UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)

of the Securities Exchange Act of 1934

Filed by the Registrant  x   Filed by a Party other than the Registrant  ¨

Check the appropriate box:

JDS Uniphase 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):

JDS UNIPHASE CORPORATION

430 North McCarthy Boulevard

Milpitas, California 95035

(408) 546-5000

Notice of Annual Meeting of Stockholders

and Proxy Statement

20082009 Annual Report

CONSIDERING REGISTERING ELECTRONICALLY FOR STOCKHOLDER MATERIALS?

JDS Uniphase Corporation is pleased to take advantage of the new Securities and Exchange Commission (the “SEC”) rule allowing companies to furnish this Proxy Statement and Annual Report over the Internet to our stockholders who hold Common Stock. We believe that this new e-proxy process, also known as “Notice and Access” will expedite the holders’ of Common Stock receipt of proxy materials, reduce our printing and mailing expenses and reduce the environmental impact of producing materials required for our Annual Meeting.

Holders of Common Stock should refer to the “General Information” portion of the following Proxy Statement (beginning on page 1) or contact our Investor Relations hotline at 408-546-4445 for assistance regarding instructions on how to register for and thereafter access our Proxy Statement and Annual Report online.

Holders of Exchangeable Shares remain unaffected by the new SEC rule and will continue to receive paper copies of the Proxy Statement and Annual Report.

Dear Stockholders,

Fiscal 20082009 was both a challenging and opportunistic year of revenue growth and earnings improvement for JDSU as we continuedJDSU. Similar to most companies around the world, the global economic climate significantly reduced demand from our focus on improving the business model in each of our business segments. Throughout fiscal 2008, we welcomed new leadership and talent at multiple levels within the Company, to position us well for the next phase of growth and predictability.customers. For the full fiscal year the Company delivered:

Maximizing the utilization of our assets

Strong End Markets

Our strategy continues to be to execute as a diversified technology company with a focus on optical and broadband innovation. We embraced this view suchDespite the economic downturn in fiscal 2009, market research indicates that the composite company would be better ableour end markets and long-term drivers remain strong as broadband demand continues to navigate fluctuationsgrow. According to ComScore,

U.S. consumers watched 16.8 billion online videos in any one constituent business. Details on each of theApril, a 53% growth year over year. Worldwide IPTV subscribers reached 26 million in calendar year 2008 and are expected to grow to 155 million by calendar year 2013. And social networking sites like Facebook and Twitter are driving an increase in mobile internet services.

The business segments during fiscal 2008year 2009 follow:

Communications and Commercial Optical Products

The Optical Communications business segment provides products used by communications equipment providers for telecommunications and enterprise data communications. These products enable the transmission and transport of video, audio, and text data over high-capacity fiber optic cables.

We continued to see favorable end market indicators for broadband services and network build-outs and we believe broadband capacity will continue to expand as higher data rates are being delivered to the access edge accompanied by video applications and high definition network requirements.

Increased use of voice, video, and data applications among consumers has placedplaces strains on network bandwidth, pushingbandwidth. The industry continues to ask for solutions that are highly reconfigurable, giving network equipment manufacturers (NEM) and service providers the flexibility they need for agile optical technology allwhile giving them the way fromability to reduce inventory and help reduce their total cost of ownership. Examples of our leadership in reconfigurable solutions are ROADMs, tunable transponders, and photonically integrated amplifiers.

Over the core infrastructure to the outer edge of networks. JDSU is at the forefront of developing technology to support these trends. In 2008past year we introduced a photonic integrated circuit (PIC)number of platforms that possess high functional integration where we can differentiate ourselves in the marketplace. The Tunable XFP, the first tunable introduced in an XFP form factor targets both the fixed wavelength XFP and the300 pin tunable transponder markets and our AON Super Transport Blade a single-slot blade solution that delivers all major functions requiredarchitecture generates significant footprint savings for optical network transport andour NEM customers. JDSU inventeddeveloped the first nano wavelength selective switch (WSS) technology.ever Photonically Integrated Amplifier platform (PIA). The Nano WSS includes technology extracted from JDSU'sPIA platform replaces up to fifty discrete components with a single chip and is up to 50% smaller than current solutions.

JDSU provides laser components and subsystems for a broad range of applications. Our pipeline for new Mini WSS technology,laser products over fiscal 2010 is robust as we continue to invest in research and development. Our product development will enable JDSUcontinue to develop denserbe focused on advanced solid state and fiber laser platforms. These new products, when introduced, are expected to increase our served available market by more highly integrated optical solutions, such asthan three-fold by the AON Super Transport Blade.end of the fiscal year.

Communications Test and Measurement

Our Communications Test and& Measurement segment is structured along three product groups. Each of these units’ portfolios addresses a portion of the lifecycle of the communication network market. Lab and Production

supplies test equipment for development, system verification and production; Field Services supplies both telecom and cable instruments to install and troubleshoot broadband triple play services; Service Assurance Solutions ensures quality of services by providing end-to-end network test and monitoring.

InAlthough fiscal 2009 was challenging for the second half of fiscal 2008 we acquiredtest and measurement industry, JDSU remained the fibermarket leader in our served addressable markets. Our test division of Westover Scientific, the leading provider of proactive fiber inspection test solutions for service providers, equipment manufacturers and premises wiring technicians. The products are designed to proactively inspect fiber optic connectors, which when contaminated aremeasurement business has the number one source for faultsmarket share position in optical transport test, fiber network deployments. The acquisition strengthens JDSU’s portfoliofield test, cable networking test and leadership ofaccess/metro field test solutions in fiber optic networks.tools.

JDSU continuescontinued to expand its position with Network Equipment Manufacturers with new lab and production test solutions. The MAP-200 product speeds the development of next generation fiber networks systems with an in-depth analysis of network element performance. JDSU is also providingprovide service providers withnew field tools and service assurance systems designed to speed up triple play service delivery and to ensure quality. This year we introduced the MTS/T-BERD 4000 Multiple Services test platform for testing and maintenance of FTTx networks, which is the first full-capacity single box solution for fiber, copper, and triple play testing. The T-BERD 6000, aT-BERD/MTS 6000A is the industry’s smallest 10GigE field tester fortest with advanced IPTV and other IP based service deployment is gaining customer acceptance, and Tier-1 telecom service provides continue strong adoption of the JDSU’s FTTX tools including the SmartClass Home, HST and T-BERD for tripleTriple play service delivery.test features and has been widely accepted by our service provider customers. The NetComplete Home Performance Monitoring ensures high quality broadband service performance. NetComplete Home offers increased visibility required to meet quality experience expectations for video, voice, and data over DSL and FTTx networks by accessing service performance information inside the home.

Advanced Optical Technologies

The Advanced Optical Technologies business segment leverages its core technology strengths of optics and materials science to manage light and/or color effects.

This segment provides optical security solutions including brand protection, anti counterfeiting for currency, and transaction card authentication; custom optics for aerospace and defense; and innovative custom color solutions for helping manufacturers differentiate their products. The currency market has provided strength for this business, driven by pre-Olympic currency printing in China, general inflationary trends, convergencediversity of new denominations and redesign activities.

We announced the acquisition of American Bank Note and Holographicproducts in the second half of fiscal 2008. This acquisition fortifies our overtAOT segment contributes to revenue resiliency despite adverse market conditions.

Positive trends for the AOT segment include 3D film releases, customers requiring more complex integrated design features to combat counterfeiting utilizing multiple technologies, and covert security product portfolio by enhancing our diffractive optics and magnetic technologies, including holograms, for security applications, along with related manufacturing and marketing expertise and a leading position in the transaction card market.

Commercial Lasers

JDSU provides laser components and subsystems for a broad range of applications. Semiconductor industry activity has declined where with biomedical and material processing customers continue to be strong and growing. Our commercial lasers business is focused on the transition from gas lasers to more reliable solid state lasers. Gross margins have continued to improve and have reached the best level we have seen in several years despite the slight revenue growth in fiscal 2008. We continue to improve our quality, operations and supply chain performance and believe there is more improvement to come in these areas.aerospace.

Corporate FocusLooking Ahead

Fiscal 20092010 will be a year in which JDSU continues to advance itsnew chapter for the company. Our strong product portfolio, solid balance sheet, and improved business model positions JDSU for growth as each business segment expects tothe economy rebounds. We will continue to improve individual operating results while maintaining a leadership market position.

The current economic conditions have caused a level of uncertainty infocus on our core priorities to further advance the markets we participate in which has increased the risk acrosscompany towards our businesses. We have created a plan that reaches our financial goals under the current telecom economic climate, albeit we have initiated work on bottom line improvements that will cushion possible deviations due to the economic climate. In addition we will consider mergers and acquisitions that fortify or augment our existing businesses.

Our priorities for fiscal 2009 are to:

1. Accelerate profitable growth;

2. Improve the company’s operating performance and efficiency;

3. Increase free cash flow; and

4. Improve predictability such that the impact of seasonality on gross margins is reduced.

long-term goals. I look forward to updating you on our progress in the coming quarters. If you are interested in learning more about JDSU in the meantime, visit our website atwww.jdsu.com/investors or contact our Investor Relations Department atinvestor.relations@jdsu.com or (408) 546-4445. Thank you for your support of JDSU.

Sincerely yours,All of JDSU’s accomplishments are made possible because of the in-depth knowledge and extensive skill set of our employees. I would like to thank our employees whose focused commitment and tremendous efforts continue to advance JDSU towards long-term success. I would also like to thank our customers, partners, vendors and long-term stockholders for their continued support of JDSU.

Kevin J. KennedyThomas H. Waechter

President & CEO

Forward-Looking Statements

This letter includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 that are based on certain assumptions and reflect our current expectations. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance, or achievements discussed or implied by such forward-looking statements. Any forward-looking statement is qualified by reference to these risks, uncertainties and factors. For more information on the risks affecting the Company’s business, please refer to the “Risk Factors” section included in the Company’s Annual Report on Form 10-K for the year ended June 28, 200827, 2009 filed with the Securities and Exchange Commission, as well as in other filings on Forms 10-Q and 10-K. The forward-looking statements contained in this letter are made as of the date hereof and the Company does not assume any obligation to update the reasons why actual results could differ materially from those projected in the forward-looking statements.

JDS UNIPHASE CORPORATION

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON NOVEMBER 12, 200811, 2009

By Order of the Board of Directors,

Kevin J. KennedyThomas Waechter

Chief Executive Officer and President

Milpitas, California

September 26, 200825, 2009

JDS UNIPHASE CORPORATION

430 North McCarthy Boulevard

Milpitas, California 95035

(408) 546-5000

PROXY STATEMENT

GENERAL INFORMATION

Why am I receiving these proxy materials?

The Board of Directors (the “Board” or “Board of Directors”) of JDS Uniphase Corporation, a Delaware corporation (the “Company”), is furnishing these proxy materials to you in connection with the Company’s 2008 annual meeting2009 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting will be held at 690 North McCarthy Boulevard, Milpitas, California 95035, on November 12, 200811, 2009 at 9:00 a.m., Pacific Standard Time. You are invited to attend the Annual Meeting and are entitled and requested to vote on the proposals outlined in this proxy statement (“Proxy Statement”).

What is “Notice and Access”?

The Securities and Exchange Commission has adopted amendments to the proxy rules that change how companies must provide proxy materials. These new rules are often referred to as “Notice and Access”. Under the Notice and Access model, a company may select either of the following two options for making proxy materials available to stockholders:

A company may use a single method for all its stockholders, or use full set delivery for some while adopting the notice only option for others.

This process reduces the amount of time it takes for stockholders to obtain the materials, reduces the printing and mailing expenses paid by the Company, and reduces the environmental impact of producing the materials. The Company is required to comply with these new “Notice and Access” rules in connection with its Annual Meeting.

Other than holders of Exchangeable Shares, who will continue to receive printed copies of the proxy materials, most of our stockholders who hold Common Stock will not receive printed copies of the proxy materials unless they request them. Instead, the “Notice of Internet Availability of Proxy Materials” (referred herein as the “Notice”), which was mailed to our stockholders who hold Common Stock, will instruct you as to how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may submit your proxy on the Internet. If you would like to receive a paper or e-mail copy of our proxy materials, you should follow the instructions in the Notice for requesting such materials.

If I am a holder of Exchangeable Shares, do the “Notice and Access” rules apply to me?

No. The new “Notice and Access” rules apply only to stockholders of the Company who hold Common Stock. Accordingly, as a holder of Exchangeable Shares, you will continue to receive printed copies of the proxy materials.

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What is the Full Set Delivery Option?

Under the full set delivery option, a company delivers all proxy materials to its stockholders as it would have done prior to the change in the rules. This can be by mail or, if a stockholder has previously agreed, by e-mail. In addition to delivering proxy materials to stockholders, a company must now post all proxy materials on a publicly-accessible website and provide information to stockholders about how to access that website.

What is the Notice Only Option?

Under the notice only option, a company must post all its proxy materials on a publicly accessible website. However, instead of delivering its proxy materials to stockholders, the company instead delivers a Notice. This Notice includes, among other matters:

If a stockholder requests paper copies of the proxy materials, these materials must be sent to the stockholder within three business days. Additionally, paper copies must be sent via first class mail.

In connection with its Annual Meeting, the Company has elected to use the notice only delivery option with respect to the Company’s holders of Common Stock. Accordingly, if you are a holder of Common Stock, you should have received the Notice, which provides instructions on how to access the proxy materials on-line.

Will the Company use the Notice Only option in the future?

The Company may choose to continue to use the notice only option in the future as a delivery option of its proxy materials with respect to its holders of Common Stock. By reducing the amount of materials that the Company is required to print and mail, the notice only option provides an opportunity for cost savings as well as conservation of natural resources. The Company plans to evaluate the future possible cost savings as well as the possible impact on stockholder participation as it considers future use of the notice only option.

As a Holder of Common Stock, what do I need to do?

If you would prefer to continue receiving paper copies of proxy materials if the Company elects to use the notice only option for future annual meetings, please mark the “Paper Copies” box on your Proxy Card (or provide this information when you vote telephonically or via the internet).

As noted above, the Company must provide paper copies via first class mail to any stockholder who, after receiving the Notice referenced above, nevertheless requests paper copies. Accordingly, for example, even if you do not check the “Paper Copies” box now, you will still have the right to request delivery of a free set of proxy materials upon receipt of any Notice in the future. Because first class postage is significantly costlier than bulk mail rates and because each such request must be processed on a stockholder-by-stockholder basis, the cost of responding to a single request for paper copies is likely to be significantly greater than the per stockholder cost the Company currently incurs in delivering proxy materials in bulk. Accordingly, requests for paper copies could significantly undermine or eliminate expected cost savings associated with the notice only option.

By developing in advance a database of Common Stock holders who would prefer to continue receiving paper copies of proxy materials, the Company would be able to use the full set delivery option for these stockholders—using bulk mail to deliver the paper copies—while using the notice only option for other Common

Stock holders. We believe this would significantly reduce the number of requests for paper copies that the Company would need to process on a stockholder-by-stockholder basis and would position the Company to better capture cost savings should it continue to use the notice only option in the future. We appreciate your assistance in helping us develop this database through the Proxy Card, telephonic and internet voting processes.

If I am a holder of Common Stock, how do I obtain electronic access to the proxy materials?

The Notice will provide you with instructions regarding how to:

Choosing to receive your future proxy materials by e-mail will save us the cost of printing and mailing documents to you and will reduce the impact of printing and mailing these materials on the environment. If you choose to receive future proxy materials by e-mail, you will receive an e-mail next year with instructions containing a link to those materials and a link to the proxy voting site. Your election to receive proxy materials by e-mail will remain in effect until you terminate it.

What if I prefer to receive paper copies of the materials?

If you are a holder of Exchangeable Shares, you will continue to receive printed copies of the proxy materials. If you are a holder of Common Shares and if you prefer to receive paper copies of the materials, you can still do so. You may request a paper copy of the materials by (i) calling 1-800-579-1639; (ii) sending an e-mail to sendmaterial@proxyvote.com; or (iii) logging ontowww.ProxyVote.com. There is no charge to receive the materials by mail. If requesting material by e-mail, please send a blank e-mail with the 12 digit “Control Number” (located on the second page of the Notice) in the subject line.

What proposals will be voted on at the Annual Meeting?

There are fourfive proposals scheduled to be voted on at the Annual Meeting:

1. To elect threefour Class IIIII directors to serve until the 20112012 annual meeting of Stockholders and until their successors are elected and qualified.

2. To approve amendments to the Company’s Amended and Restated 2003 Equity Incentive Plan.Plans to permit the Exchange Program.

3. To approve an amendment to the ESPP to increase the number of shares of common stock authorized for issuance under the ESPP.

4. To ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm (hereinafter referred to as “independent auditors”) for the fiscal year ending June 30, 2009.2010.

4.5. To consider such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.

As to any other business which may properly come before the Annual Meeting, the persons named on the enclosed proxy card will vote according to their best judgment. The Company does not know now of any other matters to be presented or acted upon at the Annual Meeting.

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What are the recommendations of the Company’s Board of Directors?

The Board recommends that you vote “FOR”“FOR” each of the four proposals presented in this Proxy Statement.

Specifically, the Board recommends you vote:

What is the record date and what does it mean?

The record date for the Annual Meeting is September 12, 2008.14, 2009. The record date is established by the Board of Directors as required by Delaware law. Holders of shares of the Company’s Common Stock and holders of Exchangeable Shares of JDS Uniphase Canada Ltd., a subsidiary of the Company, at the close of business on the record date are entitled to receive notice of the Annual Meeting and to vote at the Annual Meeting and any adjournments or postponements thereof.

What shares can I vote?

Each stockholder of the Company’s common stock, par value $.001 per share (“Common Stock”), is entitled to one vote for each share of Common Stock owned as of the record date, and CIBC Mellon Trust Company (the “Trustee”), the holder of the Company’s special voting share (“Special Voting Share”), is entitled to one vote for each exchangeable share of JDS Uniphase Canada Ltd., a subsidiary of the Company (“Exchangeable Shares”), outstanding as of the record date (other than Exchangeable Shares owned by the Company and its affiliates). Holders of Common Stock and the Exchangeable Shares are collectively referred to as “Stockholders”. Votes cast with respect to Exchangeable Shares will be voted through the Special Voting Share by the Trustee as directed by the holders of Exchangeable Shares, except votes cast with respect to Exchangeable Shares whose holders request to vote directly in person as proxy for the Trustee at the Annual Meeting.

At the record date, 209,817,464217,953,264 shares of Common Stock were issued and outstanding, one share of the Company’s Special Voting Share was issued and outstanding, and 5,000,0414,501,756 Exchangeable Shares were issued and outstanding (excluding Exchangeable Shares owned by the Company and its affiliates which are not voted). Each Exchangeable Share is exchangeable at any time, at the option of its holder, for one share of the Company’s Common Stock.

What constitutes a quorum?

The presence at the Annual Meeting, in person or by proxy, of the holders of a majority of the shares of Common Stock and Exchangeable Shares outstanding and entitled to vote on the record date will constitute a quorum permitting the Annual Meeting to conduct its business.

How are abstentions and broker non-votes treated?

Under the General Corporation Law of the State of Delaware, an abstaining vote and a broker non-vote are counted as present and are, therefore, included for purposes of determining whether a quorum of shares is present at the Annual Meeting. Broker non-votes are not included in the tabulation of the voting results on the election of directors or issues requiring approval of a majority of the shares present or represented by proxy and entitled to

vote at the Annual Meeting and, therefore, do not have an effect on Proposals 1, 2, 3 or 3.4. A broker non-vote occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have the discretionary voting instructions with respect to that item and has not received instructions from the beneficial owner. Under the rules that govern brokers who are voting with respect to shares held by them as nominee, brokers have the discretion to vote such shares only on routine matters. Routine matters include, among others, the election of directors and ratification of auditors. Non-routine matters include, among others, the proposed amendments to the Company’s AmendedPlans and Restated 2003 Equity Incentive Plan.the proposed amendment to the ESPP. For the purpose of determining whether the Stockholders have approved matters other than the election of directors, abstentions are treated as shares present or represented and voting, so abstentions have the same effect as negative votes. Shares held by brokers who do not have discretionary authority to vote on a particular matter and have not received voting instructions from their customers are not counted or deemed to be present or represented for purposes of determining whether Stockholders have approved that matter. Thus, if you do not give your broker specific instructions, your shares may not be voted on these matters and will not be counted in determining the number of shares necessary for approval of Proposals 1, 2, 3, or 4.

What is the voting requirement to approve each of the proposals?

Proposal 1. The threefour candidates receiving the greatest number of affirmative votes of the votes attached to shares of Common Stock and the Special Voting Share present in person, or represented by proxy, and entitled to vote at the Annual Meeting will be elected, provided a quorum is present and voting. Abstentions and broker non-votes will not be counted toward a nominee’s total.

Proposal 2. Approval of the amendments to the Company’s Amended and Restated 2003 Equity Incentive PlanPlans requires the affirmative vote of a majority of the shares of Common Stock and the votes represented by the Special Voting Share (all taken together as one class) present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. As a result, abstentions will have the same effect as votes against thethis proposal. Broker non-votes will have no effect on the outcome of this vote.

Proposal 33.Approval of the amendment to the ESPP requires the affirmative vote of a majority of the shares of Common Stock and the votes represented by the Special Voting Share (all taken together as one class) present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. As a result, abstentions will have the same effect as votes against this proposal. Broker non-votes will have no effect on the outcome of this vote.

Proposal 4. Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent auditors requires the affirmative vote of a majority of the shares of Common Stock and the votes represented by the Special Voting Share (all taken together as one class) present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. As a result, abstentions will have the same effect as votes against the proposal. Broker non-votes will have no effect on the outcome of this vote.

All shares of Common Stock and the Special Voting Share represented by valid proxies will be voted in accordance with the instructions contained therein. Votes with respect to Exchangeable Shares represented by valid voting instructions received by the Trustee will be cast by the Trustee in accordance with those instructions. In the absence of instructions, proxies from holders of Common Stock will be voted FOR Proposals 1, 2, 3 and 3.4. If no instructions are received by the Trustee from a holder of Exchangeable Shares, the votes to which such holder is entitled will not be exercised.

How do I vote my shares?

If you are a record holder of Common Stock, you can either attend the Annual Meeting and vote in person or give a proxy to be voted at the Annual Meeting:

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The Internet and telephone voting procedures have been set up for your convenience and are designed to authenticate the Common Stock holders’ identities, to allow the holders of Common Stock to provide their voting instructions, and to confirm that their instructions have been recorded properly. The Company believes the procedures which have been put in place are consistent with the requirements of applicable law. Specific instructions for record holders of Common Stock who wish to use the Internet or telephone voting procedures are set forth on the enclosed proxy card or in the Notice you received by mail.

If you are a record holder of Exchangeable Shares, you can either attend the Annual Meeting and vote in person or give a proxy to be voted at the Annual Meeting by mailing the enclosed voting instruction card to the Trustee.

If a holder of Exchangeable Shares does not provide the Trustee with voting instructions, your Exchangeable Shares will not be voted.

Who will tabulate the votes?

An automated system administered by Broadridge Financial Services, Inc. (“Broadridge”) will tabulate votes cast by proxy at the Annual Meeting and a representative of the Company will tabulate votes cast in person at the Annual Meeting.

Is my vote confidential?

Proxy instructions, ballots and voting tabulations that identify individual Stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within the Company or to third parties, except (i) as necessary to meet applicable legal requirements, or (ii) to allow for the tabulation and/or certification of the vote.

Can I change my vote after submitting my proxy?

You may revoke your proxy at any time before the final vote at the Annual Meeting. You may do so by one of the following four ways:

If you hold Exchangeable Shares and you wish to direct the Trustee to change the vote attached to the Special Voting Share on your behalf, you should follow carefully the instructions provided by the Trustee, which accompany this Proxy Statement. The procedure for instructing the Trustee differs in certain respects from the procedure for delivering a proxy, including the place for depositing the instructions and the manner for revoking the proxy.

Who is paying for this proxy solicitation?

This Proxy Statement and the accompanying proxy were first sent by mail to the Trustee for the Special Voting Share and holders of Exchangeable Shares on or about September 26, 2008.25, 2009. The Company has also sent printed copies of the proxy materials by mail to holders of Common Stock to each holder of Common Stock who has requested such copy. The Company will bear the cost of soliciting proxies, including preparation, assembly, printing and mailing of the Proxy Statement. If you are a holder of Common Stock and if you choose to access the proxy materials and/or vote over the Internet, you are responsible for Internet access charges you may incur. If you choose to vote by telephone, you are responsible for telephone charges you may incur. The Company has not retained the services of the Laurel Hill Advisory Group to assist in the solicitation of proxies and provide related advice and information support. The Company will pay for these solicitation services and the cost is not expected to exceed $15,000.any proxy solicitor. In addition, the Company will reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. Proxies may be solicited by certain of the Company’s directors, officers and regular employees, without additional compensation, either personally, by telephone, facsimile, or telegram.

How can I find out the voting results?

The Company will announce the preliminary results at the Annual Meeting and publish the final results in the Company’s Quarterly Report on Form 10-Q for the second quarter of fiscal 2009.2010. Stockholders may also find out the final results by calling the Company’s Investor Relations Department at (408) 546-4445.

How do I receive electronic access to proxy materials for the current and future annual meetings?

Stockholders who have previously elected to receive the Proxy Statement and annual reportAnnual Report over the Internet will be receiving an e-mail on or about September 26, 200825, 2009 with information on how to access Stockholder information and instructions for voting over the Internet. Stockholders of record may vote via the Internet until 11:59 p.m. Eastern Time, November 11, 2008.10, 2009.

If your shares are registered in the name of a brokerage firm and you have not elected to receive your Proxy Statement and Annual Report over the Internet, you still may be eligible to vote your shares electronically over the Internet. A large number of brokerage firms are participating in the ADP online program, which provides eligible Stockholders who receive a paper copy of this Proxy Statement the opportunity to vote via the Internet. If your brokerage firm is participating in ADP’s program, your proxy card will provide instructions for voting online.

Stockholders can elect to view future proxy statements and annual reports over the Internet instead of receiving paper copies, which results in cost savings for the Company. If you are a Stockholder of record and would like to receive future Stockholder materials electronically, you can elect this option by following the instructions provided when you vote your proxy over the Internet atwww.ProxyVote.com.

If you chose to view future proxy statements and annual reports over the Internet, you will receive an e-mail notification next year with instructions containing the Internet address of those materials. Your choice to view future proxy statements and annual reports over the Internet will remain in effect until you contact either your broker or the Company to rescind your instructions. You do not have to elect Internet access each year.

If you elected to receive this Proxy Statement electronically over the Internet and would now like to receive a paper copy of this Proxy Statement so that you may submit a paper proxy in lieu of an electronic proxy, you should contact your broker or the Company.

How can I avoid having duplicate copies of the Proxy Statement sent to my household?

Some brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports, which results in cost savings for the Company. The practice of “householding” means that only one copy of the Proxy Statement and Annual Report will be sent to multiple

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Stockholders in a Stockholder’s household. The Company will promptly deliver a separate copy of either document to any Stockholder who contacts the Company’s Investor Relations Department at (408) 546-4445 requesting such copies. If a Stockholder is receiving multiple copies of the Proxy Statement and Annual Report at the Stockholder’s household and would like to receive a single copy of those documents for a Stockholder’s household in the future, that Stockholder should contact their broker, other nominee record holder, or the Company’s Investor Relations Department to request mailing of a single copy of the Proxy Statement and Annual Report.

When are Stockholder proposals due for next year’s annual meeting?

In order for Stockholder proposals to be considered properly brought before an annual meeting by a Stockholder, the Stockholder must have given timely notice in writing to the Secretary of the Company. To be timely for the 20092010 annual meeting of Stockholders (the “2009“2010 Annual Meeting”), a Stockholder’s notice must be received by the Company at its principal executive offices not less than 30 days nor more than 60 days prior to the meeting; provided, however, that in the event that less than 40 days’ notice or prior public disclosure of the date of the meeting is given or made to Stockholders, notice by the Stockholder to be timely must be so received not later than the close of business on the 10^th day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure was made. A Stockholder’s notice to the Secretary must set forth as to each matter the Stockholder proposes to bring before the 20092010 Annual Meeting: (i) a brief description

of the business desired to be brought before the 20092010 Annual Meeting and the reasons for conducting such business at the 20092010 Annual Meeting; (ii) the name and record address of the Stockholder proposing such business; (iii) the class and number of shares of the Company which are beneficially owned by the Stockholder; and (iv) any material interest of the Stockholder in such business. Subject to applicable laws and regulations, the Company has discretion over what Stockholder proposals will be included in the agenda for the 20092010 Annual Meeting and/or in the related proxy materials.

Subject to applicable laws and regulations, the Company will also have discretionary authority to vote all shares for which it has proxies regarding a Stockholder proposal if the Company fails to receive notice of the Stockholder proposal for next year’s annual meeting at least 45 days before the date in 20082009 on which the Company filed this Proxy Statement (specifically, since the Company filed this fiscal 20082009 proxy on September 26, 2008,25, 2009, the Company will have this discretionary authority if notice of a Stockholder proposal for the 20092010 Annual Meeting is not received by the Company by August 12, 2009)11, 2010).

PROPOSAL 1

ELECTION OF CLASS IIIII DIRECTORS

The Board is divided into three classes as nearly equal in number as possible. The members of each class of directors serve staggered three-year terms. As of September 26, 2008,25, 2009, the Board is composed of the following teneleven members:

In July 2008, Penelope A. HerscherJanuary 2009, Thomas Waechter joined the Board of Directors. As a result of this change, as of September 26, 200825, 2009 the authorized number of directors on the Board is ten.eleven.

The Board is currently composed of threefour Class I directors (Mr. Day, Mr. Kaplan, Mr. Kennedy and Mr. Kennedy)Waechter), four Class II directors (Mr. Belluzzo, Mr. Covert, Ms. Herscher and Mr. Jabbar) and three Class III directors (Mr. Liebhaber, Mr. Skrzypczak and Mr. DeNuccio), whose terms will expire upon the election and qualification of directors at the Annual Meeting of Stockholders held in 2010, 2009 and 2008,2011, respectively. At each Annual Meeting of Stockholders, directors will be elected for a full term of three years to succeed those directors whose terms are expiring.

At this Annual Meeting, the Stockholders will elect threefour Class IIIII directors recommended by the Corporate Governance Committee (which serves as the Company’s Nominating Committee) and nominated by the Board, each to serve a three year term until the 20112012 Annual Meeting of Stockholders and until a qualified successor is elected and qualified or until the director’s earlier resignation or removal. The Board has no reason to believe that the nominees named below will be unable or unwilling to serve as a director if elected.

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Certain information about the Board of Directors nominees is furnished below.

Class IIIII Directors Whose Terms Will Expire in 20082009

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION

TO THE BOARD OF EACH OF THE NOMINEES NAMED ABOVEABOVE.

The Company’s directors listed below will continue in office for the remainder of their terms or earlier in accordance with the Company’s Bylaws. Information regarding the business experience of each such director is provided below.

Class I Director—Nominees For Three Year Terms That Will Expire in 2010

Thomas Waechter

Age 56

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Class IIIII Directors Whose Terms Will Expire in 20092011

CORPORATE GOVERNANCE

Code of Ethics

The Board and management of the Company believe that good corporate governance is an important component in enhancing investor confidence in the Company and increasing Stockholder value. The imperative to continue to develop and implement best practices throughout our corporate governance structure is fundamental to our strategy to enhance performance by creating an environment that increases operational efficiency and ensures long-term productivity growth. Solid corporate governance practices also ensure alignment with Stockholder interests by promoting fairness, transparency and accountability in business activities among employees, management and the Board.

Our corporate governance practices represent our firm commitment to the highest standards of corporate ethics, compliance with laws, financial transparency and reporting with objectivity and the highest degree of integrity. Representative steps we have taken to fulfill this commitment include, among others:

The Company has adopted a Code of Ethics (known as the Code of Business Conduct) for its directors, officers and other employees. The Company will post on its website any amendments to, or waivers from, any provision of its Code of Business Conduct. A copy of the Code of Business Conduct is available on the Company’s website atwww.jdsu.com.www.jdsu.com.

Director Independence

In accordance with current NASDAQ listing standards, the Board of Directors, on an annual basis, affirmatively determines the independence of each Director and nominee for election as a Director. Our Director independence standards include all elements of independence set forth in the NASDAQ listing standards, which can be found in the “Corporate Governance” section of our website atwww.jdsu.com.

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Board Committees and Meetings

During fiscal 20082009¹, the Board held eighteensixteen meetings. The Board has four committees: Audit Committee, Compensation Committee, Corporate Governance Committee, and Corporate Development Committee. The members of the committees during fiscal 20082009 are identified in the following table:

No director attended fewer than 75% of all Board meetings and committees on which he served after becoming a member of the Board of Directors, except Mr. Kennedy, who did not attend five Board meetings related to the subject of the Kennedy Agreement (as that term is defined below inselecting his successor as CEO and President of the section titled “Employment Contracts, Termination of Employment and Change in Control Arrangements”).Company. The Company encourages, but does not require, its Board members to attend the annual Stockholders meeting. All then-current Directors attended the 20072008 Annual Meeting except for Mr. Covert and Mr. Jabbar.Meeting.

The Audit Committee met twelveten times in fiscal 2008.2009. The Audit Committee is responsible for assisting the full Board of Directors in fulfilling its oversight responsibilities relative to the Company’s financial statements, financial reporting practices, systems of internal accounting and financial control, the internal audit function, annual independent audits of the Company’s financial statements, and such legal and ethics programs as may established from time to time by the Board. The Audit Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the Company and may retain external consultants at its sole discretion. In addition, the Audit Committee considers whether the Company’s independent auditors’ provision of non-audit services is compatible with maintaining the independence of the independent auditors. The Board has determined that all members of the Audit Committee are “independent” as that term is defined in Rule 4200 of the Marketplace Rules of the Nasdaq Stock Market, Inc. The Board has further determined that Harold L. Covert, and Bruce D. Day and Masood A. Jabbar are “audit committee financial expert(s)” as defined by Item 401(h) of Regulation S-K of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and are independent as defined by Item 7(d)(3)(iv) of Schedule 14A of the Exchange Act. A copy of the Audit Committee charter can be viewed at the Company’s website atwww.jdsu.com.

The Compensation Committee met fivenine times in fiscal 2008.2009. The Compensation Committee of the Board of Directors is responsible for ensuring that the Company adopts and maintains responsible and responsive compensation programs for its employees, officers and directors consistent with the long-range interests of Stockholders. The Compensation Committee is also responsible for administering certain other compensation programs for such individuals, subject in each instance to approval by the full Board. The Compensation Committee also has the exclusive responsibility for the administration of the Company’s employee stock purchase plans and equity incentive plans. The chair of the Compensation Committee reports on the Compensation Committee’s

Committee also has the exclusive responsibility for the administration of the Company’s employee stock purchase plans and equity incentive plans. The chair of the Compensation Committee reports on the Compensation Committee’s actions and recommendations at Board meetings. In addition, the Compensation Committee has the authority to engage the services of outside advisors, experts and others to provide assistance as needed. All members of the Compensation Committee are “independent” as that term is defined in Rule 4200 of the Marketplace Rules of the Nasdaq Stock Market, Inc. A copy of the Compensation Committee charter can be viewed at the Company’s website atwww.jdsu.com. Additional information on the Compensation Committee’s processes and procedures for consideration of executive compensation are addressed in the “Compensation Discussion and Analysis” below.

The Corporate Development Committee met fivefour times in fiscal 2008.2009. The Corporate Development Committee oversees the Company’s strategic acquisition and investment activities. The Corporate Development Committee reviews and approves certain strategic transactions for which approval of the full Board of Directors is not required and makes recommendations to the Board of Directors regarding those transactions for which the consideration of the full Board of Directors is appropriate. A copy of the Corporate Development Committee charter can be viewed at the Company’s website atwww.jdsu.com.

The Corporate Governance Committee met fivethree times in fiscal 2008.2009. The Corporate Governance Committee, which serves as the Company’s nominating committee, reviews current trends and practices in corporate governance and recommends to the Board of Directors the adoption of programs pertinent to the Company. As provided in the charter of the Corporate Governance Committee, nominations for director may be made by the Corporate Governance Committee or by a Stockholder of record entitled to vote. The Corporate Governance Committee will consider and make recommendations to the Board of Directors regarding any Stockholder recommendations for candidates to serve on the Board of Directors. Stockholders wishing to recommend candidates for consideration by the Corporate Governance Committee may do so by writing to the Company’s Investor Relations Department-Attention Corporate Governance Committee at 430 North McCarthy Boulevard, Milpitas, California 95035 providing the candidate’s name, biographical data and qualifications, a document indicating the candidate’s willingness to act if elected, and evidence of the nominating Stockholder’s ownership of Company’s stock at least 120 days prior to the next annual meeting to assure time for meaningful consideration by the Corporate Governance Committee. There are no differences in the manner in which the Corporate Governance Committee evaluates nominees for director based on whether the nominee is recommended by a Stockholder. All members of the Corporate Governance Committee are “independent” as that term is defined in Rule 4200 of the Marketplace Rules of the Nasdaq Stock Market, Inc.

In reviewing potential candidates for the Board, the Corporate Governance Committee considers the individual’s experience in the Company’s industry, the general business or other experience of the candidate, the needs of the Company for an additional or replacement director, the personality of the candidate, the candidate’s interest in the business of the Company, as well as numerous other subjective criteria. Of greatest importance is the individual’s integrity, willingness to be involved and ability to bring to the Company experience and knowledge in areas that are most beneficial to the Company. The Board intends to continue to evaluate candidates for election to the Board on the basis of the foregoing criteria. A detailed description of the criteria used by the Corporate Governance Committee in evaluating potential candidates may be found in the charter of the Corporate Governance Committee.

The Corporate Governance Committee operates under a written charter setting forth the functions and responsibilities of the committee. A copy of the charter can be viewed at the Company’s website atwww.jdsu.com.

Compensation Committee Interlocks and Insider Participation

No interlocking relationship exists between any member of the Company’s Board or Compensation Committee and any member of the board of directors or compensation committee of any other companies, nor has such interlocking relationship existed in the past. Messrs. Belluzo, DeNuccio, Herscher, Kaplan and

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Skrzypczak were not at any time an officer or employee of JDSU. In addition, none of our executive officers serves as a member of the Board of Directors or Compensation Committee of any company that has one or more of its executive officers serving as a member of our Board of Directors or Compensation Committee.

Communication between Stockholders and Directors

Stockholders may communicate with the Company’s Board of Directors through the Company’s Secretary by sending an email to bod@jdsu.com, or by writing to the following address: Chairman of the Board, c/o Company Secretary, JDSU, 430 North McCarthy Boulevard, Milpitas, California 95035. The Company’s Secretary will forward all correspondence to the Board of Directors, except for spam, junk mail, mass mailings, product complaints or inquiries, job inquiries, surveys, business solicitations or advertisements, or patently offensive or otherwise inappropriate material. The Company’s Secretary may forward certain correspondence, such as product-related inquiries, elsewhere within the Company for review and possible response.

Director Compensation

Each non-employee director of the Company receives an annual cash retainer of $48,000 which is paid in quarterly installments of $12,000. Additionally, each non-employee director receives a grant of restricted stock units having a value on the date of grant of $40,000, net of applicable taxes at the discretion of each non-employee director. Such restricted stock units are subject to a grant agreement which provides for vesting over a three year period. Upon vesting each restricted stock unit is converted into one share of the Company’s Common Stock. Each non-employee director receives $1,500 for each meeting of the Board of Directors attended. In addition, each non-employee director serving on a committee of the Board receives an annual cash retainer of $7,500, and each non-employee director serving as a committee chair receives an additional cash retainer of $6,000. Each non-employee director serving on a committee of the Board also receives a stipend of $500 per committee meeting attended.

In addition to the compensation described above, Mr. Kaplan, who serves as Chairman of the Board, receives an additional annual cash retainer of $80,000 as compensation for his services which is paid in quarterly installments of $20,000. In addition, Mr. Kaplan receives $1,500 for each meeting of the Board of Directors attended.

Additionally, immediately after each annual meeting of Stockholders, each individual who is continuing to serve as a non-employee director is granted an option to purchase 1,250 shares of the Company’s Common Stock. The individual who is serving as the Chairman is granted an option to purchase an additional 7,500 shares of the Company’s Common Stock. Upon initial appointment to the Board, each non-employee director is granted an option to purchase 5,000 shares of the Company’s Common Stock. In its discretion, the Company’s Board may make grants of additional equity incentives to non-employee directors. No such additional grants were made in fiscal year 2007. In addition, all non-employee directors who are serving as chair of one of the committees of the Board receive an annual option grant of 375 shares of the Company’s Common Stock upon their initial appointment as chair and an automatic option grant of 375 shares of the Company’s Common Stock immediately after each annual meeting of Stockholders if the non-employee director continues as chair for the ensuing year. Options granted to non-employee directors have an exercise price equal to 100% of the fair market value of the Company’s Common Stock on the date of grant, vest over twelve months and terminate eight years from the date of grant, except for the option grant made upon initial appointment to the Board which vests monthly over 36 months. Upon retirement of a non-employee director, all unvested options and restricted shares of the Company’s Common Stock will automatically become fully vested, and the exercise period for such options will be extended to expire on the expiration date of such options, which is eight years from the date of grant.

Directors who are also employed by the Company do not receive any compensation for their services as directors. All directors are reimbursed for expenses incurred in connection with attending Board and committee meetings.

In June 2008 the Compensation Committee recommended, and the full Board approved, a new director compensation structure that will taketook effect following the 2008 Annual Meeting, except for new directors joining the Board after June 2008 for whom the new structure was effective immediately. In approving the new compensation structure the Board desired to align the Company’s total pay structure for directors with relevant director compensation benchmarks, but believed it more appropriate to leave unchanged the compensation of then current directors including the three directors currently nominated for election, until after the 2008 Annual Meeting.

Each non-employee director of the Company receives an annual cash retainer of $60,000 which is paid in quarterly installments of $15,000. Also, upon initial appointment to the Board, each non-employee director receives a grant of restricted stock units having a value on the date of grant of $150,000, net of applicable taxes at the discretion of each non-employee director. Additionally, each non-employee director receives an annual grant of restricted stock units having a value on the date of grant of $100,000, net of applicable taxes at the discretion of each non-employee director. Such restricted stock units are subject to a grant agreement which provides for vesting over a three year period. Upon vesting each restricted stock unit is converted into one share of the Company’s Common Stock.

In addition, each non-employee director serving on the Audit Committee of the Board receives an annual cash retainer of $15,000, whereas the director serving as the Audit Committee chair receives an annual cash retainer of $30,000. Each non-employee director serving on the Compensation Committee of the Board receives an annual cash retainer of $10,000, whereas the director serving as the Compensation Committee chair receives an annual cash retainer of $20,000. Each non-employee director serving on the Governance or Corporate Development Committees of the Board receives an annual cash retainer of $7,500, whereas the directors serving as the Governance or Corporate Development Committee chairs receive an annual cash retainer of $15,000.

In addition to the compensation described above, Mr. Kaplan, who serves as Chairman of the Board, receives an additional annual cash retainer of $100,000 as compensation for his services which is paid in quarterly installments of $25,000.

Directors who are also employed by the Company do not receive any compensation for their services as directors. All directors are reimbursed for expenses incurred in connection with attending Board and committee meetings.

All director compensation described above is summarized in the following table. For clarity, Ms. Herscher (who joined the Board on July 21, 2008) is currently being compensated under the structure summarized belowtable in the column titled “New Board Compensation” and all other directors are being compensated under“Board Compensation Following 2008 Annual Meeting.” The previous director compensation structure is summarized in the structure summarizes belowfollowing table in the column titled “Current Board Compensation” until after the“Board Compensation Before 2008 Annual Meeting:Meeting”:

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Non-Management Directors’ Compensation for Fiscal Year 20082009

The director compensation policies summarized above resulted in the following total compensation for our non-management directors in fiscal year 2008:2009:

DIRECTOR COMPENSATION TABLE

Relationships Among Directors or Executive Officers

There are no family relationships among any of the Company’s directors or executive officers.

Certain Relationships and Related Person Transactions

Review and Approval of Related Person Transactions

We review all relationships and transaction in which the Company and our Directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. The Company’s legal staff is primarily responsible for the development and implementation of processes and controls to obtain information from the Directors and executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether the Company or a related person has a direct or indirect material interest in the transaction. On an annual basis, all Directors and executive officers must respond to a questionnaire requiring disclosure about any related person transactions, arrangements or relationships (including indebtedness). As required under SEC rules, any transactions that are determined to be directly or indirectly material to the Company or a related person are disclosed in the Company’s Proxy Statement. In addition, the Audit Committee reviews and approves or ratifies any related person transaction that is required to be disclosed.

Related Person Transactions

The Company has entered into an employment and change in control agreement with Thomas Waechter and Kevin J. Kennedy (see “Employment Contracts, Termination of Employment and Change in Control Arrangements” below).

In June 2006, the Audit Committee approved a policy applicable to the reimbursement of expenses incurred by Mr. Kennedy in the operation of his private aircraft when used by Mr. Kennedy for Company business purposes. The policy limits the reimbursement of direct expenses incurred by Mr. Kennedy for Company business purposes at $2,100 per flight hour plus a 12.5% fuel surcharge rate, for a total reimbursement cap of $2,362.50 per flight hour, and further limits such expense reimbursement to a maximum of $800,000 per fiscal year. No reimbursement is provided to Mr. Kennedy for any other expenses associated with his private aircraft. These reimbursement rates were established and approved by the Audit Committee of the Board following review of fair market rates applicable to the rental and use of similar aircraft.

Mr. Kennedy sold his private aircraft in April 2008 and this policy of expense reimbursement therefore terminated in April 2008.

Executive Officers

The following sets forth certain information regarding the Company’s executive officers as of June 30, 2008:2009:

Kevin J. KennedyThomas Waechterbecame a member of the Company’s Board in November 2001, and became Chief Executive Officer and President of the Company on September 1, 2003. From August 2001in January 2009, prior to September 2003, Mr. Kennedywhich he was Executive Vice President of the Chief Operating Officer of Openwave Systems, Inc.Communications Test & Measurement Group. Prior to joining Openwave Systems Inc.,the Company, Mr. KennedyWaechter was the chief operating officer of Harris Stratex Networks, an independent supplier of wireless transmission systems. As president and chief executive officer of Stratex Networks, he was instrumental in the merging of Stratex and Harris, while growing revenues substantially and improving profitability. Prior to that, Mr. Waechter was the president and chief executive officer of REMEC Corporation and has also served seven years at Cisco Systems, Inc.,as

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president and 17 years at Bell Laboratories.chief executive officer of Spectrian Corporation. Additionally, he held a number of executive level global operations positions during his 14 year career with Schlumberger as well as a senior executive position with Asyst Technologies. He holds a Bachelor of Business Administration from The College of William and Mary. Mr. Kennedy isWaechter also serves as a directortrustee for the College of Polycom, Inc.William and KLA-Tencor Corporation.Mary Foundation.

David Vellequettejoined the Company in July 2004 as Vice President and Operations Controller and served in this capacity until June 2005 when he accepted the position of Chief Financial Officer. Prior to joining the Company, Mr. Vellequette was Vice President of Worldwide Sales and Services Operations at Openwave Systems, Inc., from April 2002 to July 2004. Between 1992 and 2002, Mr. Vellequette held increasingly responsible positions at Cisco Systems, first as Corporate Controller of StrataCom Corporation (acquired by Cisco in 1996) and later as Vice President of Finance. Mr. Vellequette is a Certified Public Accountant and holds a B.S. degree in accounting from the University of California, Berkeley.

Christopher S. Dewees was Senior Vice President, Corporate Development and Chief Legal Officer from June 2006 until September 2008, prior to which he was Senior Vice President and General Counsel from July 2003 until June 2006. From February 2003 until July 2003, Mr. Dewees served as Vice President and General Counsel, prior to which he was Acting General Counsel from October 2002 until February 2003. Mr. Dewees joinedVellequette serves on the Company’s Legal Department in October 1999. Prior to joining the Company, Mr. Dewees was employed at Morrison & Foerster LLP, where he represented the Company and other Silicon Valley public and private companies. Mr. Dewees earned his A.B. degree from Dartmouth College in 1986, and his J.D. degree from Northwestern University in 1989.

Alan “Al” Ettermanwas Executive Vice President, Chief Administrative Officer and Chief Information Officerboard of the Company until August 27, 2008, at which time he became Vice President and Senior Advisor and ceased to be an executive officerdirectors of the Company. He joined the Company in November 2004 and was responsible for Information Technology, Human Resources, Workplace Solutions and Customer Service. Before joining the Company, Mr. Etterman was Senior Vice President of Corporate Infrastructure and Chief Information Officer at Openwave Systems. In 2001, he co-founded and was Chief Operating Officer for TheoryR Capital Partners. Prior to that, Mr. Etterman was Cisco’s Senior Director of Global communications and technology services where he implemented the world’s first large scale (10,000+ lines) voice over Internet protocol communications system. Mr. Etterman’s experience also includes management roles at 3Com Corporation, IBM RealCom, LinCom, InteCom, and GTE Automatic Electric.

Thomas Waechterjoined the Company as Executive Vice President and President of the Communications Test & Measurement Group in October 2007. Before joining the Company, Mr. Waechter was the chief operating officer of Harris Stratex Networks, an independent supplier of wireless transmission systems, where he was responsible for global operations, sales, services, and customer satisfaction. Prior to that, Mr. Waechter was the president and chief executive officer of REMEC Corporation and has also served as president and chief executive officer of Spectrian Corporation. He holds a Bachelor of Business Administration from The College of William and Mary.

David Gudmundsonbecame Executive Vice President and President of the Optical Communications Products Group in April 2007. Mr. Gudmundson joined the Company in 2003 as senior vice president of business development and corporate marketing. Before joining the Company, Mr. Gudmundson spent more than a decade at Cisco Systems where he held a series of increasingly senior leadership roles at Cisco Systems, culminating in his service as Vice President and General Manager responsible for Cisco's security server, DSL and edge routing business units. Prior to Cisco, Mr. Gudmundson held various hardware and software development and systems engineering positions at Argo Systems,Superconductor Technologies Inc. (now part of Boeing Company Inc.) and ESL Incorporated (now part of TRW).

Roy Biebecame Senior Vice President, Advanced Optical Technologies Products Group in 2006, prior to which he was Vice President and General Manager of the Flex Products Group from 2000 until 2006, and Vice President of Operations for Flex Products from 1996 to 2000. From 1993 to 1996, Mr. Bie served as Director of Operations for Flex Products. Prior to joining the Company, Mr. Bie held operational and management leadership positions with Xicor (now part of Intersil), Material Progress (now part of Komag), Mag-Media (bought by Polaroid), and began his career at National Semiconductor.

Matthew Fawcett joined the Company in August 1999 as Corporate Counsel and then served as Associate General Counsel and Director of Intellectual Property until October 2008 when he became Senior Vice President, General Counsel and Secretary. Prior to joining JDSU, Mr. Fawcett was Corporate Counsel to Fujitsu, and before that he worked in private practice at Morrison & Foerster. Fawcett holds a bachelor’s degree from the University of California at Berkeley and a J.D. from the University of California at Los Angeles.

David Holly joined the Company in August 2005 as part of its acquisition of Acterna, and he became Executive Vice President and President, Communications Test & Measurement in April 2009. He has more than 18 years of experience in the test and measurement industry. Prior to Acterna/JDSU, Mr. Holly had managerial sales responsibilities at NYNEX (now part of Verizon) and began his career in engineering at IBM. Mr. Holly earned a bachelor’s of science degree in electrical engineering from Lehigh University and a master’s degree in business administration from the State University of New York in Binghamton.

Alan Lowe joined the Company in September 2007 as Senior Vice President of the Commercial Lasers business, and he became Executive Vice President and President, Communications & Commercial Optical Products in October 2008. Prior to joining the Company, Mr. Lowe was Senior Vice President, Customer Solutions Group at Asyst Technologies, Inc. a leader in automating semiconductor and flat panel display fabs. From 2000 to 2003, he was president and chief executive officer of Read-Rite Corporation, a manufacturer of thin-film recording heads for disk and tape drives. From 1989 to 2000, Lowe served in roles of increasing responsibility at Read-Rite, including President and Chief Operating Officer, and senior vice president, customer business units. Prior to joining Read-Rite, he served in various sales positions with Microcom Corporation and IBM Corporation. Mr. Lowe holds bachelor’s degrees in computer science and business economics from the University of California, Santa Barbara, and also completed the Stanford Executive Program in 1994.

Sharad Rastogi joined the Company in October 2008 as Senior Vice President, Corporate Development & Marketing. Prior to joining the Company in 2008, Mr. Rastogi served as vice president of corporate development at Avid Technology and general manager of Pinnacle Systems, Avid’s consumer business unit. Prior to Avid, Sharad was a partner at management consulting firm Bain & Company, Inc. Before Bain & Company, he was senior automation engineer at hard-disk manufacturer Komag, Inc. Rastogi holds a bachelor of technology in mechanical engineering from the Indian Institute of Technology in New Delhi and an M.S. in manufacturing engineering from Boston University. He also holds an MBA from the Wharton School at the University of Pennsylvania.

PROPOSAL 2

STOCK OPTION EXCHANGE PROGRAM FOR ELIGIBLE EMPLOYEES

We are asking our Stockholders to approve amendments to certain of our existing equity incentive plans to allow for a one-time, value-for-value stock option exchange program (the “Exchange Program”). Our Board, upon recommendation by the Compensation Committee of our Board (the “Compensation Committee”), authorized the Exchange Program on August 12, 2009, subject to Stockholder approval of this proposal. In brief, under the Exchange Program, Company employees other than the Named Executive Officers (“NEOs”) and members of our Board would be given the one-time opportunity to exchange stock options with an exercise price no lower than our 52-week high on NASDAQ for a lesser number of new restricted stock units (“RSUs”) that have approximately the same value as the options surrendered or, under limited circumstances, new stock options, may be issued instead of RSUs. We believe the Exchange Program is in the best interests of our Stockholders and the Company, as new RSUs and stock options received under the Exchange Program will enhance our employee retention efforts by motivating and engaging our eligible employees to continue to build Stockholder value. In addition, we also believe that the Exchange Program will allow the Company to reduce its “overhang” of outstanding employee stock options (defined as the sum of options outstanding plus the unvested restricted stock plus the shares available for grant under the Company’s equity plans divided by the total Common Stock outstanding) and allow the Company and our Stockholders to realize value from the compensation expense already incurred and anticipated to be incurred in the future from the surrendered stock options.

In order to effectuate the Exchange Program, we specifically are seeking Stockholder approval of an amendment to each of our Amended and Restated 1993 Flexible Stock Incentive Plan, Amended and Restated 2003 Equity Incentive Plan, Amended and Restated 2005 Acquisition Equity Incentive Plan, and the SDL, Inc. 1995 Stock Option Plan (collectively, the “Plans”). The amendments, each of which are included as an appendix to this Proxy Statement, would permit some of our employees to surrender certain outstanding stock options that are significantly “underwater” (i.e., options with an exercise price that is greater than the current per share closing price of our Common Stock) for cancellation in exchange for a lesser number of RSUs or a lesser number of stock options with lower exercise prices to be granted under our Amended and Restated 2003 Equity Incentive Plan (the “2003 Plan”). Exchange ratios will be designed to result in the employee receiving a value as of the grant date of the RSU or the new option which is approximately equal to the value of the options that are being replaced. Each RSU issued in the Exchange Program will represent an unfunded right to receive one share of our Common Stock on the future date when the RSU vests. This proposal does not seek additional shares of our Common Stock for our Plans or to extend the terms of our 2003 Plan.

The exercise price threshold for options eligible to be exchanged will be no lower than the highest closing price of our Common Stock on NASDAQ during the 52 weeks prior to the start of the Exchange Program (“Exchange Price”), though the Board will retain discretion to set the Exchange Pricehigher than this trailing 52 week high. The use of this threshold is designed to ensure that only outstanding options that are significantly underwater are eligible to participate in the Exchange Program. Additionally, no stock options granted within the 12-month period prior to the commencement of the Exchange Program will be eligible for exchange. The Board in its sole discretion may also exclude options that expire within a short time period from the date the Exchange Program is effectuated from participating in the Exchange Program. The Exchange Program will be open to all employees of the Company and any of our subsidiaries designated for participation by the Compensation Committee other than, as mentioned above, members of the Board and our NEOs.

Stockholder approval is required for this proposal under the NASDAQ listing standards and the terms of certain of the Plans. If this proposal is approved, and our Board determines to implement the Exchange Program, the option exchange would commence within 12 months of the date of the Annual Meeting. If our Stockholders do not approve this proposal, the Exchange Program will not take place.

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Vote Required

Stockholder approval of this proposal requires the affirmative vote of a majority of the shares of Common Stock and the votes represented by the Special Voting Share (all taken together as one class) present or represented by proxy and entitled to vote on this proposal at the Annual Meeting. As a result, abstentions will have the same effect as votes against the proposal. Broker non-votes will have no effect on the outcome of this vote.

Rationale for the Exchange Program

Economic conditions worldwide have contributed to slowdowns in the technology industry at large, as well as to the specific segments and markets in which we operate. More specifically, the worldwide economic downturn and the impacted credit markets have affected the solvency of customers, the solvency of key suppliers and the ability of customers to obtain credit to finance purchases of products. In addition, and in response to the global economic slowdown, many customers have deferred and/or delayed new deployments and build-outs. Consequently, there has been a widespread reduction in telecom carrier and cable operator capital and R&D spending levels. This, in turn, has negatively impacted our sales compared to the prior fiscal year, as well as the sales of our competitors, and some of our customers who also serve the telecom and cable end markets. These macroeconomic conditions have contributed to a significant reduction in our share price.

As described elsewhere in this Proxy Statement, we award stock options in order to motivate and retain our talented employees. In addition, we believe that equity-based compensation aligns the interests of our employees with those of our Stockholders by providing opportunities to derive compensation through equity ownership and appreciation in the fair market value of the shares of our Common Stock. Our long-term equity compensation program is broad-based, with over 57% of our employees currently holding equity awards. Our stock price decline over the last several years has resulted in a significant weakening of the incentive and retention value of our outstanding stock options, which are important components of our total compensation program. The Board believes that these underwater options no longer support the long-term incentive and retention objectives that they were intended to provide. The Board believes the Exchange Program is important in order to restore the intended objectives and realign employee and Stockholder interests. Specifically, we believe that it is critical to implement the Exchange Program at this time in order to be able to continue to effectively motivate and retain employees, particularly given the challenges and difficult operating conditions which currently persist in the global financial and economic climate and the threat to employee retention once conditions improve. In addition, we believe the Exchange Program would help reduce market overhang provided by our equity awards to better balance the objectives of our long term incentive plans and our Stockholder’s interests. Further, cancellation of certain outstanding options in exchange for RSUs or fewer new stock options will result in an increase in the number of shares available for further strategic grant under the 2003 Plan because certain cancelled options originally issued under the 2003 Plan would be returned to the available share pool of the 2003 Plan, thus potentially reducing the frequency and/or size of future requests to increase the maximum number of shares that may be strategically issued under the 2003 Plan.

On June 27, 2009, there were options outstanding to purchase 16.8 million shares of our Common Stock with exercise prices ranging from $1.04 to $1,054.50 per share, and a weighted average exercise price of $33.65 as compared to the closing price per share of our Common Stock on the NASDAQ National Market on that day of $5.70. Approximately 70% of our outstanding options are underwater. The weighted average exercise price of these underwater options was $46.36 as compared to a $5.70 closing price of our Common Stock on June 27, 2009 and a weighted average expected term of 3.3 years.

The majority of the stock options eligible for the Exchange Program were granted as part of our periodic broad-based equity compensation program. In addition to our periodic broad-based grants, historically we have granted options under our guidelines at varying times to newly-hired employees and employees who have been promoted or assumed greater responsibilities outside our regular compensation cycle. Please see the “Equity Grant Practices” section of our Compensation Discussion and Analysis for more information.

We believe the Exchange Program is important for the following reasons:

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Alternatives Considered

As part of our consideration of the Exchange Program, we considered the following alternatives:

The Exchange Program

The Exchange Program has been designed to take into account our Stockholder’s interests and includes the following principles:

Description of Exchange Program

General. We have not commenced the Exchange Program and will not do so unless our Stockholders approve this proposal. Our Board, upon recommendation by the Compensation Committee, authorized the Exchange Program on August 12, 2009, subject to Stockholder approval of this proposal. If this proposal is approved, and our Board determines to implement the Exchange Program, the option exchange would commence within 12 months of the date of the Annual Meeting.

Under the proposed Exchange Program, Eligible Employees will be offered the opportunity to participate in the Exchange Program pursuant to a written offer that will be distributed to all eligible employees. The Eligible Employees will be given at least 20 business days in which to accept the offer of the new RSUs in exchange for the surrender of their eligible options. The surrendered options will be cancelled on the first business day following this election period. The new RSUs will be granted under the 2003 Plan on the date of cancellation of the surrendered options. In those limited cases where new options will be granted or cash payments made in exchange for surrendered options, such grants or payments also will be made on the date of the cancellation of the surrendered options. The shares of our Common Stock subject to surrendered options will not be available for future issuance under our equity incentive plans once the surrendered options are cancelled except that shares subject to surrendered options initially granted under the 2003 Plan will be returned to the 2003 Plan’s share pool and available for future strategic award issuance to the extent permitted by RiskMetrics guidelines. Based on an assumption that 100% of the options eligible for the Exchange Program are surrendered, we estimate approximately 4 million shares will be returned to the 2003 Plan through the Exchange Program (after the necessary adjustment for the RSUs that will be issued in exchange for the surrendered options).

Prior to commencement of the Exchange Program, we will file the offer to exchange with the Securities and Exchange Commission (the “SEC”) as part of a tender offer statement on Schedule TO. Eligible Employees, as well as Stockholders and members of the public, will be able to review the offer to exchange and other related documents filed by us with the SEC free of charge on the SEC’s website at www.sec.gov.

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Eligible Employees. If implemented, the Exchange Program will be open to all of our then-active employees worldwide, including any employees of our majority-owned subsidiaries, who hold options with a per share exercise price greater than or equal to the Exchange Price,except where we determine that it is infeasible or impractical to offer the Exchange Program under local regulations (an “Eligible Employee”). Our members of the Board and NEOs will not be eligible to participate in the Exchange Program. Our other executive officers will be eligible to participate in the Exchange Program. The Exchange Program will not be available to any former employees. An active employee who tenders his or her options for exchange must also remain an Eligible Employee through the date that the new RSU grant is made following the completion of the Exchange Program in order to receive the new RSUs. Active employment does not include any period of “garden leave” or notice periods that may be provided for under local law. If an option holder is no longer an active employee with us or one of our majority-owned subsidiaries for any reason, including layoff, termination, voluntary resignation, death or disability, on the date that the Exchange Program is commenced, that option holder cannot participate in the Exchange Program. If an option holder is no longer an active employee with us or one of our majority-owned subsidiaries for any reason on the date that the new RSU grant is made following the completion of the offer, even if he or she had elected to participate and had tendered his or her options for exchange, such employee’s tender will automatically be deemed withdrawn and he or she will not participate in the Exchange Program. He or she will retain his or her outstanding options in accordance with their original terms and conditions, and he or she may exercise them during a limited period of time following termination of employment in accordance with their terms and to the extent that they are vested. A vote by an employee in favor of this proposal at the Annual Meeting does not constitute an election to participate in the Exchange Program.

Election to Participate. Participation in the Exchange Program will be entirely voluntary on part of the Eligible Employees. The Eligible Employees will have an election period of at least 20 business days from the commencement of the Exchange Program in which to determine whether they wish to participate.

Eligible Options. Only stock options with an exercise price above the Exchange Price (which, assuming an exchange offer to implement the Exchange Program were to have commenced June 27, 2009, would have been no lower than $11.90) will be eligible for exchange under the Exchange Program. In addition, only stock options that were granted at least 12 months prior to the commencement of the Exchange Program will be eligible for exchange under the Exchange Program. On June 27, 2009, the per share closing price of our Common Stock on the NASDAQ National Market was $5.70. Thus, the exercise prices of the stock options eligible under the Exchange Program, which would range from $11.91 to $1,054.50, are approximately 2 to 185 times such closing price. Approximately 70% of all of our currently outstanding options are underwater and approximately 44% of our currently outstanding stock options would be eligible for exchange in the Exchange Program.

Exchange Ratio. The exchange ratios set forth below for the Exchange Program (that is, how many options an employee must surrender in order to receive one RSU) will be determined using the Black-Scholes option pricing model with a computation of expected volatility based on a combination of historical and market-based implied volatility from traded options on our Common Stock. Volatility is calculated on the same basis as we use for calculating stock expense under FAS 123(R). We chose to use this model to enable us to implement the Exchange Program in a manner that will result in the granting of new RSUs that have a fair value equal as of its grant date which is approximately equal to the fair value of the surrendered options and to avoid the stockholder dilution that occurs when all options are exchanged on a one option for one RSU basis. New RSU grants calculated according to the exchange ratios will be rounded down to the nearest whole share on a grant-by-grant basis. Fractional RSUs will not be issued.

Although the final exchange ratios cannot be determined now, the exchange ratios set forth below provide an example by utilizing the Black-Scholes option pricing model and actual data available as of June 27, 2009 (the conclusion of our 2009 fiscal year) including (i) our closing stock price on NASDAQ of $5.70, (ii) our previous highest per share closing price of our Common Stock for the 52-week period immediately preceding June 27, 2009 of $11.90, (iii) the number of stock options that would be eligible for exchange using a hypothetical June 27, 2009 exchange date, (iv) the principle that the new RSUs or options granted will have a fair value approximately equal as of its grant date to the fair value of the surrendered options, (v) the presumption that all

eligible options will be surrendered through the Exchange Program, and (vi) the exclusion of all options set to expire by their contractual terms prior to July 1, 2010 as an example of the potential exercise of the Board’s discretion to exclude options that will expire within a short time period after the Exchange Program is effectuated.

The illustrative exchange ratios for new RSUs and options granted in exchange for surrendered options are set forth in the table below. The actual exchange ratios will be determined at the time the Exchange Program commences based on our then-current stock price and volatility.

OPTION-FOR-RSU EXCHANGE

OPTION-FOR-OPTION EXCHANGE

Vesting of New RSUs. New RSUs granted in the Exchange Program will not be vested on their date of grant regardless of whether the surrendered option was fully vested. Instead, the new RSUs will vest on the first anniversary of the grant date.

New RSUs will only vest if the award holder remains an employee with us or one of our majority-owned subsidiaries. Any portion of the new RSUs that are not vested at termination of employment will be forfeited. As described above, the new RSUs will be completely unvested on the date of grant, regardless of whether the surrendered options were partially or completely vested.

Term and Conditions of New RSUs. The terms and conditions of the new RSUs will be governed by the terms and conditions of the 2003 Plan and the RSU agreement entered into thereunder.

New Stock Options. In Canada, and potentially in other foreign jurisdictions, an option-for-RSU exchange is subject to taxation on the date the options are cancelled in exchange for the new RSUs grants. In light of the potential adverse consequences of such taxation to eligible employees in foreign jurisdictions such as Canada, we will grant a lesser number of new options in exchange for surrendered options held by employees in Canada and other foreign jurisdictions where we determine that the tax consequences of an option-for-RSU exchange are prohibitively adverse to employees. Any new options granted as part of the Exchange Program will be granted on the date of cancellation of the old options, will have a per share exercise price equal to the fair market value of

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our Common Stock on the date of grant and will have a fair value approximately equal as of its grant date to the fair value of the surrendered options (as calculated using the same assumptions as are used for the RSU exchange ratios). All new options granted as part of the Exchange Program will vest on the first anniversary of the grant date and will have a new term of five years.

Cash Payments. In certain instances where we have determined that offering RSUs would provide minimal retentive value, would be overly burdensome to implement or administer or would not provide a meaningful benefit to holders of eligible options, we will provide for a cash payment to the employee in exchange for the surrendered options. Generally, subject to the determination of the Board, we expect that this will be limited to cases where less than an aggregate of 100 new RSUs would be issuable to an employee in the Exchange Program. The amount of the cash payment will be calculated based on the RSU exchange ratio and in a manner intended to provide those receiving cash payments with a fair value approximately equal as of the payment date to the fair value of the surrendered options, less any taxes and social insurance contributions due on the payments. To ensure that the payments of any such de minimis cash amounts satisfy securities law requirements that they be made promptly following the completion of the Exchange Program, we have determined that such payments cannot be subject to vesting or other delayed payment schedule. Accordingly, any cash payments that we provide in exchange for surrendered options will not be subject to any vesting schedule and will be made on the date that replacement RSUs are granted.

Accounting Treatment. The intent of the Exchange Program is that it will be approximately cost-neutral and not result in us incurring significant additional compensation expense. Based on this objective, the average fair value of the awards granted to employees in exchange for surrendered stock options, measured as of the date such awards are granted (and the amount of any cash payments made for eligible options) will be approximately equal to fair value of the surrendered options (other than compensation expense that might result from fluctuations in stock price after the exchange ratios have been set but before the exchange actually occurs). The unamortized compensation expense from the surrendered options and incremental compensation expense, if any, associated with the new awards under the Exchange Program will be recognized over the service period of the new awards. If any portion of the new awards granted is forfeited due to termination of employment, the compensation cost for the forfeited portion of the award generally will not be recognized. Based on the assumptions described under “Description of Exchange Program—Exchange Ratios” above, and assuming that our stock price does not materially fluctuate between the establishment of the exchange ratios and the date the exchange actually occurs, then, as a result of the Exchange Program, we would expect to recognize an incremental non-cash accounting charge of approximately $453,000 over the vesting period of the new awards. However, even if our stock price fluctuates between the date the Exchange Program commences and the date the exchange actually occurs, we would not expect to recognize any material non-cash accounting charges as a result of the Exchange Program.

U.S. Federal Income Tax Consequences and Other Tax Consequences. The following is a summary of the anticipated material U.S. federal income tax consequences of participating in the Exchange Program. A more detailed summary of the applicable tax considerations to participating employees will be provided in the offer to exchange. We believe that the Exchange Program should be treated as a non-taxable exchange for U.S. federal income tax purposes, and we and our participating employees should recognize no income for U.S. federal income tax purposes upon the issuance of the new RSUs. Recipients of cash payments will recognize ordinary income for U.S. federal income tax purposes on the date the cash payments are made to them, and the payments will be subject to applicable tax withholdings. However, the tax consequences of the Exchange Program are not entirely certain, and the Internal Revenue Service is not precluded from adopting a contrary position. The law and regulations themselves are also subject to change. The tax consequences of the Exchange Program in foreign jurisdictions will depend on applicable foreign tax rules and regulations. All Eligible Employees are urged to consult their own tax advisors regarding the tax treatment of participating in the Exchange Program under all applicable laws prior to participating in the Exchange Program.

Potential Modification to Terms to Comply with Governmental Requirements. The terms of the Exchange Program will be described in a tender offer statement on Schedule TO that will be filed with the SEC. Although

we do not anticipate that the SEC would require us to modify the terms materially, it is possible that we will need to alter the terms of the Exchange Program to comply with potential SEC comments. In addition, it is currently our intention to make the program available to our Eligible Employees, including certain employees of our majority-owned subsidiaries who are located outside of the United States, where permitted by local law and where we determine it is feasible and practical to do so. It is possible that we will make modifications to the terms offered to employees in countries outside the United States to comply with local requirements, for tax or accounting reasons or for other reasons. The Board will retain the discretion to make any such necessary or desirable changes to the terms of the Exchange Program for purposes of complying with comments from the SEC or optimizing the consequences of U.S. federal or foreign tax, accounting or other local requirements. For example, as described above, because of the adverse tax consequences to participants who are resident in Canada and potentially in some other foreign jurisdictions of an option-for-RSU exchange, we intend to issue a lesser number of options, calculated based on the same methodology as for the option-for-RSU exchange described above, to employees resident in Canada and potentially to employees in jurisdictions with similar adverse tax consequences.

Amendment to the Plans

In order to permit us to implement the Exchange Program in compliance with the terms of the Plans and applicable NASDAQ listing standards, our Board, upon recommendation by the Compensation Committee, authorized the Exchange Program, including amendments to each of the Plans, subject to Stockholder approval of this proposal. We are seeking Stockholder approval to amend each of the Plans to provide for the Exchange Program, notwithstanding any provision to the contrary in the respective plan. Please see the Appendices to this Proxy Statement for the text of the amendments to the Plans.

Effect on Stockholders

The Exchange Program was designed to provide renewed incentives and motivate the eligible employees to continue to create Stockholder value and reduce the number of shares currently subject to outstanding options, thereby avoiding the dilution in ownership that normally results from supplemental grants of new stock options or other awards. We are unable to predict the precise impact of the Exchange Program on our Stockholders because we are unable to predict how many or which of our employees will be considered Eligible Employees or will choose to participate in the Exchange Program. As noted above, however, members of our Board and our NEOs will not be able to participate in the Exchange Program. The Exchange Program is also not available to any former employee of us or our majority-owned subsidiaries.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE STOCK OPTION EXCHANGE PROGRAM FOR ELIGIBLE EMPLOYEES.

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PROPOSAL 3

AMENDMENT OF THE AMENDED AND RESTATED 2003 EQUITY INCENTIVE1998 EMPLOYEE STOCK PURCHASE PLAN

General

The Company’s Stockholders are being asked to approve the amendments toamendment of the Company’s Amended and Restated 2003 Equity Incentive1998 Employee Stock Purchase Plan (the “Plan”) described under, which will have the heading “Summaryeffect of Proposal” below. In addition,increasing the Stockholders will be asked to reapprove the material termsnumber of performance goalsshares reserved under the Plan soby 8,000,000 shares to 14,250,000. The Company’s Plan was adopted in June 1998. The Plan was originally amended on November 9, 2001 and subsequently amended and restated on July 31, 2002, November 10, 2005, November 16, 2007, and June 22, 2009. On August 12, 2009 the Board approved the amendment of the Plan to increase the number of shares reserved under the Plan by 8,000,000 shares, subject to Stockholder approval at the Annual Meeting.

The Plan is an important component in the Company’s compensation structure, providing eligible employees an opportunity to purchase Company stock through payroll deductions and benefit from stock price appreciation, thus enhancing the alignment of employee and stockholder interests. The Board believes that amending the Plan to increase the share reserve is critical in enabling the Company to continue offering benefits to employees under the Plan and to motivate high levels of performance through employee stock ownership in the Company.

The Stockholders were last requested to approve the addition of shares to the Plan eight years ago at the Company’s annual meeting of Stockholders for its 2001 fiscal year on November 9, 2001. At that time Stockholders approved an increase in the number of authorized shares to the current approved total of 6,250,000 shares, which has been sufficient to provide for purchases until now. The Board believes, however, that the remaining share balance has declined to the point where it is no longer adequate to ensure that the Company will continue to be able to fully deduct for federal income tax purposes performance-based compensation providedcontinue to certain employees pursuant to the Plan.

The Plan was originally approved by our Stockholders in November 2003 and was last amended with Stockholder approval in November 2006. Its purpose is to help us attract, motivate and retain the employees, directors and consultants whose contributions are important to our success. The use of broad-based equity incentive programs such as those made available throughoffer the Plan has long been an important component of our compensation and incentive philosophy. This philosophy emphasizes the alignment of compensation and incentives with Stockholder interests, and utilization of long-term equity incentivesas a benefit to increase the proportion of individual compensation that is dependent uponeligible employees beyond another one to two purchase periods. The Company and segment performance as the level of individual employee responsibility increases. As further discussed below, we believepresently anticipates that the proposed amendmentsaddition of the shares for which approval is being sought through this proposal will be sufficient to provide for employee purchases under the Plan are necessary to enable us to continue to provide these incentives.for approximately seven years.

Summary of ProposalPlan Amendment

The firstAt the Annual Meeting, the Stockholders are being asked to approve an amendment to the Plan would increase by 13,200,000to add 8,000,000 shares to the maximum number of shares of our Common Stock that may be issued under the Plan, subject to proportionate adjustment in the event of a stock split or other change in the Common Stock or capital structure of the Company. Currently, a maximum of 30,000,000 shares of Common Stock has been authorizedreserved for issuance under the Plan. Of that number, approximately 7,811,888 shares remained available forThis will increase the grant of future awards as of June 28, 2008. We believe that these remaining shares will be insufficient to continue operating the Plan through calendar year 2009, after taking into account the charge of 1.5 shares against the available Plan share reserve for each share made subject to a “full value award,” such as a restricted stock unit award. We believe that thetotal number of additional shares to be reserved for issuance under the Plan for which Stockholder approval is being sought will be sufficient for a minimum of an additional two full years following Stockholder approval of the amendments to the Plan. We believe that these additional shares to be reserved will allow us to remain consistent with our intent to limit annual potential incremental dilution attributable to equity incentive awards to at or below a long-term average of 3% while continuing to have the ability to utilize awards under the Plan to compete for, attract and retain talent necessary to the Company’s future success and align employee interests with those of the Company’s Stockholders. Consistent with this intent average annual dilution resulting from grants under the 2003 Plan to date has been 2.9%.²14,250,000.

The second amendment to the Plan would increase the maximum number of shares for which awards may be granted to any individual in any fiscal year. Currently, no individual may be granted in any fiscal year of the Company awards under the Plan for more than 375,000 shares, except that this limit is increased by an additional 250,000 shares in connection with an individual’s initial commencement of service or first promotion in any

fiscal year. As we explain below, these limits have been established to enable compensation in connection with certain types of awards granted under the Plan to qualify as “performance-based” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), and therefore to be fully deductible by the Company for federal income tax purposes. However, we believe that the current levels at which these limits are set too narrowly constrain the discretion of our Board of Directors and are significantly less than competitive benchmarks. The median number of shares that any individual may be granted in a fiscal year within our peer group of companies is 1,000,000. Our substantially lower limits put the Company at a competitive disadvantage in its ability to attract, motivate and retain key executive talent and align compensation to stockholder interests. Accordingly, subject to Stockholder approval, each of these limits would be increased to 1,000,000 shares. As in the case of the maximum number of shares issuable under the Plan, these individual fiscal year grant limits are subject to proportionate adjustment in the event of a stock split or other change in the Common Stock or capital structure of the Company.

Finally, the Plan is designed to preserve the Company’s ability to deduct in full for federal income tax purposes the compensation recognized by certain employees in connection with certain awards granted under the Plan. Section 162(m) of the Code generally denies a corporate tax deduction for annual compensation exceeding $1 million paid to a “covered employee” of a publicly held company. Generally, covered employees are the chief executive officer, the chief financial officer and the three highest compensated officers other than the chief executive and chief financial officers. However, certain types of compensation, including performance-based compensation, are generally excluded from this limitation on deductibility. To enable compensation in connection with stock options, stock appreciation rights, certain restricted stock and restricted stock unit awards, performance shares and performance units granted under the Plan to qualify as “performance-based” within the meaning of Section 162(m), the Stockholders must approve the material terms of the performance goals that may be established in conjunction with performance-based compensation awarded under the Plan, which our Stockholders so approved in 2003. In addition, regulations issued under Section 162(m) generally require reapproval by the Stockholders every five years of the material terms of these performance goals if the Plan permits the compensation committee of the Board of Directors to select the specific target levels of performance to be achieved under these awards. Because the Plan authorizes the compensation committee to select the appropriate target levels of performance to be achieved, Stockholder reapproval of the material terms of the performance goals is required at this Annual Meeting if the Company is to continue to be able to deduct certain compensation under the Plan. Accordingly, by approving this proposal, the Stockholders will be reapproving the following specific provisions of the Plan:

Summary of the Purchase Plan as Amended

The following summary of the Plan amended as described in this proposal, is qualified in its entirety by the specific termslanguage of the Plan, a copy of which is attachedavailable to this Proxy Statement as Appendix Aany Stockholder upon request or may be viewed without charge on the Securities and is incorporated herein by reference.Exchange Commission website at www.sec.gov.

Purpose of PlanGeneral. The purposePlan is intended to provide eligible employees of the Company and one or more of its Corporate Affiliates with the opportunity to purchase shares in the Company through participation in a stock purchase plan. It is also intended to qualify as an “employee stock purchase plan” under section 423 of the Internal Revenue Code. Each Participant in the Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important togranted at the successbeginning of the Company by offering them an opportunity to participate in the Company’s future performance.

Shares Authorized for Issuance Undereach Purchase Period under the Plan. If this proposal is approved by the Company’s Stockholders, the maximumright to purchase through accumulated payroll deductions up to a number of shares of Common Stock thatthe common stock of the Company (referred to under this Proposal as a “Purchase Right”) determined on the first day of the Purchase Period. The Purchase Right is automatically exercised on the last date of the Purchase Period provided the Purchase Right remains outstanding on such date.

Authorized Shares. Currently, an aggregate of 6,250,000 of the Company’s authorized but unissued or reacquired shares of common stock have been authorized for issuance under the Plan. The amendment would increase this number to 14,250,000. Under the terms of the Plan, the maximum amount of shares purchased by an individual Participant may not exceed 4,000 shares pursuant to any one outstanding Purchase Right. Appropriate adjustments will be issuedmade to the number of shares authorized under the Plan will be increased from

30,000,000and to 43,200,000, subject to proportionate adjustmentoutstanding Purchase Rights in the event of any recapitalization, stock splits or other changes in the Common Stock or capital structure of the Company.

The numberdividend, stock split, combination of shares, charged against this Plan limit when an award is granted differs depending on whether the award is a “full value award” or another award, such as a stock option. Full value awards are awards, such as restricted stock, restricted stock units, performance shares or performance units, which do not require payment of a purchase price per share at least equal to the fair market value of a share of Common Stock on the date of grant. The Plan’s share reserve is reduced by 1.5 shares for each one share made subject to a full value award. Accordingly, 1.5 shares is returned to the share reserve for each share subject to a full value award that is forfeited, cancelled, expired, or repurchased by the Company at the lower of its original purchase price or its fair market value at the time of repurchase. For each share made subject to an award that is not a full value award, the Plan’s share reserve is reduced by one share, and one share is returned to the share reserve for each share subject to a non-full value award that is forfeited, cancelled, expired, or repurchased by the Company at the lower of its original purchase price or its fair market value at the time of repurchase. Except as described in this paragraph, shares that have been issued under the Plan cannot be returned to the Plan’s share reserve to again become available for future grant. The number of shares available under the Plan will be reduced upon the exercise of a stock appreciation right by the gross number of shares for which the award is exercised, rather than by the net number of shares actually issued.

Prior to its amendment, the Plan provided that the maximum number of shares for which awards may be granted to any participant during a fiscal year of the Company is 375,000 shares, except that this limit is increased by an additional 250,000 shares in connection with an individual’s initial commencement of service or first promotion in any fiscal year. Subject to Stockholder approval of this proposal, the maximum number of shares for which awards may be granted to any participant during a fiscal year will be 1,000,000 shares, provided that a participant may be granted awards for up to an additional 1,000,000 shares in connection with the participant’s initial commencement of service or first promotion in any fiscal year. These award limits will be adjusted proportionately in the event of a stock split or other change inaffecting the Common Stock or capital structureoutstanding common stock of the Company. All outstanding Purchase Rights will be automatically exercised immediately prior to any sale, merger, reorganization, or liquidation of the Company.

Administration. The Plan must beis administered by the Plan Administrator, which is defined by the Plan as either the Board of Directors or a committeeCommittee of the Board of Directors, either of which we refer(referred to inunder this proposalProposal collectively as the “Administrator.“Board”). The Board of Directors has delegatedfull authority to its compensation committee the authority generally to administer the Plan. In the case of awards granted to officersconstrue, interpret, and members of the Board of Directors or which are intended to qualify as “performance-based” for purposes of Section 162(m) of the Code, the Plan requires that the Administrator be constituted in a manner that complies with applicable law.

Subject to applicable laws andapply the terms of the Plan, the Administrator has the authority, in its discretion, to select the employees, directors and consultants to whom awards are to be granted; to determine eligibility and to adjudicate all disputed claims filed under the typePlan. All determinations of award granted;the Board are final and binding on all persons having an interest in the Plan or any Purchase Right.

Eligibility. Any Employee of the Company or of any present or future Corporate Affiliate designated by the Board for inclusion in the Plan is eligible to determineparticipate in a particular Purchase Period under the Plan so long as the Employee is customarily employed for more than 20 hours per week and more than five months in any calendar year. However, no Employee who owns or holds options to purchase, or who, as a result of participation in the Plan, would own or hold options to purchase, five percent or more of the total combined voting power or value of all classes of stock of the Company or of its Corporate Affiliates is eligible to participate in the Plan. The Employee must complete the enrollment forms prescribed by the Board and file the forms with the Company before the start of the Purchase Period. As of July 31, 2009, approximately 2,913 Employees, including seven executive officers, were eligible to participate in the Plan.

Purchase Periods. The Plan is implemented through offerings of approximately six months in duration, beginning on or about February 1 and August 1 of each year. Two separate Purchase Periods shall begin during a calendar year during which the Plan remains in existence.

Participation and Purchase of Shares. Participation in a Purchase Period under the Plan is limited to eligible Employees who authorize payroll deductions prior to the first day of a Purchase Period. Payroll deductions may be any multiple of 1% of Compensation paid to the Employee up to a maximum of 10%. An employee who becomes a Participant in the Plan will automatically participate in each subsequent Purchase Period beginning immediately after the last day of the Purchase Period in which he or she is a Participant until the employee withdraws from the Plan, becomes ineligible to participate, or terminates employment.

Subject to any notice requirements imposed by the Company, a Participant may decrease his or her rate of payroll deductions one time in each Purchase Period. The reduced rate shall stay in effect unless the Participant designates a different rate (up to the 10% maximum) before the beginning of the next Purchase Period. If the rate is increased, the new rate will be effective for the first Purchase Period after the appropriate forms are filed with the Company. The Participant may withdraw from the Plan before any purchase date by filing the prescribed notice with the Company. Upon withdrawal, the Company will refund without interest the Participant’s accumulated payroll deductions not previously applied to the purchase of shares. Once a Participant withdraws from a Purchase Period, that Participant may not again participate in the same Purchase Period.

Subject to certain limitations, the shares a Participant can acquire for a Purchase Period shall be the number of whole shares ordetermined by dividing both the payroll deductions collected during the Purchase Period and any amount carried over from prior Purchase Periods, by the purchase price in effect for such purchase date. As a further limitation, no Participant may accrue a right to purchase shares of other consideration to be covered by each award; to approve award agreements for use under the Plan; to determine the terms and conditions of each award; to construe and interpret the terms of the Plan and the awards granted; to establish additional terms, conditions, rules or procedures to accommodate the rules or laws of applicable non-U.S. jurisdictions; and to take such other action not inconsistent with the terms of the Plan as the Administrator deems appropriate.

Prohibition of Repricing without Stockholder Approval. The Plan expressly provides that, without the approval of the Company’s Stockholders, the Company may not reduce the exercise price of any option orcommon stock appreciation right granted under the Plan or cancel an outstanding option orany other employee stock appreciation rightpurchase plan of the Company having an exercise price that exceedsa fair market value exceeding $25,000 (measured by the fair market value of the underlying shares in exchange for cash, another option,such stock appreciation right, restricted stock, restricted stock unit or other award, unless the exchange occurs in connection with a corporate transaction, as described below.

Terms and Conditions of Awards. The Plan provides for the grant of awards in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, and

dividend equivalent rights. Options granted under the Plan may be either incentive stock options complying with Section 422 of the Code or nonqualified stock options. Incentive stock options may be granted only to employees. All other awards may be granted to employees, directors and consultants.

Each award must be evidenced by an award agreement designating the type of award granted. Options must be designated as either incentive stock options or nonqualified stock options. However, to the extent that the aggregate fair market value of shares of Common Stock subject to options designated as incentive stock options which become exercisable by an employee for the first time during any calendar year exceeds $100,000, such excess options are treated as nonqualified stock options. The term of any award granted under the Plan may not exceed eight years, provided that the term of an incentive stock option granted to an employee who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company may not exceed five years.

Awards may be granted with such vesting conditions, including satisfaction of performance criteria, as are determined by the Administrator. Compensation realized by a covered employee pursuant to a stock-based award other than a stock option or stock appreciation right will qualify as performance-based for purposes of Section 162(m) of the Code provided that it is payable only upon the achievement of one or more performance goals established by the Administrator not later than 90 days (or other period required by Section 162(m)) after the commencement of the services to which the goal relates and while the outcome is substantially uncertain. The Plan establishes the following business criteria upon which the Administrator may base such performance goals: (i) increase in share price, (ii) earnings per share, (iii) total Stockholder return, (iv) operating margin, (v) gross margin, (vi) return on equity, (vii) return on assets, (viii) return on investment, (ix) operating income, (x) net operating income, (xi) pre-tax profit, (xii) cash flow, (xiii) revenue, (xiv) expenses, (xv) earnings before interest, taxes and depreciation, (xvi) economic value added, and (xvii) market share.

Options and stock appreciation rights must have an exercise price per share that is not less than 100% of the fair market value of a share of Common Stock on the date or dates the option is granted, except that in the case of incentive stock optionsrights are granted to an employee who owns stock representing more than 10% of the combined voting power ofParticipant) for each calendar year in which the Company orPurchase Right is outstanding at any parent or subsidiary of the Company such exercise price may not be less than 110% of the fair market value of a share of Common Stock on the date the option is granted. The exercise price per share, if any, of an award intended to qualify as “performance-based” for purposes of Section 162(m) of the Code may not be less than 100% of the fair market value of a share of Common Stock on the date the award is granted. The exercise price is generally payable in cash,time. Purchase Rights are nontransferable unless by check, through the surrender of shares of Common Stock or, in the case of options, by means of a broker-assisted sale and remittance procedure.

Under the Plan, the Administrator may establish one or more programs to permit selected participants the opportunity to elect to defer receipt of consideration payable under an award. The Administrator also may establish separate programs for the grant of particular forms of awards to one or more classes of participants.

Termination of Service. A participant in the Plan whose service with the Company terminates may exercise an award only to the extent and only within the time period provided in the award agreement. Any award designated as an incentive stock option not exercised within the time permitted by Section 422 of the Code following the participant’s termination of employment will be treated as a nonqualified stock option.

Transferability of Awards. Incentive stock options may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution, and may only be exercised during the lifetime of the participant only by the participant. Other awards may transferred only by will or byParticipant.

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On the lawslast day of descent and distribution, or by gift or domestic relations ordereach offering (referred to the participant’s immediate family in a manner determined by the Administrator. The Plan permits the designation of beneficiaries by holders of awards.

Change in Capitalization. Subject to any required action by the Stockholders ofunder this Proposal as “Purchase Date”), the Company issues to each Participant in the offering the number of shares of Common Stock coveredthe Company’s common stock determined by outstanding awards,dividing the amount of payroll deductions accumulated for the Participant during the offering by the purchase price, limited in any case by the number of shares of Common Stocksubject to the Participant’s Purchase Right for that have been

authorized for issuanceoffering. The price at which shares are sold under the Plan is established by the exerciseBoard but shall be the lesser of 95% of the fair market value of the share on the date the Purchase Right is granted or purchaseon the date it is exercised. The fair market value of the common stock on any relevant date generally will be the closing price per share as reported on the NASDAQ Stock Market. On June 26, 2009, the closing price per share of each outstanding award,our common stock was $5.70. Any payroll deductions under the maximum numberPurchase Plan not applied to the purchase of shares will be returned to the Participant without interest, unless the amount remaining is less than the amount necessary to purchase a whole share of Common Stock thatcommon stock, in which case the remaining amount may be granted subjectapplied to awards to any participant in a fiscal year, and the like, will be proportionally adjustednext Purchase Period if the Participant participates in the event of (i) any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, stock dividend, combination or reclassification or similar event affecting the Common Stock, or (ii) any other increase or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company. In addition, the Administrator is authorized to provide for such adjustments in connection with any other transaction with respect to Common Stock, including a merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction.next Purchase Period.

Corporate TransactionChange in Control. Outstanding awards will terminate upon the consummation ofIf there is a corporate transaction (as described below) except to the extent that they are continued by the Company or assumed by the successor entity or its parent. Except as otherwise provided by the award agreement, the vesting of an outstanding award will be accelerated in full if it is not continued by the Company or assumed or replaced by the successor entity or its parent in connection with a corporate transaction. The Plan provides that a corporate transaction includes (i) the saledisposal of all or substantially all of the Company's assets (ii) the complete dissolution or liquidationoutstanding capital stock of the Company (iii)by means of a sale, merger, or consolidation in whichreorganization where the Company is not the surviving entity, (iv) any reverse mergercorporation, or in which the Company isevent of a liquidation, then all outstanding Purchase Rights under the surviving entity but in which securities possessing more than 40% of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediatelyPlan shall automatically be exercised prior to such sale, merger, reorganization or (v)liquidation. Subject to other limitations under the acquisition in a singlePlan, all purchase rights will be automatically exercised by applying previously collected payroll deductions to the purchase of whole shares of Stock.

Termination or series of related transactionsAmendment. The Plan will continue until the earlier of: (i) the date it is terminated by any person or related group of persons of beneficial ownership of securities possessing more than 50%the Company under the sole discretion of the total combined voting powerBoard, (ii) August 1, 2018, or (iii) until all of the Company’s outstanding securities.

Amendment, Suspension or Termination ofshares reserved for issuance under the Plan. have been issued. The Board of Directors may at any time alter, amend, suspend or terminate the Plan. The Plan, except that no such action will terminate automatically ten yearsbecome effective until after any outstanding Purchase Rights are exercised in a Purchase Period during which said action was authorized.

New Plan Benefits.

No purchase rights have been granted, and no shares have been issued, on the date of its initial approval by the Company's Stockholders. To the extent necessary to comply with applicable law, the Company will obtain Stockholder approval of any amendment to the Plan. The Board of Directors may unilaterally amend the Plan or any award agreement, retroactively or otherwise, in order to conform the Plan or award agreement to any present or future law, regulation or rule applicable to the Plan, including Section 409Abasis of the Code. Section 409A establishes certain requirements applicable to nonqualified deferred compensation and imposes tax penalties on such deferred compensation that does not satisfy these requirements. Certain awards granted8,000,000 share increase, which is the subject of this proposal. Because benefits under the Plan may be deemedwill depend on employees’ elections to constitute deferred compensationparticipate and the fair market value of the Company’s common stock at various future dates, it is not possible to determine the benefits that will be requiredreceived by executive officers and other employees if the share increase is approved by the shareholders. Non-employee directors are not eligible to comply withparticipate in the requirementsPlan.

Purchases Under the Plan

The following table shows, as to each of Section 409A.our named executive officers and the other individuals and groups indicated, the number of shares of common stock purchased under the Plan from the inception of the Plan through the most recent Purchase Date:

CertainSummary of U.S. Federal Income Tax Consequences

The following summary ofis intended only as a general guide to the United StatesU.S. federal income tax consequences of participation in connection with awards granted under the Plan is based upon federal income tax laws in effect on the date of this proxy statement. This summary does not purport to be complete, and does not discuss, state, localattempt to describe all possible federal or non-U.S.other tax consequences.consequences of such participation or tax consequences based on particular circumstances.

Nonqualified Stock Options. The grant of a nonqualified stock option under the Plan will not result in any federal incomeGenerally, there are no tax consequences to the participant or to the Company. Upon exercisean Employee of either becoming a nonqualified stock option, the participant is subject to income tax at the rate applicable to ordinary compensation income on the excess of the fair market value on the date of exercise of the shares acquired over the exercise price paid. If the participant is an employee, this income will be subject to withholding of federal income and employment taxes. The Company generally will be entitled to an income tax deductionParticipant in the amount of the income recognized by the participant, except to the extent such deduction is limited by applicable provisions of the Code. Any gainPlan or loss realized by the participant upon a subsequent disposition of thepurchasing shares will be a long- or short-term capital gain or loss, depending on whether the shares are held for more than one year following exercise of the option. The Company does not receive a tax deduction for any such gain.

Incentive Stock Options. The grant of an incentive stock option under the Plan will not result in any federal incomePlan. The tax consequences to the participant or to the Company. A participant recognizes no taxable income for

regular tax purposes upon exercising an incentive stock option (subject to the alternative minimum tax rules discussed below), and the Company receives no deduction at the time of exercise. In the event of a disposition of shares vary depending on the period such stock acquired upon exerciseis held before its disposition. If a Participant disposes of an incentive stock option, the tax consequences depend upon how long the participant has held the shares. If the participant does not dispose of the shares within two years after the incentive stock option was grantedoffer date or within one year after the incentive stock option was exercised,purchase date on which the participant will recognize a long-term capital gain (or loss)shares are acquired (a “disqualifying disposition”), the Participant recognizes ordinary income in the year of disposition in an amount equal to the difference between the sale pricefair market value of the shares on the purchase date and the exercise price paid. The Companypurchase price. Any additional gain or resulting loss recognized by the Participant from the disposition of the shares is not entitled to any deduction under these circumstances.a capital gain or loss.

If the participant fails to satisfy eitherParticipant disposes of shares at least two years after the foregoing holding periods, he or she must recognizeoffer date and at least one year after the purchase date on which the shares are acquired, the Participant recognizes ordinary income in the year of the disposition (referredin an amount equal to as a “disqualifying disposition”). The amount of such ordinary income generally is the lesser of (i) the difference between the amount realizedfair market value of the shares on the date of disposition and the exercisepurchase price paid, or (ii) the difference between the fair market value of the stockshares on

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the offering date and purchase price (determined as if the Purchase Right were exercised on the exercise date and the exercise price paid.offering date). Any additional gain in excess of the amount taxed as ordinary income will be treated as a long- or short-term capital gain, depending on whether the shares were held for more than one year. The Company, in the year of the disqualifying disposition, is entitled to a deduction equal to the amount of ordinary income recognized by the participant, except toParticipant on the extent such deduction is limited by applicable provisionsdisposition of the Code.

In general, the difference between the exercise price paid andshares is a capital gain. If the fair market value of the shares on the date when an incentive stock optionof disposition is exercisedless than the purchase price, there is treated as an adjustment in computingno ordinary income, that may be subject toand the alternative minimum tax, whichloss recognized is paid if such tax exceedsa capital loss. If the regular tax forParticipant owns the year. Special rules may apply with respect to certain subsequent salesshares at the time of the Participant’s death, the lesser of (i) the difference between the fair market value of the shares in a disqualifying disposition, certain basis adjustments for purposeson the date of computingdeath and the alternative minimum taxable income on a subsequent salepurchase price or (ii) the difference between the fair market value of the shares on the offer date and certain tax credits which may arise with respect to participants subject topurchase price (determined as if the alternative minimum tax.Purchase Right were exercised on the offering date) is recognized as ordinary income in the year of the Participant’s death.

Stock Appreciation Rights. A participant recognizes no taxable income upon the receipt of a stock appreciation right. UponIf the exercise of a Purchase Right does not constitute an exercise pursuant to an “employee stock appreciation right,purchase plan” under section 423 of the participant generallyInternal Revenue Code, it will be treated as the exercise of a nonstatutory stock option. The Participant would therefore recognize ordinary income in an amounton the Purchase Date equal to the excess of the fair market value of the underlying shares of common stock on the exercise dateacquired over the award’s basepurchase price. If the participant is an employee, such ordinarySuch income generally is subject to withholding of income and employment taxes. TheAny gain or loss recognized on a subsequent sale of the shares, as measured by the difference between the sale proceeds and the sum of (i) the purchase price for such shares and (ii) the amount of ordinary income recognized on the exercise of the Purchase Right, will be treated as a capital gain or loss, as the case may be.

If the Participant disposes of the shares in a disqualifying disposition, the Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant in connection with the exerciseParticipant as a result of the stock appreciation right,disposition, except to the extent such deduction is limited by applicable provisions of the Internal Revenue Code. Any gain or loss on participant’s subsequent disposition of the shares will be a long- or short-term capital gain or loss, depending on whether the shares have been held for more than one year following exercise of the stock appreciation right. The Company does not receive a tax deduction for any such gain.

Restricted Stock. A participant who acquires shares under a restricted stock award will generally recognize ordinary income on the difference between the amount paid for the shares, if anything, and their fair market value on the date that the restrictions lapse. If the participant is an employee, this income will be subject to withholding of federal income and employment taxes. The Company is entitled to an income tax deduction in the amount of the ordinary income recognized by the participant, except to the extent suchIn all other cases, no deduction is limited by applicable provisions ofallowed the Code. Any gain or loss on the recipient's subsequent disposition of the shares will be a long- or short-term capital gain or loss, depending on whether the shares have been held for more than one year since the restrictions lapsed. The Company does not receive a tax deduction for any such gain.

Recipients of restricted stock awards may make an election under Section 83(b) of the Code to recognize as ordinary income in the year that such shares are granted an the amount equal to the excess of the fair market value on the date of their issuance over the price paid for such shares, if any. If this election is made, the participant will recognize no additional compensation income when the restrictions on the shares lapse. Any gain or loss on the subsequent disposition of the shares will be a long- or short-term capital gain or loss, depending on whether the shares have been held for more than one year since they were acquired by the participant. An election under Section 83(b) must be made, if at all, within thirty days following the date on which the shares of restricted stock were issued to the participant.

Restricted Stock Units, Performance Shares and Performance Units. A participant generally will recognize no income upon the receipt of a restricted stock unit, performance share or performance unit award. Upon the settlement of such awards, participants normally will recognize ordinary income in the year of settlement in an amount equal to the cash received and the fair market value of any unrestricted shares of stock received. If the participant is an employee, such ordinary income generally is subject to withholding of federal income and employment taxes. If the participant receives shares of restricted stock, the participant generally will be taxed in the same manner as described above under “Restricted Stock.” Upon the sale of any shares received, any gain or loss, based on the difference between the sale price and the fair market value of unrestricted shares on the date they were issued, will be taxed as a long- or short-term capital gain or loss, depending on whether the shares have been held for more than one year since they were acquired by the participant. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant, except to the extent such deduction is limited by applicable provisions of the Code.

Dividends and Dividend Equivalents. Recipients of stock-based awards that earn dividends or dividend equivalents will recognize taxable ordinary income on any dividend payments received with respect to unvested shares subject to such awards. If the participant is an employee, such income is subject to withholding of federal income and employment taxes. The Company is entitled to an income tax deduction in the amount of the income recognized by a participant, except to the extent such deduction is limited by applicable provisions of the Code.

Options Granted to Certain Persons

The following table shows the number of shares subject to options issued under the Plan since its inception to:

2003 Equity Incentive Plan

Required Vote

Approval of this proposal requires a number of votes “For” the proposal that represents a majority of the shares present or represented by proxy and entitled to vote on this proposal at the annual meeting of Stockholders. Abstentions and broker non-votes will be counted as present for purposes of determining the presence of a quorum, with abstentions having the same effect as a negative vote and broker non-votes having no effect on the outcome of the vote.Company.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF

THE AMENDMENTSAMENDMENT OF THE 1998 EMPLOYEE STOCK PURCHASE PLAN TO INCREASE

THE AMENDED AND RESTATED 2003 EQUITY INCENTIVE PLAN.SHARE RESERVE.

PROPOSAL 34

RATIFICATION OF INDEPENDENT AUDITORS

The Audit Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP as the Company’s independent auditors for the fiscal year ending June 30, 2009,2010, and the Board has directed that the selection of the independent auditors be submitted for ratification by the Stockholders at the Annual Meeting.

Although the Company is not required to seek Stockholder approval of its selection of the independent auditors, the Board believes it to be sound corporate governance to do so. If the appointment is not ratified, the Board will investigate the reasons for Stockholder rejection and will reconsider its selection of the independent auditors. Even if the appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the fiscal year if the Audit Committee determines that such a change would be in the Company’s and its Stockholders’ best interests.

Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.

Audit and Non-Audit Fees

The following table presents fees billed for professional audit services rendered by PricewaterhouseCoopers LLP for the audit of the Company’s annual financial statements for the years ended June 30, 20082009 and June 30, 2007,2008, respectively, and fees billed for other services rendered by PricewaterhouseCoopers LLP and during those periods.

For fiscal year 2008,2009, the Audit Committee considered whether audit-related services and services other than audit-related services provided by PricewaterhouseCoopers LLP are compatible with maintaining the independence of PricewaterhouseCoopers LLP and concluded that the independence of PricewaterhouseCoopers LLP was maintained.

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

The Audit Committee pre-approves all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. The Audit Committee has adopted a policy for the pre-approval of services provided by the independent auditors.

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Under the policy, pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. In addition, the Audit Committee may also pre-approve particular services on a case-by-case basis. For each proposed service, the independent auditors are required to provide detailed back-up documentation at the time of approval. Pursuant to the Sarbanes-Oxley Act of 2002, the fees and services provided as noted in the table above were authorized and approved by the Audit Committee in compliance with the pre-approval policies and procedures described herein.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF

PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT AUDITORS

FOR THE YEAR ENDING JUNE 30, 2009.2010.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to the Company with respect to the beneficial ownership as of August 15, 2008,2009, by (i) all persons who are beneficial owners of five percent (5%) or more of the Company’s Common Stock including Exchangeable Shares, (ii) each director and nominee, (iii) the Named Executive Officers (as defined in the “Compensation of Executive Officers” section below), and (iv) all current directors and executive officers as a group.

As of August 15, 2008, 209,597,8802009, 217,665,583 shares of the Company’s Common Stock were outstanding, and 5,075,1414,501,756 Exchangeable Shares were outstanding. The amounts and percentages of Common Stock beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission (“SEC”) governing the determination of beneficial ownership of securities. Under the SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of securities as to which such person has no economic interest.

(2)	Includes 607,276701,807 shares subject to stock options and RSUs currently exercisable or exercisable within 60 days of August 15, 2008.2009.

(3)	Includes (i) 9,6030 shares subject to stock options and RSUs currently exercisable or exercisable within 60 days of August 15, 2008; and (ii) 595 shares subject to further vesting restrictions.2009.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Compensation Philosophy

We believe that the quality, experience, skills, engagement and dedication of our executive officers are critical factors affecting the Company’s performance and our ability to drive long-term growth of Stockholder value. These factors guide our primary executive compensation philosophy: that total compensation should be established at a competitive level to attract, motivate and retain the superior executive talent necessary to achieve our business objectives. Our compensation philosophy recognizes that we compete for superior executive talent in a highly competitive market and that retention of superior executive talent is enabled through reinforcement of a strong pay for performance compensation system which provides the opportunity to earn above average compensation in return for achieving business and financial success, and the sustained delivery of the results, leadership and innovation necessary to drive long-term growth of Stockholder value. Additionally, our compensation philosophy has evolvedcontinues to evolve to align compensation with our diversified technology structure. Finally, weWe recognize that especially with respect to shared services positions we compete for superior executive talent in a highly competitive market not only within our industry, but also with companies outside our immediate product and geographic markets and thus should consider role-specific factors when determining executive compensation. Finally, we anticipate that when macroeconomic conditions improve competition for executive talent is likely to increase.

In support of this compensation philosophy, the Compensation Committee of the Board (the “Committee”) utilizes three primary compensation elements, each aligned with specific goals: (a) base salary, to attract and retain highly qualified executive talent; (b) the opportunity to earn annual, semi-annual and other cash incentive bonuses to incentivize and reward delivery of financial and business results that enable long-term sustained profitability and revenue growth within each operating segment and at a corporate level; and (c) long-term equity grants, including restricted stock units (“RSUs”), time-based stock options, performance-based stock options with stock price appreciation vesting requirements and other stock-based incentive awards intended to align our executives’ interests with those of our Stockholders by providing opportunities to derive compensation through equity ownership and appreciation in the fair market value of our stock and enable the Company to attract and retain superior executive talent. Each of these compensation elements are discussed in detail below.

Throughout this proxy statement, the individuals who served as the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) during the fiscal year 2008,2009, as well as the other individuals included in the Summary Compensation Table, are referred to as the “named executive officers” (or “NEOs”).

Determining Executive Compensation

It is the Committee’s intent that base salary, target cash bonus levels and target long-term incentive award values for the Company’s NEOs generally are to be established at or near the 60^th percentile for cash components and 70^th-75^th percentile for equity incentive compensation, relative to a peer group utilized for benchmarking purposes (as discussed below). The Committee believes that these percentile levels and targets are necessary and appropriate to achieve the Committee’s primary executive compensation goals discussed above in the highly competitive market for high quality executive talent and during the Company’s current phase in its evolution and business cycles. To assist the Committee in its review of executive compensation, the Company’s Human Resources Department and the Company’s primary external compensation consultant, Compensia, Inc., (retained both by management and by the Committee) as well as Pearl, Meyer & Partners (retained solely by the Committee for assistance relative to CEO compensation), provide compensation data compiled both from executive compensation surveys (including proprietary surveys conducted by Radford Surveys + Consulting, Inc., Buck Consultants, LLC and Compensia, Inc.), and annual reports and proxy statements from companies that the Committee selects as a “peer group” of technology companies for executive compensation analysis purposes. The peer group utilized for this benchmarking purpose is determined based upon geographic location, annual revenue and other financial performance metrics including revenue growth, earnings, market capitalization, headcount,

39

position within relevant business cycles, and the Company’s competition in recruiting executive

talent. The Committee’s policy is to chooseselect peer group members that have one or more attributes significantly similar to JDSU, including markets, manufacturing profile, level of integration and enterprises with global operations. The peer group is periodically reviewed by the Committee and may be amended from time to time based on the criteria stated above. The current list of peer group companies (the “Peer List”) is as follows:

Agilent Technologies, Inc., Corning, Inc., Sandisk Corporation, Beckman Coulter, Inc., Network Appliance Inc., Juniper Networks, Inc., Tellabs, Inc., KLA-Tencor Corporation, Applied Biosystems Inc., Palm, Inc., PerkinElmer, Inc. , XO Holdings, Inc., Teradyne, Inc., AVX Corporation, ADC Telecommunications, Inc., Bio-Rad Laboratories, Inc., Quantum Corporation, Brocade Communications Systems, Inc., Coherent Communications Systems Corp, Ciena Corporation, Newport Corporation

To enable alignment of compensation decisions with actual individual performance the CEO periodically apprises the Committee of his personal assessment of each executive officer’s performance. In assessing each executive officer, the CEO reviews and documents each executive officer’s performance during the relevant year or portion thereof, including accomplishments, areas of strength, areas for development and long-term potential. The CEO bases this evaluation on his own knowledge of each executive officer’s performance, actual results achieved and feedback provided by others. In addition, the independent members of the Committee have periodic formal and informal interactions with each NEO multiple times during the year including discussions relative to the functions and/or business units for which such NEO is responsible. Prior to any Committee decision on compensation for NEOs, the CEO, working with the Senior Vice President of Human Resources, and the Compensation and Benefits group within the Human Resources Department and Compensia, reviews the compensation data obtained as described in the preceding paragraph and budgetary data obtained from the Company’s Finance Department, and provides a recommendation to the Committee for each NEO’s compensation, except for himself. The Committee ultimately is responsible for the final determination of all compensation for NEOs other than the CEO.

The CEO’s annual performance is reviewed by the Committee and the independent members of the full Board using performance criteria developed by the Committee and approved by the full Board’s independent directors. The CEO’s performance criteria established for fiscal year 20082009 and methodology used for their determination are discussed below. In assessing CEO performance, the Committee and independent members of the Board review Company business, operational and financial performance and other factors that may be included in the CEO performance criteria described above and feedback that may be obtained from the CEO’s direct reports and other employees. Additionally, the CEO performs a self-assessment which he provides to the Chairpersons of the Committee and the Board.Board, respectively. The Committee recommends all elements of compensation for the CEO to the independent directors of the Board, all elements of compensation for the CEO, including salary and incentive-based and equity-based compensation, for the Board’s review, consideration and approval.

NEOs are not present for, nor do they participate in, Committee or Board discussions or approvals regarding their own compensation.

Elements of Executive Compensation

The fundamental policy of the Committee is to provide NEOs with competitive compensation opportunities based upon the overall financial performance of the Company and the Company’s individual operating segments, their specific current and anticipated future contributions to the financial success of the Company and their personal performance relative to associated business performance objectives. It is the Committee’s objective to have a significant portion of each named executive officer’s compensation contingent upon the Company’s performance, and as applicable, individual operating segment performance, as well as upon his or her own individual contributions to the achievement of business objectives. The compensation package for NEOs is, and

in fiscal year 20082009 was, comprised of three elements: (i) base salary, which is designed primarily to be competitive with salary levels in the industry as well as reflect individual performance through merit increases; (ii) the opportunity to earn periodic variable cash bonuses tied to the Company’s achievement of financial and business performance results and objectives within each operating segment and at a corporate level; and (iii) long-term equity-based incentive awards which provide enhanced executive compensation opportunities in return for performance

intended to increase long-term Stockholder value and enable the Company to attract and retain superior executive talent. As an executive officer’s level of responsibility increases, a greater proportion of such executive’s total target compensation is comprised of cash incentive bonuses and equity compensation vehicles in order to align total target compensation with the actual achievement of Company and operating segment business and financial performance objectives.

The factors which the Committee considered in establishing the individual components of each NEO’s compensation package for fiscal year 20082009 are summarized below. The Committee may in its discretion apply different factors, in the future, particularly different measures of financial and business performance, in setting future NEO compensation.

Base Salary.The Company provides NEOs and other executives with a fixed base salary set at a level to allow the Company to attract, motivate and retain highly qualified executives. The base salary for each NEO is determined on the basis of the following factors: scope of responsibilities, experience, skill level, personal performance, potential for growth, and salary levels in effect for comparable positions within and outside the industry against which the Company competes for superior executive talent. The Committee also compares the compensation of NEOs with the compensation of other executive officers and Company employees for internal pay equity purposes. The weight given to each of these factors differs from individual to individual as the Committee deems appropriate and necessary to support the Company’s business objectives. For the purposes of maintaining competitive compensation, the Committee refers to the compensation surveys and peer group discussed above. The Committee targets setting each NEO’s base salary at or near the 60^th percentile when compared to similarly situated senior executives at peer group companies utilizing the Company’s Peer List, as described above.above, which such targeted levels may be reached over time depending upon the various factors described above and the performance of the individual NEO. Salary levels generally are considered annually as part of the Company’s performance review process as well as upon a promotion or other change of position or level of responsibility. Merit based increases to salaries of the Company’s NEOs other than the CEO are recommended by the CEO to the Committee, and all increases are based on the Committee’s (and in the case of the CEO, the independent directors of the full Board) review and assessment of the individual’s performance, skill set and competitive market factors.

On October 2, 2007, the Board approved,No NEOs received merit or other pay increases in fiscal 2009 except in connection with specific promotions, and the Company and Kevin Kennedy entered into, an employment agreement (the “Kennedy Agreement”) replacing Mr. Kennedy’s previous employment agreement dated September 1, 2003 (the “Former Kennedy Agreement”) which had an initial term that expired on August 31, 2007. Mr. Kennedy’s base salary under the Former Kennedy Agreement at the beginningexpansion of fiscal year 2008 was $575,000, and had last been increased to that amount on February 15, 2006responsibilities resulting from Mr. Kennedy’s original base salary of $500,000 under the Former Kennedy Agreement. Mr. Kennedy’s base salary was increased to $800,000 under the terms of the Kennedy Agreement, retroactive to September 1, 2007. The Board approved this increase in Mr. Kennedy’s base salary in order to align it with the Company’s target of the 60^th percentile when compared to CEOs at peer companies within the Company’s Peer List. The Board believes that this new base salary for Mr. Kennedy is consistent with its compensation philosophy regarding competition for superior executive talent in a highly competitive market and retention of executive talent through reinforcement of a strong pay for performance compensation system which provides the opportunity to earn above average compensation in return for business and financial success. In determining Mr. Kennedy’s base salary (and other compensation elements, as discussed below) under the Kennedy Agreement, the Committee and the independent members of the Board recognized the substantial results of Mr. Kennedy’s leadership in effectuating the Company’s turnaround and positioning of the Company for future long-term success. In particular, the Committee and Board considered, among other factors, the following specific substantial positive changes and improvements in the Company’s financial performance, business strategy, evolution and structure between the Company’s fiscal year 2003 (which ended on June 30, 2003, two months prior to the commencement of Mr. Kennedy’s employment under the Former Kennedy Agreement) and fiscal year 2007 (the Company’s last full fiscal year concluded prior to the execution of the Kennedy Agreement): (a) an increase in revenue from $676 million to $1.40 billion; (b) an increase in Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) from $(878) million to $9 million; (c) an increase in gross margins from 8% to 34%; (d) an increase in GAAP earnings per share from $(0.66) to $(0.12); (e) an increase in non-GAAP earnings per share from

$(0.16) to $0.30; (f) significant improvement in free cash flow from $(257) million to $(14) million, and from $(50) million in the fourth quarter of fiscal year 2003 to over $25 million in the fourth quarter of fiscal year 2007; (g) the Company’s successful transition to a diversified technology company through mergers and acquisitions as well as organic growth, providing substantial diversification in markets and customer base; (h) successful divestiture of unprofitable and/or non-core legacy assets; (i) improvements in financial and business controls (including the elimination of identified material weaknesses in financial controls under the Sarbanes-Oxley Act of 2002); (i) the positioning of the Company for continued improvement.

On May 13, 2008, the Committee approved an increase in David Vellequette’s base salary from $360,000 to $405,000, effective on May 25, 2008. The Committee approved this increase in Mr. Vellequette’s base salary in order to continue to align Mr. Vellequette’s base salary with the Company’s 60^th percentile base salary target.such promotions.

Thomas Waechter joined the Company as Executive Vice President and President of the Company’s Communications Test and Measurement operating segment (“CommTest”) in October 2007 at a base salary of $450,000, which was consistent with the base salary of his predecessor. Mr. Waechter’s salary was not adjusted during the first half of fiscal year 2009. On December 17, 2008, the Board approved, and the Company and Mr. Waechter entered into, an employment agreement (the “Waechter Agreement”), pursuant to which Mr. Waechter became the CEO and President of the Company, effective January 1, 2009. Mr. Waechter’s base salary under the Waechter Agreement is $700,000. The Board believes that the new base salary for Mr. Waechter is consistent with its compensation philosophy articulated above. In determining Mr. Waechter’s base salary (and other compensation elements, as discussed below) under the Waechter Agreement, the Board and Committee reviewed data from the sources described above, including data pertaining to the Company’s Peer List. Additionally, the Board and Committee also considered market survey data of broad high-technology companies with revenues between $1 billion and $6 billion with internal CEO promotions in calendar years 2007 and 2008 compiled by Compensia (the “Internal Promotions Survey”). The Committee and the Board also noted that this new base salary was setconsistent with the Committee’s compensation philosophy discussed above and below the Company’s 60^th percentile base salary target for NEOs when compared with CEOs within the Company’s Peer List and the Internal Promotions Survey and less than the base salary of Mr. Waechter’s predecessor.

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Kevin Kennedy was the CEO at the commencement of fiscal 2009, a position he had held for more than 4 years. At the beginning of fiscal 2009, Mr. Kennedy’s base salary was $800,000 per year (as discussed in recognitionthe CD&A included within the Company’s Proxy and Annual Report for Fiscal Year 2008, the “2008 CD&A”) and was not adjusted during fiscal year 2009. On October 24, 2008 Mr. Kennedy notified the Company of his past executive experienceresignation as CEO and resulting potential to assume broader responsibilities withinPresident of the Company.

Company, effective as of December 31, 2008. On February 12,December 5, 2008, the Board approved, and the Company and Mr. Kennedy entered into, an agreement (the “Transition Agreement”) which cancelled and replaced Mr. Kennedy’s previous employment agreement dated October 2, 2007 (the “Kennedy Agreement”). Pursuant to the terms of the Transition Agreement, the Company provided Mr. Kennedy with a bonus payment for the first half of fiscal year 2009 in the amount of $400,000 within seven days of the termination of Mr. Kennedy’s service as CEO and President (discussed further below under “Cash Incentive Compensation”). In conjunction with the Transition Agreement, on December 5, 2008, the Company and Mr. Kennedy also entered into a consulting agreement (the “Consulting Agreement”) which, pursuant to its terms, commenced on January 1, 2009 and will terminate on December 31, 2009. In exchange for certain transition and support services described in the Consulting Agreement, Mr. Kennedy will receive consulting fees of $800,000, payable in equal monthly installments each calendar month of 2009. In determining the fees under the Consulting Agreement, the Committee approved an increaseand the independent members of the Board determined that the Company would benefit from Mr. Kennedy’s engagement as a consultant to the Company to assist with the transition of the President and CEO responsibilities to his successor, and for ongoing support of significant and strategic Company initiatives commenced during his term as CEO.

David Holly was appointed Executive Vice President and President of CommTest in David Gudmundson’sApril 2009. In connection with this promotion Mr. Holly’s base salary from $360,000 to $400,000, retroactively effective to February 3, 2008. The Committee approved this increase in Mr. Gudmundson’swas set at $355,000 per year. Roy Bie’s salary of $310,000 and David Vellequette’s base salary in recognition of his strong performance since assuming his role leading$405,000 were not changed during the Company’s Optical Communications operating segment (“Optical Communications”) and in order to continue to align his base salary withcourse of the Company’s 60^th percentile base salary target.

fiscal year. The Committee determined that all other pay increases in fiscal year 2008each of these base salaries were in lineconsistent with general cost-of-living level increases,the compensation philosophy discussed. . The Committee determined that each of these base salaries were consistent with the compensation philosophy discussed above and are indicated inless than the “Salary” columnCommittee’s 60^th percentile target for NEO base salaries.

Alan Lowe was appointed to the role of Executive Vice President and President of the Summary Compensation Table.Commercial and Consumer Optics Products segment (“CCOP”) in October 2008. In connection with this promotion Mr. Lowe’s base salary was set at $425,000 per year (an increase from $315,000 prior to his promotion). In considering Mr. Lowe’s new base salary the Committee considered the base salary target for NEOs discussed above, as well as Mr. Lowe’s prior experience and anticipated contributions given the aggressive business objectives set by the Company for the CCOP segment for the remainder of the fiscal year, including significant restructuring activities such as the outsourcing of key manufacturing operations, product line rationalization, and the need to significantly reduce operational cost structure in light of the impact of the global recession. Accordingly, the Committee determined that while Mr. Lowe’s base salary is above the Committee’s target of 60^th percentile within the Company’s Peer Group, a higher base salary was warranted.

Cash Incentive Compensation.The Company utilizes threetwo primary cash incentive programs relative to its NEOs which are designed to achieve the compensation goals discussed above: (i) the Annual Incentive Plan, in which the broad majority of Company personnel participate, (ii) the 2005 Executive Retention Program, in which only one senior executive continued to participate in fiscal year 2008, and (iii)(ii) the CEO Incentive Program, in which participation iswas limited to Mr. Kennedy.Kennedy for the first half of fiscal year 2009 and to Mr. Waechter for the second half of fiscal year 2009.

Annual Incentive Plan: Semi-annual incentive bonuses, designed to reward short-term performance and achievement of designated results, may be earned by each NEO under the Company’s Annual Incentive Plan (“AIP”), in which the majority of Company employees participate. Awards under the AIP are based on Company performance as a whole and on the performance of individual operating segments, measured with respect to financial and business performance objectives, projections and estimates established for each half of the fiscal year by the Committee and the Board. These goals are determined in a manner designed to align executives’ and Stockholders’ interests by making payouts under the AIP contingent on profitability improvement, revenue growth, and/or business performance objectives (such as innovation, enhancements in effective corporate

governance and controls, customer satisfaction, employee retention, and operational excellence) consistent with long-term profitability, revenue growth and sustainable, long-term appreciation in Stockholder value.

Each participant in the AIP is assigned a target bonus of a percentage of his or her base salary, based upon the individual’s grade level within the Company’s standard leveling structure for all Company employees. For fiscal year 20082009 the assigned target bonuses for each of the Company’s NEOs were: 100% for Mr. Kennedy, and 75% for each of Mr. Vellequette, Mr. Gudmundson, Alan EttermanLowe and Mr. Waechter.Bie. Mr. Waechter’s assigned target bonus was increased from 75% for the first half of fiscal year 2009 to 100% for the second half of fiscal year 2009 concurrent with his promotion to the role of CEO and President effective January 1, 2009, as discussed above. Mr. Holly’s assigned target bonus was increased from 50% for the first half of fiscal year 2009 to 75% concurrent with his promotion Executive Vice President and President of CommTest for the second half of fiscal year 2009. The actual bonus payments earned by each employee annually under the AIP may be either less or greater than these target bonus percentages depending on whether and the extent to which the various operating segment and Company performance goals (as discussed below) are achieved in the fiscal year, and may range from 0% to 125% of each employee’s assigned target bonus. Additionally, each employee’s actual bonus under the AIP may be adjusted

lower or higher by a factor of 25% based upon subjective individual performance criteria (“Individual Performance Factor” or “IPF”). The CEO recommends to the Committee whether an IPF adjustment is warranted relative to executives other than himself, although the Committee (or in the case of the CEO the independent members of the Board) retains discretion to approve such adjustments. Actual bonuses earned by our NEOs in fiscal year 20082009 are indicated in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

AIP goals are recommended by management and reviewed and approved by the Committee (and the independent members of the Board relative to the CEO’s participation in the AIP) for each operating segment and for central function employees (“Corporate”) to align AIP compensation with the Company’s portfolio structure, and are equally applicable to all employees eligible to participate in the AIP, regardless of grade level. These goals reflect financial and business performance objectives, projections and estimates approved by the Board upon the start of each half of the fiscal year utilized for purposes of financial and business planning and analysis. For fiscal year 2008,2009, Mr. Kennedy and Mr. Vellequette, and for the second half of fiscal year 2009 only, Mr. EttermanWaechter, were treated as Corporate employees, Mr. Lowe as an employee of CCOP, Mr. Holly and Mr. Waechter for the first half of fiscal year 2009 as employees of CommTest, and Mr. Bie as an employee of the CommTestAdvanced Optical Technologies segment and Mr. Gudmundson as an employee of Optical Communications segment.(“AOT”).

The Company’s financial and business planning and performance objectives, projections and estimates approved by the Board upon the start of each half of the fiscal year and the corresponding AIP goals reflect the Company’s confidential and commercially sensitive analysis, expectations and objectives for its financial, operating and overall business performance, taking into consideration then current forecasted economic conditions, the outlook for the industry and the Company’s businesses, technology and new product development, and strategic objectives intended to drive growth in long-term Stockholder value, among other factors. Due to the confidential and commercially sensitive nature of these analyses, expectations and objectives and corresponding AIP funding thresholds and goals (as described below), their specific disclosure would result in competitive harm to the Company. It is for this reason that the Company’s specific financial performance objectives and estimates, while frequently referenced in this document, are not disclosed. The use of financial metrics and defined operating objectives for the establishment of the Company’s incentive bonus (and for equity compensation as discussed below) performance criteria is intended to set challenging goals and is designed to ensure that all participants, including our NEOs, are focused on operating the Company in a disciplined manner in accordance with the Committee’s and Board’s compensation objectives discussed above.

In general, achievement of Company annual operating plan objectives will result in NEOs earning incentive compensation payments below the target percentages listed above. Accordingly, in order for NEOs to receive their full target bonuses, and subject to the application of the IPF as discussed above, the Company must exceed operating plan objectives. The Committee anticipated that achieving fiscal year 20082009 annual operating plan

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objectives would result in bonus payments of approximately 50% of target bonuses, which was determined to be considerably less than the percentage of target bonus payments for annual operating plan achievement at most companies within the Peer List.

For the first halfand second halves of fiscal year 20082009, payment of bonuses under the AIP waswere contingent upon the Company achieving a minimum threshold of EBITDA (for Corporate employees)(the “Corporate Funding”) oroperating income as a minimum thresholdpercentage of operating segment contribution margin (for CommTest employees)revenue for the applicable period (the “CommTest respective fiscal half year (“Funding”). ForThe independent members of the Board and the Committee approved Funding targets for fiscal year 2009 as follows: (a) the operating income percentage threshold for the first half of the fiscal year was set at a level higher than the Company’s reported operating income percentage in its fiscal year 2008, and (b) the criteriaoperating income percentage threshold for determinationthe second half of the fiscal year 2009 was set at a level approximately 75% higher than selected for the first half of the fiscal year. In each case the operating income percentage targets were set at progressively increasing levels over the Company’s fiscal year 2008 actual results in order to align AIP bonus payments with the Company’s objective of continuously driving operating performance improvements and cash generation and were intended to be reasonably achievable. Subject to Funding having been achieved, actual payment of bonuses under the AIP for Corporate employees, including Messrs. Kennedy, Vellequette, and Etterman, was measured against the following factors (in each casewere subject to Corporate Funding): 75% of the bonus calculation was based on the achievement of a Company-wide revenue target,Corporate and the remaining 25% was based on the achievement of a targeted level of corporate operating expensessegment goals as a percentage of revenue. Based upon relative performance against these factors, eligible Corporate employees, including Messrs. Kennedy, Vellequette, and Etterman, were paid 100% of their assigned target bonuses. Mr. Waechter was not eligible to participate indiscussed above. Goals under the AIP for the first half of the fiscal year 2008, as he joined the Company in October 2007. However, Mr. Waechter received an $85,000 new hire bonus in lieu of participating in the AIP during the first half of fiscal year 2008, which is approximately equivalent

to what he would have received had he participated in the AIP for the first half of fiscal year 2008 on a pro-rata basis based upon achievement of applicable CommTest AIP performance targets.

For the second half of fiscal year 2008, payment of bonuses under the AIP was contingent upon the Company achieving a minimum threshold of earnings per share (“Funding”). Corporate goals under the AIP applicable to Messrs. Kennedy Vellequette and EttermanVellequette were as follows (in each case subject to Funding): 50% of the bonus calculation was based on the achievement of a Company-wide revenue target, 25% was based on the achievement of a Company-wide free cash flow target, and the remaining 25% was based on the achievement of a targeted level of corporate operating expenses as a percentage of revenue. CommTest goals applicable to Mr. Waechter and Mr. Holly were as follows (subject to CommTest Funding): (i) 35%30% for achievement of a CommTest revenue target, (ii) 35%50% for achievement of a CommTest contribution margin target, (iii) 20%10% for achievement of a CommTest inventory turns target, and (iv) 10% for achievement of a CommTest free cash flow target. Based upon relativeCCOP goals applicable to Mr. Lowe were as follows (subject to Funding): (i) 50% for achievement of a CCOP revenue target, (ii) 20% for achievement of a CCOP gross margin target, (iii) 20% for achievement of a CCOP operating income target, and (iv) 10% for achievement of a CCOP free cash flow target. AOT goals applicable to Mr. Bie were as follows (subject to Funding): (i) 35% for achievement of a AOT revenue target, (ii) 40% for achievement of a AOT revenue target, (ii) 40% for achievement of a contribution margin target, (iii) 10% for achievement of a specific revenue growth target from non-currency security related customers, and (iv) 10% for achievement of a AOT free cash flow target. In each case the specific operational objectives selected for each segment were intended to align cash incentive compensation opportunities with segment operating performance metrics which would yield increases in operating cash flows. The Company did not attain the Funding targets, and thesethus no AIP bonuses were paid to any of the Company’s NEOs for the first half of fiscal year 2009.

As a result of the general global economic downturn and its impact upon the Company’s financial performance in the first half of the fiscal year, the Committee and independent members of the Board (with respect to the CEO), upon management’s recommendation, suspended the AIP for the second half of fiscal year 2009. Accordingly, no Corporate or segment performance goals were adopted for such period and no bonuses were paid to any of the Company’s NEOs for the second half of the fiscal year 2008.under the AIP. However, as discussed belowabove, in connection with his promotion to Executive Vice President and President of CCOP, the descriptionCompany guaranteed the payment of the Executive Retention Program (“ERP”), since the incentive payment earned by Mr. Etterman under the ERP exceeded that which was earned by him under the AIP for the full fiscal year, Mr. Etterman’s firstLowe’s second half of fiscal year 2008 AIP incentive payment was credited against Mr. Etterman’s payment under the ERP.

For fiscal year 2008, employees in Optical Communications, including Mr. Gudmundson, were ineligible to participate in the AIP based upon a determination by the Committee that Optical Communications was not generating a sufficient level2009 bonus at his assigned target bonus of profitability to fund the broader payment75% of cash incentives under the AIP.

Executive Retention Program: In fiscal year 2005 the Committee approved a supplementary cash incentive compensation program, the Executive Retention Program (“ERP”), under which only Mr. Etterman continued to participate in fiscal year 2008. Eligibility for cash incentive payments under the terms of the ERP are subject to the achievement of certain Company EBITDA targets, continued employment in good standing and an individual performance rating for each participating executive of at least “meets” or “exceeds” expectations or their equivalents as determined by the Company’s CEO and approved by the Committee. These metrics were selected to support achievement of the Company’s profitability and individual performance objectives while ensuring incentive bonus payments are provided subject to continued service to the Company in good standing, and are intended to cause payment of incentives under the ERP to be reasonably probable. In each case eligibility for a cash incentive payment is determined following the close of a Company fiscal year. Each eligible employee may only receive the greater of such incentive bonus as may have been earned under the AIP or the ERP (but not both). In recognition of Mr. Etterman’s increasing responsibilities since the ERP was first approved in fiscal year 2005, the ERP was amended by the Committee in fiscal year 2007 to increase his target cash incentive payment for fiscal year 2007 from $150,000 to $200,000, and to make Mr. Etterman eligible for a cash incentive payment for fiscal year 2008 in the amount of $400,000, in each case subject to his satisfaction of the criteria described above. As discussed above, Mr. Etterman’s incentive payment earned under the ERP exceeded that which was earned under the AIP, and thus the incentive payment received by Mr. Etterman under the AIPbase salary for the first half of fiscal 2008 was credited againstapplicable period. The actual bonus paid to Mr. Etterman’s ERP incentive payment such that his total combined incentive payments for fiscal year 2008 equaled his target ERP incentive payment of $400,000. The ERP terminated atLowe is shown on the end of fiscal year 2008.Summary Compensation Table.

CEO Incentive Plan: In addition to his eligibility to participate in the AIP, as CEO Mr. Kennedy iswas eligible to participate in an alternate annual incentive compensation plan (the “CEO Incentive Plan”) as defined within the Kennedy Agreement. Mr. Kennedy iswas entitled to receive the greater of (a) what he would be entitled to under the AIP, or (b) his respective bonus under the CEO Incentive Plan, but not both.

Under the CEO Incentive Plan and pursuant to the Kennedy Agreement, Mr. Kennedy was eligible to earn a minimum cash incentive bonus in fiscal year 20082009 of $400,000 and a maximum cash incentive bonus of $1,000,000 (125% of Mr. Kennedy’s base salary) based upon performance criteria and performance evaluation

recommended by the Committee and approved by the independent members of the Board for each fiscal year. For fiscal year 2008,2009, performance criteria considered by the Committee and the independent members of the

Board included a comprehensive evaluation of the Company’s financial and business performance including the total payout under the AIP to the Corporate Group, talent management (including talent acquisition, succession planning and organization planning objectives) and strategy development (including strategy development, updates and execution, as well as growth in Asian markets). Additionally, unless the Company achieved a minimum of 50% of Corporate objectives under the AIP, bonus payments to the CEO under the CEO Incentive Plan were capped at 50% of Mr. Kennedy’s base salary.

In considering whether to provide Mr. Kennedy with a bonus under the CEO Incentive Plan the Committee and the independent directors of the Board performed an evaluation of Mr. Kennedy’s performance during the fiscal year. This review included an evaluationfirst half of the Company’s performance against internal confidential and commercially sensitive expectations and objectives for its financial, operating and overall business performance and business model development, actual year over year revenue growth and profitability improvements, as well as Mr. Kennedy’s strategy development, execution and leadership contributions. In particular, in evaluating whether to provide Mr. Kennedy with a bonus under the CEO Incentive Plan for fiscal year 2008, the Committee and the independent members of the Board considered the substantial improvements in Company and segment financial performance during fiscal year 2008, including: (a) overall revenue growth of 9.5% (to $1.53 billion); (b) year over year revenue growth in three out of four Company segments; (c) positive free cash flow in all four fiscal quarters; (d) year over year non-GAAP gross margin improvement from 37.7% to 42.8%; (e) EBITDA reaching $142.9, or 9.3% of revenue, the highest in the last six fiscal years; and (f) 72% increase in non-GAAP earnings per share over fiscal year 2007 and for the second consecutive fiscal year the Company demonstrated positive earnings per share on a non-GAAP basis in all four quarters of fiscal year 2008.year. The Committee and the Board also considered the bonus paid to Mr. Kennedy for the first half of fiscal year 2008 as reported on the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table, and the fact that no bonuses were paid to other Company NEOs under the AIP for the secondfirst half of fiscal year 2008.2009. Based upon these considerations and despite the substantial operational and financial performance improvements noted above,achieved under Mr. Kennedy’s leadership, the Committee and Board determined that Mr. Kennedy would not be paid a CEO Incentive Bonus in excessfor the first half of his bonus already paid under the AIP (which as described above would be applied as a credit against any bonus earned under the CEO Incentive Plan) and thus no bonus was paid to Mr. Kennedy under the CEO Incentive Plan for fiscal year 2008.2009.

In addition to annual incentive bonus payments, executive officers are eligible for individual recognition bonuses at the discretion of the Committee or, in the case of the CEO, the independent members of the Board, for exceptional achievement that exceeds the performance metrics set for that executive through the AIP or any other incentive bonus program. None of the Company’s NEOs other than Mr. Kennedy earned an individual recognition bonus in fiscal year 2008.

2009. In December 2008 the Board approved the payment to Mr. Waechter’s original termsKennedy of employment includedan individual bonus in the offeramount of moving and temporary living$400,000 to be paid upon the conclusion of his service as CEO. In considering this bonus the Board evaluated actions taken by the Company under Mr. Kennedy’s leadership in the first half of fiscal year 2009 to (a) aggressively reduce operating expenses as well as his choicethe Company began to experience the impact of either (a)the global economic recession, which enabled the Company to generate $28.7 million in free cash flow during the first half of fiscal year 2009 despite declines in revenue over that same period, and (b) driving a relocation package including home sale and purchase assistance, or (b) a lump sum bonus of $265,000 plus a more limited set of relocation benefits. These benefits weremanufacturing outsourcing strategy intended to offset the costs that the Committee anticipated Mr. Waechter would incur as a result of his then-planned move at the Company’s request from California to Maryland. However, following the commencement of his employmentposition the Company determined that a change in Mr. Waechter’s principal residence to Maryland would not be required to fulfill his responsibilities tofurther reduce fixed operating costs and enable the Company though he would continue to be required to spend a significant portion of his working time ingenerate greater leverage once the Company’s Germantown, Maryland office. As a result of this change, the Committee authorized an amendment to Mr. Waechter’s original employment terms in June 2008 (a) eliminating the offer of relocation-related benefits and home sale and purchase assistance, and (b) further approving a one-time bonus of $265,000 to be drawn by Mr. Waechter between the date of execution of such amendment and the end of the calendar year. The Committee determined that this amendment was appropriate as the value of this bonus had been a factor in Mr. Waechter’s total compensation package as originally offered. While the Company and Mr. Waechter did not enter into the formal letter agreement prior to the end of the fiscal year amending his original terms of employment, the Committee considers it appropriate to include this one-time bonus referenced above in Mr. Waechter’s fiscal year 2008 compensation for purposes of this proxy statement.recession ends.

Long-Term Incentive Compensation.Long-term incentives are provided through RSUs, restricted stock and/or stock option grants. The Committee believes that stock-based compensation aligns the interests of employees

with long-term Stockholder value creation, providing each NEO with a significantan incentive to manage the Company from the perspective of an owner driving long-term Stockholder value. The Committee also believes stock-based compensation provides the Company with a significantan important long-term retention tool in a highly competitive market for executive talent. The Committee sets equity grant levels to executive officers based on a variety of factors, including the individual performance of the executive officer, an assessment of the value of the individual’s current and anticipated future services to the Company, relative business criticality of the position held, the awards given to other executives, and the desire to keep the Company’s overall compensation competitive. The number of shares of Common Stock subject to each grant is set at a level intended to create a meaningful opportunity for stock ownership and resulting compensation opportunity based on the executive officer’s current position with the Company, the base salary associated with that position, the average size and potential returns of comparable awards made to executive officers in similar positions within the industry, the executive officer’s potential for increased responsibility and promotion over the grant term, and the executive officer’s personal performance in recent periods. The Committee also takes into account the number of vested and unvested equity incentives held by the executive officer in order to maintain an appropriate level of equity incentives for that executive officer. Additionally, the Committee generally grants equity awards to executive officers upon commencement of their employment with the Company or their promotion, with the level of award based on factors similar to those considered in connection with awards to existing executive officers. Finally, the Committee considers the number of shares of Common Stock which would be subject to proposed equity incentive awards to individual NEOs for consistency with the Committee’s objective to limit annual potential incrementalactual net dilution attributable to equity awards to Company employees to at or below a long-term average of 3%. per annum.

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RSUs are granted with vesting requirements related to (a) the passage of time, to encourage continued service and retention, (b) the occurrence of one or more events, and/or (c)(b) the satisfaction of performance or financial goals or other conditions that are aligned with the Company’s business and financial objectives and designed to support growth in long-term Stockholder value. In all cases, vesting of RSUs is contingent upon the executive officer’s continued employmentservice with the Company. The Company utilizes a mix of time and performance-based RSU awards for all of its NEOs.

Similarly, all stock options are granted at a fixed price per share equal to or greater than the market price on the grant date and have a term not to exceed eight years. StockIn February 2009 the Company began issuing performance stock options which include vesting criteria providing that each such option will vest in three equal installments on the latter to occur of (i) the first, second and third anniversaries of the grant date and (ii) the appreciation of the price of the Company’s common stock such that it will have traded at a minimum of a 25% premium to the exercise price of these options for at least 30 consecutive trading days (the “Performance Options”). The Company also issues time-based stock options, which generally become exercisable either in three equal annual installments (for annual awards) or, for new hire awards, at the rate of 25% of the shares subject thereto one year from the grant date and as to approximately 6.25% of the shares subject to the option at the end of each three-month period thereafter such that the option is fully exercisable four years from the grant date, contingent upon the executive officer’s continued employmentservice with the Company.Company (the “Time Based Options”). Accordingly, the option will provide the maximum return to the executive officer only if the executive officer remains employed by the Company for the full three or four year vesting period, and then only if the market price of the underlying shares of Common Stock appreciate over the option term.

In May 2007 theThe Committee approved a change in long-term incentive compensation programs suchaffirmed its commitment to pay-for-performance on October 28, 2008 by announcing its intent that, future awards for Company employees will be in the form of RSUs only. The Company and the Committee presently believe that RSUs are a better method than stock optionswith respect to provideall equity compensation opportunities to continuing employees in a mannerawards granted after that permits more predictable long-term rewards and functions as an improved long-term retention tool. Also, the usedate:

As discussed in the Grants of Plan-Based Awards Table. This RSU award was subject to 100% time-based vesting requirements, with 2/3rds of the award to vest on the one year anniversary of the award and 1/3^rd of the award to vest fifteen months following the award date. The Committee believes that this vesting schedule for2008 CD&A, Mr. Gudmundson’s fiscal year 2008 annual award will most effectively deliver competitive compensation opportunities while utilizing fewer shares, reducing dilution and aggregate financial expense than would a longer vesting term. Additionally, the Committee believes that this vesting schedule is aligned with the Committee’s objective of providing a retention incentive.

Waechter, Mr. Vellequette, Mr. EttermanLowe and Mr. WaechterBie were awarded RSUs in June 2008 as an element of the Company’s fiscal year 2008 annual review process. Management recommended and the Committee determined a target award level for each NEO (the “Target Award Level”) consistent with the 70^th-75^th percentile level of the Peer List and adjusted based upon an individual performance assessments asand role-based assessment and factors discussed above. Each NEOindividual was then awarded approximately 80% of the total RSUs representing this adjusted Target Award Level in the form of time-based RSUs, which vest in three equal annual installments. The Committee believes that a three year vesting period for these fiscal year 2008 annual awards will most effectively deliver competitive compensation opportunities while utilizing fewer shares, reducing dilution and aggregate financial expense than would a longer vesting term. The Committee intends to consider at least annually the Company’s time-based vesting criteria and retains the discretion to utilize longer or shorter vesting schedules for future grants. Actual awards to NEOs are shown in the Grants of Plan-Based Awards Table.²

It iswas the Committee’s present intent as an element of the June 2008 awards program that if the Company achieves certain commercially sensitive and confidentialachieved full Company fiscal year 2009 EBITDA targets,target that the Company willwould award each of Mr. Waechter, Mr. Vellequette, Mr. Etterman, Mr. GudmundsonLowe and Mr. WaechterBie RSUs in a number equivalent to the remaining 20% of such executive’s fiscal year 20082009 adjusted Target Award Level (the “Anticipated Performance Awards”), subject to further adjustment as described below, following the public release of the Company’s fiscal year 2009 results, which is presently anticipated to occur in August 2009.results. The actual number of units that will be awarded in each Anticipated Performance Award will dependwas dependent upon the percentage achievement of the Company’s commercially sensitive fiscal year 2009 Company EBITDA targets,target, subject to a minimum threshold achievement. In the event Anticipated Performance Awards arewere issued, 1/3^rd of the units comprising each such award willwould immediately vest, and the remaining 2/3rds3^rds of these units willwould vest in equal installments on the first and second anniversary of the award date. The Committee believesbelieved that aligning the performance goals for the Anticipated Performance Awards with Company fiscal year 2009 EBITDA targets will

would most closely tie compensation of these NEOs to Company profitability growth. In August 2009 the Committee reviewed the Company’s actual fiscal year 2009 EBITDA results against the 2009 EBITDA target and determined that the minimum performance threshold had not been attained. As a result, none of these NEOs were awarded the Anticipated Performance Awards.

Mr. Vellequette, Mr. Holly and Mr. Bie were awarded RSUs and stock options in February 2009 as an element of the Company’s fiscal year 2009 equity award and review process. Management recommended and the Committee determined a target award level for each NEO consistent with the 70^th-75^th percentile level of the Peer List and adjusted based upon individual performance assessments as discussed above. Consistent with the Company’s commitment discussed above to ensure that at least 50% of equity awards to NEOs are performance-based. Each NEO was then awarded 50% of the target award level shares in the form of Performance Options. The remaining 50% of the shares subject to award were then apportioned between time-based RSUs and time-based stock options (together the “2009 Time Based Awards”) such that approximately 25% of the total potential value of the combined elements of the award would be delivered in the form of RSUs and the remaining approximately 75% in the form of stock options (valuing stock options on a Black-Scholes basis). All of the 2009 Time Based Awards were subject to the Company’s standard time-based vesting schedules discussed above. Actual awards to NEOs are shown in the Grants of Plan-Based Awards Table.

Pursuant to the long-term incentive compensation portion of the Waechter Agreement, the following equity incentive awards were granted to Mr. Waechter upon his becoming the Company’s CEO on January 1, 2009:

In determining the appropriate size and value of Mr. Waechter’s promotion related equity award the independent members of the Board considered the same data discussed above with respect to determination of Mr. Waechter’s CEO base salary. In particular, the Board noted that while the number of shares of the Company’s common stock subject to the award was higher as a percentage of outstanding shares than the 75^th percentile of the Internal Promotions Survey, the Black-Scholes valuation of the award was less than the 50^th percentile. Consistent with the Company’s commitment relative to at least 50% of all equity awarded being subject to performance vesting criteria, the Board utilized a mix of 50% Performance Options and time-based RSUs and Time-Based Options.

Certain elements of Mr. Kennedy’s long-term incentive compensation arewere stipulated by the terms of the Kennedy Agreement. Specifically,Agreement, as disclosed and described in the Company awarded2008 CD&A. These elements included the award to Mr. Kennedy of a grant of 175,000 deferred stock units (“DSUs”) on October 15, 2007 which was fully vested upon the date of grant. These shares are being held byPursuant to the Company to beterms of the Kennedy Agreement and the terms of the DSU award described in the 2008 CD&A, the DSUs were delivered to Mr. Kennedy upon the sooner to occur of: (i) the date upon which Mr. Kennedy’s service(and awarded as shares) on July 1, 2009.

Similarly, pursuant to the Company terminates for any reason; (ii) upon a changeterms of control (as defined in the Kennedy Agreement), or (iii)Agreement, on the second anniversary of the date of the grant of the deferred stock units. Similarly,August 29, 2008 the Company also awarded Mr. Kennedy a grant of 200,000 RSUs October 15, 2007 subject to time-based vesting requirements. This award shall vest in equal installments on each of the first and second anniversaries of the date of grant.

Finally, the Kennedy Agreement provides that no later than the last business day of the first fiscal quarter of the Company’s fiscal year 2009 the Company will award Mr. Kennedy a grant of arequired minimum of 375,000 RSUs under the Company’s then effective equity incentive plan(s)(the “2009 Kennedy Award”). This award shall beThe 2009 Kennedy Award was subject to the following conditions of vesting:

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In June 2008February 2009 and in August 2009 the independent members of the Board determinedand the Committee evaluated the Company’s financial performance in the first and second halves of fiscal year 2009 against the performance criteria applicable to the RSU awardabove described performance-based portion of the 2009 Kennedy Award as established by the independent members of the Board in June 2008 (as discussed in the preceding paragraph. Specifically,2008 CD&A) and determined in each case that such performance criteria were not met. As a result, none of the performance targets to be applicable to such award shall be based upon achievementbased-portion of certain commercially sensitive and confidential Company fiscal yearthe 2009 and 2010 EBITDA targets, measured at points in time describedKennedy Award vested in the preceding paragraph. Such performance targets applicable toCompany’s 2009 fiscal year 2009 EBITDA targets are aligned with targets applicable to the Anticipated Performance Awards for the Company’s other NEOs described above. The Committee believes that aligning the performance goals for this award with Company fiscal year 2009 and 2010 EBITDA targets will most closely tie this element of Mr. Kennedy’s compensation to full Company profitability growth. As stated above, these performance criteria are based upon Board-approved financial performance objectives, projections and estimates, and as such are confidential and commercially sensitive.year.

The Committee and the Board intendintended that the above elements of Mr. Kennedy’s and Mr. Waechter’s long-term incentive compensation result in compensation opportunities that are at or near the 7575th^th percentile when compared to CEOs at peer group companies on the Company’s Peer List, consistent with the long-term incentive compensation philosophy discussed above. The Committee and the Board further believe that targeting the CEO’s long-term incentive compensation at or near the 75^th percentile is necessary and appropriate to retain the highest caliber of individual at the CEO level to manage the continuing risks, challenges and opportunities inherent in successfully completing a corporate turnaround situation, sustainsustaining the positive momentum resulting from a successfully completed corporate turnaround situation and continuing to transform the Company into a benchmark for sustainable profitability. Ascash generation and profitability, especially in a consequence,challenging recessionary environment.

In connection with Mr. Lowe’s promotion in October 2008, Mr. Lowe was awarded 269,607 time based RSUs, which will vest in three equal installments on the Committeefirst, second and Board believe the establishment of more aggressive long-term incentive compensation opportunities for the Company’s CEO is consistent with the long term interests of Stockholders. The Committee and the Board’s decision to include in the Kennedy Agreement the award of DSUs which were immediately vested is intended to provide such opportunities to Mr. Kennedy though increasing his beneficial holding of Company Common Stock, support his commitment to the Kennedy Agreement upon the expirationthird anniversaries of the initial term of the Former Kennedy Agreement and provide favorable tax treatment without increased expense togrant date. Additionally, the Company and is consistent with the Committee and Board’s CEO compensation targets.

The long-term incentive compensation portion of Mr. Waechter’s new hire compensation package awarded on November 15, 2007, as detailed in the “Stock Awards” columns of the Outstanding Equity Awards at Fiscal Year End Table, reflects the standard Company policy at that point in fiscal year 2008 of grantingcommitted to awarding up to an additional 269,607 RSUs to NEOs with 60% time-based vesting and 40% performance-based vesting provisions. Mr. Waechter’s performance-based RSUswhich will vest upon the earlier of (a)be granted subject to the achievement of certain CommTest specific commercially sensitiveperformance criteria determined by the CEO and confidential, gross margin and operating expense milestones, or (b) in their entirety on the third anniversaryCommittee (the “Lowe Performance RSUs”). The relative value of Mr. Lowe’s equity award associate with his promotion was determined by the date of grant. The Committee determined that allowing the cliff vesting of the performance-based portion of this RSU grant on the third anniversary of the grant date with the opportunity for accelerated vesting wasto be consistent with the Committee’s objective75^th percentile target for NEOs. Additionally, in approving the award the Committee considered the fact that Mr. Lowe would not be eligible to participate in the Company’s fiscal year 2009 focal equity incentive program. The specific performance criteria applicable to the Lowe Performance RSUs were approved by the Committee in November 2008 and, like the objectives discussed above with respect to the AIP, reflect the Company’s confidential and commercially sensitive financial and business planning and performance objectives, projections and estimates, the specific disclosure of encouraging acceleratedwhich would result in competitive harm to the Company. In general, the performance targets assigned to the Lowe Performance RSUs are as follows:

Pursuant to the vesting terms of the Lowe Performance RSUs, upon achievement of aggressivethe specific performance targets, the corresponding portion of the RSUs will vest 50% upon Committee determination of the achievement of such performance target, and challengingthe remaining 50% shall vest on the first anniversary of such determination. However, no portion of the Lowe Performance RSUs may vest prior to May 15, 2009, and any portion of the Lowe Performance RSUs for which the applicable performance objectives while simultaneously enablingtargets have not been met by the recruitment and retentionend of a highly experienced executive with previous public company CEO experience to leadthe third quarter of the Company’s largest (by revenue) business segment.

Current compensation and amounts realizable from prior compensation are considered in setting other elements of compensation, asfiscal year 2011 shall be cancelled. The Committee approved the Committee actively tracks historical and prospective summaries of total compensation components for each NEOabove performance criteria in order to gauge how much retentionincentivize specific operational actions which the Board and Committee believe will accelerate the Company’s objectives of sustained profitability and cash generation through margin improvements and reduction in fixed manufacturing expenses. In each case the performance targets were intended by the Committee to be challenging yet reasonably achievable.

In May 2009 the Committee determined that Mr. Lowe had achieved the performance target tied to 20% of the Lowe Performance RSUs and accordingly that portion of the RSUs became subject to vesting on the schedule described in the preceding paragraph.

In connection with Mr. Holly’s promotion in April 2009, Mr. Holly was awarded the following equity incentive awards:

The relative value previous grantsof Mr. Holly’s equity award associate with his promotion was determined by the Committee to be less than the Committee’s 75^th percentile target for NEOs. Additionally, in approving the award the Committee considered the fact that Mr. Holly would not be eligible to participate in the Company’s fiscal year 2010 focal incentive program, and continuing cashhad in February 2009 received an equity award pursuant to the Company’s fiscal year 2009 focal incentive programs provide.program.

Other Compensation Programs and Policies.In addition to the components of compensation that the Company currently pays to its NEOs, below are two additional potential elements of compensation available to NEOs:

Deferred Compensation Plan.The Company maintains a deferred compensation plan, pursuant to which certain members of management (including executive officers) may elect to defer a portion of his or her annual

compensation. The participants’ funds are invested among various funds designated by the plan administrator and which are identical to those available in the Company’s 401(k) Retirement Plan, and may not be invested in the Company’s Common Stock or other Company securities. Upon the death or retirement of a participant, the funds attributable to the participant (including any earnings on contributions) are distributed to the participant or the participant’s beneficiary in a lump sum or in annual installments over a period not to exceed fifteen years. During fiscal year 2008,2009, none of the Company’s NEOs participated in the deferred compensation plan.

Perquisites and Other Personal Benefits. We strongly believe that it is critical that the Company maintains an egalitarian culture in our facilities and operations, and that our executive officers are not entitled to operate under different standards than other employees. The Company’s healthcare, insurance, and other welfare and employee benefit programs are the same for all eligible employees, including executive officers. The Company shares the cost of health and welfare benefits with its employees, a cost that is dependent on the level of benefits coverage that each employee elects. The Company does not have programs for providing personal benefit perquisites to NEOs, such as defraying the cost of financial or legal advice, personal entertainment, recreational club memberships or family travel, nor does it provide its officers with reserved parking spaces or separate dining or other facilities or services. The Company has no outstanding loans of any kind to any of its executive officers, and it expects its officers to be role models under its Code of Business Conduct, which applies equally to all employees.

As indicated in the “All Other Compensation” column of the Summary Compensation Table, the Kennedy Agreement required the Company to obtain a policy of insurance which provides that if Mr. Kennedy’s employment is terminated as the result of his death or disability, a benefit equivalent to three years’ salary, at Mr. Kennedy’s annual salary in effect on the effective date of the event, plus three years’ bonus calculated based upon Mr. Kennedy’s “at target” bonus under the CEO Incentive Plan, shall be paid to Mr. Kennedy and/or Mr. Kennedy’s estate or heirs as may be designated by Mr. Kennedy at his sole discretion. The Company pays the premium listed in the “All Other Compensation” column of the Summary Compensation Table on behalf of Mr. Kennedy to maintain this insurance policy. Under the Former Kennedy Agreement, which contained a similar employment termination benefit in the event of Mr. Kennedy’s death or disability, the Company bore the risk and would have had to bear the entire cost in the event Mr. Kennedy’s death or disability employment termination benefit became due and owing. When entering into the Kennedy Agreement the independent members of the Board determined that it was reasonable and appropriate to insure against these contingencies under the Kennedy Agreement rather than have the Company bear this risk.

Compensation Recovery Policy

The Committee will evaluate in appropriate circumstances whether to seek the reimbursement of certain compensation awards paid to an executive officer if such executive engages in misconduct that caused or partially caused a restatement of financial results, in accordance with section 304 of the Sarbanes-Oxley Act of 2002. If circumstances warrant, we will seek to claw back appropriate portions of the executive officer’s compensation for the relevant period, as provided by law.

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Executive Stock Ownership Policy

The Committee recommended and the full Board approved formal stock ownership requirements for non-employee directors and executive officers of the Company in fiscal year 2005. Under the policy, each non-employee director of the Company should have a minimum equity interest in the Company’s stock at least equal to that non-employee director’s then current annual cash retainer by the later to occur of the fifth anniversary of his or her first election the Board or June 30, 2010. Likewise, each executive officer of the Company should have a minimum equity interest in the Company’s stock at least equal to that executive officer’s then current annual base salary by the later to occur of the fifth anniversary of his or her commencement of employment with the Company or June 30, 2010. The shares that count towards this Company policy include stock owned outright, unvested and vested restricted stock and RSUs, and any stock options exercisable with 60 days of the valuation date. The equity incentive awards granted in fiscal year 20082009 to each of the current named executive officers are listed in the Outstanding Equity At Fiscal Year End Table.

Equity Grant Practices

All stock option awards made to our NEOs, as well as all other Company employees, have an exercise price equal to the fair market value of our common stock on the date of grant.grant (though as noted above the Performance Options only vest upon significant stock price appreciation over the exercise price). Fair market value is defined under our equity compensation plans as the closing market price of a share of our common stock on NASDAQ on the date of grant. The Committee generally makes grants to our NEOs and other senior management on a once-a-yearonce-a-fiscal year basis, but the Committee retains the discretion to make additional awards to NEOs at other times in connection with the initial hiring of a new officer, for retention purposes, or otherwise. All new hire equity incentive awards for all employees, including officers, are granted on the 15^th day of the month immediately following the first day of employment of such new employee.

The Company does not have any program, plan or practice to time equity compensation grants to its executives in coordination with the release of material nonpublic information. The Company has not timed, nor does it plan to time, the release of material nonpublic information for the purpose of affecting the value of executive compensation, nor are equity compensation grants timed with regard to current share price or factors which may affect future share price.

Tax Considerations

The Committee endeavors to maximize deductibility of compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) to the extent practicable while maintaining a competitive, performance-based compensation program. . Based on the amount of deductions the Company can take each year, the actual impact of the loss of deduction for compensation paid to any NEO over the $1 million limitation is extremely small and has a de minimus impact on the Company’s overall tax position. For the foregoing reasons, the Committee, while considering tax deductibility as one of the factors in determining compensation, will not limit compensation to those levels or types of compensation that will be deductible. The Committee will, of course, consider alternative forms of compensation that, consistent with its compensation goals, preserve deductibility.

The Company’s 2003 Equity Incentive Plan (the “2003 Plan”) is structured such that compensation deemed paid to an executive officer when he or she exercises an outstanding option under the 2003 Plan, with an exercise price equal to the fair market value of the option shares on the grant date, will qualify as performance-based compensation which will not be subject to the $1 million limitation. In addition, other stock based awards issued under the 2003 Plan may be exempt from the $1 million limitation if such awards are subject to performance criteria and administered in accordance with Section 162(m) of the Code. The Company has discretion to issue other stock based awards which are intended to be exempt from the $1 million limitation as well as other stock based awards that are not intended to be exempt from the $1 million limitation.

COMPENSATION COMMITTEE REPORT

The information contained in the following report shall not be deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission, except to the extent that the Company specifically requests that the information be treated as soliciting material or incorporates it by reference into a document filed under the Securities Act or the Exchange Act. The information will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.

COMPENSATION COMMITTEE

Casimir S. Skrzypczak, Chair

Richard E. Belluzzo

Kevin A. DeNuccio

Penelope A. Herscher

Martin A. Kaplan

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SUMMARY COMPENSATION TABLE

The following table summarized the total compensation of our Named Executive Officers in fiscal years 2007 and 2008.through 2009. The amounts shown below for stock awards (i.e. RSUs) and stock options represent the amounts we expensed during fiscal years 2007 and 2008,through 2009, rather than the amounts actually received by our NEOs, and includes compensation cost recognized in our consolidated financial statements with respect to awards granted in fiscal years 2007 and 2008,through 2009, respectively, and in prior years.

Employment Contracts, Termination of Employment and Change in Control Arrangements

On October 2, 2007,December 17, 2008, the Company and Mr. KennedyWaechter entered into a newan employment agreement (the “Kennedy“Waechter Agreement”) replacing Mr. Kennedy’s previous employment agreement dated September 1, 2003 (the “Former Kennedy Agreement”). The Former Kennedy Agreement had an original term of September 1, 2003 to August 31, 2007. Pursuant to the Kennedy Agreement the term commenced on September 1, 2007 and shall expire on August 31, 2009, subject to being automatically renewed for additional periods of one year each unless sooner terminated, pursuant to which Mr. Waechter became the termsChief Executive Officer and President of the Kennedy Agreement.

Company, effective January 1, 2009. Mr. Kennedy’sWaechter’s base salary under the KennedyWaechter Agreement is $800,000, with effect from September 1, 2007.$700,000. In addition, Mr. KennedyWaechter is eligible to earn an annual bonusa cash incentive under the Company’s established incentive plan(s) for senior executives with a target bonus of 100% of his annual base salary, and a range of potential bonus from 0% to a maximum bonus of up to 125% of his annual base salary, based upon achievement of objectives determined by the Company from time to time. Mr. Kennedy also is eligible to participate in an individual performance-based bonus program (the “CEO Incentive Plan”) with performance targets to be established by the Company’s Board of Directors and reasonably agreed upon by Mr. Kennedy (the “CEO Bonus Targets”). Under the CEO Incentive Plan, subject to achievement of minimum performance criteria, Mr. Kennedy is eligible to receive a minimum bonus of 50% of his annual base salary, and a maximum bonus of up to 125% of his annual base salary. Any bonus paid to Mr. Kennedy under the Company’s established incentive plan(s) for senior executives shall be a credit against and will be deducted from any obligation of the Company to Mr. Kennedy under the CEO Incentive Plan.

Pursuant to the Kennedy Agreement, the Company awarded Mr. Kennedy a grant of 175,000 deferred stock units on October 15, 2007 which was fully vested upon the date of grant, such shares to be delivered to Mr. Kennedy upon the sooner to occur of: (i) the date upon which Mr. Kennedy’s service to the Company terminates for any reason; (ii) upon a change of control (as definedtime, commencing in the Kennedy Agreement), or (iii) on the second anniversary of the date of the grant of the deferred stock units.

Pursuant to the Kennedy Agreement, the Company also awarded Mr. Kennedy a grant of 200,000 restricted stock units (“RSUs”) on October 15, 2007, under the Company’s then effective equity incentive plan(s). This award shall vest in equal installments on each of the first and second anniversaries of the date of grant.

Pursuant to the Kennedy Agreement, no later than the last business day of the first fiscal quarterhalf of the Company’s 2009 fiscal year 2009.

Mr. Waechter also received the Company will award Mr. Kennedy a grant of a minimum of 375,000 RSUs under the Company’s then effectivefollowing equity incentive plan(s). This award shall be subjectawards pursuant to the following conditions of vesting:Waechter Agreement, each granted on January 1, 2009:

On December 5, 2008, the Company and Mr. Kennedy entered into an agreement (the “Transition Agreement”), pursuant to which the Company paid Mr. Kennedy $400,000 within seven days of the termination of Mr. Kennedy’s service as Chief Executive Officer and President.

Additionally, on December 5, 2008, the Company and Mr. Kennedy entered into a consulting agreement (the “Transitional Consulting Agreement”) which, pursuant to its terms, commenced on January 1, 2009 and will terminate on December 31, 2009. In exchange for certain transition and support services, Mr. Kennedy will be paid consulting fees of $800,000 pursuant to the terms of the Transitional Consulting Agreement, payable in equal monthly installments each calendar month of 2009.

For a complete summary of the termination and change of control provisions of the Kennedy Agreement,above agreements, please see the section “Potential Payments Made Upon Termination or Change of Control” below. A complete summary of the Executive2008 Change of Control SeveranceBenefits Plan that the Company adopted on February 17, 2007,August 29, 2008, which explains the termination benefits available to the NEOs other than Mr. Waechter and Mr. Kennedy, can also be found under that section heading below.

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GRANTS OF PLAN-BASED AWARDS TABLE

The following table provides information about equity and non-equity awards granted to the Named Executive Officers in fiscal year 2008:2009: