upon
the achievement of performance targets shall not vest in full in
less than one year from the Grant Date. The foregoing
restriction shall not apply to Restricted Stock or Restricted
Stock Unit Awards assumed in connection with mergers,
reorganizations, separations, or other transactions to which
Section 424(a) of the Code applies.
10.3. Restricted Stock Certificates.
The Company shall issue, in the name of each Grantee to whom
Restricted Stock has been granted, stock certificates
representing the total number of shares of Restricted Stock
granted to the Grantee, as soon as reasonably practicable after
the Grant Date. The Board may provide in an Award Agreement that
either (i) the Secretary of the Company shall hold such
certificates for the Grantees benefit until such time as
the Restricted Stock is forfeited to the Company or the
restrictions lapse, or (ii) such certificates shall be
delivered to the Grantee, provided, however, that
such certificates shall bear a legend or legends that comply
with the applicable securities laws and regulations and makes
appropriate reference to the restrictions imposed under the Plan
and the Award Agreement.
10.4. Rights of Holders of Restricted Stock.
Unless the Board otherwise provides in an Award Agreement,
holders of Restricted Stock shall have the right to vote such
Stock and the right to receive any dividends declared or paid
with respect to such Stock. The Board may provide that any
dividends paid on Restricted Stock must be reinvested in shares
of Stock, which may or may not be subject to the same vesting
conditions and restrictions applicable to such Restricted Stock.
All distributions, if any, received by a Grantee with respect to
Restricted Stock as a result of any stock split, stock dividend,
combination of shares, or other similar transaction shall be
subject to the restrictions applicable to the original Grant.
10.5. Rights of Holders of Restricted Stock Units.
10.5.1. Voting and Dividend Rights.
Holders of Restricted Stock Units shall have no rights as
stockholders of the Company. The Board may provide in an Award
Agreement evidencing a grant of Restricted Stock Units that the
holder of such Restricted Stock Units shall be entitled to
receive, upon the Companys payment of a cash dividend on
its outstanding Stock, a cash payment for each Restricted Stock
Unit held equal to the per-share dividend paid on the Stock.
Such Award Agreement may also provide that such cash payment
will be deemed reinvested in additional Restricted Stock Units
at a price per unit equal to the Fair Market Value of a share of
Stock on the date that such dividend is paid.
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10.5.2. Creditors Rights.
A holder of Restricted Stock Units shall have no rights other
than those of a general creditor of the Company. Restricted
Stock Units represent an unfunded and unsecured obligation of
the Company, subject to the terms and conditions of the
applicable Award Agreement.
10.6. Termination of Service.
(a) Unless the Board otherwise provides in an Award
Agreement or in writing after the Award Agreement is issued,
upon the termination of a Grantees Service, any Restricted
Stock or Restricted Stock Units held by such Grantee that have
not vested, or with respect to which all applicable restrictions
and conditions have not lapsed, shall immediately be deemed
forfeited. Upon forfeiture of Restricted Stock or Restricted
Stock Units, the Grantee shall have no further rights with
respect to such Award, including but not limited to any right to
vote Restricted Stock or any right to receive dividends with
respect to shares of Restricted Stock or Restricted Stock Units.
(b) Notwithstanding the terms of
Section 10.6(a), and subject to Section 10.9
below, the Board may not (i) grant Restricted Stock or
Restricted Stock Units that provide for acceleration of vesting,
except in the case of a Grantees death, disability or
retirement, or upon or in connection with a Corporate
Transaction, or upon the satisfaction of performance-based
vesting conditions as provided in Section 10.2(b)(ii); or
(ii) waive vesting restrictions or conditions applicable to
Restricted Stock or Restricted Stock Units, except in the case
of a Grantees death, disability or retirement or upon or
in connection with a Corporation Transaction. The foregoing
restriction shall not apply to Restricted Stock or Restricted
Stock Unit Awards assumed in connection with mergers,
reorganizations, separations, or other transactions to which
Section 424(a) of the Code applies.
10.7. Purchase of Restricted Stock and Shares Subject to
Restricted Stock Units.
The Grantee shall be required, to the extent required by
applicable law, to purchase the Restricted Stock or shares of
Stock subject to vested Restricted Stock Units from the Company
at a Purchase Price equal to the greater of (i) the
aggregate par value of the shares of Stock represented by such
Restricted Stock or Restricted Stock Units (ii) the
Purchase Price, if any, specified in the Award Agreement
relating to such Restricted Stock or Restricted Stock Units. The
Purchase Price shall be payable in a form described in
Section 12 or, in the discretion of the Board, in
consideration for past or future Services rendered to the
Company or an Affiliate.
10.8. Delivery of Stock.
Upon the expiration or termination of any restricted period and
the satisfaction of any other conditions prescribed by the
Board, the restrictions applicable to shares of Restricted Stock
or Restricted Stock Units settled in Stock shall lapse, and,
unless otherwise provided in the Award Agreement, a stock
certificate for such shares shall be delivered, free of all such
restrictions, to the Grantee or the Grantees beneficiary
or estate, as the case may be. Neither the Grantee, nor the
Grantees beneficiary or estate, shall have any further
rights with regard to a Restricted Stock Unit once the share of
Stock represented by the Restricted Stock Unit has been
delivered.
10.9. Unrestricted Pool.
Notwithstanding anything to the contrary in this Plan,
Restricted Stock and Restricted Stock Unit Awards may be
(i) granted with vesting terms that do not comply with the
requirements of Section 10.2(b); (ii) granted
with terms providing for the acceleration of vesting that do not
comply with Section 10.6(b)(i),
and/or
(iii) subsequent to the date of grant, modified to provide
acceleration of vesting terms that do not comply with
Section 10.6(b)(ii), provided that, in no event,
shall the aggregate number of shares underlying Restricted Stock
and Restricted Stock Unit Awards granted or modified as
contemplated in this Section 10.9 exceed five
percent of the shares authorized for issuance in
Section 4.1 hereof. In calculating compliance with
this limitation, the share usage rules set forth in
Section 4.3 shall apply.
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11.
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TERMS AND
CONDITIONS OF UNRESTRICTED STOCK AWARDS
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The Board may, in its sole discretion, grant (or sell at par
value or such other higher Purchase Price determined by the
Board) an Unrestricted Stock Award to any Grantee pursuant to
which such Grantee may receive shares of Stock free of any
restrictions (Unrestricted Stock) under the Plan,
which Awards shall be deducted from the five
A-12
percent limitation set forth in Section 10.9.
Unrestricted Stock Awards may be granted or sold as described in
the preceding sentence in respect of past services and other
valid consideration, or in lieu of, or in addition to, any cash
compensation due to such Grantee.
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12.
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FORM OF
PAYMENT FOR OPTIONS AND RESTRICTED STOCK
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12.1. General Rule.
Payment of the Option Price for the shares purchased pursuant to
the exercise of an Option or the Purchase Price for Restricted
Stock shall be made in cash or in cash equivalents acceptable to
the Company.
12.2. Surrender of Stock.
To the extent the Award Agreement so provides, payment of the
Option Price for shares purchased pursuant to the exercise of an
Option or the Purchase Price for Restricted Stock may be made
all or in part through the tender or attestation to the Company
of shares of Stock, which shall be valued, for purposes of
determining the extent to which the Option Price or Purchase
Price has been paid thereby, at their Fair Market Value on the
date of exercise or surrender.
12.3. Cashless Exercise.
With respect to an Option only (and not with respect to
Restricted Stock), to the extent permitted by law and to the
extent the Award Agreement so provides, payment of the Option
Price for shares purchased pursuant to the exercise