def14a
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __ )
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Check the appropriate box:
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þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12
Ciena Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule and the date of its filing. |
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Amount previously paid: |
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Form, schedule or registration statement no.: |
Ciena
Corporation
1201 Winterson Road
Linthicum, Maryland 21090
NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS
TO BE HELD MARCH 14,
2007
To the
Shareholders of Ciena Corporation:
The 2007 Annual Meeting of Shareholders of Ciena Corporation
will be held at the Baltimore Marriott Waterfront Hotel located
at 700 Aliceanna Street in Baltimore, Maryland, on Wednesday,
March 14, 2007 at 3:00 p.m. local time for the
following purposes:
1. To elect three members of the Board of Directors to
serve as Class I directors for three-year terms ending in
2010, or until their respective successors are elected and
qualified;
2. To ratify the Board of Directors election of a
Class III director in accordance with Cienas
Principles of Corporate Governance;
3. To ratify the appointment of PricewaterhouseCoopers LLP
as Cienas independent registered public accounting firm
for the fiscal year ending October 31, 2007; and
4. To consider and act upon such other business as may
properly come before the Annual Meeting or any adjournments
thereof.
Please complete, sign, date and return the enclosed proxy card
as promptly as possible in the postage paid envelope provided.
Shareholders of record may also vote by telephone or Internet by
following the instructions on the enclosed proxy card. If you
choose to attend the Annual Meeting, you may still vote your
shares in person even though you have previously returned your
proxy by mail, telephone or Internet. If your shares are held in
a bank or brokerage account, please refer to the materials
provided by your bank or broker for voting instructions. If you
elected to receive our Proxy Statement and Annual Report to
Shareholders over the Internet, you will not receive a paper
proxy card and you should vote online, unless you cancel your
enrollment. Shareholders may listen to a webcast of the Annual
Meeting by following the instructions that will be available on
the Investor Relations page of our website at www.ciena.com.
By Order of the Board of Directors,
Russell B. Stevenson, Jr.
Secretary
Linthicum, Maryland
January 26, 2007
CIENA
CORPORATION
2007 Proxy Statement
Table of Contents
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i
CIENA
CORPORATION
1201 WINTERSON ROAD
LINTHICUM, MARYLAND 21090
PROXY
STATEMENT
Annual
Meeting of Shareholders
To Be Held March 14, 2007
We are furnishing this Proxy Statement to shareholders of Ciena
Corporation, 1201 Winterson Road, Linthicum, Maryland 21090, in
connection with the solicitation by the Board of Directors of
Ciena of proxies to be voted at the Annual Meeting of
Shareholders to be held at the Baltimore Marriott Waterfront
Hotel located at 700 Aliceanna Street in Baltimore, Maryland, on
Wednesday, March 14, 2007 at 3:00 p.m. local time, or
at any adjournment thereof. This Proxy Statement, the proxy card
and our Annual Report to Shareholders will be mailed on or about
January 26, 2007, to each shareholder entitled to vote.
GENERAL
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Who may
vote at the Annual Meeting?
The Board of Directors has set January 19, 2007 as the
record date for the Annual Meeting. If you were the owner of
Ciena common stock at the close of business on January 19,
2007, you may vote at the Annual Meeting. You are entitled to
one vote for each share of common stock you held on the record
date, including shares:
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held directly in your name with our transfer agent as a
shareholder of record; and
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held for you in an account with a broker, bank or other nominee
(shares held in street name).
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A list of shareholders entitled to vote at the Annual Meeting
will be open to the examination of any shareholder, for any
purpose germane to the Annual Meeting, during normal business
hours for a period of ten days before the Annual Meeting at our
corporate offices at 1201 Winterson Road, Linthicum, Maryland
21090, and at the time and place of the Annual Meeting.
How many
shares must be present to hold the Annual Meeting?
A majority of our shares of common stock outstanding as of the
record date must be present at the Annual Meeting in order to
hold the meeting and conduct business. This is called a quorum.
On the record date, there were 85,064,429 shares of Ciena
common stock outstanding. Your shares are counted as present at
the Annual Meeting if you:
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are present and vote in person at the Annual Meeting; or
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have properly submitted a proxy card prior to the Annual Meeting.
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What
proposals will be voted on at the Annual Meeting?
The items scheduled to be voted on at the Annual Meeting are:
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the election of three Class I directors to the Board of
Directors for three-year terms ending in 2010, or until their
respective successors are elected and qualified;
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the ratification of the Board of Directors election of a
Class III director in accordance with Cienas
Principles of Corporate Governance; and
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the ratification of the appointment of PricewaterhouseCoopers
LLP as our independent registered public accounting firm for the
fiscal year ending October 31, 2007.
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We are not currently aware of any other business to be acted
upon at the Annual Meeting. If any other matters are properly
submitted for consideration at the Annual Meeting, including any
proposal to adjourn the Annual Meeting, the persons named as
proxies shall vote the shares represented thereby in their
discretion. Adjournment of the Annual Meeting may be made for
the purpose of, among other things, soliciting additional
proxies. Any adjournment may be made from time to time by
approval of the holders of common stock representing a majority
of the votes present in person or by proxy at the Annual
Meeting, whether or not a quorum exists, without further notice
other than by an announcement made at the Annual Meeting.
How does
the Board of Directors recommend that I vote?
The Board of Directors recommends that you vote:
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FOR the election of the Class I director
nominees named in this Proxy Statement;
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FOR the ratification of the Board of Directors
election of the Class III director in accordance with
Cienas Principles of Corporate Governance; and
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FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent registered public
accounting firm.
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How many
votes are required to approve each proposal?
Directors are elected by a plurality of the votes cast at the
Annual Meeting. This means that the nominees who receive the
largest number of FOR votes cast will be elected as
directors. Notwithstanding the foregoing, under our Principles
of Corporate Governance, any nominee in an uncontested election
who receives a greater number of WITHHELD votes than
FOR votes, will tender his or her resignation
promptly after certification of the shareholder vote, and will
otherwise be subject to the procedures set forth in Cienas
Principles of Corporate Governance, as more fully described
under the heading Election of Directors and Cienas
Principles of Corporate Governance in
Proposal No. 1 below. Cienas Shareholders may
not cumulate votes in the election of directors.
Approval of the ratification of the election of the
Class III director named in this Proxy Statement and
ratification of the appointment of our independent registered
public accounting firm each require the affirmative vote of a
majority of the total votes cast by holders of shares present in
person or represented by proxy at the Annual Meeting and
entitled to vote on these proposals.
How are
votes counted?
You may either vote FOR or WITHHOLD
authority to vote for our director nominees. If you withhold
authority to vote with respect to any nominee, your shares will
be counted for purposes of establishing a quorum, but will have
no effect on the election of that nominee. However, under our
Principles of Corporate Governance, if any nominee receives a
greater number of WITHHELD votes than
FOR votes, that nominee will tender his or her
resignation, and will otherwise be subject to the procedures set
forth in Cienas Principles of Corporate Governance, as
more fully described under the heading Election of
Directors and Cienas Principles of Corporate
Governance in Proposal No. 1 below.
You may vote FOR, AGAINST or
ABSTAIN on the other proposals to be presented at
the Annual Meeting and set forth in the Notice of Annual Meeting
of Shareholders. If you abstain from voting on these proposals,
your shares will be counted as present for purposes of
establishing a quorum at the Annual Meeting. An abstention will
not count as a vote for or against either the ratification of
the election of our Class III director or the ratification
of the appointment of our independent registered public
accounting firm.
Broker non-votes are counted as present for purposes of
determining the presence or absence of a quorum for the
transaction of business but will not be counted for purposes of
determining whether a proposal has been approved. Broker
non-votes occur when brokers do not receive voting instructions
from their customers and the broker does not have discretionary
voting authority with respect to a proposal. If you hold shares
through a broker, bank or other nominee and you do not give
instructions as to how to vote, your broker may have authority
to vote your shares on certain routine items but not on other
items. Broker non-votes will not be counted for purposes of the
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election of directors and will have no effect on the outcome of
the vote for the ratification of the election of our
Class III director or the ratification of our independent
registered public accounting firm.
The persons named as proxies are officers of Ciena. All properly
executed proxies returned in time to be counted at the Annual
Meeting will be voted in accordance with the instructions
contained therein. If you sign and submit your proxy card
without voting instructions, your shares will be voted in
accordance with the recommendations of the Board of Directors
set forth above.
How do I
vote my shares without attending the Annual Meeting?
Whether you are a shareholder of record or hold your
shares in street name, you may direct your vote
without attending the Annual Meeting in person. If you are a
shareholder of record, you may vote by signing and dating your
enclosed proxy card and mailing it in the postage-paid envelope
provided. You should sign your name exactly as it appears on the
proxy card. If you are signing in a representative capacity (for
example, as guardian, executor, trustee, custodian, attorney or
officer of a corporation), you should indicate your name and
title or capacity. You may also vote by telephone or Internet by
following the instructions on the enclosed proxy card.
If your shares are registered in the name of a bank or a
brokerage firm, you may be eligible to vote your shares
electronically over the Internet or by telephone. A large number
of banks and brokerage firms participate in the ADP Investor
Communications Services online program. This program provides
eligible shareholders that hold shares in street
name the opportunity to vote via the Internet or by
telephone. If your bank or brokerage firm is participating in
ADPs program, your proxy materials will provide voting
instructions. Eligible shareholders who elected to receive our
Proxy Statement and Annual Report to Shareholders via the
Internet will be receiving an
e-mail on or
about January 31, 2007 with information explaining how to
access Annual Meeting materials and instructions for voting. If
you provide specific voting instructions by mail, telephone or
the Internet, your shares will be voted by your broker or
nominee as you have directed.
How do I
vote my shares in person at the Annual Meeting?
Even if you plan to attend the Annual Meeting, we encourage you
to vote by signing, dating and returning the enclosed proxy card
so your vote will be counted if you are unable to, or later
decide not to, attend the Annual Meeting. If you are a
shareholder of record, you may vote in person by marking and
signing the ballot to be provided at the Annual Meeting. If you
hold your shares in street name, you must obtain a
proxy in your name from your bank, broker or other shareholder
of record in order to vote by ballot at the Annual Meeting.
What
happens if my shares are held in more than one
account?
If your shares are held in more than one account, you will
receive a proxy card (or other voting instructions if your
shares are held in street name) for each account. To ensure that
all of your shares in each account are voted, you must sign,
date and return each proxy card you receive.
May I
revoke my proxy and change my vote?
You may revoke your proxy at any time before it is voted by
submitting a properly signed proxy card with a later date;
delivering a written notice of revocation bearing a later date
than your proxy card to Ciena Corporation, 1201 Winterson Road,
Linthicum, Maryland 21090, Attention: Corporate Secretary; or
voting in person at the Annual Meeting.
PROPOSAL NO. 1
ELECTION
OF DIRECTORS
General
Cienas Board of Directors currently consists of nine
members. The directors are divided into three classes, with each
class serving on the Board of Directors for a staggered
three-year term. Class I, whose term expires at the Annual
Meeting, consists of Lawton W. Fitt, Patrick H.
Nettles, Ph.D. and Michael J. Rowny. At the Annual
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Meeting, three directors will be elected to fill positions in
Class I. Each of the current Class I directors is a
nominee for election at the Annual Meeting. The nomination of
such directors to stand for election at the Annual Meeting has
been recommended by the Governance and Nominations Committee and
approved by the Board of Directors. Each of the nominees for
Class I, if elected, will serve for a three-year term
expiring at the 2010 Annual Meeting, or until their respective
successors are elected and qualified.
Unless otherwise instructed on the proxy card, the persons named
as proxies will vote the shares represented by each properly
executed proxy FOR the election as directors of the
persons named in this Proxy Statement as nominees. Each of the
nominees has consented to serve if elected. However, if any of
the persons nominated by the Board of Directors fails to stand
for election, or declines to accept election, or is otherwise
unavailable for election prior to our Annual Meeting, proxies
solicited by our Board of Directors will be voted by the proxy
holders for the election of any other person or persons as the
Board of Directors may recommend, or our Board of Directors, at
its option, may reduce the number of directors that constitute
the entire Board of Directors.
The following tables present information, including age, term of
office and business experience, for each person nominated for
election as a Class I director and for those directors
whose terms of office will continue after the Annual Meeting.
Director
Nominees for Election to Class I with Terms Expiring in
2010
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Lawton W. Fitt |
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Ms. Fitt, age 53, has served as a director of Ciena
since November 2000. Since October 2006, Ms. Fitt has
served as a senior advisor to GSC Group, Inc., an alternative
asset investment management firm. From October 2002 to March
2005, Ms. Fitt served as Director of the Royal Academy of
Arts in London. From 1979 to October 2002, Ms. Fitt was an
investment banker with Goldman Sachs & Co., where she
was a partner from 1994 to October 2002, and a managing director
from 1996 to October 2002. Ms. Fitt is a director of
Reuters PLC and Citizens Communications Company. |
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Patrick H. Nettles, Ph.D |
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Dr. Nettles, age 63, has served as a director of Ciena
since April 1994 and as Executive Chairman of the Board of Ciena
since May 2001. From October 2000 to May 2001, Dr. Nettles
was Chairman of the Board and Chief Executive Officer of Ciena,
and he was President and Chief Executive Officer from April 1994
to October 2000. Dr. Nettles serves as a Trustee for the
California Institute of Technology and serves on the board of
directors of Axcelis Technologies, Inc. and The Progressive
Corporation. Dr. Nettles also serves on the board of
directors of Carrius Technologies, Inc., a privately held
company. |
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Michael J. Rowny |
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Mr. Rowny, age 56, has served as a director of Ciena
since August 2004. Mr. Rowny has been Chairman of Rowny
Capital, a private equity firm, since 1999. From 1994 to 1999,
and previously from 1983 to 1986, Mr. Rowny was with MCI
Communications in positions including President and Chief
Executive Officer of MCIs International Ventures,
Alliances and Correspondent group, acting Chief Financial
Officer, Senior Vice President of Finance, and Treasurer.
Mr. Rowny serves on the board of directors of Neustar, Inc.
Mr. Rowny also serves on the board of directors of
Llamagraphics, Inc., a privately held company. |
Class II
Directors with Terms Expiring in 2008
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Harvey B. Cash |
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Mr. Cash, age 68, has served as a director of Ciena
since April 1994. Mr. Cash is a general partner of
InterWest Partners, a venture capital firm in Menlo Park,
California that he joined in 1985. Mr. Cash serves on the
board of directors of First Acceptance Corp.,
i2 Technologies, Inc., Silicon Laboratories, Inc., Argonaut
Group, Inc. and Staktek |
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Holdings, Inc. Mr. Cash also serves on the board of
directors of Voyence Inc., a privately held company. |
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Judith M. OBrien |
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Ms. OBrien, age 56, has served as a director of
Ciena since July 2000. Since November 2006,
Ms. OBrien has served as executive vice president of
Obopay, Inc., a provider of a comprehensive U.S. mobile
payment service. From February 2001 until October 2006,
Ms. OBrien served as a managing director at Incubic
Venture Fund, a venture capital firm. From February 1984 until
February 2001, Ms. OBrien was a partner with Wilson
Sonsini Goodrich & Rosati, where she specialized in
corporate finance, mergers and acquisitions and general
corporate matters. Ms. OBrien serves on the board of
directors of Adaptec, Inc. Ms. OBrien also serves on
the board of directors of AviaraDx, Inc., Grandis Inc. and
Mistletoe Technologies, Inc., all of which are privately held
companies. |
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Gary B. Smith |
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Mr. Smith, age 46, has served as Cienas
President and Chief Executive Officer since May 2001 and has
served as a director of Ciena since October 2000. Mr. Smith
serves on the board of directors for CommVault Systems, Inc. and
the American Electronics Association. Mr. Smith also serves
as a member of the Global Information Infrastructure Commission. |
Class III
Directors with Terms Expiring in 2009
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Stephen P. Bradley, Ph.D |
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Professor Bradley, age 65, has served as a director of
Ciena since April 1998. Professor Bradley is the William Ziegler
Professor of Business Administration and teaches Competitive and
Corporate Strategy in the Advanced Management Program at the
Harvard Business School. A member of the Harvard faculty since
1968, Professor Bradley is also Chairman of Harvards
Executive Program in Competition and Strategy: Building and
Sustaining Competitive Advantage. Professor Bradley serves on
the board of directors of the Risk Management Foundation of the
Harvard Medical Institutions and i2 Technologies, Inc. |
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Bruce L. Claflin |
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Mr. Claflin, age 55, has served as a director of Ciena
since August 2006. Mr. Claflin served as president and
Chief Executive Officer of 3Com Corporation, from January 2001
until his retirement in February 2006. Mr. Claflin joined
3Com as President and Chief Operating Officer in August 1998.
Prior to 3Com, Mr. Claflin served as Senior Vice President
and General Manager, Sales and Marketing, for Digital Equipment
Corporation. Mr. Claflin also worked for 22 years at
IBM, where he held various sales, marketing and management
positions, including general manager of IBM PC Companys
worldwide research and development, product and brand
management, as well as president of IBM PC Company Americas.
Mr. Claflin also serves on the board of directors of
Advanced Micro Devices. |
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Gerald H. Taylor |
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Mr. Taylor, age 65, has served as a director of Ciena
since January 2000. Mr. Taylor has served as a Managing
Member of mortonsgroup, LLC, a venture partnership specializing
in telecommunications and information technology, since January
2000. From 1996 to 1998, Mr. Taylor was Chief Executive
Officer of MCI Communications Corporation. |
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Election
of Directors and Cienas Principles of Corporate
Governance
As noted above, Cienas directors are elected by a
plurality of the votes cast at the Annual Meeting. This means
that the nominees who receive the largest number of
FOR votes cast will be elected as directors.
Notwithstanding the plurality voting standard for election of
directors, Cienas Principles of Corporate Governance
provides that any nominee in an uncontested election who
receives a greater number of votes WITHHELD than
cast FOR his or her election will tender his or her
resignation promptly after certification of the shareholder
vote. The Governance and Nominations Committee would then
consider the nominees resignation and make a
recommendation to the Board on whether to accept or reject the
resignation. In making its recommendation, the Governance and
Nominations Committee will consider all factors it deems
relevant, including the stated reasons shareholders withheld
their votes, the length of service and qualifications of the
director, the directors contributions to Ciena and
Cienas Principles of Corporate Governance. The Board of
Directors is required to act on the Governance and Nominations
Committees recommendation no later than 90 days
following the date of the shareholders meeting. Promptly
following the Boards decision, Ciena will file a
Form 8-K
with the SEC disclosing the nature of the Boards decision,
providing an explanation of the process by which the decision
was reached and, if applicable, the reasons for rejecting the
directors resignation. To the extent that one or more
director resignations are accepted by the Board, the Governance
and Nominations Committee will recommend to the Board whether to
fill such vacancy or vacancies or to reduce the size of the
Board of Directors.
Any director who tenders his or her resignation pursuant to
Cienas Principles of Corporate Governance will not
participate in the recommendation of the Governance and
Nominations Committee or the decision of the Board on the
resignation. If a majority of the members of the Governance and
Nominations Committee have been required to tender their
resignations because of the application of this provision, then
the remaining independent directors will appoint a special
committee from among themselves for the purpose of considering
the resignations and recommending whether to accept or reject
them.
Proposal No. 1
Recommendation of the Board of Directors
The Board of Directors recommends that Ciena shareholders vote
FOR the election of the three Class I nominees
listed above.
CORPORATE
GOVERNANCE AND THE BOARD OF DIRECTORS
Independent
Directors
The Board of Directors has determined that, with the exception
of Dr. Nettles and Mr. Smith, both of whom are
employees of Ciena, all of its members are independent
directors as that term is defined in the listing standards
of The NASDAQ Stock Market.
Communicating
with the Board of Directors
The Board of Directors has adopted a procedure for receiving and
addressing communications from shareholders. Shareholders may
send written communications to the entire Board of Directors or
to any of its committees, addressing them to Ciena Corporation,
1201 Winterson Road, Linthicum, Maryland 21090, Attention:
Corporate Secretary. Communications by
e-mail
should be addressed to ir@ciena.com and marked Attention:
Corporate Secretary in the Subject field.
Codes of
Ethics
Ciena has adopted a Code of Business Conduct and Ethics that is
applicable to all of its directors, officers and employees. The
Code of Business Conduct and Ethics reflects Cienas policy
of dealing with all persons, including its customers, employees,
investors, and suppliers, with honesty and integrity. Ciena has
also adopted a Code of Ethics for Senior Financial Officers that
is specifically applicable to Cienas Chief Executive
Officer, Chief Financial Officer and Controller. Its purpose is
to promote honest and ethical conduct and compliance with the
law, particularly as related to the maintenance of Cienas
financial records and the preparation of financial statements
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filed with the Securities and Exchange Commission. Cienas
Code of Ethics for Senior Financial Officers complies with the
requirements of Section 406(c) of the Sarbanes-Oxley Act. A
copy of Cienas Code of Ethics for Senior Financial
Officers and Code of Business Conduct and Ethics can each be
found on the Corporate Governance page of our website at
www.ciena.com. You may also obtain copies of these documents
without charge by writing to: Ciena Corporation, 1201 Winterson
Road, Linthicum, Maryland 21090, Attention: Corporate Secretary.
Principles
of Corporate Governance
During 2006, the Governance and Nominations Committee reviewed
Cienas governance policies and the Board of Directors
modified Cienas Principles of Corporate Governance to
include additional information on the role and responsibilities
of Cienas lead independent director. In addition to the
Boards policy on voting standards for election of
directors described above, Cienas Principles of Corporate
Governance include Cienas corporate governance principles
regarding the composition, structure, interaction and operation
of the Board of Directors, including as follows:
Selection of Board Members; Vacancies. For so
long as the Board of Directors is classified, the Board shall
endeavor, where reasonably practicable, to appoint nominees for
vacancies or newly created directorships to the class of
director that will stand for election at the next annual meeting
of Cienas shareholders. If appointment to this class is
not reasonably practicable, the Board will submit the election
of the director to the class so appointed by the Board for
ratification by shareholders at the next annual meeting. If
shareholders fail to ratify the election of the newly appointed
director at the next annual meeting, the newly appointed
director shall tender his or her resignation for consideration
by the Board of Directors. Mr. Claflins election by
the Board of Directors in August 2004 is subject to ratification
at the Annual Meeting. See Proposal No. 2
Ratification of the Board of Directors Election of a
Class III Director in accordance with Cienas
Principles of Corporate Governance below.
Service on Other Boards of
Directors. Cienas Board of Directors
believes that directors should not serve on more than four other
boards of public companies in addition to Cienas Board of
Directors. Ciena directors serving at the time of the adoption
of this requirement may maintain directorships in excess of this
limit unless the Board determines that doing so would impair the
directors service on Cienas Board of Directors. In
the event that a director wishes to join the Board of another
public company in excess of the limit above, the Board, in its
sole discretion, shall determine whether service on the
additional board of directors is likely to interfere with the
performance of the directors duties to Ciena, taking into
account the individual, the nature of his or her other
activities and such other factors or considerations as the Board
of Directors deems relevant. In selecting nominees for
membership, the Governance and Nominations Committee and the
Board of Directors will take into account the other demands on
the time of a candidate, and avoid candidates whose other
responsibilities might interfere with effective service on
Cienas Board of Directors.
Change in Principal Occupation of Director. In
some cases, when a director changes his or her principal
occupation, the change may result in an increased workload,
actual or apparent conflicts of interest, or other consequences
that may affect his or her ability to continue to serve on
Cienas Board of Directors. As a result, the Board of
Directors has determined that when a director substantially
changes his or her principal occupation, including by
retirement, that director shall tender his or her resignation to
the Board of Directors. The Governance and Nominations Committee
will weigh such factors as it deems relevant and recommend to
the Board of Directors whether the resignation should be
accepted, and the Board shall act promptly on the matter.
Director Stock Ownership Requirements. All
non-employee directors are required to hold at least
3,200 shares of Cienas common stock
and/or units
while serving as a director. New directors and directors serving
at the time of the adoption of this requirement will have three
years to attain the director stock ownership threshold. Shares
or units held or beneficially owned by a director, including
under any applicable equity plan, are included in determining
whether this minimum ownership requirement has been met.
Cienas Board of Directors recognizes that exceptions to
this policy may be necessary or appropriate in individual cases,
and may approve exceptions from time to time as it deems
appropriate and in the interest of Ciena and its shareholders.
Lead Independent Director. The Lead
Independent Director serves as principal liaison on Board-wide
issues between the independent directors and the Executive
Chairman and coordinates the activities of the other independent
directors. The Lead Independent Director approves meeting
schedules and agendas, as well as the
7
quality, quantity and timeliness of information sent to the
Board. The Lead Independent Director has the responsibility and
authority to preside at all meetings of the Board at which the
Executive Chairman is not present, including executive sessions
of the independent directors. The Lead Independent Director may
also recommend the retention of outside advisors and consultants
who report directly to the Board of Directors. If requested by
shareholders, when appropriate, the Lead Independent Director
shall also be available for consultation and direct
communication.
A complete copy of Cienas revised Principles of Corporate
Governance is available on the Corporate Governance page of
Cienas website at www.ciena.com.
Committees
of the Board of Directors and Meetings
During fiscal 2006, the Board of Directors held six meetings.
The Board of Directors currently has three standing committees,
each consisting entirely of independent directors, as defined by
The NASDAQ Stock Market:
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the Audit Committee, which held seven meetings during fiscal
2006;
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the Compensation Committee, which held four meetings during
fiscal 2006; and
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the Governance and Nominations Committee, which held four
meetings during fiscal 2006.
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Mr. Taylor attended four of the six meetings of the Board
of Directors. Otherwise, all of the directors attended at least
75% of the aggregate of the total number of meetings of the
Board of Directors and the committees on which they served
during fiscal 2006. Two members of the Board of Directors
attended Cienas 2006 Annual Meeting of Shareholders. Ciena
encourages, but does not require, members of the Board of
Directors to attend the Annual Meeting of Shareholders. Each of
the three standing committees of the Board of Directors has a
written charter, copies of which can be found on the Corporate
Governance page of Cienas website at www.ciena.com.
Committee
Composition
The table below details the composition of the committees of
Cienas Board of Directors as of the date of this Proxy
Statement. Mr. Claflin was appointed to the Audit Committee
in December 2006 and did not serve on the Audit Committee during
fiscal 2006. Mr. Smith and Dr. Nettles do not serve on
committees of the Board of Directors.
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Governance and
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Audit
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Compensation
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Nominations
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Director Name
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Committee
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Committee
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Committee
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Stephen P.
Bradley, Ph.D.
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X
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X
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Harvey B. Cash
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X
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Chairperson
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Bruce L. Claflin
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X
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Lawton W. Fitt
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Chairperson
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Judith M. OBrien
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Chairperson
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X
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Michael J. Rowny
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X
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Gerald H. Taylor
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X
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Audit
Committee
The Audit Committee falls within the definition of audit
committee under Section 3(a)(58)(A) of the Securities
Exchange Act of 1934. In addition to meeting The NASDAQ Stock
Markets tests for director independence, directors on
audit committees must meet two basic criteria set forth in the
SECs rules. First, audit committee members are barred from
accepting, directly or indirectly, any consulting, advisory or
other compensatory fee from the company or an affiliate of the
company, other than in the members capacity as a member of
the Board of Directors and any Board committee. Second, a member
of an audit committee may not be
8
an affiliated person of the company or any subsidiary of the
company apart from his or her capacity as a member of the Board
and any Board committee. The Board of Directors has determined
that each member of the Audit Committee meets these independence
requirements, in addition to the independence criteria
established by The NASDAQ Stock Market. The Board of Directors
has determined that Mr. Rowny is an audit committee
financial expert as defined in Item 401 of
Regulation S-K.
Among its responsibilities, the Audit Committee appoints and
establishes the compensation for Cienas independent
registered public accounting firm, approves in advance all
engagements with Cienas independent registered public
accounting firm to perform audit and non-audit services, reviews
and approves the procedures used by Ciena to prepare its
periodic reports, reviews and approves Cienas critical
accounting policies, discusses the plans and reviews results of
the audit engagement with Cienas independent registered
public accounting firm, reviews the independence of Cienas
independent registered public accounting firm, and oversees
Cienas internal audit function and Cienas accounting
processes, including the adequacy of its internal controls over
financial reporting. Cienas independent registered public
accounting firm and internal audit department report directly to
the Audit Committee. To assist it in carrying out its
responsibilities, the Audit Committee is authorized to retain
the services of independent advisors.
Compensation
Committee
The Compensation Committee advises and assists management in
developing Cienas overall compensation strategy to assure
that it promotes shareholder interests, supports Cienas
strategic and tactical objectives, and provides for appropriate
rewards and incentives for Cienas management and
employees. As part of that responsibility, the Compensation
Committee reviews and approves the structure of Cienas
bonus plans and administers Cienas stock option plans. To
assist it in carrying out its responsibilities, the Compensation
Committee is authorized to retain the services of independent
advisors.
At the end of each fiscal year, the Compensation Committee
evaluates the performance of the Executive Chairman and the
Chief Executive Officer and establishes their compensation for
the next fiscal year. The Compensation Committee also reviews
with the Chief Executive Officer the performance of the other
executive officers and approves their compensation for the next
fiscal year.
Governance
and Nominations Committee
The Governance and Nominations Committee reviews, develops and
makes recommendations to the Board of Directors regarding
various aspects of the Board of Directors and Cienas
governance processes and procedures. It also recommends
candidates for election to fill vacancies on the Board of
Directors, including nomination for re-election of directors
whose terms are due to expire. The Governance and Nominations
Committee is also responsible for making recommendations to the
Board of Directors regarding the compensation of its
non-employee members.
In discharging its responsibilities to nominate candidates for
election to the Board of Directors, the Governance and
Nominations Committee endeavors to identify, recruit and
nominate candidates characterized by wisdom, maturity, sound
judgment, excellent business skills and high integrity. The
Governance and Nominations Committee seeks to assure that the
Board of Directors is composed of individuals of diverse
backgrounds who have a variety of complementary experience,
training and relationships relevant to Cienas needs. In
nominating candidates to fill vacancies created by the
expiration of the term of a member of the Board of Directors,
the Governance and Nominations Committee determines whether the
incumbent director is willing to stand for re-election. If so,
the Governance and Nominations Committee evaluates his or her
performance in office to determine suitability for continued
service, taking into consideration the value of continuity and
familiarity with Cienas business. In addition, the
Governance and Nominations Committee considers recommendations
for nomination from any reasonable source, including
Cienas officers, directors and shareholders according to
the foregoing standards. When appropriate, the Governance and
Nominations Committee may retain executive recruitment firms to
assist in identifying suitable candidates. Shareholders who wish
to suggest potential nominees may address their suggestions in
writing to Ciena Corporation, 1201 Winterson Road, Linthicum,
Maryland 21090, Attention: Corporate Secretary.
9
Director
Compensation
The compensation of the Board of Directors is determined by the
Governance and Nominations Committee. Non-employee members of
the Board of Directors currently receive cash and equity
compensation in connection with their service to Ciena.
Cash Compensation. In December 2006, the Board
of Directors approved revised cash compensation effective as of
the date of this years Annual Meeting. Non-employee
members of the Board of Directors receive cash compensation in
the form of the annual retainers and attendance fees per meeting
of the Board of Directors and its committees as set forth below:
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Cash Compensation
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Fiscal 2006
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Fiscal 2007
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Annual Retainer for Each
Non-Employee Director
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$20,000
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$25,000
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Additional Lead Outside Director
Retainer
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$7,500
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$7,500
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Audit Committee Chairperson Retainer
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$7,500
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$20,000
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Other Committee Chairperson Retainer
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$7,500
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Board Meeting Attendance
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$1,500
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$1,500
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Board Meeting Attendance
(telephonic)
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$500
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Audit Committee Meeting Attendance
(in person)
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$3,000 (Chairperson)
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$2,000 (Chairperson)
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$2,000 (other directors)
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$2,000 (other directors)
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Other Committee Meeting Attendance
(in person)
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$1,500 (Chairperson)
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$1,000 (Chairperson)
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$1,000 (other directors)
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$1,000 (other directors)
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All Committee Meeting Attendance
(telephonic)
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$500
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$500
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Ciena also reimburses each non-employee member of the Board of
Directors for
out-of-pocket
expenses incurred in connection with attendance at meetings.
During fiscal 2006, the following non-employee directors earned
cash compensation for their service on the Board of Directors as
set forth below:
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Cash Compensation
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Director Name
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Fiscal 2006
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Stephen P. Bradley, Ph.D.
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$
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39,500
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Harvey B. Cash
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$
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43,500
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Bruce L. Claflin
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$
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6,500
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Lawton W. Fitt
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$
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47,000
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Judith M. OBrien
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$
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36,000
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Michael J. Rowny
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$
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35,500
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Gerald H. Taylor
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$
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30,000
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Equity Compensation. At the Annual Meeting
held on March 15, 2006, each non-employee director and
Dr. Nettles received a stock option grant to purchase
3,214 shares of common stock at an exercise price of
$37.45 per share, the closing price per share of Ciena
common stock on The NASDAQ Stock Market on the date of grant.
Each non-employee director and Dr. Nettles also received a
restricted stock unit award for 1,071 shares of common
stock. Each award vests in full on the first anniversary of the
date of grant. Upon joining the Board in August 2006,
Mr. Claflin received a stock option grant to purchase
6,428 shares of common stock at an exercise price of
$30.17, the closing price per share of Ciena common stock on The
NASDAQ Stock Market on the date of grant, and a restricted stock
unit award for 2,142 shares. Each equity award vests in
thirds annually over a three-year period.
In December 2006, the Board of Directors approved revised equity
compensation for the non-employee members of the Board of
Directors and Dr. Nettles as set forth below. Initial
equity awards made upon joining the
10
Board of Directors vest in thirds annually over a period of
three years and annual awards vest in full on the first
anniversary of the date of grant.
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Equity Compensation
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Fiscal 2006
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Fiscal 2007
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Initial Restricted Stock Unit Grant
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2,142 shares
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6,500 shares
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Initial Stock Option Grant
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6,428 shares
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Annual Restricted Stock Unit Grant
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1,071 shares
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3,250 shares
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Annual Stock Option Grant
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3,214 shares
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The modifications to the equity compensation of the Board above
will be effective upon this years Annual Meeting.
PROPOSAL NO. 2
RATIFICATION OF THE BOARD OF DIRECTORS ELECTION OF A
CLASS III DIRECTOR IN ACCORDANCE WITH CIENAS
PRINCIPLES OF CORPORATE GOVERNANCE
Following a search by the Governance and Nominations Committee
to identify someone to fill the Class III Board seat that
became vacant after the 2006 Annual Meeting, the Committee
nominated and the Board of Directors elected Mr. Claflin on
August 30, 2006 in accordance with Cienas bylaws. In
electing Mr. Claflin, the Board deemed it in the best
interest of Ciena and its shareholders to appoint
Mr. Claflin to Class III, such that each class of
Cienas Board of Directors consisted of three directors.
Directors serving in Class III, serve until the 2009 annual
meeting, or until their successors are duly elected and
qualified. Information regarding Mr. Claflin and his
business experience can be found under Proposal No. 1
above.
Pursuant to Section 8 of Cienas Principles of
Corporate Governance below, the election of any director
appointed to fill a vacant Board seat in a class other than the
class of directors whose term expires at the next annual
meeting, is subject to ratification by shareholders at the next
annual meeting of shareholders.
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8.
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Selection of Board Members;
Vacancies. The Board is responsible for
filling vacancies in its membership, replacing directors who are
unable to continue to serve effectively, and nominating
candidates to stand for election at the annual meeting of
stockholders. The Board has delegated to the Governance and
Nominations Committee the process of identifying and screening
candidates when a vacancy is to be filled and making preliminary
recommendations for nominations. For so long as the Board of
Directors is classified, the Board shall endeavor, where
reasonably practicable, to appoint nominees for vacancies or
newly created directorships to such class of director that will
stand for election at the next annual meeting of the
Corporations stockholders. If appointment to such class is
not reasonably practicable, the election of the newly appointed
director, to serve in the class to which he or she was
appointed, will be ratified at the next annual meeting of the
Corporations stockholders, notwithstanding that other
directors serving in that class are not required to stand for
election. If the election of the newly appointed director fails
to be ratified at the next annual meeting of the
Corporations stockholders, he or she shall tender his or
her resignation to the Board.
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Cienas charter, bylaws and Delaware law do not require
that shareholders ratify the election of directors appointed by
the Board of Directors to fill a vacancy in any class, and as a
matter of Delaware law the shareholder ratification vote is not
binding on any person. The Board of Directors is seeking
ratification of the election of Mr. Claflin in accordance
with Cienas Principles of Corporate Governance and because
it believes seeking ratification is a matter of good corporate
governance. If shareholders fail to ratify the appointment, the
Principles of Corporate Governance state that Mr. Claflin
shall tender his resignation to the Board and Mr. Claflin
has agreed to do so. If this occurs, the Board of Directors, in
its sole discretion, will determine whether or not accepting
such resignation would be in the best interests of Ciena and its
shareholders. The Board of Directors has determined that,
consistent with Section 16 of Cienas Principles of
Corporate Governance described under Proposal 1 above, the
shareholder ratification will only be deemed effective if more
votes are cast FOR than AGAINST the
ratification proposal.
11
Proposal No. 2
Recommendation of the Board of Directors
The Board of Directors recommends that Ciena shareholders vote
FOR the ratification of the election by the Board of
Directors of Mr. Claflin as a Class III director in
accordance with Cienas Principles of Corporate Governance.
PROPOSAL NO. 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed
PricewaterhouseCoopers LLP (PwC) as our independent
registered public accounting firm to audit Cienas
consolidated financial statements for the fiscal year ending
October 31, 2007, and is asking shareholders to ratify this
appointment at the Annual Meeting.
PwC has audited our consolidated financial statements annually
since Cienas incorporation in 1992. A representative of
PwC is expected to be present at the Annual Meeting, will have
the opportunity to make a statement if he or she desires to do
so and will be available to respond to appropriate questions. In
making its recommendation to the Board of Directors to select
PwC as Cienas independent registered public accounting
firm for fiscal 2007, the Audit Committee has considered whether
the non-audit services provided by PwC are compatible with
maintaining the independence of PwC. Information regarding fees
billed by PwC for our 2005 and 2006 fiscal years is set forth
under the heading Relationship with Independent Registered
Public Accounting Firm below.
Our bylaws do not require that shareholders ratify the
appointment of our independent registered public accounting
firm. We are seeking ratification because we believe it is a
matter of good corporate governance. In the event that
shareholders fail to ratify the appointment, the Audit Committee
will reconsider whether or not to retain PwC, but may ultimately
determine to retain PwC as our independent registered public
accounting firm. Even if the appointment is ratified, the Audit
Committee, in its sole discretion, may direct the appointment of
a different independent registered public accounting firm at any
time during the year if the Audit Committee determines that such
a change would be in the best interests of Ciena and its
shareholders.
Proposal No. 3
Recommendation of the Board of Directors
The Board of Directors recommends that Ciena shareholders vote
FOR the ratification of the appointment of PwC as
our independent registered public accounting firm for the
current fiscal year.
RELATIONSHIP
WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The following table shows the fees that were billed to Ciena by
PwC for professional services rendered for the fiscal years
ended October 31, 2005 and 2006. In compliance with the
Audit Committees internal policy and auditor independence
rules of the SEC, all audit and permissible non-audit services
provided by PwC to Ciena for the fiscal years ended
October 31, 2005 and 2006 were pre-approved by the Audit
Committee.
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Fee Category
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2005
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2006
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Audit Fees
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$
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2,014,000
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$
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2,046,149
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Audit-Related Fees
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$
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$
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86,985
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Tax Fees
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$
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91,000
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$
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66,672
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All Other Fees
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$
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$
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Total Fees
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$
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2,105,000
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$
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2,199,806
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Audit
Fees
This category of the table above includes fees for the audit of
our annual financial statements, review of financial statements
included in our quarterly reports on
Form 10-Q
and services that are normally provided by PwC in connection
with statutory and regulatory filings or engagements. The
preparation of Cienas audited financial
12
statements includes compliance with Section 404 of the
Sarbanes-Oxley Act of 2002 and the preparation, by PwC, of an
attestation report expressing its opinion regarding
managements assessment of our internal control over
financial reporting and on the effectiveness of our internal
control over financial reporting. As a result, audit fees for
fiscal 2005 and 2006 reflect PwCs integrated audit of our
financial statements and our internal control over financial
reporting as of the end of each fiscal year.
Audit-Related
Fees
This category of the table above includes fees for assurance and
related services that are reasonably related to the performance
of the audit or review of our financial statements and are not
included above under Audit Fees. For fiscal 2006,
audit related fees include services in connection with
Cienas convertible note offering. Ciena did not incur any
audit related fees during fiscal 2005.
Tax
Fees
This category of the table above includes fees for tax
compliance, tax advice, and tax planning. These services for
fiscal 2005 and fiscal 2006 include tax return preparation,
expatriate tax services and international VAT tax planning.
All Other
Fees
This category of the table above includes fees for services
provided by PwC that are not included in the service categories
reported above. Ciena did not incur any other fees during fiscal
2005 or fiscal 2006.
Pre-Approval
of Services
The Audit Committee pre-approves all services, including both
audit and non-audit services, provided by our independent
registered public accounting firm. For audit services (including
statutory audit engagements as required under local country
laws), each year our independent registered public accounting
firm provides the Audit Committee with an engagement letter
outlining the scope of the audit services proposed to be
performed during the year, which must be accepted by the Audit
Committee before the audit commences. Our independent registered
public accounting firm also submits an audit services fee
proposal, which also must be approved by the Audit Committee
before the audit commences.
Each year, management also submits to the Audit Committee a list
of non-audit services that it recommends the independent
registered public accounting firm be engaged to provide and an
estimate of the fees to be paid for each. Management and the
independent registered public accounting firm must each confirm
to the Audit Committee that the performance of the non-audit
services on the list would not compromise the independence of
our registered public accounting firm and would be permissible
under applicable legal requirements. The Audit Committee must
approve both the list of non-audit services and the budget for
each such service before commencement of the work. Our
management and our independent registered public accounting firm
report to the Audit Committee at each of its regular meetings as
to the non-audit services actually provided by the independent
registered public accounting firm and the approximate fees
incurred by Ciena for those services.
To ensure prompt handling of unexpected matters, the Audit
Committee has authorized its Chairperson to amend or modify the
list of approved permissible non-audit services and fees. If the
Chairperson exercises this delegation of authority, she reports
the action taken to the Audit Committee at its next regular
meeting.
All audit and permissible non-audit services provided by PwC to
Ciena for the fiscal years ended October 31, 2005 and 2006
were pre-approved by the Audit Committee.
13
OWNERSHIP
OF SECURITIES
The following table sets forth, as of December 31, 2006,
the beneficial ownership of Cienas common stock for the
following persons:
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all shareholders known by us to own beneficially more than 5% of
our common stock;
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our Chief Executive Officer and the other Named Executive
Officers (as that term is defined in the Summary Compensation
Table included in this Proxy Statement);
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each of our directors; and
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all of our directors and executive officers as a group.
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Certain information in the table concerning beneficial owners
other than our directors and executive officers is based on
information contained in filings made by such beneficial owners
with the Securities and Exchange Commission.
Pursuant to
Rule 13d-3
of the Securities Exchange Act of 1934, shares are deemed to be
beneficially owned by a person on a particular date if that
person has the right to acquire shares (for example, upon
exercise of an option) within sixty days of that date. In
computing the percentage ownership of any person, the amount of
shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by
reason of such acquisition rights. As a result, the percentage
of outstanding shares held by any person in the table below does
not necessarily reflect the persons actual voting power.
As of December 31, 2006, there were 84,993,768 shares
of Ciena common stock outstanding.
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Number
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Beneficial
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Percent of
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of Shares
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Right to
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Ownership
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Outstanding
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Name of Beneficial Owner
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Owned(1)
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Acquire(2)
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Total(3)
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Shares
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FMR Corp.(4)
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8,848,136
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534,586
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9,382,722
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11.0
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%
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Patrick H.
Nettles, Ph.D.
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|
|
349,557
|
|
|
|
176,112
|
|
|
|
525,669
|
|
|
|
*
|
|
Gary B. Smith
|
|
|
32
|
|
|
|
437,668
|
|
|
|
437,700
|
|
|
|
*
|
|
Stephen B. Alexander(5)
|
|
|
30,077
|
|
|
|
184,820
|
|
|
|
214,897
|
|
|
|
*
|
|
Michael G. Aquino
|
|
|
902
|
|
|
|
64,488
|
|
|
|
65,390
|
|
|
|
*
|
|
Joseph R. Chinnici(6)
|
|
|
14,736
|
|
|
|
140,274
|
|
|
|
155,010
|
|
|
|
*
|
|
Arthur D. Smith, Ph.D.
|
|
|
8,540
|
|
|
|
123,544
|
|
|
|
132,084
|
|
|
|
*
|
|
Stephen P.
Bradley, Ph.D.
|
|
|
5,714
|
|
|
|
47,212
|
|
|
|
52,926
|
|
|
|
*
|
|
Harvey B. Cash(7)
|
|
|
54,128
|
|
|
|
31,498
|
|
|
|
85,626
|
|
|
|
*
|
|
Bruce L. Claflin
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Lawton W. Fitt
|
|
|
|
|
|
|
34,122
|
|
|
|
34,122
|
|
|
|
*
|
|
Judith M. OBrien(8)
|
|
|
4,231
|
|
|
|
33,636
|
|
|
|
37,867
|
|
|
|
*
|
|
Michael J. Rowny
|
|
|
|
|
|
|
7,380
|
|
|
|
7,380
|
|
|
|
*
|
|
Gerald H. Taylor
|
|
|
286
|
|
|
|
32,645
|
|
|
|
32,931
|
|
|
|
*
|
|
All executive officers and
directors as a group (15 persons)
|
|
|
476,872
|
|
|
|
1,519,761
|
|
|
|
1,996,633
|
|
|
|
2.3
|
%
|
|
|
|
* |
|
Represents less than 1%. |
|
(1) |
|
Excludes shares that may be acquired through the exercise of
stock options, the vesting of restricted stock units or other
convertible equity awards. |
|
(2) |
|
Except as otherwise set forth in the footnotes below, represents
shares of common stock that can be acquired upon the exercise of
stock options and vesting of restricted stock units within sixty
days of December 31, 2006. |
|
(3) |
|
Except as indicated in the footnotes to this table, the persons
named in this table have sole voting and investment power with
respect to all shares of common stock shown as beneficially
owned by them, subject to community property laws where
applicable. |
14
|
|
|
(4) |
|
Shareholders address is 82 Devonshire Street, Boston, MA
02109. Ownership information is based solely on a
Schedule 13G/A, filed jointly by FMR Corp.
(FMR) and Edward C. Johnson 3d with the Securities
and Exchange Commission on October 10, 2006, and reflects
their beneficial ownership as of September 30, 2006. Based
on the Schedule 13G/A, FMR is the parent holding company of
Fidelity Management & Research Company
(Fidelity). By acting as investment adviser to
various investment companies, Fidelity is the beneficial owner
of 9,111,872 shares of Cienas common stock, or 10.7%
of the outstanding shares of Ciena common stock at
December 31, 2006. Shares included in the Right to
Acquire column above reflect shares of common stock
issuable upon conversion of Cienas outstanding convertible
notes held by Fidelity and another subsidiary of FMR as reported
on Schedule 13G/A. |
|
(5) |
|
Voting and investment power is shared with
Mr. Alexanders spouse. |
|
(6) |
|
Includes 8,176 shares of stock held by a trust, of which
Mr. Chinnicis spouse is the beneficiary. |
|
(7) |
|
Includes 31,640 shares of common stock owned by InterWest
Partners VI, L.P. and 1,003 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 each limited partnership. Mr. Cash disclaims
beneficial ownership of these shares except to the extent of his
proportionate partnership interest therein. |
|
(8) |
|
Voting and investment power is shared with
Ms. OBriens spouse. |
15
COMPENSATION
AND OTHER INFORMATION CONCERNING EXECUTIVE OFFICERS
Summary
Compensation Table
The following table sets forth the compensation information for
Cienas fiscal years ended October 31, 2004, 2005 and
2006 for Cienas Chief Executive Officer and the other four
highest-paid executive officers as of October 31, 2006. The
following table also discloses compensation information for
Cienas Executive Chairman. The individuals included in the
compensation information below are collectively referred to as
the Named Executive Officers. Information in the
table below regarding Restricted Stock Unit Awards reflects the
dollar value of the shares subject to the grant based upon the
closing price per share of Ciena common stock on the grant date.
Additional information regarding the value of unvested
restricted stock units as of the end of fiscal 2006 is set forth
in the footnotes to the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Compensation
|
|
|
|
|
|
|
|
|
|
|
Awards
|
|
|
|
|
|
|
|
|
|
|
Restricted
|
|
Securities
|
|
|
|
|
Annual Compensation
|
|
Stock Unit
|
|
Underlying
|
|
All Other
|
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Award(s)(1)
|
|
Options
|
|
Compensation(3)
|
|
Patrick H.
Nettles, Ph.D.
|
|
|
2006
|
|
|
$
|
300,000
|
|
|
|
|
|
|
$
|
40,109
|
(2)
|
|
|
3,214
|
(2)
|
|
$
|
14,355
|
|
Executive Chairman of
the
|
|
|
2005
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
11,701
|
|
Board of Directors
|
|
|
2004
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
42,857
|
|
|
$
|
12,012
|
|
Gary B. Smith
|
|
|
2006
|
|
|
$
|
500,000
|
|
|
$
|
312,500
|
|
|
$
|
1,179,990
|
|
|
|
107,142
|
|
|
$
|
7,183
|
|
President, Chief
Executive
|
|
|
2005
|
|
|
$
|
528,846
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
6,737
|
|
Officer and Director
|
|
|
2004
|
|
|
$
|
650,000
|
|
|
|
|
|
|
$
|
405,600
|
|
|
|
32,857
|
|
|
$
|
6,662
|
|
Stephen B. Alexander
|
|
|
2006
|
|
|
$
|
325,000
|
|
|
$
|
101,563
|
|
|
$
|
471,976
|
|
|
|
39,285
|
|
|
$
|
3,678
|
|
Senior Vice President
and
|
|
|
2005
|
|
|
$
|
300,000
|
|
|
|
|
|
|
|
|
|
|
|
35,714
|
|
|
$
|
3,438
|
|
Chief Technology
Officer
|
|
|
2004
|
|
|
$
|
300,000
|
|
|
|
|
|
|
$
|
94,640
|
|
|
|
7,857
|
|
|
$
|
3,342
|
|
Michael G. Aquino
|
|
|
2006
|
|
|
$
|
487,410
|
(4)
|
|
|
|
|
|
$
|
336,741
|
|
|
|
28,571
|
|
|
$
|
3,778
|
|
Senior Vice President,
Worldwide Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph R. Chinnici
|
|
|
2006
|
|
|
$
|
350,000
|
|
|
$
|
164,063
|
|
|
$
|
353,974
|
|
|
|
35,714
|
|
|
$
|
8,141
|
|
Senior Vice
President,
|
|
|
2005
|
|
|
$
|
350,000
|
|
|
|
|
|
|
|
|
|
|
|
35,714
|
|
|
$
|
7,538
|
|
Finance and Chief
|
|
|
2004
|
|
|
$
|
350,000
|
|
|
|
|
|
|
$
|
94,640
|
|
|
|
7,857
|
|
|
$
|
9,463
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arthur D. Smith, Ph.D.
|
|
|
2006
|
|
|
$
|
325,000
|
|
|
$
|
101,563
|
|
|
$
|
471,976
|
|
|
|
46,428
|
|
|
$
|
4,449
|
|
Chief Operating
Officer
|
|
|
2005
|
|
|
$
|
275,000
|
|
|
|
|
|
|
|
|
|
|
|
35,714
|
|
|
$
|
4,159
|
|
|
|
|
2004
|
|
|
$
|
275,000
|
|
|
|
|
|
|
$
|
74,339
|
|
|
|
6,000
|
|
|
$
|
4,474
|
|
|
|
|
(1) |
|
For fiscal 2006, information includes the value of restricted
stock units and performance stock units, based on the closing
price per share on the date of grant. Restricted stock units
were granted on November 1, 2005 in the following amounts:
46,428 shares to Mr. Smith, 21,428 shares to
Mr. Alexander, 14,285 shares to Mr. Chinnici and
21,428 shares to Dr. Smith. A restricted stock unit
for 10,714 shares was issued to Mr. Aquino on
June 1, 2006. Restricted stock units vest as to
one-sixteenth of the grant amount on the last day of each fiscal
quarter over a four-year period from the date of grant. Based on
the $23.59 closing price per share of Ciena common stock on
October 27, 2006, at the end of fiscal 2006 the aggregate
remaining unvested restricted stock units held by each Named
Executive Officer were as follows: 40,538 restricted stock units
with a value of $956,291 held by Mr. Smith, 17,406
restricted stock units with a value of $410,608 held by
Mr. Alexander, 9,376 restricted stock units with a value of
$221,180 held by Mr. Aquino, 12,050 restricted stock units
with a value of $284,260 held by Mr. Chinnici, and 17,120
restricted stock units with a value of $403,861 held by
Dr. Smith. Unvested restricted stock units vest upon a
termination of service due to death or disability. Performance
stock units were granted on November 1, 2005 in the
following amounts: 25,000 shares to Mr. Smith, and
7,142 shares to each of Mr. Alexander,
Mr. Chinnici and Dr. Smith. Performance stock units
vested in their entirety during fiscal 2006 upon Cienas
achievement of certain corporate financial measures. |
|
(2) |
|
Reflects equity compensation payable for service on the Board of
Directors. Based on the $23.59 closing price per share of Ciena
common stock on October 27, 2006, the 1,071 aggregate
remaining unvested restricted stock units held by
Dr. Nettles had a dollar value of $25,265 at the end of
fiscal 2006. |
16
|
|
|
(3) |
|
Includes the following for fiscal 2006: |
|
|
|
(a) |
|
life insurance premiums, paid by Ciena on behalf of all
employees, in the amount of $3,564 to Dr. Nettles, $810 to
Mr. Smith, $810 to Mr. Alexander, $1,053 to
Mr. Aquino, $1,242 to Mr. Chinnici and $532 to
Dr. Smith for group term life insurance coverage equal to
two times annual salary and bonus, up to a maximum of $500,000; |
|
(b) |
|
additional life insurance premium of $199 for Mr. Smith
pursuant to a supplemental term life insurance policy that
offers $235,000 in additional coverage; |
|
(c) |
|
long-term disability premiums, paid by Ciena on behalf of all
employees, in the amount of $570 for Dr. Nettles, $855 for
Mr. Smith, $618 for Mr. Alexander, $475 for
Mr. Aquino, $665 for Mr. Chinnici and $618 for
Dr. Smith; |
|
(d) |
|
supplemental long-term disability premiums of $6,921 for
Dr. Nettles, $2,019 for Mr. Smith, and $3,084 for
Mr. Chinnici, paid by Ciena on their respective behalf,
pursuant to executive long-term disability insurance policies
held by those individuals; and |
|
(e) |
|
401(k) plan matching contributions, available to all employees,
paid by Ciena in the amount of $3,300 to Dr. Nettles,
Mr. Smith and Dr. Smith, $2,250 to Mr. Alexander
and Mr. Aquino, and $3,150 to Mr. Chinnici. |
|
|
|
(4) |
|
Includes sales commissions of $237,410 earned by Mr. Aquino. |
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, 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Grants
|
|
|
|
|
|
|
|
|
Percentage
|
|
|
|
|
|
|
|
|
|
|
|
|
of Total
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Options
|
|
|
|
|
|
Potential Realizable Value at
|
|
|
Securities
|
|
Granted to
|
|
|
|
|
|
Assumed Annual Rates of
|
|
|
Underlying
|
|
Employees
|
|
Exercise
|
|
|
|
Stock Price Appreciation for
|
|
|
Options
|
|
in Fiscal
|
|
Price Per
|
|
Expiration
|
|
Option Term(4)
|
|
|
Granted(1)
|
|
2006(2)
|
|
Share(3)
|
|
Date
|
|
5%
|
|
10%
|
|
Patrick H. Nettles, Ph.D.
|
|
|
3,214
|
|
|
|
0.6
|
%
|
|
$
|
37.45
|
|
|
|
3/15/2016
|
|
|
$
|
75,696
|
|
|
$
|
191,830
|
|
Gary B. Smith
|
|
|
107,142
|
|
|
|
19.9
|
%
|
|
$
|
16.52
|
|
|
|
11/1/2015
|
|
|
$
|
1,113,135
|
|
|
$
|
2,820,902
|
|
Stephen B. Alexander
|
|
|
39,285
|
|
|
|
7.3
|
%
|
|
$
|
16.52
|
|
|
|
11/1/2015
|
|
|
$
|
408,145
|
|
|
$
|
1,034,320
|
|
Michael G. Aquino
|
|
|
28,571
|
|
|
|
5.3
|
%
|
|
$
|
31.43
|
|
|
|
6/1/2016
|
|
|
$
|
564,739
|
|
|
$
|
1,431,159
|
|
Joseph R. Chinnici
|
|
|
35,714
|
|
|
|
6.6
|
%
|
|
$
|
16.52
|
|
|
|
11/1/2015
|
|
|
$
|
371,045
|
|
|
$
|
940,301
|
|
Arthur D. Smith, Ph.D.
|
|
|
46,428
|
|
|
|
8.6
|
%
|
|
$
|
16.52
|
|
|
|
11/1/2015
|
|
|
$
|
482,356
|
|
|
$
|
1,222,385
|
|
|
|
|
(1) |
|
Except for the grant to Dr. Nettles, options reported above
vest in equal monthly amounts over a
48-month
period. Options reported for Dr. Nettles reflect equity
compensation payable for service on the Board of Directors and
such options vest in full on the first anniversary of the date
of grant. |
|
(2) |
|
Percentage of Total Options Granted to Employees reflects the
unusual timing of broad-based stock option grants to
non-executive employees in fiscal years 2005, 2006 and 2007.
Ciena made broad-based grants of equity to non-executives at the
end of fiscal 2005 and, just over a year later, early in fiscal
2007. Because neither of these grants fell in fiscal 2006, the
total number of options granted to non-executives in 2006 was
substantially lower than normal. See Compensation
Committee Report on Executive Compensation below for a
discussion regarding changes in Cienas equity award
practices. |
|
(3) |
|
Options were granted at exercise prices equal to the fair market
value of Cienas common stock based on the closing price on
The NASDAQ Stock Market on the date of the grant. Upon exercise,
the aggregate exercise price is to be paid to Ciena in cash. |
|
(4) |
|
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 Cienas stock price.
Cienas stock price may increase or decrease in value over
the time period set forth above. |
17
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides the specified information
concerning option exercises in the last fiscal year and the
number and dollar value of unexercised options held as of
October 31, 2006 by the Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
Value of Unexercised
|
|
|
|
Shares
|
|
|
|
|
|
Underlying Unexercised
|
|
|
in-the-Money
Options at
|
|
|
|
Acquired
|
|
|
Value
|
|
|
Options at 10/31/2006
|
|
|
10/31/2006(2)
|
|
|
|
on Exercise
|
|
|
Realized(1)
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Patrick H.
Nettles, Ph.D.
|
|
|
249,999
|
|
|
$
|
5,944,026
|
|
|
|
176,112
|
|
|
|
3,214
|
|
|
|
|
|
|
|
|
|
Gary B. Smith
|
|
|
15,625
|
|
|
$
|
243,009
|
|
|
|
418,917
|
|
|
|
132,589
|
|
|
$
|
245,121
|
|
|
$
|
765,904
|
|
Stephen B. Alexander
|
|
|
6,864
|
|
|
$
|
140,031
|
|
|
|
177,514
|
|
|
|
48,139
|
|
|
$
|
128,651
|
|
|
$
|
279,093
|
|
Michael G. Aquino
|
|
|
|
|
|
|
|
|
|
|
31,899
|
|
|
|
36,667
|
|
|
$
|
72,139
|
|
|
$
|
66,570
|
|
Joseph R. Chinnici
|
|
|
26,487
|
|
|
$
|
296,914
|
|
|
|
134,410
|
|
|
|
45,387
|
|
|
$
|
57,861
|
|
|
$
|
259,637
|
|
Arthur D. Smith, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
115,806
|
|
|
|
53,645
|
|
|
$
|
140,224
|
|
|
$
|
318,021
|
|
|
|
|
(1) |
|
Calculated on the basis of the fair market value of the shares
acquired on the exercise date, less the aggregate exercise price. |
|
(2) |
|
Calculated based upon the $23.59 closing price per share of
Ciena common stock on October 27, 2006, less the aggregate
exercise price. |
Equity
Compensation Plan Information
The Board of Directors has determined that future grants of
stock options, restricted stock, or other forms of equity-based
compensation will be issued only under the Ciena Corporation
2000 Equity Incentive Plan (the 2000 Plan). The
Board of Directors capped future equity grants under all other
current equity incentive plans, excluding Cienas 2003
Employee Stock Purchase Plan (ESPP). The following
table provides information as of October 31, 2006 with
respect to the shares of Cienas common stock that may be
issued under Cienas existing equity compensation plans.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
|
(B)
|
|
|
(C)
|
|
|
|
Number of securities to be
|
|
|
|
|
|
Number of securities remaining
|
|
|
|
issued upon exercise of
|
|
|
Weighted average exercise
|
|
|
available for future issuance under
|
|
|
|
outstanding options,
|
|
|
price of outstanding
|
|
|
equity compensation plans (excluding
|
|
Plan category
|
|
warrants and rights
|
|
|
options, warrants and rights
|
|
|
securities reflected in Column(A)
|
|
|
Equity compensation plans approved
by security holders(1)
|
|
|
2,990,589
|
(2)
|
|
$
|
51.50
|
|
|
|
8,528,270
|
(3)(4)
|
Equity compensation plans not
approved by security holders(5)
|
|
|
4,119,640
|
|
|
$
|
46.35
|
|
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
7,110,229
|
|
|
$
|
48.51
|
|
|
|
8,528,270
|
|
|
|
|
(1) |
|
Consists of the following equity compensation plans: |
|
|
|
|
|
1994 Third Amended and Restated Stock Option Plan;
|
|
|
|
1996 Outside Directors Stock Option Plan;
|
|
|
|
2000 Plan;
|
|
|
|
ESPP; and
|
|
|
|
equity compensation plans assumed by Ciena in connection with
its merger with ONI Systems Corp. (ONI), including,
the ONI 1999 Equity Incentive Plan, the ONI 1998 Equity
Incentive Plan and the ONI 1997 Stock Option Plan (ONI
Plans).
|
|
|
|
(2) |
|
Does not include 162,329 shares underlying restricted stock
units issued and outstanding under the 2000 Plan. |
|
(3) |
|
Consists solely of shares remaining available for future
issuance under the 2000 Plan and the ESPP. The 2000 Plan
incorporates an evergreen provision pursuant to which, on
January 1 of each year, the aggregate number of |
18
|
|
|
|
|
shares reserved for issuance under the 2000 Plan automatically
increases by 5% of the total number of shares of Cienas
common stock outstanding on December 31 of the preceding
year, unless the Compensation Committee determines to reduce the
increase in that year. The Compensation Committee did not
increase the number of shares available under the 2000 Plan in
2005 or 2006. The ESPP also provides for an evergreen provision,
pursuant to which, on December 31 of each year, the number
of shares available for issuance annually increases by up to
571,428 shares, provided that the total number of shares
available for issuance at any time under the ESPP shall not
exceed 3,571,428 shares. On December 31, 2005, the
evergreen provision automatically added 306,735 shares to
the ESPP. An additional 571,428 shares were added to the
ESPP on December 31, 2006 (not reflected in the table at
fiscal year end above), increasing the total number of shares
available to 3,547,758. |
|
(4) |
|
There are no shares available for future issuance under the ONI
Plans. However, any shares subject to outstanding options or
other awards under the ONI Plans that are forfeited upon
cancellation become available for grant and issuance under the
2000 Plan. |
|
(5) |
|
Consists of the following equity compensation plans: |
|
|
|
|
|
1999 Non-Officer Stock Option Plan; and
|
|
|
|
equity compensation plans assumed by Ciena in connection with
mergers or acquisitions, including the Cyras Systems, Inc. 1998
Stock Plan, the Omnia Communications, Inc. 1997 Stock Plan, the
Lightera Networks, Inc. 1998 Stock Plan, the WaveSmith Networks,
Inc. 2000 Stock Option and Incentive Plan, the Internet
Photonics, Inc. 2000 Corporate Stock Option Plan and the Catena
Networks, Inc. 1998 Equity Incentive Plan.
|
|
|
|
(6) |
|
By operation of the determination of the Board of Directors to
cap future grants from equity incentive plans other than the
2000 Plan and the ESPP. |
Employment
Agreements and Change in Control Arrangements
Change in
Control Severance Agreements with Executive Officers
In January 2007, Ciena entered into amended and restated change
in control severance agreements with all of its executive
officers, including the Named Executive Officers listed above,
excluding Dr. Nettles whose existing employment arrangement
was unchanged and is described below. The agreements were
amended to address Cienas change in equity compensation
practices to include restricted stock units and awards that vest
based on performance measures, and to provide for the treatment
of such awards under the severance agreements. In addition,
these agreements were revised to remove the
gross-up
payment related to excise tax. In addition,
Mr. Smiths agreement, described separately below, was
amended to reduce the minimum severance payable from
$3 million to $2 million and to reduce the benefits
continuation period to one year.
The agreements provide for the payment of severance benefits in
the event that the officers employment is terminated by
Ciena or any successor entity without cause, or, by
the officer for good reason, within one year
following a change in control (a covered
termination). Payment of severance benefits may also apply
where the officer is terminated in advance of a change in
control and the officer can reasonably demonstrate that his or
her termination was in connection with or in anticipation of a
change in control. The agreements continue in effect for the
duration of each officers employment and for up to a
period of 14 months following a change in control. Payment
of any severance benefits under the agreement is conditioned
upon the officer agreeing to be bound by provisions restricting
his or her ability to compete with Ciena and solicit Ciena
employees or business for a period of 12 months after
termination, as well as the delivery of a general release and
waiver of claims against Ciena. In the event of a breach of
these provisions, all gross severance benefits shall be
reimbursed to Ciena by the officer.
The severance payment benefits described below will be paid by
Ciena or its successor upon a covered termination.
Continuation of Salary and Bonus
Payment. Ciena will continue to pay the officer
his or her base salary and bonus, in accordance with
Cienas standard bi-weekly employee payroll practices, for
one year following termination. The base salary and bonus
payable will be determined based on the salary rate and
incentive compensation program in effect immediately prior to
either, the date of termination or the effective date of the
19
change in control, whichever is higher. Any bonus amounts will
be determined by assuming that the officer achieved the target
performance goals for such award.
Continuation of Benefits. The officer and his
or her family are eligible to continue to participate in
Cienas group medical, dental, life and disability plans
until the earlier of the first anniversary of termination or the
officers commencement of employment with another employer.
If Ciena cannot continue benefits coverage, Ciena is obligated
to pay for or provide equivalent coverage at its expense. Ciena
will also pay the officer, on a
grossed-up
basis at the highest marginal income tax rate for individuals,
an amount sufficient to cover any additional taxes incurred due
to income realized from continued benefits coverage, to the
extent such taxes result from non-employee status. Ciena is also
required to maintain effective any indemnification agreements
and insurance coverage under director and officer policies until
the applicable statute of limitations has ended.
Treatment of equity awards. Upon a change in
control, any unvested performance-based restricted stock units
(including awards that provide for performance-based
acceleration of vesting) will be converted into restricted stock
units with time-based vesting conditions. The vesting of these
converted awards will be deemed to have commenced on the grant
date, with vesting being deemed to have occurred as to
1/16th of the grant amount at the end of each three-month
period following the grant. In addition, upon a covered
termination, 50% of the officers options and restricted
stock units (including converted awards above), to the extent
unvested, will vest immediately. This acceleration of vesting is
in addition to any acceleration available to employees generally
under Cienas employee stock option plans. Options must be
exercised during the period provided for in the applicable
equity award plan, subject to certain extensions to address any
transfer restrictions under applicable securities laws.
Applicability of Excise Taxes. Should any
payment of severance benefits by Ciena be subject to excise tax
imposed under federal law, or any related interest or penalties,
the payments shall be either paid in full or paid in a lesser
amount such that no portion of the payments would be subject to
the excise tax, whichever results in receipt of a greater amount
by the officer.
Applicable definitions. For purposes of
determining whether a covered termination has occurred the
following definitions apply.
Cause means:
|
|
|
|
|
the officers willful or continued failure substantially to
perform the duties of his or her position as determined by the
Board;
|
|
|
|
any willful act or omission constituting dishonesty, fraud or
other malfeasance;
|
|
|
|
any act or omission constituting immoral conduct or a willful
material violation of Cienas Code of Business Conduct and
Ethics, that is injurious to Cienas financial condition or
business reputation;
|
|
|
|
a final adjudication of liability of the officer in any SEC or
other civil or criminal securities law action; or
|
|
|
|
the officers conviction of, or plea of nolo contendere to,
a felony.
|
Good reason means:
|
|
|
|
|
removal from, or failure to be reappointed to, the
officers principal position immediately prior to the
change in control;
|
|
|
|
material diminution in the officers position, duties or
responsibilities immediately prior to the change in control;
|
|
|
|
reduction in base salary, incentive compensation opportunity or
participation in other benefit plans as in effect immediately
before the change in control;
|
|
|
|
relocation of principal workplace more than
50 miles; or
|
|
|
|
the failure to obtain the assumption of the change in control
severance agreement by any successor to Ciena.
|
20
A change in control shall be deemed to have taken
place upon:
|
|
|
|
|
the sale or exchange by shareholders of all or substantially all
of Cienas stock, or a merger, consolidation, sale or
exchange transaction, in each case, where the shareholders
before such transaction do not retain at least a majority voting
interest in the acquiring corporation after such transaction;
|
|
|
|
the sale or transfer of all or substantially all of Cienas
assets;
|
|
|
|
a liquidation or dissolution of Ciena; or
|
|
|
|
any other event determined to be a change in control by
Cienas Board of Directors.
|
Change in
Control Severance Agreement with Mr. Smith
Cienas agreement with Mr. Smith is substantially upon
the same terms as the severance agreements with other executive
officers described above; however, upon a covered termination
Ciena will make a lump sum payment to Mr. Smith of the
greater of $2 million or the sum of his base salary and
annual bonus. Base salary and bonus will be determined as set
forth for the other executive officers above.
Mr. Smiths agreement also provides that all of his
unvested options and restricted stock units, to the extent
unvested, will become immediately vested and exercisable upon a
covered termination.
Employment
and Severance Agreement with Dr. Nettles
In April 1994, Ciena 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 without cause, he will receive
continuation of benefits and payment of his monthly base salary
until the earlier of the expiration of six months from such
termination, or the commencement of his employment with a person
or entity other than Ciena. Under this agreement,
cause means a felony conviction or an act of gross
misconduct, fraud, misappropriation of funds or embezzlement in
connection with performance of duties. In addition,
Dr. Nettles and Ciena have entered into a severance
agreement substantially on the same terms as the amended and
restated severance agreements with executive officers described
above. Dr. Nettles agreement provides for the vesting
of his stock options to continue for up to one year following a
covered termination. The agreement does not include a provision
for the conversion of performance-based equity awards upon a
change in control or the acceleration of vesting of restricted
stock units upon a covered termination. Under the agreement,
Dr. Nettles is eligible to receive a
gross-up
payment equal to the amount of any excise tax imposed upon his
severance benefits.
COMPENSATION
COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The information contained in this report shall not be deemed
to be soliciting material or filed or
incorporated by reference in future filings with the SEC, or
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, except to the extent that Ciena
specifically incorporates it by reference into a document filed
under the Securities Act of 1933 or the Exchange Act.
The Compensation Committee administers Cienas executive
compensation program. In this role, it establishes the
compensation of Cienas Executive Chairman and its Chief
Executive Officer and approves the compensation of the other
members of Cienas executive leadership team upon the
recommendation of the Chief Executive Officer. The Committee
also administers Cienas equity compensation plans and its
bonus plan, and exercises general oversight over Cienas
compensation practices.
Compensation
Philosophy
General
As a general matter, the Committee seeks to formulate and
administer compensation programs that enable Ciena to attract
and retain the highly qualified employees necessary to enable it
to compete successfully. The Committee is also conscious of
designing compensation packages that provide incentives for
employees both to
21
increase long-term shareholder value, generally, and to achieve
defined financial and operational objectives in the short- to
intermediate-term.
The Committee develops or oversees compensation plans, for both
Cienas executive leadership team and the majority of its
salaried workforce, based on three principal elements: a base
salary, cash incentive bonuses that depend on corporate or
individual performance, and equity-based long-term incentive
compensation.
Base
Salary
The Committee establishes salaries for the executive leadership
team based on the nature and scope of their responsibilities and
their performance in their positions. The Committee believes
that it is important that base salaries be set at a level that
is competitive with other opportunities that might be available
to Cienas employees. As a general guideline, the Committee
seeks to set base salaries at or above the 50th percentile
of salaries for similar positions at comparable companies,
taking into account the nature of the position, the
responsibilities, skills and experience of the executive, and
his or her performance. The Committee may depart from this
guideline in particular cases, when it believes that the need to
retain the services and the unique skills and experience of a
particular executive justifies paying a higher salary. In view
of Cienas financial performance over the last few years
and its need to make prudent use of its cash, the Committee has
generally not increased the base salaries of its executive
leadership team since 2001, except to recognize promotions or
changes in responsibility.
Bonus
Program
For the third quarter of fiscal 2006, Ciena reinstituted its
bonus program, paying quarterly cash bonuses to eligible
employees for the first time since the end of fiscal 2001. The
Committee adopted a formal written incentive bonus plan designed
to provide a means to reward eligible employees for achieving
goals established by the Committee. The goals may be related to
Cienas financial performance or to the achievement of
individual, departmental or team objectives.
All non-exempt employees, including the executive leadership
team, are eligible for bonuses under the plan, which establishes
target bonuses, expressed as percentages of base salary. The
Committee has authority to establish these target percentages.
For non-executive employees, they range from 7.5% to 35%,
according to the employees position and responsibilities;
and for executives they range from 50% to 100%. These
percentages are based on market data for bonus programs of
companies similar to Ciena. The Committee reviewed that data
during fiscal 2006 to assure that the bonus program is
competitive.
The plan provides a mechanism for paying more or less than the
target bonuses if the goals are over- or under-achieved, in
order that bonuses are not paid on an
all-or-nothing
basis, which the Committee believes is generally undesirable. In
addition to bonuses paid to eligible employees under the plan,
the Committee also approved the payment of a special bonus to
non-exempt hourly-paid employees in December of 2006.
Equity-Based
Long-Term Incentive Compensation
The Committee believes that equity-based long-term incentive
compensation performs an essential role in attracting and
retaining senior executives and providing them long-term
incentives to maximize shareholder value. This has been
particularly true for Ciena because over the last five years we
have generally not increased the base salaries of the executive
leadership team and only recently made them eligible again to
receive bonuses.
Historically, Ciena has primarily used stock options for its
long-term incentive program. Both the Committee and Cienas
management have devoted considerable efforts over the last two
years to reviewing the approach to the use of equity
compensation, which, given the constraints on Cienas
ability to pay bonuses or increase salaries, took on increasing
importance.
In recent years there has been a rapid evolution of practices
relating to equity-based compensation. We believe those changes
to be partly the result of changing perceptions of the
advantages and disadvantages of equity-based compensation,
including an increased sensitivity to the dilutive effects on
existing shareholders. The Committee is of the view that the
requirement that companies expense grants of stock options under
SFAS 123(R) is also likely to continue to have a
significant effect on the use of options as a compensatory
vehicle generally. Although there is still
22
considerable uncertainty as to the precise nature of those
effects, it seems likely that many companies will reduce their
use of stock options and make increased use of restricted stock
and similar vehicles. The Committee believes that this will have
an effect on the use of equity compensation in the market for
executive talent that it should take into account when approving
compensation packages for Cienas executives.
For these reasons, in fiscal 2006, we began a shift toward using
restricted stock in lieu of options. For administrative
convenience, the Committee makes these grants in the form of
restricted stock units (which give the recipients the right to
receive shares as the units vest) rather than make outright
grants of stock subject to vesting.
In making equity grants, the Committee now focuses heavily on
the value awarded to the executive. As a measure of this value,
the Committee uses the value of restricted stock and options (as
measured by the Black-Scholes model) at the time of grant. This
is consistent with the method Ciena uses to calculate the
compensation expense it recognizes under FAS 123(R). While
the Committee believes that this approach overstates the true
value of both stock options and restricted stock grants that are
subject to vesting, it does provide a
more-or-less
consistent metric that the Committee finds to be a useful tool
in determining the appropriate size of equity grants.
The Committee also considers other factors in granting equity to
members of the executive leadership team. One of these factors
is the executives current holdings of unvested equity and
the extent to which those holdings provide adequate retention
incentives. The Committee also considers the percentage of the
outstanding common stock represented by the executives
equity position as compared to his or her counterparts in peer
companies.
Ciena has also historically used stock options as a part of the
compensation of its non-executive employees. Ciena has typically
made grants to all employees at the time they are hired, in
connection with promotions, and to reward exceptional
performance. The Committee has also routinely made regular
semi-annual grants in amounts based on an employees level
within the organization and his or her performance.
During fiscal 2005, we reviewed Cienas equity compensation
program and made several changes in the way we were
administering it. At the end of fiscal 2005, following our prior
practice, we made substantial grants of stock options to
non-executive employees; but we deferred making the usual annual
grants to executives until shortly thereafter, which was early
in fiscal 2006. During 2006, we determined that, going forward,
we would make annual grants to executives and non-executives at
the same time; and we made the next annual grants early in
fiscal 2007. As a result of the timing of these grants, we made
no regular annual grants to non-executive employees during
fiscal 2006, although we did make an annual grant to executives
in that year.
During fiscal 2006, we again reviewed the equity compensation
program, focusing primarily on the use of equity for non-officer
employees. We determined to discontinue our practice of granting
stock options to almost all employees, and instead to limit
grants of equity to those employees for whom we believe equity
compensation can provide more meaningful incentives.
More specifically, we determined to discontinue making equity
grants to less senior employees. While we will continue making
option grants to newly-hired employees at more senior levels at
most of our locations in order to remain competitive in hiring,
we plan to limit annual grants to those employees who are
considered by their supervisors to be key
contributors, i.e., who are performing well in roles
considered to be important to Cienas success. This change
in policy will enable us to make larger grants to those officers
and senior employees on whose continued employment and strong
performance Cienas future success depends. We expect that
it will also reduce somewhat both the dilution and the
compensation expense resulting from equity grants.
Perquisites
Cienas executive leadership team are eligible for the same
health and dental insurance, accidental death insurance,
disability insurance, vacation, and other similar benefits as
the rest of Cienas employees. Ciena provides supplemental,
executive long-term disability insurance coverage for
Messrs. Nettles, Smith and Chinnici. In addition, the
executive leadership team are afforded annual physicals, tax
preparation and financial planning services, and life insurance
up to two times annual salary and bonus, subject to a $500,000
cap. Supplemental life insurance procured on behalf of
Mr. Smith provides an additional $235,000 of coverage in
excess of this limitation.
23
Employment
Contracts and Deferred Compensation Plans
With the exception of agreements providing certain severance
benefits if an executives employment is terminated
following a change of control, Ciena does not have employment
contracts with any of its executive officers, all of whom serve
as employees at will. Ciena does not maintain
deferred compensation plans for its executives.
Performance
Goals
The Committee believes that a significant portion of the
compensation of the executive leadership team should be tied to
performance. The Committee uses two types of goals in setting
performance-based compensation, goals based on the financial
performance of Ciena as a whole and goals based on the
accomplishment of narrower objectives related to particular
functions or activities for which the executive is responsible.
Which type of goal is used for a given individual depends on the
nature of his or her function and what behaviors the Committee
wishes to reward. Because it believes that overall corporate
performance is the ultimate objective, and fostering teamwork is
important, the Committee generally uses company-wide goals for
at least a part of the performance-based compensation of all of
the executives.
Process
General
In establishing the compensation of the Executive Chairman and
the Chief Executive Officer, and reviewing the proposed
compensation for the other executive officers, the Committee
considers, for each officer, the value of his or her role to
Ciena, the contribution he or she makes to Ciena in that role
and the quality of his or her individual performance. The
Committee also reviews market survey data for executive officers
in a selection of companies in the same or related industries
that are sufficiently like Ciena that their compensation
practices should serve as a benchmark for what constitutes
competitive compensation. The Committee believes that these
market data are important indicators of the levels of
compensation that Ciena must provide to its employees to remain
competitive in the market for executive talent and thus to
retain its key executives.
External
Advisor
The Committee has retained Compensia, a compensation consultant,
to assist it with its work. Among other services Compensia:
|
|
|
|
|
Assists with the establishment of a peer group of companies;
|
|
|
|
Provides information on compensation paid by those companies to
their officers;
|
|
|
|
Provides survey data to supplement publicly available
information on compensation paid by peer group companies;
|
|
|
|
Advises on alternative structures and forms of compensation;
|
|
|
|
Advises the Committee on appropriate levels of compensation for
the Chief Executive Officer and the Executive Chairman;
|
|
|
|
Advises the CEO on appropriate levels of compensation for other
members of the executive leadership team; and
|
|
|
|
Prepares tally sheets showing the amounts of all of
the elements of compensation proposed for each of the executive
officers and the current and projected value both of proposed
grants and of vested and unvested outstanding grants.
|
Peer
Group
With the assistance of its consultant, the Committee has
identified the following companies that it considers to be
similar to, and competitive with, Ciena in the market for
executive talent because they are in the same or related
24
businesses; are publicly-held; and are in the same size range
based on revenues, market capitalization, and employee headcount:
|
|
|
ADC Telecommunications
|
|
Juniper Networks
|
ADTRAN
|
|
McDATA
|
Brocade Communications
Systems
|
|
Redback Networks
|
Extreme Networks
|
|
Sonus Networks
|
Foundry Networks
|
|
TEKELEC
|
Harmonic
|
|
Tellabs
|
JDS Uniphase
|
|
|
Chief
Executive Officer and Executive Chairman
The Chair of the Committee works with Compensia, in conjunction
with the Committee, to develop proposed compensation packages
for the Chief Executive Officer and the Executive Chairman.
Meeting in executive session, the Committee reviews and
discusses those packages in light of its assessment of the
performance of the two officers, making any modifications that
it considers desirable.
Other
Members of the Executive Leadership Team
The Chief Executive Officer works with Compensia to develop
proposed compensation packages for the other members of the
executive leadership team. He presents his recommendations to
the Compensation Committee, which then discusses them, often in
consultation with Compensia, makes any modifications it
considers desirable, and approves the final results.
New Hires
and Promotions
In the event it becomes necessary to fill a vacancy in the
executive leadership team by hiring a new employee or promoting
an existing one, the Chief Executive Officer consults with the
Chair, and often the other members of the Committee, with
respect to the proposed compensation for the position. The
Committee is asked to ratify the salary and bonus package of the
new officer at its next regular meeting, at which it also
approves any equity grants for the new officer.
Significant
Recent Compensation Decisions
General
Since the precipitous downturn in the networking equipment
industry in
2001-2002,
Cienas executive leadership team has, in the
Committees view, done an excellent job in conceiving and
implementing a strategic plan to restore Ciena to financial
health. Fiscal 2006 saw a milestone in that progress as Ciena
was profitable for the first time since 2000. The Committee
believes that the retention of its key executives is important
to Cienas continued success and is a particularly
significant concern in its compensation program.
The Committee is concerned that the current environment poses a
threat to the retention of key employees. The industry as a
whole has also begun to return to more normal conditions and
Cienas results of operations have improved considerably in
recent years. The Committee believes that Cienas
executives, having managed a successful turnaround, are
particularly attractive to other employers that are searching
for executive talent, including established companies in the
industry, the increasing number of early stage companies, and to
companies backed by private equity investors. The Committee is
aware of several attempts to recruit members of the executive
leadership team to join other companies. Under these
circumstances, in formulating compensation for fiscal 2007, the
Committee has paid particular attention to developing
compensation packages that provide strong retention incentives
for the executive leadership team.
25
Salaries
The Committee determined at its regular meeting in October 2006
that it would again make no changes to the salaries of the
executive leadership team with the exception of two executives
who had been asked to take on increased responsibilities. It
approved an increase in salary for Mr. Alexander from
$325,000 to $375,000, and increased the target bonus percentages
for Mr. Alexander and Dr. Smith from 50% to 75% of
their base salaries.
Bonus
Program
At the Committees May 2006 meeting, it determined to
reinstitute the corporate bonus program and approved the
adoption of the formal Ciena Corporation Incentive Bonus Plan.
It made no changes in the target bonus percentages for the
executive leadership team, keeping them at the same levels in
place in 2002 when the bonus program was suspended. In order to
limit the expense and cash drain from the bonus for the third
quarter of fiscal 2006, the Committee reduced the bonus payout
to 50% of the target percentages if the bonus goal was achieved,
but provided that the bonus payout could be as high as 100% of
the target percentages if Ciena overachieved the goal. The
Committee based the goal on Cienas results of operations
for the quarter. Ciena did overachieve the goal and paid bonuses
at the 100% level.
For the fourth quarter of fiscal 2006, the Committee authorized
payment at 100% of the target percentages upon achievement of
the goal, with the possibility of payment of up to 150% of the
target percentages on overachievement of the goal. The goal was
surpassed, and Ciena paid bonuses at the 150% level. The
Committee approved a similar bonus goal for the first quarter of
fiscal 2007, and expects to continue to authorize bonuses on a
quarterly basis during the remainder of the fiscal year.
Long-Term
Incentive Program
During fiscal 2005, the Committee conducted a comprehensive
review of Cienas equity-based compensation strategy and
practices, both as they relate to long-term incentive
compensation for the executive leadership team, and to option
grants for the rest of Cienas employees. The review had
three goals:
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to reexamine and revise Cienas overall strategy for using
equity in compensating employees and executives in view of
changes in the needs of the company and in the external
environment;
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to develop an approach to equity grants for the executive
leadership team in view of the revised strategy; and
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to arrive at specific grants for the executive team for fiscal
2006.
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As a result of our review during fiscal 2005, we developed
several principles to guide our actions in making grants of
equity to the executive leadership team at the beginning of
2006. We believe that those principles still apply. They include
the following:
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Because we paid no bonuses between the end of 2001 and the
second half of 2006, and we approved only isolated increases in
salary, substantial equity grants are, and may continue to be,
appropriate to assure the retention of key executives and
provide appropriate incentives.
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A portion of the equity grants should provide for
performance-based vesting to provide additional incentives to
achieve Cienas key financial goals.
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The gross burn rate for all grants under the 2000
Plan should remain at or below the burn rate of comparable
companies and generally should not exceed 3%. (In determining
the burn rate, the Committee multiplies the number of shares of
restricted stock by 1.5 in recognition that they are more
valuable than shares underlying options.)
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We continue to believe that Cienas future will depend in
substantial part on the efforts of the executive leadership
team. The principal goals of the compensation program for these
individuals are to retain their services and to provide them
incentives to continue to work to make Ciena successful and
thereby create shareholder value. The former goal has assumed
even greater significance because the improvements in the
business climate in our sector and Cienas relative success
in effecting its turnaround have increased the possibility that
other companies will try to recruit our key executives.
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In making equity awards for fiscal 2007 we began by establishing
the value that we believed needed to be delivered to members of
the executive leadership team in the form of equity compensation
in order to accomplish the twin goals of retaining their
services and providing them incentives to achieve Cienas
goals. In determining how much value should be delivered to each
executive, the Chief Executive Officer and the Committee
considered the other elements of compensation for the executive,
primarily salary and bonus. For each of the other executives,
the Chief Executive Officer reviewed the role he plays at Ciena,
the importance of that role to Cienas success, and the
quality of the executives performance in the role. The
Committee made its own similar evaluation for the Chief
Executive Officer and the Executive Chairman. The Chief
Executive Officer and the Committee also considered the existing
holdings of stock, options, and restricted stock, both vested
and unvested, for each executive. Finally, the Committee
examined the percentage of the outstanding shares of Ciena
represented by each of the executives equity holdings, as
we believe that it is important both to retention and alignment
with shareholder interest that senior executives hold a
meaningful interest in the companys equity base.
The Committee compared the compensation and equity holdings of
Cienas executives with the compensation and equity
holdings of their counterparts in the peer group of companies
described above. It determined that, with the restoration of the
bonus program, the total cash compensation of Cienas
executives is now competitive with that of executives in the
peer group. On the other hand, the holdings of Cienas
executives as a percentage of its outstanding stock are, on the
whole, substantially lower than for the peer companies. The
Committee was also cognizant that Ciena provides its executives
relatively modest benefits and perquisites by contrast to many
other companies.
On the basis of this analysis, and in consultation with the
Chief Executive Officer and its consultant, the Committee
determined that, in order to provide sufficient assurance of
retaining the key executives, it was necessary, as a general
matter, to make equity awards having a value delivered at the
high end of the range of awards made by the peer group as
measured by the total value delivered to each executive. Based
on all of the considerations above, the Committee approved the
grants described elsewhere in this proxy statement. The size of
the awards to particular executives in relation to their peer
group counterparts varies considerably due to differences in the
individual situations of the executives, the particular nature
of the functions they perform at Ciena, their perceived
importance to Cienas future, and the risk that they would
leave the Company if not appropriately rewarded and incentivized.
In determining the structure of the grants to each executive,
the Committee considered two basic forms of equity-based
compensation: stock options and restricted stock. For a given
value to be delivered to the executives, the Committee decided,
on the advice of its consultant, that it should treat one share
of restricted stock as roughly equivalent to an option for two
shares. (According to the Black-Scholes formula, a share of
restricted stock has a value equivalent to approximately 1.7
option shares. The Committee used the 2:1 ratio because it
believes it more accurately represents the risks related to the
two instruments.) The Committee then compared the outcomes for
the executives of holding various combinations of options and
restricted stock over a five-year period, under varying
assumptions about increases in Cienas stock price. On the
basis of that comparison, the Committee concluded that, in
general, a mix of options and restricted stock would be
appropriate, as it combines the relative certainty offered by
restricted stock and the leverage offered by stock options. The
mix of the two varied from individual to individual, depending
on his role in Ciena and his personal circumstances.
Although options and restricted stock, by their nature, serve to
align the interests of the holders with that of shareholders,
the Committee seeks to amplify their incentive value by tying
the vesting of at least a portion of equity grants to executives
to the achievement of performance goals. Accordingly, a portion
of the grants for fiscal 2007 were in the form of
performance shares, the vesting of which depends on
achieving corporate financial goals set by the Committee on the
basis of Cienas operating plan, and thus designed to
incentivize the holders to achieve that plan. The remaining
performance-based grants were in the form of
performance-accelerated restricted shares. These
instruments vest after four years, and thus provide a retention
incentive. However, they are structured so that one-third vests
at the end of each of the first three years upon the achievement
of annual corporate performance goals set by the Committee on
the basis of Cienas annual operating plan. The Committee
also made some grants in the form of stock options that vest
over four years, which the Committee believes will provide an
incentive for the executive officers to work to increase
Cienas share price. The Committee believes that this
structure combines strong incentives for both performance and
retention.
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Executive
Chairman Compensation
The Committee made no change in Dr. Nettles base
salary for fiscal 2006 and made a grant to him of restricted
stock units and stock options equal to the annual grants to the
non-executive directors serving on the Board. The Committee
considers his compensation to be appropriate and not excessive
for the services he is performing for Ciena.
Chief
Executive Officer Compensation
The Committee decided to make no change in Mr. Smiths
annual base salary, but to maintain it at the reduced level of
$500,000 per year established for fiscal 2005. Using the
process described above for the other members of the executive
leadership team, and with the advice of its consultant, the
Committee decided to grant Mr. Smith a combination of a
stock option for 75,000 shares, performance-accelerated
restricted stock units for 60,000 shares and performance
share units for 20,000 shares, all on terms similar to
those granted to the other members of the executive team. The
Committee considers this compensation to be appropriate and not
excessive for the services he is performing for Ciena.
Submitted by the members of the Compensation Committee:
Judith OBrien (Chairperson)
Harvey B. Cash
Gerald Taylor
Compensation
Committee Interlocks and Insider Participation
Messrs. Cash and Taylor and Ms. OBrien, who
comprised the Compensation Committee in fiscal 2006, were not at
any time during fiscal 2006, or at any other time, officers or
employees of Ciena. During fiscal 2006, no member of the
Compensation Committee was an executive officer of another
entity on whose compensation committee or board of directors an
executive officer of Ciena served.
AUDIT
COMMITTEE REPORT
The information contained in this report shall not be deemed
to be soliciting material or filed or
incorporated by reference in future filings with the SEC, or
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934,, except to the extent that Ciena
specifically incorporates it by reference into a document filed
under the Securities Act of 1933 or the Exchange Act.
The Audit Committee met with management periodically during
fiscal 2006 to consider the adequacy of Cienas internal
controls, and discussed these matters with Cienas
independent registered public accounting firm,
PricewaterhouseCoopers LLP, and with appropriate Ciena financial
personnel. The Committee also discussed with senior management
and PricewaterhouseCoopers LLP Cienas disclosure controls
and procedures and the certifications by Cienas Chief
Executive Officer and Chief Financial Officer, which are
required by the Securities and Exchange Commission under the
Sarbanes-Oxley Act of 2002 for certain filings with the
Securities and Exchange Commission. The Committee has
established a procedure for receiving and addressing anonymous
complaints regarding financial or accounting irregularities. It
has also considered and overseen the implementation of
accounting policies and their communication to financial and
management personnel.
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The Audit Committee has reviewed and discussed Cienas
audited financial statements for fiscal 2006 with management and
with PricewaterhouseCoopers LLP. The Audit Committee has
discussed with PricewaterhouseCoopers LLP the matters required
to be discussed by Statement on Auditing Standards No. 61,
which relates to the conduct of the audit. The Audit Committee
has received the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit
Committees, and has discussed with PricewaterhouseCoopers LLP
its independence. Based on the Audit Committees review of
the audited financial statements and the review and discussions
described in this report, the Audit Committee recommended to the
Board of Directors that the audited financial statements for
fiscal 2006 be included in Cienas Annual Report on
Form 10-K
for fiscal 2006 for filing with the Securities and Exchange
Commission.
Submitted by the members of the Audit Committee:
Lawton W. Fitt (Chairperson)
Stephen P. Bradley, Ph.D.
Bruce L. Claflin
Michael J. Rowny
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STOCK
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total
returns for an investment in the common stock of Ciena, the
NASDAQ Telecommunications Index and the S&P 500 Index from
October 31, 2001 to October 31, 2006. The NASDAQ
Telecommunications Index contains securities of NASDAQ-listed
companies classified according to the Industry Classification
Benchmark as Telecommunications and Telecommunications
Equipment. They include providers of fixed-line and mobile
telephone services, and makers and distributors of
high-technology communication products. This graph is not deemed
to be soliciting material or to be filed
with the SEC or subject to the SECs proxy rules or to the
liabilities of Section 18 of the Securities Exchange Act of
1934, and the graph shall not be deemed to be incorporated by
reference into any prior or subsequent filing by Ciena under the
Securities Act of 1933 or the Exchange Act.
Assumes $100 invested in Ciena Corporation, the NASDAQ
Telecommunications Index and the S&P 500 Index on
October 31, 2001 with all dividends reinvested at month-end.
SHAREHOLDER
PROPOSALS FOR 2008 ANNUAL MEETING
Pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934, some proposals by
shareholders may be eligible for inclusion in Cienas proxy
statement for the 2008 Annual Meeting. Shareholder proposals
must be submitted, along with proof of ownership of Ciena common
stock in accordance with
Rule 14a-8(b)(2),
to Ciena Corporation, 1201 Winterson Road, Linthicum, Maryland
21090, Attention: Corporate Secretary. These submissions must
comply with the rules of the SEC for inclusion in Cienas
Proxy Statement and must be received no later than
September 29, 2007. Submitting a shareholder proposal does
not guarantee that we will include it in our proxy statement. We
strongly encourage any shareholder interested in submitting a
proposal to contact our Corporate Secretary in advance of this
deadline to discuss the proposal, and shareholders may want to
consult knowledgeable counsel with regard to the detailed
requirements of applicable securities laws.
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SEC rules establish a different deadline for submission of
shareholder proposals that are not intended to be included in
Cienas proxy statement with respect to discretionary
voting. Proxies may grant discretionary authority to vote on a
matter that a shareholder has not delivered written notice of to
Cienas Corporate Secretary at least 45 days prior to
the anniversary of the date on which Ciena first mailed its
proxy materials for its immediately preceding annual meeting of
shareholders. The deadline for matters sought to be presented at
the 2008 Annual Meeting is December 13, 2007. If a
shareholder gives notice of such a proposal after that deadline,
proxies for Cienas 2008 Annual Meeting may grant
discretionary voting authority to the proxy holders to vote
against the shareholder proposal when and if the proposal is
raised at Cienas 2008 Annual Meeting. To make a
submission, shareholders should provide written notice to Ciena
Corporation, 1201 Winterson Road, Linthicum, Maryland 21090,
Attention: Corporate Secretary.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16 of the Securities Exchange Act of 1934 requires
Cienas directors and officers, and persons who own more
than 10% of Cienas common stock, to file initial reports
of ownership and reports of changes in ownership with the
Securities and Exchange Commission and The NASDAQ Stock Market.
Such persons are required by Securities and Exchange Commission
regulations to furnish Ciena with copies of all
Section 16(a) forms that they file.
Based solely on Cienas review of the copies of such forms
furnished to Ciena and written representations from our
executive officers and directors, we believe that
Mr. Aquino filed one late Form 4 reporting two equity
grants and that all other Section 16(a) filing requirements
of our directors and executive officers were met.
ANNUAL
REPORT ON
FORM 10-K
A copy of Cienas Annual Report to Shareholders for the
fiscal year ended October 31, 2006 has been mailed
concurrently with this Proxy Statement to all shareholders
entitled to notice of and to vote at the Annual Meeting. The
Annual Report is not incorporated into this Proxy Statement and
is not considered proxy-soliciting material.
Ciena filed its Annual Report on
Form 10-K
with the Securities and Exchange Commission on January 10,
2007. Ciena will mail without charge, upon written request, a
copy of its Annual Report on
Form 10-K
for the fiscal year ended October 31, 2006, excluding
exhibits. Please send a written request to Investor Relations,
Ciena Corporation, 1201 Winterson Road, Linthicum, Maryland
21090, or complete the request form on the investor relations
page of Cienas website at www.ciena.com.
OTHER
MATTERS
Management knows of no matters to be presented for action at the
Annual Meeting other than those mentioned in this Proxy
Statement. However, if any other matters properly come before
the Annual Meeting, it is intended that the persons named as
proxies will vote on such other matters in accordance with their
judgment of the best interests of Ciena.
HOUSEHOLDING
OF PROXY STATEMENT AND ANNUAL REPORT TO SHAREHOLDERS
Shareholders residing in the same household who hold their stock
through a bank or broker may receive only one Annual Report to
Shareholders and Proxy Statement in accordance with a notice
sent earlier by their bank or broker. This practice of sending
only one copy of proxy materials is called
householding. This saves Ciena money in printing and
distribution costs. This practice will continue unless
instructions to the contrary are received by your bank or broker
from one or more of the shareholders within the household.
If you hold your shares in street name and reside in
a household that received only one copy of the Annual Meeting
materials, you can request to receive a separate copy in the
future by following the instructions provided on the voting
instruction card sent by your bank or broker. If your household
is receiving multiple copies of the annual report and proxy
statement, you may request that only a single set of materials
be sent by checking the appropriate
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box on the voting instruction card sent by your bank or broker.
Alternatively, you may send written instructions to ADP,
Householding Department, 51 Mercedes Way, Edgewood, NY 11717.
Your instructions must include the name of your bank or broker
and your brokerage account number.
Shareholders of record will receive one Proxy Statement and
Annual Report for each account. Copies of our Annual Report to
Shareholders and Proxy Statement are available by contacting
Cienas Investor Relations at
(888) 243-6223,
or write us at Ciena Corporation, 1201 Winterson Road,
Linthicum, MD 21090, Attention: Investor Relations.
DIRECTIONS
TO THE ANNUAL MEETING
From
Washington, DC via Interstate 95 North
Follow I-95 North to Exit 53 (395 Downtown). At the third light
turn right onto Pratt Street. Proceed on Pratt Street through
eight lights, take a right on President Street and proceed three
lights, getting into the right hand lane after the second light
(Eastern Avenue). Go straight at the third light towards the
Katyn Memorial. Enter the traffic circle and follow to the first
right onto Aliceanna Street. The hotel entrance is approximately
100 yards on the right.
From New
York and Philadelphia via Interstate 95 South
Follow I-95 South through the Fort McHenry Tunnel to Exit
53 (395 Downtown). At the third light turn right onto Pratt
Street. Proceed on Pratt Street through eight lights, take a
right on President Street and proceed three lights, getting into
the right hand lane after the second light (Eastern Avenue). Go
straight at the third light towards the Katyn Memorial. Enter
the traffic circle and follow to the first right onto Aliceanna
Street. The hotel entrance is approximately 100 yards on the
right.
From
Interstate 83 South
Follow I-83 South until it turns into President Street at
Fayette Street. Follow President Street for five lights, getting
into the right hand lane after the fourth light (Eastern
Avenue). Go straight at the fifth light towards the Katyn
Memorial. Enter the traffic circle and follow to the first right
onto Aliceanna Street. The hotel entrance is approximately 100
yards on the right.
MISCELLANEOUS
Ciena 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 Ciena common stock, and normal handling
charges may be paid for such forwarding service. Officers and
other Ciena management employees, who will receive no additional
compensation for their services, may solicit proxies by mail,
e-mail,
personal interview or telephone.
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Electronic Voting Instructions
You can vote by Internet or telephone!
Available 24 hours a day, 7 days a week!
Instead of mailing your proxy, you may choose one of the two voting methods outlined below to vote your proxy.
VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Time, on March 14, 2007.
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Vote by Internet
Log on to the Internet and go to www.computershare.com/expressvote
Follow the steps outlined on the secured website. |
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Vote by telephone
Call toll free 1-800-652-VOTE (8683) within the United States, Canada & Puerto Rico any time on a touch tone telephone. There is NO CHARGE to you for the call.
Follow the instructions provided by the recorded message. |
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Using a black ink pen, mark your votes with an X as shown in
this example. Please do not write outside the designated areas
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x |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE,
FOLD ALONG THE PERFORATION, DETACH AND RETURN
THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
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Proposals The Board of Directors recommends a vote FOR Proposal 1, Proposal 2 and Proposal 3 below. |
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Election of three Class I directors. |
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01 Lawton W. Fitt
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02 Patrick H. Nettles, Ph.D.
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03 Michael J. Rowny
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2.
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Ratification of the election by the Board of Directors of Bruce
L. Claflin as a Class III director in accordance with Cienas
Principles of Corporate Governance.
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Ratification of the appointment of PricewaterhouseCoopers
LLP as Cienas independent registered public accounting firm
for the current fiscal year.
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Non-Voting Items |
Change of Address Please print your new address below. |
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Authorized Signatures This section must be completed for your vote to be counted. Date
and Sign Below |
Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as
attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give
full title.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box. |
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IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE,
FOLD ALONG THE PERFORATION, DETACH AND RETURN
THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. ▼
Proxy Ciena Corporation
1201 Winterson Road
Linthicum, Maryland 21090
Proxy for Annual Meeting of Shareholders to be held March 14, 2007
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby revokes all previous proxies, acknowledges receipt of the Notice of
Annual Meeting of Shareholders and the Proxy Statement, and
appoints Gary B. Smith, Joseph R. Chinnici and Russell B. Stevenson, Jr., or any of them, the
proxies of the undersigned, with full power of substitution, to
vote all shares of common stock of Ciena Corporation that the undersigned is entitled to vote at
the Annual Meeting of Shareholders of Ciena Corporation
to be held on Wednesday, March 14, 2007 at 3:00 p.m., or any adjournment thereof.