2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 78 CIENA CORPORATION FISCAL2017PERFORMANCEANDBUSINESSHIGHLIGHTS FinancialPerformance BusinessHighlights ❖ Increasedannualrevenuefrom$2.6to$2.8billion, representingfaster-than-marketgrowthof7.7% ❖ Reducedadjustedoperatingexpenseasapercentageof revenueto33.2% ❖ Increasedadjustedoperatingincometo$333M,adjusted operatingmarginto11.9%,andadjustednetincometo $178M ❖ Reducedgrossdebt-to-EBITDAleverageratioto2.8x ❖ Generated$235millionincashfromoperations,andended yearwith$33millionnetcash ❖ GrewIndiayear-over-yearrevenuenearly100%,giving usaleadingpositioninthecountry ❖ AchievedsolidgrowthinWebscale/DCIvertical,with $110MWaveserverannualrevenueand73new customers ❖ Completedsuccessfulexchangeoffertomanage dilutionfromour2018convertiblenotes ❖ Receivedtworatingsagencyupgradesfromeachof Moody’sandStandard&Poor’s ❖ Continuedoutstandingproductinnovation,includingthe introductionsofourWaveLogicAicoherentchipset, LiquidSpectrumsolutionandBluePlanetMCPdomain controller FY2017 REVENUE FY2016 GROSSDEBT-TO-EBIDTA LEVERAGERATIO FY2016 FY2017 FY2017 ADJ.NET INCOME FY2016 ADJ.OPERATINGMARGIN FY2016 FY2017 FY2017 ADJ.OPERATINGEXPENSE ASA%OFREVENUE FY2016 FY2017 ADJ.OPERATING INCOME FY2016 $2.80B $2.60B 4.4X 2.8X $178M $145M 11.9% 11.4% 33.2% 34.1% $333M $296M Containedabove,andelsewhereinthisproxystatement,arecertainnon-GAAPmeasuresofCiena’sfinancialperformance forfiscal2016and2017.Thesemeasures,alongwiththeircorrespondingGAAPmeasuresandreconciliationsthereto,have beenpreviouslydisclosedinexhibitstoCiena’sCurrentReportonForm8-KfiledwiththeSEConDecember7,2017.Alsosee “Non-GAAPMeasures”belowformoreinformationaboutthesemeasuresandhowtheyareused. 2018ProxyStatement 3 CORPORATEGOVERNANCEANDSTOCKHOLDEROUTREACH StockholderOutreach Webelievethatstrongcorporategovernancepracticesshouldincluderegularoutreachandconversationswithour stockholders.Inconnectionwiththedesignandadoptionofour2017OmnibusIncentivePlan,wespokewithanumberof stockholdersduringfiscal2017aboutourincentivecompensationstructure,executivecompensationandcorporategovernance. Weregularlydiscussourbusiness,financialperformanceandindustrywithstockholders.Duringfiscal2017,weengagedwitha numberofstockholderstoobtainfeedbackontheirperceptionandunderstandingofourbusiness,marketsandindustry.These engagementsinformedourrecentapproachinDecember2017incommunicatingtostockholderskeyelementsofourlong-term strategyandseverallonger-termfinancialtargetsagainstwhichtomeasureCiena’sperformancegoingforward.Wealsoengage inregularcommunicationswithourstockholderswithrespecttocorporategovernancepracticesandhaveusedtheirf edbackto makemeaningfulchangesinrecentyears. RecentGovernanceChanges CATEGORY WHATWE’VEDONE ProxyAccess ❖ Adoptedproxyaccessbylaw,whichprovideseligible stockholderstherighttonominatecandidatesforelectionto ourBoardandbeincludedinourproxystatement BoardRefreshment ❖ IncreasedthesizeoftheBoardfromninetotendirectors ❖ Appointedanewindependentdirector ❖ AppointednewLeadIndependentDirectorandChairof GovernanceandNominationsCommittee ReturnofCapitaltoStockholders ❖ Authorized$300millionsharerepurchaseprogram ❖ Completedexchangeoffertomitigatedilutionfrom2018 convertiblenotesthroughcashrepaymentfeature StockOwnershipGuidelines ❖ Substantiallyincreasedtheminimumownership requirements,including5xbasesalaryforCEOand5xcash retainerfornon-employeedirectors ❖ Addedaholdingrequirementuntiltherelevantminimum ownershiplevelisachieved PoliciesandCharters ❖ UpdatedPrinciplesofCorporateGovernance ❖ AdoptedCodeofEthicsforDirectors ❖ UpdatedChartersofstandingBoardcommittees ExistingStrongGovernanceStructure ❖ Eightoftendirectorsareindependent ❖ Standingcommitteescomprisedsolelyofindependentdirectors ❖ LeadIndependentDirectorroleinplace ❖ SeparateCEOandChairmanroles(since2001) ❖ AnnualBoardandcommitteeself-assessments ❖ Majorityvotinginuncontesteddirectorelections ❖ Limitsonannualdirectorcompensation ❖ Independentdirectorsmeetwithoutmanagementpresent 2 2018ProxyStatement PROXY STATEMENT SUMMARY Thissummaryhighlightsinformationthatiscontainedelsewhereinthisproxystatement.Itdoesnotincludeallinformation necessarytomakeavotingdecisionandyoushouldreadthisproxystatementinitsentiretybeforecastingyourvote. VOTINGOVERVIEW ItemsofBusiness BoardVote Recommendation Page ElectthreeClassIIIDirectornomineesandoneClassIIDirectornominee FOReachnominee 4 RatifyappointmentofPricewaterhouseCoopersLLPasourindependentregisteredpublic accountingfirmforfiscal2018 FOR 24 Advisoryvoteonnamedexecutiveofficercompensation(“Say-on-Pay”) FOR 62 FISCAL2017COMPENSATIONHIGHLIGHTS BaseSalaries TargetCashincentives DidnotincreasethebasesalariesoftheCEOorthe otherNEOs. Didnotincreasethetargetcashincentiveopportunities fortheCEO,andincreasedthetargetcashincentive opportunitiesfortwoNEOs–onebasedonalarger roleandonetopromoteinternalalignment. EquityAwardValues EquityAwardStructure Exceptforonerole-basedincrease,deliveredannual equityawardsfortheNEOsthatwereidenticaltofiscal 2016targetdeliveredvalue.However,grantdatefair valueincreasedsubstantiallyfromthepreviousyear duetostockpricefluctuations. Continuedtostructuretheequityawardssothat60% ofthetargetawardvaluefortheCEO,and50%ofthe targetawardvaluefortheotherNEOs,wasallocated toat-risk,performance-basedequity,withattainment linkedtoobjectivescriticaltoachievingbothlonger- termgrowthandnearer-termprofitability,anddelivery ofsharessubjecttoadditionalservice(vesting) requirements. CEOFY2017 TargetTotalDirectCompensationMix At -Risk Performance- Based Compensation 59% Time-Based Compensation 41% BaseSalary Time-BasedEquity (RSUs) TargetAnnualCash Incentive Performance-BasedEquity (PSUs) 12% 29% 44% 15% 2018ProxyStatement 1 CME GROUP INC. Summary Information This summary highlights key elements of our proxy statement. For more complete information, you should review the entire proxy statement along with our 2017 Annual Report. BUSINESSHIGHLIGHTS Theyear2017wasoneofgrowthandachievementforCMEGroup.Totalvolumewasmorethan4.1billioncontractstraded, whichgenerated$1.8billionincashearnings.In2017,wereachedrecordaveragedailyvolumeof16.3millioncontracts,up4% from2016,despitealowervolatilityenvironment.Year-endopeninterestwasup5%fromtheendof2016,andwereachedan all-timehighrecordopeninterestduringtheyearof129.1millioncontractsonJune14,2017.Thefollowingareadditionalkey performancemetricsfrom2017: RecordAverage DailyVolume IncreaseinElectronic OptionsAverageDaily Volume AggregateValueof DeclaredDividends IncreaseinCMEGlobex VolumeOriginating OutsideU.S. 16.3 million contracts 25% $2.1 billion 10% Foramoredetaileddiscussiononourfinancialperformance,seeour 2017AnnualReport . ANNUALMEETING PROPOSALSANDBOARDRECOMMENDATIONS Proposal BoardRecommendation Item1: ElectionofEquityDirectors FOReachofthenominees Item2: RatificationofErnst&YoungasourAuditors FOR Item3: Approval,byadvisoryvote,onthecompensationofournamedexecutiveofficers FOR Item4: ElectionofClassB-1,ClassB-2andClassB-3Directors Norecommendation Item5: ElectionofClassB-1,ClassB-2andClassB-3NominatingCommitteeMembers Norecommendation BeginningonorafterMarch20,2018,wedistributedtoourshareholders(1)acopyoftheproxystatement,2017AnnualReport andproxycard(s)orvotinginstructionform,(2)anImportantNoticeRegardingtheAvailabilityofProxyMaterials,with instructionstoaccesstheproxymaterialsandvoteonlineor(3)forshareholderswhohaveelectedtoreceivematerials electronically,anemailwithinstructionsonhowtoaccessthematerialsandvoteonline. Additionalinformationregardingthelogisticsoftheannualmeetingisavailablebeginningon page65 . NoticeofAnnualMeetingofShareholders and2018ProxyStatement 1