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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTIONProxy Statement Pursuant to Section 14(a) OF THE SECURITIES
EXCHANGE ACT OFof the Securities Exchange Act of 1934
(AMENDMENT NO. )(Amendment No. __)
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[ ]
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[ ]|_| Soliciting Material Pursuant to Rule 14a-11(c)ss.240.14a-11(c) or Rule 14a-12ss.240.14a-12
CIENA Corporation
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CIENA Corporation
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PRELIMINARY FILING
LOGO[LOGO]
CIENA CORPORATION
920 ELKRIDGE LANDING ROAD
LINTHICUM, MARYLAND1201 Winterson Road
Linthicum, Maryland 21090
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 19982000 Annual Meeting of Stockholders of CIENA Corporation will be held
at the Harbor Inn Pier 5, 711 Eastern Avenue,BWI Marriott, 1743 W. Nursery Road, Baltimore, Maryland, on Wednesday,Thursday,
March 11, 199816, 2000 at 3:00 p.m. for the following purposes:
1. To elect two Class IIII directors.
2. To adopt the Third Amended and Restated CIENA Corporation Employee1994 Stock
PurchaseOption Plan.
3. To amend the Corporation's Third Restated Certificate of Incorporation
to increase the number of shares of Common Stock authorized for issuance
thereunder from 180360 million shares to 360460 million shares.
4. To ratify the selection of Price WaterhousePricewaterhouseCoopers LLP as independent
public accountants for the Corporation.
5. To consider and act upon such other business as may properly come
before the meeting.
Whether or not you expect to attend the meeting, you are requested toplease sign, date and
return the enclosed proxy as promptly as possible in the enclosed stamped
envelope.
By Order of the Board of Directors
G. Eric Georgatos/s/ Michael O. McCarthy III
Michael O. McCarthy III
Secretary
Linthicum, Maryland
February 19, 19988, 2000
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PRELIMINARY FILING
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MARCH 11, 1998Annual Meeting of Stockholders
March 16, 2000
This Proxy Statement iswill be furnished on or about February 19, 19988, 2000 to
stockholders of CIENA Corporation (the "Corporation"), 920 Elkridge Landing1201 Winterson Road,
Linthicum, Maryland 21090, in connection with the solicitation by the Board of
Directors of the Corporation of proxies to be voted at the Annual Meeting of
Stockholders. The stockholder giving the proxy has the power to revoke the proxy
at any time before it is exercised. Such right of revocation is not limited by
or subject to compliance with any formal procedures.
The Corporation will bear the cost of soliciting proxies will be borne by the Corporation.proxies. Copies of
solicitation material may be furnished to brokers, custodians, nominees and
other fiduciaries for forwarding to beneficial owners of shares of the
Corporation's Common Stock, and normal handling charges may be paid for such
forwarding service. Solicitation of proxies may be made by mail, personal
interview, telephone and telegraph by officersOfficers and other management employees of the Corporation,
who will receive no additional compensation for their services.services, may solicit
proxies by mail, personal interview, telephone and telegraph.
At the close of business on January 12, 1998,13, 2000, there were 99,982,487139,339,284
shares of the Common Stock of the Corporation outstanding and entitled to vote
at the meeting. There were 5611,543 record holders as of January 12, 199813, 2000 and only
stockholders of record on that date will be entitled to vote at the meeting.
Each share will have one vote.
PROPOSAL 1
ELECTION OF DIRECTORS
GENERALElection of Directors
General
The Board of Directors currently consists of sixseven members. The directors
are divided into three classes. Each class of Directors consists of two Directors,
withclasses, each class serving for a staggered three-year
term. Each class contains two Directors. Class I, whose term expires in 2001,
consists of Mr. Dillon and Dr. Nettles; Class II, whose term expires in 2002,
consists of Messrs. Cash and Zak; and Class III, whose term expires at the
Annual Meeting, consists of Professor Bradley and Messrs. Taylor and Oliver. At
the Annual Meeting, two directors will be elected to fill positions in Class
I.III. Professor Bradley and Mr. Taylor are nominees for election at the meeting.
Mr. Oliver is retiring as a director at the end of his term, which expires on
the date of the meeting. Each of the nominees for Class I,III, if elected, will
serve for terms expiring at the 20012003 annual meeting of stockholders.
Unless otherwise instructed on the proxy, it is the intention of the
persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as directors of the persons named below as
nominees. The Board of Directors believes that all such nominees will stand for
election and will serve if elected. However, if any of the persons nominated by
the Board of Directors fails to stand for election or is unable to accept
election, proxies will be voted by the proxy holders for the election of such
other person or persons as the Board of Directors may recommend.
The following table presents information concerning persons nominated for
election as directors of the Corporation and for those directors whose termterms of
officesoffice will continue after the meeting.
NOMINEES FOR ELECTION AS A DIRECTOR FOR TERMS EXPIRING IN 2001
Jon W. Bayless,
Nominees for Election as a Director for Terms Expiring in 2003
Stephen P. Bradley, Ph.D. ........ Director of the Corporation since April 19941998.
Professor Bradley, age 58, is a William Ziegler
Professor of Business Administration and the
Chairman of the Program for Management Development
at the Harvard Business School. A member of the
Harvard faculty since 1968, Professor Bradley is
also Chairman of Harvard's Executive Program in
Competition and Strategy and teaches in Harvard's
Delivering Information Services program. Professor
Bradley has written extensively on the
telecommunications industry and the impact of
technology on competitive strategy. Professor
Bradley received his B.E. in electrical
engineering from Yale University in 1963 and his
M.S. and Ph.D. in operations research from the
University of California, Berkeley, in 1965 and
1968 respectively. Professor Bradley serves on the
Audit Committee of the Board of DirectorsDirectors.
Gerald H. Taylor ............ Director of the Corporation since January 2000.
Mr. Taylor, age 57, has been a private consultant
and investor in the telecommunications industry
since November 1998. He served as Chief Executive
Officer of MCI Communications from November 1996
to November 1998 and was President and Chief
Operating Officer from July 1994 to November 1996.
Dr. Bayless, age 57, isMr. Taylor was a general partner of
various venture capital funds associated with Sevin
Rosen Funds where, since 1981, he has focused on
developing business opportunities in the fields of
telecommunications and computers. Dr. Bayless also
is the controlling stockholder and
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sole director of Jon W. Bayless, Inc., the general
partner of Atlantic Partners L.P., which is the
general partner of Citi Growth Fund L.P., a venture
capital investment firm. Dr. Bayless currently
serves as a director of 3DX Technologies Inc. and
of several private companies. Dr. Bayless is also
Chairmanmember of the Board of Directors
of Shared
Resource Exchange,MCI Worldcom Inc. Shared Resource Exchange,
Inc. filed for reorganization under Chapter 11 of
the Federal Bankruptcy Code in August 1996. A plan
under Chapter 11 has been approved. Dr. Bayless
earned his B.S. degree in electrical engineering at
the University of Oklahoma.from 1998 to 1999. He
earned his M.S.
degree in electrical engineering at the University
of Alabama, and his Ph.D. in electrical engineering
at Arizona State University. Dr. Baylesscurrently serves on the Audit, Human Resources,Boards of Lafarge
Corporation, E2Enet, Inc. and Corporate
Governance CommitteesVoyager.net. Mr.
Taylor was Chief Operating Officer of the Board of Directors.MCI from
April 1993 to November 1996. Taylor joined MCI in
1969 as its sixth employee and was integrally
involved in building MCI through key roles held in
operations, sales and marketing.
Directors Continuing in Office
Patrick H. Nettles, Ph.D.,..................... ... Chief Executive Officer of the Corporation since
February 1994, President and Chief Executive
Officer of the Corporation since April 1994 and
Director of the Corporation since February 1994.
From 1992 until 1994, Dr. Nettles, age 54,56, served
as executive vice presidentExecutive Vice President and chief operating
officerChief Operating
Officer of Blyth Holdings Inc., a publicly-held
supplier of client/server software. From late 1990
through 1992, Dr. Nettles was presidentPresident and chief
executive officerChief
Executive Officer of Protocol Engines Inc., a
development stage enterprise, formed as an
outgrowth of Silicon Graphics Inc., and targeted
toward very large scale integration basedintegration-based
solutions for high-performance computer
networking. From 1989 to 1990, Dr. Nettles was
Chief Financial Officer of Optilink, a venture
start-up which was acquired by DSC Communications.
Dr. Nettles received his B.S. degree from the
Georgia Institute of Technology and his Ph.D. from
the California Institute of Technology. DIRECTORS CONTINUING IN OFFICEDr.
Nettles' term as Director expires 2001.
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John R. Dillon .............. Director of the Corporation since October 1999.
Mr. Dillon, age 58, has held a variety of
positions at such companies as the Coca-Cola
Company, Scientific Atlanta and Fuqua National,
where he served as President. Mr. Dillon joined
Cox Communications in 1981. He was instrumental in
taking it private in 1985 and merging it with Cox
Newspapers to form Cox Enterprises at which time
he was elected Senior Vice President, CFO and a
member of the board of directors. At Cox
Enterprises, he was responsible for all corporate
financial activities as well as planning and
development, until his retirement in December
1996. He continued to serve on the Boards of TCG
and Cox Communications for two years following his
retirement from Cox Enterprises. Mr. Dillon holds
an M.B.A. from Harvard Business School and a
B.E.E. degree from Georgia Institute of
Technology, where he was elected to the Academy of
Distinguished Engineering Alumni in 1997. He was a
founding director of the Georgia Center for
Advanced Telecommunications Technology and
currently serves on the Georgia Institute of
Technology National Advisory Board. Mr. Dillon
serves on the Audit Committee of the Board of
Directors. Mr. Dillon's term as Director expires
in 2001.
Harvey B. Cash.............Cash .............. Director of the Corporation since April 1994. Mr.
Cash, age 59,61, is a general partner of InterWest
Partners, a venture capital firm in Menlo Park,
California which he joined in 1985. Mr. Cash
serves on the board of directors of Benchmarq
Microelectronics, Liberte, Inc.,
AMXPANJA Corporation, i(2)and i2 Technologies Inc. and Aurora Electronics, Inc.
He is
also is an advisor to Austin Ventures. Mr. Cash
received a B.S. in electrical engineering from
Texas A&M University and an M.B.A. from Western
Michigan University. Mr. Cash serves on the Human
Resources and Corporate Governance CommitteeCommittees of
the Board of Directors. Mr. Cash's term as
Director expires in 1999.
Clifford H. Higgerson...... Director of the Corporation since April 1994. Since
1991, Mr. Higgerson, age 58, has been a general
partner of Vanguard Venture Partners, a venture
capital firm specializing in high technology
start-ups, located in Palo Alto, California. Prior
to joining Vanguard in July 1991, Mr. Higgerson was
the managing partner of Communications Ventures,
Inc. and prior to that was a Managing Partner of
Hambrecht & Quist. Mr. Higgerson also is a director
of Advanced Fibre Communications and Digital
Microwave Corp. Mr. Higgerson earned his B.S. in
electrical engineering from the University of
Illinois and an M.B.A. in finance from the
University
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of California at Berkeley. Mr. Higgerson serves on
the Audit Committee of the Board of Directors. Mr.
Higgerson's term as Director expires in 2000.
Billy B. Oliver............ Director of the Corporation since June 1996. Since
his retirement in 1985 after nearly 40 years of
services at AT&T, Mr. Oliver, age 72, has worked as
a self-employed communications consultant. During
his last 15 years with AT&T, he held the position
of vice president, engineering planning and design,
where he was directly involved in and had
significant responsibility for the evolution of
AT&T's long distance network during that period. He
was a co-recipient of the Alexander Graham Bell
Medal for the conception and implementation of
Nonhierarchical Routing in AT&T's network. Mr.
Oliver also is a director of Digital Microwave
Corp., Communications Network Enhancement Inc. and
Enterprise Network Services Inc. Mr. Oliver earned
his B.S.E.E. degree from North Carolina State
University. Mr. Oliver serves on the Human
Resources Committee of the Board of Directors. Mr.
Oliver's term as Director expires in 2000.2002.
Michael J. Zak.............Zak .............. Director of the Corporation since December 1994.
Mr. Zak, age 44,46, has been employed by Charles
River Ventures of Boston,Waltham, Massachusetts since
1991 and has been a general partner of Charles
River Partnership VII and its related entities
since 1993. From 1986 through 1991, he was a
founder and corporate officer of Concord
Communications, Inc., a manufacturerdeveloper of data communications systems.network
management software. He is a director of ON Technology Corporation as well
as seven otherfour
private companies. Mr. Zak has a B.S. degree in
engineering from Cornell University and an M.B.A.
from Harvard Business School. Mr. Zak serves on
the Audit, Human Resources and Corporate Governance
Committees of the Board of Directors. Mr. Zak's
term as Director expires in 1999.
BOARD AND BOARD COMMITTEE INFORMATION
BOARD COMMITTEES2002.
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Board and Board Committee Information
Board Committees
The current committees of the Board of Directors each consist entirely of
non-employee directors. The Corporation's Audit Committee makes recommendations
concerning the engagement of independent public accountants, reviews the plans
and results of the audit engagement with the independent public accountants,
reviews the independence of the independent public accountants, considers the
range of audit and non-audit fees and reviews the adequacy of the Corporation's
internal accounting controls. Dr. BaylessProfessor Bradley and Messrs. Zak and HiggersonDillon are
the members of the Audit Committee. The Corporation's Compensation Committee,
recently renamed the Human Resources Committee
determines compensation for the Corporation's executive officers and administers
the Corporation's 1999 Non-Officer Stock Option Plan (the "Non-Officer Plan"),
the Amended and Restated 1994 Stock Option Plan (the "1994 Plan"), the Second
Amended and Restated 1994 Stock Option Plan and will administer the CIENA Corporation1999 Employee Stock Purchase
Plan, if approved by stockholders. Dr. BaylessPlan. Messrs. Zak, Cash and Messrs. Oliver and Zak arewere the members of the Human Resources
Committee. The
Corporation's Corporate Governance Committee reviews at least annually the
operationin 1999. Mr. Bayless was a member of the Board, monitors evolving corporate governance standards and
guidelines, and may recommend to the full Board the adoption or implementation
of actions believed appropriate to improve the operation ofHuman Resources Committee
until his resignation from the Board relative
to such standards and guidelines. Dr. Bayless and Messrs. Higgerson and Zak are
the members of the Corporate Governance Committee.
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ATTENDANCE AT MEETINGSDirectors in March 1999.
Attendance at Meetings
During fiscal 1997,1999, the Board of Directors held tentwelve meetings, the Audit
Committee held four meetings and the Human Resources Committee held five meetings,
and the Corporate Governance Committee held twoeleven
meetings. Each director of the Corporation attended 75% or more of all Board of
Director meetings and 75% or more of all meetings of each committee on which he
served. DIRECTORS' FEESMr. Dillon was elected to the Board of Directors in October 1999 and
attended 75% or more of all Board of Director meetings and 75% or more of all
meetings of each committee on which he served during his term.
Directors' Fees
Members of the Board of Directors receive $2,500 for participation in each
regular meeting of the full Board of Directors and $1,250 for each committee
meeting and
are reimbursedmeeting. The Corporation also reimburses each member of the Board of Directors
for out-of-pocket expenses incurred in connection with attendance at meetings.
Under the Corporation's 1996 Outside Directors Stock Option Plan (the "Directors
Plan"), non-employee Directors are eligible to receive stock options in
consideration for their services. BENEFICIAL OWNERSHIP OF COMMON STOCKThe Directors Plan provides that each
non-employee Director will receive an option grant for 30,000 shares of Common
Stock upon joining the Board of Directors and an annual option grant for 10,000
shares of Common Stock thereafter. The exercise price of options granted under
the Directors Plan will be equal in all cases to the fair market value of the
Common Stock on the date of grant. Initial grants under the Directors Plan vest
over a period of three years and annual grants vest in full on the first
anniversary of the date of grant. Options generally must be exercised within ten
years.
At the annual meeting held on March 10, 1999, each of Professor Bradley
and Messrs. Cash, Oliver and Zak, the non-employee Directors who were re-elected
to the Board of Directors at that annual meeting, received the annual option
grant under the Directors Plan for 10,000 shares of Common Stock, with an
exercise price of $25.063 per share. Mr. Dillon received an initial option grant
for 30,000 shares of Common Stock on October 20, 1999 when he was first
appointed to the Board of Directors, with an exercise price of $29.813 per
share. Mr. Taylor received an initial option grant for 30,000 shares of Common
Stock on January 5, 2000 when he was first appointed to the Board of Directors,
with an exercise price of $49.75 per share. Professor Bradley received an option
grant for 30,000 shares of Common Stock effective November 12, 1998 under the
1994 Plan, with an exercise price of $17.375 per share.
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Beneficial Ownership of Common Stock
The following table sets forth certain information as of December 31, 19971999
(unless otherwise specified) with respect to the beneficial ownership of the
Corporation's Common Stock by each person who is known to the Corporation to
beneficially ownhave beneficial ownership of more than 5% of the outstanding shares of Common
Stock, each director, each Named Executive Officer (as defined below), and all
directors and executive officers as a group.
SHARES OF COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) PERCENT OF CLASSAmount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class
- - ---------------------------------------------------------------------------- ----------------------- ---------------------------------
Patrick H. Nettles(2)Nettles, Ph.D. (2)(3).............................. 3,927,135 3.90% 3,653,261 2.61%
Gary B. Smith (2) 13,188 *
Joseph R. Chinnici(2) 233,727 *
Steve W. Chaddick(2).................................. 1,060,250 1.05
Lawrence P. Huang(2).................................. 1,061,250 1.05
Joseph R. Chinnici(2)................................. 271,750 668,438 *
Mark Cummings(2)...................................... 210,000 *
G. Eric Georgatos(2).................................. 165,000 *
Jon W. Bayless........................................ 176,791 172,688 *
Harvey B. Cash........................................ 172,500 *
Clifford H. Higgerson(4).............................. 2,245,077 2.25Cash(2)(4) 2,887,469 2.08%
Billy B. Oliver(2).................................... 67,500 61,625 *
Michael J. Zak(5)..................................... 811,200Zak(2)(5) 517,375 *
Stephen P. Bradley, Ph.D.(2) 10,000 *
John R. Dillon(2) 100 *
Gerald H. Taylor(2) 0 *
All officers and directors as a group (14(18 persons)(2)......................................... 10,760,453 10.42(6) 10,474,675 7.42%
- - -------------------------
* Represents less than 1%.
(1) The persons named in this table have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them,
subject to community property laws where applicable and except as
indicated in the other footnotes to this table. Beneficial ownership is
determined in accordance with the rules of the United States Securities
and Exchange Commission ("SEC"). In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by that
person that are currently exercisable or exercisable within 60 days after
December 31, 19971999 are deemed outstanding. Such shares, however, are not
deemed outstanding for the purpose of computing the percentage ownership
of any other person.
(2) Includes shares issuable upon exercise of stock options granted under the
Corporation's Amended and Restated 1994 Stock Option Plan (the "1994 Plan")
or 1996 Outsidethe Directors Stock Option Plan (the "Directors Plan").Plan. Options granted under the 1994 Plan that
are reflected in the beneficial ownership table are generally exercisable
immediately but may be subject to a right of repurchase based on a
scheduled vesting period. Generally, shares
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7 underlying options vest over
four years and options must be exercised within ten years. Initial grants
of options under the Directors Plan vest over a period of three years,
annual grants vest in full on the first anniversary date of the grant and
options must be exercised within ten years of the date of grant.
(3) Does not include 175,000 shares held by the Patrick H. and Marion S.
Nettles Charitable Trust as to which Mr.and 175,000 shares held by The Patrick and Selma
Nettles Charitable Remainder Unitary Trust FBO Caltech. Dr. Nettles
disclaims beneficial ownership.ownership of the shares held by each of these trusts.
(4) Includes 1,963,4192,632,434 shares of Common Stock owned by Vanguard IV,InterWest Partners VI,
L.P., which Mr. HiggersonCash may be deemed to beneficially own by virtue of his
status as a Managing Director of InterWest Management Partners VI, LLC,
which is the general partner of Vanguard IV,InterWest Partners VI, L.P., and 82,535
shares owned by InterWest Investors VI, L.P., which Mr. Cash may be deemed
to beneficially own by virtue of his status as a Managing Director of
InterWest Management Partners VI, LLC, which is the general partner of
InterWest Investors VI, L.P. Mr. HiggersonCash disclaims beneficial ownership of
the shares held by such entityentities except to the extent of his proportionate
partnership interest therein. Mr. HiggersonCash has direct ownership of 281,658172,500
shares of Common Stock.Stock, including 72,500 shares owned by the Harvey B.
Cash self-directed IRA.
(5) Includes 600,000275,075 shares of Common Stock owned by Charles River Partnership
VII,VIII, which Mr. Zak may be deemed to beneficially own by virtue of his
status as a general partner of Charles River Partnership VII.VIII, 5,068
shares of Common Stock owned by Charles River VIII-A LLC, which Mr. Zak
may be deemed to beneficially own by virtue of his status as an officer of
the manager of Charles River VII-A LLC, and 13,214 shares of
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Common Stock owned by the Zak Family Limited Partnership, which Mr. Zak
may be deemed to beneficially own by virtue of his status as a limited
partner of the Zak Family Partnership. Mr. Zak disclaims beneficial
ownership of the shares held by such entityentities except to the extent of his
proportionate partnership interest therein. Mr. Zak has direct ownership
of 211,200219,018 shares of Common Stock.
COMPENSATION
SUMMARY COMPENSATION TABLE(6) Includes 208,451 shares that are subject to repurchase by the Corporation
based upon a scheduled vesting period, and 71,999 shares held in escrow on
behalf of executive officers who joined the Corporation in connection with
its acquisition of Lightera Networks, Inc. in March 1999 and its
acquisition of Omnia Communications, Inc. in July 1999. Includes 181,329
shares held by the Champa Irrevocable Trust, as to which Michael Champa
disclaims beneficial ownership.
Compensation
Summary Compensation Table
The following table sets forth the annual and long-term compensation for
services in all capacities to the Corporation for the fiscal years ended October
31, 1997, 19961999, 1998 and 19951997 of the Chief Executive Officer and the other five most
highly compensated persons who were executive officers of the Corporation as of
October 31, 1997 (the "NamedNamed Executive
Officers").Officers:
LONG-TERM
COMPENSATION
-------------
ANNUAL COMPENSATION SECURITIES
---------------------------- UNDERLYING
YEAR SALARY BONUS OPTIONSLong-Term
Annual Compensation Compensation
----------------------------- ------------
Securities
Underlying All Other
Year Salary Bonus Options Compensation(1)
---- -------- -------- ------------------- ----- ------- --------------
Patrick H. Nettles, Ph.D. ....................... 1997 $253,365 $168,750 0Ph.D ................ 1999 $348,077 $362,500 100,000 $2,740
President and Chief Executive Officer 1996 $174,000 $154,000 875,000
1995 $135,000 $164,4011998 $300,000 $150,000 0 5,480
1997 $253,365 $168,750 0 5,480
Gary B. Smith ........................... 1999 $277,404 $215,625 197,500 $ 199
Senior Vice President and 1998 $160,000 $ 90,000 50,000 199
Chief Operating Officer 1997 $ 0 $ 0 0 0
Mark Cummings ........................... 1999 $229,808 $115,625 40,000 $ 184
Senior Vice President, Operations 1998 $225,000 $ 56,250 0 184
1997 $159,519 $ 67,500 0 184
Steve W. Chaddick................................Chaddick ....................... 1999 $229,808 $115,625 105,000 $ 348
President, Core Switching Division 1998 $225,000 $ 56,250 0 348
1997 $160,385 $ 67,500 0 348
Joseph R. Chinnici ...................... 1999 $229,808 $115,625 55,000 $ 170
Senior Vice President, ProductsFinance and 1996 $132,0001998 $225,000 $ 87,000 312,500
Technologies................................... 1995 $115,000 $ 23,039 250,000
Lawrence P. Huang................................ 1997 $160,385 $ 81,56256,250 0 Senior Vice President, Sales and Marketing 1996 $132,000 $ 87,000 312,500
1995 $115,000 $ 80,453 250,000
Joseph R. Chinnici...............................170
Chief Financial Officer 1997 $159,519 $ 67,500 0 Senior Vice President, Finance and 1996 $115,000 $ 79,000 72,500
Chief Financial Officer 1995 $ 83,077 $ 27,776 100,000
Mark Cummings.................................... 1997 $159,519 $ 67,500 0
Senior Vice President, Operations 1996 $ 53,077 $ 41,592 250,000
1995 $ 0 $ 0 0
G. Eric Georgatos................................ 1997 $160,385 $ 67,500 0
Vice President, General Counsel and 1996 $ 87,500 $ 25,688 200,000
Secretary 1995 $ 0 $ 0 0170
OPTION GRANTS IN FISCAL 1997
There were no stock(1) The Corporation's life insurance plan provides each employee with life
insurance coverage equal to two times the employee's annual salary and
bonus, up to a maximum of $500,000. These amounts represent life insurance
premiums paid by the Corporation on behalf of the Chief Executive Officer
and the Named Executive Officers in order to provide additional coverage
equal to the difference between $500,000 and twice the individual's annual
salary and bonus.
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Option Grants in Last Fiscal Year
The following table provides the specified information concerning options
granted to the Named Executive Officers duringfor the fiscal 1997.
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year ended October 31,
1999:
Number of Percent of
Securities Total Options Potential Realizable Value at
Underlying Granted to Exercise or Assumed Annual Rates of
Options Employees In Base Price Stock Price Appreciation for
Granted(1) Fiscal 1999 (Per Share)(2) Expiration Date Option Term (3)
---------- ------------- -------------- --------------- -----------------------------
5% 10%
----- -----
Patrick H. Nettles, Ph.D .... 100,000 1.54% $ 29.81 10/20/09 $1,874,924 $4,751,424
Gary B. Smith ............... 57,500 0.88% $ 17.38 11/12/08 $ 628,305 $1,592,248
100,000 1.54% $ 32.25 08/23/09 $2,028,185 $5,139,819
40,000 0.61% $ 29.81 10/20/09 $ 749,969 $1,900,570
Mark Cummings ............... 15,000 0.23% $ 17.38 11/12/08 $ 163,906 $ 415,369
25,000 0.38% $ 29.81 10/20/09 $ 468,731 $1,187,856
Steve W. Chaddick ........... 15,000 0.23% $ 17.38 11/12/08 $ 163,906 $ 415,369
50,000 0.77% $ 32.25 08/23/09 $1,014,093 $2,569,910
40,000 0.61% $ 29.81 10/20/09 $ 749,969 $1,900,570
Joseph R. Chinnici .......... 15,000 0.23% $ 17.38 11/12/08 $ 163,906 $ 415,369
40,000 0.61% $ 29.81 10/20/09 $ 749,969 $1,900,570
(1) Options vest and become exercisable 25% on the last day of the month in
which the first anniversary of the grant occurs and 2.084% per month
thereafter. As of October 31, 1999, none of these options were vested. As
of November 30, 1999, the first anniversary of the options granted on
November 8, AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES1998 to Messrs. Smith, Cummings, Chaddick occurred, 14,375,
3,750, 3,750 and 3,750, respectively, of those options became vested.
(2) Options were granted having exercise prices at fair market value on the
date of grant.
(3) The dollar amounts set forth under these columns are the result of
calculations of assumed annual rates of stock price appreciation of 5% and
10% from the date of grant to the date of expiration of such options.
These assumptions are not intended to forecast future appreciation of the
Corporation's stock price. The Corporation's stock price may increase or
decrease in value over the time period set forth above.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides the specified information concerning
unexercised options held as of October 31, 19971999 by the Named Executive Officers:
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES OCTOBERShares Number of Securities Underlying Value of Unexercised in-the-
Acquired on Unexercised Options at Money Options at
Exercise Value Realized October 31, 1997(1) OCTOBER1999(1) October 31, 1997(2)
ACQUIRED ON VALUE1999(2)
----------- -------------- ------------------------------- ----------------------------
----------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- --------------Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
Patrick H. Nettles, Ph.D.....Ph.D .... 0 $ 0 875,000 100,000 $28,227,500 $ 474,700
Gary B. Smith ............... 0 $46,112,500 $ 0 20,834 226,666 $ 462,202 $2,056,065
Mark Cummings ............... 13,000 $ 335,624 175,000 40,000 $ 5,817,000 $ 376,450
Steve W. Chaddick............ 491,250Chaddick ........... 60,000 $1,997,318 536,250 105,000 $17,807,338 $ 13,941,347 821,250563,155
Joseph R. Chinnici .......... 0 $44,437,325 $ 0 Lawrence P. Huang............ 660,000245,250 55,000 $ 13,699,584 652,500 0 $35,160,4508,304,635 $ 0
Joseph R. Chinnici........... 51,750 $ 2,177,636 270,750 0 $14,719,535 $ 0
Mark Cummings................ 32,500 $ 1,358,345 217,500 0 $11,675,400 $ 0
G. Eric Georgatos............ 20,800 $ 1,093,331 154,200 0 $ 8,419,320 $ 0447,655
- - ---------------
(1) All options granted prior to Fiscal 1998 are immediately exercisable at the date of
grant, but shares purchased upon exercise of options are subject to
repurchase by the Corporation based upon a scheduled vesting period. NoneOf
the shares underlying options, 729,167, 20,834, 133,334, 340,939 and
187,855 of the shares underlying options held by Dr. Nettles are vested and 321,250, 168,125,
124,291, 56,042Messrs.
Smith, Cummings, Chaddick, and 37,533 of the shares underlying options held by Messrs.
Chaddick, Huang, Chinnici, Cummings and Georgatos, respectively, are vested.
(2) Calculated on the basis of the fair market value of the underlying Common
Stockcommon
stock as of October 31, 19971999 of $55.00$34.56 per share, less the aggregate
exercise price. The value of vested in-the-money options held by Dr.
Nettles and Messrs. Smith, Cummings, Chaddick, and Chinnici is
$0.00$23,522,927, $462,202, $4,432,022, $11,506,605, and the value of vested in-the-money options for Messrs. Chaddick,
Huang, Chinnici, Cummings$6,453,072,
respectively.
7
Employment Agreements and Georgatos is $17,661,000, $9,243,000,
$6,833,000, $3,008,000 and $2,049,000, respectively.
No compensation intended to serve as incentive for performance to occur
over a period longer than one fiscal year was paid pursuant to a long-term
incentive plan during the last fiscal year to any of the Named Executive
Officers.
EMPLOYMENT AGREEMENTSChange-in-Control Arrangements
In April 1994, the Corporation entered into an employment agreement with
Dr. Nettles. The employment agreement specifies that Dr. Nettles is an employee
at will. In the event that he is terminated for cause, as defined in the
employment agreement, he will receive a severance payment equal to his monthly
base salary until the earlier of the expiration of six months or the
commencement of employment with a person or entity other than the Corporation.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATIONIn November 1998, the Corporation entered into transfer of
control/severance agreements with Dr. Nettles, and Messrs. Smith, Cummings,
Chaddick and Chinnici. The initial term of each of these agreements is three
years. The agreements provide for the payment of up to one year of salary and
bonus continuation in the event that the Named Executive Officer's employment is
terminated without cause or for "good reason," as defined in the agreements,
within one year following a change-in-control of the Corporation.
In August 1999, the Corporation entered into an employment agreement with
Mr. Smith. The employment agreement provides for payment of an incentive bonus
of $3,000,000 to Mr. Smith upon the earlier of: (i) his termination without
cause or for "good reason," as defined in the agreement, following a transfer of
control, or (ii) on August 18, 2002. In the event that Mr. Smith elects to
terminate his employment for "good reason" as defined in the agreement, or he is
terminated for any reason other than for cause, he will receive a pro-rata
portion of the incentive bonus.
Human Resources Committee Report on Executive Compensation
The Human Resources Committee of the Board of Directors consists(the "Committee")
in fiscal 1999 consisted of Dr.
BaylessMessrs. Zak, Cash and Messrs. Oliver, and Zak, none of whom are
employees or officers of the Corporation. Mr. Bayless was a member of the
Committee until his resignation from the Board of Directors in March 1999. Mr.
Cash was elected to the Committee in September of 1999. The Committee which performs the functions of a Compensation
Committee,advises
and assists and advises management in developing the Corporation's compensation and
personnel policies, and provides Board oversight of their implementation. The
Committee endeavors to meet no less than four times per year to review issues
associated with compensation, human resources policies, personnel recruitment
and retention and to consider, amend, or approve quarterly objectives for the
Corporation, including for management, as recommended by the Corporation's chief executive
officer.Chief
Executive Officer.
The Committee has adopted a performance-based compensation policy which
contains consideration ofthat
considers both the long and short term. These two components are linked in a way
intended to focus management on increasing the strength of the business and its
ability to serve important customers with leading, high-value products, while
building the organization in a deliberate, thoughtful way. The Committee
believes that this policy will increase stockholder value over the long term. On
at least an annual basis, the Committee approves the Corporation's compensation
package for executive officers, which includes a combination of an annual base
salary and benefits, performance-based quarterly bonuses, and long termlong-term
compensation consisting of stock options. Annual base salaries are established
following an assessment by the Committee of market survey data for comparable
positions in comparable companies compiled by an independent compensation
consultant, with aconsultant. The Committee's goal of settingis to set the Corporation's compensation for
various positions at levels whichthat are generally favorable to the averages
indicated by the market survey data. The Committee typically targets the
fiftieth percentile for compensation, taking into account regional and national
data, together with the skills and performance of the individual and the needs
of the Corporation. Quarterly bonus payments to
6
9 members of management are
awarded following assessment by the Committee of performance compared to
corporate objectives.
Annual base salaries for members of management, including Patrick H.
Nettles, the President and Chief Executive Officer of the Corporation, were most
recently reassessed and reset for fiscal 1999 in
8
accordance with the foregoing policy in August 1997.1999 as a result of the
Corporation's acquisitions of Lightera Networks and Omnia Communications. The
Committee also determined that the Corporation's quarterly corporate objectives
were met or otherwise satisfied during each of the four fiscal quarters of the
fiscal year ending October 31, 1997,1999, and bonuses were paid accordingly. Except for grantsaccordingly at the
conclusion of each quarter during fiscal 1999. Management participates, along
with all other employees, in the Corporation's annual grant of stock options to
newemployees who have worked for the Corporation for at least one year. In
addition, consistent with the Corporation's policy, members of management who
joined the Corporationwere promoted during the fiscal year ended October 31, 1997, no1999 received an additional grant of stock options.
The annual grant of stock options were granted to existing members of management during such fiscal year.was first implemented in November 1998.
With respect to the compensation of Dr. Nettles for the overall fiscal
year ended October 31, 1997,1999, the Committee recognized his unique role and
responsibility as President and Chief Executive Officer of the Corporation, but
otherwise considered the qualitative and quantitativeno factors andor criteria as
useddifferent from those applied to determine the compensation for others
members of management described
above.generally.
For fiscal 1998,2000, if the Committee determines that the corporate objectives
have been met or otherwise satisfied in each of the four fiscal quarters, the
aggregate
bonus payments, which are paid quarterly on an equal pro rata basis, will equal
35%, 50%, 75% or 100% of base salary, with the exact percentage based on the
particular officer's title and responsibilities, as viewed by the Committee.
Only the Chief Executive Officer is eligible for a bonus of up to 100% of base
salary in fiscal 1998.2000.
Under Section 162(m) of the Internal Revenue Code limitsof 1986, as amended (the
"Code"), and applicable Treasury regulations, no tax deductionsdeduction is allowed for
annual compensation in excess of $1 million paid to any of the five most highly
compensated executive officers. "Performance-based" compensation that has been
approved by stockholders, however, is excluded from the $1 million limit if,
among other requirements, the compensation is payable only upon attainment of
pre-established objective performance goals and the board committee that
establishes such goals consists only of "outside directors" as defined for
purposes of Section 162(m). The Board of Directors has approved the adoption of
the CIENA Corporation Third Amended and Restated 1994 Stock Option Plan (the
"Third Amended and Restated Plan"), which is structured to qualify as
"performance-based," and is submitting that plan for shareholder approval at
this Annual Meeting. In addition, all of the members of the Human Resources
Committee qualify as "outside directors." Accordingly, assuming shareholder
approval of the Third Amended and Restated Plan, compensation paid to the
Corporation's five most highly compensated executive officers under that plan
should be deductible under Section 162(m). The Human Resources Committee thus
intends to structure performance-based compensation, including stock option
grants and annual bonuses, to executive officers who may be subject to Section
162(m) in a manner that satisfies the requirements of Section 162(m) so long as
doing so is compatible with its determinations as to the most appropriate
methods and approaches for the design and delivery of compensation to $1 million. There are several exemptions to Section
162(m), including one for qualified performance-based compensation. To be
qualified, performance-based compensation must meet various requirements,
including shareholder approval. The Committee intends to consider annually
whether it should adopt a policy regarding 162(m) and to date has concluded that
it was not appropriate to do so. One reason for this conclusion is that,
assuming the current compensation policies and philosophy remain in place,
Section 162(m) will not be applicable in the near term to any executive's
compensation.executive
officers of CIENA.
Submitted by the members of the Human Resources Committee:
Jon W. Bayless, Ph.D.Michael J. Zak
Harvey B. Cash
Billy B. Oliver
Michael J. Zak
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONCompensation Committee Interlocks and Insider Participation
The Human Resources Committee of the Board of Directors, which serves the
traditional functions of a compensation committee, consists of Jon W. Bayless,
Ph.D.,Michael J. Zak,
Harvey B. Cash and Billy B. OliverOliver. None of Messrs. Zak, Cash and Michael J. Zak. Dr. Bayless is an affiliate of Sevin
Rosen Bayless Management Co., Sevin Rosen Fund IV L.P. and Sevin Rosen Fund V
L.P. (collectively, the "Sevin Rosen Entities"), and Mr. Zak is a general
partner of the general partner of Charles River Partnership VII ("Charles
River"). Although each of Sevin Rosen and Charles River is a stockholder of the
Corporation, none of Mr. Oliver Mr. Zak or Dr. Bayless was at
any time during the fiscal year ended October 31, 1997,1999, or at any other time, an
officer or employee of the Corporation. No member of the Human Resources
Committee
9
of the Corporation serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a
member of the Corporation's Board of Directors or Human Resources Committee.
7
10
SHAREHOLDER RETURN PERFORMANCE PRESENTATIONOn March 31, 1999, the Corporation acquired Lightera Networks, Inc. for
approximately 20.6 million shares of CIENA Common Stock. Mr. Cash is a general
partner of InterWest Partners, which is an affiliate of InterWest VI, L.P. and
InterWest Investors VI, L.P. Together, these two InterWest entities owned
193,416 shares of Lightera common stock, 2,632,584 shares of Lightera Series A
preferred stock and 476,190 shares of Series B preferred stock. In the merger,
these partnerships received an aggregate of 2,714,968 shares of CIENA Common
Stock.
On July 1, 1999, the Corporation acquired Omnia Communications, Inc. for
approximately 16 million shares of CIENA Common Stock. Mr. Zak is a general
partner of the general partner of Charles River Partnership VIII, a Limited
Partnership and Charles River VIII-A LLC, which together owned 2,228,000 shares
of Omnia common stock, 2,228,000 shares of Omnia Series A preferred stock and
698,370 shares of Omnia Series B preferred stock. In the merger, these
partnerships received an aggregate of approximately 2.5 million shares of CIENA
Common Stock.
Shareholder Return Performance Presentation
The following graph shows a comparison of cumulative total returns for an
investment in the Common Stock of the Corporation, the NASDAQ Telecommunications
Index and the S&P 500 Index. Although the SEC requires the Corporation to
present such a graph for a five-year period, the Common Stock has been publicly
traded only since February 7, 1997 and, as a result, the following graph
commences as of such date. This graph is not deemed to be "soliciting material"
or to be "filed" with the SEC or subject to the SEC's proxy rules or to the
liabilities of Section 18 of the Exchange Act of 1934, Act, and the graph shall not
be deemed to be incorporated by reference into any prior or subsequent filing by
the Corporation under the Securities Act of 1933 or the 1934 Act.
Measurement Period Ciena Common NASDAQ Telecom
(Fiscal Year Covered) Stock Index S&P 500
1/31/97 0
2/7/97 100 100 100
2/28/97 170.652173913043 97.236699459292 100.159582552308
3/31/97 123.64347826087 90.7414702139264 95.8913825421754
4/30/97 135.869565217391 94.1927761953821 101.491970211257
5/30/97 203.260869565217 105.864964412931 107.437053548812
6/30/97 204.891304347826 113.908247984971 112.105476467906
7/31/97 244.021739130435 121.073975314627 120.863518921931
8/29/97 207.608695652174 117.004019958386 113.920411368357
9/30/97 215.352173913043 132.231211576403 119.975682658696
10/31/97 239.130434782609 136.088890235609 115.839201580627
[The following table was depicted as a line graph in the printed material.]
NASDAQ Telecom Index S&P 500 CIENA Common Stock
-------------------- ------- ------------------
02/07/97 100.00 100.00 $100.00
04/30/97 93.69 101.95 $ 84.46
07/31/97 120.28 122.01 $151.69
10/31/97 134.99 117.52 $148.65
01/30/98 151.85 126.51 $148.82
04/30/98 178.66 144.18 $150.68
07/31/98 199.31 145.93 $200.17
10/30/98 185.23 143.48 $ 46.45
01/29/99 270.70 168.24 $ 54.56
04/30/99 307.24 175.57 $ 63.51
07/30/99 302.07 175.41 $ 91.22
10/29/99 339.97 180.98 $ 95.27
Assumes $100 invested in CIENA Corporation, NASDAQ Telecom Index and S&P
500 on February 7, 1997, with all dividends reinvested at month-end.
10
PROPOSAL 2
ADOPTION OFAdoption of CIENA CORPORATION EMPLOYEE STOCK PURCHASE PLAN
GENERALCorporation Third Amended and Restated 1994 Stock Option Plan
General
The Corporation has had a stock option plan, the CIENA Corporation Amended
and Restated 1994 Stock Option Plan (the "1994 Plan"), which was initially
adopted in 1994 and is designed to attract, retain and reward persons providing
services to CIENA, and to motivate these persons to contribute to the growth and
profits of CIENA in the future. In 1998, the Board of Directors approved
amending and restating the 1994 Plan, resulting in the CIENA Corporation Second
Amended and Restated 1994 Stock Option Plan (the "Second Amended and Restated
Plan"). The Board of Directors has considered and approved certain amendments to
the Second Amended and Restated Plan, resulting in the CIENA Corporation Third
Amended and Restated 1994 Stock Option Plan (the "Third Amended and Restated
Plan"), and is proposing the Third Amended and Restated Plan, as it amends the
Second Amended and Restated Plan, for stockholder approvalapproval.
The Third Amended and Restated Plan amends the CIENA Corporation Employee Stock PurchaseSecond Amended and Restated
Plan (the "Employee
Purchase Plan"by, among other matters, making the following changes:
o Retaining the authorized shares reserved for issuance pursuant
to stock options at twenty million fifty thousand (20,050,000)
shares and adding an additional four percent (4%). The purpose of the
Employee Purchase Plan is to enable eligible
employeesnumber of the Corporation or any of its subsidiaries, through payroll
deductions, to purchaseissued and outstanding shares of stock of CIENA (but
not including increases resulting from the Corporation's Common Stock and thus to
encourage stock ownership by employees, officers and directors of the
Corporation and to encourage the continued employment of employees, directors
and officers of the Corporation.
8
11
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Purchase Plan, 2,500,000 shares of Common Stock are
available for purchase by eligible employees of the Corporation or any of its
subsidiaries. The Employee Purchase Plan permits eligible employees to elect to
have a portion of their pay deducted by the Corporation to purchase shares of
Common Stock of the Corporation. In the event there is any increase or decrease
in Common Stock without receipt of consideration by the Corporation (for
instance, by a recapitalization or stock split), there may be a proportionate
adjustment to the number and kindsissuance of shares
that may be purchased under the Employee Purchase Plan.
Rights to purchase shares of Common Stock will be deemed granted to
participating employees asThird Amended and Restated Plan) on each of the
first trading day of each Offering Period.
Offering Periods will be 24 months or such other period as is set by the
Corporation. Offering Periods are the periods during which shares of Common
Stock are purchased. Within an Offering Period there will be four or more
Purchase Periods. Generally, Purchase Periods will be six months. Payroll
deductions and other payments will be accumulated during a Purchase Period and
purchases of shares will occur at the end of each Purchase Period (from the
amounts accumulated during that Purchase Period).
The purchase price for each share (the "Purchase Price") will be set by the
Human Resources Committee. The Purchase Price for the initial Offering Period
will be 85%five annual anniversaries of the fair market value of the Common Stock on the first trading
day of such Offering Period or the last day of the applicable Purchase Period,
whichever is lower.
Any employee of the Corporation or subsidiary may participate in the
Employee Purchase Plan, except the following, who are ineligibleThird Amended and
Restated Plan's effective date;
o Limiting to participate:
(a) an employee who has been employed by the Corporation or subsidiary for less
than three months as of the beginning of the Offering Period; (b) an employee
whose customary employment is for less than five months in any calendar year;
(c) an employee whose customary employment is 20 hours or less per week; and (d)
an employee who, after exercising his or her rights to purchase stock under the
Employee Purchase Plan, would own stock (including stock that may be acquired
under any outstanding options) representing five percent or more of the total
combined voting power of all classes of stock of the Corporation. An employee
must be employed on the last day of the Purchase Period in order to acquire
stock for that Purchase Period under the Employee Purchase Plan unless the
employee has retired, died, become disabled, been laid off or is on an approved
leave of absence.
An eligible employee may become a participant in the Employee Purchase Plan
by completing an election to participate in the Employee Purchase Plan
authorizing the Corporation to have deductions made from pay on each pay day
following enrollment in the Employee Purchase Plan. The deductions or
contributions will be credited to the employee's account under the Employee
Purchase Plan. An employee may not change his or her percentage of payroll
deduction or contribution for any Purchase Period during an Offering Period, nor
may an employee withdraw any contributed funds other than by terminating
participation in the Employee Purchase Plan (as described below). A
participating employee may terminate payroll deductions or contributions at any
time.
No employee may purchase Common Stock in any calendar year under the
Employee Purchase Plan and all other "employee stock purchase plans" of the
Corporation and any parent or subsidiary having an aggregate fair market value
in excess of $25,000, determined as of the first trading date of the Offering
Period.
On the last trading day of each Purchase Period within an Offering Period,
a participating employee will be credited with the number of whole shares of
Common Stock purchased under the Employee Purchase Plan for such period. Common
Stock purchased under the Employee Purchase Plan will be held in the custody of
an agent designated by the Corporation (the "Agent"). The Agent
9
12
may hold the Common Stock purchased under the Employee Purchase Plan in stock
certificates in nominee names and may commingle shares held in its custody in a
single account or stock certificate, without identification as to individual
employees. An employee may, however, instruct the Agent to have all or part of
such shares reissued in the employee's own name and have the stock certificate
delivered to the employee.
A participating employee will be refunded all monies in his or her account,
and his or her participation in the Employee Purchase Plan will be terminated,
if: (a) the employee elects to terminate participation by delivering a written
notice to that effect to the Corporation; (b) the employee ceases to be employed
by the Corporation or a participating affiliate except on account of death,
disability, retirement, lay-off or authorized leave of absence; (c) the Board
elects to terminate the Employee Purchase Plan; or (d) the employee ceases to be
eligible to participate in the Employee Purchase Plan. If a participating
employee terminates employment on account of death, disability, retirement,
lay-off or authorized leave of absence, the participating employee will have the
following alternatives: (a) refund of all monies in his or her account or (b)
purchase of Common Stock on the last day of the Purchase Period during which
termination occurs with the amounts then accumulated in his or her account.
No participating employee may assign his or her rights to purchase shares
of Common Stock under the Employee Purchase Plan, whether voluntarily, by
operation of law or otherwise.
The Employee Purchase Plan will be administered by the Human Resources
Committee. The Human Resources Committee has the authority to interpret the
Employee Purchase Plan, to prescribe, amend and rescind rules relating to it,
and to make all other determinations necessary or advisable in administering the
Employee Purchase Plan, all of which determinations will be final and binding.
The Board of Directors may, at any time, amend the Employee Purchase Plan
in any respect; provided, however, that without approval of the stockholders of
the Corporation no amendment shall be made (a) increasingtwenty million fifty thousand (20,050,000) the
number of shares that may be made available for purchaseissued under the Employee PurchaseThird Amended
and Restated Plan (b)
changingpursuant to incentive stock options;
o Limiting to one million (1,000,000) the eligibility requirementsnumber of shares that
may be issued under the Third Amended and Restated Plan to any
single individual in a calendar year;
o Clarifying that, in addition to the standard credit of twelve
(12) full months of accelerated vesting upon a Transfer of
Control currently provided for participating in the Employee PurchaseSecond Amended and
Restated Plan, or (c) impairing the vested rights of participating employees.
The Board of Directors may terminatehas the Employee Purchase Plan at any time
and for any reason or for no reason, provided that such termination shall not
impair any rights of participants that have vestedauthority to grant at the
time an option grant is made an additional credit of
termination.
In any event,accelerated vesting of the Employee Purchaseshares subject to the options upon
a Transfer of Control;
o Designating that the committee administering the Third Amended
and Restated Plan shall without further actionconsist of at least two outside
directors; and
o Extending the date by which incentive stock options granted
under the Third Amended and Restated Plan must be granted from
within ten (10) years of April 4, 1997 to within ten (10)
years of January 13, 2000.
The Human Resources Committee of the Board of Directors terminate at(the "Committee") has
administered the earlier of (i) ten years after adoption ofSecond Amended and Restated Plan. If the Employee Purchase Plan bystockholders approve
it, the Committee will also administer the Third Amended and Restated Plan.
The Board of Directors and (ii) such time as all
shares of Common Stock that may be made available for purchase under the
Employee Purchase Plan have been issued.
FEDERAL INCOME TAX CONSEQUENCES OF THE EMPLOYEE PURCHASE PLAN
If a participant acquires stock under the Employee Purchase Plan, no income
will result to such participant, and the Corporation will be allowed no
deduction as a result of such purchase, if certain conditions are met. The
principal condition which must be satisfied ishas directed that the participant doesThird Amended and Restated
Plan be submitted to the stockholders in its entirety for approval. If the
stockholders do not disposeapprove the Third Amended and Restated Plan, the Second
Amended and Restated Plan will remain in effect.
11
Summary of the stock within two years after the first day of the applicable
Offering Period or one year after purchase of the stock. If the employee
disposes of the stock acquired pursuant to the Employee PurchaseThird Amended and Restated 1994 Stock Option Plan
after the
statutory holding period has expired, gain on the sale is capital gain except to
the extent of ordinary (compensation) income determined as described below. If
the employee disposes of the stock before the expiration of the statutory
holding period, the employee must recognize as ordinary (compensation) income
the difference between the stock's fair market value and the purchase price.
An employee disposing of stock after expiration of the statutory holding
period (or who dies) must include in ordinary (compensation) income at the time
of sale or other taxable disposition of
10
13
the stock acquired under the Employee Purchase Plan, or upon the employee's
death while still holding the stock, the lesser of:
(1) the Purchase Price discount from the fair market value of the
stock at the beginning of the Offering Period; or
(2) the amount, if any, by which the stock's fair market value at the
time of such disposition or death exceeds the purchase price paid.
The foregoing is only afollowing summary of the Employee PurchaseThird Amended and Restated Plan does not
purport to be complete, and is subject to and qualified in its entirety by
reference to the complete text of the Employee PurchaseThird Amended and Restated Plan, a copy of which is
attached hereto as Appendix 1 and is incorporated herein by reference.
Eligibility
Options may be obtained upon requestgranted only to employees (including officers) and
directors of CIENA or any parent or subsidiary of CIENA or to individuals who
are rendering services as consultants, advisors, or other independent
contractors to CIENA or any parent or subsidiary of CIENA.
Stock Subject to the Third Amended and Restated Plan
As originally adopted by the Board and approved by the shareholders, the
1994 Plan provides that grants may be made with respect to no more than twenty
million fifty thousand (20,050,000) shares of Common Stock in the aggregate. The
aggregate grants made since the 1994 Plan was originally adopted have used up
most of the shares initially authorized for grants under the 1994 Plan.
The Third Amended and Restated Plan sets the number of shares of Common
Stock available for grants under the Third Amended and Restated Plan to the sum
of twenty million fifty thousand (20,050,000), plus an additional four percent
(4%) of the number of issued and outstanding shares of Common Stock (but not
including increases resulting from the Corporationissuance of shares under the Third
Amended and Restated Plan) on each of the first five annual anniversaries of the
effective date of the Third Amended and Restated Plan. The Third Amended and
Restated Plan also provides that no more than twenty million fifty thousand
(20,050,000) shares of Common Stock may be issued under the Third Amended and
Restated Plan as incentive stock options. The provision providing for an
additional 4% of the number of issued and outstanding shares of Common Stock on
each of the first five anniversary dates is necessary to provide for future
grants of options under the Third Amended and Restated Plan. This change is
intended to further the purpose of the 1994 Plan as approved by contacting Investor Relations at (410) 865-8500the
stockholders. In the judgment of the Board of Directors, these additional
options will be a valuable incentive and will serve to the ultimate benefit of
stockholders by aligning more closely the interests of officers, other key
employees and other individuals with those of the stockholders.
Under Section 162(m) of the Code, if the optionee is one of certain
specified executive officers, then, unless certain exceptions apply, the
employer is not entitled to deduct compensation with respect to the optionee,
including compensation related to the exercise of stock options, to the extent
such compensation in the aggregate exceeds $1,000,000 for the taxable year. To
be eligible for an exception, Section 162(m) requires that option plans such as
the Third Amended and Restated Plan must provide the maximum number of options
that can be granted to the specified executive officers subject to stockholder
approval. The Third Amended and Restated Plan provides that options covering up
to one million shares (1,000,000) shares may be granted to any Plan participant
during a calendar year. The options are intended to comply with the exception to
Section 162(m) for "performance-based" compensation.
Each of the limits described above relating to the number of shares of
Common Stock available for issuance under the Third Amended and Restated Plan is
subject to adjustment for stock dividends, splits and other similar events. In
addition, if any shares of Common Stock covered by an option are not purchased
or are forfeited, or if the option otherwise terminates without delivery of any
shares of Common Stock subject thereto, then the number of shares of Common
Stock counted against the aggregate number of shares available under the Third
Amended and Restated Plan with respect to such option will, to the extent of any
such forfeiture or termination, again be available for making awards under the
Third Amended and Restated Plan.
12
Stock Options
The Third Amended and Restated Plan permits the granting of options to
purchase shares of Common Stock intended to qualify as incentive stock options
under the Code and options that do not qualify as incentive stock options. The
exercise price of each option will be determined by the Committee but may not be
less than 100% of the fair market value of CIENA's Common Stock on the date of
grant in the case of incentive stock options and 85% of the fair market value of
CIENA's Common Stock on the date of grant in the case of non-qualified stock
options. To qualify as incentive stock options, options must meet certain
federal tax requirements, including limits on the value of shares subject to
incentive stock options which first become exercisable in any one calendar year,
and a shorter term and higher minimum exercise price in the case of certain
large stockholders.
The term of each option will be fixed by the Committee and may not exceed
10 years from the date of grant. The options granted under the Third Amended and
Restated Plan will vest in the amount of 25% of the covered shares on the last
day of the month in which the first anniversary of the date of grant occurs and
a rate of 2.084% of the covered shares per month thereafter. In general, vested
options are exercisable for thirty days following termination of the optionee's
employment for a reason other than death or disability. Vested options are
exercisable for a period of twelve months following a termination for death or
disability. Options may be made exercisable in installments. The exercisability
of options may be accelerated by the Committee.
Upon exercise of options, the option exercise price must be paid in full
either in cash or cash equivalents or by writing
Investor Relations,delivery of Common Stock already owned
and held by the optionee for at least six months. If the Committee so permits,
the exercise price may also be delivered to CIENA by a broker pursuant to
irrevocable instructions to the broker from the optionee.
General Provisions
Transfer of Control. Each option granted under the Third Amended and
Restated Plan will be credited, as of the proposed effective date of a Transfer
of Control, and if the optionee is still employed by CIENA on the date such
Transfer of Control is consummated, with the longer of (a) twelve (12) full
months of additional vesting of the shares subject to the option or (b) the
number of months of additional vesting of the shares subject to the option as
may be designated by the Board and set forth in the Notice of Grant on the date
that the option was granted. If the successor entity does not assume the
outstanding options or arrange for the substitution for outstanding options of
new options covering the stock of the successor entity, all outstanding options
will be fully exercisable thirty (30) days before the Transfer of Control and
shall terminate immediately after the Transfer of Control.
Amendments and Termination. The Board of Directors may at any time amend
or discontinue the Third Amended and Restated Plan and the Committee may at any
time amend or cancel outstanding awards for the purpose of satisfying changes in
law or for any other lawful purpose. However, no such action may be taken which
adversely affects any rights under an outstanding award without the holder's
consent. Further, plan amendments may be subject to approval by CIENA's
stockholders if and to the extent required by the Code to preserve the qualified
status of incentive stock options.
Adjustments for Stock Dividends and Similar Events. The Committee will
make appropriate adjustments in outstanding awards to reflect Common Stock
dividends, splits and similar events.
Federal Income Tax Consequences
Incentive stock options. The grant of an incentive stock option will not
be a taxable event for the optionee or CIENA. An optionee will not recognize
taxable income upon exercise of an incentive stock option (except that the
alternative minimum tax may apply), and any gain realized upon a disposition of
Common Stock received pursuant to the exercise of an incentive stock option will
be taxed as long-term
13
capital gain if the optionee holds the shares for at least two years after the
date of grant and for one year after the date of exercise (the "holding period
requirement"). CIENA will not be entitled to any business expense deduction with
respect to the exercise of an incentive stock option, except as discussed below.
For the exercise of an option to qualify for the foregoing tax treatment,
the optionee generally must be an employee of CIENA or a subsidiary from the
date the option is granted through a date within three months before the date of
exercise of the option. In the case of an optionee who is disabled, the
three-month period for exercise following termination of employment is extended
to one year. In the case of an employee who dies, both the time for exercising
incentive stock options after termination of employment and the holding period
for Common Stock received pursuant to the exercise of the option are waived.
If all of the foregoing requirements are met except the holding period
requirement mentioned above, the optionee will recognize ordinary income upon
the disposition of the Common Stock in an amount generally equal to the excess
of the fair market value of the Common Stock at the time the option was
exercised over the option exercise price (but not in excess of the gain realized
on the sale). The balance of the realized gain, if any, will be capital gain.
The employer corporation will be allowed a business expense deduction to the
extent the optionee recognizes ordinary income subject to Section 162(m) of the
Code summarized below.
If an optionee exercises an incentive stock option by tendering Common
Stock with a fair market value equal to part or all of the option exercise
price, the exchange of shares will be treated as a nontaxable exchange (except
that this treatment would not apply if the optionee had acquired the shares
being transferred pursuant to the exercise of an incentive stock option and had
not satisfied the holding period requirement summarized above). If the exercise
is treated as a tax free exchange, the optionee would have no taxable income
from the exchange and exercise (other than minimum taxable income as discussed
above) and the tax basis of the shares exchanged would be treated as the
substituted basis for the shares received. If the optionee used shares received
pursuant to the exercise of an incentive stock option (or another statutory
option) as to which the optionee had not satisfied the applicable holding period
requirement, the exchange would be treated as a taxable disqualifying
disposition of the exchanged shares.
If, pursuant to an option agreement, CIENA withholds shares in payment of
the option price for incentive stock options, the transaction should generally
be treated as if the withheld shares had been sold in a disqualifying
disposition after exercise of the option, so that the optionee will realize
ordinary income with respect to such shares. The shares paid for by the withheld
shares should be treated as having been received upon exercise of an incentive
stock option, with the tax consequences described above. However, the Internal
Revenue Service has not ruled on the tax treatment of shares received on
exercise of an incentive stock option where the option exercise price is paid
with withheld shares.
Non-Qualified Stock Options. The grant of a non-qualified stock option
will not be a taxable event for the optionee or CIENA. Upon exercising a
non-qualified stock option, an optionee will recognize ordinary income in an
amount equal to the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise (except that, if the optionee
is subject to certain restrictions imposed by the securities laws, the
measurement date will be deferred, unless the optionee makes a special tax
election within 30 days after exercise). Upon a subsequent sale or exchange of
shares acquired pursuant to the exercise of a non-qualified stock option, the
optionee will have taxable gain or loss, measured by the difference between the
amount realized on the disposition and the tax basis of the shares (generally,
the amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised).
If the employer corporation complies with applicable reporting
requirements and with the restrictions of Section 162(m) of the Code, it will be
entitled to a business expense deduction in the same amount and generally at the
same time as the optionee recognizes ordinary income. Under
14
Section 162(m) of the Code, if the optionee is one of certain specified
executive officers, then, unless certain exceptions apply, the employer is not
entitled to deduct compensation with respect to the optionee, including
compensation related to the exercise of shares options, to the extent such
compensation in the aggregate exceeds $1.0 million for the taxable year. The
options are intended to comply with the exception to Section 162(m) for
"performance-based" compensation.
If the optionee surrenders Common Stock in payment of part or all of the
exercise price for non-qualified stock options, no gain or loss will be
recognized with respect to the shares surrendered (regardless of whether the
shares were acquired pursuant to the exercise of an incentive stock option) and
the optionee will be treated as receiving an equivalent number of shares
pursuant to the exercise of the option in a nontaxable exchange. The basis of
the shares surrendered will be treated as the substituted tax basis for an
equivalent number of option shares received and the new shares will be treated
as having been held for the same holding period as had expired with respect to
the transferred shares. The difference between the aggregate option exercise
price and the aggregate fair market value of the shares received pursuant to the
exercise of the option will be taxed as ordinary income. The optionee's basis in
the additional shares will be equal to the amount included in the optionee's
income.
If, pursuant to an option agreement, CIENA withholds shares in payment of
the option price for non-qualified stock options or in payment of tax
withholding, the transaction should generally be treated as if the withheld
shares had been sold for an amount equal to the exercise price after exercise of
the option.
The Board of Directors believes that approval of the CIENA Corporation
920 Elkridge Landing Road, Linthicum,
Maryland 21090.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE EMPLOYEE PURCHASE PLAN
IS IN THE BEST INTERESTS OF ALL STOCKHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTEThird Amended and Restated 1994 Stock Option Plan is in the best interests of
all stockholders and, accordingly, recommends a vote FOR PROPOSALProposal 2. YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.Your proxy
will be so voted unless you specify otherwise.
PROPOSAL 3
PROPOSAL TO AMEND THE CORPORATION'S THIRD
RESTATED CERTIFICATE OF INCORPORATIONProposal to Amend the Corporation's Third Restated Certification of
Incorporation
The Board of Directors of the Corporation has approved, declares it
advisable and in the best interests of the Corporation and its stockholders, and
recommends that Article FOURTH of the Corporation's Third Restated Certificate
of Incorporation, as amended (the "Charter"), be amended to increase the
authorized shares of Common Stock from 180,000,000360,000,000 to 360,000,000.460,000,000. The text of
the Amendment is as follows:
FOURTH: The Corporation shall have the authority to issue two (2)
classes of shares to be designated respectively "Preferred Stock"
and "Common Stock." The total number of shares of stock that the
Corporation shall have the authority to issue is ThreeFour Hundred Eighty
Million (380,000,000)(480,000,000) shares of capital stock, par value $0.01 per
share. The total number of shares of Preferred Stock that the
Corporation shall have authority to issue is Twenty Million
(20,000,000), par value $0.01 per share. The total number of shares
of Common Stock which the Corporation shall have the authority to
issue is ThreeFour Hundred Sixty Million (360,000,000)(460,000,000), par value $0.01
per share.
As of December 31, 1997,1999, there were 99,935,579138,894,581 shares of Common Stock
outstanding. In addition, as of December 31, 1997,1999, options to purchase 8,896,7358,571,462
shares were outstanding under the Corporation's1994 Plan and the Second Amended and Restated
1994 Stock
Option Plan, as amended, and options to purchase 67,500170,000 shares were outstanding under the Corporation's Outside Directors
Stock Option Plan.Plan, options to purchase 3,225,725 shares were outstanding under the
Non-Officers Plan and options to purchase an aggregate of 2,635,060 shares were
outstanding under option plans assumed by the Corporation in connection with two
acquisitions. Thus, at December 31, 1997,1999, the Corporation had outstanding or
reserved for issuance 108,832,314159,573,881 shares of Common Stock.
15
The authorization of a total of 360,000,000460,000,000 shares of Common Stock would
give the Board the express authority, without further action of the
Corporation's stockholders, to issue such shares of Common Stock from time to
time as the Board deems necessary or advisable. The Corporation expends
substantial funds on research and development and other commercialization
activities, including investment in complementary businesses, obtaining the
rights to use complementary technologies, marketing activities and
administrative support of these activities. The Board believes that having the
additional shares authorized and available for issuance will allow the
Corporation to have greater flexibility in considering potential future actions
involving the issuance of stock which may be desirable or necessary to
accommodate the Corporation's business plan, including capital raising
transactions. In addition, the Board believes it is necessary to have the
ability to issue such additional shares for general corporate purposes. Such
general corporate uses of the additional 11
14
authorized shares of Common Stock may
include acquisition transactions, stock dividends or distributions, and
distributions in connection with future issuances of Preferred Stock of the
Corporation, stock options or warrants. In any case, the additional shares of
Common Stock would be available for issuance by the Board without future action
by the stockholders, unless such action were specifically required by applicable
law or rules of any securities market on which the Corporation's securities may
be traded. The Company has no current plans or proposals to issue any portion of
the additional shares of Common Stock.
Although the proposed increase in the authorized capital stock of the
Corporation could be construed as having potential anti-takeover effects,
neither the Board nor management of the Corporation views this proposal in that
perspective. Nevertheless, the Corporation could use the additional shares to
frustrate persons seeking to effect a takeover or otherwise gain control of the
Corporation by, for example, privately placing shares to purchasers who might
side with the Board in opposing a hostile takeover bid. The Corporation is not
aware of any such hostile takeover bid at this time. Shares of Common Stock
could also be issued to a holder that would thereafter have sufficient voting
power to assure that any proposal to amend or repeal the Amended and Restated
By-Laws of the Corporation or certain provisions of the Charter would not
receive the requisite vote required. Such uses of the Common Stock could render
more difficult or discourage an attempt to acquire control of the Corporation,
if such transactions were opposed by the Board. Further, an issuance of
additional shares by the Corporation could have the effect on the potential
realizable value of a stockholder's investment in the Corporation. In the
absence of a proportionate increase in the Corporation's earnings and book
value, an increase in the aggregate number of outstanding shares of Common Stock
would dilute the earnings per share and book value per share of all outstanding
shares of the Corporation's Common Stock. The foregoing factors, if reflected in
the price per share of Common Stock, could adversely affect the realizable value
of a stockholder's investment in the Corporation.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE PROPOSED AMENDMENT TO
THE CORPORATION'S CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK FROM 180,000,000 TO 360,000,000 SHARES IS IN THE BEST INTERESTS OF ALL
STOCKHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTEThe Board of Directors believes that approval of the proposed amendment to
the Corporation's Charter to increase the number of authorized shares of Common
Stock from 360,000,00 shares to 460,000,000 shares is in the best interests of
all stockholders and, accordingly, recommends a vote FOR PROPOSALProposal 3. YOUR PROXY WILL
BE SO VOTED UNLESS YOU SPECIFY OTHERWISE.Your proxy
will be so voted unless you specify otherwise.
PROPOSAL 4
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTSRatification of Independent Public Accountants
The independent public accounting firm of Price WaterhousePricewaterhouseCoopers LLP has
acted as the Corporation's independent auditors for the year ended October 31,
19971999 and has been selected by the Board of Directors to act as such for the
examination of the Corporation's 19982000 financial statements, subject to
ratification by the stockholders. Representatives of Price WaterhousePricewaterhouseCoopers LLP
are expected to be present at the stockholders' meeting and will have an
opportunity to make a statement if they desire and to respond to appropriate
questions.
16
In the event the appointment of Price WaterhousePricewaterhouseCoopers LLP as independent
public auditors for 19982000 is not approved by the stockholders, the adverse vote
will be considered as a direction to the Board of Directors to consider the
selection of other auditors for the following year. However, because of the
difficulty in making any substitution of auditors so long after the beginning of
the current year, it is contemplated that the appointment for the year 19982000 will
be permitted to stand unless the Board finds other good reason for making a
change.
THE BOARD OF DIRECTORS BELIEVES THAT RATIFICATION OF THE SELECTION OF PRICE
WATERHOUSEThe Board of Directors believes that ratification of the selection of
PricewaterhouseCoopers LLP AS THE CORPORATION'S INDEPENDENT PUBLIC ACCOUNTANTSas the corporation's independent public accountants
for the 2000 fiscal year is in the best interests of all stockholders and,
accordingly, recommends a vote FOR THE 1998
FISCAL YEAR IS IN THE BEST INTERESTS OF ALL STOCKHOLDERS AND, ACCORDINGLY,
RECOMMENDS A VOTE FOR PROPOSALProposal 4. YOUR PROXY WILL BE SO VOTED UNLESS YOU SPECIFY
OTHERWISE.
12
15
VOTING PROCEDURESYour proxy will be so voted
unless you specify otherwise.
Voting Procedures
Shares can be voted only if the stockholder is present in person or by
proxy. Whether or not you plan to attend in person, you are encouraged to sign
and return the enclosed proxy card. The representation in person or by proxy of
at least a majority of the outstanding shares entitled to vote is necessary to
provide a quorum at the meeting. Directors are elected by a plurality of the
affirmative votes cast by the stockholders present at the Meeting (in person or
by proxy). The affirmative vote of a majority of all shares of the Corporation's
Common Stock outstanding is required for approval of the proposed Amendment to
the Corporation's Charter. Proposals 2, 3 and 4 must be approved by a majority of the shares of
Common Stock voting for or against each Proposalthe Proposals at the Meeting. Unless
otherwise indicated, executed proxies will be voted for Proposals 1 through 4.
Abstentions and "non-votes" are counted as present in determining whether
the quorum requirement is satisfied. Abstentions and "non-votes" are treated as
votes against proposals presented to stockholders other than elections of
directors. A "non-vote" occurs when a nominee holding shares for a beneficial
owner votes on one proposal, but does not vote on another proposal because the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner.
STOCKHOLDER PROPOSALSStockholder Proposals
All stockholder proposals intended to be presented at the 19992001 Annual
Meeting of the Corporation must be received by the Corporation not later than
October 15, 199816, 2000 and must otherwise comply with the rules of the SEC for
inclusion in the Corporation's proxy statement and form of proxy relating to
that meeting.
OTHER MATTERSSection 16(a) Beneficial Ownership Reporting Compliance
Michael A. Champa and Charles Chi each filed a late Form 3 reporting their
initial statement of beneficial ownership of the Company's stock. Stephen
Bradley, Michael A. Champa, Steve W. Chaddick, Gary B. Smith and Rebecca E.
Seidman each filed a late Form 4 reporting a single transaction, Charles Chi
filed three late Forms 4 reporting seven transactions, and Harvey Cash filed one
late Form 4 reporting two transactions. Billy Oliver filed four late Forms 4
totaling seven transactions. Clifford Higgerson filed one late Form 5 reporting
two transactions. Steve W. Chaddick filed one late Form 5 reporting one
transaction.
Other Matters
Management knows of no matters to be presented for action at the meeting
other than those mentioned above. However, if any other matters properly come
before the meeting, it is intended that the persons named in the Corporation's
form of proxy will vote on such other matters in accordance with their judgment
of the best interests of the Corporation.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Andrew C. Petrik, Vice President and Controller, filed a late Form 3
reporting his initial statement of beneficial ownership of the Corporation's
stock. Joseph R. Chinnici filed a late Form 4 reporting two transactions. Mark
R. Cummings and Harvey B. Cash each filed a late Form 4 each reporting a single
transaction, and Clifford H. Higgerson filed a late Form 4 reporting four
transactions.
INFORMATION REGARDING STOCKHOLDER RIGHTS PLAN
On December 23, 1997 the Board of Directors adopted a Stockholder Rights
Plan. The Stockholder Rights Plan is designed to protect all stockholders of the
Corporation against hostile acquirers who may seek to take advantage of the
Corporation and its stockholders through coercive or unfair tactics aimed at
gaining control of the Corporation without paying all stockholders of the
Corporation a full and fair price. As part of this Plan, a special type of
dividend was declared on the Common Stock of the Corporation in the form of a
distribution of rights to all stockholders of record on January 8, 1998.
The rights are not intended to prevent a fair and equitable takeover of the
Corporation and will not do so. However, the rights should discourage any effort
to acquire the Corporation in a manner or on terms not approved by the Board of
Directors. The rights are designed to deal with the serious
13
16
problem of a potential acquirer using coercive or unfair tactics to deprive the
Corporation's Board of Directors of any real opportunity to determine the future
of the Corporation and to realize the value of each stockholder's investment in
the Corporation.
The distribution of rights will not alter the financial strength of the
Corporation or interfere with its business plans. The distribution will not
change the way in which stockholders can currently trade the Corporation's
shares and will not be dilutive or affect reported per share results. While the
distribution of the rights was not taxable either to stockholders or to the
Corporation, stockholders may, depending on their individual circumstances,
recognize taxable income should the rights become exercisable.
Many publicly-traded companies have adopted stockholder rights plans
similar to the one adopted by the Corporation. The Board is aware that some
argue that such plans could deter legitimate acquisition proposals. The Board,
assisted by the Corporation's investment banking and legal advisors, carefully
considered these arguments and concluded that such arguments are speculative and
do not justify denying stockholders the protection which the rights afford
against abusive takeover tactics. Among other things, the Board considered third
party studies which suggested that rights plans do not prevent takeovers, and
that companies protected by rights plans received premiums higher than companies
without such plans in takeover contests.
The Corporation's overriding objective is to preserve and enhance the
Corporation's value for all stockholders. In declaring the rights dividend, the
Board of Directors has expressed its confidence in the Corporation's future and
its determination that stockholders be given every opportunity to participate
fully in that future.
By Order of the Board of Directors
G. Eric Georgatos/s/ Michael O. McCarthy III
Michael O. McCarthy III
Secretary
17
APPENDIX 1
CIENA CORPORATION
THIRD AMENDED AND RESTATED
1994 STOCK OPTION PLAN
1. Establishment and Purpose.
(a) Establishment. The CIENA Third Amended and Restated 1994
Employee Stock Option Plan (the "Plan") was adopted effective January 13, 2000
(the "Effective Date").
(b) Purpose. The purpose of the Plan is to attract, retain and
reward persons providing services to CIENA Corporation, a Delaware corporation,
and any successor corporation thereto (collectively referred to as the
"Company"), and any present or future parent and/or subsidiary corporations of
such corporation (all of which along with the Company being individually
referred to as a "Participating Company" and collectively referred to as the
"Participating Company Group"), and to motivate such persons to contribute to
the growth and profits of the Participating Company Group in the future. For
purposes of the Plan, a parent corporation and a subsidiary corporation shall be
as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986,
as amended (the "Code").
2. Definitions:
(a) "Date of Option Grant" shall mean the date set forth on the
Notice of Grant of Stock Options attached hereto as Exhibit A annexed hereto and
made a part hereof.
(b) "Number of Option Shares" shall mean the number of shares of
common stock of the Company set forth on Notice of Grant of Stock Options as
adjusted from time to time pursuant to paragraph 14 below.
(c) "Exercise Price" shall mean the price per share set forth on the
Notice of Grant of Stock Option attached hereto as Exhibit A as adjusted from
time to time pursuant to paragraph 14 below.
(d) "Initial Exercise Date" shall be the Initial Vesting Date.
(e) "Initial Vesting Date" shall be the last day of the calendar
month in which occurs the date one (1) year after the date set forth on the
Notice of Grant of Stock Options:
(f) Determination of "Vested Percentage":
Vested Ratio
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee
is continuously employed by a Participating Company
from the Date of Option Grant until the Initial
Vesting Date 25%
Plus
For each full month of the Optionee's continuous
employment by a Participating Company from the
Initial Vesting Date 2.084%
In no event shall the Vested Percentage exceed 100%.
(g) "Option Term Date" shall mean the date ten (10) years after the
Date of Option Grant.
A-1
17(h) On any given date, the number of "Vested Shares" shall be equal
to the Number of Option Shares multiplied by the Vested Percentage determined as
of such date pursuant to paragraph 2(f) above and rounded down to the nearest
whole share. On such date, the number of "Unvested Shares" shall be equal to the
Number of Option Shares reduced by the number of Vested Shares as of such date.
(i) As to any individual Option granted hereunder, the Board and/or
Committee, referred to in Section 3(a) below, shall have authority under
Sections 7, 12 and 21 of the Plan to include vesting provisions which result in
a different Vested Percentage or Vested Ratio than are set forth in Section 2(f)
above.
3. Administration.
(a) Administration by Board and/or Committee. The Plan shall be
administered by the Board of Directors of the Company (the "Board") and/or by a
duly appointed committee of the Board having such powers as shall be specified
by the Board. If appointed, the committee shall consist of no fewer than two
members of the Board, none of whom may be an officer or other salaried employee
of the Company or an officer or other salaried employee of any affiliate of the
Company. Any subsequent references herein to the Board shall also mean the
committee if such committee has been appointed and, unless the powers of the
committee have been specifically limited, the committee shall have all of the
powers of the Board granted herein, including, without limitation, the power to
terminate or amend the Plan at any time, subject to the terms of the Plan and
any applicable limitations imposed by law. All determinations by the Board shall
be final and binding upon all persons having an interest in the Option. All
questions of interpretation of the Plan or of any options granted under the Plan
(an "Option") shall be determined by the Board, and such determinations shall be
final and binding upon all persons having an interest in the Plan and/or any
Option.
(b) Options Authorized. Options may be either incentive stock
options as defined in Section 422 of the Code ("Incentive Stock Options") or
non-statutory stock options. Each option shall be designated as either an
Incentive Stock Option or a non-statutory Stock Option on the Notice of Grant.
In the absence of any designation options granted hereunder shall be
non-statutory Stock Options.
(c) Authority of Officers. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or which
is allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
(d) Disinterested Administration. With respect to the participation
in the Plan of officers or directors of the Company subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Plan shall
be administered by the Board in compliance with the requirements of Rule 16b-3,
as promulgated under the Exchange Act and amended from time to time or any
successor rule or regulation ("Rule 16b-3") if and to the extent still
applicable.
4. Eligibility.
(a) Eligible Persons. Options may be granted only to employees
(including officers) and directors of the Participating Company Group or to
individuals who are rendering services as consultants, advisors, or other
independent contractors to the Participating Company Group. The Board shall, in
its sole discretion, determine which persons shall be granted Options (an
"Optionee"). Eligible persons may be granted more than one (l) Option.
(b) Restrictions on Option Grants. A director of a Participating
Company may only be granted a nonstatutory stock option unless the director is
also an employee of the Participating
A-2
Company Group. An individual who is rendering services as a consultant, advisor,
or other independent contractor may only be granted a non-statutory stock
option.
5. Shares Subject to Option.
Options shall be for the purchase of shares of the authorized but unissued
common stock or treasury shares of common stock of the Company (the "Stock"),
subject to adjustment as provided in paragraph 14 below. The maximum number of
shares of Stock which may be issued under the Plan shall be the sum of twenty
million fifty thousand (20,050,000) shares plus an additional four percent (4%)
of the number of issued and outstanding shares of Stock (but not including
increases resulting from the issuance of shares under the Plan) on each of the
first five annual anniversaries of the Effective Date; provided, however, that
no more than twenty million fifty thousand (20,050,000) shares may be issued
under the Plan pursuant to Incentive Stock Options. In the event that any
outstanding Option for any reason expires or is terminated or canceled and/or
shares of Stock subject to repurchase are repurchased by the Company, the shares
allocable to the unexercised portion of such Option or such repurchased shares,
may again be subject to an Option grant. Notwithstanding the foregoing any such
shares shall be made subject to a new Option only if the grant of such new
Option and the issuance of such shares pursuant to such new Option would not
cause the Plan or any Option granted under the Plan to contravene Rule 16b-3.
During any time when the Company has a class of equity security registered under
Section 12 of the Exchange Act, the maximum number of shares of Stock subject to
Options that can be awarded under the Plan to any person eligible for an Option
granted under the Plan is one million (1,000,000) per year.
6. Time for Granting Options. The Plan shall have no termination date;
provided, however, that all Incentive Stock Options shall be granted, if at all,
within ten (10) years of January 13, 2000.
7. Terms Conditions and Form of Options. Subject to the provisions of the
Plan, the Board shall determine for each Option (which need not be identical)
the number of shares of Stock for which the Option shall be granted, the
exercise price of the Option, the timing and terms of exercisability and vesting
of the Option, the time of expiration of the Option, the effect of the
Optionee's termination of employment or service, whether the Option is to be
treated as an Incentive Stock Option or as a non-statutory stock option, the
method for satisfaction of any tax withholding obligation arising in connection
with Option, including by the withholding or delivery of shares of stock, and
all other terms and conditions of the Option not inconsistent with the Plan.
Options granted pursuant to the Plan shall be evidenced by written notices
specifying the number of shares of Stock covered thereby, in such form as the
Board shall from time to time establish, which notices may incorporate all or
any of the terms of the Plan by reference and shall comply with and be subject
to the following terms and conditions:
(a) Exercise Price. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (i) the
exercise price per share for an Incentive Stock Option shall be not less than
the fair market value, as determined by the Board, of a share of Stock on the
date of the granting of the Option; (ii) the exercise price per share for a
non-statutory stock option shall not be less than eighty-five percent (85%) of
the fair market value, as determined by the Board, of a share of Stock on the
date of the granting of the Option; and (iii) no Incentive Stock Option granted
to an Optionee who at the time the Option is granted owns stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of a Participating Company within the meaning of Section 422(b)(6) of the
Code (a "Ten Percent Owner Optionee") shall have an exercise price per share
less than one hundred ten percent (110%) of the fair market value, as determined
by the Board, of a share of Stock on the date of the granting of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
non-statutory stock option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying with the
provisions of Section
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424(a) of the Code.
(b) Exercise Period of Options. The Board shall have the power to
set, including by amendment of an Option, the time or times within which each
Option shall be exercisable or the event or events upon the occurrence of which
all or a portion of each Option shall be exercisable and the term of each
Option; provided, however, that (i) no Option shall be exercisable after the
expiration of ten (10) years after the date such Option is granted, and (ii) no
Incentive Stock Option granted to a Ten Percent Owner Optionee shall be
exercisable after the expiration of five (5) years after the date such Option is
granted.
(c) Right to Exercise. The Option shall be first exercisable on and
after the Initial Vesting Date, and then only to the extent vested.
Notwithstanding the foregoing, the Option may be exercised only in multiples of
twenty-five (25) shares unless all shares subject to the Option are being
exercised; provided, however, that the foregoing restriction shall not apply so
as to prevent an exercise (i) following the Optionee's termination of employment
as set forth in paragraph 10 below or (ii) during the thirty (30) day periods
immediately preceding and following a Transfer of Control as defined in
paragraph 15 below.
(d) Method of Exercise. Exercise of the Option must be by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of the
Plan. The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, or by
confirmed facsimile transmission, to the Chief Financial Officer of the Company,
or other authorized representative of the Participating Company Group, prior to
the termination of the Option as set forth in paragraph 6 below, accompanied by
(i) full payment of the exercise price for the number of shares being purchased
and (ii) an executed copy, if required herein, of the then current forms of
escrow and security agreements referenced below.
(e) Payment of Exercise Price.
(i) Forms of Payment Authorized. Payment of the exercise price
for the number of shares of Stock being purchased pursuant to any Option shall
be made (1) in cash, by check, or cash equivalent, (2) by tender to the Company
of shares of the Company's stock owned by the Optionee having a fair market
value, as determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the exercise price, (3) by the assignment of the proceeds of a sale of some
or all of the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of Governors of the
Federal Reserve System), or (4) by any combination thereof. The Board may at any
time or from time to time grant Options which do not permit all of the foregoing
forms of consideration to be used in payment of the exercise price and/or which
otherwise restrict one or more forms of consideration.
(ii) Tender of Company Stock. Notwithstanding the foregoing,
an Option may not be exercised by tender to the Company of shares of the
Company's stock to the extent such tender of stock would constitute a violation
of the provisions of any law, regulation and/or agreement restricting the
redemption of the Company's stock or, if in the opinion of Company counsel,
might impair the ability of purchasers of stock from the Company from taking
full advantage of the provisions of Section 1202 of the Code relating to capital
gains treatment of stock issued by the Company. Unless otherwise provided by the
Board, an Option may not be exercised by tender to the Company of shares of the
Company's stock unless such shares of the Company's stock either have been owned
by the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
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(iii) Assignment of Proceeds of Sale. The Company reserves, at
any and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve and/or terminate any program and/or procedures for
the exercise of Options by means of an assignment of the proceeds of a sale of
some or all of the shares of Stock to be acquired upon such exercise.
(f) Tax Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
by accepting the grant of the Option shall be considered to have authorized
payroll withholding and otherwise agreed to make adequate provision for foreign,
federal and state tax withholding obligations of the Company, if any, which
arise in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part, of any shares acquired on exercise of the Option,
or (iii) the operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares
acquired on exercise of the Option. The Optionee is cautioned that the Option is
not exercisable unless the Company's withholding obligations are satisfied.
Accordingly, the Optionee may not be able to exercise the Option when desired
even though the Option is vested and the Company shall have no obligation to
issue a certificate for such shares.
(g) Certificate Registration. Except in the event the exercise price
is paid by Immediate Sales Proceeds, the certificate or certificates for the
shares as to which the Option is exercised shall be registered in the name of
the Optionee, or, if applicable, the heirs of the Optionee.
(h) Restrictions on Grant of the Option and Issuance of Shares. The
grant of the Option and the issuance of shares upon exercise of the Option shall
be subject to compliance with all applicable requirements of federal, state or
foreign law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal, state or foreign securities laws or other law or
regulations. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option, or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. Questions concerning this
restriction should be directed to the Chief Financial Officer or the General
Counsel of the Company. As a condition to the exercise of the Option, the
Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation, and to make any representation or warranty with respect thereto as
may be requested by the Company.
(i) Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
8. Non-Transferability of the Option; Non-Alienation of Benefits. The
Option may be exercised during the lifetime of the Optionee only by the Optionee
and may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent unexercised and exercisable by the Optionee on the date of
death, may be exercised by the Optionee's legal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
Except with the prior written consent of the Company, subject to the
foregoing, or as otherwise provided herein, no right or benefit under this
Option Plan shall be subject to anticipation, alienation, sale, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, sell,
assign, pledge, encumber or charge the same without such consent, if applicable,
shall be void. Except with
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such consent, no right or benefit under this Option Plan shall in any manner be
liable for or subject to the debts, contracts, liabilities or torts of the
person entitled to such benefit. Except to the extent previously approved by the
Company in writing, or as otherwise provided herein, if the Optionee should
become bankrupt or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right or benefit hereunder, then such right or benefit
shall cease and terminate, and in such event, the Company may hold or apply the
same or any part thereof for the benefit of the Optionee, the Optionee's spouse,
children or other dependents, or any of them, in such manner and in such
proportion as the Company may in its sole determination deem proper.
9. Termination of the Option. The Option shall terminate and may no longer
be exercised on the first to occur of (a) the Option Term Date as defined above,
(b) the last date for exercising the Option following termination of employment
as described in paragraph 10 below, or (c) a Transfer of Control to the extent
provided in paragraph 15 below.
10. Termination of Employment.
(a) Termination Other Than by Death or Disability. Except as
otherwise provided below, if the Optionee ceases to be an employee of the
Participating Company Group for any reason, except death or disability within
the meaning of section 422(c) of the Code, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee ceased to be
an employee, may be exercised by the Optionee within thirty (30) days after the
date on which the Optionee's employment terminated, but in any event no later
than the Option Term date.
(b) Termination by Death or Disability. Except as otherwise provided
below, if the Optionee's employment with the Company is terminated because of
the death or disability of the Optionee within the meaning of section 422(c) of
the Code, the Option, to the extent unexercised and exercisable by the Optionee
on the date on which the Optionee ceased to be an employee, may be exercised by
the Optionee (or the Optionee's legal representative) at any time prior to the
expiration of twelve (12) months from the date on which the Optionee's
employment terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death if
the Optionee dies within three (3) months after the Optionee's termination of
employment.
(c) Limitations on Exercise After Termination. Except as provided in
this paragraph 10, the Option shall terminate and may not be exercised after the
Optionee ceases to be an employee of the Participating Company Group.
Furthermore, the Board may at any time after the Optionee's termination of
employment cancel the Option with respect to all or a portion of the shares
otherwise remaining exercisable under the Option, if the Company finds or has
found that the Optionee:
(i) Engaged in willful, deliberate or gross misconduct toward
the Company;
(ii) Has violated the terms of any confidentiality agreement
or obligation between the Optionee and the Company; or
(iii) Has accepted employment with an entity which the Company
determines is in a business that could result in compromising any
confidentiality agreement or obligation between the Optionee and the Company.
(d) Employee and Termination of Employment Defined. For purposes of
this paragraph 10, the term "employee" shall mean any person, including officers
and directors, employed by a Participating Company or performing services for a
Participating Company as a director, consultant, advisor or other independent
contractor. For purposes of this paragraph 10, the Optionee's employment shall
be deemed to have terminated if the Optionee ceases to be employed by a
Participating Company (whether upon an actual termination of employment or upon
the Optionee's employer ceasing to be a
A-6
Participating Company). The Optionee's employment shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
serves as an employee, provided that there is no interruption or termination of
the Optionee's service as an employee.
(e) Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above is prevented by the provisions of paragraph 7(h) above, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Term Date.
(f) Extension if Optionee Subject to Section 16(b). Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above would subject the Optionee to suit under Section 16(b) of the
Exchange Act, the Option shall remain exercisable until the earliest to occur of
(i) the tenth (10th) day following the date on which the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of employment, or (iii) the Option Term Date.
(g) Leave of Absence. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company (or required by law) a leave of absence shall not be treated as
employment for purposes of determining the Optionee's Vested Percentage.
11. Standard Forms of Stock Options.
(a) Incentive Stock Options. Unless otherwise provided for by the
Board at the time an Option is granted, an Option designated as an "Incentive
Stock Option" shall comply with and be subject to the terms and conditions set
forth herein.
(b) Non-statutory Stock Options. Unless otherwise provided for by
the Board at the time an Option is granted, an Option designated as a
"Non-statutory Stock Option" shall comply with and be subject to the terms and
conditions set forth herein.
(c) Standard Term for Options. Unless otherwise provided for by the
Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
12. Authority to Vary Terms. The Board shall have the authority from time
to time to vary the terms of an individual stock option grant either in
connection with the grant or amendment of an individual Option or in connection
with the authorization of a new standard form or forms of Notice of Grant;
provided, however, that the terms and conditions of such revised or amended
standard form or forms shall be in accordance with the terms of the Plan.
13. Fair Market Value Limitation. To the extent that the aggregate fair
market value (determined at the time the Option is granted) of stock with
respect to which Incentive Stock Options are exercisable by an Optionee for the
first time during any calendar year (under all stock option plans of the
Company, including the Plan) exceeds One Hundred Thousand Dollars ($100,000),
such Options shall be treated as non-statutory stock options. This paragraph
shall be applied by taking Incentive Stock Options into account in the order in
which they were granted.
14. Effect of Change in Stock Subject to Plan. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan and
to any outstanding Options and in the exercise price of any outstanding Options
in the event of a stock dividend, stock split, reverse stock split,
A-7
recapitalization, combination, reclassification or like change in the capital
structure of the Company.
In the event a majority of the shares which are of the same class as the
shares that are subject to outstanding Options are exchanged for, converted
into, or otherwise become (whether or not pursuant to a Transfer of Control (as
defined below)) shares of another corporation (the "New Shares"), the Company
shall unilaterally amend the outstanding Options to provide that such Options
are exercisable for New Shares. In the event of any such amendment, the number
of shares and the exercise price of the outstanding Options shall be adjusted in
a fair and equitable manner.
15. Transfer of Control. A "Transfer of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company.
(a) the direct or indirect sale or exchange by the stockholders of
the Company of all or substantially all of the stock of the Company where the
stockholders of the Company before such sale or exchange do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Acquiring Corporation as defined below after such sale or exchange;
(b) a merger or consolidation where the stockholders of the Company
before such merger or consolidation do not retain, directly or indirectly, at
least a majority of the beneficial interest in the voting stock of the Acquiring
Corporation as defined below after such merger or consolidation;
(c) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations (as defined in paragraph 1 above) of the
Company); or
(d) a liquidation or dissolution of the Company.
Each Optionee shall be credited, as of the proposed effective date of a
Transfer of Control, and if still employed by the Company on the date such
Transfer of Control is consummated, with the greater of (i) twelve (12) full
months of additional vesting of the shares subject to his/her Option or (ii) the
number of months of additional vesting of the shares subject to his/her Option
as the Board shall have designated in the Optionee's Notice of Grant on the Date
of Option Grant.
Furthermore, in the event of a Transfer of Control, the surviving,
continuing successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "Acquiring Corporation"), shall either assume the
Company's rights and obligations under outstanding stock option agreements or
substitute options for the Acquiring Corporation's stock for such outstanding
Options. In the event the Acquiring Corporation elects not to assume or
substitute for such outstanding Options in connection with the Transfer of
Control, any unexercisable and/or unvested shares subject to such outstanding
stock option agreements shall be immediately exercisable and fully vested as of
the date thirty (30) days prior to the proposed effective date of the Transfer
of Control. The exercise and/or vesting of any Option that was permissible
solely by reason of this paragraph 15 shall be conditioned upon the consummation
of the Transfer of Control. Any Options which are neither assumed or substituted
for by the Acquiring Corporation in connection with the Transfer of Control nor
exercised as of the date of the Transfer of Control shall terminate and cease to
be outstanding effective as of the date of the Transfer of Control.
16. Rights as a Stockholder or Employee. The Optionee shall have no rights
as a stockholder with respect to any shares covered by the Option until the date
of the issuance of a certificate or certificates for the shares for which the
Option has been exercised. No adjustment shall be made for dividends or
distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 14
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
17. Stock Dividends Subject to Plan. If, from time to time, there is any
stock dividend, stock split,
A-8
or other change in the character or amount of any of the outstanding stock of
the corporation the stock of which is subject to the provisions of the Plan,
then in such event any and all new, substituted or additional securities to
which the Optionee is entitled by reason of the Optionee's ownership of the
shares acquired upon exercise of the Option shall be immediately subject to any
security interest held by the Company with the same force and effect as the
shares subject to such security interest immediately before such event.
18. Legends. The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of the Plan.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to carry out the provisions of
this paragraph.
19. Provision of Information. Each Optionee shall be given access to
information concerning the Company equivalent to that information made available
to the Company's common stockholders generally.
20. Options Non-Transferable. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
21. Termination or Amendment of Plan or Options. The Board, including any
duly appointed committee of the Board, may terminate or amend the Plan or any
Option at any time; provided, however, that without the approval of the
Company's stockholders, there shall be (a) no increase in the total number of
shares of Stock covered by the Plan (except by operation of the provisions of
paragraph 14 above), (b) no change in the class eligible to receive Incentive
Stock Options and (c) no expansion in the class eligible to receive
non-statutory stock options. In addition to the foregoing, the approval of the
Company's stockholders shall be sought for any amendment to the Plan for which
the Board deems stockholder approval necessary in order to comply with Rule
16b-3. In any event, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such amendment is required to enable an Option designated as an Incentive
Stock Option to qualify as an Incentive Stock Option.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing CIENA Corporation Third Amended and Restated 1994 Stock
Option Plan was duly adopted by the Board of Directors of the Company on the
13th day of January, 2000.
/s/ Michael O. McCarthy III
----------------------------------
Michael O. McCarthy III, Secretary
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1562-PS-00
PROXY
CIENA CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MARCH 11, 1998Proxy Solicited on behalf of the Board of Directors
Annual Meeting of Stockholders to be held March 16, 2000
The undersigned hereby appoints Patrick H. Nettles, Joseph R. Chinnici and
G. Eric Georgatos,Michael O. McCarthy III, or any of them, the proxies of the undersigned, with
full power of substitution, to vote all shares of Common Stock of CIENA
Corporation which the undersigned is entitled to vote at the Annual Meeting of
Stockholders of the Corporation to be held March 11, 1998,16, 2000, or any adjournment
thereof, as follows:
1. Election of Two Directors by all Stockholders
____|_| FOR all nominees listed below ____|_| WITHHOLD AUTHORITY to
except as marked to the contrary vote for all nominees
listed below
PatrickStephen P. Bradley, Ph.D. and Gerald H. Nettles and Jon W. BaylessTaylor
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below):
- - --------------------------------------------------------------------------------
2. Proposal to approve the CienaCIENA Corporation EmployeeThird Amended and Restated 1994
Stock PurchaseOption Plan.
____|_| FOR ____|_| AGAINST ____|_| ABSTAIN
3. Proposal to amend the Corporation's Third Restated Certificate of
Incorporation to increase the number of shares of Common Stock authorized for
issuance thereunder from 180360 million shares to 360460 million shares.
____|_| FOR ____|_| AGAINST ____|_| ABSTAIN
4. Proposal to ratify the selection of Price WaterhousePricewaterhouseCoopers LLP as independent
public accountants for the Corporation.
____|_| FOR ____|_| AGAINST ____|_| ABSTAIN
5. The proxies are authorized to vote in their discretion on any other matters
which may properly come before the Annual Meeting to the extent set forth in the
proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTEThe Board of Directors recommends a vote "FOR" EACH OF THE LISTED PROPOSALS.each of the listed proposals.
PLACE AN "X" HERE IF YOU PLAN TO VOTE YOUR SHARES AT THE MEETING. __________|_|
Execute proxy exactly as your name appears on this form. If stock is registered
in more than one name, each joint holder should sign. When signing as trustee,
executor or other fiduciary, please so indicate:
- - ------------------------ ---------------------------------- ---------------------------------- ------------------------------- ----
Signature of holder Signature of co-holder (if any) Date
18
APPENDIX
CIENA CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
19
TABLE OF CONTENTS
PAGE
----
1. SHARES SUBJECT TO THE PLAN.......................................................1
2. ADMINISTRATION...................................................................1
3. INTERPRETATION...................................................................1
4. ELIGIBLE EMPLOYEES...............................................................1
5. PARTICIPATION IN THE PLAN........................................................2
6. PAYROLL DEDUCTIONS...............................................................2
7. INTEREST ON PAYROLL DEDUCTIONS...................................................2
8. OFFERING AND PURCHASE PERIODS....................................................3
9. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE.................................3
10. TIMING OF PURCHASE; PURCHASE LIMITATION.........................................3
11. ISSUANCE OF STOCK CERTIFICATES..................................................4
12. WITHHOLDING OF TAXES............................................................4
13. ACCOUNT STATEMENTS..............................................................4
14. PARTICIPATION ADJUSTMENT........................................................5
15. CHANGES IN ELECTIONS TO PURCHASE................................................5
16. TERMINATION OF EMPLOYMENT.......................................................5
17. RETIREMENT......................................................................6
18. LAY-OFF, AUTHORIZED LEAVE OR ABSENCE OR DISABILITY..............................6
19. DEATH...........................................................................7
20. TERMINATION OF PARTICIPATION....................................................7
21. ASSIGNMENT......................................................................8
- i -
20
22. APPLICATION OF FUNDS.............................................................8
23. NO RIGHT TO CONTINUED EMPLOYMENT.................................................8
24. AMENDMENT OF PLAN................................................................8
25. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN.................................9
26. EFFECT OF CHANGES IN CAPITALIZATION..............................................9
(a) Changes in Stock.........................................................9
(b) Reorganization in Which the Company Is the Surviving
Corporation............................................................10
(c) Reorganization in Which the Company Is Not the Surviving
Corporation or Sale of Assets or Stock...............................10
(d) Adjustments..............................................................10
(e) No Limitations on Company................................................11
27. GOVERNMENTAL REGULATION..........................................................11
28. STOCKHOLDER RIGHTS...............................................................11
29. RULE 16B-3.......................................................................11
30. PAYMENT OF PLAN EXPENSES.........................................................11
- ii -
21
CIENA CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
The Board of Directors of Ciena Corporation (the "Company") has
adopted this Employee Stock Purchase Plan (the "Plan") to enable eligible
employees of the Company and its participating Affiliates (as defined below),
through payroll deductions, to purchase shares of the Company's common stock,
par value $0.01 per share (the " Common Stock"). The Plan is for the benefit of
the employees of Ciena Corporation and any participating Affiliates. The Plan is
intended to benefit the Company by increasing the employees' interest in the
Company's growth and success and encouraging employees to remain in the employ
of the Company or its participating Affiliates. The provisions of the Plan are
set forth below:
1. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 26 below, the aggregate
number of shares of Common Stock that may be made available for purchase by
participating employees under the Plan is 2,500,000. The shares issuable under
the Plan may, in the discretion of the Board of Directors of the Company (the
"Board"), be authorized but unissued shares, treasury shares or issued and
outstanding shares that are purchased in the open market.
2. ADMINISTRATION.
The Plan shall be administered under the direction of the Human
Resources Committee of the Board (the "Committee"). No member of the Board or
the Committee shall be liable for any action or determination made in good faith
with respect to the Plan.
3. INTERPRETATION.
It is intended that the Plan will meet the requirements for an
"employee stock purchase plan" under Section 423 of the Internal Revenue Code of
1986 (the "Code"), and it is to be so applied and interpreted. Subject to the
express provisions of the Plan, the Committee shall have authority to interpret
the Plan, to prescribe, amend and rescind rules relating to it, and to make all
other determinations necessary or advisable in administering the Plan, all of
which determinations will be final and binding upon all persons.
4. ELIGIBLE EMPLOYEES.
Any employee of the Company or any of its participating Affiliates
may participate in the Plan, except the following, who are ineligible to
participate: (a) an employee who has been employed by the Company or any of its
participating Affiliates for less than three months as of the beginning of an
Offering Period (as
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defined in Section 7 below); (b) an employee whose customary employment is for
less than five months in any calendar year; (c) an employee whose customary
employment is 20 hours or less per week; and (d) an employee who, after
exercising his or her rights to purchase shares under the Plan, would own shares
of Common Stock (including shares that may be acquired under any outstanding
options) representing five percent or more of the total combined voting power of
all classes of stock of the Company. The term "participating Affiliate" means
any company or other trade or business that is a subsidiary of the Company
(determined in accordance with the principles of Sections 424(e) and (f) of the
Code and the regulations thereunder). The Board may at any time in its sole
discretion, if it deems it advisable to do so, terminate the participation of
the employees of a particular participating Affiliate.
5. PARTICIPATION IN THE PLAN.
An eligible employee may become a participating employee in the Plan
by completing an election to participate in the Plan on a form provided by the
Company and submitting that form to the Payroll Department of the Company. The
form will authorize payroll deductions (as provided in Section 6 below) and
authorize the purchase of shares of Common Stock for the employee's account in
accordance with the terms of the Plan. Enrollment will become effective upon the
first day of the first Offering Period.
6. PAYROLL DEDUCTIONS.
At the time an eligible employee submits his or her election to
participate in the Plan (as provided in Section 5 above), the employee shall
elect to have deductions made from his or her pay, on each pay day following his
or her enrollment in the Plan, and for as long as he or she shall participate in
the Plan. The deductions will be credited to the participating employee's
account under the Plan. An employee may not during any Offering Period change
his or her percentage of payroll deduction for that Offering Period, nor may an
employee withdraw any contributed funds, other than in accordance with Sections
15 through 20 below.
7. INTEREST ON PAYROLL DEDUCTIONS.
The Company and participating Affiliates will cause to be maintained
a record of amounts credited to each participating employee authorizing a
payroll deduction pursuant to Section 6. The Company may, but is not required
to, credit interest on the balance of the employees' accounts during the
Offering Period. If interest is credited to such accounts, the rate may be a
fixed or variable rate determined by the Company.
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8. OFFERING AND PURCHASE PERIODS.
The Offering Periods and Purchase Period shall be determined by the
Committee. The initial Offering Period shall commence on ______________ and end
on ______________, and every Offering Period thereafter, shall commence on the
six month anniversary of the commencement of the prior Offering Period and shall
be a 24-month period until changed by the Committee. The initial Purchase Period
shall commence on ______________ and end on __________________, and every
Purchase Period thereafter, shall commence immediately after the prior Purchase
Period ends and shall be a six month period until changed by the Committee.
9. RIGHTS TO PURCHASE COMMON STOCK; PURCHASE PRICE.
Rights to purchase shares of Common Stock will be deemed granted to
participating employees as of the first trading day of each Offering Period. The
purchase price of each share of Common Stock (the "Purchase Price") shall be the
lesser of 85 percent of the fair market value of the Common Stock (i) on the
first trading day of the Offering Period or (ii) on the last trading day of the
Purchase Period, unless the Purchase Price is otherwise established by the
Committee; provided that in no event shall the Purchase Price be less than the
amount determined pursuant to subparagraphs (i) and (ii) above or the par value
of the Common Stock. For purposes of the Plan, "fair market value" means the
value of each share of Common Stock subject to the Plan determined as follows:
if on the determination date the shares of Common Stock are listed on an
established national or regional stock exchange, are admitted to quotation on
the National Association of Securities Dealers Automated Quotation System, or
are publicly traded on an established securities market, the fair market value
of the shares of Common Stock shall be the closing price of the shares of Common
Stock on such exchange or in such market (the highest such closing price if
there is more than one such exchange or market) on the trading day immediately
preceding the determination date (or if there is no such reported closing price,
the fair market value shall be the mean between the highest bid and lowest asked
prices or between the high and low sale prices on such trading day) or, if no
sale of the shares of Common Stock is reported for such trading day, on the next
preceding day on which any sale shall have been reported. If the shares of
Common Stock are not listed on such an exchange, quoted on such System or traded
on such a market, fair market value shall be determined by the Board in good
faith.
10. TIMING OF PURCHASE; PURCHASE LIMITATION.
Unless a participating employee has given prior written notice
terminating such employee's participation in the Plan, or the employee's
participation in the Plan has otherwise been terminated as provided in Sections
16 through 20 below, such employee will be deemed to have exercised
automatically his or her right to purchase Common Stock on the last trading day
of the Purchase Period (except as
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provided in Section 15 below) for the number of shares of Common Stock which the
accumulated funds in the employee's account at that time will purchase at the
Purchase Price, subject to the participation adjustment provided for in Section
14 below and subject to adjustment under Section 26 below. Notwithstanding any
other provision of the Plan, no employee may purchase in any one calendar year
under the Plan and all other "employee stock purchase plans" of the Company and
its participating Affiliates shares of Common Stock having an aggregate fair
market value in excess of $25,000, determined as of the first trading date of
the Offering Period as to shares purchased during such period. Effective upon
the last trading day of the Purchase Period, a participating employee will
become a stockholder with respect to the shares purchased during such period,
and will thereupon have all dividend, voting and other ownership rights incident
thereto. Notwithstanding the foregoing, no shares shall be sold pursuant to the
Plan unless the Plan is approved by the Company's stockholders in accordance
with Section 25 below.
11. ISSUANCE OF STOCK CERTIFICATES.
As of the last trading day of the Purchase Period, a participating
employee will be credited with the number of shares of Common Stock purchased
for his or her account under the Plan during such Offering Period. Shares
purchased under the Plan will be held in the custody of an agent (the "Agent")
appointed by the Committee. The Agent may hold the shares purchased under the
Plan in stock certificates in nominee names and may commingle shares held in its
custody in a single account or stock certificate without identification as to
individual participating employees. A participating employee may, at any time
following his or her purchase of shares under the Plan, by written notice
instruct the Agent to have all or part of such shares reissued in the
participating employee's own name and have the stock certificate delivered to
the employee.
12. WITHHOLDING OF TAXES.
To the extent that a participating employee realizes ordinary income
in connection with a sale or other transfer of any shares of Common Stock
purchased under the Plan, the Company may withhold amounts needed to cover such
taxes from any payments otherwise due and owing to the participating employee or
from shares that would otherwise be issued to the participating employee
hereunder. Any participating employee who sells or otherwise transfers shares
purchased under the Plan within two years after the beginning of the Offering
Period in which the shares were purchased must within 30 days of such transfer
notify the Payroll Department of the Company in writing of such transfer.
13. ACCOUNT STATEMENTS.
The Company will cause the Agent to deliver to each participating
employee a statement for each Purchase Period during which the employee
purchases
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Common Stock under the Plan, but no more frequently than quarterly,
reflecting the amount of payroll deductions during the Purchase Period, the
number of shares purchased for the employee's account, the price per share of
the shares purchased for the employee's account and the number of shares held
for the employee's account at the end of the Purchase Period.
14. PARTICIPATION ADJUSTMENT.
If in any Purchase Period the number of unsold shares that may be
made available for purchase under the Plan pursuant to Section 1 above is
insufficient to permit exercise of all rights deemed exercised by all
participating employees pursuant to Section 9 above, a participation adjustment
will be made, and the number of shares purchasable by all participating
employees will be reduced proportionately. Any funds then remaining in a
participating employee's account after such exercise will be refunded to the
employee.
15. CHANGES IN ELECTIONS TO PURCHASE.
(a) A participating employee may, at any time prior to the last day
of the Purchase Period, by written notice to the Company, direct the Company to
cease payroll deductions (or, if the payment for shares is being made through
periodic cash payments, notify the Company that such payments will be
terminated), in accordance with the following alternatives:
(i) The employee's option to purchase shall be reduced
to the number of shares which may be purchased, as of the last day of the
Purchase Period, with the amount then credited to the employee's account; or
(ii) Withdraw the amount in such employee's account and
terminate such employee's option to purchase.
(b) Any participating employee may increase or decrease his or her
payroll deduction or periodic cash payments, to take effect on the first day of
the next Offering Period, by delivering to the Company a new form regarding
election to participate in the Plan under Section 5 above.
16. TERMINATION OF EMPLOYMENT.
In the event a participating employee voluntarily leaves the employ
of the Company or a participating Affiliate, otherwise than by retirement under
a plan of the Company or a participating Affiliate, or is terminated by the
Company prior to the last day of the Purchase Period, the amount in the
employee's account will be distributed and the employee's option to purchase
will terminate.
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17. RETIREMENT.
In the event a participating employee who has an option to purchase
shares leaves the employ of the Company or a participating Affiliate because of
retirement under a plan of the Company or a participating Affiliate the
participating employee may elect, within 10 days after the date of such
retirement or termination, one of the following alternatives:
(a) To make up any deficiency in the employee's account resulting
from the termination of payroll deductions by an immediate cash payment;
(b) The employee's option to purchase shall be reduced to the number
of shares which may be purchased, as of the last day of the Purchase Period,
with the amount then credited to the employee's account; or
(c) Withdraw the amount in such employee's account and terminate
such employee's option to purchase.
In the event the participating employee does not make an election
within the aforesaid 10-day period, he or she will be deemed to have elected
subsection 17(c) above.
18. LAY-OFF, AUTHORIZED LEAVE OR ABSENCE OR DISABILITY.
Payroll deductions for shares for which a participating employee has
an option to purchase may be suspended during any period of absence of the
employee from work due to lay-off, authorized leave of absence or disability or,
if the employee so elects, periodic payments for such shares may continue to be
made in cash.
If such employee returns to active service prior to the last day of
the Purchase Period, the employee's payroll deductions will be resumed and if
said employee did not make periodic cash payments during the employee's period
of absence, the employee shall, by written notice to the Company's Payroll
Department within 10 days after the employee's return to active service, but not
later than the last day of the Purchase Period, elect:
(a) To make up any deficiency in the employee's account resulting
from a suspension of payroll deductions by an immediate cash payment;
(b) Not to make up such deficiency, in which event the number of
shares to be purchased by the employee shall be reduced to the number of whole
shares which may be purchased with the amount, if any, then credited to the
employee's account plus the aggregate amount, if any, of all payroll deductions
to be made thereafter; or
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(c) Withdraw the amount in the employee's account and terminate the
employee's option to purchase.
A participating employee on lay-off, authorized leave of absence or
disability on the last day of the Purchase Period shall deliver written notice
to his or her employer on or before the last day of the Purchase Period,
electing one of the alternatives provided in the foregoing clauses (a), (b) and
(c) of this Section 18. If any employee fails to deliver such written notice
within 10 days after the employee's return to active service or by the last day
of the Purchase Period, whichever is earlier, the employee shall be deemed to
have elected subsection 18(c) above.
If the period of a participating employee's lay-off, authorized
leave of absence or disability shall terminate on or before the last day of the
Purchase Period, and the employee shall not resume active employment with the
Company or a participating Affiliate, the employee shall receive a distribution
in accordance with the provisions of Section 17 of this Plan.
19. DEATH.
In the event of the death of a participating employee while the
employee's option to purchase shares is in effect, the legal representatives of
such employee may, within three months after the employee's death (but no later
than the last day of the Purchase Period) by written notice to the Company or
participating Affiliate, elect one of the following alternatives:
(a) To make up any deficiency in the employee's account resulting
from a suspension of payroll deductions by an immediate cash payment;
(b) The employee's option to purchase shall be reduced to the number
of shares which may be purchased, as of the last day of the Purchase Period,
with the amount then credited to the employee's account; or
(c) Withdraw the amount in such employee's account and terminate
such employee's option to purchase.
In the event the legal representatives of such employee fail to
deliver such written notice to the Company or participating Affiliate within the
prescribed period, the election to purchase shares shall terminate and the
amount, then credited to the employee's account shall be paid to such legal
representatives.
20. TERMINATION OF PARTICIPATION.
A participating employee will be refunded all moneys in his or her
account, and his or her participation in the Plan will be terminated if either
(a) the Board
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elects to terminate the Plan as provided in Section 25 below, or (b) the
employee ceases to be eligible to participate in the Plan under Section 4 above.
As soon as practicable following termination of an employee's participation in
the Plan, the Company will deliver to the employee a check representing the
amount in the employee's account and a stock certificate representing the number
of whole shares held in the employee's account. Once terminated, participation
may not be reinstated for the then current Offering Period, but, if otherwise
eligible, the employee may elect to participate in any subsequent Offering
Period.
21. ASSIGNMENT.
No participating employee may assign his or her rights to purchase
shares of Common Stock under the Plan, whether voluntarily, by operation of law
or otherwise. Any payment of cash or issuance of shares of Common Stock under
the Plan may be made only to the participating employee (or, in the event of the
employee's death, to the employee's estate). Once a stock certificate has been
issued to the employee or for his or her account, such certificate may be
assigned the same as any other stock certificate.
22. APPLICATION OF FUNDS.
All funds received or held by the Company under the Plan shall be
deposited with the Agent for the account of the participating employees.
Participating employees' accounts will not be segregated.
23. NO RIGHT TO CONTINUED EMPLOYMENT.
Neither the Plan nor any right to purchase Common Stock under the
Plan confers upon any employee any right to continued employment with the
Company or any of its participating Affiliates, nor will an employee's
participation in the Plan restrict or interfere in any way with the right of the
Company or any of its participating Affiliates to terminate the employee's
employment at any time.
24. AMENDMENT OF PLAN.
The Board may, at any time, amend the Plan in any respect (including
an increase in the percentage specified in Section 9 above used in calculating
the Purchase Price); provided, however, that without approval of the
stockholders of the Company no amendment shall be made (a) increasing the number
of shares specified in Section 1 above that may be made available for purchase
under the Plan (except as provided in Section 26 below), (b) changing the
eligibility requirements for participating in the Plan, or (c) impairing the
vested rights of participating employees.
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25. EFFECTIVE DATE; TERM AND TERMINATION OF THE PLAN.
The Plan shall be effective as of the date of adoption by the Board,
which date is set forth below, subject to approval of the Plan by a majority of
the votes present and entitled to vote at a duly held meeting of the
shareholders of the Company at which a quorum representing a majority of all
outstanding voting stock is present, either in person or by proxy; provided,
however, that upon approval of the Plan by the shareholders of the Company as
set forth above, all rights to purchase shares granted under the Plan on or
after the effective date shall be fully effective as if the shareholders of the
Company had approved the Plan on the effective date. If the shareholders fail to
approve the Plan on or before one year after the effective date, the Plan shall
terminate, any rights to purchase shares granted hereunder shall be null and
void and of no effect and all contributed funds shall be refunded to
participating employees. The Board may terminate the Plan at any time and for
any reason or for no reason, provided that such termination shall not impair any
rights of participating employees that have vested at the time of termination.
In any event, the Plan shall, without further action of the Board, terminate ten
(10) years after the date of adoption of the Plan by the Board or, if earlier,
at such time as all shares of Common Stock that may be made available for
purchase under the Plan pursuant to Section 1 above have been issued.
26. EFFECT OF CHANGES IN CAPITALIZATION.
(a) CHANGES IN STOCK.
If the number of outstanding shares of Common Stock is increased or
decreased or the shares of Common Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company by reason
of any recapitalization, reclassification, stock split, reverse split,
combination of shares, exchange of shares, stock dividend, or other distribution
payable in capital stock, or other increase or decrease in such shares effected
without receipt of consideration by the Company occurring after the effective
date of the Plan, the number and kinds of shares that may be purchased under the
Plan shall be adjusted proportionately and accordingly by the Company. In
addition, the number and kind of shares for which rights are outstanding shall
be similarly adjusted so that the proportionate interest of a participating
employee immediately following such event shall, to the extent practicable, be
the same as immediately prior to such event. Any such adjustment in outstanding
rights shall not change the aggregate Purchase Price payable by a participating
employee with respect to shares subject to such rights, but shall include a
corresponding proportionate adjustment in the Purchase Price per share.
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(b) REORGANIZATION IN WHICH THE COMPANY IS THE SURVIVING
CORPORATION.
Subject to Subsection (c) of this Section 26, if the Company shall
be the surviving corporation in any reorganization, merger or consolidation of
the Company with one or more other corporations, all outstanding rights under
the Plan shall pertain to and apply to the securities to which a holder of the
number of shares of Common Stock subject to such rights would have been entitled
immediately following such reorganization, merger or consolidation, with a
corresponding proportionate adjustment of the Purchase Price per share so that
the aggregate Purchase Price thereafter shall be the same as the aggregate
Purchase Price of the shares subject to such rights immediately prior to such
reorganization, merger or consolidation.
(c) REORGANIZATION IN WHICH THE COMPANY IS NOT THE SURVIVING
CORPORATION OR SALE OF ASSETS OR STOCK.
Upon any dissolution or liquidation of the Company, or upon a
merger, consolidation or reorganization of the Company with one or more other
corporations in which the Company is not the surviving corporation, or upon a
sale of all or substantially all of the assets of the Company to another
corporation, or upon any transaction (including, without limitation, a merger or
reorganization in which the Company is the surviving corporation) approved by
the Board that results in any person or entity owning more than 80 percent of
the combined voting power of all classes of stock of the Company, the Plan and
all rights outstanding hereunder shall terminate, except to the extent provision
is made in writing in connection with such transaction for the continuation of
the Plan and/or the assumption of the rights theretofore granted, or for the
substitution for such rights of new rights covering the stock of a successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kinds of shares and exercise prices, in which event the Plan
and rights theretofore granted shall continue in the manner and under the terms
so provided. In the event of any such termination of the Plan, all current
Purchase Periods and Offering Periods shall be deemed to have ended on the last
trading day prior to such termination, and in accordance with Section 10 above
the rights of each participating employee then outstanding shall be deemed to be
automatically exercised on such last trading day. The Board shall send written
notice of an event that will result in such a termination to all participating
employees not later than the time at which the Company gives notice thereof to
its stockholders.
(d) ADJUSTMENTS.
Adjustments under this Section 26 related to stock or securities of
the Company shall be made by the Committee, whose determination in that respect
shall be final, binding, and conclusive.
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(e) NO LIMITATIONS ON COMPANY.
The grant of a right pursuant to the Plan shall not affect or limit
in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
27. GOVERNMENTAL REGULATION.
The Company's obligation to issue, sell and deliver shares of Common
Stock pursuant to the Plan is subject to such approval of any governmental
authority and any national securities exchange or other market quotation system
as may be required in connection with the authorization, issuance or sale of
such shares.
28. STOCKHOLDER RIGHTS.
Any dividends paid on shares held by the Company for a participating
employee's account will be transmitted to the employee. The Company will deliver
to each participating employee who purchases shares of Common Stock under the
Plan, as promptly as practicable by mail or otherwise, all notices of meetings,
proxy statements, proxies and other materials distributed by the Company to its
stockholders. Any shares of Common Stock held by the Agent for an employee's
account will be voted in accordance with the employee's duly delivered and
signed proxy instructions. There will be no charge to participating employees in
connection with such notices, proxies and other materials.
29. RULE 16B-3.
Transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or any successor provision under the
Securities Exchange Act of 1934, as amended. If any provision of the Plan or
action by the Board fails to so comply, it shall be deemed null and void to the
extent permitted by law and deemed advisable by the Board. Moreover, in the
event the Plan does not include a provision required by Rule 16b-3 to be stated
herein, such provision (other than one relating to eligibility requirements, or
the price and amount of awards) shall be deemed automatically to be incorporated
by reference into the Plan.
30. PAYMENT OF PLAN EXPENSES.
The Company will bear all costs of administering and carrying out
the Plan; provided however, participating employees shall bear all costs
incurred subsequent to the issuance of stock certificates pursuant to Section
11.
* * *
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This Plan was duly adopted and approved by the Board of Directors of
the Company by resolution at a meeting held on the ___ of __________, 199_.
-------------------------
Secretary of the Company
This Plan was duly approved by the stockholders of the Company at a
meeting of the stockholders held on the ____ of _______________, 199__.
-------------------------
Secretary of the Company
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