SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
CIENA Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CIENA Corporation
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1/
________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
5) Total fee paid: ________________________________________________________
1/ Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________
3) Filing Party:
________________________________________________________________________
4) Date Filed:
________________________________________________________________________
Notes: _________________________________________________________________________
[LOGO]
CIENA CORPORATION
1201 Winterson Road
Linthicum, Maryland 21090
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1999 Annual Meeting of Stockholders of CIENA Corporation will be held
at the Harbor Inn Pier 5, 711 Eastern Avenue, Baltimore, Maryland on Wednesday,
March 10, 1999 at 3:00 p.m. for the following purposes:
1. To elect two Class II directors.
2. To ratify the selection of PricewaterhouseCoopers LLP as independent
public accountants for the Corporation.
3. To consider and act upon such other business as may properly come
before the meeting.
Whether or not you expect to attend the meeting, please sign, date and
return the enclosed proxy as promptly as possible in the enclosed stamped
envelope.
By Order of the Board of Directors
/s/ G. Eric Georgatos
G. Eric Georgatos
Secretary
Linthicum, Maryland
February 8, 1999
PROXY STATEMENT
Annual Meeting of Stockholders
March 10, 1999
This Proxy Statement is furnished on or about February 8, 1999 to
stockholders of CIENA Corporation (the "Corporation"), 1201 Winterson Road,
Linthicum, Maryland 21090, in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be voted at the Annual Meeting of
Stockholders. The stockholder giving the proxy has the power to revoke the proxy
at any time before it is exercised. Such right of revocation is not limited by
or subject to compliance with any formal procedures.
The Corporation will bear the cost of soliciting proxies. Copies of
solicitation material may be furnished to brokers, custodians, nominees and
other fiduciaries for forwarding to beneficial owners of shares of the
Corporation's Common Stock, and normal handling charges may be paid for such
forwarding service. Officers and other management employees of the Corporation,
who will receive no additional compensation for their services, may solicit
proxies by mail, personal interview, telephone and telegraph.
At the close of business on January 13, 1999, there were 103,318,508 shares
of the Common Stock of the Corporation outstanding and entitled to vote at the
meeting. There were 924 record holders as of January 13, 1999 and only
stockholders of record on that date will be entitled to vote at the meeting.
Each share will have one vote.
PROPOSAL 1
Election of Directors
General
The Board of Directors currently consists of seven members. The directors
are divided into three classes, each class serving for a staggered three-year
term. Classes I and II each contain two Directors, while Class III contains
three Directors. Class I, whose term expires in 2001, consists of Drs. Bayless
and Nettles; Class II, whose term expires at the Annual Meeting, consists of
Messrs. Cash and Zak; and Class III, whose term expires in 2000, consists of
Professor Bradley and Messrs. Higgerson and Oliver. At the Annual Meeting, two
directors will be elected to fill positions in Class II. Each of the nominees
for Class II, if elected, will serve for terms expiring at the 2002 annual
meeting of stockholders.
Unless otherwise instructed on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as directors of the persons named below as
nominees. The Board of Directors believes that all such nominees will stand for
election and will serve if elected. However, if any of the persons nominated by
the Board of Directors fails to stand for election or is unable to accept
election, proxies will be voted by the proxy holders for the election of such
other person or persons as the Board of Directors may recommend.
The following table presents information concerning persons nominated for
election as directors of the Corporation and for those directors whose term of
offices will continue after the meeting.
Nominees for Election as a Director for Terms Expiring in 2002
Harvey B. Cash .............. Director of the Corporation since April 1994. Mr.
Cash, age 60, is a general partner of InterWest
Partners, a venture capital firm in Menlo Park,
California which he joined in 1985. Mr. Cash
serves on the
board of directors of Benchmarq Microelectronics,
Liberte, Inc., AMX Corporation, i2 Technologies
Inc. and Aurora Electronics, Inc. He is also an
advisor to Austin Ventures. Mr. Cash received a
B.S. in electrical engineering from Texas A&M
University and an M.B.A. from Western Michigan
University. Mr. Cash serves on the Corporate
Governance Committee of the Board of Directors.
Michael J. Zak .............. Director of the Corporation since December 1994.
Mr. Zak, age 45, has been employed by Charles
River Ventures of Waltham, Massachusetts since
1991 and has been a general partner of Charles
River Partnership VII and its related entities
since 1993. From 1986 through 1991, he was a
founder and corporate officer of Concord
Communications, Inc., a developer of network
management software. He is a director of three
private companies. Mr. Zak has a B.S. degree in
engineering from Cornell University and an M.B.A.
from Harvard Business School. Mr. Zak serves on
the Human Resources and Corporate Governance
Committees of the Board of Directors.
Directors Continuing in Office
Jon W. Bayless, Ph.D. ....... Director of the Corporation since April 1994 and
Chairman of the Board of Directors since November
1996. Dr. Bayless, age 58, is a general partner of
various venture capital funds associated with
Sevin Rosen Funds where, since 1981, he has
focused on developing business opportunities in
the fields of telecommunications and computers.
Dr. Bayless is also the controlling stockholder
and sole director of Jon W. Bayless, Inc., the
general partner of Atlantic Partners L.P., which
is the general partner of Citi Growth Fund L.P., a
venture capital investment firm. Dr. Bayless
currently serves as a director of 3DX Technologies
Inc. and of several private companies. Dr. Bayless
is also Chairman of the Board of Directors of
Shared Resource Exchange, Inc. which filed for
reorganization under Chapter 11 of the Federal
Bankruptcy Code in August 1996. A plan under
Chapter 11 has been approved. Dr. Bayless has held
faculty positions at Southern Methodist
University, Virginia Polytechnic Institute, and
the Catholic University of America. He holds
patents in the field of digital
telecommunications, and is a senior member of the
Institute of Electronic Engineers. Dr. Bayless
earned his B.S. degree in electrical engineering
at the University of Oklahoma. He earned his M.S.
degree in electrical engineering at the University
of Alabama, and his Ph.D. in electrical
engineering at Arizona State University. Dr.
Bayless serves on the Audit, Human Resources and
Corporate Governance Committees of the Board of
Directors. Mr. Bayless' term as Director expires
2001.
Stephen P. Bradley, Ph.D. ... Director of the Corporation since April 1998.
Professor Bradley, age 57, is a William Ziegler
Professor of Business Administration and the
Chairman of the Program for Management Development
at the Harvard Business School. A member of the
Harvard faculty since 1968, Professor Bradley is
also Chairman of Harvard's Executive Program in
Competition and Strategy and teaches in Harvard's
2
Delivering Information Services program. Professor
Bradley has written extensively on the
telecommunications industry and the impact of
technology on competitive strategy. Professor
Bradley received his B.E. in electrical
engineering from Yale University in 1963 and his
M.S. and Ph.D. in operations research from the
University of California, Berkeley, in 1965 and
1968 respectively. Professor Bradley serves on the
Audit Committee of the Board of Directors.
Professor Bradley's term as a Director expires in
2000.
Clifford H. Higgerson ....... Director of the Corporation since April 1994.
Since 1991, Mr. Higgerson, age 59, has been a
general partner of Vanguard Venture Partners, a
venture capital firm specializing in high
technology start-ups, located in Palo Alto,
California. Mr. Higgerson is also a partner of
Communications Ventures. Mr. Higgerson is a
director of Advanced Fibre Communications and
Digital Microwave Corp. Mr. Higgerson earned his
B.S. in electrical engineering from the University
of Illinois and an M.B.A. in finance from the
University of California at Berkeley. Mr.
Higgerson serves on the Audit and Corporate
Governance Committees of the Board of Directors.
Mr.Higgerson's term as Director expires in 2000.
Patrick H. Nettles, Ph.D. ... Chief Executive Officer of the Corporation since
February 1994, President and Chief Executive
Officer of the Corporation since April 1994 and
Director of the Corporation since February 1994.
From 1992 until 1994, Dr. Nettles, age 55, served
as Executive Vice President and Chief Operating
Officer of Blyth Holdings Inc., a publicly-held
supplier of client/server software. From late 1990
through 1992, Dr. Nettles was President and Chief
Executive Officer of Protocol Engines Inc., a
development stage enterprise, formed as an
outgrowth of Silicon Graphics Inc., and targeted
toward very large scale integration-based
solutions for high-performance computer
networking. From 1989 to 1990, Dr. Nettles was
Chief Financial Officer of Optilink, a venture
start-up which was acquired by DSC Communications.
Dr. Nettles received his B.S. degree from the
Georgia Institute of Technology and his Ph.D. from
the California Institute of Technology. Dr.
Nettles' term as Director expires 2001.
Billy B. Oliver ............. Director of the Corporation since June 1996. Since
his retirement in 1985 after nearly 40 years of
service at AT&T, Mr. Oliver, age 73, has worked as
a self-employed communications consultant. During
his last 15 years with AT&T, he held the position
of Vice President, Engineering Planning and
Design, where he was directly involved in and had
significant responsibility for the evolution of
AT&T's long distance network during that period.
He was a co-recipient of the Alexander Graham Bell
Medal for the conception and implementation of
Nonhierarchical Routing in AT&T's network. Mr.
Oliver is also a director of Digital Microwave
Corp., Communications Network Enhancement Inc. and
Enterprise Network Services Inc. Mr. Oliver earned
his B.S.E.E. degree from North Carolina State
University. Mr. Oliver serves on the Human
Resources Committee of the Board of Directors. Mr.
Oliver's term as Director expires in 2000.
3
Board and Board Committee Information
Board Committees
The current committees of the Board of Directors each consist entirely of
non-employee directors. The Corporation's Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews the plans
and results of the audit engagement with the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Corporation's
internal accounting controls. Dr. Bayless, Mr. Higgerson and Professor Bradley
are the members of the Audit Committee. Mr. Zak was also a member of the Audit
Committee through September 1998, when Professor Bradley joined the Audit
Committee in his place. The Corporation's Human Resources Committee determines
compensation for the Corporation's executive officers and administers the
Corporation's Amended and Restated 1994 Stock Option Plan and the 1999 Employee
Stock Purchase Plan. Dr. Bayless and Messrs. Oliver and Zak are the members of
the Human Resources Committee. The Corporation's Corporate Governance Committee
reviews at least annually the operation of the Board, monitors evolving
corporate governance standards and guidelines, and may recommend to the full
Board the adoption or implementation of actions believed appropriate to improve
the operation of the Board relative to such standards and guidelines. Dr.
Bayless and Messrs. Higgerson and Zak are the members of the Corporate
Governance Committee.
Attendance at Meetings
During fiscal 1998, the Board of Directors held 26 meetings, the Audit
Committee held five meetings, the Human Resources Committee held five meetings,
and the Corporate Governance Committee held two meetings. Each director of the
Corporation attended 75% or more of all Board of Director meetings and 75% or
more of all meetings of each committee on which he served. Professor Bradley was
nominated to the Board of Directors in February 1998 and attended 75% or more of
all Board of Director meetings and 75% or more of all meetings of each committee
on which he served during his term.
Directors' Fees
Members of the Board of Directors receive $2,500 for participation in each
regular meeting of the full Board of Directors and $1,250 for each committee
meeting. The Corporation also reimburses each member of the Board of Directors
for out-of-pocket expenses incurred in connection with attendance at meetings.
Under the Corporation's 1996 Outside Directors Stock Option Plan, non-employee
Directors are eligible to receive stock options in consideration for their
services.
4
Beneficial Ownership of Common Stock
The following table sets forth certain information as of December 31, 1998
(unless otherwise specified) with respect to the beneficial ownership of the
Corporation's Common Stock by each person who is known to the Corporation to
have beneficial ownership of more than 5% of the outstanding shares of Common
Stock, each director, each Named Executive Officer (as defined below), and all
directors and executive officers as a group.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1) Percent of Class
- ------------------------ ------------------------ ----------------
Patrick H. Nettles, Ph.D.(2)(3) ..................................... 3,927,010 3.8%
Steve W. Chaddick(2) ................................................ 843,750 *
Lawrence P. Huang(2) ................................................ 761,250 *
Joseph R. Chinnici(2) ............................................... 265,750 *
Mark Cummings(2) .................................................... 203,000 *
G. Eric Georgatos(2) ................................................ 156,000 *
Jon W. Bayless(2) ................................................... 183,791 *
Harvey B. Cash(2) ................................................... 161,510 *
Clifford H. Higgerson(2)(4) ......................................... 2,250,077 2.2%
Billy B. Oliver(2) .................................................. 72,500 *
Michael J. Zak(2)(5) ................................................ 716,200 *
Stephen P. Bradley, Ph.D.(2) ........................................ 60,000 *
All officers and directors as a group (17 persons)(2) ............... 7,937,034 7.5%
- ------------
* Represents less than 1%.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as indicated
in the other footnotes to this table. Beneficial ownership is determined in
accordance with the rules of the United States Securities and Exchange
Commission ("SEC"). In computing the number of shares beneficially owned by
a person and the percentage ownership of that person, shares of Common
Stock subject to options or warrants held by that person that are currently
exercisable or exercisable within 60 days after December 31, 1998 are
deemed outstanding. Such shares, however, are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.
(2) Includes shares issuable upon exercise of stock options granted under the
Corporation's Amended and Restated 1994 Stock Option Plan (the "1994 Plan")
or 1996 Outside Directors Stock Option Plan (the "Directors Plan"). Options
granted under the 1994 Plan that are reflected in the beneficial ownership
table are generally exercisable immediately but may be subject to a right
of repurchase based on a scheduled vesting period. Generally, shares
underlying options vest over four years and options must be exercised
within ten years. Initial grants of options under the Directors Plan vest
over a period of three years, annual grants vest in full on the first
anniversary date of the grant and options must be exercised within ten
years of the date of grant.
(3) Does not include 175,000 shares held by the Patrick H. and Marion S.
Nettles Charitable Trust, as to which Dr. Nettles disclaims beneficial
ownership.
(4) Includes 1,963,419 shares of Common Stock owned by Vanguard IV, L.P., which
Mr. Higgerson may be deemed to beneficially own by virtue of his status as
a general partner of Vanguard IV, L.P. Mr. Higgerson disclaims beneficial
ownership of the shares held by such entity except to the extent of his
proportionate partnership interest therein. Mr. Higgerson has direct
ownership of 281,658 shares of Common Stock.
5
(5) Includes 500,000 shares of Common Stock owned by Charles River Partnership
VII, which Mr. Zak may be deemed to beneficially own by virtue of his
status as a general partner of Charles River Partnership VII. Mr. Zak
disclaims beneficial ownership of the shares held by such entity except to
the extent of his proportionate partnership interest therein. Mr. Zak has
direct ownership of 211,200 shares of Common Stock.
Compensation
Summary Compensation Table
The following table sets forth the annual and long-term compensation for
services in all capacities to the Corporation for the fiscal years ended October
31, 1998, 1997 and 1996 of the Chief Executive Officer and the other five most
highly compensated persons who were executive officers of the Corporation as of
October 31, 1998 (the "Named Executive Officers").
Long-Term
Compensation
------------
Annual Compensation Securities
------------------------------------ Underlying
Year Salary Bonus Options
---- ------ ----- ------------
Patrick H. Nettles, Ph.D ......................... 1998 $300,000 $150,000 0
President and Chief Executive Officer 1997 $253,365 $168,750 0
1996 $174,000 $154,000 875,000
Steve W. Chaddick ................................ 1998 $225,000 $ 56,250 0
Senior Vice President, Strategy 1997 $160,385 $ 67,500 0
and Corporate Development 1996 $132,000 $ 87,000 312,500
Lawrence P. Huang ................................ 1998 $225,000 $ 84,375 0
Senior Vice President, Strategic 1997 $160,385 $ 81,562 0
Account Sales 1996 $132,000 $ 87,000 312,500
Joseph R. Chinnici ............................... 1998 $225,000 $ 56,250 0
Senior Vice President, Finance and 1997 $159,519 $ 67,500 0
Chief Financial Officer 1996 $115,000 $ 79,000 72,500
Mark Cummings .................................... 1998 $225,000 $ 56,250 0
Senior Vice President, Operations 1997 $159,519 $ 67,500 0
1996 $ 53,077 $ 41,592 250,000
G. Eric Georgatos ................................ 1998 $225,000 $ 56,250 0
Senior Vice President, General Counsel 1997 $160,385 $ 67,500 0
and Secretary 1996 $ 87,500 $ 25,688 200,000
Option Grants in Last Fiscal Year
The corporation did not grant any stock options to the Named Executive
Officers during fiscal 1998.
6
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides the specified information concerning
unexercised options held as of October 31, 1998 by the Named Executive Officers:
Number of
Securities Underlying Value of Unexercised
Unexercised Options at in-the-Money Options at
Shares October 31, 1998(1) October 31, 1998(2)
Acquired on Value -------------------------- --------------------------
Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- -------- ----------- ------------- ----------- -------------
Patrick H. Nettles, Ph.D ....... 0 $ 0 875,000 0 $13,352,500 $0
Steve W. Chaddick .............. 225,000 $6,919,113 596,250 0 $ 9,743,225 $0
Lawrence P. Huang .............. 120,000 $7,125,559 532,500 0 $ 8,626,050 $0
Joseph R. Chinnici ............. 25,500 $1,539,789 245,250 0 $ 4,135,385 $0
Mark Cummings .................. 29,500 $1,587,154 188,000 0 $ 3,053,120 $0
G. Eric Georgatos .............. 25,000 $1,467,902 129,200 0 $ 2,217,072 $0
- ------------
(1) All options are immediately exercisable at the date of grant, but shares
purchased upon exercise of options are subject to repurchase by the
Corporation based upon a scheduled vesting period. Of the shares underlying
options 291,667, 268,125, 204,375, 158,167, 89,042 and 62,533 of the shares
underlying options held by Messrs. Nettles, Chaddick, Huang, Chinnici,
Cummings and Georgatos, respectively, are vested.
(2) Calculated on the basis of the fair market value of the underlying Common
Stock as of October 31, 1998 of $17.56 per share, less the aggregate
exercise price. The value of vested in-the-money options held by Messrs.
Nettles, Chaddick, Huang, Chinnici, Cummings and Georgatos is $4,450,838,
$4,700,569, $3,583,394, $2,773,395, $1,446,042, and $1,073,066,
respectively.
Ten-year Option Repricings(1)
Length of
Number of Original
Securities Market Price Exercise Option Term
Underlying of Stock at Price at Remaining at
Options Time of Time of New Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Date Amended Amendment Amendment Price Amendment
------ ----------- ------------ ------------ -------- ------------
Jesus Leon ................. 9/17/98 128,000 $12.375 $16.27 $12.375 98 months
Gary B. Smith .............. 9/17/98 40,000 $12.375 $55.00 $12.375 110 months
- ------------
(1) The option repricings did not affect any of the Named Executive Officers.
Messrs. Leon and Smith became executive officers of the Company in
connection with their promotions to Senior Vice President, Products and
Technology, and Senior Vice President, Worldwide Sales, respectively.
Human Resources Committee Report on Option Repricing
On September 17, 1998, the Human Resources Committee of the Board of
Directors approved a reduction in the exercise price of certain outstanding
stock options to $12.375 per share, the fair market value of the Corporation's
Common Stock on September 17, 1998. The reduction of exercise price affected
options to purchase 2,905,116 shares of common stock with an average exercise
price of $42.87 per share. Employees other than directors and executive officers
also hold these options.
As set forth in the Plan, stock options are intended to provide incentives
to the Corporation's officers and employees. The Human Resources Committee
believes that such equity incentives are a significant factor in the
Corporation's ability to attract, retain and motivate key employees who are
critical to the Corporation's long-term success. The Human Resources Committee
believed that, at their original exercise prices, the disparity between the
exercise price of these options and recent market prices for the Corporation's
Common Stock did not provide meaningful incentives to the employees holding
these options. The Human Resources Committee approved the repricing of these
options as a means of ensuring that optionees will continue to have meaningful
equity incentives to work toward the success
7
of the Corporation. The Human Resources Committee deemed the adjustment to be in
the best interest of the Corporation and its shareholders.
Submitted by the members of the Human Resources Committee:
Jon W. Bayless, Ph.D.
Billy B. Oliver
Michael J. Zak
Employment Agreements and Change-in-Control Arrangements
In April 1994, the Corporation entered into an employment agreement with
Dr. Nettles. The employment agreement specifies that Dr. Nettles is an employee
at will. In the event that he is terminated for cause, as defined in the
employment agreement, he will receive a severance payment equal to his monthly
base salary until the earlier of the expiration of six months or the
commencement of employment with a person or entity other than the Corporation.
In November 1998, the Corporation entered into a transfer of
control/severance agreement with each of the Named Executive Officers. The
initial term of each of these agreements is three years. The agreements provide
for the payment of up to one year of salary and bonus continuation in the event
that the Named Executive Officer's employment is terminated without cause or for
"good reason," as defined in the agreements, within one year following a
change-in-control of the Corporation.
Human Resources Committee Report on Executive Compensation
The Human Resources Committee of the Board of Directors consists of Dr.
Bayless and Messrs. Oliver and Zak, none of whom are employees or officers of
the Corporation. The Committee advises and assists management in developing the
Corporation's compensation and personnel policies, and provides Board oversight
of their implementation. The Committee endeavors to meet no less than four times
per year to review issues associated with compensation, human resources
policies, personnel recruitment and retention and to consider, amend, or approve
quarterly objectives for management recommended by the Corporation's Chief
Executive Officer.
The Committee has adopted a performance-based compensation policy which
considers both the long and short term. These two components are linked in a way
intended to focus management on increasing the strength of the business and its
ability to serve important customers with leading, high-value products, while
building the organization in a deliberate, thoughtful way. The Committee
believes that this policy will increase stockholder value over the long term. On
an annual basis, the Committee approves the Corporation's compensation package
for executive officers, which includes a combination of an annual base salary
and benefits, performance-based quarterly bonuses, and long-term compensation
consisting of stock options. Annual base salaries are established following an
assessment by the Committee of market survey data for comparable positions in
comparable companies compiled by an independent compensation consultant. The
Committee's goal is to set the Corporation's compensation for various positions
at levels that are generally favorable to the averages indicated by the market
survey data. Quarterly bonus payments to members of management are awarded
following assessment by the Committee of performance compared to corporate
objectives.
Annual base salaries for members of management, including Patrick H.
Nettles, the President and Chief Executive Officer of the Corporation, were most
recently reassessed and reset in accordance with the foregoing policy, effective
in August 1997. In the aftermath of the terminated merger with Tellabs on
September 14, 1998, and after taking into account the attendant adverse effect
on the Corporation and its stockholders, the resetting of expectations for
future operations, and the perceived need to maintain stability and restore
focus on the continuing business, the Committee decided to leave annual base
salaries for members of management unchanged for the fiscal year commencing
November 1, 1999,
8
except in the case of newly promoted members of management. The Committee also
determined that the Corporation's quarterly corporate objectives were met or
otherwise satisfied during only the first two of the four fiscal quarters of the
fiscal year ending October 31, 1998, and bonuses were paid accordingly at the
conclusion of each of those quarters. Except for grants of stock options to new
members of management who joined the Corporation during the fiscal year ended
October 31, 1998, no stock options were granted to existing members of
management during such fiscal year. Management participates, along with all
other employees, in the Corporation's annual grant of stock options to employees
who have worked for the Corporation for at least one year. The annual grant of
stock options was implemented in November 1998.
With respect to the compensation of Dr. Nettles for the overall fiscal year
ended October 31, 1998, the Committee recognized his unique role and
responsibility as President and Chief Executive Officer of the Corporation, but
otherwise considered no factors or criteria different from those applied to
members of management generally.
For fiscal 1999, if the Committee determines that the corporate objectives
have been met or otherwise satisfied in each of the four fiscal quarters, the
bonus payments, which are paid quarterly on an equal pro rata basis, will equal
35%, 50%, 75% or 100% of base salary, with the exact percentage based on the
particular officer's title and responsibilities, as viewed by the Committee.
Only the Chief Executive Officer is eligible for a bonus of up to 100% of base
salary in fiscal 1999.
Section 162(m) of the Internal Revenue Code limits tax deductions for
executive compensation to $1 million. There are several exemptions to Section
162(m), including one for qualified performance-based compensation. To be
qualified, performance-based compensation must meet various requirements,
including shareholder approval. The Committee intends to consider annually
whether it should adopt a policy regarding 162(m) and to date has concluded that
it is not appropriate to do so. One reason for this conclusion is that, assuming
the current compensation policies and philosophy remain in place, Section 162(m)
will not be applicable in the near term to any executive's compensation.
Submitted by the members of the Human Resources Committee:
Jon W. Bayless, Ph.D.
Billy B. Oliver
Michael J. Zak
Compensation Committee Interlocks and Insider Participation
The Human Resources Committee of the Board of Directors, which serves the
traditional functions of a compensation committee, consists of Jon W. Bayless,
Ph.D., Billy B. Oliver and Michael J. Zak. None of Dr. Bayless or Messrs. Oliver
and Zak was at any time during the fiscal year ended October 31, 1998, or at any
other time, an officer or employee of the Corporation. No member of the Human
Resources Committee of the Corporation serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving as a member of the Corporation's Board of Directors or Human
Resources Committee.
Shareholder Return Performance Presentation
The following graph shows a comparison of cumulative total returns for an
investment in the Common Stock of the Corporation, the NASDAQ Telecommunications
Index and the S&P 500 Index. Although the SEC requires the Corporation to
present such a graph for a five-year period, the Common Stock has been publicly
traded only since February 7, 1997 and, as a result, the following graph
commences as of such date. This graph is not deemed to be "soliciting material"
or to be "filed" with the SEC or subject to the SEC's proxy rules or to the
liabilities of Section 18 of the Exchange Act of 1934,
9
and the graph shall not be deemed to be incorporated by reference into any prior
or subsequent filing by the Corporation under the Securities Act of 1933 or the
1934 Act.
Assumes $100 invested in CIENA Corporation, NASDAQ Telecom Index and S&P
500 on February 7, 1997, with all dividends reinvested at month-end.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
CIENA NASDAQ
----- ------
Common Telecom
------ -------
Stock Index S&P 500
----- ----- -------
IPO $100 $100 $100
Feb-97 $171 $97 $100
Mar-97 $124 $91 $96
Apr-97 $136 $94 $101
May-97 $203 $106 $107
Jun-97 $205 $114 $112
Jul-97 $244 $121 $121
Aug-97 $208 $117 $114
Sep-97 $215 $132 $120
Oct-97 $239 $136 $116
Nov-97 $235 $137 $121
Dec-97 $266 $145 $123
Jan-98 $239 $154 $124
Feb-98 $182 $167 $133
Mar-98 $185 $183 $140
Apr-98 $242 $181 $141
May-98 $226 $178 $138
Jun-98 $303 $195 $144
Jul-98 $322 $203 $142
Aug-98 $122 $155 $131
Sep-98 $62 $174 $129
Oct-98 $75 $187 $139
PROPOSAL 2
Ratification of Independent Public Accountants
The independent public accounting firm of PricewaterhouseCoopers LLP has
acted as the Corporation's independent auditors for the year ended October 31,
1998 and has been selected by the Board of Directors to act as such for the
examination of the Corporation's 1999 financial statements, subject to
ratification by the stockholders. Representatives of PricewaterhouseCoopers LLP
are expected to be present at the stockholders' meeting and will have an
opportunity to make a statement if they desire and to respond to appropriate
questions.
In the event the appointment of PricewaterhouseCoopers LLP as independent
public auditors for 1999 is not approved by the stockholders, the adverse vote
will be considered as a direction to the Board of Directors to consider the
selection of other auditors for the following year. However, because of the
difficulty in making any substitution of auditors so long after the beginning of
the current year, it is contemplated that the appointment for the year 1999 will
be permitted to stand unless the Board finds other good reason for making a
change.
The Board of Directors believes that ratification of the selection of
PricewaterhouseCoopers LLP as the corporation's independent public accountants
for the 1999 fiscal year is in the best interests of all stockholders and,
accordingly, recommends a vote FOR Proposal 2. Your proxy will be so voted
unless you specify otherwise.
Voting Procedures
Shares can be voted only if the stockholder is present in person or by
proxy. Whether or not you plan to attend in person, you are encouraged to sign
and return the enclosed proxy card. The representation in person or by proxy of
at least a majority of the outstanding shares entitled to vote is necessary to
provide a quorum at the meeting. Directors are elected by a plurality of the
affirmative votes cast by the stockholders present at the Meeting (in person or
by proxy). Proposal 2 must be approved by a majority of the shares of Common
Stock voting for or against the Proposal at the Meeting. Unless otherwise
indicated, executed proxies will be voted for Proposals 1 and 2.
10
Abstentions and "non-votes" are counted as present in determining whether
the quorum requirement is satisfied. Abstentions and "non-votes" are treated as
votes against proposals presented to stockholders other than elections of
directors. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner.
Stockholder Proposals
All stockholder proposals intended to be presented at the 2000 Annual
Meeting of the Corporation must be received by the Corporation not later than
October 16, 1999 and must otherwise comply with the rules of the SEC for
inclusion in the Corporation's proxy statement and form of proxy relating to
that meeting.
All proposals intended to be presented at the 2000 Annual Meeting of the
Corporation which are not sought to be included in the proxy statement must be
received by the Corporation no later than December 30, 1999.
Section 16(a) Beneficial Ownership Reporting Compliance
Each of Jon W. Bayless and Rebecca K. Seidman filed one late Form 4, each
reporting one transaction.
Other Matters
Management knows of no matters to be presented for action at the meeting
other than those mentioned above. However, if any other matters properly come
before the meeting, it is intended that the persons named in the Corporation's
form of proxy will vote on such other matters in accordance with their judgment
of the best interests of the Corporation.
By Order of the Board of Directors
/s/ G. Eric Georgatos
G. Eric Georgatos
Secretary
11
PROXY
CIENA CORPORATION
Proxy Solicited on behalf of the Board of Directors
Annual Meeting of Stockholders to be held March 10, 1999
The undersigned hereby appoints Patrick H. Nettles, Joseph R. Chinnici and
G. Eric Georgatos, or any of them, the proxies of the undersigned, with full
power of substitution, to vote all shares of Common Stock of CIENA Corporation
which the undersigned is entitled to vote at the Annual Meeting of Stockholders
of the Corporation to be held March 10, 1999, or any adjournment thereof, as
follows:
1. Election of Two Directors by all Stockholders
_____ FOR all nominees listed below _____ WITHHOLD AUTHORITY to
except as marked to the contrary vote for all nominees
listed below
Harvey B. Cash and Michael J. Zak
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below):
- --------------------------------------------------------------------------------
2. Proposal to ratify the selection of PricewaterhouseCoopers LLP as independent
public accountants for the Corporation.
_____ FOR _____ AGAINST _____ ABSTAIN
3. The proxies are authorized to vote in their discretion on any other matters
which may properly come before the Annual Meeting to the extent set forth in the
proxy statement.
The Board of Directors recommends a vote "FOR" each of the listed proposals.
PLACE AN "X" HERE IF YOU PLAN TO VOTE YOUR SHARES AT THE MEETING. ____________
Execute proxy exactly as your name appears on this form. If stock is registered
in more than one name, each joint holder should sign. When signing as trustee,
executor or other fiduciary, please so indicate:
______________________ ________________________________ ___________
Signature of holder Signature of co-holder (if any) Date
