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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CIENA Corporation
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(Name of Registrant as Specified In Its Charter)
CIENA Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1.
Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11(1)
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4. Proposed maximum aggregate value transaction:
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5. Total fee paid:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined):
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration number, or the Form
or Schedule and the date of its filing.
1. Amount previously paid:
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Notes:
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[LOGO]
CIENA CORPORATION
1201 Winterson Road
Linthicum, Maryland 21090
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 2001 Annual Meeting of Stockholders of CIENA Corporation will be
held at the BWI Marriott, 1743 W. Nursery Road, Baltimore, Maryland, on
Monday, March 12, 2001 at 3:00 p.m. for the following purposes:
1. To elect three Class I directors.
2. To adopt the Third Amended and Restated CIENA Corporation 1994 Stock
Option Plan to increase the number of options authorized for issuance thereunder
from 40,100,000 to 46,100,000 and to make certain other changes, including
eliminating the ability of the Board of Directors to reprice options granted
after January 17, 2001.
3. To amend the Third Amended and Restated CIENA Corporation 1994 Stock
Option Plan (or, if Proposal 2 is not adopted, the existing Second Amended and
Restated 1994 Stock Option Plan) to add a provision that will automatically
increase the number of shares reserved under the Plan by 0.75% of the issued and
outstanding Common Stock of the Corporation on the last day of each fiscal year
beginning with 2001 and ending with 2004.
4. To amend the Corporation's Third Restated Certificate of
Incorporation to increase the number of shares of Common Stock authorized for
issuance thereunder from 460,000,000 shares to 980,000,000 shares.
5. To consider and act upon such other business as may properly come
before the meeting.
Whether or not you expect to attend the meeting, please sign, date and
return the enclosed proxy as promptly as possible in the enclosed stamped
envelope.
By Order of the Board of Directors
/s/ Michael O. McCarthy III
Michael O. McCarthy III
Secretary
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Linthicum, Maryland
February 5, 2001
PROXY STATEMENT
Annual Meeting of Stockholders
March 12, 2001
This Proxy Statement will be furnished on or about February 5, 2001 to
stockholders of CIENA Corporation (the "Corporation"), 1201 Winterson Road,
Linthicum, Maryland 21090, in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be voted at the Annual Meeting of
Stockholders. The stockholder giving the proxy has the power to revoke the proxy
at any time before it is exercised. Such right of revocation is not limited by
or subject to compliance with any formal procedures.
The Corporation will bear the cost of soliciting proxies. Copies of
solicitation material may be furnished to brokers, custodians, nominees and
other fiduciaries for forwarding to beneficial owners of shares of the
Corporation's Common Stock, and normal handling charges may be paid for such
forwarding service. Officers and other management employees of the Corporation,
who will receive no additional compensation for their services, may solicit
proxies by mail, personal interview, telephone and telegraph.
At the close of business on January 11, 2001, there were 287,601,323
shares of the Common Stock of the Corporation outstanding and entitled to vote
at the meeting. There were 1,483 record holders as of January 11, 2001 and only
stockholders of record on that date will be entitled to vote at the meeting.
Each share will have one vote.
PROPOSAL 1
Election of Directors
General
The Board of Directors currently consists of eight members. The directors are
divided into three classes, each class serving for a staggered three-year term.
Class I and Class II each consist of three directors and Class III consists of
two directors. Class II, whose term expires in 2002, consists of Ms. O'Brien and
Messrs. Smith and Cash; Class III, whose term expires in 2003, consists of
Professor Bradley and Mr. Taylor; and Class I, whose term expires at the Annual
Meeting, consists of Dr. Nettles, Mr. Dillon and Ms. Fitt. At the Annual
Meeting, three directors will be elected to fill positions in Class I. Dr.
Nettles, Mr. Dillon and Ms. Fitt are nominees for election at the meeting. Each
of the nominees for Class I, if elected, will serve for terms expiring at the
2004 annual meeting of stockholders.
Unless otherwise instructed on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as directors of the persons named below as
nominees. The Board of Directors believes that all such nominees will stand for
election and will serve if elected. However, if any of the persons nominated by
the Board of Directors fails to stand for election or is unable to accept
election, proxies will be voted by the proxy holders for the election of such
other person or persons as the Board of Directors may recommend.
The following table presents information concerning persons nominated
for election as directors of the Corporation and for those directors whose terms
of office will continue after the meeting.
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Nominees for Election as a Director for Terms Expiring in 2004
Patrick H. Nettles, Ph.D........Chairman of the Board of Directors since October
2000, President of the Corporation from April
1994 through October 2000 and Director and
Chief Executive Officer since February 1994.
Dr. Nettles, 57, serves as a Trustee for the
California Institute of Technology and also
serves on the Advisory Board to the President
at Georgia Institute of Technology. From 1992
until 1994, Dr. Nettles served as Executive
Vice President and Chief Operating Officer of
Blyth Holdings Inc., a publicly-held supplier
of client/server software. From late 1990
through 1992, Dr. Nettles was President and
Chief Executive Officer of Protocol Engines
Inc., a development stage enterprise, formed as
an outgrowth of Silicon Graphics Inc., and
targeted toward very large scale integration
based solutions for high-performance computer
networking. From 1989 to 1990, Dr. Nettles was
Chief Financial Officer of Optilink, a venture
start-up that was acquired by DSC
Communications. Dr. Nettles received his B.S.
degree from the Georgia Institute of Technology
and his Ph.D. from the California Institute of
Technology.
John R. Dillon..................Director of the Corporation since October 1999.
Mr. Dillon, age 59, held positions at The
Coca-Cola Company, Scientific Atlanta and Fuqua
National prior to joining Cox Communications
in 1981. He was instrumental in taking it
private in 1985 and merging it with Cox
Newspapers to form Cox Enterprises, at which
time he was elected Senior Vice President,
CFO and a member of the board of directors. At
Cox Enterprises, he was responsible for all
corporate financial activities as well as
planning and business development until his
retirement in December 1996. He was a founding
member of the partnership board of Sprint PCS
and served on the Boards of Teleport
Communications Group and Cox Communications.
Mr. Dillon holds an M.B.A. from Harvard
Business School and a B.E.E. degree from
Georgia Institute of Technology, where he was
elected to the Academy of Distinguished
Engineering Alumni in 1997. He was a founding
director of the Georgia Center for Advanced
Telecommunications Technology and served on the
Georgia Tech National Advisory Board. Mr. Dillon
serves on the Audit Committee of the Board of
Directors. He is also a director of AirGate PCS.
Lawton W. Fitt..................Director of the Corporation since November 2000.
Ms. Fitt, age 47, was elected a partner at
Goldman Sachs in 1994 and has been a managing
director since 1996. Ms. Fitt has been involved
in investment banking and equity underwriting
for high-technology companies, including
numerous initial public offerings in the
Internet, software and communications equipment
sectors. Ms. Fitt is currently co-head of
Goldman Sachs' European High Technology
Investment Banking Group. In addition to
chairing the Corporate Financing Committee of
the National Association of Securities Dealers,
Ms. Fitt serves as a director on the boards of
Wink Communications, Inc. and e-Steel
Corporation. Ms. Fitt is a trustee of the Darden
School Foundation. Ms. Fitt received an A.B.
degree in European History from Brown
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University and her M.B.A degree from the Darden
School of the University of Virginia. Ms. Fitt
serves on the Audit Committee of the Board of
Directors.
Directors Continuing in Office
Stephen P. Bradley, Ph.D........Director of the Corporation since April 1998.
Professor Bradley is a William Ziegler Professor
of Business Administration and the Chairman of
the Program for Management Development at the
Harvard Business School. A member of the Harvard
faculty since 1968, Professor Bradley is also
Chairman of Harvard's Executive Program in
Competition and Strategy and teaches in
Harvard's Delivering Information Services
program. Professor Bradley has written
extensively on the telecommunications industry
and the impact of technology on competitive
strategy. Professor Bradley received his B.E.
degree in Electrical Engineering from Yale
University in 1963 and his M.S. degree and Ph.D.
in Operations Research from the University of
California, Berkeley, in 1965 and 1968
respectively. Professor Bradley serves on the
Audit Committee of the Board of Directors.
Professor Bradley's term as Director expires in
2003.
Gerald H. Taylor................Director of the Corporation since January 2000.
Mr. Taylor, age 59, has been a private
consultant and investor in the
telecommunications industry since November 1998.
He served as Chief Executive Officer of MCI
Communications from November 1996 to November
1998 and was President and Chief Operating
Officer from July 1994 to November 1996. Mr.
Taylor was a member of the Board of Directors of
MCI WorldCom Inc. from 1998 to 1999. He
currently serves on the Board of Lafarge
Corporation. Mr. Taylor was Chief Operating
Officer of MCI from April 1993 to November 1996.
He joined MCI in 1969 as its sixth employee and
was integrally involved in building MCI through
key roles held in operations, sales and
marketing. Mr. Taylor received a B.S. in
physics from San Francisco State University.
Mr. Taylor serves on the Human Resources
Committee of the Board of Directors. Mr.
Taylor's term as Director expires in 2003.
Judith M. O'Brien...............Director of the Corporation since July 2000.
Since 1984, Ms. O'Brien, 50, has been a partner
with Wilson Sonsini Goodrich & Rosati, where she
specializes in corporate finance, mergers and
acquisitions and general corporate matters. In
July 1993, Ms. O'Brien was named as one of the
top 25 lawyers under 45 in California by the
California Law Business, and in 1997 she was
named one of the top five women attorneys in
Northern California by the California Lawyer as
well as one of the leading women securities
lawyers by The Recorder. In April 2000, she was
named one of the top twelve Dealmakers of the
Year for 1999 by American Lawyer magazine. Ms.
O'Brien received her B.A. from Smith College and
her law degree from UCLA. Ms. O'Brien serves on
the Human Resources Committee of the Board of
Directors. Ms. O'Brien's term as Director
expires in 2002.
Gary B. Smith .................President, Chief Operating Officer and Director
since October 2000 and Senior Vice President,
Chief Operating Officer from August 1999 to
October 2000. Mr. Smith, age 40, served as
Senior Vice President Worldwide Sales from
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September 1998 to August 1999, and was
previously Vice President of International Sales
since joining the Company in November 1997. From
June 1995 to October 1997, Mr. Smith served as
Vice President, Sales and Marketing for Intelsat
and from August 1991 to May 1995, Mr. Smith
served as Vice President of Sales and Marketing
for Cray Communications, Inc. Mr. Smith received
an M.B.A. from Ashridge Management College, U.K.
Mr. Smith's term as Director expires in 2002.
Harvey B. Cash..................Director of the Corporation since April 1994.
Mr. Cash, age 61, 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 board of directors of
Liberte, Inc., Panja Corporation, and i2
Technologies Inc.. He is also an advisor to
Austin Ventures. Mr. Cash received a B.S. degree
in Electrical Engineering from Texas A&M
University and an M.B.A. degree from Western
Michigan University. Mr. Cash served on the
board of directors of Benchmarq Microelectronics
from 1990 to 1999, and on the board of directors
of Aurora Electronics, Inc. from 1991 to 1999.
Mr. Cash serves on the Human Resources Committee
of the Board of Directors. Mr. Cash's term as
Director expires in 2002.
Board and Board Committee Information
Board Committees
The current committees of the Board of Directors each consist entirely
of non-employee directors. The Corporation's Audit Committee makes
recommendations concerning the engagement of independent public accountants,
discusses the plans and reviews results of the audit engagement with the
independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and
discusses the adequacy of the Corporation's internal accounting controls.
Professor Bradley, Mr. Dillon and Ms. Fitt are the members of the Audit
Committee. Michael Zak was a member of the Audit Committee until his resignation
from the Board of Directors in July 2000. Ms. O'Brien was a member of the Audit
Committee from August 2000 until December 2000. The Corporation's Human
Resources Committee determines compensation for the Corporation's executive
officers and administers the Corporation's 1999 Non-Officer Stock Option Plan
(the "Non-Officer Plan"), the Amended and Restated 1994 Stock Option Plan (the
"1994 Plan"), the Second Amended and Restated 1994 Stock Option Plan, the 1996
Outside Directors Stock Option Plan and the 1999 Employee Stock Purchase Plan.
Ms. O'Brien and Messrs. Cash and Taylor are the members of the Human Resources
Committee. Mr. Zak was a member of the Human Resources Committee until his
resignation from the Board of Directors in July 2000. Mr. Dillon was a member of
the Human Resources Committee from May 2000 until December 2000.
During fiscal 2000, the Board of Directors held 16 meetings, the Audit
Committee held 4 meetings and the Human Resources Committee held 7 meetings.
Each director of the Corporation attended 75% or more of all Board of Director
meetings and 75% or more of all meetings of each committee on which he or she
served, except for Director Cash who only attended 57% of the meetings of the
Human Resources Committee. Ms. Fitt was elected to the Board of Directors in
November 2000 and attended 75% or more of all Board of Director meetings and 75%
or more of all meetings of each committee on which she served during her term.
Ms. O'Brien was elected to the Board of Directors in July 2000 and attended 75%
or more of all Board of Director meetings and 75% or more of all meetings of
each committee on which she served during her term.
Directors' Fees
Members of the Board of Directors receive $2,500 for participation in
each regular meeting of the Board of Directors and $1,250 for each committee
meeting. The
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Corporation also reimburses each member of the Board of Directors
for out-of-pocket expenses incurred in connection with attendance at meetings.
Under the Corporation's 1996 Outside Directors Stock Option Plan (the "Directors
Plan"), non-employee Directors are eligible to receive stock options in
consideration for their services. The Directors Plan provides that each
non-employee Director will receive an option grant for 60,000 shares of Common
Stock upon joining the Board of Directors and an annual option grant for 20,000
shares of Common Stock thereafter. Directors who have not served for at least
twelve months as of the date immediately following the date of the last annual
meeting will receive a pro-rata annual option grant. The exercise price of
options granted under the Directors Plan will be equal in all cases to the fair
market value of the Common Stock on the date of grant. Initial grants under the
Directors Plan vest over a period of three years and annual grants vest in full
on the first anniversary of the date of grant. Options generally must be
exercised within ten years.
At the annual meeting held on March 16, 2000, each of Professor Bradley
and Messrs. Cash, and Zak, non-employee Directors, received an annual option
grant under the Directors Plan for 20,000 shares of Common Stock, with an
exercise price of $12.532 per share and Directors Dillon and Taylor received a
pro-rata annual option grant under the Directors Plan for 6,666 shares of Common
Stock and 3,333 shares of Common Stock, respectively. Mr. Taylor received an
initial option grant for 60,000 shares of Common Stock on January 5, 2000 when
he was first appointed to the Board of Directors, with an exercise price of
$24.88 per share. Ms. O'Brien received an initial option grant for 60,000 shares
of Common Stock on July 18, 2000 when she was first appointed to the Board of
Directors, with an exercise price of $78.469 per share. Ms. Fitt received an
initial option grant for 60,000 shares of Common Stock on November 2, 2000 when
she was first appointed to the Board of Directors, with an exercise price of
$106.438 per share. The option grants reflect the Company's two-for-one stock
split on September 18, 2000, pursuant to which the number of shares for option
grants were doubled and the exercise price was halved.
Beneficial Ownership of Common Stock
The following table sets forth certain information as of October 31,
2000, unless otherwise specified, with respect to the beneficial ownership of
the Corporation's Common Stock by each person who is known to the Corporation to
have beneficial ownership of more than 5% of the outstanding shares of Common
Stock, each director, each named executive officer (as defined below), and all
directors and executive officers of the Corporation as a group.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class
- ---------------------- ----------------------- ----------------
Patrick H. Nettles, Ph.D. (2)(3) 6,905,967 2.40%
Gary B. Smith (2) 389,195 *
Mark Cummings(2) 235,167 *
Steve W. Chaddick(2) 1,004,625 *
Joseph R. Chinnici(2) 355,200 *
Stephen P. Bradley, Ph.D.(2) 100,000 *
Harvey B. Cash(2)(4) 485,410 *
John R. Dillon(2) 20,200 *
Gerald H. Taylor(2) 0 *
Judith M. O'Brien(6) 8,166 *
Lawton W. Fitt(5) 0 *
All officers and directors as a group (20 persons)(2) 10,451,497 3.60%
- ----------
* Represents less than 1%.
(1) 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 and except
as indicated in the other footnotes to this table. Beneficial ownership
is determined in accordance with the rules of the United States
Securities and Exchange Commission ("SEC"). In computing the number of
shares beneficially owned by a person and the percentage ownership of
that person, shares of Common Stock subject to options or warrants held
by that
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person that are currently exercisable or exercisable within 60 days
after October 31, 2000 are deemed outstanding. Such shares, however, are
not deemed outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Includes shares issuable upon exercise of stock options granted under
the 1994 Plan or the Directors Plan. Options granted under the 1994 Plan
that are reflected in the beneficial ownership table are generally
exercisable immediately but may be subject to a right of repurchase
based on a scheduled vesting period. Generally, shares underlying
options vest over four years and options must be exercised within ten
years. Initial grants of options under the Directors Plan vest over a
period of three years, annual grants vest in full on the first
anniversary date of the grant and options must be exercised within ten
years of the date of grant.
(3) Does not include 350,000 shares held by the Patrick H. and Marion S.
Nettles Charitable Trust and 350,000 shares held by The Patrick and
Selma Nettles Charitable Remainder Unitary Trust FBO Caltech. Dr.
Nettles disclaims beneficial ownership of the shares held by each of
these trusts.
(4) Includes 441,486 shares of Common Stock owned by InterWest Partners VI,
L.P., which Mr. Cash may be deemed to beneficially own by virtue of his
status as a Managing Director of InterWest Management Partners VI, LLC,
which is the general partner of InterWest Partners VI, L.P., and 13,924
shares owned by InterWest Investors VI, L.P., which Mr. Cash may be
deemed to beneficially own by virtue of his status as a Managing
Director of InterWest Management Partners VI, LLC, which is the general
partner of InterWest Investors VI, L.P. Mr. Cash disclaims beneficial
ownership of the shares held by such entities except to the extent of
his proportionate partnership interest therein. Mr. Cash has direct
ownership of 172,500 shares of Common Stock, including 145,000 shares
owned by the Harvey B. Cash self-directed IRA and 2,572 shares owned by
InterWest Management Profit Sharing Retirement Plan FBO Harvey B. Cash.
(5) Ms. Fitt joined the board on November 2, 2000. She received a grant of
60,000 options upon joining the board.
(6) Ms. O'Brien joined the board on July 18, 2000. She received a grant of
30,000 options upon joining the board. Following the two-for-one stock
split of the Corporation, which became effective on September 18, 2000,
she now holds a total of 60,000 options.
Compensation
Summary Compensation Table
The following table sets forth the annual and long-term compensation for
services in all capacities to the Corporation for the fiscal years ended October
31, 2000, 1999 and 1998 of the Chief Executive Officer and the Named Executive
Officers:
Long-Term
Annual Compensation Compensation
----------------------------- ------------
Securities
Underlying All Other
Year Salary Bonus Options Compensation(1)
---- ------ ----- ------- --------------
Patrick H. Nettles, Ph.D 2000 $560,079 $550,000 262,500 $2,411
Chief Executive Officer 1999 348,077 362,500 200,000 2,740
1998 300,000 150,000 5,480
Gary B. Smith 2000 $325,000 $243,750 292,500 $561
President and 1999 277,404 215,625 395,000 199
Chief Operating Officer 1998 160,000 90,000 100,000 199
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Mark Cummings 2000 $250,000 $125,000 60,000 $997
Senior Vice President, Operations 1999 229,808 115,625 80,000 184
1998 225,000 56,250 184
Steve W. Chaddick 2000 250,000 $125,000 205,000 $858
Senior Vice President, 1999 229,808 115,625 210,000 348
Systems and Technology 1998 225,000 56,250 348
Joseph R. Chinnici 2000 250,000 $125,000 105,000 $898
Senior Vice President, Finance and 1999 229,808 115,625 110,000 170
Chief Financial Officer 1998 225,000 56,250 170
(1) The Corporation's life insurance plan provides each employee with life
insurance coverage equal to two times the employee's annual salary and
bonus, up to a maximum of $500,000. These amounts represent life
insurance premiums paid by the Corporation on behalf of the Chief
Executive Officer and the Named Executive Officers in order to provide
additional coverage equal to the difference between $500,000 and twice
the individual's annual salary and bonus.
Option Grants in Last Fiscal Year
The following table provides the specified information concerning
options granted to the Named Executive Officers for the fiscal year ended
October 31, 2000:
Number of Percent of
Securities Total Options Potential Realizable Value at
Underlying Granted to Exercise or Assumed Annual Rates of
Options Employees In Base Price Stock Price Appreciation for
Granted(1) Fiscal 2000 (Per Share)(2) Expiration Date Option Term (3)
---------- ------------- -------------- --------------- -----------------------------
5% 10%
----- -----
Patrick H. Nettles, Ph.D 262,500 2.09% $ 130.00 10/18/10 $21,461,029 $54,386,461
Gary B. Smith 292,500 2.33% 130.00 10/18/10 23,913,718 60,602,057
Mark Cummings 60,000 0.48% 130.00 10/18/10 4,905,378 12,431,191
Steve W. Chaddick 100,000 0.80% 33.41 01/17/10 2,100,917 5,324,136
105,000 0.84% 130.00 10/18/10 8,484,412 21,754,584
Joseph R. Chinnici 105,000 0.84% 130.00 10/18/10 8,584,411 21,754,584
(1) Options vest and become exercisable 25% on the last day of the month in
which the first anniversary of the grant occurs and 2.084% per month
thereafter. As of October 31, 2000, none of these options were vested.
(2) Options were granted having exercise prices at fair market value on the
date of grant.
(3) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price appreciation of 5%
and 10% from the date of grant to the date of expiration of such
options. These assumptions are not intended to forecast future
appreciation of the Corporation's stock price. The Corporation's stock
price may increase or decrease in value over the time period set forth
above.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
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The following table provides the specified information concerning option
exercises in the last fiscal year and unexercised options held as of October 31,
2000 by the Named Executive Officers:
Shares Number of Securities Underlying Value of Unexercised in-the-
Acquired on Unexercised Options at Money Options at
Exercise Value Realized October 31, 2000(1) October 31, 2000(2)
----------- -------------- ------------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Patrick H. Nettles, Ph.D - $ - 1,750,000 462,500 $178,237,500 $17,618,700
Gary B. Smith 164,896 9,944,015 8,646 613,958 789,641 28,818,687
Mark Cummings 161,000 10,741,708 202,750 126,250 20,639,057 5,937,253
Steve W. Chaddick 240,000 23,895,403 873,333 374,167 88,675,270 21,874,072
Joseph R. Chinnici 212,800 17,255,880 291,450 201,250 29,935,717 8,580,058
(1) All options prior to Fiscal 1998 are exercisable at the date of grant,
but shares purchased upon exercise of options are subject to repurchase
by the Corporation based upon a scheduled vesting period. Of the shares
underlying options 1,750,000, 8,646, 202,750, 795,208, and 249,159 of
the shares underlying options held by Dr. Nettles and Messrs. Smith,
Cummings, Chaddick, and Chinnici respectively, are vested.
(2) Calculated on the basis of the fair market value of the underlying
Common Stock as of October 28, 2000 of $103.00 per share, less the
aggregate exercise price. The value of vested in-the-money options held
by Dr. Nettles and Messrs. Smith, Cummings, Chaddick, and Chinnici is
$178,237,500, $789,641, $20,639,057, $80,718,238 and $25,628,378,
respectively.
Employment Agreements and Change-in-Control Arrangements
In April 1994, the Corporation entered into an employment agreement with
Dr. Nettles. The employment agreement specifies that Dr. Nettles is an employee
at will. In the event that he is terminated for cause, as defined in the
employment agreement, he will receive a severance payment equal to his monthly
base salary until the earlier of the expiration of six months or the
commencement of employment with a person or entity other than the Corporation.
In November 1998, the Corporation entered into transfer of
control/severance agreements with Dr. Nettles, and Messrs. Smith, Cummings,
Chaddick and Chinnici. The initial term of each of these agreements is three
years. The agreements provide for the payment of up to one year of salary and
bonus continuation in the event that the Named Executive Officer's employment is
terminated without cause or for "good reason," as defined in the agreements,
within one year following a change-in-control of the Corporation.
In August 1999, the Corporation entered into an employment agreement
with Mr. Smith. The employment agreement provides for payment of an incentive
bonus of $3,000,000 to Mr. Smith upon the earlier of: (i) his termination
without cause or for "good reason," as defined in the agreement, following a
transfer of control, or (ii) on August 18, 2002. In the event that Mr. Smith
elects to terminate his employment for "good reason" as defined in the
agreement, or he is terminated for any reason other than for cause, he will
receive a pro-rata portion of the incentive bonus.
Human Resources Committee Report on Executive Compensation
The Human Resources Committee of the Board of Directors (the
"Committee") in fiscal 2000 consisted of Messrs. Cash and Taylor and Ms.
O'Brien, none of whom are employees or officers of the Corporation. Mr. Zak was
a member of the Committee until his resignation from the Board of Directors in
July of 2000. Mr. Dillon was a member of the Committee from May of 2000 until
December of 2000, Mr. Taylor was elected to the Committee in March of 2000 and
Ms. O'Brien was elected to the Committee in August of 2000. The Committee
advises and assists management in developing the Corporation's compensation and
personnel policies, and provides Board oversight of their implementation. The
Committee endeavors to meet no less than four times per year to review issues
associated with compensation, human resources policies, personnel recruitment
and retention and to
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consider, amend, or approve quarterly objectives for the Corporation, as
recommended by the Corporation's Chief Executive Officer.
The Committee has adopted a performance-based compensation policy for
executive officers that considers both the long and short term. These two
components are linked in a way intended to focus management on increasing the
strength of the business and its ability to serve important customers with
leading, high-value products, while building the organization in a deliberate,
thoughtful way. The Committee believes that this policy will increase
stockholder value over the long term. On at least an annual basis, the Committee
approves the Corporation's compensation package for executive officers, which
includes a combination of annual base salary and benefits, performance-based
quarterly bonuses, and long-term compensation consisting of stock options.
Annual base salaries are established following an assessment by the Committee of
market survey data for comparable positions in comparable companies compiled by
an independent compensation consultant. The Committee's goal is to set the
Corporation's total compensation for various positions at levels that are
generally comparable to the averages indicated by the market survey data.
Because of the competitive nature and projected growth of the optical networking
industry, the Committee typically targets between the fiftieth and the
seventy-fifth percentile of these surveys in setting compensation. In setting
compensation the Committee takes into account regional and national data,
together with the skills and performance of the individual and the needs of the
Corporation. Quarterly bonus payments to members of management are awarded
following assessment by the Committee of the success of the Corporation in
achieving its revenue and income objectives.
Annual base salaries for members of management, including Dr. Patrick H.
Nettles, the Chief Executive Officer of the Corporation, are reassessed and
reset annually and were most recently reassessed and reset for fiscal 2001 in
accordance with the foregoing policy in October 2000. The Committee also
determined that the Corporation's quarterly corporate objectives were met or
otherwise satisfied during each of the four fiscal quarters of fiscal 2000, and
bonuses were paid accordingly at the conclusion of each quarter during fiscal
2000. Management participates, along with all other employees, in the
Corporation's annual grant of stock options to employees. In addition,
consistent with the Corporation's policy, members of management who were
promoted during fiscal 2000 received an additional grant of stock options at the
time of their promotion. The annual grant of stock options to Company employees
and management was first implemented in November 1998.
With respect to the compensation of Dr. Nettles for the fiscal year
ended October 31, 2000, the Committee recognized his unique role and
responsibility as Chief Executive Officer of the Corporation and formerly as
President and Chief Executive Officer, but otherwise considered no factors or
criteria different from those applied to members of management generally. Mr.
Nettles' incentive compensation for fiscal 2000 was payable based upon the
success of the Corporation in achieving certain quarterly revenue and income
objectives that were set by the Committee in advance of each fiscal quarter. If
the Company met or exceeded these criteria in a fiscal quarter, Dr. Nettles
would receive a bonus of 25% of his base salary. If the Company did not meet the
objectives set for a fiscal quarter, Dr. Nettles would not receive a bonus for
that quarter. Because these criteria were met or exceeded in each of the four
quarters during fiscal 2000, the full bonus amounts, equal to 100% of Dr.
Nettles' base salary, was paid to Dr. Nettles in fiscal 2000. Dr. Nettles was
also awarded stock options in the Corporation's annual grant based upon market
survey data. The Committee targeted between the fiftieth and the seventy-fifth
percentile of this survey in setting Dr. Nettles' annual option grant.
For fiscal 2001, the Committee will again establish quarterly corporate
objectives. If the Committee determines that the corporate objectives have been
met or otherwise satisfied in each of the four fiscal quarters, the bonus
payments for the executive officers of the Company, which will be paid quarterly
on an equal pro rata basis, will equal, in the aggregate, up to 50% or 100% of
an executive's base salary, with the exact percentage based on the particular
officer's title and responsibilities as viewed by the Committee. Only the Chief
Executive Officer, the President and
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Chief Operating Officer and the Sr. Vice President of Worldwide sales are
eligible for a bonus of up to 100% of base salary in fiscal 2001.
Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), and applicable Treasury regulations, no tax deduction is allowed
for annual compensation in excess of $1 million paid to any of the five most
highly compensated executive officers. "Performance-based" compensation that has
been approved by stockholders, however, is excluded from the $1 million limit
if, among other requirements, the compensation is payable only upon attainment
of pre-established objective performance goals and the board committee that
establishes such goals consists only of "outside directors" as defined for
purposes of Section 162(m). The Board of Directors has approved the adoption of
the CIENA Corporation Third Amended and Restated 1994 Stock Option Plan (the
"Third Amended and Restated Plan"), which is structured to qualify as
"performance-based," and is submitting that plan for shareholder approval at
this Annual Meeting. In addition, all of the members of the Human Resources
Committee qualify as "outside directors." Accordingly compensation awarded by
the Committee to the Corporation's five most highly compensated executive
officers under the Third Amended and Restated Plan is intended to be deductible
under Section 162(m). The Human Resources Committee thus intends to structure
performance-based compensation, including stock option grants and annual
bonuses, to executive officers who may be subject to Section 162(m) in a manner
that satisfies the requirements of Section 162(m) so long as doing so is
compatible with its determinations as to the most appropriate methods and
approaches for the design and delivery of compensation to executive officers of
CIENA.
Submitted by the members of the Human Resources Committee:
Judith O'Brien (Chairman)
Harvey B. Cash
Gerald Taylor
Compensation Committee Interlocks and Insider Participation
The Human Resources Committee of the Board of Directors, which serves
the traditional functions of a compensation committee, consists of Harvey B.
Cash, Gerald H. Taylor and Judith M. O'Brien. None of Messrs. Cash and Taylor
and Ms. O'Brien was at any time during the fiscal year ended October 31, 2000,
or at any other time, an officer or employee of the Corporation. No member of
the Human Resources Committee of the Corporation serves as a member of the board
of directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Corporation's Board of Directors
or Human Resources Committee.
Audit Committee Report
The Audit Committee of the Board of Directors (the "Audit Committee")
consists of Mr. Dillon, Ms. Fitt and Professor Bradley, all of whom meet the
independence and experience requirements of Rule 4200(a)(15) of the National
Association of Securities Dealers' listing standards. The Audit Committee's
responsibilities are as described in a written Charter adopted by the Board,
which is attached as Appendix 2 to this Proxy Statement. Mr. Zak was a member
of the Audit Committee until his resignation from the Board of Directors in
July 2000. Ms. O'Brien was a member of the Audit Committee from August 2000
until December 2000. Ms. Fitt was elected to the Audit Committee in
November 2000.
The Audit Committee has reviewed and discussed the Corporation's audited
financial statements for the fiscal year ended October 31, 2000 with management
and with the Corporation's independent auditors, PricewaterhouseCoopers LLP. The
Audit Committee has discussed with PricewaterhouseCoopers LLP the matters
required to be discussed by Statement on Auditing Standards No. 61 relating 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 their
independence. Based on the Audit Committee's review of the audited financial
statements and the review and discussions described in the foregoing paragraph,
the Audit Committee recommended to the Board of Directors that the audited
financial statements for the fiscal year ended October 31, 2000 be
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included in the Corporation's Annual Report on Form 10-K for the fiscal year
ended October 31, 2000 for filing with the Securities and Exchange Commission.
Submitted by the members of the Audit Committee:
John R. Dillon (Chairman)
Lawton W. Fitt
Stephen P. Bradley, Ph.D.
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Shareholder Return Performance Presentation
The following graph shows a comparison of cumulative total returns for
an investment in the Common Stock of the Corporation, the NASDAQ
Telecommunications Index and the S&P 500 Index. Although the SEC requires the
Corporation to present such a graph for a five-year period, the Common Stock has
been publicly traded only since February 7, 1997 and, as a result, the following
graph commences as of such date. This graph is not deemed to be "soliciting
material" or to be "filed" with the SEC or subject to the SEC's proxy rules or
to the liabilities of Section 18 of the Exchange Act of 1934, and the graph
shall not be deemed to be incorporated by reference into any prior or subsequent
filing by the Corporation under the Securities Act of 1933 or the 1934 Act.
[The following table was depicted as a line graph in the printed material.]
NASDAQ Telecom Index S&P 500 CIENA Common Stock
-------------------- ------- ------------------
02/07/97 100.00 100.00 $100.00
04/30/97 93.69 101.95 $ 84.46
07/31/97 120.28 122.01 $151.69
10/31/97 134.75 117.52 $148.65
01/30/98 151.57 126.51 $148.82
04/30/98 178.34 144.16 $150.68
07/31/98 198.92 145.93 $200.17
10/30/98 185.05 143.47 $ 46.45
01/29/99 271.67 168.23 $ 54.56
04/30/99 314.71 175.56 $ 63.51
07/30/99 305.82 175.39 $ 91.22
10/29/99 339.15 180.52 $ 95.27
01/31/00 415.84 185.49 $177.37
05/01/00 372.20 195.97 $378.55
07/31/00 311.52 191.68 $384.12
10/27/00 232.52 185.60 $564.19
Assumes $100 invested in CIENA Corporation, NASDAQ Telecom Index and S&P
500 on February 7, 1997, with all dividends reinvested at month-end.
PROPOSAL 2
Adoption of CIENA Corporation Third Amended and Restated 1994 Stock Option Plan
to Increase the Number of Options Authorized for Issuance Thereunder from
40,100,000 to 46,100,000 and to Make Certain Other Changes, Including
Eliminating the Ability of the Board of Directors to Reprice Options Granted
after January 17, 2001.
General
The CIENA Corporation Amended and Restated 1994 Stock Option Plan (the
"1994 Plan"), first effective in 1994, is designed to attract, retain and reward
persons providing services to CIENA, and to motivate these persons to contribute
to the growth and profits of CIENA in the future. In 1998, the Board of
Directors approved an amendment and restatement of the 1994 Plan, resulting in
the CIENA Corporation Second Amended and Restated 1994 Stock Option Plan (the
"Second Amended and Restated Plan"). The Board of Directors has considered and
approved an amendment and restatement of the Second Amended and Restated Plan,
which will be known as the CIENA Corporation Third Amended and Restated 1994
Stock Option Plan (the "Third Amended and Restated Plan"). The Board of
Directors is proposing the Third Amended and Restated Plan for stockholder
approval.
The Third Amended and Restated Plan is different from the Second Amended
and Restated Plan in the following ways:
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- The number of authorized shares reserved for issuance pursuant to stock
options under the Third Amended and Restated Plan has been increased to
forty-six million one hundred thousand (46,100,000) shares. This is an
increase of 6,000,000 shares over the number of shares reserved for
issuance under the Second Amended and Restated Plan;
- Grants under the Third Amended and Restated Plan are limited to a
maximum of two million (2,000,000) shares per calendar year per person.
The Second Amended and Restated Plan did not have this type of limit on
grants to individuals in a calendar year;
- The Third Amended and Restated Plan provides that non-qualified stock
options must have an exercise price equal to no less than one hundred
percent (100%) of the value of the Common Stock on the date the options
are granted;
- The Third Amended and Restated Plan provides that options granted under
the plan on or after January 17, 2001 may not, without prior
shareholder approval, be repriced to lower the option exercise prices,
or be replaced by options with lower exercise prices; and
- A provision has been added to the Third Amended and Restated Plan to
clarify that, in addition to the standard credit of twelve (12) full
months of accelerated vesting upon a Transfer of Control currently
provided for in the Second Amended and Restated Plan, the Board has the
authority to provide in an option agreement for an additional credit of
accelerated vesting of the option upon a Transfer of Control.
At January 11, 2001, there were 4,774,493 shares of Common Stock
available for grant under the Second Amended and Restated Plan. On January 11,
2001, the closing price of CIENA's Common Stock was $83.50 per share. Because
participation and the types of options granted under the Third Amended and
Restated Plan are subject to the discretion of the Committee, the benefits or
amounts that will be received by any participant or groups of participants if
the Third Amended and Restated Plan is approved are not currently determinable.
As of January 11, 2001, there were approximately 14 executive officers, 3,228
employees and 6 non-employee directors of CIENA and our subsidiaries who were
eligible to participate in the Second Amended and Restated Plan.
The Board of Directors has directed that the Third Amended and Restated
Plan be submitted to the stockholders for their approval.
Summary of the Third Amended and Restated 1994 Stock Option Plan
The following summary of the Third Amended and Restated Plan does not
purport to be complete, and is subject to and qualified in its entirety by
reference to the complete text of the Third Amended and Restated Plan, which is
attached hereto as Appendix 1 and is incorporated herein by reference.
Administration
The Human Resources Committee of the Board of Directors (the
"Committee") administers the Third Amended and Restated Plan.
Eligibility
Options may be granted only to employees (including officers) and
directors of CIENA or any subsidiary of CIENA or to individuals who are
rendering services as consultants, advisors, or other independent contractors to
CIENA or any subsidiary of CIENA.
Stock Subject to the Third Amended and Restated Plan
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The aggregate grants made since the 1994 Plan was originally adopted
have used up most of the shares initially authorized for grants under the 1994
Plan. As of January 11, 2001, there are currently only 4,774,493 shares of
Common Stock available for grant under the Second Amended and Restated Plan. The
Third Amended and Restated Plan increases the shares of Common Stock reserved
for issuance to forty-six million one hundred thousand (46,100,000) shares.
Section 162(m) of the Internal Revenue Code
Under Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"), if the optionee is one of certain specified executive officers,
then, unless certain exceptions apply, the employer is not entitled to deduct
compensation with respect to the optionee, including compensation related to the
exercise of stock options, to the extent such compensation in the aggregate
exceeds $1,000,000 for the taxable year. The options granted under the Third
Amended and Restated Plan are intended to comply with the exception to Section
162(m) for "performance-based" compensation. To be eligible for the
performance-based exception, Section 162(m) requires that option plans such as
the Third Amended and Restated Plan must provide the maximum number of options
that can be granted to the specified executive officers. The Third Amended and
Restated Plan provides that options covering up to two million shares
(2,000,000) shares may be granted to any optionee under the plan during a
calendar year.
Adjustments
Each of the limits described above relating to the number of shares of
Common Stock available for grant under the Third Amended and Restated Plan is
subject to adjustment for stock dividends, splits and other similar events. In
addition, if any outstanding option for any reason expires or is terminated or
canceled and/or shares of Common Stock subject to repurchase are repurchased by
CIENA, the shares allocable to the unexercised portion of such option or such
repurchased shares may again be subject to an option under the Third Amended and
Restated Plan.
Stock Option Terms
The Third Amended and Restated Plan permits the granting of options to
purchase shares of Common Stock intended to qualify as incentive stock options
under the Code and options that do not qualify as incentive stock options. The
exercise price of each option will be determined by the Committee but may not be
less than 100% of the fair market value of the Common Stock on the date of
grant. To qualify as incentive stock options, options must meet certain federal
tax requirements, including limits on the value of shares subject to incentive
stock options which first become exercisable in any one calendar year, and a
shorter term and higher minimum exercise price in the case of certain large
stockholders.
The term of each option will be fixed by the Committee and may not
exceed 10 years from the date of grant. In general, the options granted under
the Third Amended and Restated Plan will vest in the amount of 25% of the
covered shares on the last day of the month in which the first anniversary of
the date of grant occurs and a rate of 2.084% of the covered shares per month
thereafter. In general, vested options are exercisable for thirty days following
termination of the optionee's employment for a reason other than death or
disability. Vested options are exercisable for a period of twelve months
following a termination for death or disability. Options may be made exercisable
in installments. The exercisability of options may be accelerated by the
Committee.
Upon exercise of options, the option exercise price must be paid in full
either in cash or cash equivalents or by delivery of Common Stock already owned
and held by the optionee for at least six months. If the Committee so permits,
the exercise price may also be delivered to CIENA by a broker pursuant to
irrevocable instructions to the broker from the optionee.
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General Provisions
Transfer of Control. Each option granted under the Third Amended and
Restated Plan will be credited, as of the proposed effective date of a Transfer
of Control, and if the optionee is still employed by CIENA on the date such
Transfer of Control is consummated, with the longer of (a) twelve (12) full
months of additional vesting of the shares subject to the option or (b) the
number of months of additional vesting of the shares subject to the option as
may be designated by the Board and set forth in the notice of grant on the date
that the option was granted. If the successor entity does not assume the
outstanding options or arrange for the substitution for outstanding options of
new options covering the stock of the successor entity, all outstanding options
will be fully exercisable thirty (30) days before the Transfer of Control and
shall terminate immediately after the Transfer of Control.
Amendments and Termination. The Board of Directors may at any time amend
or discontinue the Third Amended and Restated Plan and the Committee may at any
time amend or cancel outstanding awards for the purpose of satisfying changes in
law or for any other lawful purpose. However, no such action may be taken which
adversely affects any rights under an outstanding award without the holder's
consent. Further, plan amendments may be subject to approval by our stockholders
if and to the extent required by the Code to preserve the qualified status of
incentive stock options and options granted under the Plan on or after January
17, 2001 may not, without the approval of the Corporation's stockholders, be
repriced to lower the exercise prices of the options, or be replaced by options
with a lower exercise price.
Adjustments for Stock Dividends and Similar Events. The Committee will
make appropriate adjustments in outstanding awards to reflect Common Stock
dividends, splits and similar events. In the event a majority of the shares
which are of the same class as the shares that are subject to outstanding
options are exchanged for, converted into, or otherwise become shares of another
corporation (the "New Shares"), CIENA may unilaterally amend the outstanding
options to provide that such options are exercisable for New Shares. In the
event of any such amendment, the number of shares and the exercise price of the
outstanding options will be adjusted in a fair and equitable manner.
Federal Income Tax Consequences
Incentive stock options. The grant of an incentive stock option will not
be a taxable event for the optionee or CIENA. An optionee 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
Common Stock received pursuant to the exercise of an incentive stock option will
be taxed as long-term capital gain if the optionee holds the shares for at least
two years after the date of grant and for one year after the date of exercise
(the "holding 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 optionee generally must be an employee of CIENA or a subsidiary
from the date the option is granted through a date within three months before
the date of exercise of the option. In the case of an optionee who is disabled,
the three-month period for exercise following termination of employment is
extended to one year. In the case of an employee who dies, both the time for
exercising incentive stock options after termination of employment and the
holding period for Common Stock received pursuant to the exercise of the option
are waived.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the optionee 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.
The employer corporation will be allowed a business expense deduction to the
extent the optionee recognizes ordinary income subject to Section 162(m) of the
Code summarized below.
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If an optionee exercises an incentive stock option by tendering Common
Stock with a fair market value equal to part or all of the option exercise
price, the exchange of shares will be treated as a nontaxable exchange (except
that this treatment would not apply if the optionee had acquired the shares
being transferred pursuant to the exercise of an incentive stock option and had
not satisfied the holding period requirement summarized above). If the exercise
is treated as a tax free exchange, the optionee would have no taxable income
from the exchange and exercise (other than minimum taxable income as discussed
above) and the tax basis of the shares exchanged would be treated as the
substituted basis for the shares received. If the optionee used shares received
pursuant to the exercise of an incentive stock option (or another statutory
option) as to which the optionee had not satisfied the applicable holding period
requirement, the exchange would be treated as a taxable disqualifying
disposition of the exchanged shares.
If, pursuant to an option agreement, CIENA withholds shares in payment
of the option price for incentive stock options, the transaction should
generally be treated as if the withheld shares had been sold in a disqualifying
disposition after exercise of the option, so that the optionee will realize
ordinary income with respect to such shares. The shares paid for by the withheld
shares should be treated as having been received upon exercise of an incentive
stock option, with the tax consequences described above. However, the Internal
Revenue Service has not ruled on the tax treatment of shares received on
exercise of an incentive stock option where the option exercise price is paid
with withheld shares.
Non-Qualified Stock Options. The grant of a non-qualified stock option
will not be a taxable event for the optionee or CIENA. Upon exercising a
non-qualified stock option, an optionee 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 (except that, if the optionee
is subject to certain restrictions imposed by the securities laws, the
measurement date will be deferred, unless the optionee makes a special tax
election within 30 days after exercise). Upon a subsequent sale or exchange of
shares acquired pursuant to the exercise of a non-qualified stock option, the
optionee will have taxable gain or loss, measured by the difference between the
amount realized on the disposition and the tax basis of the shares (generally,
the amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised).
If the employer corporation complies with applicable reporting
requirements and with the restrictions of Section 162(m) of the Code, it will be
entitled to a business expense deduction in the same amount and generally at the
same time as the optionee recognizes ordinary income. Under Section 162(m) of
the Code, if the optionee is one of certain specified executive officers, then,
unless certain exceptions apply, the employer is not entitled to deduct
compensation with respect to the optionee, including compensation related to the
exercise of shares options, to the extent such compensation in the aggregate
exceeds $1.0 million for the taxable year. The options are intended to comply
with the exception to Section 162(m) for "performance-based" compensation.
If the optionee surrenders Common Stock in payment of part or all of the
exercise price for non-qualified stock options, no gain or loss will be
recognized with respect to the shares surrendered (regardless of whether the
shares were acquired pursuant to the exercise of an incentive stock option) and
the optionee will be treated as receiving an equivalent number of shares
pursuant to the exercise of the option in a nontaxable exchange. The basis of
the shares surrendered will be treated as the substituted tax basis for an
equivalent number of option shares received and the new shares will be treated
as having been held for the same holding period as had expired with respect to
the transferred shares. The difference between the aggregate option exercise
price and the aggregate fair market value of the shares received pursuant to the
exercise of the option will be taxed as ordinary income. The optionee's basis in
the additional shares will be equal to the amount included in the optionee's
income.
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If, pursuant to an option agreement, CIENA withholds shares in payment
of the option price for non-qualified stock options or in payment of tax
withholding, the transaction should generally be treated as if the withheld
shares had been sold for an amount equal to the exercise price after exercise of
the option.
The Board of Directors believes that approval of the Third Amended and
Restated Plan is in the best interests of all stockholders and, accordingly,
recommends a vote FOR Proposal 2. Your proxy will be so voted unless you specify
otherwise.
PROPOSAL 3
Adoption of and Amendment to the CIENA Corporation Third Amended and Restated
1994 Stock Option Plan (or if that Plan is Not Adopted, the Second Amended and
Restated 1994 Stock Option Plan) to Add a Provision That Will Automatically
Increase the Number of Shares Reserved Under the Plan by 0.75% of the Issued and
Outstanding Common Stock of the Corporation on the Last Day of Each Fiscal Year
Beginning with 2001 and Ending with 2004.
The Board of Directors has approved, subject to stockholder approval,
the CIENA Corporation Third Amended and Restated 1994 Stock Option Plan (the
"Third Amended and Restated Plan"). The terms and conditions of the Third
Amended and Restated Plan are described above in Proposal 2.
The Board of Directors is also proposing for stockholder approval an
amendment to the number of shares of Common Stock reserved for issuance under
the Third Amended and Restated Plan, or, if that Plan is not adopted by
stockholders, the existing Second Amended and Restated 1994 Stock Option Plan.
This amendment, which the Board of Directors approved on January 17, 2001,
provides that the number of shares of Common Stock available for grant under the
relevant Plan shall be the sum of the number of shares reserved under the Plan,
plus an additional three quarters of one percent (0.75%) of the number of issued
and outstanding shares of Common Stock (but not including increases resulting
from the issuance of shares under the Plan) on the last day of each fiscal year
beginning with 2001 and ending with 2004. The Board of Directors believes that
this amendment is necessary to make sure that an adequate supply of shares of
Common Stock is available for grants of options for the purpose of retaining,
incentivizing and attracting employees to CIENA.
The Board of Directors has considered CIENA's past option granting
practices and CIENA's future hiring needs in determining the proper amount by
which to increase the pool of reserved shares and has determined that a three
quarters of one percent (0.75%) per year increase over four years is appropriate
and in the best interests of CIENA and its stockholders.
The Board of Directors believes that approval of the amendment to the
Third Amended and Restated Plan (or, if relevant, the Second Amended and
Restated Stock Option Plan) is in the best interests of all stockholders and,
accordingly, recommends a vote FOR Proposal 3. Your proxy will be so voted
unless you specify otherwise.
PROPOSAL 4
Adoption of Amendment to the Corporation's Third Restated Certificate of
Incorporation to Increase the Number of Shares of Common Stock Authorized for
Issuance Thereunder from 460,000,000 to 980,000,000 shares
The Board of Directors of the Corporation has approved, declares it
advisable and in the best interests of the Corporation and its stockholders, and
recommends that Article FOURTH of the Corporation's Third Restated Certificate
of Incorporation, as amended (the "Charter"), be amended to increase the
authorized shares of Common Stock from 460,000,000 to 980,000,000. The text of
the Amendment is as follows:
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FOURTH: The Corporation shall have the authority to issue two (2)
classes of shares to be designated respectively "Preferred Stock"
and "Common Stock." The total number of shares of stock that the
Corporation shall have the authority to issue is One Billion
(1,000,000,000) shares of capital stock, par value $0.01 per
share. The total number of shares of Preferred Stock that the
Corporation shall have authority to issue is Twenty Million
(20,000,000), par value $0.01 per share. The total number of
shares of Common Stock which the Corporation shall have the
authority to issue is Nine Hundred Eighty Million (980,000,000)
shares, par value $0.01 per share.
As of December 31, 2000, there were 287,413,695 shares of Common Stock
outstanding. In addition, as of December 31, 2000, options to purchase
11,798,500 shares were outstanding under the 1994 Plan and the Second Amended
and Restated Plan, options to purchase 399,998 shares were outstanding under the
Directors Plan, options to purchase 15,581,631 shares were outstanding under the
Non-Officer Plan and options to purchase an aggregate of 2,869,858 shares were
outstanding under option plans assumed by the Corporation in connection with two
acquisitions. Thus, at December 31, 2000, the Corporation had outstanding or
reserved for issuance 30,649,987 shares of Common Stock.
The authorization of a total of 980,000,000 shares of Common Stock would
give the Board the express authority, without further action of the
Corporation's stockholders, to issue such shares of Common Stock from time to
time as the Board deems necessary or advisable. The Corporation expends
substantial funds on research and development and other commercialization
activities, including investment in complementary businesses, obtaining the
rights to use complementary technologies, marketing activities and
administrative support of these activities. The Board believes that having the
additional shares authorized and available for issuance will allow the
Corporation to have greater flexibility in considering potential future actions
involving the issuance of stock which may be desirable or necessary to
accommodate the Corporation's business plan, including capital raising
transactions. In addition, the Board believes it is necessary to have the
ability to issue such additional shares for general corporate purposes. Such
general corporate uses of the additional authorized shares of Common Stock may
include acquisition transactions, stock dividends or distributions, and
distributions in connection with future issuances of Preferred Stock of the
Corporation, stock options or warrants. In any case, the additional shares of
Common Stock would be available for issuance by the Board without future action
by the stockholders, unless such action were specifically required by applicable
law or rules of any securities market on which the Corporation's securities may
be traded. The Corporation has no current plans or proposals to issue any
portion of the additional shares of Common Stock.
Although the proposed increase in the authorized capital stock of the
Corporation could be construed as having potential anti-takeover effects,
neither the Board nor management of the Corporation views this proposal in that
perspective. Nevertheless, the Corporation could use the additional shares to
frustrate persons seeking to effect a takeover or otherwise gain control of the
Corporation by, for example, privately placing shares to purchasers who might
side with the Board in opposing a hostile takeover bid. The Corporation is not
aware of any such hostile takeover bid at this time. Shares of Common Stock
could also be issued to a holder that would thereafter have sufficient voting
power to assure that any proposal to amend or repeal the Amended and Restated
By-Laws of the Corporation or certain provisions of the Charter would not
receive the requisite vote required. Such uses of the Common Stock could render
more difficult or discourage an attempt to acquire control of the Corporation,
if such transactions were opposed by the Board. Further, an issuance of
additional shares by the Corporation could have the effect on the potential
realizable value of a stockholder's investment in the Corporation. In the
absence of a proportionate increase in the Corporation's earnings and book
value, an increase in the aggregate number of outstanding shares of Common Stock
would dilute the earnings per share and book value per share of all outstanding
shares of the Corporation's Common Stock. The foregoing factors, if reflected in
the price per
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share of Common Stock, could adversely affect the realizable value of a
stockholder's investment in the Corporation.
The Board of Directors believes that approval of the proposed amendment
to the Corporation's Charter to increase the number of authorized shares of
Common Stock from 460,000,00 shares to 980,000,000 shares is in the best
interests of all stockholders and, accordingly, recommends a vote FOR Proposal
4. Your proxy will be so voted unless you specify otherwise.
Voting Procedures
Shares can be voted only if the stockholder is present in person or by
proxy. Whether or not you plan to attend in person, you are encouraged to sign
and return the enclosed proxy card. The representation in person or by proxy of
at least a majority of the outstanding shares entitled to vote is necessary to
provide a quorum at the meeting. Directors are elected by a plurality of the
affirmative votes cast by the stockholders present at the Meeting (in person or
by proxy). Proposals 2, 3, and 4 must be approved by a majority of the shares of
Common Stock voting for or against the Proposals at the Meeting. Unless
otherwise indicated, executed proxies will be voted for Proposals 1 through 4.
Abstentions and "non-votes" are counted as present in determining
whether the quorum requirement is satisfied. Abstentions and "non-votes" are
treated as votes against proposals presented to stockholders other than
elections of directors. A "non-vote" occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on another proposal
because the nominee does not have discretionary voting power and has not
received instructions from the beneficial owner.
Stockholder Proposals
All stockholder proposals intended to be presented at the 2002 Annual
Meeting of the Corporation must be received by the Corporation not later than
October 1, 2001 and must otherwise comply with the rules of the SEC for
inclusion in the Corporation's proxy statement and form of proxy relating to
that meeting.
SEC rules also establish a different deadline for submission of
stockholder proposals that are not intended to be included in the Corporation's
proxy statement with respect to discretionary voting. The discretionary voting
deadline for the Corporation's 2002 annual meeting is December 17, 2001. If a
stockholder gives notice of such a proposal after the discretionary voting
deadline, the Corporation's proxy holders will be allowed to use their
discretionary voting authority to vote against the stockholder proposal when and
if the proposal is raised at the Corporation's 2002 annual meeting.
Certain Relationships and Related Transactions
Judith O'Brien, a director of the Corporation, may be deemed to
beneficially have an interest in 540,000 shares of Cyras Systems Inc. ("Cyras")
Series A Preferred Stock though an interest in WSGR Investment Company 98B, an
investment fund affiliated with her law firm. In the event that the merger of
CIENA and Cyras, which was announced on December 19, 2000, is completed, she
will receive CIENA stock in exchange for her Cyras stock.
CIENA provides relocation and housing assistance packages to some of its
executives. In September 2000 CIENA agreed to a relocation and housing
assistance package with Ms. Elizabeth Perry, its Senior Vice President, Core
Switching Division and Network Management Systems, that includes providing her
a home at below market rental and granting Ms. Perry an option exercisable in
2004 to purchase the house at a reduced price.
Section 16(a) Beneficial Ownership Reporting Compliance
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Perry Kamel filed one late Form 4 reporting a single transaction and
Steve Chaddick filed one late Form 4 reporting a single transaction and one late
Form 5 reporting a single transaction.
Other Matters
Management knows of no matters to be presented for action at the meeting
other than those mentioned above. However, if any other matters properly come
before the meeting, it is intended that the persons named in the Corporation's
form of proxy will vote on such other matters in accordance with their judgment
of the best interests of the Corporation.
By Order of the Board of Directors
/s/ Michael O. McCarthy III
Michael O. McCarthy III
Secretary
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APPENDIX 1
CIENA CORPORATION
THIRD AMENDED AND RESTATED
1994 STOCK OPTION PLAN
1. Establishment and Purpose.
(a) Establishment. The CIENA Corporation Third Amended and
Restated 1994 Employee Stock Option Plan (the "Plan") became effective January
17, 2001 upon the amendment and restatement of the CIENA Corporation Second
Amended and Restated 1994 Employee Stock Option Plan.
(b) Purpose. The purpose of the Plan is to attract, retain
and reward persons providing services to Ciena Corporation, a Delaware
corporation, and any successor corporation thereto (collectively referred to as
the "Company"), and any present or future parent and/or subsidiary corporations
of such corporation (all of which along with the Company being individually
referred to as a "Participating Company" and collectively referred to as the
"Participating Company Group"), and to motivate such persons to contribute to
the growth and profits of the Participating Company Group in the future. For
purposes of the Plan, a parent corporation and a subsidiary corporation shall be
as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986,
as amended (the "Code").
2. Definitions:
(a) "Date of Option Grant" shall mean the date set forth on
the Notice of Grant of Stock Options attached hereto as Exhibit A annexed hereto
and made a part hereof.
(b) "Number of Option Shares" shall mean the number of
shares of common stock of the Company set forth on Notice of Grant of Stock
Options as adjusted from time to time pursuant to paragraph 14 below.
(c) "Exercise Price" shall mean the price per share set
forth on the Notice of Grant of Stock Option attached hereto as Exhibit A as
adjusted from time to time pursuant to paragraph 14 below.
(d) "Initial Exercise Date" shall be the Initial Vesting
Date.
(e) "Initial Vesting Date" shall be the last day of the
calendar month in which occurs the date one (1) year after the date set forth on
the Notice of Grant of Stock Options:
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(f) Determination of "Vested Percentage":
Vested Ratio
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee is 25%
continuously employed by a Participating Company from
the Date of Option Grant until the Initial Vesting Date
Plus
----
For each full month of the Optionee's continuous employment by a 2.084%
Participating Company from the Initial Vesting Date
In no event shall the Vested Percentage exceed 100%.
(g) "Option Term Date" shall mean the date ten (10) years
after the Date of Option Grant.
(h) On any given date, the number of "Vested Shares" shall
be equal to the number of Number of Option Shares multiplied by the Vested
Percentage determined as of such date pursuant to paragraph 2(f) above and
rounded down to the nearest whole share. On such date, the number of "Unvested
Shares" shall be equal to the Number of Option Shares reduced by the number of
Vested Shares as of such date.
(i) As to any individual Option granted hereunder, the Board
and/or Committee, referred to in Section 3(a) below, shall have authority under
Sections 7, 12 and 21 of the Plan to include vesting provisions which result in
a different Vested Percentage or Vested Ratio than are set forth in Section 2(f)
above.
3. Administration.
(a) Administration by Board and/or Committee. The Plan shall
be administered by the Board of Directors of the Company (the "Board") and/or by
a duly appointed committee of the Board having such powers as shall be specified
by the Board. Any subsequent references herein to the Board shall also mean the
committee if such committee has been appointed and, unless the powers of the
committee have been specifically limited, the committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
terminate or amend the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law. All determinations by the Board shall
be final and binding upon all persons having an interest in the Option. All
questions of interpretation of the Plan or of any options granted under the Plan
(an "Option") shall be determined by the Board, and such determinations shall be
final and binding upon all persons having an interest in the Plan and/or any
Option.
(b) Options Authorized. Options may be either incentive
stock options as defined in Section 422 of the Code ("Incentive Stock Options")
or non-statutory stock options. Each option shall be designated as either an
Incentive Stock Option or a non-statutory Stock Option on the Notice of Grant.
In the absence of any designation, options granted hereunder shall be
non-statutory Stock Options.
(c) Authority of Officers. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to
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the Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
(d) Disinterested Administration. With respect to the
participation in the Plan of officers or directors of the Company subject to
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), the Plan shall be administered by the Board in compliance with the
requirements of Rule 16b-3, as promulgated under the Exchange Act and amended
from time to time or any successor rule or regulation ("Rule 16b-3") if and to
the extent still applicable.
4. Eligibility.
(a) Eligible Persons. Options may be granted only to
employees (including officers) and directors of the Participating Company Group
or to individuals who are rendering services as consultants, advisors, or other
independent contractors to the Participating Company Group. The Board shall, in
its sole discretion, determine which persons shall be granted Options (an
"Optionee"). Eligible persons may be granted more than one (l) Option.
(b) Restrictions on Option Grants. A director of a
Participating Company may only be granted a nonstatutory stock option unless the
director is also an employee of the Participating Company Group. An individual
who is rendering services as a consultant, advisor, or other independent
contractor may only be granted a non-statutory stock option.
5. Shares Subject to Option. Options shall be for the purchase of
shares of the authorized but unissued common stock or treasury shares of common
stock of the Company (the "Stock"). The maximum number of shares of Stock which
may be issued under the Plan shall be forty-six million one hundred thousand
(46,100,000) shares. In the event that any outstanding Option for any reason
expires or is terminated or canceled and/or shares of Stock subject to
repurchase are repurchased by the Company, the shares allocable to the
unexercised portion of such Option or such repurchased shares may again be
subject to an Option grant. Notwithstanding the foregoing any such shares shall
be made subject to a new Option only if the grant of such new Option and the
issuance of such shares pursuant to such new Option would not cause the Plan or
any Option granted under the Plan to contravene Rule 16b-3. During any time when
the Company has a class of equity security registered under Section 12 of the
Exchange Act, the maximum number of shares of Stock subject to Options that can
be awarded under the Plan to any person eligible for an Option granted under the
Plan is two million (2,000,000) per year. Each of the limits on the number of
shares that may be issued or awarded under the Plan contained in this section 5
is subject to adjustment as provided in paragraph 14 below.
6. Time for Granting Options. All Options shall be granted, if at
all, within ten (10) years of January 17, 2001.
7. Terms Conditions and Form of Options. Subject to the provisions
of the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be granted,
the exercise price of the Option, the timing and terms of exercisability and
vesting of the Option, the time of expiration of the Option, the effect of the
Optionee's termination of employment or service, whether the Option is to be
treated as an Incentive Stock Option or as a non-statutory stock option, the
method for satisfaction of any tax withholding obligation arising in connection
with Option, including by the withholding or delivery of shares of stock, and
all other terms and conditions of the Option not inconsistent with the Plan.
Options granted pursuant to the Plan shall be evidenced by written notices
specifying the number of shares of Stock covered thereby, in such form as the
Board shall from time to time establish, which notices may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
(a) Exercise Price. The exercise price for each Option shall
be established in the sole discretion of the Board; provided, however, that (i)
the
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exercise price per share for an Option shall be not less than the fair market
value, as determined by the closing price of the Company's common stock on the
previous day, of a share of Stock on the date of the granting of the Option and
(ii) no Incentive Stock Option granted to an Optionee who at the time the Option
is granted owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of a Participating Company within
the meaning of Section 422(b)(6) of the Code (a "Ten Percent Owner Optionee")
shall have an exercise price per share less than one hundred ten percent (110%)
of the fair market value, as determined by the Board, of a share of Stock on the
date of the granting of the Option. Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a non-statutory stock option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying with the provisions of Section 424(a) of
the Code.
(b) Exercise Period of Options. The Board shall have the
power to set, including by amendment of an Option, the time or times within
which each Option shall be exercisable or the event or events upon the
occurrence of which all or a portion of each Option shall be exercisable and the
term of each Option; provided, however, that (i) no Option shall be exercisable
after the expiration of ten (10) years after the date such Option is granted,
and (ii) no Incentive Stock Option granted to a Ten Percent Owner Optionee shall
be exercisable after the expiration of five (5) years after the date such Option
is granted.
(c) Right to Exercise. The Option shall be first exercisable
on and after the Initial Vesting Date, and then only to the extent vested.
Notwithstanding the foregoing, the Option may be exercised only in multiples of
twenty-five (25) shares unless all shares subject to the Option are being
exercised; provided, however, that the foregoing restriction shall not apply so
as to prevent an exercise (i) following the Optionee's termination of employment
as set forth in paragraph 10 below or (ii) during the thirty (30) day periods
immediately preceding and following a Transfer of Control as defined in
paragraph 15 below.
(d) Method of Exercise. Exercise of the Option must be by
written notice to the Company which must state the election to exercise the
Option, the number of shares for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of the
Plan. The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, or by
confirmed facsimile transmission, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in paragraph 9 below, accompanied by
(i) full payment of the exercise price for the number of shares being purchased
and (ii) an executed copy, if required herein, of the then current forms of
escrow and security agreements referenced below.
(e) Payment of Exercise Price.
(i) Forms of Payment Authorized. Payment of the
exercise price for the number of shares of Stock being purchased pursuant to any
Option shall be made (1) in cash, by check, or cash equivalent, (2) by tender to
the Company of shares of the Company's stock owned by the Optionee having a fair
market value, as determined by the Board (but without regard to any restrictions
on transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the exercise price, (3) by the assignment of the proceeds of a sale of some
or all of the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System), or (4) by any combination thereof. The Board may at any
time or from time to time grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the exercise price and/or which
otherwise restrict one or more forms of consideration.
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(ii) Tender of Company Stock. Notwithstanding the
foregoing, an Option may not be exercised by tender to the Company of shares of
the Company's stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's stock or, if in the opinion of Company counsel,
might impair the ability of purchasers of stock from the Company from taking
full advantage of the provisions of Section 1202 of the Code relating to capital
gains treatment of stock issued by the Company. Unless otherwise provided by the
Board, an Option may not be exercised by tender to the Company of shares of the
Company's stock unless such shares of the Company's stock either have been owned
by the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(iii) Assignment of Proceeds of Sale. The Company
reserves, at any and all times, the right, in the Company's sole and absolute
discretion, to establish, decline to approve and/or terminate any program and/or
procedures for the exercise of Options by means of an assignment of the proceeds
of a sale of some or all of the shares of Stock to be acquired upon such
exercise.
(f) Tax Withholding. At the time the Option is exercised, in
whole or in part, or at any time thereafter as requested by the Company, the
Optionee by accepting the grant of the Option shall be considered to have
authorized payroll withholding and otherwise agreed to make adequate provision
for foreign, federal and state tax withholding obligations of the Company, if
any, which arise in connection with the Option, including, without limitation,
obligations arising upon (i) the exercise, in whole or in part, of the Option,
(ii) the transfer, in whole or in part, of any shares acquired on exercise of
the Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired on exercise of the Option. The Optionee is cautioned that
the Option is not exercisable unless the Company's withholding obligations are
satisfied. Accordingly, the Optionee may not be able to exercise the Option when
desired even though the Option is vested and the Company shall have no
obligation to issue a certificate for such shares.
(g) Certificate Registration. Except in the event the
exercise price is paid by Immediate Sales Proceeds, the certificate or
certificates for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
(h) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of shares upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option, or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this
restriction should be directed to the Chief Financial Officer or the General
Counsel of the Company. As a condition to the exercise of the Option, the
Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation, and to make any representation or warranty with respect thereto as
may be requested by the Company.
(i) Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
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8. Non-Transferability of the Option; Non-Alienation of Benefits.
The Option may be exercised during the lifetime of the Optionee only by the
Optionee and may not be assigned or transferred in any manner except by will or
by the laws of descent and distribution. Following the death of the Optionee,
the Option, to the extent unexercised and exercisable by the Optionee on the
date of death, may be exercised by the Optionee's legal representative or by any
person empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
Except with the prior written consent of the Company, subject to
the foregoing, or as otherwise provided herein, no right or benefit under this
Option Plan shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge the same without such consent, if applicable,
shall be void. Except with such consent, no right or benefit under this Option
Plan shall in any manner be liable for or subject to the debts, contracts,
liabilities or torts of the person entitled to such benefit. Except to the
extent previously approved by the Company in writing, or as otherwise provided
herein, if the Optionee should become bankrupt or attempt to anticipate,
alienate, sell, assign, pledge, encumber or charge any right or benefit
hereunder, then such right or benefit shall cease and terminate, and in such
event, the Company may hold or apply the same or any part thereof for the
benefit of the Optionee, the Optionee's spouse, children or other dependents, or
any of them, in such manner and in such proportion as the Company may in its
sole determination deem proper.
9. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 10 below, or (c) a Transfer of Control to
the extent provided in paragraph 15 below.
10. Termination of Employment.
(a) Termination Other Than by Death or Disability. Except as
otherwise provided below, if the Optionee ceases to be an employee of the
Participating Company Group for any reason, except death or disability within
the meaning of section 422(c) of the Code, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee ceased to be
an employee, may be exercised by the Optionee within thirty (30) days after the
date on which the Optionee's employment terminated, but in any event no later
than the Option Term date.
(b) Termination by Death or Disability. Except as otherwise
provided below, if the Optionee's employment with the Company is terminated
because of the death or disability of the Optionee within the meaning of section
422(c) of the Code, the Option, to the extent unexercised and exercisable by the
Optionee on the date on which the Optionee ceased to be an employee, may be
exercised by the Optionee (or the Optionee's legal representative) at any time
prior to the expiration of twelve (12) months from the date on which the
Optionee's employment terminated, but in any event no later than the Option Term
Date. The Optionee's employment shall be deemed to have terminated on account of
death if the Optionee dies within three (3) months after the Optionee's
termination of employment.
(c) Limitations on Exercise After Termination. Except as
provided in this paragraph 10, the Option shall terminate and may not be
exercised after the Optionee ceases to be an employee of the Participating
Company Group. Furthermore, the Board may at any time after the Optionee's
termination of employment cancel the Option with respect to all or a portion of
the shares otherwise remaining exercisable under the Option, if the Company
finds or has found that the Optionee:
(i) Engaged in willful, deliberate or gross
misconduct toward the Company;
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(ii) Has violated the terms of any confidentiality
agreement or obligation between the Optionee and the Company; or
(iii) Has accepted employment with an entity which the
Company determines is in a business that could result in compromising any
confidentiality agreement or obligation between the Optionee and the Company.
(d) Employee and Termination of Employment Defined. For
purposes of this paragraph 10, the term "employee" shall mean any person,
including officers and directors, employed by a Participating Company or
performing services for a Participating Company as a director, consultant,
advisor or other independent contractor. For purposes of this paragraph 10, the
Optionee's employment shall be deemed to have terminated if the Optionee ceases
to be employed by a Participating Company (whether upon an actual termination of
employment or upon the Optionee's employer ceasing to be a Participating
Company). The Optionee's employment shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee serves as an
employee, provided that there is no interruption or termination of the
Optionee's service as an employee.
(e) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 7(h) above, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
(f) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of employment, or (iii)
the Option Term Date.
(g) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company of ninety (90) days or less. In the event of
a leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company (or required by law) a leave of absence shall not be treated as
employment for purposes of determining the Optionee's Vested Percentage.
11. Standard Forms of Stock Options.
(a) Incentive Stock Options. Unless otherwise provided for
by the Board at the time an Option is granted, an Option designated as an
"Incentive Stock Option" shall comply with and be subject to the terms and
conditions set forth herein.
(b) Non-statutory Stock Options. Unless otherwise provided
for by the Board at the time an Option is granted, an Option designated as a
"Non-statutory Stock Option" shall comply with and be subject to the terms and
conditions set forth herein.
(c) Standard Term for Options. Unless otherwise provided for
by the Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
12. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of an individual stock option grant either in
connection with the grant or amendment of an individual Option or in connection
with the authorization of a new standard form or forms of Notice of Grant:
provided, however, that the terms
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and conditions of such revised or amended standard form or forms shall be in
accordance with the terms of the Plan. In addition, any limitation on the
vesting of an Option contained in the Option may be rescinded, modified or
waived by the Board, in its sole discretion, at any time and from time to time
after the Date of Option Grant of such Option, so as to accelerate the time at
which the Option may be exercised.
13. Fair Market Value Limitation. To the extent that the aggregate
fair market value (determined at the time the Option is granted) of stock with
respect to which Incentive Stock Options are exercisable by an Optionee for the
first time during any calendar year (under all stock option plans of the
Company, including the Plan) exceeds One Hundred Thousand Dollars ($100,000),
such Options shall be treated as non-statutory stock options. This paragraph
shall be applied by taking Incentive Stock Options into account in the order in
which they were granted.
14. Effect of Change in Stock Subject to Plan. Appropriate
adjustments shall be made in the number and class of shares of Stock subject to
the Plan and to any outstanding Options and in the exercise price of any
outstanding Options in the event of a stock dividend, stock split, reverse stock
split, recapitalization, combination, reclassification or like change in the
capital structure of the Company.
In the event a majority of the shares which are of the same class as the
shares that are subject to outstanding Options are exchanged for, converted
into, or otherwise become (whether or not pursuant to a Transfer of Control (as
defined below)) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price of the outstanding Options shall be adjusted in a
fair and equitable manner.
15. Transfer of Control. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Company.
(a) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the stock of the
Company where the stockholders of the Company before such sale or exchange do
not retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Acquiring Corporation as defined below after
such sale or exchange;
(b) a merger or consolidation where the stockholders of the
Company before such merger or consolidation do not retain, directly or
indirectly, at least a majority of the beneficial interest in the voting stock
of the Acquiring Corporation as defined below after such merger or
consolidation;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations (as defined in paragraph 1 above) of the
Company); or
(d) a liquidation or dissolution of the Company.
Each Optionee shall be credited, as of the proposed effective date of a
Transfer of Control, and if still employed by the Company on the date such
Transfer of Control is consummated, with twelve (12) full months of additional
vesting of the shares subject to his/her Option.
Furthermore, in the event of a Transfer of Control, the surviving,
continuing successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "Acquiring Corporation"), shall either assume the
Company's rights and obligations under outstanding stock option agreements or
substitute options for the Acquiring Corporation's stock for such outstanding
Options. In the event the Acquiring Corporation elects not to assume or
substitute for such outstanding Options in connection with the Transfer of
Control, any unexercisable and/or unvested shares subject to such outstanding
stock option agreements shall be immediately exercisable and fully vested as of
the date thirty (30) days prior to the proposed effective date
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of the Transfer of Control. The exercise and/or vesting of any Option that was
permissible solely by reason of this paragraph 15 shall be conditioned upon the
consummation of the Transfer of Control. Any Options which are neither assumed
or substituted for by the Acquiring Corporation in connection with the Transfer
of Control nor exercised as of the date of the Transfer of Control shall
terminate and cease to be outstanding effective as of the date of the Transfer
of Control.
16. Rights as a Stockholder or Employee. The Optionee shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 14
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
17. Stock Dividends Subject to Plan. If, from time to time, there is
any stock dividend, stock split, or other change in the character or amount of
any of the outstanding stock of the corporation the stock of which is subject to
the provisions of the Plan, then in such event any and all new, substituted or
additional securities to which the Optionee is entitled by reason of the
Optionee's ownership of the shares acquired upon exercise of the Option shall be
immediately subject to any security interest held by the Company with the same
force and effect as the shares subject to such security interest immediately
before such event.
18. Legends. The Company may at any time place legends referencing
any applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of the Plan.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to carry out the provisions of
this paragraph.
19. Provision of Information. Each Optionee shall be given access to
information concerning the Company equivalent to that information made available
to the Company's common stockholders generally.
20. Options Non-Transferable. During the lifetime of the Optionee,
the Option shall be exercisable only by the Optionee. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws of
descent and distribution.
21. Termination or Amendment of Plan or Options. The Board,
including any duly appointed committee of the Board, may terminate or amend the
Plan or any Option at any time; provided, however, that without the approval of
the Company's stockholders, there shall be (a) no increase in the total number
of shares of Stock covered by the Plan (except by operation of the provisions of
paragraph 14 above), (b) no change in the class eligible to receive Incentive
Stock Options and (c) no expansion in the class eligible to receive
non-statutory stock options. In addition to the foregoing, the approval of the
Company's stockholders shall be sought for any amendment to the Plan for which
the Board deems stockholder approval necessary in order to comply with Rule
16b-3. In any event, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such amendment is required to enable an Option designated as an Incentive
Stock Option to qualify as an Incentive Stock Option. Notwithstanding the first
sentence of this Section 21, Options granted under the Plan on or after January
17, 2001 may not, without the approval of the Company's stockholders, be
repriced to lower the exercise prices of the Options, or be replaced by Options
with lower exercise prices.
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IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing CIENA Corporation Third Amended and Restated 1994 Stock
Option Plan was duly adopted by the Board of Directors of the Company on the
17th day of January, 2001.
/s/ Michael O. McCarthy III
----------------------------
Michael O. McCarthy III, Secretary
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EXHIBIT A
NOTICE OF GRANT OF STOCK OPTION
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APPENDIX 2
CIENA CORPORATION
AUDIT COMMITTEE CHARTER
MISSION
The Audit Committee (the "Committee") is a committee of the Company's Board of
Directors (the "Board"). Its mission is to assist the Board in fulfilling its
oversight responsibilities by assessing and monitoring the Company's financial
information, potential financial, legal and regulatory exposures, systems of
internal controls and the independent audit process.
MEMBERSHIP
Membership of the Committee shall consist of at least three independent outside
Directors (including a Committee Chairman) who shall be designated by the Board
of Directors. The duties and responsibilities of a member of the Committee are
in addition to those duties assumed as a member of the Board of Directors.
Diligence should be used so that one of the independent members of the Audit
Committee should have a financial/accounting background and be knowledgeable of
the Company's business, operations and inherent risk.
MEETINGS
The Committee shall meet at least four times per year (usually in conjunction
with regularly scheduled meetings of the Board of Directors) and shall maintain
minutes of each meeting. In addition to the members of the Committee, the
Company's Chief Executive Officer, Chief Financial Officer and the Company's
independent public accountants shall normally attend all regular meetings of the
Committee. Other persons may be invited to attend as appropriate. During each of
the regular meetings, at the request of the Committee Chairman, the Committee
members may meet separately with the Company's independent public accountants
with no members of management present. The Committee shall report to the Board
on the major items covered at each Committee meeting and shall make
recommendations to the Board and management as appropriate.
PRIMARY RESPONSIBILITIES
- - Facilitate communication between the independent public accountants and
the Board.
- - Periodically review the accounting principles, policies and practices
followed by the Company in accounting for and reporting its business
activities. In addition, review compliance with these items as well as
significant proposed changes.
- - Ensure that the Company fulfills its responsibilities for the fair and
accurate presentation of financial statements in accordance with
generally accepted accounting principles and SEC regulations (and those
of other countries as appropriate) including review of all press
releases containing financial results, periodic financial reports
(including 10Qs, 10Ks, annual reports), proxy materials and any other
public documents containing Company financials.
- - Review legal, environmental and regulatory matters that may have a
material impact on the Company's financial statements or operations.
- - Ensure that the Company maintains adequate systems of internal controls
encompassing management information systems, computer systems, security,
disaster recovery and a code of business conduct. In addition, review
compliance with these controls as well as significant proposed changes.
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- - Assess with management and the independent public accountants
significant risks and exposures and evaluate measures management has
implemented to reduce such risks.
- - Review with the Company's Chief Financial Officer and the independent
public accountants the audit scope and audit plan of the independent
public accountants.
- - Review with management and the independent public accountants at the
completions of the annual audit:
- The Company's annual financial statements and related footnotes.
- The independent public accountant's audit of the Company's
financial statements and the report thereon including
recommended changes in reporting policies or internal controls.
- Any significant changes required in the independent public
accountant's audit plan.
- Any significant difficulties or disputes with management during
the course of the audit.
- Other matters related to the audit which are to be communicated
to the Committee under generally accepted auditing standards.
- - Review with the Board of Directors the results of the annual audit
including the scope, effectiveness and cost of the audit. In addition,
recommend changing the accounting firm retained by the Company if
necessary.
- - Review, confirm and assure the independence of the independent
accountants by reviewing non-audit services performed by external
accountants.
- - Review the cost of audit and non-audit services performed by the
independent accountants.
- - Discuss with the Chief Financial Officer and the independent accountants
their qualitative judgments about the appropriateness, not just the
acceptability, of accounting principles and financial disclosure
practices used or proposed to be adopted by the Company and,
particularly, about the degree of aggressiveness or conservatism of its
accounting principles and underlying estimates.
- - Inquire as to the independent accountant's independent qualitative
judgments about the appropriateness, not just the acceptability, of the
accounting principles and the clarity of the financial disclosure
practices used or proposed to be adopted by the Company.
- - Report Committee actions to the Board of Directors with such
recommendations as the Committee may deem appropriate.
- - Periodically review and update the Committee's charter.
- - The Committee shall perform such other functions as assigned by law, the
Company's charter or bylaws or the Board of Directors. The Committee
shall have the power to conduct or authorize investigations into any
matters within the Committee's scope of responsibilities. The Committee
shall be empowered to retain independent counsel, accountants or others
to assist it in the conduct of any investigation.
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PROXY
CIENA CORPORATION
Proxy Solicited on behalf of the Board of Directors
Annual Meeting of Stockholders to be held March 12, 2001
The undersigned hereby appoints Patrick H. Nettles, Joseph R. Chinnici
and Michael O. McCarthy III, or any of them, the proxies of the undersigned,
with full power of substitution, to vote all shares of Common Stock of CIENA
Corporation which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Corporation to be held March 12, 2001, or any adjournment
thereof, as follows:
1. Election of three Directors by all Stockholders
|_| FOR all nominees listed below |_| WITHHOLD AUTHORITY to
except as marked to the contrary vote for all nominees
listed below
Lawton W. Fitt, Patrick H. Nettles, Ph.D. and John R. Dillon
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below):
- --------------------------------------------------------------------------------
2. Proposal to approve the CIENA Corporation Third Amended and Restated 1994
Stock Option Plan to increase the number of options authorized for issuance
thereunder from 40,100,000 to 46,100,000 and to make certain other changes,
including eliminating the ability of the Board of Directors to reprice options
granted after January 17, 2001.
|_| FOR |_| AGAINST |_| ABSTAIN
3. Proposal to amend the CIENA Corporation Third Amended and Restated 1994 Stock
Option Plan (or, if Proposal 2 is not adopted, the CIENA Corporation Second
Amended and Restated 1994 Stock Option Plan) to add a provision that will
automatically increase the number of shares reserved under the Plan by 0.75% of
the issued and outstanding Common Stock of the Corporation on the last day of
each fiscal year beginning with 2001 and ending with 2004.
|_| FOR |_| AGAINST |_| ABSTAIN
4. Proposal to amend the Corporation's Third Restated Certificate of
Incorporation to increase the number of shares of Common Stock authorized for
issuance thereunder from 460,000,000 shares to 980,000,000 shares.
|_| FOR |_| AGAINST |_| ABSTAIN
5. The proxies are authorized to vote in their discretion on any other matters
which may properly come before the Annual Meeting to the extent set forth in the
proxy statement.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
PLACE AN "X" HERE IF YOU PLAN TO VOTE YOUR SHARES AT THE MEETING. |_|
Execute proxy exactly as your name appears on this form. If stock is registered
in more than one name, each joint holder should sign. When signing as trustee,
executor or other fiduciary, please so indicate:
- ------------------- ------------------------------- ----
Signature of holder Signature of co-holder (if any) Date
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